Loans and Allowance for Credit Losses (Tables)

9 Months Ended

Sep. 30, 2023

Loans and Allowance for Credit Losses [Abstract]

A summary of loans at September 30, 2023 and December 31, 2022, are as follows (dollars in thousands):

	September 30, 2023			December 31, 2022

Construction & development	$	139,053		$	163,203
1 - 4 family real estate		91,540			76,928
Commercial real estate - other		516,975			439,001
Total commercial real estate	$	747,568		$	679,132

Commercial & industrial		568,684			513,011
Agricultural		64,688			66,145
Consumer		14,993			14,949

Gross loans		1,395,933			1,273,237

Less allowance for credit losses		(20,649	)		(14,734	)
Less deferred loan fees		(3,156	)		(2,781	)

Net loans	$	1,372,128		$	1,255,722

Activity in Allowance for Credit Losses by Portfolio Segment

The following table presents, by portfolio segment, the activity in the allowance for credit losses for the three months ended September 30, 2023 and 2022 (dollars in thousands):

	Construction & Development			1 - 4 Family Real Estate		Commercial Real Estate - Other			Commercial & Industrial			Agricultural			Consumer			Total

September 30, 2023
Loans
Balance, beginning of period	$	1,592		$	1,116	$	6,089		$	6,712		$	601		$	267		$	16,377
Charge-offs		-			-		-			-			-			-			-
Recoveries		-			-		-			-			-			1			1
Net (charge-offs) recoveries		-			-		-			-			-			1			1

Provision (credit) for credit losses		(111	)		30		640			3,718			8			(14	)		4,271
Balance, end of period	$	1,481		$	1,146	$	6,729		$	10,430		$	609		$	254		$	20,649

Unfunded Commitments
Balance, beginning of period	$	227		$	4	$	14		$	305		$	24		$	2		$	576
Provision (credit) for credit losses		(69	)		-		(6	)		(25	)		(13	)		1			(112	)
Balance, end of period	$	158		$	4	$	8		$	280		$	11		$	3		$	464

Total Allowance for Credit Losses	$	1,639		$	1,150	$	6,737		$	10,710		$	620		$	257		$	21,113

	Construction & Development		1 - 4 Family Real Estate		Commercial Real Estate - Other		Commercial & Industrial		Agricultural		Consumer			Total

September 30, 2022
Balance, beginning of period	$	1,792	$	649	$	3,216	$	4,449	$	558	$	155		$	10,819

Charge-offs		-		-		-		-		-		(19	)		(19	)
Recoveries		-		-		-		-		-		5			5

Net (charge-offs) recoveries		-		-		-		-		-		(14	)		(14	)

Provision (credit) for credit losses		466		150		746		829		137		20			2,348

Balance, end of period	$	2,258	$	799	$	3,962	$	5,278	$	695	$	161		$	13,153

The following table presents, by portfolio segment, the activity in the allowance for credit losses for the nine months ended September 30, 2023 and 2022 (dollars in thousands):

	Construction & Development			1 - 4 Family Real Estate			Commercial Real Estate - Other			Commercial & Industrial		Agricultural			Consumer			Total

September 30, 2023
Loans
Balance, beginning of period	$	1,889		$	890		$	5,080		$	5,937	$	765		$	173		$	14,734
Impact of CECL adoption		44			(138	)		(168	)		716		(149	)		(55	)		250
Charge-offs		-			-			-			-		(7	)		(16	)		(23	)
Recoveries		-			-			-			-		2			5			7
Net (charge-offs) recoveries		-			-			-			-		(5	)		(11	)		(16	)

Provision (credit) for credit losses		(452	)		394			1,817			3,777		(2	)		147			5,681
Balance, end of period	$	1,481		$	1,146		$	6,729		$	10,430	$	609		$	254		$	20,649

Unfunded Commitments
Balance, beginning of period	$	-		$	-		$	-		$	-	$	-		$	-		$	-
Impact of CECL adoption		171			4			24			274		25			2			500
Provision (credit) for credit losses		(13	)		-			(16	)		6		(14	)		1			(36	)
Balance, end of period	$	158		$	4		$	8		$	280	$	11		$	3		$	464

Total Allowance for Credit Losses	$	1,639		$	1,150		$	6,737		$	10,710	$	620		$	257		$	21,113

	Construction & Development		1 - 4 Family Real Estate		Commercial Real Estate - Other		Commercial & Industrial		Agricultural			Consumer			Total

September 30, 2022
Balance, beginning of period	$	1,695	$	630	$	3,399	$	3,621	$	730		$	241		$	10,316

Charge-offs		-		-		-		-		-			(20	)		(20	)
Recoveries		-		-		-		-		-			14			14

Net (charge-offs) recoveries		-		-		-		-		-			(6	)		(6	)

Provision (credit) for credit losses		563		169		563		1,657		(35	)		(74	)		2,843

Balance, end of period	$	2,258	$	799	$	3,962	$	5,278	$	695		$	161		$	13,153

Loan Portfolio Based on Internal Rating Category

The following table presents the amortized cost of the Company’s loan portfolio with the gross charge-offs for the nine months ended by year of origination based on internal rating category as of September 30, 2023 (dollars in thousands):

As of September 30, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total

Construction & development
Grade
1 (Pass)	$	26,403	$	10,300	$	4,857	$	214	$	104	$	46	$	96,336	$	138,260
2 (Watch)		-		-		-		-		-		-		-		-
3 (Special Mention)		563		-		-		-		-		-		230		793
4 (Substandard)		-		-		-		-		-		-		-		-
Total construction & development		26,966		10,300		4,857		214		104		46		96,566		139,053
Current-period gross charge-offs		-		-		-		-		-		-		-		-
1 - 4 family real estate
Grade
1 (Pass)		31,511		27,605		14,110		4,540		1,847		1,141		10,786		91,540
2 (Watch)		-		-		-		-		-		-		-		-
3 (Special Mention)		-		-		-		-		-		-		-		-
4 (Substandard)		-		-		-		-		-		-		-		-
Total 1 - 4 family real estate		31,511		27,605		14,110		4,540		1,847		1,141		10,786		91,540
Current-period gross charge-offs		-		-		-		-		-		-		-		-
Commercial real estate - other
Grade
1 (Pass)		147,441		159,184		36,185		42,601		3,657		4,139		107,802		501,009
2 (Watch)		-		-		-		-		-		-		-		-
3 (Special Mention)		14,738		-		-		-		-		1,094		-		15,832
4 (Substandard)		-		-		-		-		-		134		-		134
Total commercial real estate - other		162,179		159,184		36,185		42,601		3,657		5,367		107,802		516,975
Current-period gross charge-offs		-		-		-		-		-		-		-		-
Commercial and industrial
Grade
1 (Pass)		142,077		68,443		41,428		3,129		1,849		4,130		242,714		503,770
2 (Watch)		-		-		-		-		-		-		-		-
3 (Special Mention)		10,452		-		-		-		-		-		1,333		11,785
4 (Substandard)		42,744		7,963		112		12		-		-		2,298		53,129
Total commercial and industrial		195,273		76,406		41,540		3,141		1,849		4,130		246,345		568,684
Current-period gross charge-offs		-		-		-		-		-		-		-		-
Agriculural
Grade
1 (Pass)		5,993		6,291		24,893		4,535		1,109		1,300		20,460		64,581
2 (Watch)		56		51		-		-		-		-		-		107
3 (Special Mention)		-		-		-		-		-		-		-		-
4 (Substandard)		-		-		-		-		-		-		-		-
Total agriculural		6,049		6,342		24,893		4,535		1,109		1,300		20,460		64,688
Current-period gross charge-offs		-		7		-		-		-		-		-		7
Consumer
Grade
1 (Pass)		3,649		1,988		2,799		2,900		705		1,934		938		14,913
2 (Watch)		-		-		-		-		-		-		-		-
3 (Special Mention)		-		-		-		-		-		-		-		-
4 (Substandard)		-		-		-		-		-		80		-		80
Total consumer		3,649		1,988		2,799		2,900		705		2,014		938		14,993
Current-period gross charge-offs		11		-		-		-		5		-		-		16
Total loans held for investment	$	425,627	$	281,825	$	124,384	$	57,931	$	9,271	$	13,998	$	482,897	$	1,395,933
Total current-period gross charge-offs	$	11	$	7	$	-	$	-	$	5	$	-	$	-	$	23

The following table presents the credit risk profile of the Company’s loan portfolio based on internal rating category, prior to the adoption of ASU 2016-13, as of December 31, 2022 (dollars in thousands):

	Construction & Development		1 - 4 Family Real Estate		Commercial Real Estate - Other		Commercial & Industrial		Agricultural		Consumer		Total

December 31, 2022
Grade
1 (Pass)	$	163,203	$	76,928	$	397,295	$	493,412	$	65,857	$	14,927	$	1,211,622
2 (Watch)		-		-		14,976		-		288		-		15,264
3 (Special Mention)		-		-		24,747		584		-		-		25,331
4 (Substandard)		-		-		1,983		19,015		-		22		21,020
Total	$	163,203	$	76,928	$	439,001	$	513,011	$	66,145	$	14,949	$	1,273,237

Loan Portfolio Aging Analysis of Recorded Investment in Loans

The following table presents the Company’s loan portfolio aging analysis of the recorded investment in loans as of September 30, 2023 and December 31, 2022 (dollars in thousands):

	Past Due												Total Loans
	30–59 Days		60–89 Days		Greater than 90 Days		Total		Current		Total Loans		> 90 Days & Accruing

September 30, 2023
Construction & development	$	-	$	-	$	-	$	-	$	139,053	$	139,053	$	-
1 - 4 family real estate		-		-		-		-		91,540		91,540		-
Commercial real estate - other		134		-		-		134		516,841		516,975		-
Commercial & industrial⁽¹⁾		58		-		9,776		9,834		558,850		568,684		9,776
Agricultural		-		-		-		-		64,688		64,688		-
Consumer		123		-		80		203		14,790		14,993		80
Total	$	315	$	-	$	9,856	$	10,171	$	1,385,762	$	1,395,933	$	9,856

December 31, 2022
Construction & development	$	-	$	-	$	-	$	-	$	163,203	$	163,203	$	-
1 - 4 family real estate		-		-		-		-		76,928		76,928		-
Commercial real estate - other		-		617		-		617		438,384		439,001		-
Commercial & industrial⁽¹⁾		21		-		9,923		9,944		503,067		513,011		9,923
Agricultural		4		-		-		4		66,141		66,145		-
Consumer		291		82		22		395		14,554		14,949		18
Total	$	316	$	699	$	9,945	$	10,960	$	1,262,277	$	1,273,237	$	9,941

⁽¹⁾ The $9.78 million and $9.92 million that is greater than 90 days past due as of September 30, 2023 and December 31, 2022, respectively, consists of a single borrower that is well collateralized and for which collection is being diligently pursued.

Nonaccrual Loans

The following table presents information regarding nonaccrual loans as of September 30, 2023 (dollars in thousands):

			Recorded			Recorded
	Amortized		Investment			Investment			Total						Interest
	Cost		with No			with an			Recorded			Related			Income
	Basis		Allowance			Allowance			Investment			Allowance			Recognized
September 30, 2023
Construction & development	$	-		$	-		$	-		$	-		$	-		$	-
1 - 4 Family Real Estate		-			-			-			-			-			-
Commercial Real Estate - other		134			134			-			134			-			16
Commercial & industrial		41,109			14,378			26,731			41,109			3,115			2,609
Agricultural		-			-			-			-			-			-
Consumer		-			-			-			-			-			-
Total	$	41,243		$	14,512		$	26,731		$	41,243		$	3,115		$	2,625

Impaired Loans

The following table presents impaired loans, prior to the adoption of ASU 2016-13, as of December 31, 2022 (dollars in thousands):

			Recorded			Recorded
	Unpaid		Investment			Investment			Total						Average			Interest
	Principal		with No			with an			Recorded			Related			Recorded			Income
	Balance		Allowance			Allowance			Investment			Allowance			Investment			Recognized
December 31, 2022
Construction & development	$	-		$	-		$	-		$	-		$	-		$	21		$	-
1 - 4 Family Real Estate		-			-			-			-			-			-			-
Commercial Real Estate - other		2,808			1,983			-			1,983			-			11,749			141
Commercial & industrial		19,882			18,882			133			19,015			133			11,773			1,214
Agricultural		-			-			-			-			-			14			-
Consumer		31			22			-			22			-			27			-
Total	$	22,721		$	20,887		$	133		$	21,020		$	133		$	23,584		$	1,355

Collateral-Dependent Gross Loans Held for Investment

The following table summarizes collateral-dependent gross loans held for investment by collateral type and the related specific allocation as follows (dollars in thousands):

	Collateral Type
			Business									Specific
	Real Estate		Assets			Other Assets			Total			Allocation
September 30, 2023
Construction & development	$	-		$	-		$	-		$	-		$	-
1 - 4 Family Real Estate		-			-			-			-			-
Commercial Real Estate - other		134			-			-			134			-
Commercial & industrial		-			43,237			9,776			53,013			3,000
Agricultural		-			-			-			-			-
Consumer		-			-			80			80			-
Total	$	134		$	43,237		$	9,856		$	53,227		$	3,000

Loans Modified to Borrowers Experiencing Financial Difficulty

The following tables present the amortized cost basis at the end of the reporting period of loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of modification made, as well as the financial effect of the modifications made as of September 30, 2023:

	Term Extension and Payment Deferral
	Amortized Cost Basis		% of Total Class			Financial Effect

September 30, 2023
Construction & development	$	-		-	%
1 - 4 Family Real Estate		-		-
Commercial Real Estate - other		-		-
Commercial & industrial		26,615		4.6		Extended the maturity of loan by four months, and payment of principal and interest deferred until the sale of collateral
Agricultural		-		-
Consumer		-		-

Total	$	26,615		4.6	%

Performance of Loans Modified in Last 12 Months

The following table depicts the performance of loans that have been modified in the last 12 months:

	Current		30-89 Days Past Due		90+ Days Past Due		Non-Accruing

September 30, 2023
Construction & development	$	-	$	-	$	-	$	-
1 - 4 Family Real Estate		-		-		-		-
Commercial Real Estate - other		-		-		-		-
Commercial & industrial		-		-		-		26,615
Agricultural		-		-		-		-
Consumer		-		-		-		-

Total	$	-	$	-	$	-	$	26,615

Information Regarding Nonperforming Assets

The following table represents information regarding nonperforming assets at December 31, 2022 (dollars in thousands):

	Construction & Development		1 - 4 Family Real Estate		Commercial Real Estate - Other		Commercial & Industrial		Agricultural		Consumer		Total

December 31, 2022
Nonaccrual loans	$	-	$	-	$	1,348	$	6,686	$	-	$	5	$	8,039
Troubled-debt restructurings ⁽¹⁾		-		-		-		-		-		-		-
Accruing loans 90 or more days past due		-		-		-		9,923		-		18		9,941

Total nonperforming loans	$	-	$	-	$	1,348	$	16,609	$	-	$	23	$	17,980

(1)

$1.2 million of TDRs as of December 31, 2022, are included in the nonaccrual loans balance.