Loan and Allowance for Loan Losses	6 Months Ended
Loan and Allowance for Loan Losses	Jun. 30, 2021
Loans And Leases Receivable Disclosure [Abstract]
Loans and leases receivable disclosure [Text Block]	NOTE 4: LOANS AND ALLOWANCE FOR LOAN LOSSES June 30, December 31, (Dollars in thousands) 2021 2020 Commercial and industrial $ 87,933 $ 82,585 Construction and land development 37,477 33,514 Commercial real estate: Owner occupied 51,520 54,033 Hotel/motel 46,963 42,900 Multi-family 39,316 40,203 Other 105,046 118,000 Total commercial real estate 242,845 255,136 Residential real estate: Consumer mortgage 33,140 35,027 Investment property 49,024 49,127 Total residential real estate 82,164 84,154 Consumer installment 7,762 7,099 Total loans 458,181 462,488 Less: unearned income (1,197) (788) Loans, net of unearned income $ 456,984 $ 461,700 Loans secured by real estate were approximately 79.1% of the Company’s total loan portfolio at June 30, 2021. At June 30, 2021, the Company’s geographic loan distribution was concentrated primarily in Lee County, Alabama, and surrounding areas. In accordance with ASC 310, a portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for loan losses. As part of the Company’s quarterly assessment of the allowance, the loan portfolio is disaggregated into the following portfolio segments: commercial and industrial, construction and land development, commercial real estate, residential real estate, and consumer installment. Where appropriate, the Company’s loan portfolio segments are further disaggregated into classes. A class is generally determined based on the initial measurement attribute, risk characteristics of the loan, and an entity’s method for monitoring and determining credit risk. The following describes the risk characteristics relevant to each of the portfolio segments and classes. Commercial and industrial (“C&I”) — includes loans to finance business operations, equipment purchases, or other needs for small and medium-sized commercial customers. Also included in this category are loans to finance agricultural production. Generally, the primary source of repayment is the cash flow from business operations and activities of the borrower. We participated as a lender in the Paycheck Protection Program (“PPP”), which ended May 31, 2021. PPP loans are forgivable in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. The Company had 288 and 265 PPP loans with an aggregate outstanding principal balance of $ 22.1 million and $ 19.0 million, included in this category, as of June 30, 2021 and December 31, 2020, respectively. Construction and land development (“C&D”) — includes both loans and credit lines for the purpose of purchasing, carrying, and developing land into commercial developments or residential subdivisions. Also included are loans and credit lines for construction of residential, multi-family, and commercial buildings. Generally, the primary source of repayment is dependent upon the sale or refinance of the real estate collateral. Commercial real estate (“CRE”) — includes loans disaggregated into four classes: (1) owner occupied, (2) hotel/motel, (3) multifamily and (4) other. ● Owner occupied – includes loans secured by business facilities to finance business operations, equipment and owner-occupied facilities primarily for small and medium-sized commercial customers. Generally, the primary source of repayment is the cash flow from business operations and activities of the borrower, who owns the property. ● Hotel/motel – includes loans for hotels and motels. Generally, the primary source of repayment is dependent upon income generated from the real estate collateral. The underwriting of these loans takes into consideration the occupancy and rental rates, as well as the financial health of the borrower. ● Multi-family – primarily includes loans to finance income-producing multi-family properties. Loans in this class include loans for 5 or more unit residential property and apartments leased to residents. Generally, the primary source of repayment is dependent upon income generated from the real estate collateral. The underwriting of these loans takes into consideration the occupancy and rental rates , as well as the financial health of the borrower. ● Other – primarily includes loans to finance income-producing commercial properties that are not owner occupied. Loans in this class include loans for neighborhood retail centers, medical and professional offices, single retail stores, industrial buildings, and warehouses leased to local businesses. Generally, the primary source of repayment is dependent upon income generated from the real estate collateral. The underwriting of these loans takes into consideration the occupancy and rental rates, as well as the financial health of the borrower. Residential real estate (“RRE”) — includes loans disaggregated into two classes: (1) consumer mortgage and (2) investment property. ● Consumer mortgage – primarily includes first or second lien mortgages and home equity lines of credit to consumers that are secured by a primary residence or second home. These loans are underwritten in accordance with the Bank’s general loan poli cies and procedures which require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit history, and property value. ● Investment property – primarily includes loans to finance income-producing 1-4 family residential properties. Generally, the primary source of repayment is dependent upon income generated from leasing the property securing the loan. The underwriting of these loans takes into consideration the rental rates and property value, as well as the financial health of the borrower. Consumer installment — includes loans to individuals both secured by personal property and unsecured. Loans include personal lines of credit, automobile loans, and other retail loans. These loans are underwritten in accordance with the Bank’s general loan policies and procedures which require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit history, and, if applicable, property value. The following is a summary of current, accruing past due, and nonaccrual loans by portfolio segment and class as of June 30, 2021 and December 31, 2020. Accruing Accruing Total 30-89 Days Greater than Accruing Non- Total (Dollars in thousands) Current Past Due 90 days Loans Accrual Loans June 30, 2021: Commercial and industrial $ 87,932 1 — 87,933 — $ 87,933 Construction and land development 37,273 204 — 37,477 — 37,477 Commercial real estate: Owner occupied 51,520 — — 51,520 — 51,520 Hotel/motel 46,963 — — 46,963 — 46,963 Multi-family 39,316 — — 39,316 — 39,316 Other 104,642 205 — 104,847 199 105,046 Total commercial real estate 242,441 205 — 242,646 199 242,845 Residential real estate: Consumer mortgage 32,745 68 — 32,813 327 33,140 Investment property 48,922 — — 48,922 102 49,024 Total residential real estate 81,667 68 — 81,735 429 82,164 Consumer installment 7,755 7 — 7,762 — 7,762 Total $ 457,068 485 — 457,553 628 $ 458,181 December 31, 2020: Commercial and industrial $ 82,355 230 — 82,585 — $ 82,585 Construction and land development 33,453 61 — 33,514 — 33,514 Commercial real estate: Owner occupied 54,033 — — 54,033 — 54,033 Hotel/motel 42,900 — — 42,900 — 42,900 Multi-family 40,203 — — 40,203 — 40,203 Other 117,759 29 — 117,788 212 118,000 Total commercial real estate 254,895 29 — 254,924 212 255,136 Residential real estate: Consumer mortgage 33,169 1,503 140 34,812 215 35,027 Investment property 49,014 6 — 49,020 107 49,127 Total residential real estate 82,183 1,509 140 83,832 322 84,154 Consumer installment 7,069 29 1 7,099 — 7,099 Total $ 459,955 1,858 141 461,954 534 $ 462,488 Allowance for Loan Losses The Company assesses the adequacy of its allowance for loan losses prior to the end of each calendar quarter. The level of the allowance is based upon management’s evaluation of the loan portfolio, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect a borrower’s ability to repay (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, industry and peer bank loan loss rates, and other pertinent factors, including regulatory recommendations. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. Loans are charged off, in whole or in part, when management believes that the full collectability of the loan is unlikely. A loan may be partially charged-off after a “confirming event” has occurred, which serves to validate that full repayment pursuant to the terms of the loan is unlikely. The Company deems loans impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Collection of all amounts due according to the contractual terms means that both the interest and principal payments of a loan will be collected as scheduled in the loan agreement. An impairment allowance is recognized if the fair value of the loan is less than the recorded investment in the loan. The impairment is recognized through the allowance. Loans that are impaired are recorded at the present value of expected future cash flows discounted at the loan’s effective interest rate, or if the loan is collateral dependent, the impairment measurement is based on the fair value of the collateral, less estimated disposal costs. The level of allowance maintained is believed by management to be adequate to absorb probable losses inherent in the portfolio at the balance sheet date. The allowance is increased by provisions charged to expense and decreased by charge- offs, net of recoveries of amounts previously charged -off. In assessing the adequacy of the allowance, the Company also considers the results of its ongoing internal and independent loan review processes. The Company’s loan review process assists in determining whether there are loans in the portfolio whose credit quality has weakened over time and evaluating the risk characteristics of the entire loan portfolio. The Company’s loan review process includes the judgment of management, the input from our independent loan reviewers, and reviews conducted by bank regulatory agencies as part of their examination process. The Company incorporates loan review results in the determination of whether or not it is probable that it will be able to collect all amounts due according to the contractual terms of a loan. As part of the Company’s quarterly assessment of the allowance, management divides the loan portfolio into five segments: commercial and industrial, construction and land development, commercial real estate, residential real estate, and consumer installment. The Company analyzes each segment and estimates an allowance allocation for each loan segment. The allocation of the allowance for loan losses begins with a process of estimating the probable losses inherent for each loan segment. The estimates for these loans are established by category and based on the Company’s internal system of credit risk ratings and historical loss data. The estimated loan loss allocation rate for the Company’s internal system of credit risk grades is based on its experience with similarly graded loans. For loan segments where the Company believes it does not have sufficient historical loss data, the Company may make adjustments based, in part, on loss rates of peer bank groups. At June 30, 2021 and December 31, 2020, and for the periods then ended, the Company adjusted its historical loss rates for the commercial real estate portfolio segment based, in part, on loss rates of peer bank groups. The estimated loan loss allocation for all five loan portfolio segments is then adjusted for management’s estimate of probable losses for several “qualitative and environmental” factors. The allocation for qualitative and environmental factors is particularly subjective and does not lend itself to exact mathematical calculation. This amount represents estimated probable inherent credit losses which exist, but have not yet been identified, as of the balance sheet date, and are based upon quarterly trend assessments in delinquent and nonaccrual loans, credit concentration changes, prevailing economic conditions, changes in lending personnel experience, changes in lending policies or procedures, and other factors. These qualitative and environmental factors are considered for each of the five loan segments and the allowance allocation, as determined by the processes noted above, is increased or decreased based on the incremental assessment of these factors. The Company regularly re-evaluates its practices in determining the allowance for loan losses. Since the fourth quarter of 2016, the Company has increased its look-back period each quarter to incorporate the effects of at least one economic downturn in its loss history. The Company believes the extension of its look-back period is appropriate due to the risks inherent in the loan portfolio. Absent this extension, the early cycle periods in which the Company experienced significant losses would be excluded from the determination of the allowance for loan losses and its balance would decrease. For the quarter ended June 30, 2021, the Company increased its look-back period to 49 quarters to continue to include losses incurred by the Company beginning with the first quarter of 2009. The Company will likely continue to increase its look- back period to incorporate the effects of at least one economic downturn in its loss history. During 2020, the Company adjusted certain qualitative and economic factors related to changes in economic conditions driven by the impact of the novel strain of coronavirus (“COVID-19 pandemic”) and resulting adverse economic conditions, including higher unemployment in our primary market area. During the second quarter of 2021, the Company adjusted certain qualitative and economic factors to reflect improvements in economic conditions in our primary market area. The following table details the changes in the allowance for loan losses by portfolio segment for the respective periods. June 30, 2021 (Dollars in thousands) Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment Total Quarter ended: Beginning balance $ 828 551 3,302 908 93 $ 5,682 Charge-offs — — — (1) — (1) Recoveries 2 — — 13 11 26 Net recoveries (charge-offs) 2 — — 12 11 25 Provision for loan losses (1) 88 (598) (82) (7) (600) Ending balance $ 829 639 2,704 838 97 $ 5,107 Six months ended: Beginning balance $ 807 594 3,169 944 104 $ 5,618 Charge-offs — — — (1) (5) (6) Recoveries 54 — — 26 15 95 Net recoveries (charge-offs) 54 — — 25 10 89 Provision for loan losses (32) 45 (465) (131) (17) (600) Ending balance $ 829 639 2,704 838 97 $ 5,107 June 30, 2020 (Dollars in thousands) Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment Total Quarter ended: Beginning balance $ 675 582 2,596 877 137 $ 4,867 Charge-offs (4) — — — (27) (31) Recoveries 2 — — 14 6 22 Net (charge-offs) recoveries (2) — — 14 (21) (9) Provision for loan losses 6 31 319 63 31 450 Ending balance $ 679 613 2,915 954 147 $ 5,308 Six months ended: Beginning balance $ 577 569 2,289 813 138 $ 4,386 Charge-offs (4) — — — (32) (36) Recoveries 55 — — 45 8 108 Net recoveries (charge-offs) 51 — — 45 (24) 72 Provision for loan losses 51 44 626 96 33 850 Ending balance $ 679 613 2,915 954 147 $ 5,308 The following table presents an analysis of the allowance for loan losses and recorded investment in loans by portfolio segment and impairment methodology as of June 30, 2021 and 2020. Collectively evaluated (1) Individually evaluated (2) Total Allowance Recorded Allowance Recorded Allowance Recorded for loan investment for loan investment for loan investment (Dollars in thousands) losses in loans losses in loans losses in loans June 30, 2021: Commercial and industrial (3) $ 829 87,933 — — 829 87,933 Construction and land development 639 37,477 — — 639 37,477 Commercial real estate 2,704 242,646 — 199 2,704 242,845 Residential real estate 838 82,067 — 97 838 82,164 Consumer installment 97 7,762 — — 97 7,762 Total $ 5,107 457,885 — 296 5,107 458,181 June 30, 2020: Commercial and industrial (4) $ 679 87,754 — — 679 87,754 Construction and land development 613 32,967 — — 613 32,967 Commercial real estate 2,915 250,370 — 218 2,915 250,588 Residential real estate 954 85,714 — 111 954 85,825 Consumer installment 147 8,631 — — 147 8,631 Total $ 5,308 465,436 — 329 5,308 465,765 (1) Represents loans collectively evaluated for impairment in accordance with ASC 450-20, Loss Contingencies , and pursuant to amendments by ASU 2010-20 regarding allowance for non-impaired loans. (2) Represents loans individually evaluated for impairment in accordance with ASC 310-30, Receivables , and pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans. (3) Includes $22.1 million of PPP loans for which no allowance for loan losses was allocated due to 100% SBA guarantee. (4) Includes $36.5 million of PPP loans for which no allowance for loan losses was allocated due to 100% SBA guarantee. Credit Quality Indicators The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. The following table presents credit quality indicators for the loan portfolio segments and classes. These categories are utilized to develop the associated allowance for loan losses using historical losses adjusted for qualitative and environmental factors and are defined as follows: ● Pass – loans which are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral. ● Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date. These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification. ● Substandard Accruing – loans that exhibit a well-defined weakness which presently jeopardizes debt repayment, even though they are currently performing. These loans are characterized by the distinct possibility that the Company may incur a loss in the future if these weaknesses are not corrected. ● Nonaccrual – includes loans where management has determined that full payment of principal and interest is not expected. (Dollars in thousands) Pass Special Mention Substandard Accruing Nonaccrual Total loans June 30, 2021: Commercial and industrial $ 86,092 1,550 291 — $ 87,933 Construction and land development 37,235 3 239 — 37,477 Commercial real estate: Owner occupied 49,361 2,026 133 — 51,520 Hotel/motel 39,151 7,812 — — 46,963 Multi-family 35,786 3,530 — — 39,316 Other 103,413 1,389 45 199 105,046 Total commercial real estate 227,711 14,757 178 199 242,845 Residential real estate: Consumer mortgage 30,631 417 1,765 327 33,140 Investment property 48,408 183 331 102 49,024 Total residential real estate 79,039 600 2,096 429 82,164 Consumer installment 7,749 6 7 — 7,762 Total $ 437,826 16,916 2,811 628 $ 458,181 December 31, 2020: Commercial and industrial $ 79,984 2,383 218 — $ 82,585 Construction and land development 33,260 — 254 — 33,514 Commercial real estate: Owner occupied 51,265 2,627 141 — 54,033 Hotel/motel 35,084 7,816 — — 42,900 Multi-family 36,673 3,530 — — 40,203 Other 116,498 1,243 47 212 118,000 Total commercial real estate 239,520 15,216 188 212 255,136 Residential real estate: Consumer mortgage 32,518 397 1,897 215 35,027 Investment property 48,501 187 332 107 49,127 Total residential real estate 81,019 584 2,229 322 84,154 Consumer installment 7,069 7 23 — 7,099 Total $ 440,852 18,190 2,912 534 $ 462,488 Impaired loans The following tables present details related to the Company’s impaired loans. Loans that have been fully charged-off are not included in the following tables. The related allowance generally represents the following components that correspond to impaired loans: ● Individually evaluated impaired loans equal to or greater than $500,000 secured by real estate (nonaccrual construction and land development, commercial real estate, and residential real estate loans). ● Individually evaluated impaired loans equal to or greater than $250,000 not secured by real estate (nonaccrual commercial and industrial and consumer installment loans). The following tables set forth certain information regarding the Company’s impaired loans that were individually evaluated for impairment at June 30, 2021 and December 31, 2020. June 30, 2021 (Dollars in thousands) Unpaid principal balance (1) Charge-offs and payments applied (2) Recorded investment (3) Related allowance With no allowance recorded: Commercial real estate: Other $ 211 (12) 199 $ — Total commercial real estate 211 (12) 199 — Residential real estate: Investment property 103 (6) 97 — Total residential real estate 103 (6) 97 — Total impaired loans $ 314 (18) 296 $ — (1) Unpaid principal balance represents the contractual obligation due from the customer. (2) Charge-offs and payments applied represents cumulative charge-offs taken, as well as interest payments that have been applied against the outstanding principal balance subsequent to the loans being placed on nonaccrual status. (3) Recorded investment represents the unpaid principal balance less charge-offs and payments applied; it is shown before any related allowance for loan losses. December 31, 2020 (Dollars in thousands) Unpaid principal balance (1) Charge-offs and payments applied (2) Recorded investment (3) Related allowance With no allowance recorded: Commercial real estate: Other $ 216 (4) 212 $ — Total commercial real estate 216 (4) 212 — Residential real estate: Investment property 109 (2) 107 — Total residential real estate 109 (2) 107 — Total impaired loans $ 325 (6) 319 $ — (1) Unpaid principal balance represents the contractual obligation due from the customer. (2) Charge-offs and payments applied represents cumulative charge-offs taken, as well as interest payments that have been applied against the outstanding principal balance subsequent to the loans being placed on nonaccrual status. (3) Recorded investment represents the unpaid principal balance less charge-offs and payments applied; it is shown before any related allowance for loan losses. The following table provides the average recorded investment in impaired loans, if any, by portfolio segment, and the amount of interest income recognized on impaired loans after impairment by portfolio segment and class during the respective periods. Quarter ended June 30, 2021 Six months ended June 30, 2021 Average Total interest Average Total interest recorded income recorded income (Dollars in thousands) investment recognized investment recognized Impaired loans: Commercial real estate: Other $ 202 — 205 — Total commercial real estate 202 — 205 — Residential real estate: Investment property 100 — 102 — Total residential real estate 100 — 102 — Total $ 302 — 307 — Quarter ended June 30, 2020 Six months ended June 30, 2020 Average Total interest Average Total interest recorded income recorded income (Dollars in thousands) investment recognized investment recognized Impaired loans: Commercial real estate: Other $ 54 — 31 — Total commercial real estate 54 — 31 — Residential real estate: Investment property 28 — 16 — Total residential real estate 28 — 16 — Total $ 82 — 47 — Troubled Debt Restructurings Impaired loans also include troubled debt restructurings (“TDRs”). On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. Section 4013 of the CARES Act, “Temporary Relief From Troubled Debt Restructurings,” provides banks the option to temporarily suspend certain requirements under ASC 340-10’s TDR classifications for a limited period of time to account for the effects of COVID-19. On April 7, 2020, the Federal Reserve and the other banking regulators issued a statement, “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by the Coronavirus (Revised)” (the “Interagency Statement on COVID-19 Loan Modifications”), to encourage banks to work prudently with borrowers and to describe the agencies’ interpretation of how accounting rules under ASC 310 -40, “Troubled Debt Restructurings by Creditors,” apply to certain COVID-19-related modifications. The Interagency Statement on COVID-19 Loan Modifications was supplemented on June 23, 2020 by the Interagency Examiner Guidance for Assessing Safety and Soundness Considering the Effect of the COVID-19 Pandemic on Institutions. If a loan modification is eligible, a bank may elect to account for the loan under section 4013 of the CARES Act. If a loan modification is not eligible under section 4013, or if the bank elects not to account for the loan modification under section 4013, the Revised Statement includes criteria when a bank may presume a loan modification is not a TDR in accordance with ASC 310 -40. The Company evaluates loan extensions or modifications not qualified under Section 4013 of the CARES Act or under the Interagency Statement on COVID-19 Loan Modifications in accordance with FASB ASC 340 -10 with respect to the classification of the loan as a TDR. In the normal course of business, management may grant concessions to borrowers that are experiencing financial difficulty. A concession may include, but is not limited to, delays in required payments of principal and interest for a specified period, reduction of the stated interest rate of the loan, reduction of accrued interest, extension of the maturity date, or reduction of the face amount or maturity amount of the debt. A concession has been granted when, as a result of the restructuring, the Bank does not expect to collect, when due, all amounts owed, including interest at the original stated rate. A concession may have also been granted if the debtor is not able to access funds elsewhere at a market rate for debt with similar risk characteristics as the restructured debt. In making the determination of whether a loan modification is a TDR, the Company considers the individual facts and circumstances surrounding each modification. As part of the credit approval process, the restructured loans are evaluated for adequate collateral protection in determining the appropriate accrual status at the time of restructure. Similar to other impaired loans, TDRs are measured for impairment based on the present value of expected payments using the loan’s original effective interest rate as the discount rate, or the fair value of the collateral, less selling costs if the loan is collateral dependent. If the recorded investment in the loan exceeds the measure of fair value, impairment is recognized by establishing a valuation allowance as part of the allowance for loan losses or a charge-off to the allowance for loan losses. In periods subsequent to the modification, all TDRs are individually evaluated for possible impairment. The following is a summary of accruing and nonaccrual TDRs, which are included in the impaired loan totals, and the related allowance for loan losses, by portfolio segment and class as of June 30, 2021 and December 31, 2020, respectively. TDRs Related (Dollars in thousands) Accruing Nonaccrual Total Allowance June 30, 2021 Commercial real estate: Other $ — 199 199 $ — Total commercial real estate — 199 199 — Residential real estate: Investment property — 97 97 $ — Total residential real estate — 97 97 — Total $ — 296 296 $ — TDRs Related (In thousands) Accruing Nonaccrual Total Allowance December 31, 2020 Commercial real estate: Other $ — 212 212 $ — Total commercial real estate — 212 212 — Investment property — 107 107 — Total residential real estate — 107 107 — Total $ — 319 319 $ — At June 30, 2021 there were no significant outstanding commitments to advance additional funds to customers whose loans had been restructured. Quarter ended June 30, Six months ended June 30, Pre- Post - Pre- Post - modification modification modification modification Number outstanding outstanding Number outstanding outstanding of recorded recorded of recorded recorded (Dollars in thousands) contracts investment investment contracts investment investment 2020: Commercial real estate: Other — $ — — 1 $ 216 216 Total commercial real estate — — — 1 216 216 Residential real estate: Investment property — — — 3 111 111 Total residential real estate — — — 3 111 111 Total — $ — — 4 $ 327 327 There were no loans modified in a TDR during the quarter and six months ended June 30, 2021. During the quarter and six months ended ended June 30, 2021 and 2020, respectively, there were no loans modified in a TDR within the previous 12 months for which there was a payment default (defined as 90 days or more past due).