

(dollars in thousands)	December 31, 2023		December 31, 2022
Construction, land & land development	$	247,146	$	229,435
Other commercial real estate	974,375		975,447
Total commercial real estate	1,221,521		1,204,882
Residential real estate	356,234		290,054
Commercial, financial & agricultural(*)	242,756		223,923
Consumer and other	62,959		18,247
Total loans	$	1,883,470	$	1,737,106

Included in the above table are government guaranteed loans totaling $86.8 million at December 31, 2023 and $58.4 million at December 31, 2022. The following table presents the composition of government guaranteed loans segregated by class of loans for each respective period.



(dollars in thousands)	December 31, 2023		December 31, 2022

Construction, land & land development	$	7,027	$	5,888
Other commercial real estate	40,852		32,642
Total commercial real estate	47,879		38,530
Residential real estate	12,170		8,036
Commercial, financial & agricultural	26,716		11,787

Total loans	$	86,765	$	58,353

The Company elected to exclude accrued interest receivable from the amortized cost basis of loans disclosed throughout this note. As of December 31, 2023 and 2022, respectively, accrued interest receivable for loans totaled $8.8 million and $6.8 million and is included in the "other assets" line item on the Company's consolidated balance sheet.

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 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 credit 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 segregated by class of loans and the risk category of term loans by vintage year, which is the year of origination or most recent renewal, as of December 31, 2023. Those loans with a risk grade of 1, 2, 3, 4 and 5 have been combined in the pass column for presentation purposes. There were no loans with a risk rating of "doubtful" or "loss" at December 31, 2023.


	Term Loans Amortized Cost Basis by Origination Year
(dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolvers		Revolvers converted to term loans		Total
December 31, 2023
Construction, land & land development
Risk rating
Pass	$	112,587	$	91,981	$	27,332	$	5,654	$	1,000	$	5,765	$	605	$	31	$	244,955
Special Mention	792		—		25		—		—		29		282		—		1,128
Substandard	—		888		4		—		20		151		—		—		1,063
Total Construction, land & land development	113,379		92,869		27,361		5,654		1,020		5,945		887		31		247,146

Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Other commercial real estate
Risk rating
Pass	61,816		341,656		204,145		88,629		79,123		145,374		24,158		2,031		946,932
Special Mention	75		3,251		766		2,113		5,733		4,694		545		48		17,225
Substandard	2,303		2,615		211		—		486		4,395		208		—		10,218
Total Other commercial real estate	64,194		347,522		205,122		90,742		85,342		154,463		24,911		2,079		974,375

Current period gross write offs	—		—		69		—		—		—		—		—		69

Residential real estate
Risk rating
Pass	78,088		116,704		50,986		21,892		8,510		43,038		22,642		100		341,960
Special Mention	856		466		10		50		679		4,687		424		—		7,172
Substandard	—		1,169		384		296		272		4,735		246		—		7,102
Total Residential real estate	78,944		118,339		51,380		22,238		9,461		52,460		23,312		100		356,234

Current period gross write offs	253		492		26		—		—		—		—		—		771


Commercial, financial & agricultural
Risk rating
Pass	66,820		51,439		21,673		12,489		4,734		14,002		58,607		306		230,070
Special Mention	4,186		894		376		745		188		40		974		—		7,403
Substandard	164		1,872		1,979		190		25		165		866		22		5,283
Total Commercial, financial & agricultural	71,170		54,205		24,028		13,424		4,947		14,207		60,447		328		242,756

Current period gross write offs	150		168		408		200		9		134		—		—		1,069

Consumer and other
Risk rating
Pass	53,117		4,021		2,004		1,240		925		908		462		1		62,678
Special Mention	79		42		38		12		25		1		—		—		197
Substandard	43		20		3		5		4		9		—		—		84
Total Consumer and other	53,239		4,083		2,045		1,257		954		918		462		1		62,959

Current period gross write offs	9		12		10		2		—		2		—		—		35

Total Loans
Risk rating
Pass	372,428		605,801		306,140		129,904		94,292		209,087		106,474		2,469		1,826,595
Special Mention	5,988		4,653		1,215		2,920		6,625		9,451		2,225		48		33,125
Substandard	2,510		6,564		2,581		491		807		9,455		1,320		22		23,750
Total Loans	$	380,926	$	617,018	$	309,936	$	133,315	$	101,724	$	227,993	$	110,019	$	2,539	$	1,883,470

Total current period gross write offs	$	412	$	672	$	513	$	202	$	9	$	136	$	—	$	—	$	1,944

The following table presents the loan portfolio 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. There were no loans with a risk rating of “doubtful” or “loss” at December 31, 2022.


(dollars in thousands)	Pass		Special Mention		Substandard		Total Loans
December 31, 2022
Construction, land & land development	$	228,494	$	290	$	651	$	229,435
Other commercial real estate	951,126		17,562		6,759		975,447
Total commercial real estate	1,179,620		17,852		7,410		1,204,882
Residential real estate	277,930		6,574		5,550		290,054
Commercial, financial & agricultural	220,908		885		2,130		223,923
Consumer and other	18,157		54		36		18,247
Total loans	$	1,696,615	$	25,365	$	15,126	$	1,737,106

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 7 or worse 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 credit 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.

Loans are classified as collateral-dependent when the borrower is experiencing financial difficulty, and we expect repayment to be provided substantially through the operation or sale of collateral. Our commercial loans have collateral that is comprised of real estate and business assets. Our consumer loans have collateral that is substantially comprised of residential real estate.


	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
December 31, 2023
Construction, land & land development	$	812	$	—	$	812	$	85	$	246,249	$	247,146
Other commercial real estate	1,796		—		1,796		4,219		968,360		974,375
Total commercial real estate	2,608		—		2,608		4,304		1,214,609		1,221,521
Residential real estate	2,503		350		2,853		3,561		349,820		356,234
Commercial, financial & agricultural	775		—		775		1,956		240,025		242,756
Consumer and other	183		20		203		18		62,738		62,959
Total loans	$	6,069	$	370	$	6,439	$	9,839	$	1,867,192	$	1,883,470


	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
December 31, 2022
Construction, land & land development	$	—	$	—	$	—	$	149	$	229,286	$	229,435
Other commercial real estate	395		—		395		1,509		973,543		975,447
Total commercial real estate	395		—		395		1,658		1,202,829		1,204,882
Residential real estate	882		—		882		2,686		286,486		290,054
Commercial, financial & agricultural	476		—		476		1,341		222,106		223,923
Consumer and other	40		—		40		21		18,186		18,247
Total loans	$	1,793	$	—	$	1,793	$	5,706	$	1,729,607	$	1,737,106


	December 31, 2023							December 31, 2022
(dollars in thousands)	Nonaccrual Loans with No Related ACL			Nonaccrual Loans with a Related ACL		Total Nonaccrual Loans		Nonaccrual Loans
December 31, 2023
Construction, land & land development	$	27		$	58	$	85	$	149
Other commercial real estate	2,806			1,413		4,219		1,509
Total commercial real estate	2,833		2,833	1,471		4,304		1,658
Residential real estate	725			2,836		3,561		2,686
Commercial, financial & agricultural	—			1,956		1,956		1,341
Consumer and other	—			18		18		21
Total loans	$	3,558		$	6,281	$	9,839	$	5,706


(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 and other	—		—		—		1
	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 and other	—		—		—		—
	474		474		44		1,637
Purchase credit impaired
Construction, land & land development	—		—		—		—
Other commercial real estate	798		798		33		760
Residential real estate	—		—		—		13
Commercial, financial & agricultural	—		—		—		—
Consumer and other	—		—		—		65
	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 and other	—		—		—		66
	$	5,128	$	5,128	$	77	$	8,673

Interest income recorded on impaired loans during the year ended December 31, 2023 was $430,000, and reflects interest income recorded on nonaccrual loans prior to them being placed on nonaccrual status. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $3.1 million for the year ended December 31, 2023.

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.

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a discounted cash flow model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. Upon the Company's determination that a modified loan, or portion of a loan, has subsequently been deemed uncollectible, the loan, or portion of the loan, is written off.


	Loans modified due to financial difficulty
(dollars in thousands)	Term Extension		Term Extension and Payment Delay		Total*

Residential real estate	$	12	$	—	$	12
Commercial, financial & agricultural	—		10		10
Total Loans	$	12	$	10	$	22
*less than .01% of total class of receivable

Prior to the adoption of ASU 2022-02 on January 1, 2023, the restructuring of a loan was considered a troubled debt restructuring ("TDR") if both the borrower was experiencing financial difficulties and the Company had granted a concession to the terms of the loan. Concessions may have included interest rate reductions to below market interest rates, principal forgiveness, restructured 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, 2022, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, once a loan was identified as a TDR, it was accounted for as an impaired loan. The Company had no unfunded commitments to lend to a customer that had a troubled debt restructured loan as of December 31, 2022. Loans modified in a TDR were considered to be in default once the loan became 90 days past due. A TDR ceased being classified as impaired if the loan was subsequently modified at market terms and, had performed according to the modified terms for at least six months, and there had not been any prior principal forgiveness on a cumulative basis.