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Loans
 3 Months Ended
Mar. 31, 2022
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, 2022 and December 31, 2021. Purchased loans are defined as loans that were acquired in bank acquisitions.
March 31, 2022
(dollars in thousands)Legacy LoansPurchased LoansTotal
Construction, land and land development$147,306 $23,605 $170,911 
Other commercial real estate653,831 149,164 802,995 
Total commercial real estate801,137 172,769 973,906 
Residential real estate149,215 58,471 207,686 
Commercial, financial, & agricultural (*)126,373 27,865 154,238 
Consumer and other16,788 1,414 18,202 
Total Loans$1,093,513 $260,519 $1,354,032 
December 31, 2021
(dollars in thousands)Legacy LoansPurchased LoansTotal
Construction, land and land development$119,953 $45,493 $165,446 
Other commercial real estate595,739 191,653 787,392 
Total commercial real estate715,692 237,146 952,838 
Residential real estate159,469 53,058 212,527 
Commercial, financial, & agricultural (*)113,040 41,008 154,048 
Consumer and other16,003 2,561 18,564 
Total Loans$1,004,204 $333,773 $1,337,977 
(*) Includes $387,000 and $9.0 million in PPP loans at March 31, 2022 and December 31, 2021, respectively.
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 a risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 10. A description of the general characteristics of the grades is as follows:
•Grades 1, 2 and 3 - Borrowers with these assigned risk grades range 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 4 and 5 - 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. These loans are also included in into the “pass” classification.
•Grade 6 - 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.
•Grades 7 and 8 - These grades 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 grade 8, 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 9 and 10 - 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, and generally the Company has no loans with these assigned grades. 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 7 or 8. 
The following table presents the loan portfolio, excluding purchased loans, by credit quality indicator (risk grade) as of March 31, 2022 and December 31, 2021. Those loans with a risk grade of 1, 2, 3, 4 and 5 have been combined in the pass column for presentation purposes.
(dollars in thousands)PassSpecial MentionSubstandardTotal Loans
March 31, 2022
Construction, land and land development$144,522 $2,529 $255 $147,306 
Other commercial real estate622,237 23,734 7,860 653,831 
Total commercial real estate766,759 26,263 8,115 801,137 
Residential real estate138,027 5,803 5,385 149,215 
Commercial, financial, & agricultural124,178 1,174 1,021 126,373 
Consumer and other16,670 70 48 16,788 
Total Loans$1,045,634 $33,310 $14,569 $1,093,513 
(dollars in thousands)
December 31, 2021
Construction, land and land development$117,044 $2,634 $275 $119,953 
Other commercial real estate562,228 25,718 7,793 595,739 
Total commercial real estate679,272 28,352 8,068 715,692 
Residential real estate148,507 5,733 5,229 159,469 
Commercial, financial, & agricultural110,267 1,488 1,285 113,040 
Consumer and other15,787 78 $138 16,003 
Total Loans$953,833 $35,651 $14,720 $1,004,204 
The following table presents the purchased loan portfolio by credit quality indicator (risk grade) as of March 31, 2022 and December 31, 2021. Those loans with a risk grade of 1, 2, 3, 4 or 5 have been combined in the pass column for presentation purposes. For the period ending March 31, 2022, the Company did not have any loans classified as “doubtful” or a “loss”.
(dollars in thousands)PassSpecial MentionSubstandardTotal Loans
March 31, 2022
Construction, land and land development$23,577 $— $28 $23,605 
Other commercial real estate147,899 184 1,081 149,164 
Total commercial real estate171,476 184 1,109 172,769 
Residential real estate55,412 686 2,373 58,471 
Commercial, financial, & agricultural27,241 373 251 27,865 
Consumer and other1,410 — 4 1,414 
Total Loans$255,539 $1,243 $3,737 $260,519 
December 31, 2021
Construction, land and land development$45,432 $— $61 $45,493 
Other commercial real estate186,905 3,518 1,230 191,653 
Total commercial real estate232,337 3,518 1,291 237,146 
Residential real estate49,875 563 2,620 53,058 
Commercial, financial, & agricultural40,711 — 297 41,008 
Consumer and other2,558 3 — 2,561 
Total Loans$325,481 $4,084 $4,208 $333,773 
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, 2022 and December 31, 2021:
(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, 2022
Construction, land and land development$109 $— $109 $67 $147,130 $147,306 
Other commercial real estate759 — 759 1,336 651,736 653,831 
Total commercial real estate868 — 868 1,403 798,866 801,137 
Residential real estate278 — 278 2,978 145,959 149,215 
Commercial, financial, & agricultural437 — 437 578 125,358 126,373 
Consumer and other18 — 18 22 16,748 16,788 
Total Loans$1,601 $— $1,601 $4,981 $1,086,931 $1,093,513 
December 31, 2021
Construction, land and land development$6 $— $6 $— $119,947 $119,953 
Other commercial real estate349 — 349 577 594,813 595,739 
Total commercial real estate355 — 355 577 714,760 715,692 
Residential real estate421 — 421 2,641 156,407 159,469 
Commercial, financial, & agricultural69 — 69 708 112,263 113,040 
Consumer and other93 — 93 26 15,884 16,003 
Total Loans$938 $— $938 $3,952 $999,314 $1,004,204 
The following table presents the aging of the amortized cost basis in purchased loans by aging category and accrual status as of March 31, 2022 and December 31, 2021:
(dollars in thousands)30-89 Days
Past Due		90 Days
or More
Past Due		Total Accruing
Loans Past Due		Nonaccrual
Loans		Current LoansTotal Loans
March 31, 2022
Construction, land and land development$— $— $— $— $23,605 $23,605 
Other commercial real estate— — — 125 149,039 149,164 
Total commercial real estate— — — 125 172,644 172,769 
Residential real estate598 — 598 1,061 56,812 58,471 
Commercial, financial, & agricultural226 — 226 — 27,639 27,865 
Consumer and other3 — 3 4 1,407 1,414 
Total Loans$827 $— $827 $1,190 $258,502 $260,519 
December 31, 2021
Construction, land and land development$2,680 $— $2,680 $31 $42,782 $45,493 
Other commercial real estate— — — 260 191,393 191,653 
Total commercial real estate2,680 — 2,680 291 234,175 237,146 
Residential real estate560 — 560 1,198 51,300 53,058 
Commercial, financial, & agricultural389 — 389 — 40,619 41,008 
Consumer and other— — — 8 2,553 2,561 
Total Loans$3,629 $— $3,629 $1,497 $328,647 $333,773 
The following table details impaired loan data, including purchased credit impaired loans, as of March 31, 2022.
March 31, 2022
(dollars in thousands)Unpaid
Contractual
Principal
Balance		Recorded InvestmentRelated
Allowance		Average
Recorded
Investment
With No Related Allowance Recorded
Construction, land and land development$— $— $— $1,773 
Commercial real estate5,982 5,281 — 6,155 
Residential real estate1,022 1,058 — 1,071 
Commercial, financial & agriculture99 99 — 85 
Consumer & other2 2 — 1 
7,105 6,440 — 9,085 
With An Allowance Recorded
Construction, land and land development— — — — 
Commercial real estate1,168 1,183 141 2,938 
Residential real estate1,297 1,406 123 1,022 
Commercial, financial & agriculture180 198 163 50 
Consumer & other— — — — 
2,645 2,787 427 4,010 
Purchased Credit Impaired Loans
Construction, land and land development— — — 30 
Commercial real estate— — — 1,239 
Residential real estate3 — 1 6 
Commercial, financial & agriculture— — — 31 
Consumer & other192 — 96 144 
195 — 97 1,450 
Total
Construction, land and land development— — — 1,803 
Commercial real estate7,150 6,464 141 10,332 
Residential real estate2,322 2,464 124 2,099 
Commercial, financial & agriculture279 297 163 166 
Consumer & other194 2 96 145 
$9,945 $9,227 $524 $14,545 
The following table details impaired loan data as of December 31, 2021.
December 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$62 $62 $— $4,311 
Commercial real estate7,203 6,369 — 8,113 
Residential real estate958 997 — 1,083 
Commercial, financial & agriculture75 75 — 56 
Consumer & other— — — — 
8,298 7,503 — 13,563 
With An Allowance Recorded
Construction, land and land development— — — — 
Commercial real estate430 483 148 4,429 
Residential real estate685 773 108 1,029 
Commercial, financial & agriculture— — — 79 
Consumer & other— — — 1 
1,115 1,256 256 5,538 
Purchased Credit Impaired Loans
Construction, land and land development— — — 51 
Commercial real estate2,003 1,916 18 802 
Residential real estate4 — 6 7 
Commercial, financial & agriculture— — — 35 
Consumer & other192 73 96 72 
2,199 1,989 120 967 
Total
Construction, land and land development62 62 — 4,362 
Commercial real estate9,636 8,768 166 13,344 
Residential real estate1,647 1,770 114 2,119 
Commercial, financial & agriculture75 75 — 170 
Consumer & other192 73 96 73 
$11,612 $10,748 $376 $20,068 
Interest income recorded on impaired loans during the three months ended March 31, 2022 and 2021 was $215,000 and $238,000, respectively.
Troubled Debt Restructurings
The restructuring of a loan is considered a troubled debt restructuring ("TDR") 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, 2021, which are included in the Company’s 2021 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, 2022. The Company had no loans restructured during the three month period ended March 31, 2022. Loans modified in a TDR 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, 2022 and 2021.