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Note 4 - Loans Receivable and Credit Disclosures

12 Months Ended

Dec. 31, 2023

Note 4. Loans Receivable and Credit Disclosures

The composition of loans receivable is as follows (in thousands):

	2023			2022

Real estate - construction	$	63,050		$	51,253
Real estate - 1 to 4 family residential		289,404			285,107
Real estate - multi-family		195,536			185,784
Real estate - commercial		359,266			353,285
Real estate - agricultural		161,517			159,448
Commercial		89,729			77,265
Agricultural		119,136			113,355
Consumer and other		16,540			16,211
		1,294,178			1,241,708
Unallocated portfolio layer basis adjustments¹		410			-
Less allowance for credit losses		(16,776	)		(15,697	)
Total loans receivable, net	$	1,277,812		$	1,226,011

¹ This amount represents portfolio layer method basis adjustments related to loans hedged in a closed portfolio. Under the portfolio layer method basis adjustments are not allocated to individual loans, however, the amounts impact the net loan balance. These basis adjustments would be allocated to the amortized cost of specific loans within the pool if the hedge was de-designated. See Note 11 (“Derivative Financial Instruments”) for additional information.

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.

Construction loans are underwritten utilizing independent appraisals, sensitivity analysis of absorption, vacancy and lease rates and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the completed project. These estimates may prove to be inaccurate primarily due to unforeseen circumstances beyond the control of the borrower or lender. Construction loans often involve the disbursement of funds with repayment substantially dependent on the success of the ultimate project. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing. The Company may require guarantees on these loans. The Company’s construction loans are secured primarily by properties located in its primary market area. National unemployment rate is a key economic forecast used in estimating expected credit losses for this segment.

The Company originates 1-4 family real estate loans utilizing credit reports to supplement the underwriting process. The Company’s underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines. Properties securing 1-4 family real estate loans are appraised by either staff appraisers or fee appraisers, both of which are independent of the loan origination function and have been approved by the Board of Directors. The loan-to-value ratios normally do not exceed 90% without credit enhancements such as mortgage insurance. The Company will lend up to 100% of the lesser of the appraised value or purchase price for conventional 1-4 family real estate loans, provided private mortgage insurance is obtained. The Company’s 1-4 family real estate loans are secured primarily by properties located in its primary market area. The national unemployment rate is a key economic forecast used in estimating expected credit losses for this segment.

Multi-family, commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans, in addition to those unique to real estate loans. These loans are viewed primarily as cash flow loans and, secondarily, as loans secured by real estate. Multi-family, commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Loan-to-value generally does not exceed 80% of the cost or value of the assets. Loans are typically subject to interest rate adjustments between five and seven years from origination. Fully amortized monthly repayment terms normally do not exceed twenty-five years. Projections and cash flows that show ability to service debt within the amortization period are required. Property and casualty insurance is required to protect the Banks’ collateral interests. Appraisals on properties securing these loans are generally performed by fee appraisers approved by the Board of Directors. Because payments on multi-family, commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to adverse conditions in the real estate market or the economy. Management monitors and evaluates commercial and agricultural real estate loans based on collateral and risk rating criteria. The Company may require guarantees on these loans. The Company’s multi-family, commercial and agricultural real estate loans are secured primarily by properties located in its primary market areas. The national unemployment rate and the national real gross domestic product (GDP) are key economic forecasts used in estimating expected credit losses for the multi-family and commercial real estate segments. The national real GDP is a key economic forecast used in estimating expected credit losses for the agricultural real estate segment.

Commercial and agricultural operating loans are underwritten based on the Company’s examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. This underwriting includes the evaluation of cash flows of the borrower, underlying collateral, if applicable, and the borrower’s ability to manage its business activities. The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation. A first priority lien on the general assets of the business normally secures these types of loans. Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower. Crop and hail insurance is required for most agricultural borrowers. Loans are generally guaranteed by the principal(s). The Company’s commercial and agricultural operating lending is primarily in its primary market area. The national unemployment rate and the national real GDP are key economic forecasts used in estimating expected credit losses for the commercial operating segment. The national real GDP is a key economic forecast used in estimating expected credit losses for the agricultural operating segment.

Consumer and other loans utilize credit reports to supplement the underwriting process. The underwriting standards include a determination of the applicant’s payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan. To monitor and manage loan risk, policies and procedures are developed and modified, as needed by management. This activity, coupled with smaller loan amounts that are spread across many individual borrowers, minimizes risk. Additionally, market conditions are reviewed by management on a regular basis. The Iowa real GDP and Iowa retail trade earnings are key economic forecasts used in estimating expected credit losses for this segment.

The Company reviews and validates the credit risk program on a periodic basis. Results of these reviews are presented to management and the audit committee. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.

Summary changes in the allowance for credit losses for the years ended December 31, 2023 and 2022 are as follows (in thousands):

	2023			2022

Balance, beginning	$	15,697		$	16,621
Impact of adopting ASC 326		518			-
Credit loss expense (benefit) ¹		774			(874	)
Recoveries of loans charged-off		32			42
Loans charged-off		(245	)		(92	)
Balance, ending	$	16,776		$	15,697

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 $15 thousand related to off-balance sheet credit exposures.

Activity in the allowance for credit losses, on a disaggregated basis, for the years ended December 31, 2023 and 2022 is as follows (in thousands):

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, beginning	$	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)		73			58		73			(24	)		11			381			161			41			774
Recoveries of loans charged-off		-			5		-			5			-			9			5			8			32
Loans charged-off		-			-		-			-			-			(37	)		(203	)		(5	)		(245	)
Balance, ending	$	408		$	3,333	$	2,542		$	5,236		$	1,238		$	1,955		$	1,607		$	457		$	16,776

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, beginning	$	675	$	2,752		$	2,501		$	5,905		$	1,584	$	1,170		$	1,836		$	198		$	16,621
Provision (credit) for loan losses		55		291			(8	)		(1,166	)		41		20			(124	)		17			(874	)
Recoveries of loans charged-off		-		8			-			3			-		4			-			27			42
Loans charged-off		-		(23	)		-			-			-		(41	)		(7	)		(21	)		(92	)
Balance, ending	$	730	$	3,028		$	2,493		$	4,742		$	1,625	$	1,153		$	1,705		$	221		$	15,697

The following table shows the balance in the allowance for credit losses and loans receivable as of December 31, 2022, disaggregated on the basis of measurement methodology (in thousands).

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
Ending ACL balance: Individually evaluated for credit losses	$	-	$	10	$	-	$	-	$	-	$	-	$	68	$	17	$	95
Ending ACL balance: Collectively evaluated for credit losses		730		3,018		2,493		4,742		1,625		1,153		1,637		204		15,602
Ending ACL balance	$	730	$	3,028	$	2,493	$	4,742	$	1,625	$	1,153	$	1,705	$	221	$	15,697

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

Ending loans receiveable balance: Individually evaluated for credit losses	$	-	$	805	$	-	$	12,853	$	165	$	200	$	342	$	21	$	14,386
Ending loans receivable balance: Collectively evaluated for credit losses		51,253		284,302		185,784		340,432		159,283		77,065		113,013		16,190		1,227,322

Ending loans receivable balance	$	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
December 31, 2023	Real Estate		Equipment		Other		Total		ACL Allocation

Real estate - construction	$	66	$	-	$	-	$	66	$	-
Real estate - 1 to 4 family residential		678		-		-		678		10
Real estate - multi-family		2,034		-		-		2,034		-
Real estate - commercial		8,993		-		-		8,993		-
Real estate - agricultural		449		-		-		449		-
Commercial		118		-		101		219		96
Agricultural		239		669		402		1,310		-
Consumer and other		-		-		-		-		-

	$	12,577	$	669	$	503	$	13,749	$	106

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 “Pass” 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 December 31, 2023 (in thousands):

December 31, 2023	Amortized Cost Basis of Term Loans by Year of Origination
	2023		2022		2021		2020		2019		Prior		Revolving		Total
Real estate - construction
Pass	$	45,404	$	14,501	$	746	$	11	$	-	$	325	$	1,917	$	62,904
Watch		80		-		-		-		-		-		-		80
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Substandard-Impaired		-		66		-		-		-		-		-		66
Total	$	45,484	$	14,567	$	746	$	11	$	-	$	325	$	1,917	$	63,050

Current-period gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Real estate - 1-4 family residential
Pass	$	55,051	$	66,190	$	59,250	$	47,865	$	8,607	$	17,154	$	18,649	$	272,766
Watch		1,608		298		10,483		1,226		-		358		27		14,000
Special Mention		-		-		-		-		-		-		-		-
Substandard		448		18		1,350		47		33		64		-		1,960
Substandard-Impaired		115		-		140		-		199		144		80		678
Total	$	57,222	$	66,506	$	71,223	$	49,138	$	8,839	$	17,720	$	18,756	$	289,404

Current-period gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Real estate - multi-family
Pass	$	18,436	$	51,928	$	47,161	$	40,201	$	13,542	$	694	$	5,020	$	176,982
Watch		4,603		1,427		8,192		-		-		-		-		14,222
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		2,298		-		-		-		2,298
Substandard-Impaired		983		-		-		-		1,051		-		-		2,034
Total	$	24,022	$	53,355	$	55,353	$	42,499	$	14,593	$	694	$	5,020	$	195,536

Current-period gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Real estate - commercial
Pass	$	35,133	$	81,342	$	51,598	$	66,467	$	20,006	$	13,122	$	2,929	$	270,597
Watch		8,379		13,580		14,669		14,607		78		583		2,988		54,884
Special Mention		-		2,531		11,853		3,006		1,043		-		-		18,433
Substandard		897		-		4,822		551		-		106		-		6,376
Substandard-Impaired		8,517		-		99		-		360		-		-		8,976
Total	$	52,926	$	97,453	$	83,041	$	84,631	$	21,487	$	13,811	$	5,917	$	359,266

Current-period gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Real estate - agricultural
Pass	$	22,469	$	30,738	$	32,893	$	27,733	$	6,039	$	22,850	$	2,073	$	144,795
Watch		4,163		379		2,263		1,760		333		3,601		-		12,499
Special Mention		-		-		-		-		-		-		-		-
Substandard		2,302		1,439		114		-		-		214		-		4,069
Substandard-Impaired		-		-		154		-		-		-		-		154
Total	$	28,934	$	32,556	$	35,424	$	29,493	$	6,372	$	26,665	$	2,073	$	161,517

Current-period gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

December 31, 2023	Amortized Cost Basis of Term Loans by Year of Origination
	2023		2022		2021		2020		2019		Prior		Revolving		Total
Commercial
Pass	$	23,904	$	12,645	$	10,378	$	2,087	$	2,434	$	1,578	$	29,752	$	82,778
Watch		860		295		119		423		93		137		1,996		3,923
Special Mention		-		-		-		-		-		-		-		-
Substandard		600		256		-		421		-		-		1,484		2,761
Substandard-Impaired		94		-		5		96		-		72		-		267
Total	$	25,458	$	13,196	$	10,502	$	3,027	$	2,527	$	1,787	$	33,232	$	89,729

Current-period gross writeoffs	$	-	$	-	$	-	$	33	$	-	$	4	$	-	$	37

Agricultural
Pass	$	14,614	$	8,395	$	5,459	$	2,858	$	400	$	608	$	77,448	$	109,782
Watch		1,107		340		288		18		18		194		5,419		7,384
Special Mention		-		-		-		-		-		-		-		-
Substandard		866		14		25		58		-		-		-		963
Substandard-Impaired		95		140		383		-		-		-		389		1,007
Total	$	16,682	$	8,889	$	6,155	$	2,934	$	418	$	802	$	83,256	$	119,136

Current-period gross writeoffs	$	39	$	74	$	90	$	-	$	-	$	-	$	-	$	203

Consumer and other
Pass	$	6,801	$	3,719	$	2,701	$	2,071	$	352	$	731	$	15	$	16,390
Watch		127		-		-		-		-		-		-		127
Special Mention		-		-		-		-		-		-		-		-
Substandard		10		-		-		-		-		-		-		10
Substandard-Impaired		-		-		-		13		-		-		-		13
Total	$	6,938	$	3,719	$	2,701	$	2,084	$	352	$	731	$	15	$	16,540

Current-period gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	5	$	-	$	5

Total loans
Pass	$	221,812	$	269,458	$	210,186	$	189,293	$	51,380	$	57,062	$	137,803	$	1,136,994
Watch		20,927		16,319		36,014		18,034		522		4,873		10,430		107,119
Special Mention		-		2,531		11,853		3,006		1,043		-		-		18,433
Substandard		5,123		1,727		6,311		3,375		33		384		1,484		18,437
Substandard-Impaired		9,804		206		781		109		1,610		216		469		13,195
Total	$	257,666	$	290,241	$	265,145	$	213,817	$	54,588	$	62,535	$	150,186	$	1,294,178

Current-period gross writeoffs	$	39	$	74	$	90	$	33	$	-	$	9	$	-	$	245

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

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

Total	$	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):

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

Performing	$	284,302	$	16,190	$	300,492
Non-performing		805		21		826

Total	$	285,107	$	16,211	$	301,318

As of December 31, 2022, consumer and 1-4 family loans are considered non-performing when the loan is greater than 90 days past due or it is determined that the borrower is unable to make contractual principal and interest payments.

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 credit losses 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 credit losses.

The following is a Pre-ASC 326 (CECL) adoption recap of impaired loans, on a disaggregated basis, as of December 31, 2022 and the average recorded investment and interest income recognized on these loans for the year ended December 31, 2022 (in thousands):

2022:			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized

With no specific reserve recorded:
Real estate - construction	$	-	$	-	$	-	$	-	$	-
Real estate - 1 to 4 family residential		687		721		-		715		70
Real estate - multi-family		-		-		-		-		-
Real estate - commercial		12,853		13,578		-		3,391		-
Real estate - agricultural		165		194		-		319		14
Commercial		200		249		-		227		6
Agricultural		78		88		-		147		-
Consumer and other		4		7		-		5		1
Total loans with no specific reserve:		13,987		14,837		-		4,804		91

With an allowance recorded:
Real estate - construction		-		-		-		-		-
Real estate - 1 to 4 family residential		118		123		10		188		1
Real estate - multi-family		-		-		-		-		-
Real estate - commercial		-		-		-		7,667		-
Real estate - agricultural		-		-		-		-		-
Commercial		-		-		-		35		1
Agricultural		264		294		68		292		-
Consumer and other		17		19		17		19		-
Total loans with specific reserve:		399		436		95		8,201		2

Total
Real estate - construction		-		-		-		-		-
Real estate - 1 to 4 family residential		805		844		10		903		71
Real estate - multi-family		-		-		-		-		-
Real estate - commercial		12,853		13,578		-		11,058		-
Real estate - agricultural		165		194		-		319		14
Commercial		200		249		-		262		7
Agricultural		342		382		68		439		-
Consumer and other		21		26		17		24		1

Total	$	14,386	$	15,273	$	95	$	13,005	$	93

The following table presents the amortized cost basis of loans on nonaccrual status and loans on nonaccrual status with no allowance for credit losses recorded by loan category (in thousands).

	Total Nonaccrual				Nonaccrual with no ACL
	December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022

Real estate - construction	$	66	$	-	$	66	$	-
Real estate - 1 to 4 family residential		678		805		563		687
Real estate - multi-family		2,034		-		2,034		-
Real estate - commercial		8,976		12,853		8,976		12,853
Real estate - agricultural		449		500		449		500
Commercial		268		200		172		200
Agricultural		1,310		342		1,310		78
Consumer and other		13		21		-		4

	$	13,794	$	14,721	$	13,570	$	14,322

The interest foregone on nonaccrual loans for the years ended December 31, 2023 and 2022 was approximately $768 thousand and $733 thousand, respectively.

Loan Modifications to Borrowers Experiencing Financial Difficulty. Loan modifications may include interest rate reductions or below market interest rates, extension of payments terms beyond the original maturity date, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a loss rate model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, a change to the allowance for credit losses is generally not recorded upon modification.

The Company made three loan modifications to borrowers experiencing financial difficulty for the year ended December 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
	December 31, 2023		Financing Receivable
Loan Type
Agricultural	$	336		0.3	%

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty:

Term Extension
Loan Type		Financial Effect

Agricultural		8

Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged-off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. The Company had $34 thousand of net charge-offs for the year ended December 31, 2023.

There were two loan modifications with an amortized cost basis of $42 thousand that had a payment default and were modified in the twelve months before default as of December 31, 2023. A loan is considered to be in payment default once it is 60 days contractually past due under the modified terms.

Troubled Debt Restructurings. The restructuring of a loan is considered a TDR if both the borrower is experiencing financial difficulties and the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, extension of payments terms beyond the original maturity date, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.

Certain troubled debt restructurings are on nonaccrual status at the time of restructuring. These borrowings are typically returned to accrual status after sustained repayment performance in accordance with the restructuring agreement for a reasonable period of at least six months and management is reasonably assured of future performance. If the TDR meets these performance criteria and the interest rate granted at the modification is equal to or greater than the rate that the Company was willing to accept at the time of the restructuring for a new loan with comparable risk, then the loan will return to performing status. If the TDR loan has a below market interest rate at the time of restructuring, it will be considered impaired until fully collected.

For TDR loans that were on nonaccrual status before the modification, a specific reserve may already be recorded. In periods subsequent to modification, the Company will continue to evaluate all troubled debt restructurings for possible credit losses and, as necessary, recognizes credit losses through the allowance. The Company had no net charge-offs for the year ended December 31, 2022.

The Company had loans meeting the definition of TDR of $10.7 million as of December 31, 2022, all of which were included as impaired and nonaccrual loans.

The Company’s TDRs, on a disaggregated basis, occurring in the year ended December 31, 2022 is as follows (dollars in thousands):

	2022
			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment

Real estate - construction		-	$	-	$	-
Real estate - 1 to 4 family residential		1		118		118
Real estate - commercial		-		-		-
Real estate - agricultural		-		-		-
Commercial		-		-		-
Agricultural		-		-		-
Consumer and other		-		-		-

Total		1	$	118	$	118

During the year ended December 31, 2022, the Company granted a concession to one borrower, with one contract, experiencing financial difficulties. The loan was restructured for an extended maturity and accrued interest was capitalized.

There were no TDR loans that were modified during the year ended December 31, 2022 with a payment default. A TDR loan is considered to have payment default when it is past due 60 days or more.

There was no significant financial impact from specific reserves for the TDR loans.

An aging analysis of the recorded investment in loans, on a disaggregated basis, as of December 31, 2023 and 2022, are as follows (in thousands):

2023:	30-89		90 Days								90 Days
	Days		or Greater		Total						or Greater
	Past Due		Past Due		Past Due		Current		Total		Accruing

Real estate - construction	$	359	$	66	$	425	$	62,625	$	63,050	$	-
Real estate - 1 to 4 family residential		1,020		302		1,322		288,082		289,404		3
Real estate - multi-family		-		983		983		194,553		195,536		-
Real estate - commercial		119		106		225		359,041		359,266		106
Real estate - agricultural		-		-		-		161,517		161,517		-
Commercial		559		98		657		89,072		89,729		-
Agricultural		169		529		698		118,438		119,136		-
Consumer and other		16		-		16		16,524		16,540		-

Total	$	2,242	$	2,084	$	4,326	$	1,289,852	$	1,294,178	$	109

2022:	30-89		90 Days								90 Days
	Days		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		-

Total	$	4,404	$	1,451	$	5,855	$	1,235,853	$	1,241,708	$	-

There are no other known problem loans that cause management to have serious doubts as to the ability of such borrowers to comply with the present loan repayment terms.

As of December 31, 2023, there were no material commitments to lend additional funds to customers whose loans were classified as substandard-impaired.

Loans are made in the normal course of business to certain directors and executive officers of the Company and to their affiliates. The terms of these loans, including interest rates and collateral, are similar to those prevailing for comparable transactions with others and do not involve more than a normal risk of collectability. Loan transactions with related parties as of December 31, 2023 and 2022 were as follows (in thousands):

	2023			2022

Balance, beginning of year	$	16,680		$	17,269
New loans		9,480			13,067
Repayments		(10,269	)		(13,633	)
Change in status		69			(23	)
Balance, end of year	$	15,960		$	16,680