LOANS AND ALLOWANCE FOR CREDIT LOSSES (Tables)

9 Months Ended

Sep. 30, 2023

LOANS AND ALLOWANCE FOR CREDIT LOSSES [Abstract]

Loan Portfolio, by Loan Class

The composition of the Company’s loan portfolio, by loan class, as of September 30, 2023 and December 31, 2022 was as follows:

($ in thousands)	September 30, 2023			December 31, 2022
Commercial	$	93,753		$	106,771
Commercial Real Estate		718,847			645,166
Agriculture		109,942			114,040
Residential Mortgage		101,755			92,669
Residential Construction		14,021			10,167
Consumer		14,826			15,287
		1,053,144			984,100
Allowance for credit losses		(16,149	)		(14,792	)
Deferred origination fees and costs, net		71			830
Loans, net	$	1,037,066		$	970,138

Activity in ACL on Loans by Loan Class

For the periods indicated, the following tables summarize the activity in the allowance for credit losses on loans which is recorded as a contra asset, and the reserve for unfunded commitments which is recorded on the balance sheet within other liabilities:

	Allowance for credit losses – Three months ended September 30, 2023
($ in thousands)	Beginning balance		Charge-offs			Recoveries		Provision (recovery)			Ending Balance
Commercial	$	1,775	$	(91	)	$	20	$	32		$	1,736
Commercial Real Estate		10,050		—			—		526			10,576
Agriculture		939		—			—		80			1,019
Residential Mortgage		1,824		—			—		79			1,903
Residential Construction		487		—			—		(155	)		332
Consumer		367		(9	)		—		4			362
Unallocated		137		—			—		84			221
Allowance for credit losses on loans		15,579		(100	)		20		650			16,149
Reserve for unfunded commitments		1,200		—			—		(150	)		1,050
Total	$	16,779	$	(100	)	$	20	$	500		$	17,199

	Allowance for credit losses – Nine months ended September 30, 2023
($ in thousands)	Beginning balance		Adoption of CECL			Charge-offs			Recoveries		Provision (recovery)			Ending Balance
Commercial	$	1,463	$	623		$	(269	)	$	155	$	(236	)	$	1,736
Commercial Real Estate		10,073		(464	)		—			—		967			10,576
Agriculture		1,757		(671	)		(2,567	)		—		2,500			1,019
Residential Mortgage		880		834			(3	)		—		192			1,903
Residential Construction		178		200			—			—		(46	)		332
Consumer		173		201			(10	)		1		(3	)		362
Unallocated		268		77			—			—		(124	)		221
Allowance for credit losses on loans		14,792		800			(2,849	)		156		3,250			16,149
Reserve for unfunded commitments		700		500			—			—		(150	)		1,050
Total	$	15,492	$	1,300		$	(2,849	)	$	156	$	3,100		$	17,199

The following tables summarize the activity in the allowance for loan losses by loan class for the three and nine months ended September 30, 2022:

Three Months Ended September 30, 2022
($ in thousands)	Commercial			Commercial Real Estate		Agriculture		Residential Mortgage		Residential Construction			Consumer			Unallocated			Total
Balance as of June 30, 2022	$	1,650		$	9,571	$	1,694	$	802	$	151		$	179		$	228		$	14,275
Provision for (reversal of) loan losses		(385	)		566		128		45		(21	)		26			(59	)		300
Charge-offs		—			—		—		—		—			(30	)		—			(30	)
Recoveries		225			—		—		—		—			1			—			226
Net (charge-offs)/recoveries		225			—		—		—		—			(29	)		—			196
Balance as of September 30, 2022	$	1,490		$	10,137	$	1,822	$	847	$	130		$	176		$	169		$	14,771

Nine Months Ended September 30, 2022
($ in thousands)	Commercial			Commercial Real Estate		Agriculture		Residential Mortgage		Residential Construction		Consumer			Unallocated			Total
Balance as of December 31, 2021	$	1,604		$	8,808	$	1,482	$	742	$	74	$	167		$	1,075		$	13,952
Provision for (reversal of) loan losses		(66	)		1,329		340		105		56		42			(906	)		900
Charge-offs		(297	)		—		—		—		—		(39	)		—			(336	)
Recoveries		249			—		—		—		—		6			—			255
Net (charge-offs)/recoveries		(48	)		—		—		—		—		(33	)		—			(81	)
Balance as of September 30, 2022	$	1,490		$	10,137	$	1,822	$	847	$	130	$	176		$	169		$	14,771

Amortized Cost of Collateral Dependent Loans by Class

The following table presents the amortized cost basis of collateral-dependent loans by class, which are individually evaluated to determine expected credit losses as of September 30, 2023 and December 31, 2022:

September 30, 2023
($ in thousands)	Secured by 1-4 Family Residential Properties-1st lien		Secured by 1-4 Family Residential Properties-junior lien		Secured by 1-4 Family Residential Properties- revolving		Commercial		Construction and land development		Secured by farmland		Agriculture production loans		Total
Commercial	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate		—		—		—		—		—		—		—		—
Agriculture		—		—		—		—		—		1,008		4,012		5,020
Residential Mortgage		400		—		—		—		—		—		—		400
Residential Construction		—		—		—		—		—		—		—		—
Consumer		—		372		327		—		—		—		—		699
Total	$	400	$	372	$	327	$	—	$	—	$	1,008	$	4,012	$	6,119

December 31, 2022
($ in thousands)	Secured by 1-4 Family Residential Properties-1st lien		Secured by 1-4 Family Residential Properties-junior lien		Secured by 1-4 Family Residential Properties- revolving		Commercial		Construction and land development		Secured by farmland		Agriculture production loans		Total
Commercial	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate		—		—		—		—		—		—		—		—
Agriculture		—		—		—		—		—		1,148		6,268		7,416
Residential Mortgage		123		—		—		—		—		—		—		123
Residential Construction		—		—		—		—		—		—		—		—
Consumer		—		—		637		—		—		—		—		637
Total	$	123	$	—	$	637	$	—	$	—	$	1,148	$	6,268	$	8,176

Loans by Delinquency and Non-Accrual Status

The Company’s loans by delinquency and non-accrual status, as of September 30, 2023 and December 31, 2022, was as follows:

($ in thousands)	30-59 days Past Due & Accruing		60-89 days Past Due & Accruing		90 days or More Past Due & Accruing		Nonaccrual Loans		Total Past Due & Nonaccrual Loans		Current & Accruing Loans		Total Loans		Nonaccrual loans with No ACL
September 30, 2023
Commercial	$	7	$	47	$	—	$	—	$	54	$	93,699	$	93,753	$	—
Commercial Real Estate		1,910		1,956		—		—		3,866		714,981		718,847		—
Agriculture		—		—		—		5,020		5,020		104,922		109,942		5,020
Residential Mortgage		636		—		—		400		1,036		100,719		101,755		400
Residential Construction		3,420		—		—		—		3,420		10,601		14,021		—
Consumer		45		—		—		699		744		14,082		14,826		699
Total	$	6,018	$	2,003	$	—	$	6,119	$	14,140	$	1,039,004	$	1,053,144	$	6,119
December 31, 2022
Commercial	$	41	$	—	$	403	$	—	$	444	$	106,327	$	106,771	$	—
Commercial Real Estate		—		—		—		—		—		645,166		645,166		—
Agriculture		—		—		—		7,416		7,416		106,624		114,040		7,416
Residential Mortgage		—		—		—		123		123		92,546		92,669		123
Residential Construction		—		—		—		—		—		10,167		10,167		—
Consumer		—		—		—		637		637		14,650		15,287		637
Total	$	41	$	—	$	403	$	8,176	$	8,620	$	975,480	$	984,100	$	8,176

Amortized Cost Basis of Loans Modification to Borrowers Experiencing Financial Difficulty and Financial Effects of Loan Modifications

The amortized cost basis of loans that were experiencing both financial difficulty and modification during the three months ended September 30, 2023 were as follows:

($ in thousands)	Term Extension		Combination Term Extension and Interest Rate Reduction		Total Class of Financing Receivable
Commercial	$	—	$	—		—
Commercial Real Estate		—		—		—
Agriculture		—		—		—
Residential Mortgage		—		—		—
Residential Construction		3,420		—		24.39	%
Consumer		—		—		—
Total	$	3,420	$	—		24.39	%

The amortized cost basis of loans that were experiencing both financial difficulty and modification during the nine months ended September 30, 2023 were as follows:

($ in thousands)	Term Extension		Combination Term Extension and Interest Rate Reduction		Total Class of Financing Receivable
Commercial	$	—	$	44		0.05	%
Commercial Real Estate		—		398		0.06	%
Agriculture		4,005		—		3.64	%
Residential Mortgage		—		—		—
Residential Construction		3,420		—		24.39	%
Consumer		—		—		—
Total	$	7,425	$	442		28.14	%

The Company had commitments to lend additional funds totaling $580,000 to borrowers whose loans were modified at September 30, 2023.

The following table presents the financial effect of the loan modifications to borrowers experiencing financial difficulty during the three-month period ended September 30, 2023:

($ in thousands)	Weighted-Average Interest Rate Reduction		Weighted-Average Term Extension (in months)
Commercial		—	$	—
Commercial Real Estate		—		—
Agriculture		—		—
Residential Mortgage		—		—
Residential Construction		—		1
Consumer		—		—
Total		—	$	1

The following table presents the financial effect of the loan modifications to borrowers experiencing financial difficulty during the nine-month period ended September 30, 2023:

($ in thousands)	Weighted-Average Interest Rate Reduction			Weighted-Average Term Extension (in months)
Commercial		0.50	%	$	38
Commercial Real Estate		0.25	%		26
Agriculture		—			4
Residential Mortgage		—			—
Residential Construction		—			1
Consumer		—			—
Total		0.27	%	$	4

Loans modified as TDRs during the nine months ended September 30, 2022 were as follows:

($ in thousands)	Nine months ended September 30, 2022
	Number of Contracts		Pre- modification outstanding recorded investment		Post- modification outstanding recorded investment
Consumer		1	$	75	$	75
Total		1	$	75	$	75

Risk Ratings by Loan Class

The following tables present the loan portfolio by loan class, origination year, and internal risk rating as of September 30, 2023. Generally, existing term loans that were re-underwritten are reflected in the table in the year of renewal. Lines of credit that have a conversion feature at the time of origination, such as construction to permanent loans, are presented by year of origination. Revolving loans converted to term loans totaled $80,000 as of September 30, 2023.

(in thousands)
	Term Loans Amortized Cost Basis by Origination Year - As of September 30, 2023
	2023			2022			2021			2020		2019			Prior		Revolving Loans Amortized Cost Basis			Total
Commercial
Pass	$	7,398		$	18,546		$	22,473		$	5,829	$	7,999		$	6,764	$	20,995		$	90,004
Special Mention		—			—			—			258		326			—		945			1,529
Substandard		44			—			1,576			553		—			—		47			2,220
Doubtful/Loss		—			—			—			—		—			—		—			—
Total Commercial loans	$	7,442		$	18,546		$	24,049		$	6,640	$	8,325		$	6,764	$	21,987		$	93,753
Year-to-date Period Charge-offs		—			(146	)		(36	)		—		(87	)		—		—			(269	)
Year-to-date Recoveries		—			—			—			—		87			68		—			155
Year-to-date Net Charge-offs		—			(146	)		(36	)		—		—			68		—			(114	)
Commercial Real Estate
Pass	$	98,815		$	171,601		$	197,873		$	50,758	$	52,652		$	121,005	$	6,953		$	699,657
Special Mention		—			—			2,219			846		2,898			1,291		—			7,254
Substandard		398			—			1,728			2,117		6,671			1,022		—			11,936
Doubtful/Loss		—			—			—			—		—			—		—			—
Total Commercial Real Estate loans	$	99,213		$	171,601		$	201,820		$	53,721	$	62,221		$	123,318	$	6,953		$	718,847
Year-to-date Charge-offs		—			—			—			—		—			—		—			—
Year-to-date Recoveries		—			—			—			—		—			—		—			—
Year-to-date Net Charge-offs		—			—			—			—		—			—		—			—
Agriculture
Pass	$	6,836		$	21,080		$	23,854		$	8,868	$	4,459			11,712	$	27,050		$	103,859
Special Mention		—			—			—			—		—			1,064		—			1,064
Substandard		—			—			1,525			—		—			—		3,494			5,019
Doubtful/Loss		—			—			—			—		—			—		—			—
Total Agriculture loans	$	6,836		$	21,080		$	25,379		$	8,868	$	4,459		$	12,776	$	30,544		$	109,942
Year-to-date Charge-offs		(1,825	)		—			—			—		—			—		(742	)		(2,567	)
Year-to-date Recoveries		—			—			—			—		—			—		—			—
Year-to-date Net Charge-offs		(1,825	)		—			—			—		—			—		(742	)		(2,567	)

(in thousands)
	Term Loans Amortized Cost Basis by Origination Year - As of September 30, 2023
	2023			2022			2021			2020		2019			Prior			Revolving Loans Amortized Cost Basis			Total
Residential Mortgage
Pass	$	14,581		$	23,310		$	26,725		$	15,053	$	6,073		$	15,574		$	—		$	101,316
Special Mention		—			—			—			—		—			—			—			—
Substandard		—			—			39			—		—			400			—			439
Doubtful/Loss		—			—			—			—		—			—			—			—
Total Residential Mortgage loans	$	14,581		$	23,310		$	26,764		$	15,053	$	6,073		$	15,974		$	—		$	101,755
Year-to-date Charge-offs		—			—			—			—		—			(3	)		—			(3	)
Year-to-date Recoveries		—			—			—			—		—			—			—			—
Year-to-date Net Charge-offs		—			—			—			—		—			(3	)		—			(3	)
Residential Construction
Pass	$	3,086		$	4,521		$	2,994		$	—	$	—		$	—		$	—		$	10,601
Special Mention		—			—			—			—		—			—			—			—
Substandard		—			3,420			—			—		—			—			—			3,420
Doubtful/Loss		—			—			—			—		—			—			—			—
Total Residential Construction loans	$	3,086		$	7,941		$	2,994		$	—	$	—		$	—		$	—		$	14,021
Year-to-date Charge-offs		—			—			—			—		—			—			—			—
Year-to-date Recoveries		—			—			—			—		—			—			—			—
Year-to-date Net Charge-offs		—			—			—			—		—			—			—			—
Consumer
Pass	$	357		$	801		$	138		$	172	$	64		$	433		$	12,162		$	14,127
Special Mention		—			—			—			—		—			—			—			—
Substandard		—			—			—			—		—			—			699			699
Doubtful/Loss		—			—			—			—		—			—			—			—
Total Consumer loans	$	357		$	801		$	138		$	172	$	64		$	433		$	12,861		$	14,826
Year-to-date Charge-offs		(10	)		—			—			—		—			—			—			(10	)
Year-to-date Recoveries		—			—			—			—		—			1			—			1
Year-to-date Net Charge-offs		(10	)		—			—			—		—			1			—			(9	)
Total Loans
Pass	$	131,073		$	239,859		$	274,057		$	80,680	$	71,247		$	155,488		$	67,160		$	1,019,564
Special Mention		—			—			2,219			1,104		3,224			2,355			945			9,847
Substandard		442			3,420			4,868			2,670		6,671			1,422			4,240			23,733
Doubtful/Loss		—			—			—			—		—			—			—			—
Total Loans	$	131,515		$	243,279		$	281,144		$	84,454	$	81,142		$	159,265		$	72,345		$	1,053,144
Year-to-date Charge-offs	$	(1,835	)	$	(146	)	$	(36	)	$	—	$	(87	)	$	(3	)	$	(742	)	$	(2,849	)
Year-to-date Recoveries	$	—		$	—		$	—		$	—	$	87		$	69		$	—		$	156
Year-to-date Net Charge-offs	$	(1,835	)	$	(146	)	$	(36	)	$	—	$	—		$	66		$	(742	)	$	(2,693	)

The following table presents the risk ratings by loan class as of December 31, 2022.

	Pass		Special Mention		Substandard		Doubtful		Loss		Total
December 31, 2022
Commercial	$	106,643	$	—	$	128	$	—	$	—	$	106,771
Commercial Real Estate		631,693		6,748		6,725		—		—		645,166
Agriculture		105,560		1,064		7,416		—		—		114,040
Residential Mortgage		92,299		207		163		—		—		92,669
Residential Construction		10,167		—		—		—		—		10,167
Consumer		14,650		—		637		—		—		15,287
Total	$	961,012	$	8,019	$	15,069	$	—	$	—	$	984,100