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Note C - Loans

12 Months Ended

Dec. 31, 2023

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

NOTE C - LOANS:

Certain items previously reported have been reclassified to conform to the current year’s reporting format due to the adoption of CECL.

The composition of the loan portfolio at December 31, 2023 and 2022 is as follows (in thousands):

December 31,	2023		2022

Real estate, residential	$	74,296	$	67,512

Real estate, construction		27,353		30,146

Real estate, nonresidential		115,014		122,233

Commercial and industrial		12,496		10,497

Other		9,180		7,490

Total	$	238,339	$	237,878

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):

	2023			2022
Balance, January 1	$	6,947		$	5,978
Change in directors/officers loans during the year		-			124
New loans and advances		452			1,324
Repayments		(446	)		(479	)

Balance, December 31	$	6,953		$	6,947

The age analysis of the loan portfolio, segregated by class of loans, as of December 31, 2023 and 2022 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, 2023:
Real estate, residential	$	207	$	540	$	-	$	747	$	73,549	$	74,296	$	-
Real estate, construction		131		-		-		131		27,222		27,353		-
Real estate, nonresidential		58		-		-		58		114,956		115,014		-
Commercial and industrial		21		-		-		21		12,475		12,496		-
Other		75		30		-		105		9,075		9,180		-

Total	$	492	$	570	$	-	$	1,062	$	237,277	$	238,339	$	-
December 31, 2022:
Real estate, residential	$	34	$	49	$	-	$	83	$	67,429	$	67,512	$	-
Real estate, construction		79		2		-		81		30,065		30,146		-
Real estate, nonresidential		-		-		1,101		1,101		121,132		122,233		-
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	$	-

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.

The following tables further disaggregates credit quality disclosures by amortized cost by class and vintage for term loans and by revolving and revolving converted to amortizing as of December 31, 2023 (in thousands). The Company defines vintage as the later of origination, or restructure date.

	Term Loans														Revolving
	Amortized Cost Basis by Origination Year														Loans
													Revolving		Converted to
	2023		2022		2021		2020		2019		Prior		Loans		Term Loans		Total
December 31, 2023:
Real Estate, Residential Loans:
A, B, or C	$	11,865	$	17,053	$	12,158	$	4,695	$	5,451	$	17,502	$	4,147	$	401	$	73,272
S		-		-		-		-		-		66		-		-		66
D		-		-		122		-		-		623		-		-		745
E		-		-		-		45		27		141		-		-		213
F		-		-		-		-		-		-		-		-		-
Total Real Estate Residential Loans	$	11,865	$	17,053	$	12,280	$	4,740	$	5,478	$	18,332	$	4,147	$	401	$	74,296

Real Estate, Construction Loans:
A, B, or C	$	1,069	$	2,119	$	2,133	$	1,379	$	38	$	3,966	$	12,827	$	-	$	23,531
S		-		-		-		-		-		-		3,735		-		3,735
D		-		-		-		87		-		-		-		-		87
E		-		-		-		-		-		-		-		-		-
F		-		-		-		-		-		-		-		-		-
Total Real Estate, Construction Loans	$	1,069	$	2,119	$	2,133	$	1,466	$	38	$	3,966	$	16,562	$	-	$	27,353

Real Estate,Nonresidential Loans:
A, B, or C	$	12,387	$	20,951	$	11,056	$	15,008	$	5,497	$	34,330	$	14,959	$	728	$	114,916
S		-		-		-		-		-		-		-		-		-
D		-		-		-		-		-		98		-		-		98
E		-		-		-		-		-		-		-		-		-
F		-		-		-		-		-		-		-		-		-
Total Real Estate, Nonresidential Loans	$	12,387	$	20,951	$	11,056	$	15,008	$	5,497	$	34,428	$	14,959	$	728	$	115,014

Commercial and industrial
A, B, or C	$	850	$	1,008	$	831	$	263	$	2,742	$	39	$	6,763	$	-	$	12,496
S		-		-		-		-		-		-		-		-		-
D		-		-		-		-		-		-		-		-		-
E		-		-		-		-		-		-		-		-		-
F		-		-		-		-		-		-		-		-		-
Total Commercial and Industrial Loans	$	850	$	1,008	$	831	$	263	$	2,742	$	39	$	6,763	$	-	$	12,496

Consumer/Other Loans
A, B, or C	$	5,346	$	1,417	$	841	$	439	$	234	$	304	$	508	$	52	$	9,141
S		-		-		-		-		-		-		-		-		-
D		7		6		-		-		18		3		5		-		39
E		-		-		-		-		-		-		-		-		-
F		-		-		-		-		-		-		-		-		-
Total Consumer/Other Loans	$	5,353	$	1,423	$	841	$	439	$	252	$	307	$	513	$	52	$	9,180

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

	Loans With A Grade Of:
	A, B or C		S		D		E		F		Total
December 31, 2022:
Real estate, residential	$	66,490	$	77	$	822	$	123	$	-	$	67,512

Real estate, construction		30,115		-		2		29		-		30,146

Real estate, nonresidential		120,423		-		466		1,344		-		122,233

Commercial and industrial		10,497		-		-		-		-		10,497

Other		7,476		-		7		7		-		7,490


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

The following table is a summary of the Company’s nonaccrual loans by major categories for the periods indicated (in thousands):

	CECL						Incurred Loss

	December 31, 2023						December 31, 2022
	Nonaccrual Loans with		Nonaccrual Loans		Total Nonaccrual
	No Allowance		with an Allowance		Loans
Real estate, residential	$	168	$	45	$	213	$	90
Real estate, nonresidential		-		-		-		1,344
Other		-		-		-		7
Total	$	168	$	45	$	213	$	1,441

The Company recognized no interest income on nonaccrual loans during the year ended December 31, 2023.

The following table represents the accrued interest receivables written off by reversing interest income during the year ended December 31, 2023 (in thousands):

	For the Year Ended
	December 31, 2023
Real estate, residential	$	1
Total loans	$	1

The Company designates individually evaluated loans on nonaccrual status as collateral-dependent loans, as well as other loans that management of the Company designates as having higher risk. Collateral-dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. Under CECL, for collateral-dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required.

The following table presents an analysis of collateral-dependent loans of the Company as of December 31, 2023 (in thousands):

	Residential
	Properties
Real estate, residential	$	222
Total loans	$	222

The following tables further disaggregates nonaccrual disclosures by amortized cost by class and vintage for term loans and by revolving and revolving converted to amortizing as of December 31, 2023 (in thousands). The Company defines vintage as the later of origination or restructure date.

	Term Loans														Revolving
	Amortized Cost Basis by Origination Year														Loans
													Revolving		Converted to
	2023		2022		2021		2020		2019		Prior		Loans		Term Loans		Total
December 31, 2023:
Real estate, residential	$	-	$	-	$	-	$	-	$	-	$	213	$	-	$	-	$	213
Real estate, construction		-		-		-		-		-		-		-		-		-
Real estate, nonresidential		-		-		-		-		-		-		-		-		-
Commercial and industrial		-		-		-		-		-		-		-		-		-
Consumer/Other		-		-		-		-		-		-		-		-		-
Total Loans on Nonaccrual	$	-	$	-	$	-	$	-	$	-	$	213	$	-	$	-	$	213

Impaired loans, which include loans classified as nonaccrual and TDRs, segregated by class of loans, as of December 31, 2022 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, residential	$	525	$	500	$	-	$	533	$	25
Real estate, construction		102		29		-		46		7
Real estate, nonresidential		363		243		-		273		-
Other		7		7		-		7		-

Total		997		779		-		859		32

With a related allowance recorded:
Real estate, residential		57		49		40		50		-
Real estate, nonresidential		1,101		1,101		84		1,103		-

Total		1,158		1,150		124		1,153		-

Total by class of loans:
Real estate, residential		525		500		-		533		25
Real estate, construction		159		78		40		96		7
Real estate, nonresidential		1,464		1,344		84		1,376		-
Other		7		7		-		7		-

Total	$	2,155	$	1,929	$	124	$	2,012	$	32

The Company had no loan modifications made to borrowers experiencing financial difficulty as of December 31, 2023 and December 31, 2022.

The following tables show activity in the allowance for credit losses by portfolio class for the years ended December 31, 2023, 2022, and 2021 as well as the corresponding recorded investment in loans at the end of each period. Effective January 1, 2023, the Company adopted the provisions of ASC 326 (CECL) using a modified retrospective basis. The difference between the December 31, 2023 incurred allowance and the CECL allowance is reflected as a cumulative effect of change in accounting principle in the table below. For further discussion of the day one impact of the CECL adoption, refer to Note A.

The calculation of the allowance for credit losses under CECL is performed using two primary approaches: a collective approach for pools of loans that have similar risk characteristics using a loss rate analysis, and a specific reserve analysis for credits individually evaluated.

The following table summarizes the activity related to the allowance for credit losses on loans and leases and unfunded commitments for the year ended December 31, 2023 and the balances of loans and unfunded commitments, individually and collectively evaluated for credit losses, as of December 31, 2023 are as follows (in thousands):

	Real Estate, Residential			Real Estate, Construction			Real Estate, Nonresidential			Commercial and Industrial			Other			Total
December 31, 2023
Allowance for credit losses on loans and leases
Beginning balance	$	1,018		$	392		$	1,535		$	143		$	250		$	3,338
Cumulative effect of change in accounting principle		396			(58	)		(215	)		(84	)		(49	)		(10	)
Charge-offs		-			-			(270	)		-			(197	)		(467	)
Recoveries		-			9			20			467			111			607
Net provision for loan losses		(443	)		(170	)		737			(472	)		104			(244	)
Ending Balance	$	971		$	173		$	1,807		$	54		$	219		$	3,224

Reserve for unfunded lending commitments
Beginning balance	$	-		$	-		$	-		$	-		$	-		$	-
Cumulative effect of change in accounting principle		4			30			5			15			18			72
Provision for losses on unfunded commitments		(2	)		4			-			(5	)		(14	)		(17	)
Ending balance-reserve for unfunded commitments	$	2		$	34		$	5		$	10		$	4		$	55
Total allowance for credit losses on loans and unfunded commitments	$	973		$	207		$	1,812		$	64		$	223		$	3,279

Allowance for credit losses on loans and leases
Individually evaluated	$	40		$	-		$	-		$	-		$	21		$	61
Collectively evaluated		931			173			1,807			54			198			3,163
Total allowance for credit losses on loans:	$	971		$	173		$	1,807		$	54		$	219		$	3,224
Reserve for unfunded lending commitments
Individually evaluated	$	-		$	-		$	-		$	-		$	-		$	-
Collectively evaluated		2			34			5			10			4			55
Reserve for unfunded lending commitments:	$	2		$	34		$	5		$	10		$	4		$	55
Total allowance for credit losses, December 31, 2023	$	973		$	207		$	1,812		$	64		$	223		$	3,279

Loans, December 31, 2023
Individually evaluated	$	958		$	87		$	98		$	-		$	39		$	1,182
Collectively evaluated		73,338			27,266			114,916			12,496			9,141			237,157
Total loans, December 31, 2023	$	74,296		$	27,353		$	115,014		$	12,496		$	9,180		$	238,339

Prior to the adoption of ASC 326 on January 1, 2023, the Company calculated the allowance for loan losses under the incurred loss methodology. The following tables are disclosures related to the allowance for loan losses in prior periods (in thousands).

	Real Estate, Residential		Real Estate, Construction		Real Estate, Nonresidential			Commercial and Industrial			Other			Total
December 31, 2022:
Allowance for Loan Losses:
Beginning Balance	$	873	$	351	$	1,781		$	228		$	78		$	3,311
Charge-offs		-		-		-			-			(240	)		(240	)
Recoveries		-		-		48			15			124			187
Provision		145		41		(294	)		(100	)		288			80
Ending Balance	$	1,018	$	392	$	1,535		$	143		$	250		$	3,338

Allowance for Loan Losses:
Ending balance: individually evaluated for impairment	$	145	$	-	$	84		$	-		$	-		$	229
Ending balance: collectively evaluated for impairment	$	873	$	392	$	1,451		$	143		$	250		$	3,109

Total Loans:
Ending balance: individually evaluated for impairment	$	945	$	31	$	1,811		$	-		$	14		$	2,801
Ending balance: collectively evaluated for impairment	$	66,567	$	30,115	$	120,422		$	10,497		$	7,476		$	235,077

	Real Estate, Residential			Real Estate, Construction			Real Estate, Nonresidential			Commercial and Industrial			Other			Total
December 31, 2021:
Allowance for Loan Losses:
Beginning Balance	$	926		$	433		$	2,420		$	493		$	154		$	4,426
Charge-offs		(2	)		(2	)		-			-			(286	)		(290	)
Recoveries		36			18			4,563			102			119			4,838
Provision		(87	)		(98	)		(5,202	)		(367	)		91			(5,663	)
Ending Balance	$	873		$	351		$	1,781		$	228		$	78		$	3,311

Allowance for Loan Losses:
Ending balance: individually evaluated for impairment	$	75		$	27		$	40		$	-		$	-		$	142
Ending balance: collectively evaluated for impairment	$	798		$	324		$	1,741		$	228		$	78		$	3,169

Total Loans:
Ending balance: individually evaluated for impairment	$	1,747		$	211		$	2,229		$	48		$	12		$	4,247
Ending balance: collectively evaluated for impairment	$	55,505		$	26,980		$	127,536		$	15,834		$	9,060		$	234,915

The following table further disaggregates gross charge-off disclosures by amortized cost by credit quality indicator, class, and year of origination as of December 31, 2023 (in thousands). The Company defines vintage as the later of origination or restructure date.

	Term Loans														Revolving
	Amortized Cost Basis by Origination Year														Loans
													Revolving		Converted to
	2023		2022		2021		2020		2019		Prior		Loans		Term Loans		Total
December 31, 2023:
Real estate, nonresidential	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
A,B, or C		-		-		-		-		-		-		-		-		-
S		-		-		-		-		-		-		-		-		-
D		-		-		-		-		-		-		-		-		-
E		-		-		-		-		-		270		-		-		270
F		-		-		-		-		-		-		-		-		-
Total Real estate, nonresidential loans	$	-	$	-	$	-	$	-	$	-	$	270	$	-	$	-	$	270
Consumer/Other
A,B, or C	$	188	$	5	$	-	$	-	$	-	$	-	$	-	$	-	$	193
S		-		-		-		-		-		-		-		-		-
D		-		-		-		-		-		-		-		-		-
E		-		-		-		4		-		-		-		-		4
F		-		-		-		-		-		-		-		-		-
Total Consumer/Other Loans	$	188	$	5	$	-	$	4	$	-	$	-	$	-	$	-	$	197
Total Gross Loan Chargeoffs:	$	188	$	5	$	-	$	4	$	-	$	270	$	-	$	-	$	467