Loans and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2025

Loans and Allowance for Credit Losses

Loans and Allowance for Credit Losses

Note 5:    Loans and Allowance for Credit Losses

Classes of loans at March 31, 2025 and December 31, 2024 include:

	March 31,		December 31,
	2025		2024
Mortgage loans on real estate:
Residential 1-4 family	$	65,146	$	65,721
Commercial		24,735		21,412
Construction and land development		1,448		1,637
Total mortgage loans on real estate		91,329		88,770
Commercial loans		5,099		4,656
Consumer		3,817		3,479
		100,245		96,905
Plus:
Deferred Loan Costs		76		69
Less:
Allowance for credit losses		745		700
Net loans	$	99,576	$	96,274

The Company participates in the U.S. Department of Agriculture’s Rural Development Section 502 Guaranteed Loan Program. This program assists approved lenders in providing low- and moderate-income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas. Eligible applicants may, purchase, build, rehabilitate, or relocate a dwelling in an eligible rural area with 100% financing. The program provides a 90% loan note guarantee to approved lenders in order to reduce the risk of extending 100% loans to eligible rural homebuyers. As of March 31, 2025 and December 31, 2024, the company held $2,542 and $2,572 respectively, of USDA Guaranteed loans in the Residential 1-4 Family portfolio of loans.

The following tables present the balance in the allowance for credit losses based on portfolio segment as of March 31, 2025 and December 31, 2024:

	For the Three Months Ended
	March 31, 2025
	Mortgage Loans on Real Estate
					Construction
	Residential				and Land
	1-4 Family		Commercial		Development		Commercial
Allowance for credit losses:
Balance, beginning of period	$	271	$	339	$	13	$	60
Provision charged to expense		(5)		44		(2)		6
Losses charged off		—		—		—		—
Recoveries		—		—		—		—
Balance, end of period	$	266	$	383	$	11	$	66
Allowance for credit losses for unfunded loan commitments
Balance, beginning of period	$	2	$	7	$	6	$	2
Provision charged to expense		2		14		(6)		1
Losses charged off		—		—		—		—
Recoveries		—		—		—		—
Balance, end of period	$	4	$	21	$	—	$	3

	For the Three Months Ended
	March 31, 2025 (Continued)
	Consumer		Total
Allowance for credit losses:
Balance, beginning of period	$	17	$	700
Provision charged to expense		2		45
Losses charged off		—		—
Recoveries		—		—
Balance, end of year	$	19	$	745
Allowance for credit losses for unfunded loan commitments
Balance, beginning of year	$	—	$	17
Provision charged to expense		—		11
Losses charged off		—		—
Recoveries		—		—
Balance, end of year	$	—	$	28

	For the Three Months Ended
	March 31, 2024
	Mortgage Loans on Real Estate
					Construction
	Residential				and Land
	1-4 Family		Commercial		Development		Commercial
Allowance for credit losses:
Balance, beginning of period	$	247	$	332	$	15	$	65
Provision charged to expense		9		16		(4)		10
Losses charged off		—		—		—		—
Recoveries		—		—		—		—
Balance, end of year	$	256	$	348	$	11	$	75
Allowance for credit losses for unfunded loan commitments
Balance, beginning of year	$	2	$	10	$	8	$	2
Provision charged to expense		2		(3)		(6)		2
Losses charged off		—		—		—		—
Recoveries		—		—		—		—
Balance, end of year	$	4	$	7	$	2	$	4

	For the Three Months Ended
	March 31, 2024 (Continued)
	Consumer		Total
Allowance for credit losses:
Balance, beginning of period	$	16	$	675
Provision charged to expense		—		31
Losses charged off		—		—
Recoveries		—		—
Balance, end of year	$	16	$	706
Allowance for credit losses for unfunded loan commitments
Balance, beginning of year	$	—	$	22
Provision charged to expense		—		(5)
Losses charged off		—		—
Recoveries		—		—
Balance, end of year	$	—	$	17

The provision for credit losses is determined by the Company as the amount that is added to ACL accounts to bring the ACL to that, in management's judgement, is necessary to absorb expected credit losses over the lives of the respective financial instruments. The following table presents the components of the provision for credit losses:
	Three months ended March 31,
	2025		2024
Provision for credit losses:
Loans	$	45	$	31
Unfunded loan commitments		11		(5)
Total	$	56	$	26

Management’s opinion as to the ultimate collectability of loans is subject to estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral. These estimates are affected by changing economic conditions and the economic prospects of borrowers.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. All commercial and land development loans are graded at inception of the loan. Subsequently, analyses are performed on an annual basis and grade changes are made, as necessary. Interim grade reviews may take place if circumstances of the borrower warrant a timelier review. The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans. The Company uses the following definitions for risk ratings:

Pass — Loans classified as pass are well protected by the ability of the borrower to pay or by the value of the asset or underlying collateral.

Special Mention — Loans classified as watch represent loans with the minimum level of acceptable credit risk and servicing requirements and the borrower has the capacity to perform according to the terms and repayment is expected. However, one or more elements of uncertainty exist.

Substandard — Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful — Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss — Loans classified as loss are the portion of the loan that is considered uncollectible so that its continuance as an asset is not warranted. The amount of the loss determined will be charged-off.

The Company evaluates the loan risk grading system definitions and allowance for credit loss methodology on an ongoing basis. No significant changes were made to either during the three months ended March 31, 2025 or during the year ended December 31, 2024. The following tables represents loans, as of March 31, 2025 and December 31, 2024, by grading category and year in which the loans were originated:

	March 31, 2025
													Revolving
													Lines of
	2025		2024		2023		2022		2021		Prior		Credit		Total
Pass
Residential 1-4 Family	$	866	$	7,908	$	7,441	$	8,763	$	7,439	$	31,601	$	772	$	64,790
Commercial Real Estate		3,933		5,074		3,322		3,984		3,374		3,926		—		23,613
Construction and Land Development		—		481		802		—		—		165		—		1,448
Commercial		518		1,060		2,667		130		208		87		429		5,099
Consumer		772		1,446		854		275		318		152		—		3,817
Total Pass	$	6,089	$	15,969	$	15,086	$	13,152	$	11,339	$	35,931	$	1,201	$	98,767
Special Mention
Residential 1-4 Family	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate		—		—		631		—		—		—		—		631
Construction and Land Development		—		—		—		—		—		—		—		—
Commercial		—		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—		—
Total Special Mention	$	—	$	—	$	631	$	—	$	—	$	—	$	—	$	631
Substandard
Residential 1-4 Family	$	—	$	—	$	—	$	—	$	—	$	356	$	—	$	356
Commercial Real Estate		—		—		—		—		—		491		—		491
Construction and Land Development		—		—		—		—		—		—		—		—
Commercial		—		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—		—
Total Substandard	$	—	$	—	$	—	$	—	$	—	$	847	$	—	$	847
Total	$	6,089	$	15,969	$	15,717	$	13,152	$	11,339	$	36,778	$	1,201	$	100,245
Current period gross charge-offs:
Residential 1-4 Family	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate		—		—		—		—		—		—		—		—
Construction and Land Development		—		—		—		—		—		—		—		—
Commercial		—		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—		—
	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

	December 31, 2024
													Revolving
													Lines of
	2024		2023		2022		2021		2020		Prior		Credit		Total
Pass
Residential 1-4 Family	$	8,124	$	7,509	$	8,960	$	7,554	$	14,686	$	17,705	$	835	$	65,373
Commercial Real Estate		5,344		3,339		4,034		3,440		1,285		2,837		—		20,279
Construction and Land Development		625		843		—		—		46		123		—		1,637
Commercial		1,086		2,742		180		215		6		93		334		4,656
Consumer		1,659		945		322		373		172		8		—		3,479
Total Pass	$	16,838	$	15,378	$	13,496	$	11,582	$	16,195	$	20,766	$	1,169	$	95,424
Special Mention
Residential 1-4 Family	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate		—		637		—		—		—		—		—		637
Construction and Land Development		—		—		—		—		—		—		—		—
Commercial		—		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—		—
Total Special Mention	$	—	$	637	$	—	$	—	$	—	$	—	$	—	$	637
Substandard
Residential 1-4 Family	$	—	$	—	$	—	$	—	$	—	$	348	$	—	$	348
Commercial Real Estate		—		—		—		—		—		496		—		496
Construction and Land Development		—		—		—		—		—		—		—		—
Commercial		—		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—		—
Total Substandard	$	—	$	—	$	—	$	—	$	—	$	844	$	—	$	844
Total	$	16,838	$	16,015	$	13,496	$	11,582	$	16,195	$	21,610	$	1,169	$	96,905
Current period gross charge-offs:
Residential 1-4 Family	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate		—		—		—		—		—		(179)		—		(179)
Construction and Land Development		—		—		—		—		—		—		—		—
Commercial		—		(13)		—		—		—		—		—		(13)
Consumer		—		(2)		—		—		—		—		—		(2)
	$	—	$	(15)	$	—	$	—	$	—	$	(179)	$	—	$	(194)

The following tables present the Company’s loan portfolio aging analysis as of March 31, 2025 and December 31, 2024:

March 31, 2025							2025				Total
	30-59 Days		60-89 Days		90 Days and		Total Past				Loans
	Past Due		Past Due		Greater		Due		Current		Receivable
Mortgage loans on real estate:
Residential 1-4 family	$	372	$	—	$	156	$	528	$	64,618	$	65,146
Commercial		249		—		—		249		24,486		24,735
Construction and land development		—		—		—		—		1,448		1,448
Total real estate loans		621		—		156		777		90,552		91,329
Commercial		—		—		—		—		5,099		5,099
Consumer		31		3		—		34		3,783		3,817
Total	$	652	$	3	$	156	$	811	$	99,434	$	100,245

December 31, 2024							2024				Total
	30-59 Days		60-89 Days		90 Days and		Total Past				Loans
	Past Due		Past Due		Greater		Due		Current		Receivable
Mortgage loans on real estate:
Residential 1-4 family	$	445	$	219	$	317	$	981	$	64,740	$	65,721
Commercial		—		—		—		—		21,412		21,412
Construction and land development		—		—		—		—		1,637		1,637
Total real estate loans		445		219		317		981		87,789		88,770
Commercial		—		—		—		—		4,656		4,656
Consumer		46		—		—		46		3,433		3,479
Total	$	491	$	219	$	317	$	1,027	$	95,878	$	96,905

During the three months ended March 31, 2025, there was no accrued interest that was written off, related to loans placed in nonaccrual during the year. During the year ended December 31, 2024 accrued interest that was written off, related to loans placed in nonaccrual during the year, amounted to $5 all related to Residential Real Estate loans.

Collateral-Dependent Loans

At March 31, 2025, the Company held loans that were individually evaluated for impairment due to financial difficulties experienced by the borrower and for which the repayment, on the basis of our assessment, is expected to be provided substantially through the sale or operations of the collateral. The ACL for these collateral dependent loans is primarily based on the fair value of the underlying collateral at the reporting date. The following describes the types of collateral that secure collateral dependent loans:

● One-to-four family mortgages are primarily secured by first liens on residential real estate.

● Commercial real estate loans are primarily secured by office and industrial buildings.

● Commercial and industrial loans are primarily secured by accounts receivables, inventory, and equipment.

● Home equity loans are primarily secured by second liens on residential real estate.

● Consumer loans are primarily secured by titles on automobiles and recreational vehicles.

The following table presents information regarding collateral dependent loans as of March 31, 2025 and December 31, 2024:

	March 31, 2025				December 31, 2024
	Loan		Specific		Loan		Specific
	Balance		Allowance		Balance		Allowance
Mortgage loans on real estate:
Residential 1-4 family		356		—	$	348	$	—
Commercial		491		—		496		—
Construction and land development		—		—		—		—
Total real estate loans		847		—		844		—
Commercial		—		—		—		—
Consumer		—		—		—		—
Total	$	847	$	—	$	844	$	—

							Total		Interest		Amortized
	Nonaccrual		Nonaccrual				Nonaccrual		Income		Cost Basis
	Loans with No		Loans with an		Total		Loans at		Recognized on		of Loans 90+
	Allowance for		Allowance for		Nonaccrual		Beginning of		Nonaccrual		Days Past Due
	Credit Losses		Credit Losses		Loans		Year		Loans		Not on Nonaccrual
March 31, 2025
Residential - First Mortgage		356		—		356		348		—		—
Commercial real estate		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—
Commercial and Industrial		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Total	$	356	$	—	$	356	$	348	$	—	$	—
							Total		Interest		Amortized
	Nonaccrual		Nonaccrual				Nonaccrual		Income		Cost Basis
	Loans with No		Loans with an		Total		Loans at		Recognized on		of Loans 90+
	Allowance for		Allowance for		Nonaccrual		Beginning of		Nonaccrual		Days Past Due
	Credit Losses		Credit Losses		Loans		Year		Loans		Not on Nonaccrual
December 31, 2024
Residential - First Mortgage		348		—		348		177		—		—
Commercial real estate		—		—		—		156		—		—
Construction and land development		—		—		—		—		—		—
Commercial and Industrial		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Total	$	348	$	—	$	348	$	333	$	—	$	—

There were no new loans modified due to borrowers experiencing financial difficulties during the three months ended March 31, 2025 or 2024.