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Loans and Allowance for Credit Losses
 12 Months Ended
Dec. 31, 2023
Receivables [Abstract]  
Loans and Allowance for Credit Losses

(6) Loans and Allowance for Credit Losses

 

Loans consisted of the following:

  

(Dollars in thousands)  2023   2022 
   As of December 31, 
(Dollars in thousands)  2023   2022 
         
One-to-four family residential real estate loans  $302,544   $236,982 
Construction and land loans   21,090    22,725 
Commercial real estate loans   320,962    304,074 
Commercial loans   180,942    173,415 
Paycheck protection program loans   -    21 
Agriculture loans   89,680    84,283 
Municipal loans   4,507    2,026 
Consumer loans   28,931    26,664 
Total gross loans   948,656    850,190 
Net deferred loan (fees) costs and loans in process   (429)   (250)
Allowance for credit losses   (10,608)   (8,791)
Loans, net  $937,619   $841,149 

 

 

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

  

   One-to-four family residential real estate loans   Construction and land loans   Commercial real estate loans   Commercial loans    Agriculture loans   Municipal loans   Consumer loans   Total 
(Dollars in thousands) 
   Year ended December 31, 2023 
   One-to-four family residential real estate loans   Construction and land loans   Commercial real estate loans   Commercial loans    Agriculture loans   Municipal loans   Consumer loans   Total 
                                  
Allowance for credit losses:                                         
Balance at January 1, 2023  $655   $117   $3,158   $2,753    $1,966   $5   $137   $8,791 
Impact of adopting ASC 326   1,022    49    1,063    145     (824)   11    57    1,523 
Charge-offs   -    -    -    (479)    -    -    (371)   (850)
Recoveries   -    675    -    35     74    -    110    894 
Provision for credit losses   358    (691)   297    32     (26)   (1)   281    250 
Balance at December 31, 2023  $2,035   $150   $4,518   $2,486    $1,190   $15   $214   $10,608 

 

   One-to-four family residential real estate loans   Construction and land loans   Commercial real estate loans   Commercial loans   Paycheck protection loans   Agriculture loans   Municipal loans   Consumer loans   Total 
(Dollars in thousands)
   Year ended December 31, 2022 
   One-to-four family residential real estate loans   Construction and land loans   Commercial real estate loans   Commercial loans   Paycheck protection loans   Agriculture loans   Municipal loans   Consumer loans   Total 
                                     
Allowance for credit losses:                                             
Balance at January 1, 2022  $623   $138   $3,051   $2,613   $-   $2,221   $6   $123   $8,775 
Charge-offs   -    -    -    -    -    -    -    (336)   (336)
Recoveries   -    165    -    38    -    59    6    84    352 
Provision for credit losses   32    (186)   107    102    -    (314)   (7)   266    - 
Balance at December 31, 2022  $655   $117   $3,158   $2,753   $-   $1,966   $5   $137   $8,791 
                                              
Allowance for credit losses:                                             
Individually evaluated for loss  $-   $-   $-   $636   $-   $18   $-   $-   $654 
Collectively evaluated for loss   655    117    3,158    2,117    -    1,948    5    137    8,137 
Total  $655   $117   $3,158   $2,753   $-   $1,966   $5   $137   $8,791 
                                              
Loan balances:                                             
Individually evaluated for loss  $326   $412   $1,224   $812   $-   $1,319   $36   $-   $4,129 
Collectively evaluated for loss   236,656    22,313    302,850    172,603    21    82,964    1,990    26,664    846,061 
Total  $236,982   $22,725   $304,074   $173,415   $21   $84,283   $2,026   $26,664   $850,190 

 

(Dollars in thousands) 
   Year ended December 31, 2021 
   One-to-four family residential real estate loans   Construction and land loans   Commercial real estate loans   Commercial loans   Paycheck protection loans   Agriculture loans   Municipal loans   Consumer loans   Total 
                                     
Allowance for credit losses:                                             
Balance at January 1, 2021  $859   $181   $2,482   $2,388   $-   $2,690   $6   $169   $8,775 
Charge-offs   (81)   -    (540)   (72)   -    (50)   -    (235)   (978)
Recoveries   11    263    -    14    -    66    6    118    478 
Provision for credit losses   (166)   (306)   1,109    283    -    (485)   (6)   71    500 
Balance at December 31, 2021  $623   $138   $3,051   $2,613   $-   $2,221   $6   $123   $8,775 
                                              
Allowance for credit 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 $44,000 during 2023 compared to net loan charge recoveries of $16,000 during 2022 and net loan charge-offs of $500,000 during 2021.

 

The following table presents information on non-accrual status and loans past due over 89 days and still accruing:

  

   Non-accrual with no allowance for credit loss   Non-accrual with allowance for credit losses   Loans past due over 89 days still accruing 
(Dollars in thousands)  As of December 31, 2023 
   Non-accrual with no allowance for credit loss   Non-accrual with allowance for credit losses   Loans past due over 89 days still accruing 
             
One-to-four family residential real estate loans  $161   $31   $- 
Commercial loans   363    1,517    - 
Agriculture loans   295    -    - 
Consumer loans   24    -    - 
Total loans  $843   $1,548   $- 

 

The Company has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following table presents information on the amortized cost basis and collateral type of collateral-dependent loans:

 

Schedule of Amortized Cost Basis and Collateral Type 

(Dollars in thousands)  As of December 31, 2023
   Loan balance   Collateral Type
        
One-to-four family residential real estate loans  $192   First mortgage on residential real estate
Construction and land loans   192   First mortgage on residential or commercial real estate
Commercial real estate loans   1,205   First mortgage on commercial real estate
Commercial loans   2,054   Accounts receivable, equipment and real estate
Agriculture loans   682   Crops, livestock, machinery and real estate
Consumer loans   24   Personal property or second mortgages on real estate
Total loans  $4,349    

 

 

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 December 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 loans  $326   $326   $326   $-   $-   $357   $9 
Construction and land loans   843    412    412    -    -    243    10 
Commercial real estate loans   1,224    1,224    1,224    -    -    1,224    47 
Commercial loans   1,063    812    75    737    636    865    5 
Agriculture loans   1,402    1,319    1,301    18    18    1,433    64 
Municipal loans   36    36    36    -    -    36    1 
Total impaired loans  $4,894   $4,129   $3,374   $755   $654   $4,158   $136 

 

   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 loans  $578   $578   $578   $-   $-   $590   $8 
Construction and land loans   2,401    794    794    -    -    895    16 
Commercial real estate loans   2,214    2,214    2,214    -    -    2,388    37 
Commercial loans   1,380    1,029    520    509    504    1,096    38 
Agriculture loans   2,235    2,067    2,067    -    -    2,420    67 
Municipal loans   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 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 delinquent and accruing interest at December 31, 2023 or December 31, 2022.

 

 

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

  

   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 
(Dollars in thousands)  As of December 31, 2023 
   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  $85   $247   $-   $332   $192   $524   $302,020 
Construction and land loans   -    -    -    -    -    -    21,090 
Commercial real estate loans   153    -    -    153    -    153    320,809 
Commercial loans   399    332    -    731    1,880    2,611    178,331 
Paycheck protection program loans   -    -    -    -    -    -    - 
Agriculture loans   256    -    -    256    295    551    89,129 
Municipal loans   -    -    -    -    -    -    4,507 
Consumer loans   110    -    -    110    24    134    28,797 
Total  $1,003   $579   $-   $1,582   $2,391   $3,973   $944,683 
                                    
Percent of gross loans   0.11%   0.06%   0.00%   0.17%   0.25%   0.42%   99.58%

 

   As of December 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  $8   $72   $-   $80   $170   $250   $236,732 
Construction and land loans   -    -    -    -    195    195    22,530 
Commercial real estate loans   -    -    -    -    1,224    1,224    302,850 
Commercial loans   -    411    -    411    812    1,223    172,192 
Paycheck protection program loans   -    -    -    -    -    -    21 
Agriculture loans   -    180    -    180    925    1,105    83,178 
Municipal loans   -    -    -    -    -    -    2,026 
Consumer loans   67    -    -    67    -    67    26,597 
Total  $75   $663   $-   $738   $3,326   $4,064   $846,126 
                                    
Percent of gross loans   0.01%   0.08%   0.00%   0.09%   0.39%   0.48%   99.52%

 

Under the original terms of the Company’s non-accrual loans, interest earned on such loans for the years 2023, 2022 and 2021, would have increased interest income by $96,000, $137,000 and $309,000, respectively. No interest income related to non-accrual loans was included in interest income for the years ended December 31, 2023, 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. 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 classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

 

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 category of loans by type and year of origination:

  

   2023   2022   2021   2020   2019   Prior   Revolving loans amortized cost   Revolving loans converted to term   Total 
(Dollars in thousands)  As of December 31, 2023 
   2023   2022   2021   2020   2019   Prior   Revolving loans amortized cost   Revolving loans converted to term   Total 
                                     
One-to-four family residential real estate loans                                             
Nonclassified  $95,290   $84,718   $42,533   $32,081   $12,776   $29,694   $5,097   $163   $302,352 
Classified   -    -    -    -    -    192    -    -    192 
Total  $95,290   $84,718   $42,533   $32,081   $12,776   $29,886   $5,097   $163   $302,544 
Charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Construction and land loans                                             
Nonclassified  $6,283   $5,267   $5,367   $2,665   $916   $492   $100   $-   $21,090 
Classified   -    -    -    -    -    -    -    -    - 
Total  $6,283   $5,267   $5,367   $2,665   $916   $492   $100   $-   $21,090 
Charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Commercial real estate loans                                             
Nonclassified  $41,644   $77,427   $58,327   $50,744   $30,551   $57,502   $3,017   $92   $319,304 
Classified   -    -    481    22    180    975    -    -    1,658 
Total  $41,644   $77,427   $58,808   $50,766   $30,731   $58,477   $3,017   $92   $320,962 
Charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Commercial loans                                             
Nonclassified  $38,818   $32,764   $16,747   $15,511   $2,514   $4,386   $61,046   $4,121   $175,907 
Classified   226    2,000    158    460    57    -    1,952    182    5,035 
Total  $39,044   $34,764   $16,905   $15,971   $2,571   $4,386   $62,998   $4,303   $180,942 
Charge-offs  $-   $(28)  $(407)  $(44)  $-   $-   $-   $-   $(479)
Agriculture loans                                             
Nonclassified  $7,862   $11,718   $4,864   $4,092   $3,902   $12,114   $44,352   $214   $89,118 
Classified   -    16    171    -    131    113    131    -    562 
Total  $7,862   $11,734   $5,035   $4,092   $4,033   $12,227   $44,483   $214   $89,680 
Charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Municipal loans                                             
Nonclassified  $2,774   $128   $-   $-   $-   $1,605   $-   $-   $4,507 
Classified   -    -    -    -    -    -    -    -    - 
Total  $2,774   $128   $-   $-   $-   $1,605   $-   $-   $4,507 
Charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Consumer loans                                             
Nonclassified  $4,705   $1,332   $1,340   $1,380   $1   $4,906   $15,221   $21   $28,906 
Classified   -    -    -    -    -    -    25    -    25 
Total  $4,705   $1,332   $1,340   $1,380   $1   $4,906   $15,246   $21   $28,931 
Charge-offs  $-   $-   $(3)  $-   $-   $-   $(368)  $-   $(371)
Total loans                                             
Nonclassified  $197,376   $213,354   $129,178   $106,473   $50,660   $110,699   $128,833   $4,611   $941,184 
Classified   226    2,016    810    482    368    1,280    2,108    182    7,472 
Total  $197,602   $215,370   $129,988   $106,955   $51,028   $111,979   $130,941   $4,793   $948,656 
Charge-offs  $-   $(28)  $(410)  $(44)  $-   $-   $(368)  $-   $(850)

 

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

  

(Dollars in thousands)  Nonclassified   Classified 
   As of December 31, 2022 
(Dollars in thousands)  Nonclassified   Classified 
         
One-to-four family residential real estate loans  $236,663   $319 
Construction and land loans   22,530    195 
Commercial real estate loans   300,216    3,858 
Commercial loans   165,709    7,706 
Paycheck protection program loans   21    - 
Agriculture loans   83,358    925 
Municipal loans   2,026    - 
Consumer loans   26,664    - 
Total  $837,187   $13,003 

 

 

The following table provides information on the Company’s allowance for credit losses related to unfunded loan commitments.

  

(dollars in thousands)    
Balance at January 1, 2023  $170 
Impact of adopting ASC 326   - 
Provision for credit losses   80 
Balance at December 31, 2023  $250 

 

The following table presents the amortized cost basis of loans at December 31, 2023 that were both experiencing financial difficulty and modified by class, type of modification and includes the financial effect of the modification.

  

(Dollars in thousands)  As of December 31, 2023
   Amortized cost basis   % of loan class total   Financial effect
            
Term extension:             
Commercial  $141    0.1%  90 day payment deferral

 

As of December 31, 2023, all loans experiencing both financial difficulty and modified during the twelve months ended December 31, 2023 were current under the terms of the agreements. There were no commitments to lend additional funds to the borrowers and there were no charge-offs recorded against the loans. The Company had a $1,000 allowance for credit losses recorded against these loans as of December 31, 2023. The Company did not have any loan modifications that had a payment default during the twelve months ended December 31, 2023.

 

The Company had loans and unfunded commitments to directors and officers, and to affiliated parties, at December 31, 2023 and 2022. A summary of such loans is as follows:

  

     
(Dollars in thousands)    
     
Balance at December 31, 2022  $14,573 
New loans   3,250 
Repayments   (4,767)
Balance at December 31, 2023  $13,056