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Allowance for Loan Losses
9 Months Ended
Sep. 30, 2022
Allowance for Loan Losses  
Allowance for Loan Losses

Note 4— Allowance for Loan Losses

The following tables present the activity in the allowance for loan losses for the nine months ended September 30, 2022 and September 30, 2021.

September 30, 2022

Real Estate

Construction &

Land

Dollars in thousands

Commercial

Development

Residential

Commercial

Consumer

Unallocated

Total

Allowance for loan losses:

    

  

    

  

    

  

    

  

    

  

    

  

    

  

Beginning Balance, December 31, 2021

$

13,091

$

2,824

$

2,769

$

711

$

5

$

632

$

20,032

Charge-offs

 

(1)

 

 

 

 

 

(1)

Recoveries

 

 

 

 

1

 

 

 

1

Provision

 

345

 

97

 

(186)

 

(208)

 

1

 

(49)

 

Ending Balance, September 30, 2022

$

13,435

$

2,921

$

2,583

$

504

$

6

$

583

$

20,032

September 30, 2021

Real Estate

Construction &

Land

Dollars in thousands

Commercial

Development

Residential

Commercial

Consumer

Unallocated

Total

Allowance for loan losses:

    

  

    

  

    

  

    

  

    

  

    

  

    

  

Beginning Balance, December 31, 2020

$

10,602

$

2,617

$

2,430

$

1,007

$

11

$

350

$

17,017

Charge-offs

 

(90)

 

 

 

(1)

 

 

(91)

Recoveries

 

 

 

 

 

 

 

Provision

 

2,001

 

(782)

 

88

 

(291)

 

(6)

 

1,770

 

2,780

Ending Balance, September 30, 2021

$

12,513

$

1,835

$

2,518

$

715

$

5

$

2,120

$

19,706

The following tables present the balance of the allowance for loan losses, the allowance by impairment methodology, total loans, and loans by impairment methodology as of September 30, 2022 and December 31, 2021.

September 30, 2022

Real Estate

Construction &

Land

Dollars in thousands

Commercial

Development

Residential

Commercial

Consumer

Unallocated

Total

Allowance balance attributable to loans:

    

  

    

  

    

  

    

  

    

  

    

  

    

  

Individually evaluated for impairment

$

$

$

$

$

$

$

Collectively evaluated for impairment

13,435

2,921

2,583

504

6

583

20,032

Total allowance

$

13,435

$

2,921

$

2,583

$

504

$

6

$

583

$

20,032

Loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Individually evaluated for impairment

$

$

$

530

$

$

$

$

530

Collectively evaluated for impairment

1,091,221

199,324

385,166

45,105

585

1,721,401

Total loans

$

1,091,221

$

199,324

$

385,696

$

45,105

$

585

$

$

1,721,931

December 31, 2021

Real Estate

Construction &

Land

Dollars in thousands

Commercial

Development

Residential

Commercial

Consumer

Unallocated

Total

Allowance balance attributable to loans:

    

  

    

  

    

  

    

  

    

  

    

  

    

  

Individually evaluated for impairment

$

$

$

$

$

$

$

Collectively evaluated for impairment

13,091

2,824

2,769

711

5

632

20,032

Total allowance

$

13,091

$

2,824

$

2,769

$

711

$

5

$

632

$

20,032

Loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Individually evaluated for impairment

$

$

$

549

$

$

$

$

549

Collectively evaluated for impairment

968,442

231,090

341,942

122,945

586

1,665,005

Total loans

$

968,442

$

231,090

$

342,491

$

122,945

$

586

$

$

1,665,554

Gross commercial loans included $138 thousand and $69.6 million of Paycheck Protection Program (“PPP”) loans as of September 30, 2022 and December 31, 2021, respectively. The Company does not maintain an allowance on these loan balances, as they are 100% guaranteed by the U.S. Small Business Administration (“SBA”). Management believes the ending allowances at each of the dates indicated were sufficient to absorb the probable losses inherent in the loan portfolio at those dates.

The following tables present a summary of impaired loans and the related allowance as of September 30, 2022 and December 31, 2021.

September 30, 2022

Recorded

Recorded

Unpaid

Investment

Investment

Total

Average

Interest

Principal

with

with

Recorded

Related

Recorded

Income

(Dollars in thousands)

Balance

No Allowance

Allowance

Investment

Allowance

Investment

Recognized

Real Estate Loans

    

  

    

  

    

  

    

  

    

  

    

  

    

  

Commercial

$

$

$

$

$

$

$

Construction and land development

 

 

 

 

 

 

 

Residential

 

530

 

530

 

 

530

 

 

540

 

15

Commercial

 

 

 

 

 

 

 

Consumer

 

 

 

 

 

 

 

Total Impaired Loans

$

530

$

530

$

$

530

$

$

540

$

15

December 31, 2021

Recorded

Recorded

Unpaid

Investment

Investment

Total

Average

Interest

Principal

with

with

Recorded

Related

Recorded

Income

(Dollars in thousands)

Balance

No Allowance

Allowance

Investment

Allowance

Investment(1)

Recognized(1)

Real Estate Loans

    

  

    

  

    

  

    

  

    

  

    

  

    

  

Commercial

$

$

$

$

$

$

$

Construction and land development

 

 

 

 

 

 

 

Residential

 

549

 

549

 

 

549

 

 

569

 

24

Commercial

 

 

 

 

 

 

 

Consumer

 

 

 

 

 

 

 

Total Impaired Loans

$

549

$

549

$

$

549

$

$

569

$

24

(1)Amounts shown for the twelve month period ended December 31, 2021.

The following tables present a summary of past due and non-accrual loans by class as of September 30, 2022 and December 31, 2021.

    

September 30, 2022

30-59 Days

60-89 Days

90 Days or

90 Days or More

Past

Past

More

Total Past

Total

Past Due and

Nonaccrual

(Dollars in thousands)

    

Due

    

Due

    

Past Due

    

Due

    

Current

    

Loans

    

Still Accruing

    

Loans

Real Estate Loans

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Commercial

$

$

$

$

$

1,091,221

 

$

1,091,221

$

$

Construction and land development

 

 

 

 

 

199,324

 

199,324

 

 

Residential

 

 

 

 

 

385,696

 

385,696

 

 

Commercial

 

 

 

 

 

45,105

 

45,105

 

 

Consumer

 

 

 

 

 

585

 

585

 

 

Total Loans

$

$

$

$

$

1,721,931

$

1,721,931

$

$

    

December 31, 2021

30-59 Days

60-89 Days

90 Days or

90 Days or More

Past

Past

More

Total Past

Total

Past Due and

Nonaccrual

(Dollars in thousands)

Due

    

Due

    

Past Due

    

Due

    

Current

    

Loans

    

Still Accruing

    

Loans

Real Estate Loans

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Commercial

$

$

$

$

$

968,442

$

968,442

$

$

Construction and land development

 

 

 

 

 

231,090

 

231,090

 

 

Residential

 

 

 

 

 

342,491

 

342,491

 

 

Commercial

 

 

 

 

 

122,945

 

122,945

 

 

Consumer

 

 

 

 

 

586

 

586

 

 

Total Loans

$

$

$

$

$

1,665,554

$

1,665,554

$

$

The following tables present a summary of credit quality information for loans by class as of September 30, 2022 and December 31, 2021.

    

September 30, 2022

Special

Total

(Dollars in thousands)

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Loss

    

Loans

Real Estate Loans

 

  

 

  

 

  

 

  

 

  

 

  

Commercial

$

1,091,221

$

$

$

$

$

1,091,221

Construction and land development

 

197,174

 

2,150

 

 

 

199,324

Residential

 

385,588

 

 

108

 

 

 

385,696

Commercial

 

45,105

 

 

 

 

 

45,105

Consumer

 

585

 

 

 

 

 

585

Total Loans

$

1,719,673

$

2,150

$

108

$

$

$

1,721,931

    

December 31, 2021

Special

Total

(Dollars in thousands)

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Loss

    

Loans

Real Estate Loans

  

  

  

  

  

  

Commercial

$

961,177

$

7,029

$

236

$

$

$

968,442

Construction and land development

 

230,704

 

 

386

 

 

 

231,090

Residential

 

342,377

 

 

114

 

 

 

342,491

Commercial

 

122,945

 

 

 

 

 

122,945

Consumer

 

586

 

 

 

 

 

586

Total Loans

$

1,657,789

$

7,029

$

736

$

$

$

1,665,554

The Company assesses credit quality based on internal risk rating of loans. Internal risk rating definitions are:

Pass: These include satisfactory loans that have acceptable levels of risk.

Special Mention: Loans classified as special mention have a potential weakness that requires close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. These credits do not expose the Company to sufficient risk to warrant further adverse classification.

Substandard: A substandard asset is inadequately protected by the current worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in a substandard asset with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss: Loans classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be received in the future.

As part of the Company’s loan modification program to borrowers experiencing financial difficulty, the Company may provide concessions to minimize the economic loss and improve long-term loan performance and collectability.

The Company had a recorded investment in TDRs of $530 thousand and $549 thousand as of September 30, 2022 and December 31, 2021, respectively. The Company did not have any loans that were determined to be new TDRs during the three or nine months ended September 30, 2022 and September 30, 2021.

As of September 30, 2022 and September 30, 2021, all loans in TDR status were in compliance with their modified terms. There were no loans modified in TDRs that subsequently defaulted within 12 months of their modification date during the three or nine months ended September 30, 2022 and September 30, 2021.

All TDRs are considered impaired and impairment is determined on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. As of September 30, 2022 and December 31, 2021, none of the Bank’s TDRs required the recordation of a specific reserve. As of September 30, 2022 and December 31, 2021, there were no additional commitments to disburse funds on loans classified as TDRs.