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Loans and allowance for loan losses
6 Months Ended
Jun. 30, 2024
Loans and allowance for credit losses  
Loans and allowance for credit losses

Note 5 – Loans and allowance for credit losses

Loans classified by type as of June 30, 2024 and December 31, 2023 are as follows (dollars in thousands):

June 30, 2024

December 31, 2023

 

    

Amount

    

%  

    

Amount

    

%

Construction and land development

 

  

 

  

 

  

 

  

Residential

$

13,080

 

2.16

%  

$

10,471

 

1.82

%

Commercial

 

36,067

 

5.96

%  

 

37,024

 

6.44

%

 

49,147

 

8.12

%  

 

47,495

 

8.26

%

Commercial real estate

 

  

 

  

 

  

 

  

Owner occupied

 

128,783

 

21.28

%  

 

122,666

 

21.33

%

Non-owner occupied

 

162,621

 

26.86

%  

 

154,855

 

26.93

%

Multifamily

 

18,293

 

3.02

%  

 

12,743

 

2.22

%

Farmland

 

315

 

0.05

%  

 

326

 

0.06

%

 

310,012

 

51.21

%  

 

290,590

 

50.54

%

Consumer real estate

 

  

 

  

 

  

 

  

Home equity lines

 

22,281

 

3.68

%  

 

21,557

 

3.75

%

Secured by 1-4 family residential,

 

  

 

  

 

  

 

  

First deed of trust

 

95,196

 

15.72

%  

 

95,638

 

16.63

%

Second deed of trust

 

12,808

 

2.12

%  

 

11,337

 

1.97

%

 

130,285

 

21.52

%  

 

128,532

 

22.35

%

Commercial and industrial loans

 

  

 

  

 

  

 

  

(except those secured by real estate)

 

97,363

 

16.08

%  

 

86,203

 

14.99

%

Guaranteed student loans

 

14,156

 

2.34

%  

 

17,923

 

3.12

%

Consumer and other

 

4,445

 

0.73

%  

 

4,265

 

0.74

%

Total loans

 

605,408

 

100.0

%  

 

575,008

 

100.0

%

Deferred and costs, net

 

678

 

 

803

 

Less: allowance for credit losses

 

(3,681)

 

 

(3,423)

 

$

602,405

$

572,388

The Bank has a purchased portfolio of rehabilitated student loans guaranteed by the U.S. Department of Education (“DOE”). The guarantee covers approximately 98% of principal and accrued interest. The loans are serviced by a third-party servicer that specializes in handling the special needs of the DOE student loan programs.

Loans pledged as collateral with the FHLB as part of their lending arrangement with the Company totaled $57.2 million and $35.5 million as of June 30, 2024, and December 31, 2023, respectively.

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The following table provides information on nonaccrual loans segregated by type at the dates indicated (in thousands):

    

June 30, 

    

December 31, 

2024

2023

Consumer real estate

 

  

 

  

Secured by 1-4 family residential

 

  

 

  

First deed of trust

$

157

$

160

Second deed of trust

 

96

 

105

 

253

 

265

Commercial and industrial loans

 

  

 

  

(except those secured by real estate)

 

134

 

26

Total loans

$

387

$

291

There was $125,000 in loans with an individual allowance of $17,000 that were collateral dependent associated with the total nonaccrual loans of $387,000 at June 30, 2024.  There were no individual allowances associated with the total nonaccrual loans of $291,000 at December 31, 2023, that were considered collateral dependent.

The Company recognized $12,000 of interest on nonaccrual loans outstanding as of June 30, 2024.

Management considers the guidance in Accounting Standards Codification (“ASC”) 310-20 when determining whether a modification, extension, or renewal of loan constitutes a current period origination.  Generally, current period renewals of credit are reunderwritten at the point of renewal and considered current period originations for purposes of the table below.

As of June 30, 2024, based on the most recent analysis performed, the risk category of loans based on year of origination is as follows (in thousands):

    

    

    

    

Revolving-

    

Total

2024

2023

2022

2021

2020

Prior

Revolving

Term

Loans

June 30, 2024

 

  

 

  

 

  

 

  

 

  

Construction and land development

 

  

 

  

 

  

 

  

 

  

Residential

Pass

$

5,528

$

4,902

$

2,311

$

339

$

$

$

$

$

13,080

Special Mention

Substandard

Total Residential

$

5,528

$

4,902

$

2,311

$

339

$

$

$

$

$

13,080

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Commercial

 

 

 

 

 

 

 

 

 

Pass

1,271

7,430

14,118

10,277

214

959

1,798

36,067

Special Mention

Substandard

Total Commercial

$

1,271

$

7,430

$

14,118

$

10,277

$

214

$

959

$

1,798

$

$

36,067

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Commercial real estate

 

 

  

 

  

 

  

 

 

 

 

 

  

Owner occupied

 

 

 

 

 

 

 

 

 

Pass

8,890

12,906

24,293

19,014

9,161

50,313

625

125,202

Special Mention

456

3,125

3,581

Substandard

Total Owner occupied

$

8,890

$

12,906

$

24,293

$

19,014

$

9,617

$

53,438

$

625

$

$

128,783

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Non-owner occupied

 

 

 

 

 

 

 

 

 

Pass

9,535

9,379

28,949

28,023

23,128

54,241

4,476

157,731

Special Mention

2,148

2,742

4,890

Substandard

Total Non-owner occupied

$

9,535

$

9,379

$

28,949

$

30,171

$

23,128

$

56,983

$

4,476

$

$

162,621

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Multifamily

 

 

 

 

 

 

 

 

 

Pass

5,250

1,300

2,363

537

6,751

2,092

18,293

Special Mention

Substandard

Total Multifamily

$

5,250

$

1,300

$

$

2,363

$

537

$

6,751

$

2,092

$

$

18,293

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Farmland

 

 

 

 

 

 

 

 

 

Pass

20

295

315

Special Mention

Substandard

Total Farmland

$

$

$

$

$

$

20

$

295

$

$

315

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Consumer real estate

 

 

  

 

  

 

  

 

 

 

 

 

  

Home equity lines

 

 

 

 

 

 

 

 

 

Pass

22,206

22,206

Special Mention

75

75

Substandard

Total Home equity lines

$

$

$

$

$

$

$

22,281

$

$

22,281

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Secured by 1-4 family residential

 

 

  

 

  

 

  

 

 

 

 

 

  

First deed of trust

Pass

7,483

30,394

14,148

14,019

7,834

18,826

2,124

94,828

Special Mention

211

211

Substandard

157

157

Total First deed of trust

$

7,483

$

30,394

$

14,148

$

14,019

$

7,834

$

19,194

$

2,124

$

$

95,196

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Second deed of trust

 

 

 

 

 

 

 

 

 

Pass

1,768

4,377

2,996

989

375

1,464

547

12,516

Special Mention

87

109

196

Substandard

96

96

Total Second deed of trust

$

1,855

$

4,377

$

2,996

$

989

$

375

$

1,669

$

547

$

$

12,808

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Commercial and industrial loans

  

(except those secured by real estate)

Pass

11,149

17,274

13,894

12,044

5,003

5,135

32,098

96,597

Special Mention

93

123

416

632

Substandard

83

51

134

Total Commercial and industrial

$

11,149

$

17,274

$

13,987

$

12,127

$

5,003

$

5,309

$

32,514

$

$

97,363

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Guaranteed student loans

 

 

 

 

 

 

 

 

 

Pass

14,156

14,156

Special Mention

Substandard

Total Guaranteed student loans

$

$

$

$

$

$

14,156

$

$

$

14,156

Current period gross writeoff

$

11

$

$

$

$

$

$

$

$

11

Consumer and other

Pass

283

394

363

81

30

16

3,278

4,445

Special Mention

Substandard

Total Consumer and other

$

283

$

394

$

363

$

81

$

30

$

16

$

3,278

$

$

4,445

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Total Current period gross writeoff

$

11

$

$

$

$

$

$

$

$

11

Total loans

$

51,244

$

88,356

$

101,165

$

89,380

$

46,738

$

158,495

$

70,030

$

$

605,408

    

    

    

    

Revolving-

    

Total

2023

2022

2021

2020

2019

Prior

Revolving

Term

Loans

December 31, 2023

 

  

 

  

 

  

 

  

 

  

Construction and land development

 

  

 

  

 

  

 

  

 

  

Residential

Pass

$

6,320

$

3,812

$

339

$

$

$

$

$

$

10,471

Special Mention

Substandard

Total Residential

$

6,320

$

3,812

$

339

$

$

$

$

$

$

10,471

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Commercial

 

 

 

 

 

 

 

 

 

Pass

5,007

14,506

10,339

235

1,183

5,754

37,024

Special Mention

Substandard

Total Commercial

$

5,007

$

14,506

$

10,339

$

235

$

$

1,183

$

5,754

$

$

37,024

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Commercial real estate

 

 

  

 

  

 

  

 

 

 

 

 

  

Owner occupied

 

 

 

 

 

 

 

 

 

Pass

11,945

21,846

20,044

9,855

12,145

41,067

788

117,690

Special Mention

202

73

4,701

4,976

Substandard

Total Owner occupied

$

11,945

$

22,048

$

20,117

$

9,855

$

12,145

$

45,768

$

788

$

$

122,666

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Non-owner occupied

 

 

 

 

 

 

 

 

 

Pass

9,468

25,607

28,455

23,567

9,528

47,645

3,312

147,582

Special Mention

2,173

5,100

7,273

Substandard

Total Non-owner occupied

$

9,468

$

25,607

$

30,628

$

23,567

$

9,528

$

52,745

$

3,312

$

$

154,855

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Multifamily

 

 

 

 

 

 

 

 

 

Pass

1,300

2,503

548

885

6,113

1,394

12,743

Special Mention

Substandard

Total Multifamily

$

1,300

$

$

2,503

$

548

$

885

$

6,113

$

1,394

$

$

12,743

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Farmland

 

 

 

 

 

 

 

 

 

Pass

26

300

326

Special Mention

Substandard

Total Farmland

$

$

$

$

$

$

26

$

300

$

$

326

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Consumer real estate

 

 

  

 

  

 

  

 

 

 

 

 

  

Home equity lines

 

 

 

 

 

 

 

 

 

Pass

446

21,036

21,482

Special Mention

75

75

Substandard

Total Home equity lines

$

$

446

$

$

$

$

$

21,111

$

$

21,557

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Secured by 1-4 family residential

 

 

  

 

  

 

  

 

 

 

 

 

  

First deed of trust

Pass

34,067

14,288

15,613

8,107

2,957

17,427

2,125

94,584

Special Mention

170

724

894

Substandard

160

160

Total First deed of trust

$

34,067

$

14,288

$

15,613

$

8,277

$

2,957

$

18,311

$

2,125

$

$

95,638

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Second deed of trust

 

 

 

 

 

 

 

 

 

Pass

4,530

3,207

1,027

397

1,067

626

266

11,120

Special Mention

45

67

112

Substandard

105

105

Total Second deed of trust

$

4,530

$

3,207

$

1,027

$

397

$

1,112

$

798

$

266

$

$

11,337

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Commercial and industrial loans

  

(except those secured by real estate)

Pass

15,022

15,900

15,321

5,634

2,852

3,698

27,068

85,495

Special Mention

37

318

22

306

683

Substandard

13

12

25

Total Commercial and industrial

$

15,059

$

15,900

$

15,321

$

5,647

$

3,170

$

3,732

$

27,374

$

$

86,203

Current period gross writeoff

$

$

$

$

$

$

$

$

$

Guaranteed student loans

 

 

 

 

 

 

 

 

 

Pass

17,923

17,923

Special Mention

Substandard

Total Guaranteed student loans

$

$

$

$

$

$

17,923

$

$

$

17,923

Current period gross writeoff

$

30

$

$

$

$

$

$

$

$

30

Consumer and other

Pass

455

483

123

50

17

11

3,126

4,265

Special Mention

Substandard

Total Consumer and other

$

455

$

483

$

123

$

50

$

17

$

11

$

3,126

$

$

4,265

Current period gross writeoff

$

3

$

$

$

$

$

$

$

$

3

Total Current period gross writeoff

$

33

$

$

$

$

$

$

$

$

33

Total loans

$

88,151

$

100,297

$

96,010

$

48,576

$

29,814

$

146,610

$

65,550

$

$

575,008

The following table presents the aging of the recorded investment in past due loans and leases as of the dates indicated (in thousands):

Greater

Investment >

3059 Days

6089 Days

Than

Total Past

Total

90 Days and

Past Due

Past Due

90 Days

Due

Current

Loans

Accruing

June 30, 2024

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Construction and land development

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Residential

$

$

$

$

$

13,080

$

13,080

$

Commercial

 

 

 

 

 

36,067

 

36,067

 

 

 

 

 

 

49,147

 

49,147

 

Commercial real estate

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Owner occupied

 

 

 

 

 

128,783

 

128,783

 

Non-owner occupied

 

 

 

 

 

162,621

 

162,621

 

Multifamily

 

 

 

 

 

18,293

 

18,293

 

Farmland

 

 

 

 

 

315

 

315

 

 

 

 

 

 

310,012

 

310,012

 

Consumer real estate

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Home equity lines

 

25

 

 

 

25

 

22,256

 

22,281

 

Secured by 1‑4 family residential

 

  

 

  

 

  

 

  

 

  

 

  

 

  

First deed of trust

 

 

 

 

 

95,196

 

95,196

 

Second deed of trust

 

 

 

 

 

12,808

 

12,808

 

 

25

 

 

 

25

 

130,260

 

130,285

 

Commercial and industrial loans

 

  

 

  

 

  

 

  

 

  

 

  

 

  

(except those secured by real estate)

 

46

 

1,086

 

 

1,132

 

96,231

 

97,363

 

Guaranteed student loans

 

547

 

172

 

1,050

 

1,769

 

12,387

 

14,156

 

1,050

Consumer and other

 

 

 

17

 

17

 

4,428

 

4,445

 

Total loans

$

618

$

1,258

$

1,067

$

2,943

$

602,465

$

605,408

$

1,050

    

    

    

    

    

    

    

Recorded

Greater

Investment >

30-59 Days

60-89 Days

Than

Total Past

Total

90 Days and

Past Due

Past Due

90 Days

Due

Current

Loans

Accruing

December 31, 2023

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Construction and land development

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Residential

$

$

$

$

$

10,471

$

10,471

$

Commercial

 

 

 

 

 

37,024

 

37,024

 

 

 

 

 

 

47,495

 

47,495

 

Commercial real estate

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Owner occupied

 

 

 

 

 

122,666

 

122,666

 

Non-owner occupied

 

 

 

 

 

154,855

 

154,855

 

Multifamily

 

 

 

 

 

12,743

 

12,743

 

Farmland

 

 

 

 

 

326

 

326

 

 

 

 

 

 

290,590

 

290,590

 

Consumer real estate

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Home equity lines

 

83

 

25

 

 

108

 

21,449

 

21,557

 

Secured by 1-4 family residential

 

  

 

  

 

  

 

  

 

  

 

  

 

  

First deed of trust

 

 

 

 

 

95,638

 

95,638

 

Second deed of trust

 

33

 

 

 

33

 

11,304

 

11,337

 

 

116

 

25

 

 

141

 

128,391

 

128,532

 

Commercial and industrial loans

 

  

 

  

 

  

 

  

 

  

 

  

 

  

(except those secured by real estate)

 

 

 

 

 

86,203

 

86,203

 

Guaranteed student loans

 

690

 

493

 

2,228

 

3,411

 

14,512

 

17,923

 

2,228

Consumer and other

 

734

 

 

 

734

 

3,531

 

4,265

 

Total loans

$

1,540

$

518

$

2,228

$

4,286

$

570,722

$

575,008

$

2,228

Loans greater than 90 days past due consist of student loans that are guaranteed by the DOE which covers approximately 98% of the principal and interest. Accordingly, these loans will not be placed on nonaccrual status and are not considered to be impaired.

Loans that are individually evaluated for credit losses are limited to loans that have specific risk characteristics that are not shared by other loans and based on current information and events it is probable the Company will be unable to collect all amounts when due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. The repayment of these loans is expected to be substantially through the operations or the sale of the collateral. The allowance for credit

losses on loans that are individually evaluated will be measured based on the fair value of the collateral either through operations or the sale of the collateral. When repayment is expected through the sale of the collateral, the allowance will be based on the fair value of the collateral less estimated costs to sell. Collateral dependent loans, or portions thereof, are charged off when deemed uncollectible.

Collateral dependent loans are set forth in the following table as of the dates indicated (in thousands):

June 30, 2024

December 31, 2023

    

    

Unpaid

    

    

    

Unpaid

    

Recorded

Principal

Related

Recorded

Principal

Related

Investment

Balance

Allowance

Investment

Balance

Allowance

With no related allowance recorded

 

  

 

  

 

  

 

  

 

  

 

  

Secured by 1‑4 family residential

 

 

  

 

  

 

 

  

 

  

First deed of trust

$

157

$

157

$

$

160

$

160

$

Second deed of trust

 

96

 

96

 

 

105

 

105

 

 

253

 

253

 

 

265

 

265

 

Commercial and industrial loans

 

  

 

 

  

 

  

 

 

  

(except those secured by real estate)

 

9

 

9

 

 

26

 

26

 

 

262

 

262

 

 

291

 

291

 

With an allowance recorded

 

  

 

  

 

  

 

  

 

  

 

  

Commercial and industrial loans

 

  

 

  

 

  

 

  

 

  

 

  

(except those secured by real estate)

 

125

 

125

 

17

 

 

 

 

125

 

125

 

17

 

 

 

Total

 

  

 

  

 

  

 

  

 

  

 

  

Secured by 1-4 family residential,

 

  

 

  

 

  

 

  

 

  

 

  

First deed of trust

 

157

 

157

 

 

160

 

160

 

Second deed of trust

 

96

 

96

 

 

105

 

105

 

 

253

 

253

 

 

265

 

265

 

Commercial and industrial loans

 

  

 

  

 

  

 

  

 

  

 

  

(except those secured by real estate)

 

134

 

134

 

17

 

26

 

26

 

Consumer and other

$

387

$

387

$

17

$

291

$

291

$

The following is a summary of average recorded investment in collateral dependent loans with and without a valuation allowance and interest income recognized on those loans for the periods indicated (in thousands):

For the Three Months Ended

For the Six Months Ended

June 30, 2024

June 30, 2024

Average

    

Interest

    

Average

    

Interest

Recorded

Income

Recorded

Income

Investment

Recognized

Investment

Recognized

With no related allowance recorded

  

 

  

 

  

 

  

Consumer real estate

 

  

 

  

 

  

 

  

Secured by 1-4 family residential

 

  

 

  

 

  

 

  

First deed of trust

$

158

$

3

$

159

$

5

Second deed of trust

 

98

 

5

 

100

 

6

 

256

 

8

 

259

 

11

Commercial and industrial loans

 

  

 

  

 

  

 

  

(except those secured by real estate)

 

11

 

 

16

 

 

267

 

8

 

275

 

11

With an allowance recorded

 

  

 

  

 

  

 

  

Commercial and industrial loans

 

  

 

  

 

  

 

  

(except those secured by real estate)

 

134

 

5

 

134

 

8

 

134

 

5

 

134

 

8

Total

 

  

 

  

 

  

 

  

Consumer real estate

 

  

 

  

 

  

 

  

Secured by 1-4 family residential,

 

  

 

  

 

  

 

  

First deed of trust

 

158

 

3

 

159

 

5

Second deed of trust

 

98

 

5

 

100

 

6

 

256

 

8

 

259

 

11

Commercial and industrial loans

 

  

 

  

 

  

 

  

(except those secured by real estate)

 

145

 

5

 

150

 

8

Consumer and other

 

 

 

 

$

401

$

13

$

409

$

19

Loan Modifications to Borrowers in Financial Difficulty

As part of its credit risk management, the Company may modify a loan agreement with a borrower experiencing financial difficulties through a refinancing or restructuring of the borrower’s loan agreement. There were no modified loans identified during the six months ended June 30, 2024 and June 30, 2023.  

In accordance with ASC 326, the Company has segmented its loan portfolio based on similar risk characteristics by call report code. The Company’s forecast of estimated expected losses is based on a twelve-month forecast of the national rate of unemployment and external observations of historical loan losses. The Company uses the Federal Open Market Committee’s projection of unemployment for its reasonable and supportable forecasting of current expected credit losses. For the periods beyond the reasonable and supportable forecast period, projections of expected credit losses are based on a reversion to the long-run mean for the national unemployment rate. To further adjust the allowance for credit losses for expected losses not already included within the quantitative component of the calculation, the Company may consider the following qualitative adjustment factors: changes in lending policies and procedures including changes in underwriting standards, and collections, charge-offs, and recovery practices, changes in international, national, regional, and local conditions, changes in the nature and volume of the portfolio and terms of loans, changes in experience, depth, and ability of lending management, changes in the volume and severity of past due loans and other similar conditions, changes in the quality of the organization’s loan review system, changes in the value of underlying collateral for collateral dependent loans, the existence and effect of any concentrations of credit and changes in the levels of such concentrations, and the effect of other external factors (i.e. competition, legal and regulatory requirements) on the level of estimated credit losses.

Activity in the allowance for credit losses on loans is as follows for the periods indicated (in thousands):

    

Provision for

    

    

    

Beginning

(Recovery of)

Ending

Balance

Credit Losses

Charge-offs

Recoveries

Balance

Three Months Ended June 30, 2024

 

  

  

 

  

 

  

 

  

Construction and land development

 

  

  

 

  

 

  

 

  

Residential

$

57

$

27

$

$

$

84

Commercial

 

202

 

4

 

 

 

206

 

259

 

31

 

 

 

290

Commercial real estate

 

  

 

  

 

  

 

  

 

  

Owner occupied

 

437

 

24

 

 

 

461

Non-owner occupied

 

1,596

 

(127)

 

 

 

1,469

Multifamily

 

86

 

(2)

 

 

 

84

Farmland

 

 

1

 

 

 

1

 

2,119

 

(104)

 

 

 

2,015

Consumer real estate

 

  

 

  

 

  

 

  

 

  

Home equity lines

 

32

 

 

 

 

32

Secured by 1-4 family residential

 

  

 

 

  

 

  

 

  

First deed of trust

 

298

 

(7)

 

 

1

 

292

Second deed of trust

 

98

 

(103)

 

 

108

 

103

 

428

 

(110)

 

 

109

 

427

Commercial and industrial loans

 

  

 

  

 

  

 

  

 

  

(except those secured by real estate)

 

666

 

57

 

 

3

 

726

Student loans

 

55

 

(5)

 

(5)

 

 

45

Consumer and other

 

36

 

(2)

 

 

 

34

Unallocated

 

11

 

133

 

 

 

144

$

3,574

$

$

(5)

$

112

$

3,681

    

Impact of

Provision for

    

    

    

Beginning

adopting

(Recovery of)

Ending

Balance

ASC 326

Credit Losses

Charge-offs

Recoveries

Balance

Three Months Ended June 30, 2023

 

  

  

  

 

  

 

  

 

  

Construction and land development

 

  

  

  

 

  

 

  

 

  

Residential

$

51

$

$

10

$

$

$

61

Commercial

 

264

 

 

3

 

 

 

267

 

315

 

 

13

 

 

 

328

Commercial real estate

 

  

 

  

 

  

 

  

 

  

 

  

Owner occupied

 

391

 

 

(12)

 

 

 

379

Non-owner occupied

 

1,460

 

 

(84)

 

 

 

1,376

Multifamily

 

40

 

 

 

 

 

40

Farmland

 

 

 

 

 

 

 

1,891

 

 

(96)

 

 

 

1,795

Consumer real estate

 

  

 

  

 

  

 

  

 

  

 

  

Home equity lines

 

33

 

 

30

 

 

 

63

Secured by 1-4 family residential

 

  

 

  

 

 

  

 

  

 

  

First deed of trust

 

214

 

 

5

 

 

 

219

Second deed of trust

 

75

 

 

4

 

 

4

 

83

 

322

 

 

39

 

 

4

 

365

Commercial and industrial loans

 

  

 

  

 

  

 

  

 

  

 

  

(except those secured by real estate)

 

549

 

 

118

 

 

6

 

673

Student loans

 

112

 

 

(95)

 

(4)

 

 

13

Consumer and other

 

34

 

 

1

 

 

 

35

Unallocated

 

49

 

 

(2)

 

 

 

47

$

3,272

$

$

(22)

$

(4)

$

10

$

3,256

    

Provision for

    

    

    

Beginning

(Recovery of)

Ending

Balance

Credit Losses

Charge-offs

Recoveries

Balance

Six Months Ended June 30, 2024

 

  

  

 

  

 

  

 

  

Construction and land development

 

  

  

 

  

 

  

 

  

Residential

$

86

$

(2)

$

$

$

84

Commercial

 

228

 

(22)

 

 

 

206

 

314

 

(24)

 

 

 

290

Commercial real estate

 

  

 

  

 

  

 

  

 

  

Owner occupied

 

409

 

52

 

 

 

461

Non-owner occupied

 

1,467

 

2

 

 

 

1,469

Multifamily

 

44

 

40

 

 

 

84

Farmland

 

3

 

(2)

 

 

 

1

 

1,923

 

92

 

 

 

2,015

Consumer real estate

 

  

 

  

 

  

 

  

 

  

Home equity lines

 

40

 

(18)

 

 

10

 

32

Secured by 1-4 family residential

 

  

 

 

  

 

 

  

First deed of trust

 

293

 

(3)

 

 

2

 

292

Second deed of trust

 

99

 

(109)

 

 

113

 

103

 

432

 

(130)

 

 

125

 

427

Commercial and industrial loans

 

  

 

  

 

  

 

  

 

  

(except those secured by real estate)

 

640

 

79

 

 

7

 

726

Student loans

 

57

 

(1)

 

(11)

 

 

45

Consumer and other

 

36

 

(2)

 

 

 

34

Unallocated

 

21

 

123

 

 

 

144

$

3,423

$

137

$

(11)

$

132

$

3,681

    

Impact of

    

Provision for

    

    

    

Beginning

adopting

(Recovery of)

Ending

Balance

ASC 326

Loan Losses

Charge-offs

Recoveries

Balance

Six Months Ended June 30, 2023

 

  

  

 

  

 

  

 

  

 

  

Construction and land development

 

  

  

 

  

 

  

 

  

 

  

Residential

$

79

$

3

$

(21)

$

$

$

61

Commercial

 

192

 

34

 

41

 

 

 

267

 

271

 

37

 

20

 

 

 

328

Commercial real estate

 

  

 

  

 

  

 

  

 

  

 

  

Owner occupied

 

867

 

(475)

 

(13)

 

 

 

379

Non-owner occupied

 

1,289

 

192

 

(105)

 

 

 

1,376

Multifamily

 

33

 

7

 

 

 

 

40

Farmland

 

 

 

 

 

 

 

2,189

 

(276)

 

(118)

 

 

 

1,795

Consumer real estate

 

  

 

  

 

  

 

  

 

  

 

  

Home equity lines

 

11

 

24

 

28

 

 

 

63

Secured by 1-4 family residential

 

  

 

  

 

  

 

  

 

  

 

  

First deed of trust

 

131

 

76

 

11

 

 

1

 

219

Second deed of trust

 

43

 

25

 

9

 

 

6

 

83

 

185

 

125

 

48

 

 

7

 

365

Commercial and industrial loans

 

  

 

  

 

  

 

  

 

  

 

  

(except those secured by real estate)

 

576

 

1

 

84

 

 

12

 

673

Student loans

 

52

 

 

(32)

 

(7)

 

 

13

Consumer and other

 

37

 

(5)

 

3

 

 

 

35

Unallocated

 

60

 

(9)

 

(4)

 

 

 

47

$

3,370

$

(127)

$

1

$

(7)

$

19

$

3,256

    

    

Impact of

Provision for

    

    

    

Beginning

adopting

(Recovery of)

Ending

Balance

ASC 326

Loan Losses

Charge-offs

Recoveries

Balance

Year Ended December 31, 2023

 

  

 

  

 

  

 

  

 

  

Construction and land development

 

  

 

  

 

  

 

  

 

  

Residential

$

79

$

3

$

4

$

$

$

86

Commercial

 

192

 

34

 

2

 

 

 

228

 

271

 

37

 

6

 

 

 

314

Commercial real estate

 

  

 

  

 

  

 

  

 

  

 

  

Owner occupied

 

867

 

(475)

 

17

 

 

 

409

Non-owner occupied

 

1,289

 

192

 

(14)

 

 

 

1,467

Multifamily

 

33

 

7

 

4

 

 

 

44

Farmland

 

 

 

3

 

 

 

3

 

2,189

 

(276)

 

10

 

 

 

1,923

Consumer real estate

 

  

 

  

 

  

 

  

 

  

 

  

Home equity lines

 

11

 

24

 

5

 

 

 

40

Secured by 1-4 family residential

 

  

 

  

 

  

 

  

 

  

 

  

First deed of trust

 

131

 

76

 

83

 

 

3

 

293

Second deed of trust

 

43

 

25

 

15

 

 

16

 

99

 

185

 

125

 

103

 

 

19

 

432

Commercial and industrial loans

 

  

 

  

 

  

 

  

 

  

 

  

(except those secured by real estate)

 

576

 

1

 

(110)

 

 

173

 

640

Student loans

 

52

 

 

35

 

(30)

 

 

57

Consumer and other

 

37

 

(5)

 

7

 

(3)

 

 

36

Unallocated

 

60

 

(9)

 

(30)

 

 

 

21

$

3,370

$

(127)

$

21

$

(33)

$

192

$

3,423

Loans are required to be measured at amortized costs and to be presented at the net amount expected to be collected. Off balance sheet credit exposures, including loan commitments, are not recorded on balance sheet, but expected credit losses arising from off balance sheet credit exposures are recorded as a reserve for unfunded commitments and reported in Other Liabilities. Credit losses on available for sale debt securities are accounted for as an allowance for credit losses, which is a valuation account that is deducted from the amortized cost basis of the financial asset to present the net carrying value and the amount expected to be collected on the financial assets. The allowance for credit losses on loans, available for sale debt securities and the reserve for unfunded commitments are established through a provision for credit losses charged against earnings.

The following table presents a breakdown of the provision for credit losses for the periods indicated (in thousands):

Three Months Ended June 30,

2024

2023

Provision for credit losses:

  

  

Recovery (provision) for loans

$

$

(22)

Provision for unfunded commitments

22

Total

$

$

Six Months Ended June 30,

2024

2023

Provision for credit losses:

  

  

Recovery for loans

$

137

$

1

Provision (recovery) for unfunded commitments

13

(1)

Total

$

150

$

As of June 30, 2024, the allowance for credit losses was $4.0 million and included an allowance for credit losses on loans of $3.68 million and a reserve for unfunded commitments of $320,000.

The Company did not record a provision for credit losses for the three months ended June 30, 2024. The lack of a provision for credit losses was driven primarily by the recognition of a net-recovery of previously charged-off loans of $107,000 during the period and was supported by stable local economic conditions and credit quality remaining strong during the period.

The Company did not record a provision for credit losses for unfunded commitments for the three months ended June 30, 2024, which was driven by a stable balance in the total commitments outstanding at June 30, 2024.

The Company recorded a provision for credit losses for loans of $136,700 for the six months ended June 30, 2024, which was the result of loan growth as all credit metrics remained strong compared to year-end 2023. Non-performing loans as a percentage of loans were consistent, 0.06% at June 30, 2024 compared to 0.05 at December 31, 2023.

The Company recorded a provision for credit losses for unfunded commitments of $13,300 for the six months ended June 30, 2024, which was driven by an increase in the total commitments outstanding at June 30, 2024.

As of June 30, 2023, the allowance for credit losses was $3.53 million and included an allowance for credit losses on loans of $3.26 million and a reserve for unfunded commitments of $277,000.

The Company recorded a recovery of credit losses for loans of $22,000 for the three months ended June 30, 2023, which was due to improved credit metrics as nonperforming loans as a percentage of loans decreased from 0.12% at March 31, 2023 to 0.06% at June 30, 2023.

The Company recorded a provision for credit losses for unfunded commitments of $22,000 for the three months ended June 30, 2023, which was driven by an increase in the total balance outstanding at June 30, 2023.

The Company recorded a provision for credit losses for loans of $1,000 for the six months ended June 30, 2023, which was the result of loan growth being offset by improved credit metrics as non-performing loans as a percentage of loans decreased from 0.13% at December 31, 2022 to 0.06% at June 30, 2023.  

The Company recorded a recovery for credit losses for unfunded commitments of $1,000 for the six months ended June 30, 2023, which was driven by a slight decrease in the total balance outstanding at June 30, 2023.

Loans were evaluated for credit losses as follows for the periods indicated (in thousands):

Recorded Investment in Loans

Allowance

Loans

    

Ending

    

    

    

Ending

    

    

 

Balance

 

Individually

 

Collectively

 

Balance

 

Individually

 

Collectively

Six Months Ended June 30, 2024

 

  

 

  

 

  

 

  

 

  

 

  

Construction and land development

 

  

 

  

 

  

 

  

 

  

 

  

Residential

$

84

$

$

84

$

13,080

$

$

13,080

Commercial

 

206

 

 

206

 

36,067

 

 

36,067

 

290

 

 

290

 

49,147

 

 

49,147

Commercial real estate

 

  

 

  

 

  

 

  

 

  

 

  

Owner occupied

 

461

 

 

461

 

128,783

 

 

128,783

Non-owner occupied

 

1,469

 

 

1,469

 

162,621

 

 

162,621

Multifamily

 

84

 

 

84

 

18,293

 

 

18,293

Farmland

 

1

 

 

1

 

315

 

 

315

 

2,015

 

 

2,015

 

310,012

 

 

310,012

Consumer real estate

 

  

 

  

 

  

 

  

 

  

 

  

Home equity lines

 

32

 

 

32

 

22,281

 

 

22,281

Secured by 1-4 family residential

 

  

 

  

 

 

 

  

 

  

First deed of trust

 

292

 

 

292

 

95,196

 

157

 

95,039

Second deed of trust

 

103

 

 

103

 

12,808

 

96

 

12,712

 

427

 

 

427

 

130,285

 

253

 

130,032

Commercial and industrial loans

 

  

 

  

 

  

 

  

 

  

 

(except those secured by real estate)

 

726

 

17

 

709

 

97,363

 

134

 

97,229

Student loans

 

45

 

 

45

 

14,156

 

 

14,156

Consumer and other

 

178

 

 

178

 

4,445

 

 

4,445

$

3,681

$

17

$

3,664

$

605,408

$

387

$

605,021

Year Ended December 31, 2023

 

 

  

 

  

 

  

 

  

 

  

Construction and land development

 

  

 

  

 

  

 

  

 

  

 

  

Residential

$

86

$

$

86

$

10,471

$

$

10,471

Commercial

 

228

 

 

228

 

37,024

 

 

37,024

 

314

 

 

314

 

47,495

 

 

47,495

Commercial real estate

 

  

 

  

 

  

 

  

 

  

 

  

Owner occupied

 

409

 

 

409

 

122,666

 

 

122,666

Non-owner occupied

 

1,467

 

 

1,467

 

154,855

 

 

154,855

Multifamily

 

44

 

 

44

 

12,743

 

 

12,743

Farmland

 

3

 

 

3

 

326

 

 

326

 

1,923

 

 

1,923

 

290,590

 

 

290,590

Consumer real estate

 

  

 

  

 

  

 

  

 

  

 

  

Home equity lines

 

40

 

 

40

 

21,557

 

 

21,557

Secured by 1-4 family residential

 

  

 

  

 

 

  

 

  

 

  

First deed of trust

 

293

 

 

293

 

95,638

 

160

 

95,478

Second deed of trust

 

99

 

 

99

 

11,337

 

105

 

11,232

 

432

 

 

432

 

128,532

 

265

 

128,267

Commercial and industrial loans

 

  

 

  

 

  

 

  

 

  

 

  

(except those secured by real estate)

 

640

 

 

640

 

86,203

 

26

 

86,177

Student loans

 

57

 

 

57

 

17,923

 

 

17,923

Consumer and other

 

57

 

 

57

 

4,265

 

 

4,265

$

3,423

$

$

3,423

$

575,008

$

291

$

574,717