XML 24 R14.htm IDEA: XBRL DOCUMENT v3.23.1
Loans
 3 Months Ended
Mar. 31, 2023
Receivables [Abstract]  
Loans Loans
 
Loans were comprised of the following classifications:
 March 31,
2023		December 31,
2022
Commercial:
Commercial and Industrial Loans$608,870 $620,106 
Commercial Real Estate Loans2,000,237 1,966,884 
Agricultural Loans378,587 417,413 
Leases58,436 56,396 
Retail:
Home Equity Loans277,576 279,748 
Consumer Loans80,502 79,904 
Credit Cards18,320 17,512 
Residential Mortgage Loans350,338 350,682 
Subtotal3,772,866 3,788,645 
Less: Unearned Income(3,994)(3,711)
Allowance for Credit Losses(44,315)(44,168)
Loans, net$3,724,557 $3,740,766 

The table above includes $18,310 and $21,149 of purchase credit deteriorated loans as of March 31, 2023 and December 31, 2022, respectively.
Allowance for Credit Losses for Loans

The following tables present the activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2023 and 2022:

March 31, 2023Commercial and Industrial
Loans		Commercial Real Estate LoansAgricultural
Loans		LeasesConsumer LoansHome Equity LoansCredit CardsResidential Mortgage LoansUnallocatedTotal
Allowance for Credit Losses:
Beginning balance$13,749 $21,598 $4,188 $209 $595 $1,344 $257 $2,228 $— $44,168 
Provision (Benefit) for credit loss expense501 402 (301)18 226 54 125 75 — 1,100 
Loans charged-off(733)— — — (345)(14)(120)(26)— (1,238)
Recoveries collected55 62 — — 133 31 1 3 — 285 
Total ending allowance balance$13,572 $22,062 $3,887 $227 $609 $1,415 $263 $2,280 $— $44,315 
March 31, 2022Commercial and Industrial
Loans		Commercial Real Estate LoansAgricultural
Loans		LeasesConsumer LoansHome Equity LoansCredit CardsResidential Mortgage LoansUnallocatedTotal
Allowance for Credit Losses:
Beginning balance$9,554 $19,245 $4,505 $200 $507 $1,061 $240 $1,705 $— $37,017 
Acquisition of Citizens Union Bank of Shelbyville, KY376 1,945 689 — 2 — — 105 — 3,117 
Provision (Benefit) for credit loss expense2,788 2,095 (435)(4)225 183 7 341 — 5,200 
Loans charged-off(5)(78)— — (210)(37)(39)— — (369)
Recoveries collected7 10 — — 92 — 4 — — 113 
Total ending allowance balance$12,720 $23,217 $4,759 $196 $616 $1,207 $212 $2,151 $— $45,078 
The Company utilizes the Static Pool methodology in determining expected future credit losses. Static pool analysis means segmenting and tracking loans over a period of time based on similar risk characteristics such as loan structure, collateral type, industry of borrower and concentrations, contractual terms and credit risk indicators. Static pool calculates a loss rate on a closed pool of loans that existed on a specified start date based upon the remaining life of each segment.

The Company’s expected loss estimate is anchored in historical credit loss experience, with an emphasis on all available portfolio data. The Company's historical look-back period includes January 2014 through the current period, on a monthly basis.

Qualitative reserves reflect management’s overall estimate of the extent to which current expected credit losses on collectively evaluated loans will differ from historical loss experience. The analysis takes into consideration industry and collateral concentrations, acquired loan portfolio characteristics and other credit-related analytics as deemed appropriate. Management attempts to quantify qualitative reserves whenever possible.
The Company estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for changes in underwriting standards, portfolio mix, delinquency level, changes in environmental conditions, unemployment rates, risk classifications and collateral values. The allowance for credit losses is measured on a collective (pooled) basis when similar risk characteristics exist. Based on the potential increased losses related to the advancing stress on the economy as a result of inflationary pressures, rising interest rates and financial market volatility, the Company has considered this loss experience may align with loss experience from the recessionary period from 2008-2011 and qualitative adjustments have been made accordingly.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation. When the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date adjusted for selling costs.

For the three months ended March 31, 2023, the allowance for credit losses remained constant. Key indicators utilized in forecasting for the allowance calculations include unemployment rates and gross domestic product. There has been some improvement in these factors over previous periods; however, rising interest rates and the expanded inflationary impact on consumer discretionary spending were considered in the qualitative factors to determine the allowance for credit losses.

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 amortized cost in non-accrual loans and loans past due over 89 days still accruing by class of loans as of March 31, 2023 and December 31, 2022:
March 31, 2023
Non-Accrual With No Allowance for Credit Loss (1)
Total Non-AccrualLoans Past Due Over 89 Days Still Accruing
Commercial and Industrial Loans$1,384 $8,583 $— 
Commercial Real Estate Loans276 1,996 517 
Agricultural Loans956 1,312 581 
Leases— — — 
Home Equity Loans555 665 — 
Consumer Loans6 14 — 
Credit Cards145 145 — 
Residential Mortgage Loans515 780 — 
Total$3,837 $13,495 $1,098 
(1) Non-accrual loans with no allowance for credit loss and are also included in Total Non-Accrual loans of $13,495.
Interest income on non-accrual loans recognized during the three months ended March 31, 2023 totaled $16.
December 31, 2022
Non-Accrual With No Allowance for Credit Loss (1)
Total Non-AccrualLoans Past Due Over 89 Days Still Accruing
Commercial and Industrial Loans$1,142 $7,936 $1,427 
Commercial Real Estate Loans49 1,950 — 
Agricultural Loans994 1,062 — 
Leases— — — 
Home Equity Loans262 310 — 
Consumer Loans240 254 — 
Credit Cards146 146 — 
Residential Mortgage Loans676 1,230 — 
Total$3,509 $12,888 $1,427 
(1) Includes non-accrual loans with no allowance for credit loss and are also included in Total Non-Accrual loans of $12,888.

Interest income on non-accrual loans recognized during the year ended December 31, 2022 totaled $32.
The following tables present the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2023 and December 31, 2022:
March 31, 2023Real EstateEquipmentAccounts ReceivableOtherTotal
Commercial and Industrial Loans$2,079 $962 $242 $6,803 $10,086 
Commercial Real Estate Loans11,612 36 — — 11,648 
Agricultural Loans4,816 312 — — 5,128 
Leases— — — — — 
Home Equity Loans530 — — — 530 
Consumer Loans8 4 — 3 15 
Credit Cards— — — — — 
Residential Mortgage Loans874 — — — 874 
Total$19,919 $1,314 $242 $6,806 $28,281 

December 31, 2022Real EstateEquipmentAccounts ReceivableOtherTotal
Commercial and Industrial Loans$2,078 $1,219 $272 $5,851 $9,420 
Commercial Real Estate Loans12,192 36 — — 12,228 
Agricultural Loans4,944 318 — — 5,262 
Leases— — — — — 
Home Equity Loans467 — — — 467 
Consumer Loans8 2 — 12 22 
Credit Cards— — — — — 
Residential Mortgage Loans1,060 — — — 1,060 
Total$20,749 $1,575 $272 $5,863 $28,459 

The following tables present the aging of the amortized cost basis in past due loans by class of loans as of March 31, 2023 and December 31, 2022:
March 31, 202330-59 Days Past Due60-89 Days Past DueGreater Than 89 Days Past DueTotal
Past Due		Loans Not Past DueTotal
Commercial and Industrial Loans$1,165 $221 $6,916 $8,302 $600,568 $608,870 
Commercial Real Estate Loans1,870 121 1,363 3,354 1,996,883 2,000,237 
Agricultural Loans1,465 69 1,322 2,856 375,731 378,587 
Leases— — — — 58,436 58,436 
Home Equity Loans1,571 230 665 2,466 275,110 277,576 
Consumer Loans255 51 13 319 80,183 80,502 
Credit Cards150 39 145 334 17,986 18,320 
Residential Mortgage Loans5,437 201 552 6,190 344,148 350,338 
Total$11,913 $932 $10,976 $23,821 $3,749,045 $3,772,866 
December 31, 202230-59 Days Past Due60-89 Days Past DueGreater Than 89 Days Past DueTotal
Past Due		Loans Not Past DueTotal
Commercial and Industrial Loans$268 $681 $8,285 $9,234 $610,872 $620,106 
Commercial Real Estate Loans1,617 14 616 2,247 1,964,637 1,966,884 
Agricultural Loans343 — 123 466 416,947 417,413 
Leases— — — — 56,396 56,396 
Home Equity Loans1,770 140 310 2,220 277,528 279,748 
Consumer Loans219 64 252 535 79,369 79,904 
Credit Cards86 24 146 256 17,256 17,512 
Residential Mortgage Loans6,330 2,783 1,051 10,164 340,518 350,682 
Total$10,633 $3,706 $10,783 $25,122 $3,763,523 $3,788,645 

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

Effective January 1, 2023, the Company prospectively adopted ASU 2022-02, which eliminated the accounting for troubled debt restructurings while establishing a new standard for the treatment of modifications made to borrowers experiencing financial difficulties. As such, effective with the adoption of the new standard, the Company will not include, prospectively, financial difficulty modifications in its presentation of nonperforming loans, nonperforming assets or classified assets. Prior period data, which included troubled debt restructurings, has not been adjusted.

The Company’s loan modifications for borrowers experiencing financial difficulties will typically include one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. No modification in 2023 resulted in the permanent reduction of the recorded investment in the loan.

During the three months ended March 31, 2023, the Company had no modified loans made to borrowers experiencing financial difficulty. There were no modified loans that had a payment default during the three months ended March 31, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty. The Company considers a loan to be in payment default once it is 30 days contractually past due under the modified terms.
Troubled Debt Restructurings Disclosures Prior to Adoption of ASU 2022-02 
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.

As of December 31, 2022, the Company had no troubled debt restructurings. The Company had no specific allocation of allowance for these loans at December 31, 2022.
  
The Company had not committed to lending any additional amounts as of December 31, 2022 to customers with outstanding loans that are classified as troubled debt restructurings.

For the year ended December 31, 2022, 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 year ended December 31, 2022.

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 analysis performed at March 31, 2023 and December 31, 2022, the risk category of loans by class of loans is as follows:
Term Loans Amortized Cost Basis by Origination Year
As of March 31, 202320232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Commercial and Industrial:
Risk Rating
Pass$23,934 $151,024 $103,507 $36,957 $42,665 $64,882 $155,521 $578,490 
Special Mention— 55 574 713 673 1,649 1,990 5,654 
Substandard— 1,171 5,403 479 1,223 2,425 14,025 24,726 
Doubtful— — — — — — — — 
Total Commercial & Industrial Loans$23,934 $152,250 $109,484 $38,149 $44,561 $68,956 $171,536 $608,870 
Current Period Gross Charge-Offs$— $520 $32 $30 $— $50 $101 $733 
Commercial Real Estate:
Risk Rating
Pass$64,742 $414,758 $488,827 $249,845 $158,968 $530,615 $33,620 $1,941,375 
Special Mention— 3,953 1,413 4,816 133 35,707 — 46,022 
Substandard— 210 5,131 551 1,398 5,438 112 12,840 
Doubtful— — — — — — — — 
Total Commercial Real Estate Loans$64,742 $418,921 $495,371 $255,212 $160,499 $571,760 $33,732 $2,000,237 
Current Period Gross Charge-Offs$— $— $— $— $— $— $— $— 
Agricultural:
Risk Rating
Pass$10,620 $61,039 $45,959 $45,512 $24,363 $109,918 $47,769 $345,180 
Special Mention1,608 333 833 5,991 2,837 12,289 3,139 27,030 
Substandard— — 208 625 419 5,100 25 6,377 
Doubtful— — — — — — — — 
Total Agricultural Loans$12,228 $61,372 $47,000 $52,128 $27,619 $127,307 $50,933 $378,587 
Current Period Gross Charge-Offs$— $— $— $— $— $— $— $— 
Leases:
Risk Rating
Pass$8,085 $8,904 $13,392 $18,227 $7,050 $2,778 $— $58,436 
Special Mention— — — — — — — — 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total Leases$8,085 $8,904 $13,392 $18,227 $7,050 $2,778 $— $58,436 
Current Period Gross Charge-Offs$— $— $— $— $— $— $— $— 
Term Loans Amortized Cost Basis by Origination Year
As of December 31, 202220222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Commercial and Industrial:
Risk Rating
Pass$156,318 $117,648 $39,949 $46,505 $18,423 $51,482 $154,203 $584,528 
Special Mention56 148 577 78 551 2,346 1,672 5,428 
Substandard1,714 5,629 849 1,304 1,028 2,237 17,389 30,150 
Doubtful— — — — — — — — 
Total Commercial & Industrial Loans$158,088 $123,425 $41,375 $47,887 $20,002 $56,065 $173,264 $620,106 
Commercial Real Estate:
Risk Rating
Pass$398,631 $490,747 $261,462 $162,701 $129,151 $427,433 $35,163 $1,905,288 
Special Mention3,982 1,568 4,612 135 13,689 25,371 — 49,357 
Substandard— 4,628 489 1,415 979 4,728 — 12,239 
Doubtful— — — — — — — — 
Total Commercial Real Estate Loans$402,613 $496,943 $266,563 $164,251 $143,819 $457,532 $35,163 $1,966,884 
Agricultural:
Risk Rating
Pass$62,673 $47,682 $47,355 $25,431 $21,728 $92,344 $83,862 $381,075 
Special Mention634 842 6,066 4,149 2,355 11,440 4,310 29,796 
Substandard— 210 628 429 85 5,190 — 6,542 
Doubtful— — — — — — — — 
Total Agricultural Loans$63,307 $48,734 $54,049 $30,009 $24,168 $108,974 $88,172 $417,413 
Leases:
Risk Rating
Pass$20,057 $14,461 $9,648 $8,901 $1,851 $1,478 $— $56,396 
Special Mention— — — — — — — — 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total Leases$20,057 $14,461 $9,648 $8,901 $1,851 $1,478 $— $56,396 
The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses. For residential and consumer 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 tables present the amortized cost in residential, home equity and consumer loans based on payment activity.
Term Loans Amortized Cost Basis by Origination Year
As of March 31, 202320232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Consumer:
Payment performance
Performing$13,674 $38,471 $16,603 $4,811 $1,969 $2,751 $2,209 $80,488 
Nonperforming— 6 4 3 — 1 — 14 
Total Consumer Loans$13,674 $38,477 $16,607 $4,814 $1,969 $2,752 $2,209 $80,502 
Current Period Gross Charge-Offs$179 $126 $20 $16 $3 $1 $— $345 
Home Equity:
Payment performance
Performing$— $74 $153 $91 $— $861 $275,732 $276,911 
Nonperforming— 40 271 — 68 223 63 665 
Total Home Equity Loans$— $114 $424 $91 $68 $1,084 $275,795 $277,576 
Current Period Gross Charge-Offs$— $— $— $— $— $4 $10 $14 
Residential Mortgage:
Payment performance
Performing$12,701 $69,799 $93,206 $44,964 $19,267 $109,621 $— $349,558 
Nonperforming— — 140 208 109 323 — 780 
Total Residential Mortgage Loans$12,701 $69,799 $93,346 $45,172 $19,376 $109,944 $— $350,338 
Current Period Gross Charge-Offs$— $— $21 $5 $— $— $— $26 
Term Loans Amortized Cost Basis by Origination Year
As of December 31, 202220222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Consumer:
Payment performance
Performing$42,685 $22,708 $5,610 $2,394 $1,543 $1,553 $3,157 $79,650 
Nonperforming3 19 212 8 2 10 — 254 
Total Consumer Loans$42,688 $22,727 $5,822 $2,402 $1,545 $1,563 $3,157 $79,904 
Home Equity:
Payment performance
Performing$63 $— $— $— $— $591 $278,784 $279,438 
Nonperforming— 20 — — 19 1 270 310 
Total Home Equity Loans$63 $20 $— $— $19 $592 $279,054 $279,748 
Residential Mortgage:
Payment performance
Performing$69,982 $97,176 $46,851 $20,080 $16,664 $98,699 $— $349,452 
Nonperforming— 161 253 — 78 738 — 1,230 
Total Residential Mortgage Loans$69,982 $97,337 $47,104 $20,080 $16,742 $99,437 $— $350,682 

The Company considers the performance of the loan portfolio and its impact on the allowance for credit loan losses. For certain retail 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 credit cards based on payment activity:
Credit CardsMarch 31, 2023December 31, 2022
   Performing$18,175 $17,366 
   Nonperforming145 146 
      Total$18,320 $17,512 

The following tables present loans purchased and/or sold during the year by portfolio segment and excludes the business combination activity:
March 31, 2023Commercial and Industrial LoansCommercial Real Estate LoansAgricultural LoansLeasesConsumer LoansHome Equity LoansCredit CardsResidential Mortgage LoansTotal
   Purchases$— $— $— $— $— $— $— $— $— 
   Sales— — — — — — — — — 
December 31, 2022Commercial and Industrial LoansCommercial Real Estate LoansAgricultural LoansLeasesConsumer LoansHome Equity LoansCredit CardsResidential Mortgage LoansTotal
   Purchases$522 $411 $— $— $— $— $— $— $933 
   Sales— 3,819 97 — — — — — 3,916