XML 26 R11.htm IDEA: XBRL DOCUMENT v3.23.1
ALLOWANCE FOR LOAN LOSSES
 12 Months Ended
Dec. 31, 2022
ALLOWANCE FOR LOAN LOSSES  
ALLOWANCE FOR LOAN LOSSES

NOTE 4 ALLOWANCE FOR LOAN LOSSES

 

A summary of changes in the allowance for loan losses for the years ended December 31, 2022 and 2021 is as follows (dollars in thousands):

 

December 31, 2022

 

Beginning Balance

 

 

Charge-offs

 

 

Recoveries

 

 

Provision for (Recovery of) Loan Losses

 

 

Ending Balance

 

 

Individually Evaluated for Impairment

 

 

Collectively Evaluated for Impairment

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

Construction/Land Development

 

$977

 

 

$-

 

 

$-

 

 

$41

 

 

$1,018

 

 

$228

 

 

$790

 

Farmland

 

 

448

 

 

 

-

 

 

 

-

 

 

 

122

 

 

 

570

 

 

 

-

 

 

 

570

 

Real Estate

 

 

1,162

 

 

 

17

 

 

 

-

 

 

 

243

 

 

 

1,388

 

 

 

92

 

 

 

1,296

 

Multi-Family

 

 

29

 

 

 

-

 

 

 

-

 

 

 

42

 

 

 

71

 

 

 

-

 

 

 

71

 

Commercial Real Estate

 

 

2,205

 

 

 

-

 

 

 

-

 

 

 

(190)

 

 

2,015

 

 

 

11

 

 

 

2,004

 

Home Equity – closed end

 

 

41

 

 

 

-

 

 

 

-

 

 

 

(3)

 

 

38

 

 

 

-

 

 

 

38

 

Home Equity – open end

 

 

407

 

 

 

84

 

 

 

130

 

 

 

(8)

 

 

445

 

 

 

-

 

 

 

445

 

Commercial & Industrial – Non- Real Estate

 

 

288

 

 

 

46

 

 

 

49

 

 

 

159

 

 

 

450

 

 

 

-

 

 

 

450

 

Consumer

 

 

520

 

 

 

153

 

 

 

84

 

 

 

(370)

 

 

81

 

 

 

-

 

 

 

81

 

Dealer Finance

 

 

1,601

 

 

 

1,280

 

 

 

691

 

 

 

780

 

 

 

1,792

 

 

 

13

 

 

 

1,779

 

Credit Cards

 

 

70

 

 

 

66

 

 

 

14

 

 

 

50

 

 

 

68

 

 

 

-

 

 

 

68

 

Total

 

$7,748

 

 

$1,646

 

 

$968

 

 

$866

 

 

$7,936

 

 

$344

 

 

$7,592

 

 

December 31, 2021

 

Beginning Balance

 

 

Charge-offs

 

 

Recoveries

 

 

Provision for (Recovery of) Loan Losses

 

 

Ending

Balance

 

 

Individually Evaluated for Impairment

 

 

Collectively Evaluated for Impairment

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

Construction/Land Development

 

$1,249

 

 

$-

 

 

$307

 

 

$(579)

 

$977

 

 

$-

 

 

$977

 

Farmland

 

 

731

 

 

 

-

 

 

 

-

 

 

 

(283)

 

 

448

 

 

 

-

 

 

 

448

 

Real Estate

 

 

1,624

 

 

 

-

 

 

 

76

 

 

 

(538)

 

 

1,162

 

 

 

119

 

 

 

1,043

 

Multi-Family

 

 

54

 

 

 

-

 

 

 

-

 

 

 

(25)

 

 

29

 

 

 

-

 

 

 

29

 

Commercial Real Estate

 

 

3,662

 

 

 

-

 

 

 

19

 

 

 

(1,476)

 

 

2,205

 

 

 

603

 

 

 

1,602

 

Home Equity – closed end

 

 

55

 

 

 

-

 

 

 

-

 

 

 

(14)

 

 

41

 

 

 

-

 

 

 

41

 

Home Equity – open end

 

 

463

 

 

 

-

 

 

 

13

 

 

 

(69)

 

 

407

 

 

 

-

 

 

 

407

 

Commercial & Industrial – Non-Real Estate

 

 

363

 

 

 

40

 

 

 

37

 

 

 

(72)

 

 

288

 

 

 

-

 

 

 

288

 

Consumer

 

 

521

 

 

 

33

 

 

 

24

 

 

 

8

 

 

 

520

 

 

 

-

 

 

 

520

 

Dealer Finance

 

 

1,674

 

 

 

1,038

 

 

 

754

 

 

 

211

 

 

 

1,601

 

 

 

14

 

 

 

1,587

 

Credit Cards

 

 

79

 

 

 

54

 

 

 

29

 

 

 

16

 

 

 

70

 

 

 

-

 

 

 

70

 

Total

 

$10,475

 

 

$1,165

 

 

$1,259

 

 

$(2,821)

 

$7,748

 

 

$736

 

 

$7,012

 

The following table presents the recorded investment in loans based on impairment method as of December 31, 2022 and 2021 (dollars in thousands):

 

December 31, 2022

 

Loan Receivable

 

 

Individually Evaluated for Impairment

 

 

Collectively Evaluated for Impairment

 

Construction/Land Development

 

$68,671

 

 

$853

 

 

$67,818

 

Farmland

 

 

74,322

 

 

 

2,079

 

 

 

72,243

 

Real Estate

 

 

153,281

 

 

 

3,260

 

 

 

150,021

 

Multi-Family

 

 

9,622

 

 

 

-

 

 

 

9,622

 

Commercial Real Estate

 

 

195,163

 

 

 

9,111

 

 

 

186,052

 

Home Equity – closed end

 

 

4,707

 

 

 

-

 

 

 

4,707

 

Home Equity –open end

 

 

46,928

 

 

 

-

 

 

 

46,928

 

Commercial & Industrial – Non-Real Estate

 

 

56,625

 

 

 

-

 

 

 

56,625

 

Consumer

 

 

6,488

 

 

 

-

 

 

 

6,488

 

Dealer Finance

 

 

125,125

 

 

 

62

 

 

 

125,063

 

Credit Cards

 

 

3,242

 

 

 

-

 

 

 

3,242

 

Gross Loans

 

 

744,174

 

 

 

15,365

 

 

 

728,809

 

Less: Deferred loan fees, net of costs

 

 

(570)

 

 

-

 

 

 

(570)

Total

 

$743,604

 

 

$15,365

 

 

$728,239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

Loan

Receivable

 

 

Individually Evaluated for Impairment

 

 

Collectively Evaluated for Impairment

 

Construction/Land Development

 

$75,236

 

 

$645

 

 

$74,591

 

Farmland

 

 

66,344

 

 

 

2,286

 

 

 

64,058

 

Real Estate

 

 

139,552

 

 

 

3,920

 

 

 

135,632

 

Multi-Family

 

 

4,887

 

 

 

-

 

 

 

4,887

 

Commercial Real Estate

 

 

163,564

 

 

 

14,498

 

 

 

149,066

 

Home Equity – closed end

 

 

6,262

 

 

 

147

 

 

 

6,115

 

Home Equity –open end

 

 

44,247

 

 

 

-

 

 

 

44,247

 

Commercial & Industrial – Non-Real Estate

 

 

44,224

 

 

 

-

 

 

 

44,224

 

Consumer

 

 

8,036

 

 

 

5

 

 

 

8,031

 

Dealer Finance

 

 

107,346

 

 

 

107

 

 

 

107,239

 

Credit Cards

 

 

3,000

 

 

 

-

 

 

 

3,000

 

Gross Loans

 

 

662,698

 

 

 

21,608

 

 

 

641,090

 

Less: Deferred loan fees, net of costs

 

 

(277)

 

 

-

 

 

 

(277)

Total

 

$662,421

 

 

$21,608

 

 

$640,813

 

The following table shows the Company’s loan portfolio broken down by internal loan grade as of December 31, 2022 and 2021 (dollars in thousands):

 

December 31, 2022

 

Grade 1 Minimal

Risk

 

 

Grade 2

Modest

Risk

 

 

Grade 3 Average

Risk

 

 

Grade 4 Acceptable

Risk

 

 

Grade 5 Marginally Acceptable

 

 

Grade 6

Watch

 

 

Grade 7 Substandard

 

 

Grade 8 Doubtful

 

 

Total

 

Construction/Land Development

 

$-

 

 

$4

 

 

$11,112

 

 

$42,684

 

 

$13,116

 

 

$1,213

 

 

$542

 

 

$-

 

 

$68,671

 

Farmland

 

 

155

 

 

 

269

 

 

 

11,373

 

 

 

38,051

 

 

 

22,069

 

 

 

947

 

 

 

1,458

 

 

 

-

 

 

 

74,322

 

Real Estate

 

 

-

 

 

 

553

 

 

 

27,003

 

 

 

86,269

 

 

 

28,560

 

 

 

6,950

 

 

 

3,946

 

 

 

-

 

 

 

153,281

 

Multi-Family

 

 

-

 

 

 

-

 

 

 

963

 

 

 

5,116

 

 

 

3,430

 

 

 

113

 

 

 

-

 

 

 

-

 

 

 

9,622

 

Commercial Real Estate

 

 

-

 

 

 

3,097

 

 

 

55,662

 

 

 

72,779

 

 

 

41,749

 

 

 

13,878

 

 

 

7,998

 

 

 

-

 

 

 

195,163

 

Home Equity – closed end

 

 

-

 

 

 

48

 

 

 

1,065

 

 

 

2,560

 

 

 

639

 

 

 

382

 

 

 

13

 

 

 

-

 

 

 

4,707

 

Home Equity – open end

 

 

27

 

 

 

1,272

 

 

 

18,671

 

 

 

23,207

 

 

 

2,091

 

 

 

1,611

 

 

 

49

 

 

 

-

 

 

 

46,928

 

Commercial & Industrial - Non-Real Estate

 

 

10

 

 

 

516

 

 

 

12,934

 

 

 

26,310

 

 

 

15,613

 

 

 

911

 

 

 

331

 

 

 

-

 

 

 

56,625

 

Consumer (excluding dealer)

 

 

33

 

 

 

286

 

 

 

2,965

 

 

 

3,105

 

 

 

68

 

 

 

16

 

 

 

15

 

 

 

-

 

 

 

6,488

 

Gross loans

 

$225

 

 

$6,045

 

 

$141,748

 

 

$300,081

 

 

$127,335

 

 

$26,021

 

 

$14,352

 

 

$-

 

 

$615,807

 

Less: Deferred loan fees, net of costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(570)

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$615,237

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit

Cards

 

 

Dealer

Finance

 

Performing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$3,240

 

 

$124,910

 

Nonperforming

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

215

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$3,242

 

 

$125,125

 

 December 31, 2021

 

Grade 1 Minimal

Risk

 

 

Grade 2

Modest

Risk

 

 

Grade 3 Average

Risk

 

 

Grade 4 Acceptable

Risk

 

 

Grade 5 Marginally Acceptable

 

 

Grade 6

Watch

 

 

Grade 7 Substandard

 

 

Grade 8 Doubtful

 

 

Total

 

Construction/Land Development

 

$-

 

 

$6

 

 

$9,952

 

 

$43,861

 

 

$19,457

 

 

$1,658

 

 

$302

 

 

$-

 

 

$75,236

 

Farmland

 

 

56

 

 

 

291

 

 

 

6,804

 

 

 

42,615

 

 

 

13,620

 

 

 

1,638

 

 

 

1,320

 

 

 

-

 

 

 

66,344

 

Real Estate

 

 

-

 

 

 

1,128

 

 

 

30,268

 

 

 

61,940

 

 

 

28,895

 

 

 

12,462

 

 

 

4,859

 

 

 

-

 

 

 

139,552

 

Multi-Family

 

 

-

 

 

 

-

 

 

 

1,021

 

 

 

2,586

 

 

 

1,154

 

 

 

126

 

 

 

-

 

 

 

-

 

 

 

4,887

 

Commercial Real Estate

 

 

-

 

 

 

2,124

 

 

 

36,308

 

 

 

72,414

 

 

 

35,444

 

 

 

4,428

 

 

 

12,846

 

 

 

-

 

 

 

163,564

 

Home Equity – closed end

 

 

-

 

 

 

61

 

 

 

1,268

 

 

 

3,103

 

 

 

762

 

 

 

1,068

 

 

 

-

 

 

 

-

 

 

 

6,262

 

Home Equity – open end

 

 

-

 

 

 

1,293

 

 

 

17,333

 

 

 

21,296

 

 

 

2,477

 

 

 

1,632

 

 

 

216

 

 

 

-

 

 

 

44,247

 

Commercial & Industrial - Non-Real Estate

 

 

-

 

 

 

1,001

 

 

 

7,562

 

 

 

21,527

 

 

 

13,538

 

 

 

533

 

 

 

63

 

 

 

-

 

 

 

44,224

 

Consumer (excluding dealer)

 

 

10

 

 

 

522

 

 

 

2,919

 

 

 

3,526

 

 

 

980

 

 

 

79

 

 

 

-

 

 

 

-

 

 

 

8,036

 

Gross loans

 

$66

 

 

$6,426

 

 

$113,435

 

 

$272,868

 

 

$116,327

 

 

$23,624

 

 

$19,606

 

 

$-

 

 

$552,352

 

Less: Deferred loan fees, net of costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(277)

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$552,075

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit

Cards

 

 

Dealer

Finance

 

Performing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$3,000

 

 

$107,330

 

Nonperforming

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

16

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$3,000

 

 

$107,346

 

 

Description of internal loan grades:

 

Grade 1 – Minimal Risk:   Excellent credit, superior asset quality, excellent debt capacity and coverage, and recognized management capabilities.

 

Grade 2 – Modest Risk:  Borrower consistently generates sufficient cash flow to fund debt service, excellent credit, above average asset quality and liquidity.

 

Grade 3 – Average Risk:  Borrower generates sufficient cash flow to fund debt service.  Employment (or business) is stable with good future trends.  Credit is very good.

 

Grade 4 – Acceptable Risk:  Borrower’s cash flow is adequate to cover debt service; however, unusual expenses or capital expenses must by covered through additional long-term debt.  Employment (or business) stability is reasonable, but future trends may exhibit slight weakness. Credit history is good. No unpaid judgments or collection items appearing on credit report.

 

Grade 5 – Marginally acceptable:  Credit to borrowers who may exhibit declining earnings, may have leverage that is materially above industry averages, liquidity may be marginally acceptable.  Employment or business stability may be weak or deteriorating.  May be currently performing as agreed but would be adversely affected by developing factors such as layoffs, illness, reduced hours or declining business prospects.  Credit history shows weaknesses, past dues, paid or disputed collections and judgments, but does not include borrowers that are currently past due on obligations or with unpaid, undisputed judgments.

Grade 6 – Watch: Loans are currently protected but are weak due to negative balance sheet or income statement trends. There may be a lack of effective control over collateral or the existence of documentation deficiencies. These loans have potential weaknesses that deserve management’s close attention. Other reasons supporting this classification include adverse economic or market conditions, pending litigation or any other material weakness. Existing loans that become 60 or more days past due are placed in this category pending a return to current status.

 

Grade 7 – Substandard: Loans having well-defined weaknesses where a payment default and or loss is possible, but not yet probable. Cash flow is inadequate to service the debt under the current payment, or terms, with prospects that the condition is permanent. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the borrower and there is the likelihood that collateral will have to be liquidated and/or guarantor(s) called upon to repay the debt. Generally, the loan is considered collectible as to both principal and interest, primarily because of collateral coverage, however, if the deficiencies are not corrected quickly; there is a probability of loss.

 

Grade 8 – Doubtful: Loans having all the characteristics of a substandard credit, but available information indicates it is unlikely the loan will be repaid in its entirety. Cash flow is insufficient to service the debt. It may be difficult to project the exact amount of loss, but the probability of some loss is great. Loans are to be placed on non-accrual status when any portion is classified doubtful.

 

Credit card and dealer finance loans are classified as performing or nonperforming. A loan is nonperforming when payments of principal and interest are past due 90 days or more.