10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  ___________ to ___________

Commission file number:  0-12668

Hills Bancorporation

(State or other jurisdiction of incorporation or organization)	I.R.S. Employer Identification No.
Iowa	42-1208067

131 MAIN STREET, HILLS, Iowa 52235

Telephone number: (319) 679-2291

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered

Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes  ☐ No

Indicate by checkmark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). ☑ Yes  ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated Filer	☑
Non-accelerated filer	☐	Small Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes  ☑ No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date.

		SHARES OUTSTANDING
CLASS		July 31, 2022
Common Stock	No par value	9,264,154

HILLS BANCORPORATION

Index to Form 10-Q

Part I

FINANCIAL INFORMATION

		Page
		Number
Item 1.	Financial Statements
	Consolidated balance sheets, June 30, 2022 (unaudited) and December 31, 2021	4
	Consolidated statements of income (unaudited) for three and six months ended June 30, 2022 and 2021	5
	Consolidated statements of comprehensive income (loss) (unaudited) for three and six months ended June 30, 2022 and 2021	6
	Consolidated statements of stockholders' equity (unaudited) for three and six months ended June 30, 2022 and 2021	8
	Consolidated statements of cash flows (unaudited) for three and six months ended June 30, 2022 and 2021	9
	Notes to consolidated financial statements (condensed)	11
Item 2.	Management Discussion and Analysis of Financial Condition and Results of Operations	52
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	69
Item 4.	Controls and Procedures	69
	Part II
	OTHER INFORMATION
Item 1.	Legal proceedings	70
Item 1A.	Risk factors	70
Item 2.	Unregistered sales of equity securities and use of proceeds	71
Item 3.	Defaults upon senior securities	72
Item 4.	Mine safety disclosures	72
Item 5.	Other information	72
Item 6.	Exhibits	73
	Signatures	74

Page 3

HILLS BANCORPORATION CONSOLIDATED BALANCE SHEETS (Amounts In Thousands, Except Share Amounts) 

	June 30, 2022		December 31, 2021
ASSETS	(Unaudited)
Cash and cash equivalents	$	307,493	$	781,918
Investment securities available for sale at fair value (amortized cost June 30, 2022 $808,702; December 31, 2021 $549,386)	767,421		551,354
Stock of Federal Home Loan Bank	4,862		4,546
Loans held for sale	1,600		5,716
Loans, net of allowance for credit losses June 30, 2022 $38,260; December 31, 2021 $35,470	2,768,039		2,625,062
Property and equipment, net	33,710		34,290
Tax credit real estate investment	9,587		9,815
Accrued interest receivable	12,739		11,437
Deferred income taxes, net	21,083		9,125
Goodwill	2,500		2,500
Other assets	9,096		8,799
Total Assets	$	3,938,130	$	4,044,562
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Noninterest-bearing deposits	$	645,934	$	633,101
Interest-bearing deposits	2,799,897		2,900,893
Total deposits	$	3,445,831	$	3,533,994
Other borrowings	—		249
Accrued interest payable	1,037		1,165
Allowance for credit losses on off-balance sheet credit exposures	5,110		3,850
Other liabilities	19,570		16,841
Total Liabilities	$	3,471,548	$	3,556,099
Redeemable Common Stock Held by Employee Stock Ownership Plan (ESOP)	$	49,932	$	50,013
STOCKHOLDERS' EQUITY
Common stock, no par value; authorized 20,000,000 shares; issued June 30, 2022 10,353,235 shares; December 31, 2021 10,329,493 shares	$	—	$	—
Paid in capital	62,969		60,938
Retained earnings	487,066		474,392
Accumulated other comprehensive (loss) income	(30,981)		1,477
Treasury stock at cost (June 30, 2022 1,085,825 shares; December 31, 2021 1,029,853 shares)	(52,472)		(48,344)
Total Stockholders' Equity	$	466,582	$	488,463
Less maximum cash obligation related to ESOP shares	49,932		50,013
Total Stockholders' Equity Less Maximum Cash Obligation Related to ESOP Shares	$	416,650	$	438,450
Total Liabilities & Stockholders' Equity	$	3,938,130	$	4,044,562

See Notes to Consolidated Financial Statements.

Page 4

HILLS BANCORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Amounts In Thousands, Except Per Share Amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Interest income:
Loans, including fees	$	27,542	$	28,752	$	53,307	$	57,952
Investment securities:
Taxable	2,445		871		3,577		1,689
Nontaxable	996		972		2,000		1,917
Federal funds sold	801		199		1,136		363
Total interest income	$	31,784	$	30,794	$	60,020	$	61,921
Interest expense:
Deposits	$	3,094	$	3,849	$	6,150	$	8,002
FHLB borrowings	—		749		—		1,490
Total interest expense	$	3,094	$	4,598	$	6,150	$	9,492
Net interest income	$	28,690	$	26,196	$	53,870	$	52,429
Credit loss expense (benefit)	2,502		(1,659)		3,606		(4,643)
Net interest income after credit loss expense (benefit)	$	26,188	$	27,855	$	50,264	$	57,072
Noninterest income:
Net gain on sale of loans	$	326	$	1,728	$	1,137	$	4,731
Trust fees	3,211		3,064		6,479		6,077
Service charges and fees	3,282		3,114		6,162		5,654
Other noninterest income	132		76		650		558
	$	6,951	$	7,982	$	14,428	$	17,020
Noninterest expenses:
Salaries and employee benefits	$	10,776	$	10,639	$	21,172	$	21,203
Occupancy	1,109		1,042		2,241		2,180
Furniture and equipment	1,683		1,888		3,380		3,871
Office supplies and postage	468		386		952		840
Advertising and business development	558		449		1,288		984
Outside services	2,966		3,097		5,916		6,285
FDIC insurance assessment	267		252		548		510
Other noninterest expense	747		466		1,152		1,045
	$	18,574	$	18,219	$	36,649	$	36,918
Income before income taxes	$	14,565	$	17,618	$	28,043	$	37,174
Income taxes	3,239		4,008		6,065		8,367
Net income	$	11,326	$	13,610	$	21,978	$	28,807
Earnings per share:
Basic	$	1.22	$	1.46	$	2.37	$	3.09
Diluted	$	1.22	$	1.46	$	2.37	$	3.09

See Notes to Consolidated Financial Statements.

Page 5

HILLS BANCORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited) (Amounts In Thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	11,326	$	13,610	$	21,978	$	28,807
Other comprehensive loss
Securities:
Net change in unrealized loss on securities available for sale	$	(13,485)	$	(805)	$	(43,249)	$	(4,507)
Income taxes	3,365		201		10,791		1,125
Other comprehensive loss on securities available for sale	$	(10,120)	$	(604)	$	(32,458)	$	(3,382)
Other comprehensive loss, net of tax	$	(10,120)	$	(604)	$	(32,458)	$	(3,382)
Comprehensive (loss) income	$	1,206	$	13,006	$	(10,480)	$	25,425

See Notes to Consolidated Financial Statements.

Page 6

HILLS BANCORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited) (Amounts In Thousands, Except Share Amounts)

Three Months Ended June 30, 2022 and 2021
	Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Maximum Cash Obligation Related to ESOP Shares		Total
Balance, March 31, 2021	$	60,611	$	441,505	$	6,004	$	(46,735)	$	(48,134)	$	413,251
Issuance of 4,096 shares of common stock	153		—		—		110		—		263
Issuance of 1,821 shares of common stock under the employee stock purchase plan	106		—		—		—		—		106
Unearned restricted stock compensation	79		—		—		—		—		79
Forfeiture of 3,455 shares of common stock	(179)		—		—		—		—		(179)
Share-based compensation	6		—		—		—		—		6
Change related to ESOP shares	—		—		—		—		(592)		(592)
Net income	—		13,610		—		—		—		13,610
Purchase of 8,728 shares of common stock	—		—		—		(562)		—		(562)
Other comprehensive loss	—		—		(604)		—		—		(604)
Balance, June 30, 2021	$	60,776	$	455,115	$	5,400	$	(47,187)	$	(48,726)	$	425,378
Balance, March 31, 2022	$	61,334	$	475,740	$	(20,861)	$	(50,112)	$	(51,939)	$	414,162
Issuance of 24,595 shares of common stock	1,513		—		—		96		—		1,609
Issuance of 1,637 shares of common stock under the employee stock purchase plan	102		—		—		—		—		102
Unearned restricted stock compensation	89		—		—		—		—		89
Forfeiture of 1,193 shares of common stock	(75)		—		—		—		—		(75)
Share-based compensation	6		—		—		—		—		6
Change related to ESOP shares	—		—		—		—		2,007		2,007
Net income	—		11,326		—		—		—		11,326
Purchase of 34,774 shares of common stock	—		—		—		(2,456)		—		(2,456)
Other comprehensive loss	—		—		(10,120)		—		—		(10,120)
Balance, June 30, 2022	$	62,969	$	487,066	$	(30,981)	$	(52,472)	$	(49,932)	$	416,650

Page 7

HILLS BANCORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (Amounts In Thousands, Except Share Amounts)

Six Months Ended June 30, 2022 and 2021
	Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Maximum Cash Obligation Related to ESOP Shares		Total
Balance, December 31, 2020	$	60,233	$	439,831	$	8,782	$	(45,441)	$	(47,329)	$	416,076
Cumulative change in accounting principle (Note 1)	—		(4,751)		—		—		—		(4,751)
Balance, January 1, 2021 (as adjusted for change in accounting principle)	60,233		435,080		8,782		(45,441)		(47,329)		411,325
Issuance of 4,753 shares of common stock	177		—		—		127		—		304
Issuance of 3,839 shares of common stock under the employee stock purchase plan	220		—		—		—		—		220
Unearned restricted stock compensation	330		—		—		—		—		330
Forfeiture of 3,755 shares of common stock	(196)		—		—		—		—		(196)
Share-based compensation	12		—		—		—		—		12
Change related to ESOP shares	—		—		—		—		(1,397)		(1,397)
Net income	—		28,807		—		—		—		28,807
Cash dividends ($0.94 per share)	—		(8,772)		—		—		—		(8,772)
Purchase of 29,580 shares of common stock	—		—		—		(1,873)		—		(1,873)
Other comprehensive loss	—		—		(3,382)		—		—		(3,382)
Balance, June 30, 2021	$	60,776	$	455,115	$	5,400	$	(47,187)	$	(48,726)	$	425,378
Balance, December 31, 2021	$	60,938	$	474,392	$	1,477	$	(48,344)	$	(50,013)	$	438,450
Issuance of 29,934 shares of common stock	1,702		—		—		144		—		1,846
Issuance of 3,434 shares of common stock under the employee stock purchase plan	212		—		—		—		—		212
Unearned restricted stock compensation	355		—		—		—		—		355
Forfeiture of 4,412 shares of common stock	(250)		—		—		—		—		(250)
Share-based compensation	12		—		—		—		—		12
Change related to ESOP shares	—		—		—		—		81		81
Net income	—		21,978		—		—		—		21,978
Cash dividends ($1.00 per share)	—		(9,304)		—		—		—		(9,304)
Purchase of 61,186 shares of common stock	—		—		—		(4,272)		—		(4,272)
Other comprehensive loss	—		—		(32,458)		—		—		(32,458)
Balance, June 30, 2022	$	62,969	$	487,066	$	(30,981)	$	(52,472)	$	(49,932)	$	416,650

 See Notes to Consolidated Financial Statements.

Page 8

HILLS BANCORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Amounts In Thousands)

	Six Months Ended June 30,
	2022		2021
Cash Flows from Operating Activities
Net income	$	21,978	$	28,807
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Depreciation	1,393		1,617
Credit loss expense (benefit)	3,606		(4,643)
Forfeiture of common stock	(250)		(196)
Share-based compensation	12		12
Compensation expensed through issuance of common stock	365		304
Provision for deferred income taxes	(1,167)		782
Net gain on sale of other real estate owned and other repossessed assets	(62)		(25)
(Increase) decrease in accrued interest receivable	(1,302)		546
Amortization of premium on investment securities, net	828		549
(Increase) decrease in other assets	(300)		262
Amortization of operating lease right-of-use assets	106		213
Increase in accrued interest payable and other liabilities	2,956		2,321
Loans originated for sale	(75,480)		(252,653)
Proceeds on sales of loans	80,733		285,744
Net gain on sales of loans	(1,137)		(4,731)
Net cash and cash equivalents provided by operating activities	$	32,279	$	58,909
Cash Flows from Investing Activities
Proceeds from maturities of investment securities available for sale	$	81,746	$	59,538
Purchases of investment securities available for sale	(341,891)		(124,706)
Purchases of stock of Federal Home Loan Bank	(316)		(575)
Loans made to customers, net of collections	(145,487)		26,984
Proceeds on sale of other real estate owned and other repossessed assets	124		70
Purchases of property and equipment	(813)		(701)
Investment in tax credit real estate	—		(4,183)
Net changes from tax credit real estate investment	228		504
Net cash and cash equivalents used in investing activities	$	(406,409)	$	(43,069)
Cash Flows from Financing Activities
Net (decrease) increase in deposits	$	(88,163)	$	129,347
Net (decrease) increase in short-term borrowings	(249)		108
Issuance of common stock, net of costs	1,243		—
Stock options exercised	238		—
Purchase of common stock	(4,272)		(1,873)
Proceeds from the issuance of common stock through the employee stock purchase plan	212		220
Dividends paid	(9,304)		(8,772)
Net cash and cash equivalents (used in) provided by financing activities	$	(100,295)	$	119,030

(Continued)

Page 9

HILLS BANCORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued) (Amounts In Thousands)

	Six Months Ended June 30,
	2022		2021
(Decrease) increase in cash and cash equivalents	$	(474,425)	$	134,870
Cash and cash equivalents:
Beginning of period	781,918		574,310
End of period	$	307,493	$	709,180
Supplemental Disclosures
Cash payments for:
Interest paid to depositors	$	6,278	$	8,429
Interest paid on other obligations	—		1,490
Income taxes paid	5,171		5,015
Noncash activities:
(Decrease) increase in maximum cash obligation related to ESOP shares	$	(81)	$	1,397

See Notes to Consolidated Financial Statements.

Page 10

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1.Summary of Significant Accounting Policies

Basis of Presentation:

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and with instructions for Form 10-Q and Regulation S-X.  These financial statements include all adjustments (consisting of normal recurring accruals) which in the opinion of management are considered necessary for the fair presentation of the financial position and results of operations for the periods shown.  Certain prior year amounts have been reclassified to conform to the current year presentation.  The Company considers that it operates as one business segment, a commercial bank.

Operating results for the six month period ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Form 10-K Annual Report of Hills Bancorporation and subsidiary (the “Company”) for the year ended December 31, 2021 filed with the Securities Exchange Commission on March 4, 2022.  The consolidated balance sheet as of December 31, 2021, has been derived from the audited consolidated financial statements for that period.

The Company evaluated subsequent events through the filing date of its quarterly report on Form 10-Q with the SEC.

Accounting Estimates:

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Certain Significant Estimates:

The allowance for credit losses, fair values of securities and other financial instruments, and share-based compensation expense involve certain significant estimates made by management. These estimates are reviewed by management routinely and it is reasonably possible that circumstances that exist at June 30, 2022 may change in the near-term and the effect could be material to the consolidated financial statements. Actual amounts and values as of the balance sheet dates may be materially different than the amounts and values reported due to the inherent uncertainty in the estimation process.

Revenue Recognition:

Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the Company’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as loans, letters of credit and investment securities. Interest income on loans and investment securities is recognized on the accrual method in accordance with written contracts.

Descriptions of the Company’s revenue-generating activities that are within the scope of ASC 606 are the following: Service charges and fees on deposit accounts represent general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue which includes interchange income, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when the Company’s performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations are generally received at

Page 11

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

the time the performance obligations are satisfied. Trust income represents monthly fees due from wealth management customers as consideration for managing the customers' assets. Wealth management and trust services include custody of assets, investment management, fees for trust services and similar fiduciary activities. Revenue is recognized when our performance obligation is completed each month, which is generally the time that payment is received.

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity's obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. As of June 30, 2022, the Company did not have any significant contract balances.

An entity is required to capitalize, and subsequently amortize into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, sales commission). The Company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less. The Company has not incurred or capitalized any contract acquisition costs as of June 30, 2022.

Tax Credit Real Estate:

Tax credit real estate represents three multi-family rental properties, three assisted living rental properties, a multi-tenant rental property for persons with disabilities, and a multi-family senior living rental property, all of which are affordable housing projects as of June 30, 2022. The Bank has a 99% or greater limited partnership interest in each limited partnership. The investment in each was completed after the projects had been developed by the general partner. On a regular basis, the Company evaluates recoverability of the carrying value of the tax credit real estate investments to determine if an allowance for credit losses is necessary. The allowance for credit losses is measured by a comparison of the carrying amount of the investments to the future undiscounted cash flows expected to be generated by the investment properties, including the low-income housing tax credits and any estimated proceeds from eventual disposition. If there is an indication of impairment, the allowance for credit losses would be established with a charge to credit loss expense. There were no indications of impairment based on management's evaluation and therefore no allowance for credit losses was determined necessary as of June 30, 2022. Depreciation expense is provided on a straight-line basis over the estimated useful life of the assets. Expenditures for normal repairs and maintenance are charged to expense as incurred.

The investments in tax credit real estate are recorded for all years presented using the equity method of accounting, with the exception of the investment in the affordable housing project described below. The operations of the properties are not expected to contribute significantly to the Company’s income before income taxes. However, the properties do contribute in the form of income tax credits, which lowers the Company’s effective tax rate. Once established, the credits on each property last for ten years and are passed through from the limited partnerships to the Bank and reduces the consolidated federal tax liability of the Company.

In February 2021, the Company provided construction financing and contributed capital of $4.18 million to Del Ray Ridge LP, as limited partner, which owns and operates an affordable housing property in Iowa City, Iowa. The Company accounts for the investment in this tax credit real estate using the proportional amortization method as provided for under Accounting Standards Codification (ASC) 323-740. The investment qualifies for the proportional amortization method as it meets all of the criteria under ASC 323-740-25-1. Substantially all of the projected benefits are from tax credits and other tax benefits due to the minimum buyout clause included in the partnership agreement.

Adoption of Financial Accounting Standard Codification 326 (ASC 326 (CECL)):

On January 1, 2021, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the recognition of the allowance for credit losses be estimated using the current expected credit loss (CECL) methodology. The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet (OBS) credit exposures. Results for reporting periods beginning January 1, 2021 are presented under ASC 326. The Company recorded a net decrease to retained earnings of $4.75 million as of January 1, 2021 for the cumulative effect of adopting ASC 326, which includes deferred taxes of $1.58 million. The transition adjustment includes a $2.75 million increase to the Allowance for Credit Losses On Loans and the recording of a $3.58 million Allowance for Credit Losses on OBS Credit Exposures.

Page 12

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The following table illustrates the impact of ASC 326 (amounts in thousands).

	January 1, 2021
	As Reported Under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption
Assets:
Loans
Allowance for credit losses on loans	$	39,816	$	37,070	$	2,746
Liabilities:
Allowance for credit losses on off-balance sheet credit exposures	$	3,584	$	—	$	3,584

Available-for-sale debt securities and the allowance for credit losses on available-for-sale debt securities: Available-for-sale ("AFS") securities consist of debt securities not classified as trading or held to maturity.  Available-for-sale securities are stated at fair value, and unrealized holding gains and losses, net of the related deferred tax effect, are reported as a separate component of stockholders' equity.  There were no trading or held to maturity securities as of June 30, 2022 or 2021. Fair value measurement is based upon quoted market prices in active markets, if available. If quoted prices in active markets are not available, fair value is measured using pricing models or other model-based valuation techniques such as present value of future cash flows, which consider prepayment assumptions and other factors such as credit losses and market liquidity. Unrealized gains and losses are excluded from earnings and reported, net of tax, in other comprehensive income ("OCI"). Premiums on debt securities are amortized to the earliest call date and discounts on debt securities are accreted over the period to maturity of those securities. The method of amortization results in a constant effective yield on those securities (the interest method). Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

AFS debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. For AFS debt securities, a decline in fair value due to credit loss results in recording an allowance for credit losses to the extent the fair value is less than the amortized cost basis. Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes.

Impairment may result from credit deterioration of the issuer or collateral underlying the security. In performing an assessment of whether any decline in fair value is due to a credit loss, all relevant information is considered at the individual security level. For asset-backed securities performance indicators considered related to the underlying assets include default rates, delinquency rates, percentage of nonperforming assets, debt-to-collateral ratios, third-party guarantees, current levels of subordination, vintage, geographic concentration, analyst reports and forecasts, credit ratings and other market data. In assessing whether a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount the fair value is less than amortized cost basis.

If we intend to sell a debt security or more likely than not we will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged against the allowance for credit losses with any incremental impairment reported in earnings.

Accrued interest receivable on AFS debt securities totaled $3.00 million at June 30, 2022 and is excluded from the estimate of credit losses.

Loans held for sale: Loans held for sale are stated at the lower of aggregate cost or estimated fair value. Loans are sold on a non-recourse basis with servicing released and gains and losses are recognized based on the difference between sales proceeds and the carrying value of the loan. The Company has had very few experiences of repurchasing loans previously sold into the

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secondary market. A specific reserve was not considered necessary based on the Company’s historical experience with repurchase activity.

Loans held for investment: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost net of the allowance for credit losses ("ACL"). Amortized cost is the principal balance outstanding, net of deferred loan fees and costs. Accrued interest receivable on loans held for investment totaled $9.74 million at June 30, 2022 and is excluded from the estimate of credit losses. Interest income is accrued on the unpaid principal balance. Nonrefundable loan fees and origination costs are deferred and recognized as a yield adjustment over the life of the related loan.

The accrual of interest income on loans is discontinued when, in the opinion of management, there is reasonable doubt as to the

borrower's ability to meet payments of interest or principal when they become due, which is generally when a loan is 90 days or

more past due unless the loan is well secured and in the process of collection. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest is reversed against interest income. Loans are returned to an accrual status when all of the principal and interest amounts contractually due are brought current and repayment of the remaining contractual principal and interest is expected. A loan may also return to accrual status if additional collateral is received from the borrower and, in the opinion of management, the financial position of the borrower indicates that there is no longer any reasonable doubt as to the collection of the amount contractually due. Payment received on nonaccrual loans are applied first to principal. Once principal is recovered, any remaining payments received are applied to interest income.

The policy for charging off loans is consistent throughout all loan categories. A loan is charged off based on criteria that includes but is not limited to: delinquency status, financial condition of the entire customer credit line and underlying collateral coverage, economic or external conditions that might impact full repayment of the loan, legal issues, overdrafts, and the customer’s willingness to work with the Company.

Allowance for credit losses for loans held for investment: The allowance for credit losses is an estimate of the expected losses over the remaining life of the Company's existing loans held for investment portfolio. The allowance for credit losses for loans held for investment, as reported in our consolidated balance sheet, is adjusted by a credit loss expense, which is reported in earnings, and reduced by the charge-off of loan amounts, net of recoveries.

The loan loss estimation process involves procedures to appropriately consider the unique characteristics of loan portfolio segments which consist of agricultural, 1 to 4 family first and junior liens, commercial, and consumer lending. These segments are further disaggregated into loan classes, the level at which credit risk is monitored. For each of these pools, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data. The following provides the credit quality indicators and risk elements that are most relevant and most carefully considered and monitored for each loan portfolio segment.

Agricultural - Agricultural operating loans include loans made to finance agricultural production and other loans to farmers and farming operations. Agricultural loans also include mortgage loans secured by farmland. Agricultural operating loans, most of which are secured by crops and machinery, are provided to finance capital improvement and farm operations as well as acquisitions of livestock and machinery. The ability of the borrower to repay may be affected by many factors outside of the borrower’s control including adverse weather conditions, loss of livestock due to disease or other factors, declines in market prices for agricultural products and the impact of government regulations. The ultimate repayment of agricultural operating loans is dependent upon the profitable operation or management of the agricultural entity. Agricultural operating loans generally have a term of one year and may have a fixed or variable rate.

Mortgage loans secured by farmland are made to individuals and businesses within the Company's trade area. The primary source of repayment is the cash flow generated by the collateral underlying the loan. The secondary repayment source would be the liquidation of the collateral. Terms for real estate loans secured by farmland range from one to ten years with an amortization period of 25 years or less. Generally, interest rates are fixed for mortgage loans secured by farmland. Key economic forecasts used in estimating expected credit losses for this segment include the Iowa unemployment rate and the Iowa real gross domestic product (GDP).

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1 to 4 Family First and Junior Liens - The 1 to 4 family first and junior liens portfolio segment is comprised of the single family and home equity loan classes, which are underwritten after evaluating a borrower's capacity to repay, credit, and collateral. Several factors are considered when assessing a borrower's capacity, including the borrower's employment, income, current debt, assets, and level of equity in the property. Credit refers to how well a borrower manages their current and prior debts as documented by a credit report that provides credit scores and the borrower's current and past information about their credit history. Collateral refers to the type and use of property, occupancy, and market value. Property appraisals are obtained to assist in evaluating collateral. Loan-to-property value and debt-to-income ratios, loan amount, and lien position are also considered in assessing whether to originate a loan. These borrowers are particularly susceptible to downturns in economic trends such as conditions that negatively affect housing prices and demand and levels of unemployment. Key economic forecasts used in estimating expected credit losses for this segment include the Iowa unemployment rate and the all-transactions house price index for Iowa.

Commercial - The commercial loan portfolio segment is comprised of the commercial real estate mortgage including obligations of states and political subdivisions, multifamily residential mortgage, construction/land development and commercial and financial loan classes, whose underwriting standards consider the factors described for single family and home equity loan classes as well as others when assessing the borrower's and associated guarantors or other related party's financial position. These other factors include assessing liquidity, the level and composition of net worth, leverage, considering all other lender amounts and position, an analysis of cash expected to flow through the obligors including the outflow to other lenders, vacancies and prior experience with the borrower. This information is used to assess adequate financial capacity, profitability, and experience. Ultimate repayment of these loans is sensitive to interest rate changes, general economic conditions, liquidity, and availability of long-term financing. Key economic forecasts used in estimating expected credit losses for this segment include the Iowa unemployment rate, the all-transactions house price index for Iowa and the Iowa real GDP.

Consumer Lending - The Bank offers consumer loans to individuals including personal loans and automobile loans. These consumer loans typically have shorter terms, lower balances, higher yields and higher risks of default than real estate-related loans. Consumer loans collections are dependent on the borrower's continuing financial stability and are more likely to be affected by adverse personal circumstances. Collateral for these loans generally includes automobiles, boats, recreational vehicles and real estate. However, depending on the overall financial condition of the borrower, some loans are made on an unsecured basis. The collateral securing these loans may depreciate over time, may be difficult to recover and may fluctuate in value based on condition. Key economic forecasts used in estimating expected credit losses for this segment include the Iowa unemployment rate and the Iowa real GDP.

The allowance level is influenced by loan volumes, loan credit quality indicator migration or delinquency status, historic loss experience and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses has two basic components: first, a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics; and second, an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans. Depending on the nature of the pool of financial assets with similar risk characteristics, the Company uses a discounted cash flow method or remaining life method to estimate expected credit losses.

Discounted cash flow method: In estimating the component of the allowance for credit losses for loans that share similar risk characteristics with other loans, such loans are segregated into loan classes. Loans are designated into loan classes based on loans pooled by product types and similar risk characteristics or areas of risk concentration. In determining the allowance for credit losses, we derive an estimated credit loss assumption from a model that categorizes loan pools based on loan type and purpose. This model calculates an expected loss percentage for each loan class by considering the probability of default, using life-of-loan analysis periods for all loan segments, and the historical severity of loss, based on the aggregate net lifetime losses incurred per loan class. The default and severity factors used to calculate the allowance for credit losses for loans that share similar risk characteristics with other loans are adjusted for differences between the historical period used to calculate historical default and loss severity rates and expected conditions over the remaining lives of the loans in the portfolio related to: (1) lending policies and procedures; (2) international, national, regional and local economic business conditions and developments that affect the collectability of the portfolio; (3) the nature and volume of the loan portfolio including the terms of the loans; (4) the experience, ability, and depth of the lending management and other relevant staff; (5) the volume and severity of past due and adversely classified or graded loans and the volume of nonaccrual loans; (6) the quality of our loan review system and (7) the value of underlying collateral for collateralized loans. Additional factors include the existence and effect of any

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concentrations of credit, and changes in the level of such concentrations and the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio. Such factors are used to adjust the historical probabilities of default and severity of loss so that they reflect management expectation of future conditions based on a reasonable and supportable forecast. The Company uses regression analysis of historical internal and peer data to determine which variables are best suited to be economic variables utilized when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the economic variables.

For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over twelve quarters on a straight-line basis. Other internal and external indicators of economic forecasts are also considered by management when developing the forecast metrics.

Remaining life method: Expected credit losses for credit cards and overdrafts are determined through use of the remaining life method. The remaining life method utilizes average annual charge-off rates and remaining life to estimate the allowance for credit losses. This is done by estimating the amount and timing of principal payments expected to be received as payment for the balance outstanding as of the reporting period and applying those principal payments against the balance outstanding as of the reporting period along with the average annual charge-off rate until the expected payments have been fully allocated.

Collateral dependent financial assets: For a loan that does not share risk characteristics with other loans, expected credit loss is measured based on net realizable value, that is, the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the amortized cost basis of the loan. For these loans, we recognize expected credit loss equal to the amount by which the net realizable value of the loan is less than the amortized cost basis of the loan (which is net of previous charge- offs and deferred loan fees and costs), except when the loan is collateral dependent, that is, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In these cases, expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral. The fair value of the collateral is adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral.

The Company’s estimate of the ACL reflects losses expected over the contractual life of the assets, adjusted for estimated prepayments or curtailments. The contractual term does not consider extensions, renewals or modifications unless the Company has identified an expected troubled debt restructure (TDR). A loan that has been modified or renewed is considered a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics. The Company’s ACL reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR. The Company has determined that a TDR is reasonably expected no later than the point when the lender concludes that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession from the lender to avoid a default. Reasonably expected TDRs and executed non-performing TDRs are evaluated individually to determine the required ACL. TDRs performing in accordance with their modified contractual terms for a reasonable period of time may be included in the Company’s existing pools based on the underlying risk characteristics of the loan to measure the ACL.

Allowance for credit losses on off-balance sheet credit exposures, including unfunded loan commitments: The Company maintains a separate allowance for credit losses from off-balance-sheet credit exposures, including unfunded loan commitments, which is disclosed on the balance sheet. Management estimates the amount of expected losses by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by the Company and applying the loss factors used in the ACL methodology to the results of the usage calculation to estimate the liability for credit losses related to unfunded commitments for each loan type. No credit loss estimate is reported for off-balance-sheet (OBS) credit exposures that are unconditionally cancellable by the Company, such as credit card receivables, or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement. The allowance for credit losses on OBS credit exposures is adjusted as credit loss expense. Categories of OBS credit exposures correspond to the loan portfolio segments described previously.

Troubled debt restructurings (“TDR loans”):  A loan is accounted for and reported as a troubled debt restructuring ("TDR") when, for economic or legal reasons, we grant a concession to a borrower experiencing financial difficulty that we would not otherwise consider. These concessions may include rate reductions, principal forgiveness, extension of maturity date and other actions intended to minimize potential losses to the Company. A restructuring that results in only an insignificant delay in

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payment is not considered a concession. A delay may be considered insignificant if the payments subject to the delay are insignificant relative to the unpaid principal or collateral value and the contractual amount due, or the delay in timing of the restructured payment period is insignificant relative to the frequency of payments, the debt's original contractual maturity or original expected duration.

TDRs that are performing and on accrual status as of the date of the modification remain on accrual status. TDRs that are nonperforming as of the date of modification generally remain as nonaccrual until the prospect of future payments in accordance with the modified loan agreement is reasonably assured, generally demonstrated when the borrower maintains compliance with the restructured terms for a predetermined period, normally at least six months. TDRs with temporary below-market concessions remain designated as a TDR regardless of the accrual or performance status until the loan is paid off. However, if the TDR loan has been modified in a subsequent restructure with market terms and the borrower is not currently experiencing financial difficulty, then the loan is no longer classified as a TDR in the quarter following the modification. Management evaluates loans where there is a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower for purposes of estimating the allowance for credit losses.

Section 4013 of the CARES Act, “Temporary Relief From Troubled Debt Restructurings,” allows financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time during the COVID-19 pandemic. Under Section 4013 of the CARES Act, loan modifications that qualify for such suspension are those where the borrower was not more than 30 days past due as of December 31, 2019. In addition, the loan modification being made in response to the COVID-19 pandemic must include a deferral or delay in the payment of principal or interest, or change in the interest rate on the loan. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. The relief related to TDRs expired on January 1, 2022. See Note 5 for further discussion.

Effect of New Financial Accounting Standards:

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40), Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The amendments in this ASU affect entities that issue freestanding written call options that are classified in equity. Specifically, the amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. An entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option to compensate for goods or services in accordance with the guidance in Topic 718, Compensation-Stock Compensation. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The adoption of the ASU by the Company on January 1, 2022 did not have a material impact on the financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 815) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this Update require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. An entity should apply the amendments prospectively to business combinations occurring on or after the effective date of the amendments. The Company is in the process of evaluating the impact of this ASU on the financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures. The FASB issued these amendments to eliminate accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty, and to require that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost. The amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within

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those fiscal years, and should be applied prospectively, except as provided in the next sentence. For the transition method related to the recognition and measurement of TDRs, an entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. Early adoption is permitted if an entity has adopted the amendments in Update 2016-03, including adoption in an interim period. The Company is in the process of evaluating the impact of this ASU on the financial statements.

Note 2.Earnings Per Share

Basic earnings per share is computed using the weighted average number of actual common shares outstanding during the period.  Diluted earnings per share reflects the potential dilution that would occur from the exercise of common stock options outstanding.  ESOP shares are considered outstanding for this calculation unless unearned.

The computation of basic and diluted earnings per share for the periods presented is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Common shares outstanding at the beginning of the period	9,277,145		9,312,518		9,299,640		9,330,995
Weighted average number of net shares redeemed	(5,420)		(3,315)		(18,484)		(15,711)
Weighted average shares outstanding (basic)	9,271,725		9,309,203		9,281,156		9,315,284
Weighted average of potential dilutive shares attributable to stock options granted, computed under the treasury stock method	1,581		3,567		2,348		3,546
Weighted average number of shares (diluted)	9,273,306		9,312,770		9,283,504		9,318,830
Net income (In thousands)	$	11,326	$	13,610	$	21,978	$	28,807
Earnings per share:
Basic	$	1.22	$	1.46	$	2.37	$	3.09
Diluted	$	1.22	$	1.46	$	2.37	$	3.09

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(Unaudited)

Note 3.Accumulated Other Comprehensive Income

The following table summarizes the balances of each component of accumulated other comprehensive (loss) income (AOCI), included in stockholders’ equity, at June 30, 2022 and December 31, 2021:

	June 30, 2022		December 31, 2021
	(amounts in thousands)
Net unrealized (loss) gain on available-for-sale securities	$	(41,281)	$	1,968
Tax effect	10,300		(491)
Net-of-tax amount	$	(30,981)	$	1,477

Note 4.Securities

The carrying values of investment securities at June 30, 2022 and December 31, 2021 are summarized in the following table (dollars in thousands):

	June 30, 2022				December 31, 2021
	Amount		Percent		Amount		Percent
Securities available for sale
U.S. Treasury	$	462,110	60.22	%	$	243,925	44.24	%
Other securities (FHLB, FHLMC and FNMA)	32,624		4.25		34,467		6.25
State and political subdivisions	217,714		28.37		263,516		47.80
Mortgage-backed securities and collateralized mortgage obligations	54,973		7.16		9,446		1.71
Total securities available for sale	$	767,421	100.00	%	$	551,354	100.00	%

Investment securities have been classified in the consolidated balance sheets according to management’s intent.  Available-for-sale securities consist of debt securities not classified as trading or held to maturity.  Available-for-sale securities are stated at fair value, and unrealized holding gains and losses, net of the related deferred tax effect, are reported as a separate component of stockholders' equity.  Municipal bonds are comprised of general obligation bonds and revenue bonds issued by various municipal corporations. As of June 30, 2022 and December 31, 2021, all securities held were rated investment grade based upon external ratings where available and, where not available, based upon management knowledge of the local issuers and their financial situations. There were no trading or held to maturity securities as of June 30, 2022 or December 31, 2021.

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(Unaudited)

The carrying amount of available-for-sale securities, fair values and allowance for credit losses were as follows as of June 30, 2022 and December 31, 2021 (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Allowance for Credit Losses		Estimated Fair Value
June 30, 2022
U.S. Treasury	$	478,089	$	20	$	(15,999)	$	—	$	462,110
Other securities (FHLB, FHLMC and FNMA)	35,304		—		(2,680)		—		32,624
State and political subdivisions	235,895		273		(18,454)		—		217,714
Mortgage-backed securities and collateralized mortgage obligations	59,414		—		(4,441)		—		$	54,973
Total	$	808,702	$	293	$	(41,574)	$	—	$	767,421
December 31, 2021:
U.S. Treasury	$	244,192	$	2,011	$	(2,278)	$	—	$	243,925
Other securities (FHLB, FHLMC and FNMA)	35,353		—		(886)		—		34,467
State and political subdivisions	260,266		4,420		(1,170)		—		263,516
Mortgage-backed securities and collateralized mortgage obligations	9,575		—		(129)		—		9,446
Total	$	549,386	$	6,431	$	(4,463)	$	—	$	551,354

The amortized cost and estimated fair value of available-for-sale securities classified according to their contractual maturities at June 30, 2022, were as follows (in thousands) below. Expected maturities of MBS may differ from contractual maturities because the mortgages underlying the securities may be called or prepaid without any penalties. Therefore, these securities are not included in the maturity categories in the following summary.

	Amortized Cost		Fair Value
Due in one year or less	$	60,747	$	60,544
Due after one year through five years	542,184		522,784
Due after five years through ten years	106,135		96,774
Due over ten years	40,222		32,346
	$	749,288	$	712,448
Mortgage-backed securities and collateralized mortgage obligations	59,414		54,973
	$	808,702	$	767,421

As of June 30, 2022, investment securities with a carrying value of $9.38 million were pledged to collateralize other borrowings. As of June 30, 2022, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders' equity.

There were no sales of available-for-sale securities for the six months ended June 30, 2022 and 2021.

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The following table shows the fair value, gross unrealized losses and the percentage of fair value represented by gross unrealized losses of applicable investment securities owned by the Company, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2022 and December 31, 2021 (in thousands):

	Less than 12 months							12 months or more							Total
June 30, 2022 Description of Securities	#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%
U.S. Treasury	132	$	411,292	$	(13,840)	3.37	%	12	$	28,357	$	(2,159)	7.61	%	144	$	439,649	$	(15,999)	3.64	%
Other securities (FHLB, FHLMC and FNMA)	—	—		—		—		14	32,623		(2,680)		8.22		14	32,623		(2,680)		8.22
State and political subdivisions	605	151,886		(14,906)		9.81		71	27,058		(3,548)		13.11		676	178,944		(18,454)		10.31
Mortgage-backed securities and collateralized mortgage obligations	17	52,956		(4,144)		7.83		1	2,017		(297)		14.72		18	54,973		(4,441)		8.08
Total temporarily impaired securities	754	$	616,134	$	(32,890)	5.34	%	98	$	90,055	$	(8,684)	9.64	%	852	$	706,189	$	(41,574)	5.89	%

	Less than 12 months							12 months or more							Total
December 31, 2021 Description of Securities	#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%
U.S. Treasury	55	$	136,867	$	(2,203)	1.61	%	1	$	2,416	$	(75)	3.10	%	56	$	139,283	$	(2,278)	1.64	%
Other securities (FHLB, FHLMC and FNMA)	5	12,484		(303)		2.43		9	21,984		(583)		2.65		14	34,468		(886)		2.57
State and political subdivisions	231	70,542		(1,055)		1.50		14	9,248		(115)		1.24		245	79,790		(1,170)		1.47
Mortgage-backed securities and collateralized mortgage obligations	4	9,446		(129)		1.37		—	—		—		—		4	9,446		(129)		1.37
Total temporarily impaired securities	295	$	229,339	$	(3,690)	1.61	%	24	$	33,648	$	(773)	2.30	%	319	$	262,987	$	(4,463)	1.70	%

The Company considered the following information in reaching the conclusion that the impairments disclosed in the table above are not attributable to credit losses.  None of the unrealized losses in the above table was due to the deterioration in the credit quality of any of the issues that might result in the non-collection of contractual principal and interest.  The unrealized losses are due to changes in interest rates.  The Company has not recognized any unrealized loss in income because management does not have the intent to sell the securities included in the previous table.  Management has concluded that it is more likely than not that the Company will not be required to sell these securities prior to recovery of the amortized cost basis. The securities are of high credit quality (investment grade credit ratings) and principal and interest payments are made timely with no payments past due as of June 30, 2022. The fair value is expected to recover as the securities approach maturity. The U.S. Treasury and other securities are issued and guaranteed by U.S. government-sponsored entities and agencies. The mortgage-backed securities and collateralized mortgage obligations have implied U.S. government guarantees of the agency

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(Unaudited)

securities. The Company evaluates if a credit loss exists by monitoring to ensure it has adequate credit support considering the nature of the investment, number and significance of investments in an unrealized loss position, collectability or delinquency issues, the underlying financial statements of the issuers, credit ratings and subsequent changes thereto, and other available relevant information. Considering the above factors, management has determined that no allowance for credit losses is necessary for the securities portfolio as of June 30, 2022.

Note 5.Loans

Classes of loans are as follows:

	June 30, 2022		December 31, 2021
	(Amounts In Thousands)
Agricultural	$	96,917	$	106,933
Commercial and financial	228,675		222,002
Real estate:
Construction, 1 to 4 family residential	86,279		80,486
Construction, land development and commercial	149,838		127,021
Mortgage, farmland	240,811		232,744
Mortgage, 1 to 4 family first liens	996,935		909,564
Mortgage, 1 to 4 family junior liens	115,731		114,342
Mortgage, multi-family	399,360		382,792
Mortgage, commercial	407,343		401,377
Loans to individuals	34,001		32,687
Obligations of state and political subdivisions	50,173		50,285
	$	2,806,063	$	2,660,233
Net unamortized fees and costs	236		299
	$	2,806,299	$	2,660,532
Less allowance for credit losses	38,260		35,470
	$	2,768,039	$	2,625,062

As of June 30, 2022 and December 31, 2021, the Company has outstanding balances of $0.07 million and $5.34 million, respectively, of loans issued under the Paycheck Protection Program (PPP). For the six months ended June 30, 2022 and 2021, the Company recognized none and $3.23 million, respectively, of deferred PPP loan fees in interest income.

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(Unaudited)

Changes in the allowance for credit losses, the allowance for credit losses applicable to individually evaluated loans and the related loan balance of individually evaluated loans for the three and six months ended June 30, 2022 were as follows:

	Three Months Ended June 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance	$	2,414	$	4,895	$	2,347	$	3,310	$	11,438	$	10,234	$	1,212	$	35,850
Charge-offs	(1)		(243)		—		(20)		(109)		—		(76)		(449)
Recoveries	54		89		2		247		336		28		21		777
Credit loss expense (benefit)	(202)		453		423		(207)		568		971		76		2,082
Ending balance	$	2,265	$	5,194	$	2,772	$	3,330	$	12,233	$	11,233	$	1,233	$	38,260
	Six Months Ended June 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance	$	2,261	$	4,269	$	2,300	$	3,433	$	11,498	$	10,498	$	1,211	$	35,470
Charge-offs	(1)		(291)		—		(20)		(249)		(1)		(226)		(788)
Recoveries	68		212		5		290		543		50		64		1,232
Credit loss expense (benefit)	(63)		1,004		467		(373)		441		686		184		2,346
Ending balance	$	2,265	$	5,194	$	2,772	$	3,330	$	12,233	$	11,233	$	1,233	$	38,260
Ending balance, individually evaluated for credit losses	$	—	$	5	$	55	$	—	$	15	$	314	$	—	$	389
Ending balance, collectively evaluated for credit losses	$	2,265	$	5,189	$	2,717	$	3,330	$	12,218	$	10,919	$	1,233	$	37,871
Loans:
Ending balance	$	96,917	$	228,675	$	236,117	$	240,811	$	1,112,666	$	806,703	$	84,174	$	2,806,063
Ending balance, individually evaluated for credit losses	$	207	$	1,637	$	392	$	1,747	$	5,351	$	4,628	$	—	$	13,962
Ending balance, collectively evaluated for credit losses	$	96,710	$	227,038	$	235,725	$	239,064	$	1,107,315	$	802,075	$	84,174	$	2,792,101

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Changes in the allowance for credit losses for the three and six months ended June 30, 2021 were as follows:

	Three Months Ended June 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance	$	2,147	$	5,114	$	2,288	$	4,668	$	11,496	$	9,621	$	1,286	$	36,620
Charge-offs	—		(46)		(3)		(1)		(7)		(10)		(30)		(97)
Recoveries	57		301		57		25		269		77		40		826
Credit loss expense (benefit)	(149)		(567)		141		212		(879)		19		(186)		(1,409)
Ending balance	$	2,055	$	4,802	$	2,483	$	4,904	$	10,879	$	9,707	$	1,110	$	35,940
	Six Months Ended June 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance, prior to adoption of ASC 326	$	2,508	$	4,885	$	2,319	$	4,173	$	12,368	$	9,415	$	1,402	$	37,070
Impact of adopting ASC 326	(328)		298		327		763		522		1,396		(232)		2,746
Charge-offs	—		(76)		(3)		(1)		(82)		(10)		(96)		(268)
Recoveries	89		535		91		25		508		216		77		1,541
Credit loss (benefit)	(214)		(840)		(251)		(56)		(2,437)		(1,310)		(41)		(5,149)
Ending balance	$	2,055	$	4,802	$	2,483	$	4,904	$	10,879	$	9,707	$	1,110	$	35,940
Ending balance, individually evaluated for credit losses	$	—	$	54	$	125	$	—	$	51	$	162	$	6	$	398
Ending balance, collectively evaluated for credit losses	$	2,055	$	4,748	$	2,358	$	4,904	$	10,828	$	9,545	$	1,104	$	35,542
Loans:
Ending balance	$	89,694	$	269,752	$	191,499	$	250,610	$	998,989	$	798,617	$	84,608	$	2,683,769
Ending balance, individually evaluated for credit losses	$	1,094	$	1,601	$	611	$	1,575	$	6,175	$	6,294	$	6	$	17,356
Ending balance, collectively evaluated for credit losses	$	88,600	$	268,151	$	190,888	$	249,035	$	992,814	$	792,323	$	84,602	$	2,666,413

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Changes in the allowance for credit losses for off-balance sheet credit exposures for the three and six months ended June 30, 2022 were as follows:

	Three Months Ended June 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance	$	513	$	1,420	$	1,126	$	100	$	925	$	593	$	13	$	4,690
Credit loss expense (benefit)	146		356		56		15		100		(293)		40		420
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—
Ending balance	$	659	$	1,776	$	1,182	$	115	$	1,025	$	300	$	53	$	5,110
	Three Months Ended June 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance	$	443	$	1,824	$	933	$	202	$	646	$	250	$	42	$	4,340
Credit loss expense (benefit)	51		(295)		(69)		(95)		145		25		(12)		(250)
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—
Ending balance	$	494	$	1,529	$	864	$	107	$	791	$	275	$	30	$	4,090

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

	Six Months Ended June 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance	$	383	$	1,118	$	849	$	113	$	794	$	559	$	34	$	3,850
Credit loss expense (benefit)	276		658		333		2		231		(259)		19		1,260
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—
Ending balance	$	659	$	1,776	$	1,182	$	115	$	1,025	$	300	$	53	$	5,110
	Six Months Ended June 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance, prior to adoption of ASC 326	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Impact of adopting ASC 326	385		1,585		736		180		471		212		15		3,584
Credit loss expense (benefit)	109		(56)		128		(73)		320		63		15		506
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—
Ending balance	$	494	$	1,529	$	864	$	107	$	791	$	275	$	30	$	4,090

Credit loss expense for off-balance sheet credit exposures is included in credit loss expense on the consolidated statement of income for the six months ended June 30, 2022 and 2021.

Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification and grading in accordance with applicable bank regulations. The Company's risk rating methodology assigns risk ratings ranging from 1 to 6, where a higher rating represents higher risk. The Company differentiates its lending portfolios into loans sharing common risk characteristics for which expected credit loss is measured on a pool basis and loans not sharing common risk characteristics for which credit loss is measured individually.

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(Unaudited)

The below are descriptions of the credit quality indicators:

Excellent – Excellent rated loans are prime quality loans covered by highly liquid collateral with generous margins or supported by superior current financial conditions reflecting substantial net worth, relative to total credit extended, and based on assets of a stable and non-speculative nature whose values can be readily verified. Identified repayment source or cash flow is abundant and assured. Loans are secured with cash, cash equivalents, or collateral with very low loan to values. The borrower would qualify for unsecured debt and guarantors provide excellent secondary support to the relationship. The borrower has a long-term relationship with Hills Bank, maintains high deposit balances and has an established payment history with Hills Bank and an established business in an established industry.

Good – Good rated loans are adequately secured by readily marketable collateral or good financial condition characterized by liquidity, flexibility and sound net worth. Loans are supported by sound primary and secondary payment sources and timely and accurate financial information. The relationship is not quite as strong as a borrower that is assigned an excellent rating but still has a very strong liquidity position, low leverage, and track record of strong performance. These loans have a strong collateral position with limited risk to bank capital. The collateral will not materially lose value in a distressed liquidation. Guarantors provide additional secondary support to mitigate possible bank losses. The borrower has a long-term relationship with Hills Bank with an established track record of payments; loans with shorter remaining loan amortization; deposit balances are consistent; loan payments could be made from cash reserves in the interim period; and source of income is coming from a stable industry.

Satisfactory – Satisfactory rated loans are loans to borrowers of average financial means not especially vulnerable to changes in economic or other circumstances, where the major support for the extension is sufficient collateral of a marketable nature, and the primary source of repayment is seen to be clear and adequate. The borrower's financial performance is consistent, ratios and trends are positive and the primary repayment source can clearly be identified and supported with acceptable financial information. The loan relationship could be vulnerable to changes in economic or industry conditions but have the ability to absorb unexpected issues. The loan collateral coverage is considered acceptable and guarantors can provide financial support but net worth might not be as liquid as a 1 or 2 rated relationship. The borrower has an established relationship with Hills Bank. The relationship is making timely loan payments, any operating line is revolving and deposit balances are positive with limited to no overdrafts. Management and industry is considered stable.

Monitor – Monitor rated loans are identified by management as warranting special attention for a variety of reasons that may bear on ultimate collectability. This may be due to adverse trends, a particular industry, loan structure, or repayment that is dependent on projections, or a one-time occurrence. The relationship liquidity levels are minimal and the borrower’s leverage position is brought into question. The primary repayment source is showing signs of being stressed or is not proven. If the borrower performs as planned, the loan will be repaid. The collateral coverage is still considered acceptable but there might be some concern with the type of real estate securing the debt or highly dependent on chattel assets. Some loans may be better secured than others. Guarantors still provide some support but there is not an abundance of financial strength supporting the guaranty. A monitor credit may be appropriate when the borrower is experiencing rapid growth which is impacting liquidity levels and increasing debt levels. Other attributes to consider would include if the business is a start-up or newly acquired, if the relationship has significant financing relationships with other financial institutions, the quality of financial information being received, management depth of the company, and changes to the business model. The track history with Hills Bank has some deficiencies such as slow payments or some overdrafts.

Special Mention – Special mention rated loans are supported by a marginal payment capacity and are marginally protected by collateral.  There are identified weaknesses that if not monitored and corrected may adversely affect the Company’s credit position.  A special mention credit would typically have a weakness in one of the general categories (cash flow, collateral position or payment history) but not in all categories. Potential indicators of a special mention would include past due payments, overdrafts, management issues, poor financial performance, industry issues, or the need for additional short-term borrowing. The ability to continue to make payments is in question; there are “red flags” such as past due payments, non-revolving credit lines, overdrafts, and the inability to sell assets. The borrower is experiencing delinquent taxes, legal issues, etc., obtaining financial information has become a challenge, collateral coverage is marginal at best, and the value and condition could be brought into question. Collateral document deficiencies have been noted and if not addressed, could become material. Guarantors provide minimal support for this relationship. The credit may include an action plan or follow up established in the asset quality process. There is a change in the borrower’s communication pattern. Industry issues may be impacting the relationship. Adverse credit scores or history of payment deficiencies could be noted.

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(Unaudited)

Substandard – Substandard loans are not adequately supported by the paying capacity of the borrower and may be inadequately collateralized.  These loans have a well-defined weakness or weaknesses.  Full repayment of the loan(s) according to the original terms and conditions is in question or not expected. For these loans, it is more probable than not that the Company could sustain some loss if the deficiency(ies) is not corrected. There are identified shortfalls in the primary repayment source such as carry over debt, past due payments, and overdrafts. Obtaining quality and timely financial information is a weakness. The loan is under secured with exposure that could impact bank capital. It appears the liquidation of collateral has become the repayment source. The collateral may be difficult to foreclose or have little to no value. Collateral documentation deficiencies have been noted during the review process. Guarantor(s) provide minimal to no support of the relationship. The borrower’s communication with the bank continues to decrease and the borrower is not addressing the situation. There is some concern about the borrower’s ability and willingness to repay the loans. Problems may be the result of external issues such as economic or industry related issues.

The following tables present the credit quality indicators and origination years by type of loan in each category as of June 30, 2022 (amounts in thousands):

	Agricultural
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	753	$	55	$	231	$	58	$	7	$	—	$	2,511	$	3,615
Good	1,978		642		1,241		473		37		26		3,589		7,986
Satisfactory	10,319		4,783		3,080		1,396		1,483		121		19,751		40,933
Monitor	9,353		3,276		2,547		947		501		225		23,031		39,880
Special Mention	825		80		260		3		183		—		1,092		2,443
Substandard	—		—		35		58		—		—		1,967		2,060
Total	$	23,228	$	8,836	$	7,394	$	2,935	$	2,211	$	372	$	51,941	$	96,917

	Commercial and Financial
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	692	$	825	$	600	$	3	$	208	$	8	$	3,775	$	6,111
Good	7,000		10,388		3,379		727		163		1,449		11,165		34,271
Satisfactory	26,391		32,870		14,552		5,754		2,741		1,433		46,196		129,937
Monitor	10,748		11,002		7,108		1,501		815		643		21,034		52,851
Special Mention	397		417		403		207		46		10		442		1,922
Substandard	1,143		395		—		56		—		—		1,989		3,583
Total	$	46,371	$	55,897	$	26,042	$	8,248	$	3,973	$	3,543	$	84,601	$	228,675

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(Unaudited)

	Real Estate: Construction, 1 to 4 Family Residential
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	—	$	376	$	376
Good	313		—		—		—		—		—		22,614		22,927
Satisfactory	1,869		4,375		—		—		—		—		42,724		48,968
Monitor	500		415		—		—		—		—		12,988		13,903
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		105		—		—		—		—		—		105
Total	$	2,682	$	4,895	$	—	$	—	$	—	$	—	$	78,702	$	86,279

	Real Estate: Construction, Land Development and Commercial
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	138	$	—	$	138
Good	2,220		2,164		1,101		—		—		382		17,405		23,272
Satisfactory	12,733		12,602		2,278		1,426		257		953		55,235		85,484
Monitor	3,407		4,628		237		7		35		73		25,270		33,657
Special Mention	—		—		—		—		—		—		—		—
Substandard	7,000		191		96		—		—		—		—		7,287
Total	$	25,360	$	19,585	$	3,712	$	1,433	$	292	$	1,546	$	97,910	$	149,838

	Real Estate: Mortgage, Farmland
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	3,142	$	58	$	303	$	75	$	—	$	4	$	125	$	3,707
Good	16,970		13,621		8,187		1,652		1,042		5,041		5,329		51,842
Satisfactory	32,771		45,082		22,287		3,419		6,652		10,367		8,397		128,975
Monitor	25,472		6,773		6,133		3,932		898		1,065		4,474		48,747
Special Mention	4,187		96		280		286		303		28		—		5,180
Substandard	1,021		1,045		—		60		44		190		—		2,360
Total	$	83,563	$	66,675	$	37,190	$	9,424	$	8,939	$	16,695	$	18,325	$	240,811

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(Unaudited)

	Real Estate: Mortgage, 1 to 4 Family First Liens
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	2,276	$	456	$	267	$	—	$	13	$	527	$	—	$	3,539
Good	19,280		5,065		9,391		2,404		2,208		10,825		2,181		51,354
Satisfactory	190,737		212,478		150,566		57,191		53,518		148,026		11,104		823,620
Monitor	17,804		23,059		28,049		4,834		5,525		12,069		4,675		96,015
Special Mention	988		1,591		3,204		1,026		1,067		4,481		—		12,357
Substandard	313		1,356		1,672		732		1,230		4,747		—		10,050
Total	$	231,398	$	244,005	$	193,149	$	66,187	$	63,561	$	180,675	$	17,960	$	996,935

	Real Estate: Mortgage, 1 to 4 Family Junior Liens
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	17	$	—	$	10	$	—	$	—	$	—	$	9	$	36
Good	239		191		593		94		—		566		1,166		2,849
Satisfactory	7,411		11,978		8,706		4,956		5,624		9,004		58,495		106,174
Monitor	417		293		731		84		290		246		2,827		4,888
Special Mention	31		133		344		33		43		202		106		892
Substandard	24		60		203		103		61		64		377		892
Total	$	8,139	$	12,655	$	10,587	$	5,270	$	6,018	$	10,082	$	62,980	$	115,731

	Real Estate: Mortgage, Multi-Family
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	300	$	2,493	$	4,397	$	—	$	—	$	666	$	—	$	7,856
Good	18,486		16,522		17,353		54		—		8,930		—		61,345
Satisfactory	49,308		104,276		41,362		2,424		479		14,928		16,736		229,513
Monitor	43,826		23,869		26,919		173		—		1,357		4,502		100,646
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Total	$	111,920	$	147,160	$	90,031	$	2,651	$	479	$	25,881	$	21,238	$	399,360

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(Unaudited)

	Real Estate: Mortgage, Commercial
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	2,154	$	587	$	16,045	$	—	$	—	$	1,227	$	—	$	20,013
Good	18,010		24,265		21,249		2,125		1,314		6,027		9,533		82,523
Satisfactory	36,176		66,129		41,503		11,320		9,611		19,860		18,189		202,788
Monitor	30,649		11,130		31,615		3,853		1,440		8,090		4,732		91,509
Special Mention	—		5,955		467		170		—		793		—		7,385
Substandard	267		569		1,862		129		199		99		—		3,125
Total	$	87,256	$	108,635	$	112,741	$	17,597	$	12,564	$	36,096	$	32,454	$	407,343

	Loans to Individuals
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	8	$	—	$	—	$	—	$	—	$	—	$	—	$	8
Good	22		—		—		45		—		2		1		70
Satisfactory	7,782		8,686		3,680		1,359		602		11,023		76		33,208
Monitor	186		225		74		27		32		—		3		547
Special Mention	42		37		29		2		2		—		1		113
Substandard	20		19		7		6		—		—		3		55
Total	$	8,060	$	8,967	$	3,790	$	1,439	$	636	$	11,025	$	84	$	34,001

	Obligations of State and Political Subdivisions
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	5,313	$	—	$	5,313
Good	—		—		1,927		—		—		8,692		—		10,619
Satisfactory	2,613		844		2,005		1,530		593		14,437		9,125		31,147
Monitor	—		—		849		192		245		1,808		—		3,094
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Total	$	2,613	$	844	$	4,781	$	1,722	$	838	$	30,250	$	9,125	$	50,173

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(Unaudited)

The following table presents the credit quality indicators by type of loans in each category as of December 31, 2021 (amounts in thousands):

	Agricultural
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	762	$	213	$	30	$	10	$	—	$	—	$	2,312	$	3,327
Good	1,799		1,767		603		46		52		26		7,593		11,886
Satisfactory	10,335		6,404		1,476		1,770		403		66		26,285		46,739
Monitor	8,125		5,017		998		765		164		253		23,995		39,317
Special Mention	1,662		11		85		—		7		—		2,807		4,572
Substandard	592		69		203		—		—		—		228		1,092
Total	$	23,275	$	13,481	$	3,395	$	2,591	$	626	$	345	$	63,220	$	106,933

	Commercial and Financial
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	965	$	924	$	4	$	235	$	31	$	—	$	3,391	$	5,550
Good	13,722		5,570		1,105		1,086		276		1,494		20,709		43,962
Satisfactory	44,964		20,847		7,684		3,582		2,106		331		41,832		121,346
Monitor	18,337		8,019		3,591		1,123		297		416		13,368		45,151
Special Mention	603		525		353		70		102		4		174		1,831
Substandard	1,092		670		266		54		92		—		1,988		4,162
Total	$	79,683	$	36,555	$	13,003	$	6,150	$	2,904	$	2,245	$	81,462	$	222,002

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(Unaudited)

	Real Estate: Construction, 1 to 4 Family Residential
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Good	212		—		—		—		—		—		18,755		18,967
Satisfactory	7,457		94		—		—		—		—		42,988		50,539
Monitor	1,307		—		—		—		—		—		9,187		10,494
Special Mention	—		—		—		—		—		—		374		374
Substandard	111		—		—		—		—		—		1		112
Total	$	9,087	$	94	$	—	$	—	$	—	$	—	$	71,305	$	80,486

	Real Estate: Construction, Land Development and Commercial
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	5,079	$	—	$	—	$	—	$	143	$	4	$	—	$	5,226
Good	3,294		1,200		—		—		153		242		12,678		17,567
Satisfactory	22,907		4,354		2,356		263		1,081		21		40,048		71,030
Monitor	5,694		547		7		38		74		—		18,832		25,192
Special Mention	—		—		—		—		—		—		—		—
Substandard	7,515		298		193		—		—		—		—		8,006
Total	$	44,489	$	6,399	$	2,556	$	301	$	1,451	$	267	$	71,558	$	127,021

	Real Estate: Mortgage, Farmland
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	3,568	$	124	$	60	$	80	$	41	$	134	$	4,007
Good	17,827		14,308		2,144		2,460		5,932		3,929		3,844		50,444
Satisfactory	51,639		35,616		4,689		8,358		6,745		8,339		8,242		123,628
Monitor	8,532		16,925		5,518		3,901		2,154		4,866		5,695		47,591
Special Mention	4,031		288		—		—		298		190		—		4,807
Substandard	1,283		447		291		47		—		199		—		2,267
Total	$	83,312	$	71,152	$	12,766	$	14,826	$	15,209	$	17,564	$	17,915	$	232,744

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(Unaudited)

	Real Estate: Mortgage, 1 to 4 Family First Liens
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	462	$	914	$	427	$	19	$	149	$	404	$	1	$	2,376
Good	9,598		12,300		3,124		3,443		3,091		10,943		2,496		44,995
Satisfactory	233,412		189,247		69,037		65,201		60,906		118,608		8,443		744,854
Monitor	24,908		33,863		5,038		6,527		7,273		12,203		4,066		93,878
Special Mention	1,682		3,422		887		962		1,051		3,168		—		11,172
Substandard	1,571		1,261		1,129		1,609		576		6,142		1		12,289
Total	$	271,633	$	241,007	$	79,642	$	77,761	$	73,046	$	151,468	$	15,007	$	909,564

	Real Estate: Mortgage, 1 to 4 Family Junior Liens
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	13	$	—	$	—	$	—	$	—	$	6	$	19
Good	193		611		96		—		108		482		1,374		2,864
Satisfactory	13,684		10,116		5,854		7,309		5,230		6,053		55,496		103,742
Monitor	326		1,233		70		365		140		281		2,801		5,216
Special Mention	103		489		35		56		42		110		142		977
Substandard	77		209		79		441		74		99		545		1,524
Total	$	14,383	$	12,671	$	6,134	$	8,171	$	5,594	$	7,025	$	60,364	$	114,342

	Real Estate: Mortgage, Multi-Family
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	2,539	$	4,513	$	—	$	—	$	—	$	701	$	—	$	7,753
Good	16,931		35,396		1,555		—		—		9,289		—		63,171
Satisfactory	107,192		69,287		13,635		2,030		1,561		14,660		14,764		223,129
Monitor	26,088		35,886		176		—		131		1,584		5,669		69,534
Special Mention	640		—		820		—		—		—		—		1,460
Substandard	12,186		—		—		—		—		5,559		—		17,745
Total	$	165,576	$	145,082	$	16,186	$	2,030	$	1,692	$	31,793	$	20,433	$	382,792

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(Unaudited)

	Real Estate: Mortgage, Commercial
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	597	$	16,781	$	—	$	—	$	3,313	$	350	$	1	$	21,042
Good	20,143		36,773		2,619		1,356		3,811		7,085		9,812		81,599
Satisfactory	75,040		52,653		14,727		12,091		9,707		17,398		16,333		197,949
Monitor	18,664		49,774		3,923		2,202		3,037		8,461		3,387		89,448
Special Mention	5,791		795		303		—		554		337		—		7,780
Substandard	1,528		1,721		—		208		—		102		—		3,559
Total	$	121,763	$	158,497	$	21,572	$	15,857	$	20,422	$	33,733	$	29,533	$	401,377

	Loans to Individuals
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Good	—		—		67		21		5		—		1		94
Satisfactory	12,162		5,606		2,212		967		141		10,867		57		32,012
Monitor	200		160		15		46		3		—		1		425
Special Mention	37		32		29		4		—		—		1		103
Substandard	12		24		12		—		1		3		1		53
Total	$	12,411	$	5,822	$	2,335	$	1,038	$	150	$	10,870	$	61	$	32,687

	Obligations of State and Political Subdivisions
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	6,076	$	—	$	6,076
Good	—		1,984		—		—		—		9,051		—		11,035
Satisfactory	1,009		2,034		1,551		706		11,557		3,634		9,400		29,891
Monitor	—		933		203		249		—		1,898		—		3,283
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Total	$	1,009	$	4,951	$	1,754	$	955	$	11,557	$	20,659	$	9,400	$	50,285

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(Unaudited)

Past due loans as of June 30, 2022 and December 31, 2021 were as follows:

	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Accruing Loans Past Due 90 Days or More
	(Amounts In Thousands)
June 30, 2022
Agricultural	$	213	$	80	$	—	$	293	$	96,624	$	96,917	$	—
Commercial and financial	948		59		200		1,207		227,468		228,675		200
Real estate:
Construction, 1 to 4 family residential	623		104		—		727		85,552		86,279		—
Construction, land development and commercial	495		191		96		782		149,056		149,838		—
Mortgage, farmland	223		—		60		283		240,528		240,811		—
Mortgage, 1 to 4 family first liens	930		2,492		2,036		5,458		991,477		996,935		285
Mortgage, 1 to 4 family junior liens	101		198		120		419		115,312		115,731		—
Mortgage, multi-family	—		—		—		—		399,360		399,360		—
Mortgage, commercial	296		—		1,339		1,635		405,708		407,343		187
Loans to individuals	162		39		—		201		33,800		34,001		—
Obligations of state and political subdivisions	—		—		—		—		50,173		50,173		—
	$	3,991	$	3,163	$	3,851	$	11,005	$	2,795,058	$	2,806,063	$	672
December 31, 2021
Agricultural	$	41	$	—	$	219	$	260	$	106,673	$	106,933	$	6
Commercial and financial	300		537		468		1,305		220,697		222,002		91
Real estate:
Construction, 1 to 4 family residential	276		—		—		276		80,210		80,486		—
Construction, land development and commercial	194		66		96		356		126,665		127,021		—
Mortgage, farmland	503		362		—		865		231,879		232,744		—
Mortgage, 1 to 4 family first liens	5,085		864		2,481		8,430		901,134		909,564		104
Mortgage, 1 to 4 family junior liens	246		41		124		411		113,931		114,342		—
Mortgage, multi-family	640		—		—		640		382,152		382,792		—
Mortgage, commercial	466		—		829		1,295		400,082		401,377		—
Loans to individuals	177		26		5		208		32,479		32,687		—
Obligations of state and political subdivisions	394		—		—		394		49,891		50,285		—
	$	8,322	$	1,896	$	4,222	$	14,440	$	2,645,793	$	2,660,233	$	201

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(Unaudited)

The Company does not have a material amount of loans that are past due less than 90 days where there are serious doubts as to the ability of the borrowers to comply with the loan repayment terms.

Certain nonaccrual and TDR loan information by loan type at June 30, 2022 and December 31, 2021, was as follows:

	June 30, 2022						December 31, 2021
	Non-accrual loans (1)		Accruing loans past due 90 days or more		TDR loans		Non- accrual loans (1)		Accruing loans past due 90 days or more		TDR loans
	(Amounts In Thousands)						(Amounts In Thousands)
Agricultural	$	—	$	—	$	27	$	221	$	6	$	374
Commercial and financial	715		200		721		707		91		1,085
Real estate:
Construction, 1 to 4 family residential	105		—		—		111		—		—
Construction, land development and commercial	287		—		—		290		—		202
Mortgage, farmland	104		—		1,642		251		—		1,206
Mortgage, 1 to 4 family first liens	3,892		285		1,216		4,685		104		1,364
Mortgage, 1 to 4 family junior liens	120		—		19		200		—		20
Mortgage, multi-family	—		—		628		—		—		1,460
Mortgage, commercial	1,834		187		1,979		2,026		—		2,210
Loans to individuals	—		—		—		—		—		—
Obligations of state and political subdivisions	—		—		—		—		—		—
	$	7,057	$	672	$	6,232	$	8,491	$	201	$	7,921

(1)There were $2.66 million and $2.28 million of TDR loans included within nonaccrual loans as of June 30, 2022 and December 31, 2021, respectively.

Loans 90 days or more past due that are still accruing interest increased $0.47 million from December 31, 2021 to June 30, 2022. As of June 30, 2022, there were five accruing loans past due 90 days or more with an average loan balance of $0.13 million. There were 6 accruing loans past due 90 days or more as of December 31, 2021 with an average loan balance of $0.03 million. The accruing loans past due 90 days or more balances are believed to be adequately collateralized and the Company expects to collect all principal and interest as contractually due under these loans. There was no interest income recognized on nonaccrual loans for the six months ended June 30, 2022 and year ended December 31, 2021.

The Company may modify the terms of a loan to maximize the collection of amounts due.  Such a modification is considered a troubled debt restructuring (“TDR”).  In most cases, the modification is either a reduction in interest rate, conversion to interest only payments or an extension of the maturity date.  The borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term, so a concessionary modification is granted to the borrower that would otherwise not be considered.  TDR loans accrue interest as long as the borrower complies with the revised terms and conditions and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles.

Section 4013 of the CARES Act, “Temporary Relief From Troubled Debt Restructurings,” allows financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time during the COVID-19 pandemic. As of June 30, 2022, the total amount of the eligible loans in deferral (deferral of principal and/or interest) that met the requirements set forth under the CARES Act and therefore were not considered TDRs was 16 loans,

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(Unaudited)

totaling $7.5 million. As of December 31, 2021, there were 16 loans, totaling $9.4 million that met the requirements and were not considered TDRs.

As of June 30, 2022 and December 31, 2021, COVID-19 related payment deferrals were approximately 0.06% and 0.12% of total loans, respectively.

Below is a summary of information for TDR loans as of June 30, 2022 and December 31, 2021:

	June 30, 2022					December 31, 2021
	Number of contracts	Recorded investment		Commitments outstanding		Number of contracts	Recorded investment		Commitments outstanding
		(Amounts In Thousands)					(Amounts In Thousands)
Agricultural	1	$	27	$	115	4	$	586	$	—
Commercial and financial	11	1,385		50		12	1,116		60
Real estate:
Construction, 1 to 4 family residential	1	105		—		—	—		—
Construction, land development and commercial	1	191		—		1	202		—
Mortgage, farmland	4	1,642		—		5	1,409		—
Mortgage, 1 to 4 family first liens	9	1,216		—		14	1,441		—
Mortgage, 1 to 4 family junior liens	1	19		—		1	20		—
Mortgage, multi-family	1	628		—		2	1,460		—
Mortgage, commercial	11	3,684		—		11	3,963		—
Loans to individuals	—	—		—		—	—		—
Obligations of state and political subdivisions	—	—		—		—	—		—
	40	$	8,897	$	165	50	$	10,197	$	60

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The following is a summary of TDR loans that were modified during the three and six months ended June 30, 2022:

	Three Months Ended June 30, 2022					Six Months Ended June 30, 2022
	Number of contracts	Pre-modification recorded investment		Post-modification recorded investment		Number of contracts	Pre-modification recorded investment		Post-modification recorded investment
		(Amounts In Thousands)					(Amounts In Thousands)
Agricultural	—	$	—	$	—	—	$	—	$	—
Commercial and financial	—	—		—		1	371		371
Real estate:
Construction, 1 to 4 family residential	—	—		—		1	105		105
Construction, land development and commercial	—	—		—		1	191		191
Mortgage, farmland	2	1,021		1,021		2	1,021		1,021
Mortgage, 1 to 4 family first lien	—	—		—		—	—		—
Mortgage, 1 to 4 family junior liens	—	—		—		—	—		—
Mortgage, multi-family	—	—		—		—	—		—
Mortgage, commercial	—	—		—		1	274		274
Loans to individuals	—	—		—		—	—		—
Obligations of state and political subdivisions	—	—		—		—	—		—
	2	$	1,021	$	1,021	6	$	1,962	$	1,962

The Company has allocated $0.39 million of allowance for TDR loans and the Company had commitments to lend $0.17 million in additional borrowings to restructured loan customers as of June 30, 2022.  The Company had commitments to lend $0.06 million in additional borrowings to restructured loan customers as of December 31, 2021.  These commitments were in the normal course of business.  The additional borrowings were not used to facilitate payments on these loans. The modifications of the terms of loans performed during the six months ended June 30, 2022 included extensions of the maturity date.

There were no TDR loans that were in payment default (defined as past due 90 days or more) during the period ended June 30, 2022 and the year ended December 31, 2021.

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(Unaudited)

The following table presents the amortized cost basis of collateral dependent loans, by the primary collateral type, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans:

	Primary Type of Collateral
	Real Estate		Accounts Receivable		Equipment		Other		Total		ACL Allocation
	(Amounts In Thousands)
June 30, 2022
Agricultural	$	207	$	—	$	—	$	—	$	207	$	—
Commercial and financial	1,544		—		93		—		1,637		5
Real estate:
Construction, 1 to 4 family residential	105		—		—		—		105		55
Construction, land development and commercial	287		—		—		—		287		—
Mortgage, farmland	1,560		—		187		—		1,747		—
Mortgage, 1 to 4 family first liens	5,212		—		—		—		5,212		9
Mortgage, 1 to 4 family junior liens	139		—		—		—		139		6
Mortgage, multi-family	628		—		—		—		628		—
Mortgage, commercial	4,000		—		—		—		4,000		314
Loans to individuals	—		—		—		—		—		—
Obligations of state and political subdivisions	—		—		—		—		—		—
	$	13,682	$	—	$	280	$	—	$	13,962	$	389

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HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

	Primary Type of Collateral
	Real Estate		Accounts Receivable		Equipment		Other		Total		ACL Allocation
	(Amounts In Thousands)
December 31, 2021
Agricultural	$	734	$	—	$	54	$	—	$	788	$	1
Commercial and financial	1,951		—		111		—		2,062		189
Real estate:
Construction, 1 to 4 family residential	111		—		—		—		111		111
Construction, land development and commercial	492		—		—		—		492		13
Mortgage, farmland	1,277		—		—		—		1,277		—
Mortgage, 1 to 4 family first liens	5,967		—		—		—		5,967		31
Mortgage, 1 to 4 family junior liens	220		—		—		—		220		18
Mortgage, multi-family	1,460		—		—		—		1,460		—
Mortgage, commercial	4,236		—		—		—		4,236		1
Loans to individuals	20		—		—		—		20		20
Obligations of state and political subdivisions	—		—		—		—		—		—
	$	16,468	$	—	$	165	$	—	$	16,633	$	384

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HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The changes in the ACL in 2022 compared to December 31, 2021 is the result of the following factors: improvements in the economic factors, primarily Iowa unemployment in the first quarter, used in the ACL calculation which resulted in a decrease of $0.54 million; increase in loan volume which resulted in an increase of $1.57 million; changes in prepayment and curtailment rates resulting in an increase of $0.58 million; increases in historical loss rates resulting in an increase of $0.84 million; increase in the individually analyzed loans reserve of $0.02 million; and increases in qualitative factors determined necessary by management which resulted in an increase of $0.32 million. The increase in the allowance for credit losses on off-balance sheet credit exposures is primarily a result of the increased outstanding unfunded commitments as of June 30, 2022.

The extent to which collateral secures collateral-dependent loans is provided in the previous individually analyzed loans table and changes in the extent to which collateral secures its collateral-dependent loans are described below. Collateral-dependent loans decreased $2.67 million from December 31, 2021 to June 30, 2022.  Collateral-dependent loans include any loan that has been placed on nonaccrual status, accruing loans past due 90 days or more and TDR loans. Collateral-dependent loans also include loans that, based on management’s evaluation of current information and events, the Company expects to be unable to collect in full according to the contractual terms of the original loan agreement.  Collateral-dependent loans were 0.50% of loans held for investment as of June 30, 2022 and 0.63% as of December 31, 2021.  The decrease in collateral-dependent loans is due to a decrease in nonaccrual loans of $1.43 million, an increase in 90 days or more accruing loans of $0.47 million and a decrease in TDR loans of $1.69 million from December 31, 2021 to June 30, 2022. There were no significant changes noted in the extent to which collateral secures collateral-dependent loans.

The Company regularly reviews a substantial portion of the loans in the portfolio and assesses whether the loans share common risk characteristics for which expected credit loss is measured on a pool basis or if the loans do not share common risk characteristics and therefore expected credit loss is measured on an individual loan basis.  If the loans are assessed for credit losses on an individual basis, the Company determines if a specific allowance is appropriate.  In addition, the Company's management also reviews and, where determined necessary, provides allowances for particular loans based upon (1) reviews of specific borrowers and (2) management’s assessment of areas that management considers are of higher credit risk, including loans that have been restructured or where a TDR is reasonably possible.  Loans that are determined not to be collateral-dependent and for which there are no specific allowances are classified into one or more risk categories and expected credit loss is measured on a pool basis. See Note 1 Adoption of Financial Accounting Standard for further discussion of the allowance for credit losses for loans held for investment.

Specific allowances for credit losses on loans assessed individually are established if the loan balances exceed the net present value of the relevant future cash flows or the fair value of the relevant collateral based on updated appraisals and/or updated collateral analysis for the properties if the loan is collateral dependent.  The Company may recognize a charge off or record a specific allowance related to an individually analyzed loan if there is a collateral shortfall or it is unlikely the borrower can make all principal and interest payments as contractually due.

For loans that are collateral-dependent, losses are evaluated based on the portion of a loan that exceeds the fair market value of the collateral.  In general, this is the amount that the carrying value of the loan exceeds the related appraised value less estimated costs to sell the collateral.  Generally, it is the Company’s policy not to rely on appraisals that are older than one year prior to the date the credit loss is being measured.  The most recent appraisal values may be adjusted if, in the Company’s judgment, experience and other market data indicate that the property’s value, use, condition, exit market or other variables affecting its value may have changed since the appraisal was performed. The charge off or loss adjustment supported by an appraisal is considered the minimum charge off.  Any adjustments made to the appraised value are to provide an additional charge off or specific reserve based on the applicable facts and circumstances.  In instances where there is an estimated decline in value, a specific reserve may be provided or a charge off taken pending confirmation of the amount of the loss from an updated appraisal.  Upon receipt of the new appraisals, an additional specific reserve may be provided or charge off taken based on the appraised value of the collateral.  On average, appraisals are obtained within one month of order.

Note 6.Leases

The Bank leases branch offices, parking facilities and certain equipment under operating leases. The leases have remaining lease terms of 1 year to 15 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year. As the options are reasonably certain to be exercised, they are recognized as part of the right-of-use assets and lease liabilities.

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HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

For the six months ended June 30, 2022 and 2021, total operating lease expense was $0.30 million and $0.29 million respectively, and is included in occupancy expenses in the consolidated statements of income. Included in this for the six months ended June 30, 2022 and 2021 were $0.26 million and $0.25 million, respectively, of operating lease costs, $0.02 million and $0.02 million, respectively, of short term lease costs, and $0.02 million and $0.02 million, respectively, of variable lease costs.

For the six months ended June 30, 2022 and 2021, cash paid for amounts included in the measurement of operating lease liabilities was $0.26 million and $0.25 million, respectively.

As of June 30, 2022 and December 31, 2021, operating lease right-of-use assets included in other assets was $2.31 million and $2.47 million respectively. Operating lease liabilities included in other liabilities were $2.39 million and $2.53 million as of June 30, 2022 and December 31, 2021. As of June 30, 2022 and December 31, 2021, the weighted average remaining lease term for operating leases was 9.75 years and 9.94 years, respectively, and the weighted average discount rate for operating leases was 3.50% and 3.49%, respectively. Discount rates used were determined from FHLB borrowing rates for comparable terms.

As of June 30, 2022, maturities of lease liabilities were as follows:

Year ending December 31:	(Amounts In Thousands)
2022 (excluding the six months ended June 30, 2022)	$	235
2023	327
2024	260
2025	263
2026	266
Thereafter	1,503
Total lease payments	2,854
Less imputed interest	(466)
Total operating lease liabilities	$	2,388

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HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 7.Fair Value Measurements

The carrying value and estimated fair values of the Company's financial instruments as of June 30, 2022 are as follows:

	June 30, 2022
	Carrying Amount		Estimated Fair Value		Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)
	(Amounts In Thousands)
Financial instrument assets:
Cash and cash equivalents	$	307,493	$	307,493	$	307,493	$	—	$	—
Investment securities	772,283		772,283		462,110		310,173		—
Loans held for sale	1,600		1,600		—		1,600		—
Loans
Agricultural	94,652		93,966		—		—		93,966
Commercial and financial	223,481		221,571		—		—		221,571
Real estate:
Construction, 1 to 4 family residential	85,432		85,158		—		—		85,158
Construction, land development and commercial	147,913		145,508		—		—		145,508
Mortgage, farmland	237,481		231,825		—		—		231,825
Mortgage, 1 to 4 family first liens	988,184		971,999		—		—		971,999
Mortgage, 1 to 4 family junior liens	112,485		110,958		—		—		110,958
Mortgage, multi-family	395,336		387,871		—		—		387,871
Mortgage, commercial	400,134		392,252		—		—		392,252
Loans to individuals	33,213		32,092		—		—		32,092
Obligations of state and political subdivisions	49,728		49,270		—		—		49,270
Accrued interest receivable	12,739		12,739		—		12,739		—
Total financial instrument assets	$	3,862,154	$	3,816,585	$	769,603	$	324,512	$	2,722,470
Financial instrument liabilities
Deposits
Noninterest-bearing deposits	$	645,934	$	645,934	$	—	$	645,934	$	—
Interest-bearing deposits	2,799,897		2,802,676		—		2,802,676		—
Accrued interest payable	1,037		1,037		—		1,037		—
Total financial instrument liabilities	$	3,446,868	$	3,449,647	$	—	$	3,449,647	$	—
	Face Amount
Financial instrument with off-balance sheet risk:
Loan commitments	$	725,164	$	—	$	—	$	—	$	—
Letters of credit	6,923		—		—		—		—
Total financial instrument liabilities with off-balance-sheet risk	$	732,087	$	—	$	—	$	—	$	—

(1)Considered Level 1 under Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”).

(2)Considered Level 2 under ASC 820.

(3)Considered Level 3 under ASC 820 and are based on valuation models that use significant assumptions that are not observable in an active market.

Page 44

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The carrying value and estimated fair values of the Company's financial instruments as of December 31, 2021 are as follows:

	December 31, 2021
	Carrying Amount		Estimated Fair Value		Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)
	(Amounts In Thousands)
Financial instrument assets:
Cash and cash equivalents	$	781,918	$	781,918	$	781,918	$	—	$	—
Investment securities	555,900		555,900		243,925		311,975		—
Loans held for sale	5,716		5,716		—		5,716		—
Loans
Agricultural	104,672		103,745		—		—		103,745
Commercial and financial	217,733		216,466		—		—		216,466
Real estate:
Construction, 1 to 4 family residential	79,668		79,311		—		—		79,311
Construction, land development and commercial	125,539		124,466		—		—		124,466
Mortgage, farmland	229,311		228,365		—		—		228,365
Mortgage, 1 to 4 family first liens	901,523		897,255		—		—		897,255
Mortgage, 1 to 4 family junior liens	111,184		110,903		—		—		110,903
Mortgage, multi-family	379,077		378,193		—		—		378,193
Mortgage, commercial	394,594		391,950		—		—		391,950
Loans to individuals	31,916		31,871		—		—		31,871
Obligations of state and political subdivisions	49,845		50,155		—		—		50,155
Accrued interest receivable	11,437		11,437		—		11,437		—
Total financial instrument assets	$	3,980,033	$	3,967,651	$	1,025,843	$	329,128	$	2,612,680
Financial instrument liabilities:
Deposits
Noninterest-bearing deposits	$	633,101	$	633,101	$	—	$	633,101	$	—
Interest-bearing deposits	2,900,893		2,909,243		—		2,909,243		—
Other borrowings	249		249		—		249		—
Federal Home Loan Bank borrowings	—		—		—		—		—
Accrued interest payable	1,165		1,165		—		1,165		—
Total financial instrument liabilities	$	3,535,408	$	3,543,758	$	—	$	3,543,758	$	—
	Face Amount
Financial instrument with off-balance sheet risk:
Loan commitments	$	614,324	$	—	$	—	$	—	$	—
Letters of credit	7,179		—		—		—		—
Total financial instrument liabilities with off-balance-sheet risk	$	621,503	$	—	$	—	$	—	$	—

 Considered Level 1 under ASC 820.

(1)Considered Level 2 under ASC 820.

(2)Considered Level 3 under ASC 820 and are based on valuation models that use significant assumptions that are not observable in an active market.

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HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Fair value of financial instruments:  FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) provides a single definition for fair value, a framework for measuring fair value and expanded disclosures concerning fair value.  Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company determines the fair market value of its financial instruments based on the fair value hierarchy established in ASC 820.  There are three levels of inputs that may be used to measure fair value as follows:

Level 1 Quoted prices in active markets for identical assets or liabilities.

Level 2 Observable inputs other than quoted prices included within Level 1.  Observable inputs include the quoted prices for similar assets or liabilities in markets that are not active and inputs other than quoted prices that are observable for the asset or liability.

Level 3 Unobservable inputs supported by little or no market activity for financial instruments.  Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

It is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements.  The Company is required to use observable inputs, to the extent available, in the fair value estimation process unless that data results from forced liquidations or distressed sales. 

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

ASSETS

Investment securities available for sale:  Investment securities available for sale are recorded at fair value on a recurring basis.  Fair value measurement is based upon quoted prices, if available.  If a quoted price is not available, the fair value is obtained from benchmarking the security against similar securities. U.S. Treasury securities are considered Level 1 with the remaining securities considered Level 2.

The pricing for investment securities is obtained from an independent source.  There are no Level 3 investment securities owned by the Company.  The Company obtains an understanding of the independent source’s valuation methodologies used to determine fair value by level of security. The Company validates assigned fair values on a sample basis using an additional third-party provider pricing service to determine if the fair value measurement is reasonable. Due to the nature of our investment portfolio, we do not expect significant and unusual fluctuations as fair value changes primarily relate to interest rate changes.   No unusual fluctuations were identified during the six months ended June 30, 2022. If a fluctuation requiring investigation was identified, the Company would research the change with the independent source or other available information.

Individually analyzed loans under ASC 326 CECL: See Note 1 for further discussion of individually analyzed loans under CECL.

A loan is considered to be non-performing when it is probable that all of the principal and interest due may not be collected according to its contractual terms. Generally, when a loan is considered non-performing, the amount of reserve is measured based on the fair value of the underlying collateral. The Company makes such measurements on all material loans deemed non-performing using the fair value of the collateral for collateral dependent loans or based on the present value of the estimated future cash flows of interest and principal discounted at the loans effective interest rate or the fair value of the loan if determinable. The fair value of collateral used by the Company is determined by obtaining an observable market price or by obtaining an appraised value from an independent, licensed or certified appraiser, using observable market data. This data includes information such as selling price of similar properties and capitalization rates of similar properties sold within the market, expected future cash flows or earnings of the subject property based on current market expectations, and other relevant factors. All appraised values are adjusted for market-related trends based on the Company's experience in sales and other appraisals of similar property types as well as estimated selling costs. These loans are considered Level 3 as the instruments used to determine fair market value require significant management judgment and estimation.

Page 46

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Foreclosed assets:  The Company does not record foreclosed assets at fair value on a recurring basis.  Foreclosed assets consist mainly of other real estate owned but may include other types of assets repossessed by the Company.  Foreclosed assets are adjusted to the lower of carrying value or fair value less the cost of disposal.   Fair value is generally based upon independent market prices or appraised values of the collateral, and may include a marketability discount as deemed necessary by management based on its experience with similar types of real estate.  The value of foreclosed assets is evaluated periodically as a nonrecurring fair value adjustment.  Foreclosed assets are classified as Level 3.

Off-balance sheet instruments:  Fair values for outstanding letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing.  The fair value of the outstanding letters of credit is not significant. Unfunded loan commitments are not valued since the loans are generally priced at market at the time of funding (Level 2).

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below represents the balances of assets and liabilities measured at fair value on a recurring basis:

	June 30, 2022
	Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)		Total at Fair Value
Securities available for sale	(Amounts In Thousands)
U.S. Treasury	$	462,110	$	—	$	—	$	462,110
State and political subdivisions	—		217,714		—		217,714
Mortgage-backed securities and collateralized mortgage obligations	—		54,973		—		54,973
Other securities (FHLB, FHLMC and FNMA)	—		32,624		—		32,624
Total	$	462,110	$	305,311	$	—	$	767,421

	December 31, 2021
	Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)		Total at Fair Value
Securities available for sale	(Amounts In Thousands)
U.S. Treasury	$	243,925	$	—	$	—	$	243,925
State and political subdivisions	—		263,516		—		263,516
Mortgage-backed securities and collateralized mortgage obligations	—		9,446		—		9,446
Other securities (FHLB, FHLMC and FNMA)	—		34,467		—		34,467
Total	$	243,925	$	307,429	$	—	$	551,354

(1)Considered Level 1 under ASC 820.

(2)Considered Level 2 under ASC 820.

(3)Considered Level 3 under ASC 820 and are based on valuation models that use significant assumptions that are not observable in an active market.

There were no transfers between Levels 1, 2 or 3 during the six months ended June 30, 2022 and the year ended December 31, 2021.

Page 47

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The Company is required to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP.  These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets.  The valuation methodologies used to measure these fair value adjustments are described above.    The following tables present the Company’s assets that are measured at fair value on a nonrecurring basis.

	June 30, 2022								Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
	Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)		Total at Fair Value		Total Losses		Total Losses
	(Amounts in Thousands)
Loans (4)
Agricultural	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and financial	—		—		1,363		1,363		225		225
Real Estate:											—
Construction, 1 to 4 family residential	—		—		50		50		—		—
Construction, land development and commercial	—		—		287		287		—		—
Mortgage, farmland	—		—		1,747		1,747		104		104
Mortgage, 1 to 4 family first liens	—		—		5,067		5,067		25		90
Mortgage, 1 to 4 family junior liens	—		—		133		133		—		5
Mortgage, multi-family	—		—		628		628		—		—
Mortgage, commercial	—		—		3,446		3,446		—		—
Loans to individuals	—		—		—		—		—		—
Foreclosed assets (5)	—		—		—		—		—		—
Total	$	—	$	—	$	12,721	$	12,721	$	354	$	424

(1)Considered Level 1 under ASC 820.

(2)Considered Level 2 under ASC 820.

(3)Considered Level 3 under ASC 820 and are based on valuation models that use significant assumptions that are not observable in an active market.

(4)Represents carrying value and related write-downs of loans for which adjustments are based on the value of the collateral. The carrying value of loans fully-charged off is zero.

(5)Represents the fair value and related losses of foreclosed real estate and other collateral owned that were measured at fair value subsequent to their initial classification as foreclosed assets.

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HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis (continued)

	December 31, 2021								Year Ended December 31, 2021
	Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)		Total at Fair Value		Total Losses
	(Amounts in Thousands)
Loans (4)
Agricultural	$	—	$	—	$	399	$	399	$	—
Commercial and financial	—		—		1,527		1,527		—
Real Estate:
Construction, 1 to 4 family residential	—		—		383		383		—
Construction, land development and commercial	—		—		96		96		—
Mortgage, farmland	—		—		1,114		1,114		—
Mortgage, 1 to 4 family first liens	—		—		5,902		5,902		212
Mortgage, 1 to 4 family junior liens	—		—		202		202		9
Mortgage, multi-family	—		—		1,460		1,460		—
Mortgage, commercial	—		—		4,176		4,176		255
Loans to individuals	—		—		—		—		—
Foreclosed assets (5)	—		—		—		—		—
Total	$	—	$	—	$	15,259	$	15,259	$	476

(1)Considered Level 1 under ASC 820.

(2)Considered Level 2 under ASC 820.

(3)Considered Level 3 under ASC 820 and are based on valuation models that use significant assumptions that are not observable in an active market.

(4)Represents carrying value and related write-downs of loans for which adjustments are based on the value of the collateral. The carrying value of loans fully-charged off is zero.

(5)Represents the fair value and related losses of foreclosed real estate and other collateral owned that were measured at fair value subsequent to their initial classification as foreclosed assets.

Page 49

Note 8.Stock Repurchase Program

On July 26, 2005, the Company’s Board of Directors authorized a program to repurchase up to a total of 1,500,000 shares of the Company’s common stock (the “2005 Stock Repurchase Program”).  The Company’s Board of Directors has authorized the 2005 Stock Repurchase Program through December 31, 2023.  The Company expects the purchases pursuant to the 2005 Stock Repurchase Program to be made from time to time in private transactions at a price equal to the most recent quarterly independent appraisal of the shares of the Company’s common stock and with the Board reviewing the overall results of the 2005 Stock Repurchase Program on a quarterly basis.  All purchases made pursuant to the 2005 Stock Repurchase Program since its inception have been made on that basis.  The amount and timing of stock repurchases will be based on various factors, such as the Board’s assessment of the Company’s capital structure and liquidity, the amount of interest shown by shareholders in selling shares of stock to the Company at their appraised value, and applicable regulatory, legal and accounting factors.  The Company has purchased 1,465,930 shares of its common stock in privately negotiated transactions from August 1, 2005 through June 30, 2022.  Of these 1,465,930 shares, 34,774 shares were purchased during the quarter ended June 30, 2022, at an average price per share of $70.64.

Page 50

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Note 9. Commitments and Contingencies

Concentrations of credit risk:  The Bank’s loans, commitments to extend credit, unused lines of credit and outstanding letters of credit have been granted to customers within the Bank's market area.  Investments in securities issued by state and political subdivisions within the state of Iowa totaled approximately $76.37 million.  The concentrations of credit by type of loan are set forth in Note 5 to the Consolidated Financial Statements.  Outstanding letters of credit were granted primarily to commercial borrowers.  Although the Bank has a diversified loan portfolio, a substantial portion of its debtors' ability to honor their contracts is dependent upon the economic conditions in Johnson, Linn and Washington Counties, Iowa.

Contingencies:  In the normal course of business, the Company and its subsidiaries are subject to pending and threatened legal actions, some of which seek substantial relief or damages.  While the ultimate outcome of such legal proceedings cannot be predicted with certainty, after reviewing pending and threatened litigation with counsel, management believes at this time that the outcome of such litigation will not have a material adverse effect on the Company’s business, financial conditions, or results of operations.

Financial instruments with off-balance sheet risk:  The Bank is a 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, credit card participations and standby letters of credit.  These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, credit card participations and standby letters of credit is represented by the contractual amount of those instruments.  The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.  A summary of the Bank’s commitments at June 30, 2022 and December 31, 2021 is as follows:

	June 30, 2022		December 31, 2021
	(Amounts In Thousands)
Firm loan commitments and unused portion of lines of credit:
Home equity loans	$	84,584	$	78,961
Credit cards	63,933		65,913
Commercial, real estate and home construction	200,472		170,539
Commercial lines and real estate purchase loans	376,175		298,911
Outstanding letters of credit	6,923		7,179

Note 10.Income Taxes

Federal income tax expense for the six months ended June 30, 2022 and 2021 was computed using the consolidated effective federal tax rate.  The Company also recognized income tax expense pertaining to state franchise taxes payable individually by the subsidiary bank.  The Company files a consolidated tax return for federal purposes and separate tax returns for State of Iowa purposes.  The tax years ended December 31, 2021, 2020, and 2019 remain subject to examination by the Internal Revenue Service.  For state tax purposes, the tax years ended December 31, 2021, 2020, and 2019 remain open for examination.  There were no material unrecognized tax benefits at June 30, 2022  and December 31, 2021 and therefore no interest or penalties on unrecognized tax benefits has been recorded.  As of June 30, 2022, the Company does not anticipate any significant increase in unrecognized tax benefits during the twelve-month period ending June 30, 2023. Income taxes as a percentage of income before taxes were 21.63% for the six months ended June 30, 2022 and 22.51% for the same period in 2021. 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is management’s discussion and analysis of the financial condition of Hills Bancorporation (“Hills Bancorporation” or “the Company”) and its banking subsidiary Hills Bank and Trust Company (“the Bank”) for the dates and periods indicated.  The discussion and analysis should be read in conjunction with the consolidated financial statements and the accompanying footnotes.

Special Note Regarding Forward Looking Statements

This report contains, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of such term in the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Actual results may differ materially from those included in the forward-looking statements.  Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse effect on the operations and future prospects of the Company include, but are not limited to, the following:

•The strength of the United States economy in general and the strength of the local economies in which the Company conducts its operations which may be less favorable than expected and may result in, among other things, a deterioration in the credit quality and value of the Company’s assets. This includes current concerns related to higher inflation, rising energy prices, the Russia-Ukraine war and supply chain imbalances.

•The effects of recent financial market disruptions and/or an economic recession, and monetary and other governmental actions designed to address such disruptions, including in response to the COVID-19 pandemic.

•The financial strength of the counterparties with which the Company or the Company’s customers do business and as to which the Company has investment or financial exposure.

•The credit quality and credit agency ratings of the securities in the Company’s investment securities portfolio, a deterioration or downgrade of which could lead to recognition of an allowance for credit losses on the affected securities and the recognition of a credit loss.

•The effects of, and changes in, laws, regulations and policies affecting banking, securities, insurance and monetary and financial matters as well as any laws otherwise affecting the Company, including, but not limited to, potential changes in U.S. tax laws and regulations.

•The effects of changes in interest rates (including the effects of changes in the rate of prepayments of the Company’s assets) and the policies of the Board of Governors of the Federal Reserve System.

•The ability of the Company to compete with other financial institutions as effectively as the Company currently intends due to increases in competitive pressures in the financial services sector.

•The ability of the Company to obtain new customers and to retain existing customers.

•The timely development and acceptance of products and services, including products and services offered through alternative electronic delivery channels.

•Technological changes implemented by the Company and by other parties, including third party vendors, which may be more difficult or more expensive than anticipated or which may have unforeseen consequences to the Company and its customers.

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•The ability of the Company to develop and maintain secure and reliable technology systems.

•The ability of the Company to retain key executives and employees and the difficulty that the Company may experience in replacing key executives and employees in an effective manner.

•Consumer spending and saving habits which may change in a manner that affects the Company’s business adversely.

•The economic impact of natural disasters, diseases and/or pandemics, including any extended impact from the COVID-19 pandemic, and terrorist attacks and military actions.

•Business combinations and the integration of acquired businesses and assets which may be more difficult or expensive than expected.

•The costs, effects and outcomes of existing or future litigation.

•Changes in accounting policies and practices that may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board.

•The ability of the Company to manage the risks associated with the foregoing as well as anticipated.

These risks and uncertainties should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. Additional information concerning the Company and its business, including other factors that could materially affect the Company’s financial results, is included in the Company’s filings with the Securities and Exchange Commission.

Economic Environment

The U.S. economy continued its recovery during the first half of 2022 despite pressures from higher inflation and rising energy prices as well as concerns over the Russia-Ukraine war and the continued economic uncertainty caused by the COVID-19 pandemic. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic and higher energy prices as well as other broader price pressures. In addition, the Russia-Ukraine war and related events are likely to create additional upward pressure on inflation and weigh on economic activity. As previously discussed, the COVID-19 pandemic has resulted in disruption to business and economic activity. While COVID-19 cases have stabilized considerably since the implementation of widespread vaccination protocols, the duration of the pandemic, including the potential for the emergence of new variants, and the ultimate repercussions continue to remain unclear. U.S. Gross Domestic Product ("GDP") decreased at an annual rate of 1.6 percent in the first quarter of 2022 and 0.9 percent in the second quarter, while the U.S. unemployment rate remained steady at 3.6 percent for a fourth straight month. In July 2022, in response to current inflationary pressures, the FRB increased short-term interest rates by 75 basis points for the second consecutive month.

The impacts of higher inflation, rising energy prices and the Russia-Ukraine war, in addition to the continuing impact of the COVID-19 pandemic on economic conditions both in the United States and abroad, have created significant uncertainty about the future economic environment which will continue to evolve and impact our business in future periods. Concerns over interest rate levels, energy prices, domestic and global policy issues, trade policy in the U.S. and geopolitical events, as well as the implications of those events on the markets in general, further add to the global uncertainty. Interest rate levels and energy prices, in combination with global economic conditions, fiscal and monetary policy and the level of regulatory and government scrutiny of financial institutions will continue to impact our results in 2022 and beyond. Each of the developments described above, or any combination of them, could adversely affect our business, financial condition and results of operations.

Our credit administration continues to closely monitor and analyze the higher risk segments within the loan portfolio, tracking loan payment deferrals, customer liquidity and providing timely reports to senior management and the board of directors. Based on the Company’s capital levels, prudent underwriting policies, loan concentration diversification and our geographic footprint, senior management is cautiously optimistic that the Company is positioned to continue managing the impact of the varied set of risks and uncertainties currently impacting the economy and remain adequately capitalized. However, the Company may be required to make additional loan loss provisions as warranted by the extremely fluid economic condition.

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Critical Accounting Policies

The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The financial information contained within these financial statements is, to a significant extent, financial information that is based on approximate measures of the financial effects of transactions and events that have already occurred. Based on its consideration of accounting policies that involve the most complex and subjective decisions and assessments, management has identified its most critical accounting policies to be those which are related to the allowance for credit losses.

Allowance for Credit Losses

On January 1, 2021, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the allowance for credit losses use the current expected credit loss (CECL) methodology. The following is a discussion of the methodologies used by the Company with the adoption of ASC 326.

The preparation of financial statements in accordance with the accounting principles generally accepted in the United States ("U.S. GAAP") requires management to make a number of judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expense in the financial statements. Various elements of our accounting policies, by their nature, involve the application of highly sensitive and judgmental estimates and assumptions. Some of these policies and estimates relate to matters that are highly complex and contain substantial inherent uncertainties. Management has made significant estimates in several areas, including the allowance for credit losses (see Note 5 - Loans and Note 4 - Securities) and the fair value of debt securities (see Note 4 - Securities).

We have identified the following accounting policies and estimates that, due to the inherent judgments and assumptions and the potential sensitivity of the financial statements to those judgments and assumptions, are critical to an understanding of our financial statements. We believe that the judgments, estimates and assumptions used in the preparation of the Company's financial statements are appropriate. For a further description of our accounting policies, see Note 1 - Summary of Significant Accounting Policies in the financial statements included in this Form 10-Q.

The allowance for credit losses for loans represents management's estimate of all expected credit losses over the expected contractual life of our existing loan portfolio. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolio, in light of the factors then prevailing, may result in significant changes in the allowance for credit losses in those future periods.

We employ a disciplined process and methodology to establish our allowance for credit losses that has two basic components: first, an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans; and second, a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics.

Based upon this methodology, management establishes an asset-specific allowance for loans that do not share risk characteristics with other loans based on the amount of expected credit losses calculated on those loans and charges off amounts determined to be uncollectible. Factors we consider in measuring the extent of expected credit loss include payment status, collateral value, borrower financial condition, guarantor support and the probability of collecting scheduled principal and interest payments when due.

When a loan does not share risk characteristics with other loans, we measure expected credit loss as the difference between the amortized cost basis in the loan and the present value of expected future cash flows discounted at the loan's effective interest rate except that, for collateral- dependent loans, credit loss is measured as the difference between the amortized cost basis in the loan and the fair value of the underlying collateral. The fair value of the collateral is adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral. In accordance with our appraisal policy, the fair value of collateral-dependent loans is based upon independent third-party appraisals or on collateral valuations prepared by in-house evaluations. Once a third-party appraisal is greater than one year old, or if its determined that market conditions, changes to the property, changes in intended use of the property or other factors indicate that an appraisal is no longer reliable, we perform an internal collateral valuation to assess whether a change in collateral value requires an additional adjustment to carrying value. When we receive an updated appraisal or collateral valuation, management reassesses the need for adjustments to the loan's expected credit loss measurements and, where appropriate, records an

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adjustment. If the calculated expected credit loss is determined to be permanent, fixed or nonrecoverable, the credit loss portion of the loan will be charged off against the allowance for credit losses. Loans designated having significantly increased credit risk are generally placed on nonaccrual and remain in that status until all principal and interest payments are current and the prospects for future payments in accordance with the loan agreement are reasonably assured, at which point the loan is returned to accrual status.

In estimating the component of the allowance for credit losses for loans that share common risk characteristics, loans are segregated into loan classes. Loans are designated into loan classes based on loans pooled by product types and similar risk characteristics or areas of risk concentration. Credit loss assumptions are estimated using a model that categorizes loan pools based on loan type and purpose. This model calculates an expected life-of-loan loss percentage for each loan category by considering the probability of default using historical life-of-loan analysis periods for agricultural, 1 to 4 family first and junior liens, commercial and consumer segments, and the severity of loss, based on the aggregate net lifetime losses incurred per loan class.

The component of the allowance for credit losses for loans that share common risk characteristics also considers factors for each loan class to adjust for differences between the historical period used to calculate historical default and loss severity rates and expected conditions over the remaining lives of the loans in the portfolio related to:

•Lending policies and procedures;

•International, national, regional and local economic business conditions and developments that affect the collectability of the portfolio, including the condition of various markets;

•The nature of the loan portfolio, including the terms of the loans;

•The experience, ability and depth of the lending management and other relevant staff;

•The volume and severity of past due and adversely classified or graded loans and the volume of nonaccrual loans;

•The quality of our loan review and process;

•The value of underlying collateral for collateral-dependent loans;

•The existence and effect of any concentrations of credit and changes in the level of such concentrations; and

•The effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio.

Such factors are used to adjust the historical probabilities of default and severity of loss so that they reflect management expectation of future conditions based on a reasonable and supportable forecast. To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made, the bank reduces, on a straight-line basis over the remaining life of the loans, the adjustments so that model reverts back to the historical rates of default and severity of loss.

The credit loss expense recorded through earnings is the amount necessary to maintain the allowance for credit losses at the amount of expected credit losses inherent within the loans held for investment portfolio. The amount of expense and the corresponding level of allowance for credit losses for loans are based on our evaluation of the collectability of the loan portfolio based on historical loss experience, reasonable and supportable forecasts, and other significant qualitative and quantitative factors.

The allowance for credit losses for loans, as reported in our consolidated balance sheet, is adjusted by an expense for credit losses, which is recognized in earnings, and reduced by the charge-off of loan amounts, net of recoveries. For further information on the allowance for credit losses for loans, see Note 1 - Summary of Significant Accounting Policies and Note 5 - Loans in the notes to the financial statements of this Form 10-Q.

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Overview

This overview highlights selected information and may not contain all of the information that is important to you in understanding our performance during the period.  For a more complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources, and critical accounting estimates, you should carefully read this entire report.

The Company is a holding company engaged in the business of commercial banking.  The Company’s subsidiary is Hills Bank and Trust Company, Hills, Iowa (the “Bank”), which is wholly-owned.  The Bank was formed in Hills, Iowa in 1904.  The Bank is a full-service commercial bank extending its services to individuals, businesses, governmental units and institutional customers primarily in the communities of Hills, Iowa City, Coralville, North Liberty, Lisbon, Mount Vernon, Kalona, Wellman, Cedar Rapids, Marion, and Washington, Iowa.  At June 30, 2022, the Bank has nineteen full-service locations.

Net income for the six month period ended June 30, 2022 was $21.98 million compared to $28.81 million for the same six months of 2021, a decrease of 23.71%.  The $6.83 million decrease in net income was caused by a number of factors.  The principal factors in the decrease in net income for the first six months of 2022 are a credit loss expense of $3.61 million, primarily due to increased loan growth, increased outstanding loan commitments and lower prepayment and curtailment rates with increasing interest rates; a decrease in noninterest income of $2.59 million; and offset by an increase in net interest income of $1.44 million.

The Company achieved a return on average assets of 1.03% and a return on average equity of 9.66% for the twelve months ended June 30, 2022, compared to the twelve months ended June 30, 2021, which were 1.30% and 11.93%, respectively. The return on average assets and return on average equity for the six months ended June 30, 2022 were 1.10% and 10.49%, respectively, compared to the six months ended June 30, 2021, which were 1.50% and 13.99%, respectively.  Dividends of $1.00 per share were paid in January 2022 to 2,727 shareholders.  The dividend paid in January 2021 was $0.94 per share.

The Company’s net interest income is the largest component of revenue and it is primarily a function of the average earning assets and the net interest margin percentage.  The Company achieved a net interest margin on a tax-equivalent basis of 2.80% for the six months ended June 30, 2022 compared to 2.84% for the same six months of 2021.  Average earning assets were $3.945 billion year to date in 2022 and $3.796 billion in 2021.

Highlights noted on the balance sheet as of June 30, 2022 for the Company included the following:

•Total assets were $3.938 billion, a decrease of $106.43 million since December 31, 2021.

•Cash and cash equivalents were $307.49 million, a decrease of $474.43 million since December 31, 2021. A portion of the decrease can be attributed to increased investments of $341.89 million since December 31, 2021, primarily in U.S Treasury and mortgage-backed securities.

•Net loans were $2.770 billion, an increase of $138.86 million since December 31, 2021. The increase is primarily attributable to approximately $28.6 million growth in construction loans, $22.5 million in multi-family and commercial real estate mortgages and $87.4 million growth in 1-4 family first mortgages since December 31, 2021. Loans held for sale decreased $4.12 million since December 31, 2021.

•Deposits decreased $88.16 million since December 31, 2021, primarily due to decreases in brokered deposits and insured cash sweep (ICS) deposits.

Reference is made to Note 7 for a discussion of fair value measurements which relate to methods used by the Company in recording assets and liabilities on its financial statements.

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Financial Condition

As indicated in the table below, there has been an increase in loan demand during the second quarter of 2022, primarily in construction, 1 to 4 family first mortgages, multi-family and commercial real estate mortgages. The ongoing COVID-19 pandemic, lingering supply chain and labor market disruptions, as well as significant inflationary pressures have created significant uncertainty regarding projecting loan demand throughout the remainder of 2022. However, outstanding loan commitments continue to be significantly elevated compared to historical levels.

The following table sets forth the composition of the loan portfolio as of June 30, 2022 and December 31, 2021:

	June 30, 2022				December 31, 2021
	Amount		Percent		Amount		Percent
	(Amounts In Thousands)				(Amounts In Thousands)
Agricultural	$	96,917	3.45	%	$	106,933	4.02	%
Commercial and financial	228,675		8.15		222,002		8.35
Real estate:
Construction, 1 to 4 family residential	86,279		3.07		80,486		3.03
Construction, land development and commercial	149,838		5.34		127,021		4.77
Mortgage, farmland	240,811		8.58		232,744		8.75
Mortgage, 1 to 4 family first liens	996,935		35.53		909,564		34.19
Mortgage, 1 to 4 family junior liens	115,731		4.12		114,342		4.30
Mortgage, multi-family	399,360		14.23		382,792		14.39
Mortgage, commercial	407,343		14.52		401,377		15.09
Loans to individuals	34,001		1.21		32,687		1.23
Obligations of state and political subdivisions	50,173		1.80		50,285		1.88
	$	2,806,063	100.00	%	$	2,660,233	100.00	%
Net unamortized fees and costs	236				299
	$	2,806,299			$	2,660,532
Less allowance for credit losses	38,260				35,470
	$	2,768,039			$	2,625,062

The Bank has an established formal loan origination policy.  In general, the loan origination policy attempts to reduce the risk of credit loss to the Bank by requiring, among other things, maintenance of minimum loan to value ratios, evidence of appropriate levels of insurance carried by borrowers and documentation of appropriate types and amounts of collateral and sources of expected payment.  The collateral relied upon in the loan origination policy is generally the property being financed by the Bank.  The source of expected payment is generally the income produced from the property being financed.  Personal guarantees are required of individuals owning or controlling at least 20% of the ownership of an entity.  Limited or proportional guarantees may be accepted in circumstances if approved by the Company’s Board of Directors.  Financial information provided by the borrower is verified as considered necessary by reference to tax returns, or audited, reviewed or compiled financial statements.  The Bank does not originate subprime loans.  In order to modify, restructure or otherwise change the terms of a loan, the Bank’s policy is to evaluate each borrower situation individually.  Modifications, restructures, extensions and other changes are done to improve the Bank’s position and to protect the Bank’s capital.  If a borrower is not current with its payments, any additional loans to such borrowers are evaluated on an individual borrower basis.

The Company has not experienced any significant time lapses in recognizing the required provisions for collateral dependent loans, nor has the Company delayed appropriate charge offs.  When an updated appraisal value has been obtained, the Company has used the appraisal amount in determining the appropriate charge off or required reserve.  The Company also evaluates any changes in the financial condition of the borrower and guarantors (if applicable), economic conditions, and the Company’s loss experience with the type of property in question.  Any information utilized in addition to the appraisal is intended to identify additional charge offs or provisions, not to override the appraised value.

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In accordance with Staff Accounting Bulletin No. 102, Selected Loan Loss Allowance Methodology and Documentation Issues, and Staff Accounting Bulletin No. 119, which aligns the staff's guidance with FASB ASC Topic 326, or CECL, the Company determines and assigns ratings to loans using factors that include the following: an assessment of the financial condition of the borrower; a realistic determination of the value and adequacy of underlying collateral; the condition of the local economy and the condition of the specific industry of the borrower; an analysis of the levels and trends of loan categories; and a review of delinquent and classified loans.

Through the credit risk rating process, loans are reviewed to determine if they are performing in accordance with the original contractual terms. If the borrower has failed to comply with the original contractual terms, further action may be required by the Company, including a downgrade in the credit risk rating, movement to non-accrual status, a charge-off or the establishment of a specific reserve. In the event a collateral shortfall is identified during the credit review process, the Company will work with the borrower for a principal reduction and/or a pledge of additional collateral and/or additional guarantees. In the event that these options are not available, the loan may be subject to a downgrade of the credit risk rating. If the Company determines a loan amount or portion thereof, is uncollectible, the loan’s credit risk rating may be downgraded and the uncollectible amount charged-off or recorded as a specific allowance for losses.  The Bank’s credit and legal departments undertake a thorough and ongoing analysis to determine if additional specific reserves and/or charge-offs are appropriate and to begin a workout plan for the loan to minimize actual losses.

The following table presents the allowance for credit losses as of June 30, 2022 and December 31, 2021 by loan category, the percentage of the allowance for each category to the total allowance, and the percentage of all loans in each category to total loans:

	June 30, 2022						December 31, 2021
	Amount		% of Total Allowance		% of Loans to Total Loans		Amount		% of Total Allowance		% of Loans to Total Loans
	(In Thousands)						(In Thousands)
Agricultural	$	2,265	5.92	%	3.45	%	$	2,261	6.37	%	4.02	%
Commercial and financial	5,194		13.58		8.15		4,269		12.04		8.35
Real estate:
Construction, 1 to 4 family residential	847		2.21		3.07		818		2.31		3.03
Construction, land development and commercial	1,925		5.03		5.34		1,482		4.18		4.77
Mortgage, farmland	3,330		8.70		8.58		3,433		9.68		8.75
Mortgage, 1 to 4 family first liens	8,987		23.50		35.53		8,340		23.52		34.19
Mortgage, 1 to 4 family junior liens	3,246		8.48		4.12		3,158		8.90		4.30
Mortgage, multi-family	4,024		10.52		14.23		3,715		10.47		14.39
Mortgage, commercial	7,209		18.84		14.52		6,783		19.12		15.09
Loans to individuals	788		2.06		1.21		771		2.17		1.23
Obligations of state and political subdivisions	445		1.16		1.80		440		1.24		1.88
	$	38,260	100.00	%	100.00	%	$	35,470	100.00	%	100.00	%

The allowance for credit losses (ACL) totaled $38.26 million at June 30, 2022 compared to the allowance of $35.47 million at December 31, 2021. The percentage of the allowance to outstanding loans was 1.36% and 1.33% at June 30, 2022 and December 31, 2021, respectively.  The allowance was based on management’s consideration of a number of factors, including composition of the loan portfolio, loans with higher credit risks and the overall amount of loans outstanding. The changes in the ACL in 2022 compared to December 31, 2021 is the result of the following factors: improvements in the economic factor forecasts, primarily Iowa unemployment in the first quarter, used in the ACL calculation which resulted in a decrease of $0.54 million; increase in loan volume which resulted in an increase of $1.57 million; changes in prepayment and curtailment

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rates resulting in an increase of $0.58 million; increases in historical loss rates resulting in an increase of $0.84 million; increase in the individually analyzed loans reserve of $0.02 million; and increases in qualitative factors determined necessary by management which resulted in an increase of $0.32 million.

The adequacy of the allowance is reviewed quarterly and adjusted as appropriate after consideration has been given to the impact of economic conditions on the borrowers’ ability to repay, loan collateral values, past collection experience, the risk characteristics of the loan portfolio and such other factors that deserve current recognition. The growth of the loan portfolio and the trends in problem and watch loans are significant elements in the determination of the provision for credit losses.  Quantitative factors include the Company’s historical loss experience, which is then adjusted for levels and trends in past due, levels and trends in charged-off and recovered loans, trends in volume growth, trends in problem and watch loans, trends in restructured loans, local economic trends and conditions, industry and other conditions, and effects of changing interest rates.

Management has determined that the allowance for credit losses was adequate at June 30, 2022, and that the loan portfolio is diversified and secured, without undue concentration in any specific risk area. This process involves a high degree of management judgment; however, the allowance for credit losses is based on a comprehensive, well documented, and consistently applied analysis of the Company’s loan portfolio. This analysis takes into consideration all available information existing as of the financial statement date, including environmental factors such as economic, industry, geographical and political factors. The relative level of allowance for credit losses is reviewed and compared to industry data. This review encompasses levels of total collateral-dependent loans, portfolio mix, portfolio concentrations, current geographic risks and overall levels of net charge-offs.

Investment securities available for sale held by the Company increased by $216.07 million from December 31, 2021 to June 30, 2022.  The fair value of securities available for sale was $41.28 million less than the amortized cost of such securities as of June 30, 2022.  At December 31, 2021, the fair value of the securities available for sale was $1.97 million more than the amortized cost of such securities.

Deposits decreased $88.16 million in the first six months of 2022 primarily due to decreases in brokered deposits and insured cash sweep (ICS) deposits.. In the opinion of the Company’s management, the Company continues to have sufficient liquidity resources available to fund expected additional loan growth.

Brokered deposits are included in total deposits and totaled $31.63 million as of June 30, 2022 with an average rate of 1.30%.  Brokered deposits were $51.59 million as of December 31, 2021 with an average interest rate of 0.36%. As of June 30, 2022 and December 31, 2021, brokered deposits were 0.92% and 1.46% of total deposits, respectively.

There were no Federal Home Loan Bank (FHLB) borrowings as of June 30, 2022 and December 31, 2021. The FHLB funding source is considered when loan growth exceeds core deposit increases and the interest rates on funds borrowed from the FHLB are favorable compared to other funding alternatives.

Dividends and Equity

In January 2022, Hills Bancorporation paid a dividend of $9.31 million or $1.00 per share.  The dividend paid in January 2021 was $0.94 per share. After payment of the dividend and the adjustment for accumulated other comprehensive income, stockholders’ equity as of June 30, 2022 totaled $416.65 million. On January 1, 2015, the final rules of the Federal Reserve Board went into effect implementing in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision. The final rule also adopted changes to the agencies’ regulatory capital requirements that meet the requirements of section 171 and section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Under the BASEL III rules, the minimum capital ratios are 4% for Tier 1 Leverage Capital Ratio, 4.5% for the Common Equity Tier 1 Capital Ratio, 6% for the Tier 1 Risk-Based Capital Ratio and 8% for the Total Risk-Based Capital Ratio. The Bank elected to use the Community Bank Leverage Ratio (CBLR) framework as provided for in the Economic Growth, Regulatory Relief and Consumer Protection Act. Under the CBLR framework, the Bank is required to maintain a CBLR of greater than 9%. The CARES Act reduced the minimum ratio to 8% beginning in the 2nd quarter of 2020 through December 31, 2020, increasing to 8.5% for 2021 and returning to 9% beginning January 1, 2022. As of June 30, 2022 and December 31, 2021, the Company had regulatory capital in excess of the Federal Reserve’s minimum and well-capitalized definition requirements. The actual amounts and capital ratios as of June 30, 2022 and December 31, 2021 are presented below (amounts in thousands):

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	Actual				For Capital Adequacy Purposes
	Amount		Ratio		Ratio
As of June 30, 2022:
Company:
Community Bank Leverage ratio	$	495,063	12.29	%	9.000	%
Bank:
Community Bank Leverage ratio	496,682		12.34		9.000

	Actual				For Capital Adequacy Purposes
	Amount		Ratio		Ratio
As of December 31, 2021:
Company:
Community Bank Leverage ratio	$	484,486	11.80	%	8.50	%
Bank:
Community Bank Leverage ratio	484,429		11.80		8.50

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Discussion of operations for the six months ended June 30, 2022 and 2021

Net Income Overview

Net income decreased $6.83 million for the six months ended June 30, 2022 compared to the first six months of 2021.  Total net income was $21.98 million in 2022 and $28.81 million in the comparable period in 2021, a decrease of 23.71%.  The changes in net income in 2022 from the first six months of 2021 were primarily the result of the following:

•Net interest income increased by $1.44 million, before credit loss expense, primarily due to lower interest expense from lower certificate of deposit volume and no FHLB borrowings, which more than offset the decrease in interest income due to no PPP loan fees recognized in the six months ended June 30, 2022 compared to $3.23 million of PPP loan fees recognized in the comparable period in 2021.

•For the six months ended June 30, 2022, a credit loss expense was recorded totaling $3.61 million. This represents an increase in expense of $8.25 million from the reversal of credit loss reserves of $4.64 million for the six months ended June 30, 2021.

•Noninterest income decreased by $2.59 million.

•Noninterest expenses decreased by $0.27 million.

•Income tax expense decreased by $2.30 million.

For the six month period ended June 30, 2022 and June 30, 2021 basic earnings per share was $2.37 and $3.09, respectively. Diluted earnings per share was $2.37 for the six months ended June 30, 2022 compared to $3.09 for the same period in 2021.

The Company’s net income for the period was driven primarily by three important factors.  The first important factor is credit loss expense recorded under CECL. The majority of the Company’s interest-earning assets are in loans outstanding, which amounted to more than $2.770 billion at June 30, 2022. Expected credit loss expense is computed on a quarterly basis and is a result of management’s determination of the quality of the loan portfolio.  The expense reflects a number of factors, including the size of the loan portfolio, the overall composition of the loan portfolio and loan concentrations, the borrowers’ ability to repay, past loss experience, loan collateral values, the level of collateral-dependent loans and loans past due ninety days or more.  In addition, management considers the credit quality of the loans based on management’s review of problem and watch loans, including loans with historically higher credit risk. Credit loss expense was $3.61 million in 2022 compared to a reduction of expense of $4.64 million in 2021. The increase in expense when compared to the same period in 2021 is attributable to increases in outstanding loan commitments, loan volume, lower prepayment and curtailment rates with the increasing interest rates and qualitative factor increases determined by management. The reduction in expense in 2021 was primarily due to the increases to the allowance taken in 2020 in response to the COVID-19 pandemic that were released in 2021. The Company believes that credit loss expense is expected to be dependent on the Company’s loan growth, local economic conditions, including, but not limited to, conditions associated with the COVID-19 pandemic and the attendant risks and uncertainties related thereto, and asset quality.

The second important factor affecting the Company’s net income is the interaction between changes in net interest margin and changes in average volumes of the Bank's earnings assets.  Net interest income of $53.87 million for the first six months of 2022 was derived from the Company’s $3.945 billion of average earning assets during that period and its tax-equivalent net interest margin of 2.80%.  Average earning assets in the six months ended June 30, 2021 were $3.796 billion and the tax-equivalent net interest margin was 2.84%. Net interest income for the Company increased primarily as a result of lower interest expense from lower certificate of deposits volume and no FHLB borrowings. Also, interest income on investment securities was higher due to increased volume of U.S. Treasuries, mortgage-backed securities and municipal securities though this was offset by no PPP fee income in 2022 compared to 2021. The Company expects net interest compression to impact earnings for the foreseeable future due to competition for loans and deposits combined with the low interest rate environment in 2021 and 2020. The Company believes growth in net interest income will be contingent on the growth of the Company’s earning assets, increasing yield on loans and the continued interest rate increases by the Federal Reserve Board.

The third significant factor affecting the Company’s net income is noninterest income, primarily the decrease in net gain on the sale of loans. The net gain on the sale of loans was $1.14 million and $4.73 million for the six months ended June 30, 2022 and 2021, respectively, a decrease of 75.97% for the six months ended June 30, 2022 compared to the same period in 2021. The amount of the net gain on sale of secondary market mortgage loans in each year can vary significantly. The volume of activity in these types of loans is directly related to the level of interest rates as well as the current origination and refinancing activity. The volume has been significantly impacted by the Federal Reserve Board's increases to the federal funds rate so far in 2022, resulting in a significant decline in the amount of mortgage loan origination and refinance activity.

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Discussion of operations for the six months ended June 30, 2022 and 2021

Net Interest Income

Net interest income increased for the six months ended June 30, 2022 compared to the comparable period in 2021.  The increase was primarily attributable to lower interest expense from lower certificate of deposits volume and no FHLB borrowings. Also, interest income on investment securities was higher due to increased volume of U.S. Treasuries, mortgage-backed securities and municipal securities though this was offset by no PPP fee income in 2022 compared to $3.23 million for the comparable period in 2021.  Net interest income is the excess of the interest and fees earned on interest-earning bearing assets over the interest expense of the interest-bearing liabilities.  The factors that have the greatest impact on net interest income are the average volume of earning assets for the period and the net interest margin.  The net interest margin for the first six months of 2022 was 2.80% compared to 2.84% in 2021 for the same period. The measure is shown on a tax-equivalent basis using a tax rate of 21% to make the interest earned on taxable and non-taxable assets more comparable.  The change in average balances and average rates between periods and the effect on the net interest income on a tax equivalent basis for the six months ended in 2022 compared to the comparable period in 2021 are shown in the following table:

					Increase (Decrease) in Net Interest Income
	Change in Average Balance		Change in Average Rate		Volume Changes		Rate Changes		Net Change
	(Amounts in Thousands)
Interest income:
Loans, net	$	7,947	(0.36)	%	$	(282)	$	(4,386)	$	(4,668)
Taxable securities	241,911		—		1,903		(15)		1,888
Nontaxable securities	32,291		(0.26)		381		(269)		112
Federal funds sold	(132,488)		0.30		(69)		842		773
	$	149,661			$	1,933	$	(3,828)	$	(1,895)
Interest expense:
Interest-bearing demand deposits	$	109,221	(0.05)	%	$	(137)	$	315	$	178
Savings deposits	138,150		(0.03)		(100)		153		53
Time deposits	(98,057)		(0.28)		840		781		1,621
FHLB borrowings	(105,000)		(2.09)		1,490		—		1,490
Interest-bearing other liabilities	17		0.29		—		—		—
	$	44,331			$	2,093	$	1,249	$	3,342
Change in net interest income					$	4,026	$	(2,579)	$	1,447

Rate/volume variances are allocated on a consistent basis using the absolute values of changes in volume compared to the absolute values of the changes in rates. Interest on nontaxable securities and loans is shown on a tax-equivalent basis.

A summary of the net interest spread and margin is as follows:

(Tax Equivalent Basis)	2022		2021
Yield on average interest-earning assets	3.11	%	3.34	%
Rate on average interest-bearing liabilities	0.43		0.67
Net interest spread	2.68	%	2.67	%
Effect of noninterest-bearing funds	0.12		0.17
Net interest margin (tax equivalent interest income divided by average interest-earning assets)	2.80	%	2.84	%

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Discussion of operations for the six months ended June 30, 2022 and 2021

In pricing loans and deposits, the Bank considers the U.S. Treasury indexes as benchmarks in determining interest rates.  The Federal Open Market Committee met four times during the first six months of 2022.  The target rate increased to 1.75% as of June 30, 2022.  Interest rates on loans are generally affected by the target rate since interest rates for the U.S. Treasury market normally increase or decrease when the Federal Reserve Board raises or lowers the federal funds rate.  As of June 30, 2022, the rate indexes for the one, three and five year indexes were 2.80%, 2.99% and 3.01%, respectively.  The one year index increased 3,900% from 0.07% at June 30, 2021, the three year index increased 550.00% and the five year index increased 245.98%.  The three year index was 0.46% and the five year index was 0.87% at June 30, 2021.  The targeted federal funds rate was 1.75% at June 30, 2022 and 0.25% at June 30, 2021.  The Company anticipates short term and long term rates in the indexes to increase throughout 2022.

Credit Loss Expense

Credit loss expense was $3.61 million for the six months ended June 30, 2022 compared to a reduction of expense of $4.64 million in 2021, an increase of expense of $8.25 million.  Credit loss expense is the amount necessary to adjust the allowance for credit losses to the level considered by management to appropriately account for the estimated current expected credit losses within the Bank's loan portfolio. The credit loss expense taken to fund the allowance for credit losses is computed on a quarterly basis and is a result of management’s determination of the quality of the loan portfolio.  The expense reflects a number of factors, including the size of the loan portfolio, the overall composition of the loan portfolio and loan concentrations, the impact on the borrowers’ ability to repay, past loss experience, loan collateral values, the level of collateral-dependent loans and loans past due ninety days or more.  In addition, management considers the credit quality of the loans based on management’s review of problem and watch loans, including loans with historically higher credit risks. Also, under CECL, a significant component in estimating expected credit losses are economic forecasts such as Iowa unemployment, all-transactions house price index for Iowa and Iowa real gross domestic product. The increase in expense when compared to the same period in 2021 is attributable to increases in outstanding loan commitments, loan volume, lower prepayment and curtailment rates with the increasing interest rates and qualitative factor increases determined by management. The reduction in expense in 2021 was primarily due to the increases to the allowance taken in 2020 in response to the COVID-19 pandemic that were released in 2021. The Company believes that credit loss expense is expected to be dependent on the Company’s loan growth, local economic conditions, including, but not limited to, conditions associated with the COVID-19 pandemic and the attendant risks and uncertainties related thereto, and asset quality.

The allowance for credit losses balance is affected by charge-offs, net of recoveries, for the periods presented.  For the six months ended June 30, 2022 and 2021, recoveries were $1.23 million and $1.54 million, respectively; and charge-offs were $0.79 million in 2022 and $0.27 million in 2021.  The allowance for credit losses totaled $38.26 million at June 30, 2022 compared to $35.47 million as of December 31, 2021.  The allowance represented 1.36% and 1.33% of loans held for investment at June 30, 2022 and December 31, 2021.

Noninterest Income

The following table sets forth the various categories of noninterest income for the six months ended June 30, 2022 and 2021.

	Six Months Ended June 30,
	2022		2021		$ Change		% Change
	(Amounts in thousands)
Net gain on sale of loans	$	1,137	$	4,731	$	(3,594)	(75.97)	%
Trust fees	6,479		6,077		402		6.62
Service charges and fees	6,162		5,654		508		8.98
Other noninterest income	650		558		92		16.49
	$	14,428	$	17,020	$	(2,592)	(15.23)

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In the six months ended June 30, 2022 and 2021, the net gain on sale of loans was $1.14 million and $4.73 million, respectively.  The amount of the net gain on sale of secondary market mortgage loans in each year can vary significantly.  The volume of activity, margin and demand in these types of loans is directly related to the level of interest rates as well as the current origination and refinancing activity. The primary reason for the decrease in 2022 compared to 2021 is the increased mortgage interest rates in the first half of 2022 leading to the significant decrease in loans originated for sale. The servicing of the loans sold into the secondary market is not retained by the Company so these loans do not provide an ongoing stream of income.

Service charges and fees increased $0.51 million for the six months ended June 30, 2022 compared to the same period in 2021, primarily due to increased debit and credit card interchange fees from increased volume of transactions.

Other noninterest income categories experienced marginal period-to-period fluctuations for the six months ended June 30, 2022.

Noninterest Expenses

The following table sets forth the various categories of noninterest expenses for the six months ended June 30, 2022 and 2021.

	Six Months Ended June 30,
	2022		2021		$ Change		% Change
	(Amounts in thousands)
Salaries and employee benefits	$	21,172	$	21,203	$	(31)	(0.15)	%
Occupancy	2,241		2,180		61		2.80
Furniture and equipment	3,380		3,871		(491)		(12.68)
Office supplies and postage	952		840		112		13.33
Advertising and business development	1,288		984		304		30.89
Outside services	5,916		6,285		(369)		(5.87)
FDIC insurance assessment	548		510		38		7.45
Other noninterest expense	1,152		1,045		107		10.24
	$	36,649	$	36,918	$	(269)	(0.73)

All noninterest expense categories experienced marginal period-to-period fluctuations for the six months ended June 30, 2022.

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Discussion of operations for the three months ended June 30, 2022 and 2021

Net Income Overview

Net income decreased $2.28 million for the three months ended June 30, 2022 compared to the same period in 2021.  Total net income was $11.33 million in 2022 and $13.61 million in the comparable period in 2021, a decrease of 16.78%.  For the three month periods ended June 30, 2022 and 2021 basic earnings per share was $1.22 and $1.46, respectively. Diluted earnings per share was $1.22 for the three months ended June 30, 2022 compared to $1.46 for the same period in 2021.

Net Interest Income

Net interest income increased for the three months ended June 30, 2022 compared to the comparable period in 2021.  The increase was a result of the continued low interest rates on interest bearing deposits resulting in decreased interest expenses. Also, interest income on investment securities was higher due to increased volume of U.S. Treasuries, mortgage-backed securities and municipal securities. Net interest income is the excess of the interest and fees earned on interest-earning bearing assets over the interest expense of the interest-bearing liabilities.  The factors that have the greatest impact on net interest income are the average volume of earning assets for the period and the net interest margin. Interest expense decreased $1.50 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily due to decreasing interest rates on deposits and lower volume of certificates of deposit and FHLB borrowings. The net interest margin for the three months ended June 30, 2022 was 2.96% compared to 2.77% in 2021 for the same period.  The measure is shown on a tax-equivalent basis using a tax rate of 21% to make the interest earned on taxable and non-taxable assets more comparable.  The change in average balances and average rates between periods and the effect on the net interest income on a tax equivalent basis for the three months ended in 2022 compared to the comparable period in 2021 are shown in the following table:

					Increase (Decrease) in Net Interest Income
	Change in Average Balance		Change in Average Rate		Volume Changes		Rate Changes		Net Change
	(Amounts in Thousands)
Interest income:
Loans, net	$	45,238	(0.25)	%	$	343	$	(1,561)	$	(1,218)
Taxable securities	336,094		0.23		1,381		193		1,574
Nontaxable securities	22,440		(0.16)		132		(101)		31
Federal funds sold	(312,970)		0.65		(84)		686		602
	$	90,802			$	1,772	$	(783)	$	989
Interest expense:
Interest-bearing demand deposits	$	75,075	(0.02)	%	$	(43)	$	40	$	(3)
Savings deposits	117,877		(0.01)		(39)		15		(24)
Time deposits	(96,724)		(0.27)		405		377		782
FHLB borrowings	(105,000)		(2.82)		749		—		749
Interest-bearing other liabilities	35		0.58		—		—		—
	$	(8,737)			$	1,072	$	432	$	1,504
Change in net interest income					$	2,844	$	(351)	$	2,493

Rate/volume variances are allocated on a consistent basis using the absolute values of changes in volume compared to the absolute values of the changes in rates. Interest on nontaxable securities and loans is shown on a tax-equivalent basis.

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Discussion of operations for the three months ended June 30, 2022 and 2021

A summary of the net interest spread and margin is as follows:

(Tax Equivalent Basis)	2022		2021
Yield on average interest-earning assets	3.24	%	3.25	%
Rate on average interest-bearing liabilities	0.43		0.63
Net interest spread	2.81	%	2.62	%
Effect of noninterest-bearing funds	0.15		0.15
Net interest margin (tax equivalent interest income divided by average interest-earning assets)	2.96	%	2.77	%

Credit Loss Expense

Credit loss expense was an expense of $2.50 million for the three months ended June 30, 2022 compared to a reduction of expense of $1.66 million in 2021, an increase of expense of $4.16 million. Credit loss expense is the amount necessary to adjust the allowance for credit losses to the level considered by management to appropriately account for the estimated current expected credit losses within the Bank's loan portfolio. The credit loss expense taken to fund the allowance for credit losses is computed on a quarterly basis and is a result of management’s determination of the quality of the loan portfolio.  The expense reflects a number of factors, including the size of the loan portfolio, the overall composition of the loan portfolio and loan concentrations, the impact on the borrowers’ ability to repay, past loss experience, loan collateral values, the level of collateral-dependent loans and loans past due ninety days or more.  In addition, management considers the credit quality of the loans based on management’s review of problem and watch loans, including loans with historically higher credit risks. Also, under CECL, a significant component in estimating expected credit losses are economic forecasts such as Iowa unemployment, all-transactions house price index for Iowa and Iowa real gross domestic product. The increase in expense when compared to the same period in 2021 is attributable to increases in outstanding loan commitments, loan volume, lower prepayment and curtailment rates with the increasing interest rates and qualitative factor increases determined by management. The reduction in expense in 2021 was primarily due to the increases to the allowance taken in 2020 in response to the COVID-19 pandemic that were released in 2021. The Company believes that credit loss expense is expected to be dependent on the Company’s loan growth, local economic conditions, including, but not limited to, conditions associated with the COVID-19 pandemic and the attendant risks and uncertainties related thereto, and asset quality.

The allowance for credit losses balance is affected by charge-offs, net of recoveries, for the periods presented.  For the three months ended June 30, 2022 and 2021, recoveries were $0.78 million and $0.83 million, respectively; and charge-offs were $0.45 million in 2022 and $0.10 million in 2021. 

Noninterest Income

The following table sets forth the various categories of noninterest income for the three months ended June 30, 2022 and 2021.

	Three Months Ended June 30,
	2022		2021		$ Change		% Change
	(Amounts in thousands)
Net gain on sale of loans	$	326	$	1,728	$	(1,402)	(81.13)	%
Trust fees	3,211		3,064		147		4.80
Service charges and fees	3,282		3,114		168		5.39
Other noninterest income	132		76		56		73.68
	$	6,951	$	7,982	$	(1,031)	(12.92)

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In the three months ended June 30, 2022 and 2021, the net gain on sale of loans was $0.33 million and $1.73 million, respectively.  The amount of the net gain on sale of secondary market mortgage loans in each year can vary significantly.  The volume of activity, margin and demand in these types of loans is directly related to the level of interest rates as well as the current origination and refinancing activity. The primary reason for the decrease in 2022 compared to 2021 is the increased mortgage interest rates in the first half of 2022 leading to the significant decrease in loans originated for sale. The servicing of the loans sold into the secondary market is not retained by the Company so these loans do not provide an ongoing stream of income. Other noninterest income categories experienced marginal period-to-period fluctuations for the three months ended June 30, 2022.

Noninterest Expenses

The following table sets forth the various categories of noninterest expenses for the three months ended June 30, 2022 and 2021.

	Three Months Ended June 30,
	2022		2021		$ Change		% Change
	(Amounts in thousands)
Salaries and employee benefits	$	10,776	$	10,639	$	137	1.29	%
Occupancy	1,109		1,042		67		6.43
Furniture and equipment	1,683		1,888		(205)		(10.86)
Office supplies and postage	468		386		82		21.24
Advertising and business development	558		449		109		24.28
Outside services	2,966		3,097		(131)		(4.23)
FDIC insurance assessment	267		252		15		5.95
Other noninterest expense	747		466		281		60.30
	$	18,574	$	18,219	$	355	1.95

All noninterest expense categories experienced marginal period-to-period fluctuations for the three months ended June 30, 2022 and 2021.

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Income Taxes

Federal and state income tax expenses were $6.07 million and $8.37 million for the six months ended June 30, 2022 and 2021, respectively. Income taxes as a percentage of income before taxes were 21.63% in 2022 and 22.51% in 2021.

Liquidity

The Company actively monitors and manages its liquidity position with the objective of maintaining sufficient cash flows to fund operations, meet client commitments, take advantage of market opportunities and provide a margin against unforeseeable liquidity needs.  Federal funds sold and investment securities available for sale are readily marketable assets.  Maturities of all investment securities are managed to meet the Company’s normal liquidity needs, to respond to market changes or to adjust the Company’s interest rate risk position.  Investment securities available for sale comprised 19.49% of the Company’s total assets at June 30, 2022 compared to 13.63% at December 31, 2021.

The Company has historically maintained a stable deposit base and a relatively low level of large deposits, which has mitigated the volatility in the Company’s liquidity position.  As of June 30, 2022, the Company had no outstanding borrowings from the Federal Home Loan Bank (“FHLB”) of Des Moines.  Advances are used as a means of providing both long and short-term, fixed-rate funding for certain assets and for managing interest rate risk.  The Company had additional borrowing capacity available from the FHLB of approximately $892.09 million at June 30, 2022.

As additional sources of liquidity, the Company has the ability to borrow up to $10.00 million from the Federal Reserve Bank of Chicago, and has lines of credit with three banks totaling $556.68 million.  The borrowings under these credit lines would be secured by the Bank’s investment securities.  The combination of high levels of potentially liquid assets, low dependence on volatile liabilities and additional borrowing capacity provided sources of liquidity for the Company which management considered sufficient at June 30, 2022.

As of June 30, 2022, investment securities with a carrying value of $9.38 million were pledged to collateralize public and trust deposits and other borrowings.  As of December 31, 2021, investment securities with a carrying value of $10.03 million were pledged.

Contractual Obligations

There have been no material changes with regard to contractual obligations disclosed in the Company’s Form 10-K for the year ended December 31, 2021.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company's primary market risk exposure is to changes in interest rates.  Interest rate risk is the risk to current or anticipated earnings or capital arising from movements in interest rates.  Interest rate risk arises from repricing risk, basis risk, yield curve risk and options risk.  Repricing risk is the difference between the timing of rate changes and the timing of cash flows.  Basis risk is the difference from changing rate relationships among different yield curves affecting Bank activities.  Yield curve risk is the difference from changing rate relationships across the spectrum of maturities.  Option risk is the difference resulting from interest-related options imbedded in Bank products.  The Bank’s primary source of interest rate risk exposure arises from repricing risk.  To measure this risk the Bank uses a static gap measurement system that identifies the repricing gaps across the full maturity spectrum of the Bank’s assets and liabilities and an earnings simulation approach.  The gap schedule is known as the interest rate sensitivity report.  The report reflects the repricing characteristics of the Bank’s assets and liabilities.  The report details the calculation of the gap ratio.  This ratio indicates the amount of interest-earning assets repricing within a given period in comparison to the amount of interest-bearing liabilities repricing within the same period of time.  A gap ratio of 1.0 indicates a matched position, in which case the effect on net interest income due to interest rate movements will be minimal.  A gap ratio of less than 1.0 indicates that more liabilities than assets reprice within the time period, and a ratio greater than 1.0 indicates that more assets reprice than liabilities.

The Company's asset/liability management, or its management of interest rate risk, is focused primarily on evaluating and managing net interest income given various risk criteria.  Factors beyond the Company's control, such as market interest rates and competition, may also have an impact on the Company's interest income and interest expense.  In the absence of other factors, the Company's overall yield on interest-earning assets will increase as will its cost of funds on its interest-bearing liabilities when market interest rates increase over an extended period of time.  Inversely, the Company's yields and cost of funds will decrease when market rates decline.  The Company is able to manage these swings to some extent by attempting to control the maturity or rate adjustments of its interest-earning assets and interest-bearing liabilities over given periods of time.

The Bank maintains an Asset/Liability Committee, which meets at least quarterly to review the interest rate sensitivity position and to review and develop various strategies for managing interest rate risk within the context of the following factors: 1) capital adequacy, 2) asset/liability mix, 3) economic outlook, 4) market characteristics and 5) the interest rate forecast.  In addition, the Bank uses a simulation model to review various assumptions relating to interest rate movement.  The model attempts to limit rate risk even if it appears the Bank’s asset and liability maturities are perfectly matched and a favorable interest margin is present.  The Bank’s policy is to generally maintain a balance between profitability and interest rate risk.

In order to minimize the potential effects of adverse material and prolonged increases or decreases in market interest rates on the Company's operations, management has implemented an asset/liability program designed to mitigate the Company's interest rate sensitivity.  The program emphasizes the origination of adjustable rate loans, which are held in the portfolio, the investment of excess cash in short or intermediate term interest-earning assets, and the solicitation of transaction deposit accounts, which are less sensitive to changes in interest rates and can be re-priced rapidly.

The Bank's interest rate risk, as monitored by management, has increased since December 31, 2021. Our earnings and cash flows are largely dependent upon our net interest income. Interest rates are highly sensitive to many factors that are beyond our control, including domestic and local economic conditions and the policies of various governmental and regulatory agencies and, in particular, the Federal Reserve. The FOMC, with particular attention being given to ongoing supply chain disruptions, rising energy and commodity prices and the global economic impact of the Russia-Ukraine conflict, has signaled that additional increases may be appropriate if inflation pressures remain elevated or intensify. Further increases to prevailing interest rates could influence the interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings. Moreover, additional and aggressive increases to the target range for the federal funds rate, combined with ongoing geopolitical instability, raise the risk of economic recession. Any such downturn, especially in the regions in which we operate, may adversely affect our asset quality, deposit levels, loan demand and results of operations.

Item 4. Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective, as of the end of the period covered by this report, in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports it files with the Securities and Exchange Commission.  There have been no changes in the Company’s

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internal controls over financial reporting during the six months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

HILLS BANCORPORATION

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Except as otherwise noted below, there have been no material changes in the Company’s risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Economic and Market Risks

Global Economic and Geopolitical Instability and Inflationary Risks

Instability in global economic conditions and geopolitical matters, as well as volatility in financial markets, could have a material adverse effect on the Company’s results of operations and financial condition. The macroeconomic environment in the United States is susceptible to global events and volatility in financial markets. For example, global demand for products continues to exceed supply during the economic recovery from the COVID-19 pandemic, creating significant inflationary pressures which, in turn, may adversely impact regional and global economic conditions, as well as the Company’s financial condition and results of operations.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information about the Company’s stock purchases, all of which were made pursuant to the 2005 Stock Repurchase Program, for the three months ended June 30, 2022:

Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs (1)
April 1 to April 30	7,048	$	70.00	7,048	61,796
May 1 to May 31	8,730	70.36		8,730	53,066
June 1 to June 30	18,996	71.00		18,996	34,070
Total	34,774	$	70.64	34,774	34,070

(1)  On July 26, 2005, the Company’s Board of Directors authorized a program to repurchase up to 1,500,000 shares of the Company’s common stock (the “2005 Stock Repurchase Program”).  The Company’s Board of Directors has authorized the 2005 Stock Repurchase Program through December 31, 2023.  The Company expects the purchases pursuant to the 2005 Stock Repurchase Program to be made from time to time in private transactions at a price equal to the most recent quarterly independent appraisal of the shares of the Company’s common stock and with the Board reviewing the overall results of the 2005 Stock Repurchase Program on a quarterly basis.  All purchases made pursuant to the 2005 Stock Repurchase Program since its inception have been made on that basis.  The amount and timing of stock repurchases will be based on various factors, such as the Board’s assessment of the Company’s capital structure and liquidity, the amount of interest shown by shareholders in selling shares of stock to the Company at their appraised value, and applicable regulatory, legal and accounting factors. 

Page 71

Item 3. Defaults upon Senior Securities

Hills Bancorporation has no senior securities.

Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information

None.

Page 72

Item 6. Exhibits

3.1	Restated Articles of Incorporation, incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q Filed with the Commission on May 6, 2015.
3.2	Amended and Restated Bylaws of Hills Bancorporation, incorporated by reference to Exhibit 3.2 to the Company's Form 10-Q Filed with the Commission on May 6, 2019.
4.1	Description of Registered Securities, incorporated by reference to Exhibit 4.1 to the Company's Form 10-K filed with the Commission on March 6, 2020.
31	Certifications under Section 302 of the Sarbanes-Oxley Act of 2002
32	Certifications under Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document (1), (2)
101.SCH	XBRL Taxonomy Extension Schema Document (1)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB	XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (1)

(1)Users of this data are advised that, pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934, and are otherwise not subject to liability under these sections.

(2)The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

Page 73

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		HILLS BANCORPORATION
Date:	August 5, 2022	By:  /s/ Dwight O. Seegmiller
		Dwight O. Seegmiller, Director, President and Chief Executive Officer
Date:	August 5, 2022	By:  /s/ Joseph A. Schueller
		Joseph A. Schueller, Treasurer, Chief Financial Officer and Chief Accounting Officer

Page 74

EX-31

Exhibit 31

CERTIFICATIONS

I, Dwight O. Seegmiller, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Hills Bancorporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 5, 2022	By:  /s/ Dwight O. Seegmiller
		Dwight O. Seegmiller, Director, President and Chief Executive Officer

75

Exhibit 31

CERTIFICATIONS

I, Joseph A. Schueller, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Hills Bancorporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 5, 2022	By:  /s/ Joseph A. Schueller
		Joseph A. Schueller, Treasurer, Chief Financial Officer and Chief Accounting Officer

76

EX-32

EXHIBIT 32

SECTION 906 CERTIFICATION BY DWIGHT O. SEEGMILLER

In connection with the quarterly report of Hills Bancorporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dwight O. Seegmiller, Director, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 5, 2022	By:  /s/ Dwight O. Seegmiller
		Dwight O. Seegmiller, Director, President and Chief Executive Officer

SECTION 906 CERTIFICATION BY JOSEPH A. SCHUELLER

In connection with the quarterly report of Hills Bancorporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph A. Schueller, Treasurer, Chief Financial Officer and Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 5, 2022	By:  /s/ Joseph A. Schueller
		Joseph A. Schueller, Treasurer, Chief Financial Officer and Chief Accounting Officer

77

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2022	Jul. 31, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2022
Document Transition Report	false
Entity File Number	0-12668
Entity Registrant Name	Hills Bancorporation
Entity Incorporation, State or Country Code	IA
Entity Tax Identification Number	42-1208067
Entity Address, Address Line One	131 MAIN STREET
Entity Address, City or Town	HILLS
Entity Address, State or Province	IA
Entity Address, Postal Zip Code	52235
City Area Code	319
Local Phone Number	679-2291
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Smaller Reporting Company	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		9,264,154
Entity Central Index Key	0000732417
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
ASSETS
Cash and cash equivalents	$ 307,493	$ 781,918
Investment securities available for sale at fair value (amortized cost June 30, 2022 $808,702; December 31, 2021 $549,386)	767,421	551,354
Stock of Federal Home Loan Bank	4,862	4,546
Loans held for sale	1,600	5,716
Loans, net of allowance for credit losses June 30, 2022 $38,260; December 31, 2021 $35,470	2,768,039	2,625,062
Property and equipment, net	33,710	34,290
Tax credit real estate investment	9,587	9,815
Accrued interest receivable	12,739	11,437
Deferred income taxes, net	21,083	9,125
Goodwill	2,500	2,500
Other assets	9,096	8,799
Total Assets	3,938,130	4,044,562
Liabilities
Noninterest-bearing deposits	645,934	633,101
Interest-bearing deposits	2,799,897	2,900,893
Total deposits	3,445,831	3,533,994
Other borrowings	0	249
Accrued interest payable	1,037	1,165
Allowance for credit losses on off-balance sheet credit exposures	5,110	3,850
Other liabilities	19,570	16,841
Total Liabilities	3,471,548	3,556,099
Redeemable Common Stock Held by Employee Stock Ownership Plan (ESOP)	49,932	50,013
STOCKHOLDERS' EQUITY
Common stock, no par value; authorized 20,000,000 shares; issued June 30, 2022 10,353,235 shares; December 31, 2021 10,329,493 shares	0	0
Paid in capital	62,969	60,938
Retained earnings	487,066	474,392
Accumulated other comprehensive (loss) income	(30,981)	1,477
Treasury stock at cost (June 30, 2022 1,085,825 shares; December 31, 2021 1,029,853 shares)	(52,472)	(48,344)
Total Stockholders' Equity	466,582	488,463
Less maximum cash obligation related to ESOP shares	49,932	50,013
Total Stockholders' Equity Less Maximum Cash Obligation Related to ESOP Shares	416,650	438,450
Total Liabilities & Stockholders' Equity	$ 3,938,130	$ 4,044,562

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
ASSETS
Investment securities available for sale, amortized cost	$ 808,702	$ 549,386
Loans, allowance for loan losses	$ 38,260	$ 35,470
STOCKHOLDERS' EQUITY
Common stock, no par value (in dollars per share)	$ 0	$ 0
Common stock, authorized (in shares)	20,000,000	20,000,000
Common stock, issued (in shares)	10,353,235	10,329,493
Treasury stock at cost (in shares)	1,085,825	1,029,853

XML

CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Interest income:
Loans, including fees	$ 27,542	$ 28,752	$ 53,307	$ 57,952
Investment securities:
Taxable	2,445	871	3,577	1,689
Nontaxable	996	972	2,000	1,917
Federal funds sold	801	199	1,136	363
Total interest income	31,784	30,794	60,020	61,921
Interest expense:
Deposits	3,094	3,849	6,150	8,002
FHLB borrowings	0	749	0	1,490
Total interest expense	3,094	4,598	6,150	9,492
Net interest income	28,690	26,196	53,870	52,429
Credit loss expense (benefit)	2,502	(1,659)	3,606	(4,643)
Net interest income after credit loss expense (benefit)	26,188	27,855	50,264	57,072
Noninterest income:
Net gain on sale of loans	326	1,728	1,137	4,731
Other noninterest income	132	76	650	558
Noninterest income	6,951	7,982	14,428	17,020
Noninterest expenses:
Salaries and employee benefits	10,776	10,639	21,172	21,203
Occupancy	1,109	1,042	2,241	2,180
Furniture and equipment	1,683	1,888	3,380	3,871
Office supplies and postage	468	386	952	840
Advertising and business development	558	449	1,288	984
Outside services	2,966	3,097	5,916	6,285
FDIC insurance assessment	267	252	548	510
Other noninterest expense	747	466	1,152	1,045
Noninterest expenses	18,574	18,219	36,649	36,918
Income before income taxes	14,565	17,618	28,043	37,174
Income taxes	3,239	4,008	6,065	8,367
Net income	$ 11,326	$ 13,610	$ 21,978	$ 28,807
Earnings per share:
Basic (in dollars per share)	$ 1.22	$ 1.46	$ 2.37	$ 3.09
Diluted (in dollars per share)	$ 1.22	$ 1.46	$ 2.37	$ 3.09
Trust fees
Noninterest income:
Fee income	$ 3,211	$ 3,064	$ 6,479	$ 6,077
Service charges and fees
Noninterest income:
Fee income	$ 3,282	$ 3,114	$ 6,162	$ 5,654

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Statement of Comprehensive Income [Abstract]
Net income	$ 11,326	$ 13,610	$ 21,978	$ 28,807
Securities:
Net change in unrealized loss on securities available for sale	(13,485)	(805)	(43,249)	(4,507)
Income taxes	3,365	201	10,791	1,125
Other comprehensive loss on securities available for sale	(10,120)	(604)	(32,458)	(3,382)
Other comprehensive loss, net of tax	(10,120)	(604)	(32,458)	(3,382)
Comprehensive (loss) income	$ 1,206	$ 13,006	$ (10,480)	$ 25,425

XML

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands	Total	Cumulative change in accounting principle (Note 1)	Balance, January 1, 2021 (as adjusted for change in accounting principle)	Paid in Capital	Paid in Capital Balance, January 1, 2021 (as adjusted for change in accounting principle)	Retained Earnings	Retained Earnings Cumulative change in accounting principle (Note 1)	Retained Earnings Balance, January 1, 2021 (as adjusted for change in accounting principle)	Accumulated Other Comprehensive Income (Loss)	Accumulated Other Comprehensive Income (Loss) Balance, January 1, 2021 (as adjusted for change in accounting principle)	Treasury Stock	Treasury Stock Balance, January 1, 2021 (as adjusted for change in accounting principle)	Maximum Cash Obligation Related to ESOP Shares	Maximum Cash Obligation Related to ESOP Shares Balance, January 1, 2021 (as adjusted for change in accounting principle)
Beginning Balance at Dec. 31, 2020	$ 416,076	$ (4,751)	$ 411,325	$ 60,233	$ 60,233	$ 439,831	$ (4,751)	$ 435,080	$ 8,782	$ 8,782	$ (45,441)	$ (45,441)	$ (47,329)	$ (47,329)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of 4,096, 24,595, 4,753, and 29,934 shares of common stock for 3 and 6 months ended June 30, 2021 and 2022, respectively	304			177							127
Issuance 1,821, 1,637, 3,839 and 3,434 shares of common stock under the employee stock purchase plan for 3 and 6 months ended June 30, 2021 and 2022, respectively	220			220
Unearned restricted stock compensation	330			330
Forfeiture of 3,455, 1,193, 3,755 and 4,412 shares of common stock for 3 and 6 months ended June 30, 2021 and 2022, respectively	(196)			(196)
Share-based compensation	12			12
Change related to ESOP shares	(1,397)												(1,397)
Net income	28,807					28,807
Cash dividends ($0.94 and $1.00 per share for 6 months ended June 30, 2021 and 2022, respectively)	(8,772)					(8,772)
Purchase of 8,728, 34,774, 29,580 and 61,186 shares of common stock for 3 and 6 months ended June 30, 2021 and 2022, respectively	(1,873)										(1,873)
Other comprehensive income (loss)	(3,382)								(3,382)
Ending Balance at Jun. 30, 2021	425,378			60,776		455,115			5,400		(47,187)		(48,726)
Beginning Balance at Mar. 31, 2021	413,251			60,611		441,505			6,004		(46,735)		(48,134)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of 4,096, 24,595, 4,753, and 29,934 shares of common stock for 3 and 6 months ended June 30, 2021 and 2022, respectively	263			153							110
Issuance 1,821, 1,637, 3,839 and 3,434 shares of common stock under the employee stock purchase plan for 3 and 6 months ended June 30, 2021 and 2022, respectively	106			106
Unearned restricted stock compensation	79			79
Forfeiture of 3,455, 1,193, 3,755 and 4,412 shares of common stock for 3 and 6 months ended June 30, 2021 and 2022, respectively	(179)			(179)
Share-based compensation	6			6
Change related to ESOP shares	(592)												(592)
Net income	13,610					13,610
Purchase of 8,728, 34,774, 29,580 and 61,186 shares of common stock for 3 and 6 months ended June 30, 2021 and 2022, respectively	(562)										(562)
Other comprehensive income (loss)	(604)								(604)
Ending Balance at Jun. 30, 2021	425,378			60,776		455,115			5,400		(47,187)		(48,726)
Beginning Balance at Dec. 31, 2021	438,450			60,938		474,392			1,477		(48,344)		(50,013)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of 4,096, 24,595, 4,753, and 29,934 shares of common stock for 3 and 6 months ended June 30, 2021 and 2022, respectively	1,846			1,702							144
Issuance 1,821, 1,637, 3,839 and 3,434 shares of common stock under the employee stock purchase plan for 3 and 6 months ended June 30, 2021 and 2022, respectively	212			212
Unearned restricted stock compensation	355			355
Forfeiture of 3,455, 1,193, 3,755 and 4,412 shares of common stock for 3 and 6 months ended June 30, 2021 and 2022, respectively	(250)			(250)
Share-based compensation	12			12
Change related to ESOP shares	81												81
Net income	21,978					21,978
Cash dividends ($0.94 and $1.00 per share for 6 months ended June 30, 2021 and 2022, respectively)	(9,304)					(9,304)
Purchase of 8,728, 34,774, 29,580 and 61,186 shares of common stock for 3 and 6 months ended June 30, 2021 and 2022, respectively	(4,272)										(4,272)
Other comprehensive income (loss)	(32,458)								(32,458)
Ending Balance at Jun. 30, 2022	416,650			62,969		487,066			(30,981)		(52,472)		(49,932)
Beginning Balance at Mar. 31, 2022	414,162			61,334		475,740			(20,861)		(50,112)		(51,939)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of 4,096, 24,595, 4,753, and 29,934 shares of common stock for 3 and 6 months ended June 30, 2021 and 2022, respectively	1,609			1,513							96
Issuance 1,821, 1,637, 3,839 and 3,434 shares of common stock under the employee stock purchase plan for 3 and 6 months ended June 30, 2021 and 2022, respectively	102			102
Unearned restricted stock compensation	89			89
Forfeiture of 3,455, 1,193, 3,755 and 4,412 shares of common stock for 3 and 6 months ended June 30, 2021 and 2022, respectively	(75)			(75)
Share-based compensation	6			6
Change related to ESOP shares	2,007												2,007
Net income	11,326					11,326
Purchase of 8,728, 34,774, 29,580 and 61,186 shares of common stock for 3 and 6 months ended June 30, 2021 and 2022, respectively	(2,456)										(2,456)
Other comprehensive income (loss)	(10,120)								(10,120)
Ending Balance at Jun. 30, 2022	$ 416,650			$ 62,969		$ 487,066			$ (30,981)		$ (52,472)		$ (49,932)

XML

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Statement of Stockholders' Equity [Abstract]
Issuance of common stock (in shares)	24,595	4,096	29,934	4,753
Issuance of common stock purchased under the employee stock purchase plan (in shares)	1,637	1,821	3,434	3,839
Forfeiture of shares of common stock (in shares)	1,193	3,455	4,412	3,755
Cash dividends (in dollars per share)			$ 1.00	$ 0.94
Purchase of common stock (in shares)	34,774	8,728	61,186	29,580

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Cash Flows from Operating Activities
Net income	$ 21,978	$ 28,807
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Depreciation	1,393	1,617
Credit loss expense (benefit)	3,606	(4,643)
Forfeiture of common stock	(250)	(196)
Share-based compensation	12	12
Compensation expensed through issuance of common stock	365	304
Provision for deferred income taxes	(1,167)	782
Net gain on sale of other real estate owned and other repossessed assets	(62)	(25)
(Increase) decrease in accrued interest receivable	(1,302)	546
Amortization of premium on investment securities, net	828	549
(Increase) decrease in other assets	(300)	262
Amortization of operating lease right-of-use assets	106	213
Increase in accrued interest payable and other liabilities	2,956	2,321
Loans originated for sale	(75,480)	(252,653)
Proceeds on sales of loans	80,733	285,744
Net gain on sales of loans	(1,137)	(4,731)
Net cash and cash equivalents provided by operating activities	32,279	58,909
Cash Flows from Investing Activities
Proceeds from maturities of investment securities available for sale	81,746	59,538
Purchases of investment securities available for sale	(341,891)	(124,706)
Purchases of stock of Federal Home Loan Bank	(316)	(575)
Loans made to customers, net of collections	(145,487)	26,984
Proceeds on sale of other real estate owned and other repossessed assets	124	70
Purchases of property and equipment	(813)	(701)
Investment in tax credit real estate	0	(4,183)
Net changes from tax credit real estate investment	228	504
Net cash and cash equivalents used in investing activities	(406,409)	(43,069)
Cash Flows from Financing Activities
Net (decrease) increase in deposits	(88,163)	129,347
Net (decrease) increase in short-term borrowings	(249)	108
Issuance of common stock, net of costs	1,243	0
Stock options exercised	238	0
Purchase of common stock	(4,272)	(1,873)
Proceeds from the issuance of common stock through the employee stock purchase plan	212	220
Dividends paid	(9,304)	(8,772)
Net cash and cash equivalents (used in) provided by financing activities	(100,295)	119,030
(Decrease) increase in cash and cash equivalents	(474,425)	134,870
Cash and cash equivalents:
Beginning of period	781,918	574,310
End of period	307,493	709,180
Cash payments for:
Interest paid to depositors	6,278	8,429
Interest paid on other obligations	0	1,490
Income taxes paid	5,171	5,015
Noncash activities:
(Decrease) increase in maximum cash obligation related to ESOP shares	$ (81)	$ 1,397

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation:

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and with instructions for Form 10-Q and Regulation S-X.  These financial statements include all adjustments (consisting of normal recurring accruals) which in the opinion of management are considered necessary for the fair presentation of the financial position and results of operations for the periods shown.  Certain prior year amounts have been reclassified to conform to the current year presentation.  The Company considers that it operates as one business segment, a commercial bank.

Operating results for the six month period ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Form 10-K Annual Report of Hills Bancorporation and subsidiary (the “Company”) for the year ended December 31, 2021 filed with the Securities Exchange Commission on March 4, 2022.  The consolidated balance sheet as of December 31, 2021, has been derived from the audited consolidated financial statements for that period.

The Company evaluated subsequent events through the filing date of its quarterly report on Form 10-Q with the SEC.

Accounting Estimates:

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Certain Significant Estimates:

The allowance for credit losses, fair values of securities and other financial instruments, and share-based compensation expense involve certain significant estimates made by management. These estimates are reviewed by management routinely and it is reasonably possible that circumstances that exist at June 30, 2022 may change in the near-term and the effect could be material to the consolidated financial statements. Actual amounts and values as of the balance sheet dates may be materially different than the amounts and values reported due to the inherent uncertainty in the estimation process.

Revenue Recognition:

Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the Company’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as loans, letters of credit and investment securities. Interest income on loans and investment securities is recognized on the accrual method in accordance with written contracts.

Descriptions of the Company’s revenue-generating activities that are within the scope of ASC 606 are the following: Service charges and fees on deposit accounts represent general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue which includes interchange income, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when the Company’s performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations are generally received at

the time the performance obligations are satisfied. Trust income represents monthly fees due from wealth management customers as consideration for managing the customers' assets. Wealth management and trust services include custody of assets, investment management, fees for trust services and similar fiduciary activities. Revenue is recognized when our performance obligation is completed each month, which is generally the time that payment is received.

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity's obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. As of June 30, 2022, the Company did not have any significant contract balances.

An entity is required to capitalize, and subsequently amortize into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, sales commission). The Company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less. The Company has not incurred or capitalized any contract acquisition costs as of June 30, 2022.

Tax Credit Real Estate:

Tax credit real estate represents three multi-family rental properties, three assisted living rental properties, a multi-tenant rental property for persons with disabilities, and a multi-family senior living rental property, all of which are affordable housing projects as of June 30, 2022. The Bank has a 99% or greater limited partnership interest in each limited partnership. The investment in each was completed after the projects had been developed by the general partner. On a regular basis, the Company evaluates recoverability of the carrying value of the tax credit real estate investments to determine if an allowance for credit losses is necessary. The allowance for credit losses is measured by a comparison of the carrying amount of the investments to the future undiscounted cash flows expected to be generated by the investment properties, including the low-income housing tax credits and any estimated proceeds from eventual disposition. If there is an indication of impairment, the allowance for credit losses would be established with a charge to credit loss expense. There were no indications of impairment based on management's evaluation and therefore no allowance for credit losses was determined necessary as of June 30, 2022. Depreciation expense is provided on a straight-line basis over the estimated useful life of the assets. Expenditures for normal repairs and maintenance are charged to expense as incurred.

The investments in tax credit real estate are recorded for all years presented using the equity method of accounting, with the exception of the investment in the affordable housing project described below. The operations of the properties are not expected to contribute significantly to the Company’s income before income taxes. However, the properties do contribute in the form of income tax credits, which lowers the Company’s effective tax rate. Once established, the credits on each property last for ten years and are passed through from the limited partnerships to the Bank and reduces the consolidated federal tax liability of the Company.

In February 2021, the Company provided construction financing and contributed capital of $4.18 million to Del Ray Ridge LP, as limited partner, which owns and operates an affordable housing property in Iowa City, Iowa. The Company accounts for the investment in this tax credit real estate using the proportional amortization method as provided for under Accounting Standards Codification (ASC) 323-740. The investment qualifies for the proportional amortization method as it meets all of the criteria under ASC 323-740-25-1. Substantially all of the projected benefits are from tax credits and other tax benefits due to the minimum buyout clause included in the partnership agreement.

Adoption of Financial Accounting Standard Codification 326 (ASC 326 (CECL)):

On January 1, 2021, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the recognition of the allowance for credit losses be estimated using the current expected credit loss (CECL) methodology. The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet (OBS) credit exposures. Results for reporting periods beginning January 1, 2021 are presented under ASC 326. The Company recorded a net decrease to retained earnings of $4.75 million as of January 1, 2021 for the cumulative effect of adopting ASC 326, which includes deferred taxes of $1.58 million. The transition adjustment includes a $2.75 million increase to the Allowance for Credit Losses On Loans and the recording of a $3.58 million Allowance for Credit Losses on OBS Credit Exposures.

The following table illustrates the impact of ASC 326 (amounts in thousands).

	January 1, 2021
	As Reported Under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption
Assets:
Loans
Allowance for credit losses on loans	$	39,816	$	37,070	$	2,746
Liabilities:
Allowance for credit losses on off-balance sheet credit exposures	$	3,584	$	—	$	3,584

Available-for-sale debt securities and the allowance for credit losses on available-for-sale debt securities: Available-for-sale ("AFS") securities consist of debt securities not classified as trading or held to maturity.  Available-for-sale securities are stated at fair value, and unrealized holding gains and losses, net of the related deferred tax effect, are reported as a separate component of stockholders' equity.  There were no trading or held to maturity securities as of June 30, 2022 or 2021. Fair value measurement is based upon quoted market prices in active markets, if available. If quoted prices in active markets are not available, fair value is measured using pricing models or other model-based valuation techniques such as present value of future cash flows, which consider prepayment assumptions and other factors such as credit losses and market liquidity. Unrealized gains and losses are excluded from earnings and reported, net of tax, in other comprehensive income ("OCI"). Premiums on debt securities are amortized to the earliest call date and discounts on debt securities are accreted over the period to maturity of those securities. The method of amortization results in a constant effective yield on those securities (the interest method). Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

AFS debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. For AFS debt securities, a decline in fair value due to credit loss results in recording an allowance for credit losses to the extent the fair value is less than the amortized cost basis. Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes.

Impairment may result from credit deterioration of the issuer or collateral underlying the security. In performing an assessment of whether any decline in fair value is due to a credit loss, all relevant information is considered at the individual security level. For asset-backed securities performance indicators considered related to the underlying assets include default rates, delinquency rates, percentage of nonperforming assets, debt-to-collateral ratios, third-party guarantees, current levels of subordination, vintage, geographic concentration, analyst reports and forecasts, credit ratings and other market data. In assessing whether a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount the fair value is less than amortized cost basis.

If we intend to sell a debt security or more likely than not we will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged against the allowance for credit losses with any incremental impairment reported in earnings.

Accrued interest receivable on AFS debt securities totaled $3.00 million at June 30, 2022 and is excluded from the estimate of credit losses.

Loans held for sale: Loans held for sale are stated at the lower of aggregate cost or estimated fair value. Loans are sold on a non-recourse basis with servicing released and gains and losses are recognized based on the difference between sales proceeds and the carrying value of the loan. The Company has had very few experiences of repurchasing loans previously sold into the

secondary market. A specific reserve was not considered necessary based on the Company’s historical experience with repurchase activity.

Loans held for investment: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost net of the allowance for credit losses ("ACL"). Amortized cost is the principal balance outstanding, net of deferred loan fees and costs. Accrued interest receivable on loans held for investment totaled $9.74 million at June 30, 2022 and is excluded from the estimate of credit losses. Interest income is accrued on the unpaid principal balance. Nonrefundable loan fees and origination costs are deferred and recognized as a yield adjustment over the life of the related loan.

The accrual of interest income on loans is discontinued when, in the opinion of management, there is reasonable doubt as to the

borrower's ability to meet payments of interest or principal when they become due, which is generally when a loan is 90 days or

more past due unless the loan is well secured and in the process of collection. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest is reversed against interest income. Loans are returned to an accrual status when all of the principal and interest amounts contractually due are brought current and repayment of the remaining contractual principal and interest is expected. A loan may also return to accrual status if additional collateral is received from the borrower and, in the opinion of management, the financial position of the borrower indicates that there is no longer any reasonable doubt as to the collection of the amount contractually due. Payment received on nonaccrual loans are applied first to principal. Once principal is recovered, any remaining payments received are applied to interest income.

The policy for charging off loans is consistent throughout all loan categories. A loan is charged off based on criteria that includes but is not limited to: delinquency status, financial condition of the entire customer credit line and underlying collateral coverage, economic or external conditions that might impact full repayment of the loan, legal issues, overdrafts, and the customer’s willingness to work with the Company.

Allowance for credit losses for loans held for investment: The allowance for credit losses is an estimate of the expected losses over the remaining life of the Company's existing loans held for investment portfolio. The allowance for credit losses for loans held for investment, as reported in our consolidated balance sheet, is adjusted by a credit loss expense, which is reported in earnings, and reduced by the charge-off of loan amounts, net of recoveries.

The loan loss estimation process involves procedures to appropriately consider the unique characteristics of loan portfolio segments which consist of agricultural, 1 to 4 family first and junior liens, commercial, and consumer lending. These segments are further disaggregated into loan classes, the level at which credit risk is monitored. For each of these pools, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data. The following provides the credit quality indicators and risk elements that are most relevant and most carefully considered and monitored for each loan portfolio segment.

Agricultural - Agricultural operating loans include loans made to finance agricultural production and other loans to farmers and farming operations. Agricultural loans also include mortgage loans secured by farmland. Agricultural operating loans, most of which are secured by crops and machinery, are provided to finance capital improvement and farm operations as well as acquisitions of livestock and machinery. The ability of the borrower to repay may be affected by many factors outside of the borrower’s control including adverse weather conditions, loss of livestock due to disease or other factors, declines in market prices for agricultural products and the impact of government regulations. The ultimate repayment of agricultural operating loans is dependent upon the profitable operation or management of the agricultural entity. Agricultural operating loans generally have a term of one year and may have a fixed or variable rate.

Mortgage loans secured by farmland are made to individuals and businesses within the Company's trade area. The primary source of repayment is the cash flow generated by the collateral underlying the loan. The secondary repayment source would be the liquidation of the collateral. Terms for real estate loans secured by farmland range from one to ten years with an amortization period of 25 years or less. Generally, interest rates are fixed for mortgage loans secured by farmland. Key economic forecasts used in estimating expected credit losses for this segment include the Iowa unemployment rate and the Iowa real gross domestic product (GDP).

1 to 4 Family First and Junior Liens - The 1 to 4 family first and junior liens portfolio segment is comprised of the single family and home equity loan classes, which are underwritten after evaluating a borrower's capacity to repay, credit, and collateral. Several factors are considered when assessing a borrower's capacity, including the borrower's employment, income, current debt, assets, and level of equity in the property. Credit refers to how well a borrower manages their current and prior debts as documented by a credit report that provides credit scores and the borrower's current and past information about their credit history. Collateral refers to the type and use of property, occupancy, and market value. Property appraisals are obtained to assist in evaluating collateral. Loan-to-property value and debt-to-income ratios, loan amount, and lien position are also considered in assessing whether to originate a loan. These borrowers are particularly susceptible to downturns in economic trends such as conditions that negatively affect housing prices and demand and levels of unemployment. Key economic forecasts used in estimating expected credit losses for this segment include the Iowa unemployment rate and the all-transactions house price index for Iowa.

Commercial - The commercial loan portfolio segment is comprised of the commercial real estate mortgage including obligations of states and political subdivisions, multifamily residential mortgage, construction/land development and commercial and financial loan classes, whose underwriting standards consider the factors described for single family and home equity loan classes as well as others when assessing the borrower's and associated guarantors or other related party's financial position. These other factors include assessing liquidity, the level and composition of net worth, leverage, considering all other lender amounts and position, an analysis of cash expected to flow through the obligors including the outflow to other lenders, vacancies and prior experience with the borrower. This information is used to assess adequate financial capacity, profitability, and experience. Ultimate repayment of these loans is sensitive to interest rate changes, general economic conditions, liquidity, and availability of long-term financing. Key economic forecasts used in estimating expected credit losses for this segment include the Iowa unemployment rate, the all-transactions house price index for Iowa and the Iowa real GDP.

Consumer Lending - The Bank offers consumer loans to individuals including personal loans and automobile loans. These consumer loans typically have shorter terms, lower balances, higher yields and higher risks of default than real estate-related loans. Consumer loans collections are dependent on the borrower's continuing financial stability and are more likely to be affected by adverse personal circumstances. Collateral for these loans generally includes automobiles, boats, recreational vehicles and real estate. However, depending on the overall financial condition of the borrower, some loans are made on an unsecured basis. The collateral securing these loans may depreciate over time, may be difficult to recover and may fluctuate in value based on condition. Key economic forecasts used in estimating expected credit losses for this segment include the Iowa unemployment rate and the Iowa real GDP.

The allowance level is influenced by loan volumes, loan credit quality indicator migration or delinquency status, historic loss experience and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses has two basic components: first, a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics; and second, an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans. Depending on the nature of the pool of financial assets with similar risk characteristics, the Company uses a discounted cash flow method or remaining life method to estimate expected credit losses.

Discounted cash flow method: In estimating the component of the allowance for credit losses for loans that share similar risk characteristics with other loans, such loans are segregated into loan classes. Loans are designated into loan classes based on loans pooled by product types and similar risk characteristics or areas of risk concentration. In determining the allowance for credit losses, we derive an estimated credit loss assumption from a model that categorizes loan pools based on loan type and purpose. This model calculates an expected loss percentage for each loan class by considering the probability of default, using life-of-loan analysis periods for all loan segments, and the historical severity of loss, based on the aggregate net lifetime losses incurred per loan class. The default and severity factors used to calculate the allowance for credit losses for loans that share similar risk characteristics with other loans are adjusted for differences between the historical period used to calculate historical default and loss severity rates and expected conditions over the remaining lives of the loans in the portfolio related to: (1) lending policies and procedures; (2) international, national, regional and local economic business conditions and developments that affect the collectability of the portfolio; (3) the nature and volume of the loan portfolio including the terms of the loans; (4) the experience, ability, and depth of the lending management and other relevant staff; (5) the volume and severity of past due and adversely classified or graded loans and the volume of nonaccrual loans; (6) the quality of our loan review system and (7) the value of underlying collateral for collateralized loans. Additional factors include the existence and effect of any

concentrations of credit, and changes in the level of such concentrations and the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio. Such factors are used to adjust the historical probabilities of default and severity of loss so that they reflect management expectation of future conditions based on a reasonable and supportable forecast. The Company uses regression analysis of historical internal and peer data to determine which variables are best suited to be economic variables utilized when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the economic variables.

For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over twelve quarters on a straight-line basis. Other internal and external indicators of economic forecasts are also considered by management when developing the forecast metrics.

Remaining life method: Expected credit losses for credit cards and overdrafts are determined through use of the remaining life method. The remaining life method utilizes average annual charge-off rates and remaining life to estimate the allowance for credit losses. This is done by estimating the amount and timing of principal payments expected to be received as payment for the balance outstanding as of the reporting period and applying those principal payments against the balance outstanding as of the reporting period along with the average annual charge-off rate until the expected payments have been fully allocated.

Collateral dependent financial assets: For a loan that does not share risk characteristics with other loans, expected credit loss is measured based on net realizable value, that is, the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the amortized cost basis of the loan. For these loans, we recognize expected credit loss equal to the amount by which the net realizable value of the loan is less than the amortized cost basis of the loan (which is net of previous charge- offs and deferred loan fees and costs), except when the loan is collateral dependent, that is, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In these cases, expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral. The fair value of the collateral is adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral.

The Company’s estimate of the ACL reflects losses expected over the contractual life of the assets, adjusted for estimated prepayments or curtailments. The contractual term does not consider extensions, renewals or modifications unless the Company has identified an expected troubled debt restructure (TDR). A loan that has been modified or renewed is considered a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics. The Company’s ACL reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR. The Company has determined that a TDR is reasonably expected no later than the point when the lender concludes that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession from the lender to avoid a default. Reasonably expected TDRs and executed non-performing TDRs are evaluated individually to determine the required ACL. TDRs performing in accordance with their modified contractual terms for a reasonable period of time may be included in the Company’s existing pools based on the underlying risk characteristics of the loan to measure the ACL.

Allowance for credit losses on off-balance sheet credit exposures, including unfunded loan commitments: The Company maintains a separate allowance for credit losses from off-balance-sheet credit exposures, including unfunded loan commitments, which is disclosed on the balance sheet. Management estimates the amount of expected losses by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by the Company and applying the loss factors used in the ACL methodology to the results of the usage calculation to estimate the liability for credit losses related to unfunded commitments for each loan type. No credit loss estimate is reported for off-balance-sheet (OBS) credit exposures that are unconditionally cancellable by the Company, such as credit card receivables, or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement. The allowance for credit losses on OBS credit exposures is adjusted as credit loss expense. Categories of OBS credit exposures correspond to the loan portfolio segments described previously.

Troubled debt restructurings (“TDR loans”):  A loan is accounted for and reported as a troubled debt restructuring ("TDR") when, for economic or legal reasons, we grant a concession to a borrower experiencing financial difficulty that we would not otherwise consider. These concessions may include rate reductions, principal forgiveness, extension of maturity date and other actions intended to minimize potential losses to the Company. A restructuring that results in only an insignificant delay in

payment is not considered a concession. A delay may be considered insignificant if the payments subject to the delay are insignificant relative to the unpaid principal or collateral value and the contractual amount due, or the delay in timing of the restructured payment period is insignificant relative to the frequency of payments, the debt's original contractual maturity or original expected duration.

TDRs that are performing and on accrual status as of the date of the modification remain on accrual status. TDRs that are nonperforming as of the date of modification generally remain as nonaccrual until the prospect of future payments in accordance with the modified loan agreement is reasonably assured, generally demonstrated when the borrower maintains compliance with the restructured terms for a predetermined period, normally at least six months. TDRs with temporary below-market concessions remain designated as a TDR regardless of the accrual or performance status until the loan is paid off. However, if the TDR loan has been modified in a subsequent restructure with market terms and the borrower is not currently experiencing financial difficulty, then the loan is no longer classified as a TDR in the quarter following the modification. Management evaluates loans where there is a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower for purposes of estimating the allowance for credit losses.

Section 4013 of the CARES Act, “Temporary Relief From Troubled Debt Restructurings,” allows financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time during the COVID-19 pandemic. Under Section 4013 of the CARES Act, loan modifications that qualify for such suspension are those where the borrower was not more than 30 days past due as of December 31, 2019. In addition, the loan modification being made in response to the COVID-19 pandemic must include a deferral or delay in the payment of principal or interest, or change in the interest rate on the loan. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. The relief related to TDRs expired on January 1, 2022. See Note 5 for further discussion.

Effect of New Financial Accounting Standards:

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40), Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The amendments in this ASU affect entities that issue freestanding written call options that are classified in equity. Specifically, the amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. An entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option to compensate for goods or services in accordance with the guidance in Topic 718, Compensation-Stock Compensation. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The adoption of the ASU by the Company on January 1, 2022 did not have a material impact on the financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 815) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this Update require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. An entity should apply the amendments prospectively to business combinations occurring on or after the effective date of the amendments. The Company is in the process of evaluating the impact of this ASU on the financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures. The FASB issued these amendments to eliminate accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty, and to require that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost. The amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within

those fiscal years, and should be applied prospectively, except as provided in the next sentence. For the transition method related to the recognition and measurement of TDRs, an entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. Early adoption is permitted if an entity has adopted the amendments in Update 2016-03, including adoption in an interim period. The Company is in the process of evaluating the impact of this ASU on the financial statements.

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Earnings Per Share

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Basic earnings per share is computed using the weighted average number of actual common shares outstanding during the period.  Diluted earnings per share reflects the potential dilution that would occur from the exercise of common stock options outstanding.  ESOP shares are considered outstanding for this calculation unless unearned.

The computation of basic and diluted earnings per share for the periods presented is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Common shares outstanding at the beginning of the period	9,277,145		9,312,518		9,299,640		9,330,995
Weighted average number of net shares redeemed	(5,420)		(3,315)		(18,484)		(15,711)
Weighted average shares outstanding (basic)	9,271,725		9,309,203		9,281,156		9,315,284
Weighted average of potential dilutive shares attributable to stock options granted, computed under the treasury stock method	1,581		3,567		2,348		3,546
Weighted average number of shares (diluted)	9,273,306		9,312,770		9,283,504		9,318,830
Net income (In thousands)	$	11,326	$	13,610	$	21,978	$	28,807
Earnings per share:
Basic	$	1.22	$	1.46	$	2.37	$	3.09
Diluted	$	1.22	$	1.46	$	2.37	$	3.09

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Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income

The following table summarizes the balances of each component of accumulated other comprehensive (loss) income (AOCI), included in stockholders’ equity, at June 30, 2022 and December 31, 2021:

	June 30, 2022		December 31, 2021
	(amounts in thousands)
Net unrealized (loss) gain on available-for-sale securities	$	(41,281)	$	1,968
Tax effect	10,300		(491)
Net-of-tax amount	$	(30,981)	$	1,477

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Securities

6 Months Ended

Jun. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Securities

Securities

The carrying values of investment securities at June 30, 2022 and December 31, 2021 are summarized in the following table (dollars in thousands):

	June 30, 2022				December 31, 2021
	Amount		Percent		Amount		Percent
Securities available for sale
U.S. Treasury	$	462,110	60.22	%	$	243,925	44.24	%
Other securities (FHLB, FHLMC and FNMA)	32,624		4.25		34,467		6.25
State and political subdivisions	217,714		28.37		263,516		47.80
Mortgage-backed securities and collateralized mortgage obligations	54,973		7.16		9,446		1.71
Total securities available for sale	$	767,421	100.00	%	$	551,354	100.00	%

Investment securities have been classified in the consolidated balance sheets according to management’s intent.  Available-for-sale securities consist of debt securities not classified as trading or held to maturity.  Available-for-sale securities are stated at fair value, and unrealized holding gains and losses, net of the related deferred tax effect, are reported as a separate component of stockholders' equity.  Municipal bonds are comprised of general obligation bonds and revenue bonds issued by various municipal corporations. As of June 30, 2022 and December 31, 2021, all securities held were rated investment grade based upon external ratings where available and, where not available, based upon management knowledge of the local issuers and their financial situations. There were no trading or held to maturity securities as of June 30, 2022 or December 31, 2021.

The carrying amount of available-for-sale securities, fair values and allowance for credit losses were as follows as of June 30, 2022 and December 31, 2021 (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Allowance for Credit Losses		Estimated Fair Value
June 30, 2022
U.S. Treasury	$	478,089	$	20	$	(15,999)	$	—	$	462,110
Other securities (FHLB, FHLMC and FNMA)	35,304		—		(2,680)		—		32,624
State and political subdivisions	235,895		273		(18,454)		—		217,714
Mortgage-backed securities and collateralized mortgage obligations	59,414		—		(4,441)		—		$	54,973
Total	$	808,702	$	293	$	(41,574)	$	—	$	767,421
December 31, 2021:
U.S. Treasury	$	244,192	$	2,011	$	(2,278)	$	—	$	243,925
Other securities (FHLB, FHLMC and FNMA)	35,353		—		(886)		—		34,467
State and political subdivisions	260,266		4,420		(1,170)		—		263,516
Mortgage-backed securities and collateralized mortgage obligations	9,575		—		(129)		—		9,446
Total	$	549,386	$	6,431	$	(4,463)	$	—	$	551,354

The amortized cost and estimated fair value of available-for-sale securities classified according to their contractual maturities at June 30, 2022, were as follows (in thousands) below. Expected maturities of MBS may differ from contractual maturities because the mortgages underlying the securities may be called or prepaid without any penalties. Therefore, these securities are not included in the maturity categories in the following summary.

	Amortized Cost		Fair Value
Due in one year or less	$	60,747	$	60,544
Due after one year through five years	542,184		522,784
Due after five years through ten years	106,135		96,774
Due over ten years	40,222		32,346
	$	749,288	$	712,448
Mortgage-backed securities and collateralized mortgage obligations	59,414		54,973
	$	808,702	$	767,421

As of June 30, 2022, investment securities with a carrying value of $9.38 million were pledged to collateralize other borrowings. As of June 30, 2022, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders' equity.

There were no sales of available-for-sale securities for the six months ended June 30, 2022 and 2021.

The following table shows the fair value, gross unrealized losses and the percentage of fair value represented by gross unrealized losses of applicable investment securities owned by the Company, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2022 and December 31, 2021 (in thousands):

	Less than 12 months							12 months or more							Total
June 30, 2022 Description of Securities	#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%
U.S. Treasury	132	$	411,292	$	(13,840)	3.37	%	12	$	28,357	$	(2,159)	7.61	%	144	$	439,649	$	(15,999)	3.64	%
Other securities (FHLB, FHLMC and FNMA)	—	—		—		—		14	32,623		(2,680)		8.22		14	32,623		(2,680)		8.22
State and political subdivisions	605	151,886		(14,906)		9.81		71	27,058		(3,548)		13.11		676	178,944		(18,454)		10.31
Mortgage-backed securities and collateralized mortgage obligations	17	52,956		(4,144)		7.83		1	2,017		(297)		14.72		18	54,973		(4,441)		8.08
Total temporarily impaired securities	754	$	616,134	$	(32,890)	5.34	%	98	$	90,055	$	(8,684)	9.64	%	852	$	706,189	$	(41,574)	5.89	%

	Less than 12 months							12 months or more							Total
December 31, 2021 Description of Securities	#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%
U.S. Treasury	55	$	136,867	$	(2,203)	1.61	%	1	$	2,416	$	(75)	3.10	%	56	$	139,283	$	(2,278)	1.64	%
Other securities (FHLB, FHLMC and FNMA)	5	12,484		(303)		2.43		9	21,984		(583)		2.65		14	34,468		(886)		2.57
State and political subdivisions	231	70,542		(1,055)		1.50		14	9,248		(115)		1.24		245	79,790		(1,170)		1.47
Mortgage-backed securities and collateralized mortgage obligations	4	9,446		(129)		1.37		—	—		—		—		4	9,446		(129)		1.37
Total temporarily impaired securities	295	$	229,339	$	(3,690)	1.61	%	24	$	33,648	$	(773)	2.30	%	319	$	262,987	$	(4,463)	1.70	%

The Company considered the following information in reaching the conclusion that the impairments disclosed in the table above are not attributable to credit losses.  None of the unrealized losses in the above table was due to the deterioration in the credit quality of any of the issues that might result in the non-collection of contractual principal and interest.  The unrealized losses are due to changes in interest rates.  The Company has not recognized any unrealized loss in income because management does not have the intent to sell the securities included in the previous table.  Management has concluded that it is more likely than not that the Company will not be required to sell these securities prior to recovery of the amortized cost basis. The securities are of high credit quality (investment grade credit ratings) and principal and interest payments are made timely with no payments past due as of June 30, 2022. The fair value is expected to recover as the securities approach maturity. The U.S. Treasury and other securities are issued and guaranteed by U.S. government-sponsored entities and agencies. The mortgage-backed securities and collateralized mortgage obligations have implied U.S. government guarantees of the agency

securities. The Company evaluates if a credit loss exists by monitoring to ensure it has adequate credit support considering the nature of the investment, number and significance of investments in an unrealized loss position, collectability or delinquency issues, the underlying financial statements of the issuers, credit ratings and subsequent changes thereto, and other available relevant information. Considering the above factors, management has determined that no allowance for credit losses is necessary for the securities portfolio as of June 30, 2022.

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Loans

6 Months Ended

Jun. 30, 2022

Receivables [Abstract]

Loans

Loans

Classes of loans are as follows:

	June 30, 2022		December 31, 2021
	(Amounts In Thousands)
Agricultural	$	96,917	$	106,933
Commercial and financial	228,675		222,002
Real estate:
Construction, 1 to 4 family residential	86,279		80,486
Construction, land development and commercial	149,838		127,021
Mortgage, farmland	240,811		232,744
Mortgage, 1 to 4 family first liens	996,935		909,564
Mortgage, 1 to 4 family junior liens	115,731		114,342
Mortgage, multi-family	399,360		382,792
Mortgage, commercial	407,343		401,377
Loans to individuals	34,001		32,687
Obligations of state and political subdivisions	50,173		50,285
	$	2,806,063	$	2,660,233
Net unamortized fees and costs	236		299
	$	2,806,299	$	2,660,532
Less allowance for credit losses	38,260		35,470
	$	2,768,039	$	2,625,062

As of June 30, 2022 and December 31, 2021, the Company has outstanding balances of $0.07 million and $5.34 million, respectively, of loans issued under the Paycheck Protection Program (PPP). For the six months ended June 30, 2022 and 2021, the Company recognized none and $3.23 million, respectively, of deferred PPP loan fees in interest income.

Changes in the allowance for credit losses, the allowance for credit losses applicable to individually evaluated loans and the related loan balance of individually evaluated loans for the three and six months ended June 30, 2022 were as follows:

	Three Months Ended June 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance	$	2,414	$	4,895	$	2,347	$	3,310	$	11,438	$	10,234	$	1,212	$	35,850
Charge-offs	(1)		(243)		—		(20)		(109)		—		(76)		(449)
Recoveries	54		89		2		247		336		28		21		777
Credit loss expense (benefit)	(202)		453		423		(207)		568		971		76		2,082
Ending balance	$	2,265	$	5,194	$	2,772	$	3,330	$	12,233	$	11,233	$	1,233	$	38,260
	Six Months Ended June 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance	$	2,261	$	4,269	$	2,300	$	3,433	$	11,498	$	10,498	$	1,211	$	35,470
Charge-offs	(1)		(291)		—		(20)		(249)		(1)		(226)		(788)
Recoveries	68		212		5		290		543		50		64		1,232
Credit loss expense (benefit)	(63)		1,004		467		(373)		441		686		184		2,346
Ending balance	$	2,265	$	5,194	$	2,772	$	3,330	$	12,233	$	11,233	$	1,233	$	38,260
Ending balance, individually evaluated for credit losses	$	—	$	5	$	55	$	—	$	15	$	314	$	—	$	389
Ending balance, collectively evaluated for credit losses	$	2,265	$	5,189	$	2,717	$	3,330	$	12,218	$	10,919	$	1,233	$	37,871
Loans:
Ending balance	$	96,917	$	228,675	$	236,117	$	240,811	$	1,112,666	$	806,703	$	84,174	$	2,806,063
Ending balance, individually evaluated for credit losses	$	207	$	1,637	$	392	$	1,747	$	5,351	$	4,628	$	—	$	13,962
Ending balance, collectively evaluated for credit losses	$	96,710	$	227,038	$	235,725	$	239,064	$	1,107,315	$	802,075	$	84,174	$	2,792,101

Changes in the allowance for credit losses for the three and six months ended June 30, 2021 were as follows:

	Three Months Ended June 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance	$	2,147	$	5,114	$	2,288	$	4,668	$	11,496	$	9,621	$	1,286	$	36,620
Charge-offs	—		(46)		(3)		(1)		(7)		(10)		(30)		(97)
Recoveries	57		301		57		25		269		77		40		826
Credit loss expense (benefit)	(149)		(567)		141		212		(879)		19		(186)		(1,409)
Ending balance	$	2,055	$	4,802	$	2,483	$	4,904	$	10,879	$	9,707	$	1,110	$	35,940
	Six Months Ended June 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance, prior to adoption of ASC 326	$	2,508	$	4,885	$	2,319	$	4,173	$	12,368	$	9,415	$	1,402	$	37,070
Impact of adopting ASC 326	(328)		298		327		763		522		1,396		(232)		2,746
Charge-offs	—		(76)		(3)		(1)		(82)		(10)		(96)		(268)
Recoveries	89		535		91		25		508		216		77		1,541
Credit loss (benefit)	(214)		(840)		(251)		(56)		(2,437)		(1,310)		(41)		(5,149)
Ending balance	$	2,055	$	4,802	$	2,483	$	4,904	$	10,879	$	9,707	$	1,110	$	35,940
Ending balance, individually evaluated for credit losses	$	—	$	54	$	125	$	—	$	51	$	162	$	6	$	398
Ending balance, collectively evaluated for credit losses	$	2,055	$	4,748	$	2,358	$	4,904	$	10,828	$	9,545	$	1,104	$	35,542
Loans:
Ending balance	$	89,694	$	269,752	$	191,499	$	250,610	$	998,989	$	798,617	$	84,608	$	2,683,769
Ending balance, individually evaluated for credit losses	$	1,094	$	1,601	$	611	$	1,575	$	6,175	$	6,294	$	6	$	17,356
Ending balance, collectively evaluated for credit losses	$	88,600	$	268,151	$	190,888	$	249,035	$	992,814	$	792,323	$	84,602	$	2,666,413

Changes in the allowance for credit losses for off-balance sheet credit exposures for the three and six months ended June 30, 2022 were as follows:

	Three Months Ended June 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance	$	513	$	1,420	$	1,126	$	100	$	925	$	593	$	13	$	4,690
Credit loss expense (benefit)	146		356		56		15		100		(293)		40		420
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—
Ending balance	$	659	$	1,776	$	1,182	$	115	$	1,025	$	300	$	53	$	5,110
	Three Months Ended June 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance	$	443	$	1,824	$	933	$	202	$	646	$	250	$	42	$	4,340
Credit loss expense (benefit)	51		(295)		(69)		(95)		145		25		(12)		(250)
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—
Ending balance	$	494	$	1,529	$	864	$	107	$	791	$	275	$	30	$	4,090

	Six Months Ended June 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance	$	383	$	1,118	$	849	$	113	$	794	$	559	$	34	$	3,850
Credit loss expense (benefit)	276		658		333		2		231		(259)		19		1,260
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—
Ending balance	$	659	$	1,776	$	1,182	$	115	$	1,025	$	300	$	53	$	5,110
	Six Months Ended June 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance, prior to adoption of ASC 326	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Impact of adopting ASC 326	385		1,585		736		180		471		212		15		3,584
Credit loss expense (benefit)	109		(56)		128		(73)		320		63		15		506
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—
Ending balance	$	494	$	1,529	$	864	$	107	$	791	$	275	$	30	$	4,090

Credit loss expense for off-balance sheet credit exposures is included in credit loss expense on the consolidated statement of income for the six months ended June 30, 2022 and 2021.

Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification and grading in accordance with applicable bank regulations. The Company's risk rating methodology assigns risk ratings ranging from 1 to 6, where a higher rating represents higher risk. The Company differentiates its lending portfolios into loans sharing common risk characteristics for which expected credit loss is measured on a pool basis and loans not sharing common risk characteristics for which credit loss is measured individually.

The below are descriptions of the credit quality indicators:

Excellent – Excellent rated loans are prime quality loans covered by highly liquid collateral with generous margins or supported by superior current financial conditions reflecting substantial net worth, relative to total credit extended, and based on assets of a stable and non-speculative nature whose values can be readily verified. Identified repayment source or cash flow is abundant and assured. Loans are secured with cash, cash equivalents, or collateral with very low loan to values. The borrower would qualify for unsecured debt and guarantors provide excellent secondary support to the relationship. The borrower has a long-term relationship with Hills Bank, maintains high deposit balances and has an established payment history with Hills Bank and an established business in an established industry.

Good – Good rated loans are adequately secured by readily marketable collateral or good financial condition characterized by liquidity, flexibility and sound net worth. Loans are supported by sound primary and secondary payment sources and timely and accurate financial information. The relationship is not quite as strong as a borrower that is assigned an excellent rating but still has a very strong liquidity position, low leverage, and track record of strong performance. These loans have a strong collateral position with limited risk to bank capital. The collateral will not materially lose value in a distressed liquidation. Guarantors provide additional secondary support to mitigate possible bank losses. The borrower has a long-term relationship with Hills Bank with an established track record of payments; loans with shorter remaining loan amortization; deposit balances are consistent; loan payments could be made from cash reserves in the interim period; and source of income is coming from a stable industry.

Satisfactory – Satisfactory rated loans are loans to borrowers of average financial means not especially vulnerable to changes in economic or other circumstances, where the major support for the extension is sufficient collateral of a marketable nature, and the primary source of repayment is seen to be clear and adequate. The borrower's financial performance is consistent, ratios and trends are positive and the primary repayment source can clearly be identified and supported with acceptable financial information. The loan relationship could be vulnerable to changes in economic or industry conditions but have the ability to absorb unexpected issues. The loan collateral coverage is considered acceptable and guarantors can provide financial support but net worth might not be as liquid as a 1 or 2 rated relationship. The borrower has an established relationship with Hills Bank. The relationship is making timely loan payments, any operating line is revolving and deposit balances are positive with limited to no overdrafts. Management and industry is considered stable.

Monitor – Monitor rated loans are identified by management as warranting special attention for a variety of reasons that may bear on ultimate collectability. This may be due to adverse trends, a particular industry, loan structure, or repayment that is dependent on projections, or a one-time occurrence. The relationship liquidity levels are minimal and the borrower’s leverage position is brought into question. The primary repayment source is showing signs of being stressed or is not proven. If the borrower performs as planned, the loan will be repaid. The collateral coverage is still considered acceptable but there might be some concern with the type of real estate securing the debt or highly dependent on chattel assets. Some loans may be better secured than others. Guarantors still provide some support but there is not an abundance of financial strength supporting the guaranty. A monitor credit may be appropriate when the borrower is experiencing rapid growth which is impacting liquidity levels and increasing debt levels. Other attributes to consider would include if the business is a start-up or newly acquired, if the relationship has significant financing relationships with other financial institutions, the quality of financial information being received, management depth of the company, and changes to the business model. The track history with Hills Bank has some deficiencies such as slow payments or some overdrafts.

Special Mention – Special mention rated loans are supported by a marginal payment capacity and are marginally protected by collateral.  There are identified weaknesses that if not monitored and corrected may adversely affect the Company’s credit position.  A special mention credit would typically have a weakness in one of the general categories (cash flow, collateral position or payment history) but not in all categories. Potential indicators of a special mention would include past due payments, overdrafts, management issues, poor financial performance, industry issues, or the need for additional short-term borrowing. The ability to continue to make payments is in question; there are “red flags” such as past due payments, non-revolving credit lines, overdrafts, and the inability to sell assets. The borrower is experiencing delinquent taxes, legal issues, etc., obtaining financial information has become a challenge, collateral coverage is marginal at best, and the value and condition could be brought into question. Collateral document deficiencies have been noted and if not addressed, could become material. Guarantors provide minimal support for this relationship. The credit may include an action plan or follow up established in the asset quality process. There is a change in the borrower’s communication pattern. Industry issues may be impacting the relationship. Adverse credit scores or history of payment deficiencies could be noted.

Substandard – Substandard loans are not adequately supported by the paying capacity of the borrower and may be inadequately collateralized.  These loans have a well-defined weakness or weaknesses.  Full repayment of the loan(s) according to the original terms and conditions is in question or not expected. For these loans, it is more probable than not that the Company could sustain some loss if the deficiency(ies) is not corrected. There are identified shortfalls in the primary repayment source such as carry over debt, past due payments, and overdrafts. Obtaining quality and timely financial information is a weakness. The loan is under secured with exposure that could impact bank capital. It appears the liquidation of collateral has become the repayment source. The collateral may be difficult to foreclose or have little to no value. Collateral documentation deficiencies have been noted during the review process. Guarantor(s) provide minimal to no support of the relationship. The borrower’s communication with the bank continues to decrease and the borrower is not addressing the situation. There is some concern about the borrower’s ability and willingness to repay the loans. Problems may be the result of external issues such as economic or industry related issues.

The following tables present the credit quality indicators and origination years by type of loan in each category as of June 30, 2022 (amounts in thousands):

	Agricultural
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	753	$	55	$	231	$	58	$	7	$	—	$	2,511	$	3,615
Good	1,978		642		1,241		473		37		26		3,589		7,986
Satisfactory	10,319		4,783		3,080		1,396		1,483		121		19,751		40,933
Monitor	9,353		3,276		2,547		947		501		225		23,031		39,880
Special Mention	825		80		260		3		183		—		1,092		2,443
Substandard	—		—		35		58		—		—		1,967		2,060
Total	$	23,228	$	8,836	$	7,394	$	2,935	$	2,211	$	372	$	51,941	$	96,917

	Commercial and Financial
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	692	$	825	$	600	$	3	$	208	$	8	$	3,775	$	6,111
Good	7,000		10,388		3,379		727		163		1,449		11,165		34,271
Satisfactory	26,391		32,870		14,552		5,754		2,741		1,433		46,196		129,937
Monitor	10,748		11,002		7,108		1,501		815		643		21,034		52,851
Special Mention	397		417		403		207		46		10		442		1,922
Substandard	1,143		395		—		56		—		—		1,989		3,583
Total	$	46,371	$	55,897	$	26,042	$	8,248	$	3,973	$	3,543	$	84,601	$	228,675

	Real Estate: Construction, 1 to 4 Family Residential
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	—	$	376	$	376
Good	313		—		—		—		—		—		22,614		22,927
Satisfactory	1,869		4,375		—		—		—		—		42,724		48,968
Monitor	500		415		—		—		—		—		12,988		13,903
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		105		—		—		—		—		—		105
Total	$	2,682	$	4,895	$	—	$	—	$	—	$	—	$	78,702	$	86,279

	Real Estate: Construction, Land Development and Commercial
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	138	$	—	$	138
Good	2,220		2,164		1,101		—		—		382		17,405		23,272
Satisfactory	12,733		12,602		2,278		1,426		257		953		55,235		85,484
Monitor	3,407		4,628		237		7		35		73		25,270		33,657
Special Mention	—		—		—		—		—		—		—		—
Substandard	7,000		191		96		—		—		—		—		7,287
Total	$	25,360	$	19,585	$	3,712	$	1,433	$	292	$	1,546	$	97,910	$	149,838

	Real Estate: Mortgage, Farmland
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	3,142	$	58	$	303	$	75	$	—	$	4	$	125	$	3,707
Good	16,970		13,621		8,187		1,652		1,042		5,041		5,329		51,842
Satisfactory	32,771		45,082		22,287		3,419		6,652		10,367		8,397		128,975
Monitor	25,472		6,773		6,133		3,932		898		1,065		4,474		48,747
Special Mention	4,187		96		280		286		303		28		—		5,180
Substandard	1,021		1,045		—		60		44		190		—		2,360
Total	$	83,563	$	66,675	$	37,190	$	9,424	$	8,939	$	16,695	$	18,325	$	240,811

	Real Estate: Mortgage, 1 to 4 Family First Liens
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	2,276	$	456	$	267	$	—	$	13	$	527	$	—	$	3,539
Good	19,280		5,065		9,391		2,404		2,208		10,825		2,181		51,354
Satisfactory	190,737		212,478		150,566		57,191		53,518		148,026		11,104		823,620
Monitor	17,804		23,059		28,049		4,834		5,525		12,069		4,675		96,015
Special Mention	988		1,591		3,204		1,026		1,067		4,481		—		12,357
Substandard	313		1,356		1,672		732		1,230		4,747		—		10,050
Total	$	231,398	$	244,005	$	193,149	$	66,187	$	63,561	$	180,675	$	17,960	$	996,935

	Real Estate: Mortgage, 1 to 4 Family Junior Liens
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	17	$	—	$	10	$	—	$	—	$	—	$	9	$	36
Good	239		191		593		94		—		566		1,166		2,849
Satisfactory	7,411		11,978		8,706		4,956		5,624		9,004		58,495		106,174
Monitor	417		293		731		84		290		246		2,827		4,888
Special Mention	31		133		344		33		43		202		106		892
Substandard	24		60		203		103		61		64		377		892
Total	$	8,139	$	12,655	$	10,587	$	5,270	$	6,018	$	10,082	$	62,980	$	115,731

	Real Estate: Mortgage, Multi-Family
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	300	$	2,493	$	4,397	$	—	$	—	$	666	$	—	$	7,856
Good	18,486		16,522		17,353		54		—		8,930		—		61,345
Satisfactory	49,308		104,276		41,362		2,424		479		14,928		16,736		229,513
Monitor	43,826		23,869		26,919		173		—		1,357		4,502		100,646
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Total	$	111,920	$	147,160	$	90,031	$	2,651	$	479	$	25,881	$	21,238	$	399,360

	Real Estate: Mortgage, Commercial
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	2,154	$	587	$	16,045	$	—	$	—	$	1,227	$	—	$	20,013
Good	18,010		24,265		21,249		2,125		1,314		6,027		9,533		82,523
Satisfactory	36,176		66,129		41,503		11,320		9,611		19,860		18,189		202,788
Monitor	30,649		11,130		31,615		3,853		1,440		8,090		4,732		91,509
Special Mention	—		5,955		467		170		—		793		—		7,385
Substandard	267		569		1,862		129		199		99		—		3,125
Total	$	87,256	$	108,635	$	112,741	$	17,597	$	12,564	$	36,096	$	32,454	$	407,343

	Loans to Individuals
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	8	$	—	$	—	$	—	$	—	$	—	$	—	$	8
Good	22		—		—		45		—		2		1		70
Satisfactory	7,782		8,686		3,680		1,359		602		11,023		76		33,208
Monitor	186		225		74		27		32		—		3		547
Special Mention	42		37		29		2		2		—		1		113
Substandard	20		19		7		6		—		—		3		55
Total	$	8,060	$	8,967	$	3,790	$	1,439	$	636	$	11,025	$	84	$	34,001

	Obligations of State and Political Subdivisions
June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	5,313	$	—	$	5,313
Good	—		—		1,927		—		—		8,692		—		10,619
Satisfactory	2,613		844		2,005		1,530		593		14,437		9,125		31,147
Monitor	—		—		849		192		245		1,808		—		3,094
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Total	$	2,613	$	844	$	4,781	$	1,722	$	838	$	30,250	$	9,125	$	50,173

The following table presents the credit quality indicators by type of loans in each category as of December 31, 2021 (amounts in thousands):

	Agricultural
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	762	$	213	$	30	$	10	$	—	$	—	$	2,312	$	3,327
Good	1,799		1,767		603		46		52		26		7,593		11,886
Satisfactory	10,335		6,404		1,476		1,770		403		66		26,285		46,739
Monitor	8,125		5,017		998		765		164		253		23,995		39,317
Special Mention	1,662		11		85		—		7		—		2,807		4,572
Substandard	592		69		203		—		—		—		228		1,092
Total	$	23,275	$	13,481	$	3,395	$	2,591	$	626	$	345	$	63,220	$	106,933

	Commercial and Financial
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	965	$	924	$	4	$	235	$	31	$	—	$	3,391	$	5,550
Good	13,722		5,570		1,105		1,086		276		1,494		20,709		43,962
Satisfactory	44,964		20,847		7,684		3,582		2,106		331		41,832		121,346
Monitor	18,337		8,019		3,591		1,123		297		416		13,368		45,151
Special Mention	603		525		353		70		102		4		174		1,831
Substandard	1,092		670		266		54		92		—		1,988		4,162
Total	$	79,683	$	36,555	$	13,003	$	6,150	$	2,904	$	2,245	$	81,462	$	222,002

	Real Estate: Construction, 1 to 4 Family Residential
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Good	212		—		—		—		—		—		18,755		18,967
Satisfactory	7,457		94		—		—		—		—		42,988		50,539
Monitor	1,307		—		—		—		—		—		9,187		10,494
Special Mention	—		—		—		—		—		—		374		374
Substandard	111		—		—		—		—		—		1		112
Total	$	9,087	$	94	$	—	$	—	$	—	$	—	$	71,305	$	80,486

	Real Estate: Construction, Land Development and Commercial
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	5,079	$	—	$	—	$	—	$	143	$	4	$	—	$	5,226
Good	3,294		1,200		—		—		153		242		12,678		17,567
Satisfactory	22,907		4,354		2,356		263		1,081		21		40,048		71,030
Monitor	5,694		547		7		38		74		—		18,832		25,192
Special Mention	—		—		—		—		—		—		—		—
Substandard	7,515		298		193		—		—		—		—		8,006
Total	$	44,489	$	6,399	$	2,556	$	301	$	1,451	$	267	$	71,558	$	127,021

	Real Estate: Mortgage, Farmland
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	3,568	$	124	$	60	$	80	$	41	$	134	$	4,007
Good	17,827		14,308		2,144		2,460		5,932		3,929		3,844		50,444
Satisfactory	51,639		35,616		4,689		8,358		6,745		8,339		8,242		123,628
Monitor	8,532		16,925		5,518		3,901		2,154		4,866		5,695		47,591
Special Mention	4,031		288		—		—		298		190		—		4,807
Substandard	1,283		447		291		47		—		199		—		2,267
Total	$	83,312	$	71,152	$	12,766	$	14,826	$	15,209	$	17,564	$	17,915	$	232,744

	Real Estate: Mortgage, 1 to 4 Family First Liens
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	462	$	914	$	427	$	19	$	149	$	404	$	1	$	2,376
Good	9,598		12,300		3,124		3,443		3,091		10,943		2,496		44,995
Satisfactory	233,412		189,247		69,037		65,201		60,906		118,608		8,443		744,854
Monitor	24,908		33,863		5,038		6,527		7,273		12,203		4,066		93,878
Special Mention	1,682		3,422		887		962		1,051		3,168		—		11,172
Substandard	1,571		1,261		1,129		1,609		576		6,142		1		12,289
Total	$	271,633	$	241,007	$	79,642	$	77,761	$	73,046	$	151,468	$	15,007	$	909,564

	Real Estate: Mortgage, 1 to 4 Family Junior Liens
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	13	$	—	$	—	$	—	$	—	$	6	$	19
Good	193		611		96		—		108		482		1,374		2,864
Satisfactory	13,684		10,116		5,854		7,309		5,230		6,053		55,496		103,742
Monitor	326		1,233		70		365		140		281		2,801		5,216
Special Mention	103		489		35		56		42		110		142		977
Substandard	77		209		79		441		74		99		545		1,524
Total	$	14,383	$	12,671	$	6,134	$	8,171	$	5,594	$	7,025	$	60,364	$	114,342

	Real Estate: Mortgage, Multi-Family
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	2,539	$	4,513	$	—	$	—	$	—	$	701	$	—	$	7,753
Good	16,931		35,396		1,555		—		—		9,289		—		63,171
Satisfactory	107,192		69,287		13,635		2,030		1,561		14,660		14,764		223,129
Monitor	26,088		35,886		176		—		131		1,584		5,669		69,534
Special Mention	640		—		820		—		—		—		—		1,460
Substandard	12,186		—		—		—		—		5,559		—		17,745
Total	$	165,576	$	145,082	$	16,186	$	2,030	$	1,692	$	31,793	$	20,433	$	382,792

	Real Estate: Mortgage, Commercial
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	597	$	16,781	$	—	$	—	$	3,313	$	350	$	1	$	21,042
Good	20,143		36,773		2,619		1,356		3,811		7,085		9,812		81,599
Satisfactory	75,040		52,653		14,727		12,091		9,707		17,398		16,333		197,949
Monitor	18,664		49,774		3,923		2,202		3,037		8,461		3,387		89,448
Special Mention	5,791		795		303		—		554		337		—		7,780
Substandard	1,528		1,721		—		208		—		102		—		3,559
Total	$	121,763	$	158,497	$	21,572	$	15,857	$	20,422	$	33,733	$	29,533	$	401,377

	Loans to Individuals
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Good	—		—		67		21		5		—		1		94
Satisfactory	12,162		5,606		2,212		967		141		10,867		57		32,012
Monitor	200		160		15		46		3		—		1		425
Special Mention	37		32		29		4		—		—		1		103
Substandard	12		24		12		—		1		3		1		53
Total	$	12,411	$	5,822	$	2,335	$	1,038	$	150	$	10,870	$	61	$	32,687

	Obligations of State and Political Subdivisions
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	6,076	$	—	$	6,076
Good	—		1,984		—		—		—		9,051		—		11,035
Satisfactory	1,009		2,034		1,551		706		11,557		3,634		9,400		29,891
Monitor	—		933		203		249		—		1,898		—		3,283
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Total	$	1,009	$	4,951	$	1,754	$	955	$	11,557	$	20,659	$	9,400	$	50,285

Past due loans as of June 30, 2022 and December 31, 2021 were as follows:

	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Accruing Loans Past Due 90 Days or More
	(Amounts In Thousands)
June 30, 2022
Agricultural	$	213	$	80	$	—	$	293	$	96,624	$	96,917	$	—
Commercial and financial	948		59		200		1,207		227,468		228,675		200
Real estate:
Construction, 1 to 4 family residential	623		104		—		727		85,552		86,279		—
Construction, land development and commercial	495		191		96		782		149,056		149,838		—
Mortgage, farmland	223		—		60		283		240,528		240,811		—
Mortgage, 1 to 4 family first liens	930		2,492		2,036		5,458		991,477		996,935		285
Mortgage, 1 to 4 family junior liens	101		198		120		419		115,312		115,731		—
Mortgage, multi-family	—		—		—		—		399,360		399,360		—
Mortgage, commercial	296		—		1,339		1,635		405,708		407,343		187
Loans to individuals	162		39		—		201		33,800		34,001		—
Obligations of state and political subdivisions	—		—		—		—		50,173		50,173		—
	$	3,991	$	3,163	$	3,851	$	11,005	$	2,795,058	$	2,806,063	$	672
December 31, 2021
Agricultural	$	41	$	—	$	219	$	260	$	106,673	$	106,933	$	6
Commercial and financial	300		537		468		1,305		220,697		222,002		91
Real estate:
Construction, 1 to 4 family residential	276		—		—		276		80,210		80,486		—
Construction, land development and commercial	194		66		96		356		126,665		127,021		—
Mortgage, farmland	503		362		—		865		231,879		232,744		—
Mortgage, 1 to 4 family first liens	5,085		864		2,481		8,430		901,134		909,564		104
Mortgage, 1 to 4 family junior liens	246		41		124		411		113,931		114,342		—
Mortgage, multi-family	640		—		—		640		382,152		382,792		—
Mortgage, commercial	466		—		829		1,295		400,082		401,377		—
Loans to individuals	177		26		5		208		32,479		32,687		—
Obligations of state and political subdivisions	394		—		—		394		49,891		50,285		—
	$	8,322	$	1,896	$	4,222	$	14,440	$	2,645,793	$	2,660,233	$	201

The Company does not have a material amount of loans that are past due less than 90 days where there are serious doubts as to the ability of the borrowers to comply with the loan repayment terms.

Certain nonaccrual and TDR loan information by loan type at June 30, 2022 and December 31, 2021, was as follows:

	June 30, 2022						December 31, 2021
	Non-accrual loans (1)		Accruing loans past due 90 days or more		TDR loans		Non- accrual loans (1)		Accruing loans past due 90 days or more		TDR loans
	(Amounts In Thousands)						(Amounts In Thousands)
Agricultural	$	—	$	—	$	27	$	221	$	6	$	374
Commercial and financial	715		200		721		707		91		1,085
Real estate:
Construction, 1 to 4 family residential	105		—		—		111		—		—
Construction, land development and commercial	287		—		—		290		—		202
Mortgage, farmland	104		—		1,642		251		—		1,206
Mortgage, 1 to 4 family first liens	3,892		285		1,216		4,685		104		1,364
Mortgage, 1 to 4 family junior liens	120		—		19		200		—		20
Mortgage, multi-family	—		—		628		—		—		1,460
Mortgage, commercial	1,834		187		1,979		2,026		—		2,210
Loans to individuals	—		—		—		—		—		—
Obligations of state and political subdivisions	—		—		—		—		—		—
	$	7,057	$	672	$	6,232	$	8,491	$	201	$	7,921

(1)There were $2.66 million and $2.28 million of TDR loans included within nonaccrual loans as of June 30, 2022 and December 31, 2021, respectively.

Loans 90 days or more past due that are still accruing interest increased $0.47 million from December 31, 2021 to June 30, 2022. As of June 30, 2022, there were five accruing loans past due 90 days or more with an average loan balance of $0.13 million. There were 6 accruing loans past due 90 days or more as of December 31, 2021 with an average loan balance of $0.03 million. The accruing loans past due 90 days or more balances are believed to be adequately collateralized and the Company expects to collect all principal and interest as contractually due under these loans. There was no interest income recognized on nonaccrual loans for the six months ended June 30, 2022 and year ended December 31, 2021.

The Company may modify the terms of a loan to maximize the collection of amounts due.  Such a modification is considered a troubled debt restructuring (“TDR”).  In most cases, the modification is either a reduction in interest rate, conversion to interest only payments or an extension of the maturity date.  The borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term, so a concessionary modification is granted to the borrower that would otherwise not be considered.  TDR loans accrue interest as long as the borrower complies with the revised terms and conditions and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles.

Section 4013 of the CARES Act, “Temporary Relief From Troubled Debt Restructurings,” allows financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time during the COVID-19 pandemic. As of June 30, 2022, the total amount of the eligible loans in deferral (deferral of principal and/or interest) that met the requirements set forth under the CARES Act and therefore were not considered TDRs was 16 loans,

totaling $7.5 million. As of December 31, 2021, there were 16 loans, totaling $9.4 million that met the requirements and were not considered TDRs.

As of June 30, 2022 and December 31, 2021, COVID-19 related payment deferrals were approximately 0.06% and 0.12% of total loans, respectively.

Below is a summary of information for TDR loans as of June 30, 2022 and December 31, 2021:

	June 30, 2022					December 31, 2021
	Number of contracts	Recorded investment		Commitments outstanding		Number of contracts	Recorded investment		Commitments outstanding
		(Amounts In Thousands)					(Amounts In Thousands)
Agricultural	1	$	27	$	115	4	$	586	$	—
Commercial and financial	11	1,385		50		12	1,116		60
Real estate:
Construction, 1 to 4 family residential	1	105		—		—	—		—
Construction, land development and commercial	1	191		—		1	202		—
Mortgage, farmland	4	1,642		—		5	1,409		—
Mortgage, 1 to 4 family first liens	9	1,216		—		14	1,441		—
Mortgage, 1 to 4 family junior liens	1	19		—		1	20		—
Mortgage, multi-family	1	628		—		2	1,460		—
Mortgage, commercial	11	3,684		—		11	3,963		—
Loans to individuals	—	—		—		—	—		—
Obligations of state and political subdivisions	—	—		—		—	—		—
	40	$	8,897	$	165	50	$	10,197	$	60

The following is a summary of TDR loans that were modified during the three and six months ended June 30, 2022:

	Three Months Ended June 30, 2022					Six Months Ended June 30, 2022
	Number of contracts	Pre-modification recorded investment		Post-modification recorded investment		Number of contracts	Pre-modification recorded investment		Post-modification recorded investment
		(Amounts In Thousands)					(Amounts In Thousands)
Agricultural	—	$	—	$	—	—	$	—	$	—
Commercial and financial	—	—		—		1	371		371
Real estate:
Construction, 1 to 4 family residential	—	—		—		1	105		105
Construction, land development and commercial	—	—		—		1	191		191
Mortgage, farmland	2	1,021		1,021		2	1,021		1,021
Mortgage, 1 to 4 family first lien	—	—		—		—	—		—
Mortgage, 1 to 4 family junior liens	—	—		—		—	—		—
Mortgage, multi-family	—	—		—		—	—		—
Mortgage, commercial	—	—		—		1	274		274
Loans to individuals	—	—		—		—	—		—
Obligations of state and political subdivisions	—	—		—		—	—		—
	2	$	1,021	$	1,021	6	$	1,962	$	1,962

The Company has allocated $0.39 million of allowance for TDR loans and the Company had commitments to lend $0.17 million in additional borrowings to restructured loan customers as of June 30, 2022.  The Company had commitments to lend $0.06 million in additional borrowings to restructured loan customers as of December 31, 2021.  These commitments were in the normal course of business.  The additional borrowings were not used to facilitate payments on these loans. The modifications of the terms of loans performed during the six months ended June 30, 2022 included extensions of the maturity date.

There were no TDR loans that were in payment default (defined as past due 90 days or more) during the period ended June 30, 2022 and the year ended December 31, 2021.

The following table presents the amortized cost basis of collateral dependent loans, by the primary collateral type, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans:

	Primary Type of Collateral
	Real Estate		Accounts Receivable		Equipment		Other		Total		ACL Allocation
	(Amounts In Thousands)
June 30, 2022
Agricultural	$	207	$	—	$	—	$	—	$	207	$	—
Commercial and financial	1,544		—		93		—		1,637		5
Real estate:
Construction, 1 to 4 family residential	105		—		—		—		105		55
Construction, land development and commercial	287		—		—		—		287		—
Mortgage, farmland	1,560		—		187		—		1,747		—
Mortgage, 1 to 4 family first liens	5,212		—		—		—		5,212		9
Mortgage, 1 to 4 family junior liens	139		—		—		—		139		6
Mortgage, multi-family	628		—		—		—		628		—
Mortgage, commercial	4,000		—		—		—		4,000		314
Loans to individuals	—		—		—		—		—		—
Obligations of state and political subdivisions	—		—		—		—		—		—
	$	13,682	$	—	$	280	$	—	$	13,962	$	389

	Primary Type of Collateral
	Real Estate		Accounts Receivable		Equipment		Other		Total		ACL Allocation
	(Amounts In Thousands)
December 31, 2021
Agricultural	$	734	$	—	$	54	$	—	$	788	$	1
Commercial and financial	1,951		—		111		—		2,062		189
Real estate:
Construction, 1 to 4 family residential	111		—		—		—		111		111
Construction, land development and commercial	492		—		—		—		492		13
Mortgage, farmland	1,277		—		—		—		1,277		—
Mortgage, 1 to 4 family first liens	5,967		—		—		—		5,967		31
Mortgage, 1 to 4 family junior liens	220		—		—		—		220		18
Mortgage, multi-family	1,460		—		—		—		1,460		—
Mortgage, commercial	4,236		—		—		—		4,236		1
Loans to individuals	20		—		—		—		20		20
Obligations of state and political subdivisions	—		—		—		—		—		—
	$	16,468	$	—	$	165	$	—	$	16,633	$	384

The changes in the ACL in 2022 compared to December 31, 2021 is the result of the following factors: improvements in the economic factors, primarily Iowa unemployment in the first quarter, used in the ACL calculation which resulted in a decrease of $0.54 million; increase in loan volume which resulted in an increase of $1.57 million; changes in prepayment and curtailment rates resulting in an increase of $0.58 million; increases in historical loss rates resulting in an increase of $0.84 million; increase in the individually analyzed loans reserve of $0.02 million; and increases in qualitative factors determined necessary by management which resulted in an increase of $0.32 million. The increase in the allowance for credit losses on off-balance sheet credit exposures is primarily a result of the increased outstanding unfunded commitments as of June 30, 2022.

The extent to which collateral secures collateral-dependent loans is provided in the previous individually analyzed loans table and changes in the extent to which collateral secures its collateral-dependent loans are described below. Collateral-dependent loans decreased $2.67 million from December 31, 2021 to June 30, 2022.  Collateral-dependent loans include any loan that has been placed on nonaccrual status, accruing loans past due 90 days or more and TDR loans. Collateral-dependent loans also include loans that, based on management’s evaluation of current information and events, the Company expects to be unable to collect in full according to the contractual terms of the original loan agreement.  Collateral-dependent loans were 0.50% of loans held for investment as of June 30, 2022 and 0.63% as of December 31, 2021.  The decrease in collateral-dependent loans is due to a decrease in nonaccrual loans of $1.43 million, an increase in 90 days or more accruing loans of $0.47 million and a decrease in TDR loans of $1.69 million from December 31, 2021 to June 30, 2022. There were no significant changes noted in the extent to which collateral secures collateral-dependent loans.

The Company regularly reviews a substantial portion of the loans in the portfolio and assesses whether the loans share common risk characteristics for which expected credit loss is measured on a pool basis or if the loans do not share common risk characteristics and therefore expected credit loss is measured on an individual loan basis.  If the loans are assessed for credit losses on an individual basis, the Company determines if a specific allowance is appropriate.  In addition, the Company's management also reviews and, where determined necessary, provides allowances for particular loans based upon (1) reviews of specific borrowers and (2) management’s assessment of areas that management considers are of higher credit risk, including loans that have been restructured or where a TDR is reasonably possible.  Loans that are determined not to be collateral-dependent and for which there are no specific allowances are classified into one or more risk categories and expected credit loss is measured on a pool basis. See Note 1 Adoption of Financial Accounting Standard for further discussion of the allowance for credit losses for loans held for investment.

Specific allowances for credit losses on loans assessed individually are established if the loan balances exceed the net present value of the relevant future cash flows or the fair value of the relevant collateral based on updated appraisals and/or updated collateral analysis for the properties if the loan is collateral dependent.  The Company may recognize a charge off or record a specific allowance related to an individually analyzed loan if there is a collateral shortfall or it is unlikely the borrower can make all principal and interest payments as contractually due.

For loans that are collateral-dependent, losses are evaluated based on the portion of a loan that exceeds the fair market value of the collateral.  In general, this is the amount that the carrying value of the loan exceeds the related appraised value less estimated costs to sell the collateral.  Generally, it is the Company’s policy not to rely on appraisals that are older than one year prior to the date the credit loss is being measured.  The most recent appraisal values may be adjusted if, in the Company’s judgment, experience and other market data indicate that the property’s value, use, condition, exit market or other variables affecting its value may have changed since the appraisal was performed. The charge off or loss adjustment supported by an appraisal is considered the minimum charge off.  Any adjustments made to the appraised value are to provide an additional charge off or specific reserve based on the applicable facts and circumstances.  In instances where there is an estimated decline in value, a specific reserve may be provided or a charge off taken pending confirmation of the amount of the loss from an updated appraisal.  Upon receipt of the new appraisals, an additional specific reserve may be provided or charge off taken based on the appraised value of the collateral.  On average, appraisals are obtained within one month of order.

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Leases

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Leases

LeasesThe Bank leases branch offices, parking facilities and certain equipment under operating leases. The leases have remaining lease terms of 1 year to 15 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year. As the options are reasonably certain to be exercised, they are recognized as part of the right-of-use assets and lease liabilities.

For the six months ended June 30, 2022 and 2021, total operating lease expense was $0.30 million and $0.29 million respectively, and is included in occupancy expenses in the consolidated statements of income. Included in this for the six months ended June 30, 2022 and 2021 were $0.26 million and $0.25 million, respectively, of operating lease costs, $0.02 million and $0.02 million, respectively, of short term lease costs, and $0.02 million and $0.02 million, respectively, of variable lease costs.

For the six months ended June 30, 2022 and 2021, cash paid for amounts included in the measurement of operating lease liabilities was $0.26 million and $0.25 million, respectively.

As of June 30, 2022 and December 31, 2021, operating lease right-of-use assets included in other assets was $2.31 million and $2.47 million respectively. Operating lease liabilities included in other liabilities were $2.39 million and $2.53 million as of June 30, 2022 and December 31, 2021. As of June 30, 2022 and December 31, 2021, the weighted average remaining lease term for operating leases was 9.75 years and 9.94 years, respectively, and the weighted average discount rate for operating leases was 3.50% and 3.49%, respectively. Discount rates used were determined from FHLB borrowing rates for comparable terms.

As of June 30, 2022, maturities of lease liabilities were as follows:

Year ending December 31:	(Amounts In Thousands)
2022 (excluding the six months ended June 30, 2022)	$	235
2023	327
2024	260
2025	263
2026	266
Thereafter	1,503
Total lease payments	2,854
Less imputed interest	(466)
Total operating lease liabilities	$	2,388

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Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The carrying value and estimated fair values of the Company's financial instruments as of June 30, 2022 are as follows:

	June 30, 2022
	Carrying Amount		Estimated Fair Value		Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)
	(Amounts In Thousands)
Financial instrument assets:
Cash and cash equivalents	$	307,493	$	307,493	$	307,493	$	—	$	—
Investment securities	772,283		772,283		462,110		310,173		—
Loans held for sale	1,600		1,600		—		1,600		—
Loans
Agricultural	94,652		93,966		—		—		93,966
Commercial and financial	223,481		221,571		—		—		221,571
Real estate:
Construction, 1 to 4 family residential	85,432		85,158		—		—		85,158
Construction, land development and commercial	147,913		145,508		—		—		145,508
Mortgage, farmland	237,481		231,825		—		—		231,825
Mortgage, 1 to 4 family first liens	988,184		971,999		—		—		971,999
Mortgage, 1 to 4 family junior liens	112,485		110,958		—		—		110,958
Mortgage, multi-family	395,336		387,871		—		—		387,871
Mortgage, commercial	400,134		392,252		—		—		392,252
Loans to individuals	33,213		32,092		—		—		32,092
Obligations of state and political subdivisions	49,728		49,270		—		—		49,270
Accrued interest receivable	12,739		12,739		—		12,739		—
Total financial instrument assets	$	3,862,154	$	3,816,585	$	769,603	$	324,512	$	2,722,470
Financial instrument liabilities
Deposits
Noninterest-bearing deposits	$	645,934	$	645,934	$	—	$	645,934	$	—
Interest-bearing deposits	2,799,897		2,802,676		—		2,802,676		—
Accrued interest payable	1,037		1,037		—		1,037		—
Total financial instrument liabilities	$	3,446,868	$	3,449,647	$	—	$	3,449,647	$	—
	Face Amount
Financial instrument with off-balance sheet risk:
Loan commitments	$	725,164	$	—	$	—	$	—	$	—
Letters of credit	6,923		—		—		—		—
Total financial instrument liabilities with off-balance-sheet risk	$	732,087	$	—	$	—	$	—	$	—

(1)Considered Level 1 under Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”).

(2)Considered Level 2 under ASC 820.

(3)Considered Level 3 under ASC 820 and are based on valuation models that use significant assumptions that are not observable in an active market.

The carrying value and estimated fair values of the Company's financial instruments as of December 31, 2021 are as follows:

	December 31, 2021
	Carrying Amount		Estimated Fair Value		Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)
	(Amounts In Thousands)
Financial instrument assets:
Cash and cash equivalents	$	781,918	$	781,918	$	781,918	$	—	$	—
Investment securities	555,900		555,900		243,925		311,975		—
Loans held for sale	5,716		5,716		—		5,716		—
Loans
Agricultural	104,672		103,745		—		—		103,745
Commercial and financial	217,733		216,466		—		—		216,466
Real estate:
Construction, 1 to 4 family residential	79,668		79,311		—		—		79,311
Construction, land development and commercial	125,539		124,466		—		—		124,466
Mortgage, farmland	229,311		228,365		—		—		228,365
Mortgage, 1 to 4 family first liens	901,523		897,255		—		—		897,255
Mortgage, 1 to 4 family junior liens	111,184		110,903		—		—		110,903
Mortgage, multi-family	379,077		378,193		—		—		378,193
Mortgage, commercial	394,594		391,950		—		—		391,950
Loans to individuals	31,916		31,871		—		—		31,871
Obligations of state and political subdivisions	49,845		50,155		—		—		50,155
Accrued interest receivable	11,437		11,437		—		11,437		—
Total financial instrument assets	$	3,980,033	$	3,967,651	$	1,025,843	$	329,128	$	2,612,680
Financial instrument liabilities:
Deposits
Noninterest-bearing deposits	$	633,101	$	633,101	$	—	$	633,101	$	—
Interest-bearing deposits	2,900,893		2,909,243		—		2,909,243		—
Other borrowings	249		249		—		249		—
Federal Home Loan Bank borrowings	—		—		—		—		—
Accrued interest payable	1,165		1,165		—		1,165		—
Total financial instrument liabilities	$	3,535,408	$	3,543,758	$	—	$	3,543,758	$	—
	Face Amount
Financial instrument with off-balance sheet risk:
Loan commitments	$	614,324	$	—	$	—	$	—	$	—
Letters of credit	7,179		—		—		—		—
Total financial instrument liabilities with off-balance-sheet risk	$	621,503	$	—	$	—	$	—	$	—

 Considered Level 1 under ASC 820.

(1)Considered Level 2 under ASC 820.

(2)Considered Level 3 under ASC 820 and are based on valuation models that use significant assumptions that are not observable in an active market.

Fair value of financial instruments:  FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) provides a single definition for fair value, a framework for measuring fair value and expanded disclosures concerning fair value.  Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company determines the fair market value of its financial instruments based on the fair value hierarchy established in ASC 820.  There are three levels of inputs that may be used to measure fair value as follows:

Level 1 Quoted prices in active markets for identical assets or liabilities.

Level 2 Observable inputs other than quoted prices included within Level 1.  Observable inputs include the quoted prices for similar assets or liabilities in markets that are not active and inputs other than quoted prices that are observable for the asset or liability.

Level 3 Unobservable inputs supported by little or no market activity for financial instruments.  Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

It is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements.  The Company is required to use observable inputs, to the extent available, in the fair value estimation process unless that data results from forced liquidations or distressed sales. 

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

ASSETS

Investment securities available for sale:  Investment securities available for sale are recorded at fair value on a recurring basis.  Fair value measurement is based upon quoted prices, if available.  If a quoted price is not available, the fair value is obtained from benchmarking the security against similar securities. U.S. Treasury securities are considered Level 1 with the remaining securities considered Level 2.

The pricing for investment securities is obtained from an independent source.  There are no Level 3 investment securities owned by the Company.  The Company obtains an understanding of the independent source’s valuation methodologies used to determine fair value by level of security. The Company validates assigned fair values on a sample basis using an additional third-party provider pricing service to determine if the fair value measurement is reasonable. Due to the nature of our investment portfolio, we do not expect significant and unusual fluctuations as fair value changes primarily relate to interest rate changes.   No unusual fluctuations were identified during the six months ended June 30, 2022. If a fluctuation requiring investigation was identified, the Company would research the change with the independent source or other available information.

Individually analyzed loans under ASC 326 CECL: See Note 1 for further discussion of individually analyzed loans under CECL.

A loan is considered to be non-performing when it is probable that all of the principal and interest due may not be collected according to its contractual terms. Generally, when a loan is considered non-performing, the amount of reserve is measured based on the fair value of the underlying collateral. The Company makes such measurements on all material loans deemed non-performing using the fair value of the collateral for collateral dependent loans or based on the present value of the estimated future cash flows of interest and principal discounted at the loans effective interest rate or the fair value of the loan if determinable. The fair value of collateral used by the Company is determined by obtaining an observable market price or by obtaining an appraised value from an independent, licensed or certified appraiser, using observable market data. This data includes information such as selling price of similar properties and capitalization rates of similar properties sold within the market, expected future cash flows or earnings of the subject property based on current market expectations, and other relevant factors. All appraised values are adjusted for market-related trends based on the Company's experience in sales and other appraisals of similar property types as well as estimated selling costs. These loans are considered Level 3 as the instruments used to determine fair market value require significant management judgment and estimation.

Foreclosed assets:  The Company does not record foreclosed assets at fair value on a recurring basis.  Foreclosed assets consist mainly of other real estate owned but may include other types of assets repossessed by the Company.  Foreclosed assets are adjusted to the lower of carrying value or fair value less the cost of disposal.   Fair value is generally based upon independent market prices or appraised values of the collateral, and may include a marketability discount as deemed necessary by management based on its experience with similar types of real estate.  The value of foreclosed assets is evaluated periodically as a nonrecurring fair value adjustment.  Foreclosed assets are classified as Level 3.

Off-balance sheet instruments:  Fair values for outstanding letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing.  The fair value of the outstanding letters of credit is not significant. Unfunded loan commitments are not valued since the loans are generally priced at market at the time of funding (Level 2).

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below represents the balances of assets and liabilities measured at fair value on a recurring basis:

	June 30, 2022
	Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)		Total at Fair Value
Securities available for sale	(Amounts In Thousands)
U.S. Treasury	$	462,110	$	—	$	—	$	462,110
State and political subdivisions	—		217,714		—		217,714
Mortgage-backed securities and collateralized mortgage obligations	—		54,973		—		54,973
Other securities (FHLB, FHLMC and FNMA)	—		32,624		—		32,624
Total	$	462,110	$	305,311	$	—	$	767,421

	December 31, 2021
	Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)		Total at Fair Value
Securities available for sale	(Amounts In Thousands)
U.S. Treasury	$	243,925	$	—	$	—	$	243,925
State and political subdivisions	—		263,516		—		263,516
Mortgage-backed securities and collateralized mortgage obligations	—		9,446		—		9,446
Other securities (FHLB, FHLMC and FNMA)	—		34,467		—		34,467
Total	$	243,925	$	307,429	$	—	$	551,354

(1)Considered Level 1 under ASC 820.

(2)Considered Level 2 under ASC 820.

(3)Considered Level 3 under ASC 820 and are based on valuation models that use significant assumptions that are not observable in an active market.

There were no transfers between Levels 1, 2 or 3 during the six months ended June 30, 2022 and the year ended December 31, 2021.

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The Company is required to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP.  These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets.  The valuation methodologies used to measure these fair value adjustments are described above.    The following tables present the Company’s assets that are measured at fair value on a nonrecurring basis.

	June 30, 2022								Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
	Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)		Total at Fair Value		Total Losses		Total Losses
	(Amounts in Thousands)
Loans (4)
Agricultural	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and financial	—		—		1,363		1,363		225		225
Real Estate:											—
Construction, 1 to 4 family residential	—		—		50		50		—		—
Construction, land development and commercial	—		—		287		287		—		—
Mortgage, farmland	—		—		1,747		1,747		104		104
Mortgage, 1 to 4 family first liens	—		—		5,067		5,067		25		90
Mortgage, 1 to 4 family junior liens	—		—		133		133		—		5
Mortgage, multi-family	—		—		628		628		—		—
Mortgage, commercial	—		—		3,446		3,446		—		—
Loans to individuals	—		—		—		—		—		—
Foreclosed assets (5)	—		—		—		—		—		—
Total	$	—	$	—	$	12,721	$	12,721	$	354	$	424

(1)Considered Level 1 under ASC 820.

(2)Considered Level 2 under ASC 820.

(3)Considered Level 3 under ASC 820 and are based on valuation models that use significant assumptions that are not observable in an active market.

(4)Represents carrying value and related write-downs of loans for which adjustments are based on the value of the collateral. The carrying value of loans fully-charged off is zero.

(5)Represents the fair value and related losses of foreclosed real estate and other collateral owned that were measured at fair value subsequent to their initial classification as foreclosed assets.

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis (continued)

	December 31, 2021								Year Ended December 31, 2021
	Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)		Total at Fair Value		Total Losses
	(Amounts in Thousands)
Loans (4)
Agricultural	$	—	$	—	$	399	$	399	$	—
Commercial and financial	—		—		1,527		1,527		—
Real Estate:
Construction, 1 to 4 family residential	—		—		383		383		—
Construction, land development and commercial	—		—		96		96		—
Mortgage, farmland	—		—		1,114		1,114		—
Mortgage, 1 to 4 family first liens	—		—		5,902		5,902		212
Mortgage, 1 to 4 family junior liens	—		—		202		202		9
Mortgage, multi-family	—		—		1,460		1,460		—
Mortgage, commercial	—		—		4,176		4,176		255
Loans to individuals	—		—		—		—		—
Foreclosed assets (5)	—		—		—		—		—
Total	$	—	$	—	$	15,259	$	15,259	$	476

(1)Considered Level 1 under ASC 820.

(2)Considered Level 2 under ASC 820.

(3)Considered Level 3 under ASC 820 and are based on valuation models that use significant assumptions that are not observable in an active market.

(4)Represents carrying value and related write-downs of loans for which adjustments are based on the value of the collateral. The carrying value of loans fully-charged off is zero.

(5)Represents the fair value and related losses of foreclosed real estate and other collateral owned that were measured at fair value subsequent to their initial classification as foreclosed assets.

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Stock Repurchase Program	6 Months Ended
	Jun. 30, 2022
Equity [Abstract]
Stock Repurchase Program	Stock Repurchase ProgramOn July 26, 2005, the Company’s Board of Directors authorized a program to repurchase up to a total of 1,500,000 shares of the Company’s common stock (the “2005 Stock Repurchase Program”).  The Company’s Board of Directors has authorized the 2005 Stock Repurchase Program through December 31, 2023.  The Company expects the purchases pursuant to the 2005 Stock Repurchase Program to be made from time to time in private transactions at a price equal to the most recent quarterly independent appraisal of the shares of the Company’s common stock and with the Board reviewing the overall results of the 2005 Stock Repurchase Program on a quarterly basis.  All purchases made pursuant to the 2005 Stock Repurchase Program since its inception have been made on that basis.  The amount and timing of stock repurchases will be based on various factors, such as the Board’s assessment of the Company’s capital structure and liquidity, the amount of interest shown by shareholders in selling shares of stock to the Company at their appraised value, and applicable regulatory, legal and accounting factors.  The Company has purchased 1,465,930 shares of its common stock in privately negotiated transactions from August 1, 2005 through June 30, 2022.  Of these 1,465,930 shares, 34,774 shares were purchased during the quarter ended June 30, 2022, at an average price per share of $70.64.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Concentrations of credit risk:  The Bank’s loans, commitments to extend credit, unused lines of credit and outstanding letters of credit have been granted to customers within the Bank's market area.  Investments in securities issued by state and political subdivisions within the state of Iowa totaled approximately $76.37 million.  The concentrations of credit by type of loan are set forth in Note 5 to the Consolidated Financial Statements.  Outstanding letters of credit were granted primarily to commercial borrowers.  Although the Bank has a diversified loan portfolio, a substantial portion of its debtors' ability to honor their contracts is dependent upon the economic conditions in Johnson, Linn and Washington Counties, Iowa.

Contingencies:  In the normal course of business, the Company and its subsidiaries are subject to pending and threatened legal actions, some of which seek substantial relief or damages.  While the ultimate outcome of such legal proceedings cannot be predicted with certainty, after reviewing pending and threatened litigation with counsel, management believes at this time that the outcome of such litigation will not have a material adverse effect on the Company’s business, financial conditions, or results of operations.

Financial instruments with off-balance sheet risk:  The Bank is a 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, credit card participations and standby letters of credit.  These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, credit card participations and standby letters of credit is represented by the contractual amount of those instruments.  The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.  A summary of the Bank’s commitments at June 30, 2022 and December 31, 2021 is as follows:

	June 30, 2022		December 31, 2021
	(Amounts In Thousands)
Firm loan commitments and unused portion of lines of credit:
Home equity loans	$	84,584	$	78,961
Credit cards	63,933		65,913
Commercial, real estate and home construction	200,472		170,539
Commercial lines and real estate purchase loans	376,175		298,911
Outstanding letters of credit	6,923		7,179

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Income Taxes	6 Months Ended
	Jun. 30, 2022
Income Tax Disclosure [Abstract]
Income Taxes	Income TaxesFederal income tax expense for the six months ended June 30, 2022 and 2021 was computed using the consolidated effective federal tax rate.  The Company also recognized income tax expense pertaining to state franchise taxes payable individually by the subsidiary bank.  The Company files a consolidated tax return for federal purposes and separate tax returns for State of Iowa purposes.  The tax years ended December 31, 2021, 2020, and 2019 remain subject to examination by the Internal Revenue Service.  For state tax purposes, the tax years ended December 31, 2021, 2020, and 2019 remain open for examination.  There were no material unrecognized tax benefits at June 30, 2022  and December 31, 2021 and therefore no interest or penalties on unrecognized tax benefits has been recorded.  As of June 30, 2022, the Company does not anticipate any significant increase in unrecognized tax benefits during the twelve-month period ending June 30, 2023. Income taxes as a percentage of income before taxes were 21.63% for the six months ended June 30, 2022 and 22.51% for the same period in 2021.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation:

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and with instructions for Form 10-Q and Regulation S-X.  These financial statements include all adjustments (consisting of normal recurring accruals) which in the opinion of management are considered necessary for the fair presentation of the financial position and results of operations for the periods shown.  Certain prior year amounts have been reclassified to conform to the current year presentation.  The Company considers that it operates as one business segment, a commercial bank.

Revenue Recognition

Revenue Recognition:

Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the Company’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as loans, letters of credit and investment securities. Interest income on loans and investment securities is recognized on the accrual method in accordance with written contracts.

Descriptions of the Company’s revenue-generating activities that are within the scope of ASC 606 are the following: Service charges and fees on deposit accounts represent general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue which includes interchange income, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when the Company’s performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations are generally received at

the time the performance obligations are satisfied. Trust income represents monthly fees due from wealth management customers as consideration for managing the customers' assets. Wealth management and trust services include custody of assets, investment management, fees for trust services and similar fiduciary activities. Revenue is recognized when our performance obligation is completed each month, which is generally the time that payment is received.

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity's obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. As of June 30, 2022, the Company did not have any significant contract balances.

An entity is required to capitalize, and subsequently amortize into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, sales commission). The Company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less.

Effect of New Financial Accounting Standards

Effect of New Financial Accounting Standards:

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40), Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The amendments in this ASU affect entities that issue freestanding written call options that are classified in equity. Specifically, the amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. An entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option to compensate for goods or services in accordance with the guidance in Topic 718, Compensation-Stock Compensation. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The adoption of the ASU by the Company on January 1, 2022 did not have a material impact on the financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 815) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this Update require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. An entity should apply the amendments prospectively to business combinations occurring on or after the effective date of the amendments. The Company is in the process of evaluating the impact of this ASU on the financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures. The FASB issued these amendments to eliminate accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty, and to require that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost. The amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within

those fiscal years, and should be applied prospectively, except as provided in the next sentence. For the transition method related to the recognition and measurement of TDRs, an entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. Early adoption is permitted if an entity has adopted the amendments in Update 2016-03, including adoption in an interim period. The Company is in the process of evaluating the impact of this ASU on the financial statements.

Earnings Per Share

Earnings Per ShareBasic earnings per share is computed using the weighted average number of actual common shares outstanding during the period.  Diluted earnings per share reflects the potential dilution that would occur from the exercise of common stock options outstanding.  ESOP shares are considered outstanding for this calculation unless unearned.

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Summary of Significant Accounting Policies Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Schedule of Impact of ASC 326

The following table illustrates the impact of ASC 326 (amounts in thousands).

	January 1, 2021
	As Reported Under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption
Assets:
Loans
Allowance for credit losses on loans	$	39,816	$	37,070	$	2,746
Liabilities:
Allowance for credit losses on off-balance sheet credit exposures	$	3,584	$	—	$	3,584

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Schedule of computation of basic and diluted earnings per share

The computation of basic and diluted earnings per share for the periods presented is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Common shares outstanding at the beginning of the period	9,277,145		9,312,518		9,299,640		9,330,995
Weighted average number of net shares redeemed	(5,420)		(3,315)		(18,484)		(15,711)
Weighted average shares outstanding (basic)	9,271,725		9,309,203		9,281,156		9,315,284
Weighted average of potential dilutive shares attributable to stock options granted, computed under the treasury stock method	1,581		3,567		2,348		3,546
Weighted average number of shares (diluted)	9,273,306		9,312,770		9,283,504		9,318,830
Net income (In thousands)	$	11,326	$	13,610	$	21,978	$	28,807
Earnings per share:
Basic	$	1.22	$	1.46	$	2.37	$	3.09
Diluted	$	1.22	$	1.46	$	2.37	$	3.09

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Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Components of accumulated other comprehensive (loss) income (AOCI)

The following table summarizes the balances of each component of accumulated other comprehensive (loss) income (AOCI), included in stockholders’ equity, at June 30, 2022 and December 31, 2021:

	June 30, 2022		December 31, 2021
	(amounts in thousands)
Net unrealized (loss) gain on available-for-sale securities	$	(41,281)	$	1,968
Tax effect	10,300		(491)
Net-of-tax amount	$	(30,981)	$	1,477

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Securities (Tables)

6 Months Ended

Jun. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Carrying values of investment securities

The carrying values of investment securities at June 30, 2022 and December 31, 2021 are summarized in the following table (dollars in thousands):

	June 30, 2022				December 31, 2021
	Amount		Percent		Amount		Percent
Securities available for sale
U.S. Treasury	$	462,110	60.22	%	$	243,925	44.24	%
Other securities (FHLB, FHLMC and FNMA)	32,624		4.25		34,467		6.25
State and political subdivisions	217,714		28.37		263,516		47.80
Mortgage-backed securities and collateralized mortgage obligations	54,973		7.16		9,446		1.71
Total securities available for sale	$	767,421	100.00	%	$	551,354	100.00	%

Carrying amount of available-for-sale securities and approximate fair values

The carrying amount of available-for-sale securities, fair values and allowance for credit losses were as follows as of June 30, 2022 and December 31, 2021 (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Allowance for Credit Losses		Estimated Fair Value
June 30, 2022
U.S. Treasury	$	478,089	$	20	$	(15,999)	$	—	$	462,110
Other securities (FHLB, FHLMC and FNMA)	35,304		—		(2,680)		—		32,624
State and political subdivisions	235,895		273		(18,454)		—		217,714
Mortgage-backed securities and collateralized mortgage obligations	59,414		—		(4,441)		—		$	54,973
Total	$	808,702	$	293	$	(41,574)	$	—	$	767,421
December 31, 2021:
U.S. Treasury	$	244,192	$	2,011	$	(2,278)	$	—	$	243,925
Other securities (FHLB, FHLMC and FNMA)	35,353		—		(886)		—		34,467
State and political subdivisions	260,266		4,420		(1,170)		—		263,516
Mortgage-backed securities and collateralized mortgage obligations	9,575		—		(129)		—		9,446
Total	$	549,386	$	6,431	$	(4,463)	$	—	$	551,354

Available-for-sale securities classified as per contractual maturities

The amortized cost and estimated fair value of available-for-sale securities classified according to their contractual maturities at June 30, 2022, were as follows (in thousands) below. Expected maturities of MBS may differ from contractual maturities because the mortgages underlying the securities may be called or prepaid without any penalties. Therefore, these securities are not included in the maturity categories in the following summary.

	Amortized Cost		Fair Value
Due in one year or less	$	60,747	$	60,544
Due after one year through five years	542,184		522,784
Due after five years through ten years	106,135		96,774
Due over ten years	40,222		32,346
	$	749,288	$	712,448
Mortgage-backed securities and collateralized mortgage obligations	59,414		54,973
	$	808,702	$	767,421

Available-for-sale securities, continuous unrealized loss position, fair value

The following table shows the fair value, gross unrealized losses and the percentage of fair value represented by gross unrealized losses of applicable investment securities owned by the Company, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2022 and December 31, 2021 (in thousands):

	Less than 12 months							12 months or more							Total
June 30, 2022 Description of Securities	#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%
U.S. Treasury	132	$	411,292	$	(13,840)	3.37	%	12	$	28,357	$	(2,159)	7.61	%	144	$	439,649	$	(15,999)	3.64	%
Other securities (FHLB, FHLMC and FNMA)	—	—		—		—		14	32,623		(2,680)		8.22		14	32,623		(2,680)		8.22
State and political subdivisions	605	151,886		(14,906)		9.81		71	27,058		(3,548)		13.11		676	178,944		(18,454)		10.31
Mortgage-backed securities and collateralized mortgage obligations	17	52,956		(4,144)		7.83		1	2,017		(297)		14.72		18	54,973		(4,441)		8.08
Total temporarily impaired securities	754	$	616,134	$	(32,890)	5.34	%	98	$	90,055	$	(8,684)	9.64	%	852	$	706,189	$	(41,574)	5.89	%

	Less than 12 months							12 months or more							Total
December 31, 2021 Description of Securities	#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%
U.S. Treasury	55	$	136,867	$	(2,203)	1.61	%	1	$	2,416	$	(75)	3.10	%	56	$	139,283	$	(2,278)	1.64	%
Other securities (FHLB, FHLMC and FNMA)	5	12,484		(303)		2.43		9	21,984		(583)		2.65		14	34,468		(886)		2.57
State and political subdivisions	231	70,542		(1,055)		1.50		14	9,248		(115)		1.24		245	79,790		(1,170)		1.47
Mortgage-backed securities and collateralized mortgage obligations	4	9,446		(129)		1.37		—	—		—		—		4	9,446		(129)		1.37
Total temporarily impaired securities	295	$	229,339	$	(3,690)	1.61	%	24	$	33,648	$	(773)	2.30	%	319	$	262,987	$	(4,463)	1.70	%

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Loans (Tables)

6 Months Ended

Jun. 30, 2022

Receivables [Abstract]

Schedule of classes of loans

Classes of loans are as follows:

	June 30, 2022		December 31, 2021
	(Amounts In Thousands)
Agricultural	$	96,917	$	106,933
Commercial and financial	228,675		222,002
Real estate:
Construction, 1 to 4 family residential	86,279		80,486
Construction, land development and commercial	149,838		127,021
Mortgage, farmland	240,811		232,744
Mortgage, 1 to 4 family first liens	996,935		909,564
Mortgage, 1 to 4 family junior liens	115,731		114,342
Mortgage, multi-family	399,360		382,792
Mortgage, commercial	407,343		401,377
Loans to individuals	34,001		32,687
Obligations of state and political subdivisions	50,173		50,285
	$	2,806,063	$	2,660,233
Net unamortized fees and costs	236		299
	$	2,806,299	$	2,660,532
Less allowance for credit losses	38,260		35,470
	$	2,768,039	$	2,625,062

Schedule of changes in allowance for loan losses

Changes in the allowance for credit losses, the allowance for credit losses applicable to individually evaluated loans and the related loan balance of individually evaluated loans for the three and six months ended June 30, 2022 were as follows:

	Three Months Ended June 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance	$	2,414	$	4,895	$	2,347	$	3,310	$	11,438	$	10,234	$	1,212	$	35,850
Charge-offs	(1)		(243)		—		(20)		(109)		—		(76)		(449)
Recoveries	54		89		2		247		336		28		21		777
Credit loss expense (benefit)	(202)		453		423		(207)		568		971		76		2,082
Ending balance	$	2,265	$	5,194	$	2,772	$	3,330	$	12,233	$	11,233	$	1,233	$	38,260
	Six Months Ended June 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance	$	2,261	$	4,269	$	2,300	$	3,433	$	11,498	$	10,498	$	1,211	$	35,470
Charge-offs	(1)		(291)		—		(20)		(249)		(1)		(226)		(788)
Recoveries	68		212		5		290		543		50		64		1,232
Credit loss expense (benefit)	(63)		1,004		467		(373)		441		686		184		2,346
Ending balance	$	2,265	$	5,194	$	2,772	$	3,330	$	12,233	$	11,233	$	1,233	$	38,260
Ending balance, individually evaluated for credit losses	$	—	$	5	$	55	$	—	$	15	$	314	$	—	$	389
Ending balance, collectively evaluated for credit losses	$	2,265	$	5,189	$	2,717	$	3,330	$	12,218	$	10,919	$	1,233	$	37,871
Loans:
Ending balance	$	96,917	$	228,675	$	236,117	$	240,811	$	1,112,666	$	806,703	$	84,174	$	2,806,063
Ending balance, individually evaluated for credit losses	$	207	$	1,637	$	392	$	1,747	$	5,351	$	4,628	$	—	$	13,962
Ending balance, collectively evaluated for credit losses	$	96,710	$	227,038	$	235,725	$	239,064	$	1,107,315	$	802,075	$	84,174	$	2,792,101

Changes in the allowance for credit losses for the three and six months ended June 30, 2021 were as follows:

	Three Months Ended June 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance	$	2,147	$	5,114	$	2,288	$	4,668	$	11,496	$	9,621	$	1,286	$	36,620
Charge-offs	—		(46)		(3)		(1)		(7)		(10)		(30)		(97)
Recoveries	57		301		57		25		269		77		40		826
Credit loss expense (benefit)	(149)		(567)		141		212		(879)		19		(186)		(1,409)
Ending balance	$	2,055	$	4,802	$	2,483	$	4,904	$	10,879	$	9,707	$	1,110	$	35,940
	Six Months Ended June 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance, prior to adoption of ASC 326	$	2,508	$	4,885	$	2,319	$	4,173	$	12,368	$	9,415	$	1,402	$	37,070
Impact of adopting ASC 326	(328)		298		327		763		522		1,396		(232)		2,746
Charge-offs	—		(76)		(3)		(1)		(82)		(10)		(96)		(268)
Recoveries	89		535		91		25		508		216		77		1,541
Credit loss (benefit)	(214)		(840)		(251)		(56)		(2,437)		(1,310)		(41)		(5,149)
Ending balance	$	2,055	$	4,802	$	2,483	$	4,904	$	10,879	$	9,707	$	1,110	$	35,940
Ending balance, individually evaluated for credit losses	$	—	$	54	$	125	$	—	$	51	$	162	$	6	$	398
Ending balance, collectively evaluated for credit losses	$	2,055	$	4,748	$	2,358	$	4,904	$	10,828	$	9,545	$	1,104	$	35,542
Loans:
Ending balance	$	89,694	$	269,752	$	191,499	$	250,610	$	998,989	$	798,617	$	84,608	$	2,683,769
Ending balance, individually evaluated for credit losses	$	1,094	$	1,601	$	611	$	1,575	$	6,175	$	6,294	$	6	$	17,356
Ending balance, collectively evaluated for credit losses	$	88,600	$	268,151	$	190,888	$	249,035	$	992,814	$	792,323	$	84,602	$	2,666,413

The following table presents the amortized cost basis of collateral dependent loans, by the primary collateral type, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans:

	Primary Type of Collateral
	Real Estate		Accounts Receivable		Equipment		Other		Total		ACL Allocation
	(Amounts In Thousands)
June 30, 2022
Agricultural	$	207	$	—	$	—	$	—	$	207	$	—
Commercial and financial	1,544		—		93		—		1,637		5
Real estate:
Construction, 1 to 4 family residential	105		—		—		—		105		55
Construction, land development and commercial	287		—		—		—		287		—
Mortgage, farmland	1,560		—		187		—		1,747		—
Mortgage, 1 to 4 family first liens	5,212		—		—		—		5,212		9
Mortgage, 1 to 4 family junior liens	139		—		—		—		139		6
Mortgage, multi-family	628		—		—		—		628		—
Mortgage, commercial	4,000		—		—		—		4,000		314
Loans to individuals	—		—		—		—		—		—
Obligations of state and political subdivisions	—		—		—		—		—		—
	$	13,682	$	—	$	280	$	—	$	13,962	$	389

	Primary Type of Collateral
	Real Estate		Accounts Receivable		Equipment		Other		Total		ACL Allocation
	(Amounts In Thousands)
December 31, 2021
Agricultural	$	734	$	—	$	54	$	—	$	788	$	1
Commercial and financial	1,951		—		111		—		2,062		189
Real estate:
Construction, 1 to 4 family residential	111		—		—		—		111		111
Construction, land development and commercial	492		—		—		—		492		13
Mortgage, farmland	1,277		—		—		—		1,277		—
Mortgage, 1 to 4 family first liens	5,967		—		—		—		5,967		31
Mortgage, 1 to 4 family junior liens	220		—		—		—		220		18
Mortgage, multi-family	1,460		—		—		—		1,460		—
Mortgage, commercial	4,236		—		—		—		4,236		1
Loans to individuals	20		—		—		—		20		20
Obligations of state and political subdivisions	—		—		—		—		—		—
	$	16,468	$	—	$	165	$	—	$	16,633	$	384

Schedule of allowance for credit losses for off-balance sheet credit exposure

Changes in the allowance for credit losses for off-balance sheet credit exposures for the three and six months ended June 30, 2022 were as follows:

	Three Months Ended June 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance	$	513	$	1,420	$	1,126	$	100	$	925	$	593	$	13	$	4,690
Credit loss expense (benefit)	146		356		56		15		100		(293)		40		420
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—
Ending balance	$	659	$	1,776	$	1,182	$	115	$	1,025	$	300	$	53	$	5,110
	Three Months Ended June 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance	$	443	$	1,824	$	933	$	202	$	646	$	250	$	42	$	4,340
Credit loss expense (benefit)	51		(295)		(69)		(95)		145		25		(12)		(250)
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—
Ending balance	$	494	$	1,529	$	864	$	107	$	791	$	275	$	30	$	4,090

	Six Months Ended June 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance	$	383	$	1,118	$	849	$	113	$	794	$	559	$	34	$	3,850
Credit loss expense (benefit)	276		658		333		2		231		(259)		19		1,260
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—
Ending balance	$	659	$	1,776	$	1,182	$	115	$	1,025	$	300	$	53	$	5,110
	Six Months Ended June 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance, prior to adoption of ASC 326	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Impact of adopting ASC 326	385		1,585		736		180		471		212		15		3,584
Credit loss expense (benefit)	109		(56)		128		(73)		320		63		15		506
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—
Ending balance	$	494	$	1,529	$	864	$	107	$	791	$	275	$	30	$	4,090

Schedule of credit quality indicators by type of loans

The following table presents the credit quality indicators by type of loans in each category as of December 31, 2021 (amounts in thousands):

	Agricultural
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	762	$	213	$	30	$	10	$	—	$	—	$	2,312	$	3,327
Good	1,799		1,767		603		46		52		26		7,593		11,886
Satisfactory	10,335		6,404		1,476		1,770		403		66		26,285		46,739
Monitor	8,125		5,017		998		765		164		253		23,995		39,317
Special Mention	1,662		11		85		—		7		—		2,807		4,572
Substandard	592		69		203		—		—		—		228		1,092
Total	$	23,275	$	13,481	$	3,395	$	2,591	$	626	$	345	$	63,220	$	106,933

	Commercial and Financial
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	965	$	924	$	4	$	235	$	31	$	—	$	3,391	$	5,550
Good	13,722		5,570		1,105		1,086		276		1,494		20,709		43,962
Satisfactory	44,964		20,847		7,684		3,582		2,106		331		41,832		121,346
Monitor	18,337		8,019		3,591		1,123		297		416		13,368		45,151
Special Mention	603		525		353		70		102		4		174		1,831
Substandard	1,092		670		266		54		92		—		1,988		4,162
Total	$	79,683	$	36,555	$	13,003	$	6,150	$	2,904	$	2,245	$	81,462	$	222,002

	Real Estate: Construction, 1 to 4 Family Residential
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Good	212		—		—		—		—		—		18,755		18,967
Satisfactory	7,457		94		—		—		—		—		42,988		50,539
Monitor	1,307		—		—		—		—		—		9,187		10,494
Special Mention	—		—		—		—		—		—		374		374
Substandard	111		—		—		—		—		—		1		112
Total	$	9,087	$	94	$	—	$	—	$	—	$	—	$	71,305	$	80,486

	Real Estate: Construction, Land Development and Commercial
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	5,079	$	—	$	—	$	—	$	143	$	4	$	—	$	5,226
Good	3,294		1,200		—		—		153		242		12,678		17,567
Satisfactory	22,907		4,354		2,356		263		1,081		21		40,048		71,030
Monitor	5,694		547		7		38		74		—		18,832		25,192
Special Mention	—		—		—		—		—		—		—		—
Substandard	7,515		298		193		—		—		—		—		8,006
Total	$	44,489	$	6,399	$	2,556	$	301	$	1,451	$	267	$	71,558	$	127,021

	Real Estate: Mortgage, Farmland
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	3,568	$	124	$	60	$	80	$	41	$	134	$	4,007
Good	17,827		14,308		2,144		2,460		5,932		3,929		3,844		50,444
Satisfactory	51,639		35,616		4,689		8,358		6,745		8,339		8,242		123,628
Monitor	8,532		16,925		5,518		3,901		2,154		4,866		5,695		47,591
Special Mention	4,031		288		—		—		298		190		—		4,807
Substandard	1,283		447		291		47		—		199		—		2,267
Total	$	83,312	$	71,152	$	12,766	$	14,826	$	15,209	$	17,564	$	17,915	$	232,744

	Real Estate: Mortgage, 1 to 4 Family First Liens
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	462	$	914	$	427	$	19	$	149	$	404	$	1	$	2,376
Good	9,598		12,300		3,124		3,443		3,091		10,943		2,496		44,995
Satisfactory	233,412		189,247		69,037		65,201		60,906		118,608		8,443		744,854
Monitor	24,908		33,863		5,038		6,527		7,273		12,203		4,066		93,878
Special Mention	1,682		3,422		887		962		1,051		3,168		—		11,172
Substandard	1,571		1,261		1,129		1,609		576		6,142		1		12,289
Total	$	271,633	$	241,007	$	79,642	$	77,761	$	73,046	$	151,468	$	15,007	$	909,564

	Real Estate: Mortgage, 1 to 4 Family Junior Liens
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	13	$	—	$	—	$	—	$	—	$	6	$	19
Good	193		611		96		—		108		482		1,374		2,864
Satisfactory	13,684		10,116		5,854		7,309		5,230		6,053		55,496		103,742
Monitor	326		1,233		70		365		140		281		2,801		5,216
Special Mention	103		489		35		56		42		110		142		977
Substandard	77		209		79		441		74		99		545		1,524
Total	$	14,383	$	12,671	$	6,134	$	8,171	$	5,594	$	7,025	$	60,364	$	114,342

	Real Estate: Mortgage, Multi-Family
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	2,539	$	4,513	$	—	$	—	$	—	$	701	$	—	$	7,753
Good	16,931		35,396		1,555		—		—		9,289		—		63,171
Satisfactory	107,192		69,287		13,635		2,030		1,561		14,660		14,764		223,129
Monitor	26,088		35,886		176		—		131		1,584		5,669		69,534
Special Mention	640		—		820		—		—		—		—		1,460
Substandard	12,186		—		—		—		—		5,559		—		17,745
Total	$	165,576	$	145,082	$	16,186	$	2,030	$	1,692	$	31,793	$	20,433	$	382,792

	Real Estate: Mortgage, Commercial
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	597	$	16,781	$	—	$	—	$	3,313	$	350	$	1	$	21,042
Good	20,143		36,773		2,619		1,356		3,811		7,085		9,812		81,599
Satisfactory	75,040		52,653		14,727		12,091		9,707		17,398		16,333		197,949
Monitor	18,664		49,774		3,923		2,202		3,037		8,461		3,387		89,448
Special Mention	5,791		795		303		—		554		337		—		7,780
Substandard	1,528		1,721		—		208		—		102		—		3,559
Total	$	121,763	$	158,497	$	21,572	$	15,857	$	20,422	$	33,733	$	29,533	$	401,377

	Loans to Individuals
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Good	—		—		67		21		5		—		1		94
Satisfactory	12,162		5,606		2,212		967		141		10,867		57		32,012
Monitor	200		160		15		46		3		—		1		425
Special Mention	37		32		29		4		—		—		1		103
Substandard	12		24		12		—		1		3		1		53
Total	$	12,411	$	5,822	$	2,335	$	1,038	$	150	$	10,870	$	61	$	32,687

	Obligations of State and Political Subdivisions
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	6,076	$	—	$	6,076
Good	—		1,984		—		—		—		9,051		—		11,035
Satisfactory	1,009		2,034		1,551		706		11,557		3,634		9,400		29,891
Monitor	—		933		203		249		—		1,898		—		3,283
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Total	$	1,009	$	4,951	$	1,754	$	955	$	11,557	$	20,659	$	9,400	$	50,285

Schedule of past due loans

Past due loans as of June 30, 2022 and December 31, 2021 were as follows:

	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Accruing Loans Past Due 90 Days or More
	(Amounts In Thousands)
June 30, 2022
Agricultural	$	213	$	80	$	—	$	293	$	96,624	$	96,917	$	—
Commercial and financial	948		59		200		1,207		227,468		228,675		200
Real estate:
Construction, 1 to 4 family residential	623		104		—		727		85,552		86,279		—
Construction, land development and commercial	495		191		96		782		149,056		149,838		—
Mortgage, farmland	223		—		60		283		240,528		240,811		—
Mortgage, 1 to 4 family first liens	930		2,492		2,036		5,458		991,477		996,935		285
Mortgage, 1 to 4 family junior liens	101		198		120		419		115,312		115,731		—
Mortgage, multi-family	—		—		—		—		399,360		399,360		—
Mortgage, commercial	296		—		1,339		1,635		405,708		407,343		187
Loans to individuals	162		39		—		201		33,800		34,001		—
Obligations of state and political subdivisions	—		—		—		—		50,173		50,173		—
	$	3,991	$	3,163	$	3,851	$	11,005	$	2,795,058	$	2,806,063	$	672
December 31, 2021
Agricultural	$	41	$	—	$	219	$	260	$	106,673	$	106,933	$	6
Commercial and financial	300		537		468		1,305		220,697		222,002		91
Real estate:
Construction, 1 to 4 family residential	276		—		—		276		80,210		80,486		—
Construction, land development and commercial	194		66		96		356		126,665		127,021		—
Mortgage, farmland	503		362		—		865		231,879		232,744		—
Mortgage, 1 to 4 family first liens	5,085		864		2,481		8,430		901,134		909,564		104
Mortgage, 1 to 4 family junior liens	246		41		124		411		113,931		114,342		—
Mortgage, multi-family	640		—		—		640		382,152		382,792		—
Mortgage, commercial	466		—		829		1,295		400,082		401,377		—
Loans to individuals	177		26		5		208		32,479		32,687		—
Obligations of state and political subdivisions	394		—		—		394		49,891		50,285		—
	$	8,322	$	1,896	$	4,222	$	14,440	$	2,645,793	$	2,660,233	$	201

Schedule of impaired loan information

Certain nonaccrual and TDR loan information by loan type at June 30, 2022 and December 31, 2021, was as follows:

	June 30, 2022						December 31, 2021
	Non-accrual loans (1)		Accruing loans past due 90 days or more		TDR loans		Non- accrual loans (1)		Accruing loans past due 90 days or more		TDR loans
	(Amounts In Thousands)						(Amounts In Thousands)
Agricultural	$	—	$	—	$	27	$	221	$	6	$	374
Commercial and financial	715		200		721		707		91		1,085
Real estate:
Construction, 1 to 4 family residential	105		—		—		111		—		—
Construction, land development and commercial	287		—		—		290		—		202
Mortgage, farmland	104		—		1,642		251		—		1,206
Mortgage, 1 to 4 family first liens	3,892		285		1,216		4,685		104		1,364
Mortgage, 1 to 4 family junior liens	120		—		19		200		—		20
Mortgage, multi-family	—		—		628		—		—		1,460
Mortgage, commercial	1,834		187		1,979		2,026		—		2,210
Loans to individuals	—		—		—		—		—		—
Obligations of state and political subdivisions	—		—		—		—		—		—
	$	7,057	$	672	$	6,232	$	8,491	$	201	$	7,921

(1)There were $2.66 million and $2.28 million of TDR loans included within nonaccrual loans as of June 30, 2022 and December 31, 2021, respectively.

Schedule of information for TDR loans

Below is a summary of information for TDR loans as of June 30, 2022 and December 31, 2021:

	June 30, 2022					December 31, 2021
	Number of contracts	Recorded investment		Commitments outstanding		Number of contracts	Recorded investment		Commitments outstanding
		(Amounts In Thousands)					(Amounts In Thousands)
Agricultural	1	$	27	$	115	4	$	586	$	—
Commercial and financial	11	1,385		50		12	1,116		60
Real estate:
Construction, 1 to 4 family residential	1	105		—		—	—		—
Construction, land development and commercial	1	191		—		1	202		—
Mortgage, farmland	4	1,642		—		5	1,409		—
Mortgage, 1 to 4 family first liens	9	1,216		—		14	1,441		—
Mortgage, 1 to 4 family junior liens	1	19		—		1	20		—
Mortgage, multi-family	1	628		—		2	1,460		—
Mortgage, commercial	11	3,684		—		11	3,963		—
Loans to individuals	—	—		—		—	—		—
Obligations of state and political subdivisions	—	—		—		—	—		—
	40	$	8,897	$	165	50	$	10,197	$	60

The following is a summary of TDR loans that were modified during the three and six months ended June 30, 2022:

	Three Months Ended June 30, 2022					Six Months Ended June 30, 2022
	Number of contracts	Pre-modification recorded investment		Post-modification recorded investment		Number of contracts	Pre-modification recorded investment		Post-modification recorded investment
		(Amounts In Thousands)					(Amounts In Thousands)
Agricultural	—	$	—	$	—	—	$	—	$	—
Commercial and financial	—	—		—		1	371		371
Real estate:
Construction, 1 to 4 family residential	—	—		—		1	105		105
Construction, land development and commercial	—	—		—		1	191		191
Mortgage, farmland	2	1,021		1,021		2	1,021		1,021
Mortgage, 1 to 4 family first lien	—	—		—		—	—		—
Mortgage, 1 to 4 family junior liens	—	—		—		—	—		—
Mortgage, multi-family	—	—		—		—	—		—
Mortgage, commercial	—	—		—		1	274		274
Loans to individuals	—	—		—		—	—		—
Obligations of state and political subdivisions	—	—		—		—	—		—
	2	$	1,021	$	1,021	6	$	1,962	$	1,962

XML

Leases (Tables)

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Maturities of lease liabilities, Topic 842

As of June 30, 2022, maturities of lease liabilities were as follows:

Year ending December 31:	(Amounts In Thousands)
2022 (excluding the six months ended June 30, 2022)	$	235
2023	327
2024	260
2025	263
2026	266
Thereafter	1,503
Total lease payments	2,854
Less imputed interest	(466)
Total operating lease liabilities	$	2,388

XML

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Carrying value and estimated fair values of entity's financial instruments

The carrying value and estimated fair values of the Company's financial instruments as of June 30, 2022 are as follows:

	June 30, 2022
	Carrying Amount		Estimated Fair Value		Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)
	(Amounts In Thousands)
Financial instrument assets:
Cash and cash equivalents	$	307,493	$	307,493	$	307,493	$	—	$	—
Investment securities	772,283		772,283		462,110		310,173		—
Loans held for sale	1,600		1,600		—		1,600		—
Loans
Agricultural	94,652		93,966		—		—		93,966
Commercial and financial	223,481		221,571		—		—		221,571
Real estate:
Construction, 1 to 4 family residential	85,432		85,158		—		—		85,158
Construction, land development and commercial	147,913		145,508		—		—		145,508
Mortgage, farmland	237,481		231,825		—		—		231,825
Mortgage, 1 to 4 family first liens	988,184		971,999		—		—		971,999
Mortgage, 1 to 4 family junior liens	112,485		110,958		—		—		110,958
Mortgage, multi-family	395,336		387,871		—		—		387,871
Mortgage, commercial	400,134		392,252		—		—		392,252
Loans to individuals	33,213		32,092		—		—		32,092
Obligations of state and political subdivisions	49,728		49,270		—		—		49,270
Accrued interest receivable	12,739		12,739		—		12,739		—
Total financial instrument assets	$	3,862,154	$	3,816,585	$	769,603	$	324,512	$	2,722,470
Financial instrument liabilities
Deposits
Noninterest-bearing deposits	$	645,934	$	645,934	$	—	$	645,934	$	—
Interest-bearing deposits	2,799,897		2,802,676		—		2,802,676		—
Accrued interest payable	1,037		1,037		—		1,037		—
Total financial instrument liabilities	$	3,446,868	$	3,449,647	$	—	$	3,449,647	$	—
	Face Amount
Financial instrument with off-balance sheet risk:
Loan commitments	$	725,164	$	—	$	—	$	—	$	—
Letters of credit	6,923		—		—		—		—
Total financial instrument liabilities with off-balance-sheet risk	$	732,087	$	—	$	—	$	—	$	—

(1)Considered Level 1 under Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”).

(2)Considered Level 2 under ASC 820.

(3)Considered Level 3 under ASC 820 and are based on valuation models that use significant assumptions that are not observable in an active market.

The carrying value and estimated fair values of the Company's financial instruments as of December 31, 2021 are as follows:

	December 31, 2021
	Carrying Amount		Estimated Fair Value		Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)
	(Amounts In Thousands)
Financial instrument assets:
Cash and cash equivalents	$	781,918	$	781,918	$	781,918	$	—	$	—
Investment securities	555,900		555,900		243,925		311,975		—
Loans held for sale	5,716		5,716		—		5,716		—
Loans
Agricultural	104,672		103,745		—		—		103,745
Commercial and financial	217,733		216,466		—		—		216,466
Real estate:
Construction, 1 to 4 family residential	79,668		79,311		—		—		79,311
Construction, land development and commercial	125,539		124,466		—		—		124,466
Mortgage, farmland	229,311		228,365		—		—		228,365
Mortgage, 1 to 4 family first liens	901,523		897,255		—		—		897,255
Mortgage, 1 to 4 family junior liens	111,184		110,903		—		—		110,903
Mortgage, multi-family	379,077		378,193		—		—		378,193
Mortgage, commercial	394,594		391,950		—		—		391,950
Loans to individuals	31,916		31,871		—		—		31,871
Obligations of state and political subdivisions	49,845		50,155		—		—		50,155
Accrued interest receivable	11,437		11,437		—		11,437		—
Total financial instrument assets	$	3,980,033	$	3,967,651	$	1,025,843	$	329,128	$	2,612,680
Financial instrument liabilities:
Deposits
Noninterest-bearing deposits	$	633,101	$	633,101	$	—	$	633,101	$	—
Interest-bearing deposits	2,900,893		2,909,243		—		2,909,243		—
Other borrowings	249		249		—		249		—
Federal Home Loan Bank borrowings	—		—		—		—		—
Accrued interest payable	1,165		1,165		—		1,165		—
Total financial instrument liabilities	$	3,535,408	$	3,543,758	$	—	$	3,543,758	$	—
	Face Amount
Financial instrument with off-balance sheet risk:
Loan commitments	$	614,324	$	—	$	—	$	—	$	—
Letters of credit	7,179		—		—		—		—
Total financial instrument liabilities with off-balance-sheet risk	$	621,503	$	—	$	—	$	—	$	—

 Considered Level 1 under ASC 820.

(1)Considered Level 2 under ASC 820.

(2)Considered Level 3 under ASC 820 and are based on valuation models that use significant assumptions that are not observable in an active market.

Schedule of assets and liabilities measured at fair value on a recurring basis

The table below represents the balances of assets and liabilities measured at fair value on a recurring basis:

	June 30, 2022
	Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)		Total at Fair Value
Securities available for sale	(Amounts In Thousands)
U.S. Treasury	$	462,110	$	—	$	—	$	462,110
State and political subdivisions	—		217,714		—		217,714
Mortgage-backed securities and collateralized mortgage obligations	—		54,973		—		54,973
Other securities (FHLB, FHLMC and FNMA)	—		32,624		—		32,624
Total	$	462,110	$	305,311	$	—	$	767,421

	December 31, 2021
	Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)		Total at Fair Value
Securities available for sale	(Amounts In Thousands)
U.S. Treasury	$	243,925	$	—	$	—	$	243,925
State and political subdivisions	—		263,516		—		263,516
Mortgage-backed securities and collateralized mortgage obligations	—		9,446		—		9,446
Other securities (FHLB, FHLMC and FNMA)	—		34,467		—		34,467
Total	$	243,925	$	307,429	$	—	$	551,354

(1)Considered Level 1 under ASC 820.

(2)Considered Level 2 under ASC 820.

(3)Considered Level 3 under ASC 820 and are based on valuation models that use significant assumptions that are not observable in an active market.

Schedule of assets measured at fair value on a nonrecurring basis

The following tables present the Company’s assets that are measured at fair value on a nonrecurring basis.

	June 30, 2022								Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
	Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)		Total at Fair Value		Total Losses		Total Losses
	(Amounts in Thousands)
Loans (4)
Agricultural	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and financial	—		—		1,363		1,363		225		225
Real Estate:											—
Construction, 1 to 4 family residential	—		—		50		50		—		—
Construction, land development and commercial	—		—		287		287		—		—
Mortgage, farmland	—		—		1,747		1,747		104		104
Mortgage, 1 to 4 family first liens	—		—		5,067		5,067		25		90
Mortgage, 1 to 4 family junior liens	—		—		133		133		—		5
Mortgage, multi-family	—		—		628		628		—		—
Mortgage, commercial	—		—		3,446		3,446		—		—
Loans to individuals	—		—		—		—		—		—
Foreclosed assets (5)	—		—		—		—		—		—
Total	$	—	$	—	$	12,721	$	12,721	$	354	$	424

(1)Considered Level 1 under ASC 820.

(2)Considered Level 2 under ASC 820.

(3)Considered Level 3 under ASC 820 and are based on valuation models that use significant assumptions that are not observable in an active market.

(4)Represents carrying value and related write-downs of loans for which adjustments are based on the value of the collateral. The carrying value of loans fully-charged off is zero.

(5)Represents the fair value and related losses of foreclosed real estate and other collateral owned that were measured at fair value subsequent to their initial classification as foreclosed assets.

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis (continued)

	December 31, 2021								Year Ended December 31, 2021
	Readily Available Market Prices(1)		Observable Market Prices(2)		Company Determined Market Prices(3)		Total at Fair Value		Total Losses
	(Amounts in Thousands)
Loans (4)
Agricultural	$	—	$	—	$	399	$	399	$	—
Commercial and financial	—		—		1,527		1,527		—
Real Estate:
Construction, 1 to 4 family residential	—		—		383		383		—
Construction, land development and commercial	—		—		96		96		—
Mortgage, farmland	—		—		1,114		1,114		—
Mortgage, 1 to 4 family first liens	—		—		5,902		5,902		212
Mortgage, 1 to 4 family junior liens	—		—		202		202		9
Mortgage, multi-family	—		—		1,460		1,460		—
Mortgage, commercial	—		—		4,176		4,176		255
Loans to individuals	—		—		—		—		—
Foreclosed assets (5)	—		—		—		—		—
Total	$	—	$	—	$	15,259	$	15,259	$	476

(1)Considered Level 1 under ASC 820.

(2)Considered Level 2 under ASC 820.

(3)Considered Level 3 under ASC 820 and are based on valuation models that use significant assumptions that are not observable in an active market.

(4)Represents carrying value and related write-downs of loans for which adjustments are based on the value of the collateral. The carrying value of loans fully-charged off is zero.

(5)Represents the fair value and related losses of foreclosed real estate and other collateral owned that were measured at fair value subsequent to their initial classification as foreclosed assets.

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Schedule of banks commitments

A summary of the Bank’s commitments at June 30, 2022 and December 31, 2021 is as follows:

	June 30, 2022		December 31, 2021
	(Amounts In Thousands)
Firm loan commitments and unused portion of lines of credit:
Home equity loans	$	84,584	$	78,961
Credit cards	63,933		65,913
Commercial, real estate and home construction	200,472		170,539
Commercial lines and real estate purchase loans	376,175		298,911
Outstanding letters of credit	6,923		7,179

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Summary of Significant Accounting Policies (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($) property segment	Mar. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Jun. 30, 2021 USD ($)	Mar. 31, 2021 USD ($)	Feb. 28, 2021 USD ($)	Jan. 01, 2021 USD ($)	Dec. 31, 2020 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accrued interest receivable on AFS debt securities	$ 3,000
Net decrease to retained earnings	416,650	$ 414,162	$ 438,450	$ 425,378	$ 413,251			$ 416,076
Accrued interest receivable	$ 12,739		11,437
Number of operating segments | segment	1
Number of multi family rental properties | property	3
Number of assisted living rental properties | property	3
Duration of tax credit of each property	10 years
Limited partnership, capital contribution						$ 4,180
Operating lease, right-of-use asset	$ 2,310		2,470
ACL Allocation	38,260	35,850	35,470	35,940	36,620		$ 37,070	37,070
Impact of adopting ASC 326	5,110	4,690	3,850	4,090	4,340		0	0
Loans Held For Investment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accrued interest receivable	$ 9,740
Each Limited Partnership
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Ownership interest in each limited partnership (or greater)	99.00%
As Reported Under ASC 326
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net decrease to retained earnings								411,325
ACL Allocation							39,816
Impact of adopting ASC 326							3,584
Impact of ASC 326 Adoption
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net decrease to retained earnings								(4,751)
ACL Allocation							2,746	2,746
Impact of adopting ASC 326							3,584	3,584
Deferred income taxes, net							1,580
Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net decrease to retained earnings	$ 487,066	$ 475,740	$ 474,392	$ 455,115	$ 441,505			439,831
Retained Earnings | As Reported Under ASC 326
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net decrease to retained earnings								435,080
Retained Earnings | Impact of ASC 326 Adoption
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net decrease to retained earnings							$ 4,750	$ (4,751)

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021	Dec. 31, 2020
Summary of computation of basic and diluted earnings per share [Abstract]
Common shares outstanding at the beginning of the period (shares)					9,277,145	9,299,640	9,312,518	9,330,995
Weighted average number of net shares (redeemed) issued (shares)	(5,420)	(3,315)	(18,484)	(15,711)
Weighted average shares outstanding (basic) (shares)	9,271,725	9,309,203	9,281,156	9,315,284
Weighted average of potential dilutive shares attributable to stock options granted, computed under the treasury stock method (shares)	1,581	3,567	2,348	3,546
Weighted average number of shares (diluted) (shares)	9,273,306	9,312,770	9,283,504	9,318,830
Net income (In thousands)	$ 11,326	$ 13,610	$ 21,978	$ 28,807
Earnings per share:
Basic (in dollars per share)	$ 1.22	$ 1.46	$ 2.37	$ 3.09
Diluted (in dollars per share)	$ 1.22	$ 1.46	$ 2.37	$ 3.09

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Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Accumulated Other Comprehensive Income Loss [Line Items]
Tax effect	$ 10,300	$ (491)
Net-of-tax amount	(30,981)	1,477
Net unrealized loss on available-for-sale securities [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Net unrealized gain (loss)	$ (41,281)	$ 1,968

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Securities (Details)	6 Months Ended
	Jun. 30, 2022 USD ($) security	Jun. 30, 2021 USD ($)	Dec. 31, 2021 USD ($) security
Securities available for sale
Securities available for sale, Percent	100.00%		100.00%
Available-for-sale Securities Reconciliation [Abstract]
Amortized Cost	$ 808,702,000		$ 549,386,000
Gross Unrealized Gains	293,000		6,431,000
Gross Unrealized (Losses)	(41,574,000)		(4,463,000)
Allowance for Credit Losses	0		0
Amortized Cost
Due in one year or less	60,747,000
Due after one year through five years	542,184,000
Due after five years through ten years	106,135,000
Due over ten years	40,222,000
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, Amortized Cost, Total	749,288,000
Fair Value
Due in one year or less	60,544,000
Due after one year through five years	522,784,000
Due after five years through ten years	96,774,000
Due over ten years	32,346,000
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, Fair Value, Total	712,448,000
Carrying value of investment securities pledged to collateralize short-term borrowings	767,421,000		$ 551,354,000
Debt Securities, Available-for-sale, Realized Gain (Loss) [Abstract]
Sales, available for sale securities	$ 0	$ 0
Less than 12 months
Number of securities | security	754		295
Fair Value	$ 616,134,000		$ 229,339,000
Unrealized Loss	$ (32,890,000)		$ (3,690,000)
Percentage	5.34%		1.61%
12 months or more
Number of securities | security	98		24
Fair Value	$ 90,055,000		$ 33,648,000
Unrealized Loss	$ (8,684,000)		$ (773,000)
Percentage	9.64%		2.30%
Total
Number of securities | security	852		319
Fair Value	$ 706,189,000		$ 262,987,000
Unrealized Loss	$ (41,574,000)		$ (4,463,000)
Percentage	5.89%		1.70%
Collateralized Securities [Member]
Fair Value
Carrying value of investment securities pledged to collateralize short-term borrowings	$ 9,380,000
U.S. Treasury [Member]
Securities available for sale
Securities available for sale, Percent	60.22%		44.24%
Available-for-sale Securities Reconciliation [Abstract]
Amortized Cost	$ 478,089,000		$ 244,192,000
Gross Unrealized Gains	20,000		2,011,000
Gross Unrealized (Losses)	(15,999,000)		(2,278,000)
Allowance for Credit Losses	0		0
Fair Value
Carrying value of investment securities pledged to collateralize short-term borrowings	$ 462,110,000		$ 243,925,000
Less than 12 months
Number of securities | security	132		55
Fair Value	$ 411,292,000		$ 136,867,000
Unrealized Loss	$ (13,840,000)		$ (2,203,000)
Percentage	3.37%		1.61%
12 months or more
Number of securities | security	12		1
Fair Value	$ 28,357,000		$ 2,416,000
Unrealized Loss	$ (2,159,000)		$ (75,000)
Percentage	7.61%		3.10%
Total
Number of securities | security	144		56
Fair Value	$ 439,649,000		$ 139,283,000
Unrealized Loss	$ (15,999,000)		$ (2,278,000)
Percentage	3.64%		1.64%
Other securities [Member]
Securities available for sale
Securities available for sale, Percent	4.25%		6.25%
Available-for-sale Securities Reconciliation [Abstract]
Amortized Cost	$ 35,304,000		$ 35,353,000
Gross Unrealized Gains	0		0
Gross Unrealized (Losses)	(2,680,000)		(886,000)
Allowance for Credit Losses	0		0
Fair Value
Carrying value of investment securities pledged to collateralize short-term borrowings	$ 32,624,000		$ 34,467,000
Less than 12 months
Number of securities | security	0		5
Fair Value	$ 0		$ 12,484,000
Unrealized Loss	$ 0		$ (303,000)
Percentage	0.00%		2.43%
12 months or more
Number of securities | security	14		9
Fair Value	$ 32,623,000		$ 21,984,000
Unrealized Loss	$ (2,680,000)		$ (583,000)
Percentage	8.22%		2.65%
Total
Number of securities | security	14		14
Fair Value	$ 32,623,000		$ 34,468,000
Unrealized Loss	$ (2,680,000)		$ (886,000)
Percentage	8.22%		2.57%
State and political subdivisions [Member]
Securities available for sale
Securities available for sale, Percent	28.37%		47.80%
Available-for-sale Securities Reconciliation [Abstract]
Amortized Cost	$ 235,895,000		$ 260,266,000
Gross Unrealized Gains	273,000		4,420,000
Gross Unrealized (Losses)	(18,454,000)		(1,170,000)
Allowance for Credit Losses	0		0
Fair Value
Carrying value of investment securities pledged to collateralize short-term borrowings	$ 217,714,000		$ 263,516,000
Less than 12 months
Number of securities | security	605		231
Fair Value	$ 151,886,000		$ 70,542,000
Unrealized Loss	$ (14,906,000)		$ (1,055,000)
Percentage	9.81%		1.50%
12 months or more
Number of securities | security	71		14
Fair Value	$ 27,058,000		$ 9,248,000
Unrealized Loss	$ (3,548,000)		$ (115,000)
Percentage	13.11%		1.24%
Total
Number of securities | security	676		245
Fair Value	$ 178,944,000		$ 79,790,000
Unrealized Loss	$ (18,454,000)		$ (1,170,000)
Percentage	10.31%		1.47%
Mortgage Backed Securities, Other
Securities available for sale
Securities available for sale, Percent	7.16%		1.71%
Available-for-sale Securities Reconciliation [Abstract]
Amortized Cost	$ 59,414,000		$ 9,575,000
Gross Unrealized Gains	0		0
Gross Unrealized (Losses)	(4,441,000)		(129,000)
Allowance for Credit Losses	0		0
Amortized Cost
Mortgage-backed securities and collateralized mortgage obligations, Amortized Cost	59,414,000
Fair Value
Mortgage-backed securities and collateralized mortgage obligations. Fair Value	54,973,000
Carrying value of investment securities pledged to collateralize short-term borrowings	$ 54,973,000		$ 9,446,000
Less than 12 months
Number of securities | security	17		4
Fair Value	$ 52,956,000		$ 9,446,000
Unrealized Loss	$ (4,144,000)		$ (129,000)
Percentage	7.83%		1.37%
12 months or more
Number of securities | security	1		0
Fair Value	$ 2,017,000		$ 0
Unrealized Loss	$ (297,000)		$ 0
Percentage	14.72%		0.00%
Total
Number of securities | security	18		4
Fair Value	$ 54,973,000		$ 9,446,000
Unrealized Loss	$ (4,441,000)		$ (129,000)
Percentage	8.08%		1.37%

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Loans (Details) - USD ($)	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021	Jan. 01, 2021	Dec. 31, 2020
Summary of classes of loans (abstract)
Total Loans Receivable	$ 2,806,063,000	$ 2,683,769,000		$ 2,660,233,000
Net unamortized fees and costs	236,000			299,000
Total	2,806,299,000			2,660,532,000
Less allowance for credit losses and loan losses	38,260,000	35,940,000	$ 35,850,000	35,470,000	$ 36,620,000	$ 37,070,000	$ 37,070,000
Loans and receivable, net	2,768,039,000			2,625,062,000
Loans and Leases Receivable, Allowance	38,260,000			35,470,000
financing receivable, allowance for credit loss, change due to economic factors	540,000
Financing Receivable, Allowance for Credit Losses, change due to loan volume	1,570,000
Financing Receivable, Allowance for Credit Losses, change in prepayment and curtailment rates	580,000
Financing Receivable, Allowance for Credit Losses, change due to historical loss rates	840,000
Impact of ASC 326 Adoption
Summary of classes of loans (abstract)
Less allowance for credit losses and loan losses						$ 2,746,000	2,746,000
Agricultural [Member]
Summary of classes of loans (abstract)
Total Loans Receivable	96,917,000	89,694,000		106,933,000
Total	96,917,000			106,933,000
Less allowance for credit losses and loan losses	2,265,000	2,055,000	2,414,000	2,261,000	2,147,000		2,508,000
Agricultural [Member] | Impact of ASC 326 Adoption
Summary of classes of loans (abstract)
Less allowance for credit losses and loan losses							(328,000)
Commercial and Financial [Member]
Summary of classes of loans (abstract)
Total Loans Receivable	228,675,000	269,752,000		222,002,000
Total	228,675,000			222,002,000
Less allowance for credit losses and loan losses	5,194,000	4,802,000	4,895,000	4,269,000	5,114,000		4,885,000
Commercial and Financial [Member] | Impact of ASC 326 Adoption
Summary of classes of loans (abstract)
Less allowance for credit losses and loan losses							298,000
Commercial and Financial [Member] | Small Business Administration SBA, CARES Act, Paycheck Protection Program
Summary of classes of loans (abstract)
Loans and Leases Receivable, Before Unamortized Fees and Costs	70,000.00			5,340,000
Interest and fee income, Loans and Leases, PPP Loan fees recognized in income	0	3,230,000
Real Estate Construction One to Four Family Residential [Member]
Summary of classes of loans (abstract)
Total Loans Receivable	86,279,000			80,486,000
Total	86,279,000			80,486,000
Real Estate: Construction, land development and commercial [Member]
Summary of classes of loans (abstract)
Total Loans Receivable	149,838,000			127,021,000
Total	149,838,000			127,021,000
Real Estate: Mortgage, farmland [Member]
Summary of classes of loans (abstract)
Total Loans Receivable	240,811,000	250,610,000		232,744,000
Total	240,811,000			232,744,000
Less allowance for credit losses and loan losses	3,330,000	$ 4,904,000	$ 3,310,000	3,433,000	$ 4,668,000		4,173,000
Real Estate: Mortgage, farmland [Member] | Impact of ASC 326 Adoption
Summary of classes of loans (abstract)
Less allowance for credit losses and loan losses							$ 763,000
Real Estate: Mortgage, 1 to 4 family first liens [Member]
Summary of classes of loans (abstract)
Total Loans Receivable	996,935,000			909,564,000
Total	996,935,000			909,564,000
Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Summary of classes of loans (abstract)
Total Loans Receivable	115,731,000			114,342,000
Total	115,731,000			114,342,000
Real Estate: Mortgage, multi-family [Member]
Summary of classes of loans (abstract)
Total Loans Receivable	399,360,000			382,792,000
Total	399,360,000			382,792,000
Real Estate: Mortgage, commercial [Member]
Summary of classes of loans (abstract)
Total Loans Receivable	407,343,000			401,377,000
Total	407,343,000			401,377,000
Loans to individuals [Member]
Summary of classes of loans (abstract)
Total Loans Receivable	34,001,000			32,687,000
Total	34,001,000			32,687,000
Obligations of state and political subdivisions [Member]
Summary of classes of loans (abstract)
Total Loans Receivable	50,173,000			50,285,000
Total	$ 50,173,000			$ 50,285,000

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Loans, Allowance For Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021	Jan. 01, 2021
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance	$ 35,850	$ 36,620	$ 35,470	$ 37,070
Charge-offs	(449)	(97)	(788)	(268)
Recoveries	777	826	1,232	1,541
Provision	2,082	(1,409)	2,346	(5,149)
Ending balance	38,260	35,940	38,260	35,940
Ending balance, individually evaluated for impairment	389	398	389	398
Ending balance, collectively evaluated for impairment	37,871	35,542	37,871	35,542
Loan [Abstract]
Total Loans Receivable	2,806,063	2,683,769	2,806,063	2,683,769	$ 2,660,233
Ending balance, individually evaluated for impairment	13,962	17,356	13,962	17,356
Ending balance, collectively evaluated for impairment	2,792,101	2,666,413	2,792,101	2,666,413
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance	4,690	4,340	3,850	0
Impact of adopting ASC 326	5,110	4,090	5,110	4,090	3,850	$ 0
Credit loss expense (benefit)	420	(250)	1,260	506
(Charge-offs), net recoveries	0	0	0	0
Ending balance	5,110	4,090	5,110	4,090
Impact of ASC 326 Adoption
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance				2,746
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance				3,584
Impact of adopting ASC 326						$ 3,584
Agricultural [Member]
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance	2,414	2,147	2,261	2,508
Charge-offs	(1)	0	(1)	0
Recoveries	54	57	68	89
Provision	(202)	(149)	(63)	(214)
Ending balance	2,265	2,055	2,265	2,055
Ending balance, individually evaluated for impairment	0	0	0	0
Ending balance, collectively evaluated for impairment	2,265	2,055	2,265	2,055
Loan [Abstract]
Total Loans Receivable	96,917	89,694	96,917	89,694	106,933
Ending balance, individually evaluated for impairment	207	1,094	207	1,094
Ending balance, collectively evaluated for impairment	96,710	88,600	96,710	88,600
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance	513	443	383	0
Impact of adopting ASC 326	659	494	659	494	383
Credit loss expense (benefit)	146	51	276	109
(Charge-offs), net recoveries	0	0	0	0
Ending balance	659	494	659	494
Agricultural [Member] | Impact of ASC 326 Adoption
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance				(328)
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance				385
Impact of adopting ASC 326
Commercial and Financial [Member]
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance	4,895	5,114	4,269	4,885
Charge-offs	(243)	(46)	(291)	(76)
Recoveries	89	301	212	535
Provision	453	(567)	1,004	(840)
Ending balance	5,194	4,802	5,194	4,802
Ending balance, individually evaluated for impairment	5	54	5	54
Ending balance, collectively evaluated for impairment	5,189	4,748	5,189	4,748
Loan [Abstract]
Total Loans Receivable	228,675	269,752	228,675	269,752	222,002
Ending balance, individually evaluated for impairment	1,637	1,601	1,637	1,601
Ending balance, collectively evaluated for impairment	227,038	268,151	227,038	268,151
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance	1,420	1,824	1,118	0
Impact of adopting ASC 326	1,776	1,529	1,776	1,529	1,118
Credit loss expense (benefit)	356	(295)	658	(56)
(Charge-offs), net recoveries	0	0	0	0
Ending balance	1,776	1,529	1,776	1,529
Commercial and Financial [Member] | Impact of ASC 326 Adoption
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance				298
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance				1,585
Impact of adopting ASC 326
Real Estate: Construction and land development [Member]
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance	2,347	2,288	2,300	2,319
Charge-offs	0	(3)	0	(3)
Recoveries	2	57	5	91
Provision	423	141	467	(251)
Ending balance	2,772	2,483	2,772	2,483
Ending balance, individually evaluated for impairment	55	125	55	125
Ending balance, collectively evaluated for impairment	2,717	2,358	2,717	2,358
Loan [Abstract]
Total Loans Receivable	236,117	191,499	236,117	191,499
Ending balance, individually evaluated for impairment	392	611	392	611
Ending balance, collectively evaluated for impairment	235,725	190,888	235,725	190,888
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance	1,126	933	849	0
Impact of adopting ASC 326	1,182	864	1,182	864	849
Credit loss expense (benefit)	56	(69)	333	128
(Charge-offs), net recoveries	0	0	0	0
Ending balance	1,182	864	1,182	864
Real Estate: Construction and land development [Member] | Impact of ASC 326 Adoption
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance				327
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance				736
Impact of adopting ASC 326
Real Estate: Mortgage, farmland [Member]
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance	3,310	4,668	3,433	4,173
Charge-offs	(20)	(1)	(20)	(1)
Recoveries	247	25	290	25
Provision	(207)	212	(373)	(56)
Ending balance	3,330	4,904	3,330	4,904
Ending balance, individually evaluated for impairment	0	0	0	0
Ending balance, collectively evaluated for impairment	3,330	4,904	3,330	4,904
Loan [Abstract]
Total Loans Receivable	240,811	250,610	240,811	250,610	232,744
Ending balance, individually evaluated for impairment	1,747	1,575	1,747	1,575
Ending balance, collectively evaluated for impairment	239,064	249,035	239,064	249,035
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance	100	202	113	0
Impact of adopting ASC 326	115	107	115	107	113
Credit loss expense (benefit)	15	(95)	2	(73)
(Charge-offs), net recoveries	0	0	0	0
Ending balance	115	107	115	107
Real Estate: Mortgage, farmland [Member] | Impact of ASC 326 Adoption
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance				763
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance				180
Impact of adopting ASC 326
Real Estate: Mortgage, 1 to 4 family [Member]
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance	11,438	11,496	11,498	12,368
Charge-offs	(109)	(7)	(249)	(82)
Recoveries	336	269	543	508
Provision	568	(879)	441	(2,437)
Ending balance	12,233	10,879	12,233	10,879
Ending balance, individually evaluated for impairment	15	51	15	51
Ending balance, collectively evaluated for impairment	12,218	10,828	12,218	10,828
Loan [Abstract]
Total Loans Receivable	1,112,666	998,989	1,112,666	998,989
Ending balance, individually evaluated for impairment	5,351	6,175	5,351	6,175
Ending balance, collectively evaluated for impairment	1,107,315	992,814	1,107,315	992,814
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance	925	646	794	0
Impact of adopting ASC 326	1,025	791	1,025	791	794
Credit loss expense (benefit)	100	145	231	320
(Charge-offs), net recoveries	0	0	0	0
Ending balance	1,025	791	1,025	791
Real Estate: Mortgage, 1 to 4 family [Member] | Impact of ASC 326 Adoption
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance				522
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance				471
Impact of adopting ASC 326
Real Estate: Mortgage, multi-family and commercial [Member]
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance	10,234	9,621	10,498	9,415
Charge-offs	0	(10)	(1)	(10)
Recoveries	28	77	50	216
Provision	971	19	686	(1,310)
Ending balance	11,233	9,707	11,233	9,707
Ending balance, individually evaluated for impairment	314	162	314	162
Ending balance, collectively evaluated for impairment	10,919	9,545	10,919	9,545
Loan [Abstract]
Total Loans Receivable	806,703	798,617	806,703	798,617
Ending balance, individually evaluated for impairment	4,628	6,294	4,628	6,294
Ending balance, collectively evaluated for impairment	802,075	792,323	802,075	792,323
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance	593	250	559	0
Impact of adopting ASC 326	300	275	300	275	559
Credit loss expense (benefit)	(293)	25	(259)	63
(Charge-offs), net recoveries	0	0	0	0
Ending balance	300	275	300	275
Real Estate: Mortgage, multi-family and commercial [Member] | Impact of ASC 326 Adoption
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance				1,396
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance				212
Impact of adopting ASC 326
Others [Member]
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance	1,212	1,286	1,211	1,402
Charge-offs	(76)	(30)	(226)	(96)
Recoveries	21	40	64	77
Provision	76	(186)	184	(41)
Ending balance	1,233	1,110	1,233	1,110
Ending balance, individually evaluated for impairment	0	6	0	6
Ending balance, collectively evaluated for impairment	1,233	1,104	1,233	1,104
Loan [Abstract]
Total Loans Receivable	84,174	84,608	84,174	84,608
Ending balance, individually evaluated for impairment	0	6	0	6
Ending balance, collectively evaluated for impairment	84,174	84,602	84,174	84,602
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance	13	42	34	0
Impact of adopting ASC 326	53	30	53	30	$ 34
Credit loss expense (benefit)	40	(12)	19	15
(Charge-offs), net recoveries	0	0	0	0
Ending balance	$ 53	$ 30	$ 53	30
Others [Member] | Impact of ASC 326 Adoption
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance				(232)
Off-Balance Sheet, Credit Loss, Liability [Roll Forward]
Beginning balance				$ 15
Impact of adopting ASC 326

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Loans, Credit Quality Indicators (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021	Jun. 30, 2021
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	$ 2,806,063	$ 2,660,233	$ 2,683,769
Summary of credit quality indicators by type of loans [Abstract]
Total	2,806,299	2,660,532
Agricultural [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	96,917	106,933	89,694
Summary of credit quality indicators by type of loans [Abstract]
2020	23,228	23,275
2019	8,836	13,481
2018	7,394	3,395
2017	2,935	2,591
2016	2,211	626
Prior	372	345
Revolving Loans Amortized Cost Basis	51,941	63,220
Total	96,917	106,933
Commercial and Financial [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	228,675	222,002	269,752
Summary of credit quality indicators by type of loans [Abstract]
2020	46,371	79,683
2019	55,897	36,555
2018	26,042	13,003
2017	8,248	6,150
2016	3,973	2,904
Prior	3,543	2,245
Revolving Loans Amortized Cost Basis	84,601	81,462
Total	228,675	222,002
Real Estate Construction One to Four Family Residential [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	86,279	80,486
Summary of credit quality indicators by type of loans [Abstract]
2020	2,682	9,087
2019	4,895	94
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Revolving Loans Amortized Cost Basis	78,702	71,305
Total	86,279	80,486
Real Estate: Construction, land development and commercial [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	149,838	127,021
Summary of credit quality indicators by type of loans [Abstract]
2020	25,360	44,489
2019	19,585	6,399
2018	3,712	2,556
2017	1,433	301
2016	292	1,451
Prior	1,546	267
Revolving Loans Amortized Cost Basis	97,910	71,558
Total	149,838	127,021
Real Estate: Mortgage, farmland [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	240,811	232,744	$ 250,610
Summary of credit quality indicators by type of loans [Abstract]
2020	83,563	83,312
2019	66,675	71,152
2018	37,190	12,766
2017	9,424	14,826
2016	8,939	15,209
Prior	16,695	17,564
Revolving Loans Amortized Cost Basis	18,325	17,915
Total	240,811	232,744
Real Estate: Mortgage, 1 to 4 family first liens [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	996,935	909,564
Summary of credit quality indicators by type of loans [Abstract]
2020	231,398	271,633
2019	244,005	241,007
2018	193,149	79,642
2017	66,187	77,761
2016	63,561	73,046
Prior	180,675	151,468
Revolving Loans Amortized Cost Basis	17,960	15,007
Total	996,935	909,564
Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	115,731	114,342
Summary of credit quality indicators by type of loans [Abstract]
2020	8,139	14,383
2019	12,655	12,671
2018	10,587	6,134
2017	5,270	8,171
2016	6,018	5,594
Prior	10,082	7,025
Revolving Loans Amortized Cost Basis	62,980	60,364
Total	115,731	114,342
Real Estate: Mortgage, multi-family [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	399,360	382,792
Summary of credit quality indicators by type of loans [Abstract]
2020	111,920	165,576
2019	147,160	145,082
2018	90,031	16,186
2017	2,651	2,030
2016	479	1,692
Prior	25,881	31,793
Revolving Loans Amortized Cost Basis	21,238	20,433
Total	399,360	382,792
Real Estate: Mortgage, commercial [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	407,343	401,377
Summary of credit quality indicators by type of loans [Abstract]
2020	87,256	121,763
2019	108,635	158,497
2018	112,741	21,572
2017	17,597	15,857
2016	12,564	20,422
Prior	36,096	33,733
Revolving Loans Amortized Cost Basis	32,454	29,533
Total	407,343	401,377
Loans to individuals [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	34,001	32,687
Summary of credit quality indicators by type of loans [Abstract]
2020	8,060	12,411
2019	8,967	5,822
2018	3,790	2,335
2017	1,439	1,038
2016	636	150
Prior	11,025	10,870
Revolving Loans Amortized Cost Basis	84	61
Total	34,001	32,687
Obligations of state and political subdivisions [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	50,173	50,285
Summary of credit quality indicators by type of loans [Abstract]
2020	2,613	1,009
2019	844	4,951
2018	4,781	1,754
2017	1,722	955
2016	838	11,557
Prior	30,250	20,659
Revolving Loans Amortized Cost Basis	9,125	9,400
Total	50,173	50,285
Excellent [Member] | Agricultural [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	753	762
2019	55	213
2018	231	30
2017	58	10
2016	7	0
Prior	0	0
Revolving Loans Amortized Cost Basis	2,511	2,312
Total	3,615	3,327
Excellent [Member] | Commercial and Financial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	692	965
2019	825	924
2018	600	4
2017	3	235
2016	208	31
Prior	8	0
Revolving Loans Amortized Cost Basis	3,775	3,391
Total	6,111	5,550
Excellent [Member] | Real Estate Construction One to Four Family Residential [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	0	0
2019	0	0
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Revolving Loans Amortized Cost Basis	376	0
Total	376	0
Excellent [Member] | Real Estate: Construction, land development and commercial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	0	5,079
2019	0	0
2018	0	0
2017	0	0
2016	0	143
Prior	138	4
Revolving Loans Amortized Cost Basis	0	0
Total	138	5,226
Excellent [Member] | Real Estate: Mortgage, farmland [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	3,142	0
2019	58	3,568
2018	303	124
2017	75	60
2016	0	80
Prior	4	41
Revolving Loans Amortized Cost Basis	125	134
Total	3,707	4,007
Excellent [Member] | Real Estate: Mortgage, 1 to 4 family first liens [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	2,276	462
2019	456	914
2018	267	427
2017	0	19
2016	13	149
Prior	527	404
Revolving Loans Amortized Cost Basis	0	1
Total	3,539	2,376
Excellent [Member] | Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	17	0
2019	0	13
2018	10	0
2017	0	0
2016	0	0
Prior	0	0
Revolving Loans Amortized Cost Basis	9	6
Total	36	19
Excellent [Member] | Real Estate: Mortgage, multi-family [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	300	2,539
2019	2,493	4,513
2018	4,397	0
2017	0	0
2016	0	0
Prior	666	701
Revolving Loans Amortized Cost Basis	0	0
Total	7,856	7,753
Excellent [Member] | Real Estate: Mortgage, commercial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	2,154	597
2019	587	16,781
2018	16,045	0
2017	0	0
2016	0	3,313
Prior	1,227	350
Revolving Loans Amortized Cost Basis	0	1
Total	20,013	21,042
Excellent [Member] | Loans to individuals [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	8	0
2019	0	0
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Revolving Loans Amortized Cost Basis	0	0
Total	8	0
Excellent [Member] | Obligations of state and political subdivisions [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	0	0
2019	0	0
2018	0	0
2017	0	0
2016	0	0
Prior	5,313	6,076
Revolving Loans Amortized Cost Basis	0	0
Total	5,313	6,076
Good [Member] | Agricultural [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	1,978	1,799
2019	642	1,767
2018	1,241	603
2017	473	46
2016	37	52
Prior	26	26
Revolving Loans Amortized Cost Basis	3,589	7,593
Total	7,986	11,886
Good [Member] | Commercial and Financial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	7,000	13,722
2019	10,388	5,570
2018	3,379	1,105
2017	727	1,086
2016	163	276
Prior	1,449	1,494
Revolving Loans Amortized Cost Basis	11,165	20,709
Total	34,271	43,962
Good [Member] | Real Estate Construction One to Four Family Residential [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	313	212
2019	0	0
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Revolving Loans Amortized Cost Basis	22,614	18,755
Total	22,927	18,967
Good [Member] | Real Estate: Construction, land development and commercial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	2,220	3,294
2019	2,164	1,200
2018	1,101	0
2017	0	0
2016	0	153
Prior	382	242
Revolving Loans Amortized Cost Basis	17,405	12,678
Total	23,272	17,567
Good [Member] | Real Estate: Mortgage, farmland [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	16,970	17,827
2019	13,621	14,308
2018	8,187	2,144
2017	1,652	2,460
2016	1,042	5,932
Prior	5,041	3,929
Revolving Loans Amortized Cost Basis	5,329	3,844
Total	51,842	50,444
Good [Member] | Real Estate: Mortgage, 1 to 4 family first liens [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	19,280	9,598
2019	5,065	12,300
2018	9,391	3,124
2017	2,404	3,443
2016	2,208	3,091
Prior	10,825	10,943
Revolving Loans Amortized Cost Basis	2,181	2,496
Total	51,354	44,995
Good [Member] | Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	239	193
2019	191	611
2018	593	96
2017	94	0
2016	0	108
Prior	566	482
Revolving Loans Amortized Cost Basis	1,166	1,374
Total	2,849	2,864
Good [Member] | Real Estate: Mortgage, multi-family [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	18,486	16,931
2019	16,522	35,396
2018	17,353	1,555
2017	54	0
2016	0	0
Prior	8,930	9,289
Revolving Loans Amortized Cost Basis	0	0
Total	61,345	63,171
Good [Member] | Real Estate: Mortgage, commercial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	18,010	20,143
2019	24,265	36,773
2018	21,249	2,619
2017	2,125	1,356
2016	1,314	3,811
Prior	6,027	7,085
Revolving Loans Amortized Cost Basis	9,533	9,812
Total	82,523	81,599
Good [Member] | Loans to individuals [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	22	0
2019	0	0
2018	0	67
2017	45	21
2016	0	5
Prior	2	0
Revolving Loans Amortized Cost Basis	1	1
Total	70	94
Good [Member] | Obligations of state and political subdivisions [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	0	0
2019	0	1,984
2018	1,927	0
2017	0	0
2016	0	0
Prior	8,692	9,051
Revolving Loans Amortized Cost Basis	0	0
Total	10,619	11,035
Satisfactory [Member] | Agricultural [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	10,319	10,335
2019	4,783	6,404
2018	3,080	1,476
2017	1,396	1,770
2016	1,483	403
Prior	121	66
Revolving Loans Amortized Cost Basis	19,751	26,285
Total	40,933	46,739
Satisfactory [Member] | Commercial and Financial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	26,391	44,964
2019	32,870	20,847
2018	14,552	7,684
2017	5,754	3,582
2016	2,741	2,106
Prior	1,433	331
Revolving Loans Amortized Cost Basis	46,196	41,832
Total	129,937	121,346
Satisfactory [Member] | Real Estate Construction One to Four Family Residential [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	1,869	7,457
2019	4,375	94
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Revolving Loans Amortized Cost Basis	42,724	42,988
Total	48,968	50,539
Satisfactory [Member] | Real Estate: Construction, land development and commercial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	12,733	22,907
2019	12,602	4,354
2018	2,278	2,356
2017	1,426	263
2016	257	1,081
Prior	953	21
Revolving Loans Amortized Cost Basis	55,235	40,048
Total	85,484	71,030
Satisfactory [Member] | Real Estate: Mortgage, farmland [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	32,771	51,639
2019	45,082	35,616
2018	22,287	4,689
2017	3,419	8,358
2016	6,652	6,745
Prior	10,367	8,339
Revolving Loans Amortized Cost Basis	8,397	8,242
Total	128,975	123,628
Satisfactory [Member] | Real Estate: Mortgage, 1 to 4 family first liens [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	190,737	233,412
2019	212,478	189,247
2018	150,566	69,037
2017	57,191	65,201
2016	53,518	60,906
Prior	148,026	118,608
Revolving Loans Amortized Cost Basis	11,104	8,443
Total	823,620	744,854
Satisfactory [Member] | Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	7,411	13,684
2019	11,978	10,116
2018	8,706	5,854
2017	4,956	7,309
2016	5,624	5,230
Prior	9,004	6,053
Revolving Loans Amortized Cost Basis	58,495	55,496
Total	106,174	103,742
Satisfactory [Member] | Real Estate: Mortgage, multi-family [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	49,308	107,192
2019	104,276	69,287
2018	41,362	13,635
2017	2,424	2,030
2016	479	1,561
Prior	14,928	14,660
Revolving Loans Amortized Cost Basis	16,736	14,764
Total	229,513	223,129
Satisfactory [Member] | Real Estate: Mortgage, commercial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	36,176	75,040
2019	66,129	52,653
2018	41,503	14,727
2017	11,320	12,091
2016	9,611	9,707
Prior	19,860	17,398
Revolving Loans Amortized Cost Basis	18,189	16,333
Total	202,788	197,949
Satisfactory [Member] | Loans to individuals [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	7,782	12,162
2019	8,686	5,606
2018	3,680	2,212
2017	1,359	967
2016	602	141
Prior	11,023	10,867
Revolving Loans Amortized Cost Basis	76	57
Total	33,208	32,012
Satisfactory [Member] | Obligations of state and political subdivisions [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	2,613	1,009
2019	844	2,034
2018	2,005	1,551
2017	1,530	706
2016	593	11,557
Prior	14,437	3,634
Revolving Loans Amortized Cost Basis	9,125	9,400
Total	31,147	29,891
Monitor [Member] | Agricultural [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	9,353	8,125
2019	3,276	5,017
2018	2,547	998
2017	947	765
2016	501	164
Prior	225	253
Revolving Loans Amortized Cost Basis	23,031	23,995
Total	39,880	39,317
Monitor [Member] | Commercial and Financial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	10,748	18,337
2019	11,002	8,019
2018	7,108	3,591
2017	1,501	1,123
2016	815	297
Prior	643	416
Revolving Loans Amortized Cost Basis	21,034	13,368
Total	52,851	45,151
Monitor [Member] | Real Estate Construction One to Four Family Residential [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	500	1,307
2019	415	0
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Revolving Loans Amortized Cost Basis	12,988	9,187
Total	13,903	10,494
Monitor [Member] | Real Estate: Construction, land development and commercial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	3,407	5,694
2019	4,628	547
2018	237	7
2017	7	38
2016	35	74
Prior	73	0
Revolving Loans Amortized Cost Basis	25,270	18,832
Total	33,657	25,192
Monitor [Member] | Real Estate: Mortgage, farmland [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	25,472	8,532
2019	6,773	16,925
2018	6,133	5,518
2017	3,932	3,901
2016	898	2,154
Prior	1,065	4,866
Revolving Loans Amortized Cost Basis	4,474	5,695
Total	48,747	47,591
Monitor [Member] | Real Estate: Mortgage, 1 to 4 family first liens [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	17,804	24,908
2019	23,059	33,863
2018	28,049	5,038
2017	4,834	6,527
2016	5,525	7,273
Prior	12,069	12,203
Revolving Loans Amortized Cost Basis	4,675	4,066
Total	96,015	93,878
Monitor [Member] | Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	417	326
2019	293	1,233
2018	731	70
2017	84	365
2016	290	140
Prior	246	281
Revolving Loans Amortized Cost Basis	2,827	2,801
Total	4,888	5,216
Monitor [Member] | Real Estate: Mortgage, multi-family [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	43,826	26,088
2019	23,869	35,886
2018	26,919	176
2017	173	0
2016	0	131
Prior	1,357	1,584
Revolving Loans Amortized Cost Basis	4,502	5,669
Total	100,646	69,534
Monitor [Member] | Real Estate: Mortgage, commercial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	30,649	18,664
2019	11,130	49,774
2018	31,615	3,923
2017	3,853	2,202
2016	1,440	3,037
Prior	8,090	8,461
Revolving Loans Amortized Cost Basis	4,732	3,387
Total	91,509	89,448
Monitor [Member] | Loans to individuals [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	186	200
2019	225	160
2018	74	15
2017	27	46
2016	32	3
Prior	0	0
Revolving Loans Amortized Cost Basis	3	1
Total	547	425
Monitor [Member] | Obligations of state and political subdivisions [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	0	0
2019	0	933
2018	849	203
2017	192	249
2016	245	0
Prior	1,808	1,898
Revolving Loans Amortized Cost Basis	0	0
Total	3,094	3,283
Special Mention [Member] | Agricultural [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	825	1,662
2019	80	11
2018	260	85
2017	3	0
2016	183	7
Prior	0	0
Revolving Loans Amortized Cost Basis	1,092	2,807
Total	2,443	4,572
Special Mention [Member] | Commercial and Financial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	397	603
2019	417	525
2018	403	353
2017	207	70
2016	46	102
Prior	10	4
Revolving Loans Amortized Cost Basis	442	174
Total	1,922	1,831
Special Mention [Member] | Real Estate Construction One to Four Family Residential [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	0	0
2019	0	0
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Revolving Loans Amortized Cost Basis	0	374
Total	0	374
Special Mention [Member] | Real Estate: Construction, land development and commercial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	0	0
2019	0	0
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Revolving Loans Amortized Cost Basis	0	0
Total	0	0
Special Mention [Member] | Real Estate: Mortgage, farmland [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	4,187	4,031
2019	96	288
2018	280	0
2017	286	0
2016	303	298
Prior	28	190
Revolving Loans Amortized Cost Basis	0	0
Total	5,180	4,807
Special Mention [Member] | Real Estate: Mortgage, 1 to 4 family first liens [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	988	1,682
2019	1,591	3,422
2018	3,204	887
2017	1,026	962
2016	1,067	1,051
Prior	4,481	3,168
Revolving Loans Amortized Cost Basis	0	0
Total	12,357	11,172
Special Mention [Member] | Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	31	103
2019	133	489
2018	344	35
2017	33	56
2016	43	42
Prior	202	110
Revolving Loans Amortized Cost Basis	106	142
Total	892	977
Special Mention [Member] | Real Estate: Mortgage, multi-family [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	0	640
2019	0	0
2018	0	820
2017	0	0
2016	0	0
Prior	0	0
Revolving Loans Amortized Cost Basis	0	0
Total	0	1,460
Special Mention [Member] | Real Estate: Mortgage, commercial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	0	5,791
2019	5,955	795
2018	467	303
2017	170	0
2016	0	554
Prior	793	337
Revolving Loans Amortized Cost Basis	0	0
Total	7,385	7,780
Special Mention [Member] | Loans to individuals [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	42	37
2019	37	32
2018	29	29
2017	2	4
2016	2	0
Prior	0	0
Revolving Loans Amortized Cost Basis	1	1
Total	113	103
Special Mention [Member] | Obligations of state and political subdivisions [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	0	0
2019	0	0
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Revolving Loans Amortized Cost Basis	0	0
Total	0	0
Substandard [Member] | Agricultural [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	0	592
2019	0	69
2018	35	203
2017	58	0
2016	0	0
Prior	0	0
Revolving Loans Amortized Cost Basis	1,967	228
Total	2,060	1,092
Substandard [Member] | Commercial and Financial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	1,143	1,092
2019	395	670
2018	0	266
2017	56	54
2016	0	92
Prior	0	0
Revolving Loans Amortized Cost Basis	1,989	1,988
Total	3,583	4,162
Substandard [Member] | Real Estate Construction One to Four Family Residential [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	0	111
2019	105	0
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Revolving Loans Amortized Cost Basis	0	1
Total	105	112
Substandard [Member] | Real Estate: Construction, land development and commercial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	7,000	7,515
2019	191	298
2018	96	193
2017	0	0
2016	0	0
Prior	0	0
Revolving Loans Amortized Cost Basis	0	0
Total	7,287	8,006
Substandard [Member] | Real Estate: Mortgage, farmland [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	1,021	1,283
2019	1,045	447
2018	0	291
2017	60	47
2016	44	0
Prior	190	199
Revolving Loans Amortized Cost Basis	0	0
Total	2,360	2,267
Substandard [Member] | Real Estate: Mortgage, 1 to 4 family first liens [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	313	1,571
2019	1,356	1,261
2018	1,672	1,129
2017	732	1,609
2016	1,230	576
Prior	4,747	6,142
Revolving Loans Amortized Cost Basis	0	1
Total	10,050	12,289
Substandard [Member] | Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	24	77
2019	60	209
2018	203	79
2017	103	441
2016	61	74
Prior	64	99
Revolving Loans Amortized Cost Basis	377	545
Total	892	1,524
Substandard [Member] | Real Estate: Mortgage, multi-family [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	0	12,186
2019	0	0
2018	0	0
2017	0	0
2016	0	0
Prior	0	5,559
Revolving Loans Amortized Cost Basis	0	0
Total	0	17,745
Substandard [Member] | Real Estate: Mortgage, commercial [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	267	1,528
2019	569	1,721
2018	1,862	0
2017	129	208
2016	199	0
Prior	99	102
Revolving Loans Amortized Cost Basis	0	0
Total	3,125	3,559
Substandard [Member] | Loans to individuals [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	20	12
2019	19	24
2018	7	12
2017	6	0
2016	0	1
Prior	0	3
Revolving Loans Amortized Cost Basis	3	1
Total	55	53
Substandard [Member] | Obligations of state and political subdivisions [Member]
Summary of credit quality indicators by type of loans [Abstract]
2020	0	0
2019	0	0
2018	0	0
2017	0	0
2016	0	0
Prior	0	0
Revolving Loans Amortized Cost Basis	0	0
Total	$ 0	$ 0

XML

Loans, Past Due Receivables (Details) $ in Thousands	Jun. 30, 2022 USD ($)	Dec. 31, 2021 USD ($)	Jun. 30, 2021 USD ($)
Financing Receivable, Past Due [Line Items]
Number of accruing loans past due 90 days or more	5	6
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	$ 2,806,299	$ 2,660,532
Total Loans Receivable	2,806,063	2,660,233	$ 2,683,769
Accruing Loans Past Due 90 Days or More	672	201
Agricultural [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	96,917	106,933
Total Loans Receivable	96,917	106,933	89,694
Accruing Loans Past Due 90 Days or More	0	6
Commercial and Financial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	228,675	222,002
Total Loans Receivable	228,675	222,002	269,752
Accruing Loans Past Due 90 Days or More	200	91
Real Estate Construction One to Four Family Residential [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	86,279	80,486
Total Loans Receivable	86,279	80,486
Accruing Loans Past Due 90 Days or More	0	0
Real Estate: Construction, land development and commercial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	149,838	127,021
Total Loans Receivable	149,838	127,021
Accruing Loans Past Due 90 Days or More	0	0
Real Estate: Mortgage, farmland [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	240,811	232,744
Total Loans Receivable	240,811	232,744	$ 250,610
Accruing Loans Past Due 90 Days or More	0	0
Real Estate: Mortgage, 1 to 4 family first liens [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	996,935	909,564
Total Loans Receivable	996,935	909,564
Accruing Loans Past Due 90 Days or More	285	104
Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	115,731	114,342
Total Loans Receivable	115,731	114,342
Accruing Loans Past Due 90 Days or More	0	0
Real Estate: Mortgage, multi-family [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	399,360	382,792
Total Loans Receivable	399,360	382,792
Accruing Loans Past Due 90 Days or More	0	0
Real Estate: Mortgage, commercial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	407,343	401,377
Total Loans Receivable	407,343	401,377
Accruing Loans Past Due 90 Days or More	187	0
Loans to individuals [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	34,001	32,687
Total Loans Receivable	34,001	32,687
Accruing Loans Past Due 90 Days or More	0	0
State and political subdivisions [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	50,173	50,285
Total Loans Receivable	50,173	50,285
Accruing Loans Past Due 90 Days or More	0	0
30 - 59 Days Past Due [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	3,991	8,322
30 - 59 Days Past Due [Member] | Agricultural [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	213	41
30 - 59 Days Past Due [Member] | Commercial and Financial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	948	300
30 - 59 Days Past Due [Member] | Real Estate Construction One to Four Family Residential [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	623	276
30 - 59 Days Past Due [Member] | Real Estate: Construction, land development and commercial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	495	194
30 - 59 Days Past Due [Member] | Real Estate: Mortgage, farmland [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	223	503
30 - 59 Days Past Due [Member] | Real Estate: Mortgage, 1 to 4 family first liens [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	930	5,085
30 - 59 Days Past Due [Member] | Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	101	246
30 - 59 Days Past Due [Member] | Real Estate: Mortgage, multi-family [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	0	640
30 - 59 Days Past Due [Member] | Real Estate: Mortgage, commercial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	296	466
30 - 59 Days Past Due [Member] | Loans to individuals [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	162	177
30 - 59 Days Past Due [Member] | State and political subdivisions [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	0	394
60 - 89 Days Past Due [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	3,163	1,896
60 - 89 Days Past Due [Member] | Agricultural [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	80	0
60 - 89 Days Past Due [Member] | Commercial and Financial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	59	537
60 - 89 Days Past Due [Member] | Real Estate Construction One to Four Family Residential [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	104	0
60 - 89 Days Past Due [Member] | Real Estate: Construction, land development and commercial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	191	66
60 - 89 Days Past Due [Member] | Real Estate: Mortgage, farmland [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	0	362
60 - 89 Days Past Due [Member] | Real Estate: Mortgage, 1 to 4 family first liens [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	2,492	864
60 - 89 Days Past Due [Member] | Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	198	41
60 - 89 Days Past Due [Member] | Real Estate: Mortgage, multi-family [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	0	0
60 - 89 Days Past Due [Member] | Real Estate: Mortgage, commercial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	0	0
60 - 89 Days Past Due [Member] | Loans to individuals [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	39	26
60 - 89 Days Past Due [Member] | State and political subdivisions [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	0	0
90 Days or More Past Due [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	3,851	4,222
90 Days or More Past Due [Member] | Agricultural [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	0	219
90 Days or More Past Due [Member] | Commercial and Financial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	200	468
90 Days or More Past Due [Member] | Real Estate Construction One to Four Family Residential [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	0	0
90 Days or More Past Due [Member] | Real Estate: Construction, land development and commercial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	96	96
90 Days or More Past Due [Member] | Real Estate: Mortgage, farmland [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	60	0
90 Days or More Past Due [Member] | Real Estate: Mortgage, 1 to 4 family first liens [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	2,036	2,481
90 Days or More Past Due [Member] | Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	120	124
90 Days or More Past Due [Member] | Real Estate: Mortgage, multi-family [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	0	0
90 Days or More Past Due [Member] | Real Estate: Mortgage, commercial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	1,339	829
90 Days or More Past Due [Member] | Loans to individuals [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	0	5
90 Days or More Past Due [Member] | State and political subdivisions [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	0	0
Financial Asset, Past Due
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	11,005	14,440
Financial Asset, Past Due | Agricultural [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	293	260
Financial Asset, Past Due | Commercial and Financial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	1,207	1,305
Financial Asset, Past Due | Real Estate Construction One to Four Family Residential [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	727	276
Financial Asset, Past Due | Real Estate: Construction, land development and commercial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	782	356
Financial Asset, Past Due | Real Estate: Mortgage, farmland [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	283	865
Financial Asset, Past Due | Real Estate: Mortgage, 1 to 4 family first liens [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	5,458	8,430
Financial Asset, Past Due | Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	419	411
Financial Asset, Past Due | Real Estate: Mortgage, multi-family [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	0	640
Financial Asset, Past Due | Real Estate: Mortgage, commercial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	1,635	1,295
Financial Asset, Past Due | Loans to individuals [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	201	208
Financial Asset, Past Due | State and political subdivisions [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	0	394
Financial Asset, Not Past Due
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	2,795,058	2,645,793
Financial Asset, Not Past Due | Agricultural [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	96,624	106,673
Financial Asset, Not Past Due | Commercial and Financial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	227,468	220,697
Financial Asset, Not Past Due | Real Estate Construction One to Four Family Residential [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	85,552	80,210
Financial Asset, Not Past Due | Real Estate: Construction, land development and commercial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	149,056	126,665
Financial Asset, Not Past Due | Real Estate: Mortgage, farmland [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	240,528	231,879
Financial Asset, Not Past Due | Real Estate: Mortgage, 1 to 4 family first liens [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	991,477	901,134
Financial Asset, Not Past Due | Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	115,312	113,931
Financial Asset, Not Past Due | Real Estate: Mortgage, multi-family [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	399,360	382,152
Financial Asset, Not Past Due | Real Estate: Mortgage, commercial [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	405,708	400,082
Financial Asset, Not Past Due | Loans to individuals [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	33,800	32,479
Financial Asset, Not Past Due | State and political subdivisions [Member]
Schedule of past due loans [Abstract]
Financing Receivable, before Allowance for Credit Loss	$ 50,173	$ 49,891

XML

Loans, Impaired Financing Receivable Loan Type (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($)	Dec. 31, 2021 USD ($)
Summary of certain impaired loan information [Abstract]
Non-accrual loans	$ 7,057	$ 8,491
Accruing loans past due 90 days or more	672	201
TDR loans	6,232	$ 7,921
Decrease accruing loans past due 90 days or more	$ 470
Number of accruing loans past due 90 days or more	5	6
Average 90 days or more past due loan balance	$ 130	$ 30
Agricultural [Member]
Summary of certain impaired loan information [Abstract]
Non-accrual loans	0	221
Accruing loans past due 90 days or more	0	6
TDR loans	27	374
Commercial and financial [Member]
Summary of certain impaired loan information [Abstract]
Non-accrual loans	715	707
Accruing loans past due 90 days or more	200	91
TDR loans	721	1,085
Real Estate Construction One to Four Family Residential [Member]
Summary of certain impaired loan information [Abstract]
Non-accrual loans	105	111
Accruing loans past due 90 days or more	0	0
TDR loans	0	0
Real Estate: Construction, land development and commercial [Member]
Summary of certain impaired loan information [Abstract]
Non-accrual loans	287	290
Accruing loans past due 90 days or more	0	0
TDR loans	0	202
Real Estate: Mortgage, farmland [Member]
Summary of certain impaired loan information [Abstract]
Non-accrual loans	104	251
Accruing loans past due 90 days or more	0	0
TDR loans	1,642	1,206
Real Estate: Mortgage, 1 to 4 family first liens [Member]
Summary of certain impaired loan information [Abstract]
Non-accrual loans	3,892	4,685
Accruing loans past due 90 days or more	285	104
TDR loans	1,216	1,364
Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Summary of certain impaired loan information [Abstract]
Non-accrual loans	120	200
Accruing loans past due 90 days or more	0	0
TDR loans	19	20
Real Estate: Mortgage, multi-family [Member]
Summary of certain impaired loan information [Abstract]
Non-accrual loans	0	0
Accruing loans past due 90 days or more	0	0
TDR loans	628	1,460
Real Estate: Mortgage, commercial [Member]
Summary of certain impaired loan information [Abstract]
Non-accrual loans	1,834	2,026
Accruing loans past due 90 days or more	187	0
TDR loans	1,979	2,210
Loans to individuals [Member]
Summary of certain impaired loan information [Abstract]
Non-accrual loans	0	0
Accruing loans past due 90 days or more	0	0
TDR loans	0	0
Troubled Debt Restructuring [Member]
Summary of certain impaired loan information [Abstract]
TDR Loans included within nonaccrual loans	2,660	2,280
Obligations of state and political subdivisions [Member]
Summary of certain impaired loan information [Abstract]
Non-accrual loans	0	0
Accruing loans past due 90 days or more	0	0
TDR loans	$ 0	$ 0

XML

Loans, Troubled Debt Restructuring (Details) $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2022 USD ($) contract	Jun. 30, 2022 USD ($) contract loan	Dec. 31, 2021 USD ($) contract loan
Summary of information for TDR loans [Abstract]
Number of contracts | contract		40	50
Recorded investment	$ 8,897	$ 8,897	$ 10,197
Commitments outstanding	$ 165	$ 165	60
Summary of troubled debt restructuring loans were modified [Abstract]
Number of contracts | contract	2	6
Pre-modification recorded investment	$ 1,021	$ 1,962
Post-modification recorded investment	1,021	1,962
Allowance for TDR loans	390	390
Commitments to lend additional borrowings	$ 170	$ 170	$ 60
Number of TDR loans default payment | loan		0	0
COVID-19 Related
Summary of troubled debt restructuring loans were modified [Abstract]
Financing Receivable, Modifications, Principal Deferred, Number Of Loans | loan		16	16
Financing Receivable, Modifications, Principal Deferred		$ 7,500	$ 9,400
Financing Receivable, Modifications, Payment Deferrals At Period End, Total Loans, Percent	0.06%	0.06%	0.12%
Agricultural [Member]
Summary of information for TDR loans [Abstract]
Number of contracts | contract		1	4
Recorded investment	$ 27	$ 27	$ 586
Commitments outstanding	$ 115	$ 115	$ 0
Summary of troubled debt restructuring loans were modified [Abstract]
Number of contracts | contract	0	0
Pre-modification recorded investment	$ 0	$ 0
Post-modification recorded investment	0	$ 0
Commercial and Financial [Member]
Summary of information for TDR loans [Abstract]
Number of contracts | contract		11	12
Recorded investment	1,385	$ 1,385	$ 1,116
Commitments outstanding	$ 50	$ 50	$ 60
Summary of troubled debt restructuring loans were modified [Abstract]
Number of contracts | contract	0	1
Pre-modification recorded investment	$ 0	$ 371
Post-modification recorded investment	0	$ 371
Real Estate Construction One to Four Family Residential [Member]
Summary of information for TDR loans [Abstract]
Number of contracts | contract		1	0
Recorded investment	105	$ 105	$ 0
Commitments outstanding	$ 0	$ 0	$ 0
Summary of troubled debt restructuring loans were modified [Abstract]
Number of contracts | contract	0	1
Pre-modification recorded investment	$ 0	$ 105
Post-modification recorded investment	0	$ 105
Real Estate: Construction, land development and commercial [Member]
Summary of information for TDR loans [Abstract]
Number of contracts | contract		1	1
Recorded investment	191	$ 191	$ 202
Commitments outstanding	$ 0	$ 0	$ 0
Summary of troubled debt restructuring loans were modified [Abstract]
Number of contracts | contract	0	1
Pre-modification recorded investment	$ 0	$ 191
Post-modification recorded investment	0	$ 191
Real Estate: Mortgage, farmland [Member]
Summary of information for TDR loans [Abstract]
Number of contracts | contract		4	5
Recorded investment	1,642	$ 1,642	$ 1,409
Commitments outstanding	$ 0	$ 0	$ 0
Summary of troubled debt restructuring loans were modified [Abstract]
Number of contracts | contract	2	2
Pre-modification recorded investment	$ 1,021	$ 1,021
Post-modification recorded investment	1,021	$ 1,021
Real Estate: Mortgage, 1 to 4 family first liens [Member]
Summary of information for TDR loans [Abstract]
Number of contracts | contract		9	14
Recorded investment	1,216	$ 1,216	$ 1,441
Commitments outstanding	$ 0	$ 0	$ 0
Summary of troubled debt restructuring loans were modified [Abstract]
Number of contracts | contract	0	0
Pre-modification recorded investment	$ 0	$ 0
Post-modification recorded investment	0	$ 0
Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Summary of information for TDR loans [Abstract]
Number of contracts | contract		1	1
Recorded investment	19	$ 19	$ 20
Commitments outstanding	$ 0	$ 0	$ 0
Summary of troubled debt restructuring loans were modified [Abstract]
Number of contracts | contract	0	0
Pre-modification recorded investment	$ 0	$ 0
Post-modification recorded investment	0	$ 0
Real Estate: Mortgage, multi-family [Member]
Summary of information for TDR loans [Abstract]
Number of contracts | contract		1	2
Recorded investment	628	$ 628	$ 1,460
Commitments outstanding	$ 0	$ 0	$ 0
Summary of troubled debt restructuring loans were modified [Abstract]
Number of contracts | contract	0	0
Pre-modification recorded investment	$ 0	$ 0
Post-modification recorded investment	0	$ 0
Real Estate: Mortgage, commercial [Member]
Summary of information for TDR loans [Abstract]
Number of contracts | contract		11	11
Recorded investment	3,684	$ 3,684	$ 3,963
Commitments outstanding	$ 0	$ 0	$ 0
Summary of troubled debt restructuring loans were modified [Abstract]
Number of contracts | contract	0	1
Pre-modification recorded investment	$ 0	$ 274
Post-modification recorded investment	0	$ 274
Loans to individuals [Member]
Summary of information for TDR loans [Abstract]
Number of contracts | contract		0	0
Recorded investment	0	$ 0	$ 0
Commitments outstanding	$ 0	$ 0	$ 0
Summary of troubled debt restructuring loans were modified [Abstract]
Number of contracts | contract	0	0
Pre-modification recorded investment	$ 0	$ 0
Post-modification recorded investment	0	$ 0
Obligations of state and political subdivisions [Member]
Summary of information for TDR loans [Abstract]
Number of contracts | contract		0	0
Recorded investment	0	$ 0	$ 0
Commitments outstanding	$ 0	$ 0	$ 0
Summary of troubled debt restructuring loans were modified [Abstract]
Number of contracts | contract	0	0
Pre-modification recorded investment	$ 0	$ 0
Post-modification recorded investment	$ 0	$ 0

XML

Loans, Collateral Dependent Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021	Jun. 30, 2021	Mar. 31, 2021	Jan. 01, 2021	Dec. 31, 2020
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	$ 2,806,299		$ 2,660,532
ACL Allocation	38,260	$ 35,850	35,470	$ 35,940	$ 36,620	$ 37,070	$ 37,070
Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	13,682,000		16,468,000
Accounts Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Equipment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	280,000		165,000
Other Collateral [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Total [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	13,962,000		16,633,000
ACL Allocation	389,000		384,000
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	96,917		106,933
ACL Allocation	2,265	2,414	2,261	2,055	2,147		2,508
Agricultural [Member] | Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	207,000		734,000
Agricultural [Member] | Accounts Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Agricultural [Member] | Equipment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		54,000
Agricultural [Member] | Other Collateral [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Agricultural [Member] | Total [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	207,000		788,000
ACL Allocation	0		1,000
Commercial and Financial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	228,675		222,002
ACL Allocation	5,194	4,895	4,269	4,802	5,114		4,885
Commercial and Financial [Member] | Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	1,544,000		1,951,000
Commercial and Financial [Member] | Accounts Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Commercial and Financial [Member] | Equipment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	93,000		111,000
Commercial and Financial [Member] | Other Collateral [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Commercial and Financial [Member] | Total [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	1,637,000		2,062,000
ACL Allocation	5,000		189,000
Real Estate Construction One to Four Family Residential [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	86,279		80,486
Real Estate Construction One to Four Family Residential [Member] | Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	105,000		111,000
Real Estate Construction One to Four Family Residential [Member] | Accounts Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate Construction One to Four Family Residential [Member] | Equipment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate Construction One to Four Family Residential [Member] | Other Collateral [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate Construction One to Four Family Residential [Member] | Total [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	105,000		111,000
ACL Allocation	55,000		111,000
Real Estate: Construction, land development and commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	149,838		127,021
Real Estate: Construction, land development and commercial [Member] | Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	287,000		492,000
Real Estate: Construction, land development and commercial [Member] | Accounts Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Construction, land development and commercial [Member] | Equipment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Construction, land development and commercial [Member] | Other Collateral [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Construction, land development and commercial [Member] | Total [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	287,000		492,000
ACL Allocation	0		13,000
Real Estate: Mortgage, farmland [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	240,811		232,744
ACL Allocation	3,330	$ 3,310	3,433	$ 4,904	$ 4,668		$ 4,173
Real Estate: Mortgage, farmland [Member] | Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	1,560,000		1,277,000
Real Estate: Mortgage, farmland [Member] | Accounts Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Mortgage, farmland [Member] | Equipment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	187,000		0
Real Estate: Mortgage, farmland [Member] | Other Collateral [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Mortgage, farmland [Member] | Total [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	1,747,000		1,277,000
ACL Allocation	0		0
Real Estate: Mortgage, 1 to 4 family first liens [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	996,935		909,564
Real Estate: Mortgage, 1 to 4 family first liens [Member] | Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	5,212,000		5,967,000
Real Estate: Mortgage, 1 to 4 family first liens [Member] | Accounts Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Mortgage, 1 to 4 family first liens [Member] | Equipment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Mortgage, 1 to 4 family first liens [Member] | Other Collateral [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Mortgage, 1 to 4 family first liens [Member] | Total [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	5,212,000		5,967,000
ACL Allocation	9,000		31,000
Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	115,731		114,342
Real Estate: Mortgage, 1 to 4 family junior liens [Member] | Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	139,000		220,000
Real Estate: Mortgage, 1 to 4 family junior liens [Member] | Accounts Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Mortgage, 1 to 4 family junior liens [Member] | Equipment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Mortgage, 1 to 4 family junior liens [Member] | Other Collateral [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Mortgage, 1 to 4 family junior liens [Member] | Total [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	139,000		220,000
ACL Allocation	6,000		18,000
Real Estate: Mortgage, multi-family [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	399,360		382,792
Real Estate: Mortgage, multi-family [Member] | Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	628,000		1,460,000
Real Estate: Mortgage, multi-family [Member] | Accounts Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Mortgage, multi-family [Member] | Equipment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Mortgage, multi-family [Member] | Other Collateral [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Mortgage, multi-family [Member] | Total [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	628,000		1,460,000
ACL Allocation	0		0
Real Estate: Mortgage, commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	407,343		401,377
Real Estate: Mortgage, commercial [Member] | Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	4,000,000		4,236,000
Real Estate: Mortgage, commercial [Member] | Accounts Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Mortgage, commercial [Member] | Equipment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Mortgage, commercial [Member] | Other Collateral [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Real Estate: Mortgage, commercial [Member] | Total [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	4,000,000		4,236,000
ACL Allocation	314,000		1,000
Loans to individuals [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	34,001		32,687
Loans to individuals [Member] | Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		20,000
Loans to individuals [Member] | Accounts Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Loans to individuals [Member] | Equipment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Loans to individuals [Member] | Other Collateral [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Loans to individuals [Member] | Total [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		20,000
ACL Allocation	0		20,000
Obligations of state and political subdivisions [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	50,173		50,285
Obligations of state and political subdivisions [Member] | Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Obligations of state and political subdivisions [Member] | Accounts Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Obligations of state and political subdivisions [Member] | Equipment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Obligations of state and political subdivisions [Member] | Other Collateral [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
Obligations of state and political subdivisions [Member] | Total [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	0		0
ACL Allocation	$ 0		$ 0

XML

Loans, Impaired Financing Receivables Activity (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Summary of Information regarding impaired loans [Abstract]
Decrease in impaired loans	$ 2,670
Percentages of impaired loans to loans held for investment (in hundredths)	0.50%	0.63%
Decrease in TDR loans	$ 1,690
Decrease in nonaccrual loans	1,430
Increase (Decrease) accruing loans past days or more financing receivable unpaid principal balance	$ 470
Prior period within which impairment is being measured	1 year
Number of period within which average appraisals obtained	1 month
Financing Receivable, Allowance for Credit Losses, change due to historical loss rates	$ 840
Financing Receivable, Allowance for Credit Losses, change due to individually analyzed loans reserve	20
Financing Receivable, Allowance for Credit Losses, change due to qualitative factors	$ 320

XML

Leases (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Lessee, Lease, Description [Line Items]
Operating lease, renewal term	10 years
Operating lease, option to termination term	1 year
Operating lease expense	$ 300	$ 290
Operating lease cost	260	250
Short-term lease cost	20	20
Variable lease cost	20	20
Operating lease payments	260	$ 250
Operating lease, right-of-use asset	2,310		$ 2,470
Total operating lease liabilities	$ 2,388		$ 2,530
Weighted average remaining lease term	9 years 9 months		9 years 11 months 8 days
Weighted average discount rate	3.50%		3.49%
Minimum [Member]
Lessee, Lease, Description [Line Items]
Operating lease, term	1 year
Maximum [Member]
Lessee, Lease, Description [Line Items]
Operating lease, term	15 years

XML

Leases - Minimum Future Rental Commitments, Topic 842 (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Leases [Abstract]
2022 (excluding the six months ended June 30, 2022)	$ 235
2023	327
2024	260
2025	263
2026	266
Thereafter	1,503
Total lease payments	2,854
Less imputed interest	(466)
Total operating lease liabilities	$ 2,388	$ 2,530

XML

Fair Value Measurements (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Deposits
Other borrowings	$ 0	$ 249
Readily Available Market Prices [Member]
Financial instrument assets:
Cash and cash equivalents	307,493	781,918
Investment securities	462,110	243,925
Loans held for sale	0	0
Loans
Agricultural	0	0
Commercial and financial	0	0
Real estate:
Construction, 1 to 4 family residential	0	0
Construction, land development and commercial	0	0
Mortgage, farmland	0	0
Mortgage, 1 to 4 family first liens	0	0
Mortgage, 1 to 4 family junior liens	0	0
Mortgage, multi-family	0	0
Mortgage, commercial	0	0
Loans to individuals	0	0
Obligations of state and political subdivisions	0	0
Accrued interest receivable	0	0
Total financial instrument assets	769,603	1,025,843
Deposits
Noninterest-bearing deposits	0	0
Interest-bearing deposits	0	0
Other borrowings		0
Federal Home Loan Bank borrowings		0
Accrued interest payable	0	0
Total financial instrument liabilities	0	0
Financial instrument with off-balance sheet risk:
Loan commitments	0	0
Letters of credit	0	0
Total financial instrument liabilities with off-balance-sheet risk	0	0
Observable Market Prices [Member]
Financial instrument assets:
Cash and cash equivalents	0	0
Investment securities	310,173	311,975
Loans held for sale	1,600	5,716
Loans
Agricultural	0	0
Commercial and financial	0	0
Real estate:
Construction, 1 to 4 family residential	0	0
Construction, land development and commercial	0	0
Mortgage, farmland	0	0
Mortgage, 1 to 4 family first liens	0	0
Mortgage, 1 to 4 family junior liens	0	0
Mortgage, multi-family	0	0
Mortgage, commercial	0	0
Loans to individuals	0	0
Obligations of state and political subdivisions	0	0
Accrued interest receivable	12,739	11,437
Total financial instrument assets	324,512	329,128
Deposits
Noninterest-bearing deposits	645,934	633,101
Interest-bearing deposits	2,802,676	2,909,243
Other borrowings		249
Federal Home Loan Bank borrowings		0
Accrued interest payable	1,037	1,165
Total financial instrument liabilities	3,449,647	3,543,758
Financial instrument with off-balance sheet risk:
Loan commitments	0	0
Letters of credit	0	0
Total financial instrument liabilities with off-balance-sheet risk	0	0
Company Determined Market Prices [Member]
Financial instrument assets:
Cash and cash equivalents	0	0
Investment securities	0	0
Loans held for sale	0	0
Loans
Agricultural	93,966	103,745
Commercial and financial	221,571	216,466
Real estate:
Construction, 1 to 4 family residential	85,158	79,311
Construction, land development and commercial	145,508	124,466
Mortgage, farmland	231,825	228,365
Mortgage, 1 to 4 family first liens	971,999	897,255
Mortgage, 1 to 4 family junior liens	110,958	110,903
Mortgage, multi-family	387,871	378,193
Mortgage, commercial	392,252	391,950
Loans to individuals	32,092	31,871
Obligations of state and political subdivisions	49,270	50,155
Accrued interest receivable	0	0
Total financial instrument assets	2,722,470	2,612,680
Deposits
Noninterest-bearing deposits	0	0
Interest-bearing deposits	0	0
Other borrowings		0
Federal Home Loan Bank borrowings		0
Accrued interest payable	0	0
Total financial instrument liabilities	0	0
Financial instrument with off-balance sheet risk:
Loan commitments	0	0
Letters of credit	0	0
Total financial instrument liabilities with off-balance-sheet risk	0	0
Carrying Amount [Member]
Financial instrument assets:
Cash and cash equivalents	307,493	781,918
Investment securities	772,283	555,900
Loans held for sale	1,600	5,716
Loans
Agricultural	94,652	104,672
Commercial and financial	223,481	217,733
Real estate:
Construction, 1 to 4 family residential	85,432	79,668
Construction, land development and commercial	147,913	125,539
Mortgage, farmland	237,481	229,311
Mortgage, 1 to 4 family first liens	988,184	901,523
Mortgage, 1 to 4 family junior liens	112,485	111,184
Mortgage, multi-family	395,336	379,077
Mortgage, commercial	400,134	394,594
Loans to individuals	33,213	31,916
Obligations of state and political subdivisions	49,728	49,845
Accrued interest receivable	12,739	11,437
Total financial instrument assets	3,862,154	3,980,033
Deposits
Noninterest-bearing deposits	645,934	633,101
Interest-bearing deposits	2,799,897	2,900,893
Other borrowings		249
Federal Home Loan Bank borrowings		0
Accrued interest payable	1,037	1,165
Total financial instrument liabilities	3,446,868	3,535,408
Financial instrument with off-balance sheet risk:
Loan commitments	725,164	614,324
Letters of credit	6,923	7,179
Total financial instrument liabilities with off-balance-sheet risk	732,087	621,503
Estimated Fair Value [Member]
Financial instrument assets:
Cash and cash equivalents	307,493	781,918
Investment securities	772,283	555,900
Loans held for sale	1,600	5,716
Loans
Agricultural	93,966	103,745
Commercial and financial	221,571	216,466
Real estate:
Construction, 1 to 4 family residential	85,158	79,311
Construction, land development and commercial	145,508	124,466
Mortgage, farmland	231,825	228,365
Mortgage, 1 to 4 family first liens	971,999	897,255
Mortgage, 1 to 4 family junior liens	110,958	110,903
Mortgage, multi-family	387,871	378,193
Mortgage, commercial	392,252	391,950
Loans to individuals	32,092	31,871
Obligations of state and political subdivisions	49,270	50,155
Accrued interest receivable	12,739	11,437
Total financial instrument assets	3,816,585	3,967,651
Deposits
Noninterest-bearing deposits	645,934	633,101
Interest-bearing deposits	2,802,676	2,909,243
Other borrowings		249
Federal Home Loan Bank borrowings		0
Accrued interest payable	1,037	1,165
Total financial instrument liabilities	3,449,647	3,543,758
Financial instrument with off-balance sheet risk:
Loan commitments	0	0
Letters of credit	0	0
Total financial instrument liabilities with off-balance-sheet risk	$ 0	$ 0

XML

Fair Value Measurements, Assets and Liabilities Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	$ 767,421	$ 551,354
U.S. Treasury [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	462,110	243,925
State and political subdivisions [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	217,714	263,516
Mortgage Backed Securities, Other
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	54,973	9,446
Readily Available Market Prices [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Total	769,603	1,025,843
Observable Market Prices [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Total	324,512	329,128
Company Determined Market Prices [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Total	2,722,470	2,612,680
Recurring Basis [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Total	767,421	551,354
Recurring Basis [Member] | U.S. Treasury [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	462,110	243,925
Recurring Basis [Member] | State and political subdivisions [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	217,714	263,516
Recurring Basis [Member] | Mortgage Backed Securities, Other
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	54,973	9,446
Recurring Basis [Member] | Other securities (FHLB, FHLMC and FNMA) [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	32,624	34,467
Recurring Basis [Member] | Readily Available Market Prices [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Total	462,110	243,925
Recurring Basis [Member] | Readily Available Market Prices [Member] | U.S. Treasury [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	462,110	243,925
Recurring Basis [Member] | Readily Available Market Prices [Member] | State and political subdivisions [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	0	0
Recurring Basis [Member] | Readily Available Market Prices [Member] | Mortgage Backed Securities, Other
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	0	0
Recurring Basis [Member] | Readily Available Market Prices [Member] | Other securities (FHLB, FHLMC and FNMA) [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	0	0
Recurring Basis [Member] | Observable Market Prices [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Total	305,311	307,429
Recurring Basis [Member] | Observable Market Prices [Member] | U.S. Treasury [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	0	0
Recurring Basis [Member] | Observable Market Prices [Member] | State and political subdivisions [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	217,714	263,516
Recurring Basis [Member] | Observable Market Prices [Member] | Mortgage Backed Securities, Other
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	54,973	9,446
Recurring Basis [Member] | Observable Market Prices [Member] | Other securities (FHLB, FHLMC and FNMA) [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	32,624	34,467
Recurring Basis [Member] | Company Determined Market Prices [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Total	0	0
Recurring Basis [Member] | Company Determined Market Prices [Member] | U.S. Treasury [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	0	0
Recurring Basis [Member] | Company Determined Market Prices [Member] | State and political subdivisions [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	0	0
Recurring Basis [Member] | Company Determined Market Prices [Member] | Mortgage Backed Securities, Other
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	0	0
Recurring Basis [Member] | Company Determined Market Prices [Member] | Other securities (FHLB, FHLMC and FNMA) [Member]
Summary of assets and liabilities measured at fair value on a recurring basis [Abstract]
Securities available for sale	$ 0	$ 0

XML

Fair Value Measurements, Assets and Liabilities on a Nonrecurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Readily Available Market Prices [Member]
Loans
Agricultural	$ 0	$ 0	$ 0
Commercial and financial	0	0	0
Real Estate [Abstract]
Construction, land development and commercial	0	0	0
Mortgage, farmland	0	0	0
Mortgage, 1 to 4 family first liens	0	0	0
Mortgage, 1 to 4 family junior liens	0	0	0
Mortgage, multi-family	0	0	0
Mortgage, commercial	0	0	0
Loans to individuals	0	0	0
Total financial instrument assets	769,603	769,603	1,025,843
Observable Market Prices [Member]
Loans
Agricultural	0	0	0
Commercial and financial	0	0	0
Real Estate [Abstract]
Construction, land development and commercial	0	0	0
Mortgage, farmland	0	0	0
Mortgage, 1 to 4 family first liens	0	0	0
Mortgage, 1 to 4 family junior liens	0	0	0
Mortgage, multi-family	0	0	0
Mortgage, commercial	0	0	0
Loans to individuals	0	0	0
Total financial instrument assets	324,512	324,512	329,128
Company Determined Market Prices [Member]
Loans
Agricultural	93,966	93,966	103,745
Commercial and financial	221,571	221,571	216,466
Real Estate [Abstract]
Construction, land development and commercial	145,508	145,508	124,466
Mortgage, farmland	231,825	231,825	228,365
Mortgage, 1 to 4 family first liens	971,999	971,999	897,255
Mortgage, 1 to 4 family junior liens	110,958	110,958	110,903
Mortgage, multi-family	387,871	387,871	378,193
Mortgage, commercial	392,252	392,252	391,950
Loans to individuals	32,092	32,092	31,871
Total financial instrument assets	2,722,470	2,722,470	2,612,680
Nonrecurring Basis [Member]
Loans
Agricultural	0	0	399
Commercial and financial	1,363	1,363	1,527
Real Estate [Abstract]
Construction, 1 to 4 family residential	50	50	383
Construction, land development and commercial	287	287	96
Mortgage, farmland	1,747	1,747	1,114
Mortgage, 1 to 4 family first liens	5,067	5,067	5,902
Mortgage, 1 to 4 family junior liens	133	133	202
Mortgage, multi-family	628	628	1,460
Mortgage, commercial	3,446	3,446	4,176
Loans to individuals	0	0	0
Foreclosed assets	0	0	0
Total financial instrument assets	12,721	12,721	15,259
Total Losses	354	424	476
Nonrecurring Basis [Member] | Agricultural [Member]
Real Estate [Abstract]
Total Losses	0	0	0
Nonrecurring Basis [Member] | Commercial and Financial [Member]
Real Estate [Abstract]
Total Losses	225	225	0
Nonrecurring Basis [Member] | Real Estate Construction One to Four Family Residential [Member]
Real Estate [Abstract]
Total Losses	0	0	0
Nonrecurring Basis [Member] | Real Estate: Construction, land development and commercial [Member]
Real Estate [Abstract]
Total Losses	0	0	0
Nonrecurring Basis [Member] | Real Estate: Mortgage, farmland [Member]
Real Estate [Abstract]
Total Losses	104	104	0
Nonrecurring Basis [Member] | Real Estate: Mortgage, 1 to 4 family first liens [Member]
Real Estate [Abstract]
Total Losses	25	90	212
Nonrecurring Basis [Member] | Real Estate: Mortgage, 1 to 4 family junior liens [Member]
Real Estate [Abstract]
Total Losses	0	5	9
Nonrecurring Basis [Member] | Real Estate: Mortgage, multi-family [Member]
Real Estate [Abstract]
Total Losses	0	0	0
Nonrecurring Basis [Member] | Real Estate: Mortgage, commercial [Member]
Real Estate [Abstract]
Total Losses	0	0	255
Nonrecurring Basis [Member] | Loans to individuals [Member]
Real Estate [Abstract]
Total Losses	0	0	0
Nonrecurring Basis [Member] | Foreclosed assets [Member]
Real Estate [Abstract]
Total Losses	0	0	0
Nonrecurring Basis [Member] | Readily Available Market Prices [Member]
Loans
Agricultural	0	0	0
Commercial and financial	0	0	0
Real Estate [Abstract]
Construction, 1 to 4 family residential	0	0	0
Construction, land development and commercial	0	0	0
Mortgage, farmland	0	0	0
Mortgage, 1 to 4 family first liens	0	0	0
Mortgage, 1 to 4 family junior liens	0	0	0
Mortgage, multi-family	0	0	0
Mortgage, commercial	0	0	0
Loans to individuals	0	0	0
Foreclosed assets	0	0	0
Total financial instrument assets	0	0	0
Nonrecurring Basis [Member] | Observable Market Prices [Member]
Loans
Agricultural	0	0	0
Commercial and financial	0	0	0
Real Estate [Abstract]
Construction, 1 to 4 family residential	0	0	0
Construction, land development and commercial	0	0	0
Mortgage, farmland	0	0	0
Mortgage, 1 to 4 family first liens	0	0	0
Mortgage, 1 to 4 family junior liens	0	0	0
Mortgage, multi-family	0	0	0
Mortgage, commercial	0	0	0
Loans to individuals	0	0	0
Foreclosed assets	0	0	0
Total financial instrument assets	0	0	0
Nonrecurring Basis [Member] | Company Determined Market Prices [Member]
Loans
Agricultural	0	0	399
Commercial and financial	1,363	1,363	1,527
Real Estate [Abstract]
Construction, 1 to 4 family residential	50	50	383
Construction, land development and commercial	287	287	96
Mortgage, farmland	1,747	1,747	1,114
Mortgage, 1 to 4 family first liens	5,067	5,067	5,902
Mortgage, 1 to 4 family junior liens	133	133	202
Mortgage, multi-family	628	628	1,460
Mortgage, commercial	3,446	3,446	4,176
Loans to individuals	0	0	0
Foreclosed assets	0	0	0
Total financial instrument assets	$ 12,721	$ 12,721	$ 15,259

XML

Stock Repurchase Program (Details) - $ / shares	3 Months Ended		6 Months Ended		203 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jul. 26, 2005
Equity [Abstract]
Maximum number of share authorized to repurchase under the program (in shares)						1,500,000
Common stock purchased during the period (in shares)	34,774	8,728	61,186	29,580	1,465,930
Average price per share (in dollars per share)	$ 70.64

XML

Commitments and Contingencies (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
State and political subdivisions [Member]
Concentration Risk [Line Items]
Investment in securities issued by state and political subdivisions within the state of Iowa	$ 76,370
Home equity loans [Member]
Firm loan commitments and unused portion of lines of credit [Abstract]
Total financial instrument liabilities with off-balance-sheet risk	84,584	$ 78,961
Credit cards [Member]
Firm loan commitments and unused portion of lines of credit [Abstract]
Total financial instrument liabilities with off-balance-sheet risk	63,933	65,913
Commercial, real estate and home construction [Member]
Firm loan commitments and unused portion of lines of credit [Abstract]
Total financial instrument liabilities with off-balance-sheet risk	200,472	170,539
Commercial lines and real estate purchase loans [Member]
Firm loan commitments and unused portion of lines of credit [Abstract]
Total financial instrument liabilities with off-balance-sheet risk	376,175	298,911
Outstanding letters of credit [Member]
Firm loan commitments and unused portion of lines of credit [Abstract]
Total financial instrument liabilities with off-balance-sheet risk	$ 6,923	$ 7,179

XML

Income Taxes (Details) - USD ($)	3 Months Ended	6 Months Ended
	Mar. 31, 2022	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Income Tax Examination [Line Items]
Effective tax rate		21.63%	22.51%
Unrecognized tax benefits		$ 0		$ 0
Interest or penalties on unrecognized tax benefits	$ 0	0
Increase in unrecognized tax benefits is reasonably possible		$ 0
Internal Revenue Service (IRS) [Member]
Income Tax Examination [Line Items]
Income tax examination, years under examination		December 31, 2021, 2020, and 2019
State and Local Jurisdiction [Member]
Income Tax Examination [Line Items]
Income tax examination, years under examination		December 31, 2021, 2020, and 2019