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LOANS HELD FOR INVESTMENT AND ALLOWANCE FOR CREDIT LOSSES | 3 Months Ended
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Mar. 31, 2025
Loans Held for Investment and Allowance for Credit Losses [Abstract] |
Loans Held for Investment and Allowance for Credit Losses | NOTE 3 – LOANS HELD FOR INVESTMENT AND ALLOWANCE FOR CREDIT LOSSES Loan Portfolio Composition . The composition of the held for investment (“HFI”) loan portfolio was as follows: (Dollars in Thousands) March 31, 2025 December 31, 2024 Commercial, Financial and Agricultural $ 184,393 $ 189,208 Real Estate – Construction 192,282 219,994 Real Estate – Commercial Mortgage 806,942 779,095 Real Estate – Residential (1) 1,043,821 1,042,504 Real Estate – Home Equity 225,987 220,064 Consumer (2) 207,345 200,685 Loans Held For Investment, Net of Unearned Income $ 2,660,770 $ 2,651,550 (1) Includes loans in process balances of $ 3.4 million and $ 13.6 million at March 31, 2025 and December 31, 2024, respectively. (2) Includes overdraft balances of $ 1.2 million at March 31, 2025 and December 31, 2024. Net deferred loan costs, which include premiums on purchased loans, included in loans were $ 8.4 million at March 31, 2025 and $ 8.3 million at December 31, 2024. Accrued interest receivable on loans which is excluded from amortized cost totaled $ 10.4 million at March 31, 2025 and $ 10.3 million at December 31, 2024, and is reported separately in Other Assets. The Company has pledged a blanket floating lien on all 1-4 family residential mortgage loans, commercial real estate mortgage loans, and home equity loans to support available borrowing capacity at the FHLB of Atlanta and has pledged a blanket floating lien on all consumer loans, commercial loans, and construction loans to support available borrowing capacity at the Federal Reserve Bank of Atlanta. Allowance for Credit Losses . The methodology for estimating the amount of credit losses reported in the allowance for credit losses (“ACL”) has two basic components: first, an asset-specific component involving loans that do not share risk characteristics and the measurement of expected credit losses for such individual loans; and second, a pooled component for expected credit losses for pools of loans that share similar risk characteristics. This allowance methodology is discussed further in Note 1 – Significant Accounting Policies in the Company’s 2024 Form 10-K. The following table details the activity in the allowance for credit losses by portfolio segment. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. Commercial, Real Estate Financial, Real Estate Commercial Real Estate Real Estate (Dollars in Thousands) Agricultural Construction Mortgage Residential Home Equity Consumer Total Three Months Ended March 31, 2025 Beginning Balance $ 1,514 $ 2,384 $ 5,867 $ 14,568 $ 1,952 $ 2,966 $ 29,251 Provision for Credit Losses 47 (151) 191 206 68 722 1,083 Charge-Offs (168) - - (8) - (1,435) (1,611) Recoveries 75 - 3 119 9 805 1,011 Net (Charge-Offs) Recoveries (93) - 3 111 9 (630) (600) Ending Balance $ 1,468 $ 2,233 $ 6,061 $ 14,885 $ 2,029 $ 3,058 $ 29,734 Three Months Ended March 31, 2024 Beginning Balance $ 1,482 $ 2,502 $ 5,782 $ 15,056 $ 1,818 $ 3,301 $ 29,941 Provision for Credit Losses 284 (633) (39) (248) 130 1,388 882 Charge-Offs (282) - - (17) (76) (2,188) (2,563) Recoveries 41 - 204 37 24 763 1,069 Net (Charge-Offs) Recoveries (241) - 204 20 (52) (1,425) (1,494) Ending Balance $ 1,525 $ 1,869 $ 5,947 $ 14,828 $ 1,896 $ 3,264 $ 29,329 For the three months ended March 31, 2025, the allowance for loans HFI increased by $ 0.5 million and reflected a provision expense of $ 1.1 million and net loan charge-offs of $ 0.6 million. The increase was primarily due to higher loan balances and higher loan loss rates. For the three months ended March 31, 2024, the allowance for loans HFI decreased by $ 0.6 million and reflected a provision expense of $ 0.9 million and net loan charge-offs of $ 1.5 million. The decrease was attributable to favorable loan grade migration, lower loss rates, and a combination of lower loan balances and shift in mix within the portfolio. Four unemployment forecast scenarios were utilized to estimate probability of default and are weighted based on management’s estimate of probability. See Note 8 – Commitments and Contingencies for information on the allowance for off-balance sheet credit commitments. Loan Portfolio Aging. A loan is defined as a past due loan when one full payment is past due or a contractual maturity is over 30 days past due (“DPD”). The following table presents the aging of the amortized cost basis in accruing past due loans by class of loans. 30-59 60-89 90 + Total Total Nonaccrual Total (Dollars in Thousands) DPD DPD DPD Past Due Current Loans Loans March 31, 2025 Commercial, Financial and Agricultural $ 129 $ - $ - $ 129 $ 184,147 $ 117 $ 184,393 Real Estate – Construction - - - - 192,282 - 192,282 Real Estate – Commercial Mortgage 498 - - 498 806,025 419 806,942 Real Estate – Residential 970 72 - 1,042 1,041,262 1,517 1,043,821 Real Estate – Home Equity 57 - - 57 224,380 1,550 225,987 Consumer 1,807 202 - 2,009 204,643 693 207,345 Total $ 3,461 $ 274 $ - $ 3,735 $ 2,652,739 $ 4,296 $ 2,660,770 December 31, 2024 Commercial, Financial and Agricultural $ 340 $ 50 $ - $ 390 $ 188,781 $ 37 $ 189,208 Real Estate – Construction - - - - 219,994 - 219,994 Real Estate – Commercial Mortgage 719 100 - 819 777,710 566 779,095 Real Estate – Residential 185 498 - 683 1,038,694 3,127 1,042,504 Real Estate – Home Equity 122 - - 122 218,160 1,782 220,064 Consumer 2,154 143 - 2,297 197,598 790 200,685 Total $ 3,520 $ 791 $ - $ 4,311 $ 2,640,937 $ 6,302 $ 2,651,550 Nonaccrual Loans . Loans are generally placed on nonaccrual status if principal or interest payments become 90 days past due and/or management deems the collectability of the principal and/or interest to be doubtful. Loans are returned to accrual status when the principal and interest amounts contractually due are brought current or when future payments are reasonably assured. The following table presents the amortized cost basis of loans in nonaccrual status and loans past due over 90 days and still on accrual by class of loans. March 31, 2025 December 31, 2024 Nonaccrual Nonaccrual Nonaccrual Nonaccrual With No With 90 + Days With No With 90 + Days (Dollars in Thousands) ACL ACL Still Accruing ACL ACL Still Accruing Commercial, Financial and Agricultural $ 117 $ - $ - $ - $ 37 $ - Real Estate – Construction - - - - - - Real Estate – Commercial Mortgage - 419 - 427 139 - Real Estate – Residential 233 1,284 - 2,046 1,081 - Real Estate – Home Equity 876 674 - 509 1,273 - Consumer 693 - - - 790 - Total Nonaccrual Loans $ 1,919 $ 2,377 $ - $ 2,982 $ 3,320 $ - Collateral Dependent Loans. The following table presents the amortized cost basis of collateral-dependent loans. March 31, 2025 December 31, 2024 Real Estate Non Real Estate Real Estate Non Real Estate (Dollars in Thousands) Secured Secured Secured Secured Commercial, Financial and Agricultural $ - $ 1,210 $ - $ 39 Real Estate – Construction - - - - Real Estate – Commercial Mortgage 798 - 427 - Real Estate – Residential 1,343 - 2,476 - Real Estate – Home Equity 1,066 - 651 - Consumer - 53 - 55 Total Collateral Dependent Loans $ 3,207 $ 1,263 $ 3,554 $ 94 A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is dependent on the sale or operation of the underlying collateral. The Bank’s collateral dependent loan portfolio is comprised primarily of real estate secured loans, collateralized by either residential or commercial collateral types. The loans are carried at fair value based on current values determined by either independent appraisals or internal evaluations, adjusted for selling costs or other amounts to be deducted when estimating expected net sales proceeds. Residential Real Estate Loans In Process of Foreclosure . At March 31, 2025, the Company had no 1-4 family residential real estate loans for which formal foreclosure proceedings were in process, compared to $ 0.5 million at December 31, 2024. Modifications to Borrowers Experiencing Financial Difficulty. Occasionally, the Company may modify loans to borrowers who are experiencing financial difficulty. Loan modifications to borrowers in financial difficulty are loans in which the Company has granted an economic concession to the borrower that it would not otherwise consider. In these instances, as part of a work-out alternative, the Company will make concessions including the extension of the loan term, a principal moratorium, a reduction in the interest rate, or a combination thereof. The impact of the modifications and defaults are factored into the allowance for credit losses on a loan-by-loan basis. Thus, specific reserves are established based upon the results of either a discounted cash flow analysis or the underlying collateral value, if the loan is deemed to be collateral dependent. A modified loan classification can be removed if the borrower’s financial condition improves such that the borrower is no longer in financial difficulty, the loan has not had any forgiveness of principal or interest, and the loan is subsequently refinanced or restructured at market terms and qualifies as a new loan. At March 31, 2025 and December 31, 2024, the Company maintained one modified commercial mortgage loan due to a borrower experiencing financial difficulty. The Company reduced the interest rate on the loan by 1 % in addition to extending the term of the loan from 5 to 20 years. The balance of the nonaccrual loan at March 31, 2025 and December 31, 2024 was $ 0.3 million and did not have a payment delay. No new modifications to borrowers experiencing financial difficulty were made during the three months ended March 31, 2025 and 2024. Credit Risk Management . The Company has adopted comprehensive lending policies, underwriting standards and loan review procedures designed to maximize loan income within an acceptable level of risk. Management and the Board of Directors review and approve these policies and procedures on a regular basis (at least annually). Reporting systems are used to monitor loan originations, loan quality, concentrations of credit, loan delinquencies and nonperforming loans and potential problem loans. Management and the Credit Risk Oversight Committee periodically review the Company’s lines of business to monitor asset quality trends and the appropriateness of credit policies. In addition, total borrower exposure limits are established and concentration risk is monitored. As part of this process, the overall composition of the portfolio is reviewed to gauge diversification of risk, client concentrations, industry group, loan type, geographic area, or other relevant classifications of loans. Specific segments of the loan portfolio are monitored and reported to the Board on a quarterly basis and have strategic plans in place to supplement Board approved credit policies governing exposure limits and underwriting standards. Detailed below are the types of loans within the Company’s loan portfolio and risk characteristics unique to each. Commercial, Financial, and Agricultural – Loans in this category are primarily made based on identified cash flows of the borrower with consideration given to underlying collateral and personal or other guarantees. Lending policy establishes debt service coverage ratio limits that require a borrower’s cash flow to be sufficient to cover principal and interest payments on all new and existing debt. The majority of these loans are secured by the assets being financed or other business assets such as accounts receivable, inventory, or equipment. Collateral values are determined based upon third party appraisals and evaluations. Loan to value ratios at origination are governed by established policy guidelines. Real Estate Construction – Loans in this category consist of short-term construction loans, revolving and non-revolving credit lines and construction/permanent loans made to individuals and investors to finance the acquisition, development, construction or rehabilitation of real property. These loans are primarily made based on identified cash flows of the borrower or project and generally secured by the property being financed, including 1-4 family residential properties and commercial properties that are either owner- occupied or investment in nature. These properties may include either vacant or improved property. Construction loans are generally based upon estimates of costs and value associated with the completed project. Collateral values are determined based upon third party appraisals and evaluations. Loan to value ratios at origination are governed by established policy guidelines. The disbursement of funds for construction loans is made in relation to the progress of the project and as such these loans are closely monitored by on- site inspections. Real Estate Commercial Mortgage – Loans in this category consists of commercial mortgage loans secured by property that is either owner-occupied or investment in nature. These loans are primarily made based on identified cash flows of the borrower or project with consideration given to underlying real estate collateral and personal guarantees. Lending policy establishes debt service coverage ratios and loan to value ratios specific to the property type. Collateral values are determined based upon third party appraisals and evaluations. Real Estate Residential – Residential mortgage loans held in the Company’s loan portfolio are made to borrowers that demonstrate the ability to make scheduled payments with full consideration to underwriting factors such as current income, employment status, current assets, and other financial resources, credit history, and the value of the collateral. Collateral consists of mortgage liens on 1-4 family residential properties. Collateral values are determined based upon third party appraisals and evaluations. The Company does not originate sub-prime loans. Real Estate Home Equity – Home equity loans and lines are made to qualified individuals for legitimate purposes generally secured by senior or junior mortgage liens on owner-occupied 1-4 family homes or vacation homes. Borrower qualifications include favorable credit history combined with supportive income and debt ratio requirements and combined loan to value ratios within established policy guidelines. Collateral values are determined based upon third party appraisals and evaluations. Consumer Loans – This loan portfolio includes personal installment loans, direct and indirect automobile financing, and overdraft lines of credit. The majority of the consumer loan category consists of direct and indirect automobile loans. Lending policy establishes maximum debt to income ratios, minimum credit scores, and includes guidelines for verification of applicants’ income and receipt of credit reports. Credit Quality Indicators . As part of the ongoing monitoring of the Company’s loan portfolio quality, management categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment performance, credit documentation, and current economic and market trends, among other factors. Risk ratings are assigned to each loan and revised as needed through established monitoring procedures for individual loan relationships over a predetermined amount and review of smaller balance homogenous loan pools. The Company uses the definitions noted below for categorizing and managing its criticized loans. Loans categorized as “Pass” do not meet the criteria set forth below and are not considered criticized. Special Mention – Loans in this category are presently protected from loss, but weaknesses are apparent which, if not corrected, could cause future problems. Loans in this category may not meet required underwriting criteria and have no mitigating factors. More than the ordinary amount of attention is warranted for these loans. Substandard – Loans in this category exhibit well-defined weaknesses that would typically bring normal repayment into jeopardy. These loans are no longer adequately protected due to well-defined weaknesses that affect the repayment capacity of the borrower. The possibility of loss is much more evident and above average supervision is required for these loans. Doubtful – Loans in this category have all the weaknesses inherent in a loan categorized as Substandard, with the characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Performing/Nonperforming – Loans within certain homogenous loan pools (home equity and consumer) are not individually reviewed, but are monitored for credit quality via the aging status of the loan and by payment activity. The performing or nonperforming status is updated on an on-going basis dependent upon improvement and deterioration in credit quality. The following tables summarize gross loans held for investment at March 31, 2025 and December 31, 2024 and current period gross write-offs for the three months ended March 31, 2025 and 12 months ended December 31, 2024 by years of origination and internally assigned credit risk ratings (refer to Credit Risk Management section for detail on risk rating system). (Dollars in Thousands) Term Loans by Origination Year Revolving As of March 31, 2025 2025 2024 2023 2022 2021 Prior Loans Total Commercial, Financial, Agriculture: Pass $ 11,393 $ 32,913 $ 32,235 $ 32,129 $ 16,688 $ 12,860 $ 40,665 $ 178,883 Special Mention - 406 3,321 142 - - 75 3,944 Substandard - - 117 64 - 110 1,275 1,566 Total $ 11,393 $ 33,319 $ 35,673 $ 32,335 $ 16,688 $ 12,970 $ 42,015 $ 184,393 Current-Period Gross Writeoffs $ - $ - $ 10 $ 146 $ 12 $ - $ - $ 168 Real Estate - Construction: Pass $ 9,257 $ 110,350 $ 37,419 $ 19,453 $ 53 $ - $ 11,276 $ 187,808 Special Mention - 1,735 1,698 1,041 - - - 4,474 Total $ 9,257 $ 112,085 $ 39,117 $ 20,494 $ 53 $ - $ 11,276 $ 192,282 Real Estate - Commercial Mortgage: Pass $ 9,874 $ 93,831 $ 116,893 $ 206,672 $ 105,667 $ 202,456 $ 31,364 $ 766,757 Special Mention 3,264 168 2,878 18,479 1,129 5,401 - 31,319 Substandard 402 - 240 3,693 863 3,099 569 8,866 Total $ 13,540 $ 93,999 $ 120,011 $ 228,844 $ 107,659 $ 210,956 $ 31,933 $ 806,942 Real Estate - Residential: Pass $ 47,248 $ 147,708 $ 308,378 $ 349,357 $ 66,735 $ 104,458 $ 10,623 $ 1,034,507 Special Mention - - 292 - 1,084 324 479 2,179 Substandard - - 420 1,936 1,606 3,004 169 7,135 Total $ 47,248 $ 147,708 $ 309,090 $ 351,293 $ 69,425 $ 107,786 $ 11,271 $ 1,043,821 Current-Period Gross Writeoffs $ - $ - $ - $ - $ - $ 8 $ - $ 8 Real Estate - Home Equity: Performing $ 1,103 $ 11 $ 508 $ 29 $ 119 $ 632 $ 222,035 $ 224,437 Nonperforming - - - - - - 1,550 1,550 Total $ 1,103 $ 11 $ 508 $ 29 $ 119 $ 632 $ 223,585 $ 225,987 Consumer: Performing $ 29,040 $ 31,122 $ 40,601 $ 48,672 $ 36,122 $ 11,677 $ 9,418 $ 206,652 Nonperforming - 36 211 271 128 47 - 693 Total $ 29,040 $ 31,158 $ 40,812 $ 48,943 $ 36,250 $ 11,724 $ 9,418 $ 207,345 Current-Period Gross Writeoffs $ 570 $ 11 $ 281 $ 413 $ 121 $ 23 $ 16 $ 1,435 (Dollars in Thousands) Term Loans by Origination Year Revolving As of December 31, 2024 2024 2023 2022 2021 2020 Prior Loans Total Commercial, Financial, Agriculture: Pass $ 35,596 $ 36,435 $ 37,506 $ 18,433 $ 4,610 $ 9,743 $ 41,720 $ 184,043 Special Mention 435 3,979 261 9 - - 76 4,760 Substandard - - 193 12 58 71 71 405 Total $ 36,031 $ 40,414 $ 37,960 $ 18,454 $ 4,668 $ 9,814 $ 41,867 $ 189,208 Current-Period Gross Writeoffs $ 9 $ 548 $ 500 $ 111 $ 160 $ 1 $ 183 $ 1,512 Real Estate - Construction: Pass $ 105,148 $ 73,615 $ 29,821 $ 53 $ - $ 185 $ 8,288 $ 217,110 Special Mention 1,555 - 1,329 - - - - 2,884 Total $ 106,703 $ 73,615 $ 31,150 $ 53 $ - $ 185 $ 8,288 $ 219,994 Current-Period Gross Writeoffs $ - $ - $ 47 $ - $ - $ - $ - $ 47 Real Estate - Commercial Mortgage: Pass $ 77,561 $ 110,183 $ 207,574 $ 109,863 $ 87,369 $ 122,272 $ 26,324 $ 741,146 Special Mention 171 2,913 17,031 - 2,253 4,402 530 27,300 Substandard - 2,463 3,403 869 2,508 1,305 101 10,649 Total $ 77,732 $ 115,559 $ 228,008 $ 110,732 $ 92,130 $ 127,979 $ 26,955 $ 779,095 Current-Period Gross Writeoffs $ - $ - $ - $ - $ - $ - $ 3 $ 3 Real Estate - Residential: Pass $ 165,050 $ 316,521 $ 358,851 $ 71,423 $ 31,169 $ 76,921 $ 11,872 $ 1,031,807 Special Mention - 265 - 1,104 468 534 521 2,892 Substandard - 528 1,450 1,446 1,295 2,918 168 7,805 Total $ 165,050 $ 317,314 $ 360,301 $ 73,973 $ 32,932 $ 80,373 $ 12,561 $ 1,042,504 Current-Period Gross Writeoffs $ - $ 13 $ - $ - $ - $ 48 $ - $ 61 Real Estate - Home Equity: Performing $ 801 $ 521 $ 30 $ 119 $ 9 $ 821 $ 215,981 $ 218,282 Nonperforming - - - - - - 1,782 1,782 Total $ 801 $ 521 $ 30 $ 119 $ 9 $ 821 $ 217,763 $ 220,064 Current-Period Gross Writeoffs $ - $ - $ - $ - $ - $ - $ 132 $ 132 Consumer: Performing $ 32,293 $ 44,995 $ 55,942 $ 42,002 $ 10,899 $ 4,116 $ 9,648 $ 199,895 Nonperforming 10 174 321 156 58 71 - 790 Total $ 32,303 $ 45,169 $ 56,263 $ 42,158 $ 10,957 $ 4,187 $ 9,648 $ 200,685 Current-Period Gross Writeoffs $ 2,562 $ 1,605 $ 2,088 $ 897 $ 237 $ 76 $ 162 $ 7,627

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- Definition The entire disclosure for claims held for amounts due to entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 310 -SubTopic 10 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/310-10/tableOfContent Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 835 -SubTopic 30 -Name Accounting Standards Codification -Section 45 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482925/835-30-45-2 + Details
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