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ALLOWANCE FOR CREDIT LOSSES
 12 Months Ended
Dec. 31, 2023
ALLOWANCE FOR CREDIT LOSSES  
ALLOWANCE FOR CREDIT LOSSES

NOTE 4 ALLOWANCE FOR CREDIT LOSSES

 

The allowance for credit losses consists of the allowance for credit losses on loans and the reserve for unfunded commitments. The Company’s ACL is governed by the Company’s ACL Committee, which reports to the Board of Directors and contains representatives from the Company’s finance, credit, and risk teams, and is responsible for calculating the Company’s estimate of expected credit losses and resulting ACL.  The ACL Committee considers the quantitative model results and qualitative factors when finalizing the ACL. The Company’s ACL model is subject to the Company’s models risk management program, which is overseen by the Director of Risk Management that reports to the Company’s Board Risk Committee. 

 

Allowance for Credit Losses on Loans

 

The following tables show the allowance for credit losses activity by loan segment for the years ended December 31, 2023, (dollars in thousands).

 

Allowance for Credit Losses and Carrying Amount of Loans

For the Year Ended December 31, 2023

 

 

Beginning

Balance

 

 

Adjustment

for adoption

of ASU

2016-13

 

 

Charge-offs

 

 

Recoveries

 

 

Provision

for loan

credit

losses

 

 

Ending

Balance

 

1-4 Family residential construction

 

$324

 

 

$109

 

 

$70

 

 

$1

 

 

$350

 

 

$714

 

Other construction, land development and land

 

 

694

 

 

 

602

 

 

 

-

 

 

 

-

 

 

 

(9)

 

 

1,287

 

Secured by farmland

 

 

571

 

 

 

311

 

 

 

-

 

 

 

-

 

 

 

(67)

 

 

815

 

Home equity – open end

 

 

446

 

 

 

(189)

 

 

-

 

 

 

3

 

 

 

(80)

 

 

180

 

Real estate

 

 

1,389

 

 

 

(184)

 

 

19

 

 

 

2

 

 

 

(378)

 

 

810

 

Home Equity – closed end

 

 

39

 

 

 

96

 

 

 

-

 

 

 

-

 

 

 

(58)

 

 

77

 

Multifamily

 

 

71

 

 

 

182

 

 

 

-

 

 

 

-

 

 

 

(72)

 

 

181

 

Owner-occupied commercial real estate

 

 

992

 

 

 

280

 

 

 

-

 

 

 

-

 

 

 

(51)

 

 

1,221

 

Other commercial real estate

 

 

1,023

 

 

 

(582)

 

 

-

 

 

 

-

 

 

 

(275)

 

 

166

 

Agricultural loans

 

 

80

 

 

 

(58)

 

 

-

 

 

 

-

 

 

 

(2)

 

 

20

 

Commercial and industrial

 

 

368

 

 

 

338

 

 

 

33

 

 

 

2

 

 

 

359

 

 

 

1,034

 

Credit Cards

 

 

68

 

 

 

26

 

 

 

69

 

 

 

37

 

 

 

19

 

 

 

81

 

Automobile loans

 

 

1,790

 

 

 

(257)

 

 

1,804

 

 

 

514

 

 

 

1,200

 

 

 

1,443

 

Other consumer loans

 

 

81

 

 

 

103

 

 

 

93

 

 

 

55

 

 

 

146

 

 

 

292

 

Municipal loans

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total loans

 

$7,936

 

 

$777

 

 

$2,088

 

 

$614

 

 

$1,082

 

 

$8,321

 

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 (dollars in thousands).

 

Allowance for Loan Losses and Carrying Amount of Loans and Leases

For the Year Ended December 31, 2022

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

 

 

Unfunded Commitments

 

The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e. commitment cannot be canceled at any time). The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans and are discussed above. The allowance for credit losses for unfunded loan commitments of $690 thousand at December 31, 2023 is separately classified on the balance sheet within Other liabilities.

 

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the year ended December 31, 2023 (dollars in thousands).

 

 

 

Total

Allowance

for Credit

Losses –

Unfunded

Commitments

 

Balance, December 31, 2022

 

$-

 

Adjustment to allowance for unfunded commitments for adoption of ASU 2016-13

 

 

747

 

Recovery of credit losses – unfunded commitments

 

 

(57)

Balance, December 31, 2023

 

$690