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Note 7 - Loans Receivable and Credit Disclosures | 3 Months Ended
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Mar. 31, 2023
Notes to Financial Statements |
Financing Receivables [Text Block] |
7. | Loans Receivable and Credit Disclosures
The composition of loans receivable as of March 31, 2023 and December 31, 2022 is as follows (in thousands):
|  | 2023 |  |  | 2022 |
Real estate - construction |  | $ | 59,756 |  |  | $ | 51,253 |
Real estate - 1 to 4 family residential |  |  | 286,418 |  |  |  | 285,107 |
Real estate - multi-family |  |  | 193,566 |  |  |  | 185,784 |
Real estate - commercial |  |  | 350,999 |  |  |  | 353,285 |
Real estate - agricultural |  |  | 158,337 |  |  |  | 159,448 |
Commercial |  |  | 82,345 |  |  |  | 77,265 |
Agricultural |  |  | 92,402 |  |  |  | 113,355 |
Consumer and other |  |  | 16,491 |  |  |  | 16,211 |
|  |  | 1,240,314 |  |  |  | 1,241,708 |
Less allowance for credit losses |  |  | (16,269 | ) |  |  | (15,697 | )
Loans receivable, net |  | $ | 1,224,045 |  |  | $ | 1,226,011 |
On January 1, 2023, the Company adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326)," and results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. Additionally, the Company reclassified its loan categories to breakout multi-family real estate from commercial real estate and all prior periods have been adjusted. Activity in the allowance for credit losses, on a disaggregated basis, for the three months ended March 31, 2023 and 2022 is as follows (in thousands):
|  | Three Months Ended March 31, 2023 |
|  |  |  |  |  | 1-4 Family |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Construction |  |  | Residential |  |  | Multi-family |  |  | Commercial |  |  | Agricultural |  |  |  |  |  |  |  |  |  |  | Consumer |  |  |  |  |
|  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Commercial |  |  | Agricultural |  |  | and Other |  |  | Total |
Balance, December 31, 2022 |  | $ | 730 |  |  | $ | 3,028 |  |  | $ | 2,493 |  |  | $ | 4,742 |  |  | $ | 1,625 |  |  | $ | 1,153 |  |  | $ | 1,705 |  |  | $ | 221 |  |  | $ | 15,697 |
Impact of adopting ASC 326 |  |  | (395 | ) |  |  | 242 |  |  |  | (24 | ) |  |  | 513 |  |  |  | (398 | ) |  |  | 449 |  |  |  | (61 | ) |  |  | 192 |  |  |  | 518 |
Credit loss expense (benefit) 1 |  |  | 56 |  |  |  | 17 |  |  |  | 99 |  |  |  | (54 | ) |  |  | (9 | ) |  |  | 183 |  |  |  | (88 | ) |  |  | 8 |  |  |  | 212 |
Recoveries of loans charged-off |  |  | - |  |  |  | 1 |  |  |  | - |  |  |  | 5 |  |  |  | - |  |  |  | 3 |  |  |  | - |  |  |  | 1 |  |  |  | 10 |
Loans charged-off |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (4 | ) |  |  | (164 | ) |  |  | - |  |  |  | (168 | )
Balance, March 31, 2023 |  | $ | 391 |  |  | $ | 3,288 |  |  | $ | 2,568 |  |  | $ | 5,206 |  |  | $ | 1,218 |  |  | $ | 1,784 |  |  | $ | 1,392 |  |  | $ | 422 |  |  | $ | 16,269 |
(1) The difference in the credit loss expense reported herein as compared to the Consolidated Statements of Income is associated with the credit loss expense of $63 thousand related to off-balance sheet credit exposures.
|  | Three Months Ended March 31, 2022 |
|  |  |  |  |  | 1-4 Family |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Construction |  |  | Residential |  |  | Multi-family |  |  | Commercial |  |  | Agricultural |  |  |  |  |  |  |  |  |  |  | Consumer |  |  |  |  |
|  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Commercial |  |  | Agricultural |  |  | and Other |  |  | Total |
Balance, December 31, 2021 |  | $ | 675 |  |  | $ | 2,752 |  |  | $ | 2,501 |  |  | $ | 5,905 |  |  | $ | 1,584 |  |  | $ | 1,170 |  |  | $ | 1,836 |  |  | $ | 198 |  |  | $ | 16,621 |
Credit loss expense (benefit) |  |  | (30 | ) |  |  | 150 |  |  |  | (68 | ) |  |  | (24 | ) |  |  | 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 |  |  | $ | 2,433 |  |  | $ | 5,881 |  |  | $ | 1,630 |  |  | $ | 1,152 |  |  | $ | 1,606 |  |  | $ | 238 |  |  | $ | 16,484 |
The following table shows the balance in the allowance for credit losses at March 31, 2023, and December 31, 2022, disaggregated on the basis of measurement methodology (in thousands). As of March 31, 2023, loans individually assessed are collateral dependent and in the process of foreclosure or no longer share the same risk characteristics of the other loans in the pool. All other loans are collectively evaluated for losses. Loans individually evaluated were considered impaired at December 31, 2022.
2023 |  |  |  |  |  | 1-4 Family |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Construction |  |  | Residential |  |  | Multi-family |  |  | Commercial |  |  | Agricultural |  |  |  |  |  |  |  |  |  |  | Consumer |  |  |  |  |
|  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Commercial |  |  | Agricultural |  |  | and Other |  |  | Total |
Individually evaluated for credit losses |  | $ | - |  |  | $ | 22 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 81 |  |  | $ | 16 |  |  | $ | 119 |
Collectively evaluated for credit losses |  |  | 391 |  |  |  | 3,266 |  |  |  | 2,568 |  |  |  | 5,206 |  |  |  | 1,218 |  |  |  | 1,784 |  |  |  | 1,311 |  |  |  | 406 |  |  |  | 16,150 |
Balance March 31, 2023 |  | $ | 391 |  |  | $ | 3,288 |  |  | $ | 2,568 |  |  | $ | 5,206 |  |  | $ | 1,218 |  |  | $ | 1,784 |  |  | $ | 1,392 |  |  | $ | 422 |  |  | $ | 16,269 |
2022 |  |  |  |  |  | 1-4 Family |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Construction |  |  | Residential |  |  | Multi-family |  |  | Commercial |  |  | Agricultural |  |  |  |  |  |  |  |  |  |  | Consumer |  |  |  |  |
|  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Commercial |  |  | Agricultural |  |  | and Other |  |  | Total |
Individually evaluated for credit losses |  | $ | - |  |  | $ | 10 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 68 |  |  | $ | 17 |  |  | $ | 95 |
Collectively evaluated for credit losses |  |  | 730 |  |  |  | 3,018 |  |  |  | 2,493 |  |  |  | 4,742 |  |  |  | 1,625 |  |  |  | 1,153 |  |  |  | 1,637 |  |  |  | 204 |  |  |  | 15,602 |
Balance December 31, 2022 |  | $ | 730 |  |  | $ | 3,028 |  |  | $ | 2,493 |  |  | $ | 4,742 |  |  | $ | 1,625 |  |  | $ | 1,153 |  |  | $ | 1,705 |  |  | $ | 221 |  |  | $ | 15,697 |
The following table shows the loans receivable balance at March 31, 2023, and December 31, 2022, disaggregated on the basis of measurement methodology (in thousands). As of March 31, 2023, loans individually assessed are collateral dependent and in the process of foreclosure or no longer share the same risk characteristics of the other loans in the pool. All other loans are collectively evaluated for losses. Loans individually evaluated were considered impaired at December 31, 2022.
2023 |  |  |  |  | 1-4 Family |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Construction |  |  | Residential |  |  | Multi-family |  |  | Commercial |  |  | Agricultural |  |  |  |  |  |  |  |  |  |  | Consumer |  |  |  |  |
| Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Commercial |  |  | Agricultural |  |  | and Other |  |  | Total |
Individually evaluated for credit losses | $ | - |  |  | $ | 817 |  |  | $ | - |  |  | $ | 9,176 |  |  | $ | 494 |  |  | $ | 188 |  |  | $ | 752 |  |  | $ | 16 |  |  | $ | 11,443 |
Collectively evaluated for credit losses |  | 59,756 |  |  |  | 285,601 |  |  |  | 193,566 |  |  |  | 341,823 |  |  |  | 157,843 |  |  |  | 82,157 |  |  |  | 91,650 |  |  |  | 16,475 |  |  |  | 1,228,871 |
Balance March 31, 2023 | $ | 59,756 |  |  | $ | 286,418 |  |  | $ | 193,566 |  |  | $ | 350,999 |  |  | $ | 158,337 |  |  | $ | 82,345 |  |  | $ | 92,402 |  |  | $ | 16,491 |  |  | $ | 1,240,314 |
2022 |  |  |  |  | 1-4 Family |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Construction |  |  | Residential |  |  | Multi-family |  |  | Commercial |  |  | Agricultural |  |  |  |  |  |  |  |  |  |  | Consumer |  |  |  |  |
| Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Commercial |  |  | Agricultural |  |  | and Other |  |  | Total |
Individually evaluated for credit losses | $ | - |  |  | $ | 805 |  |  | $ | - |  |  | $ | 12,853 |  |  | $ | 165 |  |  | $ | 200 |  |  | $ | 342 |  |  | $ | 21 |  |  | $ | 14,386 |
Collectively evaluated for credit losses |  | 51,253 |  |  |  | 284,302 |  |  |  | 185,784 |  |  |  | 340,432 |  |  |  | 159,283 |  |  |  | 77,065 |  |  |  | 113,013 |  |  |  | 16,190 |  |  |  | 1,227,322 |
Balance December 31, 2022 | $ | 51,253 |  |  | $ | 285,107 |  |  | $ | 185,784 |  |  | $ | 353,285 |  |  | $ | 159,448 |  |  | $ | 77,265 |  |  | $ | 113,355 |  |  | $ | 16,211 |  |  | $ | 1,241,708 |
The following table presents the amortized cost basis of collateral dependent loans, by the primary collateral type, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans (in thousands):
|  | Primary Type of Collateral |
March 31, 2023 |  | Real Estate |  |  | Equipment |  |  | Other |  |  | Total |  |  | ACL Allocation |
Real estate - construction |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Real estate - 1 to 4 family residential |  |  | 817 |  |  |  | - |  |  |  | - |  |  |  | 817 |  |  |  | 22 |
Real estate - multi-family |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Real estate - commercial |  |  | 9,176 |  |  |  | - |  |  |  | - |  |  |  | 9,176 |  |  |  | - |
Real estate - agricultural |  |  | 494 |  |  |  | - |  |  |  | - |  |  |  | 494 |  |  |  | - |
Commercial |  |  | 128 |  |  |  | 3 |  |  |  | - |  |  |  | 131 |  |  |  | - |
Agricultural |  |  | 260 |  |  |  | 42 |  |  |  | 450 |  |  |  | 752 |  |  |  | 81 |
Consumer and other |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
|  | $ | 10,875 |  |  | $ | 45 |  |  | $ | 450 |  |  | $ | 11,370 |  |  | $ | 103 |
Pre-ASC 326 (CECL) adoption impaired loan information as of December 31, 2022 (in thousands):
|  | 2022 |
|  |  |  |  |  | Unpaid |  |  |  |  |
|  | Recorded |  |  | Principal |  |  | Related |
|  | Investment |  |  | Balance |  |  | Allowance |
With no specific reserve recorded: |  |  |  |  |  |  |  |  |  |  |  |
Real estate - construction |  | $ | - |  |  | $ | - |  |  | $ | - |
Real estate - 1 to 4 family residential |  |  | 687 |  |  |  | 721 |  |  |  | - |
Real estate - multi-family |  |  | - |  |  |  | - |  |  |  | - |
Real estate - commercial |  |  | 12,853 |  |  |  | 13,578 |  |  |  | - |
Real estate - agricultural |  |  | 165 |  |  |  | 194 |  |  |  | - |
Commercial |  |  | 200 |  |  |  | 249 |  |  |  | - |
Agricultural |  |  | 78 |  |  |  | 88 |  |  |  | - |
Consumer and other |  |  | 4 |  |  |  | 7 |  |  |  | - |
Total loans with no specific reserve: |  |  | 13,987 |  |  |  | 14,837 |  |  |  | - |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Real estate - construction |  |  | - |  |  |  | - |  |  |  | - |
Real estate - 1 to 4 family residential |  |  | 118 |  |  |  | 123 |  |  |  | 10 |
Real estate - multi-family |  |  | - |  |  |  | - |  |  |  | - |
Real estate - commercial |  |  | - |  |  |  | - |  |  |  | - |
Real estate - agricultural |  |  | - |  |  |  | - |  |  |  | - |
Commercial |  |  | - |  |  |  | - |  |  |  | - |
Agricultural |  |  | 264 |  |  |  | 294 |  |  |  | 68 |
Consumer and other |  |  | 17 |  |  |  | 19 |  |  |  | 17 |
Total loans with specific reserve: |  |  | 399 |  |  |  | 436 |  |  |  | 95 |
Total |  |  |  |  |  |  |  |  |  |  |  |
Real estate - construction |  |  | - |  |  |  | - |  |  |  | - |
Real estate - 1 to 4 family residential |  |  | 805 |  |  |  | 844 |  |  |  | 10 |
Real estate - multi-family |  |  | - |  |  |  | - |  |  |  | - |
Real estate - commercial |  |  | 12,853 |  |  |  | 13,578 |  |  |  | - |
Real estate - agricultural |  |  | 165 |  |  |  | 194 |  |  |  | - |
Commercial |  |  | 200 |  |  |  | 249 |  |  |  | - |
Agricultural |  |  | 342 |  |  |  | 382 |  |  |  | 68 |
Consumer and other |  |  | 21 |  |  |  | 26 |  |  |  | 17 |
|  | $ | 14,386 |  |  | $ | 15,273 |  |  | $ | 95 |
Average recorded investment and interest income recognized on impaired loans for the three months ended March 31, 2022 (in thousands):
|  | Three Months Ended |
|  | March 31, 2022 |
|  | Average |  |  | Interest |
|  | Recorded |  |  | Income |
|  | Investment |  |  | Recognized |
With no specific reserve recorded: |  |  |  |  |  |  |  |
Real estate - construction |  | $ | - |  |  | $ | - |
Real estate - 1 to 4 family residential |  |  | 664 |  |  |  | 3 |
Real estate - multi-family |  |  | - |  |  |  | - |
Real estate - commercial |  |  | 123 |  |  |  | - |
Real estate - agricultural |  |  | 544 |  |  |  | - |
Commercial |  |  | 227 |  |  |  | 4 |
Agricultural |  |  | 289 |  |  |  | - |
Consumer and other |  |  | 5 |  |  |  | - |
Total loans with no specific reserve: |  |  | 1,852 |  |  |  | 7 |
With an allowance recorded: |  |  |  |  |  |  |  |
Real estate - construction |  |  | - |  |  |  | - |
Real estate - 1 to 4 family residential |  |  | 314 |  |  |  | - |
Real estate - multi-family |  |  | - |  |  |  | - |
Real estate - commercial |  |  | 9,668 |  |  |  | - |
Real estate - agricultural |  |  | - |  |  |  | - |
Commercial |  |  | 70 |  |  |  | - |
Agricultural |  |  | 312 |  |  |  | - |
Consumer and other |  |  | 21 |  |  |  | - |
Total loans with specific reserve: |  |  | 10,385 |  |  |  | - |
Total |  |  |  |  |  |  |  |
Real estate - construction |  |  | - |  |  |  | - |
Real estate - 1 to 4 family residential |  |  | 978 |  |  |  | 3 |
Real estate - multi-family |  |  | - |  |  |  | - |
Real estate - commercial |  |  | 9,791 |  |  |  | - |
Real estate - agricultural |  |  | 544 |  |  |  | - |
Commercial |  |  | 297 |  |  |  | 4 |
Agricultural |  |  | 601 |  |  |  | - |
Consumer and other |  |  | 26 |  |  |  | - |
|  | $ | 12,237 |  |  | $ | 7 |
The interest foregone on nonaccrual loans for the three months ended March 31, 2023 and 2022 was approximately $179 thousand and $143 thousand, respectively. Nonaccrual loans at March 31, 2023 and December 31, 2022 were $11.4 million and $14.7 million, respectively. The Company made three loan modifications to borrowers experiencing financial difficulty for the three months ended March 31, 2023. The following table shows the amortized cost basis at the end of the reporting period of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted (in thousands):
Loan Modifications Made to Borrowers Experiencing Financial Difficulty |
|  | Term Extension |
|  | Amortized Cost Basis at |  |  | % of Total Class of |
|  | March 31, 2023 |  |  | Financing Receivable |
Loan Type |  |  |  |  |  |  |  |
Agricultural |  | $ | 418 |  |  |  | 0.5 | %
The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty:
Term Extension |
Loan Type |  | Financial Effect |
Agricultural |  |  | Added a weighted-average 7.7 years to the life of loans, which reduced monthly payment amounts for the borrowers |
There were no loan modifications made to borrowers experiencing financial difficulty for which there was a payment default within twelve months following the modification during the three months ended March 31, 2023. A loan is considered to be in payment default once it is 60 days contractually past due under the modified terms. The Company had loans meeting the definition of a troubled debt restructuring (TDR) of $10.7 million as of December 31, 2022, all of which were included in impaired and nonaccrual loans. During the three months ended March 31, 2022, the Company did not grant any concessions to borrowers facing financial difficulties. There were no TDR loans that had payment defaults during the twelve months ended March 31, 2023. 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 March 31, 2022. No additional specific reserve was provided for the three months ended March 31, 2022. An aging analysis of the recorded investments in loans, on a disaggregated basis, as of March 31, 2023 and December 31, 2022, is as follows (in thousands):
2023 |  |  |  |  |  | 90 Days |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 90 Days |
|  |  | 30-89 |  |  | or Greater |  |  | Total |  |  |  |  |  |  |  |  |  |  | or Greater |
|  | Past Due |  |  | Past Due |  |  | Past Due |  |  | Current |  |  | Total |  |  | Accruing |
Real estate - construction |  | $ | 66 |  |  | $ | 305 |  |  | $ | 371 |  |  | $ | 59,385 |  |  | $ | 59,756 |  |  | $ | 305 |
Real estate - 1 to 4 family residential |  |  | 420 |  |  |  | - |  |  |  | 420 |  |  |  | 285,998 |  |  |  | 286,418 |  |  |  | - |
Real estate - multi-family |  |  | 1,290 |  |  |  | - |  |  |  | 1,290 |  |  |  | 192,276 |  |  |  | 193,566 |  |  |  | - |
Real estate - commercial |  |  | 107 |  |  |  | - |  |  |  | 107 |  |  |  | 350,892 |  |  |  | 350,999 |  |  |  | - |
Real estate - agricultural |  |  | 119 |  |  |  | - |  |  |  | 119 |  |  |  | 158,218 |  |  |  | 158,337 |  |  |  | - |
Commercial |  |  | 337 |  |  |  | - |  |  |  | 337 |  |  |  | 82,008 |  |  |  | 82,345 |  |  |  | - |
Agricultural |  |  | 205 |  |  |  | - |  |  |  | 205 |  |  |  | 92,197 |  |  |  | 92,402 |  |  |  | - |
Consumer and other |  |  | 10 |  |  |  | - |  |  |  | 10 |  |  |  | 16,481 |  |  |  | 16,491 |  |  |  | - |
|  | $ | 2,554 |  |  | $ | 305 |  |  | $ | 2,859 |  |  | $ | 1,237,455 |  |  | $ | 1,240,314 |  |  | $ | 305 |
2022 |  |  |  |  |  | 90 Days |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 90 Days |
|  |  | 30-89 |  |  | or Greater |  |  | Total |  |  |  |  |  |  |  |  |  |  | or Greater |
|  | Past Due |  |  | Past Due |  |  | Past Due |  |  | Current |  |  | Total |  |  | Accruing |
Real estate - construction |  | $ | 66 |  |  | $ | - |  |  | $ | 66 |  |  | $ | 51,187 |  |  | $ | 51,253 |  |  | $ | - |
Real estate - 1 to 4 family residential |  |  | 944 |  |  |  | 11 |  |  |  | 955 |  |  |  | 284,152 |  |  |  | 285,107 |  |  |  | - |
Real estate - multi-family |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 185,784 |  |  |  | 185,784 |  |  |  | - |
Real estate - commercial |  |  | 2,362 |  |  |  | 1,399 |  |  |  | 3,761 |  |  |  | 349,524 |  |  |  | 353,285 |  |  |  | - |
Real estate - agricultural |  |  | 185 |  |  |  | - |  |  |  | 185 |  |  |  | 159,263 |  |  |  | 159,448 |  |  |  | - |
Commercial |  |  | 592 |  |  |  | 7 |  |  |  | 599 |  |  |  | 76,666 |  |  |  | 77,265 |  |  |  | - |
Agricultural |  |  | 218 |  |  |  | 30 |  |  |  | 248 |  |  |  | 113,107 |  |  |  | 113,355 |  |  |  | - |
Consumer and other |  |  | 37 |  |  |  | 4 |  |  |  | 41 |  |  |  | 16,170 |  |  |  | 16,211 |  |  |  | - |
|  | $ | 4,404 |  |  | $ | 1,451 |  |  | $ | 5,855 |  |  | $ | 1,235,853 |  |  | $ | 1,241,708 |  |  | $ | - |
Credit Quality Indicators. As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk ratings of loans, (ii) the level of classified loans, (iii) net charge-offs, (iv) non-performing loans and (v) the general economic conditions in our market areas. The Company utilizes a risk rating matrix to assign risk ratings to each of its loans. Loans are rated on a scale of 1 to 7. A description of the general characteristics of the risk ratings is as follows: Ratings 1, 2 and 3 - These ratings include loans of average to excellent credit quality borrowers. These borrowers generally have significant capital strength, moderate leverage and stable earnings and growth commensurate to their relative risk rating. These ratings are reviewed at least annually. These ratings also include performing loans of less than $100,000. Rating 4 - This rating includes loans on management’s “watch list” and is intended to be utilized for pass rated borrowers where credit quality has begun to show signs of financial weakness that now requires management’s heightened attention. This rating is reviewed at least quarterly. Rating 5 - This rating is for “Special Mention” loans in accordance with regulatory guidelines. This rating is intended to be temporary and includes loans to borrowers whose credit quality has clearly deteriorated and are at risk of further decline unless active measures are taken to correct the situation. This rating is reviewed at least quarterly. Rating 6 - This rating includes “Substandard” loans in accordance with regulatory guidelines, for which the accrual of interest has not been stopped. Under regulatory guideline definitions, a “Substandard” loan has defined weaknesses which make payment default or principal exposure likely, but not yet certain. Such loans are apt to be dependent upon collateral liquidation, a secondary source of repayment or an event outside of the normal course of business. This rating is reviewed at least quarterly. Rating 7 - This rating includes “Substandard-Impaired” loans in accordance with regulatory guidelines, for which the accrual of interest has generally been stopped. This rating includes loans: (i) where interest is more than 90 days past due, (ii) not fully secured, (iii) where a specific valuation allowance may be necessary, or (iv) where the borrower is unable to make contractual principal and interest payments. This rating is reviewed at least quarterly. The following tables show the risk category of loans by loan category and year of origination as of March 31, 2023 (in thousands):
March 31, 2023 |  | Amortized Cost Basis of Term Loans by Year of Origination |  |  |  |  |  |  |  |  |
|  | 2023 |  |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | Prior |  |  | Revolving |  |  | Total |
Real estate - construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 5,719 |  |  | $ | 45,660 |  |  | $ | 1,605 |  |  | $ | 823 |  |  | $ | - |  |  | $ | 373 |  |  | $ | 5,273 |  |  | $ | 59,453 |
Watch |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 222 |  |  |  | - |  |  |  | 81 |  |  |  | - |  |  |  | 303 |
Special Mention |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Substandard-Impaired |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | 5,719 |  |  | $ | 45,660 |  |  | $ | 1,605 |  |  | $ | 1,045 |  |  | $ | - |  |  | $ | 454 |  |  | $ | 5,273 |  |  | $ | 59,756 |
Current-period gross writeoffs |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Real estate - 1-4 family residential |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 10,438 |  |  | $ | 88,375 |  |  | $ | 66,711 |  |  | $ | 55,200 |  |  | $ | 9,996 |  |  | $ | 21,924 |  |  | $ | 17,476 |  |  | $ | 270,120 |
Watch |  |  | 94 |  |  |  | 746 |  |  |  | 11,044 |  |  |  | 1,593 |  |  |  | - |  |  |  | 620 |  |  |  | 72 |  |  |  | 14,169 |
Special Mention |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Substandard |  |  | - |  |  |  | 19 |  |  |  | 971 |  |  |  | - |  |  |  | 259 |  |  |  | 62 |  |  |  | - |  |  |  | 1,311 |
Substandard-Impaired |  |  | - |  |  |  | 118 |  |  |  | 601 |  |  |  | 19 |  |  |  | - |  |  |  | 62 |  |  |  | 18 |  |  |  | 818 |
Total |  | $ | 10,532 |  |  | $ | 89,258 |  |  | $ | 79,327 |  |  | $ | 56,812 |  |  | $ | 10,255 |  |  | $ | 22,668 |  |  | $ | 17,566 |  |  | $ | 286,418 |
Current-period gross writeoffs |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Real estate - multi-family |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 13,969 |  |  | $ | 49,639 |  |  | $ | 49,826 |  |  | $ | 44,291 |  |  | $ | 14,330 |  |  | $ | 734 |  |  | $ | 1,564 |  |  | $ | 174,353 |
Watch |  |  | 4,038 |  |  |  | 1,447 |  |  |  | 8,375 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 13,860 |
Special Mention |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Substandard |  |  | - |  |  |  | 1,290 |  |  |  | - |  |  |  | 2,368 |  |  |  | 1,695 |  |  |  | - |  |  |  | - |  |  |  | 5,353 |
Substandard-Impaired |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | 18,007 |  |  | $ | 52,376 |  |  | $ | 58,201 |  |  | $ | 46,659 |  |  | $ | 16,025 |  |  | $ | 734 |  |  | $ | 1,564 |  |  | $ | 193,566 |
Current-period gross writeoffs |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Real estate - commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 13,527 |  |  | $ | 72,328 |  |  | $ | 70,949 |  |  | $ | 67,757 |  |  | $ | 20,043 |  |  | $ | 16,700 |  |  | $ | 7,129 |  |  | $ | 268,433 |
Watch |  |  | 1,938 |  |  |  | 3,123 |  |  |  | 20,485 |  |  |  | 23,676 |  |  |  | 6,815 |  |  |  | 1,141 |  |  |  | 2,442 |  |  |  | 59,620 |
Special Mention |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Substandard |  |  | - |  |  |  | 10,557 |  |  |  | - |  |  |  | 2,459 |  |  |  | 376 |  |  |  | 396 |  |  |  | - |  |  |  | 13,788 |
Substandard-Impaired |  |  | 9,133 |  |  |  | - |  |  |  | 25 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 9,158 |
Total |  | $ | 24,598 |  |  | $ | 86,008 |  |  | $ | 91,459 |  |  | $ | 93,892 |  |  | $ | 27,234 |  |  | $ | 18,237 |  |  | $ | 9,571 |  |  | $ | 350,999 |
Current-period gross writeoffs |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Real estate - agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 6,666 |  |  | $ | 34,187 |  |  | $ | 33,669 |  |  | $ | 30,595 |  |  | $ | 6,540 |  |  | $ | 28,103 |  |  | $ | 1,687 |  |  | $ | 141,447 |
Watch |  |  | - |  |  |  | 1,477 |  |  |  | 5,637 |  |  |  | 4,270 |  |  |  | 268 |  |  |  | 1,469 |  |  |  | - |  |  |  | 13,121 |
Special Mention |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Substandard |  |  | - |  |  |  | 1,413 |  |  |  | 363 |  |  |  | 1,829 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3,605 |
Substandard-Impaired |  |  | - |  |  |  | - |  |  |  | 164 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 164 |
Total |  | $ | 6,666 |  |  | $ | 37,077 |  |  | $ | 39,833 |  |  | $ | 36,694 |  |  | $ | 6,808 |  |  | $ | 29,572 |  |  | $ | 1,687 |  |  | $ | 158,337 |
Current-period gross writeoffs |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 14,768 |  |  | $ | 15,628 |  |  | $ | 13,152 |  |  | $ | 3,775 |  |  | $ | 3,557 |  |  | $ | 1,881 |  |  | $ | 22,255 |  |  | $ | 75,016 |
Watch |  |  | 23 |  |  |  | 552 |  |  |  | 1,149 |  |  |  | 570 |  |  |  | 121 |  |  |  | 178 |  |  |  | 2,707 |  |  |  | 5,300 |
Special Mention |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 111 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 111 |
Substandard |  |  | - |  |  |  | 71 |  |  |  | - |  |  |  | 471 |  |  |  | - |  |  |  | - |  |  |  | 1,188 |  |  |  | 1,730 |
Substandard-Impaired |  |  | 51 |  |  |  | 57 |  |  |  | 3 |  |  |  | - |  |  |  | - |  |  |  | 77 |  |  |  | - |  |  |  | 188 |
Total |  | $ | 14,842 |  |  | $ | 16,308 |  |  | $ | 14,304 |  |  | $ | 4,927 |  |  | $ | 3,678 |  |  | $ | 2,136 |  |  | $ | 26,150 |  |  | $ | 82,345 |
Current-period gross writeoffs |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 4 |  |  | $ | - |  |  | $ | 4 |
Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 8,790 |  |  | $ | 12,970 |  |  | $ | 6,844 |  |  | $ | 3,750 |  |  | $ | 597 |  |  | $ | 1,028 |  |  | $ | 52,403 |  |  | $ | 86,382 |
Watch |  |  | 1,881 |  |  |  | 580 |  |  |  | 16 |  |  |  | 30 |  |  |  | 82 |  |  |  | 16 |  |  |  | 2,640 |  |  |  | 5,245 |
Special Mention |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Substandard |  |  | - |  |  |  | - |  |  |  | 310 |  |  |  | 53 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 363 |
Substandard-Impaired |  |  | 117 |  |  |  | 21 |  |  |  | 274 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 412 |
Total |  | $ | 10,788 |  |  | $ | 13,571 |  |  | $ | 7,444 |  |  | $ | 3,833 |  |  | $ | 679 |  |  | $ | 1,044 |  |  | $ | 55,043 |  |  | $ | 92,402 |
Current-period gross writeoffs |  | $ | - |  |  | $ | 74 |  |  | $ | 90 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 164 |
Consumer and other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 2,146 |  |  | $ | 5,703 |  |  | $ | 4,268 |  |  | $ | 2,520 |  |  | $ | 777 |  |  | $ | 993 |  |  | $ | 36 |  |  | $ | 16,443 |
Watch |  |  | - |  |  |  | 1 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1 |
Special Mention |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Substandard |  |  | 31 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 31 |
Substandard-Impaired |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 16 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 16 |
Total |  | $ | 2,177 |  |  | $ | 5,704 |  |  | $ | 4,268 |  |  | $ | 2,536 |  |  | $ | 777 |  |  | $ | 993 |  |  | $ | 36 |  |  | $ | 16,491 |
Current-period gross writeoffs |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Total loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 76,023 |  |  | $ | 324,490 |  |  | $ | 247,024 |  |  | $ | 208,711 |  |  | $ | 55,840 |  |  | $ | 71,736 |  |  | $ | 107,823 |  |  | $ | 1,091,647 |
Watch |  |  | 7,974 |  |  |  | 7,926 |  |  |  | 46,706 |  |  |  | 30,361 |  |  |  | 7,286 |  |  |  | 3,505 |  |  |  | 7,861 |  |  |  | 111,619 |
Special Mention |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 111 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 111 |
Substandard |  |  | 31 |  |  |  | 13,350 |  |  |  | 1,644 |  |  |  | 7,180 |  |  |  | 2,330 |  |  |  | 458 |  |  |  | 1,188 |  |  |  | 26,181 |
Substandard-Impaired |  |  | 9,301 |  |  |  | 196 |  |  |  | 1,067 |  |  |  | 35 |  |  |  | - |  |  |  | 139 |  |  |  | 18 |  |  |  | 10,756 |
Total |  | $ | 93,329 |  |  | $ | 345,962 |  |  | $ | 296,441 |  |  | $ | 246,398 |  |  | $ | 65,456 |  |  | $ | 75,838 |  |  | $ | 116,890 |  |  | $ | 1,240,314 |
Current-period gross writeoffs |  | $ | - |  |  | $ | 74 |  |  | $ | 90 |  |  | $ | - |  |  | $ | - |  |  | $ | 4 |  |  | $ | - |  |  | $ | 168 |
The credit risk profile by internally assigned grade, on a disaggregated basis, as of December 31, 2022 is as follows (in thousands):
December 31, 2022 |  | Construction |  |  | Multi-family |  |  | Commercial |  |  | Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Commercial |  |  | Agricultural |  |  | Total |
Pass |  | $ | 51,253 |  |  | $ | 174,048 |  |  | $ | 264,898 |  |  | $ | 136,043 |  |  | $ | 69,872 |  |  | $ | 98,415 |  |  | $ | 794,529 |
Watch |  |  | - |  |  |  | 9,344 |  |  |  | 62,076 |  |  |  | 18,324 |  |  |  | 5,392 |  |  |  | 14,146 |  |  |  | 109,282 |
Special Mention |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 116 |  |  |  | - |  |  |  | 116 |
Substandard |  |  | - |  |  |  | 2,392 |  |  |  | 13,458 |  |  |  | 4,916 |  |  |  | 1,685 |  |  |  | 452 |  |  |  | 22,903 |
Substandard-Impaired |  |  | - |  |  |  | - |  |  |  | 12,853 |  |  |  | 165 |  |  |  | 200 |  |  |  | 342 |  |  |  | 13,560 |
|  | $ | 51,253 |  |  | $ | 185,784 |  |  | $ | 353,285 |  |  | $ | 159,448 |  |  | $ | 77,265 |  |  | $ | 113,355 |  |  | $ | 940,390 |
The credit risk profile based on payment activity, on a disaggregated basis, as of December 31, 2022 is as follows (in thousands):
December 31, 2022 |  | 1-4 Family |  |  |  |  |  |  |  |  |
|  | Residential |  |  | Consumer |  |  |  |  |
|  | Real Estate |  |  | and Other |  |  | Total |
Performing |  | $ | 284,302 |  |  | $ | 16,190 |  |  | $ | 300,492 |
Non-performing |  |  | 805 |  |  |  | 21 |  |  |  | 826 |
|  | $ | 285,107 |  |  | $ | 16,211 |  |  | $ | 301,318 |

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