XML 24 R12.htm IDEA: XBRL DOCUMENT

LOANS

12 Months Ended

Dec. 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 $1.4 million and $2.2 million as of December 31, 2021 and December 31, 2020, respectively.

Schedule of Loan Portfolio


	December 31,
(Dollars in thousands)	2021		2020
Commercial, financial and agricultural	$	69,952	$	96,688
Real estate:
Construction		94,969		95,282
Mortgage-residential		45,498		43,928
Mortgage-commercial		617,464		573,258
Consumer:
Home equity		27,116		26,442
Other		8,703		8,559
Total	$	863,702	$	844,157

Commercial, financial, and agricultural category includes $1.5 million and $42.2 million in PPP loans, net of deferred fees and costs, as of December 31, 2021 and December 31, 2020, respectively.

Activity in the allowance for loan losses was as follows:


	Years ended December 31,
(Dollars in thousands)	2021			2020			2019
Balance at the beginning of year	$	10,389		$	6,627		$	6,263
Provision for loan losses		335			3,663			139
Charged off loans		(182	)		(110	)		(145	)
Recoveries		637			209			370
Balance at end of year	$	11,179		$	10,389		$	6,627

The detailed activity in the allowance for loan losses and the recorded investment in loans receivable as of and for the years ended December 31, 2021, December 31, 2020 and December 31, 2019 follows:

(Dollars in thousands)	Commercial		Real estate Construction			Real estate Mortgage Residential		Real estate Mortgage Commercial			Consumer Home equity			Consumer Other			Unallocated		Total
2021
Allowance for loan losses:
Beginning balance	$	778	$	145		$	541	$	7,855		$	324		$	125		$	621	$	10,389
Charge-offs		—		—			—		(110	)		—			(72	)		—		(182	)
Recoveries		39		—			10		473			69			46			—		637
Provisions		36		(32	)		9		352			(60	)		27			3		335
Ending balance	$	853	$	113		$	560	$	8,570		$	333		$	126		$	624	$	11,179

Ending balances:
Individually evaluated for impairment	$	—	$	—		$	—	$	1		$	—		$	—		$	—	$	—

Collectively evaluated for impairment		853		113			560		8,569			333			126			624		11,179

Loans receivable:
Ending balance-total	$	69,952	$	94,969		$	45,498	$	617,464		$	27,116		$	8,703		$	—	$	863,702

Ending balances:
Individually evaluated for impairment		—		—			133		1,561			—			—			—		1,694

Collectively evaluated for impairment		69,952		94,969			45,365		615,903			27,116			8,703			—		862,008

(Dollars in thousands)	Commercial		Real estate Construction			Real estate Mortgage Residential		Real estate Mortgage Commercial			Consumer Home equity		Consumer Other			Unallocated			Total
2020
Allowance for loan losses:
Beginning balance	$	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	$	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

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

(Dollars in thousands)	Commercial			Real estate Construction		Real estate Mortgage Residential			Real estate Mortgage Commercial			Consumer Home equity			Consumer Other			Unallocated		Total
2019
Allowance for loan losses:
Beginning balance	$	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	$	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

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

At December 31, 2021, $9.5 million of loans acquired in the Cornerstone acquisition were excluded in the evaluation of the adequacy of the allowance for loan losses. These loans were recorded at fair value at acquisition which included a credit component of approximately $125.6 thousand at December 31, 2021. Loans acquired prior to 2017 have been included in the evaluation of the allowance for loan losses.

The following tables are by loan category and present at December 31, 2021, December 31, 2020 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 troubled debt restructurings.

(Dollars in thousands)
December 31, 2021	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no allowance recorded:
Commercial	$	—	$	—	$	—	$	—	$	—
Real estate:
Construction		—		—		—		—		—
Mortgage-residential		133		151		—		131		6
Mortgage-commercial		1,521		3,514		—		1,748		223
Consumer:
Home Equity		—		—		—		—		—
Other		—		—		—		—		—

With an allowance recorded:
Commercial		—		—		—		—		—
Real estate:
Construction		—		—		—		—		—
Mortgage-residential		—		—		—		—		—
Mortgage-commercial		40		40		1		39		5
Consumer:
Home Equity		—		—		—		—		—
Other		—		—		—		—		—

Total:
Commercial		—		—		—		—		—
Real estate:
Construction		—		—		—		—		—
Mortgage-residential		133		151		—		131		6
Mortgage-commercial		1,561		3,554		1		1,787		228
Consumer:
Home Equity		—		—		—		—		—
Other		—		—		—		—		—
	$	1,694	$	3,705	$	1	$	1,918	$	234

(Dollars in thousands)
December 31, 2020	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
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

(Dollars in thousands)
December 31, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income 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 such as: 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 to be “Pass” rated loans. As of December 31, 2021 and December 31, 2020, 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 December 31, 2021 and December 31, 2020, no loans were classified as doubtful.

(Dollars in thousands)
December 31, 2021	Pass		Special Mention		Substandard		Doubtful		Total
Commercial, financial & agricultural	$	69,833	$	119	$	—	$	—	$	69,952
Real estate:		—		—		—
Construction		94,966		—		3		—		94,969
Mortgage – residential		45,049		305		144		—		45,498
Mortgage – commercial		610,001		1,009		6,454		—		617,464
Consumer:		—		—		—
Home Equity		25,751		171		1,194		—		27,116
Other		8,604		22		77		—		8,703
Total	$	854,204	$	1,626	$	7,872	$	—	$	863,702

(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 December 31, 2021 and December 31, 2020, non-accrual loans totaled $250 thousand and $4.7 million, respectively. The gross interest income which would have been recorded under the original terms of the non-accrual loans amounted to $33.0 thousand and $150.5 thousand in 2021 and 2020, respectively. Interest recorded on non-accrual loans in 2021 and 2020 amounted to $453.3 thousand and $447.5 thousand, respectively.

TDRs that are still accruing and included in impaired loans at December 31, 2021 and at December 31, 2020 amounted to $1.4 million and $1.6 million, respectively. Interest earned during 2021 and 2020 on these loans amounted to $120.4 thousand and $130.1 thousand, respectively.

Loans greater than 90 days delinquent and still accruing interest were $0 and $1.3 million at December 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 December 31, 2021 and December 31, 2020:

(Dollars in thousands) December 31, 2021	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days and Accruing		Nonaccrual		Total Past Due		Current		Total Loans
Commercial	$	125	$	35	$	—	$	118	$	278	$	69,674	$	69,952
Real estate:
Construction		—		—		—		—		—		94,969		94,969
Mortgage-residential		8		4		—		132		144		45,354		45,498
Mortgage-commercial		—		—		—		—		—		617,464		617,464
Consumer:
Home equity		—		62		—		—		62		27,054		27,116
Other		—		1		—		—		1		8,702		8,703
Total	$	133	$	102	$	—	$	250	$	485	$	863,217	$	863,702

(Dollars in thousands) December 31, 2020	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days and Accruing		Nonaccrual		Total 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
Total	$	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 were dependent upon the direct involvement of financial institutions like the Bank. These programs were 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. The relief period provided in the CARES Act expired on January 1, 2022.

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, permitted 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 were related to COVID-19, and (iii) the modification occurred 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.

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. 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, $4.5 million at June 30, 2021, $4.1 million at September 30, 2021, and $0 at December 31, 2021.

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 twelve month period ended December 31, 2021 December 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 its corresponding collateral value. All TDR accruing loans where the loan balance exceeds the present value of cash flow 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 Bank 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 PCI loans for the years ended December 31, 2021, 2020, and 2019 follows:

(Dollars in thousands)	Year Ended December 31, 2021			Year Ended December 31, 2020			Year Ended December 31, 2019
Accretable yield, beginning of period	$	93		$	123		$	153
Additions		—			—			—
Accretion		(29	)		(30	)		(30	)
Reclassification of non-accretable difference due to improvement in expected cash flows		—			—			—
Other changes, net		—			—			—
Accretable yield, end of period	$	64		$	93		$	123

At December 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 $152 thousand and $171 thousand at December 31, 2021 and December 31, 2020, respectively. At December 31, 2021 and December 31, 2020, these loans were all secured by commercial real estate.

Related party loans 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 years ended December 31, 2021 and December 31, 2020.

Schedule of Related Party Loans


(Dollars in thousands)	For the years ended December 31,
	2021		2020
Balance, beginning of year	$	3,297	$	4,108
New Loans		4		188
Less loan repayments		492		999
Balance, end of year	$	2,809	$	3,297