Loans

12 Months Ended

Dec. 31, 2023

Note 4 - Loans

The Company had $1.6 million in loans held for sale at December 31, 2023 as compared to $827 thousand in loans held for sale at December 31, 2022.

Loans at December 31 are summarized below:


	(In Thousands)
Loans:	2023			2022
Consumer Real Estate	$	521,895		$	494,423
Agricultural Real Estate		223,791			220,819
Agricultural		132,560			128,733
Commercial Real Estate		1,337,766			1,152,603
Commercial and Industrial		254,935			242,360
Consumer		79,591			89,147
Other		30,136			29,818
		2,580,674			2,357,903
Less: Net deferred loan fees and costs and other*		517			(1,516	)
		2,581,191			2,356,387
Less: Allowance for credit losses		(25,024	)		(20,313	)
Loans - Net	$	2,556,167		$	2,336,074

*This chart contains fair value adjustments to the basis of derivatives in the amount of $2.7 million at December 31, 2023. No derivatives existed at December 31, 2022.

Following are the characteristics and underwriting criteria for each major type of loan the Bank offers:

Consumer Real Estate: Purchase, refinance, or equity financing of one to four family owner occupied dwelling. Success in repayment is subject to borrower’s income, debt level, character in fulfilling payment obligations, employment, and others.

Agricultural Real Estate: Purchase of farm real estate or for permanent improvements to the farm real estate. Cash flow from the farm operation is the repayment source and is therefore subject to the financial success of the farm operation.

Agricultural: Loans for the production and housing of crops, fruits, vegetables, and livestock or to fund the purchase or re-finance of capital assets such as machinery and equipment and livestock. The production of crops and livestock is especially vulnerable to commodity prices and weather. The vulnerability to commodity prices is offset by the farmer’s ability to hedge their position by the use of the future contracts. The risk related to weather is often mitigated by requiring crop insurance.

Commercial Real Estate: Construction, purchase, and refinance of business purpose real estate. Risks include potential construction delays and overruns, vacancies, collateral value subject to market value fluctuations, interest rate, market demands, borrower’s ability to repay in orderly fashion, and others. The Bank does employ stress testing on higher balance loans to mitigate risk by ensuring the customer’s ability to repay in a changing rate environment before granting loan approval.

Commercial and Industrial: Loans to proprietorships, partnerships, or corporations to provide temporary working capital and seasonal loans as well as long term loans for capital asset acquisition. Risks include adequacy of cash flow, reasonableness of projections, financial leverage, economic trends, management ability and estimated capital expenditures during the fiscal year. The Bank does employ stress testing on higher balance loans to mitigate risk by ensuring the customer's ability to repay in a changing rate environment before granting loan approval. During 2022, the remaining Protection Program (PPP) loan balances of $2.9 million were forgiven and consequently paid off. The PPP provided loans to eligible business through financial institutions like the Bank, with loans being eligible for forgiveness of some or all of the principal amount by the Small Business Administration (SBA) if the borrower meets certain requirements. The SBA guarantees repayment of the loans to the Bank if the borrower’s loan is not forgiven and is then not repaid by the customer. Therefore, there is no allowance for credit losses related to these loans.

Consumer: Funding for individual and family purposes. Success in repayment is subject to borrower’s income, debt level, character in fulfilling payment obligations, employment, and other factors.

Other: Primarily funds public improvements in the Bank’s service area. Repayment ability is based on the continuance of the taxation revenue as the source of repayment.

The following is a maturity schedule by major category of loans excluding fair value adjustments at December 31, 2023:


	(In Thousands)
			After One		After Five
	Within		Year Within		Years Within		After
	One Year		Five Years		Fifteen Years		Fifteen Years		Total
Consumer Real Estate	$	12,307	$	33,817	$	157,139	$	322,639	$	525,902
Agricultural Real Estate		546		6,149		63,073		154,648		224,416
Agricultural		62,926		47,053		19,184		3,430		132,593
Commercial Real Estate		109,232		382,123		619,438		227,126		1,337,919
Commercial and Industrial		97,823		103,806		52,981		828		255,438
Consumer		2,036		58,115		19,561		94		79,806
Other		2,855		1,452		16,251		9,584		30,142
	$	287,725	$	632,515	$	947,627	$	718,349	$	2,586,216

The distribution of fixed rate loans and variable rate loans by major loan category is as follows as of December 31, 2023:


	(In Thousands)
	Fixed		Variable
	Rate		Rate
Consumer Real Estate	$	329,142	$	192,753
Agricultural Real Estate		123,783		100,008
Agricultural		56,269		76,291
Commercial Real Estate		1,024,989		312,777
Commercial and Industrial		131,385		123,550
Consumer		79,526		65
Other		20,552		9,584

Other loans are included in the commercial and industrial category for the remainder of the tables in this Note 4, unless specifically noted separately.

The following table represents the contractual aging of the recorded investment in past due loans by portfolio classification of loans as of December 31, 2023 and 2022, net of deferred loan fees and costs:


	(In Thousands)
December 31, 2023	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Consumer Real Estate	$	1,914	$	137	$	670	$	2,721	$	519,187	$	521,908	$	-
Agricultural Real Estate		-		3,429		55		3,484		219,995		223,479		-
Agricultural		-		1,132		2,977		4,109		128,654		132,763		-
Commercial Real Estate		380		-		255		635		1,334,440		1,335,075		-
Commercial and Industrial		145		-		199		344		284,550		284,894		-
Consumer		218		37		26		281		80,072		80,353		-
Total	$	2,657	$	4,735	$	4,182	$	11,574	$	2,566,898	$	2,578,472	$	-


	(In Thousands)
December 31, 2022	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Consumer Real Estate	$	1,536	$	635	$	90	$	2,261	$	492,162	$	494,423	$	-
Agricultural Real Estate		118		2		1,550		1,670		218,844		220,514		-
Agricultural		433		-		152		585		128,341		128,926		-
Commercial Real Estate		74		-		180		254		1,150,257		1,150,511		-
Commercial and Industrial		953		-		182		1,135		270,984		272,119		-
Consumer		83		37		-		120		89,774		89,894		-
Total	$	3,197	$	674	$	2,154	$	6,025	$	2,350,362	$	2,356,387	$	-

The following tables present the recorded investment in nonaccrual loans by portfolio class of loans as of December 31, 2023 and December 31, 2022:


	(In Thousands)
	December 31, 2023
	Nonaccrual				Loans Past
	With No				Due Over
	Allowance				89 Days
	for Credit Loss		Nonaccrual		Still Accruing

Consumer Real Estate	$	1,006	$	1,190	$	-
Agricultural Real Estate		15,949		15,949		-
Agricultural		4,671		4,671		-
Commercial Real Estate		254		254		-
Commercial & Industrial		198		198		-
Consumer		91		91		-
Total	$	22,169	$	22,353	$	-

Interest income that would have been recorded under the original terms of these loans would have aggregated $1.6 million for 2023 and $157 thousand for 2022.


	(In Thousands)
	2022
Consumer Real Estate	$	612
Agricultural Real Estate		1,921
Agriculture		152
Commercial Real Estate		903
Commercial and Industrial		1,096
Consumer		5
Total	$	4,689

The Bank uses a nine tier risk rating system to grade its loans. The grade of a loan may change during the life of the loan.

The risk ratings are described as follows.

Zero (0) Unclassified. Any loan which has not been assigned a classification.

One (1) Excellent. Credit to premier customers having the highest credit rating based on an extremely strong financial condition, which compares favorably with industry standards (upper quartile of RMA ratios). Financial statements indicate a sound earnings and financial ratio trend for several years with satisfactory profit margins and excellent liquidity exhibited. Prime credits may also be borrowers with loans fully secured by highly liquid collateral such as traded stocks, bonds, certificates of deposit, savings account, etc. No credit or collateral exceptions exist, and the loan adheres to The Bank's loan policy in every respect. Financing alternatives would be readily available and would qualify for unsecured credit. This rate is summarized by high liquidity, minimum risk, strong ratios, and low handling costs.

Two (2) Good. Desirable loans of somewhat less stature than rate 1, but with strong financial statements. Loan supported by financial statements containing strong balance sheets and a history of profitability. Probability of serious financial deterioration is unlikely. Possessing a sound repayment source (and a secondary source), which would allow repayment in a reasonable period of time. Individual loans backed by liquid personal assets, established history and unquestionable character.

Three (3) Satisfactory. Satisfactory loans of average or slightly above average risk – having some deficiency or vulnerability to changing economic conditions, but still fully collectible. Projects should normally

demonstrate acceptable debt service coverage. There may be some weakness but with offsetting features of other support readily available. Loans that are meeting the terms of repayment.

Loans may be rated 3 when there is no recent information on which to base a current risk evaluation and the following conditions apply:

At inception, the loan was properly underwritten and did not possess an unwarranted level of credit risk;

At inception, the loan was secured with collateral possessing a loan-to-value adequate to protect The Bank from loss;

The loan exhibited two or more years of satisfactory repayment with a reasonable reduction of the principal balance;

During the period that the loan has been outstanding, there has been no evidence of any credit weakness. Some examples of weakness include slow payment, lack of cooperation by the borrower, breach of loan covenants, or the business is in an industry which is known to be experiencing problems. If any of these credit weaknesses is observed, a lower risk rating is warranted.

Four (4) Satisfactory / Monitored. A “4” (Satisfactory/Monitored) risk rating may be established for a loan considered satisfactory but which is of average credit risk due to financial weakness or uncertainty. The loans warrant a higher than average level of monitoring to ensure that weaknesses do not advance. The level of risk in Satisfactory/Monitored classification is considered acceptable and within normal underwriting guidelines, so long as the loan is given management supervision.

Five (5) Special Mention. Loans that possess some credit deficiency or potential weakness which deserve close attention, but which do not yet warrant substandard classification. Such loans pose unwarranted financial risk that, if not corrected, could weaken the loan and increase risk in the future. The key distinctions of a 5 (Special Mention) classification are that (1) it is indicative of an unwarranted level of risk, and (2) weaknesses are considered “potential” versus “defined” impairments to the primary source of loan repayment and collateral.

Six (6) Substandard. One or more of the following characteristics may be exhibited in loans classified substandard:

Loans which possess a defined credit weakness and the likelihood that a loan will be paid from the primary source are uncertain. Financial deterioration is underway and very close attention is warranted to ensure that the loan is collected without loss.

Loans are inadequately protected by the current net worth and paying capacity of the borrower.

The primary source of repayment is weakened, and The Bank is forced to rely on a secondary source of repayment such as collateral liquidation or guarantees.

Loans are characterized by the distinct possibility that The Bank will sustain some loss if deficiencies are not corrected.

Unusual courses of action are needed to maintain a high probability of repayment.

The borrower is not generating enough cash flow to repay loan principal; however, continues to make interest payments.

The lender is forced into a subordinate position or unsecured collateral position due to flaws in documentation.

Loans have been restructured so that payment schedules, terms and collateral represent concessions to the borrower when compared to the normal loan terms.

The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan

There is significant deterioration in the market conditions and the borrower is highly vulnerable to these conditions.

Seven (7) Doubtful. One or more of the following characteristics may be exhibited in loans classified Doubtful:

Loans have all of the weaknesses of those classified as Substandard. Additionally, however, these weaknesses make collection or liquidation in full based on existing conditions improbable.

The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.

The possibility of loss is high, but, because of certain important pending factors which may strengthen the loan, loss classification is deferred until its exact status is known. A Doubtful classification is established deferring the realization of the loss.

Eight (8) Loss. Loans are considered uncollectable and of such little value that continuing to carry them as assets on the institution’s financial statements is not feasible. Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

The following table reflects the risk category of loans by portfolio class based on the most recent analysis performed as of December 31, 2023 based on year of origination:


	(In Thousands)
	Term Loans Amortized Cost Basis by Origination Year
													Revolving
													Loans
											Term		Amortized		Grand
	2023		2022		2021		2020		Prior		Total		Cost Basis		Total

Consumer Real Estate
Risk Rating
Pass (1-4)	$	77,298	$	88,695	$	90,139	$	82,680	$	126,596	$	465,408	$	52,904	$	518,312
Special Mention (5)		1,228		40		-		-		134		1,402		-		1,402
Substandard (6)		-		261		558		163		1,198		2,180		14		2,194
Doubtful (7)		-		-		-		-		-		-		-		-
Total Consumer Real Estate	$	78,526	$	88,996	$	90,697	$	82,843	$	127,928	$	468,990	$	52,918	$	521,908
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural Real Estate
Risk Rating
Pass (1-4)	$	30,504	$	37,199	$	25,168	$	25,874	$	87,107	$	205,852	$	97	$	205,949
Special Mention (5)		-		861		14		-		508		1,383		-		1,383
Substandard (6)		-		-		12,196		186		3,765		16,147		-		16,147
Doubtful (7)		-		-		-		-		-		-		-		-
Total Agricultural Real Estate	$	30,504	$	38,060	$	37,378	$	26,060	$	91,380	$	223,382	$	97	$	223,479
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Risk Rating
Pass (1-4)	$	17,787	$	20,330	$	8,356	$	4,476	$	5,736	$	56,685	$	69,824	$	126,509
Special Mention (5)		38		621		112		-		-		771		330		1,101
Substandard (6)		514		634		2,009		498		-		3,655		1,498		5,153
Doubtful (7)		-		-		-		-		-		-		-		-
Total Agricultural	$	18,339	$	21,585	$	10,477	$	4,974	$	5,736	$	61,111	$	71,652	$	132,763
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-


	(In Thousands)
	Term Loans Amortized Cost Basis by Origination Year
													Revolving
													Loans
											Term		Amortized		Grand
	2023		2022		2021		2020		Prior		Total		Cost Basis		Total

Commercial Real Estate
Risk Rating
Pass (1-4)	$	224,232	$	438,716	$	245,273	$	122,656	$	235,603	$	1,266,480	$	-	$	1,266,480
Special Mention (5)		34,864		9,100		-		10,793		12,968		67,725		-		67,725
Substandard (6)		-		-		-		-		795		795		-		795
Doubtful (7)		-		-		-		75		-		75		-		75
Total Commercial Real Estate	$	259,096	$	447,816	$	245,273	$	133,524	$	249,366	$	1,335,075	$	-	$	1,335,075
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial & Industrial
Risk Rating
Pass (1-4)	$	56,224	$	51,663	$	24,876	$	20,071	$	3,074	$	155,908	$	90,018	$	245,926
Special Mention (5)		716		69		211		146		794		1,936		6,016		7,952
Substandard (6)		74		454		-		-		48		576		122		698
Doubtful (7)		-		-		-		182		-		182		-		182
Total Commercial & Industrial	$	57,014	$	52,186	$	25,087	$	20,399	$	3,916	$	158,602	$	96,156	$	254,758
Gross charge-offs YTD	$	-	$	-	$	-	$	565	$	-	$	565	$	-	$	565

Other
Risk Rating
Pass (1-4)	$	2,810	$	-	$	16,761	$	5,790	$	4,775	$	30,136	$	-	$	30,136
Special Mention (5)		-		-		-		-		-		-		-		-
Substandard (6)		-		-		-		-		-		-		-		-
Doubtful (7)		-		-		-		-		-		-		-		-
Total Other	$	2,810	$	-	$	16,761	$	5,790	$	4,775	$	30,136	$	-	$	30,136
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

The following table presents payment performance as of December 31, 2023 by year of origination:


	(In Thousands)
	Term Loans Amortized Cost Basis by Origination Year
													Revolving
													Loans
											Term		Amortized		Grand
	2023		2022		2021		2020		Prior		Total		Cost Basis		Total

Consumer
Payment Performance
Performing	$	21,511	$	40,729	$	10,666	$	5,006	$	2,305	$	80,217	$	44	$	80,261
Nonperforming		26		58		-		6		2		92		-		92
Total Consumer	$	21,537	$	40,787	$	10,666	$	5,012	$	2,307	$	80,309	$	44	$	80,353
Gross charge-offs YTD	$	236	$	51	$	100	$	38	$	-	$	425	$	-	$	425

The following table presents collateral-dependent loans grouped by collateral as of December 31, 2023:


	(In Thousands)
	Collateral
	Dependent Loans
Consumer Real Estate	$	1,518
Agricultural Real Estate		15,888
Agricultural		4,998
Commercial Real Estate		255
Commercial & Industrial		17
Consumer		-
Total	$	22,676

The following table represents the risk category of loans by portfolio class, net of deferred fees, based on the most recent analysis performed as of the time periods shown of December 31, 2022:


	(In Thousands)
	Agricultural Real Estate		Agricultural		Commercial Real Estate		Commercial and Industrial		Other
	2022		2022		2022		2022		2022
1-2	$	9,912	$	5,857	$	8,718	$	780	$	-
3		47,405		33,671		370,035		67,506		10,921
4		146,143		88,992		737,745		167,291		18,897
5		10,389		228		9,751		3,592		-
6		6,665		178		24,262		3,132		-
7		-		-		-		-		-
8		-		-		-		-		-
Total	$	220,514	$	128,926	$	1,150,511	$	242,301	$	29,818

For consumer residential real estate, the Company also evaluates credit quality based on the aging status of the loan, which was previously stated, and by payment activity. The following tables present the recorded investment in those classes based on payment activity and assigned risk grading as of December 31, 2022:


	(In Thousands)
	Consumer Real Estate
	2022
Grade
Pass	$	492,575
Special mention (5)		676
Substandard (6)		1,172
Doubtful (7)		-
Total	$	494,423


	(In Thousands)
	Consumer - Other
	2022
Performing	$	89,853
Nonperforming		41
Total	$	89,894

Information about impaired loans as of and for the year ended December 31, 2022 is as follows:


	(In Thousands)
	2022
Impaired loans without a valuation allowance	$	4,194
Impaired loans with a valuation allowance		4,663
Total impaired loans	$	8,857
Valuation allowance related to impaired loans	$	1,996
Total nonaccrual loans	$	4,689
Total loans past-due ninety days or more and still accruing	$	-


	(In Thousands)
	2022		2021
Average investment in impaired loans	$	10,710	$	12,247
Interest income recognized on impaired loans	$	361	$	292
Interest income recognized on a cash basis on impaired loans	$	97	$	188

The Bank had approximately $3.6 million of its impaired loans classified as modifications to borrowers experiencing financial difficulty as of December 31, 2022.

Under ASC 310-40, TDRs were eliminated from being classified as such for 2023 and will no longer be reported as such. Modification programs focused on payment pattern changes and/or modified maturity dates with most receiving a combination of the two concessions. The modifications did not result in the contractual forgiveness of principal. During 2023, one new loan was considered a modification to a borrower experiencing financial difficulty. The modification consisted of refinancing at a higher balance to a borrower experiencing financial difficulty that would not have otherwise been granted to a borrower. The amount of new money increase to the loan balance was $411 thousand. This loan was subsequently paid off during 2023. During 2022, three new loans were considered modifications to borrowers experiencing financial difficulty as a result of the continuance of interest only payment modifications. These three loans stem from a single relationship with a borrower. This relationship has a Small Business Administration (SBA) guaranty and consequently the request for the continuance of the interest only period was also approved by the SBA as were previous requests. One of the three loans was charged off in December of 2022. The ACL includes a $837 thousand specific allocation for one of the loans as of December 31, 2022. The fourth loan was a work-out loan that was included on Peoples modification list which had some debt written off when the loan was granted. Two loans previously reported as modifications to borrowers experiencing financial difficulty were paid off in April 2022.


December 31, 2023							December 31, 2022
			(In thousands)							(In thousands)
Modified Loans for Borrowers Experiencing Financial Difficulty	Number of Contracts Modified in the Last 12 Months		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Troubled Debt Restructurings	Number of Contracts Modified in the Last 12 Months		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Consumer Real Estate		-	$	-	$	-	Consumer Real Estate		1	$	95	$	95
Commercial Real Estate		1		1,024		1,024	Commercial Real Estate		1		74		74
Commercial and Industrial		-		-		-	Commercial and Industrial		2		1,232		1,232

For the years ended December 31, 2023 and 2022, there were no modifications to borrowers experiencing financial difficulty that subsequently defaulted after modification.

For the majority of the Bank’s impaired loans, the Bank applied a measurement incorporating the present value of expected future cash flows discounted at the loan's effective rate of interest or the fair value of collateral if the loan is collateral dependent. To determine the fair value of collateral, collateral asset values securing an impaired loan are periodically evaluated. Maximum time of re-evaluation is every 12 months for chattels and titled vehicles and every two years for real estate. In this process, third party evaluations are obtained and heavily relied upon. Until such time that updated appraisals are received, the Bank may discount the collateral value used.

The Bank uses the following guidelines as stated in policy to determine when to realize a charge-off, whether a partial or full loan balance. A charge down in whole or in part is realized when unsecured consumer loans, credit card credits and overdraft lines of credit reach 90 days delinquency. At 90 days delinquent, secured consumer loans are charged down to the value of the collateral, if repossession of the collateral is assured and/or in the process of repossession. Consumer mortgage loan deficiencies are charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency. A broker's price opinion or appraisal will be completed on all home loans in litigation and any deficiency will be charged off before reaching 150 days delinquent. Commercial and agricultural credits are charged down/allocated at 120 days delinquency, unless an established and approved work-out plan is in place or litigation of the credit will likely result in recovery of the loan balance. Upon notification of bankruptcy, unsecured debt is charged off. Additional charge-off may be realized as further unsecured positions are recognized.

The following tables present loans individually evaluated for impairment by portfolio class of loans as of December 31, 2022:


	(In Thousands)
2022	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	509	$	509	$	-	$	355	$	5	$	12
Agricultural Real Estate		2,280		2,385		-		2,048		25		6
Agricultural		152		152		-		588		-		2
Commercial Real Estate		1,234		1,272		-		1,252		29		43
Commercial and Industrial		17		417		-		135		2		10
Consumer		2		2		-		15		1		-
With a specific allowance recorded:
Consumer Real Estate		60		60		6		15		-		1
Agricultural Real Estate		-		-		-		1,388		-		-
Agricultural		-		-		-		-		-		-
Commercial Real Estate		2,874		2,874		438		3,176		150		-
Commercial and Industrial		1,564		1,564		1,551		1,736		149		23
Consumer		165		165		1		2		-		-
Totals:
Consumer Real Estate	$	569	$	569	$	6	$	370	$	5	$	13
Agricultural Real Estate	$	2,280	$	2,385	$	-	$	3,436	$	25	$	6
Agricultural	$	152	$	152	$	-	$	588	$	-	$	2
Commercial Real Estate	$	4,108	$	4,146	$	438	$	4,428	$	179	$	43
Commercial and Industrial	$	1,581	$	1,981	$	1,551	$	1,871	$	151	$	33
Consumer	$	167	$	167	$	1	$	17	$	1	$	-

As of December 31, 2023 and 2022 the Company had no foreclosed residential real estate property obtained by physical possession or consumer real estate loans secured by residential real estate properties for which foreclosure proceedings are in process according to local jurisdictions.

On January 1, 2023, the Company adopted Accounting Standards Update ("ASU") No. 2016-13 - "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and implemented the current expected credit losses accounting standard. As a result, the Company recorded a one-time adjustment from equity into the allowance for credit losses for loan losses and unfunded commitment liability in the amount of $4.5 million, or $3.4 million, net of tax.

Allowance for Credit Losses (ACL) has a direct impact on the provision expense. An increase in the ACL is funded through recoveries and provision expense.

The Company segregates its allowance into two reserves: The Allowance for Credit Losses (ACL) and the Allowance for Unfunded Loan Commitments and Letters of Credit (AULC). When combined, these reserves constitute the total Current Expected Credit Losses (CECL).

Additional analysis related to the allowance for credit losses as of December 31, 2023 and 2022 is as follows:


	(In Thousands)
	Consumer Real Estate				Agricultural Real Estate			Agricultural			Commercial Real Estate		Commercial and Industrial			Consumer			Total
2023
ALLOWANCE FOR CREDIT LOSSES
Beginning balance	$	998			$	349		$	751		$	11,924	$	5,382		$	909		$	20,313
Adoption of ASU 2016-13		2,874		-		(166	)		(650	)		3,501		(2,165	)		170			3,564
Provision for credit losses-loans		(326	)			24			225			1,967		(643	)		451			1,698
Charge-offs		-				-			-			-		(565	)		(425	)		(990	)
Recoveries		35				105			10			8		84			197			439
Ending Balance	$	3,581			$	312		$	336		$	17,400	$	2,093		$	1,302		$	25,024


	(In Thousands)
	Unfunded Loan Commitment & Letters of Credit
2023
ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
Beginning balance	$	1,262
Adoption of ASU 2016-13		904
Provision for credit losses-off balance sheet credit exposures		46
Charge-offs		-
Recoveries		-
Ending Balance	$	2,212


	(In Thousands)
2022	Consumer Real Estate		Agricultural Real Estate			Agricultural		Commercial Real Estate		Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated			Total
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	857	$	1,040		$	709	$	9,130	$	3,847		$	625		$	1,041	$	34		$	17,283
Charge-Offs		-		-			-		-		(418	)		(409	)		-		-			(827	)
Recoveries		20		-			7		9		93			169			-		-			298
Provision (Credit)		121		(691	)		35		2,785		1,860			506			-		(16	)		4,600
Other Non-interest expense related to unfunded		-		-			-		-		-			-			221		-			221
Ending Balance	$	998	$	349		$	751	$	11,924	$	5,382		$	891		$	1,262	$	18		$	21,575
Ending balance: individually evaluated for impairment	$	6	$	-		$	-	$	438	$	1,551		$	1		$	-	$	-		$	1,996
Ending balance: collectively evaluated for impairment	$	992	$	349		$	751	$	11,486	$	3,831		$	890		$	1,262	$	18		$	19,579
Ending balance: loans acquired with deteriorated credit quality	$	-	$	-		$	-	$	-	$	-		$	-		$	-	$	-		$	-
FINANCING RECEIVABLES:
Ending balance	$	494,423	$	220,514		$	128,926	$	1,150,511	$	272,119		$	89,894		$	-	$	-		$	2,356,387
Ending balance: individually evaluated for impairment	$	569	$	2,280		$	152	$	4,108	$	1,581		$	167		$	-	$	-		$	8,857
Ending balance: collectively evaluated for impairment	$	493,449	$	218,039		$	128,774	$	1,146,389	$	270,493		$	89,727		$	-	$	-		$	2,346,871
Ending balance: loans acquired with deteriorated credit quality	$	405	$	195		$	-	$	14	$	45		$	-		$	-	$	-		$	659