Loan and Allowance for Loan Losses |
12 Months Ended |
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Dec. 31, 2022 | |
Loans And Leases Receivable Disclosure [Abstract] | |
Loans and leases receivable disclosure [Text Block] | NOTE 5: LOANS AND ALLOWANCE December 31 (In thousands) 2022 2021 Commercial and industrial $ 66,179 $ 83,977 Construction and land development 66,479 32,432 Commercial real estate: Owner occupied 61,265 63,375 Hotel/motel 33,457 43,856 Multifamily 41,181 42,587 Other 129,278 108,553 Total commercial real estate 265,181 258,371 Residential real estate: Consumer mortgage 45,410 29,781 Investment property 52,325 47,880 Total residential real estate 97,735 77,661 Consumer installment 9,546 6,682 Total loans 505,120 459,123 Less: unearned income (662) (759) Loans, net of unearned income $ 504,458 $ 458,364 Loans secured by real estate were approximately 85.0 % of the total loan portfolio at December 31, 2022. 2022, the Company’s geographic loan areas. In accordance with ASC 310, Receivables , a portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for loan losses. assessment of the allowance, the loan portfolio is disaggregated into the industrial, construction and land development, commercial real estate, residential real Where appropriate, the Company’s loan portfolio determined based on the initial measurement attribute, risk characteristics of the loan, and monitoring and determining credit risk. The following describe the risk characteristics relevant to each of the portfolio segments Commercial and industrial (“C&I”) — includes loans to finance business operations, equipment purchases, or for small and medium-sized commercial customers. Also included production. borrower. for payroll and other permitted purposes in accordance with the requirements of the PPP. Company had one 0.1 Company had 138 8.1 December 31, 2021. Construction and land development (“C&D”) — includes both loans and credit lines for the purpose of purchasing, carrying and developing land into commercial developments or residential subdivisions. for construction of residential, multi-family and commercial buildings. Generally the primary dependent upon the sale or refinance of the real estate collateral. Commercial real estate includes loans disaggregated into three classes: (1) owner occupied (2) and (3) other. – includes loans for hotels and motels. Residential real estate (“RRE”) — includes loans disaggregated into two classes: (1) consumer mortgage and (2) investment property. Consumer installment — includes loans to individuals both secured by personal property and unsecured. personal lines of credit, automobile loans, and other retail loans. Bank’s general loan policies and procedures financial condition, satisfactory credit history, The following is a summary of current, accruing past due and nonaccrual loans by portfolio and 2021. Accruing Accruing Total 30-89 Days Greater than Accruing Non- Total (In thousands) Current Past Due 90 days Loans Accrual Loans December 31, 2022: Commercial and industrial $ 65,731 5 — 65,736 443 $ 66,179 Construction and land development 66,479 — — 66,479 — 66,479 Commercial real estate: Owner occupied 61,265 — — 61,265 — 61,265 Hotel/motel 33,457 — — 33,457 — 33,457 Multifamily 41,181 — — 41,181 — 41,181 Other 127,162 — — 127,162 2,116 129,278 Total commercial real estate 263,065 — — 263,065 2,116 265,181 Residential real estate: Consumer mortgage 45,200 38 — 45,238 172 45,410 Investment property 52,325 — — 52,325 — 52,325 Total residential real estate 97,525 38 — 97,563 172 97,735 Consumer installment 9,506 40 — 9,546 — 9,546 Total $ 502,306 83 — 502,389 2,731 $ 505,120 December 31, 2021: Commercial and industrial $ 83,974 3 — 83,977 — $ 83,977 Construction and land development 32,228 204 — 32,432 — 32,432 Commercial real estate: Owner occupied 63,375 — — 63,375 — 63,375 Hotel/motel 43,856 — — 43,856 — 43,856 Multifamily 42,587 — — 42,587 — 42,587 Other 108,366 — — 108,366 187 108,553 Total commercial real estate 258,184 — — 258,184 187 258,371 Residential real estate: Consumer mortgage 29,070 516 — 29,586 195 29,781 Investment property 47,818 — — 47,818 62 47,880 Total residential real estate 76,888 516 — 77,404 257 77,661 Consumer installment 6,657 25 — 6,682 — 6,682 Total $ 457,931 748 — 458,679 444 $ 459,123 The gross interest income which would have been recorded under the original terms of those been accruing interest, amounted to approximately $ 26 27 and 2021, respectively. Allowance for Loan Losses The allowance for loan losses as of and for the years ended December 31, Year ended December 31 (In thousands) 2022 2021 Beginning balance $ 4,939 $ 5,618 Charged-off loans (292) (294) Recovery of previously charged-off loans 118 215 Net charge-offs (174) (79) Provision for loan losses 1,000 (600) Ending balance $ 5,765 $ 4,939 The Company assesses the adequacy of its allowance for loan losses prior the allowance is based upon management’s trends, known and inherent risks in the portfolio, adverse situations that may affect the timing of future payment), the estimated value of any underlying collateral, conditions, industry and peer bank loan loss rates and other pertinent factors, including regulatory evaluation is inherently subjective as it requires material estimates including the amounts expected to be received on impaired loans that may be susceptible to significant change. Loans are in part, when management believes that the full collectability of the loan is unlikely. after a “confirming event” has occurred which serves to validate that full repayment pursuant unlikely. The Company deems loans impaired when, based on current information and events, be unable to collect all amounts due according to the contractual terms of the loan agreement. according to the contractual terms means that both the interest and principal payments of scheduled in the loan agreement. An impairment allowance is recognized if the fair value of the loan is less than the recorded impairment is recognized through the allowance. Loans that are impaired are future cash flows discounted at the loan’s effective measurement is based on the fair value of the collateral, less estimated disposal costs. The level of allowance maintained is believed by management to be adequate portfolio at the balance sheet date. The allowance is increased by provisions charged offs, net of recoveries of amounts previously charged-off. In assessing the adequacy of the allowance, the Company also considers the results of its loan review process. The Company’s loan whose credit quality has weakened over time and evaluating the risk characteristics of the Company’s loan review process includes the judgment reviews that may have been conducted by bank regulatory agencies as part of their examination incorporates loan review results in the determination of whether or not it is probable amounts due As part of the Company’s quarterly assessment commercial and industrial, construction and land development, commercial real estate, residential installment loans. The Company analyzes each segment and estimates an allowance allocation The allocation of the allowance for loan losses begins with a process of estimating the types of loans. The estimates for these loans are established by category and based credit risk ratings and historical loss data. The estimated loan loss allocation rate for the Company’s credit risk grades is based on its experience with similarly graded loans. For does not have sufficient historical loss data, the Company may groups. At December 31, 2022 and 2021, and for the years then ended, the Company adjusted commercial real estate portfolio segment based, in part, on loss rates of peer bank groups. The estimated loan loss allocation for all five loan portfolio segments is then adjusted for management’s probable losses for several “qualitative and environmental” factors. The allocation is particularly subjective and does not lend itself to exact mathematical calculation. This probable inherent credit losses which exist, but have not yet been identified, upon quarterly trend assessments in delinquent and nonaccrual loans, credit concentration conditions, changes based on lending personnel experience, changes in lending policies factors. These qualitative and environmental factors are considered allocation, as determined by the processes noted above, is increased or decreased these factors. The Company regularly re-evaluates its practices in determining the allowance 2016, the Company has increased its look-back period each quarter to downturn in its loss history. The Company believes inherent in the loan portfolio. Absent this extension, the early cycle periods in which losses would be excluded from the determination of the allowance for loan losses and its balance year ended December 31, 2022, the Company increased its look-back period to incurred by the Company beginning with the first quarter of 2009. and economic factors to reflect improvements in economic conditions in our primary observed as a result of the COVID-19 pandemic. The following table details the changes in the allowance for loan losses by portfolio segment 31, 2022 and 2021. (in thousands) Commercial and industrial Construction and land Development Commercial Real Estate Residential Real Estate Consumer Installment Total Balance, December 31, 2020 $ 807 594 3,169 944 104 $ 5,618 Charge-offs — — (254) (3) (37) (294) Recoveries 140 — — 55 20 215 Net recoveries (charge-offs) 140 — (254) 52 (17) (79) Provision (90) (76) (176) (257) (1) (600) Balance, December 31, 2021 $ 857 518 2,739 739 86 $ 4,939 Charge-offs (222) — — — (70) (292) Recoveries 7 — 23 26 62 118 Net (charge-offs) recoveries (215) — 23 26 (8) (174) Provision 105 431 347 63 54 1,000 Balance, December 31, 2022 $ 747 949 3,109 828 132 $ 5,765 The following table presents an analysis of the allowance for loan losses and recorded segment and impairment methodology as of December 31, 2022 and 2021. Collectively evaluated (1) Individually evaluated (2) Total Allowance Recorded Allowance Recorded Allowance Recorded for loan investment for loan investment for loan investment (In thousands) losses in loans losses in loans losses in loans December 31, 2022: Commercial and industrial $ 688 65,736 59 443 747 66,179 Construction and land development 949 66,479 — — 949 66,479 Commercial real estate 2,663 263,065 446 2,116 3,109 265,181 Residential real estate 828 97,735 — — 828 97,735 Consumer installment 132 9,546 — — 132 9,546 Total $ 5,260 502,561 505 2,559 5,765 505,120 December 31, 2021: Commercial and industrial $ 857 83,977 — — 857 83,977 Construction and land development 518 32,432 — — 518 32,432 Commercial real estate 2,739 258,184 — 187 2,739 258,371 Residential real estate 739 77,599 — 62 739 77,661 Consumer installment 86 6,682 — — 86 6,682 Total $ 4,939 458,874 — 249 4,939 459,123 (1) Represents loans collectively evaluated for impairment Loss Contingencies (formerly FAS 5), and pursuant to amendments by ASU 2010-20 regarding allowance for (2) Represents loans individually evaluated for impairment Receivables (formerly Credit Quality Indicators The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories standard asset classification system used by the federal banking agencies. indicators for the loan portfolio segments and classes. These categories are utilized to develop loan losses using historical losses adjusted for qualitative and environmental factors ● Pass – loans which are well protected by the current net worth and paying capacity any) or by the fair value, less cost to acquire and sell, of any underlying collateral. ● Special Mention – loans with potential weakness that may, inadequately protect the Company’s position not expose an institution to sufficient risk to warrant an adverse classification. ● Substandard Accruing – loans that exhibit a well-defined weakness which presently jeopardizes even though they are currently performing. These loans are characterized by the distinct possibility Company may incur a loss in the future if these weaknesses are not corrected. ● Nonaccrual – includes loans where management has determined that full payment doubt. (In thousands) Mention Substandard Accruing Nonaccrual Total loans December 31, 2022 Commercial and industrial $ 65,517 7 212 443 $ 66,179 Construction and land development 66,479 — — — 66,479 Commercial real estate: Owner occupied 60,866 238 161 — 61,265 Hotel/motel 33,457 — — — 33,457 Multifamily 41,181 — — — 41,181 Other 126,992 170 — 2,116 129,278 Total commercial real estate 262,496 408 161 2,116 265,181 Residential real estate: Consumer mortgage 44,212 439 587 172 45,410 Investment property 52,034 43 248 — 52,325 Total residential real estate 96,246 482 835 172 97,735 Consumer installment 9,498 1 47 — 9,546 Total $ 500,236 898 1,255 2,731 $ 505,120 December 31, 2021 Commercial and industrial $ 83,725 26 226 — $ 83,977 Construction and land development 32,212 2 218 — 32,432 Commercial real estate: Owner occupied 61,573 1,675 127 — 63,375 Hotel/motel 36,162 7,694 — — 43,856 Multifamily 39,093 3,494 — — 42,587 Other 107,426 911 29 187 108,553 Total commercial real estate 244,254 13,774 156 187 258,371 Residential real estate: Consumer mortgage 27,647 452 1,487 195 29,781 Investment property 47,459 98 261 62 47,880 Total residential real estate 75,106 550 1,748 257 77,661 Consumer installment 6,650 20 12 — 6,682 Total $ 441,947 14,372 2,360 444 $ 459,123 Impaired loans The following table presents details related to the Company’s not appear in the following table. The related allowance generally represents the to impaired loans: ● Individually evaluated impaired loans equal to or greater than $500 thousand secured by real construction and land development, commercial real estate, and residential real estate). ● Individually evaluated impaired loans equal to or greater than $250 thousand not secured (nonaccrual commercial and industrial and consumer loans). The following table sets forth certain information regarding the Company’s for impairment at December 31, 2022 and 2021. December 31, 2022 (In thousands) Unpaid principal balance (1) Charge-offs and payments applied (2) Recorded investment (3) Related allowance With no allowance recorded: Commercial and industrial $ 210 (1) $ 209 Commercial real estate: Owner occupied 858 (3) 855 Total commercial real estate 858 (3) 855 Total $ 1,068 (4) $ 1,064 With allowance recorded: Commercial and industrial $ 234 — 234 $ 59 Commercial real estate: Owner occupied 1,261 — 1,261 446 Total commercial real estate 1,261 — 1,261 446 Total 1,495 — 1,495 505 Total $ 2,563 (4) 2,559 $ 505 (1) Unpaid principal balance represents the contractual obligation (2) Charge-offs and payments applied represents cumulative charge-offs taken, as well applied against the outstanding principal balance. (3) Recorded investment represents the unpaid principal balance December 31, 2021 (In thousands) Unpaid principal balance (1) Charge-offs and payments applied (2) Recorded investment (3) Related allowance With no allowance recorded: Commercial real estate: Other $ 205 (18) 187 Total commercial real estate 205 (18) 187 Residential real estate: Investment property 68 (6) 62 Total residential real estate 68 (6) 62 Total $ 273 (24) $ 249 With allowance recorded: Total $ 273 (24) 249 $ — (1) Unpaid principal balance represents the contractual obligation (2) Charge-offs and payments applied represents cumulative charge-offs taken, as well applied against the outstanding principal balance. (3) Recorded investment represents the unpaid principal balance The following table provides the average recorded investment in impaired loans and recognized on impaired loans after impairment by portfolio segment and class. Year ended December 31, 2022 Year ended December 31, 2021 Average Total interest Average Total interest recorded income recorded income (In thousands) investment recognized investment recognized Impaired loans: Commercial and industrial $ 34 — $ — — Commercial real estate: Owner occupied 163 — — — Other $ 153 — $ 199 — Total commercial real estate 316 — 199 — Residential real estate: Investment property 5 — 96 — Total residential real estate 5 — 96 — Total $ 355 — $ 295 — Troubled Debt Impaired loans also include troubled debt restructurings (“TDRs”). From Troubled Debt Restructurings,” provides banks the option 340-10 TDR classifications for a limited period of time to account for the effects CARES Act was extended to January 1, 2022 by Section 541 of the Consolidated The Interagency Statement on COVID-19 Loan Modifications, encourages banks describes the agencies’ interpretation of how accounting rules under ASC 310-40, “Troubled Creditors,” apply to certain COVID-19-related modifications. Modifications was supplemented on June 23, 2020 by the Interagency Examiner Guidance Soundness Considering the Effect of the COVID-19 Pandemic on Institutions. may elect to account for the loan under Section 4013 of the CARES Act. If a loan modification 4013, or if the bank elects not to account for the loan modification under section 4013, criteria when a bank may presume a loan modification is not a TDR in accordance The Company evaluates loan extensions or modifications not Interagency Statement on COVID-19 Loan Modifications in accordance classification of the loan as a TDR. are experiencing financial difficulty. principal and interest for a specified period, reduction of the stated interest rate of the loan, extension of the maturity date, or reduction of the face amount or maturity amount of the debt. granted when, as a result of the restructuring, the Bank does not expect to collect, interest at the original stated rate. elsewhere at a market rate for debt with similar risk characteristics as the restructured whether a loan modification is a TDR, the Company considers the individual facts and circumstances modification. in determining the appropriate accrual status at the time of restructure. Similar to other impaired loans, TDRs are measured for impairment based on the present value of expected the loan’s original effective collateral dependent. If the recorded investment in the loan exceeds the measure of establishing a valuation allowance as part of the allowance for loan losses or a charge In periods subsequent to the modification, all TDRs are evaluated individually, for possible impairment. The Company had no TDRs at December 31, 2022. related allowance for loan losses, by portfolio segment and class at December 31, 2021. TDRs Related (In thousands) Accruing Nonaccrual Total Allowance December 31, 2021 Commercial real estate: Other $ — 187 187 $ — Total commercial real estate — 187 187 — Residential real estate: Investment property — 62 62 — Total residential real estate — 62 62 — Total $ — 249 249 $ — At December 31, 2022 there were no significant outstanding commitments to advance loans had been restructured. During the years ended December 31, 2022 and 2021, respectively, the previous 12 months for which there was a payment default (defined as 90 days or |