5. Loans & Leases and Allowance for Credit Losses

Loans & Leases consisted of the following:

Loan & Lease Portfolio (in thousands)	March 31, 2020		December 31, 2019		March 31, 2019
Commercial Real Estate	$	868,736	$	846,486	$	823,028
Agricultural Real Estate		594,154		625,767		603,601
Real Estate Construction		126,956		115,644		99,837
Residential 1st Mortgages		256,732		255,253		258,359
Home Equity Lines & Loans		40,747		39,270		40,072
Agricultural		264,771		292,904		257,004
Commercial		404,329		384,795		364,439
Consumer & Other		14,839		15,422		18,418
Leases		105,362		104,470		105,823
Total Gross Loans & Leases		2,676,626		2,680,011		2,570,581
Less: Unearned Income		6,517		6,984		6,613
Subtotal		2,670,109		2,673,027		2,563,968
Less: Allowance for Credit Losses		54,824		55,012		54,907
Net Loans & Leases	$	2,615,285	$	2,618,015	$	2,509,061

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, 2020	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, 2020	$	11,053	$	15,128		$	1,949		$	855	$	2,675	$	8,076		$	11,466		$	456		$	3,162	$	192	$	55,012
Charge-Offs		-		-			-			-		-		-			(244	)		(21	)		-		-		(265	)
Recoveries		-		-			-			19		20		28			2			8			-		-		77
Provision		69		(659	)		(22	)		163		88		(1,145	)		990			(61	)		26		551		-
Ending Balance- March 31, 2020	$	11,122	$	14,469		$	1,927		$	1,037	$	2,783	$	6,959		$	12,214		$	382		$	3,188	$	743	$	54,824
Ending Balance Individually Evaluated for Impairment		-		-			-			116		10		398			11			60			-		-		595
Ending Balance Collectively Evaluated for Impairment		11,122		14,469			1,927			921		2,773		6,561			12,203			322			3,188		743		54,229
Loans:
Ending Balance	$	861,311	$	594,154		$	126,956		$	256,732	$	40,747	$	264,771		$	404,329		$	14,839		$	106,270	$	-	$	2,670,109
Ending Balance Individually Evaluated for Impairment		4,486		5,629			-			2,310		200		733			1,517			196			-		-		15,071
Ending Balance Collectively Evaluated for Impairment	$	856,825	$	588,525		$	126,956		$	254,422	$	40,547	$	264,038		$	402,812		$	14,643		$	106,270	$	-	$	2,655,038


December 31, 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		-			-		-		-			-			-			(592	)		(83	)		-			-			(675	)
Recoveries		-			38		-		13			28			-			90			52			-			-			221
Provision		(556	)		998		700		(38	)		(114	)		(166	)		312			(7	)		(860	)		(69	)		200
Ending Balance- December 31, 2019	$	11,053		$	15,128	$	1,949	$	855		$	2,675		$	8,076		$	11,466		$	456		$	3,162		$	192		$	55,012
Ending Balance Individually Evaluated for Impairment		234			-		-		118			12			99			137			61			-			-			661
Ending Balance Collectively Evaluated for Impairment		10,819			15,128		1,949		737			2,663			7,977			11,329			395			3,162			192			54,351
Loans & Leases:
Ending Balance	$	838,570		$	625,767	$	115,644	$	255,253		$	39,270		$	292,904		$	384,795		$	15,422		$	105,402		$	-		$	2,673,027
Ending Balance Individually Evaluated for Impairment		4,524			5,654		-		2,368			229			188			1,528			200			-			-			14,691
Ending Balance Collectively Evaluated for Impairment		834,046			620,113		115,644		252,885			39,041			292,716			383,267			15,222			105,402			-			2,658,336

March 31, 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	)		(21	)		-			-		(400	)
Recoveries		-			6		-			3			6			-			12			14			-			-		41
Provision		(209	)		395		(42	)		(20	)		(29	)		(794	)		644			(20	)		(14	)		89		-
Ending Balance- March 31, 2019	$	11,400		$	14,493	$	1,207		$	863		$	2,738		$	7,448		$	11,933		$	467		$	4,008		$	350	$	54,907
Ending Balance Individually Evaluated for Impairment		214			-		-			124			13			98			172			6			-			-		627
Ending Balance Collectively Evaluated for Impairment		11,186			14,493		1,207			739			2,725			7,350			11,761			461			4,008			350		54,280
Loans:
Ending Balance	$	815,366		$	603,601	$	99,837		$	258,359		$	40,072		$	257,004		$	364,439		$	18,418		$	106,872		$	-	$	2,563,968
Ending Balance Individually Evaluated for Impairment		4,638			7,238		-			2,469			255			200			1,591			6			-			-		16,397
Ending Balance Collectively Evaluated for Impairment	$	810,728		$	596,363	$	99,837		$	255,890		$	39,817		$	256,804		$	362,848		$	18,412		$	106,872		$	-	$	2,547,571

The ending balance of loans individually evaluated for impairment includes restructured loans in the amount of $2.5 million at March 31, 2020, $2.6 million at December 31, 2019 and $2.7 million at March 31, 2019, 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, 2020	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	854,346	$	6,965	$	-	$	861,311
Agricultural Real Estate		580,205		1,136		12,813		594,154
Real Estate Construction		126,956		-		-		126,956
Residential 1st Mortgages		256,027		-		705		256,732
Home Equity Lines & Loans		40,577		-		170		40,747
Agricultural		263,794		-		977		264,771
Commercial		400,735		2,321		1,273		404,329
Consumer & Other		14,392		-		447		14,839
Leases		106,270		-		-		106,270
Total	$	2,643,302	$	10,422	$	16,385	$	2,670,109

December 31, 2019	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	831,941	$	6,629	$	-	$	838,570
Agricultural Real Estate		611,792		1,136		12,839		625,767
Real Estate Construction		115,644		-		-		115,644
Residential 1st Mortgages		254,459		-		794		255,253
Home Equity Lines & Loans		39,092		-		178		39,270
Agricultural		289,276		2,617		1,011		292,904
Commercial		380,650		3,239		906		384,795
Consumer & Other		14,934		-		488		15,422
Leases		105,402		-		-		105,402
Total	$	2,643,190	$	13,621	$	16,216	$	2,673,027

March 31, 2019	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	813,090	$	2,276	$	-	$	815,366
Agricultural Real Estate		587,444		2,847		13,310		603,601
Real Estate Construction		99,837		-		-		99,837
Residential 1st Mortgages		257,878		-		481		258,359
Home Equity Lines & Loans		40,028		-		44		40,072
Agricultural		250,630		6,167		207		257,004
Commercial		360,525		2,983		931		364,439
Consumer & Other		18,263		-		155		18,418
Leases		106,872		-		-		106,872
Total	$	2,534,567	$	14,273	$	15,128	$	2,563,968

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, 2020, December 31, 2019, and March 31, 2019, 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, 2020	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	$	-	$	-	$	-	$	-	$	-	$	861,311	$	861,311
Agricultural Real Estate		-		-		-		-		-		594,154		594,154
Real Estate Construction		-		-		-		-		-		126,956		126,956
Residential 1st Mortgages		-		-		-		-		-		256,732		256,732
Home Equity Lines & Loans		226		-		-		-		226		40,521		40,747
Agricultural		-		-		-		549		549		264,222		264,771
Commercial		250		-		-		-		250		404,079		404,329
Consumer & Other		7		-		-		-		7		14,832		14,839
Leases		-		-		-		-		-		106,270		106,270
Total	$	483	$	-	$	-	$	549	$	1,032	$	2,669,077	$	2,670,109

December 31, 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	$	-	$	-	$	-	$	-	$	-	$	838,570	$	838,570
Agricultural Real Estate		-		-		-		-		-		625,767		625,767
Real Estate Construction		240		-		-		-		240		115,404		115,644
Residential 1st Mortgages		-		-		-		-		-		255,253		255,253
Home Equity Lines & Loans		-		-		-		-		-		39,270		39,270
Agricultural		-		-		-		-		-		292,904		292,904
Commercial		77		-		-		-		77		384,718		384,795
Consumer & Other		35		-		-		-		35		15,387		15,422
Leases		-		-		-		-		-		105,402		105,402
Total	$	352	$	-	$	-	$	-	$	352	$	2,672,675	$	2,673,027


March 31, 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	$	-	$	-	$	-	$	-	$	-	$	815,366	$	815,366
Agricultural Real Estate		-		-		-		-		-		603,601		603,601
Real Estate Construction		-		-		-		-		-		99,837		99,837
Residential 1st Mortgages		707		-		-		-		707		257,652		258,359
Home Equity Lines & Loans		-		-		-		-		-		40,072		40,072
Agricultural		-		-		-		-		-		257,004		257,004
Commercial		-		-		-		-		-		364,439		364,439
Consumer & Other		20		-		-		-		20		18,398		18,418
Leases		-		-		-		-		-		106,872		106,872
Total	$	727	$	-	$	-	$	-	$	727	$	2,563,241	$	2,563,968

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

March 31, 2020	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	2,888	$	2,888	$	-	$	1,487	$	29
Agricultural Real Estate		5,629		5,629		-		5,642		89
Commercial		1,507		1,507		-		754		15
	$	10,024	$	10,024	$	-	$	7,883	$	133
With an allowance recorded:
Commercial Real Estate	$	-	$	-	$	-	$	1,411	$	-
Agricultural Real Estate		549		549		214		275		-
Residential 1st Mortgages		1,550		1,761		77		1,556		19
Home Equity Lines & Loans		67		78		3		68		1
Agricultural		184		184		184		186		2
Commercial		11		11		11		770		-
Consumer & Other		196		196		61		198		4
	$	2,557	$	2,779	$	550	$	4,464	$	26
Total	$	12,581	$	12,803	$	550	$	12,347	$	159

December 31, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	86	$	86	$	-	$	90	$	8
Agricultural Real Estate		5,654		5,654		-		6,069		379
Commercial		-		-		-		8		1
	$	5,740	$	5,740	$	-	$	6,167	$	388
With an allowance recorded:
Commercial Real Estate	$	2,822	$	2,822	$	234	$	2,853	$	94
Residential 1st Mortgages		1,562		1,770		74		1,601		73
Home Equity Lines & Loans		68		79		7		71		4
Agricultural		188		188		99		195		6
Commercial		1,528		1,528		137		1,554		53
Consumer & Other		200		200		61		54		-
	$	6,368	$	6,587	$	612	$	6,328	$	230
Total	$	12,108	$	12,327	$	612	$	12,495	$	618

March 31, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	93	$	93	$	-	$	94	$	2
Agricultural Real Estate		7,239		7,238		-		7,239		73
	$	7,332	$	7,331	$	-	$	7,333	$	75
With an allowance recorded:
Commercial Real Estate	$	2,883	$	2,875	$	214	$	2,893	$	23
Residential 1st Mortgages		1,625		1,829		81		1,633		21
Home Equity Lines & Loans		73		83		4		74		1
Agricultural		201		200		98		101		-
Commercial		1,596		1,590		172		1,620		14
Consumer & Other		6		7		6		6		-
	$	6,384	$	6,584	$	575	$	6,327	$	59
Total	$	13,716	$	13,915	$	575	$	13,660	$	134

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. 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.

On March 27, 2020 the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law by Congress. The CARES Act provides financial institutions, under specific circumstances, the opportunity to temporarily suspend certain requirements under generally accepted accounting principles related to TDR’s for a limited period of time to account for the effects of COVID-19. In March 2020, a joint statement was issued by federal and state regulatory agencies, after consultation with the FASB, to clarify that short-term loan modifications are not TDRs if made on a good-faith basis in response to COVID-19 to borrowers who were current prior to any relief. Under this guidance, six months is provided as an example of short-term, and current is defined as less than 30 days past due at the time the modification program is implemented. The guidance also provides that these modified loans generally will not be classified as nonaccrual during the term of the modification. For borrowers who are 30 days or more past due when enrolling in a loan modification program related to the COVID-19 pandemic, we evaluate the loan modifications under our existing TDR framework, and where such a loan modification would result in a more than insignificant concession to a borrower experiencing financial difficulty, the loan will be accounted for as a TDR and will generally not accrue interest. See “Note 2 – Risks and Uncertainties” for additional information on the CARES Act and the impact of COVID-19 on the Company.

At March 31, 2020, there were no formal foreclosure proceedings in process for consumer mortgage loans secured by residential real estate properties.

At March 31, 2020, the Company allocated $336,000 of specific reserves to $12.6 million of troubled debt restructured loans & leases, all of which were performing. The Company had no commitments at March 31, 2020 to lend additional amounts to customers with outstanding loans or leases that are classified as TDRs.

During the three-month period ended March 31, 2020, no loans or leases were modified as a troubled debt restructuring.

During the three months ended March 31, 2020, the year ended December 31, 2019, and the three months ended March 31, 2019, 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, 2019, the Company allocated $612,000 of specific reserves to $12.1 million of troubled debt restructured loans, all of which were performing. The Company had no commitments at December 31, 2019 to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

During the year ended December 31, 2019, 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.

There were no modifications involving a reduction of the stated interest rate. Modifications involving an extension of the maturity date ranged from 3 months to 6 years.

The following table presents loans by class modified as troubled debt restructured loans for the period ended December 31, 2019 (in thousands):

	December 31, 2019
Troubled Debt Restructurings	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Agricultural		1	$	201	$	201
Consumer & Other		1		195		195
Total		2	$	396	$	396

The troubled debt restructurings described above increased the allowance for credit losses by $101,000. There were no charge-offs for the twelve months ended December 31, 2019.

At March 31, 2019, there were no formal foreclosure proceedings in process for consumer mortgage loans secured by residential real estate properties.

At March 31, 2019, the Company allocated $575,000 of specific reserves to $13.7 million of troubled debt restructured loans & leases, all of which were performing. The Company had no commitments at March 31, 2019 to lend additional amounts to customers with outstanding loans or leases that are classified as TDRs.

During the three-month period ended March 31, 2019, the terms of one loan was modified as a troubled debt restructuring. The modification involved a reduction of the stated interest rate of the loan for 5 years and an extension of the maturity date for 10 years.

The following table presents loans or leases by class modified as TDRs during the three-month period ended March 31, 2019 (in thousands):

	March 31, 2019
Troubled Debt Restructurings	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Agricultural		1	$	201	$	201
Total		1	$	201	$	201

The troubled debt restructurings described above increased the allowance for credit losses by $84,000 for the three months ended March 31, 2019.