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Loans
 9 Months Ended
Sep. 30, 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 September 30, 2021 and December 31, 2020. Purchased loans are defined as loans that were acquired in bank acquisitions.
September 30, 2021
(dollars in thousands)Legacy LoansPurchased LoansTotal
Construction, land and land development$101,433 $51,558 $152,991 
Other commercial real estate543,883 208,750 752,633 
Total commercial real estate645,316 260,308 905,624 
Residential real estate163,750 54,474 218,224 
Commercial, financial, & agricultural (*)125,213 41,015 166,228 
Consumer and other16,417 3,367 19,784 
Total Loans$950,696 $359,164 $1,309,860 
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 $17.0 million and $101.1 million in PPP loans at September 30, 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 September 30, 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 September 30, 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
September 30, 2021
Construction, land and land development$98,619 $2,078 $736 $101,433 
Other commercial real estate504,951 22,107 16,825 543,883 
Total commercial real estate603,570 24,185 17,561 645,316 
Residential real estate153,983 3,560 6,207 163,750 
Commercial, financial, & agricultural122,991 1,332 890 125,213 
Consumer and other16,047 144 226 16,417 
Total Loans$896,591 $29,221 $24,884 $950,696 
(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 
The following table presents the purchased loan portfolio by credit quality indicator (risk grade) as of September 30, 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 September 30, 2021, the Company did not have any loans classified as “doubtful” or a “loss”.
(dollars in thousands)PassSpecial MentionSubstandardTotal Loans
September 30, 2021
Construction, land and land development$50,713 $803 $42 $51,558 
Other commercial real estate194,696 10,802 3,252 208,750 
Total commercial real estate245,409 11,605 3,294 260,308 
Residential real estate47,407 3,886 3,181 54,474 
Commercial, financial, & agricultural39,965 666 384 41,015 
Consumer and other3,118 17 232 3,367 
Total Loans$335,899 $16,174 $7,091 $359,164 
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 September 30, 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
September 30, 2021
Construction, land and land development$59 $— $59 $46 $101,328 $101,433 
Other commercial real estate59 — 59 4,430 539,394 543,883 
Total commercial real estate118 — 118 4,476 640,722 645,316 
Residential real estate579 — 579 3,582 159,589 163,750 
Commercial, financial, & agricultural132 — 132 675 124,406 125,213 
Consumer and other70 — 70 84 16,263 16,417 
Total Loans$899 $— $899 $8,817 $940,980 $950,696 
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 September 30, 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
September 30, 2021
Construction, land and land development$2,688 $— $2,688 $8 $48,862 $51,558 
Other commercial real estate— — — 1,350 207,400 208,750 
Total commercial real estate2,688 — 2,688 1,358 256,262 260,308 
Residential real estate76 — 76 1,790 52,608 54,474 
Commercial, financial, & agricultural97 — 97 47 40,871 41,015 
Consumer and other17 — 17 234 3,116 3,367 
Total Loans$2,878 $— $2,878 $3,429 $352,857 $359,164 
December 31, 2020
Construction, land and land development$— $— $— $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 September 30, 2021.
September 30, 2021
(dollars in thousands)Unpaid
Contractual
Principal
Balance		Recorded InvestmentRelated
Allowance		Average
Recorded
Investment
With No Related Allowance Recorded
Construction, land and land development$62 $61 $— $5,373 
Commercial real estate7,334 6,460 — 8,549 
Residential real estate1,194 1,194 — 1,105 
Commercial, financial & agriculture80 80 — 52 
Consumer & other— — — — 
8,670 7,795 — 15,079 
With An Allowance Recorded
Construction, land and land development— — — — 
Commercial real estate4,806 4,806 880 5,415 
Residential real estate778 778 113 1,093 
Commercial, financial & agriculture— — — 99 
Consumer & other— — — 2 
5,584 5,584 993 6,609 
Purchased Credit Impaired Loans
Construction, land and land development— — — 64 
Commercial real estate851 851 26 524 
Residential real estate11 8 8 8 
Commercial, financial & agriculture55 47 4 44 
Consumer & other192 96 96 72 
1,109 1,002 134 712 
Total
Construction, land and land development62 61 — 5,437 
Commercial real estate12,991 12,117 906 14,488 
Residential real estate1,983 1,980 121 2,206 
Commercial, financial & agriculture135 127 4 195 
Consumer & other192 96 96 74 
$15,363 $14,381 $1,127 $22,400 
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— — — — 
20,129 19,249 — 17,376 
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 81 113 
$28,384 $27,361 $2,010 $25,476 
Interest income recorded on impaired loans during the three and nine months ended September 30, 2021 and 2020 were $261,000,$104,000, $825,000, and $154,000 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 September 30, 2021. The Company had one construction, land and land development loan restructured during the nine month period ended September 30, 2021 with outstanding principal balance of $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 and nine months ended September 30, 2021 and 2020.