Loans held for investment and allowance for credit losses | NOTE 3 – LOANS HELD FOR INVESTMENT AND ALLOWANCE Loan Portfolio Composition . (Dollars in Thousands) September 30, 2022 December 31, 2021 Commercial, Financial and Agricultural $ 246,304 $ 223,086 Real Estate – Construction 237,718 174,394 Real Estate – Commercial Mortgage 715,870 663,550 Real Estate – Residential (1) 594,785 360,021 Real Estate – Home Equity 202,512 187,821 Consumer (2) 348,996 322,593 Loans Held For Investment, Net of Unearned Income $ 2,346,185 $ 1,931,465 (1) Includes loans in process balances of $ 21.7 13.6 respectively. (2) Includes overdraft balances of $ 1.0 1.1 Net deferred loan costs, which include premiums on purchased loans, 8.5 $ 3.9 Accrued interest receivable on loans which is excluded from amortized 6.6 5.3 million at December 31, 2021, and is reported separately in Other Assets. The Company has pledged a blanket floating lien on all 1-4 family residential mortgage and home equity loans to support available borrowing capacity at the FHLB of consumer loans, commercial loans, and construction loans to support available Atlanta. Loan Purchase and Sales . loans from Capital City Home Loans (“CCHL”), a related party. 267.0 $ 72.7 Allowance for Credit Losses . (“ACL”) has two basic components: first, an asset-specific component measurement of expected credit losses for such individual loans; and second, of loans that share similar risk characteristics. Policies in the Company’s 2021 Form The following table details the activity in the allowance for credit losses by allowance to one category of loans does not preclude its availability to Commercial, Real Estate Financial, Real Estate Commercial Real Estate Real Estate (Dollars in Thousands) Agricultural Construction Mortgage Residential Home Equity Consumer Total Three Months Ended September 30, 2022 Beginning Balance $ 1,641 $ 3,138 $ 5,052 $ 5,645 $ 1,760 $ 4,045 $ 21,281 Provision for Credit Losses (136) (22) (120) 1,333 127 749 1,931 Charge-Offs (2) - (1) - - (1,759) (1,762) Recoveries 58 2 8 44 22 926 1,060 Net (Charge-Offs) Recoveries 56 2 7 44 22 (833) (702) Ending Balance $ 1,561 $ 3,118 $ 4,939 $ 7,022 $ 1,909 $ 3,961 $ 22,510 Nine Months Ended September 30, 2022 Beginning Balance $ 2,191 $ 3,302 $ 5,810 $ 4,129 $ 2,296 $ 3,878 $ 21,606 Provision for Credit Losses 267 (194) (697) 2,707 (501) 1,940 3,522 Charge-Offs (1,179) - (267) - (33) (4,354) (5,833) Recoveries 282 10 93 186 147 2,497 3,215 Net (Charge-Offs) Recoveries (897) 10 (174) 186 114 (1,857) (2,618) Ending Balance $ 1,561 $ 3,118 $ 4,939 $ 7,022 $ 1,909 $ 3,961 $ 22,510 Three Months Ended September 30, 2021 Beginning Balance $ 1,972 $ 2,759 $ 7,569 $ 4,353 $ 2,457 $ 3,065 $ 22,175 Provision for Credit Losses 178 517 (1,588) (433) (131) 911 (546) Charge-Offs (37) - (405) (17) (15) (1,314) (1,788) Recoveries 66 10 169 401 46 967 1,659 Net Charge-Offs 29 10 (236) 384 31 (347) (129) Ending Balance $ 2,179 $ 3,286 $ 5,745 $ 4,304 $ 2,357 $ 3,629 $ 21,500 Nine Months Ended September 30, 2021 Beginning Balance $ 2,204 $ 2,479 $ 7,029 $ 5,440 $ 3,111 $ 3,553 $ 23,816 Provision for Credit Losses (192) 797 (1,719) (1,768) (900) 740 (3,042) Charge-Offs (138) - (405) (88) (94) (3,040) (3,765) Recoveries 305 10 840 720 240 2,376 4,491 Net Charge-Offs 167 10 435 632 146 (664) 726 Ending Balance $ 2,179 $ 3,286 $ 5,745 $ 4,304 $ 2,357 $ 3,629 $ 21,500 For the nine months ended September 30, 2022, the allowance for 0.9 expense of $ 3.5 2.6 growth, and to a lesser extent, a higher projected rate of unemployment and ended September 30, 2021, the allowance decreased by $ 2.3 3.0 recoveries of $ 0.7 and its potential effect on rates of default, and strong net 0.7 utilized to estimate probability of default and are weighted based on management’s Commitments and Contingencies for information on the Loan Portfolio Aging. A loan is defined as a past due loan when one full payment is past due or a contractual maturity past due (“DPD”). The following table presents the aging of the amortized cost basis in accruing 30-59 60-89 90 + Total Total Nonaccrual Total (Dollars in Thousands) DPD DPD DPD Past Due Current Loans Loans September 30, 2022 Commercial, Financial and Agricultural $ 274 $ 68 $ - $ 342 $ 245,883 $ 79 $ 246,304 Real Estate – Construction - - - - 237,718 - 237,718 Real Estate – Commercial Mortgage 1,098 - - 1,098 714,292 480 715,870 Real Estate – Residential (1) 114 1,237 - 1,351 592,629 805 594,785 Real Estate – Home Equity 564 18 - 582 201,134 796 202,512 Consumer 2,151 739 - 2,890 345,857 249 348,996 Total $ 4,201 $ 2,062 $ - $ 6,263 $ 2,337,513 $ 2,409 $ 2,346,185 December 31, 2021 Commercial, Financial and Agricultural $ 100 $ 23 $ - $ 123 $ 222,873 $ 90 $ 223,086 Real Estate – Construction - - - - 174,394 - 174,394 Real Estate – Commercial Mortgage 151 - - 151 662,795 604 663,550 Real Estate – Residential 365 151 - 516 357,408 2,097 360,021 Real Estate – Home Equity 210 - - 210 186,292 1,319 187,821 Consumer 1,964 636 - 2,600 319,781 212 322,593 Total $ 2,790 $ 810 $ - $ 3,600 $ 1,923,543 $ 4,322 $ 1,931,465 (1) Includes $0.1 million of Loans Held for Sale in nonaccrual status as of September 30, 2022. Nonaccrual Loans . management deems the collectability of the principal and/or interest principal and interest amounts contractually due are brought current The following table presents the amortized cost basis of loans in nonaccrual by class of loans. September 30, 2022 December 31, 2021 Nonaccrual Nonaccrual Nonaccrual Nonaccrual With No With 90 + Days With No With 90 + Days (Dollars in Thousands) ACL ACL Still Accruing ACL ACL Still Accruing Commercial, Financial and Agricultural $ - $ 79 $ - $ 67 $ 23 $ - Real Estate – Construction - - - - - - Real Estate – Commercial Mortgage - 480 - - 604 - Real Estate – Residential 597 208 - 928 1,169 - Real Estate – Home Equity - 796 - 463 856 - Consumer - 249 - - 212 - Total Nonaccrual $ 597 $ 1,812 $ - $ 1,458 $ 2,864 $ - Collateral Dependent Loans. The following table presents the amortized cost basis of collateral-dependent September 30, 2022 December 31, 2021 Real Estate Non Real Estate Real Estate Non Real Estate (Dollars in Thousands) Secured Secured Secured Secured Commercial, Financial and Agricultural $ - $ - $ - $ 67 Real Estate – Construction - - - - Real Estate – Commercial Mortgage - - 455 - Real Estate – Residential 570 - 1,645 - Real Estate – Home Equity 596 - 649 - Consumer - - - - Total Collateral Dependent $ 1,166 $ - $ 2,749 $ 67 A loan is collateral dependent when the borrower is experiencing financial sale or operation of the underlying collateral. The Bank’s collateral dependent or commercial collateral types. or internal evaluations, adjusted for selling costs or other amounts to be deducted Residential Real Estate Loans In Process of Foreclosure . 0.7 million and $ 0.9 process. Troubled 6.3 performing in accordance with the modified terms. 8.0 7.6 million were performing in accordance with modified terms. 0.3 September 30, 2022 and December 31, 2021. The modifications made to TDRs involved either an extension of the loan term, a principal moratorium, or a combination thereof. no nine months ended September 30, 2021, there were no loans modified three 0.6 million, respectively. no as TDRs, for which there was a payment default and the loans were modified within Credit Risk Management . procedures designed to maximize loan income within an acceptable approve these policies and procedures on a regular basis (at least annually). Reporting systems are used to monitor loan originations, loan quality, loans and potential problem loans. monitor asset quality trends and the appropriateness of credit policies. concentration risk is monitored. of risk, client concentrations, industry group, loan type, geographic of the loan portfolio are monitored and reported to the Board on a quarterly Board approved credit policies governing exposure limits and underwriting the Company’s loan portfolio Commercial, Financial, and Agricultural – Loans in this category with consideration given to underlying collateral and personal or ratio limits that require a borrower’s cash flow to be sufficient The majority of these loans are secured by the assets being financed or other business equipment. governed by established policy guidelines. Real Estate Construction – Loans in this category consist of short-term and construction/permanent loans made to individuals and investors to rehabilitation of real property. secured by the property being financed, including 1-4 family residential occupied or investment in nature. based upon estimates of costs and value associated with the completed party appraisals and evaluations. of funds for construction loans is made in relation to the progress of the project site inspections. Real Estate Commercial Mortgage – Loans in this category consists of commercial owner-occupied or investment in nature. with consideration given to underlying real estate collateral and coverage ratios and loan to value ratios specific to the property type. appraisals and evaluations. Real Estate Residential – Residential mortgage loans held in the Company’s ability to make scheduled payments with full consideration to underwriting assets, and other financial resources, credit history, residential properties. originate sub-prime loans. Real Estate Home Equity – Home equity loans and lines are made to qualified by senior or junior mortgage liens on owner-occupied favorable credit history combined with supportive income and debt ratio established policy guidelines. Consumer Loans – This loan portfolio includes personal installment loans, lines of credit. establishes maximum debt to income ratios, minimum credit scores, and receipt of credit reports. Credit Quality Indicators . into risk categories based on relevant information about the ability of borrowers information, historical payment performance, credit documentation, factors. relationships over a predetermined amount and review of smaller balance homogenous noted below for categorizing and managing its criticized loans. and are not considered criticized. Special Mention – Loans in this category are presently protected from loss, but cause future problems. the ordinary amount of attention is warranted for these loans. Substandard – Loans in this category exhibit well-defined weaknesses that would These loans are no longer adequately protected due to well-defined borrower. Doubtful – Loans in this category have all the weaknesses inherent in a loan categorized the weaknesses make collection or liquidation in full, on the basis of questionable and improbable. Performing/Nonperforming – Loans within certain homogenous but are monitored for credit quality via the aging status of the loan and by payment is updated on an on-going basis dependent upon improvement The following table summarizes gross loans held for investment at credit risk ratings (refer to Credit Risk Management section for detail on risk rating Term Revolving (Dollars in Thousands) 2022 2021 2020 2019 2018 Prior Loans Total Commercial, Financial, Agriculture: Pass $ 71,112 $ 49,357 $ 22,681 $ 17,018 $ 13,343 $ 12,893 $ 57,623 $ 244,027 Special Mention - - - 8 - 23 1,979 2,010 Substandard - - 7 - 95 150 15 267 Total $ 71,112 $ 49,357 $ 22,688 $ 17,026 $ 13,438 $ 13,066 $ 59,617 $ 246,304 Real Estate - Construction: Pass $ 101,666 $ 92,202 $ 37,665 $ 809 $ - $ 125 $ 3,023 $ 235,490 Special Mention 44 323 384 786 - - - 1,537 Substandard - - 691 - - - - 691 Total $ 101,710 $ 92,525 $ 38,740 $ 1,595 $ - $ 125 $ 3,023 $ 237,718 Real Estate - Commercial Mortgage: Pass $ 172,531 $ 148,101 $ 122,782 $ 57,497 $ 61,869 $ 105,875 $ 19,567 $ 688,222 Special Mention 219 5,014 233 1,725 733 6,779 1,578 16,281 Substandard 7,415 1,789 391 622 - 1,021 129 11,367 Total $ 180,165 $ 154,904 $ 123,406 $ 59,844 $ 62,602 $ 113,675 $ 21,274 $ 715,870 Real Estate - Residential: Pass $ 310,007 $ 100,110 $ 47,970 $ 30,070 $ 20,570 $ 67,954 $ 8,748 $ 585,429 Special Mention 279 - 128 16 58 545 - 1,026 Substandard 679 1,336 820 1,441 720 3,334 - 8,330 Total $ 310,965 $ 101,446 $ 48,918 $ 31,527 $ 21,348 $ 71,833 $ 8,748 $ 594,785 Real Estate - Home Equity: Performing $ 32 $ 141 $ 12 $ 403 $ 149 $ 1,368 $ 199,612 $ 201,717 Nonperforming - - - 15 - - 780 795 Total $ 32 $ 141 $ 12 $ 418 $ 149 $ 1,368 $ 200,392 $ 202,512 Consumer: Performing $ 131,573 $ 124,096 $ 42,504 $ 24,655 $ 14,966 $ 5,455 $ 5,498 $ 348,747 Nonperforming - 109 76 14 39 11 - 249 Total $ 131,573 $ 124,205 $ 42,580 $ 24,669 $ 15,005 $ 5,466 $ 5,498 $ 348,996 |