Loans and Allowance for Loan Losses [Text Block] | Loans and Allowance for Loan Losses Loans consisted of the following segments as of March 31, 2020 and December 31, 2019 . March 31, 2020 December 31, 2019 Commercial $ 443,759 $ 431,044 Real estate: Construction, land and land development 278,734 264,193 1-4 family residential first mortgages 57,802 54,475 Home equity 11,835 12,380 Commercial 1,197,915 1,175,024 Consumer and other 6,542 6,787 1,996,587 1,943,903 Net unamortized fees and costs (2,155 ) (2,240 ) $ 1,994,432 $ 1,941,663 Real estate loans of approximately $960,000 and $910,000 were pledged as security for Federal Home Loan Bank (FHLB) advances as of March 31, 2020 and December 31, 2019 , respectively. Loans are stated at the principal amounts outstanding, net of unamortized loan fees and costs, with interest income recognized on the interest method based upon the terms of the loan. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method. Loans are reported by the portfolio segments identified above and are analyzed by management on this basis. All loan policies identified below apply to all segments of the loan portfolio. Delinquencies are determined based on the payment terms of the individual loan agreements. The accrual of interest on past due and other impaired loans is generally discontinued at 90 days past due or when, in the opinion of management, the borrower may be unable to make all payments pursuant to contractual terms. Unless considered collectible, all interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income, if accrued in the current year, or charged to the allowance for loan losses, if accrued in the prior year. Generally, all payments received while a loan is on nonaccrual status are applied to the principal balance of the loan. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. A loan is classified as a troubled debt restructured (TDR) loan when the Company separately concludes that a borrower is experiencing financial difficulties and a concession is granted that would not otherwise be considered. Concessions may include a restructuring of the loan terms to alleviate the burden of the borrower's cash requirements, such as an extension of the payment terms beyond the original maturity date or a change in the interest rate charged. TDR loans with extended payment terms are accounted for as impaired until performance is established. A change to the interest rate would change the classification of a loan to a TDR loan if the restructured loan yields a rate that is below a market rate for that of a new loan with comparable risk. TDR loans with below-market rates are considered impaired until fully collected. TDR loans may also be reported as nonaccrual or 90 days past due if they are not performing per the restructured terms. On March 22, 2020, federal banking regulators issued an interagency statement that included guidance on their approach for the accounting of loan modifications in light of the economic impact of the Coronavirus Disease 2019 (COVID-19) pandemic. The guidance interprets current accounting standards and indicates that a lender can conclude that a borrower is not experiencing financial difficulty if short-term modifications are made in response to COVID-19, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to the loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented. The agencies confirmed in working with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. Based upon its ongoing assessment of credit quality within the loan portfolio, the Company maintains a Watch List, which includes loans classified as Doubtful, Substandard and Watch according to the Company's classification criteria. These loans involve the anticipated potential for payment defaults or collateral inadequacies. A loan on the Watch List is considered impaired when management believes it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The amount of impairment, if any, and any subsequent changes are included in the allowance for loan losses. TDR loans totaled $0 and $4 as of March 31, 2020 and December 31, 2019 , respectively, and were included in the nonaccrual category. There were no loan modifications considered to be TDR that occurred during the three months ended March 31, 2020 and 2019 . No TDR loans that were modified within the twelve months preceding March 31, 2020 have subsequently had a payment default. One TDR loan that was modified within the twelve months preceding March 31, 2019 , with a recorded investment of $537 , has subsequently had a payment default. A TDR loan is considered to have a payment default when it is past due 30 days or more. The following table summarizes the recorded investment in impaired loans by segment, broken down by loans with no related allowance for loan losses and loans with a related allowance and the amount of that allowance as of March 31, 2020 and December 31, 2019 . March 31, 2020 December 31, 2019 Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance With no related allowance recorded: Commercial $ 90 $ 90 $ — $ 91 $ 91 $ — Real estate: Construction, land and land development — — — — — — 1-4 family residential first mortgages 398 398 — 411 411 — Home equity — — — 31 31 — Commercial — — — 5 5 — Consumer and other — — — — — — 488 488 — 538 538 — With an allowance recorded: Commercial — — — — — — Real estate: Construction, land and land development — — — — — — 1-4 family residential first mortgages — — — — — — Home equity — — — — — — Commercial — — — — — — Consumer and other — — — — — — — — — — — — Total: Commercial 90 90 — 91 91 — Real estate: Construction, land and land development — — — — — — 1-4 family residential first mortgages 398 398 — 411 411 — Home equity — — — 31 31 — Commercial — — — 5 5 — Consumer and other — — — — — — $ 488 $ 488 $ — $ 538 $ 538 $ — The balance of impaired loans at March 31, 2020 and December 31, 2019 was composed of three and six different borrowers, respectively. The Company has no commitments to advance additional funds on any of the impaired loans. The following table summarizes the average recorded investment and interest income recognized on impaired loans by segment for the three months ended March 31, 2020 and 2019 . Three Months Ended March 31, 2020 2019 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no related allowance recorded: Commercial $ 91 $ — $ 989 $ — Real estate: Construction, land and land development — — — — 1-4 family residential first mortgages 405 — 103 — Home equity 8 — 40 — Commercial 1 5 634 — Consumer and other — — — — 505 5 1,766 — With an allowance recorded: Commercial — — 14 — Real estate: Construction, land and land development — — — — 1-4 family residential first mortgages — — — — Home equity — — — — Commercial — — 98 — Consumer and other — — — — — — 112 — Total: Commercial 91 — 1,003 — Real estate: Construction, land and land development — — — — 1-4 family residential first mortgages 405 — 103 — Home equity 8 — 40 — Commercial 1 5 732 — Consumer and other — — — — $ 505 $ 5 $ 1,878 $ — The following tables provide an analysis of the payment status of the recorded investment in loans as of March 31, 2020 and December 31, 2019 . March 31, 2020 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Current Nonaccrual Loans Total Loans Commercial $ — $ — $ — $ — $ 443,669 $ 90 $ 443,759 Real estate: Construction, land and land development 4,988 — — 4,988 273,746 — 278,734 1-4 family residential first mortgages 52 — — 52 57,352 398 57,802 Home equity — — — — 11,835 — 11,835 Commercial — — — — 1,197,915 — 1,197,915 Consumer and other — — — — 6,542 — 6,542 Total $ 5,040 $ — $ — $ 5,040 $ 1,991,059 $ 488 $ 1,996,587 December 31, 2019 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Current Nonaccrual Loans Total Loans Commercial $ — $ — $ — $ — $ 430,953 $ 91 $ 431,044 Real estate: Construction, land and land development — — — — 264,193 — 264,193 1-4 family residential first mortgages 76 — — 76 53,988 411 54,475 Home equity — — — — 12,349 31 12,380 Commercial — 152 — 152 1,174,867 5 1,175,024 Consumer and other — — — — 6,787 — 6,787 Total $ 76 $ 152 $ — $ 228 $ 1,943,137 $ 538 $ 1,943,903 The following tables present the recorded investment in loans by credit quality indicator and loan segment as of March 31, 2020 and December 31, 2019 . March 31, 2020 Pass Watch Substandard Doubtful Total Commercial $ 419,500 $ 20,779 $ 3,480 $ — $ 443,759 Real estate: Construction, land and land development 278,674 60 — — 278,734 1-4 family residential first mortgages 55,652 1,503 647 — 57,802 Home equity 11,677 158 — — 11,835 Commercial 1,169,522 27,420 973 — 1,197,915 Consumer and other 6,530 12 — — 6,542 Total $ 1,941,555 $ 49,932 $ 5,100 $ — $ 1,996,587 December 31, 2019 Pass Watch Substandard Doubtful Total Commercial $ 410,070 $ 18,680 $ 2,294 $ — $ 431,044 Real estate: Construction, land and land development 264,132 61 — — 264,193 1-4 family residential first mortgages 52,168 1,841 466 — 54,475 Home equity 12,349 — 31 — 12,380 Commercial 1,146,472 28,475 77 — 1,175,024 Consumer and other 6,787 — — — 6,787 Total $ 1,891,978 $ 49,057 $ 2,868 $ — $ 1,943,903 All loans are subject to the assessment of a credit quality indicator. Risk ratings are assigned for each loan at the time of approval, and they change as circumstances dictate during the term of the loan. The Company utilizes a 9-point risk rating scale as shown below, with ratings 1 - 5 included in the Pass column, rating 6 included in the Watch column, ratings 7 - 8 included in the Substandard column and rating 9 included in the Doubtful column. All loans classified as impaired that are included in the specific evaluation of the allowance for loan losses are included in the Substandard column along with all other loans with ratings of 7 - 8. Risk rating 1: The loan is secured by cash equivalent collateral. Risk rating 2: The loan is secured by properly margined marketable securities, bonds or cash surrender value of life insurance. Risk rating 3: The borrower is in strong financial condition and has strong debt service capacity. The loan is performing as agreed, and the financial characteristics and trends of the borrower exceed industry statistics. Risk rating 4: The borrower's financial condition is satisfactory and stable. The borrower has satisfactory debt service capacity, and the loan is well secured. The loan is performing as agreed, and the financial characteristics and trends fall in line with industry statistics. Risk rating 5: The borrower's financial condition is less than satisfactory. The loan is still generally paying as agreed, but strained cash flows may cause some slowness in payments. The collateral values adequately preclude loss on the loan. Financial characteristics and trends lag industry statistics. There may be noncompliance with loan covenants. Risk rating 6: The borrower's financial condition is deficient. Payment delinquencies may be more common. Collateral values still protect from loss, but margins are narrow. The loan may be reliant on secondary sources of repayment, including liquidation of collateral and guarantor support. Risk rating 7: The loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Well-defined weaknesses exist that jeopardize the liquidation of the debt. The Company is inadequately protected by the valuation or paying capacity of the collateral pledged. If deficiencies are not corrected, there is a distinct possibility that a loss will be sustained. Risk rating 8: All the characteristics of rating 7 exist with the added condition that the loan is past due more than 90 days or there is reason to believe the Company will not receive its principal and interest according to the terms of the loan agreement. Risk rating 9: All the weaknesses inherent in risk ratings 7 and 8 exist with the added condition that collection or liquidation, on the basis of currently known facts, conditions and values, is highly questionable and improbable. A loan reaching this category would most likely be charged off. Credit quality indicators for all loans and the Company's risk rating process are dynamic and updated on a continuous basis. Risk ratings are updated as circumstances that could affect the repayment of an individual loan are brought to management's attention through an established monitoring process. Individual lenders initiate changes as appropriate for ratings 1 through 5, and changes for ratings 6 through 9 are initiated via communications with management. The likelihood of loss increases as the risk rating increases and is generally preceded by a loan appearing on the Watch List, which consists of all loans with a risk rating of 6 or worse. Written action plans with firm target dates for resolution of identified problems are maintained and reviewed on a quarterly basis for all segments of loans included on the Watch List. In addition to the Company's internal credit monitoring practices and procedures, an outsourced independent credit review function is in place to further assess assigned internal risk classifications and monitor compliance with internal lending policies and procedures. In all portfolio segments, the primary risks are that a borrower's income stream diminishes to the point that the borrower is not able to make scheduled principal and interest payments and any collateral securing the loan declines in value. The risk of declining collateral values is present for most types of loans. Commercial loans consist primarily of loans to businesses for various purposes, including revolving lines to finance current operations, inventory and accounts receivable, and capital expenditure loans to finance equipment and other fixed assets. These loans generally have short maturities, have either adjustable or fixed interest rates, and are either unsecured or secured by inventory, accounts receivable and/or fixed assets. For commercial loans, the primary source of repayment is from the operation of the business. Real estate loans include various types of loans for which the Company holds real property as collateral, and consist of loans on commercial properties and single and multifamily residences. Real estate loans are typically structured to mature or reprice every five to ten years with payments based on amortization periods up to 30 years. The majority of construction loans are to contractors and developers for construction of commercial buildings or residential real estate. These loans typically have maturities of up to 24 months. The Company's loan policy includes minimum appraisal and other credit guidelines. Consumer loans include loans extended to individuals for household, family and other personal expenditures not secured by real estate. The majority of the Company's consumer lending is for vehicles, consolidation of personal debts and household improvements. The repayment source for consumer loans, including 1-4 family residential and home equity loans, is typically wages. The allowance for loan losses is established through a provision for loan losses charged to expense. The allowance is an amount that management believes will be adequate to absorb probable losses on existing loans based on an evaluation of the collectability of loans and prior loss experience. This evaluation also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, the review of specific problem loans, and the current economic conditions that may affect the borrower's ability to pay. Loans are charged-off against the allowance for loan losses when management believes that collectability of the principal is unlikely. While management uses the best information available to make its evaluations, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or the other factors relied upon. The allowance for loan losses consists of specific and general components. The specific component relates to loans that meet the definition of impaired. The general component covers the remaining loans and is based on historical loss experience adjusted for qualitative factors such as delinquency trends, loan growth, economic elements and local market conditions. These same policies are applied to all segments of loans. In addition, regulatory agencies, as an integral part of their examination processes, periodically review the Company's allowance for loan losses, and may require the Company to make additions to the allowance based on their judgment about information available to them at the time of their examinations. The following tables detail the changes in the allowance for loan losses by segment for the three months ended March 31, 2020 and 2019 . Three Months Ended March 31, 2020 Real Estate Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total Beginning balance $ 3,875 $ 2,375 $ 216 $ 127 $ 10,565 $ 77 $ 17,235 Charge-offs — — — (1 ) — — (1 ) Recoveries 23 — 70 1 3 1 98 Provision (1) 233 220 (39 ) — 586 — 1,000 Ending balance $ 4,131 $ 2,595 $ 247 $ 127 $ 11,154 $ 78 $ 18,332 Three Months Ended March 31, 2019 Real Estate Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total Beginning balance $ 3,508 $ 2,384 $ 250 $ 171 $ 10,301 $ 75 $ 16,689 Charge-offs — — — — — — — Recoveries 21 — 3 20 4 — 48 Provision (1) (1 ) 213 (17 ) (29 ) (176 ) 10 — Ending balance $ 3,528 $ 2,597 $ 236 $ 162 $ 10,129 $ 85 $ 16,737 (1) The negative provisions for the various segments are related to the decline in outstanding balances in each of those portfolio segments during the time periods disclosed and/or improvement in the credit quality factors related to those portfolio segments. The following tables present a breakdown of the allowance for loan losses disaggregated on the basis of impairment analysis method by segment as of March 31, 2020 and December 31, 2019 . March 31, 2020 Real Estate Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total Ending balance: Individually evaluated for impairment $ — $ — $ — $ — $ — $ — $ — Collectively evaluated for impairment 4,131 2,595 247 127 11,154 78 18,332 Total $ 4,131 $ 2,595 $ 247 $ 127 $ 11,154 $ 78 $ 18,332 December 31, 2019 Real Estate Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total Ending balance: Individually evaluated for impairment $ — $ — $ — $ — $ — $ — $ — Collectively evaluated for impairment 3,875 2,375 216 127 10,565 77 17,235 Total $ 3,875 $ 2,375 $ 216 $ 127 $ 10,565 $ 77 $ 17,235 The following tables present the recorded investment in loans, exclusive of unamortized fees and costs, disaggregated on the basis of impairment analysis method by segment as of March 31, 2020 and December 31, 2019 . March 31, 2020 Real Estate Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total Ending balance: Individually evaluated for impairment $ 90 $ — $ 398 $ — $ — $ — $ 488 Collectively evaluated for impairment 443,669 278,734 57,404 11,835 1,197,915 6,542 1,996,099 Total $ 443,759 $ 278,734 $ 57,802 $ 11,835 $ 1,197,915 $ 6,542 $ 1,996,587 December 31, 2019 Real Estate Commercial Construction and Land 1-4 Family Residential Home Equity Commercial Consumer and Other Total Ending balance: Individually evaluated for impairment $ 91 $ — $ 411 $ 31 $ 5 $ — $ 538 Collectively evaluated for impairment 430,953 264,193 54,064 12,349 1,175,019 6,787 1,943,365 Total $ 431,044 $ 264,193 $ 54,475 $ 12,380 $ 1,175,024 $ 6,787 $ 1,943,903 |