XML 30 R12.htm IDEA: XBRL DOCUMENT v3.24.0.1
Loans Receivable and Allowance for Credit Losses
 12 Months Ended
Dec. 31, 2023
Loans Receivable and Allowance for Credit Losses [Abstract]  
Loans Receivable and Allowance for Credit Losses NOTE 4 - LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

Set forth below is selected data relating to the composition of the loan portfolio (in thousands):

December 31, 2023

December 31, 2022

Real Estate:

Residential

$

316,546

19.7

%

$

298,813

20.3

%

Commercial

675,156

42.1

651,544

44.2

Agricultural

63,859

4.0

68,915

4.7

Construction

51,453

3.2

32,469

2.2

Commercial loans

200,576

12.5

187,257

12.7

Other agricultural loans

31,966

2.0

35,277

2.4

Consumer loans to individuals

264,321

16.5

200,149

13.5

Total loans

1,603,877

100.0

%

1,474,424

100.0

%

Deferred fees, net

(259)

(479)

Total loans receivable

1,603,618

1,473,945

Allowance for credit losses

(18,968)

(16,999)

Net loans receivable

$

1,584,650

$

1,456,946

As of December 31, 2023 and 2022, the Company considered its concentration of credit risk to be acceptable. As of December 31, 2023, the highest concentrations are in commercial rentals and the residential rentals category, with loans outstanding of $149.2 million, or 9.3% of loans outstanding, to commercial rentals, and $115.2 million, or 7.2% of loans outstanding, to residential rentals. For the year ended December 31, 2023, the Company recognized charge offs of $6,000 on commercial rentals and $44,000 on residential rentals. There were no charge-offs on loans within these concentrations in 2022.

During 2023, the Company sold residential mortgage loans totaling $4,973,000. During 2022, the Company sold residential mortgage loans totaling $845,000. Gross realized gains and gross realized losses on sales of residential mortgage loans were $63,000 and $0, respectively, in 2023 and $3,000 and $0, respectively, in 2022. The proceeds from the sales of residential mortgage loans totaled $5,036,000 and $848,000 for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, the outstanding value of loans serviced for others totaled $59.2 million and $60.0 million, respectively

Changes in the accretable yield for purchased credit-impaired loans were as follows for the twelve months ended December 31,2022:

(In thousands)

2022

Balance at beginning of period

$

1,884

Additions

—

Accretion

(710)

Reclassification and other

653

Balance at end of period

$

1,827

The following table presents additional information regarding loans acquired and accounted for in accordance with ASC 310-30 as of December 31, 2022 (in thousands):

December 31, 2022

Outstanding Balance

$

8,368

Carrying Amount

$

6,290

The Company maintains a loan review system, which allows for a periodic review of our loan portfolio and the early identification of potential non-performing loans. The system takes into consideration, among other things, delinquency status, size of loans, type and market value of collateral and financial condition of the borrowers. Specific credit loss allowances are established for identified losses based on a review of such information. All loans identified as individually analyzed are evaluated independently. The Company does not aggregate such loans for evaluation purposes. Allowance for credit losses are measured on a loan-by-loan basis for commercial and construction loans by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral-dependent.

The following table shows the amount of loans in each category that were individually and collectively evaluated for credit loss under ASC 326:

Real Estate Loans

Commercial

Other

Consumer

Residential

Commercial

Agricultural

Construction

Loans

Agricultural

Loans

Total

(In thousands)

December 31, 2023

Individually evaluated

$

432

$

2,211

$

—

$

—

$

4,264

$

—

$

715

$

7,622

Collectively evaluated

316,114

672,945

63,859

51,453

196,312

31,966

263,606

1,596,255

Total Loans

$

316,546

$

675,156

$

63,859

$

51,453

$

200,576

$

31,966

$

264,321

$

1,603,877

The following table shows the amount of loans in each category that were individually and collectively evaluated for impairment under ASC 310:

 

Real Estate Loans

Commercial

Other

Consumer

Residential

Commercial

Agricultural

Construction

Loans

Agricultural

Loans

Total

(In thousands)

December 31, 2022

Individually evaluated for impairment

$

—

$

402

$

—

$

—

$

61

$

—

$

—

$

463

Loans acquired with deteriorated credit quality

567

2,049

2,034

—

1,640

—

—

6,290

Collectively evaluated for impairment

298,246

649,093

66,881

32,469

185,556

35,277

200,149

1,467,671

Total Loans

$

298,813

$

651,544

$

68,915

$

32,469

$

187,257

$

35,277

$

200,149

$

1,474,424

The following table includes the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable, under ASC 310.

Unpaid

Recorded

Principal

Associated

Investment

Balance

Allowance

December 31, 2022

(In thousands)

With no related allowance recorded:

Real Estate Loans

Commercial

$

402

$

402

$

—

Commercial loans

11

11

—

Subtotal

413

413

—

With an allowance recorded:

Real Estate Loans

Commercial

50

50

50

Subtotal

50

50

50

Total:

Real Estate Loans

Residential

—

Commercial

$

402

$

402

$

—

Commercial loans

61

61

50

Total Impaired Loans

$

463

$

463

$

50

The following information for impaired loans is presented for the year ended 2022, under ASC 310:

Average Recorded

Interest Income

Investment

Recognized

2022

2022

(In thousands)

Total:

Real Estate Loans

Commercial

$

740

$

93

Commercial loans

24

—

Total Loans

$

764

$

93

Management uses an eight point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first four categories are considered not criticized, and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. Loans greater than 90 days past due are considered Substandard unless full payment is expected. Any portion of a loan that has been charged off is placed in the Loss category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as nonperformance, repossession, or death occurs to raise awareness of a possible credit event. The Company’s Loan Review Department is responsible for the timely and accurate risk rating of the loans on an ongoing basis. Every credit which must be approved by Loan Committee or the Board of Directors is assigned a risk rating at time of consideration. Loan Review also annually reviews relationships of $1,500,000 and over to assign or re-affirm risk ratings.

Based on the most recent analysis performed, the following table presents the recorded investment in non-homogenous pools by internal risk rating systems, under ASC 326 (in thousands):

Revolving

Revolving

Term Loans Amortized Costs Basis by Origination Year

Loans

Loans

Amortized

Converted

December 31, 2023

2023

2022

2021

2020

2019

Prior

Cost Basis

to Term

Total

Commercial real estate

Risk Rating

Pass

$

78,496

$

131,948

$

112,102

$

65,949

$

72,480

$

186,116

$

13,332

$

-

$

660,423

Special Mention

1,300

411

243

1,331

-

6,157

1,579

-

11,021

Substandard

-

-

-

1,444

36

2,232

-

-

3,712

Doubtful

-

-

-

-

-

-

-

-

-

Total

$

79,796

$

132,359

$

112,345

$

68,724

$

72,516

$

194,505

$

14,911

$

-

$

675,156

Commercial real estate

Current period gross charge-offs

$

-

$

-

$

-

$

-

$

112

$

42

$

-

$

-

$

154

Real Estate - Agriculture

Risk Rating

Pass

$

2,635

$

12,509

$

5,433

$

7,606

$

7,746

$

24,654

$

522

$

-

$

61,105

Special Mention

-

-

-

-

399

490

150

-

1,039

Substandard

-

508

-

1,018

-

189

-

-

1,715

Doubtful

-

-

-

-

-

-

-

-

-

Total

$

2,635

$

13,017

$

5,433

$

8,624

$

8,145

$

25,333

$

672

$

-

$

63,859

Real Estate - Agriculture

Current period gross charge-offs

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Commercial loans

Risk Rating

Pass

$

48,571

$

41,863

$

24,443

$

13,752

$

9,914

$

15,384

$

38,644

$

-

$

192,571

Special Mention

553

1,412

257

134

20

188

768

-

3,332

Substandard

-

126

342

656

-

49

3,500

-

4,673

Doubtful

-

-

-

-

-

-

-

-

-

Total

$

49,124

$

43,401

$

25,042

$

14,542

$

9,934

$

15,621

$

42,912

$

-

$

200,576

Commercial loans

Current period gross charge-offs

$

-

$

32

$

24

$

4,856

$

-

$

41

$

-

$

-

$

4,953

Other agricultural loans

Risk Rating

Pass

$

2,670

$

5,286

$

3,251

$

2,912

$

2,373

$

3,836

$

11,091

$

-

$

31,419

Special Mention

-

-

2

185

86

-

155

-

428

Substandard

-

-

-

-

119

-

-

-

119

Doubtful

-

-

-

-

-

-

-

-

-

Total

$

2,670

$

5,286

$

3,253

$

3,097

$

2,578

$

3,836

$

11,246

$

-

$

31,966

Other agricultural loans

Current period gross charge-offs

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Total

Risk Rating

Pass

$

132,372

$

191,606

$

145,229

$

90,219

$

92,513

$

229,990

$

63,589

$

-

$

945,518

Special Mention

1,853

1,823

502

1,650

505

6,835

2,652

-

15,820

Substandard

-

634

342

3,118

155

2,470

3,500

-

10,219

Doubtful

-

-

-

-

-

-

-

-

-

Total

$

134,225

$

194,063

$

146,073

$

94,987

$

93,173

$

239,295

$

69,741

$

-

$

971,557

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard, Doubtful and Loss within the internal risk rating system as of December 31, 2022 (in thousands):

Special

Pass

Mention

Substandard

Doubtful

Loss

Total

December 31, 2022

Commercial real estate loans

$

646,775

$

1,079

$

3,690

$

—

$

—

$

651,544

Real estate - agricultural

66,444

368

2,103

—

—

68,915

Commercial loans

186,966

184

107

—

—

187,257

Other agricultural loans

34,071

556

650

—

—

35,277

Total

$

934,256

$

2,187

$

6,550

$

—

$

—

$

942,993

The Company monitors the credit risk profile by payment activity for residential and consumer loan classes. Loans past due over 90 days and loans on nonaccrual status are considered nonperforming. Nonperforming loans are reviewed monthly. The following table presents the carrying value of residential and consumer loans based on payment activity (in thousands):

Revolving

Revolving

Term Loans Amortized Costs Basis by Origination Year

Loans

Loans

Amortized

Converted

December 31, 2023

2023

2022

2021

2020

2019

Prior

Cost Basis

to Term

Total

Residential real estate

Payment Performance

Performing

$

27,446

$

62,178

$

57,691

$

35,357

$

16,406

$

87,951

$

29,085

$

-

$

316,114

Nonperforming

-

-

-

-

58

324

50

-

432

Total

$

27,446

$

62,178

$

57,691

$

35,357

$

16,464

$

88,275

$

29,135

$

-

$

316,546

Residential real estate

Current period gross charge-offs

$

-

$

-

$

-

$

-

$

-

$

34

$

-

$

-

$

34

Construction

Payment Performance

Performing

$

23,500

$

14,906

$

6,791

$

1,599

$

1,829

$

624

$

2,204

$

-

$

51,453

Nonperforming

-

-

-

-

-

-

-

-

-

Total

$

23,500

$

14,906

$

6,791

$

1,599

$

1,829

$

624

$

2,204

$

-

$

51,453

Construction

Current period gross charge-offs

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Consumer loans to individuals

Payment Performance

Performing

$

127,243

$

76,339

$

24,584

$

14,343

$

10,217

$

9,942

$

938

$

-

$

263,606

Nonperforming

111

404

118

31

41

10

-

-

715

Total

$

127,354

$

76,743

$

24,702

$

14,374

$

10,258

$

9,952

$

938

$

-

$

264,321

Consumer loans to individuals

Current period gross charge-offs

$

45

$

710

$

200

$

35

$

45

$

28

$

4

$

-

$

1,067

Total

Payment Performance

Performing

$

178,189

$

153,423

$

89,066

$

51,299

$

28,452

$

98,517

$

32,227

$

-

$

631,173

Nonperforming

111

404

118

31

99

334

50

-

1,147

Total

$

178,300

$

153,827

$

89,184

$

51,330

$

28,551

$

98,851

$

32,277

$

-

$

632,320

For residential real estate loans, construction loans and consumer loans, the Company evaluates credit quality based on the performance of the individual credits. The following table presents the recorded investment in the loan classes based on payment activity as of December 31, 2022, under ASC 310 (in thousands):

 

Performing

Nonperforming

Total

December 31, 2022

Residential real estate loans

$

298,327

$

486

$

298,813

Construction

32,469

—

32,469

Consumer loans to individuals

199,985

164

200,149

Total

$

530,781

$

650

$

531,431

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of December 31, 2023 and December 31, 2022 (in thousands):

Current

31-60 Days Past Due

61-90 Days Past Due

Greater than 90 Days Past Due and still accruing

Non-Accrual

Total Past Due and Non-Accrual

Total Loans

December 31, 2023

Real Estate loans

Residential

$

315,224

$

877

$

13

$

—

$

432

$

1,322

$

316,546

Commercial

666,768

6,177

—

—

2,211

8,388

675,156

Agricultural

63,732

127

—

—

—

127

63,859

Construction

51,435

—

18

—

—

18

51,453

Commercial loans

192,988

3,170

154

—

4,264

7,588

200,576

Other agricultural loans

31,959

7

—

—

—

7

31,966

Consumer loans

262,578

865

163

—

715

1,743

264,321

Total

$

1,584,684

$

11,223

$

348

$

—

$

7,622

$

19,193

$

1,603,877

Current

31-60 Days Past Due

61-90 Days Past Due

Greater than 90 Days Past Due and still accruing

Non-Accrual

Total Past Due and Non-Accrual

Purchased Credit Impaired Loans

Total Loans

December 31, 2022

Real Estate loans

Residential

$

297,350

$

187

$

223

$

—

$

486

$

896

$

567

$

298,813

Commercial

648,688

405

—

—

402

807

2,049

651,544

Agricultural

66,751

130

—

—

—

130

2,034

68,915

Construction

32,469

—

—

—

—

—

-

32,469

Commercial loans

185,485

71

—

—

61

132

1,640

187,257

Other agricultural loans

35,277

—

—

—

—

—

—

35,277

Consumer loans

198,893

853

239

—

164

1,256

-

200,149

Total

$

1,464,913

$

1,646

$

462

$

—

$

1,113

$

3,221

$

6,290

$

1,474,424

The following table presents the carrying value of loans on nonaccrual status and loans past due over 90 days still accruing interest (in thousands):

Nonaccrual

Nonaccrual

Loans Past Due

with no

with

Total

Over 90 Days

Total

ACL

ACL

Nonaccrual

Still Accruing

Nonperforming

December 31, 2023

Real Estate loans

Residential

$

432

$

-

$

432

$

-

$

432

Commercial

2,211

-

2,211

-

2,211

Agricultural

-

-

-

-

-

Construction

-

-

-

-

-

Commercial loans

4,264

-

4,264

-

4,264

Other agricultural loans

-

-

-

-

-

Consumer loans

162

553

715

-

715

Total

$

7,069

$

553

$

7,622

$

-

$

7,622

The following table presents, by class of loans and leases, the amortized cost basis of collateral-dependent nonaccrual loans and leases and type of collateral as of December 31, 2023:

 

Real Estate

Other

None

Total

December 31, 2023

Real Estate loans

Residential

$

432

$

-

$

-

$

432

Commercial

2,211

-

-

2,211

Agricultural

-

-

-

-

Construction

-

-

-

-

Commercial loans

49

4,215

-

4,264

Other agricultural loans

-

-

-

-

Consumer loans

-

715

-

715

Total

$

2,692

$

4,930

$

-

$

7,622

The following table presents the allowance for credit losses by the classes of the loan portfolio under ASC 326:

(In thousands)

Residential Real Estate

Commercial Real Estate

Agricultural

Construction

Commercial

Other Agricultural

Consumer

Total

Beginning balance, December 31, 2022

$

2,833

$

8,293

$

259

$

409

$

2,445

$

124

$

2,636

$

16,999

Impact of adopting ASC 326

(1,545)

5,527

(200)

388

(1,156)

3

(551)

2,466

Charge Offs

(34)

(154)

—

—

(4,953)

—

(1,067)

(6,208)

Recoveries

6

15

—

—

21

—

88

130

Provision for credit losses

91

(1,810)

(1)

136

4,850

(33)

2,348

5,581

Ending balance, December 31, 2023

$

1,351

$

11,871

$

58

$

933

$

1,207

$

94

$

3,454

$

18,968

Ending balance individually evaluated

$

—

$

—

$

—

$

—

$

—

$

—

$

135

$

135

Ending balance collectively evaluated

$

1,351

$

11,871

$

58

$

933

$

1,207

$

94

$

3,319

$

18,833

The following table presents the allowance for loan losses by the classes of the loan portfolio under ASC 310:

(In thousands)

Residential Real Estate

Commercial Real Estate

Agricultural

Construction

Commercial

Other Agricultural

Consumer

Total

Beginning balance, December 31, 2021

$

2,175

$

10,878

$

—

$

133

$

1,490

$

—

$

1,766

$

16,442

Charge Offs

(172)

(20)

—

—

(16)

—

(457)

(665)

Recoveries

130

82

—

—

46

—

64

322

Provision for loan losses

700

(2,647)

259

276

925

124

1,263

900

Ending balance, December 31, 2022

$

2,833

$

8,293

$

259

$

409

$

2,445

$

124

$

2,636

$

16,999

Ending balance individually evaluated for impairment

$

—

$

—

$

—

$

—

$

50

$

—

$

—

$

50

Ending balance collectively evaluated
‎for impairment

$

2,833

$

8,293

$

259

$

409

$

2,395

$

124

$

2,636

$

16,949

The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Company’s historical loss experience. The Company chose to apply qualitative factors based on “quantitative metrics” which link the quantifiable metrics to historical changes in the qualitative factor categories. The Company also chose to apply economic projections to the model. A select group of economic indicators was utilized which was then correlated to the historical loss experience of the Company and its peers. Based on the correlation results, the economic adjustments are then weighted for relevancy and applied to the individual loan pools.

During the period ended December 31, 2023, the allowance for credit losses increased from $16,999,000 to $18,968,000 This $1,969,000 increase in the required allowance was due primarily to charge-offs on one large commercial relationship.

During the period ended December 31, 2022, the allowance for loan losses increased from $16,442,000 to $16,999,000. This $557,000 increase in the required allowance was due primarily to a $2.4 million increase in the qualitative factor related to loan growth and a $445,000 increase in the qualitative factor related to large balance loans, which was partially offset by a $2.3 million decrease in the qualitative factor related to the Covid pandemic.

Interest income that would have been recorded on loans accounted for on a non-accrual basis under the original terms of the loans was $694,000 and $182,000 for 2023 and 2022, respectively.

Occasionally, the Bank modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In some cases, the Bank provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. The following table presents modifications made to borrowers experiencing financial difficulty:

 

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

Term Extension

Amortized Cost Basis at December 31, 2023

% of Total Class of Financing Receivable

Financial Effect

Commercial real estate loans

$

4,321,547

0.64

%

Extended maturity date of loans by three to six months.

Total

$

4,321,547

Combination - Term Extension and Interest Rate Adjustment

Amortized Cost Basis at December 31, 2023

% of Total Class of Financing Receivable

Financial Effect

Consumer loans to individuals

$

19,225

0.01

%

New loans were granted which extended terms for a weighted average of 34 months and rates were increased from a weighted average rate of 5.25% to a weighted average rate of 11.03%

Total

$

19,225

As of December 31, 2023, all loan modifications made to borrowers experiencing financial difficulty were current per the modified contractual terms.

During the year ended December 31, 2023, the Company adopted ASU 2022-02 on a modified retrospective basis. ASU 2022-02 eliminates the TDR accounting model, and requires that the Company evaluate, based on the accounting for loan modifications, whether the borrower is experiencing financial difficulty and the modification results in a more-than-insignificant direct change in the contractual cash flows and represents a new loan or a continuation of an existing loan. This change required all loan modifications to be accounted for under the general loan modification guidance in ASC 310-20, Receivables – Nonrefundable Fees and Other Costs, and subject entities to new disclosure requirements on loan modifications to borrowers experiencing financial difficulty. Upon adoption of CECL, the TDRs were evaluated and included in the CECL loan segment pools if the loans shared similar risk characteristics to other loans in the pool or remained with individually evaluated loans for which the ACL was measured using the collateral-dependent or discounted cash flow method.

As of December 31, 2022, there were no troubled debt restructured loans. During 2022, there were no new loans relationships identified as troubled debt restructurings. During 2022, there were no charge-offs on loans classified as troubled debt restructurings.