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Note 7 - Loans Receivable and Credit Disclosures

3 Months Ended

Mar. 31, 2022

7.	Loans Receivable and Credit Disclosures

The composition of loans receivable as of March 31, 2022 and December 31, 2021 is as follows (in thousands):

	2022			2021

Real estate - construction	$	46,140		$	42,638
Real estate - 1 to 4 family residential		256,362			246,745
Real estate - commercial		507,598			515,367
Real estate - agricultural		152,136			153,457
Commercial ¹		71,150			75,482
Agricultural		96,197			111,881
Consumer and other		16,647			15,097
		1,146,230			1,160,667
Less:
Allowance for loan losses		(16,484	)		(16,621	)
Deferred loan (fees) and costs, net		331			62
Loans receivable, net	$	1,130,077		$	1,144,108

¹ Commercial loan portfolio includes $0.3 million and $6.0 million of Paycheck Protection Program ("PPP") loans as of March 31, 2022 and December 31, 2021, respectively.

The Paycheck Protection Program (PPP) was established by the Coronavirus Aid, Relief and Economic Security Act (CARES Act) in response to the Coronavirus Disease 2019 (COVID-19) pandemic. Funding was extended into 2021. The PPP is administered by the Small Business Administration (SBA). PPP loans are forgivable by the SBA in qualifying circumstances and are 100 percent guaranteed by the SBA.

Activity in the allowance for loan losses, on a disaggregated basis, for the three months ended March 31, 2022 and 2021 is as follows (in thousands):

	Three Months Ended March 31, 2022
				1-4 Family
	Construction			Residential			Commercial			Agricultural								Consumer
	Real Estate			Real Estate			Real Estate			Real Estate		Commercial			Agricultural			and Other			Total
Balance, December 31, 2021	$	675		$	2,752		$	8,406		$	1,584	$	1,170		$	1,836		$	198		$	16,621
Provision (credit) for loan losses		(30	)		150			(92	)		46		(19	)		(230	)		48			(127	)
Recoveries of loans charged-off		-			1			-			-		1			-			1			3
Loans charged-off		-			(4	)		-			-		-			-			(9	)		(13	)
Balance, March 31, 2022	$	645		$	2,899		$	8,314		$	1,630	$	1,152		$	1,606		$	238		$	16,484

	Three Months Ended March 31, 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		(431	)		118		(97	)		(79	)		(82	)		2			(426	)
Recoveries of loans charged-off		-		263			1		-			1			-			4			269
Loans charged-off		-		(30	)		-		-			(113	)		-			(8	)		(151	)
Balance, March 31, 2021	$	868	$	2,383		$	9,049	$	1,498		$	1,262		$	1,614		$	233		$	16,907

Allowance for loan losses disaggregated on the basis of impairment analysis method as of March 31, 2022 and December 31, 2021 is as follows (in thousands):

2022			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	$	-	$	53	$	1,139	$	-	$	42	$	119	$	20	$	1,373
Collectively evaluated for impairment		645		2,846		7,175		1,630		1,110		1,487		218		15,111
Balance March 31, 2022	$	645	$	2,899	$	8,314	$	1,630	$	1,152	$	1,606	$	238	$	16,484

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	$	1,139	$	-	$	60	$	132	$	21	$	1,392
Collectively evaluated for impairment		675		2,712		7,267		1,584		1,110		1,704		177		15,229
Balance December 31, 2021	$	675	$	2,752	$	8,406	$	1,584	$	1,170	$	1,836	$	198	$	16,621

Loans receivable disaggregated on the basis of impairment analysis method as of March 31, 2022 and December 31, 2021 is as follows (in thousands):

2022			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	$	-	$	976	$	9,789	$	542	$	262	$	564	$	24	$	12,157
Collectively evaluated for impairment		46,140		255,386		497,809		151,594		70,888		95,633		16,623		1,134,073

Balance March 31, 2022	$	46,140	$	256,362	$	507,598	$	152,136	$	71,150	$	96,197	$	16,647	$	1,146,230

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	$	-	$	980	$	9,792	$	546	$	330	$	637	$	27	$	12,312
Collectively evaluated for impairment		42,638		245,765		505,575		152,911		75,152		111,244		15,070		1,148,355

Balance December 31, 2021	$	42,638	$	246,745	$	515,367	$	153,457	$	75,482	$	111,881	$	15,097	$	1,160,667

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 March 31, 2022 and December 31, 2021 (in thousands):

	2022						2021
			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		651		719		-		677		739		-
Real estate - commercial		121		140		-		124		142		-
Real estate - agricultural		542		617		-		546		1,001		-
Commercial		220		258		-		233		269		-
Agricultural		255		486		-		322		521		-
Consumer and other		4		6		-		6		8		-
Total loans with no specific reserve:		1,793		2,226		-		1,908		2,680		-

With an allowance recorded:
Real estate - construction		-		-		-		-		-		-
Real estate - 1 to 4 family residential		325		341		53		303		314		40
Real estate - commercial		9,668		10,001		1,139		9,668		10,001		1,139
Real estate - agricultural		-		-		-		-		-		-
Commercial		42		42		42		97		98		60
Agricultural		309		315		119		315		315		132
Consumer and other		20		22		20		21		23		21
Total loans with specific reserve:		10,364		10,721		1,373		10,404		10,751		1,392

Total
Real estate - construction		-		-		-		-		-		-
Real estate - 1 to 4 family residential		976		1,060		53		980		1,053		40
Real estate - commercial		9,789		10,141		1,139		9,792		10,143		1,139
Real estate - agricultural		542		617		-		546		1,001		-
Commercial		262		300		42		330		367		60
Agricultural		564		801		119		637		836		132
Consumer and other		24		28		20		27		31		21

	$	12,157	$	12,947	$	1,373	$	12,312	$	13,431	$	1,392

Average recorded investment and interest income recognized on impaired loans for the three months ended March 31, 2022 and 2021 (in thousands):

	Three Months Ended March 31,
	2022				2021
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
With no specific reserve recorded:
Real estate - construction	$	-	$	-	$	167	$	-
Real estate - 1 to 4 family residential		664		3		361		-
Real estate - commercial		123		-		192		297
Real estate - agricultural		544		-		1,378		25
Commercial		227		4		546		-
Agricultural		289		-		360		13
Consumer and other		5		-		6		-
Total loans with no specific reserve:		1,852		7		3,010		335

With an allowance recorded:
Real estate - construction		-		-		-		-
Real estate - 1 to 4 family residential		314		-		509		-
Real estate - commercial		9,668		-		10,016		-
Real estate - agricultural		-		-		-		-
Commercial		70		-		333		-
Agricultural		312		-		443		-
Consumer and other		21		-		40		-
Total loans with specific reserve:		10,385		-		11,341		-

Total
Real estate - construction		-		-		167		-
Real estate - 1 to 4 family residential		978		3		870		-
Real estate - commercial		9,791		-		10,208		297
Real estate - agricultural		544		-		1,378		25
Commercial		297		4		879		-
Agricultural		601		-		803		13
Consumer and other		26		-		46		-

	$	12,237	$	7	$	14,351	$	335

The interest foregone on nonaccrual loans for the three months ended March 31, 2022 and 2021 was approximately $143 thousand and $199 thousand, respectively.

Nonaccrual loans at March 31, 2022 and December 31, 2021 were $12.2 million and $12.3 million, respectively.

The Company had loans meeting the definition of a troubled debt restructuring (TDR) of $11.27 million as of March 31, 2022, all of which were included in impaired and nonaccrual loans. The Company had TDRs of $11.30 million as of December 31, 2021, all of which were included in impaired and nonaccrual loans.

The Company’s TDRs, on a disaggregated basis, occurring in the three months ended March 31, 2022 and 2021, were as follows (dollars in thousands):

	Three Months Ended March 31,
	2022						2021
			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		-		-		-		2		153		153
Real estate - commercial		-		-		-		-		-		-
Real estate - agricultural		-		-		-		-		-		-
Commercial		-		-		-		1		58		58
Agricultural		-		-		-		-		-		-
Consumer and other		-		-		-		-		-		-

		-	$	-	$	-		3	$	211	$	211

During the three months ended March 31, 2022, the Company did not grant any concessions to borrowers facing financial difficulties. During the three months ended March 31, 2021, the Company granted concessions to two borrowers, with three contracts, facing financial difficulties. The loans were restructured for an extended maturity without principal reductions or an amortization period longer than a typical loan.

There were no TDR loans that were modified during the twelve months ended March 31, 2022 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 $262 thousand of net recoveries related to TDRs for the three months ended March 31, 2022 and 2021, respectively. No additional specific reserve was provided for the three months ended March 31, 2022 and 2021.

An aging analysis of the recorded investments in loans, on a disaggregated basis, as of March 31, 2022 and December 31, 2021, is as follows (in thousands):

2022			90 Days								90 Days
	30-89		or Greater		Total						or Greater
	Past Due		Past Due		Past Due		Current		Total		Accruing

Real estate - construction	$	-	$	-	$	-	$	46,140	$	46,140	$	-
Real estate - 1 to 4 family residential		989		216		1,205		255,157		256,362		-
Real estate - commercial		24		-		24		507,574		507,598		-
Real estate - agricultural		408		-		408		151,728		152,136		-
Commercial		549		49		598		70,552		71,150		-
Agricultural		894		-		894		95,303		96,197		-
Consumer and other		15		-		15		16,632		16,647		-

	$	2,879	$	265	$	3,144	$	1,143,086	$	1,146,230	$	-

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

Real estate - construction	$	-	$	-	$	-	$	42,638	$	42,638	$	-
Real estate - 1 to 4 family residential		1,198		482		1,680		245,065		246,745		169
Real estate - commercial		24		-		24		515,343		515,367		-
Real estate - agricultural		30		-		30		153,427		153,457		-
Commercial		251		15		266		75,216		75,482		-
Agricultural		172		-		172		111,709		111,881		-
Consumer and other		49		-		49		15,048		15,097		-

	$	1,724	$	497	$	2,221	$	1,158,446	$	1,160,667	$	169

The credit risk profile by internally assigned grade, on a disaggregated basis, as of March 31, 2022 and December 31, 2021 is as follows (in thousands):

2022	Construction		Commercial		Agricultural
	Real Estate		Real Estate		Real Estate		Commercial		Agricultural		Total

Pass	$	45,904	$	388,722	$	125,766	$	61,302	$	80,758	$	702,452
Watch		236		78,615		20,791		7,372		14,293		121,307
Special Mention		-		830		-		633		-		1,463
Substandard		-		29,642		5,037		1,581		582		36,842
Substandard-Impaired		-		9,789		542		262		564		11,157

	$	46,140	$	507,598	$	152,136	$	71,150	$	96,197	$	873,221

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

Pass	$	38,753	$	381,346	$	126,157	$	63,141	$	95,289	$	704,686
Watch		239		99,127		17,853		8,132		7,421		132,772
Special Mention		-		3,085		3,519		762		7,664		15,030
Substandard		3,646		22,017		5,382		3,117		870		35,032
Substandard-Impaired		-		9,792		546		330		637		11,305

	$	42,638	$	515,367	$	153,457	$	75,482	$	111,881	$	898,825

The credit risk profile based on payment activity, on a disaggregated basis, as of March 31, 2022 and December 31, 2021 is as follows (in thousands):

2022	1-4 Family
	Residential		Consumer
	Real Estate		and Other		Total

Performing	$	255,386	$	16,623	$	272,009
Non-performing		976		24		1,000

	$	256,362	$	16,647	$	273,009

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

Performing	$	245,598	$	15,067	$	260,665
Non-performing		1,147		30		1,177

	$	246,745	$	15,097	$	261,842