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Loans and Allowance for Loan Losses | 6 Months Ended
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Jun. 30, 2022
Receivables [Abstract] |
Loans and Allowance for Loan Losses | Loans and Allowance for Loan Losses Loans Major classifications within the Company’s held for investment loan portfolio at June 30, 2022 and December 31, 2021 is as follows:
(in thousands) | June 30, 2022 |  | December 31, 2021
Commercial, financial, and agricultural(a) | $ | 242,701 |  |  | $ | 217,214 |
Real estate construction − residential | 23,629 |  | 27,920
Real estate construction − commercial | 119,079 |  | 91,369
Real estate mortgage − residential | 312,086 |  | 279,346
Real estate mortgage − commercial | 706,700 |  | 663,256
Installment and other consumer | 23,633 |  | 23,028
Total loans held for investment | $ | 1,427,828 |  |  | $ | 1,302,133 |
(a)Includes $1.1 million and $8.4 million of Small Business Administration Paycheck Protection (SBA PPP) loans, net as of June 30, 2022 and December 31, 2021, respectively. The Bank grants real estate, commercial, installment, and other consumer loans to customers located within the Missouri communities surrounding Jefferson City, Columbia, Clinton, Warsaw, Springfield, St. Louis, and the greater Kansas City metropolitan area. As such, the Bank is susceptible to changes in the economic environment in these communities. The Bank does not have a concentration of credit in any one economic sector. Installment and other consumer loans consist primarily of the financing of automotive vehicles. At June 30, 2022, loans of $585.5 million were pledged to the Federal Home Loan Bank (FHLB) as collateral for borrowings and letters of credit. Allowance for Loan Losses The following table illustrates the changes in the allowance for loan losses by portfolio segment:
| Three Months Ended June 30, 2022
(in thousands) | Commercial, Financial, & Agricultural |  | Real Estate Construction - Residential |  | Real Estate Construction - Commercial |  | Real Estate Mortgage - Residential |  | Real Estate Mortgage - Commercial |  | Installment and Other Consumer |  | Un- allocated |  | Total
Balance at beginning of period | $ | 2,830 |  |  | $ | 60 |  |  | $ | 664 |  |  | $ | 2,578 |  |  | $ | 7,692 |  |  | $ | 273 |  |  | $ | 182 |  |  | $ | 14,279 |
Additions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for (release of ) loan losses | 184 |  | 6 |  | 98 |  | 149 |  | 821 |  | 73 |  | (131) |  | 1,200
Deductions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans charged off | 25 |  | — |  | — |  | — |  | 104 |  | 59 |  | — |  | 188
Less recoveries on loans | (16) |  | — |  | — |  | (20) |  | (1) |  | (25) |  | — |  | (62)
Net loan charge-offs (recoveries) | 9 |  | — |  | — |  | (20) |  | 103 |  | 34 |  | — |  | 126
Balance at end of period | $ | 3,005 |  |  | $ | 66 |  |  | $ | 762 |  |  | $ | 2,747 |  |  | $ | 8,410 |  |  | $ | 312 |  |  | $ | 51 |  |  | $ | 15,353 |
| Three Months Ended June 30, 2021
(in thousands) | Commercial, Financial, & Agricultural |  | Real Estate Construction - Residential |  | Real Estate Construction - Commercial |  | Real Estate Mortgage - Residential |  | Real Estate Mortgage - Commercial |  | Installment and Other Consumer |  | Un- allocated |  | Total
Balance at beginning of period | $ | 4,676 |  |  | $ | 309 |  |  | $ | 532 |  |  | $ | 2,594 |  |  | $ | 9,904 |  |  | $ | 245 |  |  | $ | 101 |  |  | $ | 18,361 |
Additions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for (release of ) loan losses | 655 |  | (58) |  | (37) |  | (130) |  | 14 |  | 38 |  | (82) |  | 400
Deductions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans charged off | 28 |  | — |  | — |  | 4 |  | 3 |  | 46 |  | — |  | 81
Less recoveries on loans | (33) |  | — |  | — |  | (7) |  | — |  | (15) |  | — |  | (55)
Net loan charge-offs (recoveries) | (5) |  | — |  | — |  | (3) |  | 3 |  | 31 |  | — |  | 26
Balance at end of period | $ | 5,336 |  |  | $ | 251 |  |  | $ | 495 |  |  | $ | 2,467 |  |  | $ | 9,915 |  |  | $ | 252 |  |  | $ | 19 |  |  | $ | 18,735 |
| Six Months Ended June 30, 2022
(in thousands) | Commercial, Financial, & Agricultural |  | Real Estate Construction - Residential |  | Real Estate Construction - Commercial |  | Real Estate Mortgage - Residential |  | Real Estate Mortgage - Commercial |  | Installment and Other Consumer |  | Un- allocated |  | Total
Balance at beginning of period | $ | 2,717 |  |  | $ | 137 |  |  | $ | 588 |  |  | $ | 2,482 |  |  | $ | 10,662 |  |  | $ | 256 |  |  | $ | 61 |  |  | $ | 16,903 |
Additions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for (release of ) loan losses | 312 |  | (71) |  | 174 |  | 242 |  | (2,077) |  | 130 |  | (10) |  | (1,300)
Deductions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans charged off | 60 |  | — |  | — |  | — |  | 178 |  | 116 |  | — |  | 354
Less recoveries on loans | (36) |  | — |  | — |  | (23) |  | (3) |  | (42) |  | — |  | (104)
Net loan charge-offs (recoveries) | 24 |  | — |  | — |  | (23) |  | 175 |  | 74 |  | — |  | 250
Balance at end of period | $ | 3,005 |  |  | $ | 66 |  |  | $ | 762 |  |  | $ | 2,747 |  |  | $ | 8,410 |  |  | $ | 312 |  |  | $ | 51 |  |  | $ | 15,353 |
| Six Months Ended June 30, 2021
(in thousands) | Commercial, Financial, & Agricultural |  | Real Estate Construction - Residential |  | Real Estate Construction - Commercial |  | Real Estate Mortgage - Residential |  | Real Estate Mortgage - Commercial |  | Installment and Other Consumer |  | Un- allocated |  | Total
Balance at beginning of period | $ | 5,121 |  |  | $ | 213 |  |  | $ | 475 |  |  | $ | 2,679 |  |  | $ | 9,354 |  |  | $ | 264 |  |  | $ | 7 |  |  | $ | 18,113 |
Additions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for (release of ) loan losses | 87 |  | 25 |  | 20 |  | (384) |  | 587 |  | 53 |  | 12 |  | 400
Deductions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans charged off | 55 |  | — |  | — |  | 3 |  | 26 |  | 104 |  | — |  | 188
Less recoveries on loans | (183) |  | (13) |  | — |  | (175) |  | — |  | (39) |  | — |  | (410)
Net loan charge-offs (recoveries) | (128) |  | (13) |  | — |  | (172) |  | 26 |  | 65 |  | — |  | (222)
Balance at end of period | $ | 5,336 |  |  | $ | 251 |  |  | $ | 495 |  |  | $ | 2,467 |  |  | $ | 9,915 |  |  | $ | 252 |  |  | $ | 19 |  |  | $ | 18,735 |
Loans, or portions of loans, are charged off to the extent deemed uncollectible or a loss is confirmed. Loan charge-offs reduce the allowance for loan losses, and recoveries of loans previously charged off are added back to the allowance. If management determines that it is probable that all amounts due on a loan will not be collected under the original terms of the loan agreement, the loan is considered to be impaired. These loans are evaluated individually for impairment, and in conjunction with current economic conditions and loss experience, specific reserves are estimated as further discussed below. Loans not individually evaluated are aggregated by risk characteristics and reserves are recorded using a consistent methodology that considers historical loan loss experience by loan type, delinquencies, current economic conditions, loan risk ratings and industry concentration. These historical loss rates for each risk group are used as the starting point to determine loss rates for measurement purposes. The historical loan loss rates are multiplied by loss emergence periods (LEP) which represent the estimated time period between a borrower first experiencing financial difficulty and the recognition of a loss. Management's look-back period began with loss history in the first quarter 2012 as the starting point through the current quarter and it will continue to include this starting point going forward. The look-back period will continue to be evaluated and will be adjusted once a sustained loss-producing downturn is recognized and found to be representative of historical losses expected for the current portfolio. The Company’s methodology includes qualitative risk factors that allow management to adjust its estimates of losses based on the most recent information available and to address other limitations in the quantitative component based on historical loss rates. Such risk factors are generally reviewed and updated quarterly, as appropriate, and are adjusted to reflect changes in national and local economic conditions and developments, the nature, volume and terms of loans in the portfolio, including changes in volume and severity of past due loans, the volume of non-accrual loans, and the volume and severity of adversely classified or graded loans, loan concentrations, assessment of trends in collateral values, assessment of changes in the quality of the Company’s internal loan review department, and changes in lending policies and procedures, including underwriting standards and collections, charge-off and recovery practices. The funding of $88.4 million and $47.5 million in SBA PPP loans during 2020 and 2021, respectively, required management to assess the methodology that would be adopted in regard to the allowance for loan losses applicable to these loans. Because the SBA PPP loans are expected to be mostly paid off within a year and carry a 100% credit guarantee from the SBA, management determined that no allowance for loan losses was deemed necessary for these loans. At June 30, 2022, the net balance of the PPP loans totaled $1.1 million. All SBA PPP loans have a 1% interest rate and the Company earns a fee based upon a tiered schedule corresponding with the amount of the loan to the borrower, which is deferred and recognized over the life of the loan. The PPP loan may be forgiven by the SBA if the borrower meets certain criteria as defined by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Company reports these loans at their principal amount outstanding, net of unearned income, unamortized deferred loan fee income and loan origination costs. Interest is accrued as earned and loan origination fees and direct costs are deferred and accreted or amortized into interest income, as an adjustment to the yield, over the life of the loan using the level yield method. When a PPP loan is paid off or forgiven by the SBA, the remaining unaccreted or unamortized net origination fees or costs are immediately recognized into income. The following table illustrates the allowance for loan losses and recorded investment by portfolio segment:
(in thousands) | Commercial, Financial, and Agricultural |  | Real Estate Construction - Residential |  | Real Estate Construction - Commercial |  | Real Estate Mortgage - Residential |  | Real Estate Mortgage - Commercial |  | Installment and Other Consumer |  | Un- allocated |  | Total
June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 38 |  |  | $ | — |  |  | $ | 12 |  |  | $ | 190 |  |  | $ | 40 |  |  | $ | 27 |  |  | $ | — |  |  | $ | 307 |
Collectively evaluated for impairment | 2,967 |  | 66 |  | 750 |  | 2,557 |  | 8,370 |  | 285 |  | 51 |  | 15,046
Total | $ | 3,005 |  |  | $ | 66 |  |  | $ | 762 |  |  | $ | 2,747 |  |  | $ | 8,410 |  |  | $ | 312 |  |  | $ | 51 |  |  | $ | 15,353 |
Loans outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 313 |  |  | $ | — |  |  | $ | 96 |  |  | $ | 2,283 |  |  | $ | 16,413 |  |  | $ | 209 |  |  | $ | — |  |  | $ | 19,314 |
Collectively evaluated for impairment | 242,388 |  | 23,629 |  | 118,983 |  | 309,803 |  | 690,287 |  | 23,424 |  | — |  | 1,408,514
Total | $ | 242,701 |  |  | $ | 23,629 |  |  | $ | 119,079 |  |  | $ | 312,086 |  |  | $ | 706,700 |  |  | $ | 23,633 |  |  | $ | — |  |  | $ | 1,427,828 |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 42 |  |  | $ | — |  |  | $ | 13 |  |  | $ | 166 |  |  | $ | 2,815 |  |  | $ | 8 |  |  | $ | — |  |  | $ | 3,044 |
Collectively evaluated for impairment | 2,675 |  | 137 |  | 575 |  | 2,316 |  | 7,847 |  | 248 |  | 61 |  | 13,859
Total | $ | 2,717 |  |  | $ | 137 |  |  | $ | 588 |  |  | $ | 2,482 |  |  | $ | 10,662 |  |  | $ | 256 |  |  | $ | 61 |  |  | $ | 16,903 |
Loans outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 341 |  |  | $ | — |  |  | $ | 105 |  |  | $ | 2,391 |  |  | $ | 24,357 |  |  | $ | 60 |  |  | $ | — |  |  | $ | 27,254 |
Collectively evaluated for impairment | 216,873 |  | 27,920 |  | 91,264 |  | 276,955 |  | 638,899 |  | 22,968 |  | — |  | 1,274,879
Total | $ | 217,214 |  |  | $ | 27,920 |  |  | $ | 91,369 |  |  | $ | 279,346 |  |  | $ | 663,256 |  |  | $ | 23,028 |  |  | $ | — |  |  | $ | 1,302,133 |
Impaired Loans Loans evaluated under Accounting Standards Codification (ASC) 310-10-35 include loans which are individually evaluated for impairment. All other loans are collectively evaluated for impairment under ASC 450-20. Impaired loans individually evaluated for impairment totaled $19.3 million and $27.3 million at June 30, 2022 and December 31, 2021, respectively, and are comprised of loans on non-accrual status and loans which have been classified as troubled debt restructurings (TDRs). The net carrying value of impaired loans is based on the fair values of collateral obtained through independent appraisals or internal evaluations, or by discounting the total expected future cash flows. At June 30, 2022, $16.0 million of impaired loans were evaluated based on the fair value less estimated selling costs of the loans' collateral compared to $24.2 million at December 31, 2021. Once the impairment amount is calculated, a specific reserve allocation is recorded. At June 30, 2022, $0.3 million of the Company’s allowance for loan losses was allocated to impaired loans totaling $19.3 million compared to $3.0 million of the Company’s allowance for loan losses allocated to impaired loans totaling $27.3 million at December 31, 2021. Management determined that $16.0 million, or 83%, of total impaired loans required no reserve allocation at June 30, 2022 compared to $16.6 million, or 61%, at December 31, 2021, primarily due to adequate collateral values, acceptable payment history and adequate cash flow ability. The categories of impaired loans at June 30, 2022 and December 31, 2021 are as follows:
(in thousands) | June 30, 2022 |  | December 31, 2021
Non-accrual loans | $ | 17,648 |  |  | $ | 25,459 |
Performing TDRs | 1,666 |  | 1,795
Total impaired loans | $ | 19,314 |  |  | $ | 27,254 |
The following tables provide additional information about impaired loans at June 30, 2022 and December 31, 2021, respectively, segregated between loans for which an allowance has been provided and loans for which no allowance has been provided.
(in thousands) | Recorded Investment |  | Unpaid Principal Balance |  | Specific Reserves
June 30, 2022 |  |  |  |  |
With no related allowance recorded: |  |  |  |  |
Real estate mortgage − commercial | $ | 15,992 |  |  | $ | 16,847 |  |  | $ | — |
Total | $ | 15,992 |  |  | $ | 16,847 |  |  | $ | — |
With an allowance recorded: |  |  |  |  |
Commercial, financial and agricultural | $ | 313 |  |  | $ | 352 |  |  | $ | 38 |
Real estate construction − commercial | 96 |  | 132 |  | 12
Real estate mortgage − residential | 2,283 |  | 2,775 |  | 190
Real estate mortgage − commercial | 421 |  | 503 |  | 40
Installment and other consumer | 209 |  | 210 |  | 27
Total | $ | 3,322 |  |  | $ | 3,972 |  |  | $ | 307 |
Total impaired loans | $ | 19,314 |  |  | $ | 20,819 |  |  | $ | 307 |
(in thousands) | Recorded Investment |  | Unpaid Principal Balance |  | Specific Reserves
December 31, 2021 |  |  |  |  |
With no related allowance recorded: |  |  |  |  |
Real estate mortgage − residential | $ | 1,034 |  |  | $ | 1,152 |  |  | $ | — |
Real estate mortgage − commercial | 15,593 |  | 16,057 |  | —
Total | $ | 16,627 |  |  | $ | 17,209 |  |  | $ | — |
With an allowance recorded: |  |  |  |  |
Commercial, financial and agricultural | $ | 341 |  |  | $ | 374 |  |  | $ | 42 |
Real estate construction − commercial | 105 |  | 138 |  | 13
Real estate mortgage − residential | 1,357 |  | 1,730 |  | 166
Real estate mortgage − commercial | 8,764 |  | 9,142 |  | 2,815
Installment and other consumer | 60 |  | 61 |  | 8
Total | $ | 10,627 |  |  | $ | 11,445 |  |  | $ | 3,044 |
Total impaired loans | $ | 27,254 |  |  | $ | 28,654 |  |  | $ | 3,044 |
The following table presents by class, information related to the average recorded investment and interest income recognized on impaired loans during the periods indicated.
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
(in thousands) | Average Recorded Investment |  | Interest Recognized For the Period Ended |  | Average Recorded Investment |  | Interest Recognized For the Period Ended |  | Average Recorded Investment |  | Interest Recognized For the Period Ended |  | Average Recorded Investment |  | Interest Recognized For the Period Ended
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural | $ | — |  |  | $ | — |  |  | $ | 1,826 |  |  | $ | 5 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,834 |  |  | $ | 13 |
Real estate mortgage − residential | — |  |  | — |  |  | 1,266 |  |  | 12 |  |  | — |  |  | — |  |  | 1,391 |  |  | 21 |
Real estate mortgage − commercial | 15,712 |  |  | — |  |  | 9,459 |  |  | — |  |  | 15,679 |  |  | — |  |  | 9,458 |  |  | — |
Total | $ | 15,712 |  |  | $ | — |  |  | $ | 12,551 |  |  | $ | 17 |  |  | $ | 15,679 |  |  | $ | — |  |  | $ | 12,683 |  |  | $ | 34 |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural | $ | 315 |  |  | $ | 3 |  |  | $ | 5,553 |  |  | $ | 7 |  |  | $ | 316 |  |  | $ | 5 |  |  | $ | 5,548 |  |  | $ | 13 |
Real estate construction − residential | — |  | — |  | 125 |  | — |  | — |  | — |  | 158 |  | —
Real estate construction − commercial | 97 |  | 16 |  | 165 |  | — |  | 97 |  | 30 |  | 182 |  | —
Real estate mortgage − residential | 2,327 |  | 9 |  | 1,692 |  | 4 |  | 2,333 |  | 16 |  | 1,779 |  | 11
Real estate mortgage − commercial | 426 |  | — |  | 16,323 |  | 8 |  | 428 |  | 1 |  | 16,189 |  | 15
Installment and other consumer | 175 |  | — |  | 58 |  | — |  | 175 |  | — |  | 71 |  | 3
Total | $ | 3,340 |  |  | $ | 28 |  |  | $ | 23,916 |  |  | $ | 19 |  |  | $ | 3,349 |  |  | $ | 52 |  |  | $ | 23,927 |  |  | $ | 42 |
Total impaired loans | $ | 19,052 |  |  | $ | 28 |  |  | $ | 36,467 |  |  | $ | 36 |  |  | $ | 19,028 |  |  | $ | 52 |  |  | $ | 36,610 |  |  | $ | 76 |
The recorded investment varies from the unpaid principal balance primarily due to partial charge-offs taken as a result of current appraisals received. The amount recognized as interest income on impaired loans continuing to accrue interest, primarily related to TDRs, was $28,000 and $52,000 for the three and six months ended June 30, 2022, respectively, compared to $36,000 and $76,000 for the three and six months ended June 30, 2021, respectively. The average recorded investment in impaired loans is calculated on a monthly basis during the periods reported. Delinquent and Non-Accrual Loans The delinquency status of loans is determined based on the contractual terms of the notes. Loans are generally classified as delinquent once payments become 30 days or more past due. The Company’s policy is to discontinue the accrual of interest income on any loan when, in the opinion of management, the ultimate collectability of interest or principal is no longer probable. In general, loans are placed on non-accrual when they become 90 days or more past due. However, management considers many factors before placing a loan on non-accrual status, including the delinquency status of the loan, the overall financial condition of the borrower, the progress of management’s collection efforts and the value of the underlying collateral. Subsequent interest payments received on non-accrual loans are applied to principal if any doubt exists as to the collectability of such principal; otherwise, such receipts are recorded as interest income on a cash basis. Non-accrual loans are returned to accrual status when, in the opinion of management, the financial condition of the borrower indicates that the timely collectability of interest and principal is probable and the borrower demonstrates the ability to pay under the terms of the note through a sustained period of repayment performance, which is generally six months. The following table provides aging information for the Company’s past due and non-accrual loans at June 30, 2022 and December 31, 2021.
(in thousands) | Current or Less Than 30 Days Past Due |  | 30 - 89 Days Past Due |  | 90 Days Past Due And Still Accruing |  | Non-Accrual |  | Total
June 30, 2022 |  |  |  |  |  |  |  |  |
Commercial, Financial, and Agricultural | $ | 242,424 |  |  | $ | 146 |  |  | $ | — |  |  | $ | 131 |  |  | $ | 242,701 |
Real estate construction − residential | 23,629 |  |  | — |  |  | — |  |  | — |  |  | 23,629 |
Real estate construction − commercial | 118,983 |  |  | — |  |  | — |  |  | 96 |  |  | 119,079 |
Real estate mortgage − residential | 310,554 |  |  | 236 |  |  | 167 |  |  | 1,129 |  |  | 312,086 |
Real estate mortgage − commercial | 688,659 |  |  | 1,944 |  |  | — |  |  | 16,097 |  |  | 706,700 |
Installment and Other Consumer | 23,384 |  |  | 52 |  |  | 2 |  |  | 195 |  |  | 23,633 |
Total | $ | 1,407,633 |  |  | $ | 2,378 |  |  | $ | 169 |  |  | $ | 17,648 |  |  | $ | 1,427,828 |
December 31, 2021 |  |  |  |  |  |  |  |  |
Commercial, Financial, and Agricultural | $ | 217,058 |  |  | $ | 3 |  |  | $ | — |  |  | $ | 153 |  |  | $ | 217,214 |
Real estate construction − residential | 27,920 |  | — |  | — |  | — |  | 27,920
Real estate construction − commercial | 91,264 |  | — |  | — |  | 105 |  | 91,369
Real estate mortgage − residential | 277,532 |  | 671 |  | 14 |  | 1,129 |  | 279,346
Real estate mortgage − commercial | 638,982 |  | 245 |  | — |  | 24,029 |  | 663,256
Installment and Other Consumer | 22,848 |  | 137 |  | — |  | 43 |  | 23,028
Total | $ | 1,275,604 |  |  | $ | 1,056 |  |  | $ | 14 |  |  | $ | 25,459 |  |  | $ | 1,302,133 |
Credit Quality The Company categorizes loans into risk categories based upon an internal rating system reflecting management’s risk assessment. Loans are placed on watch status when one or more weaknesses are identified that may result in the borrower being unable to meet repayment terms or when the Company’s credit position could deteriorate at some future date. Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Loans so classified may have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. Such loans are characterized by the distinct possibility that the Company may sustain some loss if the deficiencies are not corrected. A loan is classified as a TDR when a borrower is experiencing financial difficulties that lead to the restructuring of a loan, and the Company grants concessions to the borrower in the restructuring that it would not otherwise consider. Loans classified as TDRs that are accruing interest are classified as performing TDRs. Loans classified as TDRs that are not accruing interest are classified as non-performing TDRs and are included with all other non-accrual loans for presentation purposes. It is the Company’s policy to discontinue the accrual of interest income on loans when management believes that the collection of interest or principal is doubtful. The following table presents the risk categories by class at June 30, 2022 and December 31, 2021.
(in thousands) | Commercial, Financial, & Agricultural |  | Real Estate Construction - Residential |  | Real Estate Construction - Commercial |  | Real Estate Mortgage - Residential |  | Real Estate Mortgage - Commercial |  | Installment and other Consumer |  | Total
At June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
Watch | $ | 8,604 |  |  | $ | — |  |  | $ | 2,837 |  |  | $ | 8,326 |  |  | $ | 48,612 |  |  | $ | — |  |  | $ | 68,379 |
Substandard | 6,244 |  |  | — |  |  | 2,673 |  |  | 524 |  |  | 2,066 |  |  | — |  |  | 11,507 |
Performing TDRs | 182 |  |  | — |  |  | — |  |  | 1,154 |  |  | 316 |  |  | 14 |  |  | 1,666 |
Non-accrual loans | 131 |  |  | — |  |  | 96 |  |  | 1,129 |  |  | 16,097 |  |  | 195 |  |  | 17,648 |
Total | $ | 15,161 |  |  | $ | — |  |  | $ | 5,606 |  |  | $ | 11,133 |  |  | $ | 67,091 |  |  | $ | 209 |  |  | $ | 99,200 |
At December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |
Watch | $ | 9,219 |  |  | $ | — |  |  | $ | 4,304 |  |  | $ | 12,185 |  |  | $ | 43,348 |  |  | $ | — |  |  | $ | 69,056 |
Substandard | 6,284 |  |  | — |  |  | 2,673 |  |  | 750 |  |  | 2,305 |  |  | — |  |  | 12,012 |
Performing TDRs | 188 |  | — |  | — |  | 1,262 |  | 328 |  | 17 |  | 1,795
Non-accrual loans | 153 |  | — |  | 105 |  | 1,129 |  | 24,029 |  | 43 |  | 25,459
Total | $ | 15,844 |  |  | $ | — |  |  | $ | 7,082 |  |  | $ | 15,326 |  |  | $ | 70,010 |  |  | $ | 60 |  |  | $ | 108,322 |
Troubled Debt Restructurings At June 30, 2022, loans classified as TDRs totaled $2.1 million, of which $0.5 million were classified as non-performing TDRs and $1.6 million were classified as performing TDRs. At December 31, 2021, loans classified as TDRs totaled $2.4 million, of which $0.6 million were classified as non-performing TDRs and $1.8 million were classified as performing TDRs. Both performing and non-performing TDRs are considered impaired loans. When an individual loan is determined to be a TDR, the amount of impairment is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the underlying collateral less applicable selling costs. Accordingly, specific reserves of $167,000 and $159,000 related to TDRs were allocated to the allowance for loan losses at June 30, 2022 and December 31, 2021, respectively. The Company’s portfolio of loans classified as TDRs include concessions for the borrower given their financial condition such as applying interest rates below the current market rate, deferring principal payments, and extending maturity dates. There was one loan meeting the TDR criteria that was modified during the three and six months ended June 30, 2022, respectively, compared to no loans during the three and six months ended June 30, 2021, respectively. The Company considers a TDR to be in default when it is 90 days or more past due under the modified terms, a charge-off occurs, or it is in the process of foreclosure. There were no loans modified as a TDR that defaulted during the three and six months ended June 30, 2022 and 2021, respectively, and within twelve months of their modification date. Loans Held For Sale The Company designates certain long-term fixed rate personal real estate loans as held for sale. In the fourth quarter of 2021, the Company elected the fair value option for all newly originated long-term personal real estate loans held for sale. As of December 31, 2021, all loans held for sale were carried at fair value. The loans are primarily sold to Freddie Mac, Fannie Mae, PennyMac, and various other secondary market investors. At June 30, 2022, the carrying amount of these loans was $1.7 million compared to $2.2 million at December 31, 2021.

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -URI https://asc.fasb.org/subtopic&trid=2196772 + Details
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