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Loans and Allowance for Credit Losses
 12 Months Ended
Dec. 31, 2024
Loans and Allowance for Credit Losses [Abstract]  
Loans and Allowance for Credit Losses

Note 4: Loans and Allowance for Credit Losses

 

The following tables present the categories of loans at December 31, 2024, and 2023:

 

   Total Loans 
($ in thousands)  2024   2023 
         
Commercial & industrial  $124,764   $126,716 
Commercial real estate - owner occupied   134,431    126,717 
Commercial real estate - nonowner occupied   345,142    297,323 
Agricultural   64,680    65,659 
Residential real estate   308,378    318,123 
Home equity line of credit (HELOC)   53,811    47,845 
Consumer   15,529    17,829 
Total loans   1,046,735    1,000,212 
Allowance for credit losses   (15,096)   (15,786)
Loans, net  $1,031,639   $984,426 

 

The Company makes commercial, agri-business, consumer and residential loans to customers throughout its defined market area. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

 

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

 

Listed below is a summary of loan commitments, unused lines of credit, and standby letters of credit as of December 31, 2024, and 2023.

 

($ in thousands)  2024   2023 
Loan commitments and unused lines of credit  $224,895   $201,605 
Standby letters of credit   915    1,184 
Totals  $225,810   $202,789 

 

The risk characteristics of each loan portfolio segment are as follows:

 

Commercial & Industrial and Agricultural

 

Commercial & industrial and agricultural loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may include a personal guarantee. Short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial Real Estate (Owner and Nonowner Occupied)

 

Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The characteristics of properties securing the Company’s commercial real estate portfolio are diverse, but with geographic location almost entirely in the Company’s market area. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. In general, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate versus non-owner-occupied loans.

 

Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews and financial analysis of the developers and property owners. Construction loans are generally based on estimates of costs and value associated with the completed project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

 

Residential Real Estate, Home Equity Line of Credit (“HELOC”) and Consumer

 

Residential and consumer loans consist of two segments – residential mortgage loans and personal loans. Residential mortgage loans are secured by 1-4 family residences and are generally owner-occupied, and the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. HELOCs are typically secured by a subordinate interest in 1-4 family residences, and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles. Some consumer personal loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that these loans are of smaller individual amounts and spread over a large number of borrowers.

 

Allowance for Credit Losses (ACL)

 

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost, which is measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. A provision for credit losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors.

 

The following table summarizes the activity related to the ACL for the twelve months ended December 31, 2024.

 

($ in thousands)
For the twelve months ended
December 31, 2024		  Balance,
beginning of
period		   Chargeoffs   Recoveries   Provision for Credit Losses   Balance,
end of
period		 
                     
Commercial & industrial  $2,003   $(233)  $5   $891   $2,666 
Commercial real estate - owner occupied   1,952    
-
    
-
    (146)   1,806 
Commercial real estate - nonowner occupied   5,718    
-
    
-
    3    5,721 
Agricultural   440    
-
    
-
    444    884 
Residential real estate   4,936    (3)   
-
    (1,603)   3,330 
HELOC   510    
-
    
-
    10    520 
Consumer   227    (53)   34    (39)   169 
Total  $15,786   $(289)  $39   $(440)  $15,096 

As a result of the adoption of ASC 326, the Company recorded a $1.4 million increase to the ACL as a cumulative-effect adjustment on January 1, 2023. The following table summarizes the activity related to the ACL for the twelve months ended December 31, 2023.

 

($ in thousands)
For the twelve months ended
December 31, 2023		  Balance, beginning of period   Impact of
Adopting
ASC 326		   Chargeoffs   Recoveries   Provision for Credit Losses   Balance,
end of
period		 
                         
Commercial & industrial  $1,663   $230   $
-
   $
      -
   $110   $2,003 
Commercial real estate - owner occupied   1,696    54    
-
    
-
    202    1,952 
Commercial real estate - nonowner occupied   4,584    1,015    
-
    
-
    119    5,718 
Agricultural   611    (194)   
-
    
-
    23    440 
Residential real estate   4,438    360    (53)   1    190    4,936 
HELOC   547    (76)   
-
    
-
    39    510 
Consumer   279    (17)   (65)   25    5    227 
Total  $13,818   $1,372   $(118)  $26   $688   $15,786 

 

Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The Company reviews individually evaluated loans for designation as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the ACL.

 

The following table presents an analysis of collateral-dependent loans of the Company as of December 31, 2024.

 

($ in thousands)  Collateral Type   Allocated 
December 31, 2024  Real Estate   Other   Total   Allowance 
                 
Commercial & industrial  $2,252   $625   $2,877   $380 
Commercial real estate - owner occupied   429    
-
    429    13 
Commercial real estate - nonowner occupied   370    
-
    370    
-
 
Agricultural   
-
    
-
    
-
    
-
 
Residential real estate   801    
-
    801    26 
HELOC   
-
    
-
    
-
    
-
 
Consumer   
-
    
-
    
-
    
-
 
Total  $3,852   $625   $4,477   $419 

 

($ in thousands)  Collateral Type   Allocated 
December 31, 2023  Real Estate   Other   Total   Allowance 
                 
Commercial & industrial  $604   $
-
   $604   $97 
Commercial real estate - owner occupied   
-
    
-
    
-
    
-
 
Commercial real estate - nonowner occupied   284    
-
    284    40 
Agricultural   
-
    
-
    
-
    
-
 
Residential real estate   1,023    
-
    1,023    18 
HELOC   
-
    
-
    
-
    
-
 
Consumer   
-
    
-
    
-
    
-
 
Total  $1,911   $
-
   $1,911   $155 

Credit Risk Profile

 

The Company categorizes loans into risk categories (loan grades) 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 includes loans with an outstanding balance greater than $100,000 and non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

 

Pass (grades 1 – 4): Loans which management has determined to be performing as expected and in agreement with the terms established at the time of loan origination.

 

Special Mention (grade 5): Assets have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Ordinarily, special mention credits have characteristics which corrective management action would remedy.

 

Substandard (grade 6): Loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardized the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

 

Doubtful (grade 7): Loans classified as doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current known facts, conditions and values, highly questionable and improbable.

 

Loss (grade 8): Loans are considered uncollectable and of such little value that continuing to carry them as assets on the Company’s financial statement is not feasible. Loans will be classified as loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

The Company evaluates the loan risk grading system definitions and allowance for credit loss methodology on an ongoing basis. The following table presents loan balances by credit quality indicators and gross chargeoffs by year of origination as of December 31, 2024.

 

                               Revolving Loans      
($ in thousands)  Term Loans by Year of Origination   Revolving   Converted     
December 31, 2024  2024   2023   2022   2021   2020   Prior   Loans   to Term   Total 
Commercial & industrial                                    
Pass (1 - 4)  $22,688   $12,927   $12,813   $14,207   $9,101   $10,022   $36,363   $3,204   $121,325 
Special Mention (5)   -    355    -    -    133    -    25    -    513 
Substandard (6)   -    -    585    -    -    673    1,147    88    2,493 
Doubtful (7)   -    153    -    204    -    48    -    28    433 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total  $22,688   $13,435   $13,398   $14,411   $9,234   $10,743   $37,535   $3,320   $124,764 
Current period gross chargeoffs  $-   $42   $25   $23   $143   $-   $-   $-   $233 
                                              
Commercial real estate - owner occupied                                             
Pass (1 - 4)  $15,070   $30,372   $20,002   $24,406   $13,491   $30,140   $463   $49   $133,993 
Special Mention (5)   -    -    -    -    -    -    -    -    - 
Substandard (6)   -    -    -    -    430    -    -    -    430 
Doubtful (7)   -    -    -    7    -    1    -    -    8 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total  $15,070   $30,372   $20,002   $24,413   $13,921   $30,141   $463   $49   $134,431 
Current period gross chargeoffs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
                                              
Commercial real estate - nonowner occupied                                             
Pass (1 - 4)  $94,098   $47,026   $50,942   $40,584   $39,093   $72,609   $118   $-   $344,470 
Special Mention (5)   398    -    -    -    -    -    -    -    398 
Substandard (6)   -    -    154    -    -    120    -    -    274 
Doubtful (7)   -    -    -    -    -    -    -    -    - 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total  $94,496   $47,026   $51,096   $40,584   $39,093   $72,729   $118   $-   $345,142 
Current period gross chargeoffs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
                                              
Agricultural                                             
Pass (1 - 4)  $8,100   $8,295   $14,482   $10,748   $2,618   $8,967   $11,470   $-   $64,680 
Special Mention (5)   -    -    -    -    -    -    -    -    - 
Substandard (6)   -    -    -    -    -    -    -    -    - 
Doubtful (7)   -    -    -    -    -    -    -    -    - 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total  $8,100   $8,295   $14,482   $10,748   $2,618   $8,967   $11,470   $-   $64,680 
Current period gross chargeoffs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
                                              
Residential real estate                                             
Pass (1 - 4)  $31,291   $41,982   $100,375   $76,146   $28,237   $28,797   $-   $-   $306,828 
Special Mention (5)   -    -    -    -    -    -    -    -    - 
Substandard (6)   -    279    -    256    50    965    -    -    1,550 
Doubtful (7)   -    -    -    -    -    -    -    -    - 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total  $31,291   $42,261   $100,375   $76,402   $28,287   $29,762   $-   $-   $308,378 
Current period gross chargeoffs  $-   $-   $-   $3   $-   $-   $-   $-   $3 
                                              
Home equity line of credit (HELOC)                                             
Pass (1 - 4)  $-   $-   $-   $12   $18   $51   $46,908   $6,591   $53,580 
Special Mention (5)   -    -    -    -    -    -    -    -    - 
Substandard (6)   -    -    -    -    -    48    139    44    231 
Doubtful (7)   -    -    -    -    -    -    -    -    - 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total  $-   $-   $-   $12   $18   $99   $47,047   $6,635   $53,811 
Current period gross chargeoffs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
                                              
Consumer                                             
Pass (1 - 4)  $1,909   $1,993   $3,247   $725   $319   $94   $7,229   $-   $15,516 
Special Mention (5)   -    -    -    -    -    -    -    -    - 
Substandard (6)   -    -    13    -    -    -    -    -    13 
Doubtful (7)   -    -    -    -    -    -    -    -    - 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total  $1,909   $1,993   $3,260   $725   $319   $94   $7,229   $-   $15,529 
Current period gross chargeoffs  $-   $-   $-   $5   $2   $-   $46   $-   $53 
                                              
Total Loans                                             
Pass (1 - 4)  $173,156   $142,595   $201,861   $166,828   $92,877   $150,680   $102,551   $9,844   $1,040,392 
Special Mention (5)   398    355    -    -    133    -    25    -    911 
Substandard (6)   -    279    752    256    480    1,806    1,286    132    4,991 
Doubtful (7)   -    153    -    211    -    49    -    28    441 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total Loans  $173,554   $143,382   $202,613   $167,295   $93,490   $152,535   $103,862   $10,004   $1,046,735 
Current period gross chargeoffs  $-   $42   $25   $31   $145   $-   $46   $-   $289 

The following table presents loan balances by credit quality indicators and gross chargeoffs by year of origination as of December 31, 2023.

 

                               Revolving Loans      
($ in thousands)  Term Loans by Year of Origination   Revolving   Converted     
December 31, 2023  2023   2022   2021   2020   2019   Prior   Loans   to Term   Total 
Commercial & industrial                                    
Pass (1 - 4)  $17,239   $18,076   $19,143   $10,573   $7,449   $5,965   $45,831   $444   $124,720 
Special Mention (5)   -    731    -    64    -    140    201    -    1,136 
Substandard (6)   -    41    -    -    25    137    -    80    283 
Doubtful (7)   195    -    226    -    1    100    50    5    577 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total  $17,434   $18,848   $19,369   $10,637   $7,475   $6,342   $46,082   $529   $126,716 
Current period gross chargeoffs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
                                              
Commercial real estate - owner occupied                                             
Pass (1 - 4)  $29,253   $21,427   $26,808   $12,931   $12,881   $20,409   $112   $173   $123,994 
Special Mention (5)   -    -    -    2,338    358    -    -    -    2,696 
Substandard (6)   -    -    -    -    -    -    -    -    - 
Doubtful (7)   -    -    26    -    1    -    -    -    27 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total  $29,253   $21,427   $26,834   $15,269   $13,240   $20,409   $112   $173   $126,717 
Current period gross chargeoffs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
                                              
Commercial real estate - nonowner occupied                                             
Pass (1 - 4)  $52,915   $67,285   $47,658   $46,364   $30,561   $47,895   $2,377   $-   $295,055 
Special Mention (5)   -    -    -    -    838    1,134    -    -    1,972 
Substandard (6)   -    -    -    -    -    154    18    -    172 
Doubtful (7)   -    -    -    -    -    124    -    -    124 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total  $52,915   $67,285   $47,658   $46,364   $31,399   $49,307   $2,395   $-   $297,323 
Current period gross chargeoffs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
                                              
Agricultural                                             
Pass (1 - 4)  $9,496   $16,131   $12,940   $3,029   $1,859   $9,801   $12,403   $-   $65,659 
Special Mention (5)   -    -    -    -    -    -    -    -    - 
Substandard (6)   -    -    -    -    -    -    -    -    - 
Doubtful (7)   -    -    -    -    -    -    -    -    - 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total  $9,496   $16,131   $12,940   $3,029   $1,859   $9,801   $12,403   $-   $65,659 
Current period gross chargeoffs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
                                              
Residential real estate                                             
Pass (1 - 4)  $53,013   $110,531   $85,075   $31,558   $10,425   $22,564   $1,816   $1,300   $316,282 
Special Mention (5)   -    -    -    -    -    -    -    -    - 
Substandard (6)   -    -    361    54    485    920    -    -    1,820 
Doubtful (7)   -    -    -    -    -    21    -    -    21 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total  $53,013   $110,531   $85,436   $31,612   $10,910   $23,505   $1,816   $1,300   $318,123 
Current period gross chargeoffs  $-   $-   $32   $21   $-   $-   $-   $-   $53 
                                              
Home equity line of credit (HELOC)                                             
Pass (1 - 4)  $-   $-   $46   $18   $85   $94   $40,932   $6,492   $47,667 
Special Mention (5)   -    -    -    -    -    59    20    99    178 
Substandard (6)   -    -    -    -    -    -    -    -    - 
Doubtful (7)   -    -    -    -    -    -    -    -    - 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total  $-   $-   $46   $18   $85   $153   $40,952   $6,591   $47,845 
Current period gross chargeoffs  $-   $-   $-   $-   $-   $-   $-   $-   $- 
                                              
Consumer                                             
Pass (1 - 4)  $3,296   $5,142   $1,429   $740   $221   $128   $6,863   $-   $17,819 
Special Mention (5)   -    -    -    1    -    -    -    -    1 
Substandard (6)   -    9    -    -    -    -    -    -    9 
Doubtful (7)   -    -    -    -    -    -    -    -    - 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total  $3,296   $5,151   $1,429   $741   $221   $128   $6,863   $-   $17,829 
Current period gross chargeoffs  $-   $12   $8   $11   $-   $-   $-   $34   $65 
                                              
Total Loans                                             
Pass (1 - 4)  $165,212   $238,592   $193,099   $105,213   $63,481   $106,856   $110,334   $8,409   $991,196 
Special Mention (5)   -    731    -    2,403    1,196    1,333    221    99    5,983 
Substandard (6)   -    50    361    54    510    1,211    18    80    2,284 
Doubtful (7)   195    -    252    -    2    245    50    5    749 
Loss (8)   -    -    -    -    -    -    -    -    - 
Total Loans  $165,407   $239,373   $193,712   $107,670   $65,189   $109,645   $110,623   $8,593   $1,000,212 
Current period gross chargeoffs  $-   $12   $40   $32   $-   $-   $-   $34   $118 

The following tables present the Company’s loan portfolio aging analysis as of December 31, 2024 and 2023:

 

($ in thousands)  30-59 Days   60-89 Days   Greater Than 90 Days    Total          
December 31, 2024  Past Due   Past Due   Past Due   Past Due   Current   Total Loans 
                         
Commercial & industrial  $354   $
-
   $2,927   $3,281   $121,483   $124,764 
Commercial real estate - owner occupied   
-
    
-
    429    429    134,002    134,431 
Commercial real estate - nonowner occupied   
-
    
-
    370    370    344,772    345,142 
Agricultural   
-
    
-
    
-
    
-
    64,680    64,680 
Residential real estate   215    1,021    787    2,023    306,355    308,378 
HELOC   131    15    130    276    53,535    53,811 
Consumer   193    27    -    220    15,309    15,529 
Total Loans  $893   $1,063   $4,643   $6,599   $1,040,136   $1,046,735 

 

  30-59 Days   60-89 Days   Greater Than 90 Days    Total          
December 31, 2023  Past Due   Past Due   Past Due   Past Due   Current   Total Loans 
                         
Commercial & industrial  $26   $
-
   $658   $684   $126,032   $126,716 
Commercial real estate - owner occupied   
-
    
-
    
-
    
-
    126,717    126,717 
Commercial real estate - nonowner occupied   
-
    
-
    29    29    297,294    297,323 
Agricultural   
-
    
-
    
-
    
-
    65,659    65,659 
Residential real estate   
-
    222    395    617    317,506    318,123 
HELOC   
-
    8    67    75    47,770    47,845 
Consumer   88    33    1    122    17,707    17,829 
Total Loans  $114   $263   $1,150   $1,527   $998,685   $1,000,212 

 

All loans past due 90 days are systematically placed on nonaccrual status.

 

When a loan is moved to nonaccrual status, total unpaid interest accrued to date is reversed from income. Subsequent payments are applied to the outstanding principal balance with the interest portion of the payment recorded on the balance sheet as a contra-loan. Interest received on nonaccrual loans may be realized once all contractual principal amounts are received or when a borrower establishes a history of six consecutive timely principal and interest payments. It is at the discretion of management to determine when a loan is placed back on accrual status upon receipt of six consecutive timely payments.

The categories of nonaccrual loans as of December 31, 2024 and December 31, 2023 are presented in the following table.

 

   December 31, 2024 
($ in thousands)  Nonaccrual loans with no allowance   Nonaccrual loans with an allowance   Total nonaccrual loans 
Commercial & industrial  $2,301   $626   $2,927 
Commercial real estate - owner occupied   7    430    437 
Commercial real estate - nonowner occupied   370    
-
    370 
Agricultural   
-
    
-
    
-
 
Residential real estate   1,428    111    1,539 
Home equity line of credit (HELOC)   231    
-
    231 
Consumer   12    
-
    12 
Total loans  $4,349   $1,167   $5,516 

 

   December 31, 2023 
($ in thousands)  Nonaccrual loans with no allowance   Nonaccrual loans with an allowance   Total nonaccrual loans 
Commercial & industrial  $651   $97   $748 
Commercial real estate - owner occupied   26    
-
    26 
Commercial real estate - nonowner occupied   141    
-
    141 
Agricultural   
-
    
-
    
-
 
Residential real estate   1,694    18    1,712 
Home equity line of credit (HELOC)   180    
-
    180 
Consumer   11    
-
    11 
Total loans  $2,703   $115   $2,818 

 

Modifications made to Borrowers Experiencing Financial Difficulty

 

In the normal course of business, the Company may execute loan modifications with borrowers. These modifications are analyzed to determine whether the modification is considered concessionary, long term and made to a borrower experiencing financial difficulty. The Company’s modifications generally include interest rate adjustments, principal reductions, and amortization and maturity date extensions. These modifications provide the borrowers with short-term cash relief to allow them to improve their financial condition. If a loan modification is determined to be made to a borrower experiencing financial difficulty, the loan is considered collateral dependent and evaluated as part of the ACL as described above in the Allowance for Credit Losses section of this Note.

 

For the twelve months ended December 31, 2024, the Company did not modify any loans made to borrowers experiencing financial difficulty. The Company had no commitments to lend to borrowers experiencing financial difficulty for which the Company had modified an existing loan as of December 31, 2024.

The Company monitors loan payments on an on-going basis to determine if a loan is considered to have a payment default. Determination of payment default involves analyzing the economic conditions that exist for each customer and its ability to generate positive cash flows during the loan term. For the twelve-month period ended December 31, 2024, the Company had no loan modifications made to borrowers experiencing financial difficulty for which there was a payment default within the 12 months following the modification date.

 

Unfunded Loan Commitments

 

The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e. commitment cannot be canceled at any time). The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the ACL for loans. The ACL for unfunded loan commitments is classified on the balance sheet within Other liabilities.

 

The following table presents the balance and activity in the ACL for unfunded loan commitments for the twelve months ended December 31, 2024, and 2023.

 

($ in thousands)  2024   2023 
Balance, beginning of period  $776   $
-
 
Adjustment for adoption of ASU 2016-13   
-
    1,149 
Provision for unfunded commitments   564    (373)
Balance, end of period  $1,340   $776 

 

Related Party Loans

 

Loans to directors and their related interests, including loans to companies for which directors are principal owners and executive officers are presented in the following table at December 31:

 

($ in thousands)  2024   2023 
Balance at beginning of period  $435   $521 
Effect of change in compostion of directors and executive officers   
-
    
-
 
New Term Loans   
-
    
-
 
Repayment of term loans   (33)   (144)
Changes in balances of revolving lines of credit   48    58 
Balance at end of period  $450   $435