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Note 5 - Allowance for Loan Losses

12 Months Ended

Dec. 31, 2022

Allowance for Credit Losses [Text Block]

Note 5. Allowance for Loan Losses

(in thousands)

The allowance for loan losses is a reserve established through a provision for possible loan losses charged to expense, which represents management’s best estimate of probable losses that will occur within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio.

The allowance on the majority of the loan portfolio is calculated using a historical chargeoff percentage applied to the current loan balances by loan segment. This historical period is the average of the previous 20 quarters with the most current quarters weighted to show the effect of the most recent chargeoff activity. This percentage is also adjusted for economic factors such as unemployment and general business conditions, both local and nationwide.

The group of loans that are considered to be impaired are individually evaluated for possible loss and a specific reserve is established to cover any loss contingency. Loans that are determined to be a loss with no benefit of remaining in the portfolio are charged off to the allowance. These specific reserves are reviewed periodically for continued impairment and adequacy of the specific reserve and adjusted when necessary.

The following table details activity in the allowance for loan losses by portfolio segment for the years ended December 31:

	Real			Business
2022	Estate			Loans		Consumer			Total
Beginning Balance	$	3,622		$	645	$	246		$	4,513
Provision for loan losses		279			96		(251	)		124
Chargeoffs		8			61		110			179
Recoveries		261			33		512			806
Net chargeoffs		(253	)		28		(402	)		(627	)
Ending Balance	$	4,154		$	713	$	397		$	5,264


Period end allowance allocated to:
Loans individually evaluated for impairment	$	116		$	-	$	-		$	116
Loans collectively evaluated for impairment		4,038			713		397			5,148
Ending Balance	$	4,154		$	713	$	397		$	5,264

	Real		Business
2021	Estate		Loans		Consumer		Total
Beginning Balance	$	3,885	$	611	$	239	$	4,735
Provision for loan losses		231		199		979		1,409
Chargeoffs		628		183		1,327		2,138
Recoveries		134		18		355		507
Net chargeoffs		494		165		972		1,631
Ending Balance	$	3,622	$	645	$	246	$	4,513


Period end allowance allocated to:
Loans individually evaluated for impairment	$	3	$	36	$	-	$	39
Loans collectively evaluated for impairment		3,619		609		246		4,474
Ending Balance	$	3,622	$	645	$	246	$	4,513

	Real		Business
2020	Estate		Loans		Consumer			Total
Beginning Balance	$	3,075	$	371	$	309		$	2,334
Provision for loan losses		1,072		422		(9	)		1,485
Chargeoffs		384		229		104			717
Recoveries		122		47		43			212
Net chargeoffs		262		182		61			505
Ending Balance	$	3,885	$	611	$	239		$	4,735


Period end allowance allocated to:
Loans individually evaluated for impairment	$	782	$	125	$	-		$	907
Loans collectively evaluated for impairment		3,103		486		239			3,828
Ending Balance	$	3,885	$	611	$	239		$	4,735

The Company’s recorded investment in loans as of December 31, 2022 and 2021 related to each balance in the allowance for loan losses by portfolio segment and disaggregated on the basis of the Company’s impairment methodology was as follows:

	Real		Business
2022	Estate		Loans		Consumer		Total
Loans individually evaluated for impairment	$	3,081	$	196	$	-	$	3,277
Loans collectively evaluated for impairment		469,776		96,808		15,730		582,314
	$	472,857	$	97,004	$	15,730	$	585,591

	Real		Business
2021	Estate		Loans		Consumer		Total
Loans individually evaluated for impairment	$	2,102	$	232	$	-	$	2,334
Loans collectively evaluated for impairment		462,674		92,890		13,949		569,513
	$	464,776	$	93,122	$	13,949	$	571,847

Net chargeoffs (recoveries), segregated by class of loans, were as follows:

	2022			2021			2020
Real Estate:
Land Development and Construction	$	(14	)	$	27		$	(6	)
Farmland		(1	)		(1	)		-
1-4 Family Mortgages		(71	)		(76	)		243
Commercial Real Estate		(167	)		544			25
Total Real Estate Loans		(253	)		494			262

Business Loans:
Commercial and Industrial Loans		31			165			182
Farm Production and Other Farm Loans		(3	)		-			-
Total Business Loans		28			165			182

Consumer Loans:
Credit Cards		46			19			39
Other Consumer Loans		(448	)		953			22
Total Consumer Loans		(402	)		972			61

Total net (recoveries) chargeoffs	$	(627	)	$	1,631		$	505