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Note 2 - Loans and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Financing Receivables [Text Block]

Note 2: Loans and Allowance for Credit Losses

Loans

The loan portfolio, excluding mortgage loans held for sale, was comprised of the following.

		March 31, 2023				December 31, 2022
Real estate construction		$	54,052			$	54,579
Consumer real estate			223,438				221,052
Commercial real estate			438,843				437,888
Commercial non real estate			60,516				57,652
Public sector and IDA			47,359				48,074
Consumer non real estate			33,188				33,948
Gross loans			857,396				853,193
Less unearned income and deferred fees and costs			(431	)			(449	)
Loans, net of unearned income and deferred fees and costs		$	856,965			$	852,744
Allowance for credit losses on loans			(10,650	)			(8,225	)
Total loans, net		$	846,315			$	844,519

Accrued interest receivable on loans, which is excluded from the amortized cost of loans, totaled $2,558 and $2,516 at March 31, 2023 and December 31, 2022, respectively.

Past Due and Nonaccrual Loans

The following tables present the aging of past due loans, by loan pool, as of the dates indicated.

		March 31, 2023
		Accruing Current Loans				Accruing Loans 30 – 89 Days Past Due				Accruing Loans 90 or More Days Past Due				Nonaccrual Loans				Total Loans				Accruing and Nonaccrual 90 or More Days Past Due
Real Estate Construction
Construction, 1-4 family residential		$	13,143			$	-			$	-			$	-			$	13,143			$	-
Construction, other			40,909				-				-				-				40,909				-
Consumer Real Estate
Equity line			14,503				23				-				-				14,526				-
Residential closed-end first liens			121,466				836				27				90				122,419				117
Residential closed-end junior liens			2,476				-				-				-				2,476				-
Investor-owned residential real estate			83,924				93				-				-				84,017				-
Commercial Real Estate
Multifamily residential real estate			131,952				-				-				-				131,952				-
Commercial real estate owner-occupied			124,882				8				-				2,472				127,362				247
Commercial real estate, other			179,529				-				-				-				179,529				1
Commercial Non Real Estate
Commercial and industrial			60,201				62				1				252				60,516				-
Public Sector and IDA
States and political subdivisions			47,359				-				-				-				47,359				-
Consumer Non-Real Estate
Credit cards			4,557				5				1				-				4,563				1
Automobile			10,328				75				-				-				10,403				-
Other consumer loans			18,146				72				4				-				18,222				4
Total		$	853,375			$	1,174			$	33			$	2,814			$	857,396			$	370

		December 31, 2022
		Accruing Current Loans				Accruing Loans 30 – 89 Days Past Due				Accruing Loans 90 or More Days Past Due				Nonaccrual Loans				Total Loans				Accruing and Nonaccrual 90 or More Days Past Due
Real Estate Construction
Construction, 1-4 family residential		$	12,538			$	-			$	-			$	-			$	12,538			$	-
Construction, other			42,041				-				-				-				42,041				-
Consumer Real Estate
Equity line			15,010				16				-				-				15,026				-
Residential closed-end first liens			121,807				750				-				91				122,648				91
Residential closed-end junior liens			2,446				-				-				-				2,446				-
Investor-owned residential real estate			80,524				408				-				-				80,932				-
Commercial Real Estate
Multifamily residential real estate			127,312				-				-				-				127,312				-
Commercial real estate owner-occupied			126,640				-				-				2,493				129,133				252
Commercial real estate, other			181,443				-				-				-				181,443				-
Commercial Non Real Estate
Commercial and industrial			57,373				16				-				263				57,652				-
Public Sector and IDA
States and political subdivisions			48,074				-				-				-				48,074				-
Consumer Non-Real Estate
Credit cards			4,592				3				2				-				4,597				2
Automobile			9,833				102				-				-				9,935				-
Other consumer loans			19,317				93				6				-				19,416				6
Total		$	848,950			$	1,388			$	8			$	2,847			$	853,193			$	351

The following table presents nonaccrual loans, by loan class, as of the dates indicated:

		CECL												Incurred Loss
		March 31, 2023												December 31, 2022
		Nonaccrual Loans												Nonaccrual Loans
		With No Allowance				With an Allowance				Total
Consumer Real Estate
Residential closed-end first liens		$	-			$	90			$	90			$	91
Commercial Real Estate
Commercial real estate owner-occupied			-				2,472				2,472				2,493
Commercial Non Real Estate
Commercial and industrial			-				252				252				263
Total		$	-			$	2,814			$	2,814			$	2,847

During the three months ended March 31, 2023, no accrued interest receivable was reversed against interest income.

The following table presents certain past due indicators as of the dates indicated.

		March 31,								December 31,
		2023				2022				2022
Ratio of ACLL to nonaccrual loans			378.46	%			272.12	%			288.90	%
Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees and costs			0.00	%			0.05	%			0.00	%

Allowance for Credit Losses on Loans

The activity in the ACLL by portfolio segment follows:

		Activity in the Allowance for Credit Losses on Loans for the Three Months Ended March 31, 2023
		Real Estate Construction				Consumer Real Estate				Commercial Real Estate				Commercial Non Real Estate				Public Sector and IDA				Consumer Non Real Estate				Unallocated				Total
Balance, Dec. 31, 2022		$	450			$	2,199			$	3,642			$	930			$	319			$	506			$	179			$	8,225
Adoption of ASU 2016-13			(21	)			1,261				700				216				(15	)			72				129				2,342
Charge-offs			-				-				-				(12	)			-				(80	)			-				(92	)
Recoveries			-				102				12				2				-				57				-				173
Provision for (recovery of) credit losses			22				(260	)			20				58				(10	)			-				172				2
Balance, March 31, 2023		$	451			$	3,302			$	4,374			$	1,194			$	294			$	555			$	480			$	10,650

		Activity in the Allowance for Loan Losses for the Three Months Ended March 31, 2022
		Real Estate Construction				Consumer Real Estate				Commercial Real Estate				Commercial Non Real Estate				Public Sector and IDA				Consumer Non Real Estate				Unallocated				Total
Balance, Dec. 31, 2021		$	422			$	1,930			$	3,121			$	1,099			$	297			$	444			$	361			$	7,674
Charge-offs			-				-				-				-				-				(60	)			-				(60	)
Recoveries			-				-				12				3				-				25				-				40
Provision for (recovery of) loan losses			171				5				290				(158	)			10				6				(190	)			134
Balance, March, 31, 2022		$	593			$	1,935			$	3,423			$	944			$	307			$	415			$	171			$	7,788

		Activity in the Allowance for Loan Losses for the Year Ended December 31, 2022
		Real Estate Construction				Consumer Real Estate				Commercial Real Estate				Commercial Non Real Estate				Public Sector and IDA				Consumer Non Real Estate				Unallocated				Total
Balance, Dec. 31, 2021		$	422			$	1,930			$	3,121			$	1,099			$	297			$	444			$	361			$	7,674
Charge-offs			-				(13	)			-				(2	)			-				(352	)			-				(367	)
Recoveries			-				29				49				11				-				123				-				212
Provision for (recovery of) loan losses			28				253				472				(178	)			22				291				(182	)			706
Balance, Dec. 31, 2022		$	450			$	2,199			$	3,642			$	930			$	319			$	506			$	179			$	8,225

Information about the ACLL for individually evaluated loans and collectively evaluated loans by portfolio segment follows.

		Allowance for Credit Losses on Loans as of March 31, 2023
		Real Estate Construction				Consumer Real Estate				Commercial Real Estate				Commercial Non Real Estate				Public Sector and IDA				Consumer Non Real Estate				Unallocated				Total
Individually evaluated		$	1			$	84			$	201			$	148			$	-			$	-			$	-			$	434
Collectively evaluated			450				3,218				4,173				1,046				294				555				480				10,216
Total		$	451			$	3,302			$	4,374			$	1,194			$	294			$	555			$	480			$	10,650

		Allowance for Loan Losses as of December 31, 2022
		Real Estate Construction				Consumer Real Estate				Commercial Real Estate				Commercial Non Real Estate				Public Sector and IDA				Consumer Non- Real Estate				Unallocated				Total
Individually evaluated		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Collectively evaluated			450				2,199				3,642				930				319				506				179				8,225
Total		$	450			$	2,199			$	3,642			$	930			$	319			$	506			$	179			$	8,225

Information about individually evaluated loans and collectively evaluated loans by portfolio segment follows.

Loans as of March 31, 2023

Real Estate

Construction

Consumer

Real Estate

Commercial

Real Estate

Commercial

Non Real

Estate

Public

Sector and

IDA

Consumer Non

Real Estate

Total

Individually evaluated

$

294

$

1,061

$

2,480

$

295

$

-

$

-

$

4,130

Collectively evaluated

53,758

222,377

436,363

60,221

47,359

33,188

853,266

Total

$

54,052

$

223,438

$

438,843

$

60,516

$

47,359

$

33,188

$

857,396

		Loans as of December 31, 2022
		Real Estate Construction				Consumer Real Estate				Commercial Real Estate				Commercial Non Real Estate				Public Sector and IDA				Consumer Non- Real Estate				Total
Individually evaluated		$	-			$	186			$	2,583			$	263			$	-			$	-			$	3,032
Collectively evaluated			54,579				220,866				435,305				57,389				48,074				33,948				850,161
Total		$	54,579			$	221,052			$	437,888			$	57,652			$	48,074			$	33,948			$	853,193

A summary of ratios pertaining to the ACLL follows.

		As of and for the
		Three Months Ended March 31,								Year Ended December 31,
		2023				2022				2022
Ratio of ACLL to the end of period loans, net of unearned income and deferred fees and costs			1.24	%			0.95	%			0.96	%
Ratio of net charge-offs (recoveries), annualized, to average loans, net of unearned income and deferred fees and costs			(0.04	)%			0.01	%			0.02	%

In accordance with CECL, the Company identifies individually evaluated loans when their risk characteristics become different from their pool. Under previous GAAP, the Company identified loans for potential impairment through a variety of means, including, but not limited to, ongoing loan review, renewal processes, delinquency data, market communications, and public information. When the Company determined that it was probable all principal and interest amounts due would not be collected in accordance with the contractual terms of the loan agreement, the loan was generally deemed impaired and individually evaluated. For further information on the impairment process under previous GAAP, please refer to the Company’s 2022 Annual Report on Form 10-K. A summary of individually evaluated loans for the dates indicated follows.

		Individually Evaluated Loans under Incurred Loss as of December 31, 2022
		Principal Balance				Recorded Investment⁽¹⁾				Recorded Investment⁽¹⁾ for Which There is No Related Allowance				Recorded Investment⁽¹⁾ for Which There is a Related Allowance				Related Allowance
Consumer Real Estate
Investor-owned residential real estate		$	186			$	186			$	186			$	-			$	-
Commercial Real Estate
Commercial real estate, owner occupied			3,248				2,583				2,583				-				-
Commercial Non Real Estate
Commercial and industrial			285				263				263				-				-
Total		$	3,719			$	3,032			$	3,032			$	-			$	-

(1)

Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

The following tables show the average recorded investment and interest income recognized for individually evaluated loans. Only classes with individually evaluated loans are presented.

		For the Three Months Ended March 31, 2022
		Average Recorded Investment⁽¹⁾				Interest Income Recognized
Consumer Real Estate
Investor-owned residential real estate		$	190			$	3
Commercial Real Estate
Commercial real estate, owner occupied			2,640				1
Commercial real estate, other			2,720				17
Commercial Non-Real Estate
Commercial and industrial			292				-
Total		$	5,842			$	21

(1)

Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

Collateral Dependent Loans

The Company reviews individually evaluated loans for collateral dependency. As of March 31, 2023, none of the Company’s individually evaluated loans were considered collateral dependent.

Credit Quality

The Company categorizes loans by risk based on relevant information about the ability of borrowers to service their debt, including: collateral and financial information, historical payment experience, credit documentation and current economic trends, among other factors. At origination, each loan is assigned a risk rating. Ongoing analysis of the loan portfolio adjusts risk ratings on an individual loan basis to reflect updated information. General descriptions of risk ratings are as follows:

●

Pass: loans with acceptable credit quality are rated pass.

●

Special mention: loans with potential weaknesses due to challenging economic or financial conditions are rated special mention.

●

Classified: loans with well-defined weaknesses that heighten the risk of default are rated classified.

The following tables present the amortized cost basis of the loan portfolio, by year of origination, loan class, and credit quality, as of the date indicated.

		Term Loans Amortized Cost Basis by Origination Year
Balance at March 31, 2023		2019				2020				2021				2022				2023				Prior				Revolving				Revolving Loans Converted to Term				Total
Construction, residential
Pass		$	-			$	213			$	1,370			$	5,000			$	554			$	-			$	6,006			$	-			$	13,143
Classified			-				-				-				-				-				-				-				-				-
Total		$	-			$	213			$	1,370			$	5,000			$	554			$	-			$	6,006			$	-			$	13,143

Construction, other
Pass		$	1,253			$	1,502			$	26,880			$	5,229			$	1,573			$	2,807			$	1,371			$	-			$	40,615
Classified			-				-				294				-				-				-				-				-				294
Total		$	1,253			$	1,502			$	27,174			$	5,229			$	1,573			$	2,807			$	1,371			$	-			$	40,909

Equity lines
Pass		$	-			$	-			$	-			$	-			$	-			$	53			$	14,465			$	8			$	14,526
Classified			-				-				-				-				-				-				-				-				-
Total		$	-			$	-			$	-			$	-			$	-			$	53			$	14,465			$	8			$	14,526

*Residential closed-end first liens*
Pass		$	6,191			$	15,467			$	32,829			$	27,691			$	4,381			$	35,532			$	-				-			$	122,091
Classified			-				27				-				-				-				301				-				-				328
Total		$	6,191			$	15,494			$	32,829			$	27,691			$	4,381			$	35,833			$	-			$	-			$	122,419

*Residential closed-end junior liens*
Pass		$	7			$	-			$	87			$	405			$	82			$	1,895			$	-				-			$	2,476
Classified			-				-				-				-				-				-				-				-				-
Total		$	7			$	-			$	87			$	405			$	82			$	1,895			$	-				-			$	2,476

*Investor-owned residential real estate*
Pass		$	5,379			$	15,052			$	20,412			$	14,414			$	2,301			$	24,079			$	1,547			$	100			$	83,284
Classified			-				-				-				-				-				733				-				-				733
Total		$	5,379			$	15,052			$	20,412			$	14,414			$	2,301			$	24,812			$	1,547			$	100			$	84,017

*Multifamily residential real estate*
Pass		$	1,856			$	11,973			$	41,285			$	27,249			$	4,851			$	44,731			$	7				-			$	131,952
Classified			-				-				-				-				-				-				-				-				-
Total		$	1,856			$	11,973			$	41,285			$	27,249			$	4,851			$	44,731			$	7				-			$	131,952

*Commercial real estate, owner occupied*
Pass		$	19,563			$	24,191			$	5,088			$	16,648			$	1,899			$	54,991			$	2,452				50			$	124,882
Classified			-				-				-				-				-				2,480				-				-				2,480
Total		$	19,563			$	24,191			$	5,088			$	16,648			$	1,899			$	57,471			$	2,452				50			$	127,362

*Commercial real estate, other*
Pass		$	22,410			$	19,838			$	36,961			$	23,541			$	262			$	76,142			$	375			$	-			$	179,529
Classified			-				-				-				-				-				-				-				-				-
Total		$	22,410			$	19,838			$	36,961			$	23,541			$	262			$	76,142			$	375			$	-			$	179,529

Commercial and industrial
Pass		$	1,064			$	10,123			$	15,106			$	8,959			$	2,258			$	6,691			$	16,020			$	-			$	60,221
Classified			36				-				-				7				-				252				-				-				295
Total		$	1,100			$	10,123			$	15,106			$	8,966			$	2,258			$	6,943			$	16,020			$	-			$	60,516
YTD gross charge-offs		$	12			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	12

Public sector and IDA
Pass		$	42			$	247			$	18,419			$	6,650			$	-			$	22,001			$	-			$	-			$	47,359
Classified			-				-				-				-				-				-				-				-				-
Total		$	42			$	247			$	18,419			$	6,650			$	-			$	22,001			$	-			$	-			$	47,359

Credit cards
Pass		$	-			$	-			$	-			$	-			$	-			$	-			$	4,563			$	-			$	4,563
Classified			-				-				-				-				-				-				-				-				-
Total		$	-			$	-			$	-			$	-			$	-			$	-			$	4,563			$	-			$	4,563
YTD gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	8			$	-			$	8

Automobile
Pass		$	519			$	1,119			$	2,453			$	4,255			$	1,884			$	173			$	-			$	-			$	10,403
Classified			-				-				-				-				-				-				-				-				-
Total		$	519			$	1,119			$	2,453			$	4,255			$	1,884			$	173			$	-			$	-			$	10,403
YTD gross charge-offs		$	-			$	-			$	1			$	30			$	-			$	-			$	-			$	-			$	31

Other consumer
Pass		$	543			$	1,412			$	3,245			$	9,416			$	2,577			$	174			$	855			$	-			$	18,222
Classified			-				-				-				-				-				-				-				-				-
Total		$	543			$	1,412			$	3,245			$	9,416			$	2,577			$	174			$	855			$	-			$	18,222
YTD gross charge-offs		$	-			$	-			$	6			$	13			$	-			$	-			$	22			$	-			$	41

Total Loans
Pass		$	58,826			$	101,136			$	204,134			$	149,458			$	22,622			$	273,833			$	43,098			$	159			$	853,266
Classified			36				27				294				7				-				3,766				-				-				4,130
Total		$	58,862			$	101,163			$	204,428			$	149,465			$	22,622			$	277,599			$	43,098			$	159			$	857,396
YTD gross charge-offs		$	12			$	-			$	7			$	43			$	-			$	-			$	30			$	-			$	92

The following table presents the recorded investment by loan pool and credit quality as of December 31, 2022.

		December 31, 2022
		Pass				Special Mention				Classified
Real Estate Construction
Construction, 1-4 family residential		$	12,538			$	-			$	-
Construction, other			41,741				-				300
Consumer Real Estate
Equity lines			15,026				-				-
Residential closed-end first liens			122,187				-				461
Residential closed-end junior liens			2,446				-				-
Investor-owned residential real estate			80,143				-				603
Commercial Real Estate
Multifamily residential real estate			127,312				-				-
Commercial real estate owner-occupied			126,550				-				-
Commercial real estate, other			181,443				-				-
Commercial Non Real Estate
Commercial and industrial			57,381				-				8
Public Sector and IDA
States and political subdivisions			48,074				-				-
Consumer Non-Real Estate
Credit cards			4,597				-				-
Automobile			9,932				-				3
Other consumer			19,398				-				18
Total		$	848,768			$	-			$	1,393

Loan Modifications to Borrowers Experiencing Financial Difficulty

There were no loans to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2023. The Company analyzed its modified loan portfolio for loans that defaulted during the three month period ended March 31 2023, and that were modified within 12 months prior to default. The Company designates three circumstances that indicate default: one or more payments that occur more than 90 days past the due date, charge-off, or foreclosure after the date of modification. Of the Company’s modifications at March 31, 2023, none of the defaulted modifications were modified within 12 months prior to default.

ACL on Unfunded Commitments

The following table presents the balance and activity in the ACL for unfunded commitments for the three months ended March 31, 2023:

Allowance for Credit Losses on Unfunded Commitments
Balance, December 31, 2022		$	35
Adoption of ASU 2016-13			207
Provision for credit losses			-
Balance, March 31, 2023		$	242