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Loans
 6 Months Ended
Jun. 30, 2022
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 $1.6 million and $1.4 million as of June 30, 2022 and December 31, 2021, respectively.

 

   June 30,   December 31, 
(Dollars in thousands)  2022   2021 
Commercial, financial and agricultural   $69,989   $69,952 
Real estate:          
Construction    94,159    94,969 
Mortgage-residential   46,767    45,498 
Mortgage-commercial   662,779    617,464 
Consumer:          
Home equity    27,348    27,116 
Other    15,290    8,703 
Total loans, net of deferred loan fees and costs  $916,332   $863,702 

 

Commercial, financial, and agricultural category includes $0.2 million and $1.5 million in PPP loans, net of deferred fees and costs, as of June 30, 2022 and December 31, 2021, 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 June 30, 2022 and June 30, 2021 and for the year ended December 31, 2021 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, 2022                                        
Allowance for loan losses:                                        
Beginning balance March 31, 2022  $849   $91   $513   $8,508   $331   $150   $621   $11,063 
Charge-offs   —    —    —    —    —    (19)   —    (19)
Recoveries   —    —    1    237    4    4    —    246 
Provisions   (32)   (7)   32    (106)   (20)   67    (4)   (70)
Ending balance June 30, 2022  $817   $84   $546   $8,639   $315   $202   $617   $11,220 
                                         
           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, 2022                                        
Allowance for loan losses:                                        
Beginning balance December 31, 2021  $853   $113   $560   $8,570   $333   $126   $624   $11,179 
Charge-offs   —    —    —    —    —    (33)   —    (33)
Recoveries   11    —    1    243    7    7    —    269 
Provisions   (47)   (29)   (15)   (174)   (25)   102    (7)   (195)
Ending balance June 30, 2022  $817   $84   $546   $8,639   $315   $202   $617   $11,220 
                                         
Ending balances:                                        
Individually evaluated for impairment  $—   $—   $—   $—   $—   $—   $—   $— 
                                         
Collectively evaluated for impairment   817   $84   $546   $8,639   $315   $202   $617   $11,220 
                                         
June 30, 2022 Loans receivable:                                        
Ending balance-total  $69,989   $94,159   $46,767   $662,779   $27,348   $15,290   $—   $916,332 
                                         
Ending balances:                                        
Individually evaluated for impairment   —    —    38    4,275    163    —    —    4,476 
                                         
Collectively evaluated for impairment  $69,989   $94,159   $46,729   $658,504   $27,185   $15,290   $—   $911,856 
                                 
                                 
(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 
December 31, 2021                                        
Allowance for loan losses:                                        
Beginning balance December 31, 2020  $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 December 31, 2021  $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 
                                         
December 31, 2021 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 

 

Current Expected Credit Loss (CECL) The Company is currently (i) evaluating the impact the CECL model will have on our accounting, (ii) planning for the transition, and (iii) expect to recognize a one-time cumulative-effect adjustment to our allowance for loan losses as of the beginning of the first quarter of 2023—the first reporting period in which the new standard is effective. At this time, we cannot yet reasonably determine the magnitude of such one-time cumulative adjustment, if any, or of the overall impact of the new standard on our business, financial condition or results of operations.

The following tables are by loan category and present June 30, 2022, June 30, 2021, and December 31, 2021 loans individually evaluated and considered impaired under FASB ASC 310 “Accounting by Creditors for Impairment of a Loan.” Impairment includes performing TDRs.

 

               Six months ended   Three months ended 
       Unpaid       Average   Interest   Average   Interest 
(Dollars in thousands)  Recorded   Principal   Related   Recorded   Income   Recorded   Income 
June 30, 2022  Investment   Balance   Allowance   Investment   Recognized   Investment   Recognized 
With no allowance recorded:                                   
Commercial, financial, agricultural  $—   $—   $—   $—   $—   $—   $— 
Real estate:                                   
Construction   —    —    —    —    —    —    — 
Mortgage-residential   38    54    —    42    1    37    1 
Mortgage-commercial   4,275    9,784    —    4,289    244    4,274    122 
Consumer:                                   
Home equity   163    163    —    164    4    163    2 
Other   —    —    —    —    —    —    — 
                                    
With an allowance recorded:                                   
Commercial, financial, agricultural   —    —    —    —    —    —    — 
Real estate:                                   
Construction   —    —    —    —    —    —    — 
Mortgage-residential   —    —    —    —    —    —    — 
Mortgage-commercial   —    —    —    —    —    —    — 
Consumer:                                   
Home equity   —    —    —    —    —    —    — 
Other   —    —    —    —    —    —    — 
                                    
Total:                                   
Commercial, financial, agricultural  $—   $—   $—   $—   $—   $—   $— 
Real estate:                                   
Construction   —    —    —    —    —    —    — 
Mortgage-residential   38    54    —    42    1    37    1 
Mortgage-commercial   4,275    9,784    —    4,289    244    4,274    122 
Consumer:                                   
Home equity   163    163    —    164    4    163    2 
Other   —    —    —    —    —    —    — 
   $4,476    10,001   $—   $4,495   $249   $4,474   $125 
              Six months ended   Three months ended 
       Unpaid       Average   Interest   Average   Interest 
(Dollars in thousands)  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 
       Unpaid       Average   Interest 
(Dollars in thousands)  Recorded   Principal   Related   Recorded   Income 
December 31, 2021  Investment   Balance   Allowance   Investment   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 

 

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, 2022 and December 31, 2021. As of June 30, 2022 and December 31, 2021, no loans were classified as doubtful.

(Dollars in thousands)                    
June 30, 2022  Pass   Special
Mention		   Substandard   Doubtful   Total 
Commercial, financial & agricultural  $69,899   $90   $—   $—   $69,989 
Real estate:                         
Construction   94,159    —    —    —    94,159 
Mortgage – residential   46,352    368    47    —    46,767 
Mortgage – commercial   657,513    28    5,238    —    662,779 
Consumer:                         
Home Equity   25,984    176    1,188    —    27,348 
Other   15,031    22    237    —    15,290 
Total  $908,938   $684   $6,710   $—   $916,332 
                          
(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 

 

At June 30, 2022 and December 31, 2021, non-accrual loans totaled $4.4 million and $250 thousand, respectively.

 

TDRs that are still accruing and included in impaired loans at June 30, 2022 and at December 31, 2021 amounted to $125 thousand and $1.4 million, respectively.

 

There were no loans greater than 90 days delinquent and still accruing interest at June 30, 2022 and December 31, 2021. The following tables are by loan category and present loans past due and on non-accrual status as of June 30, 2022 and December 31, 2021:  

 

           Greater than                 
(Dollars in thousands)  30-59 Days   60-89 Days   90 Days and       Total         
June 30, 2022  Past Due   Past Due   Accruing   Nonaccrual   Past Due   Current   Total Loans 
                             
Commercial   $242   $513   $—   $4,150   $4,905   $65,084   $69,989 
Real estate:                                   
Construction    —    —    —    —    —    94,159    94,159 
Mortgage-residential    81    275    —    38    394    46,373    46,767 
Mortgage-commercial    —    —    —    0    —    662,779    662,779 
Consumer:                                   
Home equity    1,043    5    —    163    1,211    26,137    27,348 
Other    —    1    —    —    1    15,289    15,290 
Total  $1,366   $794   $—   $4,351   $6,511   $909,821   $916,332 
                                    
           Greater than                 
(Dollars in thousands)  30-59 Days   60-89 Days   90 Days and       Total         
December 31, 2021  Past Due   Past Due   Accruing   Nonaccrual   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 

 

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 $16.1 million at December 31, 2020, to zero at December 31, 2021. Loan deferrals remained at zero at June 30, 2022.

 

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, 2022 and June 30, 2021. 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 purchased credit-impaired loans for the three months ended June 30, 2022 and June 30, 2021 are as follows:

 

 

(Dollars in thousands)  Three Months
Ended
June 30, 2022		   Three Months
Ended
June 30, 2021		 
         
Accretable yield, beginning of period  $56   $86 
Accretion   (7)   (7)
Accretable yield, end of period  $49   $79 
           
(Dollars in thousands)  Six Months
Ended
June 30, 2022		   Six Months
Ended
June 30, 2021		 
         
Accretable yield, beginning of period  $64   $93 
Accretion   (15)   (14)
Accretable yield, end of period  $49   $79 

 

At June 30, 2022 and December 31, 2021, the recorded investment in purchased impaired loans was $108 thousand and $109 thousand, respectively. The unpaid principal balance was $142 thousand and $152 thousand at June 30, 2022 and December 31, 2021, respectively. At June 30, 2022 and December 31, 2021, these loans were all secured by commercial real estate.