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Loans
 6 Months Ended
Jun. 30, 2021
Receivables [Abstract]  
Loans

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 $3.2 million and $2.2 million as of June 30, 2021 and December 31, 2020, respectively.

 

   June 30,   December 31, 
(Dollars in thousands)  2021   2020 
Commercial, financial and agricultural  $111,449   $96,688 
Real estate:          
Construction   95,865    95,282 
Mortgage-residential   44,594    43,928 
Mortgage-commercial   592,099    573,258 
Consumer:          
Home equity   26,662    26,442 
Other   7,649    8,559 
Total loans, net of deferred loan fees and costs  $878,318   $844,157 

 

Commercial, financial, and agricultural category includes $47.2 million and $42.2 million in PPP loans, net of deferred fees and costs, as of June 30, 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 and six months ended June 30, 2021 and June 30, 2020 and for the year ended December 31, 2020 is as follows:

 

(Dollars in thousands)                                
   Commercial   Real estate
Construction		   Real estate
Mortgage
Residential		   Real estate
Mortgage
Commercial		   Consumer
Home
equity		   Consumer
Other		   Unallocated   Total 
Three months ended June 30, 2021                                        
Allowance for loan losses:                                        
Beginning balance March 31, 2021  $758   $134   $480   $8,137   $309   $124   $621   $10,563 
Charge-offs   —    —    —    (110)   —    (11)   —    (121)
Recoveries   2    —    —    7    5    14    —    28 
Provisions   134    (9)   62    (8)   8    (16)   (3)   168 
Ending balance June 30, 2021  $894   $125   $542   $8,026   $322   $111   $618   $10,638 
           Real estate   Real estate   Consumer             
       Real estate   Mortgage   Mortgage   Home   Consumer         
(Dollars in thousands)  Commercial   Construction   Residential   Commercial   equity   Other   Unallocated   Total 
Six months ended June 30, 2021                                        
Allowance for loan losses:                                        
Beginning balance December 31, 2020  $778   $145   $541   $7,855   $324   $125   $621   $10,389 
Charge-offs   —    —    —    (110)   —    (36)   —    (146)
Recoveries   3    —    —    11    6    30    —    50 
Provisions   113    (20)   1    270    (8)   (8)   (3)   345 
Ending balance June 30, 2021  $894   $125   $542   $8,026   $322   $111   $618   $10,638 
                                         
Ending balances:                                        
Individually evaluated for impairment  $—   $—   $—   $2   $—   $—   $—   $2 
                                         
Collectively evaluated for impairment   894    125    542    8,024    322    111    618    10,636 
                                         
June 30, 2021 Loans receivable:                                        
Ending balance-total  $111,449   $95,865   $44,594   $592,099   $26,662   $7,649   $—   $878,318 
                                         
Ending balances:                                        
Individually evaluated for impairment   —    —    310    5,163    21    —    —    5,494 
                                         
Collectively evaluated for impairment  $111,449   $95,865   $44,284   $586,936   $26,641   $7,649   $—   $872,824 
                                 
(Dollars in thousands)                                
   Commercial   Real estate
Construction		   Real estate
Mortgage
Residential		   Real estate
Mortgage
Commercial		   Consumer
Home
equity		   Consumer
Other		   Unallocated   Total 
Three months ended June 30, 2020                                        
Allowance for loan losses:                                        
Beginning balance March 31, 2020  $489   $148   $440   $5,531   $277   $112   $697   $7,694 
Charge-offs   —    —    —    —    —    (25)   —    (25)
Recoveries   3    —    —    3    —    11    —    17 
Provisions   277    17    57    935    16    34    (86)   1,250 
Ending balance June 30, 2020  $769   $165   $497   $6,469   $293   $132   $611   $8,936 

Note 4—Loans-continued

 

(Dollars in thousands)                                
           Real estate   Real estate   Consumer             
       Real estate   Mortgage   Mortgage   Home   Consumer         
   Commercial   Construction   Residential   Commercial   equity   Other   Unallocated   Total 
Six months ended June 30, 2020                                        
Allowance for loan losses:                                        
Beginning balance December 31, 2019  $427   $111   $367   $4,602   $240   $97   $783   $6,627 
Charge-offs   —    —    —    —    —    (48)   —    (48)
Recoveries   3    —    —    9    1    19    —    32 
Provisions   339    54    130    1,858    52    64    (172)   2,325 
Ending balance June 30, 2020  $769   $165   $497   $6,469   $293   $132   $611   $8,936 
                                         
Ending balances:                                        
Individually evaluated for impairment  $—   $—   $—   $4   $—   $—   $—   $4 
                                         
Collectively evaluated for impairment   769    165    497    6,465    293    132    611    8,932 
                                         
June 30, 2020 Loans receivable:                                        
Ending balance-total  $107,184   $82,584   $45,424   $544,670   $27,156   $10,354   $—   $817,372 
                                         
Ending balances:                                        
Individually evaluated for impairment   —    —    333    3,020    66    —    —    3,419 
                                         
Collectively evaluated for impairment  $107,184   $82,584   $45,091   $541,650   $27,090   $10,354   $—   $813,953 
           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 tables as of June 30, 2021, June 30, 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.

 

(Dollars in thousands)              Six months ended   Three months ended 
       Unpaid       Average   Interest   Average   Interest 
   Recorded   Principal   Related   Recorded   income   Recorded   Income 
June 30, 2021  Investment   Balance   Allowance   Investment   Recognized   Investment   Recognized 
With no allowance recorded:                                   
Commercial, financial, agricultural  $—   $—   $—   $—   $—   $—   $— 
Real estate:                                   
Construction   —    —    —    —    —    —    — 
Mortgage-residential   310    361    —    315    7    310    4 
Mortgage-commercial   5,062    7,689    —    5,332    188    5,168    94 
Consumer:                                   
Home equity   21    25    —    21    1    20    — 
Other   —    —    —    —    —    —    — 
                                    
With an allowance recorded:                                   
Commercial, financial, agricultural   —    —    —    —    —    —    — 
Real estate:                                   
Construction   —    —    —    —    —    —    — 
Mortgage-residential   —    —    —    —    —    —    — 
Mortgage-commercial   101    101    2    111    3    101    1 
Consumer:                                   
Home equity   —    —    —    —    —    —    — 
Other   —    —    —    —    —    —    — 
                                    
Total:                                   
Commercial, financial, agricultural  $—   $—   $—   $—   $—   $—   $— 
Real estate:                                   
Construction   —    —    —    —    —    —    — 
Mortgage-residential   310    361    —    315    7    310    4 
Mortgage-commercial   5,163    7,790    2    5,443    191    5,269    95 
Consumer:                                   
Home equity   21    25    —    21    1    20    — 
Other   —    —    —    —    —    —    — 
   $5,494    8,176   $2   $5,779   $199   $5,599   $99 
(Dollars in thousands)              Six months ended   Three months ended 
       Unpaid       Average   Interest   Average   Interest 
   Recorded   Principal   Related   Recorded   income   Recorded   Income 
June 30, 2020  Investment   Balance   Allowance   Investment   Recognized   Investment   Recognized 
With no allowance recorded:                                   
Commercial, financial, agricultural  $—   $—   $—   $—   $—   $—   $— 
Real estate:                                   
Construction   —    —    —    —     —    —    — 
Mortgage-residential   333    425    —    337    10    331    7 
Mortgage-commercial   2,827    5,567    —    3,189    147    3,141    74 
Consumer:                                   
Home equity   66    70    —    68    2    66    1 
Other   —    —    —    —    —    —    — 
                                    
With an allowance recorded:                                   
Commercial, financial, agricultural   —    —    —    —    —    —    — 
Real estate:                                   
Construction   —    —    —    —    —    —    — 
Mortgage-residential   —    —    —    —    —    —    — 
Mortgage-commercial   193    193    4    216    6    193    3 
Consumer:                                   
Home equity   —    —    —    —    —    —    — 
Other   —    —    —    —    —    —    — 
                                    
Total:                                   
Commercial, financial, agricultural  $—   $—   $—   $—   $—   $—   $— 
Real estate:                                   
Construction   —    —    —    —    —    —    — 
Mortgage-residential   333    425    —    337    10    331    7 
Mortgage-commercial   3,020    5,760    4    3,405    153    3,334    77 
Consumer:                                   
Home equity   66    70    —    68    2    66    1 
Other   —    —    —    —    —    —    — 
   $3,419    6,255   $4   $3,810   $165   $3,731   $85 
                     
       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 June 30, 2021 and December 31, 2020. As of June 30, 2021 and December 31, 2020, no loans were classified as doubtful.

(Dollars in thousands)      Special             
June 30, 2021  Pass   Mention   Substandard   Doubtful   Total 
Commercial, financial & agricultural  $111,273   $176   $—   $—   $111,449 
Real estate:                         
Construction   95,858    7    —    —    95,865 
Mortgage – residential   44,111    154    329    —    44,594 
Mortgage – commercial   579,401    2,529    10,169    —    592,099 
Consumer:                         
Home Equity   25,244    219    1,199    —    26,662 
Other   7,639    —    10    —    7,649 
Total  $863,526   $3,085   $11,707   $—   $878,318 
                          
(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 June 30, 2021 and December 31, 2020, non-accrual loans totaled $4.0 million and $4.7 million, respectively.

 

TDRs that are still accruing and included in impaired loans at June 30, 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 $4.2 million and $1.3 million at June 30, 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 June 30, 2021 and December 31, 2020:  

 

           Greater than                 
(Dollars in thousands)  30-59 Days   60-89 Days   90 Days and       Total         
June 30, 2021  Past Due   Past Due   Accruing   Nonaccrual   Past Due   Current   Total Loans 
                             
Commercial  $111   $—   $4,164   $3,654   $7,929   $103,520   $111,449 
Real estate:                                   
Construction   —    —    —    —    —    95,865    95,865 
Mortgage-residential   36    —    —    311    347    44,247    44,594 
Mortgage-commercial   —    —    —    —    —    592,099    592,099 
Consumer:                                   
Home equity   —    —    —    21    21    26,641    26,662 
Other   24    —    1    —    25    7,624    7,649 
   $171   $—   $4,165   $3,986   $8,322   $869,996   $878,318 
           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 generally accepted accounting principles (“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, to $8.7 million at March 31, 2021, and to $4.5 million at June 30, 2021. The Company had no loans remaining on initial deferral status in which both principal and interest were deferred at December 31, 2020, March 31, 2021 and June 30, 2021. The $4.5 million in deferrals at June 30, 2021 consists of two loans: a mixed use office building and an events / meeting center.

 

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 June 30, 2021 and June 30, 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 and six months ended June 30, 2021 and June 30, 2020 are as follows:

 

(Dollars in thousands)  Three Months
Ended
June 30, 2021		   Three Months
Ended
June 30, 2020		 
         
Accretable yield, beginning of period  $86   $116 
Accretion   (7)   (7)
Accretable yield, end of period  $79   $109 
         
(Dollars in thousands)  Six Months
Ended
June 30, 2021		   Six Months
Ended
June 30, 2020		 
         
Accretable yield, beginning of period  $93   $123 
Accretion   (14)   (14)
Accretable yield, end of period  $79   $109 

 

At June 30, 2021 and December 31, 2020, the recorded investment in purchased impaired loans was $109 thousand and $110 thousand, respectively. The unpaid principal balance was $162 thousand and $171 thousand at June 30, 2021 and December 31, 2020, respectively. At June 30, 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 June 30, 2021 and June 30, 2020:

 

(Dollars in thousands)  2021   2020 
Beginning Balance December 31,  $3,297   $4,109 
New Loans   2    55 
Less loan repayments   225    437 
Ending Balance June 30,  $3,074   $3,727