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Note 4 - Loans Receivable

6 Months Ended

Jun. 30, 2023

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE 4. LOANS RECEIVABLE

Loans receivable consisted of the following:

	June 30,			December 31,
	2023			2022
	(In Thousands)
Real estate loans:
Residential 1-4 family	$	182,953		$	195,703
Commercial real estate		875,545			826,549

Other loans:
Home equity		80,333			74,271
Consumer		30,065			27,609
Commercial		252,587			231,291

Total		1,421,483			1,355,423

Deferred loan fees, net⁽¹⁾		-			(1,745	)
Allowance for credit losses ⁽²⁾		(15,560	)		(14,000	)
Total loans, net	$	1,405,923		$	1,339,678

⁽¹⁾ Deferred loan fees, net are included in individual loan categories above and totaled $1.48 million for the quarter ended June 30, 2023.
⁽²⁾ Allowance for credit losses for the quarter ended June 30, 2023; allowance for loan losses for prior periods.

Included in the above are loans guaranteed by U.S. government agencies totaling $24,705,000 and $24,605,000 at June 30, 2023 and December 31, 2022, respectively.

The following table provides allowance for credit losses activity for the three months ended June 30, 2023.

	Residential		Commercial		Home
	1-4 Family		Real Estate		Equity		Consumer			Commercial			Total
	(In Thousands)
Allowance for credit losses on loans:
Beginning balance, March 31, 2023	$	1,580	$	9,732	$	513	$	344		$	2,831		$	15,000
Charge-offs		-		-		-		(29	)		(26	)		(55	)
Recoveries		189		6		9		-			2			206
Provision		17		273		4		3			112			409
Total ending allowance balance, June 30, 2023	$	1,786	$	10,011	$	526	$	318		$	2,919		$	15,560

The following table provides allowance for credit losses activity for the six months ended June 30, 2023.

	Residential		Commercial		Home
	1-4 Family		Real Estate		Equity		Consumer			Commercial			Total
	(In Thousands)
Allowance for credit losses on loans:
Beginning balance, December 31, 2022, prior to adoption of ASC 326	$	1,472	$	9,037	$	509	$	342		$	2,640		$	14,000
Impact of adopting ASC 326		21		534		3		1			141			700
Charge-offs		-		-		-		(30	)		(26	)		(56	)
Recoveries		195		11		9		1			12			228
Provision		98		429		5		4			152			688
Total ending allowance balance, June 30, 2023	$	1,786	$	10,011	$	526	$	318		$	2,919		$	15,560

The following table provides allowance for loan losses activity for the three and six months ended June 30, 2022.

	Residential		Commercial		Home
	1-4 Family		Real Estate		Equity			Consumer			Commercial			Total
	(In Thousands)
Allowance for loan losses:
Beginning balance, March 31, 2022	$	1,616	$	7,659	$	536		$	357		$	2,532		$	12,700
Charge-offs		-		-		(32	)		-			(215	)		(247	)
Recoveries		-		8		-			1			5			14
Provision		27		670		3			3			155			858
Ending balance, June 30, 2022	$	1,643	$	8,337	$	507		$	361		$	2,477		$	13,325

Allowance for loan losses:
Beginning balance, December 31, 2021	$	1,596	$	7,470	$	533		$	365		$	2,536		$	12,500
Charge-offs		-		-		(32	)		(8	)		(299	)		(339	)
Recoveries		-		14		-			1			12			27
Provision		47		853		6			3			228			1,137
Ending balance, June 30, 2022	$	1,643	$	8,337	$	507		$	361		$	2,477		$	13,325

Ending balance, June 30, 2022 allocated to loans individually evaluated for impairment	$	199	$	-	$	-		$	-		$	319		$	518

Ending balance, June 30, 2022 allocated to loans collectively evaluated for impairment	$	1,444	$	8,337	$	507		$	361		$	2,158		$	12,807

Loans receivable:
Ending balance, June 30, 2022	$	186,229	$	743,326	$	62,445		$	25,775		$	234,741		$	1,252,516

Ending balance, June 30, 2022 of loans individually evaluated for impairment	$	573	$	1,173	$	119		$	35		$	1,670		$	3,570

Ending balance, June 30, 2022 of loans collectively evaluated for impairment	$	185,656	$	742,153	$	62,326		$	25,740		$	233,071		$	1,248,946

Internal classification of the loan portfolio by amortized cost and based on year originated was as follows:

	June 30, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total Loans
	(In Thousands)
RESIDENTIAL 1-4 FAMILY
Pass	$	5,455	$	37,629	$	25,727	$	15,883	$	11,654	$	33,829	$	2,501	$	132,678
Special Mention		-		-		-		-		-		232		-		232
Substandard		-		-		-		-		-		527		-		527
Total Residential 1-4 family		5,455		37,629		25,727		15,883		11,654		34,588		2,501		133,437
RESIDENTIAL 1-4 FAMILY CONSTRUCTION
Pass		3,820		33,921		11,158		-		-		301		316		49,516
Special Mention		-		-		-		-		-		-		-		-
Total Residential 1-4 family construction		3,820		33,921		11,158		-		-		301		316		49,516
COMMERCIAL REAL ESTATE
Pass		32,372		135,828		144,174		55,342		57,149		113,899		31,868		570,632
Special Mention		544		-		-		-		3,533		2,360		-		6,437
Substandard		-		-		-		-		-		667		-		667
Total Commercial real estate		32,916		135,828		144,174		55,342		60,682		116,926		31,868		577,736
COMMERCIAL CONSTRUCTION AND DEVELOPMENT
Pass		10,124		84,040		43,024		6,854		7,027		4,336		2,110		157,515
Special Mention		-		-		-		-		-		1,004		-		1,004
Total Commercial construction and development		10,124		84,040		43,024		6,854		7,027		5,340		2,110		158,519
FARMLAND
Pass		10,005		36,986		20,607		23,127		9,799		31,413		4,053		135,990
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		407		-		1,091		183		1,619		-		3,300
Total Farmland		10,005		37,393		20,607		24,218		9,982		33,032		4,053		139,290
HOME EQUITY
Pass		611		5,098		389		591		657		2,291		70,502		80,139
Substandard		-		-		-		-		-		114		80		194
Total Home Equity		611		5,098		389		591		657		2,405		70,582		80,333
CONSUMER
Pass		8,096		10,213		4,510		2,613		761		1,649		2,086		29,928
Special Mention		-		-		-		-		-		-		-		-
Substandard		15		33		7		51		3		11		17		137
Total Consumer		8,111		10,246		4,517		2,664		764		1,660		2,103		30,065
COMMERCIAL
Pass		15,901		25,832		26,184		22,643		3,801		7,356		26,563		128,280
Special Mention		-		-		-		29		-		140		418		587
Substandard		-		72		18		96		19		-		4		209
Doubtful		-		-		-		-		-		8		-		8
Total Commercial		15,901		25,904		26,202		22,768		3,820		7,504		26,985		129,084
AGRICULTURAL
Pass		29,776		26,608		8,917		6,948		2,150		1,733		44,467		120,599
Special Mention		-		94		-		-		-		-		-		94
Substandard		-		210		186		55		863		559		837		2,710
Doubtful		-		-		-		-		-		100		-		100
Total Agricultural		29,776		26,912		9,103		7,003		3,013		2,392		45,304		123,503
TOTAL LOANS
Pass		116,160		396,155		284,690		134,001		92,998		196,807		184,466		1,405,277
Special Mention		544		94		-		29		3,533		3,736		418		8,354
Substandard		15		722		211		1,293		1,068		3,497		938		7,744
Doubtful		-		-		-		-		-		108		-		108
Total	$	116,719	$	396,971	$	284,901	$	135,323	$	97,599	$	204,148	$	185,822	$	1,421,483

Internal classification of the loan portfolio was as follows (prior to the adoption of ASU No. 2016-13):

	December 31, 2022
			Special
	Pass		Mention		Substandard		Doubtful		Loss		Total
	(In Thousands)
Real estate loans:
Residential 1-4 family	$	135,079	$	515	$	353		-	$	-	$	135,947
Residential 1-4 family construction		59,756		-		-		-		-		59,756
Commercial real estate		520,505		16,833		1,732		-		-		539,070
Commercial construction and development		150,101		1,044		-		-		-		151,145
Farmland		131,646		2,232		2,456		-		-		136,334
Other loans:
Home equity		74,147		-		124		-		-		74,271
Consumer		27,560		10		39		-		-		27,609
Commercial		125,035		1,476		736		8		-		127,255
Agricultural		101,441		311		2,182		102		-		104,036
Total	$	1,325,270	$	22,421	$	7,622	$	110	$	-	$	1,355,423

The following tables include information regarding delinquencies within the loan portfolio.

	June 30, 2023
	Loans Past Due and Still Accruing

			90 Days				Nonaccrual		Nonaccrual
	30-89 Days		and				Loans with		Loans with		Current		Total
	Past Due		Greater		Total		no ACL		ACL		Loans		Loans
	(In Thousands)
Real estate loans:
Residential 1-4 family	$	687	$	329	$	1,016	$	322	$	-	$	132,099	$	133,437
Residential 1-4 family construction		-		-		-		-		-		49,516		49,516
Commercial real estate		-		-		-		668		-		577,068		577,736
Commercial construction and development		-		-		-		-		-		158,519		158,519
Farmland		233		-		233		2,313		1,734		135,010		139,290
Other loans:
Home equity		425		-		425		178		-		79,730		80,333
Consumer		73		-		73		67		21		29,904		30,065
Commercial		633		40		673		213		-		128,198		129,084
Agricultural		27		-		27		3,196		849		119,431		123,503
Total	$	2,078	$	369	$	2,447	$	6,957	$	2,604	$	1,409,475	$	1,421,483

	December 31, 2022
	Loans Past Due and Still Accruing
			90 Days
	30-89 Days		and				Nonaccrual		Current		Total
	Past Due		Greater		Total		Loans		Loans		Loans
	(In Thousands)
Real estate loans:
Residential 1-4 family	$	1,798	$	330	$	2,128	$	483	$	133,336	$	135,947
Residential 1-4 family construction		500		-		500		-		59,256		59,756
Commercial real estate		780		-		780		350		537,940		539,070
Commercial construction and development		-		-		-		-		151,145		151,145
Farmland		1,620		-		1,620		754		133,960		136,334
Other loans:
Home equity		226		-		226		107		73,938		74,271
Consumer		93		-		93		25		27,491		27,609
Commercial		597		746		1,343		44		125,868		127,255
Agricultural		-		-		-		1,535		102,501		104,036
Total	$	5,614	$	1,076	$	6,690	$	3,298	$	1,345,435	$	1,355,423

The following tables presents the amortized cost basis of collateral-dependent loans by class of loans.

	June 30, 2023
	Real Estate		Business Assets		Other
	(In Thousands)
Real estate loans:
Residential 1-4 family	$	411	$	-	$	-
Commercial real estate		39		628		-
Farmland		4,164		-		-
Other loans:						-
Home equity		159		-		-
Consumer		-				68
Commercial		-		353		-
Agricultural		-		2,876		-
Total	$	4,773	$	3,857	$	68

Prior to the implementation of ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) on January 1, 2023, a loan was considered impaired when the Company determined it was probable that it would be unable to collect all amounts due to the contractual terms of the loan agreement, including scheduled interest payments. Various factors determined impairment such as the financial condition of the borrower, value of the underlying collateral, and general economic conditions.

The implementation of ASU No. 2016-13 significantly changed disclosures related to loans and, as a result, certain disclosures are no longer required. The following tables represent disclosures for the prior period that are no longer required as of January 1, 2023, but are included in this Form 10-Q since the Company is required to disclose comparative information.

The following table provides additional information on impaired loans with and without related allowance reserves at December 31, 2022:

	December 31, 2022
			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
	(In Thousands)
Real estate loans:
Residential 1-4 family	$	483	$	585	$	-
Residential 1-4 family construction		-		-		-
Commercial real estate		3,614		3,697		-
Commercial construction and development		-		-		-
Farmland		754		866		-
Other loans:
Home equity		107		133		-
Consumer		25		30		-
Commercial		184		232		35
Agricultural		1,535		1,633		115
Total	$	6,702	$	7,176	$	150

The following table provides information on impaired loans for the three and six months ended June 30, 2022:

	Three Months Ended		Six Months Ended
	June 30, 2022		June 30, 2022
	Average Recorded Investment
	(In Thousands)		(In Thousands)
Real estate loans:
Residential 1-4 family	$	580	$	595
Residential 1-4 family construction		-		169
Commercial real estate		1,134		1,213
Commercial construction and development		-		-
Farmland		1,189		1,200
Other loans:
Home equity		115		117
Consumer		40		49
Commercial		68		300
Agricultural		1,654		1,672
Total	$	4,780	$	5,315

Interest income recognized on nonaccrual loans for the three and six months ended June 30, 2023 and 2022 is considered insignificant. Interest payments received on a cash basis related to nonaccrual loans were $418,000 at June 30, 2023 and $415,000 at December 31, 2022.

Effective January 1, 2023, the Company adopted ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures. The update eliminated the recognitions and measure of TDRs while expanding loan modification and vintage disclosures for borrowers experiencing financial difficulty. Due to the removal of the TDR designation, the Company evaluates all loan restructurings according to accounting guidance for loan modifications. Modifications to borrowers experiencing financial difficulties are considered modifications if the creditor grants a concession to the debtor, for economic or legal reasons related to the debtor's financial difficulties, that it would not otherwise consider. Loan modifications that result in a change in the timing or amount of contractual cash flows include situations where there are interest rate reductions, term extensions, other than insignificant payment delays, and combinations of the listed modifications.

As of June 30, 2023, the Company modified one commercial real estate loan with an amortized cost basis of $544,000 for a borrower experiencing financial difficulty by consolidating two lines of credit and refinancing into one long term loan for ten years. There was no forgiveness of principal and the loan was current with its modified terms as of June 30, 2023.

Prior to the adoption of ASU No. 2022-02, during the three months ended June 30, 2022, there were no new TDR loans. During the six months ended June 30, 2022, there were two new TDR loans. The recorded investments for both agricultural loans at the time of restructure were $331,000 and $145,000. No charge-offs were incurred and the loans continue to be on nonaccrual status.