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Note 7 - Loans Receivable and Credit Disclosures

6 Months Ended

Jun. 30, 2022

7.	Loans Receivable and Credit Disclosures

The composition of loans receivable as of June 30, 2022 and December 31, 2021 is as follows (in thousands):

	2022			2021

Real estate - construction	$	41,151		$	42,638
Real estate - 1 to 4 family residential		261,690			246,745
Real estate - commercial		515,250			515,367
Real estate - agricultural		158,897			153,457
Commercial ¹		72,065			75,482
Agricultural		91,929			111,881
Consumer and other		15,696			15,097
		1,156,678			1,160,667
Less:
Allowance for loan losses		(16,420	)		(16,621	)
Deferred loan (fees) and costs, net		351			62
Loans receivable, net	$	1,140,609		$	1,144,108

¹	Commercial loan portfolio includes $0.2 million and $6.0 million of Paycheck Protection Program ("PPP") loans as of June 30, 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 and six months ended June 30, 2022 and 2021 is as follows (in thousands):

	Three Months Ended June 30, 2022
				1-4 Family
	Construction			Residential			Commercial		Agricultural								Consumer
	Real Estate			Real Estate			Real Estate		Real Estate		Commercial			Agricultural			and Other			Total
Balance, March 31, 2022	$	645		$	2,899		$	8,314	$	1,630	$	1,152		$	1,606		$	238		$	16,484
Provision (credit) for loan losses		(39	)		24			45		62		(28	)		(122	)		(1	)		(59	)
Recoveries of loans charged-off		-			3			1		-		1			-			3			8
Loans charged-off		-			(6	)		-		-		-			-			(7	)		(13	)
Balance, June 30, 2022	$	606		$	2,920		$	8,360	$	1,692	$	1,125		$	1,484		$	233		$	16,420

	Six Months Ended June 30, 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		(69	)		174			(47	)		108		(47	)		(352	)		47			(186	)
Recoveries of loans charged-off		-			4			1			-		2			-			4			11
Loans charged-off		-			(10	)		-			-		-			-			(16	)		(26	)
Balance, June 30, 2022	$	606		$	2,920		$	8,360		$	1,692	$	1,125		$	1,484		$	233		$	16,420

	Three Months Ended June 30, 2021
				1-4 Family
	Construction			Residential		Commercial			Agricultural							Consumer
	Real Estate			Real Estate		Real Estate			Real Estate		Commercial			Agricultural		and Other			Total
Balance, March 31, 2021	$	868		$	2,383	$	9,049		$	1,498	$	1,262		$	1,614	$	233		$	16,907
Provision (credit) for loan losses		(130	)		217		(161	)		116		(123	)		56		5			(20	)
Recoveries of loans charged-off		-			3		1			-		1			5		3			13
Loans charged-off		-			-		-			-		-			-		(7	)		(7	)
Balance, June 30, 2021	$	738		$	2,603	$	8,889		$	1,614	$	1,140		$	1,675	$	234		$	16,893

	Six Months Ended June 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		13		(214	)		(43	)		19		(202	)		(26	)		7			(446	)
Recoveries of loans charged-off		-		266			2			-		2			5			7			282
Loans charged-off		-		(30	)		-			-		(113	)		-			(15	)		(158	)
Balance, June 30, 2021	$	738	$	2,603		$	8,889		$	1,614	$	1,140		$	1,675		$	234		$	16,893

Allowance for loan losses disaggregated on the basis of impairment analysis method as of June 30, 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	$	-	$	-	$	1,065	$	-	$	2	$	100	$	19	$	1,186
Collectively evaluated for impairment		606		2,920		7,295		1,692		1,123		1,384		214		15,234
Balance June 30, 2022	$	606	$	2,920	$	8,360	$	1,692	$	1,125	$	1,484	$	233	$	16,420

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 June 30, 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	$	-	$	722	$	9,713	$	171	$	241	$	330	$	22	$	11,199
Collectively evaluated for impairment		41,151		260,968		505,537		158,726		71,824		91,599		15,674		1,145,479

Balance June 30, 2022	$	41,151	$	261,690	$	515,250	$	158,897	$	72,065	$	91,929	$	15,696	$	1,156,678

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 June 30, 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		722		799		-		677		739		-
Real estate - commercial		118		139		-		124		142		-
Real estate - agricultural		171		194		-		546		1,001		-
Commercial		207		248		-		233		269		-
Agricultural		30		38		-		322		521		-
Consumer and other		3		5		-		6		8		-
Total loans with no specific reserve:		1,251		1,423		-		1,908		2,680		-

With an allowance recorded:
Real estate - construction		-		-		-		-		-		-
Real estate - 1 to 4 family residential		-		-		-		303		314		40
Real estate - commercial		9,595		10,001		1,065		9,668		10,001		1,139
Real estate - agricultural		-		-		-		-		-		-
Commercial		34		35		2		97		98		60
Agricultural		300		315		100		315		315		132
Consumer and other		19		21		19		21		23		21
Total loans with specific reserve:		9,948		10,372		1,186		10,404		10,751		1,392

Total
Real estate - construction		-		-		-		-		-		-
Real estate - 1 to 4 family residential		722		799		-		980		1,053		40
Real estate - commercial		9,713		10,140		1,065		9,792		10,143		1,139
Real estate - agricultural		171		194		-		546		1,001		-
Commercial		241		283		2		330		367		60
Agricultural		330		353		100		637		836		132
Consumer and other		22		26		19		27		31		21

	$	11,199	$	11,795	$	1,186	$	12,312	$	13,431	$	1,392

Average recorded investment and interest income recognized on impaired loans for the three and six months ended June 30, 2022 and 2021 (in thousands):

	Three Months Ended June 30,
	2022				2021
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
With no specific reserve recorded:
Real estate - construction	$	-	$	-	$	84	$	-
Real estate - 1 to 4 family residential		687		14		619		11
Real estate - commercial		120		-		139		-
Real estate - agricultural		357		14		860		-
Commercial		214		1		544		-
Agricultural		143		-		328		1
Consumer and other		4		-		4		-
Total loans with no specific reserve:		1,525		29		2,578		12

With an allowance recorded:
Real estate - construction		-		-		-		-
Real estate - 1 to 4 family residential		163		1		57		-
Real estate - commercial		9,632		-		10,016		-
Real estate - agricultural		-		-		-		-
Commercial		38		-		-		-
Agricultural		305		-		371		-
Consumer and other		20		-		40		-
Total loans with specific reserve:		10,158		1		10,484		-

Total
Real estate - construction		-		-		84		-
Real estate - 1 to 4 family residential		850		15		676		11
Real estate - commercial		9,752		-		10,155		-
Real estate - agricultural		357		14		860		-
Commercial		252		1		544		-
Agricultural		448		-		699		1
Consumer and other		24		-		44		-

	$	11,683	$	30	$	13,062	$	12

	Six Months Ended June 30,
	2022				2021
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
With no specific reserve recorded:
Real estate - construction	$	-	$	-	$	111	$	-
Real estate - 1 to 4 family residential		683		17		551		11
Real estate - commercial		121		-		173		297
Real estate - agricultural		420		14		1,128		25
Commercial		220		5		454		-
Agricultural		202		-		344		14
Consumer and other		4		-		5		-
Total loans with no specific reserve:		1,650		36		2,766		347

With an allowance recorded:
Real estate - construction		-		-		-		-
Real estate - 1 to 4 family residential		209		1		346		-
Real estate - commercial		9,644		-		10,016		-
Real estate - agricultural		-		-		-		-
Commercial		58		-		222		-
Agricultural		308		-		408		-
Consumer and other		20		-		39		-
Total loans with specific reserve:		10,239		1		11,031		-

Total
Real estate - construction		-		-		111		-
Real estate - 1 to 4 family residential		892		18		897		11
Real estate - commercial		9,765		-		10,189		297
Real estate - agricultural		420		14		1,128		25
Commercial		278		5		676		-
Agricultural		510		-		752		14
Consumer and other		24		-		44		-

	$	11,889	$	37	$	13,797	$	347

The interest foregone on nonaccrual loans for the three months ended June 30, 2022 and 2021 was approximately $168 thousand and $170 thousand, respectively. The interest foregone on nonaccrual loans for the six months ended June 30, 2022 and 2021 was approximately $311 thousand and $369 thousand, respectively.

Nonaccrual loans at June 30, 2022 and December 31, 2021 were $11.5 million and $12.3 million, respectively.

The Company had loans meeting the definition of a troubled debt restructuring (TDR) of $11.1 million as of June 30, 2022, all of which were included in impaired and nonaccrual loans. The Company had TDRs of $11.3 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 and six months ended June 30, 2022 and 2021, were as follows (dollars in thousands):

	Three Months Ended June 30,
	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		-		-		-		1		425		425
Real estate - commercial		-		-		-		-		-		-
Real estate - agricultural		-		-		-		-		-		-
Commercial		-		-		-		-		-		-
Agricultural		-		-		-		-		-		-
Consumer and other		-		-		-		-		-		-

		-	$	-	$	-		1	$	425	$	425

	Six Months Ended June 30,
	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		-		-		-		3		578		578
Real estate - commercial		-		-		-		-		-		-
Real estate - agricultural		-		-		-		-		-		-
Commercial		-		-		-		1		58		58
Agricultural		-		-		-		-		-		-
Consumer and other		-		-		-		-		-		-

		-	$	-	$	-		4	$	636	$	636

During the three and six months ended June 30, 2022, the Company did not grant any concessions to borrowers facing financial difficulties. During the three months ended June 30, 2021, the Company granted concessions to one borrower facing financial difficulties. The loan was restructured with a lower interest rate and the amortization period was extended longer than a typical loan. During the six months ended June 30, 2021, the Company granted concessions to three borrowers, with four contracts, facing financial difficulties. The loans were restructured with a lower interest rate or amortization periods longer than a typical loan.

There were no TDR loans that were modified during the twelve months ended June 30, 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 related to TDRs for the three months ended June 30, 2022 and 2021. There were no net charge-offs and $262 thousand of net recoveries related to TDRs for the six months ended June 30, 2022 and 2021, respectively. No additional specific reserve was provided for the three and six months ended June 30, 2022 and 2021.

An aging analysis of the recorded investments in loans, on a disaggregated basis, as of June 30, 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	$	-	$	-	$	-	$	41,151	$	41,151	$	-
Real estate - 1 to 4 family residential		741		-		741		260,949		261,690		-
Real estate - commercial		23		-		23		515,227		515,250		-
Real estate - agricultural		186		-		186		158,711		158,897		-
Commercial		462		34		496		71,569		72,065		-
Agricultural		46		12		58		91,871		91,929		-
Consumer and other		27		-		27		15,669		15,696		-

	$	1,485	$	46	$	1,531	$	1,155,147	$	1,156,678	$	-

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 June 30, 2022 and December 31, 2021 is as follows (in thousands):

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

Pass	$	40,919	$	404,173	$	134,190	$	62,805	$	75,826	$	717,913
Watch		232		75,812		19,471		7,520		15,253		118,288
Special Mention		-		-		-		-		-		-
Substandard		-		25,552		5,065		1,499		520		32,636
Substandard-Impaired		-		9,713		171		241		330		10,455

	$	41,151	$	515,250	$	158,897	$	72,065	$	91,929	$	879,292

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 June 30, 2022 and December 31, 2021 is as follows (in thousands):

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

Performing	$	260,968	$	15,674	$	276,642
Non-performing		722		22		744

	$	261,690	$	15,696	$	277,386

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