Loan and Allowance for Credit Losses	9 Months Ended
Loan and Allowance for Credit Losses	Sep. 30, 2023
Loans And Leases Receivable Disclosure [Abstract]
Loans and leases receivable disclosure [Text Block]	NOTE 5: LOANS AND ALLOWANCE FOR CREDIT LOSSES September 30, December 31, (Dollars in thousands) 2023 2022 Commercial and industrial $ 66,014 $ 66,212 Construction and land development 70,129 66,479 Commercial real estate: Owner occupied 66,237 61,125 Hotel/motel 36,992 33,378 Multi-family 47,634 41,084 Other 131,101 128,986 Total commercial real estate 281,964 264,573 Residential real estate: Consumer mortgage 60,024 45,370 Investment property 57,126 52,278 Total residential real estate 117,150 97,648 Consumer installment 10,353 9,546 Total Loans $ 545,610 $ 504,458 Loans secured by real estate were approximately 86.0% of the Company’s total loan portfolio at September 30, 2023. At September 30, 2023, the Company’s geographic loan distribution was concentrated primarily in Lee County, Alabama, and surrounding areas. The loan portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. As part of the Company’s quarterly assessment of the allowance, the loan portfolio included the following portfolio segments: commercial and industrial, construction and land development, commercial real estate, residential real estate, and consumer installment. Where appropriate, the Company’s loan portfolio segments are further disaggregated into classes. A class is generally determined based on the initial measurement attribute, risk characteristics of the loan, and an entity’s method for monitoring and determining credit risk. The following describes the risk characteristics relevant to each of the portfolio segments and classes. Commercial and industrial (“C&I”) — includes loans to finance business operations, equipment purchases, or other needs for small and medium-sized commercial customers. Also included in this category are loans to finance agricultural production. Generally, the primary source of repayment is the cash flow from business operations and activities of the borrower. 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. Also included are loans and credit lines for construction of residential, multi-family, and commercial buildings. Generally, the primary source of repayment is dependent upon the sale or refinance of the real estate collateral. Commercial real estate (“CRE”) — includes loans in these classes: ● Owner occupied – includes loans secured by business facilities to finance business operations, equipment and owner-occupied facilities primarily for small and medium-sized commercial customers. Generally, the primary source of repayment is the cash flow from business operations and activities of the borrower, who owns the property. ● Hotel/motel – includes loans for hotels and motels. Generally, the primary source of repayment is dependent upon income generated from the hotel/motel securing the loan. The underwriting of these loans takes into consideration the occupancy and rental rates, as well as the financial health of the borrower. ● Multi-family – primarily includes loans to finance income-producing multi-family properties . These include loans for 5 or more unit residential properties and apartments leased to residents. Generally , the primary source of repayment is dependent upon income generated from the real estate collateral. The underwriting of these loans takes into consideration the occupancy and rental rates, as well as the financial health of the respective borrowers. ● Other – primarily includes loans to finance income-producing commercial properties other than hotels/motels and multi-family properties, and which are not owner occupied. Loans in this class include loans for neighborhood retail centers, medical and professional offices, single retail stores, industrial buildings, and warehouses leased to local and other businesses. Generally, the primary source of repayment is dependent upon income generated from the real estate collateral. The underwriting of these loans takes into consideration the occupancy and rental rates, as well as the financial health of the borrower. Residential real estate (“RRE”) — includes loans in these two classes: ● Consumer mortgage – primarily includes first or second lien mortgages and home equity lines of credit to consumers that are secured by a primary residence or second home. These loans are underwritten in accordance with the Bank’s general loan policies and procedures which require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit history , and property value. ● Investment property – primarily includes loans to finance income-producing 1-4 family residential properties. Generally, the primary source of repayment is dependent upon income generated from leasing the property securing the loan. The underwriting of these loans takes into consideration the rental rates and property values, as well as the financial health of the borrowers. Consumer installment — includes loans to individuals, which may be secured by personal property or are unsecured. Loans include personal lines of credit, automobile loans, and other retail loans. These loans are underwritten in accordance with the Bank’s general loan policies and procedures which require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit history, and, if applicable, property values. The following is a summary of current, accruing past due, and nonaccrual loans by portfolio segment and class as of September 30, 2023 and December 31, 2022. Accruing Accruing Total 30-89 Days Greater than Accruing Non- Total (Dollars in thousands) Current Past Due 90 days Loans Accrual Loans September 30, 2023: Commercial and industrial $ 65,813 39 — 65,852 162 $ 66,014 Construction and land development 70,129 — — 70,129 — 70,129 Commercial real estate: Owner occupied 65,230 206 — 65,436 801 66,237 Hotel/motel 36,992 — — 36,992 — 36,992 Multi-family 47,634 — — 47,634 — 47,634 Other 131,101 — — 131,101 — 131,101 Total commercial real estate 280,957 206 — 281,163 801 281,964 Residential real estate: Consumer mortgage 59,799 — — 59,799 225 60,024 Investment property 57,087 14 — 57,101 25 57,126 Total residential real estate 116,886 14 — 116,900 250 117,150 Consumer installment 10,297 56 — 10,353 — 10,353 Total $ 544,082 315 — 544,397 1,213 $ 545,610 December 31, 2022: Commercial and industrial $ 65,764 5 — 65,769 443 $ 66,212 Construction and land development 66,479 — — 66,479 — 66,479 Commercial real estate: Owner occupied 61,125 — — 61,125 — 61,125 Hotel/motel 33,378 — — 33,378 — 33,378 Multi-family 41,084 — — 41,084 — 41,084 Other 126,870 — — 126,870 2,116 128,986 Total commercial real estate 262,457 — — 262,457 2,116 264,573 Residential real estate: Consumer mortgage 45,160 38 — 45,198 172 45,370 Investment property 52,278 — — 52,278 — 52,278 Total residential real estate 97,438 38 — 97,476 172 97,648 Consumer installment 9,506 40 — 9,546 — 9,546 Total $ 501,644 83 — 501,727 2,731 $ 504,458 Credit Quality Indicators The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. The following table presents credit quality indicators for the loan portfolio segments and classes by year of origination as of September 30, 2023. These categories are utilized to develop the associated allowance for credit losses using historical losses adjusted for qualitative and environmental factors and are defined as follows: ● Pass – loans which are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral. ● Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date. These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification. ● Substandard Accruing – loans that exhibit a well-defined weakness which presently jeopardizes debt repayment, even though they are currently performing. These loans are characterized by the distinct possibility that the Company may incur a loss in the future if these weaknesses are not corrected . ● Nonaccrual – includes loans where management has determined that full payment of principal and interest is not expected. (Dollars in thousands) 2023 2022 2021 2020 2019 Prior to 2019 Revolving Loans Total Loans September 30, 2023: Commercial and industrial Pass $ 8,403 15,220 14,164 5,760 7,447 8,138 6,283 $ 65,415 Special mention — — — — — — 348 348 Substandard 56 — 27 — 6 — — 89 Nonaccrual — — — — 162 — — 162 Total commercial and industrial 8,459 15,220 14,191 5,760 7,615 8,138 6,631 66,014 Current period gross charge-offs — — — — — — — — Construction and land development Pass 34,977 30,923 1,735 1,562 131 162 639 70,129 Special mention — — — — — — — — Substandard — — — — — — — — Nonaccrual — — — — — — — — Total construction and land development 34,977 30,923 1,735 1,562 131 162 639 70,129 Current period gross charge-offs — — — — — — — — Commercial real estate: Owner occupied Pass 10,489 7,476 18,785 10,639 4,359 9,965 3,408 65,121 Special mention 263 — — — — — — 263 Substandard — — — — 52 — — 52 Nonaccrual — — — — 801 — — 801 Total owner occupied 10,752 7,476 18,785 10,639 5,212 9,965 3,408 66,237 Current period gross charge-offs — — — — — — — — Hotel/motel Pass 6,437 9,981 3,234 1,539 3,952 11,849 — 36,992 Special mention — — — — — — — — Substandard — — — — — — — — Nonaccrual — — — — — — — — Total hotel/motel 6,437 9,981 3,234 1,539 3,952 11,849 — 36,992 Current period gross charge-offs — — — — — — — — (Dollars in thousands) 2023 2022 2021 2020 2019 Prior to 2019 Revolving Loans Total Loans September 30, 2023: Multi-family Pass 12,436 18,185 1,972 6,163 3,825 3,126 1,927 47,634 Special mention — — — — — — — — Substandard — — — — — — — — Nonaccrual — — — — — — — — Total multi-family 12,436 18,185 1,972 6,163 3,825 3,126 1,927 47,634 Current period gross charge-offs — — — — — — — — Other Pass 16,532 36,560 32,107 14,053 10,902 19,004 914 130,072 Special mention — — — 873 — — — 873 Substandard — — — 156 — — — 156 Nonaccrual — — — — — — — — Total other 16,532 36,560 32,107 15,082 10,902 19,004 914 131,101 Current period gross charge-offs — — — — — — — — Residential real estate: Consumer mortgage Pass 18,918 20,284 2,731 2,694 1,492 12,771 79 58,969 Special mention — — — — — 250 — 250 Substandard — — — — — 580 — 580 Nonaccrual — — — 118 — 107 — 225 Total consumer mortgage 18,918 20,284 2,731 2,812 1,492 13,708 79 60,024 Current period gross charge-offs — — — — — — — — Investment property Pass 11,594 12,822 9,564 12,984 5,763 2,373 1,473 56,573 Special mention 42 — — — — — — 42 Substandard — 249 — 237 — — — 486 Nonaccrual — — — — — 25 — 25 Total investment property 11,636 13,071 9,564 13,221 5,763 2,398 1,473 57,126 Current period gross charge-offs — — — — — — — — Consumer installment Pass 4,699 4,189 861 251 126 167 — 10,293 Special mention — — 1 2 — — — 3 Substandard 12 24 8 13 — — — 57 Nonaccrual — — — — — — — — Total consumer installment 4,711 4,213 870 266 126 167 — 10,353 Current period gross charge-offs 34 37 13 1 — — — 85 Total loans Pass 124,485 155,640 85,153 55,645 37,997 67,555 14,723 541,198 Special mention 305 — 1 875 — 250 348 1,779 Substandard 68 273 35 406 58 580 — 1,420 Nonaccrual — — — 118 963 132 — 1,213 Total loans $ 124,858 155,913 85,189 57,044 39,018 68,517 15,071 $ 545,610 Total current period gross charge-offs $ 34 37 13 1 — — — 85 (Dollars in thousands) Pass Special Mention Substandard Accruing Nonaccrual Total loans December 31, 2022: Commercial and industrial $ 65,550 7 212 443 $ 66,212 Construction and land development 66,479 — — — 66,479 Commercial real estate: Owner occupied 60,726 238 161 — 61,125 Hotel/motel 33,378 — — — 33,378 Multi-family 41,084 — — — 41,084 Other 126,700 170 — 2,116 128,986 Total commercial real estate 261,888 408 161 2,116 264,573 Residential real estate: Consumer mortgage 44,172 439 587 172 45,370 Investment property 51,987 43 248 — 52,278 Total residential real estate 96,159 482 835 172 97,648 Consumer installment 9,498 1 47 — 9,546 Total $ 499,574 898 1,255 2,731 $ 504,458 The following table is a summary of the Company’s nonaccrual loans by major categories as of September 30, 2023 and December 31, 2022. CECL Incurred Loss September 30, 2023 December 31, 2022 Nonaccrual Nonaccrual Total Loans with Loans with an Nonaccrual Nonaccrual (Dollars in thousands) No Allowance Allowance Loans Loans Commercial and industrial $ 162 — 162 $ 443 Commercial real estate 801 — 801 2,116 Residential real estate 250 — 250 172 Total $ 1,213 — 1,213 $ 2,731 The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses: (Dollars in thousands) Real Estate Business Assets Total Loans September 30, 2023: Commercial and industrial $ — 162 $ 162 Commercial real estate 801 — 801 Total $ 801 162 $ 963 Allowance for Credit Losses The Company adopted ASC 326 on January 1, 2023, which introduced the CECL methodology for estimating all expected losses over the life of a financial asset. Under the CECL methodology, the allowance for credit losses is measured on a collective basis for pools of loans with similar risk characteristics, and for loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. The following table details the changes in the allowance for credit losses by portfolio segment for the respective periods. September 30, 2023 (Dollars in thousands) Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment Total Quarter ended: Beginning balance $ 1,198 1,005 3,788 529 114 $ 6,634 Charge-offs — — — — (18) (18) Recoveries 1 — — 2 1 4 Net recoveries (charge-offs) 1 — — 2 (17) (14) Provision for credit losses 16 68 15 20 39 158 Ending balance $ 1,215 1,073 3,803 551 136 $ 6,778 Nine months ended: Beginning balance $ 747 949 3,109 828 132 $ 5,765 Impact of adopting ASC 326 532 (17) 873 (347) (22) 1,019 Charge-offs — — — — (85) (85) Recoveries 197 — — 12 3 212 Net recoveries (charge-offs) 197 — — 12 (82) 127 Provision for credit losses (261) 141 (179) 58 108 (133) Ending balance $ 1,215 1,073 3,803 551 136 $ 6,778 September 30, 2022 (Dollars in thousands) Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment Total Quarter ended: Beginning balance $ 761 576 2,523 753 103 $ 4,716 Charge-offs (13) — — — (3) (16) Recoveries 2 — — 8 6 16 Net (charge-offs) recoveries (11) — — 8 3 — Provision for loan losses (18) 213 38 22 (5) 250 Ending balance $ 732 789 2,561 783 101 $ 4,966 Nine months ended: Beginning balance $ 857 518 2,739 739 86 $ 4,939 Charge-offs (17) — — — (67) (84) Recoveries 6 — 22 22 61 111 Net (charge-offs) recoveries (11) — 22 22 (6) 27 Provision for loan losses (114) 271 (200) 22 21 — Ending balance $ 732 789 2,561 783 101 $ 4,966 The following table presents an analysis of the allowance for loan losses and recorded investment in loans by portfolio segment and impairment methodology as of September 30, 2022 as determined, prior to the adoption of ASC 326. 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 September 30, 2022: Commercial and industrial $ 732 70,685 — — 732 70,685 Construction and land development 789 54,773 — — 789 54,773 Commercial real estate 2,561 249,860 — 170 2,561 250,030 Residential real estate 783 91,598 — — 783 91,598 Consumer installment 101 7,551 — — 101 7,551 Total $ 4,966 474,467 — 170 4,966 474,637 (1) Represents loans collectively evaluated for impairment, prior to the adopton of ASC 326, in accordance with ASC 450-20, Loss Contingencies, and pursuant to amendments by ASU 2010-20 regarding allowance for non-impaired loans. (2) Represents loans individually evaluated for impairment, prior to the adoption of ASC 326, in accordance with ASC 310-30, Receivables, and pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans. Impaired loans The following tables present impaired loans at December 31, 2022 as determined under ASC 310 prior to the adoption of ASC 326. Loans that have been fully charged-off are not included in the following tables. The related allowance generally represents the following components that correspond to impaired loans: ● Individually evaluated impaired loans equal to or greater than $500 thousand secured by real estate (nonaccrual construction and land development, commercial real estate, and residential real estate loans). ● Individually evaluated impaired loans equal to or greater than $250 thousand not secured by real estate (nonaccrual commercial and industrial and consumer installment loans). The following tables set forth certain information regarding the Company’s impaired loans that were individually evaluated for impairment at December 31, 2022. December 31, 2022 (Dollars 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 impaired loans $ 2,563 (4) 2,559 $ 505 (1) Unpaid principal balance represents the contractual obligation due from the customer. (2) Charge-offs and payments applied represents cumulative charge-offs taken, as well as interest payments that have been applied against the outstanding principal balance subsequent to the loans being placed on nonaccrual status. (3) Recorded investment represents the unpaid principal balance less charge-offs and payments applied; it is shown before any related allowance for loan losses. Pursuant to the adoption of ASU 2022-02, effective January 1, 2023, the Company prospectively discontinued the recognition and measurement guidance previously required for troubled debt restructurings (TDRs). As of September 30, 2023, the Company had no loans that would have previously required disclosure as TDRs. The following table provides the average recorded investment in impaired loans, if any, by portfolio segment, and the amount of interest income recognized on impaired loans after impairment by portfolio segment and class during the quarter and nine months ended September 30, 2022 as determined under ASC 310 prior to the adoption of ASC 326. Quarter ended September 30, 2022 Nine months ended September 30, 2022 Average Total interest Average Total interest recorded income recorded income (Dollars in thousands) investment recognized investment recognized Impaired loans: Commercial real estate: Other $ 173 — $ 199 — Total commercial real estate 173 — 199 — Residential real estate: Investment property — — 6 — Total residential real estate — — 6 — Total $ 173 — $ 205 —