Loans and Allowance for Credit Losses (Tables)

6 Months Ended

Jun. 30, 2021

A summary of loans at June 30, 2021 and December 31, 2020 follows (in thousands):

	June 30, 2021		December 31, 2020
Construction and land development	$	141,555	$	122,853
Agricultural real estate		277,053		254,662
1-4 family residential properties		394,850		325,480
Multifamily residential properties		275,701		189,265
Commercial real estate		1,481,410		1,176,290
Loans secured by real estate		2,570,569		2,068,550
Agricultural loans		123,985		137,333
Commercial and industrial loans		873,312		741,819
Consumer loans		85,559		78,023
All other loans		155,471		118,196
Total gross loans		3,808,896		3,143,921
Less: loans held for sale		2,867		1,924
		3,806,029		3,141,997
Less:
Net deferred loan fees (costs), premiums and discounts		12,592		5,502
Allowance for credit losses		54,597		41,910
Net loans	$	3,738,840	$	3,094,585

Allowance for Credit Losses Based on Portfolio Segment

The following table presents the activity in the allowance for credit losses based on portfolio segment for the three and six months ended June 30, 2021 (in thousands):

	Construction and Land Development			Agricultural Real Estate		1-4 Family Residential Properties			Commercial Real Estate			Agricultural Loans			Commercial and Industrial		Consumer Loans			Total
Three months ended June 30, 2021
Beginning balance	$	2,286		$	1,628	$	3,093		$	25,737		$	881		$	18,954	$	2,839		$	55,418
Initial allowance on loans purchased with credit deterioration		—			—		—			—			—			—		—			—
Provision for credit loss expense		(468	)		37		(527	)		(86	)		24			934		(474	)		(560	)
Loans charged off		23			—		14			—			—			68		344			449
Recoveries collected		—			—		18			13			1			22		134			188
Ending balance	$	1,795		$	1,665	$	2,570		$	25,664		$	906		$	19,842	$	2,155		$	54,597

Six months ended June 30, 2021
Beginning balance	$	1,666		$	1,084	$	2,322		$	19,660		$	1,526		$	13,485	$	2,167		$	41,910
Initial allowance on loans purchased with credit deterioration		261			44		328			646			—			795		—			2,074
Provision for credit loss expense		(109	)		535		90			5,816			(621	)		5,608		257			11,576
Loans charged off		23			—		196			480			—			86		632			1,417
Recoveries collected		—			2		26			22			1			40		363			454
Ending balance	$	1,795		$	1,665	$	2,570		$	25,664		$	906		$	19,842	$	2,155		$	54,597

The following tables present the activity in the allowance for credit losses based on portfolio segment for the three and six months ended June 30, 2020 and for the year ended December 31, 2020 (in thousands):

	Construction and Land Development			Agricultural Real Estate			1-4 Family Residential Properties		Commercial Real Estate		Agricultural Loans			Commercial and Industrial		Consumer Loans			Total
Three months ended June 30, 2020
Beginning balance (prior to adoption of ASC 326)	$	1,620		$	1,335		$	1,931	$	13,621	$	1,064		$	11,294	$	2,011		$	32,876
Provision for credit loss expense		738			299			483		3,118		259			1,286		(47	)		6,136
Loans charged off		—			—			69		467		—			311		116			963
Recoveries collected		—			—			141		—		—			91		100			332
Ending balance	$	2,358		$	1,634		$	2,486	$	16,272	$	1,323		$	12,360	$	1,948		$	38,381

Six months ended June 30, 2020
Beginning balance (prior to adoption of ASC 326)	$	1,146		$	1,093		$	1,386	$	11,198	$	1,386		$	9,273	$	1,429		$	26,911
Impact of adopting ASC 326		(113	)		230			756		541		(363	)		155		466			1,672
Provision for credit loss expense		1,325			311			406		5,079		300			4,101		95			11,617
Loans charged off		—			—			265		551		—			1,283		287			2,386
Recoveries collected		—			—			203		5		—			114		245			567
Ending balance	$	2,358		$	1,634		$	2,486	$	16,272	$	1,323		$	12,360	$	1,948		$	38,381

Twelve months ended December 31, 2020
Beginning balance (prior to adoption of ASC 326)	$	1,146		$	1,093		$	1,386	$	11,198	$	1,386		$	9,273	$	1,429		$	26,911
Impact of adopting ASC 326		(113	)		230			756		541		(363	)		155		466			1,672
Provision for credit loss expense		646			(239	)		274		8,581		503			5,869		469			16,103
Loans charged off		13			—			393		829		—			1,991		618			3,844
Recoveries collected		—			—			299		169		—			179		421			1,068
Ending balance	$	1,666		$	1,084		$	2,322	$	19,660	$	1,526		$	13,485	$	2,167		$	41,910

Amortized Cost Basis of Collateral-Dependent Loans by Class of Loans Individually Evaluated

The following table presents the amortized cost basis of collateral-dependent loans by class of loans that were individually evaluated to determine expected credit losses, and the related allowance for credit losses, as of June 30, 2021 (in thousands):

	Collateral								Allowance
	Real Estate		Business Assets		Other		Total		for Credit Losses
Construction and land development	$	500	$	—	$	—	$	500	$	229
Agricultural real estate		—		—		—		—		—
1-4 family residential properties		3,048		—		—		3,048		138
Multifamily residential properties		1,890		—		—		1,890		—
Commercial real estate		11,528		—		—		11,528		1,353
Loans secured by real estate		16,966		—		—		16,966		1,720
Agricultural loans		—		—		—		—		—
Commercial and industrial loans		753		3,532		1,118		5,403		2,323
Consumer loans		—		—		15	15			10
Other loans		—		—		—		—		—
Total loans	$	17,719	$	3,532	$	1,133	$	22,384	$	4,053

Credit Risk Profile of Loan Portfolio on Amortized Cost Basis Based on Risk Rating Category

The following tables present the credit risk profile of the Company’s loan portfolio on amortized cost basis based on risk rating category and year of origination as of June 30, 2021 (in thousands):

	Term Loans by Origination Year												Revolving
Risk rating	2021		2020		2019		2018		2017		Prior		Loans		Total
June 30, 2021
Construction and land development loans
Pass	$	15,090	$	34,719	$	36,595	$	34,908	$	7,483	$	12,089	$	—	$	140,884
Special mention		—		—		—		—		—		—		—		—
Substandard		—		128		—		508		—		48		—		684
Total	$	15,090	$	34,847	$	36,595	$	35,416	$	7,483	$	12,137	$	—	$	141,568
Agricultural real estate loans
Pass	$	52,827	$	67,204	$	30,337	$	38,280	$	13,913	$	61,057	$	—	$	263,618
Special mention		826		259		4,333		417		390		6,313		—		12,538
Substandard		—		—		707		202		62		235		—		1,206
Total	$	53,653	$	67,463	$	35,377	$	38,899	$	14,365	$	67,605	$	—	$	277,362
1-4 family residential property loans
Pass	$	44,456	$	87,272	$	27,827	$	35,355	$	16,318	$	132,657	$	29,035	$	372,920
Special mention		—		184		2,123		511		2,653		1,078		56		6,605
Substandard		292		868		1,814		1,929		1,957		7,580		937		15,377
Total	$	44,748	$	88,324	$	31,764	$	37,795	$	20,928	$	141,315	$	30,028	$	394,902
Commercial real estate loans
Pass	$	182,328	$	452,220	$	286,760	$	201,624	$	159,414	$	404,899	$	—	$	1,687,245
Special mention		940		2,659		1,567		2,752		10,978		22,786		—		41,682
Substandard		1,782		37		6,901		2,004		4,888		10,569		—		26,181
Total	$	185,050	$	454,916	$	295,228	$	206,380	$	175,280	$	438,254	$	—	$	1,755,108
Agricultural loans
Pass	$	57,984	$	31,547	$	6,957	$	3,625	$	1,405	$	999	$	—	$	102,517
Special mention		15,373		1,393		3,087		176		160		155		—		20,344
Substandard		44		118		25		—		—		53		—		240
Total	$	73,401	$	33,058	$	10,069	$	3,801	$	1,565	$	1,207	$	—	$	123,101
Commercial and industrial loans
Pass	$	193,441	$	248,712	$	197,188	$	92,963	$	51,719	$	223,906	$	—	$	1,007,929
Special mention		817		670		1,540		751		610		1,318		—		5,706
Substandard		343		2,302		447		1,587		100		1,308		—		6,087
Total	$	194,601	$	251,684	$	199,175	$	95,301	$	52,429	$	226,532	$	—	$	1,019,722
Consumer loans
Pass	$	14,552	$	24,756	$	19,516	$	8,138	$	5,688	$	5,239	$	—	$	77,889
Special mention		7		—		20		13		—		—		—		40
Substandard		442		2,320		559		1,689		153		1,449		—		6,612
Total	$	15,001	$	27,076	$	20,095	$	9,840	$	5,841	$	6,688	$	—	$	84,541
Total loans
Pass	$	560,678	$	946,430	$	605,180	$	414,893	$	255,940	$	840,846	$	29,035	$	3,653,002
Special mention		17,963		5,165		12,670		4,620		14,791		31,650		56		86,915
Substandard		2,903		5,773		10,453		7,919		7,160		21,242		937		56,387
Total	$	581,544	$	957,368	$	628,303	$	427,432	$	277,891	$	893,738	$	30,028	$	3,796,304

The following tables present the credit risk profile of the Company’s loan portfolio based on risk rating category as of December 31, 2020 (in thousands):

	Term Loans by Origination Year												Revolving
Risk rating	2020		2019		2018		2017		2016		Prior		Loans		Total
December 31, 2020
Construction and land development loans
Pass	$	41,842	$	40,989	$	31,500	$	2,760	$	871	$	3,822	$	—	$	121,784
Special mention		—		—		—		—		—		—		—		—
Substandard		—		128		—		517		—		50		—		695
Total	$	41,842	$	41,117	$	31,500	$	3,277	$	871	$	3,872	$	—	$	122,479
Agricultural real estate loans
Pass	$	73,630	$	34,412	$	37,839	$	16,138	$	13,559	$	58,291	$	—	$	233,869
Special mention		1,845		3,970		533		469		1,106		11,232		—		19,155
Substandard		—		—		800		208		64		245		—		1,317
Total	$	75,475	$	38,382	$	39,172	$	16,815	$	14,729	$	69,768	$	—	$	254,341
1-4 family residential property loans
Pass	$	81,366	$	29,695	$	38,163	$	23,086	$	26,676	$	62,942	$	40,363	$	302,291
Special mention		192		2,142		523		2,720		247		1,578		293		7,695
Substandard		296		695		1,915		1,859		1,996		7,516		1,499		15,776
Total	$	81,854	$	32,532	$	40,601	$	27,665	$	28,919	$	72,036	$	42,155	$	325,762
Commercial real estate loans
Pass	$	368,750	$	237,119	$	171,591	$	148,283	$	143,400	$	215,616	$	—	$	1,284,759
Special mention		2,469		1,300		6,108		11,262		6,741		16,947		—		44,827
Substandard		1,863		40		7,081		2,022		4,905		18,435		—		34,346
Total	$	373,082	$	238,459	$	184,780	$	161,567	$	155,046	$	250,998	$	—	$	1,363,932
Agricultural loans
Pass	$	83,377	$	15,680	$	5,978	$	1,838	$	635	$	2,856	$	—	$	110,364
Special mention		21,070		4,483		694		224		148		38		—		26,657
Substandard		68		238		25		—		—		—		—		331
Total	$	104,515	$	20,401	$	6,697	$	2,062	$	783	$	2,894	$	—	$	137,352
Commercial and industrial loans
Pass	$	371,683	$	132,148	$	70,497	$	78,890	$	42,439	$	114,904	$	—	$	810,561
Special mention		4,116		32,130		849		489		1,101		730		—		39,415
Substandard		889		2,360		532		1,689		136		969		—		6,575
Total	$	376,688	$	166,638	$	71,878	$	81,068	$	43,676	$	116,603	$	—	$	856,551
Consumer loans
Pass	$	31,609	$	21,384	$	12,084	$	8,279	$	3,150	$	1,022	$	—	$	77,528
Special mention		—		24		24		1		1		—		—		50
Substandard		15		16		111		95		67		120		—		424
Total	$	31,624	$	21,424	$	12,219	$	8,375	$	3,218	$	1,142	$	—	$	78,002
Total loans
Pass	$	1,052,257	$	511,427	$	367,652	$	279,274	$	230,730	$	459,453	$	40,363	$	2,941,156
Special mention		29,692		44,049		8,731		15,165		9,344		30,525		293		137,799
Substandard		3,131		3,477		10,464		6,390		7,168		27,335		1,499		59,464
Total	$	1,085,080	$	558,953	$	386,847	$	300,829	$	247,242	$	517,313	$	42,155	$	3,138,419

Loan Portfolio Aging Analysis

The following table presents the Company’s loan portfolio aging analysis at June 30, 2021 and December 31, 2020 (in thousands):

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
June 30, 2021
Construction and land development	$	4,778	$	—	$	203	$	4,981	$	136,587	$	141,568	$	—
Agricultural real estate		—		—		1		1		277,361		277,362		—
1-4 family residential properties		1,848		408		3,688		5,944		388,958		394,902		—
Multifamily residential properties		8,297		—		1,681		9,978		264,932		274,910		—
Commercial real estate		10,727		2,042		6,205		18,974		1,461,224		1,480,198		—
Loans secured by real estate		25,650		2,450		11,778		39,878		2,529,062		2,568,940		—
Agricultural loans		713		—		645		1,358		121,743		123,101		—
Commercial and industrial loans		7,121		792		1,821		9,734		854,820		864,554		—
Consumer loans		121		6		187		314		84,227		84,541		—
All other loans		—		—		—		—		155,168		155,168		—
Total loans	$	33,605	$	3,248	$	14,431	$	51,284	$	3,745,020	$	3,796,304	$	—
December 31, 2020
Construction and land development	$	—	$	—	$	128	$	128	$	122,351	$	122,479	$	—
Agricultural real estate		1,198		34		—		1,232		253,109		254,341		—
1-4 family residential properties		1,121		1,105		2,033		4,259		321,503		325,762		—
Multifamily residential properties		—		—		—		—		189,632		189,632		—
Commercial real estate		2,618		341		794		3,753		1,170,547		1,174,300		—
Loans secured by real estate		4,937		1,480		2,955		9,372		2,057,142		2,066,514		—
Agricultural loans		43		—		236		279		137,073		137,352		—
Commercial and industrial loans		2,426		8		1,420		3,854		734,459		738,313		—
Consumer loans		145		50		149		344		77,658		78,002		—
All other loans		—		—		—		—		118,238		118,238		—
Total loans	$	7,551	$	1,538	$	4,760	$	13,849	$	3,124,570	$	3,138,419	$	—

Amortized Cost Basis of Loans on Nonaccrual Status and Nonaccrual Loans Individually Evaluated

The following table presents the amortized cost basis of loans on nonaccrual status and of nonaccrual loans individually evaluated for which no allowance was recorded as of June 30, 2021 and December 31, 2020 (in thousands). There were no loans past due over eighty-nine days that were still accruing.

	June 30, 2021				December 31, 2020
	Nonaccrual with no Allowance for		Total		Nonaccrual with no Allowance for		Total
	Credit Loss		Nonaccrual		Credit Loss		Nonaccrual
Construction and land development	$	29	$	29	$	162	$	162
Agricultural real estate		343		343		359		359
1-4 family residential properties		8,199		8,302		6,747		6,930
Multifamily residential properties		2,142		2,142		2,181		2,181
Commercial real estate		3,762		9,069		7,345		8,760
Loans secured by real estate		14,475		19,885		16,794		18,392
Agricultural loans		238		238		659		659
Commercial and industrial loans		1,628		6,085		3,677		4,372
Consumer loans		277		347		327		327
All other loans		—		—		—		—
Total loans	$	16,618	$	26,555	$	21,457	$	23,750

Recorded Balance of Troubled Debt Restructurings

The following table presents the Company’s recorded balance of troubled debt restructurings at June 30, 2021 and December 31, 2020 (in thousands).

Troubled debt restructurings:	June 30, 2021		December 31, 2020
1-4 family residential properties	$	1,634	$	1,603
Commercial real estate		3,903		5,170
Loans secured by real estate		5,537		6,773
Agricultural loans		228		228
Commercial and industrial loans		2,351		2,389
Consumer loans		94		112
Total	$	8,210	$	9,502
Performing troubled debt restructurings:
1-4 family residential properties	$	904	$	1,268
Commercial real estate		2,580		3,045
Loans secured by real estate		3,484		4,313
Commercial and industrial loans		52		58
Consumer loans		24		2
Total	$	3,560	$	4,373

Loans Modified as Troubled Debt Restructurings During Period

The following table presents loans modified as TDRs during the six months ended June 30, 2021, as a result of various modified loan factors (in thousands). The change in the recorded investment from pre-modification to post- modification was not material.

	June 30, 2021					June 30, 2020
	Number of		Recorded		Type of	Number of		Recorded		Type of
	Modifications		Investment		Modifications	Modifications		Investment		Modifications
1-4 family residential properties		1	$	395	(c)		0	$	—
Commercial real estate		1		679	(b)		1		303	(b)
Loans secured by real estate		2		1,074			1		303
Agricultural loans		—		—			2		88	(b)(c)
Commercial and industrial loans		—		—			3		2,342	(b)
Consumer loans		3		24	(b)		1		11	(b)
Total		5	$	1,098			7	$	2,744

Type of modifications:

(a) Reduction of stated interest rate of loan

(b)

Change in payment terms

(c)

Extension of maturity date

(d)

Permanent reduction of the recorded investment

Summary of Purchased Credit Deteriorated (PCD) Loans

The Company has acquired loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows (in thousands):

	LINCO Bancshares, Inc. Acquisition
Purchase price of purchase credit deteriorated loans at acquisition	$	64,647
Allowance for credit losses at acquisition		(2,074	)
Non-credit discount/(premium) at acquisition		(187	)
Fair value of purchased credit deteriorated loans at acquisition	$	62,386