XML 25 R12.htm IDEA: XBRL DOCUMENT

Note 3 - Loans

9 Months Ended

Sep. 30, 2023

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

Note 3. Loans

Loans at September 30, 2023 and December 31, 2022 are summarized as follows (in thousands):

	September 30, 2023			December 31, 2022
Real estate loans:
Construction and land development	$	50,405		$	51,840
Secured by 1-4 family residential		340,773			331,421
Other real estate loans		433,177			418,456
Commercial and industrial loans		117,130			111,225
Consumer and other loans		11,014			7,581
Total loans	$	952,499		$	920,523
Allowance for credit losses		(8,896	)		(7,446	)
Loans, net	$	943,603		$	913,077

Net deferred loan fees included in the above loan categories were $929 thousand and $838 thousand at September 30, 2023 and December 31, 2022, respectively. Consumer and other loans included $368 thousand and $197 thousand of demand deposit overdrafts at September 30, 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 September 30, 2023 was $2.0 million. The outstanding principal balance and the carrying amount at September 30, 2023 and December 31, 2022 of loans acquired in business combinations were as follows:

	September 30, 2023		December 31, 2022
	Acquired Loans-		Acquired Loans-
	Non-Purchased		Non-Purchased
(Dollars in thousands)	Credit Deteriorated		Credit Deteriorated
Outstanding principal balance	$	166,349	$	187,017

Carrying amount
Real estate loans:
Construction and land development	$	8,450	$	9,823
Secured by 1-4 family residential		36,405		42,915
Other real estate loans		95,313		103,521
Commercial and industrial loans		20,681		24,661
Consumer and other loans		3,472		3,560
Total acquired loans	$	164,321	$	184,480

The following tables provide a summary of loan classes and an aging of past due loans as of September 30, 2023 and December 31, 2022 (in thousands):

	September 30, 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	$	—	$	—	$	39	$	39	$	50,366	$	50,405	$	39	$	—
Secured by 1-4 family residential		1,242		58		534		1,834		338,939		340,773		546		368
Other real estate loans		—		—		62		62		433,115		433,177		67		—
Commercial and industrial		83		—		—		83		117,047		117,130		2,464		—
Consumer and other loans		10		2		2		14		11,000		11,014		—		2
Total	$	1,335	$	60	$	637	$	2,032	$	950,467	$	952,499	$	3,116	$	370

	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 September 30, 2023 (in thousands).

	September 30, 2023
	Term Loans by Year of Origination
	2023		2022		2021		2020		2019		Prior		Revolving		Total
Construction and land development
Pass	$	2,625	$	3,311	$	7,824	$	2,613	$	2,127	$	3,290	$	28,576	$	50,366
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		39		—		39
Doubtful		—		—		—		—		—		—		—		—
Total Construction and land development	$	2,625	$	3,311	$	7,824	$	2,613	$	2,127	$	3,329	$	28,576	$	50,405

Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Secured by 1-4 family residential
Pass	$	32,461	$	78,044	$	65,455	$	42,454	$	33,258	$	78,826	$	9,438	$	339,936
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		98		19		—		—		720		—		837
Doubtful		—		—		—		—		—		—		—		—
Total Secured by 1-4 family residential	$	32,461	$	78,142	$	65,474	$	42,454	$	33,258	$	79,546	$	9,438	$	340,773

Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Other real estate loans
Pass	$	34,365	$	93,010	$	87,799	$	42,599	$	40,686	$	123,320	$	11,331	$	433,110
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		67		67
Doubtful		—		—		—		—		—		—		—		—
Total Other real estate loans	$	34,365	$	93,010	$	87,799	$	42,599	$	40,686	$	123,320	$	11,398	$	433,177

Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial and industrial
Pass	$	21,279	$	30,216	$	25,491	$	4,373	$	5,135	$	8,729	$	18,050	$	113,273
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		2,870		—		100		—		887		—		3,857
Doubtful		—		—		—		—		—		—		—		—
Total Commercial and industrial	$	21,279	$	33,086	$	25,491	$	4,473	$	5,135	$	9,616	$	18,050	$	117,130

Current period gross write-offs	$	—	$	—	$	—	$	624	$	—	$	253	$	—	$	877

Consumer and other loans
Pass	$	2,625	$	1,408	$	395	$	1,505	$	2,222	$	29	$	2,830	$	11,014
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total Consumer and other loans	$	2,625	$	1,408	$	395	$	1,505	$	2,222	$	29	$	2,830	$	11,014

Current period gross write-offs	$	273	$	55	$	3	$	14	$	3	$	3	$	—	$	351

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