
	December 31, 2022
(dollars in thousands)	Legacy Loans		Purchased Loans		Total
Construction, land & land development	$	216,206	$	13,229	$	229,435
Other commercial real estate	847,684		127,763		975,447
Total commercial real estate	1,063,890		140,992		1,204,882
Residential real estate	249,390		40,664		290,054
Commercial, financial & agricultural(*)	210,413		13,510		223,923
Consumer & other	17,296		951		18,247
Total loans	$	1,540,989	$	196,117	$	1,737,106


	December 31, 2021
(dollars in thousands)	Legacy Loans		Purchased Loans		Total

Construction, land & land development	$	119,953	$	45,493	$	165,446
Other commercial real estate	595,739		191,653		787,392
Total commercial real estate	715,692		237,146		952,838
Residential real estate	159,469		53,058		212,527
Commercial, financial & agricultural(*)	113,040		41,008		154,048
Consumer & other	16,003		2,561		18,564
Total loans	$	1,004,204	$	333,773	$	1,337,977

Commercial, financial and agricultural 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. These loans are generally smaller loan amounts spread across many individual borrowers to help minimize risk.

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.

•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.

•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 tables present the loan portfolio, excluding purchased loans, by credit quality indicator (risk grade) as of December 31, 2022. Those loans with a risk grade of 1, 2, 3, 4, and 5 have been combined in the pass column for presentation purposes. For the periods ending December 31, 2022, the Company did not have any loans classified as “doubtful” or a “loss”.


(dollars in thousands)	Pass		Special Mention		Substandard		Total Loans

Construction, land & land development	$	215,265	$	290	$	651	$	216,206
Other commercial real estate	827,300		14,236		6,148		847,684
Total commercial real estate	1,042,565		14,526		6,799		1,063,890
Residential real estate	239,570		5,976		3,844		249,390
Commercial, financial & agricultural	207,935		812		1,666		210,413
Consumer & other	17,206		54		36		17,296
Total loans	$	1,507,276	$	21,368	$	12,345	$	1,540,989


(dollars in thousands)	Pass		Special Mention		Substandard		Total Loans

Construction, land & land development	$	13,229	$	—	$	—	$	13,229
Other commercial real estate	123,826		3,326		611		127,763
Total commercial real estate	137,055		3,326		611		140,992
Residential real estate	38,360		598		1,706		40,664
Commercial, financial & agricultural	12,973		73		464		13,510
Consumer & other	951		—		—		951
Total loans	$	189,339	$	3,997	$	2,781	$	196,117

The following tables present the loan portfolio, excluding purchased loans, by credit quality indicator (risk grade) as of December 31, 2021. Those loans with a risk grade of 1, 2, 3 or 4 have been combined in the pass column for presentation purposes. For the periods ending December 31, 2021, the Company did not have any loans classified as “doubtful” or a “loss”.


(dollars in thousands)	Pass		Special Mention		Substandard		Total Loans

Construction, land & land development	$	116,524	$	3,154	$	275	$	119,953
Other commercial real estate	562,228		25,718		7,793		595,739
Total commercial real estate	678,752		28,872		8,068		715,692
Residential real estate	148,507		5,733		5,229		159,469
Commercial, financial & agricultural	100,282		11,460		1,298		113,040
Consumer & other	15,787		78		138		16,003
Total loans	$	943,328	$	46,143	$	14,733	$	1,004,204


(dollars in thousands)	Pass		Special		Substandard		Total Loans

Construction, land & land development	$	45,432	$	—	$	61	$	45,493
Other commercial real estate	186,905		3,518		1,230		191,653
Total commercial real estate	232,337		3,518		1,291		237,146
Residential real estate	49,875		563		2,620		53,058
Commercial, financial & agricultural	40,711		—		297		41,008
Consumer & other	2,558		3		—		2,561
Total loans	$	325,481	$	4,084	$	4,208	$	333,773

A loan’s risk grade is assigned at the inception of the loan and is based on the financial strength of the borrower and the type of collateral. Loan risk grades are subject to reassessment at various times throughout the year as part of the Company’s ongoing loan review process. Loans with an assigned risk grade of 6 or below and an outstanding balance of $500,000 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 considered past due if the required principal and interest payments have not been received as of the date such payments were due. Generally, 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 provision. Loans may be placed on nonaccrual status regardless of whether such loans are considered past due.


	Accruing Loans
(dollars in thousands)	30-89 Days Past Due		90 Days or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans

Construction, land & land development	$	—	$	—	$	—	$	149	$	216,057	$	216,206
Other commercial real estate	395		—		395		1,389		845,900		847,684
Total commercial real estate	395		—		395		1,538		1,061,957		1,063,890
Residential real estate	870		—		870		1,875		246,645		249,390
Commercial, financial & agricultural	403		—		403		878		209,132		210,413
Consumer & other	40		—		40		21		17,235		17,296
Total loans	$	1,708	$	—	$	1,708	$	4,312	$	1,534,969	$	1,540,989


	Accruing Loans
(dollars in thousands)	30-89 Days Past Due		90 Days or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans

Construction, land & land development	$	—	$	—	$	—	$	—	$	13,229	$	13,229
Other commercial real estate	—		—		—		120		127,643		127,763
Total commercial real estate	—		—		—		120		140,872		140,992
Residential real estate	12		—		12		811		39,841		40,664
Commercial, financial & agricultural	73		—		73		463		12,974		13,510
Consumer & other	—		—		—		—		951		951
Total loans	$	85	$	—	$	85	$	1,394	$	194,638	$	196,117


	Accruing Loans
(dollars in thousands)	30-89 Days Past Due		90 Days or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans

Construction, land & land development	$	6	$	—	$	6	$	—	$	119,947	$	119,953
Other commercial real estate	349		—		349		577		594,813		595,739
Total commercial real estate	355		—		355		577		714,760		715,692
Residential real estate	421		—		421		2,641		156,407		159,469
Commercial, financial & agricultural	69		—		69		708		112,263		113,040
Consumer & other	93		—		93		26		15,884		16,003
Total loans	$	938	$	—	$	938	$	3,952	$	999,314	$	1,004,204


	Accruing Loans
(dollars in thousands)	30-89 Days Past Due		90 Days or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans

Construction, land & land development	$	2,680	$	—	$	2,680	$	31	$	42,782	$	45,493
Other commercial real estate	—		—		—		260		191,393		191,653
Total commercial real estate	2,680		—		2,680		291		234,175		237,146
Residential real estate	560		—		560		1,198		51,300		53,058
Commercial, financial & agricultural	389		—		389		—		40,619		41,008
Consumer & other	—		—		—		8		2,553		2,561
Total loans	$	3,629	$	—	$	3,629	$	1,497	$	328,647	$	333,773


(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded investment		Related allowance		Average Recorded Investment

With No Related Allowance Recorded
Construction, land & land development	$	40	$	40	$	—	$	10
Other commercial real estate	3,754		3,754		—		5,311
Residential real estate	62		62		—		570
Commercial, financial & agricultural	—		—		—		306
Consumer & other	—		—		—		1
Total Impaired Loans with no Allowance	3,856		3,856		—		6,198

With An Allowance Recorded
Construction, land & land development	474		474		44		177
Other commercial real estate	—		—		—		503
Residential real estate	—		—		—		588
Commercial, financial & agricultural	—		—		—		369
Consumer & other	—		—		—		—
Total Impaired Loans with Allowance	474		474		44		1,637

Purchased Credit Impaired Loans
Construction, land & land development	—		—		—		—
Other commercial real estate	798		798		33		760
Residential real estate	—		—		—		13
Commercial, financial & agricultural	—		—		—		—
Consumer & other	—		—		—		65
Total Purchased Credit Impaired Loans	798		798		33		838

Total
Construction, land & land development	514		514		44		187
Other commercial real estate	4,552		4,552		33		6,574
Residential real estate	62		62		—		1,171
Commercial, financial & agricultural	—		—		—		675
Consumer & other	—		—		—		66
	$	5,128	$	5,128	$	77	$	8,673

Interest income recorded on impaired loans during the year ended December 31, 2022 was $724,000, and reflects interest income recorded on nonaccrual loans prior to them being placed on nonaccrual status and interest income recorded on TDRs. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $1.3 million for the year ended December 31, 2022.


(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment

With No Related
Allowance Recorded
Construction, land & land development	$	62	$	62	$	—	$	4,311
Other commercial real estate	7,203		6,369		—		8,113
Residential real estate	958		997		—		1,083
Commercial, financial & agricultural	75		75		—		56
Consumer & other	—		—		—		—
	8,298		7,503		—		13,563
With An Allowance Recorded
Construction, land & land development	—		—		—		—
Other commercial real estate	430		483		148		4,429
Residential real estate	685		773		108		1,029
Commercial, financial & agricultural	—		—		—		79
Consumer & other	—		—		—		1
	1,115		1,256		256		5,538
Purchase credit impaired
Construction, land & land development	—		—		—		51
Other commercial real estate	2,003		1,916		18		802
Residential real estate	4		—		6		7
Commercial, financial & agricultural	—		—		—		35
Consumer & other	192		73		96		72
	2,199		1,989		120		967
Total
Construction, land & land development	62		62		—		4,362
Other commercial real estate	9,636		8,768		166		13,344
Residential real estate	1,647		1,770		114		2,119
Commercial, financial & agricultural	75		75		—		170
Consumer & other	192		73		96		73
	$	11,612	$	10,748	$	376	$	20,068

Interest income recorded on impaired loans during the year ended December 31, 2021 was $570,000, and reflects interest income recorded on nonaccrual loans prior to them being placed on nonaccrual status and interest income recorded on TDRs. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $1.2 million for the year ended December 31, 2021.

Troubled Debt Restructurings (TDRs) are troubled loans on which the original terms of the loan have been modified in favor of the borrower due to deterioration in the borrower’s financial condition. Each potential loan modification is reviewed individually and the terms of the loan are modified to meet the borrower’s specific circumstances at a point in time. Not all loan modifications are TDRs. Loan modifications are reviewed and approved by the Company’s senior lending staff, who then determine whether the loan meets the criteria for a TDR. Generally, the types of concessions granted to borrowers that are evaluated in determining whether a loan is classified as a TDR include:

•Principal reductions - These are often the result of commercial real estate loan workouts where two new notes are created. The primary note is underwritten based upon the Company’s normal underwriting standards and is structured so that the projected cash flows are sufficient to repay the contractual principal and interest of the newly restructured note. The terms of the secondary note vary by situation and often involve that note being charged off, or the principal and interest payments being deferred until after the primary note has been repaid. In situations where a portion of the note is charged off during modification, there is often no specific reserve allocated to those loans. This is due to the fact that the amount of the charge-off usually represents the excess of the original loan balance over the collateral value and the Company has determined there is no additional exposure on those loans.

As discussed in Note 1, Summary of Significant Accounting Policies, once a loan is identified as a TDR, it is accounted for as an impaired loan. 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 unfunded commitments to lend to a customer that has a troubled debt restructured loan as of December 31, 2022 and 2021. The Company had one commercial real estate loan with outstanding principal balance of $181,000 restructured related to payment terms.