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Loans and Allowance for Credit Losses
 9 Months Ended
Sep. 30, 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:

 

   September 30,   December 31, 
(Dollars in thousands)  2024   2023 
         
One-to-four family residential real estate loans  $344,380   $302,544 
Construction and land loans   23,454    21,090 
Commercial real estate loans   324,016    320,962 
Commercial loans   181,652    180,942 
Agriculture loans   91,986    89,680 
Municipal loans   7,098    4,507 
Consumer loans   29,263    28,931 
Total gross loans   1,001,849    948,656 
Net deferred loan fees and loans in process   (63)   (429)
Allowance for credit losses   (11,544)   (10,608)
Loans, net  $990,242   $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 and nine months and six months ended September 30, 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 July 1, 2024  $2,020   $220   $4,515   $2,778   $1,118   $55   $197   $10,903 
Charge-offs   -    -    -    (22)   -    -    (131)   (153)
Recoveries   -    45    -    8    54    -    37    144 
Provision for credit losses   (30)   (109)   38    611    50    2    88    650 
Balance at September 30, 2024  $1,990   $156   $4,553   $3,375   $1,222   $57   $191   $11,544 
                                         
Allowance for credit losses:                                        
Balance at January 1, 2024  $2,035   $150   $4,518   $2,486   $1,190   $15   $214   $10,608 
Charge-offs   -    -    -    (105)   -    -    (308)   (413)
Recoveries   -    245    -    28    54    12    110    449 
Provision for credit losses   (45)   (239)   112    889    (22)   30    175    900 
Balance at September 30, 2024  $1,990   $156   $4,553   $3,375   $1,222   $57   $191   $11,544 

 

(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 and nine months ended September 30, 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 July 1, 2023  $1,852   $161   $4,373   $2,710   $1,134   $16   $203   $10,449 
Charge-offs   -    -    -    (44)   -    -    (98)   (142)
Recoveries   -    626    -    9    1    -    27    663 
Provision for credit losses   38    (641)   81    469    (45)   (1)   99    - 
Balance at September 30, 2023  $1,890   $146   $4,454   $3,144   $1,090   $15   $231   $10,970 
                                         
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   -    -    -    (151)   -    -    (257)   (408)
Recoveries   -    626    -    28    74    -    86    814 
Provision for credit losses   213    (646)   233    369    (126)   (1)   208    250 
Balance at September 30, 2023  $1,890   $146   $4,454   $3,144   $1,090   $15   $231   $10,970 

 

The Company recorded net loan charge-offs of $9,000 during the third quarter of 2024, compared to net loan recoveries of $521,000 during the third quarter of 2023. The Company recorded net loan recoveries of $36,000 during the nine months ended September 30, 2024, compared to net loan recoveries of $406,000 during the nine months ended September 30, 2023.

 

 

The following table presents information regarding non-accrual and loans past due over 89 days and still accruing as of the dates indicated:

 

   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 September 30, 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  $76   $-   $     - 
Commercial real estate loans   788    -    - 
Commercial loans   8,623    2,843    - 
Agriculture loans   1,085    -    - 
Total loans  $10,572   $2,843   $- 

 

   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 regarding the amortized cost basis and collateral type of collateral-dependent loans as of the dates indicated:

 

(Dollars in thousands)  As of September 30, 2024
   Loan balance   Collateral Type
        
One-to-four family residential real estate loans  $76   First mortgage on residential real estate
Construction and land loans   189   First mortgage on residential or commercial real estate
Commercial real estate loans   1,972   First mortgage on commercial real estate
Commercial loans   11,626   Accounts receivable, equipment and real estate
Agriculture loans   1,517   Crops, livestock, machinery and real estate
Total loans  $15,380    

 

(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 either September 30, 2024 or December 31, 2023.

 

The following tables present information regarding the Company’s past due and non-accrual loans by loan class, as of the dates indicated:

 

   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 September 30, 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  $-   $59   $-   $59   $76   $135   $344,245 
Construction and land loans   -    13    -    13    -    13    23,441 
Commercial real estate loans   -    -    -    -    788    788    323,228 
Commercial loans   2,589    1,031    -    3,620    11,466    15,086    166,566 
Agriculture loans   3,518    -    -    3,518    1,085    4,603    87,383 
Municipal loans   -    -    -    -    -    -    7,098 
Consumer loans   76    16    -    92    -    92    29,171 
Total  $6,183   $1,119   $-   $7,302   $13,415   $20,717   $981,132 
Percent of gross loans   0.62%   0.11%   0.00%   0.73%   1.34%   2.07%   97.93%

 

   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 
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 nine months ended September 30, 2024 and 2023 would have increased interest income by $244,000 and $75,000, respectively. No interest income related to non-accrual loans was included in interest income for the three and nine months ended September 30, 2024 and 2023.

 

The Company also categorizes loans into risk categories based on relevant information about the ability of 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 regarding the Company’s risk category of loans by type and year of origination, as of the dates indicated:

 

   2024   2023   2022   2021   2020   Prior   Revolving loans amortized cost   Revolving loans converted to term   Total 
(Dollars in thousands)  As of September 30, 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  $69,036   $87,966   $77,175   $38,548   $28,686   $36,751   $6,009   $133   $344,304 
Classified   -    -    -    -    -    76    -    -    76 
Total  $69,036   $87,966   $77,175   $38,548   $28,686   $36,827   $6,009   $133   $344,380 
Gross charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Construction and land loans                                             
Nonclassified  $4,264   $11,468   $1,951   $1,722   $2,594   $1,353   $102   $-   $23,454 
Classified   -    -    -    -    -    -    -    -    - 
Total  $4,264   $11,468   $1,951   $1,722   $2,594   $1,353   $102   $-   $23,454 
Gross charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Commercial real estate loans                                             
Nonclassified  $39,708   $43,771   $69,510   $54,452   $42,825   $68,946   $1,744   $89    321,045 
Classified   879    -    -    477    -    1,615    -    -    2,971 
Total  $40,587   $43,771   $69,510   $54,929   $42,825   $70,561   $1,744   $89   $324,016 
Gross charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Commercial loans                                             
Nonclassified  $21,221   $25,133   $25,238   $10,657   $8,622   $2,687   $65,215   $106   $158,879 
Classified   2,884    10,609    1,932    55    3,993    34    2,003    1,263    22,773 
Total  $24,105   $35,742   $27,170   $10,712   $12,615   $2,721   $67,218   $1,369   $181,652 
Gross charge-offs  $-   $-   $16   $86   $3   $-   $-   $-   $105 
Agriculture loans                                             
Nonclassified  $14,372   $3,839   $9,061   $3,887   $3,427   $14,533   $41,549   $233   $90,901 
Classified   -    182    241    402    9    86    165    -    1,085 
Total  $14,372   $4,021   $9,302   $4,289   $3,436   $14,619   $41,714   $233   $91,986 
Gross charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Municipal loans                                             
Nonclassified  $-   $5,551   $97   $-   $-   $1,450   $-   $-   $7,098 
Classified   -    -    -    -    -    -    -    -    - 
Total  $-   $5,551   $97   $-   $-   $1,450   $-   $-   $7,098 
Gross charge-offs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
Consumer loans                                             
Nonclassified  $2,918   $3,483   $717   $1,139   $695   $3,257   $17,035   $19   $29,263 
Classified   -    -    -    -    -    -    -    -    - 
Total  $2,918   $3,483   $717   $1,139   $695   $3,257   $17,035   $19   $29,263 
Gross charge-offs  $275   $7   $1   $-   $-   $-   $25   $-   $308 
Total loans                                             
Nonclassified  $151,519   $181,211   $183,749   $110,405   $86,849   $128,977   $131,654   $580   $974,944 
Classified   3,763    10,791    2,173    934    4,002    1,811    2,168    1,263    26,905 
Total  $155,282   $192,002   $185,922   $111,339   $90,851   $130,788   $133,822   $1,843   $1,001,849 
Gross charge-offs for the nine months ending September 30, 2024  $275   $7   $17   $86   $3   $-   $25   $-   $413 

 

 

   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 regarding the Company’s allowance for credit losses related to unfunded loan commitments for the periods indicated:

 

   2024   2023   2024   2023 
   Three months ended   Nine months ended 
(dollars in thousands)  September 30,   September 30, 
   2024   2023   2024   2023 
Balance at beginning of period  $300    200   $250    170 
Provision for credit losses   (150)   -    (100)   30 
Balance at end of period  $150   $200   $150   $200 

 

The Company did not make any loan modifications to borrowers experiencing financial difficulty during the three or nine months ended September 30, 2024. The Company did not make any loan modifications to borrowers experiencing financial difficulty during the three months ended September 30, 2023. The following table presents the amortized cost basis of loans at September 30, 2023 that were both experiencing financial difficulty and modified during the nine months ended September 30, 2023 by class, type of modification and includes the financial effect of the modification.

 

(Dollars in thousands)  As of September 30, 2023
   Amortized cost basis   % of loan class total   Financial effect
            
Term extension:             
Commercial  $145    0.1%   90 day payment deferral