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Note 4 - Allowance for Loan Losses

12 Months Ended

Dec. 31, 2020

Allowance for Credit Losses [Text Block]

Note 4. Allowance for Loan Losses

The following tables present, as of December 31, 2020 and 2019, the total allowance for loan losses, the allowance by impairment methodology, and loans by impairment methodology (in thousands).

	December 31, 2020
	Construction and Land Development			Secure by 1-4 Family Residential		Other Real Estate		Commercial and Industrial			Consumer and Other Loans			Total
Allowance for loan losses:
Beginning Balance, December 31, 2019	$	464		$	776	$	2,296	$	562		$	836		$	4,934
Charge-offs		—			—		—		(69	)		(715	)		(784	)
Recoveries		2			8		2		18			305			335
Provision for (recovery of) loan losses		(160	)		238		2,658		273			(9	)		3,000
Ending Balance, December 31, 2020	$	306		$	1,022	$	4,956	$	784		$	417		$	7,485
Ending Balance:
Individually evaluated for impairment		—			—		2,065		158			—			2,223
Collectively evaluated for impairment		306			1,022		2,891		626			417			5,262
Loans:
Ending Balance		27,328			235,814		246,883		109,838			10,051			629,914
Individually evaluated for impairment		276			449		4,441		1,548			—			6,714
Collectively evaluated for impairment		27,052			235,365		242,442		108,290			10,051			623,200

	December 31, 2019
	Construction and Land Development			Secured by 1-4 Family Residential			Other Real Estate			Commercial and Industrial			Consumer and Other Loans			Total
Allowance for loan losses:
Beginning Balance, December 31, 2018	$	561		$	895		$	2,160		$	464		$	929		$	5,009
Charge-offs		(2	)		(58	)		(27	)		(2	)		(795	)		(884	)
Recoveries		50			9			1			8			291			359
Provision for (recovery of) loan losses		(145	)		(70	)		162			92			411			450
Ending Balance, December 31, 2019	$	464		$	776		$	2,296		$	562		$	836		$	4,934
Ending Balance:
Individually evaluated for impairment		22			11			—			—			—			33
Collectively evaluated for impairment		442			765			2,296			562			836			4,901
Loans:
Ending Balance		43,164			229,438			236,555			50,153			15,036			574,346
Individually evaluated for impairment		367			630			462			—			—			1,459
Collectively evaluated for impairment		42,797			228,808			236,093			50,153			15,036			572,887

Impaired loans and the related allowance at December 31, 2020 and 2019, were as follows (in thousands):

	December 31, 2020
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
Real estate loans:
Construction and land development	$	325	$	276	$	—	$	276	$	—	$	344	$	—
Secured by 1-4 family		568		449		—		449		—		517		1
Other real estate loans		4,492		171		4,270		4,441		2,065		2,623		109
Commercial and industrial		1,582		—		1,548		1,548		158		393		77
Total	$	6,967	$	896	$	5,818	$	6,714	$	2,223	$	3,877	$	187

	December 31, 2019
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
Real estate loans:
Construction and land development	$	401	$	70	$	297	$	367	$	22	$	369	$	1
Secured by 1-4 family		729		488		142		630		11		769		1
Other real estate loans		509		462		—		462		—		766		3
Commercial and industrial		—		—		—		—		—		22		—
Total	$	1,639	$	1,020	$	439	$	1,459	$	33	$	1,926	$	5

The “Recorded Investment” amounts in the table above represent the outstanding principal balance on each loan represented in the table. The “Unpaid Principal Balance” represents the outstanding principal balance on each loan represented in the table plus any amounts that have been charged off on each loan and/or payments that have been applied towards principal on non-accrual loans. Only loan classes with balances are included in the tables above.

As of December 31, 2020, loans classified as troubled debt restructurings (TDRs) and included in impaired loans in the disclosure above totaled $6.0 million. At December 31, 2020, none of the loans classified as TDRs were performing under the restructured terms and all were considered non-performing assets. There were $360 thousand in TDRs at December 31, 2019, none of which were performing under the restructured terms. Modified terms under TDRs may include rate reductions, extension of terms that are considered to be below market, conversion to interest only, and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. There were two loans modified as TDRs during the year ended December 31, 2020. A loan secured by commercial real estate was modified as a TDR because the loan was converted to interest only and a commercial and industrial loan was modified as a TDR because interest and principal payments on the loan were deferred for a significant period of time. The TDRs described above increased the specific reserve component of the allowance for loan losses by $2.2 million at December 31, 2020. There was one loan secured by 1-4 family residential real estate modified as a TDR during the year ended December 31, 2019 because the loan was extended with terms considered to be below market. The loan modified as a TDR during 2019 did not have an impact on the allowance for loan losses at December 31, 2019.

In response to the COVID-19 pandemic, the Company created and implemented a loan payment deferral program for individual and business customers beginning in the first quarter of 2020, which provided them the opportunity to defer monthly payments for 90 days. As of December 31, 2020, loans that remained in the program totaled $1.2 million. These loans were not considered TDRs because they were modified in accordance with relief provisions of the CARES Act and recent interagency regulatory guidance.

During the fourth quarter of 2020, the Company modified terms of certain loans for customers that continued to be negatively impacted by the COVID-19 pandemic. The loan modifications lowered borrower loan payments by allowing interest only payments for periods ranging between 6 and 24 months. As of December 31, 2020, loans that were modified totaled $14.3 million. These loans were not considered TDRs because they were modified in accordance with relief provisions of the CARES Act.

For the years ended December 31, 2020 and 2019, there were no TDRs that subsequently defaulted within twelve months of the loan modification. Management defines default as over 90 days past due or the foreclosure and repossession of the collateral or charge-off of the loan during the twelve month period subsequent to the modification.

There were no non-accrual loans excluded from impaired loan disclosure at December 31, 2020 and December 31, 2019. Had non-accrual loans performed in accordance with their original contract terms, the Company would have recognized additional interest income in the amount of $271 thousand and $96 thousand during the years ended December 31, 2020 and 2019, respectively.