Loans | Note 4— Loans The following table summarizes the composition of our loan portfolio. Total loans are recorded net of deferred loan fees and costs, which totaled $3.2 million and $2.2 million as of June 30, 2021 and December 31, 2020, respectively. Schedule of Loan Portfolio June 30, December 31, (Dollars in thousands) 2021 2020 Commercial, financial and agricultural $ 111,449 $ 96,688 Real estate: Construction 95,865 95,282 Mortgage-residential 44,594 43,928 Mortgage-commercial 592,099 573,258 Consumer: Home equity 26,662 26,442 Other 7,649 8,559 Total loans, net of deferred loan fees and costs $ 878,318 $ 844,157 Commercial, financial, and agricultural category includes $ 47.2 42.2 The detailed activity in the allowance for loan losses and the recorded investment in loans receivable as of and for the three months ended and six months ended June 30, 2021 and June 30, 2020 and for the year ended December 31, 2020 is as follows: Schedule of activity in the allowance for loan losses and the recorded investment in loans receivable (Dollars in thousands) Commercial Real estate Real estate Real estate Consumer Consumer Unallocated Total Three months ended June 30, 2021 Allowance for loan losses: Beginning balance March 31, 2021 $ 758 $ 134 $ 480 $ 8,137 $ 309 $ 124 $ 621 $ 10,563 Charge-offs — — — (110 ) — (11 ) — (121 ) Recoveries 2 — — 7 5 14 — 28 Provisions 134 (9 ) 62 (8 ) 8 (16 ) (3 ) 168 Ending balance June 30, 2021 $ 894 $ 125 $ 542 $ 8,026 $ 322 $ 111 $ 618 $ 10,638 Real estate Real estate Consumer Real estate Mortgage Mortgage Home Consumer (Dollars in thousands) Commercial Construction Residential Commercial equity Other Unallocated Total Six months ended June 30, 2021 Allowance for loan losses: Beginning balance December 31, 2020 $ 778 $ 145 $ 541 $ 7,855 $ 324 $ 125 $ 621 $ 10,389 Charge-offs — — — (110 ) — (36 ) — (146 ) Recoveries 3 — — 11 6 30 — 50 Provisions 113 (20 ) 1 270 (8 ) (8 ) (3 ) 345 Ending balance June 30, 2021 $ 894 $ 125 $ 542 $ 8,026 $ 322 $ 111 $ 618 $ 10,638 Ending balances: Individually evaluated for impairment $ — $ — $ — $ 2 $ — $ — $ — $ 2 Collectively evaluated for impairment 894 125 542 8,024 322 111 618 10,636 June 30, 2021 Loans receivable: Ending balance-total $ 111,449 $ 95,865 $ 44,594 $ 592,099 $ 26,662 $ 7,649 $ — $ 878,318 Ending balances: Individually evaluated for impairment — — 310 5,163 21 — — 5,494 Collectively evaluated for impairment $ 111,449 $ 95,865 $ 44,284 $ 586,936 $ 26,641 $ 7,649 $ — $ 872,824 (Dollars in thousands) Commercial Real estate Real estate Real estate Consumer Consumer Unallocated Total Three months ended June 30, 2020 Allowance for loan losses: Beginning balance March 31, 2020 $ 489 $ 148 $ 440 $ 5,531 $ 277 $ 112 $ 697 $ 7,694 Charge-offs — — — — — (25 ) — (25 ) Recoveries 3 — — 3 — 11 — 17 Provisions 277 17 57 935 16 34 (86 ) 1,250 Ending balance June 30, 2020 $ 769 $ 165 $ 497 $ 6,469 $ 293 $ 132 $ 611 $ 8,936 Note 4—Loans-continued (Dollars in thousands) Real estate Real estate Consumer Real estate Mortgage Mortgage Home Consumer Commercial Construction Residential Commercial equity Other Unallocated Total Six months ended June 30, 2020 Allowance for loan losses: Beginning balance December 31, 2019 $ 427 $ 111 $ 367 $ 4,602 $ 240 $ 97 $ 783 $ 6,627 Charge-offs — — — — — (48 ) — (48 ) Recoveries 3 — — 9 1 19 — 32 Provisions 339 54 130 1,858 52 64 (172 ) 2,325 Ending balance June 30, 2020 $ 769 $ 165 $ 497 $ 6,469 $ 293 $ 132 $ 611 $ 8,936 Ending balances: Individually evaluated for impairment $ — $ — $ — $ 4 $ — $ — $ — $ 4 Collectively evaluated for impairment 769 165 497 6,465 293 132 611 8,932 June 30, 2020 Loans receivable: Ending balance-total $ 107,184 $ 82,584 $ 45,424 $ 544,670 $ 27,156 $ 10,354 $ — $ 817,372 Ending balances: Individually evaluated for impairment — — 333 3,020 66 — — 3,419 Collectively evaluated for impairment $ 107,184 $ 82,584 $ 45,091 $ 541,650 $ 27,090 $ 10,354 $ — $ 813,953 Real estate Real estate Consumer Real estate Mortgage Mortgage Home Consumer (Dollars in thousands) Commercial Construction Residential Commercial equity Other Unallocated Total December 31, 2020 Allowance for loan losses: Beginning balance December 31, 2019 $ 427 $ 111 $ 367 $ 4,602 $ 240 $ 97 $ 783 $ 6,627 Charge-offs — (2 ) — (1 ) — (107 ) — (110 ) Recoveries 130 2 — 23 2 52 — 209 Provisions 221 34 174 3,231 82 83 (162 ) 3,663 Ending balance December 31, 2020 $ 778 $ 145 $ 541 $ 7,855 $ 324 $ 125 $ 621 $ 10,389 Ending balances: Individually evaluated for impairment $ — $ — $ — $ 2 $ — $ — $ — $ 2 Collectively evaluated for impairment 778 145 541 7,853 324 125 621 10,387 December 31, 2020 Loans receivable: Ending balance-total $ 96,688 $ 95,282 $ 43,928 $ 573,258 $ 26,442 $ 8,559 $ — $ 844,157 Ending balances: Individually evaluated for impairment — — 440 5,631 42 — — 6,113 Collectively evaluated for impairment 96,688 95,282 43,488 567,627 26,400 8,559 — 838,044 The following tables as of June 30, 2021, June 30, 2020, and December 31, 2020, are by loan category and present loans individually evaluated and considered impaired under FASB ASC 310 Accounting by Creditors for Impairment of a Loan. Impairment includes performing TDRs. Schedule of loan category and loans individually evaluated and considered impaired (Dollars in thousands) Six months ended Three months ended Unpaid Average Interest Average Interest Recorded Principal Related Recorded income Recorded Income June 30, 2021 Investment Balance Allowance Investment Recognized Investment Recognized With no allowance recorded: Commercial, financial, agricultural $ — $ — $ — $ — $ — $ — $ — Real estate: Construction — — — — — — — Mortgage-residential 310 361 — 315 7 310 4 Mortgage-commercial 5,062 7,689 — 5,332 188 5,168 94 Consumer: Home equity 21 25 — 21 1 20 — Other — — — — — — — With an allowance recorded: Commercial, financial, agricultural — — — — — — — Real estate: Construction — — — — — — — Mortgage-residential — — — — — — — Mortgage-commercial 101 101 2 111 3 101 1 Consumer: Home equity — — — — — — — Other — — — — — — — Total: Commercial, financial, agricultural $ — $ — $ — $ — $ — $ — $ — Real estate: Construction — — — — — — — Mortgage-residential 310 361 — 315 7 310 4 Mortgage-commercial 5,163 7,790 2 5,443 191 5,269 95 Consumer: Home equity 21 25 — 21 1 20 — Other — — — — — — — $ 5,494 8,176 $ 2 $ 5,779 $ 199 $ 5,599 $ 99 (Dollars in thousands) Six months ended Three months ended Unpaid Average Interest Average Interest Recorded Principal Related Recorded income Recorded Income June 30, 2020 Investment Balance Allowance Investment Recognized Investment Recognized With no allowance recorded: Commercial, financial, agricultural $ — $ — $ — $ — $ — $ — $ — Real estate: Construction — — — — — — — Mortgage-residential 333 425 — 337 10 331 7 Mortgage-commercial 2,827 5,567 — 3,189 147 3,141 74 Consumer: Home equity 66 70 — 68 2 66 1 Other — — — — — — — With an allowance recorded: Commercial, financial, agricultural — — — — — — — Real estate: Construction — — — — — — — Mortgage-residential — — — — — — — Mortgage-commercial 193 193 4 216 6 193 3 Consumer: Home equity — — — — — — — Other — — — — — — — Total: Commercial, financial, agricultural $ — $ — $ — $ — $ — $ — $ — Real estate: Construction — — — — — — — Mortgage-residential 333 425 — 337 10 331 7 Mortgage-commercial 3,020 5,760 4 3,405 153 3,334 77 Consumer: Home equity 66 70 — 68 2 66 1 Other — — — — — — — $ 3,419 6,255 $ 4 $ 3,810 $ 165 $ 3,731 $ 85 Unpaid Average Interest (Dollars in thousands) Recorded Principal Related Recorded Income December 31, 2020 Investment Balance Allowance Investment Recognized With an allowance recorded: Commercial — — — — — With no allowance recorded: Commercial $ — $ — $ — $ — $ — Real estate: Construction — — — — — Mortgage-residential 440 499 — 440 1 Mortgage-commercial 5,508 7,980 — 5,770 388 Consumer: Home Equity 42 47 — 42 3 Other — — — — — With an allowance recorded: Commercial — — — — — Real estate: Construction — — — — — Mortgage-residential — — — — — Mortgage-commercial 123 123 2 123 11 Consumer: Home Equity — — — — — Other — — — — — Total: Commercial — — — — — Real estate: Construction — — — — — Mortgage-residential 440 499 — 440 1 Mortgage-commercial 5,631 8,103 2 5,893 399 Consumer: Home Equity 42 47 — 42 3 Other — — — — — $ 6,113 $ 8,649 $ 2 $ 6,375 $ 403 The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a monthly basis. The Company uses the following definitions for risk ratings: Special Mention Substandard Doubtful Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered as pass rated loans. Based on the most recent analysis performed, the risk category of loans by class of loans is shown in the table below as of June 30, 2021 and December 31, 2020. As of June 30, 2021 and December 31, 2020, no loans were classified as doubtful. Schedule of loan category and loan by risk categories (Dollars in thousands) Special June 30, 2021 Pass Mention Substandard Doubtful Total Commercial, financial & agricultural $ 111,273 $ 176 $ — $ — $ 111,449 Real estate: Construction 95,858 7 — — 95,865 Mortgage – residential 44,111 154 329 — 44,594 Mortgage – commercial 579,401 2,529 10,169 — 592,099 Consumer: Home Equity 25,244 219 1,199 — 26,662 Other 7,639 — 10 — 7,649 Total $ 863,526 $ 3,085 $ 11,707 $ — $ 878,318 (Dollars in thousands) Special December 31, 2020 Pass Mention Substandard Doubtful Total Commercial, financial & agricultural $ 96,507 $ 181 $ — $ — $ 96,688 Real estate: Construction 95,282 — — — 95,282 Mortgage – residential 43,240 190 498 — 43,928 Mortgage – commercial 559,982 7,270 6,006 — 573,258 Consumer: Home Equity 25,041 95 1,306 — 26,442 Other 8,538 21 — — 8,559 Total $ 828,590 $ 7,757 $ 7,810 $ — $ 844,157 At June 30, 2021 and December 31, 2020, non-accrual loans totaled $4.0 million and $4.7 million, respectively. TDRs that are still accruing and included in impaired loans at June 30, 2021 and at December 31, 2020 amounted to $ 1.5 1.6 Loans greater than 90 days delinquent and still accruing interest were $ 4.2 1.3 The following tables are by loan category and present loans past due and on non-accrual status as of June 30, 2021 and December 31, 2020: Schedule of loan category and present loans past due and on non-accrual status Greater than (Dollars in thousands) 30-59 Days 60-89 Days 90 Days and Total June 30, 2021 Past Due Past Due Accruing Nonaccrual Past Due Current Total Loans Commercial $ 111 $ — $ 4,164 $ 3,654 $ 7,929 $ 103,520 $ 111,449 Real estate: Construction — — — — — 95,865 95,865 Mortgage-residential 36 — — 311 347 44,247 44,594 Mortgage-commercial — — — — — 592,099 592,099 Consumer: Home equity — — — 21 21 26,641 26,662 Other 24 — 1 — 25 7,624 7,649 $ 171 $ — $ 4,165 $ 3,986 $ 8,322 $ 869,996 $ 878,318 Greater than (Dollars in thousands) 30-59 Days 60-89 Days 90 Days and Total December 31, 2020 Past Due Past Due Accruing Nonaccrual Past Due Current Total Loans Commercial $ 165 $ 27 $ — $ 4,080 $ 4,272 $ 92,416 $ 96,688 Real estate: Construction 424 — 1,260 — 1,684 93,598 95,282 Mortgage-residential 7 — — 440 447 43,481 43,928 Mortgage-commercial — — — — — 573,258 573,258 Consumer: Home equity — — — 42 42 26,400 26,442 Other 21 21 — — 42 8,517 8,559 $ 617 $ 48 $ 1,260 $ 4,562 $ 6,487 $ 837,670 $ 844,157 The Cares COVID-19 Related Troubled Debt Restructurings and Loan Modifications for Affected Borrowers The Company is focused on servicing the financial needs of its commercial and consumer customers with flexible loan payment arrangements, including short-term loan modifications or forbearance payments and reducing or waiving certain fees on deposit accounts. Future governmental actions may require these and other types of customer-related responses. Beginning in March 2020, the Company proactively offered payment deferrals for up to 90 days to its loan customers regardless of the impact of the pandemic on their business or personal finances. The Company continues to consider potential deferrals with respect to certain customers, which are evaluated on a case-by-case basis. At its peak, which occurred during the second quarter of 2020, the Company granted payment deferments on loans totaling $206.9 million. As a result of payments being resumed at the conclusion of their payment deferral period, loans in which payments were being deferred decreased from the peak of $206.9 million to $175.0 million at June 30, 2020, to $27.3 million at September 30, 2020, to $16.1 million at December 31, 2020, to $8.7 million at March 31, 2021, and to $4.5 million at June 30, 2021. The Company had no loans remaining on initial deferral status in which both principal and interest were deferred at December 31, 2020, March 31, 2021 and June 30, 2021. The $4.5 million in deferrals at June 30, 2021 consists of two loans: a mixed use office building and an events / meeting center. Troubled Debt Restructurings. In the determination of the allowance for loan losses, all TDRs are reviewed to ensure that one of the three proper valuation methods (fair market value of the collateral, present value of cash flows, or observable market price) is adhered to. All non-accrual loans are written down to their corresponding collateral value. All troubled TDR accruing loans that have a loan balance that exceeds the present value of cash flows will have a specific allocation. All nonaccrual loans are considered impaired. Under ASC 310-10, a loan is impaired when it is probable that the Company will be unable to collect all amounts due including both principal and interest according to the contractual terms of the loan agreement. Acquired credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality, found in FASB ASC Topic 310-30, ( Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality) A summary of changes in the accretable yield for purchased credit-impaired loans for the three months and six months ended June 30, 2021 and June 30, 2020 are as follows: Schedule for changes in the accretable yield for PCI loans (Dollars in thousands) Three Months Three Months Accretable yield, beginning of period $ 86 $ 116 Accretion (7 ) (7 ) Accretable yield, end of period $ 79 $ 109 (Dollars in thousands) Six Months Six Months Accretable yield, beginning of period $ 93 $ 123 Accretion (14 ) (14 ) Accretable yield, end of period $ 79 $ 109 At June 30, 2021 and December 31, 2020, the recorded investment in purchased impaired loans was $ 109 110 162 171 Related party loans and lines of credit are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and generally do not involve more than the normal risk of collectability. The following table presents related party loan transactions for the three months ended June 30, 2021 and June 30, 2020: Schedule of related party loan (Dollars in thousands) 2021 2020 Beginning Balance December 31, $ 3,297 $ 4,109 New Loans 2 55 Less loan repayments 225 437 Ending Balance June 30, $ 3,074 $ 3,727 |