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LOANS
 3 Months Ended
Mar. 31, 2020
Receivables [Abstract]  
LOANS

Note 4—Loans

 

Loans summarized by category as of March 31, 2020, December 31, 2019 and March 31, 2019 are as follows:

    March 31,     December 31,     March 31,  
(Dollars in thousands)   2020     2019     2019  
Commercial, financial and agricultural   $ 50,313     $ 51,805     $ 52,289  
Real estate:                        
Construction     83,547       73,512       56,234  
Mortgage-residential     46,471       45,357       50,732  
Mortgage-commercial     530,180       527,447       519,420  
Consumer:                        
Home equity     28,641       28,891       30,092  
Other     10,377       10,016       9,653  
Total   $ 749,529     $ 737,028     $ 718,420  

 

The detailed activity in the allowance for loan losses and the recorded investment in loans receivable as of and for the three months ended March 31, 2020 and March 31, 2019 and for the year ended December 31, 2019 is as follows:

 

(Dollars in thousands)                                                
                Real estate     Real estate     Consumer                    
          Real estate     Mortgage     Mortgage     Home     Consumer              
    Commercial     Construction     Residential     Commercial     equity     Other     Unallocated     Total  
March 31, 2020                                                                
Allowance for loan losses:                                                                
Beginning balance
December 31, 2019		   $ 427     $ 111     $ 367     $ 4,602     $ 240     $ 97     $ 783     $ 6,627  
Charge-offs     —       —       —       —       —       (23 )     —       (23 )
Recoveries     —       —       —       6       1       8       —       15  
Provisions     62       37       73       923       36       30       (86 )     1,075  
Ending balance
March 31, 2020		   $ 489     $ 148     $ 440     $ 5,531     $ 277     $ 112     $ 697     $ 7,694  
                                                                 
Ending balances:                                                                
Individually evaluated for impairment   $ —     $ —     $ —     $ 5     $ —     $ —     $ —     $ 5  
                                                                 
Collectively evaluated for impairment     489       148       440       5,526       277       112       697       7,689  
                                                                 
March 31, 2020
Loans receivable:		                                                                
Ending balance-total   $ 50,313     $ 83,547     $ 46,471     $ 530,180     $ 28,641     $ 10,377     $ —     $ 749,529  
                                                                 
Ending balances:                                                                
Individually evaluated for impairment     —       —       340       2,966       68       —       —       3,374  
                                                                 
Collectively evaluated for impairment   $ 50,313     $ 83,547     $ 46,131     $ 527,214     $ 28,573     $ 10,377     $ —     $ 746,155  

 

(Dollars in thousands)                                                
                Real estate     Real estate     Consumer                    
          Real estate     Mortgage     Mortgage     Home     Consumer              
    Commercial     Construction     Residential     Commercial     equity     Other     Unallocated     Total  
March 31, 2019                                                                
Allowance for loan losses:                                                                
Beginning balance
December 31, 2018		   $ 430     $ 89     $ 431     $ 4,318     $ 261     $ 88     $ 646     $ 6,263  
Charge-offs     (2 )      —       —       —       (1 )     (30 )     —       (33 )
Recoveries     —       —       —       10       —       9       —       19  
Provisions     (10 )     7       (19 )     18       8       22       79       105  
Ending balance
March 31, 2019		   $ 418     $ 96     $ 412     $ 4,346     $ 268     $ 89     $ 725     $ 6,354  
                                                                 
Ending balances:                                                                
Individually evaluated for impairment   $ —     $ —     $ —     $ 14     $ —     $ —     $ —     $ 14  
                                                                 
Collectively evaluated for impairment     418       96       412       4,332       268       89       725       6,340  
                                                                 
March 31, 2019
Loans receivable:		                                                                
Ending balance-total   $ 52,289     $ 56,234     $ 50,732     $ 519,420     $ 30,092     $ 9,653     $ —     $ 718,420  
                                                                 
Ending balances:                                                                
Individually evaluated for impairment     —       —       409       4,162       57       5       —       4,633  
                                                                 
Collectively evaluated for impairment   $ 52,289     $ 56,234     $ 50,323     $ 515,258     $ 30,035     $ 9,648     $ —     $ 713,787  

 

(Dollars in thousands)                                                
                Real estate     Real estate     Consumer                    
          Real estate     Mortgage     Mortgage     Home     Consumer              
    Commercial     Construction     Residential     Commercial     equity     Other     Unallocated     Total  
December 31, 2019                                                                
Allowance for loan losses:                                                                
Beginning balance
December 31, 2018		   $ 430     $ 89     $ 431     $ 4,318     $ 261     $ 88     $ 646     $ 6,263  
Charge-offs     (12 )     —       (12 )      —       (1 )     (120 )     —       (145 )
Recoveries     3       —       —       307       15       45       —       370  
Provisions     6       22       (52 )      (23)       (35 )      84       137       139  
Ending balance
December 31, 2019		   $ 427     $ 111     $ 367     $ 4,602     $ 240     $ 97     $ 783     $ 6,627  
                                                                 
Ending balances:                                                                
Individually evaluated for impairment   $ —     $ —     $ —     $ 6     $ —     $ —     $ —     $ 6  
                                                                 
Collectively evaluated for impairment     427       111       367       4,596       240       97       783       6,621  
                                                                 
December 31, 2019
Loans receivable:		                                                                
Ending balance-total   $ 51,805     $ 73,512     $ 45,357     $ 527,447     $ 28,891     $ 10,016     $ —     $ 737,028  
                                                                 
Ending balances:                                                                
Individually evaluated for impairment     400       —       392       3,135       70       —       —       3,997  
                                                                 
Collectively evaluated for impairment   $ 51,405     $ 73,512     $ 44,965     $ 524,312     $ 28,821     $ 10,016     $ —     $ 733,031  

 

Related party loans and lines of credit are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and generally do not involve more than the normal risk of collectability. The following table presents related party loan transactions for the three months ended March 31, 2020 and March 31, 2019:

(Dollars in thousands)   2020     2019  
Beginning Balance December 31,   $ 4,109     $ 5,937  
New Loans     55       —  
Less loan repayments     437       85  
Ending Balance March 31,   $ 3,727     $ 5,852  

 

The following table presents at March 31, 2020 and December 31, 2019 loans individually evaluated and considered impaired under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 310 “Accounting by Creditors for Impairment of a Loan.” Impairment includes performing troubled debt restructurings (“TDRs”).

 

(Dollars in thousands)   March 31,     December 31,  
    2020     2019  
Total loans considered impaired   $ 3,374     $ 3,997  
Loans considered impaired for which there is a related allowance for loan loss:                
Outstanding loan balance   $ 219     $ 256  
Related allowance   $ 5     $ 6  
Loans considered impaired and previously written down to fair value   $ 2,172     $ 2,275  
Average impaired loans   $ 3,437     $ 4,431  
Amount of interest earned during period of impairment   $ 82     $ 263  

 

The following tables are by loan category and present at March 31, 2020, March 31, 2019 and December 31, 2019, loans individually evaluated and considered impaired under FASB ASC 310 “Accounting by Creditors for Impairment of a Loan.” Impairment includes performing TDRs. 

 

(Dollars in thousands)                     Three months ended  
          Unpaid           Average     Interest  
March 31, 2020   Recorded     Principal     Related     Recorded     Income  
    Investment     Balance     Allowance     Investment     Recognized  
With no allowance recorded:                                        
Commercial   $ —     $ —     $ —     $ —     $ —  
Real estate:                                        
Construction     —       —       —       —       —  
Mortgage-residential     340       431       —       339       6  
Mortgage-commercial     2,747       5,161       —       2,797       72  
Consumer:                                        
Home Equity     68       72       —       69       1  
Other     —       —       —       —       —  
                                         
With an allowance recorded:                                        
Commercial     —       —       —       —       —  
Real estate:                                        
Construction     —       —       —       —       —  
Mortgage-residential     —       —       —       —       —  
Mortgage-commercial     219       219       5       232       3  
Consumer:                                        
Home Equity     —       —       —       —       —  
Other     —       —       —       —       —  
                                         
Total:                                        
Commercial     —       —       —       —       —  
Real estate:                                        
Construction     —       —       —       —       —  
Mortgage-residential     340       431       —       339       6  
Mortgage-commercial     2,966       5,380       5       3,029       75  
Consumer:                                        
Home Equity     68       72       —       69       1  
Other     —       —       —       —       —  
    $ 3,374     $ 5,883     $ 5     $ 3,437     $ 82  

 

(Dollars in thousands)                     Three months ended  
          Unpaid           Average     Interest  
March 31, 2019   Recorded     Principal     Related     Recorded     Income  
    Investment     Balance     Allowance     Investment     Recognized  
With no allowance recorded:                                        
Commercial   $ —     $ —     $ —     $ —     $ —  
Real estate:                                        
Construction     —       —       —       —       —  
Mortgage-residential     409       462       —       413       4  
Mortgage-commercial     3,715       6,708       —       4,048       61  
Consumer:                                        
Home Equity     57       59       —       59       1  
Other     5       5       —       5       —  
                                         
With an allowance recorded:                                        
Commercial     —       —       —       —       —  
Real estate:                                        
Construction     —       —       —       —       —  
Mortgage-residential     —       —       —       —       —  
Mortgage-commercial     447       447       14       448       6  
Consumer:                                        
Home Equity     —       —       —       —       —  
Other     —       —       —       —       —  
                                         
Total:                                        
Commercial     —       —       —       —       —  
Real estate:                                        
Construction     —       —       —       —       —  
Mortgage-residential     409       462       —       413       4  
Mortgage-commercial     4,162       7,155       14       4,496       67  
Consumer:                                        
Home Equity     57       59       —       59       1  
Other     5       5       —       5       —  
    $ 4,633     $ 7,681     $ 14     $ 4,973     $ 72  

 

(Dollars in thousands)                              
December 31, 2019         Unpaid           Average     Interest  
    Recorded     Principal     Related     Recorded     Income  
    Investment     Balance     Allowance     Investment     Recognized  
With no allowance recorded:                                        
Commercial   $ 400     $ 400     $ —     $ 600     $ 49  
Real estate:                                        
Construction     —       —       —       —       —  
Mortgage-residential     392       460       —       439       19  
Mortgage-commercial     2,879       5,539       —       2,961       170  
Consumer:                                        
Home Equity     70       73       —       76       2  
Other     —       —       —       —       —  
                                         
With an allowance recorded:                                        
Commercial     —       —       —       —       —  
Real estate:                                        
Construction     —       —       —       —       —  
Mortgage-residential     —       —       —       —       —  
Mortgage-commercial     256       256       6       355       23  
Consumer:                                        
Home Equity     —       —       —       —       —  
Other     —       —       —       —       —  
                                         
Total:                                        
Commercial     400       400       —       600       49  
Real estate:                                        
Construction     —       —       —       —       —  
Mortgage-residential     392       460       —       439       19  
Mortgage-commercial     3,135       5,795       6       3,316       193  
Consumer:                                        
Home Equity     70       73       —       76       2  
Other     —       —       —       —       —  
    $ 3,997     $ 6,728     $ 6     $ 4,431     $ 263  

 

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a monthly basis. The Company uses the following definitions for risk ratings:

 

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

 

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

 

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

 

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered as pass rated loans. As of March 31, 2020 and December 31, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is shown in the table below. As of March 31, 2020 and December 31, 2019, no loans were classified as doubtful.

 

(Dollars in thousands)                              
March 31, 2020         Special                    
    Pass     Mention     Substandard     Doubtful     Total  
Commercial, financial & agricultural   $ 50,202     $ 111     $ —     $ —     $ 50,313  
Real estate:                                        
Construction     83,547       —       —       —       83,547  
Mortgage – residential     45,301       285       885       —       46,471  
Mortgage – commercial     524,525       2,396       3,259       —       530,180  
Consumer:                                        
Home Equity     27,192       1,127       322       —       28,641  
Other            10,346       31       —       —       10,377  
Total   $ 741,113     $ 3,950     $ 4,466     $ —     $ 749,529  

 

(Dollars in thousands)                              
December 31, 2019         Special                    
    Pass     Mention     Substandard     Doubtful     Total  
Commercial, financial & agricultural   $ 51,166     $ 239     $ 400     $ —     $ 51,805  
Real estate:                                        
Construction     73,512       —       —       —       73,512  
Mortgage – residential     44,221       509       627       —       45,357  
Mortgage – commercial     521,072       2,996       3,379       —       527,447  
Consumer:                                        
Home Equity     27,450       1,157       284       —       28,891  
Other     9,981       35       —       —       10,016  
Total   $ 727,402     $ 4,936     $ 4,690     $ —     $ 737,028  

 

At March 31, 2020 and December 31, 2019, non-accrual loans totaled $1.7 million and $2.3 million, respectively.

 

TDRs that are still accruing and included in impaired loans at March 31, 2020 and at December 31, 2019 amounted to $1.6 million and $1.7 million, respectively.

 

Loans greater than 90 days delinquent and still accruing interest were $168.1 thousand and $0.3 thousand at March 31, 2020 and December 31, 2019, respectively. 

 

Acquired credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality, found in FASB ASC Topic 310-30, (Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality), and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loans. Loans acquired in business combinations with evidence of credit deterioration are considered impaired. Loans acquired through business combinations that do not meet the specific criteria of FASB ASC Topic 310-30, but for which a discount is attributable, at least in part to credit quality, are also accounted for under this guidance. Certain acquired loans, including performing loans and revolving lines of credit (consumer and commercial), are accounted for in accordance with FASB ASC Topic 310-20, where the discount is accreted through earnings based on estimated cash flows over the estimated life of the loan.

 

A summary of changes in the accretable yield for purchased credit-impaired loans for the three months ended March 31, 2020 and March 31, 2019 follows:

 

(Dollars in thousands)   Three Months
Ended
March 31, 2020		     Three Months
Ended
March 31, 2019		  
             
Accretable yield, beginning of period   $ 123     $ 153  
Additions     —       —  
Accretion     (7 )     (8 )
Reclassification of nonaccretable difference due to improvement in expected cash flows     —       —  
Other changes, net     —       —  
Accretable yield, end of period   $ 116     $ 145  

 

At March 31, 2020 and December 31, 2019, the recorded investment in purchased impaired loans was $112 thousand. The unpaid principal balance was $186 thousand and $190 thousand at March 31, 2020 and December 31, 2019, respectively. At March 31, 2020 and December 31, 2019, these loans were all secured by commercial real estate. 

 

The following tables are by loan category and present loans past due and on non-accrual status as of March 31, 2020 and December 31, 2019:  

(Dollars in thousands)               Greater than                          
    30-59 Days     60-89 Days     90 Days and           Total              
March 31, 2020   Past Due     Past Due     Accruing     Nonaccrual     Past Due     Current     Total Loans  
                                           
Commercial   $ 57     $ —     $ —     $ —     $ 57     $ 50,256     $ 50,313  
Real estate:                                                        
Construction     —       —       —       —       —       83,547       83,547  
Mortgage-residential     181       —       168       340       689       45,782       46,471  
Mortgage-commercial     294       —       —       1,330       1,624       528,556       530,180  
Consumer:                                                        
Home equity     —       70       —       68       138       28,503       28,641  
Other     66       3       —       —       69       10,308       10,377  
    $ 598     $ 73     $ 168     $ 1,738     $ 2,577     $ 746,952     $ 749,529  

 

(Dollars in thousands)               Greater than                          
    30-59 Days     60-89 Days     90 Days and           Total              
December 31, 2019   Past Due     Past Due     Accruing     Nonaccrual     Past Due     Current     Total Loans  
                                           
Commercial   $ —     $ 99     $ —     $ 400     $ 499     $ 51,306     $ 51,805  
Real estate:                                                        
Construction     113       —       —       —       113       73,399       73,512  
Mortgage-residential     151       —       —       392       543       44,814       45,357  
Mortgage-commercial     39       —       —       1,467       1,506       525,941       527,447  
Consumer:                                     —                  
Home equity     2       9       —       70       81       28,810       28,891  
Other     40       23       —       —       63       9,953       10,016  
    $ 345     $ 131     $ —     $ 2,329     $ 2,805     $ 734,223     $ 737,028  

 

The Company identifies TDRs as impaired under the guidance in ASC 310-10-35. There were no loans determined to be TDRs that were restructured during the three-month periods ended March 31, 2020 and March 31, 2019.

 

During the three month periods ended March 31, 2020 and March 31, 2019, there were no loans determined to be TDRs in the previous twelve months that had payment defaults. Defaulted loans are those loans that are greater than 89 days past due.

 

In the determination of the allowance for loan losses, all TDRs are reviewed to ensure that one of the three proper valuation methods (fair market value of the collateral, present value of cash flows, or observable market price) is adhered to. All non-accrual loans are written down to their corresponding collateral value. All troubled TDR accruing loans that have a loan balance that exceeds the present value of cash flows will have a specific allocation. All nonaccrual loans are considered impaired. Under ASC 310-10, a loan is impaired when it is probable that the Company will be unable to collect all amounts due including both principal and interest according to the contractual terms of the loan agreement. In accordance with interagency guidance, short term deferrals granted due to the COVID-19 pandemic are not considered TDRs unless the borrower was previously experiencing financial difficulty.