Loans

12 Months Ended

Dec. 31, 2022

Receivables [Abstract]

Loans

Loans

Classes of loans are as follows:

	December 31,
	2022		2021
	(Amounts In Thousands)
Agricultural	$	112,705	$	106,933
Commercial and financial	269,568		222,002
Real estate:
Construction, 1 to 4 family residential	92,408		80,486
Construction, land development and commercial	196,240		127,021
Mortgage, farmland	256,570		232,744
Mortgage, 1 to 4 family first liens	1,130,989		909,564
Mortgage, 1 to 4 family junior liens	124,951		114,342
Mortgage, multi-family	436,952		382,792
Mortgage, commercial	402,842		401,377
Loans to individuals	36,675		32,687
Obligations of state and political subdivisions	48,213		50,285
	3,108,113		2,660,233
Net unamortized fees and costs	308		299
	3,108,421		2,660,532
Less allowance for credit losses	41,440		35,470
	$	3,066,981	$	2,625,062

For the years ended December 31, 2022 and 2021, the Company recognized none and $5.81 million of deferred PPP loan fees in interest income.

Changes in the allowance for credit losses for the years ended December 31, 2022, 2021 and 2020 are as follows:

	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)
2022
Allowance for credit losses:
Beginning balance	$	2,261	$	4,269	$	2,300	$	3,433	$	11,498	$	10,498	$	1,211	$	35,470
Charge-offs	(357)		(447)		—		(40)		(729)		(51)		(589)		(2,213)
Recoveries	83		584		48		296		898		361		153		2,423
Credit loss (benefit) expense	555		1,853		1,841		(700)		2,541		(1,392)		1,062		5,760
Ending balance	$	2,542	$	6,259	$	4,189	$	2,989	$	14,208	$	9,416	$	1,837	$	41,440

	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:
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	(106)		(136)		(3)		(1)		(482)		(265)		(323)		(1,316)
Recoveries	142		1,103		94		25		964		263		152		2,743
Credit loss (benefit) expense	45		(1,881)		(437)		(1,527)		(1,874)		(311)		212		(5,773)
Ending balance	$	2,261	$	4,269	$	2,300	$	3,433	$	11,498	$	10,498	$	1,211	$	35,470

	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)
2020
Allowance for loan losses:
Beginning balance	$	2,400	$	4,988	$	2,599	$	3,950	$	10,638	$	7,859	$	1,326	$	33,760
Charge-offs	(43)		(1,425)		(43)		(1)		(738)		(291)		(381)		(2,922)
Recoveries	63		670		118		10		784		49		180		1,874
Provision	88		652		(355)		214		1,684		1,798		277		4,358
Ending balance	$	2,508	$	4,885	$	2,319	$	4,173	$	12,368	$	9,415	$	1,402	$	37,070
Ending balance, individually evaluated for impairment	$	86	$	411	$	7	$	—	$	93	$	14	$	51	$	662
Ending balance, collectively evaluated for impairment	$	2,422	$	4,474	$	2,312	$	4,173	$	12,275	$	9,401	$	1,351	$	36,408
Loan balances:
Ending balance	$	94,842	$	286,242	$	183,030	$	247,142	$	1,019,922	$	791,153	$	87,813	$	2,710,144
Ending balance, individually evaluated for impairment	$	1,543	$	2,191	$	1,266	$	2,061	$	7,417	$	6,200	$	51	$	20,729
Ending balance, collectively evaluated for impairment	$	93,299	$	284,051	$	181,764	$	245,081	$	1,012,505	$	784,953	$	87,762	$	2,689,415

Changes in the allowance for credit losses for off-balance sheet credit exposures for the years ended December 31, 2022 and 2021 were as follows:

	Year Ended December 31, 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 (benefit) expense	142		(19)		1,277		(58)		(323)		(437)		(2)		580
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—
Ending balance	$	525	$	1,099	$	2,126	$	55	$	471	$	122	$	32	$	4,430

	Year Ended December 31, 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 (benefit) expense	(2)		(467)		113		(67)		323		347		19		266
(Charge-offs), net recoveries	—		—		—		—		—		—		—		—
Ending balance	$	383	$	1,118	$	849	$	113	$	794	$	559	$	34	$	3,850

Credit loss (benefit) expense for off-balance sheet credit exposures is included in credit loss (benefit) expense on the consolidated statement of income for the years ended December 31, 2022 and 2021.

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.

The below are descriptions of the credit quality indicators:

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.

The following tables present the credit quality indicators and origination years by type of loan in each category as of December 31, 2022 and 2021 (amounts in thousands):

	Agricultural
December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	395	$	—	$	199	$	20	$	3	$	—	$	4,196	$	4,813
Good	3,823		550		1,003		427		23		13		9,671		15,510
Satisfactory	17,417		4,144		2,659		855		1,250		48		24,233		50,606
Monitor	12,835		1,885		1,770		891		272		225		19,623		37,501
Special Mention	—		—		—		—		—		—		62		62
Substandard	1,450		—		278		59		166		—		2,260		4,213
Total	$	35,920	$	6,579	$	5,909	$	2,252	$	1,714	$	286	$	60,045	$	112,705

	Commercial and Financial
December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	1,644	$	690	$	691	$	—	$	176	$	—	$	8,404	$	11,605
Good	14,733		6,854		2,504		546		105		1,059		15,836		41,637
Satisfactory	57,920		24,028		11,139		4,339		1,979		356		53,618		153,379
Monitor	16,153		7,570		6,031		1,172		260		1		24,434		55,621
Special Mention	1,201		343		278		196		29		391		668		3,106
Substandard	746		477		291		68		—		—		2,638		4,220
Total	$	92,397	$	39,962	$	20,934	$	6,321	$	2,549	$	1,807	$	105,598	$	269,568

	Real Estate: Construction, 1 to 4 Family Residential
December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Good	322		—		—		—		—		—		21,467		21,789
Satisfactory	1,962		328		—		—		—		—		47,229		49,519
Monitor	775		182		—		—		—		—		19,886		20,843
Special Mention	—		—		—		—		—		—		38		38
Substandard	—		105		—		—		—		—		114		219
Total	$	3,059	$	615	$	—	$	—	$	—	$	—	$	88,734	$	92,408

	Real Estate: Construction, Land Development and Commercial
December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	375	$	—	$	—	$	—	$	—	$	127	$	1,424	$	1,926
Good	2,383		958		947		—		—		221		18,349		22,858
Satisfactory	23,004		7,222		1,191		311		251		828		90,511		123,318
Monitor	8,121		4,788		119		6		33		71		27,551		40,689
Special Mention	—		—		—		—		—		—		—		—
Substandard	7,043		191		53		—		—		—		162		7,449
Total	$	40,926	$	13,159	$	2,310	$	317	$	284	$	1,247	$	137,997	$	196,240

	Real Estate: Mortgage, Farmland
December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	4,058	$	58	$	261	$	68	$	—	$	4	$	115	$	4,564
Good	24,552		13,966		7,541		1,582		846		917		7,034		56,438
Satisfactory	47,617		41,878		20,908		3,628		5,258		8,184		11,927		139,400
Monitor	24,754		5,803		5,440		3,478		887		1,221		8,992		50,575
Special Mention	4,284		96		112		—		—		15		—		4,507
Substandard	539		—		—		60		307		180		—		1,086
Total	$	105,804	$	61,801	$	34,262	$	8,816	$	7,298	$	10,521	$	28,068	$	256,570

	Real Estate: Mortgage, 1 to 4 Family First Liens
December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	1,507	$	450	$	352	$	—	$	6	$	360	$	—	$	2,675
Good	23,270		5,522		8,346		1,342		2,391		10,401		4,688		55,960
Satisfactory	369,706		201,488		142,417		52,727		47,736		124,754		14,992		953,820
Monitor	29,274		20,868		19,766		3,624		4,546		10,638		6,823		95,539
Special Mention	903		1,216		2,058		1,048		952		2,844		463		9,484
Substandard	1,756		2,086		2,419		833		1,690		3,980		747		13,511
Total	$	426,416	$	231,630	$	175,358	$	59,574	$	57,321	$	152,977	$	27,713	$	1,130,989

	Real Estate: Mortgage, 1 to 4 Family Junior Liens
December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	23	$	—	$	7	$	—	$	—	$	—	$	32	$	62
Good	493		189		465		91		—		527		2,023		3,788
Satisfactory	15,543		10,915		7,921		4,523		4,822		7,024		64,649		115,397
Monitor	248		244		507		83		286		188		2,442		3,998
Special Mention	114		134		214		37		12		120		72		703
Substandard	122		69		198		87		57		47		423		1,003
Total	$	16,543	$	11,551	$	9,312	$	4,821	$	5,177	$	7,906	$	69,641	$	124,951

	Real Estate: Mortgage, Multi-Family
December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	6,162	$	3,123	$	3,018	$	—	$	—	$	292	$	—	$	12,595
Good	14,175		23,485		26,302		—		—		8,538		1,362		73,862
Satisfactory	97,449		85,441		26,513		2,355		471		14,295		10,604		237,128
Monitor	44,719		26,633		26,252		169		—		1,201		6,219		105,193
Special Mention	8,174		—		—		—		—		—		—		8,174
Substandard	—		—		—		—		—		—		—		—
Total	$	170,679	$	138,682	$	82,085	$	2,524	$	471	$	24,326	$	18,185	$	436,952

	Real Estate: Mortgage, Commercial
December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	1,946	$	576	$	21,269	$	—	$	—	$	1,145	$	—	$	24,936
Good	19,682		23,000		14,286		2,026		1,271		4,413		11,689		76,367
Satisfactory	61,055		61,844		38,772		10,590		8,255		14,568		21,933		217,017
Monitor	22,542		13,111		21,909		3,318		1,515		8,212		7,089		77,696
Special Mention	—		3,298		779		—		—		—		689		4,766
Substandard	259		513		927		75		190		96		—		2,060
Total	$	105,484	$	102,342	$	97,942	$	16,009	$	11,231	$	28,434	$	41,400	$	402,842

	Loans to Individuals
December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	24	$	—	$	—	$	—	$	—	$	—	$	—	$	24
Good	47		—		—		16		—		—		2		65
Satisfactory	14,053		6,091		2,647		869		335		11,722		133		35,850
Monitor	253		146		49		5		24		—		1		478
Special Mention	88		34		5		9		—		—		—		136
Substandard	45		36		3		2		4		30		2		122
Total	$	14,510	$	6,307	$	2,704	$	901	$	363	$	11,752	$	138	$	36,675

	Obligations of State and Political Subdivisions
December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Grade:
Excellent	$	—	$	—	$	—	$	—	$	—	$	4,816	$	—	$	4,816
Good	—		—		1,870		—		—		8,342		—		10,212
Satisfactory	2,224		820		1,961		1,492		573		15,677		8,848		31,595
Monitor	344		—		830		181		99		136		—		1,590
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Total	$	2,568	$	820	$	4,661	$	1,673	$	672	$	28,971	$	8,848	$	48,213

	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

Past due loans as of December 31, 2022 and 2021 were as follows:

	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)
December 31, 2022
Agricultural	$	314	$	—	$	—	$	314	$	112,391	$	112,705	$	—
Commercial and financial	421		132		6		559		269,009		269,568		—
Real estate:
Construction, 1 to 4 family residential	—		—		105		105		92,303		92,408		—
Construction, land development and commercial	—		1,183		191		1,374		194,866		196,240		—
Mortgage, farmland	24		162		60		246		256,324		256,570		—
Mortgage, 1 to 4 family first liens	3,421		45		3,029		6,495		1,124,494		1,130,989		553
Mortgage, 1 to 4 family junior liens	473		19		8		500		124,451		124,951		—
Mortgage, multi-family	—		—		—		—		436,952		436,952		—
Mortgage, commercial	247		—		75		322		402,520		402,842		—
Loans to individuals	314		53		—		367		36,308		36,675		—
Obligations of state and political subdivisions	—		—		—		—		48,213		48,213		—
	$	5,214	$	1,594	$	3,474	$	10,282	$	3,097,831	$	3,108,113	$	553

	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)
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

The Company does not have a significant amount of loans that are past due less than 90 days where there are serious doubts as to the ability of the borrowers to comply with the loan repayment terms.

Accruing loans past due 90 days or more increased $0.35 million from December 31, 2021 to December 31, 2022.  As of December 31, 2022 and 2021, accruing loans past due 90 days or more were 0.02% and 0.01% of total loans, respectively.  The average balance of the accruing loans past due 90 days or more increased in 2022 as compared to 2021.  The average 90 days or more past due accruing loan balance per loan was $0.14 million as of December 31, 2022 compared to $0.03 million as of December 31, 2021.  The loans 90 days or more past due and still accruing are believed to be adequately collateralized.   Loans are placed on nonaccrual status when management believes the collection of future principal and interest is not reasonably assured.

Certain nonaccrual and TDR loan information by loan type at December 31, 2022 and 2021 was as follows:

	December 31, 2022								December 31, 2021
	Nonaccrual loans (1)		Interest income recognized on non-accrual		Accruing loans past due 90 days or more		TDR loans		Nonaccrual loans (1)		Accruing loans past due 90 days or more		TDR loans
	(Amounts In Thousands)								(Amounts In Thousands)
Agricultural	$	—	$	—	$	—	$	20	$	221	$	6	$	374
Commercial and financial	265		—		—		1,124		707		91		1,085
Real estate:
Construction, 1 to 4 family residential	105		—		—		—		111		—		—
Construction, land development and commercial	191		—		—		—		290		—		202
Mortgage, farmland	623		—		—		1,039		251		—		1,206
Mortgage, 1 to 4 family first liens	4,550		—		553		1,156		4,685		104		1,364
Mortgage, 1 to 4 family junior liens	175		—		—		19		200		—		20
Mortgage, multi-family	—		—		—		620		—		—		1,460
Mortgage, commercial	906		—		—		1,927		2,026		—		2,210
Loans to individuals	—		—		—		—		—		—		—
	$	6,815	$	—	$	553	$	5,905	$	8,491	$	201	$	7,921

(1)There were $1.75 million and $2.28 million of TDR loans included within nonaccrual loans as of December 31, 2022 and 2021, respectively.

The Company may modify the terms of a loan to maximize the collection of amounts due.  In most cases, the modification is 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 financial 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 December 31, 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 were 16 loans, totaling $7.3 million. As of December 31, 2021, there were 16 loans, totaling $9.4 million that met the requirements and were not considered TDRs.

As of December 31, 2022 and 2021, COVID-19 related payment deferrals were approximately 0.03% and 0.12% of total loans, respectively.

Below is a summary of information for TDR loans as of December 31, 2022 and 2021:

	December 31, 2022
	Number of contracts	Recorded investment		Commitments outstanding
		(Dollar Amounts In Thousands)
Agricultural	1	$	20	$	100
Commercial and financial	11	1,379		49
Real estate:
Construction, 1 to 4 family residential	1	105		—
Construction, land development and commercial	1	191		—
Mortgage, farmland	4	1,578		—
Mortgage, 1 to 4 family first liens	8	1,156		—
Mortgage, 1 to 4 family junior liens	1	19		—
Mortgage, multi-family	1	620		—
Mortgage, commercial	9	2,584		—
Loans to individuals	—	—		—
	37	$	7,652	$	149

	December 31, 2021
	Number of contracts	Recorded investment		Commitments outstanding
		(Dollar Amounts In Thousands)
Agricultural	4	$	586	$	—
Commercial and financial	12	1,116		60
Real estate:
Construction, 1 to 4 family residential	—	—		—
Construction, land development and commercial	1	202		—
Mortgage, farmland	5	1,409		—
Mortgage, 1 to 4 family first liens	14	1,441		—
Mortgage, 1 to 4 family junior liens	1	20		—
Mortgage, multi-family	2	1,460		—
Mortgage, commercial	11	3,963		—
Loans to individuals	—	—		—
	50	$	10,197	$	60

A summary of TDR loans that were modified during the year ended December 31, 2022 and 2021 was as follows:

	December 31, 2022
	Number of Contracts	Pre-modification recorded investment		Post-modification recorded investment
		( Dollar Amounts In Thousands)
Agricultural	—	$	—	$	—
Commercial and financial	2	1,032		1,032
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 liens	—	—		—
Mortgage, 1 to 4 family junior liens	—	—		—
Mortgage, multi-family	—	—		—
Mortgage, commercial	1	274		274
Loans to individuals	—	—		—
	7	$	2,623	$	2,623

	December 31, 2021
	Number of Contracts	Pre-modification recorded investment		Post-modification recorded investment
		( Dollar Amounts In Thousands)
Agricultural	1	$	178	$	178
Commercial and financial	—	—		—
Real estate:
Construction, 1 to 4 family residential	—	—		—
Construction, land development and commercial	—	—		—
Mortgage, farmland	1	319		319
Mortgage, 1 to 4 family first liens	4	112		112
Mortgage, 1 to 4 family junior liens	—	—		—
Mortgage, multi-family	—	—		—
Mortgage, commercial	1	232		232
Loans to individuals	—	—		—
	7	$	841	$	841

.

The Company has allocated $0.06 million of allowance for TDR loans and the Company had commitments to lend $0.15 million in additional borrowings to restructured loan customers as of December 30, 2022. The Company allocated $0.01 million of allowance for TDR loans and 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 years ended December 31, 2022 and 2021 included extensions of the maturity date.

There were no TDR loans modified that were in payment default (defined as past due 90 days or more) during the years ended December 31, 2022 and 2021.

The following tables present the amortized cost basis of collateral dependent loans, by the primary collateral type, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans as of December 31, 2022 and 2021:

	Primary Type of Collateral
	Real Estate		Accounts Receivable		Equipment		Other		Total		ACL Allocation
	(Amounts In Thousands)
December 31, 2022
Agricultural	$	197	$	—	$	—	$	—	$	197	$	—
Commercial and financial	1,385		—		74		—		1,459		4
Real estate:
Construction, 1 to 4 family residential	382		—		—		—		382		105
Construction, land development and commercial	191		—		—		—		191		—
Mortgage, farmland	1,482		—		180		—		1,662		—
Mortgage, 1 to 4 family first liens	6,012		—		—		—		6,012		44
Mortgage, 1 to 4 family junior liens	193		—		—		—		193		1
Mortgage, multi-family	620		—		—		—		620		—
Mortgage, commercial	2,833		—		—		—		2,833		1
Loans to individuals	30		—		—		—		30		29
Obligations of state and political subdivisions	—		—		—		—		—		—
	$	13,325	$	—	$	254	$	—	$	13,579	$	184

	Primary Type of Collateral
	Real Estate		Accounts Receivable		Equipment		Other		Total		ACL Allocation
	(Amounts In Thousands)
December 31, 2021
Agricultural	$	734	$	—	$	54	$	—	$	788	$	1
Commercial and financial	1,951		—		111		—		2,062		189
Real estate:
Construction, 1 to 4 family residential	111		—		—		—		111		111
Construction, land development and commercial	492		—		—		—		492		13
Mortgage, farmland	1,277		—		—		—		1,277		—
Mortgage, 1 to 4 family first liens	5,967		—		—		—		5,967		31
Mortgage, 1 to 4 family junior liens	220		—		—		—		220		18
Mortgage, multi-family	1,460		—		—		—		1,460		—
Mortgage, commercial	4,236		—		—		—		4,236		1
Loans to individuals	20		—		—		—		20		20
Obligations of state and political subdivisions	—		—		—		—		—		—
	$	16,468	$	—	$	165	$	—	$	16,633	$	384

Pre-ASC 326 (CECL) adoption impaired loan information as of December 31, 2020 is as follows:

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(Amounts in Thousands)
2020
With no related allowance recorded:
Agricultural	$	1,337	$	1,928	$	—	$	1,518	$	24
Commercial and financial	1,520		2,907		—		2,054		85
Real estate:
Construction, 1 to 4 family residential	315		337		—		475		—
Construction, land development and commercial	415		421		—		420		13
Mortgage, farmland	2,061		2,598		—		3,008		120
Mortgage, 1 to 4 family first liens	6,253		8,013		—		6,578		108
Mortgage, 1 to 4 family junior liens	108		350		—		134		—
Mortgage, multi-family	1,773		1,898		—		1,795		80
Mortgage, commercial	4,124		4,960		—		4,315		126
Loans to individuals	—		47		—		—		—
	$	17,906	$	23,459	$	—	$	20,297	$	556
With an allowance recorded:
Agricultural	$	206	$	206	$	86	$	141	$	14
Commercial and financial	671		724		411		755		27
Real estate:
Construction, 1 to 4 family residential	536		536		7		486		24
Construction, land development and commercial	—		—		—		—		—
Mortgage, farmland	—		—		—		—		—
Mortgage, 1 to 4 family first liens	924		975		56		955		25
Mortgage, 1 to 4 family junior liens	132		158		37		149		2
Mortgage, multi-family	—		—		—		—		—
Mortgage, commercial	303		304		14		306		3
Loans to individuals	51		51		51		53		3
	$	2,823	$	2,954	$	662	$	2,845	$	98
Total:
Agricultural	$	1,543	$	2,134	$	86	$	1,659	$	38
Commercial and financial	2,191		3,631		411		2,809		112
Real estate:
Construction, 1 to 4 family residential	851		873		7		961		24
Construction, land development and commercial	415		421		—		420		13
Mortgage, farmland	2,061		2,598		—		3,008		120
Mortgage, 1 to 4 family first liens	7,177		8,988		56		7,533		133
Mortgage, 1 to 4 family junior liens	240		508		37		283		2
Mortgage, multi-family	1,773		1,898		—		1,795		80
Mortgage, commercial	4,427		5,264		14		4,621		129
Loans to individuals	51		98		51		53		3
	$	20,729	$	26,413	$	662	$	23,142	$	654

Post-ASC 326 CECL Adoption:

The changes in the ACL in 2022 compared to 2021 is the result of the following factors: improvements in the economic factor forecasts, primarily Iowa unemployment, used in the ACL calculation which resulted in a decrease of $1.09 million; increase in loan volume which resulted in an increase of $4.72 million; changes in prepayment and curtailment rates resulting in an increase of $1.00 million; decreases in the individually analyzed loans reserve of $0.18 million; and increases in qualitative factors determined necessary by management which resulted in an increase of $1.52 million. The increase in the allowance for credit losses on off-balance sheet credit exposures is primarily a result of increased outstanding unfunded commitments and funding rates as of December 31, 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 $3.05 million from December 31, 2021 to December 31, 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 0.44% of loans held for investment as of December 31, 2022 and 0.63% as of December 31, 2021.  The decrease in collateral-dependent loans is due to a decrease in nonaccrual loans of $1.68 million, a decrease in TDR loans of $2.02 million and is offset by an increase of $0.29 million in loans with a specific reserve and an increase in 90 days or more accruing loans of $0.35 million from December 31, 2021 to December 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 Effect of New Financial Accounting Standards 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.

The Company has not experienced any significant time lapses in recognizing the required provisions for collateral dependent loans, nor has the Company delayed appropriate charge-offs.  When an updated appraisal value has been obtained, the Company has used the appraisal amount in helping to determine the appropriate charge-off or required reserve.  The Company also evaluates any changes in the financial condition of the borrower and guarantors (if applicable), economic conditions, and

the Company’s loss experience with the type of property in question.  Any information utilized in addition to the appraisal is intended to identify additional charge-offs or provisions, not to override the appraised value.