Commitments and Contingencies

12 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Financial Instruments with Off-Balance-Sheet Risk

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. They involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments. A summary of the Company’s commitments as of September 30, 2020 and 2019 is as follows.


	September 30,
	2020		2019
	(dollars in thousands)
Commitments to extend credit	$	2,138,138	$	2,229,678
Letters of credit	65,707		68,983

Commitments to extend credit are agreements to lend to a customer provided there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The credit and collateral policy for commitments and letters of credit is comparable to that for granting loans.

Asset Sales

The Bank regularly transfers financial assets as part of its mortgage banking activities. Transfers are recorded as sales when the criteria for surrender of control are met. The Bank has provided guarantees in connection with the sale of loans and has assumed a similar obligation in its acquisitions. The guarantees are generally in the form of asset buy back or make whole provisions that are triggered upon a credit event and remain in effect until the loans are collected. The maximum potential future payment related to these guarantees is not readily determinable because the Company’s obligation under these agreements depends on the occurrence of future events. There were $3.3 million of repurchased loans as of September 30, 2020 and 2019. Incurred losses related to these repurchased loans and guaranteed loans as of September 30, 2020, 2019 and 2018 are not significant.

Financial Instruments with Concentration of Credit Risk by Geographic Location

A substantial portion of the Company’s customers’ ability to honor their contracts is dependent on the economy in Nebraska, northern Missouri, northeastern Kansas, Iowa, southeastern Arizona, central Colorado, southeastern North Dakota, central Minnesota and South Dakota. Although the Company’s loan portfolio is diversified, there is a relationship in these regions between the agricultural economy and the economic performance of loans made to non-agricultural customers. The concentration of credit in the regional agricultural economy is taken into consideration by management in determining the allowance for loan and lease losses.

Lease Commitments

The Company leases several branch locations under terms of operating lease agreements expiring through March 31, 2034. The Company has the option to renew these leases for periods that range from 1 to 15 years. Total lease expense incurred by the Company for these leases was $7.1 million for the fiscal year ended September 30, 2020 and $5.4 million for both of the fiscal years ended September 30, 2019 and 2018.

Approximate future minimum rental payments for operating leases in excess of one year in subsequent fiscal years are as follows.


Fiscal year	Amount
	(dollars in thousands)
2021	$	5,441
2022	4,764
2023	4,212
2024	3,406
2025 and thereafter	7,832
Total	$	25,655

Contingencies

From time to time the Company is a party to various litigation matters and subject to various regulatory matters that arise in the ordinary course of business. The Company establishes reserves for such matters when potential losses become probable and can be reasonably estimated. The Company believes the ultimate resolution of existing litigation and regulatory matters will not have a material adverse effect on the financial condition, results of operations or cash flows. However, changes in circumstances or additional information could result in additional accruals or resolution of these matters in excess of established accruals, which could adversely affect the financial condition, results of operations or cash flows, potentially materially.