XML 26 R15.htm IDEA: XBRL DOCUMENT

Note 7 - Loans Receivable and Credit Disclosures

9 Months Ended

Sep. 30, 2021

7.	Loans Receivable and Credit Disclosures

The composition of loans receivable as of September 30, 2021 and December 31, 2020 is as follows (in thousands):

	2021			2020

Real estate - construction	$	37,476		$	45,497
Real estate - 1 to 4 family residential		231,468			213,562
Real estate - commercial		519,112			496,357
Real estate - agricultural		153,247			151,992
Commercial ¹		85,569			122,535
Agricultural		101,087			102,586
Consumer and other		15,346			15,048
		1,143,305			1,147,577
Less:
Allowance for loan losses		(16,830	)		(17,215	)
Deferred loan (fees) and costs, net²		(416	)		(857	)
Loans receivable, net	$	1,126,059		$	1,129,505

¹	Commercial loan portfolio includes $14.8 million and $50.9 million of Paycheck Protection Program ("PPP") loans as of September 30, 2021 and December 31, 2020, respectively.
²	Deferred loan (fees) and costs, net includes $0.7 million and $0.9 million of fees, net of costs, related to the PPP loans as of September 30, 2021 and December 31, 2020, respectively.

The Paycheck Protection Program (PPP) was established by the Coronavirus Aid, Relief and Economic Security Act (CARES Act), enacted on March 27, 2020, and expanded by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, enacted December 27, 2020 and the American Rescue Plan Act, enacted March 11, 2021, in response to the Coronavirus Disease 2019 (COVID-19) pandemic. The PPP is administered by the Small Business Administration (SBA). PPP loans may be forgiven by the SBA and are 100 percent guaranteed by the SBA.

Activity in the allowance for loan losses, on a disaggregated basis, for the three and nine months ended September 30, 2021 and 2020 is as follows (in thousands):

	Three Months Ended September 30, 2021
				1-4 Family
	Construction			Residential			Commercial		Agricultural								Consumer
	Real Estate			Real Estate			Real Estate		Real Estate			Commercial		Agricultural			and Other			Total
Balance, June 30, 2021	$	738		$	2,603		$	8,889	$	1,614		$	1,140	$	1,675		$	234		$	16,893
Provision (credit) for loan losses		(156	)		59			33		(36	)		64		(59	)		1			(94	)
Recoveries of loans charged-off		-			1			1		-			1		43			1			47
Loans charged-off		-			(4	)		-		-			-		-			(12	)		(16	)
Balance, September 30, 2021	$	582		$	2,659		$	8,923	$	1,578		$	1,205	$	1,659		$	224		$	16,830

	Nine Months Ended September 30, 2021
				1-4 Family
	Construction			Residential			Commercial			Agricultural									Consumer
	Real Estate			Real Estate			Real Estate			Real Estate			Commercial			Agricultural			and Other			Total
Balance, December 31, 2020	$	725		$	2,581		$	8,930		$	1,595		$	1,453		$	1,696		$	235		$	17,215
Provision (credit) for loan losses		(143	)		(155	)		(10	)		(17	)		(138	)		(85	)		8			(540	)
Recoveries of loans charged-off		-			267			3			-			3			48			8			329
Loans charged-off		-			(34	)		-			-			(113	)		-			(27	)		(174	)
Balance, September 30, 2021	$	582		$	2,659		$	8,923		$	1,578		$	1,205		$	1,659		$	224		$	16,830

	Three Months Ended September 30, 2020
				1-4 Family
	Construction			Residential			Commercial		Agricultural									Consumer
	Real Estate			Real Estate			Real Estate		Real Estate			Commercial			Agricultural			and Other			Total
Balance, June 30, 2020	$	849		$	2,505		$	6,864	$	1,713		$	1,994		$	1,830		$	250		$	16,005
Provision (credit) for loan losses		(105	)		80			583		(15	)		(5	)		(14	)		17			541
Recoveries of loans charged-off		-			2			1		-			9			-			273			285
Loans charged-off		-			(1	)		-		-			(582	)		(48	)		(268	)		(899	)
Balance, September 30, 2020	$	744		$	2,586		$	7,448	$	1,698		$	1,416		$	1,768		$	272		$	15,932

	Nine Months Ended September 30, 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 for loan losses		71		477			2,527			372		573			338			66			4,424
Recoveries of loans charged-off		1		5			3			-		13			-			277			299
Loans charged-off		-		(18	)		(444	)		-		(628	)		(48	)		(272	)		(1,410	)
Balance, September 30, 2020	$	744	$	2,586		$	7,448		$	1,698	$	1,416		$	1,768		$	272		$	15,932

Allowance for loan losses disaggregated on the basis of impairment analysis method as of September 30, 2021 and December 31, 2020 is as follows (in thousands):

2021			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	$	-	$	40	$	1,326	$	-	$	18	$	132	$	23	$	1,539
Collectively evaluated for impairment		582		2,619		7,597		1,578		1,187		1,527		201		15,291
Balance September 30, 2021	$	582	$	2,659	$	8,923	$	1,578	$	1,205	$	1,659	$	224	$	16,830

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	$	-	$	150	$	1,486	$	-	$	115	$	40	$	28	$	1,819
Collectively evaluated for impairment		725		2,431		7,444		1,595		1,338		1,656		207		15,396
Balance December 31, 2020	$	725	$	2,581	$	8,930	$	1,595	$	1,453	$	1,696	$	235	$	17,215

Loans receivable disaggregated on the basis of impairment analysis method as of September 30, 2021 and December 31, 2020 is as follows (in thousands):

2021			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	$	-	$	1,000	$	9,954	$	576	$	295	$	638	$	30	$	12,493
Collectively evaluated for impairment		37,476		230,468		509,158		152,671		85,274		100,449		15,316		1,130,812

Balance September 30, 2021	$	37,476	$	231,468	$	519,112	$	153,247	$	85,569	$	101,087	$	15,346	$	1,143,305

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	$	167	$	1,340	$	10,258	$	1,664	$	940	$	859	$	45	$	15,273
Collectively evaluated for impairment		45,330		212,222		486,099		150,328		121,595		101,727		15,003		1,132,304

Balance December 31, 2020	$	45,497	$	213,562	$	496,357	$	151,992	$	122,535	$	102,586	$	15,048	$	1,147,577

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 applies its normal loan review procedures to identify loans that should be evaluated for impairment.

Impaired loans, on a disaggregated basis, as of September 30, 2021 and December 31, 2020 (in thousands):

	2021						2020
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
With no specific reserve recorded:
Real estate - construction	$	-	$	-	$	-	$	167	$	167	$	-
Real estate - 1 to 4 family residential		694		747		-		416		475		-
Real estate - commercial		127		142		-		242		578		-
Real estate - agricultural		576		631		-		1,664		1,698		-
Commercial		238		271		-		274		318		-
Agricultural		323		523		-		377		542		-
Consumer and other		7		9		-		8		10		-
Total loans with no specific reserve:		1,965		2,323		-		3,148		3,788		-

With an allowance recorded:
Real estate - construction		-		-		-		-		-		-
Real estate - 1 to 4 family residential		306		316		40		924		1,278		150
Real estate - commercial		9,827		10,081		1,326		10,016		10,157		1,486
Real estate - agricultural		-		-		-		-		-		-
Commercial		57		58		18		666		1,247		115
Agricultural		315		315		132		482		484		40
Consumer and other		23		24		23		37		39		28
Total loans with specific reserve:		10,528		10,794		1,539		12,125		13,205		1,819

Total
Real estate - construction		-		-		-		167		167		-
Real estate - 1 to 4 family residential		1,000		1,063		40		1,340		1,753		150
Real estate - commercial		9,954		10,223		1,326		10,258		10,735		1,486
Real estate - agricultural		576		631		-		1,664		1,698		-
Commercial		295		329		18		940		1,565		115
Agricultural		638		838		132		859		1,026		40
Consumer and other		30		33		23		45		49		28

	$	12,493	$	13,117	$	1,539	$	15,273	$	16,993	$	1,819

Average recorded investment and interest income recognized on impaired loans for the three and nine months ended September 30, 2021 and 2020 (in thousands):

	Three Months Ended September 30,
	2021				2020
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
With no specific reserve recorded:
Real estate - construction	$	-	$	-	$	83	$	-
Real estate - 1 to 4 family residential		813		8		305		-
Real estate - commercial		132		-		11,091		-
Real estate - agricultural		602		-		1,966		-
Commercial		255		-		735		21
Agricultural		318		-		813		340
Consumer and other		6		-		8		-
Total loans with no specific reserve:		2,126		8		15,001		361

With an allowance recorded:
Real estate - construction		-		-		-		-
Real estate - 1 to 4 family residential		164		-		957		-
Real estate - commercial		9,922		-		-		-
Real estate - agricultural		-		-		-		-
Commercial		29		-		627		-
Agricultural		327		-		531		-
Consumer and other		30		-		30		-
Total loans with specific reserve:		10,472		-		2,145		-

Total
Real estate - construction		-		-		83		-
Real estate - 1 to 4 family residential		977		8		1,262		-
Real estate - commercial		10,054		-		11,091		-
Real estate - agricultural		602		-		1,966		-
Commercial		284		-		1,362		21
Agricultural		645		-		1,344		340
Consumer and other		36		-		38		-

	$	12,598	$	8	$	17,146	$	361

	Nine Months Ended September 30,
	2021				2020
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
With no specific reserve recorded:
Real estate - construction	$	84	$	-	$	41	$	-
Real estate - 1 to 4 family residential		587		19		294		-
Real estate - commercial		162		297		8,221		-
Real estate - agricultural		990		25		1,202		6
Commercial		400		-		586		23
Agricultural		339		14		1,896		340
Consumer and other		6		-		26		-
Total loans with no specific reserve:		2,568		355		12,266		369

With an allowance recorded:
Real estate - construction		-		-		-		-
Real estate - 1 to 4 family residential		336		-		938		-
Real estate - commercial		9,969		-		244		-
Real estate - agricultural		-		-		-		-
Commercial		181		-		356		-
Agricultural		385		-		380		-
Consumer and other		35		-		15		-
Total loans with specific reserve:		10,906		-		1,933		-

Total
Real estate - construction		84		-		41		-
Real estate - 1 to 4 family residential		923		19		1,232		-
Real estate - commercial		10,131		297		8,465		-
Real estate - agricultural		990		25		1,202		6
Commercial		581		-		942		23
Agricultural		724		14		2,276		340
Consumer and other		41		-		41		-

	$	13,474	$	355	$	14,199	$	369

The interest foregone on nonaccrual loans for the three months ended September 30, 2021 and 2020 was approximately $154 thousand and $247 thousand, respectively. The interest foregone on nonaccrual loans for the nine months ended September 30, 2021 and 2020 was approximately $523 thousand and $747 thousand, respectively.

Nonaccrual loans at September 30, 2021 and December 31, 2020 were $12.5 million and $15.3 million, respectively.

The Company had loans meeting the definition of a troubled debt restructuring (TDR) of $10.6 million as of September 30, 2021, all of which were included in impaired and nonaccrual loans. The Company had TDRs of $11.3 million as of December 31, 2020, all of which were included in impaired and nonaccrual loans.

The Company’s TDRs, on a disaggregated basis, occurring in the three and nine months ended September 30, 2021 and 2020, were as follows (dollars in thousands):

	Three Months Ended September 30,
	2021						2020
			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		10,157		10,157
Real estate - agricultural		-		-		-		-		-		-
Commercial		1		6		6		-		-		-
Agricultural		-		-		-		3		56		56
Consumer and other		-		-		-		1		27		27

		1	$	6	$	6		5	$	10,240	$	10,240

	Nine Months Ended September 30,
	2021						2020
			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		3		578		578		-		-		-
Real estate - commercial		-		-		-		2		10,341		10,341
Real estate - agricultural		-		-		-		-		-		-
Commercial		2		64		64		1		61		61
Agricultural		-		-		-		3		56		56
Consumer and other		-		-		-		1		27		27

		5	$	642	$	642		7	$	10,485	$	10,485

During the three months ended September 30, 2021, the Company granted concessions to one borrower facing financial difficulties which was unrelated to COVID-19. The loan was restructured with a lower interest rate and accrued interest was waived. During the three months ended September 30, 2020, the Company granted concessions to three borrowers facing financial difficulties which were unrelated to COVID-19. Payments on these loans were deferred for an extended period of time and the interest rate was reduced below the market interest rate. During the nine months ended September 30, 2021, the Company granted concessions to four borrowers facing financial difficulties. The loans were restructured with a lower interest rate or amortization periods longer than a typical loan. During the nine months ended September 30, 2020, the Company granted concessions to five borrowers facing financial difficulties. Payments on these loans were deferred for an extended period of time and the interest rate was reduced below the market interest rate.

There were no TDR loans that were modified during the twelve months ended September 30, 2021 that had payment defaults. The Company considers TDR loans to have payment default when it is past due 60 days or more.

There were no net charge-offs and $15 thousand of net charge-offs related to TDRs for the three months ended September 30, 2021 and 2020, respectively. There were $262 thousand of net recoveries and $31 thousand of net charge-offs related to TDRs for the nine months ended September 30, 2021 and 2020, respectively. No additional specific reserve was provided for the three and nine months ended September 30, 2021 and 2020.

Section 4013 of the CARES Act, “Temporary Relief From TDRs,” allows financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to TDRs for a limited period of time during the COVID-19 pandemic. This temporary suspension may only be applied to modifications of loans that were not more than 30 days past due as of December 31, 2019 and may not be applied to modifications that are not related to the COVID-19 pandemic. If elected, the temporary suspension may be applied to eligible modifications executed during the period beginning on March 1, 2020 and ending on the earlier of December 31, 2020, extended to January 1, 2022 under the Coronavirus Response and Relief Supplemental Appropriations Act, or 60 days after the termination of the COVID-19 national emergency. In March 2020, federal banking regulators in consultation with the FASB issued interagency statements that include similar guidance on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement provided that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs.

As of December 31, 2020, the Company had 24 COVID-19 related loan modifications still in the modification period with a total outstanding principal balance of $45.9 million. As of September 30, 2021, substantially all the remaining COVID-19 related loan modifications have returned to normal payment status. Modified loans continued to accrue interest and were evaluated for past due status based on the revised payment terms.

An aging analysis of the recorded investments in loans, on a disaggregated basis, as of September 30, 2021 and December 31, 2020, is as follows (in thousands):

2021			90 Days								90 Days
	30-89		or Greater		Total						or Greater
	Past Due		Past Due		Past Due		Current		Total		Accruing

Real estate - construction	$	140	$	-	$	140	$	37,336	$	37,476	$	-
Real estate - 1 to 4 family residential		1,080		170		1,250		230,218		231,468		84
Real estate - commercial		-		-		-		519,112		519,112		-
Real estate - agricultural		1,139		-		1,139		152,108		153,247		-
Commercial		495		-		495		85,074		85,569		-
Agricultural		136		315		451		100,636		101,087		-
Consumer and other		56		-		56		15,290		15,346		-

	$	3,046	$	485	$	3,531	$	1,139,774	$	1,143,305	$	84

2020			90 Days								90 Days
	30-89		or Greater		Total						or Greater
	Past Due		Past Due		Past Due		Current		Total		Accruing

Real estate - construction	$	169	$	167	$	336	$	45,161	$	45,497	$	-
Real estate - 1 to 4 family residential		1,523		176		1,699		211,863		213,562		6
Real estate - commercial		152		56		208		496,149		496,357		-
Real estate - agricultural		574		1,618		2,192		149,800		151,992		-
Commercial		283		3		286		122,249		122,535		3
Agricultural		79		458		537		102,049		102,586		30
Consumer and other		18		16		34		15,014		15,048		-

	$	2,798	$	2,494	$	5,292	$	1,142,285	$	1,147,577	$	39

The credit risk profile by internally assigned grade, on a disaggregated basis, as of September 30, 2021 and December 31, 2020 is as follows (in thousands):

2021	Construction		Commercial		Agricultural
	Real Estate		Real Estate		Real Estate		Commercial		Agricultural		Total

Pass	$	35,797	$	381,055	$	125,868	$	72,151	$	84,960	$	699,831
Watch		326		79,194		21,037		8,077		14,717		123,351
Special Mention		1,353		24,687		167		1,370		-		27,577
Substandard		-		24,222		5,599		3,676		772		34,269
Substandard-Impaired		-		9,954		576		295		638		11,463

	$	37,476	$	519,112	$	153,247	$	85,569	$	101,087	$	896,491

2020	Construction		Commercial		Agricultural
	Real Estate		Real Estate		Real Estate		Commercial		Agricultural		Total

Pass	$	39,980	$	346,591	$	110,925	$	101,858	$	80,075	$	679,429
Watch		5,350		88,113		33,144		15,897		20,793		163,297
Special Mention		-		23,753		175		52		-		23,980
Substandard		-		27,642		6,084		3,788		859		38,373
Substandard-Impaired		167		10,258		1,664		940		859		13,888

	$	45,497	$	496,357	$	151,992	$	122,535	$	102,586	$	918,967

The credit risk profile based on payment activity, on a disaggregated basis, as of September 30, 2021 and December 31, 2020 is as follows (in thousands):

2021	1-4 Family
	Residential		Consumer
	Real Estate		and Other		Total

Performing	$	230,385	$	15,343	$	245,728
Non-performing		1,083		3		1,086

	$	231,468	$	15,346	$	246,814

2020	1-4 Family
	Residential		Consumer
	Real Estate		and Other		Total

Performing	$	212,282	$	15,003	$	227,285
Non-performing		1,280		45		1,325

	$	213,562	$	15,048	$	228,610