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Loans and Allowance for Loan Losses
 3 Months Ended
Mar. 31, 2022
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)  2022   2021 
         
One-to-four family residential real estate loans  $169,514   $166,081 
Construction and land loans   25,408    27,644 
Commercial real estate loans   196,736    198,472 
Commercial loans   127,226    132,154 
Paycheck protection program loans   5,218    17,179 
Agriculture loans   82,484    94,267 
Municipal loans   2,212    2,050 
Consumer loans   24,751    24,541 
Total gross loans   633,549    662,388 
Net deferred loan costs (fees) and loans in process   (43)   (380)
Allowance for loan losses   (8,357)   (8,775)
Loans, net  $625,149   $653,233 

 

 

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

 

                                     
   Three months ended March 31, 2022 
(Dollars in thousands)  One-to-four family residential real estate loans   Construction and land loans   Commercial real estate loans   Commercial loans   Paycheck protection program loans   Agriculture loans   Municipal loans   Consumer loans   Total 
                                     
Allowance for loan losses:                                             
Balance at January 1, 2022  $623   $138   $3,051   $2,613   $-   $2,221   $6   $123   $8,775 
Charge-offs   -    -    -    -    -    -    -    (53)   (53)
Recoveries   -    100    -    14    -    1    6    14    135 
Provision for loan losses   1    (92)   10    (162)   -    (293)   (6)   42    (500)
Balance at March 31, 2022  $624   $146   $3,061   $2,465   $-   $1,929   $6   $126   $8,357 

 

   Three months ended March 31, 2021 
(Dollars in thousands)  One-to-four family residential real estate loans   Construction and land loans   Commercial real estate loans   Commercial loans   Paycheck protection program loans   Agriculture loans   Municipal loans   Consumer loans   Total 
                                     
Allowance for loan losses:                                             
Balance at January 1, 2021  $859   $181   $2,482   $2,388   $-   $2,690   $6   $169   $8,775 
Charge-offs   (23)   -    -    -    -    -    -    (41)   (64)
Recoveries   1    1    -    1    -    -    6    51    60 
Provision for loan losses   60    4    775    (143)   -    (187)   (6)   (3)   500 
Balance at March 31, 2021  $897   $186   $3,257   $2,246   $-   $2,503   $6   $176   $9,271 

 

 

   As of March 31, 2022 
(Dollars in thousands)  One-to-four family residential real estate loans   Construction and land loans   Commercial real estate loans   Commercial loans   Paycheck protection program loans   Agriculture loans   Municipal loans   Consumer loans   Total 
                                     
Allowance for loan losses:                                             
Individually evaluated for loss  $-   $-   $-   $492   $-   $51   $-   $-   $543 
Collectively evaluated for loss   624    146    3,061    1,973    -    1,878    6    126    7,814 
Total  $624   $146   $3,061   $2,465   $-   $1,929   $6   $126   $8,357 
                                              
Loan balances:                                             
Individually evaluated for loss  $580   $195   $2,194   $927   $-   $1,738   $36   $-   $5,670 
Collectively evaluated for loss   168,934    25,213    194,542    126,299    5,218    80,746    2,176    24,751    627,879 
Total  $169,514   $25,408   $196,736   $127,226   $5,218   $82,484   $2,212   $24,751   $633,549 

 

   As of December 31, 2021 
(Dollars in thousands)  One-to-four family residential real estate loan   Construction and land loans   Commercial real estate loans   Commercial loans   Paycheck protection program loans   Agriculture loans   Municipal loans   Consumer loans   Total 
                                     
Allowance for loan losses:                                             
Individually evaluated for loss  $-   $-   $-   $504   $-   $-   $-   $-   $504 
Collectively evaluated for loss   623    138    3,051    2,109    -    2,221    6    123    8,271 
Total  $623   $138   $3,051   $2,613   $-   $2,221   $6   $123   $8,775 
                                              
Loan balances:                                             
Individually evaluated for loss  $578   $794   $2,214   $1,029   $-   $2,067   $36   $-   $6,718 
Collectively evaluated for loss   165,503    26,850    196,258    131,125    17,179    92,200    2,014    24,541    655,670 
Total  $166,081   $27,644   $198,472   $132,154   $17,179   $94,267   $2,050   $24,541   $662,388 

 

The Company recorded net loan recoveries of $82,000 during the first quarter of 2022 compared to net loan charge-offs of $4,000 during the first quarter of 2021.

 

The Company’s impaired loans decreased $1.0 million from $6.7 million at December 31, 2021 to $5.7 million at March 31, 2022. 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, 2022 and December 31, 2021, 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, 2022 and 2021.

 

 

The following tables present information on impaired loans:

 

   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 
(Dollars in thousands)  As of March 31, 2022 
   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  $580   $580   $580   $-   $-   $581   $2 
Construction and land   195    195    195    -    -    195    2 
Commercial real estate   2,194    2,194    2,194    -    -    2,204    12 
Commercial   1,178    927    434    493    492    955    4 
Agriculture   1,840    1,738    1,418    320    51    1,757    15 
Municipal   36    36    36    -    -    36    - 
Total impaired loans  $6,023   $5,670   $4,857   $813   $543   $5,728   $35 

 

(Dollars in thousands)  As of December 31, 2021 
   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  $578   $578   $578   $-   $-   $590   $8 
Construction and land   2,401    794    794    -    -    895    16 
Commercial real estate   2,214    2,214    2,214    -    -    2,388    37 
Commercial   1,380    1,029    520    509    504    1,096    38 
Agriculture   2,235    2,067    2,067    -    -    2,420    67 
Municipal   36    36    36    -    -    36    1 
Total impaired loans  $8,844   $6,718   $6,209   $509   $504   $7,425   $167 

 

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, 2022 or December 31, 2021.

 

 

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, 2022 
   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 loans  $26   $-   $-   $26   $421   $447   $169,067 
Construction and land loans   -    -    -    -    195    195    25,213 
Commercial real estate loans   195    -    -    195    2,194    2,389    194,347 
Commercial loans   289    -    -    289    578    867    126,359 
Paycheck protection program loans   -    -    -    -    -    -    5,218 
Agriculture loans   308    -    -    308    1,288    1,596    80,888 
Municipal loans   -    -    -    -    -    -    2,212 
Consumer loans   20    8    -    28    -    28    24,723 
Total  $838   $8   $-   $846   $4,676   $5,522   $628,027 
                                    
Percent of gross loans   0.13%   0.00%   0.00%   0.13%   0.74%   0.87%   99.13%

 

(Dollars in thousands)  As of December 31, 2021 
   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 loans  $20   $125   $-   $145   $417   $562   $165,519 
Construction and land loans   -    -    -    -    681    681    26,963 
Commercial real estate loans   -    -    -    -    2,214    2,214    196,258 
Commercial loans   289    340    -    629    593    1,222    130,932 
Paycheck protection program loans   -    -    -    -    -    -    17,179 
Agriculture loans   1,189    -    -    1,189    1,325    2,514    91,753 
Municipal loans   -    -    -    -    -    -    2,050 
Consumer loans   18    9    -    27    -    27    24,514 
Total  $1,516   $474   $-   $1,990   $5,230   $7,220   $655,168 
                                    
Percent of gross loans   0.23%   0.07%   0.00%   0.30%   0.79%   1.09%   98.91%

 

Under the original terms of the Company’s non-accrual loans, interest earned on such loans for the three months ended March 31, 2022 and 2021 would have increased interest income by $49,000 and $186,000, respectively. No interest income related to non-accrual loans was included in interest income for the three months ended March 31, 2022 and 2021.

 

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:

 

(Dollars in thousands)  Nonclassified   Classified   Nonclassified   Classified 
   As of March 31, 2022   As of December 31, 2021 
(Dollars in thousands)  Nonclassified   Classified   Nonclassified   Classified 
                 
One-to-four family residential real estate loans  $168,943   $571   $165,299   $782 
Construction and land loans   25,213    195    26,963    681 
Commercial real estate loans   191,984    4,752    193,669    4,803 
Commercial loans   123,280    3,946    123,609    8,545 
Paycheck protection program loans   5,218    -    17,179    - 
Agriculture loans   80,981    1,503    91,036    3,231 
Municipal loan   2,212    -    2,050    - 
Consumer loans   24,751    -    24,541    - 
Total  $622,582   $10,967   $644,346   $18,042 

 

At March 31, 2022, the Company had eight loan relationships consisting of 12 outstanding loans that were previously classified as TDRs. No loans were classified as TDRs during the first three months of 2022. During the first quarter of 2022, two construction and land loans totaling $599,000 were paid off. These loans were originally classified as TDRs in 2012. A commercial loan totaling $32,000 was paid off in the first quarter of 2022 after being classified as a TDR in the first quarter of 2021. An agriculture loan totaling $250,0000 was also paid off in the first quarter of 2022 after being classified as a TDR in the third quarter of 2021.

 

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, 2022 and 2021. The Company did not record any charge-offs against loans classified as TDRs in the first quarter of 2022 or 2021. A provision of $50,000 was recorded in the first quarter of 2022 on loans classified as TDRs. No provision was recorded in the first quarter of 2021. The Company allocated $52,000 and $2,000 of the allowance for loan losses recorded against loans classified as TDRs at March 31, 2021 and December 31, 2021, respectively.

 

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

 

(Dollars in thousands)
   As of March 31, 2022   As of December 31, 2021 
   Number of loans   Non-accrual balance   Accruing balance   Number of loans   Non-accrual balance   Accruing balance 
                         
One-to-four family residential real estate loans   2   $-   $159    2   $-   $161 
Construction and land loans   1    195    -    3    681    113 
Commercial real estate loans   2    1,224    -    2    1,224    - 
Commercial loans   3    33    349    4    33    436 
Agriculture loans   3    -    450    4    -    742 
Municipal loan   1    -    36    1    -    36 
Total   12   $1,452   $994    16   $1,938   $1,488