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Note 4 - Allowance for Loan Losses

6 Months Ended

Jun. 30, 2020

Allowance for Credit Losses [Text Block]

Note 4. Allowance for Loan Losses

The following tables present, as of June 30, 2020, December 31, 2019 and June 30, 2019, the total allowance for loan losses, the allowance by impairment methodology, and loans by impairment methodology (in thousands):

	June 30, 2020
	Construction and Land Development			Secured by 1-4 Family Residential		Other Real Estate		Commercial and Industrial			Consumer and Other Loans			Total
Allowance for loan losses:
Beginning Balance, December 31, 2019	$	464		$	776	$	2,296	$	562		$	836		$	4,934
Charge-offs		—			—		—		(69	)		(435	)		(504	)
Recoveries		—			4		1		7			154			166
Provision for (recovery of) loan losses		(68	)		543		936		283			6			1,700
Ending Balance, June 30, 2020	$	396		$	1,323	$	3,233	$	783		$	561		$	6,296
Ending Balance:
Individually evaluated for impairment		—			5		23		—			—			28
Collectively evaluated for impairment		396			1,318		3,210		783			561			6,268
Loans:
Ending Balance	$	31,981		$	234,188	$	248,495	$	124,706		$	12,146		$	651,516
Individually evaluated for impairment		400			497		4,896		—			—			5,793
Collectively evaluated for impairment		31,581			233,691		243,599		124,706			12,146			645,723

	December 31, 2019
	Construction and Land Development			Secured by 1-4 Family Residential			Other Real Estate			Commercial and Industrial			Consumer and Other Loans			Total
Allowance for loan losses:
Beginning Balance, December 31, 2018	$	561		$	895		$	2,160		$	464		$	929		$	5,009
Charge-offs		(2	)		(58	)		(27	)		(2	)		(795	)		(884	)
Recoveries		50			9			1			8			291			359
Provision for (recovery of) loan losses		(145	)		(70	)		162			92			411			450
Ending Balance, December 31, 2019	$	464		$	776		$	2,296		$	562		$	836		$	4,934
Ending Balance:
Individually evaluated for impairment		22			11			—			—			—			33
Collectively evaluated for impairment		442			765			2,296			562			836			4,901
Loans:
Ending Balance	$	43,164		$	229,438		$	236,555		$	50,153		$	15,036		$	574,346
Individually evaluated for impairment		367			630			462			—			—			1,459
Collectively evaluated for impairment		42,797			228,808			236,093			50,153			15,036			572,887

June 30, 2019

Construction and Land Development Secured by 1-4 Family Residential Other Real Estate Commercial and Industrial Consumer and Other Loans
Total

Allowance for loan losses:

Beginning Balance, December 31, 2018
$ 561 $ 895 $ 2,160 $ 464 $ 929 $ 5,009

Charge-offs
— (58 ) — (2 ) (387 ) (447 )

Recoveries
50 5 — 4 174 233

Provision for (recovery of) loan losses
(71 ) (64 ) 233 50 52 200

Ending Balance, June 30, 2019
$ 540 $ 778 $ 2,393 $ 516 $ 768 $ 4,995

Ending Balance:

Individually evaluated for impairment
46 20 35 — — 101

Collectively evaluated for impairment
494 758 2,358 516 768 4,894

Loans:

Ending Balance
$ 46,281 $ 225,820 $ 237,370 $ 49,353 $ 16,130 $ 574,954

Individually evaluated for impairment
391 866 518 — — 1,775

Collectively evaluated for impairment
45,890 224,954 236,852 49,353 16,130 573,179

Impaired loans and the related allowance at June 30, 2020, December 31, 2019 and June 30, 2019, were as follows (in thousands):

	June 30, 2020
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
Real estate loans:
Construction and land development	$	439	$	400	$	—	$	400	$	—	$	383	$	—
Secured by 1-4 family		595		280		217		497		5		563		1
Other real estate loans		4,948		583		4,313		4,896		23		574		127
Total	$	5,982	$	1,263	$	4,530	$	5,793	$	28	$	1,520	$	128

	December 31, 2019
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
Real estate loans:
Construction and land development	$	401	$	70	$	297	$	367	$	22	$	369	$	1
Secured by 1-4 family		729		488		142		630		11		769		1
Other real estate loans		509		462		—		462		—		766		3
Commercial and industrial		—		—		—		—		—		22		—
Total	$	1,639	$	1,020	$	439	$	1,459	$	33	$	1,926	$	5

	June 30, 2019
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
Real estate loans:
Construction and land development	$	410	$	—	$	391	$	391	$	46	$	360	$	1
Secured by 1-4 family		941		715		151		866		20		802		2
Other real estate loans		528		483		35		518		35		1,035		3
Commercial and industrial		—		—		—		—		—		45		—
Total	$	1,879	$	1,198	$	577	$	1,775	$	101	$	2,242	$	6

The “Recorded Investment” amounts in the table above represent the outstanding principal balance on each loan represented in the table. The “Unpaid Principal Balance” represents the outstanding principal balance on each loan represented in the table plus any amounts that have been charged off on each loan and/or payments that have been applied towards principal on non-accrual loans. Only loan classes with balances are included in the tables above.

As of June 30, 2020, loans classified as troubled debt restructurings (TDRs) and included in impaired loans in the disclosure above totaled $4.5 million. At June 30, 2020, $4.3 million of the loans classified as TDRs were performing under the restructured terms and were not considered non-performing assets. There were $360 thousand in TDRs at December 31, 2019, none of which were performing under the restructured terms. Modified terms under TDRs may include rate reductions, extension of terms that are considered to be below market, conversion to interest only, and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. There was one loan secured by commercial real estate modified as a TDR during the three and six months ended June 30, 2020 because the loan was converted to interest only. The loan modified as a TDR during the three and six months ended June 30, 2020 increased the specific reserve component of the allowance for loan losses by $23 thousand at June 30, 2020. There were no loans modified under TDRs during the three months ended June 30, 2019. There was one loan secured by 1-4 family residential real estate modified as a TDR during the six months ended June 30, 2019 because the loan was extended with terms considered to be below market. The loan modified as a TDR during the six months ended June 30, 2019 did not have an impact on the allowance for loan losses at June 30, 2019.

In response to the COVID-19 pandemic, the Company is executing a payment deferral program for its individual and business customers adversely affected by the pandemic. As of June 30, 2020, loans participating in the program totaled $182.6 million, or 28% of the Bank's loan balances. The majority of the loan deferral periods were for 90 days and were for loans not more than 30 days past due as of December 31, 2019. As such, they were not considered TDRs based on the relief provisions of the CARES Act and recent interagency regulatory guidance.

For the three and six months ended June 30, 2020 and 2019, there were no TDRs that subsequently defaulted within twelve months of the loan modification. Management defines default as over ninety days past due or the foreclosure and repossession of the collateral or charge-off of the loan during the twelve month period subsequent to the modification.