
	September 30, 2021		December 31, 2020
Commercial:
Commercial and Industrial Loans	$	510,583	$	638,773
Commercial Real Estate Loans	1,528,493		1,467,397
Agricultural Loans	349,321		376,186
Leases	56,186		55,664
Retail:
Home Equity Loans	217,994		219,348
Consumer Loans	67,150		66,717
Credit Cards	13,856		11,637
Residential Mortgage Loans	269,406		256,276

Subtotal	3,012,989		3,091,998
Less: Unearned Income	(3,729)		(3,926)
Allowance for Credit Losses	(37,798)		(46,859)
Loans, net	$	2,971,462	$	3,041,213

As previously disclosed, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law in March 2020, providing an approximately $2 trillion stimulus package that included direct payments to individual taxpayers, economic stimulus to significantly impacted industry sectors, emergency funding for hospitals and providers, small business loans, increased unemployment benefits, and a variety of tax incentives. For small businesses, eligible nonprofits and certain others, the CARES Act established a Paycheck Protection Program (“PPP”), a lending program administered by the Small Business Administration (“SBA”) that is intended to incentivize participants to retain their employees by providing them with loans that are fully guaranteed by the U.S. government and subject to forgiveness if program guidelines are met. The PPP was later extended and modified by the Paycheck Protection Program and Health Care Enhancement Act in April 2020 and the Paycheck Protection Program Flexibility Act in June 2020, with PPP funding under this initial round expiring on August 8, 2020.

In December 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act was signed into law as part of the Consolidated Appropriations Act, 2021 (the “CAA”). In addition to direct stimulus payments and other aid, this Act provided for a second round of PPP loans through March 31, 2021. Under the American Rescue Plan Act of 2021 and the PPP Extension Act of 2021, which were both enacted during March 2021, additional funds were provided for the program and the deadline for applying for PPP loans was extended through May 31, 2021 (with the SBA given until June 30, 2021 to process loan applications).

The Company actively participated in both rounds of the PPP, lending funds primarily to its existing loan and/or deposit customers. The PPP loans carry an interest rate of 1.00% and included a processing fee that varied depending on the balance of the loan at origination (which fee is recognized over the life of the loan). The vast majority of the Company’s PPP loans made during 2020 had two-year maturities, while PPP loans made during 2021 have five-year maturities.

Under the first round of the PPP (i.e., the 2020 round), the Company originated loans totaling approximately $351,260 in principal amount, with approximately $12,024 of related net processing fees on 3,070 PPP loan relationships. As of September 30, 2021, $347,556 of those first round PPP loans had been forgiven by the SBA and repaid to the Company pursuant to the terms of the program, with $11,997 in net processing fees having been recognized by the Company.

30, 2021, $89,524 of second round PPP loans had been forgiven by the SBA and repaid to the Company, with $5,873 in net processing fees having been recognized by the Company. As a result of the forgiveness of the first and second round PPP loans, $71,222 of total PPP loans remain outstanding as of September 30, 2021, with approximately $3,175 of net fees remaining deferred on that date.


September 30, 2021	Commercial and Industrial Loans		Commercial Real Estate Loans		Agricultural Loans		Leases		Consumer Loans		Home Equity Loans		Credit Cards		Residential Mortgage Loans		Unallocated		Total
Allowance for Credit Losses:
Beginning balance	$	6,080	$	24,220	$	5,847	$	204	$	460	$	908	$	181	$	2,095	$	—	$	39,995
Provision (Benefit) for credit loss expense	1,965		(2,833)		(1,152)		(1)		167		124		19		(289)		—		(2,000)
Loans charged-off	—		—		—		—		(204)		(15)		(16)		(44)		—		(279)
Recoveries collected	9		5		—		—		60		—		8		—		—		82
Total ending allowance balance	$	8,054	$	21,392	$	4,695	$	203	$	483	$	1,017	$	192	$	1,762	$	—	$	37,798


September 30, 2020	Commercial and Industrial Loans		Commercial Real Estate Loans		Agricultural Loans		Leases		Consumer Loans		Home Equity Loans		Credit Cards		Residential Mortgage Loans		Unallocated		Total
Allowance for Credit Losses:
Beginning balance	$	8,787	$	22,369	$	7,030	$	202	$	496	$	1,062	$	125	$	2,360	$	—	$	42,431
Provision (Benefit) for credit loss expense	(1,017)		5,931		(315)		4		70		—		39		(212)		—		4,500
Loans charged-off	(73)		(9)		—		—		(138)		(67)		(27)		(8)		—		(322)
Recoveries collected	3		91		—		—		64		—		—		1		—		159
Total ending allowance balance	$	7,700	$	28,382	$	6,715	$	206	$	492	$	995	$	137	$	2,141	$	—	$	46,768


September 30, 2021	Commercial and Industrial Loans		Commercial Real Estate Loans		Agricultural Loans		Leases		Consumer Loans		Home Equity Loans		Credit Cards		Residential Mortgage Loans		Unallocated		Total
Allowance for Credit Losses:
Beginning balance	$	6,445	$	29,878	$	6,756	$	200	$	490	$	996	$	150	$	1,944	$	—	$	46,859
Provision (Benefit) for credit loss expense	1,747		(8,502)		(2,061)		3		234		30		186		(137)		—		(8,500)
Loans charged-off	(190)		(10)		—		—		(472)		(15)		(158)		(47)		—		(892)
Recoveries collected	52		26		—		—		231		6		14		2		—		331
Total ending allowance balance	$	8,054	$	21,392	$	4,695	$	203	$	483	$	1,017	$	192	$	1,762	$	—	$	37,798


September 30, 2020	Commercial and Industrial Loans		Commercial Real Estate Loans		Agricultural Loans		Leases		Consumer Loans		Home Equity Loans		Credit Cards		Residential Mortgage Loans		Unallocated		Total
Allowance for Credit Losses:
Beginning balance prior to adoption of ASC 326	$	4,799	$	4,692	$	5,315	$	—	$	434	$	200	$	—	$	333	$	505	$	16,278
Impact of adopting ASC 326	2,245		3,063		1,438		105		(59)		762		124		1,594		(505)		8,767
Impact of adopting ASC 326 - PCD Loans	2,191		4,385		128		—		—		35		—		147		—		6,886
Provision (Benefit) for credit loss expense	(1,182)		16,145		(166)		101		385		65		98		104		—		15,550
Initial allowance on loans purchased with credit deterioration	—		—		—		—		—		—		—		—		—		—
Loans charged-off	(369)		(9)		—		—		(520)		(67)		(86)		(39)		—		(1,090)
Recoveries collected	16		106		—		—		252		—		1		2		—		377
Total ending allowance balance	$	7,700	$	28,382	$	6,715	$	206	$	492	$	995	$	137	$	2,141	$	—	$	46,768

The Company utilizes the Static Pool methodology in determining expected future credit losses. Static pool analysis means segmenting and tracking loans over a period of time based on similar risk characteristics such as loan structure, collateral type, industry of borrower and concentrations, contractual terms and credit risk indicators. Static pool calculates a loss rate on a closed pool of loans that existed on a specified start date based upon the remaining life of each segment.

Qualitative reserves reflect management’s overall estimate of the extent to which current expected credit losses on collectively evaluated loans will differ from historical loss experience. The analysis takes into consideration industry and collateral concentrations, acquired loan portfolio characteristics and other credit-related analytics as deemed appropriate. Management attempts to quantify qualitative reserves whenever possible.

The Company estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for changes in underwriting standards, portfolio mix, delinquency level, changes in environmental conditions, unemployment rates, risk classifications and collateral values. The allowance for credit losses is measured on a collective (pooled) basis when similar risk characteristics exist. Based on the potential increased losses related to the economic impact of the COVID-19 pandemic, the bank has

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation. When the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date adjusted for selling costs.

For the nine months ended September 30, 2021, the allowance for credit losses decreased primarily due to a decline in individually analyzed loans as well as a decline in the reserve attributable to pandemic-related stressed sectors. While there continues to be great uncertainty related to COVID-19 on our borrowers and communities, we have recognized improvements in employment and gross domestic product which are key indicators utilized in our forecasting for our allowance calculations. The impact of fiscal stimulus, including direct payments to individuals, ongoing increased unemployment benefits, as well as the various government-sponsored loan programs, was also considered in our qualitative adjustments. Since PPP loans are guaranteed by the Small Business Administration (SBA), they have minimal impact on the allowance for credit losses.

All classes of loans, including loans acquired with deteriorated credit quality, are generally placed on non-accrual status when scheduled principal or interest payments are past due for 90 days or more or when the borrower’s ability to repay becomes doubtful. For purchased loans, the determination is made at the time of acquisition as well as over the life of the loan. Uncollected accrued interest for each class of loans is reversed against income at the time a loan is placed on non-accrual. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. All classes of loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans are typically charged-off at 180 days past due, or earlier if deemed uncollectible. Exceptions to the non-accrual and charge-off policies are made when the loan is well secured and in the process of collection.


September 30, 2021	Non-Accrual With No Allowance for Credit Loss (1)		Total Non-Accrual		Loans Past Due Over 89 Days Still Accruing

Commercial and Industrial Loans	$	4,283	$	13,852	$	—
Commercial Real Estate Loans	50		2,766		—
Agricultural Loans	1,073		1,174		—
Leases	—		—		—
Home Equity Loans	22		22		—
Consumer Loans	16		16		—
Credit Cards	62		62		—
Residential Mortgage Loans	542		542		—
Total	$	6,048	$	18,434	$	—


December 31, 2020	Non-Accrual With No Allowance for Credit Loss (1)		Total Non-Accrual		Loans Past Due Over 89 Days Still Accruing

Commercial and Industrial Loans	$	4,571	$	8,133	$	—
Commercial Real Estate Loans	3,152		10,188		—
Agricultural Loans	1,291		1,915		—
Leases	—		—		—
Home Equity Loans	271		271		—
Consumer Loans	77		84		—
Credit Cards	86		86		—
Residential Mortgage Loans	671		830		—
Total	$	10,119	$	21,507	$	—


September 30, 2021	Real Estate		Equipment		Accounts Receivable		Other		Total

Commercial and Industrial Loans	$	2,618	$	2,487	$	579	$	8,719	$	14,403
Commercial Real Estate Loans	5,170		—		—		25		5,195
Agricultural Loans	1,560		—		—		—		1,560
Leases	—		—		—		—		—
Home Equity Loans	412		—		—		—		412
Consumer Loans	5		—		—		—		5
Credit Cards	—		—		—		—		—
Residential Mortgage Loans	664		—		—		—		664
Total	$	10,429	$	2,487	$	579	$	8,744	$	22,239


December 31, 2020	Real Estate		Equipment		Accounts Receivable		Other		Total

Commercial and Industrial Loans	$	4,943	$	3,014	$	669	$	154	$	8,780
Commercial Real Estate Loans	11,877		—		—		1,530		13,407
Agricultural Loans	3,064		—		—		—		3,064
Leases	—		—		—		—		—
Home Equity Loans	416		—		—		—		416
Consumer Loans	4		4		—		3		11
Credit Cards	—		—		—		—		—
Residential Mortgage Loans	817		—		—		—		817
Total	$	21,121	$	3,018	$	669	$	1,687	$	26,495


September 30, 2021	30-59 Days Past Due		60-89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial and Industrial Loans	$	98	$	—	$	438	$	536	$	510,047	$	510,583
Commercial Real Estate Loans	—		6		1,232		1,238		1,527,255		1,528,493
Agricultural Loans	—		—		—		—		349,321		349,321
Leases	—		—		—		—		56,186		56,186
Home Equity Loans	222		111		23		356		217,638		217,994
Consumer Loans	136		32		—		168		66,982		67,150
Credit Cards	31		15		62		108		13,748		13,856
Residential Mortgage Loans	2,619		504		327		3,450		265,956		269,406
Total	$	3,106	$	668	$	2,082	$	5,856	$	3,007,133	$	3,012,989


December 31, 2020	30-59 Days Past Due		60-89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial and Industrial Loans	$	477	$	909	$	2,441	$	3,827	$	634,946	$	638,773
Commercial Real Estate Loans	5		4,877		3,682		8,564		1,458,833		1,467,397
Agricultural Loans	—		—		651		651		375,535		376,186
Leases	—		—		—		—		55,664		55,664
Home Equity Loans	672		5		271		948		218,400		219,348
Consumer Loans	233		84		65		382		66,335		66,717
Credit Cards	95		80		86		261		11,376		11,637
Residential Mortgage Loans	3,737		1,590		529		5,856		250,420		256,276
Total	$	5,219	$	7,545	$	7,725	$	20,489	$	3,071,509	$	3,091,998

In certain instances, the Company may choose to restructure the contractual terms of loans. A troubled debt restructuring occurs when the Bank grants a concession to the borrower that it would not otherwise consider due to a borrower’s financial difficulty. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without modification. This evaluation is performed under the Company’s internal underwriting policy. The Company uses the same methodology for loans acquired with deteriorated credit quality as for all other loans when determining whether the loan is a troubled debt restructuring.

As of September 30, 2021, the Company had troubled debt restructurings totaling $106. The Company had no specific allocation of allowance for these loans at September 30, 2021. As of December 31, 2020, the Company had troubled debt restructurings totaling $111. The Company had no specific allocation of allowance for these loans at December 31, 2020.

For the three and nine months ended September 30, 2021 and 2020, the Company had no loans modified as troubled debt restructurings. Additionally, there were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three and nine months ended September 30, 2021 and 2020.

On April 7, 2020, the federal banking regulators issued a revised Interagency Statement on Loan Modifications and Reporting for Financial Institutions, which, among other things, encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19, and stated that institutions generally do not need to categorize COVID-19-related modifications as troubled debt restructurings and that the agencies will not direct supervised institutions to automatically categorize all COVID-19 related loan modifications as troubled debt restructurings. Similarly, under the CARES Act, provisions were included that allow for loan modifications to not be classified as TDRs if certain criteria are met. This TDR exemption, which was set to expire on December 31, 2020, was extended under the CAA to, effectively, January 1, 2022.

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company classifies loans as to credit risk by individually analyzing loans. This analysis includes commercial and industrial loans, commercial real estate loans, and agricultural loans with an outstanding balance greater than $250. This analysis is typically performed on at least an annual basis. The Company uses the following definitions for risk ratings:

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.


	Term Loans Amortized Cost Basis by Origination Year
As of September 30, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial and Industrial:
Risk Rating
Pass	$	149,411	$	64,297	$	67,633	$	32,264	$	18,335	$	51,778	$	101,684	$	485,402
Special Mention	616		25		246		806		1,236		1,844		2,750		7,523
Substandard	600		543		455		1,583		1,401		3,099		9,977		17,658
Doubtful	—		—		—		—		—		—		—		—
Total Commercial & Industrial Loans	$	150,627	$	64,865	$	68,334	$	34,653	$	20,972	$	56,721	$	114,411	$	510,583

Commercial Real Estate:
Risk Rating
Pass	$	328,394	$	271,691	$	179,773	$	146,504	$	147,663	$	361,853	$	18,524	$	1,454,402
Special Mention	2,440		42		755		14,876		22,585		16,149		—		56,847
Substandard	74		—		7,688		1,568		—		7,814		100		17,244
Doubtful	—		—		—		—		—		—		—		—
Total Commercial Real Estate Loans	$	330,908	$	271,733	$	188,216	$	162,948	$	170,248	$	385,816	$	18,624	$	1,528,493

Agricultural:
Risk Rating
Pass	$	36,115	$	46,365	$	24,474	$	25,349	$	25,461	$	73,419	$	70,038	$	301,221
Special Mention	1,654		5,666		4,292		3,146		6,473		7,512		8,249		36,992
Substandard	—		—		66		385		1,080		9,347		230		11,108
Doubtful	—		—		—		—		—		—		—		—
Total Agricultural Loans	$	37,769	$	52,031	$	28,832	$	28,880	$	33,014	$	90,278	$	78,517	$	349,321

Leases:
Risk Rating
Pass	$	15,307	$	13,689	$	14,794	$	6,774	$	3,274	$	2,348	$	—	$	56,186
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total Leases	$	15,307	$	13,689	$	14,794	$	6,774	$	3,274	$	2,348	$	—	$	56,186

The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses. For residential and consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following tables present the amortized cost in residential, home equity and consumer loans based on payment activity.


	Term Loans Amortized Cost Basis by Origination Year
As of September 30, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Consumer:
Payment performance
Performing	$	31,330	$	19,007	$	5,614	$	5,201	$	880	$	1,944	$	3,158	$	67,134
Nonperforming	—		—		—		—		—		16		—		16
Total Consumer Loans	$	31,330	$	19,007	$	5,614	$	5,201	$	880	$	1,960	$	3,158	$	67,150

Home Equity:
Payment performance
Performing	$	—	$	28	$	—	$	21	$	45	$	920	$	216,957	$	217,971
Nonperforming	—		—		—		—		—		1		22		23
Total Home Equity Loans	$	—	$	28	$	—	$	21	$	45	$	921	$	216,979	$	217,994

Residential Mortgage:
Payment performance
Performing	$	76,533	$	41,468	$	15,892	$	18,773	$	21,480	$	94,721	$	—	$	268,867
Nonperforming	—		—		—		—		—		539		—		539
Total Residential Mortgage Loans	$	76,533	$	41,468	$	15,892	$	18,773	$	21,480	$	95,260	$	—	$	269,406


	Term Loans Amortized Cost Basis by Origination Year
As of December 31, 2020	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total
Consumer:
Payment performance
Performing	$	33,857	$	16,486	$	8,456	$	2,115	$	910	$	2,245	$	2,563	$	66,632
Nonperforming	—		—		11		2		14		23		35		85
Total Consumer Loans	$	33,857	$	16,486	$	8,467	$	2,117	$	924	$	2,268	$	2,598	$	66,717

Home Equity:
Payment performance
Performing	$	—	$	—	$	34	$	46	$	67	$	490	$	218,440	$	219,077
Nonperforming	—		—		—		—		—		—		271		271
Total Home Equity Loans	$	—	$	—	$	34	$	46	$	67	$	490	$	218,711	$	219,348

Residential Mortgage:
Payment performance
Performing	$	45,945	$	26,536	$	28,050	$	28,764	$	25,155	$	100,998	$	—	$	255,448
Nonperforming	—		—		—		—		—		828		—		828
Total Residential Mortgage Loans	$	45,945	$	26,536	$	28,050	$	28,764	$	25,155	$	101,826	$	—	$	256,276

The Company considers the performance of the loan portfolio and its impact on the allowance for credit loan losses. For certain retail loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in credit cards based on payment activity: