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Note 3 - Loans and Allowance for Credit Losses

6 Months Ended

Jun. 30, 2024

Notes to Financial Statements

Financing Receivables [Text Block]

Note 3: Loans and Allowance for Credit Losses

Loans

Loans as of June 30, 2024 include acquired loans at their outstanding principal balance, net of the remaining purchase discount of $8,255. Originated loans as of June 30, 2024 and December 31, 2023 are presented at amortized cost, net of unearned income and deferred fees and costs. The following table presents the composition of the loan portfolio, excluding mortgage loans held for sale, as of the dates indicated.

		June 30, 2024				December 31, 2023
Real estate construction		$	81,355			$	55,379
Consumer real estate			299,310				241,564
Commercial real estate			454,978				419,130
Commercial non real estate			52,297				41,555
Public sector and IDA			59,043				60,551
Consumer non real estate			42,915				38,996
Gross loans		$	989,898			$	857,175
Less unearned income and deferred fees and costs			(531	)			(529	)
Loans, net of unearned income and deferred fees and costs		$	989,367			$	856,646
Allowance for credit losses on loans			(10,502	)			(9,094	)
Total loans, net		$	978,865			$	847,552

Accrued interest receivable of $3,352 at June 30, 2024 and $3,032 at December 31, 2023 is not included in total loans above.

Past Due and Nonaccrual Loans

The following tables present the aging of past due loans, by loan pool, as of the dates indicated.

June 30, 2024		Accruing Current Loans				Accruing Loans 30 – 89 Days Past Due				Accruing Loans 90 or More Days Past Due				Nonaccrual Loans				Total Loans				Accruing and Nonaccrual 90 or More Days Past Due
Real Estate Construction
Construction, 1-4 family residential		$	22,801			$	140			$	-			$	-			$	22,941			$	-
Construction, other			58,264				150				-				-				58,414				-
Consumer Real Estate
Equity line			21,751				6				-				-				21,757				-
Residential closed-end first liens			164,517				353				118				-				164,988				118
Residential closed-end junior liens			6,582				11				-				-				6,593				-
Investor-owned residential real estate			105,716				256				-				-				105,972				-
Commercial Real Estate
Multifamily residential real estate			120,601				190				-				-				120,791				-
Commercial real estate owner-occupied			135,121				720				-				2,307				138,148				220
Commercial real estate, other			196,039				-				-				-				196,039				-
Commercial Non Real Estate
Commercial and industrial			51,852				199				46				200				52,297				46
Public Sector and IDA
States and political subdivisions			59,043				-				-				-				59,043				-
Consumer Non Real Estate
Credit cards			4,763				2				-				-				4,765				-
Automobile			13,482				264				13				-				13,759				13
Other consumer loans			24,170				164				57				-				24,391				57
Total		$	984,702			$	2,455			$	234			$	2,507			$	989,898			$	454

December 31, 2023		Accruing Current Loans				Accruing Loans 30 – 89 Days Past Due				Accruing Loans 90 or More Days Past Due				Nonaccrual Loans				Total Loans				Accruing and Nonaccrual 90 or More Days Past Due
Real Estate Construction
Construction, 1-4 family residential		$	13,442			$	-			$	-			$	-			$	13,442			$	-
Construction, other			41,916				21				-				-				41,937				-
Consumer Real Estate
Equity line			17,178				104				-				-				17,282				-
Residential closed-end first liens			124,886				662				131				-				125,679				131
Residential closed-end junior liens			5,027				12				-				-				5,039				-
Investor-owned residential real estate			93,564				-				-				-				93,564				-
Commercial Real Estate
Multifamily residential real estate			119,052				195				-				-				119,247				-
Commercial real estate owner-occupied			114,477				336				-				2,408				117,221				231
Commercial real estate, other			182,662				-				-				-				182,662				-
Commercial Non Real Estate
Commercial and industrial			41,249				57				28				221				41,555				28
Public Sector and IDA
States and political subdivisions			60,551				-				-				-				60,551				-
Consumer Non Real Estate
Credit cards			4,648				17				3				-				4,668				3
Automobile			12,126				135				-				-				12,261				-
Other consumer loans			21,934				107				26				-				22,067				26
Total		$	852,712			$	1,646			$	188			$	2,629			$	857,175			$	419

The following table presents nonaccrual loans, by loan class, as of the dates indicated:

		June 30, 2024												December 31, 2023
		With No Allowance				With an Allowance				Total				With No Allowance				With an Allowance				Total
Commercial Real Estate
Commercial real estate owner-occupied		$	2,087			$	220			$	2,307			$	2,177			$	231			$	2,408
Commercial Non Real Estate
Commercial and industrial			-				200				200				-				221				221
Total		$	2,087			$	420			$	2,507			$	2,177			$	452			$	2,629

During the three and six months ended June 30, 2024, no accrued interest receivable was reversed against interest income.

Allowance for Credit Losses on Loans (“ACLL”)

The following tables present the activity in the ACLL by portfolio segment for the periods indicated:

		Activity in the ACLL for the Six Months Ended June 30, 2024
		Real Estate Construction				Consumer Real Estate				Commercial Real Estate				Commercial Non Real Estate				Public Sector and IDA				Consumer Non Real Estate				Unallocated				Total
Balance, December 31, 2023		$	408			$	3,162			$	3,576			$	682			$	333			$	583			$	350			$	9,094
Charge-offs			-				-				-				(20	)			-				(157	)			-				(177	)
Recoveries			-				-				29				3				-				71				-				103
Provision for (recovery of) credit losses			131				376				594				79				(10	)			87				50				1,307
Merger adjustment⁽¹⁾			10				97				55				4				-				9				-				175
Balance, June 30, 2024		$	549			$	3,635			$	4,254			$	748			$	323			$	593			$	400			$	10,502

(1)

Adjustment for PCD acquired loans.

		Activity in the ACLL for the Six Months Ended June 30, 2023
		Real Estate Construction				Consumer Real Estate				Commercial Real Estate				Commercial Non Real Estate				Public Sector and IDA				Consumer Non Real Estate				Unallocated				Total
Balance, December 31, 2022		$	450			$	2,199			$	3,642			$	930			$	319			$	506			$	179			$	8,225
Adoption of ASU 2016-13			(21	)			1,261				700				216				(15	)			72				129				2,342
Charge-offs			-				(17	)			-				(11	)			-				(132	)			-				(160	)
Recoveries			-				102				25				3				-				77				-				207
Provision for (recovery of) credit losses			47				(180	)			(26	)			78				(3	)			70				26				12
Balance, June 30, 2023		$	476			$	3,365			$	4,341			$	1,216			$	301			$	593			$	334			$	10,626

		Activity in the ACLL for the Year Ended December 31, 2023
		Real Estate Construction				Consumer Real Estate				Commercial Real Estate				Commercial Non Real Estate				Public Sector and IDA				Consumer Non Real Estate				Unallocated				Total
Balance, December 31, 2022		$	450			$	2,199			$	3,642			$	930			$	319			$	506			$	179			$	8,225
Adoption of ASU 2016-13			(21	)			1,261				700				216				(15	)			72				129				2,342
Charge-offs			-				(17	)			-				(214	)			-				(247	)			-				(478	)
Recoveries			-				103				45				6				-				129				-				283
Provision for (recovery of) for credit losses			(21	)			(384	)			(811	)			(256	)			29				123				42				(1,278	)
Balance, December 31, 2023		$	408			$	3,162			$	3,576			$	682			$	333			$	583			$	350			$	9,094

The following tables present information about the ACLL for individually evaluated loans and collectively evaluated loans by portfolio segment as of the dates indicated.

ACLL by Segment and Evaluation Method

June 30, 2024

Real Estate

Construction

Consumer

Real Estate

Commercial

Real Estate

Commercial

Non Real

Estate

Public

Sector and

IDA

Consumer Non

Real Estate

Unallocated

Total

Individually evaluated

$

-

$

114

$

391

$

117

$

-

$

22

$

-

$

644

Collectively evaluated

549

3,521

3,863

631

323

571

400

9,858

Total

$

549

$

3,635

$

4,254

$

748

$

323

$

593

$

400

$

10,502

		ACLL by Segment and Evaluation Method
December 31, 2023		Real Estate Construction				Consumer Real Estate				Commercial Real Estate				Commercial Non Real Estate				Public Sector and IDA				Consumer Non Real Estate				Unallocated				Total
Individually evaluated		$	-			$	74			$	367			$	126			$	-			$	5			$	-			$	572
Collectively evaluated			408				3,088				3,209				556				333				578				350				8,522
Total		$	408			$	3,162			$	3,576			$	682			$	333			$	583			$	350			$	9,094

The following tables present information about individually evaluated loans and collectively evaluated loans by portfolio segment as of the dates indicated.

Loans by Segment and Evaluation Method as of

June 30, 2024

Real Estate

Construction

Consumer

Real Estate

Commercial

Real Estate

Commercial

Non Real

Estate

Public

Sector and

IDA

Consumer

Non Real

Estate

Total

Individually evaluated

$

276

$

2,259

$

10,452

$

305

$

-

$

179

$

13,471

Collectively evaluated

81,079

297,051

444,526

51,992

59,043

42,736

976,427

Total

$

81,355

$

299,310

$

454,978

$

52,297

$

59,043

$

42,915

$

989,898

		Loans by Segment and Evaluation Method as of
December 31, 2023		Real Estate Construction				Consumer Real Estate				Commercial Real Estate				Commercial Non Real Estate				Public Sector and IDA				Consumer Non Real Estate				Total
Individually evaluated		$	286			$	1,183			$	8,805			$	227			$	-			$	43			$	10,544
Collectively evaluated			55,093				240,381				410,325				41,328				60,551				38,953				846,631
Total		$	55,379			$	241,564			$	419,130			$	41,555			$	60,551			$	38,996			$	857,175

Collateral Dependent Loans

Loans are collateral dependent when repayment is expected substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans are individually evaluated. The Company measures the ACLL on collateral dependent loans based upon the fair value of the collateral, as permitted by ASU 2016-13. Fair value of the collateral is adjusted for liquidation costs/discounts. If the fair value of the collateral falls below the amortized cost of the loan, the shortfall is recognized in the ACLL. If the fair value of the collateral exceeds the amortized cost, no ACLL is required.

As of June 30, 2024, four of the Company’s individually evaluated loans were collateral dependent. As of December 31, 2023, three of the Company’s individually evaluated loans were collateral dependent. All collateral dependent loans were secured by real estate as of June 30, 2024 and December 31, 2023. The following table details the amortized cost of the collateral dependent loans as of the dates indicated:

		June 30, 2024								December 31, 2023
		Balance				Related Allowance				Balance				Related Allowance
Consumer Real Estate
Residential closed-end first lien		$	84			$	-			$	7			$	-
Commercial Real Estate
Commercial real estate, owner occupied			2,087				-				2,177				-
Commercial real estate, other			883				-				-				-
Total Loans		$	3,054			$	-			$	2,184			$	-

Credit Quality

The Company categorizes loans by risk based on relevant information about the ability of borrowers to service their debt, including: collateral and financial information, historical payment experience, credit documentation and current economic trends, among other factors. At origination, each loan is assigned a risk rating. Ongoing analysis of the loan portfolio adjusts risk ratings on an individual loan basis to reflect updated information. Loans rated pass have acceptable credit quality. Loans rated special mention have potential weakness due to challenging economic or financial conditions. Loans rated classified have well-defined weaknesses that heighten the risk of default. The tables below present the loan portfolio by amortized cost basis, year of origination, loan class, credit quality, and charge-offs as of the dates indicated.

		Term Loans Amortized Cost Basis by Origination Year																												Revolving Loans
June 30, 2024		Prior				2020				2021				2022				2023				2024				Revolving				Converted to Term				Total
Construction, residential
Pass		$	177			$	62			$	269			$	1,625			$	6,504			$	1,105			$	13,199			$	-			$	22,941
Construction, other
Pass		$	4,080			$	1,141			$	7,929			$	26,139			$	5,663			$	6,964			$	6,222			$	-			$	58,138
Classified			-				-				276				-				-				-				-				-				276
Total		$	4,080			$	1,141			$	8,205			$	26,139			$	5,663			$	6,964			$	6,222			$	-			$	58,414
Equity lines
Pass		$	554			$	329			$	429			$	528			$	938			$	171			$	18,763			$	45			$	21,757
*Residential closed-end first liens*
Pass		$	42,736			$	18,555			$	35,607			$	36,891			$	17,900			$	12,087			$	-			$	268			$	164,044
Special Mention			370				-				-				-				-				-				-				-				370
Classified			574				-				-				-				-				-				-				-				574
Total		$	43,680			$	18,555			$	35,607			$	36,891			$	17,900			$	12,087			$	-			$	268			$	164,988
*Residential closed-end junior liens*
Pass		$	1,679			$	-			$	290			$	2,081			$	1,652			$	891			$	-			$	-			$	6,593
*Investor-owned residential real estate*
Pass		$	30,684			$	23,613			$	19,627			$	16,561			$	8,638			$	2,775			$	2,800			$	-			$	104,698
Special Mention			-				-				-				142				166				-				-				-				308
Classified			759				-				168				39				-				-				-				-				966
Total		$	31,443			$	23,613			$	19,795			$	16,742			$	8,804			$	2,775			$	2,800			$	-			$	105,972
*Multifamily residential real estate*
Pass		$	40,686			$	2,114			$	40,445			$	28,096			$	8,866			$	442			$	142			$	-			$	120,791
*Commercial real estate, owner occupied*
Pass		$	55,824			$	25,096			$	7,778			$	23,749			$	10,695			$	1,377			$	4,064			$	85			$	128,668
Special mention			6,396				-				-				-				-				-				-				-				6,396
Classified			2,307				759				-				-				-				-				18				-				3,084
Total		$	64,527			$	25,855			$	7,778			$	23,749			$	10,695			$	1,377			$	4,082			$	85			$	138,148
*Commercial real estate, other*
Pass		$	93,009			$	18,641			$	38,340			$	24,225			$	17,239			$	2,118			$	1,771			$	-			$	195,343
Special Mention			696				-				-				-				-				-				-				-				696
Total		$	93,705			$	18,641			$	38,340			$	24,225			$	17,239			$	2,118			$	1,771			$	-			$	196,039
Commercial and industrial
Pass		$	6,673			$	2,412			$	12,702			$	6,415			$	7,282			$	4,292			$	12,218			$	-			$	51,994
Special Mention			-				-				-				-				-				-				96				-				96
Classified			200				-				-				7				-				-				-				-				207
Total		$	6,873			$	2,412			$	12,702			$	6,422			$	7,282			$	4,292			$	12,314			$	-			$	52,297
YTD gross charge-offs																										$	20							$	20
Public sector and IDA
Pass		$	20,062			$	227			$	26,162			$	6,130			$	6,462			$	-			$	-			$	-			$	59,043
Credit cards
Pass		$	-			$	-			$	-			$	-			$	-			$	-			$	4,765			$	-			$	4,765
YTD gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	33			$	-			$	33
Automobile
Pass		$	111			$	404			$	1,139			$	2,181			$	5,946			$	3,894			$	-			$	-			$	13,675
Special Mention			-				-				-				-				4				-				-				-				4
Classified			-				-				-				-				69				11				-				-				80
Total		$	111			$	404			$	1,139			$	2,181			$	6,019			$	3,905			$	-			$	-			$	13,759
Other consumer
Pass		$	322			$	594			$	1,318			$	3,530			$	8,901			$	8,930			$	698			$	-			$	24,293
Special Mention			-				-				2				-				13				11				-				-				26
Classified			-				-				49				-				23				-				-				-				72
Total		$	322			$	594			$	1,369			$	3,530			$	8,937			$	8,941			$	698			$	-			$	24,391
YTD gross charge-offs		$	-			$	4			$	9			$	17			$	51			$	43			$	-			$	-			$	124
Total Loans
Pass		$	296,597			$	93,188			$	192,035			$	178,151			$	106,686			$	45,046			$	64,642			$	398			$	976,743
Special Mention			7,462				-				2				142				183				11				96				-				7,896
Classified			3,840				759				493				46				92				11				18				-				5,259
Total		$	307,899			$	93,947			$	192,530			$	178,339			$	106,961			$	45,068			$	64,756			$	398			$	989,898
YTD gross charge-offs		$	-			$	4			$	9			$	17			$	51			$	43			$	53			$	-			$	177

		Term Loans Amortized Cost Basis by Origination Year																												Revolving Loans
December 31, 2023		Prior				2019				2020				2021				2022				2023				Revolving				Converted to Term				Total
Construction, residential
Pass		$	-			$	-			$	246			$	158			$	3,275			$	5,157			$	4,606			$	-			$	13,442
Construction, other
Pass		$	2,741			$	1,094			$	1,305			$	12,671			$	17,397			$	4,884			$	1,559			$	-			$	41,651
Classified			-				-				-				286				-				-				-				-				286
Total		$	2,741			$	1,094			$	1,305			$	12,957			$	17,397			$	4,884			$	1,559			$	-			$	41,937
Equity lines
Pass		$	51			$	-			$	-			$	-			$	-			$	-			$	17,182			$	-			$	17,233
Classified			-				-				-				-				-				-				49				-				49
Total		$	51			$	-			$	-			$	-			$	-			$	-			$	17,231			$	-			$	17,282
*Residential closed-end first liens*
Pass		$	32,404			$	5,806			$	14,634			$	31,414			$	29,787			$	11,208			$	-			$	-			$	125,253
Classified			426				-				-				-				-				-				-				-				426
Total		$	32,830			$	5,806			$	14,634			$	31,414			$	29,787			$	11,208			$	-			$	-			$	125,679
YTD gross charge-offs		$	-			$	-			$	17			$	-			$	-			$	-			$	-			$	-			$	17
*Residential closed-end junior liens*
Pass		$	1,499			$	116			$	-			$	172			$	1,387			$	1,850			$	-			$	15			$	5,039
*Investor-owned residential real estate*
Pass		$	24,556			$	5,162			$	23,649			$	19,062			$	14,166			$	4,880			$	1,283			$	98			$	92,856
Classified			708				-				-				-				-				-				-				-				708
Total		$	25,264			$	5,162			$	23,649			$	19,062			$	14,166			$	4,880			$	1,283			$	98			$	93,564
*Multifamily residential real estate*
Pass		$	40,092			$	1,806			$	2,148			$	40,544			$	25,681			$	8,850			$	126			$	-			$	119,247
*Commercial real estate, owner occupied*
Pass		$	41,573			$	11,091			$	23,407			$	4,792			$	16,720			$	7,914			$	2,919			$	-			$	108,416
Special mention			6,396				-				-				-				-				-				-				-				6,396
Classified			2,409				-				-				-				-				-				-				-				2,409
Total		$	50,378			$	11,091			$	23,407			$	4,792			$	16,720			$	7,914			$	2,919			$	-			$	117,221
*Commercial real estate, other*
Pass		$	68,889			$	21,841			$	19,098			$	36,157			$	22,697			$	13,279			$	701			$	-			$	182,662
Commercial and industrial
Pass		$	6,004			$	438			$	1,060			$	12,667			$	6,954			$	6,938			$	7,267			$	-			$	41,328
Classified			220				-				-				-				7				-				-				-				227
Total		$	6,224			$	438			$	1,060			$	12,667			$	6,961			$	6,938			$	7,267			$	-			$	41,555
YTD gross charge-offs		$	-			$	12			$	-			$	-			$	-			$	12			$	190			$	-			$	214
Public sector and IDA
Pass		$	20,817			$	-			$	235			$	26,702			$	6,335			$	6,462			$	-			$	-			$	60,551
Credit cards
Pass		$	-			$	-			$	-			$	-			$	-			$	-			$	4,668			$	-			$	4,668
YTD gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	39			$	-			$	39
Automobile
Pass		$	78			$	204			$	563			$	1,619			$	2,750			$	7,047			$	-			$	-			$	12,261
YTD gross charge-offs		$	-			$	3			$	-			$	1			$	38			$	-			$	-			$	-			$	42
Other Consumer
Pass		$	93			$	334			$	811			$	1,943			$	5,815			$	12,356			$	672			$	-			$	22,024
Special mention			-				-				-				-				-				17				-				-				17
Classified			-				-				-				-				11				15				-				-				26
Total		$	93			$	334			$	811			$	1,943			$	5,826			$	12,388			$	672			$	-			$	22,067
YTD gross charge-offs		$	-			$	-			$	-			$	19			$	52			$	95			$	-			$	-			$	166
Total Loans
Pass		$	238,797			$	47,892			$	87,156			$	187,901			$	152,964			$	90,825			$	40,983			$	113			$	846,631
Special mention			6,396				-				-				-				-				17				-				-				6,413
Classified			3,763				-				-				286				18				15				49				-				4,131
Total		$	248,956			$	47,892			$	87,156			$	188,187			$	152,982			$	90,857			$	41,032			$	113			$	857,175
YTD gross charge-offs		$	-			$	15			$	17			$	20			$	90			$	107			$	229			$	-			$	478

Loan Modifications to Borrowers Experiencing Financial Difficulty

The Company modifies loans for a variety of reasons. At the date of modification, the Company assesses whether the borrower is experiencing financial difficulty. If the borrower is experiencing financial difficulty, the loan’s risk rating is evaluated and is typically changed to special mention or classified, which results in individual evaluation of the loan for the ACLL. Two loans were modified for borrowers experiencing financial difficulty during the first three months of 2024. One of these loans was modified a second time during the three months ended June 30, 2024. There was one loan to a borrower experiencing financial difficulty that was modified during the three and six months ended June 30, 2023.

The following table presents information as of June 30, 2024 about loans modified for borrowers experiencing financial difficulty during the six months ended June 30, 2024.

June 30, 2024

Amortized

Cost Basis

% of

Class

Type of

Modification

Financial Effect

Commercial Real Estate

Commercial real estate owner-occupied

$

6,396

5.57

%

Interest only payments

6 months of interest only payments, re-amortization of the balance to contractual maturity.

Commercial Non real estate

Commercial and industrial

$

7

0.01

%

Term extension

Renewal of single-payment note for an additional 3 months.

The following table presents information as of June 30, 2023 about loans modified for borrowers experiencing financial difficulty during the six months ended June 30, 2023.

June 30, 2023

Amortized

Cost Basis

% of

Class

Type of

Modification

Financial Effect

Commercial Real Estate

Commercial real estate owner-occupied

$

6,396

5.40

%

Interest only payments

6 months of interest only payments, re-amortization of the balance to contractual maturity.

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty. Both loans are in current status as of June 30, 2024.

There were no loans to borrowers experiencing financial difficulty that had a payment default during the three or six months ended June 30, 2024 and 2023 and were modified in the twelve months prior to that default. Default is determined at 90 or more days past due, upon charge-off, or upon foreclosure. Modified loans in default are individually evaluated for the allowance for credit losses or if the modified loan is deemed uncollectible, the loan, or a portion of the loan, is written off and the allowance for credit losses is adjusted accordingly.

Residential Real Estate Loans In Process of Foreclosure

As of June 30, 2024, the Company had two 1-4 family residential real estate loans totaling $123 in process of foreclosure. As of December 31, 2023, one 1-4 family residential real estate loan of $7 was in process of foreclosure.

ACL for Unfunded Commitments

The following tables present the balance and activity in the ACL for unfunded commitments for the six months ended June 30, 2024 and 2023:

Allowance for Credit Losses on Unfunded Commitments
Balance, December 31, 2023		$	259
Recovery of credit losses			(15	)
FCB acquisition			7
Balance, June 30, 2024		$	251

Allowance for Credit Losses on Unfunded Commitments
Balance, December 31, 2022		$	35
Adoption of ASU 2016-13			207
Recovery of credit losses			(9	)
Balance, June 30, 2023		$	233