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Note 3 - Loans and Allowance for Credit Losses

6 Months Ended

Jun. 30, 2022

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

3.	LOANS AND ALLOWANCE FOR CREDIT LOSSES

Loans originated for investment are stated at their principal amount outstanding adjusted for partial charge-offs, the allowance, and net deferred loan fees and costs. Interest income on loans is accrued over the term of the loans primarily using the simple interest method based on the principal balance outstanding. Interest is not accrued on loans where collectibility is uncertain. Accrued interest is presented separately in the consolidated balance sheet. Loan origination fees and certain direct costs incurred to extend credit are deferred and amortized over the term of the loan or loan commitment period as an adjustment to the related loan yield.

Our total loans at June 30, 2022 were $3.72 billion compared to $3.45 billion at December 31, 2021, an increase of $270 million, or 7.8%. The components of our loan portfolio disaggregated by class of loan within the loan portfolio segments at June 30, 2022 and December 31, 2021, and the percentage change in loans from the end of 2021 to the end of the second quarter of 2022, are as follows:

											Percent
	June 30, 2022					December 31, 2021					Increase
	Balance		%			Balance		%			(Decrease)

Commercial:
Commercial and industrial (1)	$	1,187,650,000		31.9	%	$	1,137,419,000		32.9	%		4.4	%
Vacant land, land development, and residential construction		57,808,000		1.6			43,239,000		1.3			33.7
Real estate – owner occupied		598,593,000		16.1			565,758,000		16.4			5.8
Real estate – non-owner occupied		1,003,118,000		26.9			1,027,415,000		29.7			(2.4	)
Real estate – multi-family and residential rental		224,591,000		6.0			176,593,000		5.1			27.2
Total commercial		3,071,760,000		82.5			2,950,424,000		85.4			4.1

Retail:
1-4 family mortgages		623,599,000		16.7			442,547,000		12.8			40.9
Other consumer loans (2)		28,441,000		0.8			60,488,000		1.8			(53.0	)
Total retail		652,040,000		17.5			503,035,000		14.6			29.6

Total loans	$	3,723,800,000		100.0	%	$	3,453,459,000		100.0	%		7.8	%

(1)

For June 30, 2022, and December 31, 2021, includes $2.9 million and $40.1 million in loans originated under the Paycheck Protection Program, respectively.

(2)

In conjunction with the adoption of the CECL methodology effective January 1, 2022, home equity lines of credit were reclassified to 1-4 family mortgage loans from other consumer loans. Home equity lines of credit totaled $33.3 million and $29.5 million as of June 30, 2022 and December 31, 2021, respectively.

Nonperforming loans as of June 30, 2022 and December 31, 2021 were as follows:

	June 30, 2022		December 31, 2021

Loans past due 90 days or more still accruing interest	$	0	$	155,000
Nonaccrual loans		1,787,000		2,313,000

Total nonperforming loans	$	1,787,000	$	2,468,000

The recorded principal balance of nonperforming loans was as follows:

	June 30, 2022		December 31, 2021
Commercial:
Commercial and industrial	$	248,000	$	663,000
Vacant land, land development, and residential construction		0		0
Real estate – owner occupied		0		0
Real estate – non-owner occupied		0		0
Real estate – multi-family and residential rental		0		0
Total commercial		248,000		663,000

Retail:
1-4 family mortgages		1,538,000		1,686,000
Other consumer loans		1,000		119,000
Total retail		1,539,000		1,805,000

Total nonperforming loans	$	1,787,000	$	2,468,000

An age analysis of past due loans is as follows as of June 30, 2022:

	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Current		Total Loans		Recorded Balance > 89 Days and Accruing

Commercial:
Commercial and industrial	$	0	$	0	$	0	$	0	$	1,187,650,000	$	1,187,650,000	$	0
Vacant land, land development, and residential construction		0		0		0		0		57,808,000		57,808,000		0
Real estate – owner occupied		0		0		0		0		598,593,000		598,593,000		0
Real estate – non-owner occupied		0		0		0		0		1,003,118,000		1,003,118,000		0
Real estate – multi-family and residential rental		0		0		0		0		224,591,000		224,591,000		0
Total commercial		0		0		0		0		3,071,760,000		3,071,760,000		0

Retail:
1-4 family mortgages		102,000		107,000		207,000		416,000		623,183,000		623,599,000		0
Other consumer loans		3,000		0		0		3,000		28,438,000		28,441,000		0
Total retail		105,000		107,000		207,000		419,000		651,621,000		652,040,000		0

Total past due loans	$	105,000	$	107,000	$	207,000	$	419,000	$	3,723,381,000	$	3,723,800,000	$	0

An age analysis of past due loans is as follows as of December 31, 2021:

	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Current		Total Loans		Recorded Balance > 89 Days and Accruing

Commercial:
Commercial and industrial	$	14,000	$	0	$	193,000	$	207,000	$	1,137,212,000	$	1,137,419,000	$	155,000
Vacant land, land development, and residential construction		13,000		0		0		13,000		43,226,000		43,239,000		0
Real estate – owner occupied		0		0		0		0		565,758,000		565,758,000		0
Real estate – non-owner occupied		0		0		0		0		1,027,415,000		1,027,415,000		0
Real estate – multi-family and residential rental		0		0		0		0		176,593,000		176,593,000		0
Total commercial		27,000		0		193,000		220,000		2,950,204,000		2,950,424,000		155,000

Retail:
Home equity and other		132,000		2,000		20,000		154,000		60,334,000		60,488,000		0
1-4 family mortgages		1,265,000		241,000		82,000		1,588,000		440,959,000		442,547,000		0
Total retail		1,397,000		243,000		102,000		1,742,000		501,293,000		503,035,000		0

Total past due loans	$	1,424,000	$	243,000	$	295,000	$	1,962,000	$	3,451,497,000	$	3,453,459,000	$	155,000

Nonaccrual loans as of June 30, 2022 were as follows:

	Recorded
	Principal		Related
	Balance		Allowance
With no allowance recorded:
Commercial:
Commercial and industrial	$	248,000	$	0
Vacant land, land development and residential construction		0		0
Real estate – owner occupied		0		0
Real estate – non-owner occupied		0		0
Real estate – multi-family and residential rental		0		0
Total commercial		248,000		0

Retail:
1-4 family mortgages		1,000		0
Other consumer loans		1,454,000		0
Total retail		1,455,000		0

Total with no allowance recorded	$	1,703,000	$	0

With an allowance recorded:
Commercial:
Commercial and industrial	$	0	$	0
Vacant land, land development and residential construction		0		0
Real estate – owner occupied		0		0
Real estate – non-owner occupied		0		0
Real estate – multi-family and residential rental		0		0
Total commercial		0		0

Retail:
1-4 family mortgages		84,000		48,000
Other consumer loans		0		0
Total retail		84,000		48,000

Total with an allowance recorded	$	84,000	$	48,000

Total nonaccrual loans:
Commercial	$	248,000	$	0
Retail		1,539,000		48,000
Total nonaccrual loans	$	1,787,000	$	48,000

Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Identified problem loans, which exhibit characteristics (financial or otherwise) that could cause the loans to become nonperforming or require restructuring in the future, are included on an internal watch list. Senior management and the Board of Directors review this list regularly. Market value estimates of collateral on nonaccrual loans, as well as on foreclosed and repossessed assets, are reviewed periodically. We also have a process in place to monitor whether value estimates at each quarter-end are reflective of current market conditions. Our credit policies establish criteria for obtaining appraisals and determining internal value estimates. We may also adjust outside and internal valuations based on identifiable trends within our markets, such as recent sales of similar properties or assets, listing prices and offers received. In addition, we may discount certain appraised and internal value estimates to address distressed market conditions. Under CECL for collateral dependent loans in instances where the borrower is experiencing financial difficulties, we adopted the practical expedient to measure the allowance based on the fair value of collateral. The allowance is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral and the recorded principal balance. If the fair value of the collateral exceeds the recorded principal balance, no allowance is required.

Nonaccrual commercial loans totaled $0.3 million as of June 30, 2022, while nonaccrual retail loans aggregated $1.5 million, a vast majority of which were collateralized by residential property. Nonaccrual loans aggregating $1.8 million had related specific reserve allocations of less than $0.1 million as of June 30, 2022. No interest income was recognized on nonaccrual loans during the second quarter and first six months of 2022. Lost interest income on nonaccrual loans totaled less than $0.1 million and $0.1 million during the second quarter and first six months of 2022, respectively.

Impaired loans as of December 31, 2021, and average impaired loans for the three and six months ended June 30, 2021, were as follows:

	Unpaid Contractual Principal Balance		Recorded Principal Balance		Related Allowance	Second Quarter Average Recorded Principal Balance		Year-To- Date Average Recorded Principal Balance

With no related allowance recorded
Commercial:
Commercial and industrial	$	2,893,000	$	2,818,000		$	3,129,000	$	4,167,000
Vacant land, land development and residential construction		0		0			0		0
Real estate – owner occupied		9,674,000		9,674,000			13,114,000		13,607,000
Real estate – non-owner occupied		0		0			156,000		218,000
Real estate – multi-family and residential rental		91,000		91,000			0		0
Total commercial		12,658,000		12,583,000			16,399,000		17,992,000
Retail:
Home equity and other		1,173,000		1,107,000			1,088,000		1,054,000
1-4 family mortgages		3,166,000		2,025,000			2,376,000		2,442,000
Total retail		4,339,000		3,132,000			3,464,000		3,496,000

Total with no related allowance recorded	$	16,997,000	$	15,715,000		$	19,863,000	$	21,488,000

	Unpaid Contractual Principal Balance		Recorded Principal Balance		Related Allowance		Second Quarter Average Recorded Principal Balance		Year-To- Date Average Recorded Principal Balance
With an allowance recorded
Commercial:
Commercial and industrial	$	2,192,000	$	2,192,000	$	266,000	$	1,661,000	$	1,222,000
Vacant land, land development and residential construction		0		0		0		0		0
Real estate – owner occupied		761,000		761,000		84,000		872,000		826,000
Real estate – non-owner occupied		146,000		146,000		4,000		156,000		158,000
Real estate – multi-family and residential rental		0		0		0		0		0
Total commercial		3,099,000		3,099,000		354,000		2,689,000		2,206,000
Retail:
Home equity and other		160,000		140,000		123,000		242,000		256,000
1-4 family mortgages		412,000		412,000		69,000		581,000		620,000
Total retail		572,000		552,000		192,000		823,000		876,000

Total with an allowance recorded	$	3,671,000	$	3,651,000	$	546,000	$	3,512,000	$	3,082,000

Total impaired loans:
Commercial	$	15,757,000	$	15,682,000	$	354,000	$	19,088,000	$	20,198,000
Retail		4,911,000		3,684,000		192,000		4,287,000		4,372,000
Total impaired loans	$	20,668,000	$	19,366,000	$	546,000	$	23,375,000	$	24,570,000

Impaired commercial loans for which no allocation of the allowance has been made in large part consist of performing troubled debt restructurings where the estimated collateral fair value exceeds the recorded principal balance, while impaired retail loans with no allowance allocation generally reflect situations whereby the recorded principal balance has been charged-down to estimated collateral fair value. Interest income recognized on accruing troubled debt restructurings totaled $0.4 million and $0.8 million during the second quarter and first six months of 2021, respectively. No interest income was recognized on nonaccrual loans during the second quarter and first six months of 2021. Lost interest income on nonaccrual loans totaled less than $0.1 million and $0.1 million during the second quarter and first six months of 2021, respectively.

Credit Quality Indicators. We utilize a comprehensive grading system for our commercial loans. All commercial loans are graded on a ten grade rating system. The rating system utilizes standardized grade paradigms that analyze several critical factors such as cash flow, operating performance, financial condition, collateral, industry condition and management. All commercial loans are graded at inception and reviewed and, if appropriate, re-graded at various intervals thereafter. The risk assessment for retail loans is primarily based on the type of collateral.

Credit quality indicators were as follows as of June 30, 2022:

Commercial credit exposure – credit risk profiled by internal credit risk grades:

	Commercial and Industrial		Commercial Vacant Land, Land Development, and Residential Construction		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-Owner Occupied		Commercial Real Estate - Multi-Family and Residential Rental

Internal credit risk grade groupings:
Grades 1 – 4 (1)	$	726,012,000	$	40,317,000	$	363,381,000	$	508,666,000	$	136,632,000
Grades 5 – 7		454,518,000		17,379,000		234,999,000		481,799,000		87,816,000
Grades 8 – 9		7,120,000		112,000		213,000		12,653,000		143,000
Total commercial	$	1,187,650,000	$	57,808,000	$	598,593,000	$	1,003,118,000	$	224,591,000

Retail credit exposure – credit risk profiled by collateral type:

	Other Consumer Loans		Retail 1-4 Family Mortgages

Performing	$	28,440,000	$	622,061,000
Nonperforming		1,000		1,538,000
Total retail	$	28,441,000	$	623,599,000

(1)

Included in Commercial and Industrial Loans Grades 1 – 4 are $2.9 million of loans originated under the Paycheck Protection Program.

Credit quality indicators were as follows as of December 31, 2021:

Commercial credit exposure – credit risk profiled by internal credit risk grades:

	Commercial and Industrial		Commercial Vacant Land, Land Development, and Residential Construction		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-Owner Occupied		Commercial Real Estate - Multi-Family and Residential Rental

Internal credit risk grade groupings:
Grades 1 – 4 (1)	$	729,224,000	$	28,390,000	$	346,082,000	$	503,482,000	$	119,473,000
Grades 5 – 7		398,378,000		14,730,000		208,060,000		511,280,000		56,968,000
Grades 8 – 9		9,817,000		119,000		11,616,000		12,653,000		152,000
Total commercial	$	1,137,419,000	$	43,239,000	$	565,758,000	$	1,027,415,000	$	176,593,000

Retail credit exposure – credit risk profiled by collateral type:

	Retail Home Equity and Other		Retail 1-4 Family Mortgages

Performing	$	60,369,000	$	440,861,000
Nonperforming		119,000		1,686,000
Total retail	$	60,488,000	$	442,547,000

(1)

Included in Commercial and Industrial Loans Grades 1 – 4 are $40.1 million of loans originated under the Paycheck Protection Program.

All commercial loans are graded using the following criteria:

Grade 1.

“Exceptional” Loans with this rating contain very little, if any, risk.

Grade 2.

“Outstanding” Loans with this rating have excellent and stable sources of repayment and conform to bank policy and regulatory requirements.

Grade 3.

“Very Good” Loans with this rating have strong sources of repayment and conform to bank policy and regulatory requirements. These are loans for which repayment risks are acceptable.

Grade 4.

“Good” Loans with this rating have solid sources of repayment and conform to bank policy and regulatory requirements. These are loans for which repayment risks are modest.

Grade 5.

“Acceptable” Loans with this rating exhibit acceptable sources of repayment and conform with most bank policies and all regulatory requirements. These are loans for which repayment risks are satisfactory.

Grade 6.

“Monitor” Loans with this rating are considered to have emerging weaknesses which may include negative current cash flow, high leverage, or operating losses. Generally, if further deterioration is observed, these credits will be downgraded to the criticized asset report.

Grade 7.

“Special Mention” Loans with this rating have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan at some future date.

Grade 8.

“Substandard” Loans with this rating are inadequately protected by current sound net worth, paying capacity of the obligor, or of the pledged collateral, if any. A Substandard loan normally has one or more well-defined weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility of loss if the deficiencies are not corrected.

Grade 9.

“Doubtful” Loans with this rating exhibit all the weaknesses inherent in the Substandard classification and where collection or liquidation in full is highly questionable and improbable.

Grade 10.

“Loss” Loans with this rating are considered uncollectable, and of such little value that continuance as an active asset is not warranted.

The primary risk elements with respect to commercial loans are the financial condition of the borrower, the sufficiency of collateral, and timeliness of scheduled payments. We have a policy of requesting and reviewing periodic financial statements from commercial loan customers and employ a disciplined and formalized review of the existence of collateral and its value. The primary risk element with respect to each residential real estate loan and consumer loan is the timeliness of scheduled payments. We have a reporting system that monitors past due loans and have adopted policies to pursue creditors’ rights in order to preserve our collateral position.

The following table reflects loan balances as of June 30, 2022 based on year of origination (dollars in thousands):

	2022		2021		2020		2019		2018		Prior		Term Total		Revolving Loans		Grand Total
Commercial:
Commercial and Industrial:
Grades 1 – 4	$	73,547	$	183,393	$	54,533	$	13,863	$	3,792	$	10,932	$	340,060	$	385,952	$	726,012
Grades 5 – 7		122,198		68,241		62,274		9,459		2,074		600		264,846		189,672		454,518
Grades 8 – 9		3,849		249		0		0		55		47		4,200		2,920		7,120
Total	$	199,594	$	251,883	$	116,807	$	23,322	$	5,921	$	11,579	$	609,106	$	578,544	$	1,187,650

Vacant Land, Land Development and Residential Construction:
Grades 1 – 4	$	17,011	$	19,004	$	3,660	$	0	$	0	$	354	$	40,029	$	288	$	40,317
Grades 5 – 7		5,248		10,652		572		55		0		794		17,321		58		17,379
Grades 8 – 9		0		0		0		0		16		96		112		0		112
Total	$	22,259	$	29,656	$	4,232	$	55	$	16	$	1,244	$	57,462	$	346	$	57,808

Real Estate – Owner Occupied:
Grades 1 – 4	$	81,554	$	175,628	$	63,568	$	20,865	$	10,866	$	10,900	$	363,381	$	0	$	363,381
Grades 5 – 7		88,415		64,394		40,122		11,405		23,771		6,892		234,999		0		234,999
Grades 8 – 9		0		0		47		0		166		0		213		0		213
Total	$	169,969	$	240,022	$	103,737	$	32,270	$	34,803	$	17,792	$	598,593	$	0	$	598,593

Real Estate – Non-Owner Occupied:
Grades 1 – 4	$	64,529	$	193,494	$	144,040	$	78,997	$	10,428	$	17,178	$	508,666	$	0	$	508,666
Grades 5 – 7		83,053		178,420		133,404		23,436		15,620		47,866		481,799		0		481,799
Grades 8 – 9		6,849		5,804		0		0		0		0		12,653		0		12,653
Total	$	154,431	$	377,718	$	277,444	$	102,433	$	26,048	$	65,044	$	1,003,118	$	0	$	1,003,118

Real Estate – Multi-Family and Residential Rental:
Grades 1 – 4	$	26,872	$	58,323	$	37,867	$	5,768	$	3,121	$	4,681	$	136,632	$	0	$	136,632
Grades 5 – 7		38,618		26,763		13,928		3,486		3,591		1,430		87,816		0		87,816
Grades 8 – 9		88		0		0		0		0		55		143		0		143
Total	$	65,578	$	85,086	$	51,795	$	9,254	$	6,712	$	6,166	$	224,591	$	0	$	224,591
Total Commercial	$	611,831	$	984,365	$	554,015	$	167,334	$	73,500	$	101,825	$	2,492,870	$	578,890	$	3,071,760

Retail:
1-4 Family Mortgages	$	174,239	$	240,232	$	97,334	$	13,962	$	15,543	$	49,346	$	590,656	$	32,943	$	623,599
Other Consumer Loans		2,905		3,822		1,599		1,447		624		702		11,099		17,342		28,441
Total Retail	$	177,144	$	244,054	$	98,933	$	15,409	$	16,167	$	50,048	$	601,755	$	50,285	$	652,040

Grand Total	$	788,975	$	1,228,419	$	652,948	$	182,743	$	89,667	$	151,873	$	3,094,625	$	629,175	$	3,723,800

Activity in the allowance for credit losses during the three months and six months ended June 30, 2022 is as follows (dollars in thousands):

	Commercial and industrial			Commercial vacant land, land development and residential construction			Commercial real estate – owner occupied			Commercial real estate – non-owner occupied			Commercial real estate – multi-family and residential rental			1-4 family mortgages			Other consumer loans			Unallocated			Total
Allowance for credit losses:
Balance at 3-31-22	$	8,413		$	455		$	5,803		$	10,322		$	1,276		$	8,562		$	191		$	131		$	35,153
Provision for credit losses		150			(10	)		(251	)		(708	)		(8	)		1,464			(28	)		(109	)		500
Charge-offs		0			0			0			0			0			0			(15	)		0			(15	)
Recoveries		45			1			26			0			6			241			17			0			336
Ending balance	$	8,608		$	446		$	5,578		$	9,614		$	1,274		$	10,267		$	165		$	22		$	35,974

Balance at 12-31-21	$	10,782		$	420		$	6,045		$	13,301		$	1,695		$	2,449		$	626		$	45		$	35,363
Adoption of ASU 2016-13		(1,571	)		(43	)		(560	)		(2,534	)		(621	)		5,395			(411	)		(55	)		(400	)
Provision for credit losses		(592	)		96			35			(1,153	)		186			2,057			(61	)		32			600
Charge-offs		(171	)		(29	)		0			0			0			(2	)		(18	)		0			(220	)
Recoveries		160			2			58			0			14			368			29			0			631
Ending balance	$	8,608		$	446		$	5,578		$	9,614		$	1,274		$	10,267		$	165		$	22		$	35,974

Activity in the allowance for loan losses during the three months and six months ended June 30, 2021 and the recorded investments in loans as of December 31, 2021 is as follows (dollars in thousands):

	Commercial and industrial			Commercial vacant land, land development and residential construction			Commercial real estate – owner occupied			Commercial real estate – non-owner occupied			Commercial real estate – multi-family and residential rental			Home equity and other			1–4 family mortgages			Unallocated			Total
Allowance for loan losses:
Balance at 3-31-21	$	10,111		$	720		$	8,304		$	13,751		$	1,825		$	841		$	2,953		$	190		$	38,695
Provision for loan losses		(764	)		(243	)		(696	)		(966	)		(38	)		(125	)		(263	)		(5	)		(3,100	)
Charge-offs		(54	)		0			(12	)		0			0			(2	)		0			0			(68	)
Recoveries		47			2			105			0			0			28			204			0			386
Ending balance	$	9,340		$	479		$	7,701		$	12,785		$	1,787		$	742		$	2,894		$	185		$	35,913

Balance at 12-31-20	$	9,424		$	679		$	8,246		$	13,611		$	1,819		$	889		$	3,240		$	59		$	37,967
Provision for loan losses		(181	)		(203	)		(877	)		(826	)		(32	)		(207	)		(600	)		126			(2,800	)
Charge-offs		(54	)		(15	)		(12	)		0			0			(6	)		(34	)		0			(121	)
Recoveries		151			18			344			0			0			66			288			0			867
Ending balance	$	9,340		$	479		$	7,701		$	12,785		$	1,787		$	742		$	2,894		$	185		$	35,913

Ending balance: individually evaluated for impairment	$	355		$	0		$	117		$	5		$	0		$	207		$	103		$	0		$	787

Ending balance: collectively evaluated for impairment	$	8,985		$	479		$	7,584		$	12,780		$	1,787		$	535		$	2,791		$	185		$	35,126

Total loans (*):
Ending balance	$	1,097,309		$	43,239		$	565,758		$	1,027,415		$	176,593		$	60,488		$	442,547					$	3,413,349

Ending balance: individually evaluated for impairment	$	5,010		$	0		$	10,435		$	146		$	91		$	1,247		$	2,437					$	19,366

Ending balance: collectively evaluated for impairment	$	1,092,299		$	43,239		$	555,323		$	1,027,269		$	176,502		$	59,241		$	440,110					$	3,393,983

(*)

Excludes $40.1 million in loans originated under the Paycheck Protection Program.

Loans modified as troubled debt restructurings during the three months ended June 30, 2022 were as follows:

	Number of Contracts		Pre- Modification Recorded Principal Balance		Post- Modification Recorded Principal Balance

Commercial:
Commercial and industrial		2	$	6,573,000	$	6,573,000
Vacant land, land development and residential construction		0		0		0
Real estate – owner occupied		0		0		0
Real estate – non-owner occupied		0		0		0
Real estate – multi-family and residential rental		0		0		0
Total commercial		2		6,573,000		6,573,000

Retail:
1-4 family mortgages		1		84,000		84,000
Other consumer loans		0		0		0
Total retail		1		84,000		84,000

Total loans		3	$	6,657,000	$	6,657,000

Loans modified as troubled debt restructurings during the six months ended June 30, 2022 were as follows:

	Number of Contracts		Pre- Modification Recorded Principal Balance		Post- Modification Recorded Principal Balance

Commercial:
Commercial and industrial		2	$	6,573,000	$	6,573,000
Vacant land, land development and residential construction		0		0		0
Real estate – owner occupied		0		0		0
Real estate – non-owner occupied		0		0		0
Real estate – multi-family and residential rental		0		0		0
Total commercial		2		6,573,000		6,573,000

Retail:
1-4 family mortgages		3		212,000		212,000
Other consumer loans		0		0		0
Total retail		3		212,000		212,000

Total loans		5	$	6,785,000	$	6,785,000

Loans modified as troubled debt restructurings during the three months ended June 30, 2021 were as follows:

	Number of Contracts		Pre- Modification Recorded Principal Balance		Post- Modification Recorded Principal Balance

Commercial:
Commercial and industrial		8	$	2,831,000	$	2,831,000
Vacant land, land development and residential construction		0		0		0
Real estate – owner occupied		1		692,000		692,000
Real estate – non-owner occupied		0		0		0
Real estate – multi-family and residential rental		0		0		0
Total commercial		9		3,523,000		3,523,000

Retail:
Home equity and other		3		414,000		412,000
1-4 family mortgages		1		10,000		10,000
Total retail		4		424,000		422,000

Total loans		13	$	3,947,000	$	3,945,000

Loans modified as troubled debt restructurings during the six months ended June 30, 2021 were as follows:

	Number of Contracts		Pre- Modification Recorded Principal Balance		Post- Modification Recorded Principal Balance

Commercial:
Commercial and industrial		9	$	2,854,000	$	2,853,000
Vacant land, land development and residential construction		0		0		0
Real estate – owner occupied		1		692,000		692,000
Real estate – non-owner occupied		0		0		0
Real estate – multi-family and residential rental		0		0		0
Total commercial		10		3,546,000		3,545,000

Retail:
Home equity and other		4		485,000		482,000
1-4 family mortgages		2		46,000		46,000
Total retail		6		531,000		528,000

Total loans		16	$	4,077,000	$	4,073,000

The following loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due within the three months ended June 30, 2022 (amounts as of period end):

	Number of Contracts		Recorded Principal Balance
Commercial:
Commercial and industrial		0	$	0
Vacant land, land development and residential construction		0		0
Real estate – owner occupied		0		0
Real estate – non-owner occupied		0		0
Real estate – multi-family and residential rental		0		0
Total commercial		0		0

Retail:
Home equity and other		0		0
1-4 family mortgages		0		0
Total retail		0		0

Total		0	$	0

The following loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due within the six months ended June 30, 2022 (amounts as of period end):

	Number of Contracts		Recorded Principal Balance
Commercial:
Commercial and industrial		0	$	0
Vacant land, land development and residential construction		0		0
Real estate – owner occupied		0		0
Real estate – non-owner occupied		0		0
Real estate – multi-family and residential rental		0		0
Total commercial		0		0

Retail:
Home equity and other		0		0
1-4 family mortgages		0		0
Total retail		0		0

Total		0	$	0

The following loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due within the three months ended June 30, 2021 (amounts as of period end):

	Number of Contracts		Recorded Principal Balance
Commercial:
Commercial and industrial		0	$	0
Vacant land, land development and residential construction		0		0
Real estate – owner occupied		1		431,000
Real estate – non-owner occupied		0		0
Real estate – multi-family and residential rental		0		0
Total commercial		1		431,000

Retail:
Home equity and other		0		0
1-4 family mortgages		0		0
Total retail		0		0

Total		1	$	431,000

The following loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due within the six months ended June 30, 2021 (amounts as of period end):

	Number of Contracts		Recorded Principal Balance
Commercial:
Commercial and industrial		2	$	522,000
Vacant land, land development and residential construction		0		0
Real estate – owner occupied		1		431,000
Real estate – non-owner occupied		0		0
Real estate – multi-family and residential rental		0		0
Total commercial		3		953,000

Retail:
Home equity and other		0		0
1-4 family mortgages		0		0
Total retail		0		0

Total		3	$	953,000

Activity for loans categorized as troubled debt restructurings during the three months ended June 30, 2022 is as follows:

	Commercial and Industrial		Commercial Vacant Land, Land Development, and Residential Construction		Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-Owner Occupied			Commercial Real Estate - Multi-Family and Residential Rental

Commercial Loan Portfolio:
Beginning Balance	$	2,829,000	$	0	$	89,000		$	143,000		$	90,000
Charge-Offs		0		0		0			0			0
Payments (net)		536,000		0		(2,000	)		(4,000	)		(2,000	)
Transfers to ORE		0		0		0			0			0
Net Additions/Deletions		6,573,000		0		0			0			0
Ending Balance	$	9,938,000	$	0	$	87,000		$	139,000		$	88,000

	Retail			Retail
	1-4 Family			Other Consumer
	Mortgages			Loans
Retail Loan Portfolio:
Beginning Balance	$	2,346,000		$	13,000
Charge-Offs		0			0
Payments (net)		(91,000	)		(10,000	)
Transfers to ORE		0			0
Net Additions/Deletions		84,000			0
Ending Balance	$	2,339,000		$	3,000

Activity for loans categorized as troubled debt restructurings during the six months ended June 30, 2022 is as follows:

	Commercial and Industrial		Commercial Vacant Land, Land Development, and Residential Construction		Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-Owner Occupied			Commercial Real Estate - Multi-Family and Residential Rental

Commercial Loan Portfolio:
Beginning Balance	$	4,973,000	$	0	$	10,435,000		$	146,000		$	91,000
Charge-Offs		0		0		0			0			0
Payments (net)		324,000		0		(9,679,000	)		(7,000	)		(3,000	)
Transfers to ORE		0		0		0			0			0
Net Additions/Deletions		4,641,000		0		(669,000	)		0			0
Ending Balance	$	9,938,000	$	0	$	87,000		$	139,000		$	88,000

	Retail			Retail
	1-4 Family			Other Consumer
	Mortgages			Loans
Retail Loan Portfolio:
Beginning Balance	$	627,000		$	1,202,000
Charge-Offs		0			0
Payments (net)		(169,000	)		(12,000	)
Transfers to ORE		0			0
Net Additions/Deletions (1)		1,881,000			(1,187,000	)
Ending Balance	$	2,339,000		$	3,000

(1)

Includes $1.2 million in the transfer of home equity lines of credit from other consumer loans to 1-4 family mortgages in association with the adoption of the CECL methodology effective January 1, 2022.

Activity for loans categorized as troubled debt restructurings during the three months ended June 30, 2021 is as follows:

	Commercial and Industrial			Commercial Vacant Land, Land Development, and Residential Construction		Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-Owner Occupied			Commercial Real Estate - Multi-Family and Residential Rental

Commercial Loan Portfolio:
Beginning Balance	$	3,760,000		$	0	$	13,887,000		$	471,000		$	0
Charge-Offs		0			0		0			0			0
Payments (net)		(845,000	)		0		(685,000	)		(318,000	)		0
Transfers to ORE		0			0		0			0			0
Net Additions/Deletions		2,648,000			0		686,000			0			0
Ending Balance	$	5,563,000		$	0	$	13,888,000		$	153,000		$	0

	Retail Home Equity and Other			Retail 1-4 Family Mortgages
Retail Loan Portfolio:
Beginning Balance	$	1,099,000		$	820,000
Charge-Offs		0			0
Payments (net)		(115,000	)		(131,000	)
Transfers to ORE		0			0
Net Additions/Deletions		412,000			10,000
Ending Balance	$	1,396,000		$	699,000

Activity for loans categorized as troubled debt restructurings during the six months ended June 30, 2021 is as follows:

	Commercial and Industrial			Commercial Vacant Land, Land Development, and Residential Construction		Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-Owner Occupied			Commercial Real Estate - Multi-Family and Residential Rental

Commercial Loan Portfolio:
Beginning Balance	$	6,414,000		$	0	$	14,797,000		$	480,000		$	0
Charge-Offs		0			0		0			0			0
Payments (net)		(3,521,000	)		0		(1,595,000	)		(327,000	)		0
Transfers to ORE		0			0		0			0			0
Net Additions/Deletions		2,670,000			0		686,000			0			0
Ending Balance	$	5,563,000		$	0	$	13,888,000		$	153,000		$	0

	Retail Home Equity and Other			Retail 1-4 Family Mortgages
Retail Loan Portfolio:
Beginning Balance	$	1,146,000		$	806,000
Charge-Offs		0			0
Payments (net)		(232,000	)		(153,000	)
Transfers to ORE		0			0
Net Additions/Deletions		482,000			46,000
Ending Balance	$	1,396,000		$	699,000