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Loans and Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2024
Receivables [Abstract]  
Loans and Allowance for Credit Losses

3. Loans and Allowance for Credit Losses

 

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

 

   March 31,   December 31, 
(Dollars in thousands)  2024   2023 
         
One-to-four family residential real estate loans  $312,833   $302,544 
Construction and land loans   24,823    21,090 
Commercial real estate loans   323,397    320,962 
Commercial loans   181,945    180,942 
Agriculture loans   86,808    89,680 
Municipal loans   5,690    4,507 
Consumer loans   28,544    28,931 
Total gross loans   964,040    948,656 
Net deferred loan fees and loans in process   (578)   (429)
Allowance for credit losses   (10,851)   (10,608)
Loans, net  $952,611   $937,619 

 

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

 

(Dollars in thousands)  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 
   Three months ended March 31, 2024 
(Dollars in thousands)  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, 2024  $2,035   $150   $4,518   $2,486   $1,190   $15   $214   $10,608 
Charge-offs   -    -    -    (70)   -    -    (71)   (141)
Recoveries   -    80    -    11    -    7    36    134 
Provision for credit losses   51    (56)   12    224    (46)   28    37    250 
Balance at March 31, 2024  $2,086   $174   $4,530   $2,651   $1,144   $50   $216   $10,851 

 

(Dollars in thousands)  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 
   Three months ended March 31, 2023 
(Dollars in thousands)  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   -    -    -    (17)   -    -    (91)   (108)
Recoveries   -    -    -    9    16    -    36    61 
Provision for credit losses   80    4    217    (276)   (99)   1    73    - 
Balance at March 31, 2023  $1,757   $170   $4,438   $2,614   $1,059   $17   $212   $10,267 

 

 

The Company recorded net loan charge-offs of $7,000 during the first quarter of 2024 compared to net loan charge-offs of $47,000 during the first quarter of 2023.

 

The following table presents information on non-accrual 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 March 31, 2024 
    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  $137   $-   $- 
Commercial real estate loans   521    -    - 
Commercial loans   356    1,851    - 
Agriculture loans   731    -    - 
Consumer loans   24    1    - 
Total loans  $1,769   $1,852   $- 

 

   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:

 

 

(Dollars in thousands)  As of March 31, 2024
    Loan balance   Collateral Type
         
One-to-four family residential real estate loans  $137   First mortgage on residential real estate
Construction and land loans   191   First mortgage on residential or commercial real estate
Commercial real estate loans   1,718   First mortgage on commercial real estate
Commercial loans   2,371   Accounts receivable, equipment and real estate
Agriculture loans   980   Crops, livestock, machinery and real estate
Consumer loans   25   Personal property or second mortgages on real estate
Total loans  $5,422    

 

(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 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, 2024 or December 31, 2023.

 

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 March 31, 2024 
   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  $119   $473   $-   $592   $137   $729   $312,104 
Construction and land loans   -    494    -    494    -    494    24,329 
Commercial real estate loans   591    64    -    655    521    1,176    322,221 
Commercial loans   424    87    -    511    2,207    2,718    179,227 
Agriculture loans   116    1,502    -    1,618    731    2,349    84,459 
Municipal loans   -    -    -    -    -    -    5,690 
Consumer loans   182    12    -    194    25    219    28,325 
Total  $1,432   $2,632   $-   $4,064   $3,621   $7,685   $956,355 
                                    
Percent of gross loans   0.15%   0.27%   0.00%   0.42%   0.38%   0.80%   99.20%

 

(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 
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%

 

Under the original terms of the Company’s non-accrual loans, interest earned on such loans for the three months ended March 31, 2024 and 2023 would have increased interest income by $72,000 and $26,000, respectively. No interest income related to non-accrual loans was included in interest income for the three months ended March 31, 2024 and 2023.

 

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 presents information on the Company’s risk category of loans by type and year of origination:

 

   2024   2023   2022   2021   2020   Prior   Revolving loans amortized cost   Revolving loans converted to term   Total 
(Dollars in thousands)  As of March 31, 2024 
   2024   2023   2022   2021   2020   Prior   Revolving loans amortized cost   Revolving loans converted to term   Total 
                                     
One-to-four family residential real estate loans                                             
Nonclassified  $17,207   $92,683   $83,224   $41,722   $30,926   $40,712   $6,069   $153   $312,696 
Classified   -    -    -    -    -    137    -    -    137 
Total  $17,207   $92,683   $83,224   $41,722   $30,926   $40,849   $6,069   $153   $312,833 
Gross charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Construction and land loans                                             
Nonclassified  $7,239   $8,417   $3,218   $1,766   $2,642   $1,441   $100   $-   $24,823 
Classified   -    -    -    -    -    -    -    -    - 
Total  $7,239   $8,417   $3,218   $1,766   $2,642   $1,441   $100   $-   $24,823 
Gross charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Commercial real estate loans                                             
Nonclassified  $13,198   $43,201   $73,446   $58,079   $49,861   $80,450   $2,944   $66    321,245 
Classified   -    -    -    476    19    1,657    -    -    2,152 
Total  $13,198   $43,201   $73,446   $58,555   $49,880   $82,107   $2,944   $66   $323,397 
Gross charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Commercial loans                                             
Nonclassified  $6,440   $38,205   $29,380   $12,908   $14,426   $5,729   $63,586   $170   $170,844 
Classified   2,087    2,614    1,972    222    503    50    2,129    1,524    11,101 
Total  $8,527   $40,819   $31,352   $13,130   $14,929   $5,779   $65,715   $1,694   $181,945 
Gross charge-offs  $-   $-   $3   $67   $-   $-   $-   $-   $70 
Agriculture loans                                             
Nonclassified  $2,797   $6,454   $10,716   $4,605   $3,861   $15,525   $41,940   $179   $86,077 
Classified   -    -    120    13    17    390    161    30    731 
Total  $2,797   $6,454   $10,836   $4,618   $3,878   $15,915   $42,101   $209   $86,808 
Gross charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Municipal loans                                             
Nonclassified  $-   $3,956   $116   $-   $-   $1,618   $-   $-   $5,690 
Classified   -    -    -    -    -    -    -    -    - 
Total  $-   $3,956   $116   $-   $-   $1,618   $-   $-   $5,690 
Gross charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Consumer loans                                             
Nonclassified  $1,889   $3,991   $965   $1,268   $1,000   $3,651   $15,735   $20   $28,519 
Classified   -    -    -    -    -    -    25    -    25 
Total  $1,889   $3,991   $965   $1,268   $1,000   $3,651   $15,760   $20   $28,544 
Gross charge-offs  $71   $-   $-   $-   $-   $-   $-   $-   $71 
Total loans                                             
Nonclassified  $48,770   $196,907   $201,065   $120,348   $102,716   $149,126   $130,374   $588   $949,894 
Classified   2,087    2,614    2,092    711    539    2,234    2,315    1,554    14,146 
Total  $50,857   $199,521   $203,157   $121,059   $103,255   $151,360   $132,689   $2,142   $964,040 
Gross charge-offs for the three month ending 3-31-2024  $71   $-   $3   $67   $-   $-   $-   $-   $141 

 

 

   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 
Gross 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 
Gross 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 
Gross 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 
Gross 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 
Gross charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Municipal loans                                             
Nonclassified  $2,774   $128   $-   $-   $-   $1,605   $-   $-   $4,507 
Classified   -    -    -    -    -    -    -    -    - 
Total  $2,774   $128   $-   $-   $-   $1,605   $-   $-   $4,507 
Gross 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 
Gross 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 
Gross charge-offs for the year ending December 31,2023  $-   $28  $410  $44  $-   $-   $368  $-   $850

 

 

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

 

   Three months ended 
(dollars in thousands)  March 31 
   2024   2023 
Balance at January 1  $250    170 
Provision for credit losses   50    30 
Balance at March 31  $300   $200 

 

The following table presents the amortized cost basis of loans at March 31, 2024 that were both experiencing financial difficulty and modified during the three months ended March 31, 2024 by class, type of modification and includes the financial effect of the modification.

 

(Dollars in thousands)  As of March 31, 2024
   Amortized cost basis   % of loan class total   Financial effect
            
Term extension:             
Commercial  $137    0.1%  90 day payment deferral
              

 

(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 March 31, 2024, all loans experiencing both financial difficulty and modified during the three months ended March 31, 2024 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 an allowance for credit losses of $1,000 recorded against these loans as of March 31, 2024 and December 31, 2023. The Company did not have any loan modifications that had a payment default during the three months ended March 31, 2024.