
	September 30, 2022		December 31, 2021
	(Amounts In Thousands)
Agricultural	$	98,555	$	106,933
Commercial and financial	248,179		222,002
Real estate:
Construction, 1 to 4 family residential	89,379		80,486
Construction, land development and commercial	165,431		127,021
Mortgage, farmland	248,103		232,744
Mortgage, 1 to 4 family first liens	1,060,888		909,564
Mortgage, 1 to 4 family junior liens	118,326		114,342
Mortgage, multi-family	435,666		382,792
Mortgage, commercial	397,048		401,377
Loans to individuals	35,355		32,687
Obligations of state and political subdivisions	49,191		50,285
	$	2,946,121	$	2,660,233
Net unamortized fees and costs	274		299
	$	2,946,395	$	2,660,532
Less allowance for credit losses	38,980		35,470
	$	2,907,415	$	2,625,062


	Three Months Ended September 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance	$	2,265	$	5,194	$	2,772	$	3,330	$	12,233	$	11,233	$	1,233	$	38,260

Charge-offs	—		(18)		—		(1)		(222)		—		(163)		(404)
Recoveries	10		233		2		6		143		26		50		470
Credit loss expense (benefit)	195		(213)		690		(473)		631		(345)		169		654

Ending balance	$	2,470	$	5,196	$	3,464	$	2,862	$	12,785	$	10,914	$	1,289	$	38,980

	Nine Months Ended September 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance	$	2,261	$	4,269	$	2,300	$	3,433	$	11,498	$	10,498	$	1,211	$	35,470
Charge-offs	(1)		(309)		—		(21)		(471)		(1)		(389)		(1,192)
Recoveries	78		445		7		296		686		76		114		1,702
Credit loss expense (benefit)	132		791		1,157		(846)		1,072		341		353		3,000

Ending balance	$	2,470	$	5,196	$	3,464	$	2,862	$	12,785	$	10,914	$	1,289	$	38,980

Ending balance, individually evaluated for credit losses	$	295	$	4	$	55	$	—	$	42	$	308	$	—	$	704

Ending balance, collectively evaluated for credit losses	$	2,175	$	5,192	$	3,409	$	2,862	$	12,743	$	10,606	$	1,289	$	38,276

Loans:
Ending balance	$	98,555	$	248,179	$	254,810	$	248,103	$	1,179,214	$	832,714	$	84,546	$	2,946,121

Ending balance, individually evaluated for credit losses	$	552	$	1,354	$	392	$	1,687	$	5,637	$	4,395	$	—	$	14,017

Ending balance, collectively evaluated for credit losses	$	98,003	$	246,825	$	254,418	$	246,416	$	1,173,577	$	828,319	$	84,546	$	2,932,104


	Three Months Ended September 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance	$	2,055	$	4,802	$	2,483	$	4,904	$	10,879	$	9,707	$	1,110	$	35,940
Charge-offs	—		(14)		—		—		(181)		(255)		(138)		(588)
Recoveries	29		431		2		—		140		23		21		646
Credit loss expense (benefit)	34		(871)		(188)		(241)		26		743		89		(408)

Ending balance	$	2,118	$	4,348	$	2,297	$	4,663	$	10,864	$	10,218	$	1,082	$	35,590

	Nine Months Ended September 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses:
Beginning balance, prior to adoption of ASC 326	$	2,508	$	4,885	$	2,319	$	4,173	$	12,368	$	9,415	$	1,402	$	37,070
Impact of adopting ASC 326	(328)		298		327		763		522		1,396		(232)		2,746
Charge-offs	—		(90)		(3)		(1)		(263)		(265)		(234)		(856)
Recoveries	117		966		93		25		648		240		98		2,187
Credit loss expense (benefit)	(179)		(1,711)		(439)		(297)		(2,411)		(568)		48		(5,557)

Ending balance	$	2,118	$	4,348	$	2,297	$	4,663	$	10,864	$	10,218	$	1,082	$	35,590

Ending balance, individually evaluated for credit losses	$	3	$	4	$	128	$	4	$	59	$	5	$	—	$	203

Ending balance, collectively evaluated for credit losses	$	2,115	$	4,344	$	2,169	$	4,659	$	10,805	$	10,213	$	1,082	$	35,387

Loans:

Ending balance	$	94,210	$	228,181	$	191,790	$	241,650	$	1,013,641	$	799,855	$	84,534	$	2,653,861

Ending balance, individually evaluated for credit losses	$	1,426	$	1,394	$	1,028	$	1,583	$	5,566	$	5,758	$	—	$	16,755

Ending balance, collectively evaluated for credit losses	$	92,784	$	226,787	$	190,762	$	240,067	$	1,008,075	$	794,097	$	84,534	$	2,637,106


	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi-family and commercial		Other		Total
	(Amounts In Thousands)
2021
Allowance for credit losses:
Ending balance	$	2,261	$	4,269	$	2,300	$	3,433	$	11,498	$	10,498	$	1,211	$	35,470
Ending balance, individually evaluated for credit losses	$	1	$	189	$	124	$	—	$	49	$	1	$	20	$	384
Ending balance, collectively evaluated for credit losses	$	2,260	$	4,080	$	2,176	$	3,433	$	11,449	$	10,497	$	1,191	$	35,086
Loan balances:
Ending balance	$	106,933	$	222,002	$	207,507	$	232,744	$	1,023,906	$	784,169	$	82,972	$	2,660,233
Ending balance, individually evaluated for credit losses	$	788	$	2,062	$	603	$	1,277	$	6,187	$	5,696	$	20	$	16,633
Ending balance, collectively evaluated for credit losses	$	106,145	$	219,940	$	206,904	$	231,467	$	1,017,719	$	778,473	$	82,952	$	2,643,600


	Three Months Ended September 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance	$	659	$	1,776	$	1,182	$	115	$	1,025	$	300	$	53	$	5,110

Credit loss expense (benefit)	(140)		(714)		424		50		(399)		(192)		(19)		(990)
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—

Ending balance	$	519	$	1,062	$	1,606	$	165	$	626	$	108	$	34	$	4,120

	Three Months Ended September 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance	$	494	$	1,529	$	864	$	107	$	791	$	275	$	30	$	4,090

Credit loss expense (benefit)	15		117		132		61		13		156		(4)		490
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—

Ending balance	$	509	$	1,646	$	996	$	168	$	804	$	431	$	26	$	4,580


	Nine Months Ended September 30, 2022
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance	$	383	$	1,118	$	849	$	113	$	794	$	559	$	34	$	3,850

Credit loss expense (benefit)	136		(56)		757		52		(168)		(451)		—		270
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—

Ending balance	$	519	$	1,062	$	1,606	$	165	$	626	$	108	$	34	$	4,120

	Nine Months Ended September 30, 2021
	Agricultural		Commercial and Financial		Real Estate: Construction and land development		Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family		Real Estate: Mortgage, multi- family and commercial		Other		Total
	(Amounts In Thousands)
Allowance for credit losses for off-balance sheet credit exposures:
Beginning balance, prior to adoption of ASC 326	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Impact of adopting ASC 326	385		1,585		736		180		471		212		15		3,584
Credit loss expense (benefit)	124		61		260		(12)		333		219		11		996
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—

Ending balance	$	509	$	1,646	$	996	$	168	$	804	$	431	$	26	$	4,580

Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification and grading in accordance with applicable bank regulations. The Company's risk rating methodology assigns risk ratings ranging from 1 to 6, where a higher rating represents higher risk. The Company differentiates its lending portfolios into loans sharing common risk characteristics for which expected credit loss is measured on a pool basis and loans not sharing common risk characteristics for which credit loss is measured individually.

Excellent – Excellent rated loans are prime quality loans covered by highly liquid collateral with generous margins or supported by superior current financial conditions reflecting substantial net worth, relative to total credit extended, and based on assets of a stable and non-speculative nature whose values can be readily verified. Identified repayment source or cash flow is abundant and assured. Loans are secured with cash, cash equivalents, or collateral with very low loan to values. The borrower would qualify for unsecured debt and guarantors provide excellent secondary support to the relationship. The borrower has a long-term relationship with Hills Bank, maintains high deposit balances and has an established payment history with Hills Bank and an established business in an established industry.

Good – Good rated loans are adequately secured by readily marketable collateral or good financial condition characterized by liquidity, flexibility and sound net worth. Loans are supported by sound primary and secondary payment sources and timely and accurate financial information. The relationship is not quite as strong as a borrower that is assigned an excellent rating but still has a very strong liquidity position, low leverage, and track record of strong performance. These loans have a strong collateral position with limited risk to bank capital. The collateral will not materially lose value in a distressed liquidation. Guarantors provide additional secondary support to mitigate possible bank losses. The borrower has a long-term relationship with Hills Bank with an established track record of payments; loans with shorter remaining loan amortization; deposit balances are consistent; loan payments could be made from cash reserves in the interim period; and source of income is coming from a stable industry.

Satisfactory – Satisfactory rated loans are loans to borrowers of average financial means not especially vulnerable to changes in economic or other circumstances, where the major support for the extension is sufficient collateral of a marketable nature, and the primary source of repayment is seen to be clear and adequate. The borrower's financial performance is consistent, ratios and trends are positive and the primary repayment source can clearly be identified and supported with acceptable financial information. The loan relationship could be vulnerable to changes in economic or industry conditions but have the ability to absorb unexpected issues. The loan collateral coverage is considered acceptable and guarantors can provide financial support but net worth might not be as liquid as a 1 or 2 rated relationship. The borrower has an established relationship with Hills Bank. The relationship is making timely loan payments, any operating line is revolving and deposit balances are positive with limited to no overdrafts. Management and industry is considered stable.

Monitor – Monitor rated loans are identified by management as warranting special attention for a variety of reasons that may bear on ultimate collectability. This may be due to adverse trends, a particular industry, loan structure, or repayment that is dependent on projections, or a one-time occurrence. The relationship liquidity levels are minimal and the borrower’s leverage position is brought into question. The primary repayment source is showing signs of being stressed or is not proven. If the borrower performs as planned, the loan will be repaid. The collateral coverage is still considered acceptable but there might be some concern with the type of real estate securing the debt or highly dependent on chattel assets. Some loans may be better secured than others. Guarantors still provide some support but there is not an abundance of financial strength supporting the guaranty. A monitor credit may be appropriate when the borrower is experiencing rapid growth which is impacting liquidity levels and increasing debt levels. Other attributes to consider would include if the business is a start-up or newly acquired, if the relationship has significant financing relationships with other financial institutions, the quality of financial information being received, management depth of the company, and changes to the business model. The track history with Hills Bank has some deficiencies such as slow payments or some overdrafts.

Special Mention – Special mention rated loans are supported by a marginal payment capacity and are marginally protected by collateral. There are identified weaknesses that if not monitored and corrected may adversely affect the Company’s credit position. A special mention credit would typically have a weakness in one of the general categories (cash flow, collateral position or payment history) but not in all categories. Potential indicators of a special mention would include past due

payments, overdrafts, management issues, poor financial performance, industry issues, or the need for additional short-term borrowing. The ability to continue to make payments is in question; there are “red flags” such as past due payments, non-revolving credit lines, overdrafts, and the inability to sell assets. The borrower is experiencing delinquent taxes, legal issues, etc., obtaining financial information has become a challenge, collateral coverage is marginal at best, and the value and condition could be brought into question. Collateral document deficiencies have been noted and if not addressed, could become material. Guarantors provide minimal support for this relationship. The credit may include an action plan or follow up established in the asset quality process. There is a change in the borrower’s communication pattern. Industry issues may be impacting the relationship. Adverse credit scores or history of payment deficiencies could be noted.

Substandard – Substandard loans are not adequately supported by the paying capacity of the borrower and may be inadequately collateralized. These loans have a well-defined weakness or weaknesses. Full repayment of the loan(s) according to the original terms and conditions is in question or not expected. For these loans, it is more probable than not that the Company could sustain some loss if the deficiency(ies) is not corrected. There are identified shortfalls in the primary repayment source such as carry over debt, past due payments, and overdrafts. Obtaining quality and timely financial information is a weakness. The loan is under secured with exposure that could impact bank capital. It appears the liquidation of collateral has become the repayment source. The collateral may be difficult to foreclose or have little to no value. Collateral documentation deficiencies have been noted during the review process. Guarantor(s) provide minimal to no support of the relationship. The borrower’s communication with the bank continues to decrease and the borrower is not addressing the situation. There is some concern about the borrower’s ability and willingness to repay the loans. Problems may be the result of external issues such as economic or industry related issues.


	Agricultural
September 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	749	$	—	$	223	$	20	$	3	$	—	$	1,397	$	2,392
Good	2,147		633		1,133		430		36		16		4,685		9,080
Satisfactory	12,541		4,596		2,721		1,006		1,253		65		21,559		43,741
Monitor	11,712		2,442		2,213		943		420		225		20,652		38,607
Special Mention	70		—		—		—		—		—		571		641
Substandard	750		—		288		60		176		—		2,820		4,094
Total	$	27,969	$	7,671	$	6,578	$	2,459	$	1,888	$	306	$	51,684	$	98,555


	Commercial and Financial
September 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	1,252	$	758	$	554	$	—	$	202	$	—	$	4,178	$	6,944
Good	14,265		8,648		3,110		627		134		1,148		10,092		38,024
Satisfactory	45,706		26,361		12,751		5,097		2,366		900		53,506		146,687
Monitor	13,176		9,225		6,545		1,354		702		602		19,448		51,052
Special Mention	597		350		335		161		34		—		456		1,933
Substandard	1,043		461		—		47		—		—		1,988		3,539
Total	$	76,039	$	45,803	$	23,295	$	7,286	$	3,438	$	2,650	$	89,668	$	248,179


	Real Estate: Construction, 1 to 4 Family Residential
September 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Good	212		1,192		—		—		—		—		21,356		22,760
Satisfactory	2,169		3,223		—		—		—		—		41,936		47,328
Monitor	—		—		—		—		—		—		—		—
Special Mention	984		—		—		—		—		—		18,202		19,186
Substandard	—		105		—		—		—		—		—		105
Total	$	3,365	$	4,520	$	—	$	—	$	—	$	—	$	81,494	$	89,379


	Real Estate: Construction, Land Development and Commercial
September 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	375	$	—	$	—	$	—	$	—	$	132	$	1,292	$	1,799
Good	2,306		584		947		—		—		227		19,733		23,797
Satisfactory	15,940		12,707		1,200		1,345		254		900		59,340		91,686
Monitor	—		—		—		—		—		—		—		—
Special Mention	7,784		3,391		227		6		34		72		29,350		40,864
Substandard	6,998		191		96		—		—		—		—		7,285
Total	$	33,403	$	16,873	$	2,470	$	1,351	$	288	$	1,331	$	109,715	$	165,431


	Real Estate: Mortgage, Farmland
September 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	3,058	$	58	$	282	$	68	$	—	$	4	$	120	$	3,590
Good	20,914		13,439		7,917		1,626		965		3,434		5,224		53,519
Satisfactory	39,819		44,509		21,598		3,832		6,096		9,626		10,990		136,470
Monitor	26,598		5,464		6,020		3,309		891		975		3,090		46,347
Special Mention	4,185		96		208		284		—		28		—		4,801
Substandard	2,797		—		—		60		336		183		—		3,376
Total	$	97,371	$	63,566	$	36,025	$	9,179	$	8,288	$	14,250	$	19,424	$	248,103


	Real Estate: Mortgage, 1 to 4 Family First Liens
September 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	1,396	$	453	$	265	$	—	$	10	$	515	$	—	$	2,639
Good	22,265		4,842		8,574		1,247		2,165		10,231		1,964		51,288
Satisfactory	290,081		204,279		141,224		53,471		49,188		132,555		13,104		883,902
Monitor	26,097		23,646		25,438		4,180		5,168		10,431		5,737		100,697
Special Mention	1,148		1,215		2,623		1,590		889		4,063		1		11,529
Substandard	414		1,916		1,798		615		1,572		4,518		—		10,833
Total	$	341,401	$	236,351	$	179,922	$	61,103	$	58,992	$	162,313	$	20,806	$	1,060,888


	Real Estate: Mortgage, 1 to 4 Family Junior Liens
September 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	—	$	—	$	9	$	—	$	—	$	—	$	16	$	25
Good	228		190		474		93		—		543		1,418		2,946
Satisfactory	11,891		11,245		8,129		4,667		5,073		7,806		60,297		109,108
Monitor	399		275		432		94		289		197		2,742		4,428
Special Mention	55		121		351		64		41		186		106		924
Substandard	49		57		200		100		78		29		382		895
Total	$	12,622	$	11,888	$	9,595	$	5,018	$	5,481	$	8,761	$	64,961	$	118,326


	Real Estate: Mortgage, Multi-Family
September 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	299	$	3,155	$	2,644	$	—	$	—	$	649	$	—	$	6,747
Good	18,318		15,669		26,865		29		—		8,821		—		69,702
Satisfactory	98,677		96,242		29,386		2,385		475		14,563		10,661		252,389
Monitor	47,748		24,592		25,899		171		—		1,340		7,078		106,828
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Total	$	165,042	$	139,658	$	84,794	$	2,585	$	475	$	25,373	$	17,739	$	435,666


	Real Estate: Mortgage, Commercial
September 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	2,050	$	582	$	21,625	$	—	$	—	$	1,186	$	—	$	25,443
Good	19,117		23,256		14,800		2,071		1,292		5,809		11,695		78,040
Satisfactory	51,658		63,796		40,355		10,960		8,625		17,073		18,404		210,871
Monitor	20,450		16,183		24,262		3,052		1,543		7,401		4,601		77,492
Special Mention	536		892		465		169		—		245		—		2,307
Substandard	267		362		1,848		126		194		96		2		2,895
Total	$	94,078	$	105,071	$	103,355	$	16,378	$	11,654	$	31,810	$	34,702	$	397,048


	Loans to Individuals
September 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	58	$	—	$	—	$	—	$	—	$	—	$	—	$	58
Good	22		—		—		18		—		—		2		42
Satisfactory	11,077		7,316		3,117		1,084		435		11,387		111		34,527
Monitor	221		202		73		16		28		—		2		542
Special Mention	65		60		6		6		1		—		1		139
Substandard	22		8		6		4		6		—		1		47
Total	$	11,465	$	7,586	$	3,202	$	1,128	$	470	$	11,387	$	117	$	35,355


	Agricultural
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	762	$	213	$	30	$	10	$	—	$	—	$	2,312	$	3,327
Good	1,799		1,767		603		46		52		26		7,593		11,886
Satisfactory	10,335		6,404		1,476		1,770		403		66		26,285		46,739
Monitor	8,125		5,017		998		765		164		253		23,995		39,317
Special Mention	1,662		11		85		—		7		—		2,807		4,572
Substandard	592		69		203		—		—		—		228		1,092
Total	$	23,275	$	13,481	$	3,395	$	2,591	$	626	$	345	$	63,220	$	106,933


	Commercial and Financial
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	965	$	924	$	4	$	235	$	31	$	—	$	3,391	$	5,550
Good	13,722		5,570		1,105		1,086		276		1,494		20,709		43,962
Satisfactory	44,964		20,847		7,684		3,582		2,106		331		41,832		121,346
Monitor	18,337		8,019		3,591		1,123		297		416		13,368		45,151
Special Mention	603		525		353		70		102		4		174		1,831
Substandard	1,092		670		266		54		92		—		1,988		4,162
Total	$	79,683	$	36,555	$	13,003	$	6,150	$	2,904	$	2,245	$	81,462	$	222,002


	Real Estate: Construction, 1 to 4 Family Residential
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Good	212		—		—		—		—		—		18,755		18,967
Satisfactory	7,457		94		—		—		—		—		42,988		50,539
Monitor	1,307		—		—		—		—		—		9,187		10,494
Special Mention	—		—		—		—		—		—		374		374
Substandard	111		—		—		—		—		—		1		112
Total	$	9,087	$	94	$	—	$	—	$	—	$	—	$	71,305	$	80,486


	Real Estate: Construction, Land Development and Commercial
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	5,079	$	—	$	—	$	—	$	143	$	4	$	—	$	5,226
Good	3,294		1,200		—		—		153		242		12,678		17,567
Satisfactory	22,907		4,354		2,356		263		1,081		21		40,048		71,030
Monitor	5,694		547		7		38		74		—		18,832		25,192
Special Mention	—		—		—		—		—		—		—		—
Substandard	7,515		298		193		—		—		—		—		8,006
Total	$	44,489	$	6,399	$	2,556	$	301	$	1,451	$	267	$	71,558	$	127,021


	Real Estate: Mortgage, Farmland
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	—	$	3,568	$	124	$	60	$	80	$	41	$	134	$	4,007
Good	17,827		14,308		2,144		2,460		5,932		3,929		3,844		50,444
Satisfactory	51,639		35,616		4,689		8,358		6,745		8,339		8,242		123,628
Monitor	8,532		16,925		5,518		3,901		2,154		4,866		5,695		47,591
Special Mention	4,031		288		—		—		298		190		—		4,807
Substandard	1,283		447		291		47		—		199		—		2,267
Total	$	83,312	$	71,152	$	12,766	$	14,826	$	15,209	$	17,564	$	17,915	$	232,744


	Real Estate: Mortgage, 1 to 4 Family First Liens
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	462	$	914	$	427	$	19	$	149	$	404	$	1	$	2,376
Good	9,598		12,300		3,124		3,443		3,091		10,943		2,496		44,995
Satisfactory	233,412		189,247		69,037		65,201		60,906		118,608		8,443		744,854
Monitor	24,908		33,863		5,038		6,527		7,273		12,203		4,066		93,878
Special Mention	1,682		3,422		887		962		1,051		3,168		—		11,172
Substandard	1,571		1,261		1,129		1,609		576		6,142		1		12,289
Total	$	271,633	$	241,007	$	79,642	$	77,761	$	73,046	$	151,468	$	15,007	$	909,564


	Real Estate: Mortgage, 1 to 4 Family Junior Liens
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	—	$	13	$	—	$	—	$	—	$	—	$	6	$	19
Good	193		611		96		—		108		482		1,374		2,864
Satisfactory	13,684		10,116		5,854		7,309		5,230		6,053		55,496		103,742
Monitor	326		1,233		70		365		140		281		2,801		5,216
Special Mention	103		489		35		56		42		110		142		977
Substandard	77		209		79		441		74		99		545		1,524
Total	$	14,383	$	12,671	$	6,134	$	8,171	$	5,594	$	7,025	$	60,364	$	114,342


	Real Estate: Mortgage, Multi-Family
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	2,539	$	4,513	$	—	$	—	$	—	$	701	$	—	$	7,753
Good	16,931		35,396		1,555		—		—		9,289		—		63,171
Satisfactory	107,192		69,287		13,635		2,030		1,561		14,660		14,764		223,129
Monitor	26,088		35,886		176		—		131		1,584		5,669		69,534
Special Mention	640		—		820		—		—		—		—		1,460
Substandard	12,186		—		—		—		—		5,559		—		17,745
Total	$	165,576	$	145,082	$	16,186	$	2,030	$	1,692	$	31,793	$	20,433	$	382,792


	Real Estate: Mortgage, Commercial
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	597	$	16,781	$	—	$	—	$	3,313	$	350	$	1	$	21,042
Good	20,143		36,773		2,619		1,356		3,811		7,085		9,812		81,599
Satisfactory	75,040		52,653		14,727		12,091		9,707		17,398		16,333		197,949
Monitor	18,664		49,774		3,923		2,202		3,037		8,461		3,387		89,448
Special Mention	5,791		795		303		—		554		337		—		7,780
Substandard	1,528		1,721		—		208		—		102		—		3,559
Total	$	121,763	$	158,497	$	21,572	$	15,857	$	20,422	$	33,733	$	29,533	$	401,377


	Loans to Individuals
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Good	—		—		67		21		5		—		1		94
Satisfactory	12,162		5,606		2,212		967		141		10,867		57		32,012
Monitor	200		160		15		46		3		—		1		425
Special Mention	37		32		29		4		—		—		1		103
Substandard	12		24		12		—		1		3		1		53
Total	$	12,411	$	5,822	$	2,335	$	1,038	$	150	$	10,870	$	61	$	32,687


	Obligations of State and Political Subdivisions
December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total

Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	6,076	$	—	$	6,076
Good	—		1,984		—		—		—		9,051		—		11,035
Satisfactory	1,009		2,034		1,551		706		11,557		3,634		9,400		29,891
Monitor	—		933		203		249		—		1,898		—		3,283
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Total	$	1,009	$	4,951	$	1,754	$	955	$	11,557	$	20,659	$	9,400	$	50,285


	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Accruing Loans Past Due 90 Days or More
	(Amounts In Thousands)
September 30, 2022
Agricultural	$	202	$	—	$	—	$	202	$	98,353	$	98,555	$	—
Commercial and financial	701		618		6		1,325		246,854		248,179		—
Real estate:
Construction, 1 to 4 family residential	3,428		—		105		3,533		85,846		89,379		—
Construction, land development and commercial	151		56		287		494		164,937		165,431		—
Mortgage, farmland	118		—		60		178		247,925		248,103		—
Mortgage, 1 to 4 family first liens	842		2,423		2,253		5,518		1,055,370		1,060,888		386
Mortgage, 1 to 4 family junior liens	53		30		16		99		118,227		118,326		7
Mortgage, multi-family	—		—		—		—		435,666		435,666		—
Mortgage, commercial	2,949		181		1,145		4,275		392,773		397,048		—
Loans to individuals	191		45		—		236		35,119		35,355		—
Obligations of state and political subdivisions	—		—		—		—		49,191		49,191		—
	$	8,635	$	3,353	$	3,872	$	15,860	$	2,930,261	$	2,946,121	$	393

December 31, 2021
Agricultural	$	41	$	—	$	219	$	260	$	106,673	$	106,933	$	6
Commercial and financial	300		537		468		1,305		220,697		222,002		91
Real estate:
Construction, 1 to 4 family residential	276		—		—		276		80,210		80,486		—
Construction, land development and commercial	194		66		96		356		126,665		127,021		—
Mortgage, farmland	503		362		—		865		231,879		232,744		—
Mortgage, 1 to 4 family first liens	5,085		864		2,481		8,430		901,134		909,564		104
Mortgage, 1 to 4 family junior liens	246		41		124		411		113,931		114,342		—
Mortgage, multi-family	640		—		—		640		382,152		382,792		—
Mortgage, commercial	466		—		829		1,295		400,082		401,377		—
Loans to individuals	177		26		5		208		32,479		32,687		—
Obligations of state and political subdivisions	394		—		—		394		49,891		50,285		—
	$	8,322	$	1,896	$	4,222	$	14,440	$	2,645,793	$	2,660,233	$	201


	September 30, 2022				December 31, 2021
	Non-accrual loans (1)		Accruing loans past due 90 days or more		TDR loans		Non- accrual loans (1)		Accruing loans past due 90 days or more		TDR loans
	(Amounts In Thousands)				(Amounts In Thousands)
Agricultural	$	—	$	—	$	23	$	221	$	6	$	374
Commercial and financial	678		—		675		707		91		1,085
Real estate:
Construction, 1 to 4 family residential	105		—		—		111		—		—
Construction, land development and commercial	287		—		—		290		—		202
Mortgage, farmland	643		—		1,045		251		—		1,206
Mortgage, 1 to 4 family first liens	4,055		386		1,170		4,685		104		1,364
Mortgage, 1 to 4 family junior liens	178		7		19		200		—		20
Mortgage, multi-family	—		—		625		—		—		1,460
Mortgage, commercial	1,819		—		1,952		2,026		—		2,210
Loans to individuals	—		—		—		—		—		—
Obligations of state and political subdivisions	—		—		—		—		—		—
	$	7,765	$	393	$	5,509	$	8,491	$	201	$	7,921

Loans 90 days or more past due that are still accruing interest increased $0.19 million from December 31, 2021 to September 30, 2022. As of September 30, 2022, there were four accruing loans past due 90 days or more with an average loan balance of $0.98 million. There were 6 accruing loans past due 90 days or more as of December 31, 2021 with an average loan balance of $0.03 million. The accruing loans past due 90 days or more balances are believed to be adequately collateralized and the Company expects to collect all principal and interest as contractually due under these loans. There was no interest income recognized on nonaccrual loans for the nine months ended September 30, 2022 and year ended December 31, 2021.

The Company may modify the terms of a loan to maximize the collection of amounts due. Such a modification is considered a troubled debt restructuring (“TDR”). In most cases, the modification is either a reduction in interest rate, conversion to interest only payments or an extension of the maturity date. The borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term, so a concessionary modification is granted to the borrower that would otherwise not be considered. TDR loans accrue interest as long as the borrower complies with the revised terms and conditions and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles.

Section 4013 of the CARES Act, “Temporary Relief From Troubled Debt Restructurings,” allows financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time during the COVID-19 pandemic. As of September 30, 2022, the total amount of the eligible loans in deferral (deferral of principal and/or interest) that met the requirements set forth under the CARES Act and therefore were not considered TDRs was 16 loans,


	September 30, 2022					December 31, 2021
	Number of contracts	Recorded investment		Commitments outstanding		Number of contracts	Recorded investment		Commitments outstanding
		(Amounts In Thousands)					(Amounts In Thousands)
Agricultural	1	$	23	$	140	4	$	586	$	—
Commercial and financial	11	1,324		50		12	1,116		60
Real estate:
Construction, 1 to 4 family residential	1	105		—		—	—		—
Construction, land development and commercial	1	191		—		1	202		—
Mortgage, farmland	4	1,584		—		5	1,409		—
Mortgage, 1 to 4 family first liens	8	1,170		—		14	1,441		—
Mortgage, 1 to 4 family junior liens	1	19		—		1	20		—
Mortgage, multi-family	1	625		—		2	1,460		—
Mortgage, commercial	11	3,644		—		11	3,963		—
Loans to individuals	—	—		—		—	—		—
Obligations of state and political subdivisions	—	—		—		—	—		—
	39	$	8,685	$	190	50	$	10,197	$	60


	Three Months Ended September 30, 2022					Nine Months Ended September 30, 2022
	Number of contracts	Pre-modification recorded investment		Post-modification recorded investment			Number of contracts	Pre-modification recorded investment		Post-modification recorded investment
		(Amounts In Thousands)					(Amounts In Thousands)
Agricultural	—	$	—	$	—		—	$	—	$	—
Commercial and financial	—	—		—			1	371		371
Real estate:
Construction, 1 to 4 family residential	—	—		—			1	105		105
Construction, land development and commercial	—	—		—			1	191		191
Mortgage, farmland	—	—		—			2	1,021		1,021
Mortgage, 1 to 4 family first lien	—	—		—			—	—		—
Mortgage, 1 to 4 family junior liens	—	—		—			—	—		—
Mortgage, multi-family	—	—		—			—	—		—
Mortgage, commercial	—	—		—			1	274		274
Loans to individuals	—	—		—			—	—		—
Obligations of state and political subdivisions	—	—		—			—	—		—
	—	$	—	$	—		6	$	1,962	$	1,962

The Company has allocated $0.36 million of allowance for TDR loans and the Company had commitments to lend $0.19 million in additional borrowings to restructured loan customers as of September 30, 2022. The Company had commitments to lend $0.06 million in additional borrowings to restructured loan customers as of December 31, 2021. These commitments were in the normal course of business. The additional borrowings were not used to facilitate payments on these loans. The modifications of the terms of loans performed during the nine months ended September 30, 2022 included extensions of the maturity date.


	Primary Type of Collateral
	Real Estate		Accounts Receivable		Equipment		Other		Total		ACL Allocation
	(Amounts In Thousands)
September 30, 2022
Agricultural	$	552	$	—	$	—	$	—	$	552	$	295
Commercial and financial	1,271		—		83		—		1,354		4
Real estate:
Construction, 1 to 4 family residential	105		—		—		—		105		55
Construction, land development and commercial	287		—		—		—		287		—
Mortgage, farmland	1,507		—		180		—		1,687		—
Mortgage, 1 to 4 family first liens	5,433		—		—		—		5,433		40
Mortgage, 1 to 4 family junior liens	204		—		—		—		204		2
Mortgage, multi-family	625		—		—		—		625		—
Mortgage, commercial	3,770		—		—		—		3,770		308
Loans to individuals	—		—		—		—		—		—
Obligations of state and political subdivisions	—		—		—		—		—		—
	$	13,754	$	—	$	263	$	—	$	14,017	$	704

The changes in the ACL in 2022 compared to December 31, 2021 is the result of the following factors: improvements in the economic factors, primarily Iowa unemployment in the first quarter, used in the ACL calculation which resulted in a decrease of $1.09 million; increase in loan volume which resulted in an increase of $3.34 million; changes in prepayment and curtailment rates and loss driver analysis resulting in an increase of $0.35 million; increase in the individually analyzed loans reserve of $0.34 million; and increases in qualitative factors determined necessary by management which resulted in an increase of $0.57 million. The decrease in the allowance for credit losses on off-balance sheet credit exposures is primarily a result of the decreased outstanding unfunded commitments and funding rates as of September 30, 2022.

The extent to which collateral secures collateral-dependent loans is provided in the previous individually analyzed loans table and changes in the extent to which collateral secures its collateral-dependent loans are described below. Collateral-dependent loans decreased $2.62 million from December 31, 2021 to September 30, 2022. Collateral-dependent loans include any loan that has been placed on nonaccrual status, accruing loans past due 90 days or more and TDR loans. Collateral-dependent loans also include loans that, based on management’s evaluation of current information and events, the Company expects to be unable to collect in full according to the contractual terms of the original loan agreement. Collateral-dependent loans were 0.48% of loans held for investment as of September 30, 2022 and 0.63% as of December 31, 2021. The decrease in collateral-dependent loans is due to a decrease in nonaccrual loans of $0.73 million, an increase in 90 days or more accruing loans of $0.19 million and a decrease in TDR loans of $1.51 million from December 31, 2021 to September 30, 2022. There were no significant changes noted in the extent to which collateral secures collateral-dependent loans.

The Company regularly reviews a substantial portion of the loans in the portfolio and assesses whether the loans share common risk characteristics for which expected credit loss is measured on a pool basis or if the loans do not share common risk characteristics and therefore expected credit loss is measured on an individual loan basis. If the loans are assessed for credit losses on an individual basis, the Company determines if a specific allowance is appropriate. In addition, the Company's management also reviews and, where determined necessary, provides allowances for particular loans based upon (1) reviews of specific borrowers and (2) management’s assessment of areas that management considers are of higher credit risk, including loans that have been restructured or where a TDR is reasonably possible. Loans that are determined not to be collateral-dependent and for which there are no specific allowances are classified into one or more risk categories and expected credit loss is measured on a pool basis. See Note 1 Adoption of Financial Accounting Standard for further discussion of the allowance for credit losses for loans held for investment.

Specific allowances for credit losses on loans assessed individually are established if the loan balances exceed the net present value of the relevant future cash flows or the fair value of the relevant collateral based on updated appraisals and/or updated collateral analysis for the properties if the loan is collateral dependent. The Company may recognize a charge off or record a specific allowance related to an individually analyzed loan if there is a collateral shortfall or it is unlikely the borrower can make all principal and interest payments as contractually due.

For loans that are collateral-dependent, losses are evaluated based on the portion of a loan that exceeds the fair market value of the collateral. In general, this is the amount that the carrying value of the loan exceeds the related appraised value less estimated costs to sell the collateral. Generally, it is the Company’s policy not to rely on appraisals that are older than one year prior to the date the credit loss is being measured. The most recent appraisal values may be adjusted if, in the Company’s judgment, experience and other market data indicate that the property’s value, use, condition, exit market or other variables affecting its value may have changed since the appraisal was performed. The charge off or loss adjustment supported by an appraisal is considered the minimum charge off. Any adjustments made to the appraised value are to provide an additional charge off or specific reserve based on the applicable facts and circumstances. In instances where there is an estimated decline in value, a specific reserve may be provided or a charge off taken pending confirmation of the amount of the loss from an updated appraisal. Upon receipt of the new appraisals, an additional specific reserve may be provided or charge off taken based on the appraised value of the collateral. On average, appraisals are obtained within one month of order.