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Loans and Leases

12 Months Ended

Dec. 31, 2023

Note 4—Loans and Leases

Loans and leases as of the dates indicated consisted of the following:

	December 31,
(Dollars in thousands)	2023			2022
Loans and leases held-for-investment, net
Real estate:
Commercial	$	1,323,038		$	1,328,691
Agricultural		742,009			726,938
Residential and home equity		399,982			387,753
Construction		212,362			166,538
Total real estate		2,677,391			2,609,920
Commercial & industrial		499,373			478,758
Agricultural		313,737			314,525
Commercial leases		169,684			112,629
Consumer and other		5,212			5,886
Total gross loans and leases		3,665,397			3,521,718
Unearned income		(10,708	)		(9,357	)
Total net loans and leases		3,654,689			3,512,361
Allowance for credit losses		(74,965	)		(66,885	)
Total loans and leases held-for-investment, net	$	3,579,724		$	3,445,476

At December 31, 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 $1.5 billion, respectively. The borrowing capacity on these loans was $758.3 million from FHLB and $1.1 billion from the FRB at December 31, 2023.

The following tables show an aging analysis of the loan and lease portfolio, net of unearned income, by the time past due at December 31, 2023 and 2022:

	December 31, 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	$	1,314,928	$	-	$	-	$	-	$	-	$	1,314,928
Agricultural		742,009		-		-		-		-		742,009
Residential and home equity		399,946		36		-		-		36		399,982
Construction		212,362		-		-		-		-		212,362
Total real estate		2,669,245		36		-		-		36		2,669,281
Commercial & industrial		499,341		32		-		-		32		499,373
Agricultural		313,737		-		-		-		-		313,737
Commercial leases		167,086		-		-		-		-		167,086
Consumer and other		5,209		3		-		-		3		5,212
Total loans and leases, net	$	3,654,618	$	71	$	-	$	-	$	71	$	3,654,689

	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:

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

When borrowers are experiencing financial difficulty, the Company may agree to modify the contractual terms of a loan to a borrower in order to assist the borrower in repaying principal and interest owed to the Company.

The Company’s modifications of loans to borrowers experiencing financial difficulty are generally in the form of term extensions, repayment plans, payment deferrals, forbearance agreements, interest rate reductions, forgiveness of interest and/or fees, or any combination thereof. Commercial loans modified to borrowers experiencing financial difficulty are primarily loans that are substandard or non-accrual, where the maturity date was extended. Modifications on personal real estate loans are primarily those placed on forbearance plans, repayment plans, or deferral plans where monthly payments are suspended for a period of time or past due amounts are paid off over a certain period of time in the future or set up as a balloon payment at maturity. Modifications to certain credit card and other small consumer loans are often modified under debt counseling programs that can reduce the contractual rate or, in certain instances, forgive certain fees and interest charges. Other consumer loans modified to borrowers experiencing financial difficulty consist of various other workout arrangements with consumer customers.

The following table presents the amortized cost of loans to borrowers experiencing financial difficulty by portfolio segment and type of modification during the period presented.

	December 31, 2023
	Amortized cost associated with the following modification types:
(Dollars in thousands)	Interest Rate reduction		Maturity or term extension		Principal foregiveness		Payment deferral		Multiple modification types¹		Total²		Percentage of total loans³
Loans and leases held-for-investment, net
Real estate:
Commercial	$	-	$	1,600	$	-	$	-	$	-	$	1,600		0.12	%
Agricultural		-		-		-		-		-		-		0.00	%
Residential and home equity		-		-		-		-		121		121		0.03	%
Construction		-		-		-		-		-		-		0.00	%
Total real estate		-		1,600		-		-		121		1,721		0.06	%
Commercial & industrial		-		4,669		-		-		-		4,669		0.93	%
Agricultural		-		-		-		-		-		-		0.00	%
Commercial leases		-		-		-		-		-		-		0.00	%
Consumer and other		-		-		-		-		-		-		0.00	%
Total	$	-	$	6,269	$	-	$	-	$	121	$	6,390		0.17	%

During the twelve months ended December 31, 2023, we had one residential real estate loan that had the contractual interest rate decreased by 1.00% and the contractual term was extended by 120 months. In addition, we had an additional borrower with one commercial real estate loan that the contractual term was extended by 119 months, and two commercial & industrial loans that contractual term was extended by eleven months.

We closely monitor the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of the modification efforts. The modified loans presented in the table above were current and had no loss exposure as of December 31, 2023.

A payment default is defined as a loan having a payment past due 90 days or more after a modification took place. There were no loans that were modified within the last 12 months that had a payment default during the twelve months ended December 31, 2023.

The effect of modifications made to borrowers experiencing financial difficulty is already included in the ACL because of the measurement methodologies used to estimate the ACL, therefore, a change to the ACL is generally not recorded upon modification. If principal forgiveness is provided, that portion of the loan will be charged-off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the ACL. An assessment of whether the borrower is experiencing financial difficulty is made on the date of a modification.

The following table lists total troubled debt restructured loans that the Company is either accruing or not accruing interest by loan category at December 31, 2022, prior to the adoption of ASU 2022-02:

(Dollars in thousands)	December 31, 2022
Troubled debt restructured loans and leases:
Accruing TDR loans and leases
Real estate:
Commercial	$	-
Agricultural		-
Residential and home equity		1,305
Construction		-
Total real estate		1,305
Commercial & industrial		6
Agricultural		-
Commercial leases		-
Consumer and other		-
Subtotal		1,311
Non-accruing TDR loans and leases
Accruing TDR loans and leases
Real estate:	$	-
Commercial		-
Agricultural		-
Residential and home equity		-
Total real estate		-
Commercial & industrial		-
Agricultural		-
Commercial leases		-
Consumer and other		-
Subtotal		-
Total TDR loans and leases	$	1,311

The following table summarizes TDRs outstanding by year of occurrence:

	December 31, 2022
(Dollars in thousands)	# of Accruing TDR		$ of Accruing TDR		# of Non-accruing TDR		$ of Non- accruing TDR		# of Total TDR		$ of Total TDR
Loan and lease TDRs
2022		-	$	-		-	$	-		-	$	-
2021		-		-		-		-		-		-
2020		4		257		-		-		4		257
2019		-		-		-		-		-		-
Prior		8		1,054		-		-		8		1,054
Total		12	$	1,311		-	$	-		12	$	1,311

The following table presents the credit risk rating categories for loans and leases held-for-investment (accruing and non-accruing) net of unearned income by loan portfolio segment and class as of the dates indicated.

	December 31, 2023
(Dollars in thousands)	Pass		Special Mention		Sub- standard		Total Loans & Leases		Total Allowance for Credit Losses
Loans and leases held for investment, net
Real estate:
Commercial	$	1,308,717	$	6,211	$	-	$	1,314,928	$	26,093
Agricultural		729,135		12,329		545		742,009		7,744
Residential and home equity		399,217		-		765		399,982		7,770
Construction		212,362		-		-		212,362		4,432
Total real estate		2,649,431		18,540		1,310		2,669,281		46,039
Commercial & industrial		486,439		12,458		476		499,373		13,380
Agricultural		310,496		3,236		5		313,737		8,872
Commercial leases		167,080		6		-		167,086		6,537
Consumer and other		5,036		-		176		5,212		137
Total loans and leases, net	$	3,618,482	$	34,240	$	1,967	$	3,654,689	$	74,965

	December 31, 2022
(Dollars in thousands)	Pass		Special Mention		Sub- standard		Total Loans & Leases		Total Allowance for Loan 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 follows:

	December 31, 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	$	121,418	$	169,171	$	221,708	$	143,502	$	67,505	$	261,344	$	324,069	$	1,308,717
Special mention		-		2,395		-		-		-		2,216		1,600		6,211
Substandard		-		-		-		-		-		-		-		-
Total Commercial	$	121,418	$	171,566	$	221,708	$	143,502	$	67,505	$	263,560	$	325,669	$	1,314,928
Commercial
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Pass	$	37,849	$	71,367	$	40,848	$	50,445	$	12,008	$	165,267	$	351,351	$	729,135
Special mention		-		-		-		594		2,020		9,715		-		12,329
Substandard		-		-		-		-		-		545		-		545
Total Agricultural	$	37,849	$	71,367	$	40,848	$	51,039	$	14,028	$	175,527	$	351,351	$	742,009
Agricultural
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential and home equity
Pass	$	41,173	$	62,505	$	88,559	$	78,810	$	13,299	$	70,339	$	44,532	$	399,217
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		765		-		765
Total Residential and home equity	$	41,173	$	62,505	$	88,559	$	78,810	$	13,299	$	71,104	$	44,532	$	399,982
Residential and home equity
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	14	$	-	$	14

Construction
Pass	$	-	$	2,500	$	-	$	-	$	1,575	$	-	$	208,287	$	212,362
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total construction	$	-	$	2,500	$	-	$	-	$	1,575	$	-	$	208,287	$	212,362
Construction
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Total Real estate	$	200,440	$	307,938	$	351,115	$	273,351	$	96,407	$	510,191	$	929,839	$	2,669,281

Commercial & industrial
Pass	$	49,162	$	25,795	$	21,695	$	7,193	$	4,123	$	6,674	$	371,797	$	486,439
Special mention		2,500		27		4,903		466		-		-		4,562		12,458
Substandard		-		-		-		-		-		476		-		476
Total Commercial & industrial	$	51,662	$	25,822	$	26,598	$	7,659	$	4,123	$	7,150	$	376,359	$	499,373
Commercial & industrial
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Pass	$	3,013	$	4,585	$	2,296	$	688	$	1,026	$	2,116	$	296,772	$	310,496
Special mention		-		52		75		-		-		-		3,109		3,236
Substandard		-		-		-		-		5		-		-		5
Total Agricultural	$	3,013	$	4,637	$	2,371	$	688	$	1,031	$	2,116	$	299,881	$	313,737
Agricultural
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

	December 31, 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
Commercial leases
Pass	$	81,287	$	31,954	$	10,786	$	9,514	$	4,667	$	28,872	$	-	$	167,080
Special mention		-		-		-		-		6		-		-		6
Substandard		-		-		-		-		-		-		-		-
Total Commercial leases	$	81,287	$	31,954	$	10,786	$	9,514	$	4,673	$	28,872	$	-	$	167,086
Commercial leases
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer and other
Pass	$	1,650	$	930	$	375	$	48	$	45	$	1,400	$	588	$	5,036
Special mention		-		-		-		-		-		-		-		-
Substandard		152		-		-		-		-		24		-		176
Total Consumer and other	$	1,802	$	930	$	375	$	48	$	45	$	1,424	$	588	$	5,212
Consumer and other
Current-period gross charge-offs	$	41	$	3	$	-	$	-	$	-	$	2	$	-	$	46
Total net loans and leases
Pass	$	335,552	$	368,807	$	386,267	$	290,200	$	104,248	$	536,012	$	1,597,396	$	3,618,482
Special mention		2,500		2,474		4,978		1,060		2,026		11,931		9,271		34,240
Substandard		152		-		-		-		5		1,810		-		1,967
Total net loans and leases	$	338,204	$	371,281	$	391,245	$	291,260	$	106,279	$	549,753	$	1,606,667	$	3,654,689
Total current-period gross charge-offs	$	41	$	3	$	-	$	-	$	-	$	16	$	-	$	60

	December 31, 2022
	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost		Total
Net loans and leases held for investment
Real estate:
Commercial
Pass	$	194,698	$	234,478	$	150,203	$	71,333	$	85,132	$	218,261	$	360,272	$	1,314,377
Special mention		-		-		-		-		3,820		1,115		600		5,535
Substandard		-		-		-		-		-		402		-		402
Total Commercial	$	194,698	$	234,478	$	150,203	$	71,333	$	88,952	$	219,778	$	360,872	$	1,320,314
Commercial
Current-period gross charge-offs	$	-	$	-	$	170	$	-	$	-	$	-	$	-	$	170

Agricultural
Pass	$	67,044	$	42,546	$	54,893	$	15,074	$	50,186	$	144,052	$	336,132	$	709,927
Special mention		-		-		-		2,636		-		-		8,255		10,891
Substandard		-		-		-		-		111		6,009		-		6,120
Total Agricultural	$	67,044	$	42,546	$	54,893	$	17,710	$	50,297	$	150,061	$	344,387	$	726,938
Agricultural
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential and home equity
Pass	$	66,847	$	96,354	$	86,545	$	14,530	$	6,632	$	76,155	$	40,308	$	387,371
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		300		82		382
Total Residential and home equity	$	66,847	$	96,354	$	86,545	$	14,530	$	6,632	$	76,455	$	40,390	$	387,753
Residential and home equity
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	25	$	-	$	25

Construction
Pass	$	2,000	$	1	$	-	$	1,575	$	-	$	31	$	162,763	$	166,370
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		168		168
Total construction	$	2,000	$	1	$	-	$	1,575	$	-	$	31	$	162,931	$	166,538
Construction
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Total Real estate	$	330,589	$	373,379	$	291,641	$	105,148	$	145,881	$	446,325	$	908,580	$	2,601,543

Commercial & industrial
Pass	$	34,410	$	36,846	$	12,325	$	8,245	$	7,167	$	5,679	$	373,765	$	478,437
Special mention		-		63		-		-		-		-		-		63
Substandard		-		-		-		-		1		5		252		258
Total Commercial & industrial	$	34,410	$	36,909	$	12,325	$	8,245	$	7,168	$	5,684	$	374,017	$	478,758
Commercial & industrial
Current-period gross charge-offs	$	-	$	-	$	-	$	246	$	78	$	-	$	-	$	324

Agricultural
Pass	$	5,378	$	3,083	$	989	$	1,515	$	636	$	2,071	$	295,158	$	308,830
Special mention		-		-		-		-		-		-		5,682		5,682
Substandard		-		-		-		11		2		-		-		13
Total Agricultural	$	5,378	$	3,083	$	989	$	1,526	$	638	$	2,071	$	300,840	$	314,525
Agricultural
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

	December 31, 2022
	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost		Total
Net loans and leases held for investment
Commercial leases
Pass	$	35,689	$	15,874	$	13,050	$	5,904	$	20,560	$	20,491	$	-	$	111,568
Special mention		-		-		-		81		-		-		-		81
Substandard		-		-		-		-		-		-		-		-
Total Commercial leases	$	35,689	$	15,874	$	13,050	$	5,985	$	20,560	$	20,491	$	-	$	111,649
Commercial leases
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer and other
Pass	$	1,476	$	634	$	275	$	176	$	315	$	1,769	$	1,005	$	5,650
Special mention		-		-		-		-		-		-		-		-
Substandard		236		-		-		-		-		-		-		236
Total Consumer and other	$	1,712	$	634	$	275	$	176	$	315	$	1,769	$	1,005	$	5,886
Consumer and other
Current-period gross charge-offs	$	40	$	6	$	7	$	1	$	4	$	4	$	-	$	62
Total net loans and leases
Pass	$	407,542	$	429,816	$	318,280	$	118,352	$	170,628	$	468,509	$	1,569,403	$	3,482,530
Special mention		-		63		-		2,717		3,820		1,115		14,537	$	22,252
Substandard		236		-		-		11		114		6,716		502	$	7,579
Total net loans and leases	$	407,778	$	429,879	$	318,280	$	121,080	$	174,562	$	476,340	$	1,584,442	$	3,512,361
Total current-period gross charge-offs	$	40	$	6	$	177	$	247	$	82	$	29	$	-	$	581

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 twelve months ended December 31, 2023 and 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 collectibility or have other unfavorable features. A summary of the changes in those loans is as follows:

	December 31,
(Dollars in thousands)	2023			2022

Balance at beginning of the period	$	17,521		$	18,128
New loans or advances during year		1,706			523
Repayments		(2,192	)		(1,130	)
Balance at end of period	$	17,035		$	17,521

Changes in the allowance for credit losses are as follows:

	Year Ended December 31, 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 year	$	32,551	$	3,026	$	7,508		$	21,705	$	1,924	$	171		$	66,885
Provision for/(recapture of) credit losses		1,116		1,406		211			423		4,613		(19	)		7,750
Charge-offs		-		-		(14	)		-		-		(46	)		(60	)
Recoveries		170		-		65			124		-		31			390
Net (charge-offs) / recoveries		170		-		51			124		-		(15	)		330
Balance at end of year	$	33,837	$	4,432	$	7,770		$	22,252	$	6,537	$	137		$	74,965

	Year Ended December 31, 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 year	$	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 for/(recapture of) credit losses		762			(285	)		1,523			4,001			357		(301	)		6,057
Charge-offs		(170	)		-			(25	)		(324	)		-		(62	)		(581	)
Recoveries		-			-			131			248			-		23			402
Net (charge-offs) / recoveries		(170	)		-			106			(76	)		-		(39	)		(179	)
Balance at end of year	$	32,551		$	3,026		$	7,508		$	21,705		$	1,924	$	171		$	66,885

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 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 the dates indicated:

	December 31, 2023
(Dollars in thousands)	Real Estate		Vehicles and Equipment		Total
Collateral dependent loans and leases
Real estate:
Commercial	$	1,517	$	-	$	1,517
Agricultural		6,118		-		6,118
Residential and home equity		1,607		-		1,607
Construction		-		-		-
Total Real estate		9,242		-		9,242
Commercial & industrial		-		473		473
Agricultural		-		5		5
Commercial leases		-		-		-
Consumer and other		-		164		164
Total gross loans and leases	$	9,242	$	642	$	9,884

	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