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Note 5 - Allowances for Loan Losses
 12 Months Ended
Dec. 31, 2020
Notes to Financial Statements  
Allowance for Credit Losses [Text Block]

5.

Allowances for Loan Losses

 

The following tables provide the activity in and ending balances of the allowance for loan losses by loan portfolio class at and for the years ended December 31, 2020, 2019, and 2018:

 

(dollars in thousands)

 

Commercial

Real Estate

  

Construction

and Land Development

  

Commercial

and

Industrial

  

Owner

Occupied

Real Estate

  

Consumer

and Other

  

Residential Mortgage

  

Paycheck

Protection

Program

  

Unallocated

  

Total

 
                                     

Year ended December, 2020

                                 

Allowance for loan losses:

                                 
                                     

Beginning balance:

 $3,043  $688  $931  $2,292  $590  $1,705  $-  $17  $9,266 

Charge-offs

  -   -   (333)  (48)  (107)  (67)  -   -   (555)

Recoveries

  -   3   48   1   12   -   -   -   64 

Provisions

  1,351   257   721   129   228   1,387   -   127   4,200 

Ending balance

 $4,394  $948  $1,367  $2,374  $723  $3,025  $-  $144  $12,975 
                                     

Year ended December, 2019

                                 

Allowance for loan losses:

                                 
                                     

Beginning Balance:

 $2,462  $777  $1,754  $2,033  $577  $894  $-  $118  $8,615 

Charge-offs

  -   -   (1,356)  -   (126)  -   -   -   (1,482)

Recoveries

  -   -   217   2   9   -   -   -   228 

Provisions (credits)

  581   (89)  316   257   130   811   -   (101)  1,905 

Ending balance

 $3,043  $688  $931  $2,292  $590  $1,705  $-  $17  $9,266 
                                     

Year ended December, 2018

                                    

Allowance for loan losses:

                                    
                                     

Beginning Balance:

 $3,774  $725  $1,317  $1,737  $573  $392  $-  $81  $8,599 

Charge-offs

  (1,603)  -   (151)  (465)  (219)  -   -   -   (2,438)

Recoveries

  50   -   81   20   3   -   -   -   154 

Provisions (credits)

  241   52   507   741   220   502   -   37   2,300 

Ending balance

 $2,462  $777  $1,754  $2,033  $577  $894  $-  $118  $8,615 

 

The following tables provide a summary of the allowance for loan losses and balance of loans receivable by loan class and by impairment method as of December 31, 2020 and 2019:

 

(dollars in thousands)

 

Commercial

Real Estate

  

Construction

and Land Development

  

Commercial

and Industrial

  

Owner

Occupied

Real Estate

  

Consumer

and Other

  

Residential Mortgage

  

Paycheck

Protection

Program

  

Unallocated

  

Total

 
                                     

December 31, 2020

                                    
                                     

Allowance for loan losses:

                                    

Individually evaluated for impairment

 $418  $-  $51  $122  $-  $-  $-  $-  $591 

Collectively evaluated for impairment

  3,976   948   1,316   2,252   723   3,025   -   144   12,384 

Total allowance for loan losses

 $4,394  $948  $1,367  $2,374  $723  $3,025  $-  $144  $12,975 
                                     

Loans receivable:

                                    

Loans evaluated individually

 $9,048     $2,963  $3,955  $1,302  $701  $-  $-  $17,969 

Loans evaluated collectively

  696,700   142,821   197,225   471,251   101,066   394,473   636,637   -   2,640,173 

Total loans receivable

 $705,748  $142,821  $200,188  $475,206  $102,368  $395,174  $636,637  $-  $2,658,142 

 

(dollars in thousands)

 

Commercial

Real Estate

  

Construction

and Land Development

  

Commercial

and Industrial

  

Owner

Occupied

Real Estate

  

Consumer

and Other

  

Residential Mortgage

  

Paycheck

Protection

Program

  

Unallocated

  

Total

 
                                     

December 31, 2019

                                    
                                     

Allowance for loan losses:

                                    

Individually evaluated for impairment

 $265  $-  $23  $268  $-  $-  $-  $-  $556 

Collectively evaluated for impairment

  2,778   688   908   2,024   590   1,705   -   17   8,710 

Total allowance for loan losses

 $3,043  $688  $931  $2,292  $590  $1,705  $-  $17  $9,266 
                                     

Loans receivable:

                                    

Loans evaluated individually

 $10,331  $-  $3,087  $3,634  $1,062  $768  $-  $-  $18,882 

Loans evaluated collectively

  603,300   121,395   220,819   420,766   100,258   262,676   -   -   1,729,214 

Total loans receivable

 $613,631  $121,395  $223,906  $424,400  $101,320  $263,444  $-  $-  $1,748,096 

 

A loan is considered impaired, when based on current information and events, it is probable that the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan.  Impaired loans include nonperforming loans, but also include internally classified accruing loans. The following table summarizes information with regard to impaired loans by loan portfolio class as of December 31, 2020 and 2019:

 

  

December 31, 2020

  

December 31, 2019

 
(dollars in thousands) 

Recorded

Investment

  

Unpaid

Principal

Balance

  

Related

Allowance

  

Recorded

Investment

  

Unpaid

Principal

Balance

  

Related

Allowance

 

With no related allowance recorded:

                        

Commercial real estate

 $5,033  $5,040  $-  $6,186  $6,192  $- 

Construction and land development

  -   -   -   -   -   - 

Commercial and industrial

  2,608   2,794   -   2,719   2,989   - 

Owner occupied real estate

  3,198   3,407   -   2,127   2,275   - 

Consumer and other

  1,302   1,556   -   1,062   1,375   - 

Residential mortgage

  701   768   -   768   768   - 

Paycheck protection program

  -   -   -   -   -   - 

Total

 $12,842  $13,565  $-  $12,862  $13,599  $- 

 

With an allowance recorded:

                        

Commercial real estate

 $4,015  $4,536  $418  $4,145  $4,667  $265 

Construction and land development

  -   -   -   -   -   - 

Commercial and industrial

  355   371   51   368   383   23 

Owner occupied real estate

  757   775   122   1,507   1,521   268 

Consumer and other

  -   -   -   -   -   - 

Residential mortgage

  -   -   -   -   -   - 

Paycheck protection program

  -   -   -   -   -   - 

Total

 $5,127  $5,682  $591  $6,020  $6,571  $556 

 

Total:

                        

Commercial real estate

 $9,048  $9,576  $418  $10,331  $10,859  $265 

Construction and land development

  -   -   -   -   -   - 

Commercial and industrial

  2,963   3,165   51   3,087   3,372   23 

Owner occupied real estate

  3,955   4,182   122   3,634   3,796   268 

Consumer and other

  1,302   1,556   -   1,062   1,375   - 

Residential mortgage

  701   768   -   768   768   - 

Paycheck protection program

  -   -   -   -   -   - 

Total

 $17,969  $19,247  $591  $18,882  $20,170  $556 

 

The following table presents additional information regarding the Company’s impaired loans for the years ended December 31, 2020, 2019, and 2018:

 

  

Years Ended December 31,

 
  

2020

  

2019

  

2018

 

(dollars in thousands)

 

Average

Recorded

Investment

  

Interest

Income

Recognized

  

Average

Recorded

Investment

  

Interest

Income

Recognized

  

Average

Recorded

Investment

  

Interest

Income

Recognized

 

With no related allowance recorded:

                        

Commercial real estate

 $6,279  $288  $6,463  $289  $10,429  $288 

Construction and land development

  -   -   -   -   -   - 

Commercial and industrial

  2,645   3   2,144   5   3,341   52 

Owner occupied real estate

  2,964   93   1,908   38   2,275   58 

Consumer and other

  1,224   47   909   20   658   21 

Residential mortgage

  755   4   461   2   -   - 

Paycheck protection program

  -   -   -   -   -   - 

Total

 $13,867  $435  $11,885  $354  $16,703  $419 

 

With an allowance recorded:

                        

Commercial real estate

 $4,015  $-  $4,281  $1  $3,076  $- 

Construction and land development

  -   -   -   -   -   - 

Commercial and industrial

  454   -   838   -   1,862   6 

Owner occupied real estate

  1,287   39   1,071   31   969   25 

Consumer and other

  -   -   30   -   191   1 

Residential mortgage

  24   4   -   -   -   - 

Paycheck protection program

  -   -   -   -   -   - 

Total

 $5,780  $43  $6,220  $32  $6,098  $32 

 

Total:

                        

Commercial real estate

 $10,294  $288  $10,744  $290  $13,505  $288 

Construction and land development

  -   -   -   -   -   - 

Commercial and industrial

  3,099   3   2,982   5   5,203   58 

Owner occupied real estate

  4,251   132   2,979   69   3,244   83 

Consumer and other

  1,224   47   939   20   849   22 

Residential mortgage

  779   8   461   2   -   - 

Paycheck protection program

  -   -   -   -   -   - 

Total

 $19,647  $478  $18,105  $386  $22,801  $451 

 

The total average recorded investment on the Company’s impaired loans for the years ended December 31, 2020, 2019, and 2018 were $19.6 million, $18.1 million, and $22.8 million, respectively, and the related interest income recognized for those dates was $478,000, $386,000, and $451,000, respectively.

 

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past due status as of December 31, 2020 and 2019:

 

(dollars in thousands)

 

30-59

Days Past

Due

  

60-89

Days Past

Due

  

Greater

than 90

Days

  

Total

Past Due

  

Current

  

Total

Loans

Receivable

  

Loans

Receivable

> 90 Days

and

Accruing

 

At December 31, 2020

                            

Commercial real estate

 $-  $97  $4,421  $4,518  $701,230  $705,748  $- 

Construction and land development

  -   -   -   -   142,821   142,821   - 

Commercial and industrial

  1,648   -   2,963   4,611   195,577   200,188   - 

Owner occupied real estate

  581   813   2,859   4,253   470,953   475,206   - 

Consumer and other

  92   28   1,302   1,422   100,946   102,368   - 

Residential mortgage

  -   -   1,313   1,313   393,861   395,174   612 

Paycheck protection program

  -   -   -   -   636,637   636,637   - 

Total

 $2,321  $938  $12,858  $16,117  $2,642,025  $2,658,142  $612 

 

(dollars in thousands)

 

30-59

Days Past

Due

  

60-89

Days Past

Due

  

Greater

than 90

Days

  

Total

Past Due

  

Current

  

Total

Loans

Receivable

  

Loans

Receivable

> 90 Days

and

Accruing

 

At December 31, 2019

                            

Commercial real estate

 $-  $313  $4,159  $4,472  $609,159  $613,631  $- 

Construction and land development

  -   -   -   -   121,395   121,395   - 

Commercial and industrial

  -   50   3,087   3,137   220,769   223,906   - 

Owner occupied real estate

  -   1,219   3,337   4,556   419,844   424,400   - 

Consumer and other

  112   241   1,062   1,415   99,905   101,320   - 

Residential mortgage

  -   -   768   768   262,676   263,444   - 

Paycheck protection program

  -   -   -   -   -   -   - 

Total

 $112  $1,823  $12,413  $14,348  $1,733,748  $1,748,096  $- 

 

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within our internal risk rating system as of December 31, 2020 and 2019:

 

 

(dollars in thousands)

 

Pass

  

Special

Mention

  

Substandard

  

Doubtful

  

Total

 

At December 31, 2020:

                    

Commercial real estate

 $701,151  $80  $4,517  $-  $705,748 

Construction and land development

  142,821   -   -   -   142,821 

Commercial and industrial

  197,225   -   2,963   -   200,188 

Owner occupied real estate

  470,732   519   3,955   -   475,206 

Consumer and other

  101,066   -   1,302   -   102,368 

Residential mortgage

  394,473   -   701   -   395,174 

Paycheck protection program

  636,637   -   -   -   636,637 

Total

 $2,644,105  $599  $13,438  $-  $2,658,142 

 

 

(dollars in thousands)

 

Pass

  

Special

Mention

  

Substandard

  

Doubtful

  

Total

 

At December 31, 2019:

                    

Commercial real estate

 $609,382  $90  $4,159  $-  $613,631 

Construction and land development

  121,395   -   -   -   121,395 

Commercial and industrial

  220,819   -   3,087   -   223,906 

Owner occupied real estate

  418,997   1,770   3,633   -   424,400 

Consumer and other

  100,258   -   1,062   -   101,320 

Residential mortgage

  262,555   121   768   -   263,444 

Paycheck protection program

  -   -   -   -   - 

Total

 $1,733,406  $1,981  $12,709  $-  $1,748,096 

 

The following table shows non-accrual loans by class as of December 31, 2020 and 2019:

 

(dollars in thousands)

 

December 31,

2020

  

December 31,

2019

 
         

Commercial real estate

 $4,421  $4,159 

Construction and land development

  -   - 

Commercial and industrial

  2,963   3,087 

Owner occupied real estate

  2,859   3,337 

Consumer and other

  1,302   1,062 

Residential mortgage

  701   768 

Paycheck protection program

  -   - 

Total

 $12,246  $12,413 

 

If these loans were performing under their original contractual rate, interest income on such loans would have increased approximately $718,000, $548,000, and $498,000, for 2020, 2019, and 2018, respectively.  

 

Troubled Debt Restructurings

 

A modification to the contractual terms of a loan which results in a concession to a borrower that is experiencing financial difficulty is classified as a troubled debt restructuring (“TDR”). The concessions made in a TDR are those that would not otherwise be considered for a borrower or collateral with similar risk characteristics. A TDR is typically the result of efforts to minimize potential losses that may be incurred during loan workouts, foreclosure, or repossession of collateral at a time when collateral values are declining. Concessions include a reduction in interest rate below current market rates, a material extension of time to the loan term or amortization period, partial forgiveness of the outstanding principal balance, acceptance of interest only payments for a period of time, or a combination of any of these conditions.

 

Pursuant to the CARES Act, loan modifications made between March 1, 2020 and the earlier of i) December 30, 2020 or ii) 60 days after the President declares a termination of the COVID-19 national emergency are not classified as TDRs if the related loans were not more than 30 days past due as of December 31, 2019. In December 2020, the Economic Aid Act was signed into law which amended certain sections of the CARES Act. This amendment extended the period to suspend the requirements under TDR accounting guidance to the earlier of i) January 1, 2022 or ii) 60 days after the President declares a termination of the national emergency related to the COVID-19 pandemic. Deferrals reached a peak during the second quarter of 2020. As of December 31, 2020, deferrals declined to 21 customers with outstanding balances of $16 million, or less than 1% of total loans outstanding. At December 31, 2020, approximately $4 million of the deferral requests were for deferment of principal balances only. The remaining deferrals include requests to defer both principal and interest payments. Deferrals as of December 31, 2020 were comprised of the following categories: 90 day deferrals amounted to 8 customers with outstanding balances of $3 million and second deferrals amounted to 13 customers with outstanding balances of $13 million.

 

The following table summarizes information with regard to outstanding troubled debt restructurings at December 31, 2020 and 2019:

 

  

Number

of Loans

  

Accrual

Status

  

Non-

Accrual

Status

  

Total

TDRs

 

December 31, 2020

                

Commercial real estate

  1  $4,530  $-  $4,530 

Construction and land development

  -   -   -   - 

Commercial and industrial

  -   -   -   - 

Owner occupied real estate

  -   -   -   - 

Consumer and other

  -   -   -   - 

Residential mortgage

  -   -   -   - 

Paycheck protection program

  -   -   -   - 

Total

  1  $4,530  $-  $4,530 
                 

December 31, 2019

                

Commercial real estate

  1  $6,173  $-  $6,173 

Construction and land development

  -   -   -   - 

Commercial and industrial

  -   -   -   - 

Owner occupied real estate

  -   -   -   - 

Consumer and other

  -   -   -   - 

Residential mortgage

  -   -   -   - 

Paycheck protection program

  -   -   -   - 

Total

  1  $6,173  $-  $6,173 

 

All TDRs are considered impaired and are therefore individually evaluated for impairment in the calculation of the allowance for loan losses. Some TDRs may not ultimately result in the full collection of principal and interest as restructured and could lead to potential incremental losses. These potential incremental losses would be factored into our estimate of the allowance for loan losses. The level of any subsequent defaults will likely be affected by future economic conditions.

 

There were no loan modifications made during the twelve months ended December 31, 2020 and 2019 that met the criteria of a TDR.

 

After a loan is determined to be a TDR, we continue to track its performance under the most recent restructured terms. There were no TDRs that subsequently defaulted during the years ended December 31, 2020 and 2019.

 

There was one residential mortgage in the process of foreclosure as of December 31, 2020. There was one residential mortgage in the process of foreclosure at December 31, 2019. There was no other real estate owned relating to residential real estate at December 31, 2020 and 2019.