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Loans and the Allowance for Credit Losses on Loans (Tables)
 6 Months Ended
Jun. 30, 2023
Loans and the Allowance for Credit Losses on Loans [Abstract]  
Outstanding Loans By Segment Type

The following is a summary of the balances in each class of the Company’s portfolio of loans held for investment as of the dates indicated:


   
June 30,
    
December 31,
  
(dollars in thousands)
  
2023
    
2022
  
Mortgage loans on real estate:
            
Residential 1-4 family
  
$
182,129
    
$
169,248
  
Commercial - owner occupied
    
166,703
      
184,586
  
Commercial - non-owner occupied
    
274,453
      
245,277
  
Multifamily
    
32,329
      
26,675
  
Construction and land development
    
94,421
      
77,944
  
Second mortgages
    
9,631
      
8,828
  
Equity lines of credit
    
53,844
      
54,340
  
Total mortgage loans on real estate
    
813,510
      
766,898
  
Commercial and industrial loans
    
74,663
      
72,578
  
Consumer automobile loans
    
181,939
      
163,018
  
Other consumer loans
    
21,155
      
22,251
  
Other  (1)
    
3,349
      
2,340
  
Total loans, net of deferred fees (2)
    
1,094,616
      
1,027,085
  
Less:  Allowance for credit losses on loans
    
11,651
      
10,526
  
Loans, net of allowance and deferred fees (2)
  
$
1,082,965
    
$
1,016,559
  
(1)
Overdrawn accounts are reclassified as loans and included in the Other category in the table above.  Overdrawn deposit accounts, excluding internal use accounts, totaled $243 thousand and $269 thousand at June 30, 2023 and December 31, 2022, respectively.
(2)
Net deferred loan fees totaled $1.3 million on June 30, 2023 and $1.0 million on December 31, 2022.
Past Due Loans The following table shows the aging of the Company’s loan portfolio, by class, at June 30, 2023.


Age Analysis of Past Due Loans as of June 30, 2023


(dollars in thousands)
  
30 - 59 Days
Past Due
    
60 - 89 Days
Past Due
    
90 or More
Days Past
Due and still
Accruing
    
Nonaccrual
(2)
    
Total Current
Loans (1)
    
Total
Loans
  
Mortgage loans on real estate:
                                    
Residential 1-4 family
  
$
-
    
$
-
    
$
350
    
$
148
    
$
181,631
    
$
182,129
  
Commercial - owner occupied
    
-
      
-
      
-
      
-
      
166,703
      
166,703
  
Commercial - non-owner occupied
    
-
      
-
      
-
      
-
      
274,453
      
274,453
  
Multifamily
    
-
      
-
      
-
      
-
      
32,329
      
32,329
  
Construction and land development
    
-
      
-
      
-
      
87
      
94,334
      
94,421
  
Second mortgages
    
-
      
-
      
-
      
-
      
9,631
      
9,631
  
Equity lines of credit
    
56
      
47
      
-
      
-
      
53,741
      
53,844
  
Total mortgage loans on real estate
  
$
56
    
$
47
    
$
350
    
$
235
    
$
812,822
    
$
813,510
  
Commercial and industrial loans
    
358
      
236
      
494
      
-
      
73,575
      
74,663
  
Consumer automobile loans
    
1,452
      
296
      
286
      
-
      
179,905
      
181,939
  
Other consumer loans
    
128
      
232
      
78
      
-
      
20,717
      
21,155
  
Other
    
31
      
-
      
-
      
-
      
3,318
      
3,349
  
Total
  
$
2,025
    
$
811
    
$
1,208
    
$
235
    
$
1,090,337
    
$
1,094,616
  
(1)
For purposes of this table, Total Current Loans includes loans that are 1 - 29 days past due.
(2)
For purposes of this table, if a loan is past due and on nonaccrual, it is included in the nonaccrual column and not also in its respective past due column.

The following table shows the aging of the Company’s loan portfolio, by class, at December 31, 2022.

Age Analysis of Past Due Loans as of December 31, 2022

(dollars in thousands)
  
30 - 59 Days
Past Due
    
60 - 89 Days
Past Due
    
90 or More
Days Past
Due and still
Accruing
    
Nonaccrual
(2)
    
Total Current
Loans (1)
    
Total
Loans
  
Mortgage loans on real estate:
                                    
Residential 1-4 family
  
$
290
    
$
-
    
$
525
    
$
154
    
$
168,279
    
$
169,248
  
Commercial - owner occupied
    
20
      
-
      
-
      
-
      
184,566
      
184,586
  
Commercial - non-owner occupied
    
206
      
-
      
-
      
-
      
245,071
      
245,277
  
Multifamily
    
-
      
-
      
-
      
-
      
26,675
      
26,675
  
Construction and land development
    
-
      
-
      
-
      
945
      
76,999
      
77,944
  
Second mortgages
    
19
      
-
      
-
      
-
      
8,809
      
8,828
  
Equity lines of credit
    
56
      
288
      
-
      
-
      
53,996
      
54,340
  
Total mortgage loans on real estate
  
$
591
    
$
288
    
$
525
    
$
1,099
    
$
764,395
    
$
766,898
  
Commercial and industrial loans
    
221
      
284
      
23
      
144
      
71,906
      
72,578
  
Consumer automobile loans
    
1,538
      
221
      
212
      
-
      
161,047
      
163,018
  
Other consumer loans
    
445
      
372
      
80
      
-
      
21,354
      
22,251
  
Other
    
47
      
-
      
-
      
-
      
2,293
      
2,340
  
Total
  
$
2,842
    
$
1,165
    
$
840
    
$
1,243
    
$
1,020,995
    
$
1,027,085
  
(1)
For purposes of this table, Total Current Loans includes loans that are 1 - 29 days past due.
(2)
For purposes of this table, if a loan is past due and on nonaccrual, it is included in the nonaccrual column and not also in its respective past due column.
Amortized Cost Basis of Loans on Nonaccrual Status and Loans Past Due

The following table shows the Company’s amortized cost basis of loans on nonaccrual status as of January 1, 2023 as well as the amortized cost basis of loans on nonaccrual status and loans past due 90 days and accruing as of June 30, 2023 by class of loan.


   
Nonaccrual
              
(dollars in thousands)
  
January 1, 2023
    
June 30, 2023
    
Nonaccrual with
no ACLL
    
90 Days and still
Accruing
  
Mortgage loans on real estate:
                        
Residential 1-4 family
  
$
154
    
$
148
    
$
-
    
$
350
  
Construction and land development
    
945
      
87
      
87
      
-
  
Equity lines of credit
    
-
      
-
      
-
      
-
  
Total mortgage loans on real estate
    
1,099
      
235
      
87
      
350
  
Commercial and industrial loans
    
144
      
-
      
-
      
494
  
Consumer automobile loans
    
-
      
-
      
-
      
286
  
Other consumer loans
     -       -       -       78  
Total
  
$
1,243
    
$
235
    
$
87
    
$
1,208
  
Allowance for Credit Losses by Segment

The following tables presents the activity in the ACLL by portfolio class for the six months ended June 30, 2023.



ALLOWANCE FOR CREDIT LOSSES AND RECORDED INVESTMENT IN LOANS
                        For the Six Months ended June 30, 2023  
(Dollars in thousands)
  
Commercial
and Industrial
    
Real Estate
Construction
    
Real Estate -
Mortgage (1)
    
Real Estate -
Commercial
    
Consumer (2)
    
Other
    
Unallocated
    
Total
  
Allowance for credit losses on loans:
                                            
Balance, beginning
  
$
673
    
$
552
    
$
2,575
    
$
4,499
    
$
2,065
    
$
156
    
$
6
    
$
10,526
  
Day 1 impact of adoption of CECL
    
(11
)
    
19
      
87
      
1,048
      
(365
)
    
(137
)
    
-
      
641
  
Charge-offs
    
(51
)
    
-
      
-
      
-
      
(534
)
    
(169
)
    
-
      
(754
)
Recoveries
    
12
      
-
      
20
      
-
      
312
      
21
      
-
      
365
  
Provision for credit losses
    
43
      
136
      
198
      
162
      
112
      
228
      
(6
)
    
873
  
Ending Balance
  
$
666
    
$
707
    
$
2,880
    
$
5,709
    
$
1,590
    
$
99
    
$
-
    
$
11,651
  
                                                                 
Individually evaluated
  
$
-
    
$
-
    
$
16
    
$
-
    
$
-
    
$
-
    
$
-
    
$
16
  
Collectively evaluated
    
666
      
707
      
2,864
      
5,709
      
1,590
      
99
      
-
      
11,635
  
                                                                 
Ending Balance
  
$
666
    
$
707
    
$
2,880
    
$
5,709
    
$
1,590
    
$
99
    
$
-
    
$
11,651
  
                                                                 
Loans Balances:
                                                                
Individually evaluated
    
-
      
160
      
421
      
-
      
-
      
-
      
-
      
581
  
Collectively evaluated
    
74,663
      
94,261
      
277,512
      
441,156
      
203,094
      
3,349
      
-
      
1,094,035
  
Ending Balance
  
$
74,663
    
$
94,421
    
$
277,933
    
$
441,156
    
$
203,094
    
$
3,349
    
$
-
    
$
1,094,616
  
(1)
The real estate-mortgage segment includes residential 1 – 4 family, multi-family, second mortgages and equity lines of credit.
(2)
The consumer segment includes consumer automobile loans.

The following tables presents the activity in the ACLL by portfolio segment for the year ended December 31, 2022.

For the Year ended December 31, 2022
(Dollars in thousands)
  
Commercial
and Industrial
    
Real Estate
Construction
    
Real Estate -
Mortgage (1)
    
Real Estate -
Commercial
    
Consumer (2)
    
Other
    
Unallocated
    
Total
  
Allowance for loan losses:
                                                
Balance, beginning
  
$
683
    
$
459
    
$
2,390
    
$
4,787
    
$
1,362
    
$
184
    
$
-
    
$
9,865
  
Charge-offs
    
(297
)
    
-
      
(25
)
    
-
      
(1,368
)
    
(332
)
    
-
      
(2,022
)
Recoveries
    
134
      
-
      
61
      
22
      
648
      
112
      
-
      
977
  
Provision for loan losses
    
153
      
93
      
149
      
(310
)
    
1,423
      
192
      
6
      
1,706
  
Ending Balance
  
$
673
    
$
552
    
$
2,575
    
$
4,499
    
$
2,065
    
$
156
    
$
6
    
$
10,526
  
                                                                 
Individually evaluated for impairment
  
$
-
    
$
6
    
$
21
    
$
3
    
$
-
    
$
-
    
$
-
    
$
30
  
Collectively evaluated for impairment
    
673
      
546
      
2,554
      
4,496
      
2,065
      
156
      
6
      
10,496
  
                                                                 
Ending Balance
  
$
673
    
$
552
    
$
2,575
    
$
4,499
    
$
2,065
    
$
156
    
$
6
    
$
10,526
  
                                                                 
Loans Balances:
                                                                
Individually evaluated for impairment
    
144
      
1,020
      
279
      
413
      
-
      
-
      
-
      
1,856
  
Collectively evaluated for impairment
    
72,434
      
76,924
      
258,812
      
429,450
      
185,269
      
2,340
      
-
      
1,025,229
  
Ending Balance
  
$
72,578
    
$
77,944
    
$
259,091
    
$
429,863
    
$
185,269
    
$
2,340
    
$
-
    
$
1,027,085
  
(1)
The real estate-mortgage segment includes residential 1 – 4 family, multi-family, second mortgages and equity lines of credit.
(2)
The consumer segment includes consumer automobile loans.
Breakdown of Provision for Credit Losses
The following table presents a breakdown of the provision for credit losses for the periods indicated.

 
Three Months Ended June 30,
       Six Months Ended June 30,  
(dollars in thousands)
2023
  
2022
     2023   2022
  
Provision for credit losses:
                            
Provision for loans
  
$
310
    
$
570
     $
873     $
671  
Provision (recovery) for unfunded commitments
    
51
   
-
       (136 )     -  
Total
  
$
361
    
$
570
     $
737     $
671  
Risk Category Loans by Class of Loans

The following tables present credit quality exposures by internally assigned risk ratings originated as of the dates indicated:


   
June 30, 2023
  
   
Term Loans Amortized Cost Basis by Origination Year
              
(dollars in thousands)
  
2023
    
2022
    
2021
    
2020
    
2019
    
Prior
    
Revolving
Loans
    
Total
  
Construction and land development
                                                
Pass
  
$
21,278
    
$
40,516
    
$
23,996
    
$
4,706
    
$
305
    
$
3,402
    
$
131
    
$
94,334
  
OAEM
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Substandard
    
-
      
-
      
-
      
-
      
-
      
87
      
-
      
87
  
Total Construction
  
$
21,278
    
$
40,516
    
$
23,996
    
$
4,706
    
$
305
    
$
3,489
    
$
131
    
$
94,421
  
                                                                 
Commercial Real Estate - Owner Occupied
                                                                
Pass
  
$
1,628
    
$
32,346
    
$
36,824
    
$
14,141
    
$
12,892
    
$
62,658
    
$
1,346
    
$
161,835
  
OAEM
    
-
      
-
      
-
      
-
      
255
      
4,613
      
-
      
4,868
  
Substandard
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Commercial Real Estate - Owner Occupied
  
$
1,628
    
$
32,346
    
$
36,824
    
$
14,141
    
$
13,147
    
$
67,271
    
$
1,346
    
$
166,703
  
                                                                 
Commercial Real Estate - Non-Owner Occupied
                                                                
Pass
  
$
23,058
    
$
55,511
    
$
86,192
    
$
39,858
    
$
11,541
    
$
58,278
    
$
15
    
$
274,453
  
OAEM
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Substandard
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Commercial Real Estate - Non-Owner Occupied
  
$
23,058
    
$
55,511
    
$
86,192
    
$
39,858
    
$
11,541
    
$
58,278
    
$
15
    
$
274,453
  
                                                                 
Commercial and Industrial
                                                                
Pass
  
$
14,941
    
$
33,202
    
$
5,569
    
$
3,070
    
$
4,729
    
$
154
    
$
12,998
    
$
74,663
  
OAEM
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Substandard
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Commercial and Industrial
  
$
14,941
    
$
33,202
    
$
5,569
    
$
3,070
    
$
4,729
    
$
154
    
$
12,998
    
$
74,663
  
                                                                 
Multifamily Real Estate
                                                                
Pass
  
$
9,724
    
$
3,774
    
$
2,185
    
$
792
    
$
6,061
    
$
7,018
    
$
2,775
    
$
32,329
  
OAEM
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Substandard
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Multifamily Real Estate
  
$
9,724
    
$
3,774
    
$
2,185
    
$
792
    
$
6,061
    
$
7,018
    
$
2,775
    
$
32,329
  
                                                                 
Residential 1-4 Family
                                                                
Pass
  
$
19,258
    
$
35,860
    
$
40,145
    
$
27,618
    
$
13,685
    
$
55,485
    
$
53,212
    
$
245,263
  
OAEM
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Substandard
    
-
      
-
      
-
      
193
      
-
      
148
      
-
      
341
  
Total Residential 1-4 Family
  
$
19,258
    
$
35,860
    
$
40,145
    
$
27,811
    
$
13,685
    
$
55,633
    
$
53,212
    
$
245,604
  
                                                                 
Consumer - Automobile
                                                                
Pass
  
$
48,565
    
$
101,291
    
$
16,637
    
$
5,616
    
$
2,501
    
$
7,329
    
$
-
    
$
181,939
  
OAEM
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Substandard
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Consumer - Automobile
  
$
48,565
    
$
101,291
    
$
16,637
    
$
5,616
    
$
2,501
    
$
7,329
    
$
-
    
$
181,939
  
                                                                 
Consumer - Other
                                                                
Pass
  
$
321
    
$
1,583
    
$
589
    
$
169
    
$
345
    
$
15,936
    
$
2,212
    
$
21,155
  
OAEM
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Substandard
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Consumer - Other
  
$
321
    
$
1,583
    
$
589
    
$
169
    
$
345
    
$
15,936
    
$
2,212
    
$
21,155
  
                                                                 
Other
                                                                
Pass
  
$
2,453
    
$
-
    
$
309
    
$
-
    
$
-
    
$
587
    
$
-
    
$
3,349
  
OAEM
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Substandard
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Total Other
  
$
2,453
    
$
-
    
$
309
    
$
-
    
$
-
    
$
587
    
$
-
    
$
3,349
  
                                                                 
Total Loans
                                                                
Pass
  
$
141,226
    
$
304,083
    
$
212,446
    
$
95,970
    
$
52,059
    
$
210,847
    
$
72,689
    
$
1,089,320
  
OAEM
    
-
      
-
      
-
      
-
      
255
      
4,613
      
-
      
4,868
  
Substandard
    
-
      
-
      
-
      
193
      
-
      
235
      
-
      
428
  
Total Loans
  
$
141,226
    
$
304,083
    
$
212,446
    
$
96,163
    
$
52,314
    
$
215,695
    
$
72,689
    
$
1,094,616
  



The following table details the current period gross charge-offs of loans by year of origination as of June 30, 2023:


   
June 30, 2023
  
   
Current Period Charge-offs by Origination Year
              
(dollars in thousands)
  
2023
    
2022
    
2021
    
2020
    
2019
    
Prior
    
Revolving
Loans
Amortized
Cost Basis
    
Total
  
Commercial and Industrial
   $
-     $
51     $
-     $
-     $
-     $
-     $
-     $
51  
Consumer - Automobile
    
-
      
265
      
142
      
45
      
18
      
49
      
-
      
519
  
Consumer - Other
    
-
      
-
      
5
      
-
      
3
      
7
      
-
      
15
  
Other (1)
    
147
      
22
      
-
      
-
      
-
      
-
      
-
      
169
  
Total
  
$
147
    
$
338
    
$
147
    
$
45
    
$
21
    
$
56
    
$
-
    
$
754
  
(1)
Gross charge-offs of other loans for the first six months ended June 30, 2023 included $147 thousand of demand deposit overdrafts that originated in 2023.
The following tables present credit quality exposures by internally assigned risk ratings as of December 31, 2022:


Credit Quality Information
            As of December 31, 2022  
(dollars in thousands)
  
Pass
    
OAEM
    
Substandard
    
Total
  
Mortgage loans on real estate:
                        
Residential 1-4 family
  
$
169,094
    
$
 -    
$
 154    
$
 169,248  
Commercial - owner occupied
    
184,301
       285       -       184,586  
Commercial - non-owner occupied
    
245,277
       -       -       245,277  
Multifamily
    
26,675
       -       -       26,675  
Construction
    
76,999
       -       945       77,944  
Second mortgages
    
8,828
       -       -       8,828  
Equity lines of credit
    
54,340
       -       -       54,340  
Total mortgage loans on real estate
  
$
765,514
    
$
 285    
$
 1,099    
$
 766,898  
Commercial and industrial loans
    
72,434
       -       144       72,578  
Consumer automobile loans
    
162,738
       -       280       163,018  
Other consumer loans
    
22,251
       -       -       22,251  
Other
    
2,340
       -       -       2,340  
Total
  
$
1,025,277
    
$
 285    
$
 1,523    
$
 1,027,085  
Impaired Loans by Class
As of December 31, 2022, the Company measured the amount of impairment by evaluating loans either in their collective homogenous pools or individually. The following table includes the recorded investment and unpaid principal balances (a portion of which may have been charged off) for impaired loans with the associated allowance amount, if applicable. Also presented are the average recorded investments in the impaired loans and the related amount of interest recognized for the period presented. The average balances are calculated based on daily average balances.
Impaired Loans by Class
                           
For the Year Ended
  
   
As of December 31, 2022
    
December 31, 2022
  
(Dollars in thousands)
  
Unpaid Principal
Balance
    
Without
Valuation
Allowance
    
With Valuation
Allowance
    
Associated
Allowance
    
Average
Recorded
Investment
    
Interest Income
Recognized
  
Mortgage loans on real estate:
                                    
Residential 1-4 family
  
$
285
    
$
44
    
$
235
    
$
21
    
$
282
    
$
7
  
Commercial
    
430
      
55
      
358
      
3
      
420
      
-
  
Construction
    
1,321
      
829
      
191
      
6
      
1,208
      
3
  
Total mortgage loans on real estate
    
2,036
      
928
      
784
      
30
      
1,910
      
10
  
Commercial and industrial loans
    
144
      
144
      
-
      
-
      
144
      
5
  
Total
  
$
2,180
    
$
1,072
    
$
784
    
$
30
    
$
2,054
    
$
15