XML 48 R11.htm IDEA: XBRL DOCUMENT v3.20.1
Loans and Allowance for Loan Losses
 3 Months Ended
Mar. 31, 2020
Receivables [Abstract]  
Loans and Allowance for Loan Losses

Note 3: Loans and Allowance for Loan Losses

 

Major classifications of loans (net of deferred loan fees of $146,471 at March 31, 2020 and $155,697 at December 31, 2019) are as follows:

 

   March 31, 2020   December 31, 2019 
Commercial  $53,516,468   $52,848,455 
Commercial real estate:          
Construction   14,072,423    12,491,078 
Other   138,364,100    143,821,990 
Consumer:          
Real estate   67,334,135    59,533,045 
Other   5,088,534    5,377,992 
    278,375,660    274,072,560 
Allowance for loan losses   (4,014,213)   (4,003,758)
Loans, net  $274,361,447   $270,068,802 

 

We had $76.4 million and $85.2 million of loans pledged as collateral to secure funding with the Federal Reserve Bank (“FRB”) Discount Window at March 31, 2020 and at December 31, 2019, respectively.

 

Our portfolio grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled. Our internal credit risk grading system is based on experience with similarly graded loans, industry best practices, and regulatory guidance. Our portfolio is graded in its entirety.

 

Our internally assigned grades pursuant to the Board-approved lending policy are as follows:

 

  ● Excellent (1) The borrowing entity has more than adequate cash flow, unquestionable strength, strong earnings and capital and, where applicable, no overdrafts.

 

●Good (2) The borrowing entity has dependable cash flow, better than average financial condition, good capital and usually no overdrafts.

 

  ● Satisfactory (3) The borrowing entity has adequate cash flow, satisfactory financial condition, and explainable overdrafts (if any).

 

  ● Watch (4) The borrowing entity has generally adequate, yet inconsistent cash flow, cyclical earnings, weak capital, loan to/from stockholders, and infrequent overdrafts. The borrower has consistent yet sometimes unpredictable sales and growth.

 

  ● OAEM (5) The borrowing entity has marginal cash flow, occasional past dues, and frequent and unexpected working capital needs.

 

  ● Substandard (6) The borrowing entity has a cash flow barely sufficient to service debt, deteriorated financial condition, and bankruptcy is possible. The borrowing entity has declining sales, rising costs, and may need to look for secondary source of repayment.

 

  ● Doubtful (7) The borrowing entity has negative cash flow. Survival of the business is at risk, full repayment is unlikely, and there are frequent and unexplained overdrafts. The borrowing entity shows declining trends and no operating profits.

 

  ● Loss (8) The borrowing entity has negative cash flow with no alternatives. Survival of the business is unlikely.

 

The following tables illustrate credit quality by class and internally assigned grades at March 31, 2020 and December 31, 2019. “Pass” includes loans internally graded as excellent, good and satisfactory.

 

March 31, 2020 
    Commercial   Commercial
Real Estate
Construction		   Commercial
Real Estate
Other		   Consumer
Real Estate		   Consumer
Other		   Total 
Pass   $48,901,606   $13,447,945   $132,143,176   $64,711,278   $4,770,022   $263,974,027 
Watch    2,224,636    624,478    3,643,197    1,136,448    246,099    7,874,858 
OAEM    345,653    —    244,220    606,657    23,856    1,220,386 
Substandard    2,044,573    —    2,333,507    879,752    48,557    5,306,389 
Doubtful    —    —    —    —    —    — 
Loss    —    —    —    —    —    — 
Total   $53,516,468   $14,072,423   $138,364,100   $67,334,135   $5,088,534   $278,375,660 

 

December 31, 2019 
    Commercial   Commercial
Real Estate
Construction		   Commercial
Real Estate
Other		   Consumer
Real Estate		   Consumer
Other		   Total 
Pass   $48,098,936   $12,005,834   $137,641,011   $56,034,247   $4,966,615   $258,746,643 
Watch    2,303,568    485,244    3,758,220    2,096,445    315,375    8,958,852 
OAEM    460,551    —    649,039    522,600    44,232    1,676,422 
Substandard    1,985,400    —    1,773,720    879,753    51,770    4,690,643 
Doubtful    —    —    —    —    —    — 
Loss    —    —    —    —    —    — 
Total   $52,848,455   $12,491,078   $143,821,990   $59,533,045   $5,377,992   $274,072,560 

 

The following tables include an aging analysis of the recorded investment in loans segregated by class.

 

March 31, 2020
   30-59 Days
Past Due		   60-89 Days
Past Due		   Greater than
90 Days		   Total Past Due   Current   Total Loans
Receivable		   Recorded Investment ≥
90 Days and Accruing		 
Commercial  $12,347   $13,604   $—   $25,951   $53,490,517   $53,516,468   $— 
Commercial Real Estate Construction   —    —    —    —    14,072,423    14,072,423    — 
Commercial Real Estate Other   19,392    335,953    1,161,279    1,516,624    136,847,476    138,364,100    — 
Consumer Real Estate   —    34,960    629,999    664,959    66,669,176    67,334,135    — 
Consumer Other   61,554    76,410    13,848    151,812    4,936,722    5,088,534    — 
Total  $93,293   $460,927   $1,805,126   $2,359,346   $276,016,314   $278,375,660   $— 

    

  December 31, 2019  
   30-59 Days
Past Due		   60-89 Days
Past Due		   Greater than
90 Days		   Total Past Due   Current   Total Loans
Receivable		   Recorded Investment ≥
90 Days and Accruing		 
Commercial  $39,329   $—   $178,975   $218,304   $52,630,151   $52,848,455   $— 
Commercial Real Estate Construction   —    —    —    —    12,491,078    12,491,078    — 
Commercial Real Estate Other   620,837    300,240    582,419    1,503,496    142,318,494    143,821,990    — 
Consumer Real Estate   —    2,965    629,999    632,964    58,900,081    59,533,045    — 
Consumer Other   32,842    —    —    32,842    5,345,150    5,377,992    — 
Total  $693,008   $303,205   $1,391,393   $2,387,606   $271,684,954   $274,072,560   $— 

 

There were no loans over 90 days past due and still accruing as of March 31, 2020 and December 31, 2019.

 

The following table summarizes the balances of non-accrual loans:

 

   Loans Receivable on Non-Accrual  
   March 31, 2020   December 31, 2019 
           
Commercial  $178,975   $178,975 
Commercial Real Estate Construction   —    — 
Commercial Real Estate Other   1,161,279    857,327 
Consumer Real Estate   629,999    629,999 
Consumer Other   13,848    — 
Total  $1,984,101   $1,666,301 

 

The following tables set forth the changes in the allowance for loan losses and an allocation of the allowance for loan losses by loan category for the three months ended March 31, 2020 and 2019. The allowance for loan losses consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for current economic factors.

 

    Three Months Ended March 31, 2020
   Commercial   Commercial Real
Estate Construction		   Commercial Real
Estate Other		   Consumer Real
Estate		   Consumer Other   Total 
Allowance for Loan Losses:                              
Beginning balance  $1,429,917   $109,235   $1,270,445   $496,221   $697,940   $4,003,758 
Charge-offs   —    —    —    —    (39,592)   (39,592)
Recoveries   15,500    —    —    —    34,547    50,047 
Provisions   (29,150)   13,834    (57,798)   65,779    7,335    — 
Ending balance  $1,416,267   $123,069   $1,212,647   $562,000   $700,230   $4,014,213 

 

    Three Months Ended March 31, 2019
   Commercial   Commercial Real
Estate Construction		   Commercial Real
Estate Other		   Consumer Real
Estate		   Consumer Other   Total 
Allowance for Loan Losses:                              
Beginning balance  $1,665,413   $63,876   $1,292,346   $386,585   $806,111   $4,214,331 
Charge-offs   (229,395)   —    —    —    (6,334)   (235,729)
Recoveries   500    —    —    —    320    820 
Provisions   92,059    17,171    26,572    (8,944)   (116,858)   10,000 
Ending balance  $1,528,577   $81,047   $1,318,918   $377,641   $683,239   $3,989,422 

 

The following tables present, by portfolio segment and reserving methodology, the allocation of the allowance for loan losses and the gross investment in loans, for the periods indicated.

 

   March 31, 2020 
   Commercial   Commercial Real
Estate Construction		   Commercial Real
Estate Other		   Consumer Real
Estate		   Consumer Other   Total 
Allowance for Loan Losses                              
Individually evaluated for impairment  $686,583   $—   $1,781   $—   $111   $688,475 
Collectively evaluated for impairment   729,684    123,069    1,210,866    562,000    700,119    3,325,738 
Total Allowance for Loan Losses  $1,416,267   $123,069   $1,212,647   $562,000   $700,230   $4,014,213 
Loans Receivable                              
Individually evaluated for impairment  $2,044,573   $—   $2,338,432   $879,752   $48,557   $5,311,314 
Collectively evaluated for impairment   51,471,895    14,072,423    136,025,668    66,454,383    5,039,977    273,064,346 
Total Loans Receivable  $53,516,468   $14,072,423   $138,364,100   $67,334,135   $5,088,534   $278,375,660 

 

   December 31, 2019 
   Commercial   Commercial Real
Estate Construction		   Commercial Real
Estate Other		   Consumer Real
Estate		   Consumer Other   Total 
Allowance for Loan Losses                              
Individually evaluated for impairment  $683,278   $—   $1,782   $—   $90   $685,150 
Collectively evaluated for impairment   746,639    109,235    1,268,663    496,221    697,850    3,318,608 
Total Allowance for Loan Losses  $1,429,917   $109,235   $1,270,445   $496,221   $697,940   $4,003,758 
Loans Receivable                              
Individually evaluated for impairment  $2,065,732   $—   $1,679,872   $879,753   $51,770   $4,677,127 
Collectively evaluated for impairment   50,782,723    12,491,078    142,142,118    58,653,292    5,326,222    269,395,433 
Total Loans Receivable  $52,848,455   $12,491,078   $143,821,990   $59,533,045   $5,377,992   $274,072,560 

 

As of March 31, 2020 and December 31, 2019, loans individually evaluated and considered impaired are presented in the following table.

 

   Impaired Loans as of 
   March 31, 2020   December 31, 2019 
   Unpaid
Principal
Balance		   Recorded
Investment		   Related
Allowance		   Unpaid
Principal
Balance		   Recorded
Investment		   Related
Allowance		 
With no related allowance recorded:                              
Commercial  $1,340,025   $1,340,025   $—   $1,355,875   $1,355,875   $— 
Commercial Real Estate Construction   —    —    —    —    —    — 
Commercial Real Estate Other   2,091,548    2,091,548    —    1,432,988    1,432,988    — 
Consumer Real Estate   879,752    879,752    —    879,753    879,753    — 
Consumer Other   —    —    —    —    —    — 
Total   4,311,325    4,311,325    —    3,668,616    3,668,616    — 
                               
With an allowance recorded:                              
Commercial   704,548    704,548    686,583    709,857    709,857    683,278 
Commercial Real Estate Construction   —    —    —    —    —    — 
Commercial Real Estate Other   346,685    246,884    1,781    346,685    246,884    1,782 
Consumer Real Estate   —    —    —    —    —    — 
Consumer Other   48,557    48,557    111    51,770    51,770    90 
Total   1,099,790    999,989    688,475    1,108,312    1,008,511    685,150 
                               
Commercial   2,044,573    2,044,573    686,583    2,065,732    2,065,732    683,278 
Commercial Real Estate Construction   —    —    —    —    —    — 
Commercial Real Estate Other   2,438,233    2,338,432    1,781    1,779,673    1,679,872    1,782 
Consumer Real Estate   879,752    879,752    —    879,753    879,753    — 
Consumer Other   48,557    48,557    111    51,770    51,770    90 
Total  $5,411,115   $5,311,314   $688,475   $4,776,928   $4,677,127   $685,150 

 

The following table presents average impaired loans and interest income recognized on those impaired loans, by class segment, for the periods indicated.

 

   Three Months Ended March 31, 
   2020   2019 
   Average
Recorded
Investment		   Interest
Income
Recognized		   Average
Recorded
Investment		   Interest
Income
Recognized		 
With no related allowance recorded:                    
Commercial  $1,345,166   $20,499   $128,965   $2,286 
Commercial Real Estate Construction   —    —    —    — 
Commercial Real Estate Other   2,093,392    16,136    970,774    10,346 
Consumer Real Estate   879,753    3,580    879,753    14,100 
Consumer Other   —    —    —    — 
    4,318,311    40,215    1,979,492    26,732 
                     
With an allowance recorded:                    
Commercial   707,965    7,147    1,614,020    26,114 
Commercial Real Estate Construction   —    —    —    — 
Commercial Real Estate Other   246,884    —    404,765    2,763 
Consumer Real Estate   —    —    —    — 
Consumer Other   49,758    783    19,653    254 
    1,004,607    7,930    2,038,438    29,131 
Total                    
Commercial   2,053,131    27,646    1,742,985    28,400 
Commercial Real Estate Construction   —    —    —    — 
Commercial Real Estate Other   2,340,276    16,136    1,375,539    13,109 
Consumer Real Estate   879,753    3,580    879,753    14,100 
Consumer Other   49,758    783    19,653    254 
   $5,322,918   $48,145   $4,017,930   $55,863 

 

In general, the modification or restructuring of a loan is considered a troubled debt restructuring (“TDR”) if we, for economic or legal reasons related to a borrower’s financial difficulties, grant a concession to the borrower that we would not otherwise consider. As of March 31, 2020, there were 4 TDRs with a balance of $1.1 million compared to 3 TDRs with a balance of $573,473 as of December 31, 2019. These TDRs were granted extended payment terms with no principal reduction. All TDRs were performing as agreed as of March 31, 2020. No TDRs defaulted during the three months ended March 31, 2020 and 2019, which were modified within the previous twelve months.

 

Under Section 4013 of the CARES Act, banks may elect not to categorize loan modifications as TDRs if the modifications are related to COVID-19, executed on a loan that was not more than 30 days past due as of December 31, 2019, and executed between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the date of termination of the National Emergency. All short term loan modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not considered TDRs. The Bank has examined the payment accommodations granted to borrowers in response to COVID-19 and found that all borrowers were current prior to relief and were not experiencing financial difficulty prior to COVID-19.