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Loans
 12 Months Ended
Dec. 31, 2018
Receivables [Abstract]  
Loans
Loans
 
Loans were comprised of the following classifications at December 31: 
 
 
2018
 
2017
Commercial:
 
 

 
 

Commercial and Industrial Loans and Leases
 
$
543,761

 
$
486,668

Commercial Real Estate Loans
 
1,208,646

 
926,729

Agricultural Loans
 
365,208

 
333,227

Retail:
 
 

 
 

Home Equity Loans
 
207,987

 
152,187

Consumer Loans
 
77,547

 
67,475

Residential Mortgage Loans
 
328,592

 
178,733

Subtotal
 
2,731,741

 
2,145,019

Less: Unearned Income
 
(3,682
)
 
(3,381
)
Allowance for Loan Losses
 
(15,823
)
 
(15,694
)
Loans, net
 
$
2,712,236

 
$
2,125,944



As further described in Note 18, during 2018 the Company acquired loans at fair value from two separate acquisitions. The table below summarizes the loans acquired in the current year.
 
 
Acquired Loan Balance
 
Fair Value Discounts
 
Fair Value
 
 
 
 
 
 
 
Branch Acquisition
 
$
119,176

 
$
(2,871
)
 
$
116,305

Bank Acquisition
 
402,234

 
(12,128
)
 
390,106


The table below summarizes the remaining carrying amount of acquired loans included in the December 31, 2018 table above.
 
 
Loan Balance at December 31, 2018
 
Fair Value Discount at December 31, 2018
 
 
 
 
 
Branch Acquisition
 
$
108,505

 
$
(2,491
)
Bank Acquisition
 
385,557

 
(11,063
)


The following tables present the activity in the allowance for loan losses by portfolio class for the years ended December 31, 2018, 2017, and 2016: 
 
 
Commercial
and
Industrial
Loans and
Leases
 
Commercial
Real Estate
Loans
 
Agricultural
Loans
 
Home
Equity
Loans
 
Consumer
Loans
 
Residential
Mortgage
Loans
 
Unallocated
 
Total
December 31, 2018
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Beginning Balance
 
$
4,735

 
$
4,591

 
$
4,894

 
$
330

 
$
298

 
$
343

 
$
503

 
$
15,694

Provision for Loan Losses
 
(423
)
 
729

 
862

 
(52
)
 
608

 
167

 
179

 
2,070

Recoveries
 
141

 
20

 
20

 
12

 
375

 
37

 
—

 
605

Loans Charged-off
 
(1,500
)
 
(49
)
 
—

 
(61
)
 
(861
)
 
(75
)
 
—

 
(2,546
)
Ending Balance
 
$
2,953

 
$
5,291

 
$
5,776

 
$
229

 
$
420

 
$
472

 
$
682

 
$
15,823

       
 
 
Commercial
and
Industrial
Loans and
Leases
 
Commercial
Real Estate
Loans
 
Agricultural
Loans
 
Home
Equity
Loans
 
Consumer
Loans
 
Residential
Mortgage
Loans
 
Unallocated
 
Total
December 31, 2017
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Beginning Balance
 
$
3,725

 
$
5,452

 
$
4,094

 
$
283

 
$
235

 
$
329

 
$
690

 
$
14,808

Provision for Loan Losses
 
1,147

 
(689
)
 
840

 
78

 
517

 
44

 
(187
)
 
1,750

Recoveries
 
14

 
48

 
9

 
8

 
272

 
63

 
—

 
414

Loans Charged-off
 
(151
)
 
(220
)
 
(49
)
 
(39
)
 
(726
)
 
(93
)
 
—

 
(1,278
)
Ending Balance
 
$
4,735

 
$
4,591

 
$
4,894

 
$
330

 
$
298

 
$
343

 
$
503

 
$
15,694

      
 
 
Commercial
and
Industrial
Loans and
Leases
 
Commercial
Real Estate
Loans
 
Agricultural
Loans
 
Home
Equity
Loans
 
Consumer
Loans
 
Residential
Mortgage
Loans
 
Unallocated
 
Total
December 31, 2016
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Beginning Balance
 
$
4,242

 
$
6,342

 
$
2,115

 
$
383

 
$
230

 
$
414

 
$
712

 
$
14,438

Provision for Loan Losses
 
(483
)
 
(846
)
 
2,000

 
33

 
273

 
245

 
(22
)
 
1,200

Recoveries
 
32

 
10

 
1

 
3

 
208

 
16

 
—

 
270

Loans Charged-off
 
(66
)
 
(54
)
 
(22
)
 
(136
)
 
(476
)
 
(346
)
 
—

 
(1,100
)
Ending Balance
 
$
3,725

 
$
5,452

 
$
4,094

 
$
283

 
$
235

 
$
329

 
$
690

 
$
14,808


 
In determining the adequacy of the allowance for loan loss, general allocations are made for pools of loans, including non-classified loans, homogeneous portfolios of consumer and residential real estate loans, and loans within certain industry categories believed to present unique risk of loss. General allocations of the allowance are primarily made based on historical averages for loan losses for these portfolios, judgmentally adjusted for current economic factors and portfolio trends. 

Loan impairment is reported when full repayment under the terms of the loan is not expected. This methodology is used for all loans, including loans acquired with deteriorated credit quality if such loans perform worse than what was expected at the time of acquisition. For purchased loans, the assessment is made at the time of acquisition as well as over the life of loan. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate, or at the fair value of collateral if repayment is expected solely from the collateral. Commercial and industrial loans, commercial real estate loans, and agricultural loans are evaluated individually for impairment. Smaller balance homogeneous loans are evaluated for impairment in total. Such loans include real estate loans secured by one-to-four family residences and loans to individuals for household, family and other personal expenditures. Individually evaluated loans on non-accrual are generally considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Specific allocations on impaired loans are determined by comparing the loan balance to the present value of expected cash flows or expected collateral proceeds. Allocations are also applied to categories of loans not considered individually impaired but for which the rate of loss is expected to be greater than historical averages, including non-performing consumer or residential real estate loans. Such allocations are based on past loss experience and information about specific borrower situations and estimated collateral values.

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of December 31, 2018 and 2017:
December 31, 2018
 
Total
 
Commercial
and
Industrial
Loans and Leases
 
Commercial
Real Estate Loans
 
Agricultural Loans
 
Home
Equity Loans
 
Consumer Loans
 
Residential
Mortgage Loans
 
Unallocated
Allowance for Loan Losses:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Ending Allowance Balance Attributable to Loans:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Individually Evaluated for Impairment
 
$
1,823

 
$
143

 
$
1,680

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Collectively Evaluated for Impairment
 
13,992

 
2,810

 
3,608

 
5,776

 
229

 
420

 
467

 
682

Acquired with Deteriorated Credit Quality
 
8

 
—

 
3

 
—

 
—

 
—

 
5

 
—

Total Ending Allowance Balance
 
$
15,823

 
$
2,953

 
$
5,291

 
$
5,776

 
$
229

 
$
420

 
$
472

 
$
682

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Loans Individually Evaluated for Impairment
 
$
9,619

 
$
3,536

 
$
6,083

 
$
—

 
$
—

 
$
—

 
$
—

 
n/m(2)

Loans Collectively Evaluated for Impairment
 
2,722,867

 
540,768

 
1,198,806

 
368,817

 
208,644

 
77,761

 
328,071

 
n/m(2)

Loans Acquired with Deteriorated Credit Quality
 
11,556

 
1,038

 
6,993

 
1,877

 
365

 
—

 
1,283

 
n/m(2)

Total Ending Loans Balance (1)
 
$
2,744,042

 
$
545,342

 
$
1,211,882

 
$
370,694

 
$
209,009

 
$
77,761

 
$
329,354

 
n/m(2)

 
(1) Total recorded investment in loans includes $12,301 in accrued interest.
(2)n/m = not meaningful
December 31, 2017
 
Total
 
Commercial
and
Industrial
Loans and Leases
 
Commercial
Real Estate Loans
 
Agricultural Loans
 
Home
Equity Loans
 
Consumer Loans
 
Residential
Mortgage Loans
 
Unallocated
Allowance for Loan Losses:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Ending Allowance Balance Attributable to Loans:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Individually Evaluated  for Impairment
 
$
2,228

 
$
1,399

 
$
829

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Collectively Evaluated for Impairment
 
13,455

 
3,333

 
3,759

 
4,894

 
330

 
298

 
338

 
503

Acquired with Deteriorated Credit Quality
 
11

 
3

 
3

 
—

 
—

 
—

 
5

 
—

Total Ending Allowance Balance
 
$
15,694

 
$
4,735

 
$
4,591

 
$
4,894

 
$
330

 
$
298

 
$
343

 
$
503

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Loans Individually Evaluated for Impairment
 
$
11,633

 
$
5,918

 
$
5,552

 
$
163

 
$
—

 
$
—

 
$
—

 
n/m(2)

Loans Collectively Evaluated for Impairment
 
2,133,752

 
481,152

 
917,036

 
336,849

 
152,757

 
67,647

 
178,311

 
n/m(2)

Loans Acquired with Deteriorated Credit Quality
 
9,117

 
988

 
6,452

 
789

 
—

 
—

 
888

 
n/m(2)

Total Ending Loans Balance (1)
 
$
2,154,502

 
$
488,058

 
$
929,040

 
$
337,801

 
$
152,757

 
$
67,647

 
$
179,199

 
n/m(2)

 
(1) Total recorded investment in loans includes $9,483 in accrued interest.
(2)n/m = not meaningful

The following tables present loans individually evaluated for impairment by class of loans as of December 31, 2018 and 2017:
 
 
Unpaid
Principal
Balance(1)
 
Recorded
Investment
 
Allowance for
Loan Losses
Allocated
December 31, 2018
 
 

 
 

 
 

With No Related Allowance Recorded:
 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
$
3,721

 
$
1,183

 
$
—

Commercial Real Estate Loans
 
5,828

 
4,383

 
—

Agricultural Loans
 
1,726

 
1,450

 
—

Subtotal
 
11,275

 
7,016

 
—

With An Allowance Recorded:
 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
2,353

 
2,353

 
143

Commercial Real Estate Loans
 
4,404

 
4,212

 
1,683

Agricultural Loans
 
—

 
—

 
—

Subtotal
 
6,757

 
6,565

 
1,826

Total
 
$
18,032

 
$
13,581

 
$
1,826

 
 
 
 
 
 
 
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)
 
$
8,060

 
$
3,958

 
$
—

Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)
 
$
196

 
$
4

 
$
3

 
(1) Unpaid Principal Balance is the remaining contractual payments gross of partial charge-offs and discounts.
 
 
 
Unpaid
Principal
Balance(1)
 
Recorded
Investment
 
Allowance for
Loan Losses
Allocated
December 31, 2017
 
 

 
 

 
 

With No Related Allowance Recorded:
 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
$
1,205

 
$
1,166

 
$
—

Commercial Real Estate Loans
 
1,812

 
1,495

 
—

Agricultural Loans
 
919

 
749

 
—

Subtotal
 
3,936

 
3,410

 
—

With An Allowance Recorded:
 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
4,804

 
4,763

 
1,402

Commercial Real Estate Loans
 
4,489

 
4,465

 
832

Agricultural Loans
 
—

 
—

 
—

Subtotal
 
9,293

 
9,228

 
2,234

Total
 
$
13,229

 
$
12,638

 
$
2,234

 
 
 
 
 
 
 
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)
 
$
1,255

 
$
797

 
$
—

Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)
 
$
252

 
$
208

 
$
6

 
(1) Unpaid Principal Balance is the remaining contractual payments gross of partial charge-offs and discounts.
 
The following tables present loans individually evaluated for impairment by class of loans for the years ended December 31, 2018, 2017 and 2016:
 
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Cash
Basis
Recognized
December 31, 2018
 
 

 
 

 
 

With No Related Allowance Recorded:
 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
$
1,164

 
$
53

 
$
3

Commercial Real Estate Loans
 
2,163

 
80

 
36

Agricultural Loans
 
770

 
—

 
—

Subtotal
 
4,097

 
133

 
39

With An Allowance Recorded:
 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
2,956

 
2

 
9

Commercial Real Estate Loans
 
4,680

 
18

 
—

Agricultural Loans
 
—

 
—

 
—

Subtotal
 
7,636

 
20

 
9

Total
 
$
11,733

 
$
153

 
$
48

 
 
 
 
 
 
 
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)
 
$
868

 
$
21

 
$
—

Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)
 
$
151

 
$
29

 
$
—

 
 
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Cash
Basis
Recognized
December 31, 2017
 
 

 
 

 
 

With No Related Allowance Recorded:
 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
$
635

 
$
27

 
$
2

Commercial Real Estate Loans
 
1,184

 
57

 
29

Agricultural Loans
 
690

 
24

 
16

Subtotal
 
2,509

 
108

 
47

With An Allowance Recorded:
 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
1,986

 
4

 
2

Commercial Real Estate Loans
 
2,842

 
17

 
6

Agricultural Loans
 
363

 
—

 
—

Subtotal
 
5,191

 
21

 
8

Total
 
$
7,700

 
$
129

 
$
55

 
 
 
 
 
 
 
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)
 
$
792

 
$
25

 
$
25

Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)
 
$
238

 
$
19

 
$
7

 
 
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Cash
Basis
Recognized
December 31, 2016
 
 

 
 

 
 

With No Related Allowance Recorded:
 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
$
295

 
$
29

 
$
15

Commercial Real Estate Loans
 
1,688

 
92

 
73

Agricultural Loans
 
461

 
2

 
1

Subtotal
 
2,444

 
123

 
89

With An Allowance Recorded:
 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
102

 
1

 
1

Commercial Real Estate Loans
 
1,587

 
6

 
2

Agricultural Loans
 
249

 
—

 
—

Subtotal
 
1,938

 
7

 
3

Total
 
$
4,382

 
$
130

 
$
92

 
 
 
 
 
 
 
Loans Acquired With Deteriorated Credit Quality With No Related Allowance Recorded (Included in the Total Above)
 
$
489

 
$
21

 
$
10

Loans Acquired With Deteriorated Credit Quality With An Additional Allowance Recorded (Included in the Total Above)
 
$
711

 
$
—

 
$
—


 
All classes of loans, including loans acquired with deteriorated credit quality, are generally placed on non-accrual status when scheduled principal or interest payments are past due for 90 days or more or when the borrower’s ability to repay becomes doubtful. For purchased loans, the determination is made at the time of acquisition as well as over the life of the loan. Uncollected accrued interest for each class of loans is reversed against income at the time a loan is placed on non-accrual. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. All classes of loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans are typically charged-off at 180 days past due, or earlier if deemed uncollectible. Exceptions to the non-accrual and charge-off policies are made when the loan is well secured and in the process of collection.
 
The following tables present the recorded investment in non-accrual loans and loans past due 90 days or more still on accrual by class of loans as of December 31, 2018 and 2017:
 
 
 
 
 
 
Loans Past Due
90 Days or More
 
 
Non-Accrual
 
& Still Accruing
 
 
2018
 
2017
 
2018
 
2017
Commercial and Industrial Loans and Leases
 
$
2,430

 
$
4,753

 
$
—

 
$
—

Commercial Real Estate Loans
 
6,833

 
4,618

 
368

 
474

Agricultural Loans
 
1,449

 
748

 
274

 
268

Home Equity Loans
 
88

 
199

 
—

 
—

Consumer Loans
 
162

 
286

 
—

 
—

Residential Mortgage Loans
 
1,617

 
487

 
—

 
—

Total
 
$
12,579

 
$
11,091

 
$
642

 
$
742

Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)
 
$
4,162

 
$
866

 
$
141

 
$
—

Loans Acquired in Current Year
(Included in the Total Above)
 
$
4,603

 
$
—

 
$
96

 
$
—


 
The following tables present the aging of the recorded investment in past due loans by class of loans as of December 31, 2018 and 2017:
 
 
Total
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
90 Days
or More
Past Due
 
Total
Past Due
 
Loans Not
Past Due
December 31, 2018
 
 

 
 

 
 

 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
$
545,342

 
$
5,414

 
$
183

 
$
72

 
$
5,669

 
$
539,673

Commercial Real Estate Loans
 
1,211,882

 
768

 
705

 
3,032

 
4,505

 
1,207,377

Agricultural Loans
 
370,694

 
563

 
805

 
274

 
1,642

 
369,052

Home Equity Loans
 
209,009

 
471

 
125

 
60

 
656

 
208,353

Consumer Loans
 
77,761

 
971

 
94

 
149

 
1,214

 
76,547

Residential Mortgage Loans
 
329,354

 
4,771

 
1,520

 
1,387

 
7,678

 
321,676

Total (1)
 
$
2,744,042

 
$
12,958

 
$
3,432

 
$
4,974

 
$
21,364

 
$
2,722,678

Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)
 
$
11,556

 
$
448

 
$
885

 
$
1,259

 
$
2,592

 
$
8,964

Loans Acquired in Current Year
(Included in the Total Above)
 
$
481,901

 
$
2,571

 
$
1,620

 
$
2,191

 
$
6,382

 
$
475,519

 
(1) Total recorded investment in loans includes $12,301 in accrued interest.
 
 
 
Total
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
90 Days
or More
Past Due
 
Total
Past Due
 
Loans Not
Past Due
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and Industrial Loans and Leases
 
$
488,058

 
$
209

 
$
1,365

 
$
905

 
$
2,479

 
$
485,579

Commercial Real Estate Loans
 
929,040

 
1,229

 
1,650

 
677

 
3,556

 
925,484

Agricultural Loans
 
337,801

 
27

 
—

 
268

 
295

 
337,506

Home Equity Loans
 
152,757

 
366

 
93

 
199

 
658

 
152,099

Consumer Loans
 
67,647

 
246

 
97

 
286

 
629

 
67,018

Residential Mortgage Loans
 
179,199

 
2,850

 
1,247

 
261

 
4,358

 
174,841

Total (1)
 
$
2,154,502

 
$
4,927

 
$
4,452

 
$
2,596

 
$
11,975

 
$
2,142,527

Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)
 
$
9,117

 
$
342

 
$
74

 
$
27

 
$
443

 
$
8,674

 
(1) Total recorded investment in loans includes $9,483 in accrued interest.
 
Troubled Debt Restructurings:
 
In certain instances, the Company may choose to restructure the contractual terms of loans. A troubled debt restructuring occurs when the Bank grants a concession to the borrower that it would not otherwise consider due to a borrower’s financial difficulty. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without modification. This evaluation is performed under the Company’s internal underwriting policy. The Company uses the same methodology for loans acquired with deteriorated credit quality as for all other loans when determining whether the loan is a troubled debt restructuring.
 
During the year ended December 31, 2018, there were no loans modified as troubled debt restructurings. During the year ended December 31, 2017, there were three loans modified as troubled debt restructurings.
 
The following tables present the recorded investment of troubled debt restructurings by class of loans as of December 31, 2018 and 2017: 
 
 
Total
 
Performing
 
Non-Accrual(1)
December 31, 2018
 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
$
121

 
$
121

 
$
—

Commercial Real Estate Loans
 
—

 
—

 
—

Total
 
$
121

 
$
121

 
$
—

 
 
Total
 
Performing
 
Non-Accrual(1)
December 31, 2017
 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
$
258

 
$
125

 
$
133

Commercial Real Estate Loans
 
24

 
24

 
—

Total
 
$
282

 
$
149

 
$
133

 
(1) The non-accrual troubled debt restructurings are included in the Non-Accrual Loan table presented on a previous page.
 
The Company has not committed to lending any additional amounts as of December 31, 2018 and 2017 to customers with outstanding loans that are classified as troubled debt restructurings.

The following table presents loans by class modified as troubled debt restructurings that occurred during the year ended December 31, 2017:
 
 
Number of Loans
 
Pre-Modification Outstanding Recorded Investment
 
Post-Modification Outstanding Recorded Investment
December 31, 2017
 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
2

 
$
477

 
$
477

Commercial Real Estate Loans
 
1

 
28

 
28

Total
 
3

 
$
505

 
$
505

    
The troubled debt restructurings described above increased the allowance for loan losses by $149 and resulted in charge-offs of $0 during the year ending December 31, 2017.

For the years ended December 31, 2018 and 2016, the Company had no loans modified as troubled debt restructurings. Additionally, there were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the years ended December 31, 2018, 2017 and 2016.

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.
 
Credit Quality Indicators:
 
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company classifies loans as to credit risk by individually analyzing loans. This analysis includes commercial and industrial loans, commercial real estate loans, and agricultural loans with an outstanding balance greater than $250. This analysis is typically performed on at least an annual basis. The Company uses the following definitions for risk ratings:
 
Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
 
Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
 
Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
 
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Based on the most recent analysis performed, the risk category of loans by class of loans is as follows: 
 
 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Total
December 31, 2018
 
 

 
 

 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
$
517,497

 
$
7,541

 
$
20,304

 
$
—

 
$
545,342

Commercial Real Estate Loans
 
1,165,937

 
26,723

 
19,222

 
—

 
1,211,882

Agricultural Loans
 
313,309

 
40,983

 
16,402

 
—

 
370,694

Total
 
$
1,996,743

 
$
75,247

 
$
55,928

 
$
—

 
$
2,127,918

Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)
 
$
—

 
$
1,436

 
$
8,472

 
$
—

 
$
9,908

Loans Acquired in Current Year
(Included in the Total Above)
 
$
250,415

 
$
14,972

 
$
11,521

 
$
—

 
$
276,908

 
 
 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Total
December 31, 2017
 
 

 
 

 
 

 
 

 
 

Commercial and Industrial Loans and Leases
 
$
462,212

 
$
7,901

 
$
17,945

 
$
—

 
$
488,058

Commercial Real Estate Loans
 
894,027

 
18,037

 
16,976

 
—

 
929,040

Agricultural Loans
 
304,032

 
27,288

 
6,481

 
—

 
337,801

Total
 
$
1,660,271

 
$
53,226

 
$
41,402

 
$
—

 
$
1,754,899

Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)
 
$
2,604

 
$
1,647

 
$
3,978

 
$
—

 
$
8,229


 
The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For home equity, consumer and residential mortgage loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in home equity, consumer and residential mortgage loans based on payment activity as of December 31, 2018 and 2017: 
 
 
Home Equity
Loans
 
Consumer
Loans
 
Residential
Mortgage Loans
December 31, 2018
 
 

 
 

 
 

Performing
 
$
208,921

 
$
77,599

 
$
327,737

Nonperforming
 
88

 
162

 
1,617

Total
 
$
209,009

 
$
77,761

 
$
329,354

Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)
 
$
365

 
$
—

 
$
1,283

 
 
 
Home Equity
Loans
 
Consumer
Loans
 
Residential
Mortgage Loans
December 31, 2017
 
 

 
 

 
 

Performing
 
$
152,558

 
$
67,361

 
$
178,712

Nonperforming
 
199

 
286

 
487

Total
 
$
152,757

 
$
67,647

 
$
179,199

Loans Acquired With Deteriorated Credit Quality
(Included in the Total Above)
 
$
—

 
$
—

 
$
888



The following table presents financing receivables purchased and/or sold during the year by portfolio segment:
 
 
Commercial and Industrial Loans and Leases
 
Commercial Real Estate Loans
 
Total
December 31, 2018
 
 
 
 
 
 
Purchases
 
$
—

 
$
1,209

 
$
1,209

Sales
 
—

 
6,000

 
6,000

 
 
Commercial and Industrial Loans and Leases
 
Commercial Real Estate Loans
 
Total
December 31, 2017
 
 
 
 
 
 
Purchases
 
$
800

 
$
4,747

 
$
5,547

Sales
 
—

 
1,106

 
1,106



Contractually required payments receivable of loans purchased with evidence of credit deterioration during the year ended December 31, 2018 are included in the table below. The value of the purchased loans included in the table are as of acquisition date. There were no such loans purchased during the year ended December 31, 2017.
 
 
2018
 
2017
 
 
 
 
 
Commercial and Industrial Loans
 
$
4,245

 
$
—

Commercial Real Estate Loans
 
7,103

 
—

Agricultural Loans
 
1,095

 
—

Home Equity Loans
 
565

 
—

Consumer Loans
 
11

 
—

Residential Mortgage Loans
 
800

 
—

Total
 
$
13,819

 
$
—

 
 
 
 
 
Cash Flows Expected to be Collected at Acquisition
 
$
8,802

 
$
—

Fair Value of Acquired Loans at Acquisition
 
7,702

 
—



The Company has purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The recorded investment of those loans is as follows:
 
 
2018
 
2017
 
2016
 
 
 
 
 
 
 
Commercial and Industrial Loans
 
$
1,038

 
$
988

 
$
1,656

Commercial Real Estate Loans
 
6,993

 
6,452

 
7,688

Agricultural Loans
 
1,877

 
789

 
706

Home Equity Loans
 
365

 
—

 
—

Consumer Loans
 
—

 
—

 
53

Residential Mortgage Loans
 
1,283

 
888

 
945

Total
 
$
11,556

 
$
9,117

 
$
11,048

 
 
 
 
 
 
 
Carrying Amount, Net of Allowance
 
$
11,548

 
$
9,106

 
$
10,943



Accretable yield, or income expected to be collected, is as follows:
 
 
2018
 
2017
 
2016
 
 
 
 
 
 
 
Balance at January 1
 
$
2,734

 
$
2,521

 
$
1,279

New Loans Purchased
 
1,100

 
—

 
1,395

Accretion of Income
 
(944
)
 
(425
)
 
(943
)
Reclassifications from Non-accretable Difference
 
345

 
638

 
985

Charge-off of Accretable Yield
 
(97
)
 
—

 
(195
)
Balance at December 31
 
$
3,138

 
$
2,734

 
$
2,521

 
    
For those purchased loans disclosed above, the Company increased the allowances for loan losses by $33, $11, and $107 during the years ended December 31, 2018, 2017, and 2016. The Company reversed allowances for loan losses of $36, $110, and $2 during the years ended December 31, 2018, 2017, and 2016.

The carrying amount of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction totaled $58 and $14 as of December 31, 2018 and 2017.

Certain directors, executive officers, and principal shareholders of the Company, including their immediate families and companies in which they are principal owners, were loan customers of the Company during 2018. A summary of the activity of these loans follows:
Balance
January 1,
2018
 
Additions
 
Changes in Persons Included
 
Deductions
 
Balance
December 31,
2018
 
 
 
Collected
 
Charged-off
 
 
 
 
 
 
 
 
 
 
 
 
$
15,862

 
$
3,801

 
$
(1,476
)
 
$
(7,129
)
 
$
—

 
$
11,058