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Note 3 - Loans

12 Months Ended

Dec. 31, 2022

Loans, Notes, Trade and Other Receivables, Excluding Allowance for Credit Losses [Text Block]

Note 3. Loans

Loans at December 31, 2022 and 2021 are summarized as follows (in thousands):

	*2022*			*2021*
Real estate loans:
Construction and land development	$	51,840		$	55,721
Secured by 1-4 family residential		331,421			291,990
Other real estate		418,456			364,921
Commercial and industrial loans		111,225			99,805
Consumer and other loans		7,581			12,681
Total loans	$	920,523		$	825,118
Allowance for loan losses		(7,446	)		(5,710	)
Loans, net	$	913,077		$	819,408

Net deferred loan fees included in the above loan categories were $3.2 million and $3.9 million at December 31, 2022 and 2021, respectively. Consumer and other loans included $197 thousand and $175 thousand of demand deposit overdrafts at December 31, 2022 and 2021, respectively.

The following tables provide a summary of loan classes and an aging of past due loans as of December 31, 2022 and 2021 (in thousands):

	December 31, 2022
	30-59 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total Past Due		Current		Total Loans		Non-Accrual Loans		90 Days or More Past Due and Accruing
Real estate loans:
Construction and land development	$	115	$	20	$	1,045	$	1,180	$	50,660	$	51,840	$	1,045	$	—
1-4 family residential		1,033		60		207		1,300		330,121		331,421		530		—
Other real estate		109		—		—		109		418,347		418,456		13		—
Commercial and industrial		31		130		1,085		1,246		109,979		111,225		1,085		—
Consumer and other loans		26		25		—		51		7,530		7,581		—		—
Total	$	1,314	$	235	$	2,337	$	3,886	$	916,637	$	920,523	$	2,673	$	—

	December 31, 2021
	30-59 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total Past Due		Current		Total Loans		Non-Accrual Loans		90 Days or More Past Due and Accruing
Real estate loans:
Construction and land development	$	—	$	115	$	—	$	115	$	55,606	$	55,721	$	—	$	—
1-4 family residential		1,293		100		372		1,765		290,225		291,990		766		—
Other real estate		186		—		—		186		364,735		364,921		29		—
Commercial and industrial		1,474		—		—		1,474		98,331		99,805		1,509		—
Consumer and other loans		56		11		—		67		12,614		12,681		—		—
Total	$	3,009	$	226	$	372	$	3,607	$	821,511	$	825,118	$	2,304	$	—

Credit Quality Indicators

As part of the ongoing monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to the risk grading of specified classes of loans. The Company utilizes a risk grading matrix to assign a rating to each of its loans. The loan ratings are summarized into the following categories: pass, special mention, substandard, doubtful, and loss. Pass rated loans include all risk rated credits other than those included in special mention, substandard, or doubtful. Loans classified as loss are charged-off. Loan officers assign risk grades to loans at origination and as renewals arise. The Bank’s Credit Administration department reviews risk grades for accuracy on a quarterly basis and as credit issues arise. In addition, a certain amount of loans are reviewed each year through the Company’s internal and external loan review process. A description of the general characteristics of the loan grading categories is as follows:

Pass – Loans classified as pass exhibit acceptable operating trends, balance sheet trends, and liquidity. Sufficient cash flow exists to service the loan. All obligations have been paid by the borrower as agreed.

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the Bank’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The Company considers all doubtful loans to be impaired and places the loan on non-accrual status.

Loss – Loans classified as loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted.

The following tables provide an analysis of the credit risk profile of each loan class as of December 31, 2022 and 2021 (in thousands):

	December 31, 2022
	Pass		Special Mention		Substandard		Doubtful		Total
Real estate loans:
Construction and land development	$	50,795	$	—	$	1,045	$	—	$	51,840
Secured by 1-4 family residential		330,590		—		831		—		331,421
Other real estate		416,559		1,884		13		—		418,456
Commercial and industrial		110,065		75		1,085		—		111,225
Consumer and other loans		7,581		—		—		—		7,581
Total	$	915,590	$	1,959	$	2,974	$	—	$	920,523

	December 31, 2021
	Pass		Special Mention		Substandard		Doubtful		Total
Real estate loans:
Construction and land development	$	55,721	$	—	$	—	$	—	$	55,721
Secured by 1-4 family residential		290,909		—		1,081		—		291,990
Other real estate		364,892		—		29		—		364,921
Commercial and industrial		97,215		1,081		1,509		—		99,805
Consumer and other loans		12,681		—		—		—		12,681
Total	$	821,418	$	1,081	$	2,619	$	—	$	825,118

Loans acquired in business combinations are recorded in the Consolidated Balance Sheets at fair value at the acquisition date under the acquisition method of accounting. The outstanding principal balance and the carrying amount at December 31, 2022 and 2021 of loans acquired in business combinations were as follows:

	Acquired Loans - Purchased Performing
(Dollars in thousands)	2022		2021
Outstanding principal balance	$	187,017	$	216,706

Carrying amount
Real estate loans:
Construction and land development	$	9,823	$	26,348
Secured by 1-4 family residential		42,915		53,803
Other real estate loans		103,521		90,908
Commercial and industrial loans		24,661		36,968
Consumer and other loans		3,560		5,012
Total acquired loans	$	184,480	$	213,039