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Loans and Allowance for Loan Losses | 3 Months Ended
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Mar. 31, 2020
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:
|  | March 31, |  |  | December 31, |
(Dollars in thousands) |  | 2020 |  |  | 2019 |
One-to-four family residential real estate |  | $ | 148,994 |  |  | $ | 146,505 |
Construction and land |  |  | 24,657 |  |  |  | 22,459 |
Commercial real estate |  |  | 141,712 |  |  |  | 133,501 |
Commercial |  |  | 121,271 |  |  |  | 109,612 |
Agriculture |  |  | 96,120 |  |  |  | 98,558 |
Municipal |  |  | 2,628 |  |  |  | 2,656 |
Consumer |  |  | 25,662 |  |  |  | 25,101 |
Total gross loans |  |  | 561,044 |  |  |  | 538,392 |
Net deferred loan costs and loans in process |  |  | 171 |  |  |  | 255 |
Allowance for loan losses |  |  | (7,479 | ) |  |  | (6,467 | )
Loans, net |  | $ | 553,736 |  |  | $ | 532,180 |
The following tables provide information on the Company’s allowance for loan losses by loan class and allowance methodology:
|  | Three months ended March 31, 2020 |
(Dollars in thousands) |  | One-to-four family residential real estate |  |  | Construction and land |  |  | Commercial real estate |  |  | Commercial |  |  | Agriculture |  |  | Municipal |  |  | Consumer |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at January 1, 2020 |  | $ | 501 |  |  | $ | 271 |  |  | $ | 1,386 |  |  | $ | 1,815 |  |  | $ | 2,347 |  |  | $ | 7 |  |  | $ | 140 |  |  | $ | 6,467 |
Charge-offs |  |  | - |  |  |  | (100 | ) |  |  | - |  |  |  | (33 | ) |  |  | - |  |  |  | - |  |  |  | (87 | ) |  |  | (220 | )
Recoveries |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1 |  |  |  | - |  |  |  | 6 |  |  |  | 25 |  |  |  | 32 |
Provision for loan losses |  |  | 152 |  |  |  | 54 |  |  |  | 242 |  |  |  | 642 |  |  |  | 34 |  |  |  | (6 | ) |  |  | 82 |  |  |  | 1,200 |
Balance at March 31, 2020 |  | $ | 653 |  |  | $ | 225 |  |  | $ | 1,628 |  |  | $ | 2,425 |  |  | $ | 2,381 |  |  | $ | 7 |  |  | $ | 160 |  |  | $ | 7,479 |
|  | Three months ended March 31, 2019 |
(Dollars in thousands) |  | One-to-four family residential real estate |  |  | Construction and land |  |  | Commercial real estate |  |  | Commercial |  |  | Agriculture |  |  | Municipal |  |  | Consumer |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at January 1, 2019 |  | $ | 449 |  |  | $ | 168 |  |  | $ | 1,686 |  |  | $ | 1,051 |  |  | $ | 2,238 |  |  | $ | 7 |  |  | $ | 166 |  |  | $ | 5,765 |
Charge-offs |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (49 | ) |  |  | (49 | )
Recoveries |  |  | 1 |  |  |  | - |  |  |  | - |  |  |  | 1 |  |  |  | - |  |  |  | 6 |  |  |  | 14 |  |  |  | 22 |
Provision for loan losses |  |  | 24 |  |  |  | (12 | ) |  |  | 185 |  |  |  | 113 |  |  |  | (110 | ) |  |  | (6 | ) |  |  | 6 |  |  |  | 200 |
Balance at March 31, 2019 |  | $ | 474 |  |  | $ | 156 |  |  | $ | 1,871 |  |  | $ | 1,165 |  |  | $ | 2,128 |  |  | $ | 7 |  |  | $ | 137 |  |  | $ | 5,938 |
|  | As of March 31, 2020 |
(Dollars in thousands) |  | 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 |  | $ | 129 |  |  | $ | 91 |  |  | $ | 52 |  |  | $ | 235 |  |  | $ | 36 |  |  | $ | - |  |  | $ | - |  |  | $ | 543 |
Collectively evaluated for loss |  |  | 524 |  |  |  | 134 |  |  |  | 1,576 |  |  |  | 2,190 |  |  |  | 2,345 |  |  |  | 7 |  |  |  | 160 |  |  |  | 6,936 |
Total |  | $ | 653 |  |  | $ | 225 |  |  | $ | 1,628 |  |  | $ | 2,425 |  |  | $ | 2,381 |  |  | $ | 7 |  |  | $ | 160 |  |  | $ | 7,479 |
Loan balances: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for loss |  | $ | 1,436 |  |  | $ | 1,319 |  |  | $ | 5,504 |  |  | $ | 1,576 |  |  | $ | 690 |  |  | $ | 58 |  |  | $ | 15 |  |  | $ | 10,598 |
Collectively evaluated for loss |  |  | 147,558 |  |  |  | 23,338 |  |  |  | 136,208 |  |  |  | 119,695 |  |  |  | 95,430 |  |  |  | 2,570 |  |  |  | 25,647 |  |  |  | 550,446 |
Total |  | $ | 148,994 |  |  | $ | 24,657 |  |  | $ | 141,712 |  |  | $ | 121,271 |  |  | $ | 96,120 |  |  | $ | 2,628 |  |  | $ | 25,662 |  |  | $ | 561,044 |
|  | As of December 31, 2019 |
(Dollars in thousands) |  | 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 |  | $ | 129 |  |  | $ | 191 |  |  | $ | 103 |  |  | $ | 204 |  |  | $ | 106 |  |  | $ | - |  |  | $ | - |  |  | $ | 733 |
Collectively evaluated for loss |  |  | 372 |  |  |  | 80 |  |  |  | 1,283 |  |  |  | 1,611 |  |  |  | 2,241 |  |  |  | 7 |  |  |  | 140 |  |  |  | 5,734 |
Total |  | $ | 501 |  |  | $ | 271 |  |  | $ | 1,386 |  |  | $ | 1,815 |  |  | $ | 2,347 |  |  | $ | 7 |  |  | $ | 140 |  |  | $ | 6,467 |
Loan balances: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for loss |  | $ | 1,256 |  |  | $ | 1,479 |  |  | $ | 3,461 |  |  | $ | 1,298 |  |  | $ | 1,124 |  |  | $ | 58 |  |  | $ | 4 |  |  | $ | 8,680 |
Collectively evaluated for loss |  |  | 145,249 |  |  |  | 20,980 |  |  |  | 130,040 |  |  |  | 108,314 |  |  |  | 97,434 |  |  |  | 2,598 |  |  |  | 25,097 |  |  |  | 529,712 |
Total |  | $ | 146,505 |  |  | $ | 22,459 |  |  | $ | 133,501 |  |  | $ | 109,612 |  |  | $ | 98,558 |  |  | $ | 2,656 |  |  | $ | 25,101 |  |  | $ | 538,392 |
The Company recorded net loan charge-offs of $188,000 during the first quarter of 2020 compared to net loan charge-offs of $27,000 during the first quarter of 2019. The Company’s impaired loans increased from $8.7 million at December 31, 2019 to $10.6 million at March 31, 2020. 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 March 31, 2020 and December 31, 2019, 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 was immaterial during the three months ended March 31, 2020 and 2019. The following tables present information on impaired loans:
(Dollars in thousands) |  | As of March 31, 2020 |
|  | 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 |  | $ | 1,477 |  |  | $ | 1,436 |  |  | $ | 1,067 |  |  | $ | 369 |  |  | $ | 129 |  |  | $ | 1,442 |  |  | $ | 2 |
Construction and land |  |  | 3,154 |  |  |  | 1,319 |  |  |  | 1,228 |  |  |  | 91 |  |  |  | 91 |  |  |  | 1,353 |  |  |  | 7 |
Commercial real estate |  |  | 5,504 |  |  |  | 5,504 |  |  |  | 5,308 |  |  |  | 196 |  |  |  | 52 |  |  |  | 5,510 |  |  |  | 118 |
Commercial |  |  | 1,710 |  |  |  | 1,576 |  |  |  | 680 |  |  |  | 896 |  |  |  | 235 |  |  |  | 1,578 |  |  |  | 1 |
Agriculture |  |  | 905 |  |  |  | 690 |  |  |  | 514 |  |  |  | 176 |  |  |  | 36 |  |  |  | 733 |  |  |  | 13 |
Municipal |  |  | 58 |  |  |  | 58 |  |  |  | 58 |  |  |  | - |  |  |  | - |  |  |  | 58 |  |  |  | - |
Consumer |  |  | 15 |  |  |  | 15 |  |  |  | 15 |  |  |  | - |  |  |  | - |  |  |  | 15 |  |  |  | - |
Total impaired loans |  | $ | 12,823 |  |  | $ | 10,598 |  |  | $ | 8,870 |  |  | $ | 1,728 |  |  | $ | 543 |  |  | $ | 10,689 |  |  | $ | 141 |
(Dollars in thousands) |  | As of December 31, 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 |  | $ | 1,297 |  |  | $ | 1,256 |  |  | $ | 887 |  |  | $ | 369 |  |  | $ | 129 |  |  | $ | 1,291 |  |  | $ | 10 |
Construction and land |  |  | 3,214 |  |  |  | 1,479 |  |  |  | 1,288 |  |  |  | 191 |  |  |  | 191 |  |  |  | 1,631 |  |  |  | 36 |
Commercial real estate |  |  | 3,461 |  |  |  | 3,461 |  |  |  | 3,258 |  |  |  | 203 |  |  |  | 103 |  |  |  | 3,489 |  |  |  | 478 |
Commercial |  |  | 1,427 |  |  |  | 1,298 |  |  |  | 416 |  |  |  | 882 |  |  |  | 204 |  |  |  | 1,464 |  |  |  | 11 |
Agriculture |  |  | 1,339 |  |  |  | 1,124 |  |  |  | 613 |  |  |  | 511 |  |  |  | 106 |  |  |  | 1,166 |  |  |  | 48 |
Municipal |  |  | 58 |  |  |  | 58 |  |  |  | 58 |  |  |  | - |  |  |  | - |  |  |  | 58 |  |  |  | 1 |
Consumer |  |  | 4 |  |  |  | 4 |  |  |  | 4 |  |  |  | - |  |  |  | - |  |  |  | 5 |  |  |  | - |
Total impaired loans |  | $ | 10,800 |  |  | $ | 8,680 |  |  | $ | 6,524 |  |  | $ | 2,156 |  |  | $ | 733 |  |  | $ | 9,104 |  |  | $ | 584 |
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 90 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 90 days or more delinquent and accruing interest at March 31, 2020 or December 31, 2019. The following tables present information on the Company’s past due and non-accrual loans by loan class:
(Dollars in thousands) |  | As of March 31, 2020 |
|  | 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 |  | $ | 67 |  |  | $ | 221 |  |  | $ | - |  |  | $ | 288 |  |  | $ | 1,271 |  |  | $ | 1,559 |  |  | $ | 147,435 |
Construction and land |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 796 |  |  |  | 796 |  |  |  | 23,861 |
Commercial real estate |  |  | 265 |  |  |  | 64 |  |  |  | - |  |  |  | 329 |  |  |  | 3,483 |  |  |  | 3,812 |  |  |  | 137,900 |
Commercial |  |  | 201 |  |  |  | 127 |  |  |  | - |  |  |  | 328 |  |  |  | 1,548 |  |  |  | 1,876 |  |  |  | 119,395 |
Agriculture |  |  | 456 |  |  |  | 1,262 |  |  |  | - |  |  |  | 1,718 |  |  |  | 447 |  |  |  | 2,165 |  |  |  | 93,955 |
Municipal |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,628 |
Consumer |  |  | 11 |  |  |  | - |  |  |  | - |  |  |  | 11 |  |  |  | 15 |  |  |  | 26 |  |  |  | 25,636 |
Total |  | $ | 1,000 |  |  | $ | 1,674 |  |  | $ | - |  |  | $ | 2,674 |  |  | $ | 7,560 |  |  | $ | 10,234 |  |  | $ | 550,810 |
Percent of gross loans |  |  | 0.18 | % |  |  | 0.30 | % |  |  | 0.00 | % |  |  | 0.48 | % |  |  | 1.35 | % |  |  | 1.83 | % |  |  | 98.17 | %
(Dollars in thousands) |  | As of December 31, 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 |  | $79 |  |  | $593 |  |  | $- |  |  | $672 |  |  | $1,088 |  |  | $1,760 |  |  | $144,745 |
Construction and land |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 898 |  |  |  | 898 |  |  |  | 21,561 |
Commercial real estate |  |  | 1,137 |  |  |  | 707 |  |  |  | - |  |  |  | 1,844 |  |  |  | 1,440 |  |  |  | 3,284 |  |  |  | 130,217 |
Commercial |  |  | 510 |  |  |  | 68 |  |  |  | - |  |  |  | 578 |  |  |  | 1,270 |  |  |  | 1,848 |  |  |  | 107,764 |
Agriculture |  |  | 316 |  |  |  | - |  |  |  | - |  |  |  | 316 |  |  |  | 846 |  |  |  | 1,162 |  |  |  | 97,396 |
Municipal |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,656 |
Consumer |  |  | 27 |  |  |  | - |  |  |  | - |  |  |  | 27 |  |  |  | 4 |  |  |  | 31 |  |  |  | 25,070 |
Total |  | $ | 2,069 |  |  | $ | 1,368 |  |  | $ | - |  |  | $ | 3,437 |  |  | $ | 5,546 |  |  | $ | 8,983 |  |  | $ | 529,409 |
Percent of gross loans |  |  | 0.39 | % |  |  | 0.25 | % |  |  | 0.00 | % |  |  | 0.64 | % |  |  | 1.03 | % |  |  | 1.67 | % |  |  | 98.33 | %
Under the original terms of the Company’s non-accrual loans, interest earned on such loans for the three months ended March 31, 2020 and 2019 would have increased interest income by $120,000 and $124,000, respectively. No interest income related to non-accrual loans was included in interest income for the three months ended March 31, 2020 and 2019. 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. Nonclassified 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:
|  | As of March 31, 2020 |  |  | As of December 31, 2019 |
(Dollars in thousands) |  | Nonclassified |  |  | Classified |  |  | Nonclassified |  |  | Classified |
One-to-four family residential real estate |  | $ | 147,591 |  |  | $ | 1,403 |  |  | $ | 145,311 |  |  | $ | 1,194 |
Construction and land |  |  | 23,861 |  |  |  | 796 |  |  |  | 21,560 |  |  |  | 899 |
Commercial real estate |  |  | 137,577 |  |  |  | 4,135 |  |  |  | 130,714 |  |  |  | 2,787 |
Commercial |  |  | 113,195 |  |  |  | 8,076 |  |  |  | 101,678 |  |  |  | 7,934 |
Agriculture |  |  | 90,158 |  |  |  | 5,962 |  |  |  | 93,259 |  |  |  | 5,299 |
Municipal |  |  | 2,628 |  |  |  | - |  |  |  | 2,656 |  |  |  | - |
Consumer |  |  | 25,647 |  |  |  | 15 |  |  |  | 25,097 |  |  |  | 4 |
Total |  | $ | 540,657 |  |  | $ | 20,387 |  |  | $ | 520,275 |  |  | $ | 18,117 |
At March 31, 2020, the Company had nine loan relationships consisting of thirteen outstanding loans that were classified as TDRs. There were no loans classified as TDRs during the first three months of 2020 or 2019. 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 March 31, 2020 and 2019. The Company did not record any charge-offs against loans classified as TDRs in the first quarter of 2020 or 2019. A credit provision of $1,000 was recorded in the three months ended March 31, 2020 compared to no provision related to TDRs recorded in the three months ended March 31, 2019. The Company allocated $9,000 of the allowance for loan losses recorded against loans classified as TDRs at March 31, 2020 and December 31, 2019. The following table presents information on loans that are classified as TDRs:
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | As of March 31, 2020 |  |  | As of December 31, 2019 |
|  | Number of loans |  |  | Non-accrual balance |  |  | Accruing balance |  |  | Number of loans |  |  | Non-accrual balance |  |  | Accruing balance |
One-to-four family residential real estate |  |  | 2 |  |  | $ | - |  |  | $ | 165 |  |  |  | 2 |  |  | $ | - |  |  | $ | 168 |
Construction and land |  |  | 4 |  |  |  | 508 |  |  |  | 523 |  |  |  | 4 |  |  |  | 510 |  |  |  | 581 |
Commercial real estate |  |  | 1 |  |  |  | - |  |  |  | 2,021 |  |  |  | 1 |  |  |  | - |  |  |  | 2,021 |
Commercial |  |  | 1 |  |  |  | - |  |  |  | 28 |  |  |  | 1 |  |  |  | - |  |  |  | 28 |
Agriculture |  |  | 4 |  |  |  | - |  |  |  | 243 |  |  |  | 4 |  |  |  | - |  |  |  | 278 |
Municipal |  |  | 1 |  |  |  | - |  |  |  | 58 |  |  |  | 1 |  |  |  | - |  |  |  | 58 |
Total troubled debt restructurings |  |  | 13 |  |  | $ | 508 |  |  | $ | 3,038 |  |  |  | 13 |  |  | $ | 510 |  |  | $ | 3,134 |
As of March 31, 2020, the Company had 12 loan modifications on outstanding loan balances of $8.4 million in connection with the Coronavirus Disease 2019 (COVID-19) pandemic. These modifications consisted of payment deferrals that were less than 180 days and consisted of either the full loan payment or just the principal component. Consistent with regulatory guidance, the Company also entered into short-term forbearance plans or short-term repayment plans on three one-to-four family residential mortgage loans totaling $682,000 as of March 31, 2020. Based on the Joint Interagency Regulatory Guidance, these loan modifications were not classified as TDRs and are excluded from the table above.

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -URI http://asc.fasb.org/subtopic&trid=2196772 + Details
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