Major classifications of loans, by purpose code, at December 31, 2022 and 2021, are summarized as follows:


	December 31, 2022		Percent			December 31, 2021		Percent
Real estate loans:
Residential	$	136,382,014		40.16	%	$	98,433,124		36.27	%
Home equity		12,410,820		3.65	%		11,510,661		4.24	%
Multi-family		24,613,700		7.25	%		19,937,187		7.35	%
Commercial		111,394,065		32.80	%		89,830,611		33.10	%
Construction and land development		27,921,088		8.22	%		34,401,702		12.68	%
Total real estate loans		312,721,687					254,113,285
Consumer loans		1,210,164		0.36	%		1,373,761		0.51	%
Commercial and industrial loans		25,665,751		7.56	%		15,900,097		5.85	%
Total loans		339,597,602		100.00	%		271,387,143		100.00	%
Less: Allowance for loan losses		4,362,178					4,183,599
Deferred loan fees		1,096,553					899,096
Loans, net	$	334,138,871				$	266,304,448

The Bank grants loans and extensions of credit to individuals and a variety of firms and corporations primarily in Thomas County, Georgia; Tallahassee, Florida; Savannah, Georgia; and Jacksonville, Florida. 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, 2022 and 2021, the Bank recorded approximately $0 and 481,000, respectively, in PPP-related SBA fees in total. These fees are accreted 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, 2022 and 2021, the Bank has recognized approximately $62,000 and $678,000, respectively, in PPP-related SBA fees through accretion. Deferred PPP-related SBA fees totaled $4,000 and $62,000 at December 31, 2022 and 2021, respectively.

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


	Year Ended December 31,
	2022			2021
Beginning balance	$	4,183,599		$	4,085,719
Charge-offs:
Real estate loans:
Residential		(2,842	)		(11,123	)
Home equity		—			—
Multi-family		—			—
Commercial		—			—
Construction and land development		—			—
Total real estate loans		(2,842	)		(11,123	)
Consumer loans		(64,612	)		(48,022	)
Commercial and industrial loans		—			(78,219	)
Total charge-offs		(67,454	)		(137,364	)
Recoveries:
Real estate loans:
Residential		53,026			33,794
Home equity		—			—
Multi-family		—			—
Commercial		—			19,651
Construction and land development		11,345			24,392
Total real estate loans		64,371			77,837
Consumer loans		6,884			6,595
Commercial and industrial loans		63,873			27,629
Total recoveries		135,128			112,061
Net recoveries (charge offs)		67,674			(25,303	)
Provision for allowance for loan losses		110,905			123,183
Ending balance	$	4,362,178		$	4,183,599

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, 2022 and 2021:


	Loans				Allowance for loan losses
	Individually evaluated for impairment		Collectively evaluated for impairment		Individually evaluated for impairment		Collectively evaluated for impairment
December 31, 2022 -
Real estate loans:
Residential	$	1,037,428	$	135,344,586	$	—	$	1,960,955
Home equity		—		12,410,820		—		186,733
Multi-family		—		24,613,700		—		225,869
Commercial		57,000		111,337,065		—		1,632,241
Construction and development		43,388		27,877,700		—		264,589
Total real estate loans		1,137,816		311,583,871		—		4,270,387
Consumer loans		—		1,210,164		—		615
Commercial and industrial loans		—		25,665,751		—		81,182
Unallocated		—		—		—		9,994
Total	$	1,137,816	$	338,459,786	$	—	$	4,362,178
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

The following tables present impaired loans by class of loans as of December 31, 2022 and 2021:


	Recorded Investment		Principal Balance		Related Allowance
December 31, 2022 -
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	$	1,037,428	$	1,037,428	$	—
Home equity		—		—		—
Multi-family		—		—		—
Commercial		57,000		57,000		—
Construction and land development		43,388		43,388		—
Total real estate loans		1,137,816		1,137,816		—
Consumer loans		—		—		—
Commercial and industrial loans		—		—		—
Total	$	1,137,816	$	1,137,816	$	—

Impaired Loans (Continued):


	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	$	—

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


	Year Ended December 31,
	2022
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
Real estate loans:
Residential	$	1,312,688	$	45,091	$	63,343
Home equity		—		—		—
Multi-family		—		—		—
Commercial		19,000		1,247		1,247
Construction and land development		24,606		1,500		3,012
Total real estate loans		1,356,294		47,838		67,602
Consumer loans		—		—		—
Commercial and industrial loans		—		—		—
Total	$	1,356,294	$	47,838	$	67,602

	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

The following tables present the aging of the recorded investment in past due loans and nonaccrual loans as of December 31, 2022 and 2021, 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, 2022 -
Real estate loans:
Residential	$	221,100	$	—	$	31,541	$	252,641	$	136,129,373	$	136,382,014	$	453,749
Home equity		24,968		57,266		—		82,234		12,328,586		12,410,820		—
Multi-family		—		—		—		—		24,613,700		24,613,700		—
Commercial		—		—		57,000		57,000		111,337,065		111,394,065		57,000
Construction and land development		—		—		—		—		27,921,088		27,921,088		43,388
Total real estate loans		246,068		57,266		88,541		391,875		312,329,812		312,721,687		554,137
Consumer loans		5,718		—		—		5,718		1,204,446		1,210,164		—
Commercial and industrial loans		—		—		—		—		25,665,751		25,665,751		—
	$	251,786	$	57,266	$	88,541	$	397,593	$	339,200,009	$	339,597,602	$	554,137
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

As of December 31, 2022 and 2021 there were no loans greater than 90 days past due and still accruing.

The Bank did not modify any loans in 2022 or 2021 in a manner that would be considered troubled debt restructurings. There were no specific allowances allocated to troubled debt restructurings as of December 31, 2022 or 2021. 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, 2022 and 2021, 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. In 2022 and 2021, there were no COVID-19 related modifications.

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, 2022 and 2021, 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, 2022 -
Real estate loans:
Residential	$	134,695,557	$	447,915	$	1,238,542	$	—	$	—	$	136,382,014
Home equity		12,410,820		—		—		—		—		12,410,820
Multi-family		24,613,700		—		—		—		—		24,613,700
Commercial		101,192,649		7,335,673		2,865,743		—		—		111,394,065
Construction and land development		27,793,996		20,263		106,829		—		—		27,921,088
Total real estate loans		300,706,722		7,803,851		4,211,114		—		—		312,721,687
Consumer loans		1,210,164		—		—		—		—		1,210,164
Commercial and industrial loans		25,665,751		—		—		—		—		25,665,751
	$	327,582,637	$	7,803,851	$	4,211,114	$	—	$	—	$	339,597,602
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