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):

June 30, 2019	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, 2019	$	11,609		$	14,092	$	1,249	$	880		$	2,761		$	8,242		$	11,656		$	494		$	4,022		$	261	$	55,266
Charge-Offs		-			-		-		-			-			-			(379	)		(39	)		-			-		(418	)
Recoveries		-			-		-		6			11			11			23			26			-			-		77
Provision		(929	)		480		448		(22	)		(29	)		(772	)		967			(17	)		(922	)		996		200
Ending Balance- June 30, 2019	$	10,680		$	14,572	$	1,697	$	864		$	2,743		$	7,481		$	12,267		$	464		$	3,100		$	1,257	$	55,125
Second Quarter Allowance for Credit Losses:
Beginning Balance- April 1, 2019	$	11,400		$	14,493	$	1,207	$	863		$	2,738		$	7,448		$	11,933		$	467		$	4,008		$	350	$	54,907
Charge-Offs		-			-		-		-			-			-			-			(18	)		-			-		(18	)
Recoveries		-			-		-		3			5			4			12			12			-			-		36
Provision		(720	)		79		490		(2	)		-			29			322			3			(908	)		907		200
Ending Balance- June 30, 2019	$	10,680		$	14,572	$	1,697	$	864		$	2,743		$	7,481		$	12,267		$	464		$	3,100		$	1,257	$	55,125
Ending Balance Individually Evaluated for Impairment		201			-		-		122			12			99			158			6			-			-		598
Ending Balance Collectively Evaluated for Impairment		10,479			14,572		1,697		742			2,731			7,382			12,109			458			3,100			1,257		54,527
Loans & Leases:
Ending Balance	$	813,750		$	605,776	$	93,539	$	257,408		$	40,210		$	284,858		$	382,192		$	17,844		$	103,321		$	-	$	2,598,898
Ending Balance Individually Evaluated for Impairment		4,601			5,702		-		2,444			247			196			1,579			6			-			-		14,775
Ending Balance Collectively Evaluated for Impairment	$	809,149		$	600,074	$	93,539	$	254,964		$	39,963		$	284,662		$	380,613		$	17,838		$	103,321		$	-	$	2,584,123

December 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		-		-		-			(31	)		(8	)		-		(613	)		(115	)		-		-			(767	)
Recoveries		2		-		-			15			6			61		20			54			-		-			158
Provision		685		2,007		(597	)		81			439			22		3,052			346			659		(1,161	)		5,533
Ending Balance- December 31, 2018	$	11,609	$	14,092	$	1,249		$	880		$	2,761		$	8,242	$	11,656		$	494		$	4,022	$	261		$	55,266
Ending Balance Individually Evaluated for Impairment		234		-		-			125			15			-		185			6			-		-			565
Ending Balance Collectively Evaluated for Impairment		11,375		14,092		1,249			755			2,746			8,242		11,471			488			4,022		261			54,701
Loans & Leases:
Ending Balance	$	826,549	$	584,625	$	98,568		$	259,736		$	40,789		$	290,463	$	343,834		$	19,412		$	107,265	$	-		$	2,571,241
Ending Balance Individually Evaluated for Impairment		4,676		7,238		-			2,491			297			-		1,639			6			-		-			16,347
Ending Balance Collectively Evaluated for Impairment		821,873		577,387		98,568			257,245			40,492			290,463		342,195			19,406			107,265		-			2,554,894

June 30, 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		-			-		-			(12	)		(4	)		-			(14	)		(58	)		-		-			(88	)
Recoveries		-			-		-			6			2			13			3			26			-		-			50
Provision		(139	)		1,229		(230	)		55			226			(514	)		250			93			37		(174	)		833
Ending Balance- June 30, 2018	$	10,783		$	13,314	$	1,616		$	864		$	2,548		$	7,658		$	9,436		$	270		$	3,400	$	1,248		$	51,137
Second Quarter Allowance for Credit Losses:
Beginning Balance- April 1, 2018	$	11,078		$	12,242	$	1,873		$	827		$	2,343		$	7,868		$	9,374		$	239		$	3,390	$	1,443		$	50,677
Charge-Offs		-			-		-			(12	)		-			-			(14	)		(41	)		-		-			(67	)
Recoveries		-			-		-			3			1			7			1			15			-		-			27
Provision		(295	)		1,072		(257	)		46			204			(217	)		75			57			10		(195	)		500
Ending Balance- June 30, 2018	$	10,783		$	13,314	$	1,616		$	864		$	2,548		$	7,658		$	9,436		$	270		$	3,400	$	1,248		$	51,137
Ending Balance Individually Evaluated for Impairment		333			-		-			131			16			-			487			7			-		-			974
Ending Balance Collectively Evaluated for Impairment		10,450			13,314		1,616			733			2,532			7,658			8,949			263			3,400		1,248			50,163
Loans & Leases:
Ending Balance	$	752,043		$	540,852	$	94,223		$	261,804		$	37,669		$	273,170		$	286,651		$	7,390		$	90,646	$	-		$	2,344,448
Ending Balance Individually Evaluated for Impairment		4,749			-		-			2,628			324			-			2,290			7			-		-			9,998
Ending Balance Collectively Evaluated for Impairment	$	747,294		$	540,852	$	94,223		$	259,176		$	37,345		$	273,170		$	284,361		$	7,383		$	90,646	$	-		$	2,334,450

The ending balance of loans individually evaluated for impairment includes restructured loans in the amount of $2.7 million at June 30, 2019, $2.8 million at December 31, 2018 and $2.9 million at June 30, 2018, 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):

June 30, 2019	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	811,627	$	2,123	$	-	$	813,750
Agricultural Real Estate		591,191		2,523		12,062		605,776
Real Estate Construction		93,539		-		-		93,539
Residential 1st Mortgages		257,102		-		306		257,408
Home Equity Lines & Loans		40,178		-		32		40,210
Agricultural		278,794		5,254		810		284,858
Commercial		377,794		3,212		1,186		382,192
Consumer & Other		17,660		-		184		17,844
Leases		103,321		-		-		103,321
Total	$	2,571,206	$	13,112	$	14,580	$	2,598,898

December 31, 2018	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	823,983	$	2,566	$	-	$	826,549
Agricultural Real Estate		566,612		4,703		13,310		584,625
Real Estate Construction		98,568		-		-		98,568
Residential 1st Mortgages		259,208		-		528		259,736
Home Equity Lines & Loans		40,744		-		45		40,789
Agricultural		284,561		5,433		469		290,463
Commercial		343,085		163		586		343,834
Consumer & Other		19,229		-		183		19,412
Leases		107,265		-		-		107,265
Total	$	2,543,255	$	12,865	$	15,121	$	2,571,241

June 30, 2018	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	749,467	$	2,576	$	-	$	752,043
Agricultural Real Estate		524,259		10,521		6,072		540,852
Real Estate Construction		85,638		8,585		-		94,223
Residential 1st Mortgages		261,112		-		692		261,804
Home Equity Lines & Loans		37,622		-		47		37,669
Agricultural		266,837		5,050		1,283		273,170
Commercial		285,113		283		1,255		286,651
Consumer & Other		7,245		-		145		7,390
Leases		88,677		1,969		-		90,646
Total	$	2,305,970	$	28,984	$	9,494	$	2,344,448

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 June 30, 2019, December 31, 2018, and June 30, 2018, 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):

June 30, 2019	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	$	-	$	-	$	-	$	-	$	-	$	813,750	$	813,750
Agricultural Real Estate		-		-		-		-		-		605,776		605,776
Real Estate Construction		-		-		-		-		-		93,539		93,539
Residential 1st Mortgages		8		-		-		-		8		257,400		257,408
Home Equity Lines & Loans		-		-		-		-		-		40,210		40,210
Agricultural		-		-		-		-		-		284,858		284,858
Commercial		75		150		-		-		225		381,967		382,192
Consumer & Other		18		-		-		-		18		17,826		17,844
Leases		-		-		-		-		-		103,321		103,321
Total	$	101	$	150	$	-	$	-	$	251	$	2,598,647	$	2,598,898

December 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	$	-	$	731	$	-	$	-	$	731	$	825,818	$	826,549
Agricultural Real Estate		-		-		-		-		-		584,625		584,625
Real Estate Construction		327		-		-		-		327		98,241		98,568
Residential 1st Mortgages		367		-		-		-		367		259,369		259,736
Home Equity Lines & Loans		-		-		-		-		-		40,789		40,789
Agricultural		-		-		-		-		-		290,463		290,463
Commercial		-		-		-		-		-		343,834		343,834
Consumer & Other		13		-		-		-		13		19,399		19,412
Leases		-		-		-		-		-		107,265		107,265
Total	$	707	$	731	$	-	$	-	$	1,438	$	2,569,803	$	2,571,241

June 30, 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	$	-	$	-	$	-	$	-	$	-	$	752,043	$	752,043
Agricultural Real Estate		-		-		-		-		-		540,852		540,852
Real Estate Construction		277		-		-		-		277		93,946		94,223
Residential 1st Mortgages		107		-		-		130		237		261,567		261,804
Home Equity Lines & Loans		19		-		-		-		19		37,650		37,669
Agricultural		-		-		-		-		-		273,170		273,170
Commercial		-		-		-		599		599		286,052		286,651
Consumer & Other		6		-		-				6		7,384		7,390
Leases		-		-		-				-		90,646		90,646
Total	$	409	$	-	$	-	$	729	$	1,138	$	2,343,310	$	2,344,448

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

							Three Months Ended June 30, 2019				Six Months Ended June 30, 2019
June 30, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	91	$	91	$	-	$	92	$	2	$	93	$	4
Agricultural Real Estate		5,702		5,702		-		6,471		128		6,855		201
Commercial		32		32		-		16		1		8		1
	$	5,825	$	5,825	$	-	$	6,579	$	131	$	6,956	$	206
With an allowance recorded:
Commercial Real Estate	$	2,857	$	2,857	$	201	$	2,874	$	24		2,884	$	47
Residential 1st Mortgages		1,614		1,820		81		1,620		17		1,627		38
Home Equity Lines & Loans		71		82		3		72		1		73		2
Agricultural		196		196		98		199		2		150		2
Commercial		1,548		1,548		158		1,574		13		1,597		27
Consumer & Other		6		6		6		6		-		6		-
	$	6,292	$	6,509	$	547	$	6,345	$	57		6,337	$	116
Total	$	12,117	$	12,334	$	547	$	12,924	$	188	$	13,293	$	322

December 31, 2018	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	95	$	96	$	-	$	99	$	8
Agricultural Real Estate		7,239		7,238		-		3,620		119
Residential 1st Mortgages		-		-		-		226		8
	$	7,334	$	7,334	$	-	$	3,945	$	135
With an allowance recorded:
Commercial Real Estate	$	2,902	$	2,892	$	234	$	2,929	$	96
Residential 1st Mortgages		1,640		1,838		82		1,371		48
Home Equity Lines & Loans		74		84		4		76		4
Commercial		1,644		1,639		185		1,834		58
Consumer & Other		6		7		6		7		-
	$	6,266	$	6,460	$	511	$	6,217	$	206
Total	$	13,600	$	13,794	$	511	$	10,162	$	341

							Three Months Ended June 30, 2018				Six Months Ended June 30, 2018
June 30, 2018	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	100	$	100	$	-	$	101	$	2	$	102	$	4
Residential 1st Mortgages		-		-		-		452		-		680		8
	$	100	$	100	$	-	$	553	$	2	$	782	$	12
With an allowance recorded:
Commercial Real Estate	$	2,938	$	2,927	$	333	$	2,947	$	24		2,956	$	48
Residential 1st Mortgages		1,698		1,877		85		1,141		13		844		20
Home Equity Lines & Loans		76		86		3		77		1		77		2
Commercial		2,297		2,290		487		2,009		15		1,870		30
Consumer & Other		7		8		7		8		-		8		-
	$	7,016	$	7,188	$	915	$	6,182	$	53		5,755	$	100
Total	$	7,116	$	7,288	$	915	$	6,735	$	55	$	6,537	$	112

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 at a market rate, are currently performing and are no longer disclosed or classified as TDR’s. A loan or lease can be removed from TDR status if it was restructured at a market rate in a prior calendar year and is currently in compliance with its modified terms. However, these loans or leases continue to be classified as impaired and are individually evaluated for impairment.

At June 30, 2019, the Company allocated $547,000 of specific reserves to $12.1 million of troubled debt restructured loans & leases, all of which were performing. The Company had no commitments at June 30, 2019 to lend additional amounts to customers with outstanding loans or leases that are classified as TDRs.

During the six-month period ended June 30, 2019, there was one loan modified as a troubled debt restructuring. The modification involved a reduction of the stated interest rate of the loan for 5 years and extended the maturity date for 10 years.

The following table presents loans or leases by class modified as troubled debt restructured loans or leases during the three and six-month periods ended June 30, 2019 (in thousands):

	Three Months Ended June 30, 2019						Six Months Ended June 30, 2019
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Agricultural		-	$	-	$	-		1	$	201	$	201
Total		-	$	-	$	-		1	$	201	$	201

During the three and six-months ended June 30, 2019, the twelve months ended December 31, 2018, and the three and six-month periods ended June 30, 2018 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, 2018, the Company allocated $511,000 of specific reserves to $13.6 million of troubled debt restructured loans, all of which were performing. The Company had no commitments at December 31, 2018 to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

During the period ended December 31, 2018, 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 were for 5 years. Modifications involving an extension of the maturity date were for 10 years.

The following table presents loans by class modified as troubled debt restructured loans for the year ended December 31, 2018 (in thousands):

	Year ended December 31, 2018
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Agricultural Real Estate		1	$	7,239	$	7,239
Residential 1st Mortgages		2		286		255
Total		3	$	7,525	$	7,494

The troubled debt restructurings described above had minimal impact on the allowance for credit losses and resulted in charge-offs of $31,000 for the year ended December 31, 2018.

At June 30, 2018, the Company allocated $624,000 of specific reserves to $6.4 million of troubled debt restructured loans & leases, all of which were performing. The Company had no commitments at June 30, 2018 to lend additional amounts to customers with outstanding loans or leases that are classified as TDRs.

During the three and six-month periods ended June 30, 2018, there was one loan modified as a troubled debt restructuring. The modification involved a reduction of the stated interest rate of the loan for 5 years and extended the maturity date for 10 years.

The following table presents loans or leases by class modified as troubled debt restructured loans or leases during the three and six-month periods ended June 30, 2018 (in thousands):

	Three Months Ended June 30, 2018						Six Months Ended June 30, 2018
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Residential 1st Mortgages		1	$	175	$	163		1	$	175	$	163
Total		1	$	175	$	163		1	$	175	$	163