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Note 8 - Loans Receivable and Credit Disclosures
 3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Financing Receivables [Text Block]
8.
Loans Receivable and Credit Disclosures
 
The composition of loans receivable as of
March 31, 2020
and
December 31, 2019
is as follows (
in
t
housands
):
 
   
2020
    
2019
  
                 
Real estate - construction
   $
49,768
     $
47,895
  
Real estate - 1 to 4 family residential
    
204,791
      
201,510
  
Real estate - commercial
    
461,505
      
435,850
  
Real estate - agricultural
    
161,984
      
160,771
  
Commercial
    
85,743
      
84,084
  
Agricultural
    
112,406
      
111,945
  
Consumer and other
    
18,454
      
18,791
  
     
1,094,651
      
1,060,846
  
Less:
                
Allowance for loan losses
    
(14,909
 )    
(12,619
 )
Deferred loan fees
    
(85
 )    
(80
 )
Loans receivable, net
   $
1,079,657
     $
1,048,147
  
 
Activity in the allowance for loan losses, on a disaggregated basis, for the
three
months ended
March 31, 2020
and
2019
is as follows:
(in thousands)
 
   
Three Months Ended March 31, 2020
  
           
1-4 Family
                                                  
   
Construction
    
Residential
    
Commercial
    
Agricultural
      
 
      
 
    
Consumer
      
 
  
   
Real Estate
    
Real Estate
    
Real Estate
    
Real Estate
    
Commercial
    
Agricultural
    
and Other
    
Total
  
Balance, December 31, 2019
   $
672
     $
2,122
     $
5,362
     $
1,326
     $
1,458
     $
1,478
     $
201
     $
12,619
  
Provision (credit) for loan losses
    
80
      
214
      
1,220
      
237
      
212
      
337
      
16
      
2,316
  
Recoveries of loans charged-off
    
1
      
-
      
1
      
-
      
2
      
-
      
3
      
7
  
Loans charged-off
    
-
      
-
      
(31
 )    
-
      
-
      
-
      
(2
 )    
(33
 )
Balance, March 31, 2020
   $
753
     $
2,336
     $
6,552
     $
1,563
     $
1,672
     $
1,815
     $
218
     $
14,909
  
 
 
   
Three Months Ended March 31, 2019
  
           
1-4 Family
                                                  
   
Construction
    
Residential
    
Commercial
    
Agricultural
      
 
      
 
    
Consumer
      
 
  
   
Real Estate
    
Real Estate
    
Real Estate
    
Real Estate
    
Commercial
    
Agricultural
    
and Other
    
Total
  
Balance, December 31, 2018
   $
699
     $
1,820
     $
4,615
     $
1,198
     $
1,777
     $
1,384
     $
191
     $
11,684
  
Provision (credit) for loan losses
    
26
      
28
      
155
      
60
      
(190
 )    
8
      
11
      
98
  
Recoveries of loans charged-off
    
11
      
2
      
-
      
-
      
28
      
-
      
-
      
41
  
Loans charged-off
    
-
      
-
      
-
      
-
      
(5
 )    
-
      
(6
 )    
(11
 )
Balance, March 31, 2019
   $
736
     $
1,850
     $
4,770
     $
1,258
     $
1,610
     $
1,392
     $
196
     $
11,812
  
 
Allowance for loan losses disaggregated on the basis of impairment analysis method as of
March 31, 2020
and
December 31, 2019
is as follows:
(in thousands
)
 
2020
          
1-4 Family
                                                  
   
Construction
    
Residential
    
Commercial
    
Agricultural
                    
Consumer
          
   
Real Estate
    
Real Estate
    
Real Estate
    
Real Estate
    
Commercial
    
Agricultural
    
and Other
    
Total
  
Individually evaluated for impairment
   $
-
     $
213
     $
435
     $
-
     $
28
     $
45
     $
-
     $
721
  
Collectively evaluated for impairment
    
753
      
2,123
      
6,117
      
1,563
      
1,644
      
1,770
      
218
      
14,188
  
Balance March 31, 2020
   $
753
     $
2,336
     $
6,552
     $
1,563
     $
1,672
     $
1,815
     $
218
     $
14,909
  
 
2019
          
1-4 Family
                                                  
   
Construction
    
Residential
    
Commercial
    
Agricultural
                    
Consumer
          
   
Real Estate
    
Real Estate
    
Real Estate
    
Real Estate
    
Commercial
    
Agricultural
    
and Other
    
Total
  
Individually evaluated for impairment
   $
-
     $
209
     $
-
     $
-
     $
-
     $
-
     $
-
     $
209
  
Collectively evaluated for impairment
    
672
      
1,913
      
5,362
      
1,326
      
1,458
      
1,478
      
201
      
12,410
  
Balance December 31, 2019
   $
672
     $
2,122
     $
5,362
     $
1,326
     $
1,458
     $
1,478
     $
201
     $
12,619
  
 
Loans receivable disaggregated on the basis of impairment analysis method as of
March 31, 2020
and
December 31, 2019
is as follows
(in thousands)
:
 
2020
          
1-4 Family
                                                  
   
Construction
    
Residential
    
Commercial
    
Agricultural
                    
Consumer
          
   
Real Estate
    
Real Estate
    
Real Estate
    
Real Estate
    
Commercial
    
Agricultural
    
and Other
    
Total
  
Individually evaluated for impairment
   $
-
     $
1,198
     $
11,594
     $
794
     $
580
     $
3,462
     $
84
     $
17,712
  
Collectively evaluated for impairment
    
49,768
      
203,593
      
449,911
      
161,190
      
85,163
      
108,944
      
18,370
      
1,076,939
  
                                                                 
Balance March 31, 2020
   $
49,768
     $
204,791
     $
461,505
     $
161,984
     $
85,743
     $
112,406
     $
18,454
     $
1,094,651
  
 
2019
          
1-4 Family
                                                  
   
Construction
    
Residential
    
Commercial
    
Agricultural
                    
Consumer
          
   
Real Estate
    
Real Estate
    
Real Estate
    
Real Estate
    
Commercial
    
Agricultural
    
and Other
    
Total
  
Individually evaluated for impairment
   $
-
     $
1,204
     $
83
     $
84
     $
462
     $
2,951
     $
4
     $
4,788
  
Collectively evaluated for impairment
    
47,895
      
200,306
      
435,767
      
160,687
      
83,622
      
108,994
      
18,787
      
1,056,058
  
                                                                 
Balance December 31, 2019
   $
47,895
     $
201,510
     $
435,850
     $
160,771
     $
84,084
     $
111,945
     $
18,791
     $
1,060,846
  
 
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payment of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. The Company will apply its normal loan review procedures to identify loans that should be evaluated for impairment.
 
Impaired loans, on a disaggregated basis, as of
March 31, 2020
and
December 31, 2019:
(in thousands)
 
   
2020
    
2019
  
           
Unpaid
                    
Unpaid
          
   
Recorded
    
Principal
    
Related
    
Recorded
    
Principal
    
Related
  
   
Investment
    
Balance
    
Allowance
    
Investment
    
Balance
    
Allowance
  
With no specific reserve recorded:
                                                
Real estate - construction
   $
-
     $
-
     $
-
     $
-
     $
-
     $
-
  
Real estate - 1 to 4 family residential
    
104
      
139
      
-
      
460
      
796
      
-
  
Real estate - commercial
    
10,618
      
10,956
      
-
      
83
      
435
      
-
  
Real estate - agricultural
    
794
      
808
      
-
      
84
      
97
      
-
  
Commercial
    
412
      
459
      
-
      
462
      
517
      
-
  
Agricultural
    
3,006
      
3,160
      
-
      
2,951
      
3,071
      
-
  
Consumer and other
    
84
      
84
      
-
      
4
      
4
      
-
  
Total loans with no specific reserve:
    
15,018
      
15,606
      
-
      
4,044
      
4,920
      
-
  
                                                 
With an allowance recorded:
                                                
Real estate - construction
    
-
      
-
      
-
      
-
      
-
      
-
  
Real estate - 1 to 4 family residential
    
1,094
      
1,425
      
213
      
744
      
755
      
209
  
Real estate - commercial
    
976
      
976
      
435
      
-
      
-
      
-
  
Real estate - agricultural
    
-
      
-
      
-
      
-
      
-
      
-
  
Commercial
    
168
      
168
      
28
      
-
      
-
      
-
  
Agricultural
    
456
      
456
      
45
      
-
      
-
      
-
  
Consumer and other
    
-
      
-
      
-
      
-
      
-
      
-
  
Total loans with specific reserve:
    
2,694
      
3,025
      
721
      
744
      
755
      
209
  
                                                 
Total
                                                
Real estate - construction
    
-
      
-
      
-
      
-
      
-
      
-
  
Real estate - 1 to 4 family residential
    
1,198
      
1,564
      
213
      
1,204
      
1,551
      
209
  
Real estate - commercial
    
11,594
      
11,932
      
435
      
83
      
435
      
-
  
Real estate - agricultural
    
794
      
808
      
-
      
84
      
97
      
-
  
Commercial
    
580
      
627
      
28
      
462
      
517
      
-
  
Agricultural
    
3,462
      
3,616
      
45
      
2,951
      
3,071
      
-
  
Consumer and other
    
84
      
84
      
-
      
4
      
4
      
-
  
                                                 
    $
17,712
     $
18,631
     $
721
     $
4,788
     $
5,675
     $
209
  
 
Average recorded investment and interest income recognized on impaired loans for the
three
months ended
March 31, 2020
and
2019:
(in thousands)
 
   
Three Months Ended March 31,
  
   
2020
    
2019
  
   
Average
    
Interest
    
Average
    
Interest
  
   
Recorded
    
Income
    
Recorded
    
Income
  
   
Investment
    
Recognized
    
Investment
    
Recognized
  
With no specific reserve recorded:
                                
Real estate - construction
   $
-
     $
-
     $
-
     $
-
  
Real estate - 1 to 4 family residential
    
283
      
-
      
247
      
20
  
Real estate - commercial
    
5,351
      
-
      
131
      
31
  
Real estate - agricultural
    
439
      
6
      
73
      
-
  
Commercial
    
437
      
-
      
243
      
-
  
Agricultural
    
2,979
      
-
      
-
      
-
  
Consumer and other
    
44
      
-
      
1
      
-
  
Total loans with no specific reserve:
    
9,533
      
6
      
695
      
51
  
                                 
With an allowance recorded:
                                
Real estate - construction
    
-
      
-
      
-
      
-
  
Real estate - 1 to 4 family residential
    
919
      
-
      
111
      
-
  
Real estate - commercial
    
488
      
-
      
-
      
-
  
Real estate - agricultural
    
-
      
-
      
-
      
-
  
Commercial
    
84
      
-
      
2,468
      
-
  
Agricultural
    
228
      
-
      
-
      
-
  
Consumer and other
    
-
      
-
      
16
      
1
  
Total loans with specific reserve:
    
1,719
      
-
      
2,595
      
1
  
                                 
Total
                                
Real estate - construction
    
-
      
-
      
-
      
-
  
Real estate - 1 to 4 family residential
    
1,202
      
-
      
358
      
20
  
Real estate - commercial
    
5,839
      
-
      
131
      
31
  
Real estate - agricultural
    
439
      
6
      
73
      
-
  
Commercial
    
521
      
-
      
2,711
      
-
  
Agricultural
    
3,207
      
-
      
-
      
-
  
Consumer and other
    
44
      
-
      
17
      
1
  
                                 
    $
11,252
     $
6
     $
3,290
     $
52
  
 
The interest foregone on nonaccrual loans for the
three
months ended
March 31, 2020
and
2019
was approximately
$189,000
and
$58,000,
respectively.
 
Nonaccrual loans at
March 31, 2020
and
December 31, 2019
were
$17,712,000
and
$4,788,000
respectively.
 
The Company had loans meeting the definition of a troubled debt restructuring (TDR) of
$1,372,000
as of
March 31, 2020,
all of which were included in impaired and nonaccrual loans. The Company had TDRs of
$1,171,000
as of
December 31, 2019,
all of which were included in impaired and nonaccrual loans.
 
The Company’s TDR, on a disaggregated basis, occurring in the
three
months ended
March 31, 2020
and
2019,
is as follows: (
dollars in thousands
)
 
   
Three Months Ended March 31,
  
   
2020
    
2019
  
           
Pre-Modification
    
Post-Modification
            
Pre-Modification
    
Post-Modification
  
           
Outstanding
    
Outstanding
            
Outstanding
    
Outstanding
  
   
Number of
    
Recorded
    
Recorded
    
Number of
    
Recorded
    
Recorded
  
   
Contracts
    
Investment
    
Investment
    
Contracts
    
Investment
    
Investment
  
                                                 
Real estate - construction
    
-
     $
-
     $
-
      
-
     $
-
     $
-
  
Real estate - 1 to 4 family residential
    
-
      
-
      
-
      
-
      
-
      
-
  
Real estate - commercial
    
1
      
184
      
184
      
-
      
-
      
-
  
Real estate - agricultural
    
-
      
-
      
-
      
-
      
-
      
-
  
Commercial
    
1
      
61
      
61
      
-
      
-
      
-
  
Agricultural
    
-
      
-
      
-
      
-
      
-
      
-
  
Consumer and other
    
-
      
-
      
-
      
-
      
-
      
-
  
                                                 
     
2
     $
245
     $
245
      
-
     $
-
     $
-
  
 
During the
three
months ended
March 31, 2020,
the Company granted concessions to
two
related borrowers in the hospitality industry that are facing financial difficulties. One loan was secured by commercial real estate and the
second
loan was secured by a commercial operating note. Payments on these loans were deferred for
six
months and the interest rate was reduced below the market interest rate. During the
three
months ended
March 31, 2019,
the Company did
not
grant concessions to any borrowers.
 
There were
no
TDR loans that were modified during the
three
months ended
March 31, 2020
and
twelve
months ended
March 31, 2019
that had payment defaults. The Company considers TDR loans to have payment default when it is past due
60
days or more.
 
There were
$16,000
of net charge-offs related to TDRs for the
three
months ended
March 31, 2020
and
no
charge-offs related to TDRs for the
three
months ended
March 31, 2019.
No
additional specific reserve was provided for the
three
months ended
March 31, 2020
and
March 31, 2019.
 
An aging analysis of the recorded investments in loans, on a disaggregated basis, as of
March 31, 2020
and
December 31, 2019,
is as follows:
(in thousands)
 
2020
          
90 Days
                            
90 Days
  
    30-89    
or Greater
    
Total
                    
or Greater
  
   
Past Due
    
Past Due
    
Past Due
    
Current
    
Total
    
Accruing
  
                                                 
Real estate - construction
   $
410
     $
-
     $
410
     $
49,358
     $
49,768
     $
-
  
Real estate - 1 to 4 family residential
    
1,009
      
280
      
1,289
      
203,502
      
204,791
      
122
  
Real estate - commercial
    
83
      
183
      
266
      
461,239
      
461,505
      
-
  
Real estate - agricultural
    
1,474
      
1,398
      
2,872
      
159,112
      
161,984
      
682
  
Commercial
    
1,469
      
481
      
1,950
      
83,793
      
85,743
      
-
  
Agricultural
    
1,545
      
3,098
      
4,643
      
107,763
      
112,406
      
30
  
Consumer and other
    
58
      
23
      
81
      
18,373
      
18,454
      
4
  
                                                 
    $
6,048
     $
5,463
     $
11,511
     $
1,083,140
     $
1,094,651
     $
838
  
 
2019
          
90 Days
                            
90 Days
  
    30-89    
or Greater
    
Total
                    
or Greater
  
   
Past Due
    
Past Due
    
Past Due
    
Current
    
Total
    
Accruing
  
                                                 
Real estate - construction
   $
1,796
     $
-
     $
1,796
     $
46,099
     $
47,895
     $
-
  
Real estate - 1 to 4 family residential
    
811
      
290
      
1,101
      
200,409
      
201,510
      
188
  
Real estate - commercial
    
387
      
-
      
387
      
435,463
      
435,850
      
-
  
Real estate - agricultural
    
422
      
-
      
422
      
160,349
      
160,771
      
-
  
Commercial
    
518
      
237
      
755
      
83,329
      
84,084
      
-
  
Agricultural
    
666
      
2,587
      
3,253
      
108,692
      
111,945
      
62
  
Consumer and other
    
146
      
6
      
152
      
18,639
      
18,791
      
5
  
                                                 
    $
4,746
     $
3,120
     $
7,866
     $
1,052,980
     $
1,060,846
     $
255
  
 
The increase in the
90
days or greater loans from
December 31, 2019
is primarily due to agricultural loans that are well secured as of
March 31, 2020.
 
The credit risk profile by internally assigned grade, on a disaggregated basis, as of
March 31, 2020
and
December 31, 2019
is as follows:
(in thousands)
 
2020
  
Construction
    
Commercial
    
Agricultural
                          
   
Real Estate
    
Real Estate
    
Real Estate
    
Commercial
    
Agricultural
    
Total
  
                                                 
Pass
   $
35,393
     $
364,413
     $
119,570
     $
63,373
     $
87,270
     $
670,019
  
Watch
    
14,375
      
75,914
      
32,085
      
15,258
      
19,435
      
157,067
  
Special Mention
    
-
      
5,015
      
-
      
1,567
      
-
      
6,582
  
Substandard
    
-
      
4,569
      
9,535
      
4,965
      
2,239
      
21,308
  
Substandard-Impaired
    
-
      
11,594
      
794
      
580
      
3,462
      
16,430
  
                                                 
    $
49,768
     $
461,505
     $
161,984
     $
85,743
     $
112,406
     $
871,406
  
 
2019
  
Construction
    
Commercial
    
Agricultural
                          
   
Real Estate
    
Real Estate
    
Real Estate
    
Commercial
    
Agricultural
    
Total
  
                                                 
Pass
   $
41,073
     $
387,274
     $
118,692
     $
62,655
     $
90,083
     $
699,777
  
Watch
    
6,822
      
29,209
      
32,780
      
16,147
      
15,248
      
100,206
  
Special Mention
    
-
      
4,581
      
-
      
-
      
-
      
4,581
  
Substandard
    
-
      
14,703
      
9,215
      
4,820
      
3,663
      
32,401
  
Substandard-Impaired
    
-
      
83
      
84
      
462
      
2,951
      
3,580
  
                                                 
    $
47,895
     $
435,850
     $
160,771
     $
84,084
     $
111,945
     $
840,545
  
 
The credit risk profile based on payment activity, on a disaggregated basis, as of
March 31, 2020
and
December 31, 2019
is as follows:
 
2020
  
1-4 Family
                  
   
Residential
    
Consumer
          
   
Real Estate
    
and Other
    
Total
  
                         
Performing
   $
203,392
     $
18,430
     $
221,822
  
Non-performing
    
1,399
      
24
      
1,423
  
                         
    $
204,791
     $
18,454
     $
223,245
  
 
2019
  
1-4 Family
                  
   
Residential
    
Consumer
          
   
Real Estate
    
and Other
    
Total
  
                         
Performing
   $
200,117
     $
18,782
     $
218,899
  
Non-performing
    
1,393
      
9
      
1,402
  
                         
    $
201,510
     $
18,791
     $
220,301