Loans (Tables)

9 Months Ended

Sep. 30, 2023

Receivables [Abstract]

Summary of Loans

The composition of net loans receivable as of September 30, 2023 and December 31, 2022:

(Dollars in thousands)	September 30, 2023
Commercial and industrial	$	143,227
Commercial real estate		188,910
Commercial lessors of buildings		78,520
Construction		44,446
Consumer mortgage		167,419
Home equity line of credit		41,093
Consumer installment		11,197
Consumer indirect		6,168
Total loans		680,980
Allowance for credit losses		(6,691	)
Deferred loan fees, net		(31	)
Net Loans	$	674,258

(Dollars in thousands)	December 31, 2022
Commercial and industrial	$	129,343
Commercial real estate		231,785
Residential real estate		194,125
Construction & land development		55,318
Consumer		16,387
Total loans		626,958
Allowance for loan losses		(6,838	)
Deferred loan costs, net		213
Total Loans *	$	620,333

Summary of Allowance for Loan Losses

Allowance for Credit Losses

The following table details activity in the allowance for credit losses ("ACL") by portfolio segment for the three and nine months ended September 30, 2023. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

For the three months ended in September 2023, the decrease in the provision for commercial and industrial loans primarily relates to the recovery of prior loan charge-offs, as well as the decrease in substandard loan balances in this loan category. The remaining provision changes for the quarter are primarily a result of changes in loan volume in each loan category.

For the nine month period in 2023, the decrease in provision for commercial real estate loans is due to the payoff of one larger loan relationship with a specific allocation. The increase in the provision for commercial lessors of buildings relates to the increase in loans graded special mention in this category. All other changes during the nine month period are related to loan volume changes.

(Dollars in thousands)	Beginning Balance		Impact of Adopting ASC 326			Charge-offs			Recoveries		Provisions (Recovery)			Ending Balance
Three Months Ended September 30, 2023
Commercial and industrial	$	2,119	$	—		$	—		$	147	$	(303	)	$	1,963
Commercial real estate		1,882		—			—			8		239			2,129
Commercial lessors of buildings		1,237		—			—			—		(11	)		1,226
Construction		283		—			—			—		(28	)		255
Consumer mortgage		714		—			—			—		61			775
Home equity line of credit		178		—			—			—		9			187
Consumer installment		52		—			(8	)		—		13			57
Consumer indirect		94		—			(35	)		7		33			99
Unallocated		—		—			—			—		—			—
	$	6,559	$	—		$	(43	)	$	162	$	13		$	6,691
Nine Months Ended September 30, 2023
Commercial and industrial	$	1,110	$	658		$	—		$	166	$	29		$	1,963
Commercial real estate		2,760		(541	)		—			9		(99	)		2,129
Commercial lessors of buildings		—		974			—			—		252			1,226
Construction		803		(515	)		—			—		(33	)		255
Consumer mortgage		1,268		(580	)		—			1		86			775
Home equity line of credit		—		201			—			—		(14	)		187
Consumer installment		233		(183	)		(31	)		12		26			57
Consumer indirect		—		91			(66	)		34		40			99
Unallocated		664		(664	)		—			—		—			—
	$	6,838	$	(559	)	$	(97	)	$	222	$	287		$	6,691

NOTE 3 – LOANS (CONTINUED)

Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2022.

(Dollars in thousands)	Commercial and industrial			Commercial Real Estate			Residential Real Estate		Construction & Land Development			Consumer			Unallocated		Total
Three Months Ended September 30, 2022
Beginning balance	$	1,213		$	2,422		$	1,177	$	1,607		$	395		$	454	$	7,268
(Recovery of) provision for loan    losses		45			(298	)		111		(331	)		(137	)		360		(250	)
Charge-offs		(13	)		(12	)		—		—			(4	)				(29	)
Recoveries		4			—			1		—			14					19
Net (charge-offs) recoveries		(9	)		(12	)		1		—			10					(10	)
Ending balance	$	1,249		$	2,112		$	1,289	$	1,276		$	268		$	814	$	7,008
Nine Months Ended September 30, 2022
Beginning balance	$	1,240		$	2,838		$	992	$	1,380		$	421		$	747	$	7,618
(Recovery of) provision for loan    losses		30			(715	)		295		(416	)		(156	)		67		(895	)
Charge-offs		(31	)		(12	)		—		—			(28	)				(71	)
Recoveries		10			1			2		312			31					356
Net (charge-offs) recoveries		(21	)		(11	)		2		312			3					285
Ending balance	$	1,249		$	2,112		$	1,289	$	1,276		$	268		$	814	$	7,008

Schedule of Aging of Past Due and Nonaccrual Loans

The following table presents the classes of the loan portfolio summarized by the past-due status.

(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days + Past Due		Total Past Due		Total Loans
September 30, 2023
Commercial and industrial	$	143,026	$	184	$	17	$	—	$	201	$	143,227
Commercial real estate		188,576		334		—		—		334		188,910
Commercial lessors of buildings		78,520		—		—		—		—		78,520
Construction		44,446		—		—		—		—		44,446
Consumer mortgage		166,980		394		45		—		439		167,419
Home equity line of credit		40,874		219		—		—		219		41,093
Consumer installment		11,044		121		20		12		153		11,197
Consumer indirect		6,168		—		—		—		—		6,168
Total Loans	$	679,634	$	1,252	$	82	$	12	$	1,346	$	680,980

The following table presents the aging of past due loans and nonaccrual loans as of December 31, 2022:

			Accruing Loans
(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days + Past Due		Non- Accrual		Total Past Due and Non- Accrual		Total Loans
December 31, 2022
Commercial and industrial	$	129,270	$	70	$	3	$	—	$	—	$	73	$	129,343
Commercial real estate		231,693		—		—		—		92		92		231,785
Residential real estate		193,794		95		137		—		99		331		194,125
Construction & land development		55,286		32		—		—		—		32		55,318
Consumer		16,091		103		128		—		65		296		16,387
Total Loans	$	626,134	$	300	$	268	$	—	$	256	$	824	$	626,958

Schedule of Amortized Cost Basis Of Loans On Nonaccrual Status And Loans Past Due Over 90 Days Still Accruing Interest

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing interest as of September 30, 2023:

(Dollars in thousands)	Nonaccrual with no ACL		Nonaccrual with ACL		Total Nonaccrual		Loans Past Due Over 90 Days Still Accruing		Total Nonperforming
September 30, 2023
Commercial and industrial	$	17	$	—	$	17	$	—	$	17
Commercial real estate		79		—		79		—		79
Commercial lessors of buildings		—		—		—		—		—
Construction		—		—		—		—		—
Consumer mortgage		110		—		110		—		110
Home equity line of credit		—		—		—		—		—
Consumer installment		16		—		16		12		28
Consumer indirect		26		—		26		—		26
Total Loans	$	248	$	—	$	248	$	12	$	260

Interest income recognized on nonaccrual loans for the nine months ended September 30, 2023 was $1 thousand on commercial real estate loans and $22 thousand on consumer mortgage loans. Several of the consumer mortgage loans are at an amortized cost basis of $0 and all payments are being recognized as interest income.

Summary of Loans by Credit Quality Indicator

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass rated loans. Based on the most recent analysis performed, the following tables present the recorded investment in non-homogeneous loans by internal risk rating system as of September 30, 2023 and December 31, 2022:

	Term Loans Amortized Costs Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior						Total
September 30, 2023
Commercial and industrial:
Pass	$	21,665	$	27,127	$	13,867	$	5,840	$	4,057	$	8,540	$	45,546	$	—	$	126,642
Special mention		16		19		651		178		90		352		7,248		—		8,554
Substandard		294		570		483		901		60		1,230		4,493		—		8,031
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	21,975	$	27,716	$	15,001	$	6,919	$	4,207	$	10,122	$	57,287	$	—	$	143,227
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate:
Pass	$	20,649	$	36,877	$	57,330	$	14,776	$	19,773	$	24,035	$	695	$	—	$	174,135
Special Mention		213		465		652		398		—		2,688		—		—		4,416
Substandard		—		—		902		—		471		8,986		—		—		10,359
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	20,862	$	37,342	$	58,884	$	15,174	$	20,244	$	35,709	$	695	$	—	$	188,910
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial lessors of buildings:
Pass	$	13,317	$	22,938	$	15,821	$	6,516	$	3,594	$	9,202	$	381	$	—	$	71,769
Special Mention		—		446		1,513		—		3,627		—		—		—		5,586
Substandard		—		—		—		999		—		166		—		—		1,165
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	13,317	$	23,384	$	17,334	$	7,515	$	7,221	$	9,368	$	381	$	—	$	78,520
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Construction:
Pass	$	16,348	$	19,495	$	599	$	275	$	288	$	269	$	—	$	—	$	37,274
Special Mention		—		289		6		635		—		—		—		—		930
Substandard		—		—		—		33		80		—		—		—		113
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	16,348	$	19,784	$	605	$	943	$	368	$	269	$	—	$	—	$	38,317
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Total
Pass	$	71,979	$	106,437	$	87,617	$	27,407	$	27,712	$	42,046	$	46,622	$	—	$	409,820
Special Mention		229		1,219		2,822		1,211		3,717		3,040		7,248		—		19,486
Substandard		294		570		1,385		1,933		611		10,382		4,493		—		19,668
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	72,502	$	108,226	$	91,824	$	30,551	$	32,040	$	55,468	$	58,363	$	—	$	448,974

(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Not Rated		Total
December 31, 2022
Commercial and industrial	$	119,353	$	282	$	7,927	$	—	$	1,781	$	129,343
Commercial real estate		220,414		485		8,352		—		2,534		231,785
Construction & land development		40,640		6,655		—		—		8,023		55,318
Total	$	380,407	$	7,422	$	16,279	$	—	$	12,338	$	416,446

NOTE 3 – LOANS (CONTINUED)

The following table presents the amortized cost in residential consumer loans based on payment activity:

	Term Loans Amortized Costs Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior						Total
September 30, 2023
Consumer mortgage:
Performing	$	19,430	$	35,098	$	38,086	$	33,815	$	9,080	$	31,800	$	—	$	—	$	167,309
Nonperforming		—		—		—		—		—		110		—		—		110
Total	$	19,430	$	35,098	$	38,086	$	33,815	$	9,080	$	31,910	$	—	$	—	$	167,419
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Construction
Performing	$	3,422	$	1,736	$	270	$	576	$	83	$	42	$	—	$	—	$	6,129
Nonperforming		—		—		—		—		—		—		—		—		—
Total	$	3,422	$	1,736	$	270	$	576	$	83	$	42	$	—	$	—	$	6,129
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Home equity line of credit:
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	41,046	$	47	$	41,093
Nonperforming		—		—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	41,046	$	47	$	41,093
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer installment:
Performing	$	5,410	$	3,476	$	1,187	$	603	$	211	$	208	$	74	$	—	$	11,169
Nonperforming		—		1		17		—		10		—		—		—		28
Total	$	5,410	$	3,477	$	1,204	$	603	$	221	$	208	$	74	$	—	$	11,197
YTD gross charge-offs	$	1	$	11	$	10	$	3	$	2	$	4	$	—	$	—	$	31
Consumer indirect:
Performing	$	760	$	1,219	$	636	$	589	$	643	$	2,295	$	—	$	—	$	6,142
Nonperforming		—		—		—		—		21		5		—		—		26
Total	$	760	$	1,219	$	636	$	589	$	664	$	2,300	$	—	$	—	$	6,168
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	66	$	—	$	—	$	66
Total
Performing	$	29,022	$	41,529	$	40,179	$	35,583	$	10,017	$	34,345	$	41,120	$	47	$	231,842
Nonperforming		—		1		17		—		31		115		—		—		164
Total	$	29,022	$	41,530	$	40,196	$	35,583	$	10,048	$	34,460	$	41,120	$	47	$	232,006

Consumer mortgages are substantially secured by one to four family owner occupied properties and consumer indirect loans are substantially secured by recreational vehicles. All nonperforming consumer loans are evaluated when placed on nonaccrual status and may be charged down based on the fair value less cost to sell if that value is lower than the outstanding balance.

Allowances for Loan Losses and Ending Balances by Portfolio Class and Based on Impairment Method

The following table presents the balance in the allowance for loan losses and the ending loan balances by portfolio class, based on the impairment method as of December 31, 2022:

(Dollars in thousands)	Commercial and industrial		Commercial Real Estate		Residential Real Estate		Construction		Consumer		Unallocated		Total
December 31, 2022
Allowance for loan losses:
Individually evaluated for    impairment	$	—	$	—	$	—	$	—	$	4	$	—	$	4
Collectively evaluated for    impairment		1,110		2,760		1,268		803		229		664		6,834
Total ending allowance balance	$	1,110	$	2,760	$	1,268	$	803	$	233	$	664	$	6,838
Loans:
Loans individually    evaluated for    impairment	$	123	$	113	$	677	$	—	$	123			$	1,036
Loans collectively    evaluated for    impairment		129,220		231,672		193,448		55,318		16,264				625,922
Total ending loans balance	$	129,343	$	231,785	$	194,125	$	55,318	$	16,387			$	626,958

Schedule of Impairment by Class of Loans

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2022:

(Dollars in thousands)	Unpaid Principal Balance		Recorded Investment with no Allowance		Recorded Investment with Allowance		Total recorded investment1		Related Allowance
December 31, 2022
Commercial and industrial	$	123	$	124	$	—	$	124	$	—
Commercial real estate		117		92		20		112		—
Residential real estate		733		166		518		683		—
Construction & land development		—		—		—		—		—
Consumer		127		6		121		127		4
Total impaired loans	$	1,101	$	387	$	659	$	1,046	$	4

1Includes principal, accrued interest, unearned fees, and origination costs

Schedule of Average Recorded Investment in Impaired Loans and Related Interest Income Recognized

The following table presents the average recorded investment in impaired loans and related interest income recognized for the periods indicated.

	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
(Dollars in thousands)	2022		2022
Average recorded investment:
Commercial and industrial	$	255	$	258
Commercial real estate		173		198
Residential real estate		715		781
Construction & land development		—		164
Consumer		131		132
Average recorded investment in impaired loans	$	1,274	$	1,533
Interest income recognized:
Commercial and industrial	$	—	$	2
Commercial real estate		2		6
Residential real estate		7		23
Construction & land development		—		—
Consumer		2		6
Interest income recognized on a cash basis on impaired loans	$	11	$	37