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Loans | 6 Months Ended
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Jun. 30, 2023
Loans |
Loans | (3) Loans Major classifications of loans at June 30, 2023 and December 31, 2022 are summarized as follows:
(Dollars in thousands) |  |  |  |  |  |
|  | June 30, 2023 |  |  | December 31, 2022 |
Real estate loans: |  |  |  |  |  |
Construction and land development |  | $ | 114,215 |  |  |  | 114,446 |
Single-family residential |  |  | 331,124 |  |  |  | 322,262 |
Single-family residential - |  |  |  |  |  |  |  |
Banco de la Gente non-traditional |  |  | 18,907 |  |  |  | 20,019 |
Commercial |  |  | 428,084 |  |  |  | 406,750 |
Multifamily and farmland |  |  | 67,727 |  |  |  | 65,562 |
Total real estate loans |  |  | 960,057 |  |  |  | 929,039 |
Loans not secured by real estate: |  |  |  |  |  |  |  |
Commercial loans |  |  | 75,450 |  |  |  | 81,307 |
Farm loans |  |  | 428 |  |  |  | 938 |
Consumer loans |  |  | 7,097 |  |  |  | 6,834 |
All other loans |  |  | 14,692 |  |  |  | 14,490 |
Total loans |  |  | 1,057,724 |  |  |  | 1,032,608 |
Less allowance for credit losses |  |  | (9,789 | ) |  |  | (10,494 | )
Total net loans |  | $ | 1,047,935 |  |  |  | 1,022,114 |
The Bank makes loans and extensions of credit primarily within the Catawba Valley region of North Carolina, which encompasses Catawba, Alexander, Iredell and Lincoln counties and also in Mecklenburg, Wake, Rowan and Forsyth counties of North Carolina. Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by improved and unimproved real estate, the value of which is dependent upon the real estate market. Risk characteristics of the major components of the Bank’s loan portfolio are discussed below:
| · | Construction and land development loans – The risk of loss is largely dependent on the initial estimate of whether the property’s value at completion equals or exceeds the cost of property construction and the availability of take-out financing. During the construction phase, a number of factors can result in delays or cost overruns. If the estimate is inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan, sale of the property, or by seizure of collateral.
| · | Single-family residential loans – Declining home sales volumes, decreased real estate values and higher than normal levels of unemployment could contribute to losses on these loans.
| · | Commercial real estate loans – Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service. These loans also involve greater risk because they are generally not fully amortizing over the loan period, but rather have a balloon payment due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or timely sell the underlying property.
| · | Commercial loans – Repayment is generally dependent upon the successful operation of the borrower’s business. In addition, the collateral securing the loans may depreciate over time, be difficult to appraise, be illiquid, or fluctuate in value based on the success of the business.
| · | Multifamily and farmland loans – Decreased real estate values and higher than normal levels of unemployment could contribute to losses on these loans.
Loans are considered past due if the required principal and interest payments have not been received within 30 days of the date such payments were due. Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Generally, a loan is placed on non-accrual status when it is over 90 days past due and there is reasonable doubt that all principal will be collected. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The following tables present an age analysis of past due loans, by loan type, as of June 30, 2023 and December 31, 2022:
June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Loans 30-89 Days Past Due |  |  | Loans 90 or More Days Past Due |  |  | Total Past Due Loans |  |  | Total Current Loans |  |  | Total Loans |  |  | Accruing Loans 90 or More Days Past Due |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction and land development |  | $ | 88 |  |  |  | - |  |  |  | 88 |  |  |  | 114,127 |  |  |  | 114,215 |  |  |  | - |
Single-family residential |  |  | 1,351 |  |  |  | 426 |  |  |  | 1,777 |  |  |  | 329,347 |  |  |  | 331,124 |  |  |  | - |
Single-family residential - |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Banco de la Gente non-traditional |  |  | 630 |  |  |  | 117 |  |  |  | 747 |  |  |  | 18,160 |  |  |  | 18,907 |  |  |  | - |
Commercial |  |  | 485 |  |  |  | - |  |  |  | 485 |  |  |  | 427,599 |  |  |  | 428,084 |  |  |  | - |
Multifamily and farmland |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 67,727 |  |  |  | 67,727 |  |  |  | - |
Total real estate loans |  |  | 2,554 |  |  |  | 543 |  |  |  | 3,097 |  |  |  | 956,960 |  |  |  | 960,057 |  |  |  | - |
Loans not secured by real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial loans |  |  | 95 |  |  |  | - |  |  |  | 95 |  |  |  | 75,355 |  |  |  | 75,450 |  |  |  | - |
Farm loans |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 428 |  |  |  | 428 |  |  |  | - |
Consumer loans |  |  | 59 |  |  |  | 2 |  |  |  | 61 |  |  |  | 7,036 |  |  |  | 7,097 |  |  |  | - |
All other loans |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 14,692 |  |  |  | 14,692 |  |  |  | - |
Total loans |  | $ | 2,708 |  |  |  | 545 |  |  |  | 3,253 |  |  |  | 1,054,471 |  |  |  | 1,057,724 |  |  |  | - |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Loans 30-89 Days Past Due |  |  | Loans 90 or More Days Past Due |  |  | Total Past Due Loans |  |  | Total Current Loans |  |  | Total Loans |  |  | Accruing Loans 90 or More Days Past Due |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction and land development |  | $ | 363 |  |  |  | - |  |  |  | 363 |  |  |  | 114,083 |  |  |  | 114,446 |  |  |  | - |
Single-family residential |  |  | 4,318 |  |  |  | 256 |  |  |  | 4,574 |  |  |  | 317,688 |  |  |  | 322,262 |  |  |  | - |
Single-family residential - |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Banco de la Gente non-traditional |  |  | 2,977 |  |  |  | 264 |  |  |  | 3,241 |  |  |  | 16,778 |  |  |  | 20,019 |  |  |  | - |
Commercial |  |  | 306 |  |  |  | - |  |  |  | 306 |  |  |  | 406,444 |  |  |  | 406,750 |  |  |  | - |
Multifamily and farmland |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 65,562 |  |  |  | 65,562 |  |  |  | - |
Total real estate loans |  |  | 7,964 |  |  |  | 520 |  |  |  | 8,484 |  |  |  | 920,555 |  |  |  | 929,039 |  |  |  | - |
Loans not secured by real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial loans |  |  | 3 |  |  |  | - |  |  |  | 3 |  |  |  | 81,304 |  |  |  | 81,307 |  |  |  | - |
Farm loans |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 938 |  |  |  | 938 |  |  |  | - |
Consumer loans |  |  | 71 |  |  |  | - |  |  |  | 71 |  |  |  | 6,763 |  |  |  | 6,834 |  |  |  | - |
All other loans |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 14,490 |  |  |  | 14,490 |  |  |  | - |
Total loans |  | $ | 8,038 |  |  |  | 520 |  |  |  | 8,558 |  |  |  | 1,024,050 |  |  |  | 1,032,608 |  |  |  | - |
The following table presents non-accrual loans as of June 30, 2023 and December 31, 2022:
|  | CECL Methodology |  |  | Incurred Loss Methodology |
|  | June 30, 2023 |  |  | December 31, 2022 |
|  | Nonaccrual Loans |  |  | Nonaccrual Loans |  |  | Total |  |  | Total |
|  | With No |  |  | With |  |  | Nonaccrual |  |  | Nonaccrual |
(Dollars in thousands) |  | Allowance |  |  | Allowance |  |  | Loans |  |  | Loans |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |
Construction and land development |  | $ | 49 |  |  |  | - |  |  |  | 49 |  |  |  | 53 |
Single-family residential |  |  | 1,952 |  |  |  | - |  |  |  | 1,952 |  |  |  | 1,914 |
Single-family residential - |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Banco de la Gente non-traditional |  |  | 1,419 |  |  |  | - |  |  |  | 1,419 |  |  |  | 1,532 |
Commercial |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 129 |
Multifamily and farmland |  |  | 83 |  |  |  | - |  |  |  | 83 |  |  |  | 91 |
Total real estate loans |  |  | 3,503 |  |  |  | - |  |  |  | 3,503 |  |  |  | 3,719 |
Loans not secured by real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial loans |  |  | 54 |  |  |  | - |  |  |  | 54 |  |  |  | - |
Consumer loans |  |  | 4 |  |  |  | - |  |  |  | 4 |  |  |  | 9 |
Total |  | $ | 3,561 |  |  |  | - |  |  |  | 3,561 |  |  |  | 3,728 |
Interest income is not recognized on non-accrual loans. The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Bank modifies loans by providing principal forgiveness on certain loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses. In some cases, the Bank may modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. The following table shows the amortized cost basis at June 30, 2023 of the loans to borrowers experiencing financial difficulty that were modified during the six months ended June 30, 2023, disaggregated by loan class and type of concession granted. There were no loans to borrowers experiencing financial difficulty that were modified during the three months ended June 30, 2023
(Dollars in thousands) |  |  |  |  |  |
|  | Term Extension |
|  | Amortized Cost Basis at June 30, 2023 |  |  | % of Loan Class |
Loan class: |  |  |  |  |  |
Single-family residential |  |  | 157 |  |  |  | 0.05 | %
Commercial real estate |  |  | 680 |  |  |  | 0.16 | %
Total |  | $ | 837 |  |  |  |  |
The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty.
Term Extension
Loan Class |  | Financial Effect
Single-family residential |  | Forbearance agreement on matured home equity line of credit (HELOC) that was modified to 180 month term.
Commercial real estate |  | Extended existing amortization from 148 months to 173 months to keep existing payment the same with the current market rate.
Upon the Bank’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. No loans modified in the six months ended June 30, 2023 that were made to borrowers experiencing financial difficulty had been written off at June 30, 2023. The Bank closely monitors the performance of those loans that are modified because borrowers are experiencing financial difficulty so as to understand the effectiveness of its modification efforts. The following table shows the performance of loans that have been modified in the six months ended June 30, 2023.
(Dollars in thousands) |  |  |  |  |  |  |  |  |
|  | Payment Status (Amortized Cost Basis) |
|  | Current |  |  | 30 - 89 Days Past Due |  |  | 90 + Days Past Due |
Loan type: |  |  |  |  |  |  |  |  |
Single-family residential |  |  | 157 |  |  |  | - |  |  |  | - |
Commercial real estate |  |  | 680 |  |  |  | - |  |  |  | - |
Total |  | $ | 837 |  |  |  | - |  |  |  | - |
The following table presents impaired loans as of and for the year ended December 31, 2022:
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Unpaid Contractual Principal Balance |  |  | Recorded Investment With No Allowance |  |  | Recorded Investment With Allowance |  |  | Recorded Investment in Impaired Loans |  |  | Related Allowance |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction and land development |  | $ | 110 |  |  |  | - |  |  |  | 110 |  |  |  | 110 |  |  |  | 2 |
Single-family residential |  |  | 3,912 |  |  |  | 236 |  |  |  | 3,300 |  |  |  | 3,536 |  |  |  | 60 |
Single-family residential - |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Banco de la Gente non-traditional |  |  | 10,441 |  |  |  | - |  |  |  | 9,748 |  |  |  | 9,748 |  |  |  | 611 |
Commercial |  |  | 1,785 |  |  |  | 421 |  |  |  | 1,346 |  |  |  | 1,767 |  |  |  | 9 |
Multifamily and farmland |  |  | 104 |  |  |  | - |  |  |  | 91 |  |  |  | 91 |  |  |  | - |
Total impaired real estate loans |  |  | 16,352 |  |  |  | 657 |  |  |  | 14,595 |  |  |  | 15,252 |  |  |  | 682 |
Loans not secured by real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial loans |  |  | 116 |  |  |  | - |  |  |  | 116 |  |  |  | 116 |  |  |  | 1 |
Consumer loans |  |  | 11 |  |  |  | - |  |  |  | 9 |  |  |  | 9 |  |  |  | - |
Total impaired loans |  | $ | 16,479 |  |  |  | 657 |  |  |  | 14,720 |  |  |  | 15,377 |  |  |  | 683 |
The following table presents the average impaired loan balance and the interest income recognized by loan class for the three and six months ended June 30, 2022 and the twelve months ended December 31, 2022.
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Three months ended |  |  | Six months ended |  |  | Twelve months ended |
|  | June 30, 2022 |  |  | June 30, 2022 |  |  | December 31, 2022 |
|  | Average Balance |  |  | Interest Income Recognized |  |  | Average Balance |  |  | Interest Income Recognized |  |  | Average Balance |  |  | Interest Income Recognized |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction and land development |  | $ | 65 |  |  |  | 1 |  |  |  | 91 |  |  |  | 1 |  |  |  | 75 |  |  |  | 8 |
Single-family residential |  |  | 1,231 |  |  |  | 51 |  |  |  | 6,100 |  |  |  | 57 |  |  |  | 5,194 |  |  |  | 194 |
Single-family residential - |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Banco de la Gente stated income |  |  | 13,273 |  |  |  | 135 |  |  |  | 10,835 |  |  |  | 160 |  |  |  | 8,757 |  |  |  | 552 |
Commercial |  |  | 1,984 |  |  |  | 26 |  |  |  | 2,682 |  |  |  | 29 |  |  |  | 1,916 |  |  |  | 93 |
Multifamily and farmland |  |  | 100 |  |  |  | 1 |  |  |  | 113 |  |  |  | 1 |  |  |  | 96 |  |  |  | 5 |
Total impaired real estate loans |  |  | 16,653 |  |  |  | 214 |  |  |  | 19,821 |  |  |  | 248 |  |  |  | 16,038 |  |  |  | 852 |
Loans not secured by real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial loans |  |  | 151 |  |  |  | 2 |  |  |  | 315 |  |  |  | 5 |  |  |  | 137 |  |  |  | 8 |
Consumer loans |  |  | 16 |  |  |  | 1 |  |  |  | 15 |  |  |  | - |  |  |  | 15 |  |  |  | 2 |
Total impaired loans |  | $ | 16,820 |  |  |  | 217 |  |  |  | 20,151 |  |  |  | 253 |  |  |  | 16,190 |  |  |  | 862 |
Impaired loans collectively evaluated for impairment totaled $5.3 million $4.9 million at June 30, 2022 and December 31, 2022, respectively and are included in the tables above. Allowance on impaired loans collectively evaluated for impairment totaled $47,000 and $44,000 at June 30, 2022 and December 31, 2022, respectively. The following tables present changes in the allowance for credit losses for the three and six months ended June 30, 2023 and 2022. The June 30, 2023 table reflects the CECL methodology and the June 30, 2022 table reflects the Incurred Loss methodology. Paycheck Protection Program (“PPP”) loans are excluded from the allowance for credit losses because PPP loans are guaranteed by the Small Business Administration (“SBA”). No loans were individually evaluated as of June 30, 2023.
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Real Estate Loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Construction and Land Development |  |  | Single-Family Residential |  |  | Single-Family Residential - Banco de la Gente non-traditional |  |  | Commercial |  |  | Multifamily and Farmland |  |  | Commercial |  |  | Farm |  |  | Consumer and All Other |  |  | Unallocated |  |  | Total |
Three months ended June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 5,253 |  |  |  | 3,077 |  |  |  | 181 |  |  |  | 2,244 |  |  |  | 298 |  |  |  | 348 |  |  |  | 1 |  |  |  | 290 |  |  |  | - |  |  |  | 11,692 |
Charge-offs |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (35 | ) |  |  | - |  |  |  | (142 | ) |  |  | - |  |  |  | (177 | )
Recoveries |  |  | - |  |  |  | 111 |  |  |  | - |  |  |  | 1 |  |  |  | - |  |  |  | 23 |  |  |  | - |  |  |  | 23 |  |  |  | - |  |  |  | 158 |
Provision (recovery) for unfunded commitments |  |  | 163 |  |  |  | 21 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 184 |
Provision (recovery) for loan losses |  |  | (22 | ) |  |  | (2 | ) |  |  | 2 |  |  |  | 120 |  |  |  | (10 | ) |  |  | 31 |  |  |  | 1 |  |  |  | 71 |  |  |  | - |  |  |  | 191 |
Ending balance |  | $ | 5,394 |  |  |  | 3,207 |  |  |  | 183 |  |  |  | 2,365 |  |  |  | 288 |  |  |  | 367 |  |  |  | 2 |  |  |  | 242 |  |  |  | - |  |  |  | 12,048 |
Six months ended June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 1,415 |  |  |  | 2,322 |  |  |  | 763 |  |  |  | 3,207 |  |  |  | 164 |  |  |  | 657 |  |  |  | - |  |  |  | 214 |  |  |  | 1,752 |  |  |  | 10,494 |
Adjustment for CECL implementation |  |  | 3,781 |  |  |  | 715 |  |  |  | (576 | ) |  |  | (986 | ) |  |  | 115 |  |  |  | (295 | ) |  |  | 2 |  |  |  | 54 |  |  |  | (1,752 | ) |  |  | 1,058 |
Charge-offs |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (35 | ) |  |  | - |  |  |  | (308 | ) |  |  | - |  |  |  | (343 | )
Recoveries |  |  | - |  |  |  | 123 |  |  |  | - |  |  |  | 3 |  |  |  | - |  |  |  | 32 |  |  |  | - |  |  |  | 82 |  |  |  | - |  |  |  | 240 |
Provision (recovery) for unfunded commitments |  |  | (30 | ) |  |  | 13 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1 |  |  |  | (2 | ) |  |  | - |  |  |  | (18 | )
Provision (recovery) for loan losses |  |  | 228 |  |  |  | 34 |  |  |  | (4 | ) |  |  | 141 |  |  |  | 9 |  |  |  | 8 |  |  |  | (1 | ) |  |  | 202 |  |  |  | - |  |  |  | 617 |
Ending balance |  | $ | 5,394 |  |  |  | 3,207 |  |  |  | 183 |  |  |  | 2,365 |  |  |  | 288 |  |  |  | 367 |  |  |  | 2 |  |  |  | 242 |  |  |  | - |  |  |  | 12,048 |
Allowance for credit loss-loans |  | $ | 3,228 |  |  |  | 3,119 |  |  |  | 183 |  |  |  | 2,365 |  |  |  | 288 |  |  |  | 367 |  |  |  | 1 |  |  |  | 238 |  |  |  | - |  |  |  | 9,789 |
Allowance for credit losses loan commitments |  |  | 2,166 |  |  |  | 88 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1 |  |  |  | 4 |  |  |  | - |  |  |  | 2,259 |
Total allowance for credit losses |  | $ | 5,394 |  |  |  | 3,207 |  |  |  | 183 |  |  |  | 2,365 |  |  |  | 288 |  |  |  | 367 |  |  |  | 2 |  |  |  | 242 |  |  |  | - |  |  |  | 12,048 |
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Real Estate Loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Construction and Land Development |  |  | Single-Family Residential |  |  | Single-Family Residential - Banco de la Gente Non-traditional |  |  | Commercial |  |  | Multifamily and Farmland |  |  | Commercial |  |  | Farm |  |  | Consumer and All Other |  |  | Unallocated |  |  | Total |
Six months ended June 30, 2022: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 1,193 |  |  |  | 2,013 |  |  |  | 864 |  |  |  | 2,234 |  |  |  | 150 |  |  |  | 711 |  |  |  | - |  |  |  | 110 |  |  |  | 2,080 |  |  |  | 9,355 |
Charge-offs |  |  | - |  |  |  | (31 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (7 | ) |  |  | - |  |  |  | (246 | ) |  |  | - |  |  |  | (284 | )
Recoveries |  |  | - |  |  |  | 127 |  |  |  | - |  |  |  | 4 |  |  |  | - |  |  |  | 55 |  |  |  | - |  |  |  | 51 |  |  |  | - |  |  |  | 237 |
Provision |  |  | 79 |  |  |  | 62 |  |  |  | (51 | ) |  |  | 918 |  |  |  | 7 |  |  |  | (126 | ) |  |  | - |  |  |  | 301 |  |  |  | (709 | ) |  |  | 481 |
Ending balance |  | $ | 1,272 |  |  |  | 2,171 |  |  |  | 813 |  |  |  | 3,156 |  |  |  | 157 |  |  |  | 633 |  |  |  | - |  |  |  | 216 |  |  |  | 1,371 |  |  |  | 9,789 |
Three months ended June 30, 2022: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 1,163 |  |  |  | 2,095 |  |  |  | 841 |  |  |  | 3,011 |  |  |  | 147 |  |  |  | 646 |  |  |  | - |  |  |  | 128 |  |  |  | 1,395 |  |  |  | 9,426 |
Charge-offs |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (3 | ) |  |  | - |  |  |  | (121 | ) |  |  | - |  |  |  | (124 | )
Recoveries |  |  | - |  |  |  | 10 |  |  |  | - |  |  |  | 2 |  |  |  | - |  |  |  | 36 |  |  |  | - |  |  |  | 29 |  |  |  | - |  |  |  | 77 |
Provision |  |  | 109 |  |  |  | 66 |  |  |  | (28 | ) |  |  | 143 |  |  |  | 10 |  |  |  | (46 | ) |  |  | - |  |  |  | 180 |  |  |  | (24 | ) |  |  | 410 |
Ending balance |  | $ | 1,272 |  |  |  | 2,171 |  |  |  | 813 |  |  |  | 3,156 |  |  |  | 157 |  |  |  | 633 |  |  |  | - |  |  |  | 216 |  |  |  | 1,371 |  |  |  | 9,789 |
Allowance for loan losses at June 30, 2022: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance: individually |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
evaluated for impairment |  | $ | - |  |  |  | 37 |  |  |  | 640 |  |  |  | 6 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 683 |
Ending balance: collectively |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
evaluated for impairment |  |  | 1,272 |  |  |  | 2,134 |  |  |  | 173 |  |  |  | 3,150 |  |  |  | 157 |  |  |  | 633 |  |  |  | - |  |  |  | 216 |  |  |  | 1,371 |  |  |  | 9,106 |
Ending balance |  | $ | 1,272 |  |  |  | 2,171 |  |  |  | 813 |  |  |  | 3,156 |  |  |  | 157 |  |  |  | 633 |  |  |  | - |  |  |  | 216 |  |  |  | 1,371 |  |  |  | 9,789 |
Loans at June 30, 2022: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 103,241 |  |  |  | 292,685 |  |  |  | 21,378 |  |  |  | 386,368 |  |  |  | 62,687 |  |  |  | 70,691 |  |  |  | 1,006 |  |  |  | 21,417 |  |  |  | - |  |  |  | 959,473 |
Ending balance: individually |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
evaluated for impairment |  | $ | - |  |  |  | 845 |  |  |  | 9,214 |  |  |  | 1,413 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 11,472 |
Ending balance: collectively |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
evaluated for impairment |  | $ | 103,241 |  |  |  | 291,840 |  |  |  | 12,164 |  |  |  | 384,955 |  |  |  | 62,687 |  |  |  | 70,691 |  |  |  | 1,006 |  |  |  | 21,417 |  |  |  | - |  |  |  | 948,001 |
The Bank utilizes several credit quality indicators to manage credit risk in an ongoing manner. The Bank uses an internal risk grade system that categorizes loans into pass, watch or substandard categories. The Bank uses the following credit quality indicators:
| · | Pass – Includes loans ranging from excellent quality with a minimal amount of credit risk to loans with higher risk and servicing needs but still are considered to be acceptable. The higher risk loans in this category are not problem credits presently, but may be in the future if the borrower is unable to change its present course.
| · | Watch – These loans are currently performing satisfactorily, but there has been some recent past due history on repayment and there are potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank’s position at some future date.
| · | Substandard – A Substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged (if there is any). There is a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. There is a distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
The following table presents by credit quality indicator, loan class and year of origination, the amortized cost of the Bank’s loans as of June 30, 2023.
|  | Term Loans by Origination Year |  |  |  |  |  | Revolving |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Loans |  |  |  |
(dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Revolving |  |  | Converted to |  |  | Total |
|  | 2023 |  |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | Prior |  |  | Loans |  |  | Term Loans |  |  | Loans |
June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real Estate Loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction and land |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
development |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 13,426 |  |  |  | 66,208 |  |  |  | 18,146 |  |  |  | 7,142 |  |  |  | 2,068 |  |  |  | 4,750 |  |  |  | 2,334 |  |  |  | - |  |  |  | 114,074 |
Watch |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 42 |  |  |  | - |  |  |  | - |  |  |  | 42 |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 99 |  |  |  | - |  |  |  | - |  |  |  | 99 |
Total Construction and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
land development |  | $ | 13,426 |  |  |  | 66,208 |  |  |  | 18,146 |  |  |  | 7,142 |  |  |  | 2,068 |  |  |  | 4,891 |  |  |  | 2,334 |  |  |  | - |  |  |  | 114,215 |
Single family |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 20,280 |  |  |  | 70,055 |  |  |  | 46,318 |  |  |  | 25,809 |  |  |  | 13,811 |  |  |  | 52,627 |  |  |  | 98,548 |  |  |  | - |  |  |  | 327,448 |
Watch |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 91 |  |  |  | 378 |  |  |  | - |  |  |  | - |  |  |  | 469 |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,763 |  |  |  | 444 |  |  |  | - |  |  |  | 3,207 |
Total single family |  | $ | 20,280 |  |  |  | 70,055 |  |  |  | 46,318 |  |  |  | 25,809 |  |  |  | 13,902 |  |  |  | 55,768 |  |  |  | 98,992 |  |  |  | - |  |  |  | 331,124 |
Single family-Banco de la |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gente non-traditional |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 16,515 |  |  |  | - |  |  |  | - |  |  |  | 16,515 |
Watch |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 430 |  |  |  | - |  |  |  | - |  |  |  | 430 |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,962 |  |  |  | - |  |  |  | - |  |  |  | 1,962 |
Total Banco de la Gente |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
non-traditional |  | $ | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 18,907 |  |  |  | - |  |  |  | - |  |  |  | 18,907 |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 26,532 |  |  |  | 110,957 |  |  |  | 78,023 |  |  |  | 71,100 |  |  |  | 31,987 |  |  |  | 104,313 |  |  |  | 1,039 |  |  |  | - |  |  |  | 423,951 |
Watch |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 119 |  |  |  | - |  |  |  | 3,599 |  |  |  | - |  |  |  | - |  |  |  | 3,718 |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 415 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 415 |
Total commercial |  | $ | 26,532 |  |  |  | 110,957 |  |  |  | 78,023 |  |  |  | 71,634 |  |  |  | 31,987 |  |  |  | 107,912 |  |  |  | 1,039 |  |  |  | - |  |  |  | 428,084 |
Multifamily and farmland |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 7,103 |  |  |  | 16,861 |  |  |  | 22,227 |  |  |  | 6,515 |  |  |  | 3,279 |  |  |  | 10,933 |  |  |  | 610 |  |  |  | - |  |  |  | 67,528 |
Watch |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 116 |  |  |  | - |  |  |  | - |  |  |  | 116 |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 83 |  |  |  | - |  |  |  | - |  |  |  | 83 |
Total multifamily and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
farmland |  | $ | 7,103 |  |  |  | 16,861 |  |  |  | 22,227 |  |  |  | 6,515 |  |  |  | 3,279 |  |  |  | 11,132 |  |  |  | 610 |  |  |  | - |  |  |  | 67,727 |
Total real estate loans |  | $ | 67,341 |  |  |  | 264,081 |  |  |  | 164,714 |  |  |  | 111,100 |  |  |  | 51,236 |  |  |  | 198,610 |  |  |  | 102,975 |  |  |  | - |  |  |  | 960,057 |
Loans not secured by real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 5,347 |  |  |  | 17,046 |  |  |  | 4,841 |  |  |  | 4,332 |  |  |  | 3,010 |  |  |  | 13,290 |  |  |  | 27,307 |  |  |  | - |  |  |  | 75,173 |
Watch |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 105 |  |  |  | 117 |  |  |  | 1 |  |  |  | - |  |  |  | 223 |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 54 |  |  |  | - |  |  |  | 54 |
Total Commercial |  | $ | 5,347 |  |  |  | 17,046 |  |  |  | 4,841 |  |  |  | 4,332 |  |  |  | 3,115 |  |  |  | 13,407 |  |  |  | 27,362 |  |  |  | - |  |  |  | 75,450 |
Farm |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 49 |  |  |  | 49 |  |  |  | 98 |  |  |  | - |  |  |  | 17 |  |  |  | 59 |  |  |  | 156 |  |  |  | - |  |  |  | 428 |
Watch |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total farm |  | $ | 49 |  |  |  | 49 |  |  |  | 98 |  |  |  | - |  |  |  | 17 |  |  |  | 59 |  |  |  | 156 |  |  |  | - |  |  |  | 428 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 1,611 |  |  |  | 1,773 |  |  |  | 626 |  |  |  | 304 |  |  |  | 96 |  |  |  | 95 |  |  |  | 2,582 |  |  |  | - |  |  |  | 7,087 |
Watch |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Substandard |  |  | - |  |  |  | - |  |  |  | 3 |  |  |  | 2 |  |  |  | - |  |  |  | 1 |  |  |  | 4 |  |  |  | - |  |  |  | 10 |
Total consumer |  | $ | 1,611 |  |  |  | 1,773 |  |  |  | 629 |  |  |  | 306 |  |  |  | 96 |  |  |  | 96 |  |  |  | 2,586 |  |  |  | - |  |  |  | 7,097 |
All other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | - |  |  |  | 5,890 |  |  |  | 522 |  |  |  | 442 |  |  |  | 770 |  |  |  | 4,251 |  |  |  | 2,676 |  |  |  | - |  |  |  | 14,551 |
Watch |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 76 |  |  |  | 65 |  |  |  | - |  |  |  | 141 |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total all other |  | $ | - |  |  |  | 5,890 |  |  |  | 522 |  |  |  | 442 |  |  |  | 770 |  |  |  | 4,327 |  |  |  | 2,741 |  |  |  | - |  |  |  | 14,692 |
Total loans not secured |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
by real estate |  | $ | 7,007 |  |  |  | 24,758 |  |  |  | 6,090 |  |  |  | 5,080 |  |  |  | 3,998 |  |  |  | 17,889 |  |  |  | 32,845 |  |  |  | - |  |  |  | 97,667 |
Total loans |  | $ | 74,348 |  |  |  | 288,839 |  |  |  | 170,804 |  |  |  | 116,180 |  |  |  | 55,234 |  |  |  | 216,499 |  |  |  | 135,820 |  |  |  | - |  |  |  | 1,057,724 |
Current period gross charge-offs |  | $ | - |  |  |  | 34 |  |  |  | 67 |  |  |  | 3 |  |  |  | - |  |  |  | 239 |  |  |  | - |  |  |  | - |  |  |  | 343 |
The following table presents the credit risk profile of each loan type based on credit quality indicators as of December 31, 2022:
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Real Estate Loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Construction and Land Development |  |  | Single-Family Residential |  |  | Single-Family Residential - Banco de la Gente non-traditional |  |  | Commercial |  |  | Multifamily and Farmland |  |  | Commercial |  |  | Farm |  |  | Consumer |  |  | All Other |  |  | Total |
Pass |  | $ | 114,282 |  |  |  | 317,850 |  |  |  | 16,410 |  |  |  | 402,236 |  |  |  | 65,348 |  |  |  | 80,596 |  |  |  | 938 |  |  |  | 6,818 |  |  |  | 14,345 |  |  |  | 1,018,823 |
Watch |  |  | 54 |  |  |  | 922 |  |  |  | 1,136 |  |  |  | 3,963 |  |  |  | 123 |  |  |  | 711 |  |  |  | - |  |  |  | 1 |  |  |  | 145 |  |  |  | 7,055 |
Substandard |  |  | 110 |  |  |  | 3,490 |  |  |  | 2,473 |  |  |  | 551 |  |  |  | 91 |  |  |  | - |  |  |  | - |  |  |  | 15 |  |  |  | - |  |  |  | 6,730 |
Total |  | $ | 114,446 |  |  |  | 322,262 |  |  |  | 20,019 |  |  |  | 406,750 |  |  |  | 65,562 |  |  |  | 81,307 |  |  |  | 938 |  |  |  | 6,834 |  |  |  | 14,490 |  |  |  | 1,032,608 |

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- References No definition available. + Details
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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 -Topic 310 -SubTopic 10 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//310-10/tableOfContent + Details
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