XML 23 R12.htm IDEA: XBRL DOCUMENT

Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2019

3.	Loans and Allowance for Loan Losses

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

(Dollars in thousands)	June 30, 2019			December 31, 2018

One-to-four family residential real estate	$	135,705		$	136,895
Construction and land		20,050			20,083
Commercial real estate		139,907			138,967
Commercial		94,379			74,289
Agriculture		99,393			96,632
Municipal		2,787			2,953
Consumer		24,141			25,428
Total gross loans		516,362			495,247
Net deferred loan costs and loans in process		109			(109	)
Allowance for loan losses		(6,266	)		(5,765	)
Loans, net	$	510,205		$	489,373

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, 2019
	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, 2019	$	474		$	156	$	1,871		$	1,165		$	2,128	$	7		$	137		$	5,938
Charge-offs		(41	)		-		-			(40	)		-		-			(53	)		(134	)
Recoveries		-			-		-			50			-		-			12			62
Provision for loan losses		8			99		(113	)		229			132		-			45			400
Balance at June 30, 2019		441			255		1,758			1,404			2,260		7			141			6,266

Balance at January 1, 2019	$	449		$	168	$	1,686		$	1,051		$	2,238	$	7		$	166		$	5,765
Charge-offs		(41	)		-		-			(40	)		-		-			(102	)		(183	)
Recoveries		1			-		-			51			-		6			26			84
Provision for loan losses		32			87		72			342			22		(6	)		51			600
Balance at June 30, 2019		441			255		1,758			1,404			2,260		7			141			6,266

(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

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, 2019
	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		72		191		274		114		-		-		-		651
Collectively evaluated for loss		369		64		1,484		1,290		2,260		7		141		5,615
Total		441		255		1,758		1,404		2,260		7		141		6,266

Loan balances:
Individually evaluated for loss		1,372		2,049		5,248		1,700		560		58		38		11,025
Collectively evaluated for loss		134,333		18,001		134,659		92,679		98,833		2,729		24,103		505,337
Total	$	135,705	$	20,050	$	139,907	$	94,379	$	99,393	$	2,787	$	24,141	$	516,362

(Dollars in thousands)	As of December 31, 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		100		103		67		27		13		-		-		310
Collectively evaluated for loss		349		65		1,619		1,024		2,225		7		166		5,455
Total		449		168		1,686		1,051		2,238		7		166		5,765

Loan balances:
Individually evaluated for loss		623		1,808		3,912		1,528		717		58		45		8,691
Collectively evaluated for loss		136,272		18,275		135,055		72,761		95,915		2,895		25,383		486,556
Total	$	136,895	$	20,083	$	138,967	$	74,289	$	96,632	$	2,953	$	25,428	$	495,247

The Company’s impaired loans increased from $8.7 million at December 31, 2018 to $11.0 million at June 30, 2019. 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, 2019 and December 31, 2018, 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, 2019 and 2018.

The following tables present information on impaired loans:

(Dollars in thousands)	As of June 30, 2019
	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	$	1,413	$	1,372	$	1,172	$	200	$	72	$	1,430	$	5
Construction and land		3,784		2,049		1,429		620		191		2,137		20
Commercial real estate		5,248		5,248		3,289		1,959		274		5,264		237
Commercial		1,700		1,700		1,410		290		114		1,711		10
Agriculture		775		560		560		-		-		572		23
Municipal		58		58		58		-		-		58		1
Consumer		38		38		38		-		-		41		-
Total impaired loans	$	13,016	$	11,025	$	7,956	$	3,069	$	651	$	11,213	$	296

(Dollars in thousands)	As of December 31, 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	$	623	$	623	$	413	$	210	$	100	$	640	$	10
Construction and land		3,543		1,808		1,383		425		103		2,689		53
Commercial real estate		3,912		3,912		2,120		1,792		67		3,928		487
Commercial		1,528		1,528		1,446		82		27		1,537		-
Agriculture		932		717		529		188		13		844		52
Municipal		58		58		58		-		-		58		1
Consumer		45		45		45		-		-		49		-
Total impaired loans	$	10,641	$	8,691	$	5,994	$	2,697	$	310	$	9,745	$	603

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. One loan was ninety days or more delinquent and accruing interest at June 30, 2019 compared to no loans ninety days or more delinquent and accruing interest at December 31, 2018.

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, 2019
	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	$	86		$	462		$	-		$	548		$	1,197		$	1,745		$	133,960
Construction and land		-			126			-			126			1,338			1,464			18,586
Commercial real estate		686			-			-			686			3,225			3,911			135,996
Commercial		436			42			-			478			1,672			2,150			92,229
Agriculture		438			941			209			1,588			336			1,924			97,469
Municipal		-			-			-			-			-			-			2,787
Consumer		85			3			-			88			38			126			24,015
Total	$	1,731		$	1,574		$	209		$	3,514		$	7,806		$	11,320		$	505,042

Percent of gross loans		0.34	%		0.30	%		0.04	%		0.68	%		1.51	%		2.19	%		97.81	%

(Dollars in thousands)	As of December 31, 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	$	131		$	206		$	-		$	337		$	442		$	779		$	136,116
Construction and land		-			134			-			134			948			1,082			19,001
Commercial real estate		465			-			-			465			1,791			2,256			136,711
Commercial		398			20			-			418			1,528			1,946			72,343
Agriculture		100			88			-			188			482			670			95,962
Municipal		-			-			-			-			-			-			2,953
Consumer		106			23			-			129			45			174			25,254
Total	$	1,200		$	471		$	-		$	1,671		$	5,236		$	6,907		$	488,340

Percent of gross loans		0.24	%		0.10	%		0.00	%		0.34	%		1.06	%		1.40	%		98.60	%

Under the original terms of the Company’s non-accrual loans, interest earned on such loans for the six months ended June 30, 2019 and 2018 would have increased interest income by $168,000 and $132,000, respectively. No interest income related to non-accrual loans was included in interest income for the six months ended June 30, 2019 and 2018.

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, 2019				As of December 31, 2018
	Non-classified		Classified		Non-classified		Classified

One-to-four family residential real estate	$	133,918	$	1,787	$	135,947	$	948
Construction and land		18,712		1,338		19,135		948
Commercial real estate		130,157		9,750		126,619		12,348
Commercial		86,612		7,767		66,490		7,799
Agriculture		92,606		6,787		86,917		9,715
Municipal		2,787		-		2,953		-
Consumer		24,103		38		25,383		45
Total	$	488,895	$	27,467	$	463,444	$	31,803

At June 30, 2019, the Company had nine loan relationships consisting of 13 outstanding loans that were classified as TDRs. There were no loans classified as TDRs during the first six months of 2019.

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 $9,000 impairment recorded against the principal balance as of June 30, 2018.

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 modified as TDRs for which there was a payment default within 12 months of modification as of June 30, 2019 and 2018. The Company did not record any charge-offs against loans classified as TDRs in the first six months of 2019 or 2018. A credit provision for loan losses of $1,000 and $58,000 related to TDRs was recorded in the three months ended June 30, 2019 and 2018, respectively. A credit provision for loan losses of $1,000 and $91,000 related to TDRs was recorded in the six months ended June 30, 2019 and 2018, respectively. The Company allocated $9,000 and $10,000 of the allowance for loan losses against loans classified as TDRs at June 30, 2019 and December 31, 2018, respectively.

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

(Dollars in thousands)	As of June 30, 2019						As of December 31, 2018
	Number of loans		Non-accrual balance		Accruing balance		Number of loans		Non-accrual balance		Accruing balance

One-to-four family residential real estate		2	$	-	$	175		2	$	-	$	181
Construction and land		4		518		711		4		523		860
Commercial real estate		1		-		2,023		2		-		2,121
Commercial		1		-		28		1		36		-
Agriculture		4		6		224		4		23		235
Municipal		1		-		58		1		-		58
Total troubled debt restructurings		13	$	524	$	3,219		14	$	582	$	3,455