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Note 3 - Loans | 3 Months Ended
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Mar. 31, 2023
Notes to Financial Statements |
Loans, Notes, Trade and Other Receivables, Excluding Allowance for Credit Losses [Text Block] | Note 3. Loans Loans at March 31, 2023 and December 31, 2022 are summarized as follows (in thousands):
|  | March 31, 2023 |  |  | December 31, 2022 |
Real estate loans: |  |  |  |  |  |  |  |
Construction and land development |  | $ | 48,610 |  |  | $ | 51,840 |
Secured by 1-4 family residential |  |  | 334,302 |  |  |  | 331,421 |
Other real estate loans |  |  | 416,001 |  |  |  | 418,456 |
Commercial and industrial loans |  |  | 110,937 |  |  |  | 111,225 |
Consumer and other loans |  |  | 8,117 |  |  |  | 7,581 |
Total loans |  | $ | 917,967 |  |  | $ | 920,523 |
Allowance for credit losses |  |  | (8,717 | ) |  |  | (7,446 | )
Loans, net |  | $ | 909,250 |  |  | $ | 913,077 |
Net deferred loan fees included in the above loan categories were $864 thousand and $838 thousand at March 31, 2023 and December 31, 2022, respectively. Consumer and other loans included $179 thousand and $197 thousand of demand deposit overdrafts at March 31, 2023 and December 31, 2022, respectively. Risk characteristics of each loan portfolio class that are considered by the Company include:
| • | 1-4 family residential mortgage loans carry risks associated with the continued creditworthiness of the borrower and changes in the value of the collateral.
| • | Real estate construction and land development loans carry risks that the project may not be finished according to schedule, the project may not be finished according to budget, and the value of the collateral may, at any point in time, be less than the principal amount of the loan. Construction loans also bear the risk that the general contractor, who may or may not be a loan customer, may be unable to finish the construction project as planned because of financial pressure or other factors unrelated to the project.
| • | Other real estate loans carry risks associated with the successful operation of a business or a real estate project, in addition to other risks associated with the ownership of real estate, because repayment of these loans may be dependent upon the profitability and cash flows of the business or project.
| • | Commercial and industrial loans carry risks associated with the successful operation of a business because repayment of these loans may be dependent upon the profitability and cash flows of the business. In addition, there is risk associated with the value of collateral other than real estate which may depreciate over time and cannot be appraised with as much reliability. Commercial and industrial loans also include purchased loans which could have been originated outside of the Company's market area.
| • | Consumer and other loans carry risks associated with the continued creditworthiness of the borrower and the value of the collateral, if any. Consumer loans are typically either unsecured or secured by rapidly depreciating assets such as automobiles. They are also likely to be immediately and adversely affected by job loss, divorce, illness, personal bankruptcy, or other changes in circumstances. Consumer and other loans also include purchased consumer loans which could have been originated outside of the Company's market area. Other loans included in this category include loans to states and political subdivisions.
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 principal balance of purchased loans is included in the allowance for credit losses calculation. The remaining net discount on purchased loans at March 31, 2023 was $2.4 million. The outstanding principal balance and the carrying amount at March 31, 2023 and December 31, 2022 of loans acquired in business combinations were as follows:
|  | March 31, 2023 |  |  | December 31, 2022 |
|  | Acquired Loans- |  |  | Acquired Loans- |
|  | Non-Purchased |  |  | Non-Purchased |
(Dollars in thousands) |  | Credit Deteriorated |  |  | Credit Deteriorated |
Outstanding principal balance |  | $ | 178,664 |  |  | $ | 187,017 |
Carrying amount |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |
Construction and land development |  | $ | 9,876 |  |  | $ | 9,823 |
Secured by 1-4 family residential |  |  | 41,013 |  |  |  | 42,915 |
Other real estate loans |  |  | 99,115 |  |  |  | 103,521 |
Commercial and industrial loans |  |  | 22,737 |  |  |  | 24,661 |
Consumer and other loans |  |  | 3,531 |  |  |  | 3,560 |
Total acquired loans |  | $ | 176,272 |  |  | $ | 184,480 |
The following tables provide a summary of loan classes and an aging of past due loans as of March 31, 2023 and December 31, 2022 (in thousands):
|  | March 31, 2023 |
|  | 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 |  | $ | 427 |  |  | $ | — |  |  | $ | 1,003 |  |  | $ | 1,430 |  |  | $ | 47,180 |  |  | $ | 48,610 |  |  | $ | 1,044 |  |  | $ | — |
Secured by 1-4 family residential |  |  | 1,422 |  |  |  | 16 |  |  |  | 82 |  |  |  | 1,520 |  |  |  | 332,782 |  |  |  | 334,302 |  |  |  | 474 |  |  |  | — |
Other real estate loans |  |  | 17 |  |  |  | — |  |  |  | 109 |  |  |  | 126 |  |  |  | 415,875 |  |  |  | 416,001 |  |  |  | 73 |  |  |  | 47 |
Commercial and industrial |  |  | 5 |  |  |  | 16 |  |  |  | — |  |  |  | 21 |  |  |  | 110,916 |  |  |  | 110,937 |  |  |  | — |  |  |  | — |
Consumer and other loans |  |  | 3 |  |  |  | 14 |  |  |  | — |  |  |  | 17 |  |  |  | 8,100 |  |  |  | 8,117 |  |  |  | — |  |  |  | — |
Total |  | $ | 1,874 |  |  | $ | 46 |  |  | $ | 1,194 |  |  | $ | 3,114 |  |  | $ | 914,853 |  |  | $ | 917,967 |  |  | $ | 1,591 |  |  | $ | 47 |
|  | 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 |  |  | $ | — |
Secured by 1-4 family residential |  |  | 1,033 |  |  |  | 60 |  |  |  | 207 |  |  |  | 1,300 |  |  |  | 330,121 |  |  |  | 331,421 |  |  |  | 530 |  |  |  | — |
Other real estate loans |  |  | 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 |  |  | $ | — |
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 table presents the Company's recorded investment in loans by credit quality indicators by year of origination as of March 31, 2023 (in thousands).
|  | March 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Term Loans by Year of Origination |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2023 |  |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | Prior |  |  | Revolving |  |  | Total |
Construction and land development |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 627 |  |  | $ | 3,598 |  |  | $ | 8,074 |  |  | $ | 2,695 |  |  | $ | 2,327 |  |  | $ | 3,863 |  |  | $ | 26,382 |  |  | $ | 47,566 |
Special Mention |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Substandard |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,044 |  |  |  | — |  |  |  | 1,044 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total Construction and land development |  | $ | 627 |  |  | $ | 3,598 |  |  | $ | 8,074 |  |  | $ | 2,695 |  |  | $ | 2,327 |  |  | $ | 4,907 |  |  | $ | 26,382 |  |  | $ | 48,610 |
Current period gross write-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Secured by 1-4 family residential |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 8,910 |  |  | $ | 65,912 |  |  | $ | 65,803 |  |  | $ | 41,706 |  |  | $ | 32,203 |  |  | $ | 74,313 |  |  | $ | 44,685 |  |  | $ | 333,532 |
Special Mention |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Substandard |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 770 |  |  |  | — |  |  |  | 770 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total Secured by 1-4 family residential |  | $ | 8,910 |  |  | $ | 65,912 |  |  | $ | 65,803 |  |  | $ | 41,706 |  |  | $ | 32,203 |  |  | $ | 75,083 |  |  | $ | 44,685 |  |  | $ | 334,302 |
Current period gross write-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Other real estate loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 2,488 |  |  | $ | 94,258 |  |  | $ | 88,542 |  |  | $ | 42,553 |  |  | $ | 41,713 |  |  | $ | 135,868 |  |  | $ | 9,137 |  |  | $ | 414,559 |
Special Mention |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,369 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,369 |
Substandard |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 73 |  |  |  | — |  |  |  | 73 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total Other real estate loans |  | $ | 2,488 |  |  | $ | 94,258 |  |  | $ | 88,542 |  |  | $ | 43,922 |  |  | $ | 41,713 |  |  | $ | 135,941 |  |  | $ | 9,137 |  |  | $ | 416,001 |
Current period gross write-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Commercial and industrial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 5,659 |  |  | $ | 35,448 |  |  | $ | 29,514 |  |  | $ | 4,743 |  |  | $ | 7,709 |  |  | $ | 11,446 |  |  | $ | 16,349 |  |  | $ | 110,868 |
Special Mention |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 69 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 69 |
Substandard |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total Commercial and industrial |  | $ | 5,659 |  |  | $ | 35,448 |  |  | $ | 29,514 |  |  | $ | 4,812 |  |  | $ | 7,709 |  |  | $ | 11,446 |  |  | $ | 16,349 |  |  | $ | 110,937 |
Current period gross write-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 623 |  |  | $ | — |  |  | $ | 228 |  |  | $ | — |  |  | $ | 851 |
Consumer and other loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 1,365 |  |  | $ | 2,028 |  |  | $ | 606 |  |  | $ | 1,643 |  |  | $ | 2,344 |  |  | $ | 96 |  |  | $ | 35 |  |  | $ | 8,117 |
Special Mention |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Substandard |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total Consumer and other loans |  | $ | 1,365 |  |  | $ | 2,028 |  |  | $ | 606 |  |  | $ | 1,643 |  |  | $ | 2,344 |  |  | $ | 96 |  |  | $ | 35 |  |  | $ | 8,117 |
Current period gross write-offs |  | $ | 82 |  |  | $ | 26 |  |  | $ | 1 |  |  | $ | 14 |  |  | $ | — |  |  | $ | 3 |  |  | $ | — |  |  | $ | 126 |
The following tables provide an analysis of the credit risk profile of each loan class as of December 31, 2022 (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 loans |  |  | 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 |

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- Definition The entire disclosure for claims held for amounts due a company, excluding disclosure for allowance for credit losses. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Also excludes disclosure for financing receivables. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 310 -SubTopic 10 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//310-10/tableOfContent + Details
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