Annual Report 2018 - Page 7

LOAN PORTFOLIO Loan Portfolio Total loans were $4.1 billion at December 31, 2018, an increase of $256.4 million from December 31, 2017. Components of Loans (in thousands) As of December 31 Accrual loans: Real estate mortgage Production and intermediate-term Agribusiness Other Nonaccrual loans Total loans 2018 2017 2016 $2,338,607 669,777 818,184 241,515 7,850 $2,120,112 753,494 750,074 187,077 8,751 $2,066,684 758,451 643,556 184,435 5,906 $4,075,933 $3,819,508 $3,659,032 The other category is primarily comprised of communication, energy, and other diversified industries in our capital markets portfolio. The increase in total loans from December 31, 2017, was primarily due to continued demand for mortgage loans across most segments of the portfolio. We offer variable, fixed, capped, indexed, and adjustable interest rate loan programs to our borrowers. We also offer leases through Farm Credit Leasing. We determine interest margins charged on each lending program based on cost of funds, credit risk, market conditions, and the need to generate sufficient earnings. We have sold to AgriBank participation interests in certain loans as part of a pool program. The total outstanding participation interests in this program were $88.2 million, $108.1 million, and $131.2 million at December 31, 2018, 2017, and 2016, respectively. Portfolio Distribution We are chartered to serve 102 counties in Missouri. Approximately 90.1% of our total loan portfolio was in the state of Missouri at December 31, 2018. Agricultural Concentrations As of December 31 Cash grains Livestock Agribusiness Landlords Poultry and eggs Rural utilities Other Total 2018 2017 2016 37.0% 25.6% 10.5% 5.2% 5.2% 4.0% 12.5% 37.5% 26.3% 10.4% 5.3% 5.1% 3.8% 11.6% 38.4% 26.3% 9.3% 5.3% 5.0% 3.9% 11.8% 100.0% 100.0% 100.0% Commodities are based on the borrower’s primary intended commodity at the time of loan origination and may change due to borrower business decisions as a result of changes in weather, prices, input costs, and other circumstances. Our production and intermediate-term loan portfolio exhibits some seasonality relating to patterns of operating loans made to crop producers. These loans are normally at their lowest levels following the harvest and then increase in the spring and throughout the rest of the year as borrowers fund operating needs. Portfolio Credit Quality The credit quality of our portfolio improved from December 31, 2017. Adversely classified loans decreased to 2.1% of the portfolio at December 31, 2018, from 2.6% of the portfolio at December 31, 2017. Adversely classified loans are loans we have identified as showing some credit weakness outside our credit standards. We have considered portfolio credit quality in assessing the reasonableness of our allowance for loan losses. In certain circumstances, government agency guarantee programs are used to reduce the risk of loss. At December 31, 2018, $236.8 million of our loans were, to some level, guaranteed under these government programs. 4