XML 23 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
Loans and Allowance for Loan Losses
 6 Months Ended
Jun. 30, 2018
Receivables [Abstract]  
Loans and Allowance for Loan Losses

3. Loans and Allowance for Loan Losses

 

Loans consisted of the following as of the dates indicated below:

 

    June 30,     December 31,  
(Dollars in thousands)   2018     2017  
             
One-to-four family residential real estate   $ 138,267     $ 136,215  
Construction and land     26,453       19,356  
Commercial real estate     121,946       120,624  
Commercial     66,531       54,591  
Agriculture     87,901       83,008  
Municipal     3,172       3,396  
Consumer     22,867       22,046  
Total gross loans     467,137       439,236  
Net deferred loan costs and loans in process     94       (34 )
Allowance for loan losses     (5,835 )     (5,459 )
Loans, net   $ 461,396     $ 433,743  

 

The following tables provide information on the Company’s activity in the allowance for loan losses by loan class:

 

(Dollars in thousands)   Three and six months ended June 30, 2018  
    One-to-four family residential real estate     Construction and land     Commercial real estate     Commercial     Agriculture     Municipal     Consumer     Total  
                                                 
Allowance for loan losses:                                                                
Balance at April 1, 2018   $ 477     $ 121     $ 1,562     $ 1,484     $ 1,867     $ 7     $ 126     $ 5,644  
Charge-offs     -       -       -       (29 )     -       -       (44 )     (73 )
Recoveries     1       -       -       1       -       -       12       14  
Provision for loan losses     (39 )     (12 )     (96 )     237       138       -       22       250  
Balance at June 30, 2018     439       109       1,466       1,693       2,005       7       116       5,835  
                                                                 
Balance at January 1, 2018   $ 542     $ 181     $ 1,540     $ 1,226     $ 1,812     $ 8     $ 150     $ 5,459  
Charge-offs     -       -       -       (29 )     -       -       (77 )     (106 )
Recoveries     2       -       1       2       -       2       25       32  
Provision for loan losses     (105 )     (72 )     (75 )     494       193       (3 )     18       450  
Balance at June 30, 2018     439       109       1,466       1,693       2,005       7       116       5,835  

 

(Dollars in thousands)   Three and six months ended June 30, 2017  
    One-to-four family residential real estate     Construction and land     Commercial real estate     Commercial     Agriculture     Municipal     Consumer     Total  
                                                 
Allowance for loan losses:                                                                
Balance at April 1, 2017   $ 493     $ 71     $ 1,740     $ 1,101     $ 1,731     $ 11     $ 180     $ 5,327  
Charge-offs     -       -       (61 )     -       -       -       (58 )     (119 )
Recoveries     7       -       -       1       -       -       10       18  
Provision for loan losses     (1 )     (1 )     30       (21 )     41       (1 )     53       100  
Balance at June 30, 2017     499       70       1,709       1,081       1,772       10       185       5,326  
                                                                 
Balance at January 1, 2017   $ 504     $ 53     $ 1,777     $ 1,119     $ 1,684     $ 12     $ 195     $ 5,344  
Charge-offs     (19 )     -       (61 )     -       -       -       (165 )     (245 )
Recoveries     8       -       -       9       1       -       59       77  
Provision for loan losses     6       17       (7 )     (47 )     87       (2 )     96       150  
Balance at June 30, 2017     499       70       1,709       1,081       1,772       10       185       5,326  

 

The following tables provide information on the Company’s activity in the allowance for loan losses by loan class and allowance methodology:

 

(Dollars in thousands)   As of June 30, 2018  
    One-to-four family residential real estate     Construction and land     Commercial real estate     Commercial     Agriculture     Municipal     Consumer     Total  
                                                 
Allowance for loan losses:                                                                
Individually evaluated for loss     85       -       14       728       25       -       1       853  
Collectively evaluated for loss     354       109       1,452       965       1,980       7       115       4,982  
Total     439       109       1,466       1,693       2,005       7       116       5,835  
                                                                 
Loan balances:                                                                
Individually evaluated for loss     651       1,641       3,920       2,032       602       126       46       9,018  
Collectively evaluated for loss     137,616       24,812       118,026       64,499       87,299       3,046       22,821       458,119  
Total   $ 138,267     $ 26,453     $ 121,946     $ 66,531     $ 87,901     $ 3,172     $ 22,867     $ 467,137  

 

(Dollars in thousands)   As of December 31, 2017  
    One-to-four family residential real estate     Construction and land     Commercial real estate     Commercial     Agriculture     Municipal     Consumer     Total  
                                                 
Allowance for loan losses:                                                                
Individually evaluated for loss     73       102       52       391       24       -       -       642  
Collectively evaluated for loss     469       79       1,488       835       1,788       8       150       4,817  
Total     542       181       1,540       1,226       1,812       8       150       5,459  
                                                                 
Loan balances:                                                                
Individually evaluated for loss     747       2,031       3,973       2,002       833       140       34       9,760  
Collectively evaluated for loss     135,468       17,325       116,651       52,589       82,175       3,256       22,012       429,476  
Total   $ 136,215     $ 19,356     $ 120,624     $ 54,591     $ 83,008     $ 3,396     $ 22,046     $ 439,236  

 

The Company’s impaired loans decreased from $9.8 million at December 31, 2017 to $9.0 million at June 30, 2018. The difference between the unpaid contractual principal and the impaired loan balance is a result of charge-offs recorded against impaired loans. The difference in the Company’s non-accrual loan balances and impaired loan balances at June 30, 2018 and December 31, 2017, was related to troubled debt restructurings (“TDR”) that are current and accruing interest, but still classified as impaired. Interest income recognized on a cash basis on impaired loans was immaterial during the three and six month periods ended June 30, 2018 and 2017.

 

The following tables present information on impaired loans:

 

(Dollars in thousands)   As of June 30, 2018  
    Unpaid contractual principal     Impaired loan balance     Impaired loans without an allowance     Impaired loans with an allowance     Related allowance recorded     Year-to-date average loan balance     Year-to-date interest income recognized  
                                           
One-to-four family residential real estate   $ 651     $ 651     $ 395     $ 256     $ 85     $ 661     $ 5  
Construction and land     3,376       1,641       1,641       -       -       1,736       29  
Commercial real estate     3,920       3,920       2,127       1,793       14       3,926       243  
Commercial     2,032       2,032       3       2,029       728       2,055       8  
Agriculture     817       602       344       258       25       652       27  
Municipal     126       126       126       -       -       132       1  
Consumer     46       46       40       6       1       46       -  
Total impaired loans   $ 10,968     $ 9,018     $ 4,676     $ 4,342     $ 853     $ 9,208     $ 313  

 

(Dollars in thousands)   As of December 31, 2017  
    Unpaid contractual principal     Impaired loan balance     Impaired loans without an allowance     Impaired loans with an allowance     Related allowance recorded     Year-to-date average loan balance     Year-to-date interest income recognized  
                                           
One-to-four family residential real estate   $ 747     $ 747     $ 503     $ 244     $ 73     $ 774     $ 8  
Construction and land     3,766       2,031       430       1,601       102       2,033       65  
Commercial real estate     3,973       3,973       3,888       85       52       3,989       490  
Commercial     2,002       2,002       11       1,991       391       2,082       -  
Agriculture     1,048       833       545       288       24       912       1  
Municipal     140       140       140       -       -       192       5  
Consumer     34       34       34       -       -       35       -  
Total impaired loans   $ 11,710     $ 9,760     $ 5,551     $ 4,209     $ 642     $ 10,017     $ 569  

 

The Company’s key credit quality indicator is a loan’s performance status, defined as accruing or non-accruing. Performing loans are considered to have a lower risk of loss. Non-accrual loans are those which the Company believes have a higher risk of loss. The accrual of interest on non-performing loans is discontinued at the time the loan is ninety days delinquent, unless the credit is well secured and in process of collection. Loans are placed on non-accrual or are charged off at an earlier date if collection of principal or interest is considered doubtful. There were no loans ninety days or more delinquent and accruing interest at June 30, 2018 or December 31, 2017.

 

The following tables present information on the Company’s past due and non-accrual loans by loan class:

 

(Dollars in thousands)   As of June 30, 2018  
    30-59 days delinquent and accruing     60-89 days delinquent and accruing     90 days or more delinquent and accruing     Total past due loans accruing     Non-accrual loans     Total past due and non-accrual loans     Total loans not past due  
                                           
One-to-four family residential real estate   $ 100     $ 289     $ -     $ 389     $ 463     $ 852     $ 137,415  
Construction and land     -       -       -       -       567       567       25,886  
Commercial real estate     -       -       -       -       1,793       1,793       120,153  
Commercial     48       711       -       759       2,032       2,791       63,740  
Agriculture     127       176       -       303       384       687       87,214  
Municipal     -       -       -       -       -       -       3,172  
Consumer     36       43       -       79       46       125       22,742  
Total   $ 311     $ 1,219     $ -     $ 1,530     $ 5,285     $ 6,815     $ 460,322  
                                                         
Percent of gross loans     0.07 %     0.26 %     0.00 %     0.33 %     1.13 %     1.46 %     98.54 %

 

(Dollars in thousands)   As of December 31, 2017  
    30-59 days delinquent and accruing     60-89 days delinquent and accruing     90 days or more delinquent and accruing     Total past due loans accruing     Non-accrual loans     Total past due and non-accrual loans     Total loans not past due  
                                           
One-to-four family residential real estate   $ 101     $ 313     $ -     $ 414     $ 552     $ 966     $ 135,249  
Construction and land     -       4       -       4       779       783       18,573  
Commercial real estate     22       209       -       231       1,841       2,072       118,552  
Commercial     -       397       -       397       2,002       2,399       52,192  
Agriculture     -       -       -       -       833       833       82,175  
Municipal     -       -       -       -       -       -       3,396  
Consumer     105       204       -       309       34       343       21,703  
Total   $ 228     $ 1,127     $ -     $ 1,355     $ 6,041     $ 7,396     $ 431,840  
                                                         
Percent of gross loans     0.05 %     0.26 %     0.00 %     0.31 %     1.37 %     1.68 %     98.32 %

 

Under the original terms of the Company’s non-accrual loans, interest earned on such loans for the six months ended June 30, 2018 and 2017 would have increased interest income by $132,000 and $63,000, respectively. No interest income related to non-accrual loans was included in interest income for the six months ended June 30, 2018 and 2017.

 

The Company also categorizes loans into risk categories based on relevant information about the ability of the borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis. Non-classified loans generally include those loans that are expected to be repaid in accordance with contractual loan terms. Classified loans are those that are assigned a special mention, substandard or doubtful risk rating using the following definitions:

 

Special Mention: Loans are currently protected by the current net worth and paying capacity of the obligor or of the collateral pledged but such protection is potentially weak. These loans constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of substandard. The credit risk may be relatively minor, yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset.

 

Substandard: Loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged. Loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

 

Doubtful: Loans classified doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

 

The following table provides information on the Company’s risk categories by loan class:

 

(Dollars in thousands)   As of June 30, 2018     As of December 31, 2017  
    Non-classified     Classified     Non-classified     Classified  
                         
One-to-four family residential real estate   $ 137,325     $ 942     $ 135,475     $ 740  
Construction and land     25,886       567       18,577       779  
Commercial real estate     111,697       10,249       114,736       5,888  
Commercial     58,424       8,107       52,313       2,278  
Agriculture     83,390       4,511       76,455       6,553  
Municipal     3,172       -       3,396       -  
Consumer     22,821       46       22,006       40  
Total   $ 442,715     $ 24,422     $ 422,958     $ 16,278  

 

At June 30, 2018, the Company had 12 loan relationships consisting of 17 outstanding loans that were classified as TDRs. During the second quarter of 2018, the Company classified an agriculture loan totaling $64,000 as a TDR after originating a loan to an existing loan relationship that was classified as a TDR in 2016. As part of the restructuring the borrower paid off three loans previously classified as TDRs. The Company also classified a $41,000 commercial loan as a TDR after extending the maturity of the loan during the second quarter of 2018. There were no loans classified as TDRs during the first three months of 2018. Since the agriculture loan relationship was adequately secured, no impairments were recorded against the principal as of June 30, 2018. The commercial loan had a $11,000 impairment recorded against the principal balance as of June 30, 2018.

 

During the second quarter of 2017, the Company classified two agriculture loans totaling $87,000 as TDRs after renewing loans to an existing loan relationship that was classified as a TDR in 2016. These two loans were paid off in the second quarter of 2018. During the first quarter of 2017, the Company classified an $11,000 commercial real estate loan as a TDR after extending the maturity of the loan and classified as a TDR a $15,000 agriculture loan extended to an existing loan relationship that was classified as a TDR in 2016. Since the commercial real estate loan was adequately secured, no charge-offs or impairments were recorded against the principal as of June 30, 2017. The agriculture loan relationship had a $49,000 impairment recorded against the principal balance as of June 30, 2017 and a charge-off of $215,000 was recorded in the third quarter of 2016.

 

The Company evaluates each TDR individually and returns the loan to accrual status when a payment history is established after the restructuring and future payments are reasonably assured. There were no loans that were classified as TDRs that defaulted within 12 months of modification during the first six months of 2018. There was one commercial real estate loan totaling $11,000 that was classified as a TDR during the second quarter of 2017 which defaulted within 12 months of modification. The loan was charged off in the fourth quarter of 2017. The Company did not record any charge-offs against loans classified as TDRs in the first six months of either 2018 or 2017. A credit provision for loan losses of $58,000 related to TDRs was recorded in the three months ended June 30, 2018. No provision for loan losses was recorded against TDRs during the three months ended June 30, 2017. A credit provision for loan losses of $91,000 and $13,000 related to TDRs was recorded in the six months ended June 30, 2018 and 2017, respectively. The Company allocated $36,000 and $127,000 of the allowance for loan losses against loans classified as TDRs at June 30, 2018 and December 31, 2017, respectively.

 

The following table presents information on loans that are classified as TDRs:

 

(Dollars in thousands)   As of June 30, 2018     As of December 31, 2017  
    Number of loans     Non-accrual balance     Accruing balance     Number of loans     Non-accrual balance     Accruing balance  
                                     
One-to-four family residential real estate     2     $ -     $ 188       2     $ -     $ 194  
Construction and land     4       567       1,074       4       575       1,252  
Commercial real estate     2       -       2,127       3       45       2,133  
Commercial     1       41       -       -       -       -  
Agriculture     6       136       218       9       471       -  
Municipal     2       -       126       2       -       140  
Total troubled debt restructurings     17     $ 744     $ 3,733       20     $ 1,091     $ 3,719