Major classifications of loans, by purpose code, at December 31, 2021 and 2020, are summarized as follows:


	December 31, 2021		Percent			December 31, 2020		Percent
Real estate loans:
Residential	$	98,433,124		36.27	%	$	105,837,324		39.56	%
Home equity		11,510,661		4.24	%		8,892,417		3.32	%
Multi-family		19,937,187		7.35	%		15,140,468		5.66	%
Commercial		89,830,611		33.10	%		72,717,869		27.18	%
Construction and land development		34,401,702		12.68	%		29,982,506		11.21	%
Total real estate loans		254,113,285					232,570,584
Consumer loans		1,373,761		0.51	%		5,372,529		2.01	%
Commercial and industrial loans		15,900,097		5.85	%		29,599,982		11.06	%
Total loans		271,387,143		100.00	%		267,543,095		100.00	%
Less: Allowance for loan losses		4,183,599					4,085,719
Deferred loan fees		899,096					1,101,409
Loans, net	$	266,304,448				$	262,355,967

The Bank grants loans and extensions of credit to individuals and a variety of firms and corporations primarily in Thomas County, Georgia and other surrounding areas. Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by improved and unimproved real estate and is dependent on the real estate market.

The Bank has divided the loan portfolio into seven portfolio segments, each with different risk characteristics and methodologies for assessing risk. The portfolio segments identified by the Bank are real estate - residential, real estate - home equity, real estate - multi-family, real estate - commercial, real estate - construction and land development, consumer loans and commercial and industrial loans.

Real Estate - Residential: The Bank originates residential real estate loans for the purchase or refinancing of a mortgage. These loans are primarily collateralized by owner-occupied properties and rental properties located primarily in the Bank’s market areas.

Real Estate - Home Equity: The Bank originates home equity real estate loans to provide home equity lines of credit and closed-end home equity loans. These loans are primarily collateralized by owner-occupied properties located primarily in the Bank’s market areas.

Real Estate - Multi-family: Multi-family loans consist of loans to finance real estate purchases, refinancings, expansions and improvements to multi-family properties. These loans may be secured by, but are not limited to, first liens on apartments, mobile home parks or other multi-family properties primarily located within the Bank’s market areas. The Bank’s underwriting analysis includes credit verification, independent appraisals, a review of the borrower’s and borrower’s related entities’ financial condition, and a detailed analysis of the borrower’s underlying cash flows. Multi-family loans are larger than residential or home equity loans and involve greater credit risk. The repayment of these loans largely depends on the results of operations and management of these properties. Adverse economic conditions also affect the repayment ability to a greater extent than residential or home equity real estate loans.

Real Estate - Commercial: Commercial real estate loans consist of loans to finance real estate purchases, refinancings, expansions and improvements to commercial properties. These loans may be secured by first liens on office buildings, farms, retail and mixed-use properties, churches, warehouses and restaurants primarily located within the Bank’s market areas. The Bank’s underwriting analysis includes credit verification, independent appraisals, a review of the borrower’s and borrower’s related entities’ financial condition, and a detailed analysis of the borrower’s underlying cash flows. Commercial real estate loans are larger than residential loans and involve greater credit risk. The repayment of these loans largely depends on the results of operations and management of these properties. Adverse economic conditions also affect the repayment ability to a greater extent than residential real estate loans.

Real Estate - Construction and land development: These loans are made to borrowers to build commercial structures, a primary or secondary residence and, in some cases, to real estate investors to acquire and develop land. These loans are more difficult to evaluate since they are significantly more vulnerable to changes in economic conditions. In addition, these loans possess a higher degree of credit risk since they are made based on estimates of the future worth of a project and the estimated costs required for completion. The Bank limits its overall investment in this portfolio segment due both to management’s assessment of risk and certain percentage guidance set by the regulatory agencies.

Consumer: Consumer loans mainly consist of personal loans, revolving credit plans and other loans. The Bank’s consumer loans may be uncollateralized and rely on the borrower’s income for repayment.

Commercial and industrial: Commercial and industrial loans consist generally of business loans and lines of credit to companies in the Bank’s market area. Commercial and industrial loans are generally used for working capital purposes or for acquiring equipment, inventory or furniture. Such loans are usually collateralized by the financed assets, although a portion may be made on an unsecured basis and contain the guarantee of the business principals. The Bank’s underwriting analysis consists of a review of the financial statements of the borrower, the lending history of the borrower, the debt service capabilities of the borrower, the projected cash flows of the business, the value of the collateral, if any, and whether the loan is guaranteed by the principals of the borrower. Commercial and industrial loans are typically made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business, which makes them of higher risk than residential loans and the collateral securing loans may be difficult to appraise and may fluctuate in value based on the success of the business.

Commercial and industrial loans also include loans originated under the Paycheck Protection Program (“PPP”), as prescribed in the CARES Act. These loans have an interest rate of 1.0% and a two-year or five-year loan term to maturity. The Small Business Administration (“SBA”) guarantees 100% of the PPP loans made to eligible borrowers, and loan proceeds may be partially or fully forgiven by the SBA if the funds are used for eligible expenses during the relevant forgiveness period and the borrower meets the employee retention criteria.

The Bank was paid a processing fee from the SBA on PPP loan originations ranging from 1% to 5%, based on the size of the loans. During the years ended December 31, 2021 and 2020, the Bank recorded approximately $481,000 and 478,000, respectively, in PPP-related SBA fees in total and is accreting these fees into interest income over the estimated life of the applicable loans. If a PPP loan is forgiven or paid off before maturity, the remaining unearned fee is recognized into income at that time. As of December 31, 2021 and 2020, the Bank has recognized approximately $678,000 and $218,000, respectively, in PPP-related SBA fees through accretion. The majority of the remaining unearned fees are expected to be recognized as the PPP loans are forgiven or paid off. Deferred PPP-related SBA fees totaled $62,000 and $260,000 at December 31, 2021 and 2020, respectively.

The following schedule presents a roll-forward of the allowance for loan losses as of December 31:


	Year Ended December 31,
	2021			2020
Beginning balance	$	4,085,719		$	3,064,777
Charge-offs:
Real estate loans:
Residential		(11,123	)		(2,951	)
Home equity		—			(1,377	)
Multi-family		—			—
Commercial		—			(62,896	)
Construction and land development		—			(629	)
Total real estate loans		(11,123	)		(67,853	)
Consumer loans		(48,022	)		—
Commercial and industrial loans		(78,219	)		(149	)
Total charge-offs		(137,364	)		(68,002	)
Recoveries:
Real estate loans:
Residential		33,794			123,368
Home equity		—			—
Multi-family		—			—
Commercial		19,651			—
Construction and land development		24,392			31,573
Total real estate loans		77,837			154,941
Consumer loans		6,595			7,910
Commercial and industrial loans		27,629			146,335
Total recoveries		112,061			309,186
Net (charge offs) recoveries		(25,303	)		241,184
Provision for allowance for loan losses		123,183			779,758
Ending balance	$	4,183,599		$	4,085,719

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2021 and 2020:


	Loans				Allowance for loan losses
	Individually evaluated for impairment		Collectively evaluated for impairment		Individually evaluated for impairment		Collectively evaluated for impairment
December 31, 2021 -
Real estate loans:
Residential	$	1,517,822	$	96,915,302	$	—	$	1,468,649
Home equity		—		11,510,661		—		174,579
Multi-family		—		19,937,187		—		288,455
Commercial		—		89,830,611		—		1,757,794
Construction and development		9,928		34,391,774		—		350,586
Total real estate loans		1,527,750		252,585,535		—		4,040,063
Consumer loans		—		1,373,761		—		1,798
Commercial and industrial loans		—		15,900,097		—		109,724
Unallocated		—		—		—		32,014
Total	$	1,527,750	$	269,859,393	$	—	$	4,183,599
December 31, 2020 -
Real estate loans:
Residential	$	1,480,633	$	104,356,691	$	—	$	1,444,921
Home equity		675		8,891,742		—		133,985
Multi-family		—		15,140,468		—		311,409
Commercial		1,339,199		71,378,670		—		1,531,037
Construction and development		11,637		29,970,869		—		387,127
Total real estate loans		2,832,144		229,738,440		—		3,808,479
Consumer loans		—		5,372,529		—		1,360
Commercial and industrial loans		—		29,599,982		—		101,497
Unallocated		—		—		—		174,383
Total	$	2,832,144	$	264,710,951	$	—	$	4,085,719

The following tables present impaired loans by class of loans as of December 31, 2021 and 2020:


	Recorded Investment		Principal Balance		Related Allowance
December 31, 2021 -
Impaired loans with related allowance:
Real estate loans:
Residential	$	—	$	—	$	—
Home equity		—		—		—
Multi-family		—		—		—
Commercial		—		—		—
Construction and land development		—		—		—
Total real estate loans		—		—		—
Consumer loans		—		—		—
Commercial and industrial loans
Total
Impaired loans without related allowance:
Real estate loans:
Residential	$	1,517,822	$	1,517,822	$	—
Home equity		—		—		—
Multi-family		—		—		—
Commercial		—		—		—
Construction and land development		9,928		9,928		—
Total real estate loans		1,527,750		1,527,750		—
Consumer loans		—		—		—
Commercial and industrial loans		—		—		—
Total	$	1,527,750	$	1,527,750	$	—

Impaired Loans (Continued):


	Recorded Investment		Principal Balance		Related Allowance
December 31, 2020 -
Impaired loans with related allowance:
Real estate loans:
Residential	$	—	$	—	$	—
Home equity		—		—		—
Multi-family		—		—		—
Commercial		—		—		—
Construction and land development		—		—		—
Total real estate loans		—		—		—
Consumer loans		—		—		—
Commercial and industrial loans		—		—		—
Total	$	—	$	—	$	—
Impaired loans without related allowance:
Real estate loans:
Residential	$	1,480,633	$	1,480,633	$	—
Home equity		675		675		—
Multi-family		—		—		—
Commercial		1,339,199		1,339,199		—
Construction and land development		11,637		11,637		—
Total real estate loans		2,832,144		2,832,144		—
Consumer loans		—		—		—
Commercial and industrial loans		—		—		—
Total	$	2,832,144	$	2,832,144	$	—

The average net investment on impaired loans and interest income recognized and received on impaired loans are as follows:


	Year Ended December 31,
	2021
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
Real estate loans:
Residential	$	1,560,984	$	92,374	$	92,705
Home equity		598		—		—
Multi-family		—		—		—
Commercial		831,676		—		—
Construction and land development		57,086		520		399
Total real estate loans		2,450,344		92,894		93,104
Consumer loans		—		—		—
Commercial and industrial loans		—		—		—
Total	$	2,450,344	$	92,894	$	93,104

	2020
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
Real estate loans:
Residential	$	1,328,667	$	53,255	$	49,977
Home equity		2,391		194		194
Multi-family		—		—		—
Commercial		1,479,981		—		—
Construction and land development		254,687		697		697
Total real estate loans		3,065,726		54,146		50,868
Consumer loans		—		—
Commercial and industrial loans		—		—
Total	$	3,065,726	$	54,146	$	50,868

The following tables present the aging of the recorded investment in past due loans and nonaccrual loans as of December 31, 2021 and 2020, by class of loans:


	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total		Non-accrual
December 31, 2021 -
Real estate loans:
Residential	$	1,330,647	$	75,169	$	—	$	1,405,816	$	97,027,308	$	98,433,124	$	354,295
Home equity		—		—		—		—		11,510,661		11,510,661		—
Multi-family		—		—		—		—		19,937,187		19,937,187		—
Commercial		—		—		—		—		89,830,611		89,830,611		—
Construction and land development		—		9,928		60,111		70,039		34,331,663		34,401,702		60,111
Total real estate loans		1,330,647		85,097		60,111		1,475,855		252,637,430		254,113,285		414,406
Consumer loans		—		—		—		—		1,373,761		1,373,761		—
Commercial and industrial loans		—		—		—		—		15,900,097		15,900,097
	$	1,330,647	$	85,097	$	60,111	$	1,475,855	$	269,911,288	$	271,387,143	$	414,406
December 31, 2020 -
Real estate loans:
Residential	$	40,583	$	84,167	$	196,826	$	321,576	$	105,515,748	$	105,837,324	$	623,998
Home equity		—		—		—		—		8,892,417		8,892,417		—
Multi-family		—		—		—		—		15,140,468		15,140,468		—
Commercial		—		—		1,339,199		1,339,199		71,378,670		72,717,869		1,339,199
Construction and land development		—		—		—		—		29,982,506		29,982,506		—
Total real estate loans		40,583		84,167		1,536,025		1,660,775		230,909,809		232,570,584		1,963,197
Consumer loans		—		—		—		—		5,372,529		5,372,529		—
Commercial and industrial loans		151,136		—		—		151,136		29,448,846		29,599,982		—
	$	191,719	$	84,167	$	1,536,025	$	1,811,911	$	265,731,184	$	267,543,095	$	1,963,197

As of December 31, 2021 there were no loans greater than 90 days past due and still accruing. As of December 31, 2020, there was one loan greater than 90 days past due and still accruing totaling approximately $16,000.

The Bank did not modify any loans in 2021 or 2020 in a manner that would be considered troubled debt restructurings. There were no specific allowances allocated to troubled debt restructurings as of December 31, 2021 or 2020. The Bank did not commit to lend any additional amounts to customers with outstanding loans that are classified as troubled restructurings. Certain troubled debt restructurings are accruing loans in which interest is earned when payments are made. Management continues to evaluate these accruing troubled debt restructurings for impairment on a quarterly basis. During the years ended December 31, 2021 and 2020, no restructured loans defaulted subsequent to modification.

The Bank implemented a customer payment deferral program to assist borrowers that may be experiencing financial hardship due to COVID-19 related challenges, whereby short-term deferrals of payments (generally three to six months) have been provided. As of December 31, 2020, all loans that were granted COVID-19 related payment deferrals had resumed making payments under the terms of the original loan agreements. Consistent with industry regulatory guidance, borrowers that were otherwise current on loan payments that were granted COVID-19 related financial hardship payment deferrals continued to be reported as current loans throughout the agreed upon deferral period and were not classified as troubled debt restructurings.

The Bank categorized 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 Bank analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continuous basis. The Bank uses the following definitions for its risk ratings:

Special Mention. Evidence of financial deterioration exists, or file documentation is inadequate or not available to determine the borrower’s financial status or ability to repay. The loan possesses potential weakness which may, if not reversed or corrected, weaken the credit or inadequately protect the Bank’s position.

Substandard. A well-defined weakness or weaknesses exists that jeopardizes the liquidation of the debt. The loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful. All of the weaknesses of a substandard loan exist, with the added characteristic that the weaknesses jeopardize the collection and/or liquidation of the debt. Loss exposure, while evident, is not clearly determinable. Special workout negotiations and/or litigation should be initiated.

Loss. Considered uncollectible in full and of such little value that its continuance as a bankable asset is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset even though partial recovery may be achieved in the future.

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, 2021 and 2020, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Credit Exposure Based on Risk Ratings:


	Pass		Special Mention		Substandard		Doubtful		Loss		Total
December 31, 2021 -
Real estate loans:
Residential	$	95,421,741	$	1,764,789	$	1,246,594	$	—	$	—	$	98,433,124
Home equity		11,510,661		—		—		—		—		11,510,661
Multi-family		19,937,187		—		—		—		—		19,937,187
Commercial		78,797,687		8,075,262		2,957,662		—		—		89,830,611
Construction and land development		31,347,154		2,920,406		134,142		—		—		34,401,702
Total real estate loans		237,014,430		12,760,457		4,338,398		—		—		254,113,285
Consumer loans		1,373,761		—		—		—		—		1,373,761
Commercial and industrial loans		15,900,097		—				—				15,900,097
	$	254,288,288	$	12,760,457	$	4,338,398	$	—	$	—	$	271,387,143
December 31, 2020 -
Real estate loans:
Residential	$	102,229,498	$	1,243,538	$	2,364,288	$	—	$	—	$	105,837,324
Home equity		8,891,742		—		675		—		—		8,892,417
Multi-family		14,831,774		308,694		—		—		—		15,140,468
Commercial		67,305,357		4,073,313		1,339,199		—		—		72,717,869
Construction and land development		25,390,597		2,950,389		1,641,520		—		—		29,982,506
Total real estate loans		218,648,968		8,575,934		5,345,682		—		—		232,570,584
Consumer loans		5,372,529		—		—		—		—		5,372,529
Commercial and industrial loans		27,643,564		466,020		1,490,398		—		—		29,599,982
	$	251,665,061	$	9,041,954	$	6,836,080	$	—	$	—	$	267,543,095