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LOANS

6 Months Ended

Jun. 30, 2022

NOTE 6 LOANS

Loans held for sale at June 30, 2022 and December 31, 2021, totaled $62 thousand and $0, respectively, which represents mortgage loans originated for sale. These originations and sales are executed on a best-efforts basis.

Loans receivable outstanding as of June 30, 2022, and December 31, 2021, are summarized as follows:


(Dollars are in thousands)	June 30, 2022		December 31, 2021
Real estate secured:
Commercial	$	196,610	$	206,162
Construction and land development		37,690		32,325
Residential 1-4 family		223,722		224,530
Multifamily		37,611		33,048
Farmland		18,055		18,735
Total real estate loans		513,688		514,800
Commercial		46,697		54,325
Agriculture		3,623		4,021
Consumer installment loans		19,561		18,756
All other loans		2,062		1,842
Total loans	$	585,631	$	593,744

Included in commercial loans at June 30, 2022 and December 31, 2021 were $845 thousand and $6.4 million of Paycheck Protection Program (PPP) loans, respectively, that are guaranteed by the Small Business Administration (SBA).

Also included in total loans above are deferred loan fees of $1.7 million and $1.8 million at June 30, 2022 and December 31, 2021, respectively. Deferred loan costs were $2.1 million and $2.0 million, at June 30, 2022 and December 31, 2021, respectively. Income from net deferred fees and costs is recognized over the lives of the respective loans as a yield adjustment. If loans repay prior to scheduled maturities any unamortized fee or costs is recognized at that time.

Loans receivable on nonaccrual status as of June 30, 2022, and December 31, 2021, are summarized as follows:


(Dollars are in thousands)	June 30, 2022		December 31, 2021
Real estate secured:
Commercial	$	281	$	415
Construction and land development		778		37
Residential 1-4 family		2,478		2,314
Multifamily		50		111
Farmland		44		48
Total real estate loans		3,631		2,925
Commercial		—		9
Consumer installment loans and other loans		3		7
Total loans receivable on nonaccrual status	$	3,634	$	2,941

Total interest income not recognized on nonaccrual loans for the six months ended June 30, 2022, and June 30, 2021, was $11 thousand and $264 thousand, respectively.

The following tables presents information concerning the Company’s investment in loans considered impaired as of June 30, 2022, and December 31, 2021:

Schedule of summary of impaired loans
As of June 30, 2022 (Dollars are in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial	$	95	$	135	$	—
Construction and land development		11		285		—
Residential 1-4 family		1,444		1,761		—
Multifamily		—		—		—
Farmland		281		451		—
Commercial		25		33		—
Agriculture		—		—		—
Consumer installment loans		—		1		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		299		364		77
Construction and land development		744		744		207
Residential 1-4 family		299		328		47
Multifamily		50		111		50
Farmland		—		—		—
Commercial		—		—		—
Agriculture		—		—		—
Consumer installment loans		—		—		—
All other loans		—		—		—
Total	$	3,248	$	4,213	$	381

As of December 31, 2021 (Dollars are in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial	$	99	$	140	$	—
Construction and land development		24		298		—
Residential 1-4 family		1,508		1,791		—
Multifamily		—		—		—
Farmland		320		490		—
Commercial		—		—		—
Agriculture		—		—		—
Consumer installment loans		2		2		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		315		372		94
Construction and land development		—		—		—
Residential 1-4 family		340		372		53
Multifamily		—		—		—
Farmland		197		209		17
Commercial		28		35		2
Agriculture		—		—		—
Consumer installment loans		—		—		—
All other loans		—		—		—
Total	$	2,833	$	3,709	$	166

The following tables present information concerning the Company’s average impaired loans and interest recognized on those impaired loans, for the periods indicated:

	Six Months Ended
	June 30, 2022				June 30, 2021
(Dollars are in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	146	$	3	$	341	$	—
Construction and land development		31		8		89		9
Residential 1-4 family		1,549		22		1,828		29
Multifamily		—		—		—		—
Farmland		340		12		508		18
Commercial		8		—		—		—
Agriculture		—		—		—		—
Consumer installment loans		1		—		4		—
All other loans		—		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		492		3		1,235		3
Construction and land development		248		17		—		—
Residential 1-4 family		313		6		288		—
Multifamily		33		—		—		—
Farmland		105		—		69		—
Commercial		45		1		163		1
Agriculture		—		—		—		—
Consumer installment loans		—		—		—		—
All other loans		—		—		—		—
Total	$	3,311	$	72	$	4,525	$	60

	Three Months Ended
	June 30, 2022				June 30, 2021
(Dollars are in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	96	$	3	$	319	$	—
Construction and land development		14		4		85		5
Residential 1-4 family		1,464		8		1,912		15
Multifamily		—		—		—		—
Farmland		291		3		567		9
Commercial		13		1		—		—
Agriculture		—		—		—		—
Consumer installment loans		1		—		3		—
All other loans		—		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		303		—		1,070		—
Construction and land development		372		17		—		—
Residential 1-4 family		301		6		264		—
Multifamily		50		—		—		—
Farmland		97		—		—		—
Commercial		13		—		30		—
Agriculture		—		—		—		—
Consumer installment loans		—		—		—		—
All other loans		—		—		—		—
Total	$	3,015	$	42	$	4,250	$	29

An age analysis of past due loans receivable as of June 30, 2022, and December 31, 2021, is below. At June 30, 2022 and December 31, 2021, no loans over 90 days past due were accruing.


As of June 30, 2022 (Dollars are in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans
Real estate secured:
Commercial	$	5,018	$	—	$	—	$	5,018	$	191,592	$	196,610
Construction and land development		744		—		7		751		36,939		37,690
Residential 1-4 family		2,092		554		634		3,280		220,442		223,722
Multifamily		235		—		50		285		37,326		37,611
Farmland		282		—		—		282		17,773		18,055
Total real estate loans		8,371		554		691		9,616		504,072		513,688
Commercial		270		—		—		270		46,427		46,697
Agriculture		—		—		—		—		3,623		3,623
Consumer installment loans		65		15		1		81		19,480		19,561
All other loans		49		—		—		49		2,013		2,062
Total loans	$	8,755	$	569	$	692	$	10,016	$	575,615	$	585,631

As of December 31, 2021 (Dollars are in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans
Real estate secured:
Commercial	$	—	$	—	$	—	$	—	$	206,162	$	206,162
Construction and land development		7		—		7		14		32,311		32,325
Residential 1-4 family		2,473		240		486		3,199		221,331		224,530
Multifamily		—		—		111		111		32,937		33,048
Farmland		—		—		—		—		18,735		18,735
Total real estate loans		2,480		240		604		3,324		511,476		514,800
Commercial		5		—		—		5		54,320		54,325
Agriculture		—		—		—		—		4,021		4,021
Consumer installment Loans		56		5		—		61		18,695		18,756
All other loans		—		—		—		—		1,842		1,842
Total loans	$	2,541	$	245	$	604	$	3,390	$	590,354	$	593,744

The Company categorizes loans receivable 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 receivable as to credit risk. The Company uses the following definitions for risk ratings:

Pass - Loans in this category are considered to have a low likelihood of loss based on relevant information analyzed about the ability of the borrowers to service their debt and other factors.

Special Mention - Loans in this category are currently protected but are potentially weak, including adverse trends in borrower’s operations, credit quality or financial strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances. Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect the Company’s credit position at some future date.

Substandard - A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must 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 doubtful have all the weaknesses inherent in loans classified as substandard, plus 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.

Based on the most recent analysis performed, the risk categories of loans receivable as of June 30, 2022, and December 31, 2021, was as follows:


As of June 30, 2022 (Dollars are in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real estate secured:
Commercial	$	191,879	$	4,450	$	281	$	—	$	196,610
Construction and land development		36,777		135		778		—		37,690
Residential 1-4 family		220,714		530		2,478		—		223,722
Multifamily		37,349		212		50		—		37,611
Farmland		17,098		913		44		—		18,055
Total real estate loans		503,817		6,240		3,631		—		513,688
Commercial		45,755		942		—		—		46,697
Agriculture		3,623		—		—		—		3,623
Consumer installment loans		19,558		—		3		—		19,561
All other loans		2,062		—		—		—		2,062
Total	$	574,815	$	7,182	$	3,634	$	—	$	585,631

As of December 31, 2021 (Dollars are in thousands)		Pass		Special Mention		Substandard		Doubtful		Total
Real estate secured:
Commercial	$	198,022	$	7,725	$	415	$	—	$	206,162
Construction and land development		31,366		922		37		—		32,325
Residential 1-4 family		221,342		915		2,273		—		224,530
Multifamily		32,499		438		111		—		33,048
Farmland		18,137		550		48		—		18,735
Total real estate loans		501,366		10,550		2,884		—		514,800
Commercial		53,162		1,154		9		—		54,325
Agriculture		4,021		—		—		—		4,021
Consumer installment loans		18,746		2		8		—		18,756
All other loans		1,842		—		—		—		1,842
Total	$	579,137	$	11,706	$	2,901	$	—	$	593,744