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 $1.9 million and $1.4 million as of December 31, 2022 and December 31, 2021, respectively. Schedule of Loan Portfolio December 31, (Dollars in thousands) 2022 2021 Commercial, financial and agricultural $ 72,409 $ 69,952 Real estate: Construction 91,223 94,969 Mortgage-residential 65,759 45,498 Mortgage-commercial 709,218 617,464 Consumer: Home equity 28,723 27,116 Other 13,525 8,703 Total $ 980,857 $ 863,702 Commercial, financial, and agricultural category includes $ 219.0 thousand 1.5 million Activity in the allowance for loan losses was as follows: Schedule of Activity in the allowance for loan losses Years ended December 31, (Dollars in thousands) 2022 2021 2020 Balance at the beginning of year $ 11,179 $ 10,389 $ 6,627 Provision for (release of) loan losses (152 ) 335 3,663 Charged off loans (68 ) (182 ) (110 ) Recoveries 377 637 209 Balance at end of year $ 11,336 $ 11,179 $ 10,389 The detailed activity in the allowance for loan losses and the recorded investment in loans receivable as of and for the years ended December 31, 2022, December 31, 2021 and December 31, 2020 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 2022 Allowance for loan losses: Beginning balance $ 853 $ 113 $ 560 $ 8,570 $ 333 $ 126 $ 624 $ 11,179 Charge-offs — — — — (1 ) (67 ) — (68 ) Recoveries 17 — 6 325 13 16 — 377 Provisions (21 ) (38 ) 157 (326 ) (31 ) 95 12 (152 ) Ending balance $ 849 $ 75 $ 723 $ 8,569 $ 314 $ 170 $ 636 $ 11,336 Ending balances: Individually evaluated for impairment $ — $ — $ — $ — $ — $ — $ — $ — Collectively evaluated for impairment (849 ) 75 723 8,569 314 170 636 11,336 Loans receivable: Ending balance-total $ 72,409 $ 91,223 $ 65,759 $ 709,218 $ 28,723 $ 13,525 $ — $ 980,857 Ending balances: Individually evaluated for impairment 29 — 34 4,752 168 — — 4,983 Collectively evaluated for impairment 72,380 91,223 65,725 704,466 28,555 13,525 — 975,874 (Dollars in thousands) Commercial Real estate Real estate Real estate Consumer Consumer Unallocated Total 2021 Allowance for loan losses: Beginning balance $ 778 $ 145 $ 541 $ 7,855 $ 324 $ 125 $ 621 $ 10,389 Charge-offs — — — (110 ) — (72 ) — (182 ) Recoveries 39 — 10 473 69 46 — 637 Provisions 36 (32 ) 9 352 (60 ) 27 3 335 Ending balance $ 853 $ 113 $ 560 $ 8,570 $ 333 $ 126 $ 624 $ 11,179 Ending balances: Individually evaluated for impairment $ — $ — $ — $ 1 $ — $ — $ — $ 1 Collectively evaluated for impairment 853 113 560 8,569 333 126 624 11,178 Loans receivable: Ending balance-total $ 69,952 $ 94,969 $ 45,498 $ 617,464 $ 27,116 $ 8,703 $ — $ 863,702 Ending balances: Individually evaluated for impairment — — 133 1,561 — — — 1,694 Collectively evaluated for impairment 69,952 94,969 45,365 615,903 27,116 8,703 — 862,008 (Dollars in thousands) Commercial Real estate Real estate Real estate Consumer Consumer Unallocated Total 2020 Allowance for loan losses: Beginning balance $ 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 $ 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 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 At December 31, 2022 and December 31, 2021, there were $ 5.5 million 9.5 million 78.1 thousand 125.6 thousand The following tables are by loan category and present at December 31, 2022, December 31, 2021 and December 31, 2020 loans individually evaluated and considered impaired under FASB ASC 310, “Accounting by Creditors for Impairment of a Loan.” Impairment includes performing troubled debt restructurings. Schedule of loan category and loans individually evaluated and considered impaired (Dollars in thousands) December 31, 2022 Recorded Unpaid Related Average Interest With no allowance recorded: Commercial $ 29 $ 29 $ — $ 27 $ 2 Real estate: Construction — — — — — Mortgage-residential 34 51 — 34 3 Mortgage-commercial 4,752 5,260 — 4,747 464 Consumer: Home Equity 168 168 — 167 9 Other — — — — — With an allowance recorded: Commercial — — — — — Real estate: Construction — — — — — Mortgage-residential — — — — — Mortgage-commercial — — — — — Consumer: Home Equity — — — — — Other — — — — — Total: Commercial 29 29 — 27 2 Real estate: Construction — — — — — Mortgage-residential 34 51 — 34 3 Mortgage-commercial 4,752 5,260 — 4,747 464 Consumer: Home Equity 168 168 — 167 9 Other — — — — — $ 4,983 $ 5,508 $ — $ 4,975 $ 478 (Dollars in thousands) December 31, 2021 Recorded Unpaid Related Average Interest With no allowance recorded: Commercial $ — $ — $ — $ — $ — Real estate: Construction — — — — — Mortgage-residential 133 151 — 131 6 Mortgage-commercial 1,521 3,514 — 1,748 223 Consumer: Home Equity — — — — — Other — — — — — With an allowance recorded: Commercial — — — — — Real estate: Construction — — — — — Mortgage-residential — — — — — Mortgage-commercial 40 40 1 39 5 Consumer: Home Equity — — — — — Other — — — — — Total: Commercial — — — — — Real estate: Construction — — — — — Mortgage-residential 133 151 — 131 6 Mortgage-commercial 1,561 3,554 1 1,787 228 Consumer: Home Equity — — — — — Other — — — — — $ 1,694 $ 3,705 $ 1 $ 1,918 $ 234 (Dollars in thousands) December 31, 2020 Recorded Unpaid Related Average Interest 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 such as: 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 . Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Substandard . Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful . Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be “Pass” rated loans. As of December 31, 2022 and December 31, 2021, and based on the most recent analysis performed, the risk category of loans by class of loans is shown in the table below. As of December 31, 2022 and December 31, 2021, no loans were classified as doubtful. Schedule of loan category and loan by risk categories (Dollars in thousands) December 31, 2022 Pass Special Substandard Doubtful Total Commercial, financial & agricultural $ 72,333 $ 47 $ 29 $ — $ 72,409 Real estate: — — — — — Construction 91,223 — — — 91,223 Mortgage – residential 65,505 220 34 — 65,759 Mortgage – commercial 704,357 80 4,781 — 709,218 Consumer: — — — — — Home Equity 27,531 117 1,075 — 28,723 Other 13,269 93 163 — 13,525 Total $ 974,218 $ 557 $ 6,082 $ — $ 980,857 (Dollars in thousands) Special December 31, 2021 Pass Mention Substandard Doubtful Total Commercial, financial & agricultural $ 69,833 $ 119 $ — $ — $ 69,952 Real estate: — — — — — Construction 94,966 — 3 — 94,969 Mortgage – residential 45,049 305 144 — 45,498 Mortgage – commercial 610,001 1,009 6,454 — 617,464 Consumer: — — — — — Home Equity 25,751 171 1,194 — 27,116 Other 8,604 22 77 — 8,703 Total $ 854,204 $ 1,626 $ 7,872 $ — $ 863,702 The following tables are by loan category and present loans past due and on non-accrual status as of December 31, 2022 and December 31, 2021: (Dollars in thousands) 30-59 60-89 Greater than Nonaccrual Total Past Current Total Commercial $ 87 $ — $ — $ 29 $ 116 $ 72,293 $ 72,409 Real estate: Construction — — — — — 91,223 91,223 Mortgage-residential 327 — — 34 361 65,398 65,759 Mortgage-commercial 46 8 — 4,664 4,718 704,500 709,218 Consumer: Home equity — — — 168 168 28,555 28,723 Other 96 — 2 — 98 13,427 13,525 Total $ 556 $ 8 $ 2 $ 4,895 $ 5,461 $ 975,396 $ 980,857 (Dollars in thousands) 30-59 60-89 Greater than Nonaccrual Total Past Current Total Commercial $ 125 $ 35 $ — $ 118 $ 278 $ 69,674 $ 69,952 Real estate: Construction — — — — — 94,969 94,969 Mortgage-residential 8 4 — 132 144 45,354 45,498 Mortgage-commercial — — — — — 617,464 617,464 Consumer: Home equity — 62 — — 62 27,054 27,116 Other — 1 — — 1 8,702 8,703 Total $ 133 $ 102 $ — $ 250 $ 485 $ 863,217 $ 863,702 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 its corresponding collateral value. All TDR accruing loans where the loan balance exceeds the present value of cash flow 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 Bank 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 PCI loans for the years ended December 31, 2022, 2021, and 2020 follows: Schedule for changes in the accretable yield for PCI loans (Dollars in thousands) Year Year Year Accretable yield, beginning of period $ 64 $ 93 $ 123 Additions — — — Accretion (28 ) (29 ) (30 ) Reclassification of non-accretable difference due to improvement in expected cash flows — — — Other changes, net — — — Accretable yield, end of period $ 36 $ 64 $ 93 At December 31, 2022 and December 31, 2021, the recorded investment in purchased impaired loans was $ 91 thousand 109 thousand 117 thousand 152 thousand Related party loans 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 years ended December 31, 2022 and December 31, 2021. Schedule of Related Party Loans For the years ended (Dollars in thousands) 2022 2021 Balance, beginning of year $ 2,809 $ 3,297 New Loans 3 4 Less loan repayments 623 492 Balance, end of year $ 2,189 $ 2,809 |