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Loans
 9 Months Ended
Sep. 30, 2023
Loans  
Loans

(3) Loans

 

Major classifications of loans at September 30, 2023 and December 31, 2022 are summarized as follows:

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

September 30,

2023

 

 

December 31,

2022

 

Real estate loans:

 

 

 

 

 

 

Construction and land development

 

$127,706

 

 

 

114,446

 

Single-family residential

 

 

344,415

 

 

 

322,262

 

Single-family residential -

 

 

 

 

 

 

 

 

Banco de la Gente non-traditional

 

 

18,388

 

 

 

20,019

 

Commercial

 

 

430,270

 

 

 

406,750

 

Multifamily and farmland

 

 

64,313

 

 

 

65,562

 

Total real estate loans

 

 

985,092

 

 

 

929,039

 

 

 

 

 

 

 

 

 

 

Loans not secured by real estate:

 

 

 

 

 

 

 

 

Commercial loans

 

 

68,738

 

 

 

81,307

 

Farm loans

 

 

574

 

 

 

938

 

Consumer loans

 

 

7,680

 

 

 

6,834

 

All other loans

 

 

16,089

 

 

 

14,490

 

 

 

 

 

 

 

 

 

 

Total loans

 

 

1,078,173

 

 

 

1,032,608

 

 

 

 

 

 

 

 

 

 

Less allowance for credit losses

 

 

(10,285)

 

 

(10,494)

 

 

 

 

 

 

 

 

 

Total net loans

 

$1,067,888

 

 

 

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 September 30, 2023 and December 31, 2022:

 

September 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

 

$39

 

 

 

-

 

 

 

39

 

 

 

127,667

 

 

 

127,706

 

 

 

-

 

Single-family residential

 

 

938

 

 

 

217

 

 

 

1,155

 

 

 

343,260

 

 

 

344,415

 

 

 

-

 

Single-family residential -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banco de la Gente non-traditional

 

 

840

 

 

 

89

 

 

 

929

 

 

 

17,459

 

 

 

18,388

 

 

 

-

 

Commercial

 

 

481

 

 

 

-

 

 

 

481

 

 

 

429,789

 

 

 

430,270

 

 

 

-

 

Multifamily and farmland

 

 

-

 

 

 

-

 

 

 

-

 

 

 

64,313

 

 

 

64,313

 

 

 

-

 

Total real estate loans

 

 

2,298

 

 

 

306

 

 

 

2,604

 

 

 

982,488

 

 

 

985,092

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans not secured by real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loans

 

 

375

 

 

 

99

 

 

 

474

 

 

 

68,264

 

 

 

68,738

 

 

 

99

 

Farm loans

 

 

-

 

 

 

-

 

 

 

-

 

 

 

574

 

 

 

574

 

 

 

-

 

Consumer loans

 

 

37

 

 

 

-

 

 

 

37

 

 

 

7,643

 

 

 

7,680

 

 

 

-

 

All other loans

 

 

-

 

 

 

-

 

 

 

-

 

 

 

16,089

 

 

 

16,089

 

 

 

-

 

Total loans

 

$2,710

 

 

 

405

 

 

 

3,115

 

 

 

1,075,058

 

 

 

1,078,173

 

 

 

99

 

 

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 September 30, 2023 and December 31, 2022:

 

 

 

CECL Methodology

 

 

Incurred Loss Methodology

 

 

 

September 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

 

$46

 

 

 

-

 

 

 

46

 

 

 

53

 

Single-family residential

 

 

1,878

 

 

 

-

 

 

 

1,878

 

 

 

1,914

 

Single-family residential -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banco de la Gente non-traditional

 

 

1,575

 

 

 

-

 

 

 

1,575

 

 

 

1,532

 

Commercial

 

 

-

 

 

 

-

 

 

 

-

 

 

 

129

 

Multifamily and farmland

 

 

80

 

 

 

-

 

 

 

80

 

 

 

91

 

Total real estate loans

 

 

3,579

 

 

 

-

 

 

 

3,579

 

 

 

3,719

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans not secured by real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loans

 

 

33

 

 

 

-

 

 

 

33

 

 

 

-

 

Consumer loans

 

 

2

 

 

 

-

 

 

 

2

 

 

 

9

 

Total

 

$3,614

 

 

 

-

 

 

 

3,614

 

 

 

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 September 30, 2023 of the loans to borrowers experiencing financial difficulty that were modified during the nine months ended September 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 September 30, 2023.

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

Term Extension

 

 

 

Amortized Cost Basis at

September 30, 2023

 

 

% of Loan Class

 

Loan class:

 

 

 

 

 

 

Single-family residential

 

 

154

 

 

 

0.04%

Commercial real estate

 

 

673

 

 

 

0.16%

Total

 

$827

 

 

 

 

 

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 nine months ended September 30, 2023 that were made to borrowers experiencing financial difficulty had been written off at September 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 nine months ended September 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

 

 

154

 

 

 

-

 

 

 

-

 

Commercial real estate

 

 

673

 

 

 

-

 

 

 

-

 

Total

 

$827

 

 

 

-

 

 

 

-

 

 

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 nine months ended September 30, 2022 and the twelve months ended December 31, 2022.

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Nine months ended

 

 

Twelve months ended

 

 

 

September 30, 2022

 

 

September 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

 

$60

 

 

 

1

 

 

 

65

 

 

 

4

 

 

 

75

 

 

 

8

 

Single-family residential

 

 

1,393

 

 

 

51

 

 

 

1,131

 

 

 

150

 

 

 

5,194

 

 

 

194

 

Single-family residential -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banco de la Gente stated income

 

 

12,487

 

 

 

134

 

 

 

13,454

 

 

 

407

 

 

 

8,757

 

 

 

552

 

Commercial

 

 

1,939

 

 

 

25

 

 

 

1,985

 

 

 

75

 

 

 

1,916

 

 

 

93

 

Multifamily and farmland

 

 

97

 

 

 

1

 

 

 

100

 

 

 

4

 

 

 

96

 

 

 

5

 

Total impaired real estate loans

 

 

15,976

 

 

 

212

 

 

 

16,735

 

 

 

640

 

 

 

16,038

 

 

 

852

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans not secured by real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loans

 

 

138

 

 

 

3

 

 

 

163

 

 

 

7

 

 

 

137

 

 

 

8

 

Consumer loans

 

 

21

 

 

 

1

 

 

 

14

 

 

 

2

 

 

 

15

 

 

 

2

 

Total impaired loans

 

$16,135

 

 

 

216

 

 

 

16,912

 

 

 

649

 

 

 

16,190

 

 

 

862

 

 

Impaired loans collectively evaluated for impairment totaled $5.1 million $4.9 million at September 30, 2022 and December 31, 2022, respectively and are included in the tables above. Allowance on impaired loans collectively evaluated for impairment totaled $44,000 and $44,000 at September 30, 2022 and December 31, 2022, respectively.

 

The following tables present changes in the allowance for credit losses for the three and nine months ended September 30, 2023 and 2022. The September 30, 2023 table reflects the CECL methodology and the September 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 September 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 September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$5,394

 

 

 

3,207

 

 

 

183

 

 

 

2,365

 

 

 

288

 

 

 

367

 

 

 

2

 

 

 

242

 

 

 

-

 

 

 

12,048

 

Charge-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(94)

 

 

-

 

 

 

(141)

 

 

-

 

 

 

(235)

Recoveries

 

 

-

 

 

 

8

 

 

 

-

 

 

 

1

 

 

 

-

 

 

 

8

 

 

 

-

 

 

 

24

 

 

 

-

 

 

 

41

 

Provision (recovery) for

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

unfunded commitments

 

 

(95)

 

 

(31)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3

 

 

 

-

 

 

 

(4)

 

 

-

 

 

 

(127)

Provision (recovery) for

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

loan losses

 

 

390

 

 

 

111

 

 

 

(5)

 

 

(12)

 

 

(15)

 

 

87

 

 

 

-

 

 

 

133

 

 

 

-

 

 

 

689

 

Ending balance

 

$5,689

 

 

 

3,295

 

 

 

178

 

 

 

2,354

 

 

 

273

 

 

 

371

 

 

 

2

 

 

 

254

 

 

 

-

 

 

 

12,416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 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

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(129)

 

 

-

 

 

 

(450)

 

 

-

 

 

 

(579)

Recoveries

 

 

-

 

 

 

131

 

 

 

-

 

 

 

5

 

 

 

-

 

 

 

40

 

 

 

-

 

 

 

106

 

 

 

-

 

 

 

282

 

Provision (recovery) for unfunded commitments

 

 

(125)

 

 

(18)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3

 

 

 

-

 

 

 

(6)

 

 

-

 

 

 

(146)

Provision (recovery) for loan losses

 

 

618

 

 

 

145

 

 

 

(9)

 

 

128

 

 

 

(6)

 

 

95

 

 

 

-

 

 

 

336

 

 

 

-

 

 

 

1,307

 

Ending balance

 

$5,689

 

 

 

3,295

 

 

 

178

 

 

 

2,354

 

 

 

273

 

 

 

371

 

 

 

2

 

 

 

254

 

 

 

-

 

 

 

12,416

 

Allowance for credit loss-loans

 

$3,618

 

 

 

3,237

 

 

 

178

 

 

 

2,354

 

 

 

273

 

 

 

371

 

 

 

2

 

 

 

252

 

 

 

-

 

 

 

10,285

 

Allowance for credit losses unfunded loan commitments

 

 

2,071

 

 

 

58

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2

 

 

 

-

 

 

 

2,131

 

Total allowance for credit losses

 

$5,689

 

 

 

3,295

 

 

 

178

 

 

 

2,354

 

 

 

273

 

 

 

371

 

 

 

2

 

 

 

254

 

 

 

-

 

 

 

12,416

 

(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

 

Nine months ended September 30, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$1,193

 

 

 

2,013

 

 

 

864

 

 

 

2,234

 

 

 

150

 

 

 

711

 

 

 

-

 

 

 

110

 

 

 

2,080

 

 

 

9,355

 

Charge-offs

 

 

-

 

 

 

(120)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(20)

 

 

-

 

 

 

(450)

 

 

-

 

 

 

(590)

Recoveries

 

 

-

 

 

 

219

 

 

 

-

 

 

 

6

 

 

 

-

 

 

 

64

 

 

 

-

 

 

 

87

 

 

 

-

 

 

 

376

 

Provision

 

 

180

 

 

 

78

 

 

 

(101)

 

 

885

 

 

 

5

 

 

 

(14)

 

 

-

 

 

 

467

 

 

 

(611)

 

 

889

 

Ending balance

 

$1,373

 

 

 

2,190

 

 

 

763

 

 

 

3,125

 

 

 

155

 

 

 

741

 

 

 

-

 

 

 

214

 

 

 

1,469

 

 

 

10,030

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$1,272

 

 

 

2,171

 

 

 

813

 

 

 

3,156

 

 

 

157

 

 

 

633

 

 

 

-

 

 

 

216

 

 

 

1,371

 

 

 

9,789

 

Charge-offs

 

 

-

 

 

 

(89)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(13)

 

 

-

 

 

 

(204)

 

 

-

 

 

 

(306)

Recoveries

 

 

-

 

 

 

92

 

 

 

-

 

 

 

2

 

 

 

-

 

 

 

8

 

 

 

-

 

 

 

37

 

 

 

-

 

 

 

139

 

Provision

 

 

101

 

 

 

16

 

 

 

(50)

 

 

(33)

 

 

(2)

 

 

113

 

 

 

-

 

 

 

165

 

 

 

98

 

 

 

408

 

Ending balance

 

$1,373

 

 

 

2,190

 

 

 

763

 

 

 

3,125

 

 

 

155

 

 

 

741

 

 

 

-

 

 

 

214

 

 

 

1,469

 

 

 

10,030

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses at September 30, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance: individually

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

evaluated for impairment

 

$-

 

 

 

37

 

 

 

605

 

 

 

6

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

648

 

Ending balance: collectively

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

evaluated for impairment

 

 

1,373

 

 

 

2,153

 

 

 

158

 

 

 

3,119

 

 

 

155

 

 

 

741

 

 

 

-

 

 

 

214

 

 

 

1,469

 

 

 

9,382

 

Ending balance

 

$

 1,373

 

 

 

2,190

 

 

 

763

 

 

 

3,125

 

 

 

155

 

 

 

741

 

 

 

-

 

 

 

214

 

 

 

1,469

 

 

 

10,030

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans at September 30, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance

 

$112,854

 

 

 

312,208

 

 

 

20,469

 

 

 

399,015

 

 

 

62,040

 

 

 

76,434

 

 

 

961

 

 

 

20,926

 

 

 

-

 

 

 

1,004,907

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance: individually

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

evaluated for impairment

 

$-

 

 

 

547

 

 

 

8,703

 

 

 

1,401

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,651

 

Ending balance: collectively

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

evaluated for impairment

 

$112,854

 

 

 

311,661

 

 

 

11,766

 

 

 

397,614

 

 

 

62,040

 

 

 

76,434

 

 

 

961

 

 

 

20,926

 

 

 

-

 

 

 

994,256

 

 

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 September 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

 

September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real Estate Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and land

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

development

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$28,242

 

 

 

72,097

 

 

 

12,409

 

 

 

6,798

 

 

 

2,019

 

 

 

4,409

 

 

 

1,638

 

 

 

-

 

 

 

127,612

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

94

 

 

 

-

 

 

 

-

 

 

 

94

 

Total Construction and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

land development

 

$28,242

 

 

 

72,097

 

 

 

12,409

 

 

 

6,798

 

 

 

2,019

 

 

 

4,503

 

 

 

1,638

 

 

 

-

 

 

 

127,706

 

Single family

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$27,917

 

 

 

71,607

 

 

 

47,350

 

 

 

25,406

 

 

 

13,323

 

 

 

52,180

 

 

 

102,493

 

 

 

-

 

 

 

340,276

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

90

 

 

 

372

 

 

 

630

 

 

 

-

 

 

 

1,092

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,664

 

 

 

383

 

 

 

-

 

 

 

3,047

 

Total single family

 

$27,917

 

 

 

71,607

 

 

 

47,350

 

 

 

25,406

 

 

 

13,413

 

 

 

55,216

 

 

 

103,506

 

 

 

-

 

 

 

344,415

 

Single family-Banco de la

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gente non-traditional

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15,894

 

 

 

-

 

 

 

-

 

 

 

15,894

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

381

 

 

 

-

 

 

 

-

 

 

 

381

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,113

 

 

 

-

 

 

 

-

 

 

 

2,113

 

Total Banco de la Gente

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

non-traditional

 

$-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18,388

 

 

 

-

 

 

 

-

 

 

 

18,388

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$34,136

 

 

 

110,380

 

 

 

81,144

 

 

 

69,611

 

 

 

30,713

 

 

 

96,897

 

 

 

1,610

 

 

 

-

 

 

 

424,491

 

Watch

 

 

235

 

 

 

-

 

 

 

-

 

 

 

117

 

 

 

-

 

 

 

5,015

 

 

 

-

 

 

 

-

 

 

 

5,367

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

412

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

412

 

Total commercial

 

$34,371

 

 

 

110,380

 

 

 

81,144

 

 

 

70,140

 

 

 

30,713

 

 

 

101,912

 

 

 

1,610

 

 

 

-

 

 

 

430,270

 

Multifamily and farmland

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$7,921

 

 

 

13,464

 

 

 

22,026

 

 

 

6,789

 

 

 

3,245

 

 

 

10,056

 

 

 

620

 

 

 

-

 

 

 

64,121

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

112

 

 

 

-

 

 

 

-

 

 

 

112

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

80

 

 

 

-

 

 

 

-

 

 

 

80

 

Total multifamily and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

farmland

 

$7,921

 

 

 

13,464

 

 

 

22,026

 

 

 

6,789

 

 

 

3,245

 

 

 

10,248

 

 

 

620

 

 

 

-

 

 

 

64,313

 

Total real estate loans

 

$98,451

 

 

 

267,548

 

 

 

162,929

 

 

 

109,133

 

 

 

49,390

 

 

 

190,267

 

 

 

107,374

 

 

 

-

 

 

 

985,092

 

Loans not secured by real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$7,370

 

 

 

15,184

 

 

 

4,335

 

 

 

3,193

 

 

 

2,630

 

 

 

12,973

 

 

 

21,663

 

 

 

-

 

 

 

67,348

 

Watch

 

 

-

 

 

 

85

 

 

 

-

 

 

 

-

 

 

 

81

 

 

 

110

 

 

 

1,081

 

 

 

-

 

 

 

1,357

 

Substandard

 

 

33

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

33

 

Total Commercial

 

$7,403

 

 

 

15,269

 

 

 

4,335

 

 

 

3,193

 

 

 

2,711

 

 

 

13,083

 

 

 

22,744

 

 

 

-

 

 

 

68,738

 

Farm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$202

 

 

 

46

 

 

 

91

 

 

 

-

 

 

 

11

 

 

 

53

 

 

 

171

 

 

 

-

 

 

 

574

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total farm

 

$202

 

 

 

46

 

 

 

91

 

 

 

-

 

 

 

11

 

 

 

53

 

 

 

171

 

 

 

-

 

 

 

574

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$2,603

 

 

 

1,558

 

 

 

484

 

 

 

253

 

 

 

84

 

 

 

67

 

 

 

2,624

 

 

 

-

 

 

 

7,673

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

-

 

 

 

-

 

 

 

3

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4

 

 

 

-

 

 

 

7

 

Total consumer

 

$2,603

 

 

 

1,558

 

 

 

487

 

 

 

253

 

 

 

84

 

 

 

67

 

 

 

2,628

 

 

 

-

 

 

 

7,680

 

All other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$1,074

 

 

 

6,455

 

 

 

498

 

 

 

433

 

 

 

648

 

 

 

4,030

 

 

 

2,812

 

 

 

-

 

 

 

15,950

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

75

 

 

 

64

 

 

 

-

 

 

 

139

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total all other

 

$1,074

 

 

 

6,455

 

 

 

498

 

 

 

433

 

 

 

648

 

 

 

4,105

 

 

 

2,876

 

 

 

-

 

 

 

16,089

 

Total loans not secured

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

by real estate

 

$11,282

 

 

 

23,328

 

 

 

5,411

 

 

 

3,879

 

 

 

3,454

 

 

 

17,308

 

 

 

28,419

 

 

 

-

 

 

 

93,081

 

Total loans

 

$109,733

 

 

 

290,876

 

 

 

168,340

 

 

 

113,012

 

 

 

52,844

 

 

 

207,575

 

 

 

135,793

 

 

 

-

 

 

 

1,078,173

 

Current period gross charge-offs

 

$-

 

 

 

87

 

 

 

104

 

 

 

21

 

 

 

1

 

 

 

366

 

 

 

-

 

 

 

-

 

 

 

579

 

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