Note 4 - Loans, Allowance for Credit Losses and Other Real Estate Owned

6 Months Ended

Jun. 30, 2024

Notes to Financial Statements

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

Note 4: Loans, Allowance for Credit Losses and Other Real Estate Owned

A summary of the major categories of loans outstanding is shown in the following tables at the dates indicated:

	At June 30,		At December 31,
	2024		2023
	(In thousands)
Commercial	$	128,269	$	136,550
Commercial real estate		488,760		487,523
Construction		5,064		5,063
Residential real estate		9,096		9,935
Consumer installment & other		200,653		227,531
Total	$	831,842	$	866,602

The following summarizes activity in the allowance for credit losses:

	Allowance for Credit Losses
	For the Three Months Ended June 30, 2024
										Consumer
				Commercial				Residential		Installment
	Commercial			Real Estate		Construction		Real Estate		and Other			Total
	(In thousands)
Allowance for credit losses:
Balance at beginning of period	$	3,765		$	5,758	$	242	$	22	$	6,092		$	15,879
Provision (reversal)		148			32		1		2		(183	)		-
Chargeoffs		(28	)		-		-		-		(1,513	)		(1,541	)
Recoveries		11			132		-		-		1,471			1,614
Total allowance for credit losses	$	3,896		$	5,922	$	243	$	24	$	5,867		$	15,952

	Allowance for Credit Losses
	For the Six Months Ended June 30, 2024
													Consumer
				Commercial						Residential			Installment
	Commercial			Real Estate			Construction			Real Estate			and Other			Total
	(In thousands)
Allowance for credit losses:
Balance at beginning of period	$	4,216		$	5,925		$	245		$	26		$	6,455		$	16,867
(Reversal) provision		(315	)		(180	)		(2	)		(2	)		799			300
Chargeoffs		(28	)		-			-			-			(3,516	)		(3,544	)
Recoveries		23			177			-			-			2,129			2,329
Total allowance for credit losses	$	3,896		$	5,922		$	243		$	24		$	5,867		$	15,952

	Allowance for Credit Losses
	For theThree Months Ended June 30, 2023
												Consumer
				Commercial					Residential			Installment
	Commercial			Real Estate			Construction		Real Estate			and Other			Total
	(In thousands)
Allowance for credit losses:
Balance at beginning of period	$	5,746		$	6,258		$	200	$	38		$	7,267		$	19,509
(Reversal) provision		(1,001	)		(190	)		2		(6	)		1,195			-
Chargeoffs		-			-			-		-			(1,661	)		(1,661	)
Recoveries		19			15			-		-			598			632
Total allowance for credit losses	$	4,764		$	6,083		$	202	$	32		$	7,399		$	18,480

	Allowance for Credit Losses
	For the Six Months Ended June 30, 2023
										Consumer
				Commercial				Residential		Installment
	Commercial			Real Estate		Construction		Real Estate		and Other			Total
	(In thousands)
Allowance for credit losses:
Balance at beginning of period	$	6,138		$	5,888	$	150	$	32	$	8,076		$	20,284
(Reversal) provision		(3,410	)		165		52		-		1,643			(1,550	)
Chargeoffs		(148	)		-		-		-		(3,552	)		(3,700	)
Recoveries		2,184			30		-		-		1,232			3,446
Total allowance for credit losses	$	4,764		$	6,083	$	202	$	32	$	7,399		$	18,480

The Company’s customers are primarily small businesses, professionals and consumers. Given the scale of these borrowers, corporate credit rating agencies do not evaluate the borrowers’ financial condition. The Bank maintains a Loan Review Department which reports directly to the Audit Committee of the Board of Directors. The Loan Review Department performs independent evaluations of loans and validates management assigned credit risk grades on evaluated loans using grading standards employed by bank regulatory agencies. Loans judged to carry lower-risk attributes are assigned a “pass” grade, with a minimal likelihood of loss. Loans judged to carry higher-risk attributes are referred to as “classified loans,” and are further disaggregated, with increasing expectations for loss recognition, as “substandard,” “doubtful,” and “loss.” The Loan Review Department performs continuous evaluations throughout the year. If the Bank becomes aware of deterioration in a borrower’s performance or financial condition between Loan Review Department examinations, assigned risk grades are re-evaluated promptly. Credit risk grades assigned by management and validated by the Loan Review Department are subject to review by the Bank’s regulatory authorities during regulatory examinations.

The following summarizes the credit risk profile by internally assigned grade:

	Credit Risk Profile by Internally Assigned Grade
	At June 30, 2024
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Total
	(In thousands)
Grade:
Pass	$	121,814	$	476,897	$	-	$	8,731	$	197,937	$	805,379
Substandard		6,455		11,863		5,064		365		1,381		25,128
Doubtful		-		-		-		-		745		745
Loss		-		-		-		-		590		590
Total	$	128,269	$	488,760	$	5,064	$	9,096	$	200,653	$	831,842

	Credit Risk Profile by Internally Assigned Grade
	At December 31, 2023
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Total
	(In thousands)
Grade:
Pass	$	130,001	$	475,870	$	5,063	$	9,606	$	225,089	$	845,629
Substandard		6,549		11,653		-		329		377		18,908
Doubtful		-		-		-		-		1,479		1,479
Loss		-		-		-		-		586		586
Total	$	136,550	$	487,523	$	5,063	$	9,935	$	227,531	$	866,602

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The following tables summarize loans by delinquency and nonaccrual status:

	Summary of Loans by Delinquency and Nonaccrual Status
	At June 30, 2024
	Current and Accruing		30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Loans
	(In thousands)
Commercial	$	127,590	$	665	$	-	$	-	$	14	$	128,269
Commercial real estate		487,803		-		-		-		957		488,760
Construction		5,064		-		-		-		-		5,064
Residential real estate		9,037		3		56		-		-		9,096
Consumer installment and other		194,478		4,090		1,505		580		-		200,653
Total	$	823,972	$	4,758	$	1,561	$	580	$	971	$	831,842

	Summary of Loans by Delinquency and Nonaccrual Status
	At December 31, 2023
	Current and Accruing		30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Loans
	(In thousands)
Commercial	$	136,421	$	58	$	-	$	-	$	71	$	136,550
Commercial real estate		485,476		951		766		-		330		487,523
Construction		5,063		-		-		-		-		5,063
Residential real estate		9,933		-		-		-		2		9,935
Consumer installment and other		220,357		5,544		1,242		388		-		227,531
Total	$	857,250	$	6,553	$	2,008	$	388	$	403	$	866,602

There was no allowance for credit losses allocated to loans on nonaccrual status as of June 30, 2024 or December 31, 2023. There were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status at June 30, 2024 or December 31, 2023.

There were no loan modifications made to borrowers experiencing financial difficulty during the six months ended June 30, 2024 and June 30, 2023.

A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. Loans that were considered collateral dependent at June 30, 2024 included the following: ten commercial real estate loans totaling $11.3 million secured by real property and $470 thousand of indirect consumer installment loans secured by personal property. There were no other collateral dependent loans at June 30, 2024. Loans that were considered collateral dependent at December 31, 2023 included the following: nine commercial real estate loans totaling $10.9 million secured by real property and $377 thousand of indirect consumer installment loans secured by personal property. There were no other collateral dependent loans at December 31, 2023.

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	At June 30, 2024
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2020		2021		2022		2023		2024		Term Loans		Cost Basis		Total
	(In thousands)
Commercial loans by grade:
Pass	$	21,863	$	10,647	$	22,682	$	14,678	$	16,720	$	15,496	$	102,086	$	19,728	$	121,814
Substandard		2,442		-		2,835		-		-		-		5,277		1,178		6,455
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	24,305	$	10,647	$	25,517	$	14,678	$	16,720	$	15,496	$	107,363	$	20,906	$	128,269
Current gross chargeoffs on commercial loans:
For the three months ended June 30, 2024	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	28	$	28
For the six months ended June 30, 2024		-		-		-		-		-		-		-		28		28

	At December 31, 2023
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2019		2020		2021		2022		2023		Term Loans		Cost Basis		Total
	(In thousands)
Commercial loans by grade:
Pass	$	20,554	$	4,471	$	12,601	$	31,770	$	22,146	$	13,112	$	104,654	$	25,347	$	130,001
Substandard		12		2,492		-		2,835		-		-		5,339		1,210		6,549
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	20,566	$	6,963	$	12,601	$	34,605	$	22,146	$	13,112	$	109,993	$	26,557	$	136,550
Current gross chargeoffs on commercial loans:
For the year ended December 31, 2023	$	-	$	-	$	3	$	135	$	-	$	-	$	138	$	272	$	410

	At June 30, 2024
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2020		2021		2022		2023		2024		Term Loans		Cost Basis		Total
	(In thousands)
Commercial real estate loans by grade:
Pass	$	226,096	$	67,855	$	65,389	$	50,012	$	43,965	$	23,580	$	476,897	$	-	$	476,897
Substandard		11,086		777		-		-		-		-		11,863		-		11,863
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	237,182	$	68,632	$	65,389	$	50,012	$	43,965	$	23,580	$	488,760	$	-	$	488,760
Current gross chargeoffs on commercial real estate loans:
For the three months ended June 30, 2024	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
For the six months ended June 30, 2024		-		-		-		-		-		-		-		-		-

	At December 31, 2023
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2019		2020		2021		2022		2023		Term Loans		Cost Basis		Total
	(In thousands)
Commercial real estate loans by grade:
Pass	$	172,925	$	68,156	$	69,324	$	68,891	$	50,899	$	45,675	$	475,870	$	-	$	475,870
Substandard		10,056		811		786		-		-		-		11,653		-		11,653
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	182,981	$	68,967	$	70,110	$	68,891	$	50,899	$	45,675	$	487,523	$	-	$	487,523
Current gross chargeoffs on commercial real estate loans:
For the year ended December 31, 2023	$	45	$	-	$	-	$	-	$	-	$	-	$	45	$	-	$	45

	At June 30, 2024
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2020		2021		2022		2023		2024		Term Loans		Cost Basis		Total
	(In thousands)
Residential real estate loans by grade:
Pass	$	8,731	$	-	$	-	$	-	$	-	$	-	$	8,731	$	-	$	8,731
Substandard		365		-		-		-		-		-		365		-		365
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	9,096	$	-	$	-	$	-	$	-	$	-	$	9,096	$	-	$	9,096
Current gross chargeoffs on residential real estate loans:
For the three months ended June 30, 2024	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
For the six months ended June 30, 2024		-		-		-		-		-		-		-		-		-

	At December 31, 2023
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2019		2020		2021		2022		2023		Term Loans		Cost Basis		Total
	(In thousands)
Residential real estate loans by grade:
Pass	$	9,606	$	-	$	-	$	-	$	-	$	-	$	9,606	$	-	$	9,606
Substandard		329		-		-		-		-		-		329		-		329
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	9,935	$	-	$	-	$	-	$	-	$	-	$	9,935	$	-	$	9,935
Current gross chargeoffs on residential real estate loans:
For the year ended December 31, 2023	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

	At June 30, 2024
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2020		2021		2022		2023		2024		Term Loans		Cost Basis		Total
	(In thousands)
Construction loans by grade:
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Substandard		-		-		-		-		-		-		-		5,064		5,064
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	5,064	$	5,064
Current gross chargeoffs on construction loans:
For the three months ended June 30, 2024	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
For the six months ended June 30, 2024		-		-		-		-		-		-		-		-		-

	At December 31, 2023
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2019		2020		2021		2022		2023		Term Loans		Cost Basis		Total
	(In thousands)
Construction loans by grade:
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	5,063	$	5,063
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	5,063	$	5,063
Current gross chargeoffs on construction loans:
For the year ended December 31, 2023	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

The Company considers the delinquency and nonaccrual status of the consumer loan portfolio and its impact on the allowance for credit losses. The following table presents the amortized cost in consumer installment and other loans based on delinquency and nonaccrual status:

	At June 30, 2024
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2020		2021		2022		2023		2024		Term Loans		Cost Basis		Total
	(In thousands)
Consumer installment and other loans by delinquency and nonaccrual status:
Current	$	11,183	$	17,401	$	40,994	$	59,913	$	32,580	$	16,039	$	178,110	$	16,368	$	194,478
30-59 days past due		281		427		1,529		1,357		422		38		4,054		36		4,090
60-89 days past due		76		100		661		327		198		32		1,394		111		1,505
Past due 90 days or more		45		20		225		111		69		-		470		110		580
Nonaccrual		-		-		-		-		-		-		-		-		-
Total	$	11,585	$	17,948	$	43,409	$	61,708	$	33,269	$	16,109	$	184,028	$	16,625	$	200,653
Current gross chargeoffs on consumer installment and other loans:
For the three months ended June 30, 2024	$	99	$	104	$	707	$	350	$	198	$	-	$	1,458	$	55	$	1,513
For the six months ended June 30, 2024		179		266		1,382		1,107		452		-		3,386		130		3,516

	At December 31, 2023
															Line of
															Credit
	Term Loans Amortized Cost Basis by Origination Year												Total		Amortized
	Prior		2019		2020		2021		2022		2023		Term Loans		Cost Basis		Total
	(In thousands)
Consumer installment and other loans by delinquency and nonaccrual status:
Current	$	6,545	$	12,144	$	22,700	$	51,055	$	71,388	$	38,699	$	202,531	$	17,826	$	220,357
30-59 days past due		160		277		600		2,345		1,733		332		5,447		97		5,544
60-89 days past due		31		51		153		410		430		122		1,197		45		1,242
Past due 90 days or more		-		8		88		143		138		-		377		11		388
Nonaccrual		-		-		-		-		-		-		-		-		-
Total	$	6,736	$	12,480	$	23,541	$	53,953	$	73,689	$	39,153	$	209,552	$	17,979	$	227,531
Current gross chargeoffs on consumer installment and other loans:
For the year ended December 31, 2023	$	246	$	161	$	843	$	2,329	$	3,191	$	453	$	7,223	$	276	$	7,499

There were no loans held for sale at June 30, 2024 and December 31, 2023.

The Company held no other real estate owned (OREO) at June 30, 2024 and December 31, 2023. At June 30, 2024 and December 31, 2023, there were no consumer mortgage loans outstanding secured by residential real estate properties for which formal foreclosure proceedings were in process.