XML 21 R11.htm IDEA: XBRL DOCUMENT v3.21.2
Allowances for Loan Losses
 6 Months Ended
Jun. 30, 2021
Allowance for Credit Loss [Abstract]  
Allowances for Loan Losses
4.
ALLOWANCE FOR LOAN LOSSES
The segments of the Company’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. The loan segments used are consistent with the internal reports evaluated by the Company’s management and Board of Directors to monitor risk and performance within various segments of its loan portfolio and, therefore, no further disaggregation is considered necessary. The Company’s loan portfolio consists primarily of real estate loans on commercial and, to a lesser extent residential property. The portfolio also includes commercial loans, and consumer loans.
The Company’s primary lending activity is the origination of commercial loans extended to small and
mid-sized
commercial and industrial entities.
 
Commercial loans are primarily underwritten on the basis of the borrowers’ ability to service such debt from income. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. As a general practice, the Company takes as collateral a security interest in any equipment, or other chattel, although loans may also be made on an unsecured basis. Collateralized working capital loans typically are secured by short-term assets whereas long-term loans are primarily secured by long-term assets.
Construction and Land loans are to finance the construction of owner-occupied and income producing properties. These loans are categorized as construction loans during the construction period, later converting to commercial
or one-to-four family
residential loans after the construction is complete and amortization of the loan begins. Real estate development and construction loans are approved based on an analysis of the borrower and guarantor, the viability of the project and on an acceptable percentage of the appraised value of the property securing the loan. Construction loan funds are disbursed periodically based on the percentage of construction or development completed. The Company carefully monitors these loans
with on-site inspections
and requires the receipt of lien waivers on funds advanced. The Company considers the market conditions and feasibility of proposed projects, the financial condition and reputation of the borrower and guarantors, the amount of the borrower’s equity in the project, independent appraisals, cost estimates
and pre-construction sale
information. The Company also makes loans on occasion for the purchase of land for future development by the borrower. Land loans are extended for the future development for either commercial or residential use by the borrower. The Company carefully analyzes the intended use of the property and the viability thereof.
The Company’s commercial real estate loans consist of mortgage loans secured by nonresidential real estate, such as by apartment buildings, small office buildings, and owner-occupied properties. Commercial real estate loans are secured by the subject property and are underwritten based on loan to value limits, cash flow coverage and general creditworthiness of the obligors. These loans tend to involve larger loan balances and their repayment is typically dependent upon the successful operation and management of the underlying real estate.
Residential real estate loans are underwritten based on the borrower’s repayment capacity and source, value of the underlying property, credit history and stability. These loans are secured by a first or second mortgage on the borrower’s principal residence or their second/vacation home (excluding investment/rental property).
Home equity loans consists of either revolving line of credit, term, or second mortgage loans secured
by one-to-four family
residential real estate. These loans are secured by a first or second lien on the borrower’s residence. There are minimum credit score standards,
loan-to-value,
and other credit requirements. Home equity lines of credit are variable rate based on an index of Wall Street Journal prime rate with a margin.
The consumer loan portfolio consists of lending in the form of home equity loans secured by financed property and personal consumer loans, which may be secured or unsecured.
Management has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance for loan losses the Company has segmented certain loans in the portfolio by product type. Loans are segmented into the following pools: agriculture loans, commercial real estate loans, commercial loans, residential real estate loans, consumer loans, and municipal loans. Historical loss percentages for each risk category are calculated and used as the basis for calculating allowance allocations. These historical loss percentages are calculated over a four-year period for all portfolio segments.
Certain qualitative factors are then added to the historical allocation perce
n
tage to get the adjusted factor to be applied to
non-classified
loans. The following qualitative factors are analyzed for each portfolio segment:
 
  •  
Levels of and trends in delinquencies
 
  •  
Trends in volume and terms
 
  •  
Changes in collateral
 
  •  
Changes in management and lending staff
 
  •  
Economic trends
 
  •  
Concentrations of credit
 
  •  
Changes in lending policies
 
  •  
External factors
 
  •  
Changes in underwriting process
 
  •  
Trends in credit quality ratings
These qualitative factors are reviewed each quarter and adjusted based upon relevant changes within the portfolio.
The total allowance reflects management’s estimate of loan losses inherent in the loan portfolio at the Consolidated Balance Sheet date. The Company considers the allowance for loan losses adequate to cover loan losses inherent in the loan portfolio at
June 30
, 2021 and December 31, 2020.
The following table summarizes the activity in the allowance for loan losses by loan class for the three-month periods ended
June 30
, 2021 and 2020.
(in thousands)
 
 
  
Commercial
and
    Industrial    
 
  
Construction
and Land
Development
 
  
Real
Estate
Commercial
 
  
Real
Estate
Residential
 
 
Real
Estate
Home
  Equity  
 
 
Consumer
    Other    
 
 
Unallocated
 
 
  Total  
 
 
  
For the Three Months Ended June 30, 2021
 
Allowance for loan losses:
 
  
      
  
      
  
      
 
      
 
      
 
      
 
      
Beginning balance
  
$
901
 
  
$
408
 
  
$
2,343
 
  
$
484
 
  
$
219
 
  
$
31
 
  
$
—
 
  
$
4,386
 
Charge-offs
     —         —         —         —       —         —         —         —  
Recoveries
     2       —         —         2       —         —         —         4  
Provision
     73       84       177       24       36       16       —       410  
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Ending balance
  
$
976
 
  
$
492
 
  
$
2,520
 
  
$
510
 
  
$
255
 
  
$
47
 
  
$
—  
 
  
$
4,800
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
   
 
  
For the Three Months Ended June 30, 2020
 
Allowance for loan losses:
  
      
  
      
  
      
  
      
 
      
 
      
 
      
 
      
Beginning balance
   $ 904     $ 226     $ 1,638     $ 526     $ 103     $ 76     $ 171     $ 3,644  
Charge-offs
     —         —         —         —         —         —         —         —    
Recoveries
     4       —         —         3       —         —         —         5  
Provision
     32       100       127       (32 )
 
     (6 )
 
     (62 )
 
     (44 )
 
     115  
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Ending balance
  
$
940
 
    
326
 
  
$
1,765
 
  
$
497
 
  
$
97
 
  
$
14
 
  
$
127
 
  
$
3,766
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
The following table summarizes the activity in the allowance for loan losses by loan class for the six month periods ended June 30, 2021 and 2020.
(in thousands)
 
 
  
Commercial
and
    Industrial    
 
 
Construction
and Land
Development
 
  
Real
Estate
Commercial
 
  
Real Estate
 Residential 
 
  
Real
Estate
Home
  Equity  
 
  
Consumer
    Other    
 
  
Unallocated
 
 
  Total  
 
 
  
For the Six Months Ended June 30, 2021
 
Allowance for loan losses:
 
 
      
  
      
  
      
  
      
  
      
  
      
 
      
Beginning balance
  
$
1,002
 
 
$
397
 
  
$
2,082
 
  
$
418
 
  
$
242
 
  
$
35
 
  
$
1
 
 
$
4,177
 
Charge-offs
  
 
—  
 
 
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
Recoveries
  
 
3
 
 
 
—  
 
  
 
—  
 
  
 
3
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
6
 
Provision
  
 
(29
) 
 
 
95
 
  
 
438
 
  
 
89
 
  
 
13
 
  
 
12
 
  
 
(1
) 
 
 
617
 
 
  
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
Ending balance
  
$
976
 
 
$
492
 
  
$
2,520
 
  
$
510
 
  
$
255
 
  
$
47
 
  
$
—  
 
 
$
4,800
 
 
  
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
   
 
  
For the Six Months Ended June 30, 2020
 
Allowance for loan losses:
  
      
 
      
  
      
  
      
  
      
  
      
  
      
 
      
Beginning balance
  
$
623
 
 
$
170
 
  
$
598
 
  
$
214
 
  
$
45
 
  
$
9
 
  
$
30
 
 
$
1,689
 
Charge-offs
  
 
—  
 
 
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
Recoveries
  
 
6
 
 
 
—  
 
  
 
—  
 
  
 
6
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
12
 
Provision
  
 
311
 
 
 
156
 
  
 
1,167
 
  
 
277
 
  
 
52
 
  
 
5
 
  
 
97
 
 
 
2,065
 
 
  
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
Ending balance
  
$
940
 
 
 
326
 
  
$
1,765
 
  
$
497
 
  
$
97
 
  
$
14
 
  
$
127
 
 
$
3,766
 
 
  
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
The following table illustrates the balance of loans individually evaluated vs. collectively evaluated for impairment at June 30, 2021 and December 31, 2020.
(in thousands)
 
 
  
Commercial
and
    Industrial    
 
  
Construction
and Land
Development
 
  
Real
Estate
Commercial
 
  
Real Estate
 Residential 
 
  
Real
Estate
Home
  Equity  
 
  
Consumer
    Other    
 
  
Unallocated
 
  
  Total  
 
 
  
As of June 30, 2021
 
Allowance for loan losses:
 
  
      
  
      
  
      
  
      
  
      
  
      
  
      
Ending balance
  
$
976
 
  
$
492
 
  
$
2,520
 
  
$
510
 
  
$
255
 
  
$
47
 
  
$
—  
 
  
$
4,800
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Ending balance: individually evaluated for impairment
  
$
45
 
  
$
—  
 
  
$
37
 
  
$
17
 
  
$
—  
 
  
$
3
 
  
$
—  
 
  
$
102
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Ending balance: collectively evaluated for impairment
  
$
931
 
  
$
492
 
  
$
2,483
 
  
$
493
 
  
$
255
 
  
$
44
 
  
$
—  
 
  
$
4,698
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Loans:
  
      
  
      
  
      
  
      
  
      
  
      
  
      
  
      
Ending balance
  
$
129,835
 
  
$
25,177
 
  
$
193,488
 
  
$
41,891
 
  
$
21,987
 
  
$
3,429
 
  
      
  
$
415,807
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
      
  
 
 
 
Ending balance: individually evaluated for impairment
  
$
950
 
  
$
—  
 
  
$
4,916
 
  
$
823
 
  
$
—  
 
  
 
3
 
  
      
  
$
6,692
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
      
  
 
 
 
Ending balance: collectively evaluated for impairment
  
$
128,885
 
  
$
25,177
 
  
$
188,572
 
  
$
41,068
 
  
$
21,987
 
  
$
3,426
 
  
      
  
$
409,115
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
      
  
 
 
 
 
  
Commercial
and
Industrial
 
  
Construction
and Land
Development
 
  
Real

Estate
Commercial
 
  
Real
Estate
Residential
 
  
Real
Estate

Home
Equity
 
  
Consumer
Other
 
  
Unallocated
 
  
Total
 
 
  
As of December 31, 2020
 
Allowance for loan losses:
 
  
      
  
      
  
      
  
      
  
      
  
      
  
      
Ending balance
  
$
1,002
 
 
  
$
397
 
  
$
2,082
 
 
  
$
418
 
  
$
242
 
  
$
35
 
  
$
1
 
  
$
4,177
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Ending balance: individually evaluated for impairment
  
$
111
 
  
$
—  
 
  
$
—  
 
  
$
18
 
  
$
—  
 
  
 
3
 
  
 
—  
 
  
$
132
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Ending balance: colle
c
tively evaluated for impairment
  
$
891
 
  
$
397
 
  
$
2,082
 
  
$
400
 
  
$
242
 
  
 
32
 
  
 
1
 
  
$
4,045
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Loans:
  
      
  
      
  
      
  
      
  
      
  
      
  
      
  
      
Ending balance
  
$
101,370
 
  
$
20,935
 
  
$
145,800
 
  
$
37,302
 
  
$
20,218
 
  
$
2,622
 
  
      
  
$
328,247
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
      
  
 
 
 
 
  
      
  
      
  
      
  
      
  
      
  
      
  
      
  
      
Ending balance: individually evaluated for impairment
  
$
1,081
 
  
$
—  
 
  
$
230
 
  
$
331
 
  
$
—  
 
  
$
3
 
  
      
  
$
1,645
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
      
  
 
 
 
Ending balance: collectively evaluated for impairment
  
$
100,289
 
  
$
20,935
 
  
$
145,570
 
  
$
36,971
 
  
$
20,218
 
  
$
2,619
 
  
      
  
$
326,602
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
      
  
 
 
 
Credit Quality Information
The following tables represent credit exposures by internally assigned gr
a
des as of
June 30
, 2021 and December 31, 2020. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all.
The Company’s internally assigned grades are as follows:
Pass – loans that are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral. There are four
sub-grades
within the Pass category to further distinguish the loan.
Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.
Substandard – loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful – loans classified as Doubtful have all the weaknesses inherent in a Substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.
Loss – loans classified as a Loss are considered uncollectible and are immediately charged against allowances.
The following table presents the classes of the loan portfolio summarized by the internal risk rating system as of
June 30
, 2021 and December 31, 2020:
 
(In Thousands)
          
Special

Mention
                       
As of
June 30
, 2021
   
Pass
     
Substandard
     
Doubtful
     
Total
  
Commercial and industrial
    $ 125,705      $ 3,180      $ 950      $ —        $ 129,835  
Construction and land development
      25,177        —          —          —          25,177  
Real estate - commercial
      188,367        4,568        553        —          193,488  
Real estate - residential
      41,559        107        225        —          41,891  
Real estate - home equity
      21,987        —          —        —          21,987  
Consumer
      3,426        —          3        —          3,429  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
   
$
406,221
 
   
$
7,855
 
   
$
1,731
 
   
$
—  
 
   
$
415,807
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
           
(In Thousands)
          
Special

Mention
                       
As of December 31, 2020
   
Pass
     
Substandard
     
Doubtful
     
Total
  
Commercial and industrial
    $ 100,289      $ —        $ 1,081      $ —        $ 101,370  
Construction and land development
      20,935        —          —          —          20,935  
Real estate - commercial
      145,358        212        230        —          145,800  
Real estate - residential
      36,892        142        268        —          37,302  
Real estate - home equity
      20,155        —          63        —          20,218  
Consumer
      2,619        —          3        —          2,622  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
   
$
326,248
 
   
$
354
 
   
$
1,645
 
   
$
—  
 
   
$
328,247
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
The following tables present an aging analysis of the recorded investment of
past-due
loans.
 
 
  
June 30, 2021
 
(In Thousands)
  
30-59

Days
Past
    Due    
 
  
60-89

Days
Past
    Due    
 
  
90 Days
or Greater
Past
     Due     
 
  
Total
Past
    Due    
 
  
  Current  
 
  
Total
  Loans  
 
  
Total > 90
Days and
  Accruing  
 
 
Commercial and industrial
    $ 1,878      $ —        $ —        $ 1,878      $ 127,957      $ 129,835      $ —    
Construction and land development
      —          —          —          —          25,177        25,177        —    
Real estate - commercial
      2,779        —          —        2,779        190,709        193,488        —    
Real estate - residential
      150        225        —        375        41,516        41,891        —  
Real estate - home equity
      —          —          —          —          21,987        21,987        —    
Consumer
      —          14        —        14        3,415        3,429        —    
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
   
$
4,807
 
   
$
239
 
   
$
—
 
   
$
5,046
 
     
410,761
 
   
$
415,807
 
   
$
—
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
   
    
December 31, 2020
  
(In Thousands)
   
30-59

Days
Past
Due		     
60-89

Days
Past
Due		      90 Days
or
 
Greater
Past
Due		      Total
Past
Due		      Current      Total
Loans		      Total >
 
90
Days
 
and
Accruing		  
 
Commercial and industrial
    $ 10      $ —        $ —        $ 10      $ 101,360      $ 101,370      $ —    
Construction and land development
      —          —          —          —          20,935        20,935        —    
Real estate - commercial
      480        —          156        636        145,164        145,800        —    
Real estate - residential
      711        719        133        1,563        35,739        37,302        97  
Real estate - home equity
      —          —          —          —          20,218        20,218        —    
Consumer
      —          —          —          —          2,622        2,622        —    
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
   
$
1,201
 
   
$
719
 
   
$
289
 
   
$
2,209
 
   
$
326,038
 
   
$
328,247
 
   
$
97
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Impaired Loans
The following tables present the recorded investment and unpaid principal balances for impaired loans and related allowance, if applicable. Also presented are the average recorded investments and the related amount of interest recognized during the time within the period that the impaired loans were impaired.
 
 
  
As of June 30, 2021
 
(In Thousands)
  
Recorded
    Investment    
 
  
Unpaid
Principal
    Balance    
 
  
Related
    Allowance    
 
With no related allowance recorded:
  
      
Commercial and industrial
  
$
526
 
  
$
526
 
  
$
—  
 
Construction and land development
  
 
—  
 
  
 
—  
 
  
 
—  
 
Real estate - commercial
  
 
2,431
 
  
 
2,431
 
  
 
—  
 
Real estate - residential
  
 
789
 
  
 
789
 
  
 
—  
 
Real estate - home equity
  
 
—  
 
  
 
—  
 
  
 
—  
 
Consumer
  
 
—  
 
  
 
—  
 
  
 
—  
 
With an allowance recorded:
  
      
  
      
  
      
Commercial and industrial
  
$
424
 
  
$
424
 
  
$
45
 
Construction and land development
  
 
—  
 
  
 
—  
 
  
 
—  
 
Real estate - commercial
  
 
2,485
 
  
 
2,485
 
  
 
37
 
Real estate - residential
  
 
34
 
  
 
34
 
  
 
17
 
Real estate - home equity
  
 
—  
 
  
 
—  
 
  
 
—  
 
Consumer
  
 
3
 
  
 
3
 
  
 
3
 
Total
 
  
      
  
      
  
      
Commercial and industrial
  
$
950
 
  
 
950
 
  
 
45
 
Construction and land development
  
 
—  
 
  
 
—  
 
  
 
—  
 
Real estate - commercial
  
 
4,916
 
  
 
4,916
 
  
 
37
 
Real estate - residential
  
 
823
 
  
 
823
 
  
 
17
 
Real estate - home equity
  
 
—  
 
  
 
—  
 
  
 
—  
 
Consumer
  
 
3
 
  
 
3
 
  
 
3
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
  
$
6,692
 
  
 
6,692
 
  
 
102
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
 
  
As of December 31, 2020
 
With no related allowance recorded:
  
      
  
      
Commercial and industrial
  
$
—  
 
  
$
—  
 
  
$
—  
 
Construction and land development
  
 
—  
 
  
 
—  
 
  
 
—  
 
Real estate - commercial
  
 
230
 
  
 
230
 
  
 
—  
 
Real estate - residential
  
 
295
 
  
 
295
 
  
 
—  
 
Real estate - home equity
  
 
—  
 
  
 
—  
 
  
 
—  
 
Consumer
  
 
—  
 
  
 
—  
 
  
 
—  
 
With an allowance recorded:
  
      
  
      
  
      
Commercial and industrial
  
$
1,081
 
  
$
1,081
 
  
$
111
 
Construction and land development
  
 
—  
 
  
 
—  
 
  
 
—  
 
Real estate - commercial
  
 
—  
 
  
 
—  
 
  
 
—  
 
Real estate - residential
  
 
36
 
  
 
36
 
  
 
18
 
Real estate - home equity
  
 
—  
 
  
 
—  
 
  
 
—  
 
Consumer
  
 
3
 
  
 
3
 
  
 
3
 
Total
 
  
      
  
      
  
      
Commercial and industrial
  
$
1,081
 
  
 
1,081
 
  
 
111
 
Construction and land development
  
 
—  
 
  
 
—  
 
  
 
—  
 
Real estate - commercial
  
 
230
 
  
 
230
 
  
 
—  
 
Real estate - residential
  
 
331
 
  
 
331
 
  
 
18
 
Real estate - home equity
  
 
—  
 
  
 
—  
 
  
 
—  
 
Consumer
  
 
3
 
  
 
3
 
  
 
3
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
  
$
1,645
 
  
$
1,645
 
  
$
132
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
  
Three Months Ended June 30,
 
 
  
2021
 
  
2020
 
(In Thousands)
  
Average
Recorded
    Investment    
 
  
Interest Income
    Recognized    
 
  
Average
Recorded
    Investment    
 
  
Interest Income
    Recognized    
 
With no related allowance recorded:
  
      
  
      
  
      
  
      
Commercial and industrial
  
$
548
 
  
$
7
 
  
$
762
 
  
$
10
 
Construction and land development
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Real estate - commercial
  
 
2,435
 
  
 
16
 
  
 
2,426
 
  
 
26
 
Real estate - residential
  
 
790
 
  
 
8
 
  
 
812
 
  
 
11
 
Real estate - home equity
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Consumer
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
  
 
3,773
 
  
 
31
 
  
 
4,000
 
  
 
47
 
With an allowance recorded:
  
      
  
      
  
      
  
      
Commercial and industrial
  
 
424
 
  
$
4
 
  
$
499
 
  
$
6
 
Construction and land development
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Real estate - commercial
  
 
2,486
 
  
 
10
 
  
 
2,532
 
  
 
31
 
Real estate - residential
  
 
35
 
  
 
—  
 
  
 
38
 
  
 
1
 
Real estate - home equity
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Consumer
  
 
3
 
  
 
—  
 
  
 
4
 
  
 
—  
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
  
 
2,948
 
  
 
14
 
  
 
3,073
 
  
 
38
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Total
  
$
6,721
 
  
$
45
 
  
$
7,073
 
  
$
85
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
 
  
Six Months Ended June 30,
 
 
  
2021
 
  
2020
 
(In Thousands)
  
Average
Recorded
Investment
 
  
Interest Income
Recognized
 
  
Average
Recorded
Investment
 
  
Interest Income
Recognized
 
With no related allowance recorded:
  
      
  
      
  
      
  
      
Commercial and industrial
  
$
584
 
  
$
15
 
  
$
783
 
  
$
20
 
Construction and land development
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Real estate - commercial
  
 
2,435
 
  
 
34
 
  
 
2,431
 
  
 
55
 
Real estate - residential
  
 
793
 
  
 
17
 
  
 
816
 
  
 
22
 
Real estate - home equity
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Consumer
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
  
 
3,812
 
  
 
66
 
  
 
4,030
 
  
 
97
 
With an allowance recorded:
  
      
  
      
  
      
  
      
Commercial and industrial
  
 
424
 
  
$
9
 
  
$
499
 
  
$
13
 
Construction and land development
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Real estate - commercial
  
 
2,491
 
  
 
41
 
  
 
2,538
 
  
 
63
 
Real estate - residential
  
 
35
 
  
 
—  
 
  
 
38
 
  
 
1
 
Real estate - home equity
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Consumer
  
 
3
 
  
 
—  
 
  
 
4
 
  
 
—  
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
  
 
2,953
 
  
 
50
 
  
 
3,079
 
  
 
77
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Total
  
$
6,765
 
  
$
116
 
  
$
7,109
 
  
$
174
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
The following table present nonaccrual loans by classes of the loan portfolio:
 
(In Thousands)
  
June 30,
2021
 
  
December 31,
2020
 
Commercial and industrial
    $ —        $ —    
Construction and land development
      —          —    
Real estate - commercial
      250        —    
Real estate - residential
      261        100  
Real estate - home equity
      —          —    
Consumer
      3        3  
    
 
 
     
 
 
  
Total
   
$
514
 
   
$
103
 
    
 
 
     
 
 
  
The recorded investment in
 
non-accrual
loans was $514
 
and $103 at
June 30
, 2021 and December 31, 2020.
Approximately $218,665 or 52.6% of the Bank’s loan portfolio was in real estate-commercial loans and construction and land development loans at
June 30
, 2021. While the Bank does not have a concentration of credit risk with any single borrower or industry, repayments on loans in these portfolios can be negatively influenced by decreases in real estate val
u
es. The Ba
n
k mitigates this risk through conservative underwriting policies and procedures. In addition, $60,126 of real estate-commercial loans were owner occupied properties as of
June 30
, 2021. These types of loans are generally considered to involve less risk than nonowner-occupied mortgages.
At
June 30
, 2021 and December 31, 2020, the carrying amount of borrowings secured by loans pledged to the FHLB under its blanket lien was $20,000
 
and $61,667
,
 respectively.
Loan Modifications and Troubled Debt Restructurings (TDRs)
A loan is considered to be a TDR loan when the Company grants a concession to the borrower because of the borrower’s financial condition that it would not otherwise consider. Such concessions include the reduction of interest rates, forgiveness of principal or interest, or other modifications of interest rates that are less than the current market rate for new obligations with similar risk.
The Bank may grant a concession or modification for economic or legal reasons related to a borrower’s financial condition that it would not otherwise consider resulting in a modified loan which is then identified as a troubled debt restructuring (TDR). The Bank may modify loans through rate reductions, extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers’ operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are considered impaired loans for purposes of calculating the Bank’s allowance for loan losses.
The Bank identifies loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future. As of June 30, 2021 and December 31, 2020, the Company had no loans identified as TDR’s. There were also no new loan modifications during the periods that were considered TDRs.
COVID-19
Loan Forbearance Programs
Section 4013 of the CARES Act provides that banks may elect not to categorize a loan modification as a TDR if the loan modification is (1) related to
COVID-19;
(2) executed on a loan that was not more than 30
 
days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60
 
days after the date on which the national emergency concerning the novel coronavirus disease (COVID–19) outbreak declared by the President on March 13, 2020, under the National Emergencies Act terminates, or (B) 
January 1, 2022. 
On April 7, 2020, federal banking regulators issued a revised interagency statement that included guidance on their approach for the accounting of loan modifications in light of the economic impact of the
COVID-19
pandemic. The guidance interprets current accounting standards and indicates that a lender can conclude that a borrower is not experiencing financial difficulty if short-term modifications are made in response to
COVID-19,
such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to the loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented.
According to the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) issued by the federal bank regulatory agencies on April 7, 2020, short-term loan modifications not otherwise eligible under Section 4013 that are made on a good faith basis in response to
COVID-19
to borrowers who were current prior to any relief are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.
During 2020,
our
customers had requested 82
 
loan payment deferrals or payments of interest only on loans totaling $53,700. In accordance with Section 4013 of the CARES Act and the interagency guidance issued on April 7, 2020, these short-term deferrals are not considered troubled debt restructurings. As of
June 30
, 2021, the Company
had
 9
 
loans totaling $17,708 that remain on a CARES Act modification.
In addition, the risk-rating on
COVID-19
modified loans did not change, and these loans will not be considered past due until after the deferral period is over and scheduled payments resume. The credit quality of these loans will be reevaluated after the deferral period ends.