XML 23 R13.htm IDEA: XBRL DOCUMENT

Loans

3 Months Ended

Mar. 31, 2021

Note 4—Loans

The following table summarizes the composition of our loan portfolio. Total loans are recorded net of deferred loan fees and costs, which totaled $3.4 million and $2.2 million as of March 31, 2021 and December 31, 2020, respectively.

	March 31,		December 31,
(Dollars in thousands)	2021		2020
Commercial, financial and agricultural	$	110,776	$	96,688
Real estate:
Construction		104,065		95,282
Mortgage-residential		38,947		43,928
Mortgage-commercial		582,083		573,258
Consumer:
Home equity		25,068		26,442
Other		8,127		8,559
Total loans, net of deferred loan fees and costs	$	869,066	$	844,157

Commercial, financial, and agricultural category includes $61.8 million and $42.2 million in PPP loans, net of deferred fees and costs, as of March 31, 2021 and December 31, 2020, respectively.

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, 2021 and March 31, 2020 and for the year ended December 31, 2020 is as follows:

							Real estate			Real estate		Consumer
				Real estate			Mortgage			Mortgage		Home			Consumer
(Dollars in thousands)	Commercial			Construction			Residential			Commercial		equity			Other			Unallocated		Total
March 31, 2021
Allowance for loan losses:
Beginning balance December 31, 2020	$	778		$	145		$	541		$	7,855	$	324		$	125		$	621	$	10,389
Charge-offs		—			—			—			—		—			(25	)		—		(25	)
Recoveries		1			—			—			4		1			16			—		22
Provisions		(21	)		(11	)		(61	)		278		(16	)		8			—		177
Ending balance March 31, 2021	$	758		$	134		$	480		$	8,137	$	309		$	124		$	621	$	10,563

Ending balances:
Individually evaluated for impairment	$	—		$	—		$	—		$	2	$	—		$	—		$	—	$	2

Collectively evaluated for impairment		758			134			480			8,135		309			124			621		10,561

March 31, 2021 Loans receivable:
Ending balance-total	$	110,776		$	104,065		$	38,947		$	582,083	$	25,068		$	8,127		$	—	$	869,066

Ending balances:
Individually evaluated for impairment		—			—			436			5,578		21			—			—		6,035

Collectively evaluated for impairment	$	110,776		$	104,065		$	38,511		$	576,505	$	25,047		$	8,127		$	—	$	863,031


					Real estate		Real estate		Consumer
			Real estate		Mortgage		Mortgage		Home		Consumer
(Dollars in thousands)	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


						Real estate		Real estate			Consumer
			Real estate			Mortgage		Mortgage			Home		Consumer
(Dollars in thousands)	Commercial		Construction			Residential		Commercial			equity		Other			Unallocated			Total
December 31, 2020
Allowance for loan losses:
Beginning balance December 31, 2019	$	427	$	111		$	367	$	4,602		$	240	$	97		$	783		$	6,627
Charge-offs		—		(2	)		—		(1	)		—		(107	)		—			(110	)
Recoveries		130		2			—		23			2		52			—			209
Provisions		221		34			174		3,231			82		83			(162	)		3,663
Ending balance December 31, 2020	$	778	$	145		$	541	$	7,855		$	324	$	125		$	621		$	10,389

Ending balances:
Individually evaluated for impairment	$	—	$	—		$	—	$	2		$	—	$	—		$	—		$	2

Collectively evaluated for impairment		778		145			541		7,853			324		125			621			10,387

December 31, 2020 Loans receivable:
Ending balance-total	$	96,688	$	95,282		$	43,928	$	573,258		$	26,442	$	8,559		$	—		$	844,157

Ending balances:
Individually evaluated for impairment		—		—			440		5,631			42		—			—			6,113

Collectively evaluated for impairment		96,688		95,282			43,488		567,627			26,400		8,559			—			838,044

The following table presents at March 31, 2021 and December 31, 2020 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”).

	March 31,		December 31,
(Dollars in thousands)	2021		2020
Total loans considered impaired	$	6,035	$	6,113
Loans considered impaired for which there is a related allowance for loan loss:
Outstanding loan balance	$	104	$	123
Related allowance	$	2	$	2

Average impaired loans	$	6,286	$	6,375
Amount of interest earned during period of impairment	$	107	$	403

The following tables as of March 31, 2021, March 31, 2020, and December 31, 2020, are by loan category and present loans individually evaluated and considered impaired under FASB ASC 310 “Accounting by Creditors for Impairment of a Loan.” Impairment includes performing TDRs.

							Three months ended
			Unpaid				Average		Interest
(Dollars in thousands)	Recorded		Principal		Related		Recorded		Income
March 31, 2021	Investment		Balance		Allowance		Investment		Recognized
With no allowance recorded:
Commercial	$	—	$	—	$	—	$	—	$	—
Real estate:
Construction		—		—		—		—		—
Mortgage-residential		436		496		—		434		5
Mortgage-commercial		5,474		8,129		—		5,728		99
Consumer:
Home Equity		21		26		—		21		1
Other		—		—		—		—		—

With an allowance recorded:
Commercial		—		—		—		—		—
Real estate:
Construction		—		—		—		—		—
Mortgage-residential		—		—		—		—		—
Mortgage-commercial		104		104		2		103		2
Consumer:
Home Equity		—		—		—		—		—
Other		—		—		—		—		—

Total:
Commercial		—		—		—		—		—
Real estate:
Construction		—		—		—		—		—
Mortgage-residential		436		496		—		434		5
Mortgage-commercial		5,578		8,233		2		5,831		101
Consumer:
Home Equity		21		26		—		21		1
Other		—		—		—		—		—
	$	6,035	$	8,755	$	2	$	6,286	$	107

							Three months ended
			Unpaid				Average		Interest
(Dollars in thousands)	Recorded		Principal		Related		Recorded		Income
March 31, 2020	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


			Unpaid				Average		Interest
(Dollars in thousands)	Recorded		Principal		Related		Recorded		Income
December 31, 2020	Investment		Balance		Allowance		Investment		Recognized
With an allowance recorded:
Commercial		—		—		—		—		—
With no allowance recorded:
Commercial	$	—	$	—	$	—	$	—	$	—
Real estate:
Construction		—		—		—		—		—
Mortgage-residential		440		499		—		440		1
Mortgage-commercial		5,508		7,980		—		5,770		388
Consumer:
Home Equity		42		47		—		42		3
Other		—		—		—		—		—

With an allowance recorded:
Commercial		—		—		—		—		—
Real estate:
Construction		—		—		—		—		—
Mortgage-residential		—		—		—		—		—
Mortgage-commercial		123		123		2		123		11
Consumer:
Home Equity		—		—		—		—		—
Other		—		—		—		—		—

Total:
Commercial		—		—		—		—		—
Real estate:
Construction		—		—		—		—		—
Mortgage-residential		440		499		—		440		1
Mortgage-commercial		5,631		8,103		2		5,893		399
Consumer:
Home Equity		42		47		—		42		3
Other		—		—		—		—		—
	$	6,113	$	8,649	$	2	$	6,375	$	403

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. 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, 2021 and December 31, 2020. As of March 31, 2021 and December 31, 2020, no loans were classified as doubtful.

(Dollars in thousands)			Special
March 31, 2021	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial & agricultural	$	110,603	$	173	$	—	$	—	$	110,776
Real estate:
Construction		104,065		—		—		—		104,065
Mortgage – residential		38,327		163		457		—		38,947
Mortgage – commercial		568,688		2,931		10,464		—		582,083
Consumer:
Home Equity		23,627		240		1,201		—		25,068
Other		8,113		—		14		—		8,127
Total	$	853,423	$	3,507	$	12,136	$	—	$	869,066

(Dollars in thousands)			Special
December 31, 2020	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial & agricultural	$	96,507	$	181	$	—	$	—	$	96,688
Real estate:
Construction		95,282		—		—		—		95,282
Mortgage – residential		43,240		190		498		—		43,928
Mortgage – commercial		559,982		7,270		6,006		—		573,258
Consumer:
Home Equity		25,041		95		1,306		—		26,442
Other		8,538		21		—		—		8,559
Total	$	828,590	$	7,757	$	7,810	$	—	$	844,157

At March 31, 2020 and December 31, 2020, non-accrual loans totaled $4.5 million and $4.6 million, respectively.

TDRs that are still accruing and included in impaired loans at March 31, 2021 and at December 31, 2020 amounted to $1.5 million and $1.6 million, respectively.

Loans greater than 90 days delinquent and still accruing interest were $0 and $1.3 million at March 31, 2021 and December 31, 2020, respectively. The following tables are by loan category and present loans past due and on non-accrual status as of March 31, 2021 and December 31, 2020:

					Greater than
(Dollars in thousands)	30-59 Days		60-89 Days		90 Days and				Total
March 31, 2021	Past Due		Past Due		Accruing		Nonaccrual		Past Due		Current		Total Loans

Commercial	$	116	$	8	$	—	$	4,063	$	4,187	$	106,589	$	110,776
Real estate:
Construction		—		—		—		—		—		104,065		104,065
Mortgage-residential		—		7		—		436		443		38,504		38,947
Mortgage-commercial		—		—		—		—		—		582,083		582,083
Consumer:
Home equity		75		84		—		22		181		24,887		25,068
Other		26		1		—		—		27		8,100		8,127
	$	217	$	100	$	—	$	4,521	$	4,838	$	864,228	$	869,066

					Greater than
(Dollars in thousands)	30-59 Days		60-89 Days		90 Days and				Total
December 31, 2020	Past Due		Past Due		Accruing		Nonaccrual		Past Due		Current		Total Loans

Commercial	$	165	$	27	$	—	$	4,080	$	4,272	$	92,416	$	96,688
Real estate:
Construction		424		—		1,260		—		1,684		93,598		95,282
Mortgage-residential		7		—		—		440		447		43,481		43,928
Mortgage-commercial		—		—		—		—		—		573,258		573,258
Consumer:
Home equity		—		—		—		42		42		26,400		26,442
Other		21		21		—		—		42		8,517		8,559
	$	617	$	48	$	1,260	$	4,562	$	6,487	$	837,670	$	844,157

The Cares Act and Initiatives Related to COVID-19. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, was signed into law. The CARES Act provided for approximately $2.2 trillion in direct economic relief in response to the public health and economic impacts of COVID-19. Many of the CARES Act’s programs are, and remain, dependent upon the direct involvement of financial institutions like the Bank. These programs have been implemented through rules and guidance adopted by federal departments and agencies, including the U.S. Department of Treasury, the Federal Reserve and other federal bank regulatory authorities, including those with direct supervisory jurisdiction over the Company and the Bank. Furthermore, as the COVID-19 pandemic evolves, federal regulatory authorities continue to issue additional guidance with respect to the implementation, life cycle, and eligibility requirements for the various CARES Act programs, as well as industry-specific recovery procedures for COVID-19. On December 27, 2020, the federal government signed into law the Consolidated Appropriations Act, 2021 implementing a second round of stimulus relief of $900 billion. The American Rescue Plan Act of 2021, or the American Rescue Plan, the third round of stimulus relief, is a $1.9 trillion dollar economic stimulus bill that was passed by Congress and signed into law on March 11, 2021. The purpose of the American Rescue Plan is to speed up the recovery from the economic and health effects of the COVID-19 pandemic and the ongoing recession. The Company continues to assess the impact of the CARES Act, the Consolidated Appropriations Act, 2021, and the American Rescue Plan, and other statutes, regulations and supervisory guidance related to the COVID-19 pandemic.

COVID-19 Related Troubled Debt Restructurings and Loan Modifications for Affected Borrowers. The CARES Act, as extended by certain provisions of the Consolidated Appropriations Act, 2021, permits banks to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that may otherwise be characterized as troubled debt restructurings. Or TDRs, and suspend any determination related thereto if (i) the borrower was not more than 30 days past due as of December 31, 2019, (ii) the modifications are related to COVID-19, and (iii) the modification occurs between March 1, 2020 and the earlier of 60 days after the date of termination of the national emergency or January 1, 2022. Federal bank regulatory authorities also issued guidance to encourage banks to make loan modifications for borrowers affected by COVID-19.

The Company is focused on servicing the financial needs of its commercial and consumer customers with flexible loan payment arrangements, including short-term loan modifications or forbearance payments and reducing or waiving certain fees on deposit accounts. Future governmental actions may require these and other types of customer-related responses. Beginning in March 2020, the Company proactively offered payment deferrals for up to 90 days to its loan customers regardless of the impact of the pandemic on their business or personal finances. The Company continues to consider potential deferrals with respect to certain customers, which are evaluated on a case-by-case basis. At its peak, which occurred during the second quarter of 2020, the Company granted payment deferments on loans totaling $206.9 million. As a result of payments being resumed at the conclusion of their payment deferral period, loans in which payments were being deferred decreased from the peak of $206.9 million to $175.0 million at June 30, 2020, to $27.3 million at September 30, 2020, to $16.1 million at December 31, 2020, and to $8.7 million at March 31, 2021. The Company had no loans on which payments were deferred related to the COVID-19 pandemic at December 31, 2019. The Company had no loans remaining on initial deferral status in which both principal and interest were deferred at March 31, 2021. The $8.7 million in deferrals at March 31, 2021 consists of three loans on which only principal is being deferred. Two of the continuing deferrals at March 31, 2021 totaling $4.5 million are in the retail industry segment identified by the Company as one of the industry segments most impacted by the COVID-19 pandemic; the other continuing deferral totaling $4.2 million is a mixed use office space that the Company does not consider to be in an industry segment most impacted by the COVID-19 pandemic. Some of these deferments were to businesses that temporarily closed or reduced operations and some were requested as a pre-cautionary measure to conserve cash.

Troubled Debt Restructurings. 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, 2021 and March 31, 2020. Additionally, 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 90 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.

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, 2021 and March 31, 2020 are as follows:

(Dollars in thousands)	Three Months Ended March 31, 2021			Three Months Ended March 31, 2020

Accretable yield, beginning of period	$	93		$	123
Accretion		(7	)		(7	)
Accretable yield, end of period	$	86		$	116

At March 31, 2021 and December 31, 2020, the recorded investment in purchased impaired loans was $109 thousand and $110 thousand, respectively. The unpaid principal balance was $166 thousand and $171 thousand at March 31, 2021 and December 31, 2020, respectively. At March 31, 2021 and December 31, 2020, these loans were all secured by commercial real estate.

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, 2021 and March 31, 2020:

(Dollars in thousands)	2021		2020
Beginning Balance December 31,	$	3,297	$	4,109
New Loans		2		55
Less loan repayments		66		437
Ending Balance March 31,	$	3,233	$	3,727