3. Loans & Leases and Allowance for Credit Losses

The following tables show the allocation of the allowance for credit losses by portfolio segment and by impairment methodology at the dates indicated (in thousands):

March 31, 2018	Commercial Real Estate		Agricultural Real Estate		Real Estate Construction		Residential 1st Mortgages		Home Equity Lines & Loans			Agricultural			Commercial		Consumer & Other			Leases		Unallocated		Total

Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2018	$	10,922	$	12,085	$	1,846	$	815	$	2,324		$	8,159		$	9,197	$	209		$	3,363	$	1,422	$	50,342
Charge-Offs		-		-		-		-		(4	)		-			-		(17	)		-		-		(21	)
Recoveries		-		-		-		3		1			6			2		11			-		-		23
Provision		156		157		27		9		22			(297	)		175		36			27		21		333
Ending Balance- March 31, 2018	$	11,078	$	12,242	$	1,873	$	827	$	2,343		$	7,868		$	9,374	$	239		$	3,390	$	1,443	$	50,677
Ending Balance Individually Evaluated for Impairment		335		-		-		76		17			-			205		8			-		-		641
Ending Balance Collectively Evaluated for Impairment		10,743		12,242		1,873		751		2,326			7,868			9,169		231			3,390		1,443		50,036
Loans:
Ending Balance	$	698,349	$	508,400	$	96,315	$	264,137	$	34,691		$	261,427		$	274,682	$	6,685		$	90,397	$	-	$	2,235,083
Ending Balance Individually Evaluated for Impairment		4,784		-		-		2,427		332			-			1,713		9			-		-		9,265
Ending Balance Collectively Evaluated for Impairment	$	693,565	$	508,400	$	96,315	$	261,710	$	34,359		$	261,427		$	272,969	$	6,676		$	90,397	$	-	$	2,225,818

December 31, 2017	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction			Residential 1st Mortgages			Home Equity Lines & Loans			Agricultural			Commercial		Consumer & Other			Leases			Unallocated			Total

Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2017	$	11,110		$	9,450	$	3,223		$	865		$	2,140		$	7,381		$	8,515	$	200		$	3,586		$	1,449		$	47,919
Charge-Offs		(109	)		-		-			(53	)		(3	)		(374	)		-		(146	)		-			-			(685	)
Recoveries		109			-		-			40			8			17			8		76			-			-			258
Provision		(188	)		2,635		(1,377	)		(37	)		179			1,135			674		79			(223	)		(27	)		2,850
Ending Balance- December 31, 2017	$	10,922		$	12,085	$	1,846		$	815		$	2,324		$	8,159		$	9,197	$	209		$	3,363		$	1,422		$	50,342
Ending Balance Individually Evaluated for Impairment		366			-		-			73			17			-			220		8			-			-			684
Ending Balance Collectively Evaluated for Impairment		10,556			12,085		1,846			742			2,307			8,159			8,977		201			3,363			1,422			49,658
Loans & Leases:
Ending Balance	$	684,961		$	499,231	$	100,206		$	260,751		$	34,525		$	273,582		$	265,703	$	6,656		$	89,680		$	-		$	2,215,295
Ending Balance Individually Evaluated for Impairment		4,822			-		-			2,373			340			-			1,734		10			-			-			9,279
Ending Balance Collectively Evaluated for Impairment		680,139			499,231		100,206			258,378			34,185			273,582			263,969		6,646			89,680			-			2,206,016

March 31, 2017	Commercial Real Estate			Agricultural Real Estate			Real Estate Construction			Residential 1st Mortgages		Home Equity Lines & Loans			Agricultural			Commercial			Consumer & Other			Leases		Unallocated		Total

Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2017	$	11,110		$	9,450		$	3,223		$	865	$	2,140		$	7,381		$	8,515		$	200		$	3,586	$	1,449	$	47,919
Charge-Offs		(109	)		-			-			-		-			(7	)		-			(35	)		-		-		(151	)
Recoveries		7			-			-			3		2			-			4			16			-		-		32
Provision		657			(57	)		(277	)		12		(17	)		(863	)		(40	)		17			280		888		600
Ending Balance- March 31, 2017	$	11,665		$	9,393		$	2,946		$	880	$	2,125		$	6,511		$	8,479		$	198		$	3,866	$	2,337	$	48,400
Ending Balance Individually Evaluated for Impairment		471			-			-			69		17			331			268			6			-		-		1,162
Ending Balance Collectively Evaluated for Impairment		11,194			9,393			2,946			811		2,108			6,180			8,211			192			3,866		2,337		47,238
Loans:
Ending Balance	$	676,527		$	463,645		$	164,791		$	249,628	$	31,817		$	266,010		$	209,184		$	7,119		$	77,311	$	-	$	2,146,032
Ending Balance Individually Evaluated for Impairment		4,924			975			-			2,069		451			698			1,633			9			-		-		10,759
Ending Balance Collectively Evaluated for Impairment	$	671,603		$	462,670		$	164,791		$	247,559	$	31,366		$	265,312		$	207,551		$	7,110		$	77,311	$	-	$	2,135,273

The ending balance of loans individually evaluated for impairment includes restructured loans in the amount of $2.9 million at March 31, 2018, $3.0 million at December 31, 2017 and $3.4 million at March 31, 2017, which are no longer classified as TDRs.

The following tables show the loan & lease portfolio allocated by management’s internal risk ratings at the dates indicated (in thousands):

March 31, 2018	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	691,537	$	6,812	$	-	$	698,349
Agricultural Real Estate		495,936		8,537		3,927		508,400
Real Estate Construction		86,779		9,536		-		96,315
Residential 1st Mortgages		263,101		-		1,036		264,137
Home Equity Lines & Loans		34,643		-		48		34,691
Agricultural		252,553		6,286		2,588		261,427
Commercial		268,745		5,460		477		274,682
Consumer & Other		6,565		-		120		6,685
Leases		88,320		2,077		-		90,397
Total	$	2,188,179	$	38,708	$	8,196	$	2,235,083

December 31, 2017	Pass		Special Mention		Substandard		Total Loans
Loans & Leases:
Commercial Real Estate	$	677,636	$	6,843	$	482	$	684,961
Agricultural Real Estate		488,672		6,529		4,030		499,231
Real Estate Construction		90,728		9,478		-		100,206
Residential 1st Mortgages		259,795		41		915		260,751
Home Equity Lines and Loans		34,476		-		49		34,525
Agricultural		264,425		6,439		2,718		273,582
Commercial		260,565		4,610		528		265,703
Consumer & Other		6,498		-		158		6,656
Leases		87,497		2,183		-		89,680
Total	$	2,170,292	$	36,123	$	8,880	$	2,215,295

March 31, 2017	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	668,243	$	6,768	$	1,516	$	676,527
Agricultural Real Estate		461,318		1,351		976		463,645
Real Estate Construction		156,426		8,365		-		164,791
Residential 1st Mortgages		249,238		45		345		249,628
Home Equity Lines & Loans		31,752		-		65		31,817
Agricultural		255,390		9,857		763		266,010
Commercial		204,792		3,638		754		209,184
Consumer & Other		6,965		-		154		7,119
Leases		74,817		2,494		-		77,311
Total	$	2,108,941	$	32,518	$	4,573	$	2,146,032

See “Note 1. Significant Accounting Policies - Allowance for Credit Losses” for a description of the internal risk ratings used by the Company. There were no loans or leases outstanding at March 31, 2018, December 31, 2017, and March 31, 2017, rated doubtful or loss.

The following tables show an aging analysis of the loan & lease portfolio by the time past due at the dates indicated

(in thousands):

March 31, 2018	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	-	$	-	$	698,349	$	698,349
Agricultural Real Estate		-		-		-		-		-		508,400		508,400
Real Estate Construction		-		-		-		-		-		96,315		96,315
Residential 1st Mortgages		14		49		-		81		144		263,993		264,137
Home Equity Lines & Loans		20		-		-		-		20		34,671		34,691
Agricultural		-		-		-		-		-		261,427		261,427
Commercial		-		14		-		-		14		274,668		274,682
Consumer & Other		8		-		-		-		8		6,677		6,685
Leases		-		-		-		-		-		90,397		90,397
Total	$	42	$	63	$	-	$	81	$	186	$	2,234,897	$	2,235,083

December 31, 2017	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	-	$	-	$	684,961	$	684,961
Agricultural Real Estate		-		-		-		-		-		499,231		499,231
Real Estate Construction		-		-		-		-		-		100,206		100,206
Residential 1st Mortgages		448		-		-		-		448		260,303		260,751
Home Equity Lines and Loans		10		-		-		-		10		34,515		34,525
Agricultural		-		-		-		-		-		273,582		273,582
Commercial		180		-		-		-		180		265,523		265,703
Consumer & Other		7		-		-		-		7		6,649		6,656
Leases		-		-		-		-		-		89,680		89,680
Total	$	645	$	-	$	-	$	-	$	645	$	2,214,650	$	2,215,295

March 31, 2017	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	-	$	-	$	676,527	$	676,527
Agricultural Real Estate		-		-		-		976		976		462,669		463,645
Real Estate Construction		-		-		-		-		-		164,791		164,791
Residential 1st Mortgages		110		-		-		60		170		249,458		249,628
Home Equity Lines & Loans		-		-		-		64		64		31,753		31,817
Agricultural		-		-		-		315		315		265,695		266,010
Commercial		-		-		-		-		-		209,184		209,184
Consumer & Other		16		-		-		6		22		7,097		7,119
Leases		-		-		-		-		-		77,311		77,311
Total	$	126	$	-	$	-	$	1,421	$	1,547	$	2,144,485	$	2,146,032

The following tables show information related to impaired loans & leases for the periods indicated (in thousands):

March 31, 2018	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	102	$	102	$	-	$	103	$	2
Residential 1st Mortgages		903		1,005		-		907		8
	$	1,005	$	1,107	$	-	$	1,010	$	10
With an allowance recorded:
Commercial Real Estate	$	2,955	$	2,943	$	335	$	2,964	$	24
Residential 1st Mortgages		583		649		29		546		7
Home Equity Lines & Loans		78		88		4		76		1
Commercial		1,720		1,713		205		1,731		15
Consumer & Other		8		8		8		8		-
	$	5,344	$	5,401	$	581	$	5,325	$	47
Total	$	6,349	$	6,508	$	581	$	6,335	$	57

December 31, 2017	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	104	$	104	$	-	$	107	$	11
Agricultural Real Estate		-		-		-		488		-
Residential 1st Mortgages		911		1,012		-		532		11
Home Equity Lines and Loans		-		-		-		16		-
Agricultural		-		-		-		30		-
	$	1,015	$	1,116	$	-	$	1,173	$	22
With an allowance recorded:
Commercial Real Estate	$	2,973	$	2,961	$	366	$	2,999	$	104
Residential 1st Mortgages		508		571		25		469		16
Home Equity Lines and Loans		73		89		4		74		3
Agricultural		-		-		-		409		21
Commercial		1,741		1,734		220		1,693		59
Consumer & Other		8		9		8		11		-
	$	5,303	$	5,364	$	623	$	5,655	$	203
Total	$	6,318	$	6,480	$	623	$	6,828	$	225

March 31, 2017	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	110	$	110	$	-	$	147	$	4
Agricultural Real Estate		976		983		-		1,141		-
Residential 1st Mortgages		413		467		-		432		-
Home Equity Lines & Loans		64		65		-		32		-
Agricultural		60		66		-		30		-
Commercial		-		-		-		1,512		-
	$	1,623	$	1,691	$	-	$	3,294	$	4
With an allowance recorded:
Commercial Real Estate	$	3,024	$	3,010	$	471	$	1,512	$	30
Residential 1st Mortgages		426		466		20		428		5
Home Equity Lines & Loans		89		95		4		90		1
Agricultural		638		639		331		632		8
Commercial		1,641		1,633		268		1,541		16
Consumer & Other		6		12		6		6		-
	$	5,824	$	5,855	$	1,100	$	4,209	$	60
Total	$	7,447	$	7,546	$	1,100	$	7,503	$	64

Total recorded investment shown in the prior table will not equal the total ending balance of loans & leases individually evaluated for impairment on the allocation of allowance table. This is because this table does not include impaired loans that were previously modified in a troubled debt restructuring, are currently performing and are no longer disclosed or classified as TDR’s.

At March 31, 2018, the Company allocated $577,000 of specific reserves to $6.2 million of troubled debt restructured loans & leases, all of which were performing. The Company had no commitments at March 31, 2018 to lend additional amounts to customers with outstanding loans or leases that are classified as TDRs.

During the three-month period ending March 31, 2018, there were no loans & leases modified as a troubled debt restructuring.

During the three months ended March 31, 2018, the twelve months ended December 31, 2017, and the three months ended March 31, 2017, there were no payment defaults on loans or leases modified as troubled debt restructurings within twelve months following the modification. The Company considers a loan or lease to be in payment default once it is greater than 90 days contractually past due under the modified terms.

At December 31, 2017, the Company allocated $623,000 of specific reserves to $6.3 million of troubled debt restructured loans, all of which were performing. The Company had no commitments at December 31, 2017 lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

During the period ending December 31, 2017, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan ranged from 3 to 5 years. Modifications involving an extension of the maturity date ranged from 3 to 10 years.

The following table presents loans by class modified as troubled debt restructured loans for the period ended December 31, 2017 (in thousands):

	December 31, 2017
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Residential 1st Mortgages		2	$	673	$	630
Home Equity Lines and Loans		1		32		32
Commercial		2		138		138
Consumer & Other		1		9		8
Total		6	$	852	$	808

The troubled debt restructurings described above had no impact on the allowance for credit losses and resulted in charge-offs of $44,000 for the twelve months ended December 31, 2017.

At March 31, 2017, the Company allocated $844,000 of specific reserves to $6.0 million of troubled debt restructured loans & leases, all of which were performing. The Company had no commitments at March 31, 2017 to lend additional amounts to customers with outstanding loans or leases that are classified as TDRs.

During the three-month period ending March 31, 2017, there were no loans & leases modified as a troubled debt restructuring.