XML 21 R11.htm IDEA: XBRL DOCUMENT v3.20.2
Allowance for Loan Losses
 9 Months Ended
Sep. 30, 2020
Allowance for Loan Losses  
Note 4. Allowance for Loan Losses

Note 4. Allowance for Loan Losses

 

A summary of changes in the allowance for loan losses (dollars in thousands) for September 30, 2020 and December 31, 2019 is as follows:

 

September 30, 2020

 

Beginning Balance

 

 

Charge-offs

 

 

Recoveries

 

 

Provision

 

 

Ending Balance

 

 

Individually Evaluated for Impairment

 

 

Collectively Evaluated for Impairment

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction/Land Development

 

$1,190

 

 

$7

 

 

$-

 

 

$381

 

 

$1,564

 

 

$77

 

 

$1,487

 

Farmland

 

 

668

 

 

 

-

 

 

 

-

 

 

 

102

 

 

 

770

 

 

 

449

 

 

 

321

 

Real Estate

 

 

1,573

 

 

 

76

 

 

 

5

 

 

 

335

 

 

 

1,837

 

 

 

588

 

 

 

1,249

 

Multi-Family

 

 

20

 

 

 

-

 

 

 

-

 

 

 

34

 

 

 

54

 

 

 

-

 

 

 

54

 

Commercial Real Estate

 

 

1,815

 

 

 

-

 

 

 

11

 

 

 

1,699

 

 

 

3,525

 

 

 

1,017

 

 

 

2,508

 

Home Equity – closed end

 

 

42

 

 

 

-

 

 

 

-

 

 

 

14

 

 

 

56

 

 

 

-

 

 

 

56

 

Home Equity – open end

 

 

457

 

 

 

-

 

 

 

3

 

 

 

(6)

 

 

454

 

 

 

13

 

 

 

441

 

 Commercial & Industrial – Non-Real Estate

 

 

585

 

 

 

92

 

 

 

15

 

 

 

(149)

 

 

359

 

 

 

-

 

 

 

359

 

 Consumer

 

 

186

 

 

 

85

 

 

 

45

 

 

 

75

 

 

 

221

 

 

 

1

 

 

 

220

 

Dealer Finance

 

 

1,786

 

 

 

1,292

 

 

 

641

 

 

 

774

 

 

 

1,909

 

 

 

14

 

 

 

1,895

 

Credit Cards

 

 

68

 

 

 

83

 

 

 

51

 

 

 

41

 

 

 

77

 

 

 

-

 

 

 

77

 

Total

 

$8,390

 

 

$1,635

 

 

$771

 

 

$3,300

 

 

$10,826

 

 

$2,159

 

 

$8,667

 

 

December 31, 2019

 

Beginning Balance

 

 

Charge-offs

 

 

Recoveries

 

 

Provision

 

 

Ending Balance

 

 

Individually Evaluated for Impairment

 

 

Collectively Evaluated for Impairment

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction/Land Development

 

$2,094

 

 

$2,319

 

 

$50

 

 

$1,365

 

 

$1,190

 

 

$85

 

 

$1,105

 

Farmland

 

 

15

 

 

 

-

 

 

 

-

 

 

 

653

 

 

 

668

 

 

 

537

 

 

 

131

 

Real Estate

 

 

292

 

 

 

32

 

 

 

4

 

 

 

1,309

 

 

 

1,573

 

 

 

569

 

 

 

1,004

 

Multi-Family

 

 

10

 

 

 

-

 

 

 

-

 

 

 

10

 

 

 

20

 

 

 

-

 

 

 

20

 

Commercial Real Estate

 

 

416

 

 

 

677

 

 

 

16

 

 

 

2,060

 

 

 

1,815

 

 

 

213

 

 

 

1,602

 

Home Equity – closed end

 

 

13

 

 

 

1

 

 

 

2

 

 

 

28

 

 

 

42

 

 

 

-

 

 

 

42

 

Home Equity – open end

 

 

126

 

 

 

126

 

 

 

1

 

 

 

456

 

 

 

457

 

 

 

151

 

 

 

306

 

 Commercial & Industrial – Non-Real Estate

 

 

192

 

 

 

127

 

 

 

81

 

 

 

439

 

 

 

585

 

 

 

192

 

 

 

393

 

 Consumer

 

 

70

 

 

 

116

 

 

 

44

 

 

 

188

 

 

 

186

 

 

 

1

 

 

 

185

 

Dealer Finance

 

 

1,974

 

 

 

2,118

 

 

 

1,144

 

 

 

786

 

 

 

1,786

 

 

 

7

 

 

 

1,779

 

Credit Cards

 

 

38

 

 

 

110

 

 

 

29

 

 

 

111

 

 

 

68

 

 

 

-

 

 

 

68

 

Total

 

$5,240

 

 

$5,626

 

 

$1,371

 

 

$7,405

 

 

$8,390

 

 

$1,755

 

 

$6,635

 

The following table presents the recorded investment in loans (dollars in thousands) based on impairment method as of September 30, 2020 and December 31, 2019:

 

 

 

 

 

Individually

 

 

Collectively

 

 

 

 

 

Evaluated for

 

 

Evaluated for

 

September 30, 2020

 

Loan Receivable

 

 

Impairment

 

 

Impairment

 

Construction/Land Development

 

$71,377

 

 

$1,925

 

 

$69,452

 

Farmland

 

 

47,454

 

 

 

1,751

 

 

 

45,703

 

Real Estate

 

 

166,591

 

 

 

14,209

 

 

 

152,382

 

Multi-Family

 

 

6,001

 

 

 

-

 

 

 

6,001

 

Commercial Real Estate

 

 

132,564

 

 

 

5,116

 

 

 

127,448

 

Home Equity – closed end

 

 

8,768

 

 

 

699

 

 

 

8,069

 

Home Equity – open end  

 

 

47,035

 

 

 

151

 

 

 

46,864

 

Commercial & Industrial – Non-Real Estate

 

 

89,874

 

 

 

11

 

 

 

89,863

 

Consumer

 

 

10,113

 

 

 

1

 

 

 

10,112

 

Dealer Finance

 

 

90,004

 

 

 

170

 

 

 

89,834

 

Credit Cards

 

 

2,744

 

 

 

-

 

 

 

2,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$672,525

 

 

$24,033

 

 

$648,492

 

 

December 31, 2019

 

Loan Receivable

 

 

Individually

Evaluated for Impairment

 

 

Collectively

Evaluated for Impairment

 

Construction/Land Development

 

$77,131

 

 

$3,078

 

 

$74,053

 

Farmland

 

 

29,718

 

 

 

1,933

 

 

 

27,785

 

Real Estate

 

 

178,267

 

 

 

15,535

 

 

 

162,732

 

Multi-Family

 

 

5,364

 

 

 

-

 

 

 

5,364

 

Commercial Real Estate

 

 

129,850

 

 

 

1,940

 

 

 

127,910

 

Home Equity – closed end

 

 

9,523

 

 

 

716

 

 

 

8,807

 

Home Equity – open end

 

 

47,774

 

 

 

151

 

 

 

47,623

 

Commercial & Industrial – Non-Real Estate

 

 

33,535

 

 

 

209

 

 

 

33,326

 

Consumer

 

 

10,165

 

 

 

4

 

 

 

10,161

 

Dealer Finance

 

 

78,976

 

 

 

215

 

 

 

78,761

 

Credit Cards

 

 

3,122

 

 

 

-

 

 

 

3,122

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$603,425

 

 

$23,781

 

 

$579,644

 

The following table shows the Company’s loan portfolio broken down by internal loan grade (dollars in thousands) as of September 30, 2020 and December 31, 2019:

  

September 30, 2020

 

Grade 1

Minimal Risk

 

 

Grade 2

Modest Risk

 

 

Grade 3

Average Risk

 

 

Grade 4 Acceptable Risk

 

 

Grade 5 Marginally Acceptable

 

 

Grade 6

Watch

 

 

Grade 7 Substandard

 

 

Grade 8 Doubtful

 

 

Total

 

Construction/Land Development

 

$-

 

 

$144

 

 

$8,922

 

 

$33,745

 

 

$18,642

 

 

$8,783

 

 

$1,141

 

 

$-

 

 

$71,377

 

Farmland

 

 

58

 

 

 

476

 

 

 

10,223

 

 

 

24,514

 

 

 

9,775

 

 

 

657

 

 

 

1,751

 

 

 

-

 

 

 

47,454

 

Real Estate

 

 

-

 

 

 

2,398

 

 

 

42,044

 

 

 

75,825

 

 

 

25,938

 

 

 

4,153

 

 

 

16,233

 

 

 

-

 

 

 

166,591

 

Multi-Family

 

 

-

 

 

 

-

 

 

 

1,085

 

 

 

3,572

 

 

 

1,344

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,001

 

Commercial Real Estate

 

 

-

 

 

 

4,188

 

 

 

34,485

 

 

 

56,839

 

 

 

11,128

 

 

 

22,471

 

 

 

3,453

 

 

 

-

 

 

 

132,564

 

Home Equity – closed end

 

 

-

 

 

 

129

 

 

 

2,586

 

 

 

3,553

 

 

 

1,229

 

 

 

1,241

 

 

 

30

 

 

 

-

 

 

 

8,768

 

Home Equity – open end

 

 

-

 

 

 

1,626

 

 

 

19,126

 

 

 

21,331

 

 

 

3,487

 

 

 

823

 

 

 

642

 

 

 

-

 

 

 

47,035

 

Commercial & Industrial (Non-Real Estate)

 

 

102

 

 

 

1,498

 

 

 

7,586

 

 

 

13,868

 

 

 

65,640

 

 

 

1,156

 

 

 

24

 

 

 

-

 

 

 

89,874

 

Consumer (excluding dealer)

 

 

2

 

 

 

182

 

 

 

3,990

 

 

 

4,099

 

 

 

1,830

 

 

 

10

 

 

 

-

 

 

 

-

 

 

 

10,113

 

Total

 

$162

 

 

$10,641

 

 

$130,047

 

 

$237,346

 

 

$139,013

 

 

$39,294

 

 

$23,274

 

 

$-

 

 

$579,777

 

 

 

Credit Cards

 

 

Dealer Finance

 

Performing

 

$2,742

 

 

$89,920

 

Non-performing

 

 

2

 

 

 

84

 

Total

 

$2,744

 

 

$90,004

 

 

 December 31, 2019

 

Grade 1

Minimal Risk

 

 

Grade 2

Modest Risk

 

 

Grade 3

Average Risk

 

 

Grade 4 Acceptable Risk

 

 

Grade 5 Marginally Acceptable

 

 

Grade 6

Watch

 

 

Grade 7 Substandard

 

 

Grade 8 Doubtful

 

 

Total

 

Construction/Land Development

 

$-

 

 

$615

 

 

$21,904

 

 

$41,693

 

 

$8,218

 

 

$2,434

 

 

$2,267

 

 

$-

 

 

$77,131

 

Farmland

 

 

60

 

 

 

363

 

 

 

9,479

 

 

 

13,754

 

 

 

2,942

 

 

 

1,188

 

 

 

1,932

 

 

 

-

 

 

 

29,718

 

Real Estate

 

 

-

 

 

 

1,900

 

 

 

48,308

 

 

 

81,371

 

 

 

23,876

 

 

 

5,635

 

 

 

17,177

 

 

 

-

 

 

 

178,267

 

Multi-Family

 

 

-

 

 

 

-

 

 

 

1,327

 

 

 

3,711

 

 

 

153

 

 

 

173

 

 

 

-

 

 

 

-

 

 

 

5,364

 

Commercial Real Estate

 

 

-

 

 

 

2,465

 

 

 

40,227

 

 

 

67,626

 

 

 

14,139

 

 

 

4,397

 

 

 

996

 

 

 

-

 

 

 

129,850

 

Home Equity – closed end

 

 

-

 

 

 

189

 

 

 

2,999

 

 

 

3,816

 

 

 

1,154

 

 

 

1,365

 

 

 

-

 

 

 

-

 

 

 

9,523

 

Home Equity – open end

 

 

17

 

 

 

1,965

 

 

 

17,789

 

 

 

22,705

 

 

 

3,769

 

 

 

1,198

 

 

 

331

 

 

 

-

 

 

 

47,774

 

Commercial & Industrial (Non-Real Estate)

 

 

142

 

 

 

2,042

 

 

 

12,818

 

 

 

15,035

 

 

 

2,877

 

 

 

373

 

 

 

248

 

 

 

-

 

 

 

33,535

 

Consumer (excluding dealer)

 

 

6

 

 

 

170

 

 

 

3,476

 

 

 

4,726

 

 

 

1,729

 

 

 

56

 

 

 

2

 

 

 

-

 

 

 

10,165

 

Total

 

$225

 

 

$9,709

 

 

$158,327

 

 

$254,437

 

 

$58,857

 

 

$16,819

 

 

$22,953

 

 

$-

 

 

$521,327

 

 

 

 

Credit Cards

 

 

Dealer Finance

 

Performing

 

$3,118

 

 

$78,529

 

Non-performing

 

 

4

 

 

 

447

 

Total

 

$3,122

 

 

$78,976

 

 

Description of internal loan grades:

 

Grade 1 – Minimal Risk:   Excellent credit, superior asset quality, excellent debt capacity and coverage, and recognized management capabilities.

 

Grade 2 – Modest Risk:  Borrower consistently generates sufficient cash flow to fund debt service, excellent credit, above average asset quality and liquidity.

 

Grade 3 – Average Risk:  Borrower generates sufficient cash flow to fund debt service.  Employment (or business) is stable with good future trends.  Credit is very good.

 

Grade 4 – Acceptable Risk:  Borrower’s cash flow is adequate to cover debt service; however, unusual expenses or capital expenses must be covered through additional long-term debt.  Employment (or business) stability is reasonable, but future trends may exhibit slight weakness. Credit history is good. No unpaid judgments or collection items appearing on credit report.

 

Grade 5 – Marginally acceptable:  Credit to borrowers who may exhibit declining earnings, may have leverage that is materially above industry averages, liquidity may be marginally acceptable.  Employment or business stability may be weak or deteriorating.  May be currently performing as agreed, but would be adversely affected by developing factors such as layoffs, illness, reduced hours or declining business prospects.  Credit history shows weaknesses, past dues, paid or disputed collections and judgments, but does not include borrowers that are currently past due on obligations or with unpaid, undisputed judgments.

 

Grade 6 – Watch:  Loans are currently protected, but are weak due to negative balance sheet or income statement trends.  There may be a lack of effective control over collateral or the existence of documentation deficiencies.  These loans have potential weaknesses that deserve management’s close attention.  Other reasons supporting this classification include adverse economic or market conditions, pending litigation or any other material weakness.  Existing loans that become 60 or more days past due are placed in this category pending a return to current status.

 

Grade 7 – Substandard: Loans having well-defined weaknesses where a payment default and or loss is possible, but not yet probable.  Cash flow is inadequate to service the debt under the current payment, or terms, with prospects that the condition is permanent.  Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the borrower and there is the likelihood that collateral will have to be liquidated and/or guarantor(s) called upon to repay the debt.  Generally, the loan is considered collectible as to both principal and interest, primarily because of collateral coverage, however, if the deficiencies are not corrected quickly; there is a probability of loss. Loans rated substandard and in aggregate relationships of $500,000 or more are reviewed for impairment and a specific reserve is established when needed.

 

Grade 8 – Doubtful:  The loan has all the characteristics of a substandard credit, but available information indicates it is unlikely the loan will be repaid in its entirety.  Cash flow is insufficient to service the debt.  It may be difficult to project the exact amount of loss, but the probability of some loss is great.  Loans are to be placed on non-accrual status when any portion is classified doubtful. 

 

Credit card and dealer finance loans are classified as performing or nonperforming.  A loan is nonperforming when payments of principal and interest are past due 90 days or more.