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Allowances for Loan Losses
 6 Months Ended 12 Months Ended
Jun. 30, 2022
Dec. 31, 2021
Allowance for Credit Loss [Abstract]    
Allowances for Loan Losses
5.
ALLOWANCE FOR LOAN LOSSES
The segments of the Company’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. The loan segments used are consistent with the internal reports evaluated by the Company’s management and Board of Directors to monitor risk and performance within various segments of its loan portfolio and, therefore, no further disaggregation is considered necessary. The Company’s loan portfolio consists primarily of real estate loans on commercial and residential property. The portfolio also includes agricultural loans, commercial loans, municipal loans, and consumer loans.
The Company’s primary lending activity is the origination of commercial loans extended to small and
mid-sized
commercial and industrial entities.
Commercial loans are primarily underwritten on the basis of the borrowers’ ability to service such debt from income. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. As a general practice, the Company takes as collateral a security interest in any equipment, or other chattel, although loans may also be made on an unsecured basis. Collateralized working capital loans typically are secured by short-term assets whereas long-term loans are primarily secured by long-term assets.
Construction and Land loans are to finance the construction of owner-occupied and income producing properties. These loans are categorized within commercial or
one-to-four
family residential loans based upon the underlying collateral and intended use following the completion of the construction period. Real estate development and construction loans are approved based on an analysis of the borrower and guarantor, the viability of the project and on an acceptable percentage of the appraised value of the property securing the loan. Construction loan funds are disbursed periodically based on the percentage of construction or development completed. The Company carefully monitors these loans with
on-site
inspections and requires the receipt of lien waivers on funds advanced. The Company considers the market conditions and feasibility of proposed projects, the financial condition and reputation of the borrower and guarantors, the amount of the borrower’s equity in the project, independent appraisals, cost estimates and
pre-construction
sale information. The Company also makes loans on occasion for the purchase of land for future development by the borrower. Land loans are extended for the future development for either commercial or residential use by the borrower. The Company carefully analyzes the intended use of the property and the viability thereof.
The Company’s commercial real estate loans consist of mortgage loans secured by nonresidential real estate, such as by apartment buildings, small office buildings, and owner-occupied properties. Commercial real estate loans are secured by the subject property and are underwritten based on loan to value limits, cash flow coverage and general creditworthiness of the obligors. These loans tend to involve larger loan balances and their repayment is typically dependent upon the successful operation and management of the underlying
real estate.
Residential real estate loans are underwritten based on the borrower’s repayment capacity and source, value of the underlying property, credit history and stability. These loans are secured by a first or second mortgage on the borrower’s principal residence or their second/vacation home (excluding investment/rental property).
 
In addition to the main types of loans discussed above, the Company also originates agricultural loans, consumer loans, and municipal loans. The agricultural loan portfolio consists of loans to local farmers and agricultural businesses that are generally secured by farmland and equipment. The consumer loan portfolio consists of lending in the form of home equity loans secured by financed property and personal consumer loans, which may be secured or unsecured. The municipal loan portfolio consists of loans to qualified local municipalities, which are generally supported by the taxing authority of the borrowing municipality, and is frequently secured by collateral.
Management has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance for loan losses the Company has segmented certain loans in the portfolio by product type. Loans are segmented into the following pools: agriculture loans, commercial real estate loans, commercial loans, residential real estate loans, consumer loans, and municipal loans. Historical loss percentages for each risk category are calculated and used as the basis for calculating allowance allocations. These historical loss percentages are calculated over a four-year period for all portfolio segments.
Certain qualitative factors are then added to the historical allocation percentage to get the adjusted factor to be applied to
non-classified
loans. The following qualitative factors are analyzed for each portfolio segment:
 
  •  
Levels of and trends in delinquencies
 
  •  
Trends in volume and terms
 
  •  
Changes in collateral
 
  •  
Changes in management and lending staff
 
  •  
Economic trends
 
  •  
Concentrations of credit
 
  •  
Changes in lending policies
 
  •  
External factors
 
  •  
Changes in underwriting process
 
  •  
Trends in credit quality ratings
These qualitative factors are reviewed each quarter and adjusted based upon relevant changes within the portfolio.
The total allowance reflects management’s estimate of loan losses inherent in the loan portfolio at the Consolidated Balance Sheet date. The Company considers the allowance for loan losses adequate to cover loan losses inherent in the loan portfolio at June 30, 2022 and December 31, 2021.
 
The following table summarizes the activity in the allowance for loan losses by loan class for the three month periods ended June 30, 2022 and 2021.
 
 
 
Agriculture
Loans
 
 
Commercial
Loans
 
 
Commercial
Real Estate
Loans
 
 
Residential
Real Estate
Loan
 
 
Consumer
Loans
 
 
Municipal
Loans
 
 
Unallocated
Loans
 
 
Total
 
(In Thousands)
 
For the Three Months Ended June 30, 2022
 
Allowance for loan losses:
                                                                    
Beginning balance
   
$
20
 
  
$
585
 
   
$
1,070
 
   
$
1,728
 
  
$
13
 
  
$
15
 
   
$
12
 
  
$
3,443
 
Charge-offs
      —         (1 )        (1 )       —         —         —          —         (2 ) 
Recoveries
      —         5        —          49       —       —          —         54  
Provision
      (3 )      (83 )       717        (230 )      8       (2 )        (12 )      395  
    
 
 
    
 
 
     
 
 
     
 
 
    
 
 
    
 
 
     
 
 
    
 

 
Ending balance
   
$
17
 
  
$
506
 
   
$
1,786
 
   
$
1,547
 
  
$
21
 
  
$
13
 
   
$
0
 
  
$
3,890
 
    
 
 
    
 
 
     
 
 
     
 
 
    
 
 
    
 
 
     
 
 
    
 
 
  
   
    
For the Three Months Ended June 30, 202
1

  
Allowance for loan losses:
                                                                    
Beginning balance
    $ 105     $ 315      $ 315      $ 1,674     $ 24     $ 18      $ 336     $ 2,787  
Charge-offs
      —         —          —          —       —       —          —         —  
Recoveries
      —         19          —          25       —       —          —         44  
Provision
      (7 )      18        25        (29 )      (1 )      (2 )      40       44  
    
 
 
    
 
 
     
 
 
     
 
 
    
 
 
    
 
 
     
 
 
    
 
 
  
Ending balance
   
$
98
 
  
$
352
 
   
$
340
 
   
$
1,670
 
  
$
23
 
  
$
16
 
   
$
376
 
  
$
2,875
 
    
 
 
    
 
 
     
 
 
     
 
 
    
 
 
    
 
 
     
 
 
    
 
 
  
The following table summarizes the activity in the allowance for loan losses by loan class for the six month periods ended June 30, 2022 and 2021.
 
 
 
Agriculture
Loans
 
 
Commercial
and PPP
Loans
 
 
Commercial
Real Estate
Loans
 
 
Residential
Real Estate
Loan
 
 
Consumer
Loans
 
 
Municipal
Loans
 
 
Unallocated
Loans
 
 
Total
 
(In Thousands)
 
For the Six Months Ended June 30, 2022
 
Allowance for loan losses:
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
Beginning balance
 
$
23
 
 
$
582
 
 
$
799
 
 
$
1,634
 
 
$
22
 
 
$
15
 
 
$
77
 
 
$
3,152
 
Charge-offs
 
 
—  
 
 
 
(1
) 
 
 
(1
) 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
(2
) 
Recoveries
 
 
—  
 
 
 
7
 
 
 
—  
 
 
 
56
 
 
 
2
 
 
 
—  
 
 
 
—  
 
 
 
65
 
Provision
 
 
(6
) 
 
 
(82
) 
 
 
988
 
 
 
(143
) 
 
 
(3
) 
 
 
(2
) 
 
 
(77
) 
 
 
675
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
 
$
17
 
 
$
506
 
 
$
1,786
 
 
$
1,547
 
 
$
21
 
 
$
13
 
 
$
0
 
 
$
3,890
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
For the Six Months Ended June 30, 2021
 
Allowance for loan losses:
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
Beginning balance
 
$
120
 
 
$
290
 
 
$
314
 
 
$
1,702
 
 
$
35
 
 
$
18
 
 
$
310
 
 
$
2,789
 
Charge-offs
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
(49
) 
 
 
(3
) 
 
 
—  
 
 
 
—  
 
 
 
(52
) 
Recoveries
 
 
—  
 
 
 
19
 
 
 
—  
 
 
 
27
 
 
 
1
 
 
 
—  
 
 
 
—  
 
 
 
47
 
Provision
 
 
(22
) 
 
 
43
 
 
 
26
 
 
 
(10
) 
 
 
(10
) 
 
 
(2
) 
 
 
66
 
 
 
91
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
 
$
98
 
 
$
352
 
 
$
340
 
 
$
1,670
 
 
$
23
 
 
$
16
 
 
$
376
 
 
$
2,875
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The increase in the allowance for loan losses allocated to the commercial real estate loans can be attributed to the risk associated with the increased balances in commercial real estate loans. The decreased allocation in the allowance for loan losses allocated to residential real estate loans can be attributed to an increased balance of loans individually assessed for impairment as of June 30, 2022, which required no reserve based on the estimated recoverable value of collateral in comparison to the outstanding balance due on these credits. Please see the “Credit Quality Information” section below for further details.
The following table illustrates the balance of loans individually evaluated vs. collectively evaluated for impairment at June 30, 2022 and December 31, 2021.

   
Agriculture
Loans
     
Commercial
and PPP
Loans
     
Commercial
Real Estate
Loans
     
Residential
Real Estate
Loan
     
Consumer
Loans
     
Municipal
Loans
     
Unallocated
Loans
     
Total
  
(In Thousands)
  
As of June 30, 2022

  
Allowance for loan losses:
                                                                       
Ending balance
  
$
17
 
   
$
506
 
   
$
1,786
 
   
$
1,547
 
   
$
21
 
   
$
13
 
   
$
0
 
   
$
3,890
 
   
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Ending balance: individually evaluated for impairment
  
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Ending balance: collectively evaluated for impairment
  
$
17
 
   
$
506
 
   
$
1,786
 
   
$
1,547
 
   
$
21
 
   
$
13
 
   
$
0
 
   
$
3,890
 
   
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Loans:
                                                                       
Ending balance
  
$
7,710
 
   
$
90,979
 
   
$
435,588
 
   
$
241,401
 
   
$
8,689
 
   
$
5,814
 
            
$
790,181
 
   
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
              
 
 
  
Ending balance: individually evaluated for impairment
  
$
200
 
   
$
2,451
 
   
$
2,501
 
   
$
3,145
 
   
$
—  
 
   
$
—  
 
            
$
8,297
 
   
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
              
 
 
  
Ending balance: loans acquired with deteriorated credit quality
  
$
—  
 
   
$
601
 
   
$
4,369
 
   
$
597
 
   
$
—  
 
   
$
—  
 
            
$
5,567
 
   
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
              
 
 
  
Ending balance: collectively evaluated for impairment
  
$
7,510
 
   
$
87,927
 
   
$
428,718
 
   
$
237,659
 
   
$
8,689
 
   
$
5,814
 
            
$
776,317
 
   
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
              
 
 
  

 
 
 
Agriculture
Loans
 
 
Commercial
and PPP
Loans
 
 
Commercial
Real Estate
Loans
 
 
Residential
Real Estate
Loan
 
 
Consumer
Loans
 
 
Municipal
Loans
 
 
Unallocated
Loans
 
 
Total
 
(In Thousands)
 
As of December 31, 2021
 
Allowance for loan losses:
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
Ending balance
 
$
23
 
 
$
582
 
 
$
799
 
 
$
1,634
 
 
$
22
 
 
$
15
 
 
 
77
 
 
$
3,152
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: collectively evaluated for impairment
 
$
23
 
 
$
582
 
 
$
799
 
 
$
1,634
 
 
$
22
 
 
$
15
 
 
 
77
 
 
$
3,152
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans:
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
Ending balance
 
$
9,341
 
 
$
122,378
 
 
$
338,749
 
 
$
231,302
 
 
$
7,087
 
 
$
6,182
 
 
      
 
$
715,039
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—  
 
 
$
42
 
 
$
—  
 
 
$
709
 
 
$
—  
 
 
$
—  
 
 
      
 
$
751
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      
 
 
 
 
Ending balance: loans acquired with deteriorated credit quality
 
$
—  
 
 
$
512
 
 
$
4,394
 
 
$
650
 
 
$
—  
 
 
$
—  
 
 
      
 
$
5,556
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      
 
 
 
 
Ending balance: collectively evaluated for impairment
 
$
9,341
 
 
$
121,824
 
 
$
334,355
 
 
$
229,943
 
 
$
7,087
 
 
$
6,182
 
 
      
 
$
708,732
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      
 
 
 
 
The Company evaluated whether loans acquired in the Merger were within the scope of ASC
310-30,
Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality. Purchased credit-impaired loans (“PCI”) are loans that have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments. The fair value of purchased credit-impaired loans, on the acquisition date, was determined, primarily based on the fair value of loan collateral. The carrying value of purchased loans acquired with deteriorated credit quality as a result of the Merger was
 
$
5,249
and $
5,556
at June 30, 2022 and December 31, 2021, respectively.

On the acquisition date, the preliminary estimate of the unpaid principal balance for all PCI loans acquired through the Merger was $
6,627
and the estimated fair value of the loans was $
5,384
. Total contractually required payments on these loans, including interest, at acquisition was $
8,509
. The Company’s preliminary estimate of expected cash flows was $
5,793
at the acquisition date. The Company established a credit risk related non-accretable discount of $
2,716
relating to these impaired loans, reflected in the recorded net fair value. The Company further estimated the timing and amount of expected cash flows in excess of the estimated fair value and established an accretable discount of $
409
relating to these impaired
loans.
 
 
The following table provides activity for the accretable yield of PCI loans for the three and six months ended June 30, 2022:
 
(In Thousands)
  
Three Months Ended
June 30, 2022
 
  
Six Months Ended
June 30, 2022
 
Accretable yield, beginning of period
 
$
206

   
 
 $ 307  
Additions
 
 
 —     
 
   —    
Accretion of income
 
 
(25
)
 
 
   (126 ) 
Reclassifications from nonaccretable
difference due to improvement in
 
expected
cash flows
 
 
 —     
 
   —    
Other changes, net
 
 
 —     
 
   —    
Accretable yield, end of period
 
$
181

   
 
$
181
 
 
 
 
 
 
 
 
 
Credit Quality Information
The following tables represent credit exposures by internally assigned grades as of June 30, 2022 and December 31, 2021. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all.
The Company’s internally assigned grades are as follows:
Pass – loans that are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral. There are four
sub-grades
within the Pass category to further distinguish the loan.
Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.
Substandard – loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful – loans classified as Doubtful have all the weaknesses inherent in a Substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.
Loss – loans classified as a Loss are considered uncollectible and are immediately charged against
allowances.

The following table presents the classes of the loan portfolio summarized by the internal risk rating system as of June 30, 2022 and December 31, 2021:
 
(In Thousands)
          
Special
                       
As of June 30, 2022

   
Pass
     
Mention
     
Substandard
     
Doubtful
     
Total
  
Agriculture loans
    $ 7,510      $ —        $ 200      $ —        $ 7,710  
Commercial and PPP loans
      86,141        1,785        3,053        —          90,979  
Commercial real estate loans
      428,458        310        4,743        2,077        435,588  
Residential real estate loans
      236,123        1,453        3,202        623        241,401  
Consumer loans
      8,689        —          —          —          8,689  
Municipal loans
      5,814        —          —          —          5,814  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ 772,735      $ 3,548      $ 11,198      $ 2,700      $ 790,181  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
 
(In Thousands)
  
 
 
  
Special
 
  
 
 
  
 
 
  
 
 
As of December 31, 2021
  
Pass
 
  
Mention
 
  
Substandard
 
  
Doubtful
 
  
Total
 
Agriculture loans
    $ 9,341      $ —        $ —        $ —        $ 9,341  
Commercial and PPP
      117,918        3,757        703        —          122,378  
Commercial real estate loans
      332,156        2,077        4,516        —          338,749  
Residential real estate loans
      228,664        1,657        981        —          231,302  
Consumer loans
      7,087        —          —          —          7,087  
Municipal loans
      6,182        —          —          —          6,182  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ 701,348      $ 7,491      $ 6,200      $ —        $ 715,039  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
The following tables present an aging analysis of the recorded investment of
past-due
loans.
 
 
  
June 30, 2022
 
(In Thousands)
  
30-59

Days
Past Due
 
  
60-89

Days
Past Due
 
  
90 Days
or Greater
Past Due
 
  
Total
Past Due
 
  
Current
 
  
Purchased
Credit
Impaired
Loans
 
  
Total
Loans
 
  
Total > 90
Days and
Accruing
 
Agriculture loans
    $ 154      $ —        $ —        $ 154      $ 7,556      $ —        $ 7,710      $ —    
Commercial and PPP loans
      —        21        —          21        90,958        —        90,979        —    
Commercial real estate loans
      460        140        —          600        430,623        4,365        435,588        —    
Residential real estate loans
      1,467        210        338        2,015        239,386        —        241,401        —    
Consumer loans
      15        2        —          17        8,672        —          8,689        —    
Municipal loans
  
 
  
 
  
 
 —
  
 
  
 
 —
  
 
  
 
 —
 
  
 
 5,814
 
  
 
 —
  
 
  
 
 5,814
 
  
 
 —
  
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Total
   
$
2,096
 
   
$
373
 
   
$
338
 
   
$
2,807
 
   
$
783,009
 
   
$
4,365
 
   
$
790,181
 
   
$
—  
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
 
    
December 31, 2021
  
(In Thousands)
   
30-59

Days
Past
 
Due		     
60-89

Days
Past
 
Due		      90
 
Days
or
 
Greater
Past
 
Due		      Total
Past
 
Due		      Current      Purchased
Credit
Impaired
Loans		      Total
Loans		      Total
 
>
 
90
Days
 
and
Accruing		  
Agriculture loans
    $ 83      $ —        $ —        $ 83      $ 9,258      $ —        $ 9,341      $ —    
Commercial and PPP loans
      66        —          —          66        121,800        512        122,378        —    
Commercial real estate loans
      245        —          —          245        334,110        4,394        338,749        —    
Residential real estate loans
      1,427        211        869        2,507        228,145        650        231,302        762  
Consumer loans
      31        2        —          33        7,054        —          7,087        —    
Municipal loans
      —          —          —          —          6,182        —          6,182        —    
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
   
$
1,852
 
   
$
213
 
   
$
869
 
   
$
2,934
 
   
$
706,549
 
   
$
5,556
 
   
$
715,039
 
   
$
762
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
 
Impaired Loans
The following tables present the recorded investment and unpaid principal balances for impaired loans and related allowance, if applicable. Also presented are the average recorded investments and the related amount of interest recognized during the time within the period that the impaired loans were
impaired.
 
 
  
As of June 30, 2022
 
(In Thousands)
  
Recorded
Investment
 
  
Unpaid
Principal
Balance
 
  
Related
Allowance
 
With no related allowance recorded:
  
 
 
 
  
 
 
 
  
 
 
 
Agriculture loans
  
$
 200
 
  
$
 200
 
  
$
—  
 
Commercial loans
  
 
 2,451
 
  
 
 2,471
 
  
 
—  
 
Commercial real estate loans
  
 
 2,501
 
  
 
 2,501
 
  
 
—  
 
Residential real estate loans
  
 
 3,145
 
  
 
 3,269
 
  
 
—  
 
Consumer loans
  
 
 —
  
 
  
 
 —
  
 
  
 
—  
 
Municipal loans
  
 
 —
  
 
  
 
 —
  
 
  
 
—  
 
With an allowance recorded:
  
 
 
 
  
 
 
 
  
 
 
 
Agriculture loans
  
$
 —
  
 
  
$
 —
  
 
  
$
 —
  
 
Commercial loans
  
 
 —
  
 
  
 
 —
  
 
  
 
 —
  
 
Commercial real estate loans
  
 
 —
  
 
  
 
 —
  
 
  
 
 —
  
 
Residential real estate loans
  
 
 —
 
  
 
 —
 
  
 
 —
 
Consumer loans
  
 
 —
  
 
  
 
 —
  
 
  
 
 —
  
 
Municipal loans
  
 
 —
  
 
  
 
 —
  
 
  
 
 —
  
 
Total
  
 
 
 
  
 
 
 
  
 
 
 
Agriculture loans
  
$
 200
 
  
$
 200
 
  
$
 —
  
 
Commercial loans
  
 
 2,451
 
  
 
 2,471
 
  
 
 —
  
 
Commercial real estate loans
  
 
 2,501
 
  
 
 2,501
 
  
 
 —
  
 
Residential real estate loans
  
 
 3,145
 
  
 
 3,269
 
  
 
 —
 
Consumer loans
  
 
 —
  
 
  
 
 —
  
 
  
 
 —
 
Municipal loans
  
 
 —
  
 
  
 
 —
  
 
  
 
 —
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
  
$
8,297
 
  
$
8,441
 
  
$
—
 
    
 
 
     
 
 
     
 
 
  
 
 
  
As of December 31, 2021
 
(In Thousands)
  
Recorded
Investment
 
  
Unpaid
Principal
Balance
 
  
Related
Allowance
 
With no related allowance recorded:
  
 
 
 
  
 
 
 
  
 
 
 
Agriculture loans
  
$
 —  
 
  
$
 —  
 
  
$
 —  
 
Commercial loans
  
 
 42
 
  
 
 61
 
  
 
—  
 
Commercial real estate loans
  
 
 —
  
 
  
 
 —
  
 
  
 
—  
 
Residential real estate loans
  
 
 709
 
  
 
 779
 
  
 
—  
 
Consumer loans
  
 
 —
  
 
  
 
 —
  
 
  
 
—  
 
Municipal loans
  
 
 —
  
 
  
 
 —
  
 
  
 
—  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
With an allowance recorded:
  
 
 
 
  
 
 
 
  
 
 
 
Agriculture loans
  
$
 —
  
 
  
$
 —
  
 
  
$
 —
  
 
Commercial loans
  
 
 —
  
 
  
 
 —
  
 
  
 
 —
  
 
Commercial real estate loans
  
 
 —
  
 
  
 
 —
  
 
  
 
 —
  
 
Residential real estate loans
  
 
 —
  
 
  
 
 —
  
 
  
 
 —
  
 
Consumer loans
  
 
 —
  
 
  
 
 —
  
 
  
 
 —
  
 
Municipal loans
  
 
 —
  
 
  
 
 —
  
 
  
 
 —
  
 
 
 
 
 —
  
 
  
 
 —
  
 
  
 
 —
  
 
Total
  
 
 
 
  
 
 
 
  
 
 
 
Agriculture loans
  
$
 —
  
 
  
$
 —
  
 
  
$
 —
  
 
Commercial loans
  
 
 42
 
  
 
 61
 
  
 
 —
  
 
Commercial real estate loans
  
 
 —
  
 
  
 
 —
  
 
  
 
 —
  
 
Residential real estate loans
  
 
 709
 
  
 
 779
 
  
 
 —
  
 
Consumer loans
  
 
 —
  
 
  
 
 —
  
 
  
 
 —
  
 
Municipal loans
  
 
 —
  
 
  
 
 —
  
 
  
 
 —
  
 
    
 
 
     
 
 
     
 
 
  
 
  
$
 751
 
  
$
 840
 
  
$
 —
  
 
    
 
 
     
 
 
     
 
 
  
 
 
  
For the Three Months Ended June 30,
 
 
  
2022
 
  
2021
 
(In Thousands)
  
Average
Recorded
Investment
 
  
Interest
Income
Recognized
 
  
Average
Recorded
Investment
 
  
Interest
Income
Recognized
 
With no related allowance recorded:
                                    
Agriculture loans
    $ 237      $ 3      $ —      $ —  
Commercial loans
      4,706        66        —        —  
Commercial real estate loans
      455        4        —        —  
Residential real estate loans
      3,143        23        213        4  
Consumer loans
      —        —        —        —  
Municipal loans
      —        —        —        —  
    
 
 
     
 
 
     
 
 
     
 
 
  
       8,541        96        213        4  
With an allowance recorded:
                                    
Agriculture loans
   
$
 —     
$
 —     
$

 —     
$
 —  
Commercial loans
      —                 —        —  
Commercial real estate loans
      —        —        —        —  
Residential real estate loans
      —        —        —        —  
Consumer loans
      —        —        —        —  
Municipal loans
      —        —        —        —  
    
 
 
     
 
 
     
 
 
     
 
 
  
 
 
   —        —        —        —  
 
 
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Total
    $ 8,541      $ 96      $ 213      $ 4  
    
 
 
     
 
 
     
 
 
     
 
 
  
 
 
  
For the Six Months Ended June 30,
 
 
  
2022
 
  
2021
 
(In Thousands)
  
Average
Recorded
Investment
 
  
Interest
Income
Recognized
 
  
Average
Recorded
Investment
 
  
Interest
Income
Recognized
 
With no related allowance recorded:
  
      
  
      
  
      
  
      
Agriculture loans
  
$
242
 
  
$
6
 
  
$
—  
 
  
$
—  
 
Commercial loans
  
 
4,935
 
  
 
132
 
  
 
—  
 
  
 
—  
 
Commercial real estate loans
  
 
461
 
  
 
9
 
  
 
—  
 
  
 
—  
 
Residential real estate loans
  
 
3,171
 
  
 
48
 
  
 
225
 
  
 
8
 
Consumer loans
  
 
—  
 
  
      
  
 
—  
 
  
 
—  
 
Municipal loans
  
 
—  
 
  
      
  
 
—  
 
  
 
—  
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
  
$
8,809
 
  
$
195
 
  
$
225
 
  
$
8
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
With an allowance recorded:
  
      
  
      
  
      
  
      
Agriculture loans
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
Commercial loans
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Commercial real estate loans
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Residential real estate loans
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Consumer loans
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Municipal loans
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Total
  
$
8,809
 
  
$
195
 
  
$
225
 
  
$
8
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
The following table presents nonaccrual loans by classes of the loan
portfolio:
 
(In Thousands)
  
June 30,
2022
 
  
December 31,
2021
 
Commercial loans
    $ 36      $ 39  
Commercial real estate loans
      137        144  
Residential real estate loans
      1,321        449  
Consumer loans
      —        2  
    
 
 
     
 
 
  
Total
   
$
1,494
 
   
$
634
 
    
 
 
     
 
 
  
Approximately
$435,588 or 55.1%
of the Bank’s loan portfolio was in commercial real estate loans at June 30, 2022. While the Bank does not have a concentration of credit risk with any single borrower or industry, repayments on loans in these portfolios can be negatively influenced by decreases in real estate values. The Bank mitigates this risk through conservative underwriting policies and procedures. In addition,
 $165,203
of real estate-commercial loans were owner occupied properties as of June 30, 2022. These types of loans are generally considered to involve less risk than nonowner-occupied mortgages.
At June 30, 2022 and December 31, 2021, the carrying amount of borrowings
 secured by loans pledged to the FHLB under its blanket lien was $0 and $1,120, respectively.
Loan Modifications and Troubled Debt Restructurings (TDRs)
A loan is considered to be a TDR loan when the Company grants a concession to the borrower because of the borrower’s financial condition that it would not otherwise consider. Such concessions include the reduction of interest rates, forgiveness of principal or interest, or other modifications of interest rates that are less than the current market rate for new obligations with similar risk.

 
The Bank may grant a concession or modification for economic or legal reasons related to a borrower’s financial condition that it would not otherwise consider resulting in a modified loan which is then identified as a troubled debt restructuring (TDR). The Bank may modify loans through rate reductions, extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers’ operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are considered impaired loans for purposes of calculating the Bank’s allowance for loan losses.
The Bank identifies loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future. As of June 30, 2022 and December 31, 2021, the Company had no loans identified as TDRs. There were also no new loan modifications during the periods that were considered TDRs. 
6.
ALLOWANCE FOR LOAN LOSSES
The segments of the Company’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. The loan segments used are consistent with the internal reports evaluated by the Company’s management and Board of Directors to monitor risk and performance within various segments of its loan portfolio and, therefore, no further disaggregation is considered necessary. The Company’s loan portfolio consists primarily of real estate loans on commercial and residential property. The portfolio also includes agricultural loans, commercial loans, municipal loans, and consumer loans.
The Company’s primary lending activity is the origination of commercial loans extended to small and
mid-sized
commercial and industrial entities.
Commercial loans are primarily underwritten on the basis of the borrowers’ ability to service such debt from income. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. As a general practice, the Company takes as collateral a security interest in any equipment, or other chattel, although loans may also be made on an unsecured basis. Collateralized working capital loans typically are secured by short-term assets whereas long-term loans are primarily secured by long-term assets.
Construction and Land loans are to finance the construction of owner-occupied and income producing properties. These loans are categorized within commercial or
one-to-four
family residential loans based upon the underlying collateral and intended use following the completion of the construction period. Real estate development and construction loans are approved based on an analysis of the borrower and guarantor, the viability of the project and on an acceptable percentage of the appraised value of the property securing the loan. Construction loan funds are disbursed periodically based on the percentage of construction or development completed. The Company carefully monitors these loans with
on-site
inspections and requires the receipt of lien waivers on funds advanced. The Company considers the market conditions and feasibility of proposed projects, the financial condition and reputation of the borrower and guarantors, the amount of the borrower’s equity in the project, independent appraisals, cost estimates and
pre-construction
sale information. The Company also makes loans on occasion for the purchase of land for future development by the borrower. Land loans are extended for the future development for either commercial or residential use by the borrower. The Company carefully analyzes the intended use of the property and the viability thereof.
The Company’s commercial real estate loans consist of mortgage loans secured by nonresidential real estate, such as by apartment buildings, small office buildings, and owner-occupied properties. Commercial real estate loans are secured by the subject property and are underwritten based on loan to value limits, cash flow coverage and general creditworthiness of the obligors. These loans tend to involve larger loan balances and their repayment is typically dependent upon the successful operation and management of the underlying real estate.
Residential real estate loans are underwritten based on the borrower’s repayment capacity and source, value of the underlying property, credit history and stability. These loans are secured by a first or second mortgage on the borrower’s principal residence or their second/vacation home (excluding investment/rental property).
In addition to the main types of loans discussed above, the Company also originates agricultural loans, consumer loans, and municipal loans. The agricultural loan portfolio consists of loans to local farmers and agricultural businesses that are generally secured by farmland and equipment. The consumer loan portfolio consists of lending in the form of home equity loans secured by financed property and personal consumer loans, which may be secured or unsecured. The municipal loan portfolio consists of loans to qualified local municipalities, which are generally supported by the taxing authority of the borrowing municipality, and is frequently secured by collateral.
Management has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance for loan losses the Company has segmented certain loans in the portfolio by product type. Loans are segmented into the following pools: agriculture loans, commercial real estate loans, commercial
loans,
 
residential real estate loans, consumer loans, and municipal loans. Historical loss percentages for each risk category are calculated and used as the basis for calculating allowance allocations. These historical loss percentages are calculated over a four-year period for all portfolio segments.
Certain qualitative factors are then added to the historical allocation percentage to get the adjusted factor to be applied to
non-classified
loans. The following qualitative factors are analyzed for each portfolio segment:
 
  •  
Levels of and trends in delinquencies
 
  •  
Trends in volume and terms
 
  •  
Changes in collateral
 
  •  
Changes in management and lending staff
 
  •  
Economic trends
 
  •  
Concentrations of credit
 
  •  
Changes in lending policies
 
  •  
External factors
 
  •  
Changes in underwriting process
 
  •  
Trends in credit quality ratings
These qualitative factors are reviewed each quarter and adjusted based upon relevant changes within the portfolio.
The total allowance reflects management’s estimate of loan losses inherent in the loan portfolio at the Consolidated Balance Sheet date. The Company considers the allowance for loan losses adequate to cover loan losses inherent in the loan portfolio at December 31, 2021 and 2020.
The following table summarizes the activity in the allowance for loan losses by loan class for the years ended December 31, 2021 and 2020.
 
   
Agriculture
Loans
    
Commercial
and PPP
Loans
    
Commercial
Real Estate
Loans
    
Residential
Real Estate
Loan
    
Consumer
Loans
    
Municipal
Loans
    
Unallocated
Loans
    
Total
  
   
For the Year Ended December 31, 2021
  
Allowance for loan losses:
 
Beginning balance
  
$
120
 
  
$
290
 
  
$
314
 
  
$
1,702
 
  
$
35
 
  
$
18
 
  
$
310
 
  
$
2,789
 
Charge-offs
     —         (24 )      (18 )      (297 )      —         —         —         (339 ) 
Recoveries
     —         22       —         32       —         —         —         54  
Provision
     (97 )      294       503       197       (13 )      (3 )      (233 )      648  
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Ending balance
  
$
23
 
  
$
582
 
  
$
799
 
  
$
1,634
 
  
$
22
 
  
$
15
 
  
$
77
 
  
$
3,152
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
   
   
For the Year Ended December 31, 2020
  
Allowance for loan losses:
 
Beginning balance
   $ 152     $ 312     $ 255     $ 1,707     $ 43     $ 13     $ 220     $ 2,702  
Charge-offs
     —         —         —         (99 )      (12 )      —         —         (111 ) 
Recoveries
     —         —         —         7       7       —         —         14  
Provision
     (32 )      (22 )      59       87       (3 )      5       90       184  
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Ending balance
  
$
120
 
  
$
290
 
  
$
314
 
  
$
1,702
 
  
$
35
 
  
$
18
 
  
$
310
 
  
$
2,789
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
The increase in the allowance for loan losses allocated to the commercial loans and commercial real estate loans can be attributed to the increase in the carrying value of loans that have been risk rated as Special Mention and Substandard as of December 31, 2021. Please see the “Credit Quality Information” section below for further
details.
The following table illustrates the balance of loans individually evaluated vs. collectively evaluated for impairment at December 31, 2021 and 2020.
 
   
Agriculture
Loans
    
Commercial
and PPP
Loans
    
Commercial
Real Estate
Loans
    
Residential
Real Estate
Loan
    
Consumer
Loans
    
Municipal
Loans
    
Unallocated
Loans
    
Total
  
   
As of December 31, 2021
  
Allowance for loan losses:
                                                                
Ending balance
  
$
23
 
  
$
582
 
  
$
799
 
  
$
1,634
 
  
$
22
 
  
$
15
 
  
$
77
 
  
$
3,152
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Ending balance: individually evaluated for impairment
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Ending balance: collectively evaluated for impairment
  
$
23
 
  
$
582
 
  
$
799
 
  
$
1,634
 
  
$
22
 
  
$
15
 
  
$
77
 
  
$
3,152
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Loans:
                                                                
Ending balance
  
$
9,341
 
  
$
122,378
 
  
$
338,749
 
  
$
231,302
 
  
$
7,087
 
  
$
6,182
 
          
$
715,039
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
            
 
 
  
Ending balance: individually evaluated for impairment
  
$
—  
 
  
$
42
 
  
$
—  
 
  
$
709
 
  
$
—  
 
  
$
—  
 
          
$
751
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
            
 
 
  
Ending balance: loans acquired with deteriorated credit quality
  
$
—  
 
  
$
512
 
  
$
4,394
 
  
$
650
 
  
$
—  
 
  
$
—  
 
          
$
5,556
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
            
 
 
  
Ending balance: collectively evaluated for impairment
  
$
9,341
 
  
$
121,824
 
  
$
334,355
 
  
$
229,943
 
  
$
7,087
 
  
$
6,182
 
          
$
708,732
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
            
 
 
  
 
   
Agriculture
Loans
    
Commercial
Loans
    
Commercial
Real Estate
Loans
    
Residential
Real Estate
Loan
    
Consumer
Loans
    
Municipal
Loans
    
Unallocated
Loans
    
Total
  
   
As of December 31, 2020
  
Allowance for loan losses:
                                                                
Ending balance
  
$
120
 
  
$
290
 
  
$
314
 
  
$
1,702
 
  
$
35
 
  
$
18
 
  
 
310
 
  
$
2,789
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Ending balance: individually evaluated for impairment
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Ending balance: collectively evaluated for impairment
  
$
120
 
  
$
290
 
  
$
314
 
  
$
1,702
 
  
$
35
 
  
$
18
 
  
 
310
 
  
$
2,789
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Loans:
                                                                
Ending balance
  
$
11,246
 
  
$
21,534
 
  
$
27,261
 
  
$
167,536
 
  
$
2,514
 
  
$
6,749
 
          
$
236,840
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
            
 
 
  
Ending balance: individually evaluated for impairment
  
$
—  
 
  
$
2
 
  
$
—  
 
  
$
295
 
  
$
—  
 
  
$
—  
 
          
$
297
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
            
 
 
  
Ending balance: collectively evaluated for impairment
  
$
11,246
 
  
$
21,532
 
  
$
27,261
 
  
$
167,241
 
  
$
2,514
 
  
$
6,749
 
          
$
236,543
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
            
 
 
  
 
The Company evaluated whether loans acquired in the Merger were within the scope of ASC
310-30,
Receivables— Loans and Debt Securities Acquired with Deteriorated Credit Quality. Purchased credit-impaired loans (“PCI”) are loans that have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments. The fair value of purchased credit-impaired loans, on the acquisition date, was determined, primarily based on the fair value of loan collateral. The carrying value of purchased loans acquired with deteriorated credit quality as a result of the Merger was $5,527 at December 31, 2021.
On the acquisition date, the preliminary estimate of the unpaid principal balance for all PCI loans acquired through the Merger was $6,627 and the estimated fair value of the loans was $5,384. Total contractually required payments on these loans, including interest, at acquisition was $8,509. The Company’s preliminary estimate of expected cash flows was $5,793 at the acquisition date. The Company established a credit risk related non-accretable discount of $2,716 relating to these PCI loans, reflected in the recorded net fair value. The Company further estimated the timing and amount of expected cash flows in excess of the estimated fair value and established an accretable discount of $409 relating to these PCI loans. The remaining unamortized accretable discount at December 31, 2021 totaled $307.
Credit Quality Information
The following tables represent credit exposures by internally assigned grades as of December 31, 2021 and 2020. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all.
The Company’s internally assigned grades are as follows:
Pass – loans that are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral. There are four
sub-grades
within the Pass category to further distinguish the loan.
Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.
Substandard – loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful – loans classified as Doubtful have all the weaknesses inherent in a Substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.
Loss – loans classified as a Loss are considered uncollectible and are immediately charged against allowances.
The following table presents the classes of the loan portfolio summarized by the internal risk rating system as of December 31, 2021 and 2020:
 
(In Thousands)
As of December 31, 2021
   
Pass
     
Special
Mention
     
Substandard
     
Doubtful
     
Total
  
Agriculture loans
    $ 9,341        —          —          —        $ 9,341  
Commercial and PPP loans
    $ 117,918        3,757        703        —        $ 122,378  
Commercial real estate loans
    $ 332,156        2,077        4,516        —        $ 338,749  
Residential real estate loans
    $ 228,664        1,657        981        —        $ 231,302  
Consumer loans
    $ 7,087        —          —          —        $ 7,087  
Municipal loans
    $ 6,182        —          —          —        $ 6,182  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ 701,348      $ 7,491      $ 6,200      $ —        $ 715,039  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
 
(In Thousands)
As of December 31, 2020
   
Pass
     
Special
Mention
     
Substandard
     
Doubtful
     
Total
  
Agriculture loans
    $ 11,246        —          —          —        $ 11,246  
Commercial loans
    $ 21,259        —          275        —        $ 21,534  
Commercial real estate loans
    $ 27,261        —          —          —        $ 27,261  
Residential real estate loans
    $ 166,968        —          568        —        $ 167,536  
Consumer loans
    $ 2,514        —          —          —        $ 2,514  
Municipal loans
    $ 6,749        —          —          —        $ 6,749  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ 235,997      $ —        $ 843      $ —        $ 236,840  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
The following tables present an aging analysis of the recorded investment of
past-due
loans.
 
    
December 31, 2021
  
(In Thousands)
   
30-59

Days
Past Due		     
60-89

Days
Past Due		      90 Days
or Greater
Past Due		      Total
Past Due		      Current      Purchased
Credit
Impaired
Loans		      Total
Loans		      Total > 90
Days and
Accruing		  
Agriculture loans
    $ 83      $ —        $ —        $ 83      $ 9,258      $ —        $ 9,341      $ —    
Commercial and PPP loans
      66        —          —          66        121,800        512        122,378        —    
Commercial real estate loans
      245        —          —          245        334,110        4,394        338,749        —    
Residential real estate loans
      1,427        211        869        2,507        228,145        650        231,302        762  
Consumer loans
      31        2        —          33        7,054        —          7,087        —    
Municipal loans
      —          —          —          —          6,182        —          6,182        —    
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
   
$
1,852
 
   
$
213
 
   
$
869
 
   
$
2,934
 
   
$
706,549
 
   
$
5,556
 
   
$
715,039
 
   
$
762
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
   
    
December 31, 2020
  
(In Thousands)
   
30-59

Days
Past Due		     
60-89

Days
Past Due		      90 Days
or Greater
Past Due		      Total
Past Due		      Current      Total
Loans		      Total > 90
Days and
Accruing		         
Agriculture loans
    $ 171      $ —        $ —        $ 171      $ 11,075      $ 11,246      $ —             
Commercial loans
      66        —          6        72        21,462        21,534        —             
Commercial real estate loans
      1,297        —          —          1,297        25,964        27,261        —             
Residential real estate loans
      1,248        831        338        2,417        165,119        167,536        147           
Consumer loans
      69        26        —          95        2,419        2,514        —             
Municipal loans
      —          —          —          —          6,749        6,749        —             
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
           
Total
   
$
2,851
 
   
$
857
 
   
$
344
 
   
$
4,052
 
   
$
232,788
 
   
$
236,840
 
   
$
147
 
         
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
           
Impaired Loans
The following tables present the recorded investment and unpaid principal balances for impaired loans and related allowance, if applicable. Also presented are the average recorded investments and the related amount of interest recognized during the time within the period that the impaired loans were impaired.
 
    
As of December 31, 2021
  
(In Thousands)
    Recorded
Investment		      Unpaid
Principal
Balance		      Related
Allowance		  
With no related allowance recorded:
                           
Agriculture loans
    $  —        $ —        $ —    
Commercial loans
      42        61        —    
Commercial real estate loans
      —          —          —    
Residential real estate loans
      709        779        —    
Consumer loans
      —          —          —    
Municipal loans
      —          —          —    
       —          —          —    
With an allowance recorded:
                           
Agriculture loans
    $ —        $ —        $ —    
Commercial loans
      —          —          —    
Commercial real estate loans
      —          —          —    
Residential real estate loans
      —          —          —    
Consumer loans
      —          —          —    
Municipal loans
      —          —          —    
       —          —          —    
Total
                           
Agriculture loans
    $ —        $ —        $ —    
Commercial loans
      42        61        —    
Commercial real estate loans
      —          —          —    
Residential real estate loans
      709        779        —    
Consumer loans
      —          —          —    
Municipal loans
      —          —          —    
    
 
 
     
 
 
     
 
 
  
    
$
751
 
   
$
840
 
   
$
—  
 
    
 
 
     
 
 
     
 
 
  
 
    
As of December 31, 2020
  
     Recorded
Investment		      Unpaid
Principal
Balance		      Related
Allowance		  
With no related allowance recorded:
                           
Agriculture loans
    $ —        $ —        $ —    
Commercial loans
      2        7        —    
Commercial real estate loans
      —          —          —    
Residential real estate loans
      295        332        —    
Consumer loans
      —          —          —    
Municipal loans
      —          —          —    
With an allowance recorded:
                           
Agriculture loans
    $ —        $ —        $ —    
Commercial loans
      —          —          —    
 
    
As of December 31, 2020
  
     Recorded
Investment		      Unpaid
Principal
Balance		      Related
Allowance		  
Commercial real estate loans
      —          —          —    
Residential real estate loans
      —          —          —    
Consumer loans
      —          —          —    
Municipal loans
      —          —          —    
       —          —          —    
Total
                           
Agriculture loans
    $ —        $ —        $ —    
Commercial loans
      2        7        —    
Commercial real estate loans
      —          —          —    
Residential real estate loans
      295        332        —    
Consumer loans
      —          —          —    
Municipal loans
      —          —          —    
    
 
 
     
 
 
     
 
 
  
     $ 297      $ 339      $ —    
    
 
 
     
 
 
     
 
 
  
 
    
For the Year Ended December 31,
  
    
2021
     
2020
  
(In Thousands)
    Average
Recorded
Investment		      Interest
Income
Recognized		      Average
Recorded
Investment		      Interest
Income
Recognized		  
With no related allowance recorded:
                                    
Agriculture loans
    $ —        $ —        $ —        $ —    
Commercial loans
               —          3        1  
Commercial real estate loans
      —          —          —          —    
Residential real estate loans
      759        20        345        11  
Consumer loans
      —          —          —          —    
Municipal loans
      —          —          —          —    
    
 
 
     
 
 
     
 
 
     
 
 
  
     $ 759      $ 20      $ 348      $ 12  
    
 
 
     
 
 
     
 
 
     
 
 
  
With an allowance recorded:
                                    
Agriculture loans
      —          —          —          —    
Commercial loans
      —          —          —          —    
Commercial real estate loans
      —          —          —          —    
Residential real estate loans
      —          —          —          —    
Consumer loans
      —          —          —          —    
Municipal loans
      —          —          —          —    
    
 
 
     
 
 
     
 
 
     
 
 
  
     $ —        $ —        $ —        $ —    
    
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ 759      $ 20      $ 348      $ 12  
    
 
 
     
 
 
     
 
 
     
 
 
  
The following table present nonaccrual loans by classes of the loan portfolio:
 
(In Thousands)
   
December 31,
2021
     
December 31,
2020
  
Agriculture loans
    $ —        $ —    
Commercial loans
      39        48  
Commercial real estate loans
      144        —    
Residential real estate loans
      449        421  
Consumer loans
      2        —    
Municipal loans
      —          —    
    
 
 
     
 
 
  
Total
   
$
634
 
   
$
469
 
    
 
 
     
 
 
  
Approximately $338,749 or 47.4% of the Bank’s loan portfolio was in commercial real estate loans at December 31, 2021. While the Bank does not have a concentration of credit risk with any single borrower or industry, repayments on loans in these portfolios can be negatively influenced by decreases in real estate values. The Bank mitigates this risk through conservative underwriting policies and procedures. In addition, $109,226 of real estate-commercial loans were owner occupied properties as of December 31, 2021. These types of loans are generally considered to involve less risk than nonowner-occupied mortgages.
At December 31, 2021 and 2020, the carrying amount of borrowings secured by loans pledged to the FHLB under its blanket lien was $0 and $1,120, respectively.
Loan Modifications and Troubled Debt Restructurings (TDRs)
A loan is considered to be a TDR loan when the Company grants a concession to the borrower because of the borrower’s financial condition that it would not otherwise consider. Such concessions include the reduction of interest rates, forgiveness of principal or interest, or other modifications of interest rates that are less than the current market rate for new obligations with similar risk.
The Bank may grant a concession or modification for economic or legal reasons related to a borrower’s financial condition that it would not otherwise consider resulting in a modified loan which is then identified as a troubled debt restructuring (TDR). The Bank may modify loans through rate reductions, extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers’ operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are considered impaired loans for purposes of calculating the Bank’s allowance for loan losses.
The Bank identifies loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future. As of December 31, 2021 and December 31, 2020, the Company had no loans identified as TDRs. There were also no new loan modifications during the periods that were considered TDRs.
COVID-19
Loan Forbearance Programs
Section 4013 of the CARES Act provides that banks may elect not to categorize a loan modification as a TDR if the loan modification is (1) related to
COVID-19;
(2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date on which the national emergency concerning the novel coronavirus disease (COVID–19) outbreak declared by the President on March 13, 2020, under the National Emergencies Act terminates, or (B) January 1, 2022.
On April 7, 2020, federal banking regulators issued a revised interagency statement that included guidance on their approach for the accounting of loan modifications in light of the economic impact of the
COVID-19
pandemic. The guidance interprets current accounting standards and indicates that a lender can conclude that a borrower is not experiencing financial difficulty if short-term modifications are made in response to
COVID-19,
such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to the loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented.
According to the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) issued by the federal bank regulatory agencies on April 7, 2020, short-term loan modifications not otherwise eligible under Section 4013 that are made on a good faith basis in response to
COVID-19
to borrowers who were current prior to any relief are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. As of December 31, 2021, the Company had no loans that remain on a CARES Act modification.
 
In addition, the risk-rating on
COVID-19
modified loans did not change, and these loans will not be considered past due until after the deferral period is over and scheduled payments resume. The credit quality of these loans will be reevaluated after the deferral period ends.​​​​​​​