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Note C - Loans
 12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE C - LOANS:

 

The composition of the loan portfolio at December 31, 2022 and 2021 is as follows (in thousands):

 

December 31,

 

2022

  

2021

 
         

Gaming

 $9,965  $7,900 
         

Hotel/motel

  35,737   50,765 
         

Real estate, construction

  30,146   27,191 
         

Real estate, mortgage

  144,043   128,352 
         

Commercial and industrial

  10,497   15,882 
         

Other

  7,490   9,072 
         

Total

 $237,878  $239,162 

 

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), a stimulus package intended to provide relief to businesses and consumers in the United States struggling as a result of COVID-19, was signed into law. A provision in the CARES Act included funding for the creation of the Paycheck Protection Program (“PPP”). PPP is intended to provide loans to small businesses to pay their employees, rent, mortgage interest and utilities. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. If not forgiven, in whole or in part, these loans extended in 2020 carry a fixed rate of 1.00% and a maturity date of two years, with payments deferred until the date the Small Business Administration (the “SBA”) remits the borrower’s loan forgiveness amount to the lender or, if the borrower does not apply for loan forgiveness, ten months after the end of the borrowers’ loan forgiveness covered period. The loans are 100% guaranteed by the SBA. The SBA paid the originating bank a processing fee ranging from 1.00% to 5.00%, based on the size of the loan.

 

The Company worked with its customers to close 363 PPP loans for a total outstanding balance of $22,445,026. As of December 31, 2022, all of these loans were partially or completely forgiven by the SBA with the bank subsidiary receiving principal and interest payments directly from the SBA. Only 2 loans with a balance of $4,878 were still outstanding as of December 31, 2021, and are reported in the commercial and industrial segment within the loan portfolio. There were no outstanding PPP loans as of December 31, 2022.

 

Additional funds were provided in 2021 legislation for another round of PPP loans. Under this new round, 166 loans with a balance of $9,801,304 were issued. These loans carry a fixed rate of 1.00% and a maturity date of five years, with similar terms as to deferred payments, guarantees and processing fees as with prior PPP rounds. As of December 31, 2022, there were no outstanding loans related to the additional PPP loans.

 

In the ordinary course of business, the Company’s bank subsidiary extends loans to certain officers and directors and their personal business interests at, in the opinion of Management, the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans of similar credit risk with persons not related to the Company or its subsidiaries. These loans do not involve more than normal risk of collectability and do not include other unfavorable features. An analysis of the activity with respect to such loans to related parties is as follows (in thousands):

 

  

2022

  

2021

 

Balance, January 1

 $5,978  $4,458 

Change in directors/officers loans during the year

  124    

New loans and advances

  1,324   2,049 

Repayments

  (479)  (529)
         

Balance, December 31

 $6,947  $5,978 

 

As part of its evaluation of the quality of the loan portfolio, Management monitors the Company’s credit concentrations on a monthly basis. Total outstanding concentrations were as follows (in thousands):

 

December 31,

 

2022

  

2021

 
         

Gaming

 $9,965  $7,900 

Hotel/motel

  35,737   50,765 

Out of area

  7,544   6,987 

 

The age analysis of the loan portfolio, segregated by class of loans, as of December 31, 2022 and 2021 is as follows (in thousands):

 

                          

Loans Past

 
                          

Due Greater

 
  

Number of Days Past Due

              

Than 90

 
          

Greater

  

Total

      

Total

  

Days and

 
  30 - 59  60 - 89  

Than 90

  

Past Due

  

Current

  

Loans

  

Still Accruing

 

December 31, 2022:

                            

Gaming

 $  $  $  $  $9,965  $9,965  $ 

Hotel/motel

              35,737   35,737    

Real estate, construction

  79   2      81   30,065   30,146    

Real estate, mortgage

  34   49   1,101   1,184   142,859   144,043    

Commercial and industrial

              10,497   10,497    

Other

  14         14   7,476   7,490    
                             

Total

 $127  $51  $1,101  $1,279  $236,599  $237,878  $ 

December 31, 2021:

                            

Gaming

 $  $  $  $  $7,900  $7,900  $ 

Hotel/motel

              50,765   50,765    

Real estate, construction

  105         105   27,086   27,191    

Real estate, mortgage

  1,996   60   63   2,119   126,233   128,352    

Commercial and industrial

  21   320      341   15,541   15,882    

Other

  209         209   8,863   9,072    
                             

Total

 $2,331  $380  $63  $2,774  $236,388  $239,162  $ 

 

The Company monitors the credit quality of its loan portfolio through the use of a loan grading system. A score of 1 – 5 is assigned to the loan based on factors including repayment ability, trends in net worth and/or financial condition of the borrower and guarantors, employment stability, management ability, loan to value fluctuations, the type and structure of the loan, conformity of the loan to bank policy and payment performance. Based on the total score, a loan grade of A, B, C, S, D, E or F is applied. A grade of A will generally be applied to loans for customers that are well known to the Company and that have excellent sources of repayment. A grade of B will generally be applied to loans for customers that have excellent sources of repayment which have no identifiable risk of collection. A grade of C will generally be applied to loans for customers that have adequate sources of repayment which have little identifiable risk of collection. A grade of S will generally be applied to loans for customers who meet the criteria for a grade of C but also warrant additional monitoring by placement on the watch list. A grade of D will generally be applied to loans for customers that are inadequately protected by current sound net worth, paying capacity of the borrower, or pledged collateral. Loans with a grade of D have unsatisfactory characteristics such as cash flow deficiencies, bankruptcy filing by the borrower or dependence on the sale of collateral for the primary source of repayment, causing more than acceptable levels of risk. Loans 60 to 89 days past due receive a grade of D. A grade of E will generally be applied to loans for customers with weaknesses inherent in the D classification and in which collection or liquidation in full is questionable. In addition, on a monthly basis the Company determines which loans are 90 days or more past due and assigns a grade of E to them.

 

A grade of F is applied to loans which are considered uncollectible and of such little value that their continuance in an active bank is not warranted. Loans with this grade are charged off, even though partial or full recovery may be possible in the future.

 

An analysis of the loan portfolio by loan grade, segregated by class of loans, as of December 31, 2022 and 2021 is as follows (in thousands):

 

  

Loans With A Grade Of:

     
  

A, B or C

  

S

  

D

  

E

  

F

  

Total

 

December 31, 2022:

                        

Gaming

 $9,965  $   $   $   $   $9,965 
                         

Hotel/motel

  35,737       -           35,737 
                         

Real estate, construction

  30,115       2   29       30,146 
                         

Real estate, mortgage

  141,211   77   1,288   1,467       144,043 
                         

Commercial and industrial

  10,497                  10,497 
                         

Other

  7,476       7   7       7,490 
                         
                         

Total

 $235,001  $77  $1,297  $1,503  $   $237,878 
                         

December 31, 2021:

                        

Gaming

 $7,900  $   $  $   $   $7,900 
                         

Hotel/motel

  50,765                   50,765 
                         

Real estate, construction

  26,980       6   205       27,191 
                         

Real estate, mortgage

  124,289   87   3,344   632       128,352 
                         

Commercial and industrial

  15,834       27   21       15,882 
                         

Other

  9,060       12           9,072 
                         
                         

Total

 $234,828  $87  $3,389  $858  $   $239,162 

 

A loan may be impaired but not on nonaccrual status when the loan is well secured and in the process of collection. Total loans on nonaccrual as of December 31, 2022 and 2021 are as follows (in thousands):

 

December 31,

 

2022

  

2021

 
         

Real estate, construction

 $  $138 

Real estate, mortgage

  1,434   563 

Other

  7    

Total

 $1,441  $701 

 

The CARES Act also addressed COVID-19-related loan modifications and specified that such modifications executed between March 1, 2020 and the earlier of (i) 60 days after the date of the termination of the national emergency declared by the President and (ii) December 31, 2020, on loans that were current as of December 31, 2019, are not classified as a troubled debt restructuring (“TDR”). Additionally, under guidance from the federal banking agencies encouraging financial institutions to work prudently with borrowers, other short-term modifications made on a good faith basis in response to COVID-19 to borrowers that were current prior to any relief are not TDRs. During 2020, the Company modified 249 loans with a total balance of $95,010,325 for certain customers by extending payments for 90 days or granting interest only payments for 3 – 6 months as a result of the impact of COVID-19. Accordingly, such loans were not classified as TDRs. As of December 31, 2022, all extensions have expired and the customers have resumed making regular payments.

 

Prior to 2020, certain loans were modified by granting interest rate concessions to these customers with such loans being classified as TDRs. During 2022 and 2021 the Company did not restructure any additional loans. Specific reserves of $0 and $50,000 were allocated to TDRs as of December 31, 2022 and 2021. The Bank had no commitments to lend additional amounts to customers with outstanding loans classified as troubled debt restructurings as of December 31, 2022 and 2021.

 

Impaired loans, which include loans classified as nonaccrual and TDRs, segregated by class of loans, as of December 31, 2022 and 2021 were as follows (in thousands):

 

  

Unpaid

Principal

Balance

  

Recorded

Investment

  

Related

Allowance

  

Average

Recorded

Investment

  

Interest

Income

Recognized

 

December 31, 2022:

                    

With no related allowance recorded:

                    

Real estate, construction

 $102  $29  $   $46  $7 

Real estate, mortgage

  888   743       806   25 

Other

  7   7       7     
                     

Total

  997   779       859   32 
                     

With a related allowance recorded:

                    

Real estate, mortgage

  1,158   1,150   124   1,153     
                     

Total

  1,158   1,150   124   1,153     
                     

Total by class of loans:

                    

Real estate, construction

  102   29      46   7 

Real estate, mortgage

  2,046   1,893   124   1,959   25 

Other

  7   7       7     
                     

Total

 $2,155  $1,929  $124  $2,012  $32 

 

  

Unpaid

Principal

Balance

  

Recorded

Investment

  

Related

Allowance

  

Average

Recorded

Investment

  

Interest

Income

Recognized

 

December 31, 2021:

                    

With no related allowance recorded:

                    

Real estate, construction

 $272  $205  $   $369  $7 

Real estate, mortgage

  1,014   1,014       1,075   21 
                     

Total

  1,286   1,219       1,444   28 
                     

With a related allowance recorded:

                    

Real estate, mortgage

  199   199   70   203   5 
                     

Total

  199   199   70   203   5 
                     

Total by class of loans:

                    

Real estate, construction

  272   205       369   7 

Real estate, mortgage

  1,213   1,213   70   1,278   26 
                     

Total

 $1,485  $1,418  $70  $1,647  $33 

 

Transactions in the allowance for loan losses for the years ended December 31, 2022, 2021 and 2020, and the balances of loans, individually and collectively evaluated for impairment, as of December 31, 2022, 2021 and 2020 are as follows (in thousands):

 

  

Gaming

  

Hotel/Motel

  

Real Estate,

Construction

  

Real Estate,

Mortgage

  

Commercial

and Industrial

  

Other

  

Total

 

December 31, 2022:

                            

Allowance for Loan Losses:

                            

Beginning Balance

 $102  $691  $139  $2,049  $252  $78  $3,311 

Charge-offs

                 (240)  (240)

Recoveries

           48   15   124   187 

Provision

  17   (254)  253   (71)  (125)  260   80 

Ending Balance

 $119  $437  $392  $2,026  $142  $222  $3,338 
                             

Allowance for Loan Losses:

                            

Ending balance: individually evaluated for impairment

 $  $  $  $229  $  $  $229 

Ending balance: collectively evaluated for impairment

 $119  $437  $392  $1,797  $142  $222  $3,109 
                             

Total Loans:

                            

Ending balance: individually evaluated for impairment

 $  $  $31  $2,756  $  $14  $2,801 

Ending balance: collectively evaluated for impairment

 $9,965  $35,737  $30,115  $141,287  $10,497  $7,476  $235,077 

 

  

Gaming

  

Hotel/Motel

  

Real Estate,

Construction

  

Real Estate,

Mortgage

  

Commercial

and Industrial

  

Other

  

Total

 

December 31, 2021:

                            

Allowance for Loan Losses:

                            

Beginning Balance

 $186  $754  $111  $2,849  $417  $109  $4,426 

Charge-offs

        (2)  (2)     (286)  (290)

Recoveries

        18   4,599   102   119   4,838 

Provision

  (84)  (63)  12   (5,397)  (267)  136   (5,663)

Ending Balance

 $102  $691  $139  $2,049  $252  $78  $3,311 
                             

Allowance for Loan Losses:

                            

Ending balance: individually evaluated for impairment

 $  $     $115  $27     $142 

Ending balance: collectively evaluated for impairment

 $102  $691  $139  $1,934  $225  $78  $3,169 
                             

Total Loans:

                            

Ending balance: individually evaluated for impairment

    $  $211  $3,976  $48  $12  $4,247 

Ending balance: collectively evaluated for impairment

 $7,900  $50,765  $26,980  $124,376  $15,834  $9,060  $234,915 

 

  

Gaming

  

Hotel/Motel

  

Real Estate,

Construction

  

Real Estate,

Mortgage

  

Commercial

and Industrial

  

Other

  

Total

 

December 31, 2020:

                            

Allowance for Loan Losses:

                            

Beginning Balance

 $223  $779  $102  $2,454  $553  $96  $4,207 

Charge-offs

        (17)  (5,472)  (261)  (227)  (5,977)

Recoveries

     -   15      34   145   194 

Provision

  (37)  (25)  11   5,867   91   95   6,002 

Ending Balance

 $186  $754  $111  $2,849  $417  $109  $4,426 
                             

Allowance for Loan Losses:

                            

Ending balance: individually evaluated for impairment

 $  $  $20  $200  $40  $  $260 

Ending balance: collectively evaluated for impairment

 $186  $754  $91  $2,649  $377  $109  $4,166 
                             

Total Loans:

                            

Ending balance: individually evaluated for impairment

 $2,827  $  $511  $6,474  $94  $21  $9,927 

Ending balance: collectively evaluated for impairment

 $15,938  $45,499  $26,098  $137,802  $37,335  $5,822  $268,494