Loan and Allowance for Credit Losses	6 Months Ended
Loan and Allowance for Credit Losses	Jun. 30, 2023
Loans And Leases Receivable Disclosure [Abstract]
Loans and leases receivable disclosure [Text Block]	NOTE 5: LOANS AND ALLOWANCE FOR CREDIT LOSSES June 30, December 31, (Dollars in thousands) 2023 2022 Commercial and industrial $ 61,880 $ 66,212 Construction and land development 63,874 66,479 Commercial real estate: Owner occupied 67,679 61,125 Hotel/motel 37,511 33,378 Multi-family 44,431 41,084 Other 126,180 128,986 Total commercial real estate 275,801 264,573 Residential real estate: Consumer mortgage 53,674 45,370 Investment property 56,160 52,278 Total residential real estate 109,834 97,648 Consumer installment 9,022 9,546 Total Loans $ 520,411 $ 504,458 Loans secured by real estate were approximately 86.4% of the Company’s total loan portfolio at June 30, 2023. At June 30, 2023, the Company’s geographic loan distribution was concentrated primarily in Lee County, Alabama, and surrounding areas. The loan portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. As part of the Company’s quarterly assessment of the allowance, the loan portfolio included the following portfolio segments: commercial and industrial, construction and land development, commercial real estate, residential real estate, and consumer installment. Where appropriate, the Company’s loan portfolio segments are further disaggregated into classes. A class is generally determined based on the initial measurement attribute, risk characteristics of the loan, and an entity’s method for monitoring and determining credit risk. The following describes the risk characteristics relevant to each of the portfolio segments and classes. Commercial and industrial (“C&I”) — includes loans to finance business operations, equipment purchases, or other needs for small and medium-sized commercial customers. Also included in this category are loans to finance agricultural production. Generally, the primary source of repayment is the cash flow from business operations and activities of the borrower. Construction and land development (“C&D”) — includes both loans and credit lines for the purpose of purchasing, carrying, and developing land into commercial developments or residential subdivisions. Also included are loans and credit lines for construction of residential, multi-family, and commercial buildings. Generally, the primary source of repayment is dependent upon the sale or refinance of the real estate collateral. Commercial real estate (“CRE”) — includes loans in these classes: ● Owner occupied – includes loans secured by business facilities to finance business operations, equipment and owner-occupied facilities primarily for small and medium-sized commercial customers. Generally, the primary source of repayment is the cash flow from business operations and activities of the borrower, who owns the property. ● Hotel/motel – includes loans for hotels and motels. Generally, the primary source of repayment is dependent upon income generated from the hotel/motel securing the loan. The underwriting of these loans takes into consideration the occupancy and rental rates, as well as the financial health of the borrower. ● Multi-family – primarily includes loans to finance income-producing multi-family properties . These include loans for 5 or more unit residential properties and apartments leased to residents. Generally , the primary source of repayment is dependent upon income generated from the real estate collateral. The underwriting of these loans takes into consideration the occupancy and rental rates, as well as the financial health of the respective borrowers. ● Other – primarily includes loans to finance income-producing commercial properties other than hotels/motels and multi-family properties, and which are not owner occupied. Loans in this class include loans for neighborhood retail centers, medical and professional offices, single retail stores, industrial buildings, and warehouses leased to local and other businesses. Generally, the primary source of repayment is dependent upon income generated from the real estate collateral. The underwriting of these loans takes into consideration the occupancy and rental rates, as well as the financial health of the borrower. Residential real estate (“RRE”) — includes loans in these two classes: ● Consumer mortgage – primarily includes first or second lien mortgages and home equity lines of credit to consumers that are secured by a primary residence or second home. These loans are underwritten in accordance with the Bank’s general loan policies and procedures which require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit history , and property value. ● Investment property – primarily includes loans to finance income-producing 1-4 family residential properties. Generally, the primary source of repayment is dependent upon income generated from leasing the property securing the loan. The underwriting of these loans takes into consideration the rental rates and property values, as well as the financial health of the borrowers. Consumer installment — includes loans to individuals, which may be secured by personal property or are unsecured. Loans include personal lines of credit, automobile loans, and other retail loans. These loans are underwritten in accordance with the Bank’s general loan policies and procedures which require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit history, and, if applicable, property values. The following is a summary of current, accruing past due, and nonaccrual loans by portfolio segment and class as of June 30, 2023 and December 31, 2022. Accruing Accruing Total 30-89 Days Greater than Accruing Non- Total (Dollars in thousands) Current Past Due 90 days Loans Accrual Loans June 30, 2023: Commercial and industrial $ 61,701 1 — 61,702 178 $ 61,880 Construction and land development 63,874 — — 63,874 — 63,874 Commercial real estate: Owner occupied 66,860 — — 66,860 819 67,679 Hotel/motel 37,511 — — 37,511 — 37,511 Multi-family 44,431 — — 44,431 — 44,431 Other 126,180 — — 126,180 — 126,180 Total commercial real estate 274,982 — — 274,982 819 275,801 Residential real estate: Consumer mortgage 53,432 118 — 53,550 124 53,674 Investment property 56,117 15 — 56,132 28 56,160 Total residential real estate 109,549 133 — 109,682 152 109,834 Consumer installment 9,000 22 — 9,022 — 9,022 Total $ 519,106 156 — 519,262 1,149 $ 520,411 December 31, 2022: Commercial and industrial $ 65,764 5 — 65,769 443 $ 66,212 Construction and land development 66,479 — — 66,479 — 66,479 Commercial real estate: Owner occupied 61,125 — — 61,125 — 61,125 Hotel/motel 33,378 — — 33,378 — 33,378 Multi-family 41,084 — — 41,084 — 41,084 Other 126,870 — — 126,870 2,116 128,986 Total commercial real estate 262,457 — — 262,457 2,116 264,573 Residential real estate: Consumer mortgage 45,160 38 — 45,198 172 45,370 Investment property 52,278 — — 52,278 — 52,278 Total residential real estate 97,438 38 — 97,476 172 97,648 Consumer installment 9,506 40 — 9,546 — 9,546 Total $ 501,644 83 — 501,727 2,731 $ 504,458 Credit Quality Indicators The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. The following table presents credit quality indicators for the loan portfolio segments and classes by year of origination as of June 30, 2023. These categories are utilized to develop the associated allowance for credit losses using historical losses adjusted for qualitative and environmental factors and are defined as follows: ● Pass – loans which are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral. ● Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date. These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification. ● Substandard Accruing – loans that exhibit a well-defined weakness which presently jeopardizes debt repayment, even though they are currently performing. These loans are characterized by the distinct possibility that the Company may incur a loss in the future if these weaknesses are not corrected . ● Nonaccrual – includes loans where management has determined that full payment of principal and interest is not expected. (Dollars in thousands) 2023 2022 2021 2020 2019 Prior to 2019 Revolving Loans Total Loans June 30, 2023: Commercial and industrial Pass $ 5,888 12,207 14,564 5,926 7,644 8,366 6,810 $ 61,405 Special mention — — — — — — 203 203 Substandard 58 — 27 — 9 — — 94 Nonaccrual — — — — 178 — — 178 Total commercial and industrial 5,946 12,207 14,591 5,926 7,831 8,366 7,013 61,880 Current period gross charge-offs — — — — — — — — Construction and land development Pass 18,973 39,757 2,957 1,584 140 185 278 63,874 Special mention — — — — — — — — Substandard — — — — — — — — Nonaccrual — — — — — — — — Total construction and land development 18,973 39,757 2,957 1,584 140 185 278 63,874 Current period gross charge-offs — — — — — — — — Commercial real estate: Owner occupied Pass 9,644 7,779 18,781 11,072 4,864 11,168 3,267 66,575 Special mention — — 232 — — — — 232 Substandard — — — — 53 — — 53 Nonaccrual — — — — 819 — — 819 Total owner occupied 9,644 7,779 19,013 11,072 5,736 11,168 3,267 67,679 Current period gross charge-offs — — — — — — — — Hotel/motel Pass 6,533 10,087 3,264 1,586 4,022 12,019 — 37,511 Special mention — — — — — — — — Substandard — — — — — — — — Nonaccrual — — — — — — — — Total hotel/motel 6,533 10,087 3,264 1,586 4,022 12,019 — 37,511 Current period gross charge-offs — — — — — — — — (Dollars in thousands) 2023 2022 2021 2020 2019 Prior to 2019 Revolving Loans Total Loans June 30, 2023: Multi-family Pass 8,039 19,240 1,991 6,213 3,856 3,166 1,926 44,431 Special mention — — — — — — — — Substandard — — — — — — — — Nonaccrual — — — — — — — — Total multi-family 8,039 19,240 1,991 6,213 3,856 3,166 1,926 44,431 Current period gross charge-offs — — — — — — — — Other Pass 9,264 37,412 32,595 15,241 11,061 19,542 906 126,021 Special mention — — — — — — — — Substandard — — — 159 — — — 159 Nonaccrual — — — — — — — — Total other 9,264 37,412 32,595 15,400 11,061 19,542 906 126,180 Current period gross charge-offs — — — — — — — — Residential real estate: Consumer mortgage Pass 11,623 20,752 2,769 2,847 1,545 13,125 6 52,667 Special mention — — — — — 379 — 379 Substandard — — — — — 504 — 504 Nonaccrual — — — — — 124 — 124 Total consumer mortgage 11,623 20,752 2,769 2,847 1,545 14,132 6 53,674 Current period gross charge-offs — — — — — — — — Investment property Pass 8,327 13,638 10,155 13,415 5,911 2,707 1,446 55,599 Special mention 43 250 — — — — — 293 Substandard — — — 240 — — — 240 Nonaccrual — — — — — 28 — 28 Total investment property 8,370 13,888 10,155 13,655 5,911 2,735 1,446 56,160 Current period gross charge-offs — — — — — — — — Consumer installment Pass 2,671 4,595 1,002 369 153 184 — 8,974 Special mention — — 1 4 — — — 5 Substandard 14 17 10 — 2 — — 43 Nonaccrual — — — — — — — — Total consumer installment 2,685 4,612 1,013 373 155 184 — 9,022 Current period gross charge-offs 29 24 13 1 — — — 67 Total loans Pass 80,960 165,467 88,078 58,253 39,195 70,461 14,643 517,057 Special mention 43 250 233 4 — 379 203 1,112 Substandard 72 17 37 399 64 504 — 1,093 Nonaccrual — — — — 997 152 — 1,149 Total loans $ 81,075 165,734 88,348 58,656 40,256 71,496 14,846 $ 520,411 Total current period gross charge-offs $ 29 24 13 1 — — — 67 (Dollars in thousands) Pass Special Mention Substandard Accruing Nonaccrual Total loans December 31, 2022: Commercial and industrial $ 65,550 7 212 443 $ 66,212 Construction and land development 66,479 — — — 66,479 Commercial real estate: Owner occupied 60,726 238 161 — 61,125 Hotel/motel 33,378 — — — 33,378 Multi-family 41,084 — — — 41,084 Other 126,700 170 — 2,116 128,986 Total commercial real estate 261,888 408 161 2,116 264,573 Residential real estate: Consumer mortgage 44,172 439 587 172 45,370 Investment property 51,987 43 248 — 52,278 Total residential real estate 96,159 482 835 172 97,648 Consumer installment 9,498 1 47 — 9,546 Total $ 499,574 898 1,255 2,731 $ 504,458 The following table is a summary of the Company’s nonaccrual loans by major categories as of June 30, 2023 and December 31, 2022. CECL Incurred Loss June 30, 2023 December 31, 2022 Nonaccrual Nonaccrual Total Loans with Loans with an Nonaccrual Nonaccrual (Dollars in thousands) No Allowance Allowance Loans Loans Commercial and industrial $ 178 — 178 $ 443 Commercial real estate 819 — 819 2,116 Residential real estate 152 — 152 172 Total $ 1,149 — 1,149 $ 2,731 The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses: (Dollars in thousands) Real Estate Business Assets Total Loans June 30, 2023: Commercial and industrial $ — 178 $ 178 Commercial real estate 819 — 819 Total $ 819 178 $ 997 Allowance for Credit Losses The Company adopted ASC 326 on January 1, 2023, which introduced the CECL methodology for estimating all expected losses over the life of a financial asset. Under the CECL methodology, the allowance for credit losses is measured on a collective basis for pools of loans with similar risk characteristics, and for loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. The following table details the changes in the allowance for credit losses by portfolio segment for the respective periods. June 30, 2023 (Dollars in thousands) Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment Total Quarter ended: Beginning balance $ 1,232 1,021 3,966 497 105 $ 6,821 Charge-offs — — — — (56) (56) Recoveries 194 — — 5 1 200 Net recoveries (charge-offs) 194 — — 5 (55) 144 Provision for credit losses (228) (16) (178) 27 64 (331) Ending balance $ 1,198 1,005 3,788 529 114 $ 6,634 Six months ended: Beginning balance $ 747 949 3,109 828 132 $ 5,765 Impact of adopting ASC 326 532 (17) 873 (347) (22) 1,019 Charge-offs — — — — (67) (67) Recoveries 196 — — 10 2 208 Net recoveries (charge-offs) 196 — — 10 (65) 141 Provision for credit losses (277) 73 (194) 38 69 (291) Ending balance $ 1,198 1,005 3,788 529 114 $ 6,634 June 30, 2022 (Dollars in thousands) Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment Total Quarter ended: Beginning balance $ 774 508 2,536 737 103 $ 4,658 Charge-offs (4) — — — (16) (20) Recoveries 2 — 22 7 47 78 Net (charge-offs) recoveries (2) — 22 7 31 58 Provision for loan losses (11) 68 (35) 9 (31) — Ending balance $ 761 576 2,523 753 103 $ 4,716 Six months ended: Beginning balance $ 857 518 2,739 739 86 $ 4,939 Charge-offs (4) — — — (64) (68) Recoveries 4 — 22 14 55 95 Net recoveries (charge-offs) — — 22 14 (9) 27 Provision for loan losses (96) 58 (238) — 26 (250) Ending balance $ 761 576 2,523 753 103 $ 4,716 The following table presents an analysis of the allowance for loan losses and recorded investment in loans by portfolio segment and impairment methodology as of June 30, 2022 as determined, prior to the adoption of ASC 326. Collectively evaluated (1) Individually evaluated (2) Total Allowance Recorded Allowance Recorded Allowance Recorded for loan investment for loan investment for loan investment (In thousands) losses in loans losses in loans losses in loans June 30, 2022: Commercial and industrial $ 761 70,087 — — 761 70,087 Construction and land development 576 38,654 — — 576 38,654 Commercial real estate 2,523 240,120 — 176 2,523 240,296 Residential real estate 753 85,224 — — 753 85,224 Consumer installment 103 7,122 — — 103 7,122 Total $ 4,716 441,207 — 176 4,716 441,383 (1) Represents loans collectively evaluated for impairment, prior to the adopton of ASC 326, in accordance with ASC 450-20, Loss Contingencies, and pursuant to amendments by ASU 2010-20 regarding allowance for non-impaired loans. (2) Represents loans individually evaluated for impairment, prior to the adoption of ASC 326, in accordance with ASC 310-30, Receivables, and pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans. Impaired loans The following tables present impaired loans at December 31, 2022 as determined under ASC 310 prior to the adoption of ASC 326. Loans that have been fully charged-off are not included in the following tables. The related allowance generally represents the following components that correspond to impaired loans: ● Individually evaluated impaired loans equal to or greater than $500 thousand secured by real estate (nonaccrual construction and land development, commercial real estate, and residential real estate loans). ● Individually evaluated impaired loans equal to or greater than $250 thousand not secured by real estate (nonaccrual commercial and industrial and consumer installment loans). The following tables set forth certain information regarding the Company’s impaired loans that were individually evaluated for impairment at December 31, 2022. December 31, 2022 (Dollars in thousands) Unpaid principal balance (1) Charge-offs and payments applied (2) Recorded investment (3) Related allowance With no allowance recorded: Commercial and industrial $ 210 (1) 209 $ — Commercial real estate: Owner occupied 858 (3) 855 Total commercial real estate 858 (3) 855 — Total 1,068 (4) 1,064 — With allowance recorded: Commercial and industrial 234 — 234 $ 59 Commercial real estate: Owner occupied 1,261 — 1,261 446 Total commercial real estate 1,261 — 1,261 446 Total 1,495 — 1,495 505 Total impaired loans $ 2,563 (4) 2,559 $ 505 (1) Unpaid principal balance represents the contractual obligation due from the customer. (2) Charge-offs and payments applied represents cumulative charge-offs taken, as well as interest payments that have been applied against the outstanding principal balance subsequent to the loans being placed on nonaccrual status. (3) Recorded investment represents the unpaid principal balance less charge-offs and payments applied; it is shown before any related allowance for loan losses. Pursuant to the adoption of ASU 2022-02, effective January 1, 2023, the Company prospectively discontinued the recognition and measurement guidance previously required for troubled debt restructurings (TDRs). As of June 30, 2023, the Company had no loans that would have previously required disclosure as TDRs. The following table provides the average recorded investment in impaired loans, if any, by portfolio segment, and the amount of interest income recognized on impaired loans after impairment by portfolio segment and class during the quarter and six months ended June 30, 2023 as determined under ASC 310 prior to the adoption of ASC 326. Quarter ended June 30, 2022 Six months ended June 30, 2022 Average Total interest Average Total interest recorded income recorded income (Dollars in thousands) investment recognized investment recognized Impaired loans: Commercial real estate: Other $ 180 — $ 212 — Total commercial real estate 180 — 212 — Residential real estate: Investment property — — 9 — Total residential real estate — — 9 — Total $ 180 — $ 221 —