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Loans
 9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
Loans Loans
 
Loans were comprised of the following classifications:
 September 30,
2023		December 31,
2022
Commercial:
Commercial and Industrial Loans$598,893 $620,106 
Commercial Real Estate Loans2,076,962 1,966,884 
Agricultural Loans398,109 417,413 
Leases66,999 56,396 
Retail:
Home Equity Loans286,880 279,748 
Consumer Loans88,976 79,904 
Credit Cards20,144 17,512 
Residential Mortgage Loans356,610 350,682 
Subtotal3,893,573 3,788,645 
Less: Unearned Income(6,023)(3,711)
Allowance for Credit Losses(44,646)(44,168)
Loans, net$3,842,904 $3,740,766 

The table above includes $15,074 and $21,149 of purchase credit deteriorated loans as of September 30, 2023 and December 31, 2022, respectively.

Allowance for Credit Losses for Loans

The following tables present the activity in the allowance for credit losses by portfolio segment for the three months ended September 30, 2023 and 2022:

September 30, 2023Commercial and Industrial
Loans		Commercial Real Estate LoansAgricultural
Loans		LeasesConsumer LoansHome Equity LoansCredit CardsResidential Mortgage LoansTotal
Allowance for Credit Losses:
Beginning balance$13,567 $21,834 $3,956 $235 $640 $1,436 $288 $2,310 $44,266 
Provision (Benefit) for credit loss expense(436)1,117 (168)19 258 9 93 8 900 
Loans charged-off(175)(56)(2)— (352)— (64)(1)(650)
Recoveries collected2 5 — — 119 2 2 — 130 
Total ending allowance balance$12,958 $22,900 $3,786 $254 $665 $1,447 $319 $2,317 $44,646 
September 30, 2022Commercial and Industrial
Loans		Commercial Real Estate LoansAgricultural
Loans		LeasesConsumer LoansHome Equity LoansCredit CardsResidential Mortgage LoansTotal
Allowance for Credit Losses:
Beginning balance$13,545 $22,349 $4,628 $191 $668 $1,233 $239 $2,178 $45,031 
Provision (Benefit) for credit loss expense141 (210)(99)27 305 85 52 49 350 
Loans charged-off(238)(1)— — (495)(5)(63)(18)(820)
Recoveries collected7 5 — — 116 — 8 2 138 
Total ending allowance balance$13,455 $22,143 $4,529 $218 $594 $1,313 $236 $2,211 $44,699 

The following tables present the activity in the allowance for credit losses by portfolio segment for the nine months ended September 30, 2023 and 2022:

September 30, 2023Commercial and Industrial
Loans		Commercial Real Estate LoansAgricultural
Loans		LeasesConsumer LoansHome Equity LoansCredit CardsResidential Mortgage LoansTotal
Allowance for Credit Losses:
Beginning balance$13,749 $21,598 $4,188 $209 $595 $1,344 $257 $2,228 $44,168 
Provision (Benefit) for credit loss expense310 1,286 (375)45 657 109 374 144 2,550 
Loans charged-off(1,252)(56)(27)— (980)(39)(325)(58)(2,737)
Recoveries collected151 72 — — 393 33 13 3 665 
Total ending allowance balance$12,958 $22,900 $3,786 $254 $665 $1,447 $319 $2,317 $44,646 

September 30, 2022Commercial and Industrial
Loans		Commercial Real Estate LoansAgricultural
Loans		LeasesConsumer LoansHome Equity LoansCredit CardsResidential Mortgage LoansTotal
Allowance for Credit Losses:
Beginning balance$9,554 $19,245 $4,505 $200 $507 $1,061 $240 $1,705 $37,017 
Acquisition of Citizens Union Bank of Shelbyville, KY376 1,945 689 — 2 — — 105 3,117 
Provision (Benefit) for credit loss expense3,803 1,013 (665)18 823 309 131 418 5,850 
Loans charged-off(299)(79)— — (1,027)(57)(153)(21)(1,636)
Recoveries collected21 19 — — 289 — 18 4 351 
Total ending allowance balance$13,455 $22,143 $4,529 $218 $594 $1,313 $236 $2,211 $44,699 

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.

The Company’s expected loss estimate is anchored in historical credit loss experience, with an emphasis on all available portfolio data. The Company's historical look-back period includes January 2014 through the current period, on a monthly basis.

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 by anchoring to specific data points when 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 advancing stress on the economy as a result of inflationary pressures, rising interest rates and financial market volatility, the Company has considered this loss experience may align with loss experience from the recessionary period from 2008-2011 and qualitative adjustments have been made accordingly.

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, 2023, the allowance for credit losses increased minimally compared to December 31, 2022. The Company saw improvement in individually analyzed loans and added reserve for loan portfolio growth. Key indicators utilized in forecasting for the allowance calculations include unemployment rates and gross domestic product as well as commodity prices for the agricultural segment of the portfolio. There has been some improvement in these factors over previous periods; however, rising interest rates and the expanded inflationary impact on consumer discretionary spending were considered in the qualitative factors to determine 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.

The following tables present the amortized cost in non-accrual loans and loans past due over 89 days still accruing by class of loans as of September 30, 2023 and December 31, 2022:
September 30, 2023
Non-Accrual With No Allowance for Credit Loss (1)
Total Non-AccrualLoans Past Due Over 89 Days Still Accruing
Commercial and Industrial Loans$554 $7,298 $1,000 
Commercial Real Estate Loans137 1,006 145 
Agricultural Loans698 1,036 25 
Leases— — — 
Home Equity Loans567 621 — 
Consumer Loans32 32 — 
Credit Cards146 146 — 
Residential Mortgage Loans726 1,067 — 
Total$2,860 $11,206 $1,170 
(1) Includes non-accrual loans with no allowance for credit loss and are also included in Total Non-Accrual loans of $11,206.
Interest income on non-accrual loans recognized during the three and nine months ended September 30, 2023 totaled $62 and $99, respectively.
December 31, 2022
Non-Accrual With No Allowance for Credit Loss (1)
Total Non-AccrualLoans Past Due Over 89 Days Still Accruing
Commercial and Industrial Loans$1,142 $7,936 $1,427 
Commercial Real Estate Loans49 1,950 — 
Agricultural Loans994 1,062 — 
Leases— — — 
Home Equity Loans262 310 — 
Consumer Loans240 254 — 
Credit Cards146 146 — 
Residential Mortgage Loans676 1,230 — 
Total$3,509 $12,888 $1,427 
(1) Includes non-accrual loans with no allowance for credit loss and are also included in Total Non-Accrual loans of $12,888.

Interest income on non-accrual loans recognized during the year ended December 31, 2022 totaled $32.

The following tables present the amortized cost basis of collateral-dependent loans by class of loans as of September 30, 2023 and December 31, 2022:
September 30, 2023Real EstateEquipmentAccounts ReceivableOtherTotal
Commercial and Industrial Loans$3,070 $134 $— $6,707 $9,911 
Commercial Real Estate Loans8,367 — — — 8,367 
Agricultural Loans2,796 1,097 — — 3,893 
Leases— — — — — 
Home Equity Loans475 — — — 475 
Consumer Loans9 — — — 9 
Credit Cards— — — — — 
Residential Mortgage Loans847 — — — 847 
Total$15,564 $1,231 $— $6,707 $23,502 

December 31, 2022Real EstateEquipmentAccounts ReceivableOtherTotal
Commercial and Industrial Loans$2,078 $1,219 $272 $5,851 $9,420 
Commercial Real Estate Loans12,192 36 — — 12,228 
Agricultural Loans4,944 318 — — 5,262 
Leases— — — — — 
Home Equity Loans467 — — — 467 
Consumer Loans8 2 — 12 22 
Credit Cards— — — — — 
Residential Mortgage Loans1,060 — — — 1,060 
Total$20,749 $1,575 $272 $5,863 $28,459 
The following tables present the aging of the amortized cost basis in past due loans by class of loans as of September 30, 2023 and December 31, 2022:
September 30, 202330-59 Days Past Due60-89 Days Past DueGreater Than 89 Days Past DueTotal
Past Due		Loans Not Past DueTotal
Commercial and Industrial Loans$454 $— $7,822 $8,276 $590,617 $598,893 
Commercial Real Estate Loans387 384 1,012 1,783 2,075,179 2,076,962 
Agricultural Loans337 — 639 976 397,133 398,109 
Leases— — — — 66,999 66,999 
Home Equity Loans1,460 215 621 2,296 284,584 286,880 
Consumer Loans269 19 32 320 88,656 88,976 
Credit Cards87 58 146 291 19,853 20,144 
Residential Mortgage Loans8,233 1,345 855 10,433 346,177 356,610 
Total$11,227 $2,021 $11,127 $24,375 $3,869,198 $3,893,573 
December 31, 202230-59 Days Past Due60-89 Days Past DueGreater Than 89 Days Past DueTotal
Past Due		Loans Not Past DueTotal
Commercial and Industrial Loans$268 $681 $8,285 $9,234 $610,872 $620,106 
Commercial Real Estate Loans1,617 14 616 2,247 1,964,637 1,966,884 
Agricultural Loans343 — 123 466 416,947 417,413 
Leases— — — — 56,396 56,396 
Home Equity Loans1,770 140 310 2,220 277,528 279,748 
Consumer Loans219 64 252 535 79,369 79,904 
Credit Cards86 24 146 256 17,256 17,512 
Residential Mortgage Loans6,330 2,783 1,051 10,164 340,518 350,682 
Total$10,633 $3,706 $10,783 $25,122 $3,763,523 $3,788,645 

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

Effective January 1, 2023, the Company prospectively adopted ASU 2022-02, which eliminated the accounting for troubled debt restructurings while establishing a new standard for the treatment of modifications made to borrowers experiencing financial difficulties. As such, effective with the adoption of the new standard, the Company will not include, prospectively, financial difficulty modifications in its presentation of nonperforming loans, nonperforming assets or classified assets. Prior period data, which included troubled debt restructurings, has not been adjusted.

The Company’s loan modifications for borrowers experiencing financial difficulties will typically include 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. No modifications in 2023 resulted in the permanent reduction of the recorded investment in the loan.

During the three and nine months ended September 30, 2023, the Company had no modified loans made to borrowers experiencing financial difficulty. There were no modified loans that had a payment default during the three and nine months ended September 30, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty. The Company considers a loan to be in payment default once it is 30 days contractually past due under the modified terms.
Troubled Debt Restructurings Disclosures Prior to Adoption of ASU 2022-02
 
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 December 31, 2022, the Company had no troubled debt restructurings. The Company had no specific allocation of allowance for these loans at December 31, 2022.
  
The Company had not committed to lending any additional amounts as of December 31, 2022 to customers with outstanding loans that are classified as troubled debt restructurings.

For the year ended December 31, 2022, 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 year ended December 31, 2022.

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

Credit Quality Indicators:

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:
 
Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
 
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.
 
Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
 
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.
Based on the analysis performed at September 30, 2023 and December 31, 2022, the risk category of loans by class of loans is as follows:
Term Loans Amortized Cost Basis by Origination Year
As of September 30, 202320232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Commercial and Industrial:
Risk Rating
Pass$88,379 $140,656 $86,196 $30,700 $36,656 $51,279 $136,528 $570,394 
Special Mention48 470 498 1,609 642 1,991 5,843 11,101 
Substandard— 391 6,284 787 1,116 1,510 7,310 17,398 
Doubtful— — — — — — — — 
Total Commercial & Industrial Loans$88,427 $141,517 $92,978 $33,096 $38,414 $54,780 $149,681 $598,893 
Current Period Gross Charge-Offs$— $911 $32 $33 $7 $88 $181 $1,252 
Commercial Real Estate:
Risk Rating
Pass$218,088 $424,293 $473,834 $227,014 $150,687 $482,924 $36,185 $2,013,025 
Special Mention13,591 2,171 11,239 4,471 264 21,051 — 52,787 
Substandard— 203 5,360 1,152 748 3,372 315 11,150 
Doubtful— — — — — — — — 
Total Commercial Real Estate Loans$231,679 $426,667 $490,433 $232,637 $151,699 $507,347 $36,500 $2,076,962 
Current Period Gross Charge-Offs$— $— $56 $— $— $— $— $56 
Agricultural:
Risk Rating
Pass$33,037 $58,537 $41,034 $42,723 $22,653 $104,949 $65,960 $368,893 
Special Mention2,528 240 635 5,037 2,552 10,101 2,649 23,742 
Substandard— — 202 189 292 4,791 — 5,474 
Doubtful— — — — — — — — 
Total Agricultural Loans$35,565 $58,777 $41,871 $47,949 $25,497 $119,841 $68,609 $398,109 
Current Period Gross Charge-Offs$— $— $— $2 $— $— $25 $27 
Leases:
Risk Rating
Pass$27,207 $13,519 $11,533 $6,964 $6,076 $1,700 $— $66,999 
Special Mention— — — — — — — — 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total Leases$27,207 $13,519 $11,533 $6,964 $6,076 $1,700 $— $66,999 
Current Period Gross Charge-Offs$— $— $— $— $— $— $— $— 
Term Loans Amortized Cost Basis by Origination Year
As of December 31, 202220222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Commercial and Industrial:
Risk Rating
Pass$156,318 $117,648 $39,949 $46,505 $18,423 $51,482 $154,203 $584,528 
Special Mention56 148 577 78 551 2,346 1,672 5,428 
Substandard1,714 5,629 849 1,304 1,028 2,237 17,389 30,150 
Doubtful— — — — — — — — 
Total Commercial & Industrial Loans$158,088 $123,425 $41,375 $47,887 $20,002 $56,065 $173,264 $620,106 
Commercial Real Estate:
Risk Rating
Pass$398,631 $490,747 $261,462 $162,701 $129,151 $427,433 $35,163 $1,905,288 
Special Mention3,982 1,568 4,612 135 13,689 25,371 — 49,357 
Substandard— 4,628 489 1,415 979 4,728 — 12,239 
Doubtful— — — — — — — — 
Total Commercial Real Estate Loans$402,613 $496,943 $266,563 $164,251 $143,819 $457,532 $35,163 $1,966,884 
Agricultural:
Risk Rating
Pass$62,673 $47,682 $47,355 $25,431 $21,728 $92,344 $83,862 $381,075 
Special Mention634 842 6,066 4,149 2,355 11,440 4,310 29,796 
Substandard— 210 628 429 85 5,190 — 6,542 
Doubtful— — — — — — — — 
Total Agricultural Loans$63,307 $48,734 $54,049 $30,009 $24,168 $108,974 $88,172 $417,413 
Leases:
Risk Rating
Pass$20,057 $14,461 $9,648 $8,901 $1,851 $1,478 $— $56,396 
Special Mention— — — — — — — — 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total Leases$20,057 $14,461 $9,648 $8,901 $1,851 $1,478 $— $56,396 
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, 202320232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Consumer:
Payment performance
Performing$40,108 $28,347 $10,852 $3,710 $1,139 $2,121 $2,667 $88,944 
Nonperforming4 6 11 6 — 5 — 32 
Total Consumer Loans$40,112 $28,353 $10,863 $3,716 $1,139 $2,126 $2,667 $88,976 
Current Period Gross Charge-Offs$880 $42 $23 $24 $3 $1 $7 $980 
Home Equity:
Payment performance
Performing$225 $118 $87 $90 $68 $1,014 $284,657 $286,259 
Nonperforming— — 251 — — 92 278 621 
Total Home Equity Loans$225 $118 $338 $90 $68 $1,106 $284,935 $286,880 
Current Period Gross Charge-Offs$— $— $— $— $— $24 $15 $39 
Residential Mortgage:
Payment performance
Performing$40,631 $66,546 $87,909 $42,517 $18,330 $99,610 $— $355,543 
Nonperforming— 110 140 123 109 585 — 1,067 
Total Residential Mortgage Loans$40,631 $66,656 $88,049 $42,640 $18,439 $100,195 $— $356,610 
Current Period Gross Charge-Offs$— $— $22 $36 $— $— $— $58 
Term Loans Amortized Cost Basis by Origination Year
As of December 31, 202220222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Consumer:
Payment performance
Performing$42,685 $22,708 $5,610 $2,394 $1,543 $1,553 $3,157 $79,650 
Nonperforming3 19 212 8 2 10 — 254 
Total Consumer Loans$42,688 $22,727 $5,822 $2,402 $1,545 $1,563 $3,157 $79,904 
Home Equity:
Payment performance
Performing$63 $— $— $— $— $591 $278,784 $279,438 
Nonperforming— 20 — — 19 1 270 310 
Total Home Equity Loans$63 $20 $— $— $19 $592 $279,054 $279,748 
Residential Mortgage:
Payment performance
Performing$69,982 $97,176 $46,851 $20,080 $16,664 $98,699 $— $349,452 
Nonperforming— 161 253 — 78 738 — 1,230 
Total Residential Mortgage Loans$69,982 $97,337 $47,104 $20,080 $16,742 $99,437 $— $350,682 

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:
Credit CardsSeptember 30, 2023December 31, 2022
   Performing$19,998 $17,366 
   Nonperforming146 146 
      Total$20,144 $17,512 

The following tables present loans purchased and/or sold during the year by portfolio segment and excludes the business combination activity:
September 30, 2023Commercial and Industrial LoansCommercial Real Estate LoansAgricultural LoansLeasesConsumer LoansHome Equity LoansCredit CardsResidential Mortgage LoansTotal
   Purchases$— $544 $— $— $— $— $— $— $544 
   Sales— — — — — — — — — 
December 31, 2022Commercial and Industrial LoansCommercial Real Estate LoansAgricultural LoansLeasesConsumer LoansHome Equity LoansCredit CardsResidential Mortgage LoansTotal
   Purchases$522 $411 $— $— $— $— $— $— $933 
   Sales— 3,819 97 — — — — — 3,916