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Loans and Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2024
Receivables [Abstract]  
Loans and Allowance for Credit Losses Loans and Allowance for Credit Losses
Loans
Major classifications within the Company’s held for investment loan portfolio at March 31, 2024 and December 31, 2023 were as follows:
(in thousands)March 31, 2024December 31, 2023
Commercial, financial, and agricultural$218,018 $226,275 
Real estate construction − residential47,08858,347
Real estate construction − commercial52,781130,296
Real estate mortgage − residential375,118372,391
Real estate mortgage − commercial807,703731,024
Installment and other consumer18,14520,814
Total loans held for investment$1,518,853 $1,539,147 
The Bank grants real estate, commercial, installment, and other consumer loans to customers located within the Missouri communities surrounding Jefferson City, Columbia, Clinton, Warsaw, Springfield, and the greater Kansas City metropolitan area. As such, the Bank is susceptible to changes in the economic environment in these communities. The Bank does not have a concentration of credit in any one economic sector. Installment and other consumer loans consist primarily of the financing of automotive vehicles. Accrued interest on loans totaled $7.7 million and $7.2 million at March 31, 2024 and December 31, 2023, respectively, and is included in the accrued interest receivable on the Company's consolidated balance sheets. The total amount of accrued interest is excluded from the amortized cost basis of loans
presented above. Further, the Company has elected not to measure an allowance for credit losses for accrued interest receivable. At March 31, 2024, loans of $696.8 million were pledged to the Federal Home Loan Bank ("FHLB") as collateral for borrowings and letters of credit.
Allowance for Credit Losses
The allowance for credit losses is measured using a lifetime expected loss model that incorporates relevant information about past events, including historical credit loss experience on loans with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the loans. The allowance for credit losses is measured on a collective (pool) basis. Loans are aggregated into pools based on similar risk characteristics including borrower type, collateral type and expected credit loss patterns. Loans that do not share similar risk characteristics, primarily large loans on non-accrual status, are evaluated on an individual basis. The allowance for credit losses is a valuation account that is deducted from loans amortized cost basis to present the net amount expected to be collected on the instrument. Expected recoveries are included in the allowance and do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Loans are charged off against the allowance for credit losses when management believes the balance has become uncollectible.
For loans evaluated for credit losses on a collective basis, average historical loss rates are calculated for each pool using relevant peer historical net charge-offs (combined charge-offs and recoveries by observable historical reporting period) and the Company's outstanding loan balances during a lookback period. The Company chose to use relevant peer loan loss data due to statistical relevance concerns, low observation counts, historical data limitations, and the inability to secure through the cycle loan-level data. Lookback periods can be different based on the individual pool and represent management’s credit expectations for the pool of loans over the remaining contractual life. The calculated average net charge-off rate is then adjusted for current conditions and reasonable and supportable forecasts. These adjustments increase or decrease the average historical loss rate to reflect expectations of future losses given a single path economic forecast of a single macroeconomic variable, which is the civilian unemployment rate. The adjustments are based on results from various regression models projecting the impact of the selected macroeconomic variable to loss rates. The forecast is used for a reasonable and supportable period before reverting back to historical averages using a straight-line method. The forecast adjusted loss rate is applied to the loans over the remaining contractual lives, adjusted for expected prepayments. The contractual term excludes expected extensions, renewals and modifications. Credit cards and certain similar consumer lines of credit do not have stated maturities and therefore, for these loan classes, remaining contractual lives are determined by estimating future cash flows expected to be received from customers until payments have been fully allocated to outstanding balances. Agriculture loans also use the remaining life methodology for estimating life of loan losses. Additionally, the allowance for credit losses considers qualitative or environmental factors, such as: lending policies and procedures; economic conditions; the nature, volume and terms of the portfolio; lending staff and management; past due loans; the loan review system; collateral values; concentrations of credit; and external factors.
Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures
The Company maintains a separate allowance for credit losses for off-balance-sheet credit exposures, including unfunded loan commitments, unless the associated obligation is unconditionally cancellable by the Company. This allowance is included in other liabilities on the consolidated balance sheets with associated expense recognized as a component of the provision for credit losses on the consolidated statements of income. The liability for unfunded lending commitments utilizes the same model as the allowance for credit losses on loans, however, the liability for unfunded lending commitments incorporates an assumption for the portion of unfunded commitments that are expected to be funded.
Sensitivity in the Allowance for Credit Loss Model
The allowance for credit losses is an estimate that requires significant judgment including projections of the macroeconomic environment. The forecasted macroeconomic environment continuously changes which can cause fluctuations in estimated expected losses.
The following tables illustrate the changes in the allowance for credit losses by portfolio segment:
Three Months Ended March 31, 2024
(in thousands)Commercial, Financial, & AgriculturalReal Estate Construction - ResidentialReal Estate Construction - CommercialReal Estate Mortgage - ResidentialReal Estate Mortgage - CommercialInstallment and Other ConsumerUn- allocatedTotal
Allowance for Credit Losses on Loans
Balance at beginning of period$3,208 $1,043 $3,273 $5,264 $10,537 $232 $187 $23,744 
Charge-offs(30)— — (1)(23)(70)— (124)
Recoveries10 — — 1 — 44 — 55 
Provision for (release of) credit losses186 (371)(1,976)(155)2,343 (34)7 — 
Balance at end of period$3,374 $672 $1,297 $5,109 $12,857 $172 $194 $23,675 
Liability for Unfunded Commitments
Balance at beginning of period$197 $273 $245 $103 $110 $1 $18 $947 
Provision for (release of) credit losses on unfunded commitments(105)(159)57 — (10)— (13)(230)
Balance at end of period$92 $114 $302 $103 $100 $1 $5 $717 
Allowance for credit losses on loans and liability for unfunded commitments$3,466 $786 $1,599 $5,212 $12,957 $173 $199 $24,392 
Three Months Ended March 31, 2023
(in thousands)Commercial, Financial, & AgriculturalReal Estate Construction - ResidentialReal Estate Construction - CommercialReal Estate Mortgage - ResidentialReal Estate Mortgage - CommercialInstallment and Other ConsumerUn- allocatedTotal
Allowance for Credit Losses on Loans
Balance at beginning of period$2,735 $157 $875 $3,329 $8,000 $326 $166 $15,588 
Adoption of ASU 2016-13(649)291 2,894 1,890 1,613 (80)(166)5,793 
Balance at January 1, 20232,086 448 3,769 5,219 9,613 246 — 21,381 
Charge-offs(30)— — — (5)(58)— (93)
Recoveries9 — — 2 2 28 — 41 
Provision for (release of) credit losses(144)183 695 41 (123)6 (8)650 
Balance at end of period$1,921 $631 $4,464 $5,262 $9,487 $222 $(8)$21,979 
Liability for Unfunded Commitments
Balance at beginning of period$— $— $— $— $— $— $— $— 
Adoption of ASU 2016-13104 341 569 107 150 1 — 1,272 
Balance at January 1, 2023104 341 569 107 150 1 — 1,272 
Provision for (release of) credit losses on unfunded commitments20 48 (7)3 (8)— (26)30 
Balance at end of period$124 $389 $562 $110 $142 $1 $(26)$1,302 
Allowance for credit losses on loans and liability for unfunded commitments$2,045 $1,020 $5,026 $5,372 $9,629 $223 $(34)$23,281 
Collateral-Dependent loans
Collateral-dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Under the CECL methodology, for collateral-dependent loans, the Company has adopted the practical expedient to measure the allowance on the fair value of collateral.
The allowance is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral, which is adjusted for liquidation costs/discounts, and the loan’s amortized cost. If the fair value of the collateral exceeds the loan’s amortized cost, no allowance is necessary. The Company’s policy is to obtain appraisals on any significant
pieces of collateral. Higher discounts are applied in determining fair value for real estate collateral in industries that are undergoing significant stress, or for properties that are specialized use or have limited marketability.
There have been no significant changes to the types of collateral securing the Company's collateral dependent loans since December 31, 2023.

The amortized cost of collateral-dependent loans by class as of March 31, 2024 and December 31, 2023 was as follows:
Collateral Type
(in thousands)Real EstateOtherAllowance Allocated
March 31, 2024
Commercial, financial, and agricultural$— $2,204 $1,861 
Real estate construction − residential456 — 196 
Real estate mortgage − residential45 — 24 
Real estate mortgage − commercial3,962 — 799 
Total$4,463 $2,204 $2,880 
December 31, 2023
Commercial, financial, and agricultural$— $2,221 $1,300 
Real estate construction − residential432 — 164 
Real estate mortgage − residential46 — 19 
Real estate mortgage − commercial2,369 — — 
Total$2,847 $2,221 $1,483 
Credit Quality
The Company categorizes loans into risk categories based upon an internal rating system reflecting management’s risk assessment.
•Pass - loans that are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell in a timely manner, of any underlying collateral.
•Watch - loans that have one or more weaknesses identified that may result in the borrower being unable to meet repayment terms or when the Company’s credit position could deteriorate at some future date.
•Special Mention - loans that have negative financial trends, or other weaknesses that if left uncorrected, could threaten its capacity to meet its debt obligations. This is a transitional grade that is closely monitored by management for improvement or deterioration.
•Substandard - loans that are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Loans so classified may have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. Such loans are characterized by the distinct possibility that the Company may sustain some loss if the deficiencies are not corrected.
•Non-accrual - loans that are delinquent for 90 days or more and the ultimate collectability of interest or principal is no longer probable. (The majority of the Company's non-accrual loans have a substandard risk grade)
•Doubtful - loans that have all the weaknesses inherent in loans classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently known facts, conditions, and values.
In the following tables, consumer loans are generally assigned a risk grade similar to the classifications described above; however, upon reaching 90 days and 120 days past due, they are generally downgraded to non-accrual status, unless the loans are in the process of collection, in accordance with the Federal Financial Institutions Examination Counsel's Retail Credit Classification Policy.
The following table presents the recorded investment by risk categories at March 31, 2024:
Term Loans
Amortized Cost Basis by Origination Year and Risk Grades
(in thousands)20242023202220212020PriorRevolving Loans Amortized Cost BasisRevolving Loans Converted to Term Loans Amortized Cost BasisTotal
March 31, 2024
Commercial, Financial, & Agricultural
Pass$8,146 $32,236 $40,709 $30,728 $30,311 $6,766 $54,733 $— $203,629 
Watch322 155 2,440 28 344 280 2,629 — 6,198 
Substandard— 1,463 3,675 1 15 43 571 — 5,768 
Non-accrual loans3 262 89 322 — 1 1,746 — 2,423 
Total$8,471 $34,116 $46,913 $31,079 $30,670 $7,090 $59,679 $— $218,018 
Gross YTD charge-offs— — — — 2 28 — — 30 
Real Estate Construction - Residential
Pass$2,327 $38,291 $5,210 $630 $173 $— $— $— $46,631 
Non-accrual loans— 457 — — — — — — 457 
Total$2,327 $38,748 $5,210 $630 $173 $— $— $— $47,088 
Gross YTD charge-offs— — — — — — — — — 
Real Estate Construction - Commercial
Pass$8,553 $23,754 $11,057 $5,093 $1,025 $746 $1,861 $— $52,089 
Watch— 509 16 — — — 103 — 628 
Non-accrual loans— — — — — 64 — — 64 
Total$8,553 $24,263 $11,073 $5,093 $1,025 $810 $1,964 $— $52,781 
Gross YTD charge-offs— — — — — — — — — 
Real Estate Mortgage - Residential
Pass$8,197 $55,036 $124,785 $60,775 $46,615 $28,849 $45,768 $392 $370,417 
Watch1,454 280 247 406 501 1,077 31 — 3,996 
Substandard— 16 — — — 164 — — 180 
Non-accrual loans— — 22 91 57 235 120 — 525 
Total$9,651 $55,332 $125,054 $61,272 $47,173 $30,325 $45,919 $392 $375,118 
Gross YTD charge-offs— — — — — 1 — — 1 
Real Estate Mortgage - Commercial
Pass$6,390 $127,095 $241,478 $219,924 $82,076 $65,824 $17,445 $51 $760,283 
Watch2,355 4,705 4,984 2,554 — 440 76 — 15,114 
Special Mention12,312 — 5,876 7,947 — — — — 26,135 
Substandard— 710 213 428 48 282 — — 1,681 
Non-accrual loans— 1,181 — 2,922 211 176 — — 4,490 
Total$21,057 $133,691 $252,551 $233,775 $82,335 $66,722 $17,521 $51 $807,703 
Gross YTD charge-offs— — — — — 23 — — 23 
Installment and other Consumer
Pass$1,078 $5,802 $5,654 $2,299 $1,055 $2,173 $80 $— $18,141 
Non-accrual loans— — — 4 — — — — 4 
Total$1,078 $5,802 $5,654 $2,303 $1,055 $2,173 $80 $— $18,145 
Gross YTD charge-offs— 3 5 — — 62 — — 70 
Total Portfolio
Pass$34,691 $282,214 $428,893 $319,449 $161,255 $104,358 $119,887 $443 $1,451,190 
Watch4,131 5,649 7,687 2,988 845 1,797 2,839 — 25,936 
Special Mention12,312 — 5,876 7,947 — — — — 26,135 
Substandard— 2,189 3,888 429 63 489 571 — 7,629 
Non-accrual loans3 1,900 111 3,339 268 476 1,866 — 7,963 
Total$51,137 $291,952 $446,455 $334,152 $162,431 $107,120 $125,163 $443 $1,518,853 
Total Gross YTD charge-offs$— $3 $5 $— $2 $114 $— $— $124 
The following table presents the recorded investment by risk categories at December 31, 2023:
Term Loans
Amortized Cost Basis by Origination Year and Risk Grades
(in thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisRevolving Loans Converted to Term Loans Amortized Cost BasisTotal
December 31, 2023
Commercial, Financial, & Agricultural
Pass$40,103 $43,082 $32,812 $30,965 $4,774 $5,022 $55,379 $213 $212,350 
Watch1 2,505 32 586 3 282 2,502 — 5,911 
Substandard371 3,758 19 16 — — 323 1,299 5,786 
Non-accrual loans159 96 317 — 7 — 1,649 — 2,228 
Total$40,634 $49,441 $33,180 $31,567 $4,784 $5,304 $59,853 $1,512 $226,275 
Gross YTD charge-offs— 1 — — — 160 — — 161 
Real Estate Construction - Residential
Pass$39,847 $17,259 $634 $175 $— $— $— $— $57,915 
Non-accrual loans432 — — — — — — — 432 
Total$40,279 $17,259 $634 $175 $— $— $— $— $58,347 
Gross YTD charge-offs— — — — — — — — — 
Real Estate Construction - Commercial
Pass$49,041 $53,058 $24,371 $1,040 $31 $735 $187 $— $128,463 
Watch934 17 — — — — 103 — 1,054 
Substandard710 — — — — — — — 710 
Non-accrual loans— — — — — 69 — — 69 
Total$50,685 $53,075 $24,371 $1,040 $31 $804 $290 $— $130,296 
Gross YTD charge-offs— — — — — — — — — 
Real Estate Mortgage - Residential
Pass$65,472 $121,430 $62,998 $47,884 $7,242 $19,193 $44,574 $202 $368,995 
Watch179 251 411 293 71 1,310 23 — 2,538 
Substandard16 — — 129 — 126 — — 271 
Non-accrual loans— 23 93 135 — 246 90 — 587 
Total$65,667 $121,704 $63,502 $48,441 $7,313 $20,875 $44,687 $202 $372,391 
Gross YTD charge-offs— — — 75 — — 13 — 88 
Real Estate Mortgage - Commercial
Pass$99,081 $208,699 $204,789 $84,363 $27,085 $39,941 $16,059 $659 $680,676 
Watch15,759 10,978 2,737 91 345 897 70 — 30,877 
Substandard— 215 15,944 — 45 289 — — 16,493 
Non-accrual loans1,817 54 712 212 83 — 100 — 2,978 
Total$116,657 $219,946 $224,182 $84,666 $27,558 $41,127 $16,229 $659 $731,024 
Gross YTD charge-offs— — — — — 32 — — 32 
Installment and other Consumer
Pass$7,430 $6,497 $2,720 $1,287 $987 $1,803 $90 $— $20,814 
Total$7,430 $6,497 $2,720 $1,287 $987 $1,803 $90 $— $20,814 
Gross YTD charge-offs84 23 7 — — 232 1 — 347 
Total Portfolio
Pass$300,974 $450,025 $328,324 $165,714 $40,119 $66,694 $116,289 $1,074 $1,469,213 
Watch16,873 13,751 3,180 970 419 2,489 2,698 — 40,380 
Substandard1,097 3,973 15,963 145 45 415 323 1,299 23,260 
Non-accrual loans2,408 173 1,122 347 90 315 1,839 — 6,294 
Total$321,352 $467,922 $348,589 $167,176 $40,673 $69,913 $121,149 $2,373 $1,539,147 
Total Gross YTD charge-offs$84 $24 $7 $75 $— $424 $14 $— $628 
Delinquent and Non-Accrual Loans
The delinquency status of loans is determined based on the contractual terms of the notes. Loans are generally classified as delinquent once payments become 30 days or more past due. The Company’s policy is to discontinue the accrual of interest income on any loan when, in the opinion of management, the ultimate collectability of interest or principal is no longer probable. In general, loans are placed on non-accrual status when they become 90 days or more past due. However, management considers many factors before placing a loan on non-accrual status, including the delinquency status of the loan, the overall financial condition of the borrower, the progress of management’s collection efforts and the value of the underlying collateral. Subsequent interest payments received on non-accrual loans are applied to principal if any doubt exists as to the collectability of such principal; otherwise, such receipts are recorded as interest income on a cash basis. Non-accrual loans are returned to accrual status when, in the opinion of management, the financial condition of the borrower indicates that the timely collectability of interest and principal is probable and the borrower demonstrates the ability to pay under the terms of the note through a sustained period of repayment performance, which is generally six months.
The following tables present the recorded investment in non-accrual loans and loans past due over 90 days still on accrual by class of loans as of March 31, 2024 and December 31, 2023:
(in thousands)Non-accrual with no AllowanceNon-accrual with AllowanceTotal Non-accrual90 Days Past Due And Still AccruingTotal Non-performing Loans
March 31, 2024
Commercial, Financial, and Agricultural$— $2,423 $2,423 $— $2,423 
Real estate construction − residential— 456 456 — 456 
Real estate construction − commercial— 64 64 — 64 
Real estate mortgage − residential— 525 525 573 1,098 
Real estate mortgage − commercial212 4,279 4,491 — 4,491 
Installment and Other Consumer— 4 4 13 17 
Total$212 $7,751 $7,963 $586 $8,549 
December 31, 2023
Commercial, Financial, and Agricultural$— $2,228 $2,228 $— $2,228 
Real estate construction − residential— 432 432 —432 
Real estate construction − commercial— 69 69 —69 
Real estate mortgage − residential— 587 587 115702 
Real estate mortgage − commercial2,368 610 2,978 —2,978 
Installment and Other Consumer— — — 4 4 
Total$2,368 $3,926 $6,294 $119 $6,413 
No material amount of interest income was recognized on non-accrual loans during the three months ended March 31, 2024.
The following table provides aging information for the Company’s past due and non-accrual loans at March 31, 2024 and December 31, 2023.
(in thousands)Current or Less Than 30 Days Past Due30 - 89 Days Past Due90 Days Past Due And Still AccruingNon-AccrualTotal
March 31, 2024
Commercial, Financial, and Agricultural$214,547 $1,048 $— $2,423 $218,018 
Real estate construction − residential46,426 206 — 456 47,088 
Real estate construction − commercial52,717 — — 64 52,781 
Real estate mortgage − residential372,649 1,371 573 525 375,118 
Real estate mortgage − commercial802,455 757 — 4,491 807,703 
Installment and Other Consumer17,988 140 13 4 18,145 
Total$1,506,782 $3,522 $586 $7,963 $1,518,853 
December 31, 2023
Commercial, Financial, and Agricultural$223,845 $202 $— $2,228 $226,275 
Real estate construction − residential57,568 347 — 432 58,347 
Real estate construction − commercial130,227 — — 69 130,296 
Real estate mortgage − residential368,956 2,733 115 587 372,391 
Real estate mortgage − commercial728,029 17 — 2,978 731,024 
Installment and Other Consumer20,607 203 4 — 20,814 
Total$1,529,232 $3,502 $119 $6,294 $1,539,147 
Loan Modifications for Borrowers Experiencing Financial Difficulty
In the normal course of business, the Company may execute loan modifications with borrowers. These modifications are analyzed to determine whether the modification is considered concessionary, long-term and made to a borrower experiencing financial difficulty. The Company’s modifications generally include interest rate adjustments, principal reductions, and amortization and maturity date extensions. If a loan modification is determined to be made to a borrower experiencing financial difficulty, the loan is considered collateral-dependent and evaluated as part of the allowance for credit losses as described above in the Allowance for Credit Losses section of this note.

For the each of the three months ended March 31, 2024 and 2023, the Company did not modify any loans made to borrowers experiencing financial difficulty. The Company monitors loan payments on an on-going basis to determine if a loan is considered to have a payment default. Determination of payment default involves analyzing the economic conditions that exist for each customer and their ability to generate positive cash flows during the loan term.
Loans Held for Sale
The Company designates certain long-term fixed rate personal real estate loans as held for sale. These loans are initially measured at fair value under the fair value option election with subsequent changes in fair value recognized in mortgage banking income. The loans are primarily sold to Freddie Mac, Fannie Mae, PennyMac, and various other secondary market investors. At March 31, 2024, the carrying amount of these loans was $2.9 million compared to $3.9 million at December 31, 2023.