
	December 31,
	2022				2021
(Dollars in thousands)	Balance		% of Total Gross Loans		Balance		% of Total Gross Loans
Real Estate Loans:
Construction	$	112,794	20.1	%	$	100,162	19.7	%
Residential Mortgage	110,057		19.6	%	84,966		16.8	%
Commercial	252,154		44.9	%	227,752		44.9	%
Other Commercial and Agricultural Loans	30,648		5.5	%	44,689		8.8	%
Consumer Loans:
Home Equity Lines of Credit ("HELOC")	31,737		5.7	%	28,612		5.6	%
Other Consumer Loans	23,598		4.2	%	21,450		4.2	%
Total Loans Held For Investment, Gross	560,988		100.0	%	507,631		100.0	%
Less:
Allowance For Loan Losses	11,178				11,087
Deferred Loan Fees	806				1,085
	11,984				12,172
Loans Receivable Held For Investment, Net	$	549,004			$	495,459

During 2022, the Bank continued its participation in the SBA's Paycheck Protection Program (“PPP”) by processing applications for PPP loan forgiveness. PPP loans are included in Commercial and Agricultural loans in the tables above and below and had a total balance of $12,000 at December 31, 2022 compared to $9.8 million at December 31, 2021. There were no remaining unamortized net deferred fees on PPP loans at December 31, 2022 compared to $441,000 at December 31, 2021.

The Bank categorizes loans into risk categories based on relevant information regarding the borrowers' ability to payoff their loan in accordance with its terms. This information includes; but is not limited to, current financial and credit documentation, payment history, public information and current economic trends, among other factors. Risk ratings are used to rate the credit quality of loans for the purposes of determining the Bank’s allowance for loan losses. The following definitions are used for credit quality risk ratings:

Substandard - loans that are graded as substandard are considered to have the most risk. These loans typically have an identified weakness or weaknesses and are inadequately protected by the net worth of the borrower or collateral value. All loans 90 days or more past due are automatically classified in this category.


	December 31, 2022
(Dollars in thousands)	Pass		Caution		Special Mention		Substandard		Total Loans
Construction Real Estate	$	91,564	$	18,838	$	2,014	$	378	$	112,794
Residential Real Estate	84,028		22,373		888		2,768		110,057
Commercial Real Estate	196,063		47,821		3,271		4,999		252,154
Commercial and Agricultural	25,384		4,593		371		300		30,648
Consumer HELOC	25,694		5,018		402		623		31,737
Other Consumer	16,515		6,725		179		179		23,598
Total	$	439,248	$	105,368	$	7,125	$	9,247	$	560,988


	December 31, 2021
(Dollars in thousands)	Pass		Caution		Special Mention		Substandard		Total Loans
Construction Real Estate	$	67,206	$	25,867	$	6,566	$	523	$	100,162
Residential Real Estate	65,651		14,507		2,062		2,746		84,966
Commercial Real Estate	185,118		34,263		5,670		2,701		227,752
Commercial and Agricultural	40,018		4,297		54		320		44,689
Consumer HELOC	23,417		3,988		624		583		28,612
Other Consumer	15,060		6,244		86		60		21,450
Total	$	396,470	$	89,166	$	15,062	$	6,933	$	507,631


	December 31, 2022
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable
Construction Real Estate	$	—	$	—	$	100	$	100	$	112,694	$	112,794
Residential Real Estate	1,557		—		472		2,029		108,028		110,057
Commercial Real Estate	2,671		89		354		3,114		249,040		252,154
Commercial and Agricultural	6		2		55		63		30,585		30,648
Consumer HELOC	199		—		74		273		31,464		31,737
Other Consumer	272		79		17		368		23,230		23,598
Total	$	4,705	$	170	$	1,072	$	5,947	$	555,041	$	560,988


	December 31, 2021
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable
Construction Real Estate	$	4	$	114	$	—	$	118	$	100,044	$	100,162
Residential Real Estate	297		544		206		1,047		83,919		84,966
Commercial Real Estate	195		—		373		568		227,184		227,752
Commercial and Agricultural	79		134		—		213		44,476		44,689
Consumer HELOC	52		—		44		96		28,516		28,612
Other Consumer	93		4		9		106		21,344		21,450
Total	$	720	$	796	$	632	$	2,148	$	505,483	$	507,631

At December 31, 2022 and 2021, the Bank did not have any loans that were 90 days or more past due and still accruing interest. Our strategy is to work with our borrowers to reach acceptable payment plans while protecting our interests in the existing collateral. In the event an acceptable arrangement cannot be reached, we may have to acquire these properties through foreclosure or other means and subsequently sell, develop, or liquidate them.


	December 31, 2022				December 31, 2021				Increase (Decrease)
(Dollars in thousands)	Amount		Percent (1)		Amount		Percent (1)		$		%
Non-accrual Loans:
Construction Real Estate	$	115	0.02	%	$	21	—	%	$	94	447.6	%
Residential Real Estate	1,545		0.28		1,389		0.28		156		11.2
Commercial Real Estate	4,282		0.76		1,057		0.21		3,225		305.1
Commercial and Agricultural	113		0.02		64		0.01		49		76.6
Consumer HELOC	189		0.03		142		0.03		47		33.1
Other Consumer	29		0.01		9		—		20		222.2
Total Non-accrual Loans	$	6,273	1.12	%	$	2,682	0.53	%	$	3,591	133.9	%


	For the Year Ended December 31, 2022
	Real Estate								Consumer
(Dollars in thousands)	Construction		Residential		Commercial		Commercial and Agricultural		HELOC		Other		Total
Beginning Balance	$	2,401	$	1,663	$	4,832	$	1,242	$	518	$	431	$	11,087
(Provision for) Reversal of loan losses	(113)		415		(160)		(305)		30		133		—
Charge-Offs	—		—		—		(105)		—		(162)		(267)
Recoveries	35		46		133		43		51		50		358
Ending Balance	$	2,323	$	2,124	$	4,805	$	875	$	599	$	452	$	11,178

	For the Year Ended December 31, 2021
	Real Estate								Consumer
(Dollars in thousands)	Construction		Residential		Commercial		Commercial and Agricultural		HELOC		Other		Total
Beginning Balance	$	2,487	$	2,264	$	5,754	$	1,113	$	657	$	568	$	12,843
(Provision for) Reversal of loan losses	(274)		(666)		(1,342)		133		(154)		(101)		(2,404)
Charge-Offs	(20)		—		—		(7)		—		(110)		(137)
Recoveries	208		65		420		3		15		74		785
Ending Balance	$	2,401	$	1,663	$	4,832	$	1,242	$	518	$	431	$	11,087


	December 31, 2022
	Allowance For Loan Losses						Loans Receivable
(Dollars in thousands)	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total		Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Construction Real Estate	$	—	$	2,323	$	2,323	$	115	$	112,679	$	112,794
Residential Real Estate	—		2,124		2,124		1,089		108,968		110,057
Commercial Real Estate	—		4,805		4,805		4,282		247,872		252,154
Commercial and Agricultural	—		875		875		31		30,617		30,648
Consumer HELOC	—		599		599		49		31,688		31,737
Other Consumer	—		452		452		—		23,598		23,598
Total	$	—	$	11,178	$	11,178	$	5,566	$	555,422	$	560,988

	December 31, 2021
	Allowance For Loan Losses						Loans Receivable
(Dollars in thousands)	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total		Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Construction Real Estate	$	—	$	2,401	$	2,401	$	19	$	100,143	$	100,162
Residential Real Estate	—		1,663		1,663		1,128		83,838		84,966
Commercial Real Estate	—		4,832		4,832		1,047		226,705		227,752
Commercial and Agricultural	—		1,242		1,242		31		44,658		44,689
Consumer HELOC	—		518		518		97		28,515		28,612
Other Consumer	—		431		431		—		21,450		21,450
Total	$	—	$	11,087	$	11,087	$	2,322	$	505,309	$	507,631

Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment and records the loan at fair value. Fair value is estimated using one of the following methods: fair value of the collateral less estimated costs to sell, discounted cash flows, or market value of the loan based on similar debt. The fair value of the collateral less estimated costs to sell is the most frequently used method. Typically, the Company reviews the most recent appraisal and, if it is over 24 months old, will request a new third party appraisal. Depending on the particular circumstances surrounding the loan, including the location of the collateral, the date of the most recent appraisal and the value of the collateral relative to the recorded investment in the loan, management may order an independent appraisal immediately or, in some instances, may elect to perform an internal analysis.


	December 31, 2022
Impaired Loans (Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized















Construction Real Estate	$	115	$	115	$	—	$	117	$	—
Residential Real Estate	1,089		1,626		—		1,133		—
Commercial Real Estate	4,282		4,282		—		4,382		—
Commercial and Agricultural	31		926		—		31		—
Consumer HELOC	49		49		—		52		—
Other Consumer	—		—		—		—		—
Total	$	5,566	$	6,998	$	—	$	5,715	$	—


	December 31, 2021
Impaired Loans (Dollars in thousands)	Recorded Investment			Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized















Construction Real Estate	$	19		$	19	$	—	$	22	$	2
Residential Real Estate	1,128			1,647		—		1,179		4
Commercial Real Estate	1,047			1,047		—		1,078		—
Commercial and Agricultural	31			926		—		46		16
Consumer HELOC	97			97		—		101		—
Other Consumer	—		—	—		—		—		—
Total	$	2,322		$	3,736	$	—	$	2,426	$	22

In the course of resolving delinquent loans, the Bank may choose to restructure the contractual terms of certain loans. A troubled debt restructuring ("TDR") is a restructuring in which the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to a borrower that it would not otherwise consider (ASC Topic 310-40). The concessions granted on TDRs generally include terms to reduce the interest rate, extend the term of the debt obligation, or modify the payment structure on the debt obligation. The Bank grants such concessions to reassess the borrower’s financial status and develop a plan for repayment.

At the date of modification, TDRs are initially classified as nonaccrual TDRs. They are returned to accruing status when there is economic substance to the restructuring, there is documented credit evaluation of the borrower's financial condition, the remaining balance is reasonably assured of repayment in accordance with its modified terms, and the borrower has demonstrated sustained repayment performance in accordance with the modified terms for a reasonable period of time (generally a minimum of six months).

The Bank had two TDRs with a total balance of $385,000 included in impaired loans at December 31, 2022 compared to three TDRs totaling $694,000 at December 31, 2021. There were no loans restructured as TDRs during 2022 compared to one commercial real estate loan restructured as a TDR during 2021 with a balance of $412,000 at the time of restructure and immediately thereafter. At December 31, 2022 and 2021, there were no TDRs in default. The Bank considers any loan 30 days or more past due to be in default. At December 31, 2022 and 2021, the Bank had no commitments to extend additional credit to borrowers whose loan terms have been modified in a TDR. All TDRs are also classified as impaired loans and are included in the loans individually evaluated for impairment.

Our policy with respect to accrual of interest on loans restructured as a TDR follows relevant supervisory guidance. That is, if a borrower has demonstrated performance under the previous loan terms and shows capacity to perform under the restructured loan terms, continued accrual of interest at the restructured interest rate is probable. If a borrower was materially delinquent on payments prior to the restructuring but shows capacity to meet the restructured loan terms, the loan will likely continue as nonaccrual going forward. Lastly, if the borrower does not perform under the restructured terms, the loan is placed on nonaccrual status.

The Bank will continue to closely monitor these loans and will cease accruing interest on them if management believes that the borrowers may not continue performing based on the restructured note terms. If, after previously being classified as a TDR, a loan is restructured a second time, then that loan is automatically placed on nonaccrual status. The Bank's policy with respect to nonperforming loans requires the borrower to become current and then make a minimum of six consecutive payments in accordance with the loan terms before that loan can be placed back on accrual status. Further, the borrower must show capacity to continue performing into the future prior to restoration of accrual status.