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LOANS
 12 Months Ended
Dec. 31, 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 $1.9 million and $1.4 million as of December 31, 2022 and December 31, 2021, respectively.

   December 31, 
(Dollars in thousands)  2022   2021 
Commercial, financial and agricultural  $72,409   $69,952 
Real estate:          
Construction   91,223    94,969 
Mortgage-residential   65,759    45,498 
Mortgage-commercial   709,218    617,464 
Consumer:          
Home equity   28,723    27,116 
Other   13,525    8,703 
Total  $980,857   $863,702 

 

Commercial, financial, and agricultural category includes $219.0 thousand and $1.5 million in PPP loans, net of deferred fees and costs, as of December 31, 2022 and December 31, 2021, respectively.

Activity in the allowance for loan losses was as follows:

 

   Years ended December 31, 
(Dollars in thousands)  2022   2021   2020 
Balance at the beginning of year  $11,179   $10,389   $6,627 
Provision for (release of) loan losses   (152)   335    3,663 
Charged off loans   (68)   (182)   (110)
Recoveries   377    637    209 
Balance at end of year  $11,336   $11,179   $10,389 

 

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, 2022, December 31, 2021 and December 31, 2020 follows:

 

(Dollars in thousands)  Commercial   Real estate
Construction		   Real estate
Mortgage
Residential		   Real estate
Mortgage
Commercial		   Consumer
Home
equity		   Consumer
Other		   Unallocated   Total 
2022                                        
Allowance for loan losses:                                        
Beginning balance  $853   $113   $560   $8,570   $333   $126   $624   $11,179 
Charge-offs   —    —    —    —    (1)   (67)   —    (68)
Recoveries   17    —    6    325    13    16    —    377 
Provisions   (21)   (38)   157    (326)   (31)   95    12    (152)
Ending balance  $849   $75   $723   $8,569   $314   $170   $636   $11,336 
                                         
Ending balances:                                        
Individually evaluated for impairment  $—   $—   $—   $—   $—   $—   $—   $— 
                                         
Collectively evaluated for impairment   (849)   75    723    8,569    314    170    636    11,336 
                                         
Loans receivable:                                        
Ending balance-total  $72,409   $91,223   $65,759   $709,218   $28,723   $13,525   $—   $980,857 
                                         
Ending balances:                                        
Individually evaluated for impairment   29    —    34    4,752    168    —    —    4,983 
                                         
Collectively evaluated for impairment   72,380    91,223    65,725    704,466    28,555    13,525    —    975,874 
(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   $—   $—   $—   $1 
                                         
Collectively evaluated for impairment   853    113    560    8,569    333    126    624    11,178 
                                         
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 

 

At December 31, 2022 and December 31, 2021, there were $5.5 million of loans and $9.5 million 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 $78.1 thousand and $125.6 thousand at December 31, 2022 and December 31, 2021 respectively. 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, 2022, December 31, 2021 and December 31, 2020 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, 2022  Recorded
Investment		   Unpaid
Principal
Balance		   Related
Allowance		   Average
Recorded
Investment		   Interest
Income
Recognized		 
With no allowance recorded:                         
Commercial  $29   $29   $—   $27   $2 
Real estate:                         
Construction   —    —    —    —    — 
Mortgage-residential   34    51    —    34    3 
Mortgage-commercial   4,752    5,260    —    4,747    464 
Consumer:                         
Home Equity   168    168    —    167    9 
Other   —    —    —    —    — 
                          
With an allowance recorded:                         
Commercial   —    —    —    —    — 
Real estate:                         
Construction   —    —    —    —    — 
Mortgage-residential   —    —    —    —    — 
Mortgage-commercial   —    —    —    —    — 
Consumer:                         
Home Equity   —    —    —    —    — 
Other   —    —    —    —    — 
                          
Total:                         
Commercial   29    29    —    27    2 
Real estate:                         
Construction   —    —    —    —    — 
Mortgage-residential   34    51    —    34    3 
Mortgage-commercial   4,752    5,260    —    4,747    464 
Consumer:                         
Home Equity   168    168    —    167    9 
Other   —    —    —    —    — 
   $4,983   $5,508   $—   $4,975   $478 
(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  

 

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, 2022 and December 31, 2021, 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, 2022 and December 31, 2021, no loans were classified as doubtful.

 

(Dollars in thousands)                    
December 31, 2022  Pass   Special
Mention		   Substandard   Doubtful   Total 
Commercial, financial & agricultural  $72,333   $47   $29   $—   $72,409 
Real estate:   —    —    —    —    — 
Construction   91,223    —    —    —    91,223 
Mortgage – residential   65,505    220    34    —    65,759 
Mortgage – commercial   704,357    80    4,781    —    709,218 
Consumer:   —    —    —    —    — 
Home Equity   27,531    117    1,075    —    28,723 
Other   13,269    93    163    —    13,525 
Total  $974,218   $557   $6,082   $—   $980,857 
                          
(Dollars in thousands)                    
       Special             
December 31, 2021  Pass   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 

The following tables are by loan category and present loans past due and on non-accrual status as of December 31, 2022 and December 31, 2021:

 

(Dollars in thousands)
December 31, 2022		  30-59
Days
Past Due		   60-89
Days
Past Due		   Greater than
90 Days and
Accruing		   Nonaccrual   Total Past
Due		   Current   Total
Loans		 
Commercial  $87   $—   $—   $29   $116   $72,293   $72,409 
Real estate:                                   
Construction   —    —    —    —    —    91,223    91,223 
Mortgage-residential   327    —    —    34    361    65,398    65,759 
Mortgage-commercial   46    8    —    4,664    4,718    704,500    709,218 
Consumer:                                   
Home equity   —    —    —    168    168    28,555    28,723 
Other   96    —    2    —    98    13,427    13,525 
Total  $556   $8   $2   $4,895   $5,461   $975,396   $980,857 
                                    
(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 

 

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, 2022 and December 31, 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. TDRs that are still accruing and included in impaired loans at December 31, 2022 and at December 31, 2021 amounted to $88.2 thousand and $1.4 million, respectively

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, 2022, 2021, and 2020 follows:

 

(Dollars in thousands)  Year
Ended
December 31,
2022		   Year
Ended
December 31,
2021		   Year
Ended
December 31,
2020		 
Accretable yield, beginning of period  $64   $93   $123 
Additions   —    —    — 
Accretion   (28)   (29)   (30)
Reclassification of non-accretable difference due to improvement in expected cash flows   —    —    — 
Other changes, net   —    —    — 
Accretable yield, end of period  $36   $64   $93 

 

At December 31, 2022 and December 31, 2021, the recorded investment in purchased impaired loans was $91 thousand and $109 thousand, respectively. The unpaid principal balance was $117 thousand and $152 thousand at December 31, 2022 and December 31, 2021, respectively. At December 31, 2022 and December 31, 2021, 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, 2022 and December 31, 2021.

 

   For the years ended
December 31,		 
(Dollars in thousands)  2022   2021 
Balance, beginning of year  $2,809   $3,297 
New Loans   3    4 
Less loan repayments   623    492 
Balance, end of year  $2,189   $2,809