XML 20 R11.htm IDEA: XBRL DOCUMENT v3.23.2
Loans and Leases
 6 Months Ended
Jun. 30, 2023
Loans and Leases [Abstract]  
Loans and Leases
Note 3—Loans and Leases

Loans and leases as of the dates indicated consisted of the following:
(Dollars in thousands)
  
June 30,
2023
    
December 31,
2022
  
Loans and leases held-for-investment, net
            
Real estate:
            
Commercial
  
$
1,302,460
    
$
1,328,691
  
Agricultural
    
739,207
      
726,938
  
Residential and home equity
    
392,754
      
387,753
  
Construction
    
172,903
      
166,538
  
Total real estate
    
2,607,324
      
2,609,920
  
Commercial & industrial
    
479,908
      
478,758
  
Agricultural
    
282,725
      
314,525
  
Commercial leases
    
126,554
      
112,629
  
Consumer and other
    
5,553
      
5,886
  
Total gross loans and leases
    
3,502,064
      
3,521,718
  
Unearned income
    
(10,341
)
    
(9,357
)
Total net loans and leases
    
3,491,723
      
3,512,361
  
Allowance for credit losses
    
(71,112
)
    
(66,885
)
Total loans and leases held-for-investment, net
  
$
3,420,611
    
$
3,445,476
  

At June 30, 2023, the portion of loans that were approved for pledging as collateral on borrowing lines with the Federal Home Loan Bank (“FHLB”) and the Federal Reserve Bank (“FRB”) were $1.3 billion and $894.4 million, respectively. The borrowing capacity on these loans was $784.1 million from FHLB and $655.0 million from the FRB.

The following tables show an aging analysis of the loan and lease portfolio, including unearned income, by the time past due for the periods indicated:
   
June 30, 2023
  
(Dollars in thousands)
  
Current
    
30-89 Days
Past Due
    
90+ Days
Past Due
    
Non-accrual
    
Total
Past Due
    
Total
  
Loans and leases held-for-investment, net
                                   
Real estate:
                                    
Commercial
  
$
1,293,842
    
$
-
    
$
-
    
$
375
    
$
375
    
$
1,294,217
  
Agricultural
    
739,207
      
-
      
-
      
-
      
-
      
739,207
  
Residential and home equity
    
392,754
      
-
      
-
      
-
      
-
      
392,754
  
Construction
    
172,903
      
-
      
-
      
-
      
-
      
172,903
  
Total real estate
    
2,598,706
      
-
      
-
      
375
      
375
      
2,599,081
  
Commercial & industrial
    
479,729
      
179
      
-
      
-
      
179
      
479,908
  
Agricultural
    
282,725
      
-
      
-
      
-
      
-
      
282,725
  
Commercial leases
    
124,456
      
-
      
-
      
-
      
-
      
124,456
  
Consumer and other
    
5,549
      
4
      
-
      
-
      
4
      
5,553
  
Total loans and leases, net
  
$
3,491,165
    
$
183
    
$
-
    
$
375
    
$
558
    
$
3,491,723
  

 
   
December 31, 2022
  
(Dollars in thousands)
  
Current
    
30-89 Days
Past Due
    
90+ Days
Past Due
    
Non-accrual
    
Total
Past Due
    
Total
  
Loans and leases held-for-investment, net
                                   
Real estate:
                                    
Commercial
  
$
1,319,911
    
$
-
    
$
-
    
$
403
    
$
403
    
$
1,320,314
  
Agricultural
    
726,938
      
-
      
-
      
-
      
-
      
726,938
  
Residential and home equity
    
387,753
      
-
      
-
      
-
      
-
      
387,753
  
Construction
    
166,370
      
-
      
-
      
168
      
168
      
166,538
  
Total real estate
    
2,600,972
      
-
      
-
      
571
      
571
      
2,601,543
  
Commercial & industrial
    
478,758
      
-
      
-
      
-
      
-
      
478,758
  
Agricultural
    
314,525
      
-
      
-
      
-
      
-
      
314,525
  
Commercial leases
    
111,649
      
-
      
-
      
-
      
-
      
111,649
  
Consumer and other
    
5,789
      
97
      
-
      
-
      
97
      
5,886
  
Total loans and leases, net
  
$
3,511,693
    
$
97
    
$
-
    
$
571
    
$
668
    
$
3,512,361
  



Non-accrual loans are summarized as follows:
(Dollars in thousands)
  
June 30,
2023
    
December 31,
2022
 
Non-accrual loans and leases:
            
Real estate:
            
Commercial
  
$
375
    
$
403
  
Agricultural
    
-
      
-
  
Residential and home equity
    
-
      
-
  
Construction
    
-
      
168
  
Total real estate
    
375
      
571
  
Commercial & industrial
    
-
      
-
  
Agricultural
    
-
      
-
  
Commercial leases
    
-
      
-
  
Consumer and other
    
-
      
-
  
Total non-accrual loans and leases
  
$
375
    
$
571
  

During the six months ended June 30, 2023, we had one residential real estate loan modified in the amount of $127,000.  The contractual interest rate of the modified loan decreased from 3.18% to 2.18% and the contractual term was extended from 15 years to 25 years.  There were no loans modified on or after January 1, 2023, when the company adopted ASU 2022-02, through June 30, 2023 that subsequently defaulted during the period presented.


 

The following table presents the credit risk rating categories for loans and leases held-for-investment (accruing and non-accruing) net of deferred fees by loan portfolio segment and class as of the dates indicated.
   
June 30, 2023
  
(Dollars in thousands)
  
Pass
    
Special
Mention
    
Sub-
standard
    
Doubtful
    
Total Loans
& Leases
    
Total
Allowance
for Credit
Losses
  
Loans and leases held-for-investment, net
                                    
Real estate:
                                    
Commercial
  
$
1,290,902
    
$
2,940
    
$
375
    
$
-
    
$
1,294,217
    
$
24,787
  
Agricultural
    
728,490
      
-
      
10,717
      
-
      
739,207
      
9,908
  
Residential and home equity
    
392,462
      
-
      
292
      
-
      
392,754
      
7,179
  
Construction
    
172,903
      
-
      
-
      
-
      
172,903
      
3,195
  
Total real estate
    
2,584,757
      
2,940
      
11,384
      
-
      
2,599,081
      
45,069
  
Commercial & industrial
    
471,586
      
8,083
      
239
      
-
      
479,908
      
11,291
  
Agricultural
    
282,699
      
17
      
9
      
-
      
282,725
      
12,903
  
Commercial leases
    
124,412
      
44
      
-
      
-
      
124,456
      
1,657
  
Consumer and other
    
5,391
      
-
      
162
      
-
      
5,553
      
192
  
Total loans and leases, net
  
$
3,468,845
    
$
11,084
    
$
11,794
    
$
-
    
$
3,491,723
    
$
71,112
  


   
December 31, 2022
  
(Dollars in thousands)
  
Pass
    
Special Mention
    
Sub-
standard
    
Doubtful
    
Total Loans
& Leases
    
Total
Allowance
for Credit
Losses
  
Loans and leases held-for-investment, net
                                    
Real estate:
                                    
Commercial
  
$
1,314,377
    
$
5,535
    
$
402
    
$
-
    
$
1,320,314
    
$
18,055
  
Agricultural
    
709,927
      
10,891
      
6,120
      
-
      
726,938
      
14,496
  
Residential and home equity
    
387,371
      
-
      
382
      
-
      
387,753
      
7,508
  
Construction
    
166,370
      
-
      
168
      
-
      
166,538
      
3,026
  
Total real estate
    
2,578,045
      
16,426
      
7,072
      
-
      
2,601,543
      
43,085
  
Commercial & industrial
    
478,437
      
63
      
258
      
-
      
478,758
      
11,503
  
Agricultural
    
308,830
      
5,682
      
13
      
-
      
314,525
      
10,202
  
Commercial leases
    
111,568
      
81
      
-
      
-
      
111,649
      
1,924
  
Consumer and other
    
5,650
      
-
      
236
      
-
      
5,886
      
171
  
Total loans and leases, net
  
$
3,482,530
    
$
22,252
    
$
7,579
    
$
-
    
$
3,512,361
    
$
66,885
  

 
The following table presents outstanding loan and lease balances held-for-investment by segment and class, credit quality indicators, vintage year by class of financing receivable, and current period gross charge-offs by year of origination as of June 30, 2023:


   
June 30, 2023
  
   
Term Loans Amortized Cost Basis by Origination Year
              
(Dollars in thousands)
  
2023
    
2022
    
2021
    
2020
    
2019
    
Prior
    
Revolving
Loans
Amortized
Cost
    
Total
  
Net loans and leases held-for-investment
                                                
Real estate:
                                                
Commercial
                                                
Pass
  
$
72,459
    
$
172,866
    
$
226,209
    
$
146,307
    
$
69,072
    
$
285,957
    
$
318,032
    
$
1,290,902
  
Special mention
    
-
      
-
      
-
      
-
      
-
      
2,340
      
600
      
2,940
  
Substandard
    
-
      
-
      
-
      
-
      
-
      
375
      
-
      
375
  
Doubtful
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Commercial
  
$
72,459
    
$
172,866
    
$
226,209
    
$
146,307
    
$
69,072
    
$
288,672
    
$
318,632
    
$
1,294,217
  
Commercial
                                                               
Current-period gross charge-offs
  $
 		-     $
-     $
 		-     $
 		-     $
 		-     $
 		-     $
 		-     $
 		-  
                                                                 
Agricultural
                                                               
Pass
  
$
35,673
    
$
74,658
    
$
41,588
    
$
51,985
    
$
14,224
    
$
174,620
    
$
335,742
    
$
728,490
  
Special mention
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Substandard
    
-
      
-
      
-
      
-
      
-
      
6,128
      
4,589
      
10,717
  
Doubtful
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Agricultural
 
$
35,673
    
$
74,658
    
$
41,588
    
$
51,985
    
$
14,224
    
$
180,748
    
$
340,331
    
$
739,207
  
Agricultural
                                                                
Current-period gross charge-offs
   $
 		-     $
 		-     $
 		-     $
 		-     $
 		-     $
 		-     $
 		-     $
 		-  
                                                                 
Residential and home equity
                                                                
Pass
  
$
19,331
    
$
63,975
    
$
92,602
    
$
82,832
    
$
13,730
    
$
76,970
    
$
43,022
    
$
392,462
  
Special mention
     -       -       -       -       -       -       -       -  
Substandard
    
-
      
-
      
-
      
-
      
-
      
292
      
-
      
292
  
Doubtful
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Residential and home equity
  
$
19,331
    
$
63,975
    
$
92,602
    
$
82,832
    
$
13,730
    
$
77,262
    
$
43,022
    
$
392,754
  
Residential and home equity
                                                                
Current-period gross charge-offs
   $
14     $
 		-     $
 		-     $
-     $
-     $
 		-     $
 		-     $
 		14  
                                                                 
Construction
                                                                
Pass
  
$
-
    
$
3,000
    
$
-
    
$
-
    
$
1,575
    
$
-
    
$
168,328
    
$
172,903
  
Special mention
     -       -       -       -       -       -       -       -  
Substandard
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Doubtful
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total construction
  
$
-
    
$
3,000
    
$
-
    
$
-
    
$
1,575
    
$
-
    
$
168,328
    
$
172,903
  
Construction
    




























 
Current-period gross charge-offs
   $
 		-     $
 		-     $
 		-     $
-     $
 		-     $
 		-     $
 		-     $
 		-  
                                                                 
Total Real estate
  
$
127,463
    
$
314,499
    
$
360,399
    
$
281,124
    
$
98,601
    
$
546,682
    
$
870,313
    
$
2,599,081
  
                                                                 
Commercial & industrial
                                                                
Pass
  
$
33,979
    
$
29,326
    
$
33,982
    
$
10,053
    
$
6,174
    
$
8,715
    
$
349,357
    
$
471,586
  
Special mention
    
-
      
-
      
48
      
-
      
-
      
517
      
7,518
      
8,083
  
Substandard
    
-
      
-
      
-
      
-
      
-
      
5
      
234
      
239
  
Doubtful
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Commercial & industrial
  
$
33,979
    
$
29,326
    
$
34,030
    
$
10,053
    
$
6,174
    
$
9,237
    
$
357,109
    
$
479,908
  
Commercial & industrial
                                                                
Current-period gross charge-offs
   $
 		-     $ -     $
 		-     $
 		-     $
 		-     $
 		-     $
-     $
 		-  

    June 30, 2023  
    Term Loans Amortized Cost Basis by Origination Year                
(Dollars in thousands)   2023     2022     2021     2020     2019     Prior    
Revolving
Loans
Amortized
Cost
     Total  
Net loans and leases held-for-investment                                                
Agricultural
                                                        
Pass
  
$
395
    
$
4,976
    
$
2,491
    
$
794
    
$
1,109
    
$
2,368
    
$
270,566
    
$
282,699
  
Special mention
    
-
      
-
      
-
      
-
      
-
      
-
      
17
      
17
  
Substandard
    
-
      
-
      
-
      
-
      
9
      
-
      
-
      
9
  
Doubtful
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Agricultural
 
$
395
    
$
4,976
    
$
2,491
    
$
794
    
$
1,118
    
$
2,368
    
$
270,583
    
$
282,725
  
Agricultural
                                                                
Current-period gross charge-offs
   $ -     $ -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                                 
Commercial leases
                                                                
Pass
  
$
28,715
    
$
34,385
    
$
12,082
    
$
10,626
    
$
5,315
    
$
33,289
    
$
-
    
$
124,412
  
Special mention
    
-
      
-
      
-
      
-
      
44
      
-
      
-
      
44
  
Substandard
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Doubtful
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Commercial leases
  
$
28,715
    
$
34,385
    
$
12,082
    
$
10,626
    
$
5,359
    
$
33,289
    
$
-
    
$
124,456
  
Commercial leases
                                                                
Current-period gross charge-offs
   $ -     $ -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                                 
Consumer and other
                                                                
Pass
  
$
793
    
$
1,361
    
$
516
    
$
155
    
$
93
    
$
1,694
    
$
779
    
$
5,391
  
Special mention
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Substandard
    
127
      
-
      
-
      
-
      
-
      
35
      
-
      
162
  
Doubtful
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Consumer and other
  
$
920
    
$
1,361
    
$
516
    
$
155
    
$
93
    
$
1,729
    
$
779
    
$
5,553
  
Consumer and other
                                                                
Current-period gross charge-offs
   $ 18     $ -     $ -     $ -     $ -     $ -     $ -     $ 18  
Total net loans and leases
                                                                
Pass
   $
 191,345     $
 384,547     $
 409,470     $
 302,752     $
 111,292     $
 583,613     $
 1,485,826     $
 3,468,845  
Special mention
     -       -       48       -       44       2,857       8,135       11,084  
Substandard
     127       -       -       -       9       6,835       4,823       11,794  
Doubtful
     -       -       -       -       -       -       -       -  
Total net loans and leases
  
$
191,472
    
$
384,547
    
$
409,518
    
$
302,752
    
$
111,345
    
$
593,305
    
$
1,498,784
    
$
3,491,723
  
Total current-period gross charge-offs
   $ 32     $ -     $ -     $ -     $ -     $ -     $ -     $ 32  

Certain directors and executive officers of the Company are defined as related parties. These related parties, including their immediate families and companies in which they are principal owners, were loan customers of the Bank during the six months ended June 30, 2023 and year ended December 31, 2022. Such loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with borrowers not related to the Company. These loans did not involve more than the normal risk of collection or have other unfavorable features. A summary of the changes in those loans is as follows:

   
June 30,
    
December 31,
  
(Dollars in thousands)
  
2023
    
2022
  

           
Balance at beginning of the period
  
$
17,521
    
$
18,128
  
New loans or advances during year
    
1,681
      
523
  
Repayments
    
(579
)
    
(1,130
)
Balance at end of period
  
$
18,623
    
$
17,521
  



A loan or lease is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. When management determines that foreclosure is probable, expected credit losses for collateral dependent loans or leases are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. The collateral on the loans and leases is a significant portion of what secures the collateral dependent loans or leases and significant changes to the fair value of the collateral can impact the ACL. During the six months ended June 30, 2023, there were no significant changes to the collateral that secures the collateral dependent loans, whether due to general deterioration or with credit quality indicators like appraisal value. The following tables present the amortized cost basis for collateral dependent loans and leases by type as of June 30, 2023 and December 31, 2022, respectively:
   
June 30, 2023
  
(Dollars in thousands)
  
Real Estate
    
Vehicles and
Equipment
    
Total
  
Collateral dependent loans and leases
                  
Real estate:
                  
Commercial
  
$
1,471
    
$
-
    
$
1,471
  
Agricultural
    
10,717
      
-
      
10,717
  
Residential and home equity
    
1,649
      
-
      
1,649
  
Construction
    
-
      
-
      
-
  
Total real estate
    
13,837
      
-
      
13,837
  
Commercial & industrial
    
-
      
-
      
-
  
Agricultural
    
-
      
9
      
9
  
Commercial leases
    
-
      
-
      
-
  
Consumer and other
    
-
      
184
      
184
  
Total gross loans and leases
  
$
13,837
    
$
193
    
$
14,030
  


   
December 31, 2022
  
(Dollars in thousands)
  
Real Estate
    
Vehicles and
Equipment
    
Total
  
Collateral dependent loans and leases
                  
Real estate:
                  
Commercial
  
$
1,114
    
$
-
    
$
1,114
  
Agricultural
    
11,035
      
-
      
11,035
  
Residential and home equity
    
2,153
      
-
      
2,153
  
Construction
    
-
      
-
      
-
  
Total real estate
    
14,302
      
-
      
14,302
  
Commercial & industrial
    
-
      
-
      
-
  
Agricultural
    
-
      
13
      
13
  
Commercial leases
    
-
      
-
      
-
  
Consumer and other
    
-
      
158
      
158
  
Total gross loans and leases
  
$
14,302
    
$
171
    
$
14,473
  

 

Changes in the allowance for credit losses are as follows:

   
For the Three Months Ended June 30, 2023
  
(Dollars in thousands)
  
Commercial &
Agricultural
R/E
    
Construction
    
Residential &
Home Equity
    
Commercial
&
Agricultural
    
Commercial
Leases
    
Consumer
& Other
    
Total
  
Allowance for credit losses:
                                          
Balance at beginning of period
   $ 32,694     $ 2,785     $ 7,334     $ 23,888     $ 1,720     $ 152     $ 68,573  
Provision / (recapture) for credit losses
     2,001       410       (176 )     285       (63 )
     43       2,500  
Charge-offs
     -       -       -       -       -       (9 )     (9 )
Recoveries
     -       -       21       21       -       6       48  
Net (charge-offs) / recoveries
     -       -       21       21       -       (3 )     39  
Balance at end of period
   $ 34,695     $ 3,195     $ 7,179     $ 24,194     $ 1,657     $ 192     $ 71,112  

   
For the Three Months Ended June 30, 2022
  
(Dollars in thousands)
  
Commercial &
Agricultural
R/E
    
Construction
    
Residential &
Home Equity
    
Commercial
&
Agricultural
    
Commercial
Leases
    
Consumer
& Other
    
Total
  
Allowance for credit losses:
                                          
Balance at beginning
   $ 32,511     $ 3,777     $ 6,759     $ 16,098     $ 1,466     $ 421     $ 61,032  
Provision / (recapture) for credit losses
     2,205       (901 )     10       (131 )     179       (255 )     1,107  
Charge-offs
     -       -       -       (276 )     -       (9 )     (285 )
Recoveries
     -       -       105       117       -       4       226  
Net (charge-offs) / recoveries
     -       -       105       (159 )     -       (5 )     (59 )
Balance at end of period
   $ 34,716     $ 2,876     $ 6,874     $ 15,808     $ 1,645     $ 161     $ 62,080  

   
For the Six Months Ended June 30, 2023
  
(Dollars in thousands)
  
Commercial &
Agricultural
R/E
    
Construction
    
Residential &
Home Equity
    
Commercial
&
Agricultural
    
Commercial
Leases
    
Consumer
& Other
    
Total
  
Allowance for credit losses:
                                          
Balance at beginning of period
   $ 32,551     $ 3,026     $ 7,508     $ 21,705     $ 1,924     $ 171     $ 66,885  
Provision / (recapture) for credit losses
     1,974       169       (346 )     2,448       (267 )     22       4,000  
Charge-offs
     -       -       (14 )     -       -       (18 )     (32 )
Recoveries
     170       -       31       41       -       17       259  
Net (charge-offs) / recoveries
     170       -       17       41       -       (1 )     227  
Balance at end of period
   $ 34,695     $ 3,195     $ 7,179     $ 24,194     $ 1,657     $ 192     $ 71,112  

   
For the Six Months Ended June 30, 2022
  
(Dollars in thousands)
  
Commercial &
Agricultural
R/E
    
Construction
    
Residential &
Home Equity
    
Commercial
&
Agricultural
    
Commercial
Leases
    
Consumer
& Other
    
Total
  
Allowance for credit losses:
                                          
Balance at beginning of period
   $ 38,149     $ 1,456     $ 2,847     $ 16,954     $ 938     $ 663     $ 61,007  
Impact of Adopting ASC 326
    (6,190 )     1,855       3,032       826       629       (152 )     -  
Provision / (recapture) for credit losses
     2,757       (435 )     876       (1,831 )     78       (338 )     1,107  
Charge-offs
     -       -       -       (276 )     -       (18 )     (294 )
Recoveries
     -       -       119       135       -       6       260  
Net (charge-offs) / recoveries
     -       -       119       (141 )     -       (12 )     (34 )
Balance at end of period
   $ 34,716     $ 2,876     $ 6,874     $ 15,808     $ 1,645     $ 161     $ 62,080