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LOANS
 12 Months Ended
Dec. 31, 2023
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 $2.2 million and $1.9 million as of December 31, 2023 and December 31, 2022, respectively.

         
   December 31, 
(Dollars in thousands)  2023   2022 
Commercial  $78,134   $72,409 
Real estate:          
Construction   118,225    91,223 
Mortgage-residential   94,796    65,759 
Mortgage-commercial   791,947    709,218 
Consumer:          
Home equity   34,752    28,723 
Other   16,165    13,525 
Total  $1,134,019   $980,857 

 

Commercial category includes $151.0 thousand and $219.0 thousand in PPP loans, net of deferred fees and costs, as of December 31, 2023 and December 31, 2022, respectively.

 

Activity in the allowance for credit losses was as follows:

                   
   Years ended December 31, 
(Dollars in thousands)  2023   2022   2021 
Balance at the beginning of year  $11,336   $11,179   $10,389 
Adjustment for adoption of ASU 2016-13   (14)          
Provision for (release of) credit losses   939    (152)   335 
Charged off loans   (87)   (68)   (182)
Recoveries   93    377    637 
Balance at end of year  $12,267   $11,336   $11,179 

 

The detailed activity in the allowance for credit losses and the recorded investment in loans receivable as of and for the years ended December 31, 2023, December 31, 2022 and December 31, 2021 follows:

($ in thousands)  Commercial   Real Estate
Construction		   Real Estate
Mortgage
Residential		   Real Estate
Mortgage
Commercial		   Consumer
Home
Equity		   Consumer
Other		   Unallocated   Total
Loans		 
Balance at December 31, 2022  $849   $75   $723   $8,569   $314   $170   $636   $11,336 
Adjustment to allowance for adoption of ASU 2016-13   193    1,075    32    (883)   166    39    (636)   (14)
Charge-offs   (20)   —    —    —    —    (67)   —    (87)
Recoveries   5    2    9    37    22    18    —    93 
Provision for credit losses   (92)   185    358    423    (30)   95    —    939 
Balance at December 31, 2023  $935   $1,337   $1,122   $8,146   $472   $255    —   $12,267 
(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 credit 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 

 

The following table presents an allocation of the allowance for credit losses at the end of each of the past three years. The allocation is calculated on an approximate basis and is not necessarily indicative of future losses or allocations. The entire amount is available to absorb losses occurring in any category of loans.

 

Allocation of the Allowance for Credit Losses

 

   2023   2022   2021 
(Dollars in thousands)  Amount   % of
loans in
category		   Amount   % of
loans in
category		   Amount   % of
loans in
category		 
Commercial  $935    7.6%  $849    7.9%  $853    8.1%
Real Estate Construction   1,337    10.9%   75    0.7%   113    1.1%
Real Estate Mortgage:                              
Commercial   8,146    66.4%   8,569    80.1%   8,570    81.2%
Residential   1,122    9.2%   723    6.8%   560    5.3%
Consumer - Home Equity   472    3.8%   314    2.9%    333    3.2% 
Consumer - Other   255    2.1%   170    1.6%   126    1.2%
Unallocated   —    N/A    636    N/A    624    N/A 
Total  $12,267    100.0%  $11,336    100.0%  $11,179    100.0%

 

The following tables are by loan category and present at December 31, 2022 and December 31, 2021 loans considered impaired under FASB ASC 310, “Accounting by Creditors for Impairment of a Loan.” Impairment includes performing troubled debt restructurings.

 

The following table presents information related to the average recorded investment and interest income recognized on impaired loans, excluding PCI loans, at December 31, 2022 and December 31, 2021.

 

(Dollars in thousands)        
December 31, 2022  Average
Recorded
Investment		   Interest
Income
Recognized		 
With no allowance recorded:          
Commercial  $27   $2 
Real estate:          
Construction   —    — 
Mortgage-residential   34    3 
Mortgage-commercial   4,747    464 
Consumer:          
Home Equity   167    9 
Other   —    — 
           
With an allowance recorded:          
Commercial   —    — 
Real estate:          
Construction   —    — 
Mortgage-residential   —    — 
Mortgage-commercial   —    — 
Consumer:          
Home Equity   —    — 
Other   —    — 
           
Total:          
Commercial   27    2 
Real estate:          
Construction   —    — 
Mortgage-residential   34    3 
Mortgage-commercial   4,747    464 
Consumer:          
Home Equity   167    9 
Other   —    — 
   $4,975   $478 
(Dollars in thousands)        
December 31, 2021  Average
Recorded
Investment		   Interest
Income
Recognized		 
With no allowance recorded:          
Commercial   $—   $— 
Real estate:          
Construction   —    — 
Mortgage-residential    131    6 
Mortgage-commercial    1,748    223 
Consumer:          
Home Equity    —    — 
Other    —    — 
           
With an allowance recorded:          
Commercial    —    — 
Real estate:          
Construction    —    — 
Mortgage-residential    —    — 
Mortgage-commercial    39    5 
Consumer:          
Home Equity    —    — 
Other    —    — 
           
Total:          
Commercial    —    — 
Real estate:          
Construction    —    — 
Mortgage-residential    131    6 
Mortgage-commercial    1,787    228 
Consumer:          
Home Equity    —    — 
Other    —    — 
   $1,918   $234 

 

The following tables present loans individually evaluated for impairment by class of loans, excluding PCI loans, as of December 31, 2022.

(Dollars in thousands)            
December 31, 2022  Recorded
Investment		   Unpaid
Principal
Balance		   Related
Allowance		 
With no allowance recorded:               
Commercial  $29   $29   $— 
Real estate:               
Construction   —    —    — 
Mortgage-residential   34    51    — 
Mortgage-commercial   4,752    5,260    — 
Consumer:               
Home Equity   168    168    — 
Other   —    —    — 
                
With an allowance recorded:               
Commercial   —    —    — 
Real estate:               
Construction   —    —    — 
Mortgage-residential   —    —    — 
Mortgage-commercial   —    —    — 
Consumer:               
Home Equity   —    —    — 
Other   —    —    — 
                
Total:               
Commercial   29    29    — 
Real estate:               
Construction   —    —    — 
Mortgage-residential   34    51    — 
Mortgage-commercial   4,752    5,260    — 
Consumer:               
Home Equity   168    168    — 
Other   —    —    — 
   $1,694   $3,705   $— 

The following table shows the amortized cost basis at December 31, 2023 of the loans modified for borrowers experiencing financial difficulty after December 31, 2022 segregated by loan category and describes the financial effect of the modification made for a borrower experiencing financial difficulty.

Schedule of Amortized Cost of Loans, by Loan Category, Modified for Borrowers with Financial Difficulty

    December 31, 2023  
(Dollars in thousands)   Amortized cost basis     % of Total Loan Type     Financial effect
Real Estate Mortgage Residential     200       0.21 %   Deferred two monthly payments that are added to the end of the original loan term.
Total Loans   $ 200     $ 0.21 %    

 

The following table depicts the performance of loans that have been modified in the last 12 months.

             
(Dollars in thousands)      30-89 Days   Greater than 90
Days		 
December 31, 2023  Current   Past Due   Past Due 
Real Estate Mortgage Residential   —    200    — 
Total Loans  $—   $200   $— 

 

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.

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of December 31, 2023:

                                     
   Term Loans by year of Origination 
($ in thousands)  2019   2020   2021   2022   2023   Prior   Revolving   Revolving
Converted
to Term		   Total 
Commercial                                             
Pass  $1,149   $1,375   $23,226   $9,018   $12,950   $9,230   $21,033   $49   $78,030 
Special mention   —    —    —    —    —    26    —    —    26 
Substandard   —    —    78    —    —    —    —    —    78 
Total commercial   1,149    1,375    23,304    9,018    12,950    9,256    21,033    49    78,134 
                                              
Current period gross write-offs   —    20    —    —    —    —    —    —    20 
Real estate construction                                             
Pass   6,864    —    5,074    39,514    47,992    —    18,781    —    118,225 
Total real estate construction   6,864    —    5,074    39,514    47,992    —    18,781    —    118,225 
                                              
Current period gross write-offs   —    —    —    —    —    —    —    —    — 
                                              
Real estate mortgage-residential                                             
Pass   1,894    10,548    6,219    28,843    28,517    8,420    977    8,962    94,380 
Special mention   —    25    —    —    —    177    —    —    202 
Substandard   —    —    —    —    —    214    —    —    214 
Total real estate mortgage-residential   1,894    10,573    6,219    28,843    28,517    8,811    977    8,962    94,796 
                                              
Current period gross write-offs   —    —    —    —    —    —    —    —    — 
                                              
Real estate mortgage-commercial                                             
Pass   47,962    95,120    136,892    201,380    106,125    189,983    14,038    329    791,829 
Special mention   —    —    —    —    —    21    —    —    21 
Substandard   —    —    —    —    —    97    —    —    97 
Total real estate mortgage-commercial   47,962    95,120    136,892    201,380    106,125    190,101    14,038    329    791,947 
                                              
Current period gross write-offs   —    —    —    —    —    —    —    —    — 
                                              
Consumer - home equity                                             
Pass   —    —    —    —    —    —    33,621    —    33,621 
Special mention   —    —    —    —    —    —    67    —    67 
Substandard   —    —    —    —    —    —    1,064    —    1,064 
Total consumer - home equity   —    —    —    —    —    —    34,752    —    34,752 
                                              
Current period gross write-offs   —    —    —    —    —    —    —    —    — 
                                              
Consumer - other                                             
Pass   420    203    435    1,164    2,043    902    10,982    —    16,149 
Special mention   —    —    —    —    16    —    —    —    16 
Substandard   —    —    —    —    —    —    —    —    — 
Total consumer - other   420    203    435    1,164    2,059    902    10,982    —    16,165 
                                              
Current period gross write-offs   —    —    —    —    —    —    67    —    67 

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, 2023 and December 31, 2022, no loans were classified as doubtful. As of December 31, 2022, and based on the most recent analysis performed, the risk category of loans by class of loans is shown in the table below.

                     
(Dollars in thousands)                    
       Special             
December 31, 2022  Pass   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 

The following tables are by loan category and present loans past due and on non-accrual status as of December 31, 2023 and December 31, 2022:

 

Schedule of Loan Category and Aging Analysis of Loans

(Dollars in thousands)
December 31, 2023		  30-59
Days
Past Due		   60-89
Days
Past Due		   Greater than
90 Days and
Accruing		   Nonaccrual   Total Past
Due		   Current   Total
Loans		 
Commercial  $19   $7   $—   $24   $50   $78,084   $78,134 
Real estate:                                   
Construction   —    —    —    —    —    118,225    118,225 
Mortgage-residential   244    15    214    —    473    94,323    94,796 
Mortgage-commercial   67    124    —    —    191    791,756    791,947 
Consumer:                                   
Home equity   —    —    —    3    3    34,749    34,752 
Other   22    —    1    —    23    16,142    16,165 
Total  $352   $146   $215   $27   $740   $1,133,279   $1,134,019 
                                    
(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 

 

The following table is a summary of the Company’s non-accrual loans by major categories for the periods indicated.

                 
   CECL   Incurred Loss 
   December 31, 2023   December 31, 2022 
(Dollars in thousands)  Non-accrual
Loans with
No Allowance		   Non-accrual
Loans with an
Allowance		   Total
Non-accrual
Loans		   Non-accrual Loans 
Commercial  $—   $24   $24   $29 
Real Estate:                    
Construction   —    —    —    — 
Mortgage-Residential   —    —    —    34 
Mortgage-Commercial   —    —    —    4,664 
Consumer Home Equity   —    3    3    168 
Consumer Other   —    —    —    — 
Total Loans  $—   $27   $27   $4,895 

 

There were no collateral dependent loans that were individually evaluated for year ended December 31, 2023.

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, 2023 and December 31, 2022.

         
   For the years ended
December 31,		 
(Dollars in thousands)  2023   2022 
Balance, beginning of year  $2,189   $2,809 
New Loans   —    3 
Less loan repayments   1,131    623 
Balance, end of year  $1,058   $2,189 

  

Unfunded Commitments

The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e., commitment cannot be cancelled at any time). The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans. The allowance for credit losses for unfunded loan commitments of $597,000 at December 31, 2023 is separately classified on the balance sheet within Other Liabilities.

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the year ended December 31, 2023.

(Dollars in thousands)  Total Allowance
for Credit
Losses -
Unfunded
Commitments		 
Balance, December 31, 2022  $— 
Adjustment to allowance for unfunded commitments for adoption of ASU 2016-13   398 
Provision for unfunded commitments   199 
Balance, December 31, 2023  $597