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Loans
 3 Months Ended
Mar. 31, 2021
Receivables [Abstract]  
Loans Loans
The following table presents the composition of loans segregated by legacy and purchased loans and by class of loans, as of March 31, 2021 and December 31, 2020. Purchased loans are defined as loans that were acquired in bank acquisitions.
March 31, 2021
(dollars in thousands)Legacy LoansPurchased LoansTotal
Construction, land and land development$109,585 $6,383 $115,967 
Other commercial real estate499,604 38,477 538,080 
Total commercial real estate609,189 44,860 654,047 
Residential real estate165,887 12,324 178,211 
Commercial, financial, & agricultural (*)199,862 10,452 210,315 
Consumer and other18,055 2,147 20,202 
Total Loans$992,993 $69,783 $1,062,775 
December 31, 2020
(dollars in thousands)Legacy LoansPurchased LoansTotal
Construction, land and land development$109,577 $11,516 $121,093 
Other commercial real estate477,445 42,946 520,391 
Total commercial real estate587,022 54,462 641,484 
Residential real estate167,714 15,307 183,021 
Commercial, financial, & agricultural (*)200,800 12,580 213,380 
Consumer and other19,037 2,581 21,618 
Total Loans$974,573 $84,930 $1,059,503 
(*) Includes $102.6 million and $101.1 million in PPP loans at March 31, 2021 and December 31, 2020
Commercial and industrial loans are extended to a diverse group of businesses within the Company’s market area. These loans are often underwritten based on the borrower’s ability to service the debt from income from the business. Real estate construction loans often require loan funds to be advanced prior to completion of the project. Due to uncertainties inherent in estimating construction costs, changes in interest rates and other economic conditions, these loans often pose a higher risk than other types of loans. Consumer loans are originated at the Bank level.
Credit Quality Indicators. As part of the ongoing monitoring of the credit quality of the loan portfolio, management tracks certain credit quality indicators including trends related to (1) the risk grade assigned to commercial and consumer loans, (2) the level of classified commercial loans, (3) net charge-offs, (4) nonperforming loans, and (5) the general economic conditions in the Company’s geographic markets.
The Company uses an eight category risk grading system to assign a risk grade to each loan in the portfolio. The following is a description of the general characteristics of the grades:
•Grades 1 and 2 – Borrowers with these assigned grades range in risk from virtual absence of risk to minimal risk. Such loans may be secured by Company-issued and controlled certificates of deposit or properly margined equity securities or bonds. Other loans comprising these grades are made to companies that have been in existence for a long period of time with many years of consecutive profits and strong equity, good liquidity, excellent debt service ability and unblemished past performance, or to exceptionally strong individuals with collateral of unquestioned value that fully secures the loans. Loans in this category fall into the “pass” classification.
•Grades 3 and 4 – Loans assigned these “pass” risk grades are made to borrowers with acceptable credit quality and risk. The risk ranges from loans with no significant weaknesses in repayment capacity and collateral protection to acceptable loans with one or more risk factors considered to be more than average.
•Grade 5 – This grade includes “special mention” loans on management’s watch list and is intended to be used on a temporary basis for pass grade loans where risk-modifying action is intended in the short-term.
•Grade 6 – This grade includes “substandard” loans in accordance with regulatory guidelines. This category includes borrowers with well-defined weaknesses that jeopardize the payment of the debt in accordance with the agreed terms. Loans considered to be impaired are assigned this grade, and these loans often have assigned loss allocations as part of the allowance for loan and lease losses. Generally, loans on which interest accrual has been stopped would be included in this grade.
•Grades 7 and 8 – These grades correspond to regulatory classification definitions of “doubtful” and “loss,” respectively. In practice, any loan with these grades would be for a very short period of time, of which the Company has no loans with these assigned grades at March 31, 2021. Management manages the Company’s problem loans in such a way that uncollectible loans or uncollectible portions of loans are charged off immediately with any residual, collectible amounts assigned a risk grade of 6.
The following table presents the loan portfolio, excluding purchased loans, by credit quality indicator (risk grade) as of March 31, 2021 and December 31, 2020. Those loans with a risk grade of 1, 2, 3 or 4 have been combined in the pass column for presentation purposes.
(dollars in thousands)PassSpecial MentionSubstandardTotal Loans
March 31, 2021
Construction, land and land development$98,634 $3,244 $7,707 $109,585 
Other commercial real estate452,356 30,301 16,946 499,604 
Total commercial real estate550,990 33,545 24,653 609,189 
Residential real estate156,665 3,090 6,132 165,887 
Commercial, financial, & agricultural196,052 2,795 1,015 199,862 
Consumer and other17,762 129 164 18,055 
Total Loans$921,469 $39,559 $31,964 $992,993 
(dollars in thousands)
December 31, 2020
Construction, land and land development$99,430 $2,940 $7,207 $109,577 
Other commercial real estate430,515 33,579 13,351 477,445 
Total commercial real estate529,945 36,519 20,558 587,022 
Residential real estate157,927 3,855 5,932 167,714 
Commercial, financial, & agricultural196,749 2,870 1,181 200,800 
Consumer and other18,734 124 179 19,037 
Total Loans$903,355 $43,368 $27,850 $974,573 
December 31, 2020
The following table presents the purchased loan portfolio by credit quality indicator (risk grade) as of March 31, 2021 and December 31, 2020. Those loans with a risk grade of 1, 2, 3 or 4 have been combined in the pass column for presentation
purposes. For the period ending March 31, 2021, the Company did not have any loans classified as “doubtful” or a “loss”.
(dollars in thousands)PassSpecial MentionSubstandardTotal Loans
March 31, 2021
Construction, land and land development$6,263 $120 $— $6,383 
Other commercial real estate32,391 3,423 2,663 38,477 
Total commercial real estate38,654 3,543 2,663 44,860 
Residential real estate11,944 301 78 12,324 
Commercial, financial, & agricultural8,283 1,690 480 10,452 
Consumer and other2,143 4 — 2,147 
Total Loans$61,024 $5,538 $3,221 $69,783 
December 31, 2020
Construction, land and land development$11,275 $241 $— $11,516 
Other commercial real estate40,825 53 2,068 42,946 
Total commercial real estate52,100 294 2,068 54,462 
Residential real estate14,909 312 86 15,307 
Commercial, financial, & agricultural10,198 1,803 579 12,580 
Consumer and other2,364 25 192 2,581 
Total Loans$79,571 $2,434 $2,925 $84,930 
A loan’s risk grade is assigned at loan origination and is based on the financial strength of the borrower and the type of collateral. Loan risk grades are subject to review at various times throughout the year as part of the Company’s ongoing loan review process. Loans with an assigned risk grade of six or below and an outstanding balance of $250,000 or more are reassessed on a quarterly basis. During this reassessment process individual reserves may be identified and placed against certain loans which are not considered impaired.
In assessing the overall economic condition of the markets in which it operates, the Company monitors the unemployment rates for its major service areas. The unemployment rates are reviewed on a quarterly basis as part of the allowance for loan loss determination.
Loans are placed on nonaccrual status if principal or interest payments become 90 days past due or when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory guidelines. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due.
The following table presents the aging of the amortized cost basis in legacy loans by aging category and accrual status as of March 31, 2021 and December 31, 2020:
(dollars in thousands)30-89 Days
Past Due		90 Days
or More
Past Due		Total Accruing
Loans Past Due		Nonaccrual
Loans		Current LoansTotal Loans
March 31, 2021
Construction, land and land development$24 $— $24 $74 $109,487 $109,585 
Other commercial real estate108 — 108 5,154 494,342 499,604 
Total commercial real estate132 — 132 5,228 603,829 609,189 
Residential real estate471 — 471 2,572 162,844 165,887 
Commercial, financial, & agricultural149 — 149 810 198,903 199,862 
Consumer and other37 — 37 88 17,930 18,055 
Total Loans$789 $— $789 $8,698 $983,506 $992,993 
December 31, 2020
Construction, land and land development$1,314 $— $1,314 $80 $108,183 $109,577 
Other commercial real estate229 — 229 2,545 474,671 477,445 
Total commercial real estate1,543 — 1,543 2,625 582,854 587,022 
Residential real estate667 — 667 2,873 164,174 167,714 
Commercial, financial, & agricultural150 — 150 1,010 199,640 200,800 
Consumer and other48 — 48 102 18,887 19,037 
Total Loans$2,408 $— $2,408 $6,610 $965,555 $974,573 
The following table presents the aging of the amortized cost basis in purchased loans by aging category and accrual status as of March 31, 2021 and December 31, 2020:
(dollars in thousands)30-89 Days
Past Due		90 Days
or More
Past Due		Total Accruing
Loans Past Due		Nonaccrual
Loans		Current LoansTotal Loans
March 31, 2021
Construction, land and land development$— $— $— $— $6,383 $6,383 
Other commercial real estate— — — 1,883 36,594 38,477 
Total commercial real estate— — — 1,883 42,977 44,860 
Residential real estate17 — 17 69 12,238 12,324 
Commercial, financial, & agricultural27 — 27 27 10,398 10,452 
Consumer and other— — — — 2,147 2,147 
Total Loans$44 $— $44 $1,979 $67,760 $69,783 
December 31, 2020
Construction, land and land development$— $— $— $117 $11,399 $11,516 
Other commercial real estate544 — 544 2,068 40,334 42,946 
Total commercial real estate544 — 544 2,185 51,733 54,462 
Residential real estate15 — 15 85 15,207 15,307 
Commercial, financial, & agricultural125 — 125 55 12,400 12,580 
Consumer and other— — — 193 2,388 2,581 
Total Loans$684 $— $684 $2,518 $81,728 $84,930 
The following table details impaired loan data, including purchased credit impaired loans, as of March 31, 2021.
March 31, 2021
(dollars in thousands)Unpaid
Contractual
Principal
Balance		Recorded InvestmentRelated
Allowance		Average
Recorded
Investment
With No Related Allowance Recorded
Construction, land and land development$7,480 $7,480 $— $7,231 
Commercial real estate10,979 10,121 — 11,042 
Residential real estate1,047 1,067 — 1,084 
Commercial, financial & agriculture3 3 — 21 
Consumer & other— — — — 
19,509 18,671 — 19,378 
With An Allowance Recorded
Construction, land and land development— — — — 
Commercial real estate5,242 5,247 1,315 5,783 
Residential real estate1,177 1,233 229 1,203 
Commercial, financial & agriculture86 86 38 198 
Consumer & other6 6 6 3 
6,511 6,572 1,588 7,187 
Purchased Credit Impaired Loans
Construction, land and land development116 48 38 71 
Commercial real estate780 764 42 382 
Residential real estate13 1 10 6 
Commercial, financial & agriculture247 27 100 37 
Consumer & other— — — 48 
1,156 840 190 544 
Total
Construction, land and land development7,596 7,528 38 7,302 
Commercial real estate17,001 16,132 1,357 17,207 
Residential real estate2,237 2,301 239 2,293 
Commercial, financial & agriculture336 116 138 256 
Consumer & other6 6 6 51 
$27,176 $26,083 $1,778 $27,109 
The following table details impaired loan data as of December 31, 2020.
December 31, 2020
(dollars in thousands)Unpaid
Contractual
Principal
Balance		Recorded InvestmentRelated
Allowance		Average
Recorded
Investment
With No Related Allowance Recorded
Construction, land and land development$6,969 $6,982 $— $2,841 
Commercial real estate11,978 11,105 — 12,190 
Residential real estate1,140 1,122 — 2,142 
Commercial, financial & agriculture42 40 — 203 
Consumer & other— — — 123 
20,129 19,249 — 17,499 
With An Allowance Recorded
Construction, land and land development— — — — 
Commercial real estate6,292 6,325 1,436 5,945 
Residential real estate1,274 1,230 226 703 
Commercial, financial & agriculture310 310 263 1,118 
Consumer & other— — — — 
7,876 7,865 1,925 7,766 
Purchased Credit Impaired Loans
Construction, land and land development118 94 — 96 
Commercial real estate— — — 63 
Residential real estate14 11 4 13 
Commercial, financial & agriculture55 46 — 49 
Consumer & other192 96 81 113 
379 247 85 334 
Total
Construction, land and land development7,087 7,076 — 2,937 
Commercial real estate18,270 17,430 1,436 18,198 
Residential real estate2,428 2,363 230 2,858 
Commercial, financial & agriculture407 396 263 1,370 
Consumer & other192 96 81 236 
$28,384 $27,361 $2,010 $25,599 
Interest income recorded on impaired loans during the three months ended March 31, 2021 and 2020 were $238,000 and $50,000, respectively.
Troubled Debt Restructurings
The restructuring of a loan is considered a troubled debt restructuring ("TDRs") if both the borrower is experiencing financial difficulties and the Company has granted a concession to the terms of the loan. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.
As discussed in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2020, which are included in the Company’s 2020 Form 10-K, once a loan is identified as a TDR, it is accounted for as an impaired loan. The Company had no unfunded commitments to lend to a customer that has a troubled debt restructured loan as of March 31, 2021. The Company had one construction, land and land development loan restructured during the three month periods ended March 31, 2021 for $511,000. Loans modified in a troubled debt restructuring are considered to be in default once the loan becomes 90 days past due. A TDR may cease being classified as impaired if the loan is subsequently modified at market terms and, has performed according to the modified terms for at least six months, and there has not been any prior principal forgiveness on a cumulative basis.
The Company had no loans that subsequently defaulted during the three months ended March 31, 2021 and 2020.
Modifications in Response to COVID-19
Certain borrowers are currently unable to meet their contractual payment obligations because of the adverse effects of the COVID-19 pandemic. To help mitigate these effects, loan customers may apply for a deferral of payments, or portions thereof, for up to three months. In the absence of other intervening factors, such short-term modifications made on a good faith basis are not categorized as troubled debt restructurings, nor are loans granted payment deferrals related to the COVID-19 pandemic reported as past due or placed on nonaccrual status (provided the loans were not past due or on nonaccrual status prior to the deferral).
As of March 31, 2021, the Company had approximately $12.7 million in loans still under their modified terms. The Company’s modification program included payment deferrals, interest only, and other forms of modifications. See Note 1 - Summary of Significant Accounting Policies for more information.