Loans (Tables)

9 Months Ended

Sep. 30, 2018

Loan Portfolio and Allowance for Loan Losses

The following table summarizes the primary segments of the loan portfolio and how those segments are analyzed within the allowance for loan losses as of September 30, 2018 and December 31, 2017 (in thousands):

September 30, 2018	Total Loans		Individually evaluated for impairment		Loans acquired with deteriorated credit quality		Collectively evaluated for impairment
Real estate loans:
Residential	$	213,255	$	915	$	30	$	212,310
Commercial		312,982		14,148		1,345		297,489
Agricultural		280,569		5,038		683		274,848
Construction		30,262		-		-		30,262
Consumer		9,702		-		-		9,702
Other commercial loans		72,219		3,368		518		68,333
Other agricultural loans		39,917		1,448		-		38,469
State and political subdivision loans		101,425		-		-		101,425
Total		1,060,331		24,917		2,576		1,032,838
Allowance for loan losses		12,383		654		-		11,729
Net loans	$	1,047,948	$	24,263	$	2,576	$	1,021,109

December 31, 2017	Total Loans		Individually evaluated for mpairment		Loans acquired with deteriorated credit quality		Collectively evaluated for impairment
Real estate loans:
Residential	$	214,479	$	1,065	$	33	$	213,381
Commercial		308,084		13,864		1,460		292,760
Agricultural		239,957		3,901		702		235,354
Construction		13,502		-		-		13,502
Consumer		9,944		8		-		9,936
Other commercial loans		72,013		4,197		443		67,373
Other agricultural loans		37,809		1,363		-		36,446
State and political subdivision loans		104,737		-		-		104,737
Total		1,000,525		24,398		2,638		973,489
Allowance for loan losses		11,190		410		-		10,780
Net loans	$	989,335	$	23,988	$	2,638	$	962,709

Accretable Yield for Purchased Credit Impaired Loans

Changes in the accretable yield for PCI loans were as follows for the three and nine months ended September 30, 2018 and 2017, respectively (in thousands):

	Three months ended						Nine months ended
	September 30,						September 30,
	2018			2017			2018			2017
Balance at beginning of period	$	59		$	167		$	106		$	389
Accretion		(24	)		(90	)		(71	)		(312	)
Reclassification of non-accretable discount		93			-			93			-
Balance at end of period	$	128		$	77		$	128		$	77

Loans Acquired with Specific Evidence of Deterioration in Credit Quality

The following table presents additional information regarding loans acquired with specific evidence of deterioration in credit quality under ASC 310-30 (in thousands):

	September 30, 2018		December 31, 2017
Outstanding balance	$	5,340	$	5,295
Carrying amount		2,576		2,638

Impaired Financing Receivables with Associated Allowance Amount

The following table includes the recorded investment and unpaid principal balances for impaired financing receivables by class, excluding PCI loans, with the associated allowance amount, if applicable (in thousands):

			Recorded		Recorded
	Unpaid		Investment		Investment		Total
	Principal		With No		With		Recorded		Related
September 30, 2018	Balance		Allowance		Allowance		Investment		Allowance
Real estate loans:
Mortgages	$	939	$	360	$	466	$	826	$	12
Home Equity		108		12		77		89		15
Commercial		17,043		12,595		1,553		14,148		224
Agricultural		5,050		1,752		3,286		5,038		86
Construction		-		-		-		-		-
Consumer		-		-		-		-		-
Other commercial loans		3,956		2,990		378		3,368		152
Other agricultural loans		1,498		114		1,334		1,448		165
State and political subdivision loans		-		-		-		-		-
Total	$	28,594	$	17,823	$	7,094	$	24,917	$	654

			Recorded		Recorded
	Unpaid		Investment		Investment		Total
	Principal		With No		With		Recorded		Related
December 31, 2017	Balance		Allowance		Allowance		Investment		Allowance
Real estate loans:
Mortgages	$	1,055	$	273	$	700	$	973	$	47
Home Equity		92		40		52		92		9
Commercial		16,363		13,154		710		13,864		94
Agricultural		5,231		3,283		618		3,901		3
Construction		-		-		-		-		-
Consumer		10		2		6		8		-
Other commercial loans		4,739		3,766		431		4,197		231
Other agricultural loans		1,397		1,238		125		1,363		26
State and political subdivision loans		-		-		-		-		-
Total	$	28,887	$	21,756	$	2,642	$	24,398	$	410

The following tables includes the average balance of impaired financing receivables by class and the income recognized on these receivables for the three and nine month periods ended September 30, 2018 and 2017(in thousands):

	For the Three Months Ended
	September 30, 2018						September 30, 2017
					Interest						Interest
	Average		Interest		Income		Average		Interest		Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		Cash Basis		Investment		Recognized		Cash Basis
Real estate loans:
Mortgages	$	896	$	3	$	-	$	741	$	3	$	-
Home Equity		92		2		-		70		1		-
Commercial		14,116		130		6		13,663		122		2
Agricultural		5,146		24		-		3,799		27		-
Construction		-		-		-		-		-		-
Consumer		-		-		-		4		-		-
Other commercial loans		3,495		21		-		4,337		54		25
Other agricultural loans		1,453		2		-		1,443		10		-
State and political subdivision loans		-		-		-		-		-		-
Total	$	25,198	$	182	$	6	$	24,057	$	217	$	27

	For the Nine Months ended
	September 30, 2018						September 30, 2017
					Interest						Interest
	Average		Interest		Income		Average		Interest		Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		Cash Basis		Investment		Recognized		Cash Basis
Real estate loans:
Mortgages	$	988	$	10	$	-	$	874	$	9	$	-
Home Equity		98		4		-		62		3		-
Commercial		13,915		372		14		10,812		280		5
Agricultural		4,472		124		-		3,609		90		-
Construction		-		-		-		-		-		-
Consumer		2		-		-		2		-		-
Other commercial loans		3,906		73		-		4,988		131		52
Other agricultural loans		1,388		21		-		1,528		55		-
State and political subdivision loans		-		-		-		-		-		-
Total	$	24,769	$	604	$	14	$	21,875	$	568	$	57

Financing Receivable Credit Exposures by Internally Assigned Grades

The following tables represent credit exposures by internally assigned grades as of September 30, 2018 and December 31, 2017 (in thousands):

September 30, 2018	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
Real estate loans:
Commercial	$	289,909	$	12,540	$	10,415	$	118	$	-	$	312,982
Agricultural		260,554		14,619		5,396		-		-		280,569
Construction		30,262		-		-		-		-		30,262
Other commercial loans		68,449		732		2,918		120		-		72,219
Other agricultural loans		36,320		2,288		1,309		-		-		39,917
State and political
subdivision loans		91,136		9,686		603		-		-		101,425
Total	$	776,630	$	39,865	$	20,641	$	238	$	-	$	837,374

December 31, 2017	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
Real estate loans:
Commercial	$	281,742	$	15,029	$	11,271	$	42	$	-	$	308,084
Agricultural		222,198		11,538		6,221		-		-		239,957
Construction		13,364		-		138		-		-		13,502
Other commercial loans		67,706		615		3,567		125		-		72,013
Other agricultural loans		34,914		1,325		1,570		-		-		37,809
State and political
subdivision loans		94,125		-		10,612		-		-		104,737
Total	$	714,049	$	28,507	$	33,379	$	167	$	-	$	776,102

For residential real estate mortgages, home equity and consumer loans, credit quality is monitored based on whether the loan is performing or non-performing, which is typically based on the aging status of the loan and payment activity, unless a specific action, such as bankruptcy, repossession, death or significant delay in payment occurs to raise awareness of a possible credit event. Non-performing loans include those loans that are considered nonaccrual, described in more detail below, and all loans past due 90 or more days and still accruing. The following table presents the recorded investment in those loan classes based on payment activity as of September 30, 2018 and December 31, 2017 (in thousands):

September 30, 2018	Performing		Non-performing		PCI		Total
Real estate loans:
Mortgages	$	153,328	$	1,264	$	30	$	154,621
Home Equity		58,547		86		-		58,634
Consumer		9,679		23		-		9,702
Total	$	221,554	$	1,373	$	30	$	222,957

December 31, 2017	Performing		Non-performing		PCI		Total
Real estate loans:
Mortgages	$	152,820	$	1,492	$	33	$	154,345
Home Equity		60,022		112		-		60,134
Consumer		9,895		49		-		9,944
Total	$	222,737	$	1,653	$	33	$	224,423

Aging Analysis of Past Due Financing Receivables

The following table includes an aging analysis of the recorded investment of past due financing receivables as of September 30, 2018 and December 31, 2017

															90 Days or
	30-59 Days		60-89 Days		90 Days		Total Past						Total Financing		Greater and
September 30, 2018	Past Due		Past Due		Or Greater		Due		Current		PCI		Receivables		Accruing
Real estate loans:
Mortgages	$	661	$	191	$	685	$	1,537	$	153,054	$	30	$	154,621	$	1
Home Equity		125		-		67		192		58,442		-		58,634		-
Commercial		1,576		1,109		4,597		7,282		304,355		1,345		312,982		300
Agricultural		-		6		3,253		3,259		276,627		683		280,569		-
Construction		-		-		-		-		30,262		-		30,262		-
Consumer		69		7		1		77		9,625		-		9,702		1
Other commercial loans		662		141		2,179		2,982		68,719		518		72,219		-
Other agricultural loans		81		195		909		1,185		38,732		-		39,917		-
State and political
subdivision loans		-		-		-		-		101,425		-		101,425		-
Total	$	3,174	$	1,649	$	11,691	$	16,514	$	1,041,241	$	2,576	$	1,060,331	$	302

Loans considered non-accrual	$	326	$	1,370	$	11,389	$	13,085	$	1,445	$	-	$	14,530
Loans still accruing		2,848		279		302		3,429		1,039,796		2,576		1,045,801
Total	$	3,174	$	1,649	$	11,691	$	16,514	$	1,041,241	$	2,576	$	1,060,331

															90 Days or
	30-59 Days		60-89 Days		90 Days		Total Past						Total Financing		Greater and
December 31, 2017	Past Due		Past Due		Or Greater		Due		Current		PCI		Receivables		Accruing
Real estate loans:
Mortgages	$	996	$	362	$	810	$	2,168	$	152,144	$	33	$	154,345	$	218
Home Equity		277		86		78		441		59,693		-		60,134		-
Commercial		1,353		1,010		3,865		6,228		300,396		1,460		308,084		162
Agricultural		242		-		205		447		238,808		702		239,957		30
Construction		-		-		133		133		13,369		-		13,502		-
Consumer		53		33		49		135		9,809		-		9,944		7
Other commercial loans		132		-		2,372		2,504		69,066		443		72,013		32
Other agricultural loans		-		42		106		148		37,661		-		37,809		106
State and political
subdivision loans		-		-		-		-		104,737		-		104,737		-
Total	$	3,053	$	1,533	$	7,618	$	12,204	$	985,683	$	2,638	$	1,000,525	$	555

Loans considered non-accrual	$	816	$	281	$	7,063	$	8,160	$	2,011	$	-	$	10,171
Loans still accruing		2,237		1,252		555		4,044		983,672		2,638		990,354
Total	$	3,053	$	1,533	$	7,618	$	12,204	$	985,683	$	2,638	$	1,000,525

Financing Receivables on Nonaccrual Status

The following table reflects the financing receivables, excluding PCI loans, on non-accrual status as of September 30, 2018 and December 31, 2017, respectively. The balances are presented by class of financing receivable (in thousands):

	September 30, 2018		December 31, 2017
Real estate loans:
Mortgages	$	1,263	$	1,274
Home Equity		86		112
Commercial		6,445		5,192
Agricultural		3,259		175
Construction		-		133
Consumer		22		42
Other commercial loans		2,269		2,637
Other agricultural loans		1,186		606
State and political subdivision		-		-
	$	14,530	$	10,171

Troubled Debt Restructurings on Financing Receivables

Loan modifications that are considered TDRs completed during the three and nine months ended September 30, 2018 and 2017 were as follows (dollars in thousands):

	For the Three Months Ended September 30, 2018
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Commercial		-		1	$	-	$	106	$	-	$	106
Agricultural		-		2		-		1,302		-		1,302
Total		-		3	$	-	$	1,408	$	-	$	1,408

	For the Nine Months Ended September 30, 2018
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Mortgages		-		1	$	-	$	7	$	-	$	7
Home Equity		-		1		-		1		-		1
Commercial		-		2		-		683		-		683
Agricultural		-		3		-		2,825		-		2,825
Other agricultural loans		-		4		-		176		-		176
Total		-		11	$	-	$	3,692	$	-	$	3,692

	For the Three Months Ended September 30, 2017
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Agricultural		-		2	$	-	$	150	$	-	$	150
Other agricultural loans		-		1		-		161		-		161
Total		-		3	$	-	$	311	$	-	$	311

	For the Nine Months Ended September 30, 2017
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Commercial		-		7	$	-	$	6,797	$	-	$	6,797
Agricultural		-		2		-		150		-		150
Other agricultural loans		-		1		-		161		-		161
Total		-		10	$	-	$	7,108	$	-	$	7,108

Subsequent Default Recorded Investment

The following table presents the recorded investment in loans that were modified as TDRs during each 12-month period prior to the current reporting periods, which began January 1, 2018 and 2017 (9 month periods) and June 1, 2018 and 2017 (3 month periods), respectively, and that subsequently defaulted during these reporting periods (dollars in thousands):

	For the Three Months Ended								For the Nine Months Ended
	September 30, 2018				September 30, 2017				September 30, 2018				September 30, 2017
	Number of contracts		Recorded investment		Number of contracts		Recorded investment		Number of contracts		Recorded investment		Number of contracts		Recorded investment
Real estate loans:
Agricultural		2	$	1,302		-	$	-		2	$	1,302		-	$	-
Other agricultural loans		1		124		-		-		1		124		-		-
Total recidivism		3	$	1,426		-	$	-		3	$	1,426		-	$	-

Allowance for Loan Losses by Impairment Method

The following table segregates the allowance for loan losses (ALLL) into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of September 30, 2018 and December 31, 2017, respectively (in thousands):

	September 30, 2018						December 31, 2017
	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
Real estate loans:
Residential	$	27	$	1,025	$	1,052	$	56	$	993	$	1,049
Commercial		224		3,701		3,925		94		3,773		3,867
Agricultural		86		3,843		3,929		3		3,140		3,143
Construction		-		49		49		-		23		23
Consumer		-		123		123		-		124		124
Other commercial loans		152		1,067		1,219		231		1,041		1,272
Other agricultural loans		165		534		699		26		466		492
State and political
subdivision loans		-		751		751		-		816		816
Unallocated		-		636		636		-		404		404
Total	$	654	$	11,729	$	12,383	$	410	$	10,780	$	11,190

Roll forward of Allowance for Loan Losses by Portfolio Segment

The following tables roll forward the balance of the ALLL by portfolio segment for the three and nine months ended September 30, 2018 and 2017, respectively (in thousands):

	For the three months ended September 30, 2018
	Balance at June 30, 2018		Charge-offs			Recoveries		Provision			Balance at September 30, 2018
Real estate loans:
Residential	$	1,045	$	(10	)	$	1	$	16		$	1,052
Commercial		3,794		(25	)		-		156			3,925
Agricultural		3,673		-			-		256			3,929
Construction		44		-			-		5			49
Consumer		115		(13	)		9		12			123
Other commercial loans		1,266		-			5		(52	)		1,219
Other agricultural loans		589		-			-		110			699
State and political
subdivision loans		767		-			-		(16	)		751
Unallocated		648		-			-		(12	)		636
Total	$	11,941	$	(48	)	$	15	$	475		$	12,383

	For the nine months ended September 30, 2018
	Balance at December 31, 2017		Charge-offs			Recoveries		Provision			Balance at September 30, 2018
Real estate loans:
Residential	$	1,049	$	(27	)	$	70	$	(40	)	$	1,052
Commercial		3,867		(25	)		3		80			3,925
Agricultural		3,143		-			-		786			3,929
Construction		23		-			-		26			49
Consumer		124		(32	)		26		5			123
Other commercial loans		1,272		(91	)		19		19			1,219
Other agricultural loans		492		(50	)		-		257			699
State and political
subdivision loans		816		-			-		(65	)		751
Unallocated		404		-			-		232			636
Total	$	11,190	$	(225	)	$	118	$	1,300		$	12,383

	For the three months ended September 30, 2017
	Balance at June 30, 2017		Charge-offs			Recoveries		Provision			Balance at September 30, 2017
Real estate loans:
Residential	$	1,104	$	(11	)	$	-	$	(13	)	$	1,080
Commercial		3,541		-			5		36			3,582
Agricultural		2,452							242			2,694
Construction		45		-			-		(14	)		31
Consumer		125		(45	)		13		44			137
Other commercial loans		1,131		-			5		(24	)		1,112
Other agricultural loans		431		-			1		30			462
State and political
subdivision loans		838		-			-		36			874
Unallocated		312		-			-		163			475
Total	$	9,979	$	(56	)	$	24	$	500		$	10,447

	For the nine months ended September 30, 2017
	Balance at December 31, 2016		Charge-offs			Recoveries		Provision			Balance at September 30, 2017
Real estate loans:
Residential	$	1,064	$	(104	)	$	-	$	120		$	1,080
Commercial		3,589		(41	)		11		23			3,582
Agricultural		1,494		-					1,200			2,694
Construction		47		-			-		(16	)		31
Consumer		122		(90	)		35		70			137
Other commercial loans		1,327		-			14		(229	)		1,112
Other agricultural loans		312		(5	)		1		154			462
State and political
subdivision loans		833		-			-		41			874
Unallocated		98		-			-		377			475
Total	$	8,886	$	(240	)	$	61	$	1,740		$	10,447