Loans and Allowance for Loan and Lease Losses

9 Months Ended

Sep. 30, 2022

Financing Receivable, Allowance for Credit Loss, Writeoff, after Recovery [Abstract]

Loans and Allowance for Loan and Lease Losses

LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

Portfolio Segments

The Company has divided the loan portfolio into the following portfolio segments based on risk characteristics:

Construction, land development and other land loans – Commercial construction, land and land development loans include loans for the development of residential housing projects, loans for the development of commercial and industrial use property, loans for the purchase and improvement of raw land and loans primarily for agricultural production that are secured by farmland. These loans are secured in whole or in part by the underlying real estate collateral and are generally guaranteed by the principals of the borrowing entity.

Secured by 1-4 family residential properties – These loans include conventional mortgage loans on one-to-four family residential properties. These properties may serve as the borrower’s primary residence, vacation home or investment property. Also included in this portfolio are home equity loans and lines of credit. This type of lending, which is secured by a first or second mortgage on the borrower’s residence, allows customers to borrow against the equity in their home.

Secured by multi-family residential properties – This portfolio segment includes mortgage loans secured by apartment buildings.

Secured by non-farm, non-residential properties – This portfolio segment includes real estate loans secured by commercial and industrial properties, office or mixed-use facilities, strip shopping centers or other commercial property. These loans are generally guaranteed by the principals of the borrowing entity.

Commercial and industrial loans and leases – This portfolio segment includes loans and leases to commercial customers for use in the normal course of business. These credits may be loans, lines of credit and leases to financially strong borrowers, secured by inventories, equipment or receivables, and are generally guaranteed by the principals of the borrowing entity.

Direct consumer – This portfolio segment includes a variety of secured and unsecured personal loans, including automobile loans, loans for household and personal purposes and all other direct consumer installment loans.

Branch retail – This portfolio segment includes loans secured by collateral purchased by consumers at retail stores with whom ALC had an established relationship through its branch network to provide financing for the retail products sold if applicable underwriting standards were met. The collateral securing these loans generally includes personal property items such as furniture, ATVs and home appliances.

Indirect – This portfolio segment includes loans secured by collateral purchased by consumers at retail stores with whom the Company has an established relationship to provide financing for the retail products sold if applicable underwriting standards are met. The collateral securing these loans generally includes recreational vehicles, campers, boats, horse trailers and cargo trailers.

As of September 30, 2022 and December 31, 2021, the composition of the loan portfolio by reporting segment and portfolio segment was as follows:


	September 30, 2022
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	36,740	$	—	$	36,740
Secured by 1-4 family residential properties		83,231		1,680		84,911
Secured by multi-family residential properties		72,446		—		72,446
Secured by non-farm, non-residential properties		200,505		—		200,505
Commercial and industrial loans and leases (1)		65,951		—		65,951
Consumer loans:
Direct consumer		5,685		6,594		12,279
Branch retail		—		16,278		16,278
Indirect		262,742		—		262,742
Total loans		727,300		24,552		751,852
Less: Unearned interest, fees and deferred cost		847		734		1,581
Allowance for loan and lease losses		8,033		1,340		9,373
Net loans	$	718,420	$	22,478	$	740,898


	December 31, 2021
	Bank			ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	67,048		$	—	$	67,048
Secured by 1-4 family residential properties		70,439			2,288		72,727
Secured by multi-family residential properties		46,000			—		46,000
Secured by non-farm, non-residential properties		197,901			—		197,901
Commercial and industrial loans and leases (1)		73,947			—		73,947
Consumer loans:
Direct consumer		5,972			15,717		21,689
Branch retail		—			25,692		25,692
Indirect		205,940			—		205,940
Total loans		667,247			43,697		710,944
Less: Unearned interest, fees and deferred cost		(324	)		2,918		2,594
Allowance for loan and lease losses		7,038			1,282		8,320
Net loans	$	660,533		$	39,497	$	700,030

(1)

Includes equipment financing leases and PPP loans. As of September 30, 2022 and December 31, 2021, equipment finance leases totaled $10.8 million and $11.0 million, respectively, and PPP loans totaled $31 thousand and $1.7 million, respectively.

The Company makes commercial, real estate and installment loans to its customers. Although the Company has a diversified loan portfolio, 52.5% and 54.0% of the portfolio was concentrated in loans secured by real estate as of September 30, 2022 and December 31, 2021, respectively.

Loans with a carrying value of $113.5 million and $66.6 million were pledged as collateral to secure Federal Home Loan Bank (“FHLB”) borrowings as of September 30, 2022 and December 31, 2021, respectively.

Related Party Loans

In the ordinary course of business, the Bank makes loans to certain officers and directors of the Company, including companies with which they are associated. These loans are made on the same terms as those prevailing for comparable transactions with unrelated parties. Management believes that such loans do not represent more than a normal risk of collectability, nor do they present other unfavorable features. The aggregate balances of such related party loans and commitments were $0.3 million as of both September 30, 2022 and December 31, 2021. During the nine months ended September 30, 2022, there were no new loans to these parties, and repayments by active related parties were $5 thousand. During the year ended December 31, 2021, there were no new loans to these parties, and repayments by active related parties were $0.1 million.

Allowance for Loan and Lease Losses

The following tables present changes in the allowance for loan and lease losses during the nine months ended September 30, 2022 and 2021 and the related loan balances by loan type as of September 30, 2022 and 2021:


	As of and for the Nine Months Ended September 30, 2022
	Construction, Land Development, and Other			Real Estate 1-4 Family			Real Estate Multi- Family		Non- Farm Non- Residential		Commercial and Industrial		Direct Consumer			Branch Retail			Indirect			Total
	(Dollars in Thousands)
Allowance for loan and lease losses:
Beginning balance	$	628		$	690		$	437	$	1,958	$	860	$	1,004		$	304		$	2,439		$	8,320
Charge-offs		—			(10	)		—		—		—		(1,604	)		(423	)		(238	)		(2,275	)
Recoveries		2			23			—		4		—		387			97			34			547
Provision		(246	)		89			210		30		244		1,161			445			848			2,781
Ending balance	$	384		$	792		$	647	$	1,992	$	1,104	$	948		$	423		$	3,083		$	9,373
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—		$	8		$	—	$	—	$	277	$	—		$	—		$	—		$	285
Collectively evaluated for impairment		384			784			647		1,992		827		948			423			3,083			9,088
Total allowance for loan and lease losses	$	384		$	792		$	647	$	1,992	$	1,104	$	948		$	423		$	3,083		$	9,373
Ending balance of loans receivable:
Individually evaluated for impairment	$	1,048		$	600		$	—	$	1,765	$	2,603	$	18		$	—		$	—		$	6,034
Collectively evaluated for impairment		35,692			84,311			72,446		198,740		63,348		12,261			16,278			262,742			745,818
Loans acquired with deteriorated credit quality		—			—			—		—		—		—			—			—			—
Total loans receivable	$	36,740		$	84,911		$	72,446	$	200,505	$	65,951	$	12,279		$	16,278		$	262,742		$	751,852


	As of and for the Nine Months Ended September 30, 2021
	Construction, Land Development, and Other			Real Estate 1-4 Family			Real Estate Multi- Family			Non- Farm Non- Residential		Commercial and Industrial			Direct Consumer			Branch Retail			Indirect			Total
	(Dollars in Thousands)
Allowance for loan and lease losses:
Beginning balance	$	393		$	639		$	577		$	1,566	$	1,008		$	1,202		$	373		$	1,712		$	7,470
Charge-offs		(22	)		(6	)		—			—		(6	)		(848	)		(299	)		(365	)		(1,546	)
Recoveries		21			9			—			4		10			512			148			48			752
Provision		128			50			(89	)		415		(135	)		120			127			901			1,517
Ending balance	$	520		$	692		$	488		$	1,985	$	877		$	986		$	349		$	2,296		$	8,193
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—		$	10		$	—		$	—	$	58		$	—		$	—		$	—		$	68
Collectively evaluated for impairment		520			682			488			1,985		819			986			349			2,296			8,125
Total allowance for loan and lease losses	$	520		$	692		$	488		$	1,985	$	877		$	986		$	349		$	2,296		$	8,193
Ending balance of loans receivable:
Individually evaluated for impairment	$	—		$	671		$	—		$	1,053	$	1,015		$	21		$	—		$	—		$	2,760
Collectively evaluated for impairment		58,175			72,430			51,420			197,692		76,664			25,824			29,764			194,154			706,123
Loans acquired with deteriorated credit quality		—			11			—			—		—			—			—			—			11
Total loans receivable	$	58,175		$	73,112		$	51,420		$	198,745	$	77,679		$	25,845		$	29,764		$	194,154		$	708,894

Credit Quality Indicators

The Company utilizes a credit grading system that provides a uniform framework for establishing and monitoring credit risk in the loan portfolio. Under this system, construction, land, multi-family real estate, other commercial real estate, and commercial and industrial loans are graded based on pre-determined risk metrics and categorized into one of nine risk grades. These risk grades can be summarized into categories described as pass, special mention, substandard, doubtful and loss, as described in further detail below.

•

Pass (Risk Grades 1-5): Loans in this category include obligations in which the probability of default is considered low.

•

Special Mention (Risk Grade 6): Loans in this category exhibit potential credit weaknesses or downward trends deserving management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Although a special mention asset has a higher probability of default than pass-rated categories, its default is not imminent.

•

Substandard (Risk Grade 7): Loans in this category have defined weaknesses that jeopardize the orderly liquidation of debt. A substandard loan is inadequately protected by the current worth and paying capacity of the obligor or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. There is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as substandard.

•

Doubtful (Risk Grade 8): Loans classified as doubtful have all of the weaknesses found in substandard loans, with the added characteristic that the weaknesses make collection of debt in full, based on currently existing facts, conditions and values, highly questionable or improbable. Serious problems exist such that partial loss of principal is likely; however, because of certain important, reasonably specific pending factors that may work to strengthen the assets, the loans’ classification as estimated losses is deferred until a more exact status may be determined. Such pending factors may include proposed merger, acquisition or liquidation procedures, capital injection, perfection of liens on additional collateral and refinancing plans. Loans classified as doubtful may include loans to borrowers that have demonstrated a history of failing to live up to agreements. The Company did not have any loans classified as Doubtful (Risk Grade 8) as of September 30, 2022 or December 31, 2021.

•

Loss (Risk Grade 9): Loans are classified in this category when borrowers are deemed incapable of repayment of unsecured debt. Loans to such borrowers are considered uncollectable and of such little value that continuance as active assets of the Company is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not prudent to defer writing off these assets, even though partial recovery may be realized in the future. The Company did not have any loans classified as Loss (Risk Grade 9) as of September 30, 2022 or December 31, 2021.

Because residential real estate and consumer loans are more uniform in nature, each loan is categorized into one of two risk grades, depending on whether the loan is considered to be performing or nonperforming. Performing loans are loans that are paying principal and interest in accordance with a contractual agreement. Nonperforming loans are loans that have demonstrated characteristics that indicate a probability of loss.

The tables below illustrate the carrying amount of loans by credit quality indicator as of September 30, 2022:


	September 30, 2022
	Pass 1-5			Special Mention 6			Substandard 7			Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	35,692		$	—		$	1,048		$	36,740
Secured by multi-family residential properties		72,446			—			—			72,446
Secured by non-farm, non-residential properties		198,004			656			1,845			200,505
Commercial and industrial loans		63,064			—			2,887			65,951
Total	$	369,206		$	656		$	5,780		$	375,642
As a percentage of total loans		98.29	%		0.17	%		1.54	%		100.00	%


	September 30, 2022
	Performing			Nonperforming			Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	83,611		$	1,300		$	84,911
Consumer loans:
Direct consumer		12,112			167			12,279
Branch retail		16,130			148			16,278
Indirect		262,742			—			262,742
Total	$	374,595		$	1,615		$	376,210
As a percentage of total loans		99.57	%		0.43	%		100.00	%

The tables below illustrate the carrying amount of loans by credit quality indicator as of December 31, 2021:


	December 31, 2021
	Pass 1-5			Special Mention 6			Substandard 7			Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	67,046		$	—		$	2		$	67,048
Secured by multi-family residential properties		43,472			2,528			—			46,000
Secured by non-farm, non-residential properties		189,425			7,442			1,034			197,901
Commercial and industrial loans		72,116			333			1,498			73,947
Total	$	372,059		$	10,303		$	2,534		$	384,896
As a percentage of total loans		96.66	%		2.68	%		0.66	%		100.00	%


	December 31, 2021
	Performing			Nonperforming			Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	71,526		$	1,201		$	72,727
Consumer loans:
Direct consumer		20,939			750			21,689
Branch retail		25,486			206			25,692
Indirect		205,940			—			205,940
Total	$	323,891		$	2,157		$	326,048
As a percentage of total loans		99.34	%		0.66	%		100.00	%

The following table provides an aging analysis of past due loans by class as of September 30, 2022:


	As of September 30, 2022
	30-59 Days Past Due			60-89 Days Past Due			90 Days Or Greater			Total Past Due			Current			Total Loans			Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—		$	—		$	—		$	—		$	36,740		$	36,740		$	—
Secured by 1-4 family residential properties		288			15			223			526			84,385			84,911			—
Secured by multi-family residential properties		—			—			—			—			72,446			72,446			—
Secured by non-farm, non-residential properties		382			—			—			382			200,123			200,505			—
Commercial and industrial loans		406			—			—			406			65,545			65,951			—
Consumer loans:
Direct consumer		289			143			150			582			11,697			12,279			—
Branch retail		195			142			148			485			15,793			16,278			—
Indirect		101			—			59			160			262,583			262,742			—
Total	$	1,661		$	300		$	580		$	2,541		$	749,312		$	751,852		$	—
As a percentage of total loans		0.22	%		0.04	%		0.08	%		0.34	%		99.66	%		100.00	%

The following table provides an aging analysis of past due loans by class as of December 31, 2021:


	As of December 31, 2021
	30-59 Days Past Due			60-89 Days Past Due			90 Days Or Greater			Total Past Due			Current			Total Loans			Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—		$	—		$	—		$	—		$	67,048		$	67,048		$	—
Secured by 1-4 family residential properties		349			23			20			392			72,335			72,727			—
Secured by multi-family residential properties		—			—			—			—			46,000			46,000			—
Secured by non-farm, non-residential properties		403			—			—			403			197,498			197,901			—
Commercial and industrial loans		54			—			234			288			73,659			73,947			—
Consumer loans:
Direct consumer		652			589			730			1,971			19,718			21,689			—
Branch retail		377			182			206			765			24,927			25,692			—
Indirect		43			14			—			57			205,883			205,940			—
Total	$	1,878		$	808		$	1,190		$	3,876		$	707,068		$	710,944		$	—
As a percentage of total loans		0.27	%		0.11	%		0.17	%		0.55	%		99.45	%		100.00	%

The following table provides an analysis of non-accruing loans by class as of September 30, 2022 and December 31, 2021:


	Loans on Non-Accrual Status
	September 30, 2022		December 31, 2021
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	2
Secured by 1-4 family residential properties		1,090		780
Secured by multi-family residential properties		—		—
Secured by non-farm, non-residential properties		—		—
Commercial and industrial loans		631		277
Consumer loans:
Direct consumer		149		743
Branch retail		148		206
Indirect		59		—
Total loans	$	2,077	$	2,008

Impaired Loans

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the related loan agreement. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the liquidation of the collateral. At the Bank, all loans of $0.5 million or more that have a credit quality risk grade of seven or above are identified for impairment analysis. At management’s discretion, additional loans may be impaired based on homogeneous factors such as changes in the nature and volume of the portfolio, portfolio quality, adequacy of the underlying collateral value, loan concentrations, historical charge-off trends and economic conditions that may affect the borrower’s ability to pay. At ALC, all loans of $50 thousand or more that are 90 days or more past due are identified for impairment analysis. As of both September 30, 2022 and December 31, 2021, there were $0.1 million of impaired loans with no related allowance recorded at ALC. Impaired loans, or portions thereof, are charged off when deemed uncollectable.

As of September 30, 2022, the carrying amount of the Company’s impaired loans consisted of the following:


	September 30, 2022
	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Impaired loans with no related allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	1,048	$	1,048	$	—
Secured by 1-4 family residential properties		585		585		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		1,765		1,765		—
Commercial and industrial		2,249		2,249		—
Direct consumer		18		18		—
Total loans with no related allowance recorded	$	5,665	$	5,665	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		15		15		8
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		354		354		277
Direct consumer		—		—		—
Total loans with an allowance recorded	$	369	$	369	$	285
Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	1,048	$	1,048	$	—
Secured by 1-4 family residential properties		600		600		8
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		1,765		1,765		—
Commercial and industrial		2,603		2,603		277
Direct consumer		18		18		—
Total impaired loans	$	6,034	$	6,034	$	285

As of December 31, 2021, the carrying amount of the Company’s impaired loans consisted of the following:


	December 31, 2021
	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Impaired loans with no related allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		630		630		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		1,051		1,051		—
Commercial and industrial		823		823		—
Direct consumer		21		21		—
Total loans with no related allowance recorded	$	2,525	$	2,525	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		16		16		10
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		57		57		57
Direct consumer		—		—		—
Total loans with an allowance recorded	$	73	$	73	$	67
Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		646		646		10
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		1,051		1,051		—
Commercial and industrial		880		880		57
Direct consumer		21		21		—
Total impaired loans	$	2,598	$	2,598	$	67

The average net investment in impaired loans and interest income recognized and received on impaired loans during the nine months ended September 30, 2022 and the year ended December 31, 2021 were as follows:


	Nine Months Ended September 30, 2022
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	116	$	2	$	—
Secured by 1-4 family residential properties		624		4		4
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		1,116		38		35
Commercial and industrial		872		7		4
Direct consumer		19		1		1
Total	$	2,747	$	52	$	44


	Year Ended December 31, 2021
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		773		31		31
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		2,377		140		108
Commercial and industrial		637		61		40
Direct consumer		22		9		2
Total	$	3,809	$	241	$	181

Loans on which the accrual of interest has been discontinued amounted to $2.1 million and $2.0 million as of September 30, 2022 and December 31, 2021, respectively. If interest on those loans had been accrued, there would have been $17 thousand and $52 thousand of interest accrued for the periods ended September 30, 2022 and December 31, 2021, respectively. Interest income related to these loans for the nine months ended September 30, 2022 and the year ended December 31, 2021 was $27 thousand and $30 thousand, respectively.

Troubled Debt Restructurings

Troubled debt restructurings include loans with respect to which concessions have been granted to borrowers that generally would not have otherwise been considered had the borrowers not been experiencing financial difficulty. The concessions granted may include payment schedule modifications, interest rate reductions, maturity date extensions, modifications of note structure, principal balance reductions or some combination of these concessions. There were no loans modified with concessions granted during the nine months ended September 30, 2022 and two loans with balances totaling $0.6 million modified with concessions granted during the year ended December 31, 2021. Restructured loans may involve loans remaining on non-accrual, moving to non-accrual or continuing on accrual status, depending on the individual facts and circumstances of the borrower. Non-accrual restructured loans are included with all other non-accrual loans. In addition, all accruing restructured loans are reported as troubled debt restructurings. Generally, restructured loans remain on non-accrual until the customer has attained a sustained period of repayment performance under the modified loan terms (generally a minimum of six months). However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can meet the new terms and whether the loan should be returned to or maintained on non-accrual status. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, then the loan remains on non-accrual. The Company did not have any non-accruing loans that were previously restructured and that remained on non-accrual status as of both September 30, 2022 and December 31, 2021. For both the nine months ended September 30, 2022 and the year ended December 31, 2021, the Company had no loans that were restored to accrual status based on a sustained period of repayment performance.

The following table provides, as of September 30, 2022 and December 31, 2021, the number of loans remaining in each loan category that the Company had previously modified in a troubled debt restructuring, as well as the pre- and post-modification principal balance as of each date.


	September 30, 2022						December 31, 2021
	Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance		Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans		1	$	107	$	—		1	$	107	$	—
Secured by 1-4 family residential properties		2		59		12		2		59		12
Secured by non-farm, non-residential properties		2		621		613		2		621		617
Commercial loans		2		116		24		2		116		31
Total		7	$	903	$	649		7	$	903	$	660

As of September 30, 2022 and December 31, 2021, no loans that previously had been modified in a troubled debt restructuring had defaulted subsequent to modification.

Restructured loan modifications primarily included maturity date extensions and payment schedule modifications. There were no modifications to principal balances of the loans that were restructured. Accordingly, there was no impact on the Company’s allowance for loan and lease losses resulting from the modifications.

All loans with a principal balance of $0.5 million or more that have been modified in a troubled debt restructuring are considered impaired and evaluated individually for impairment. The nature and extent of impairment of restructured loans, including those that have experienced a subsequent payment default, are considered in the determination of an appropriate level of allowance for loan and lease losses. This evaluation resulted in an allowance for loan and lease losses attributable to such restructured loans of $7 thousand as of both September 30, 2022 and December 31, 2021.