Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Loans

v3.23.2
Note 5 - Loans
6 Months Ended
Jun. 30, 2023
Notes to Financial Statements  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE 5 LOANS

 

The loan portfolio is classified based on the underlying collateral utilized to secure each loan for financial reporting purposes. This classification is consistent with the Quarterly Report of Condition and Income filed by the Bank with the Federal Deposit Insurance Corporation (FDIC).

 

Commercial, financial and agricultural - Includes loans to business enterprises issued for commercial, industrial, agricultural production and/or other professional purposes. These loans are generally secured by equipment, inventory, and accounts receivable of the borrower and repayment is primarily dependent on business cash flows.

 

Real estate construction – Includes loans secured by real estate to finance land development or the construction of industrial, commercial or residential buildings. Repayment is dependent upon the completion and eventual sale, refinance or operation of the related real estate project.

 

Owner-occupied commercial real estate mortgage – Includes loans secured by nonfarm nonresidential properties for which the primary source of repayment is the cash flow from the ongoing operations conducted by the party that owns the property.

 

1-4 family real estate mortgage – Includes loans secured by residential properties, including home equity lines of credit. Repayment is primarily dependent on the personal cash flow of the borrower.

 

Other real estate mortgage – Includes loans secured by nonowner-occupied properties, including office buildings, industrial buildings, warehouses, retail buildings, multifamily residential properties and farmland. Repayment is primarily dependent on income generated from the underlying collateral.

 

Consumer – Includes loans to individuals not secured by real estate. Repayment is dependent upon the personal cash flow of the borrower.

 

The following table details the Company’s loans at June 30, 2023 and December 31, 2022:

 

   

June 30,

   

December 31,

 
   

2023

   

2022

 
   

(Dollars In Thousands)

 

Commercial, financial and agricultural

  $ 2,986,453     $ 3,145,317  

Real estate - construction

    1,397,732       1,532,388  

Real estate - mortgage:

               

Owner-occupied commercial

    2,294,002       2,199,280  

1-4 family mortgage

    1,167,238       1,146,831  

Other mortgage

    3,686,434       3,597,750  

Subtotal: Real estate - mortgage

    7,147,674       6,943,861  

Consumer

    73,035       66,402  

Total Loans

    11,604,894       11,687,968  

Less: Allowance for credit losses

    (152,272 )     (146,297 )

Net Loans

  $ 11,452,622     $ 11,541,671  
                 
                 

Commercial, financial and agricultural

    25.73

%

    26.91

%

Real estate - construction

    12.04

%

    13.11

%

Real estate - mortgage:

               

Owner-occupied commercial

    19.77

%

    18.82

%

1-4 family mortgage

    10.06

%

    9.81

%

Other mortgage

    31.77

%

    30.78

%

Subtotal: Real estate - mortgage

    61.59

%

    59.41

%

Consumer

    0.63

%

    0.57

%

Total Loans

    100.00

%

    100.00

%

 

The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. The following table presents credit quality indicators for the loan credit portfolio segments and classes. These categories are utilized to develop the associated allowance for credit losses using historical losses adjusted for current economic conditions defined as follows:

 

 

Pass – loans which are well protected by the current net worth and paying capacity of the borrower (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral.

 

Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date. These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification.

 

Substandard – loans that exhibit well-defined weakness or weaknesses that currently jeopardize debt repayment. These loans are characterized by the distinct possibility that the company will sustain some loss if the weaknesses are not corrected.

 

Doubtful – loans that have all the weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.

 

The table below presents loan balances classified by credit quality indicator, loan type and based on year of origination as of June 30, 2023 :

 

   

2023

   

2022

   

2021

   

2020

   

2019

   

Prior

   

Revolving Loans

   

Revolving lines of credit converted to term loans

   

Total

 
   

(In Thousands)

 

Commercial, financial and agricultural

                                                                 

Pass

  $ 188,322     $ 452,817     $ 274,416     $ 175,236     $ 232,062     $ 524,756     $ 1,031,315     $ 5,827     $ 2,884,751  

Special Mention

    1,209       2,018       5,105       6,327       1,969       13,801       17,946       -       48,375  

Substandard - accruing

    -       -       -       374       10,853       24,514       9,783       -       45,524  

Substandard -Non-accrual

    -       452       146       -       2,101       3,211       1,894       -       7,804  

Total Commercial, financial and agricultural

  $ 189,531     $ 455,287     $ 279,667     $ 181,937     $ 246,985     $ 566,282     $ 1,060,937     $ 5,827     $ 2,986,453  

Current-period gross charge-offs

    -       4,677       -       -       -       446       492       -       5,615  
                                                                         

Real estate - construction

                                                                       

Pass

  $ 50,354     $ 646,738     $ 235,612     $ 36,480     $ 7,935     $ 17,850     $ 401,532     $ -     $ 1,396,501  

Special Mention

    -       -       -       -       -       200       19       -       219  

Substandard - accruing

    -       -       -       -       -       1,011       1       -       1,012  

Total Real estate - construction

  $ 50,354     $ 646,738     $ 235,612     $ 36,480     $ 7,935     $ 19,061     $ 401,552     $ -     $ 1,397,732  
                                                                         

Owner-occupied commercial

                                                                       

Pass

  $ 27,570     $ 362,863     $ 208,803     $ 306,095     $ 188,247     $ 384,494     $ 768,636     $ 1,741     $ 2,248,449  

Special Mention

    5,386       1,187       840       7,715       8,679       2,816       6,851       -       33,474  

Substandard - accruing

    -       -       -       -       -       3,498       3,074       -       6,572  

Substandard -Non-accrual

    -       -       -       -       2,332       -       3,175       -       5,507  

Total Owner-occupied commercial

  $ 32,956     $ 364,050     $ 209,643     $ 313,810     $ 199,258     $ 390,808     $ 781,736     $ 1,741     $ 2,294,002  

Current-period gross charge-offs

    -       -       -       -       117       -       -       -       117  
                                                                         

1-4 family mortgage

                                                                       

Pass

  $ 46,213     $ 391,730     $ 209,540     $ 96,218     $ 63,229     $ 121,505     $ 224,137     $ 69     $ 1,152,641  

Special Mention

    -       4,710       1,080       1,193       237       1,204       2,108       -       10,532  

Substandard - accruing

    -       -       -       -       3       541       442       -       986  

Substandard -Non-accrual

    -       -       422       733       1,152       773       -       -       3,080  

Total 1-4 family mortgage

  $ 46,213     $ 396,440     $ 211,042     $ 98,144     $ 64,621     $ 124,023     $ 226,686     $ 69     $ 1,167,238  

Current-period gross charge-offs

    -       40       -       -       -       -       -       -       40  
                                                                         

Other mortgage

                                                                       

Pass

  $ 23,499     $ 881,657     $ 444,982     $ 397,700     $ 260,033     $ 414,557     $ 1,234,081     $ 12,321     $ 3,668,830  

Special Mention

    -       -       -       -       -       1,050       4,431       -       5,482  

Substandard - accruing

    -       236       -       -       -       11,380       -       -       11,616  

Substandard -Non-accrual

    -       -       -       -       130       376       -       -       506  

Total Other mortgage

  $ 23,499     $ 881,893     $ 444,982     $ 397,700     $ 260,163     $ 427,363     $ 1,238,513     $ 12,321     $ 3,686,434  
                                                                         

Consumer

                                                                       

Pass

  $ 23,293     $ 12,787     $ 1,242     $ 4,428     $ 2,206     $ 6,463     $ 22,607     $ -     $ 73,026  

Special Mention

    -       -       -       -       -       -       9       -       9  

Substandard - accruing

    -       -       -       -       -       -       -       -       -  

Total Consumer

  $ 23,293     $ 12,787     $ 1,242     $ 4,428     $ 2,206     $ 6,463     $ 22,616     $ -     $ 73,035  

Current-period gross charge-offs

    -       -       -       -       -       -       501       -       501  
                                                                         

Total Loans

                                                                       

Pass

  $ 359,251     $ 2,748,592     $ 1,374,595     $ 1,016,157     $ 753,712     $ 1,469,625     $ 3,682,308     $ 19,958     $ 11,424,198  

Special Mention

    6,595       7,915       7,025       15,235       10,885       19,071       31,364       -       98,090  

Substandard - accruing

    -       236       -       374       10,856       40,947       13,296       -       65,709  

Substandard -Non-accrual

    -       452       568       733       5,716       4,360       5,069       -       16,897  

Total Loans

  $ 365,846     $ 2,757,195     $ 1,382,188     $ 1,032,499     $ 781,169     $ 1,534,003     $ 3,732,037     $ 19,958     $ 11,604,894  

Current-period gross charge-offs

  $ -     $ 4,717     $ -     $ -     $ 117     $ 446     $ 993     $ -     $ 6,273  

 

The table below presents loan balances classified by credit quality indicator, loan type and based on year of origination as of December 31, 2022:

 

                                                   

Revolving

         
   

2022

   

2021

   

2020

   

2019

   

2018

   

Prior

   

Loans

   

Total

 
   

(In Thousands)

 

Commercial, financial and agricultural

                                                         

Pass

  $ 691,817     $ 502,648     $ 223,096     $ 144,587     $ 78,477     $ 134,893     $ 1,267,333     $ 3,042,851  

Special Mention

    6,906       3,737       1,101       1,748       570       898       29,516       44,476  

Substandard

    200       -       379       9,501       16,329       16,595       14,986       57,990  

Total Commercial, financial and agricultural

  $ 698,923     $ 506,385     $ 224,576     $ 155,836     $ 95,376     $ 152,386     $ 1,311,835     $ 3,145,317  
                                                                 

Real estate - construction

                                                               

Pass

  $ 618,578     $ 638,126     $ 156,834     $ 15,197     $ 12,063     $ 14,847     $ 72,172     $ 1,527,817  

Special Mention

    2,500       -       -       -       -       873       -       3,373  

Substandard

    -       -       -       -       1,198       -       -       1,198  

Total Real estate - construction

  $ 621,078     $ 638,126     $ 156,834     $ 15,197     $ 13,261     $ 15,720     $ 72,172     $ 1,532,388  
                                                                 

Owner-occupied commercial

                                                               

Pass

  $ 424,321     $ 496,298     $ 352,375     $ 199,987     $ 157,204     $ 477,926     $ 64,152     $ 2,172,263  

Special Mention

    2,362       -       -       2,723       4,682       6,917       1,687       18,371  

Substandard

    -       -       -       73       -       8,573       -       8,646  

Total Owner-occupied commercial

  $ 426,683     $ 496,298     $ 352,375     $ 202,783     $ 161,886     $ 493,416     $ 65,839     $ 2,199,280  
                                                                 

1-4 family mortgage

                                                               

Pass

  $ 388,778     $ 273,515     $ 93,272     $ 52,209     $ 28,999     $ 57,512     $ 243,302     $ 1,137,587  

Special Mention

    315       445       816       375       294       881       2,854       5,980  

Substandard

    -       279       404       648       346       1,224       363       3,264  

Total 1-4 family mortgage

  $ 389,093     $ 274,239     $ 94,492     $ 53,232     $ 29,639     $ 59,617     $ 246,519     $ 1,146,831  
                                                                 

Other mortgage

                                                               

Pass

  $ 1,027,747     $ 976,208     $ 517,392     $ 380,104     $ 130,228     $ 470,699     $ 75,669     $ 3,578,047  

Special Mention

    231       -       -       -       -       7,161       -       7,392  

Substandard

    -       -       -       130       4,569       7,612       -       12,311  

Total Other mortgage

  $ 1,027,978     $ 976,208     $ 517,392     $ 380,234     $ 134,797     $ 485,472     $ 75,669     $ 3,597,750  
                                                                 

Consumer

                                                               

Pass

  $ 21,132     $ 5,845     $ 4,203     $ 1,759     $ 440     $ 2,988     $ 30,021     $ 66,388  

Special Mention

    -       -       -       -       -       14       -       14  

Substandard

    -       -       -       -       -       -       -       -  

Total Consumer

  $ 21,132     $ 5,845     $ 4,203     $ 1,759     $ 440     $ 3,002     $ 30,021     $ 66,402  
                                                                 

Total Loans

                                                               

Pass

  $ 3,172,373     $ 2,892,640     $ 1,347,172     $ 793,843     $ 407,411     $ 1,158,865     $ 1,752,649     $ 11,524,953  

Special Mention

    12,314       4,182       1,917       4,846       5,546       16,744       34,057       79,606  

Substandard

    200       279       783       10,352       22,442       34,004       15,349       83,409  

Total Loans

  $ 3,184,887     $ 2,897,101     $ 1,349,872     $ 809,041     $ 435,399     $ 1,209,613     $ 1,802,055     $ 11,687,968  

 

Loans by performance status as of June 30, 2023 and December 31, 2022 were as follows:

 

June 30, 2023

 

Performing

   

Nonperforming

   

Total

 
                         
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 2,978,515     $ 7,938     $ 2,986,453  

Real estate - construction

    1,397,732       -       1,397,732  

Real estate - mortgage:

                       

Owner-occupied commercial

    2,288,496       5,506       2,294,002  

1-4 family mortgage

    1,162,842       4,396       1,167,238  

Other mortgage

    3,681,497       4,937       3,686,434  

Total real estate mortgage

    7,132,835       14,839       7,147,674  

Consumer

    72,968       67       73,035  

Total

  $ 11,582,050     $ 22,844     $ 11,604,894  

 

December 31, 2022

 

Performing

   

Nonperforming

   

Total

 
                         
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 3,138,014     $ 7,303     $ 3,145,317  

Real estate - construction

    1,532,388       -       1,532,388  

Real estate - mortgage:

                       

Owner-occupied commercial

    2,195,968       3,312       2,199,280  

1-4 family mortgage

    1,144,713       2,118       1,146,831  

Other mortgage

    3,592,732       5,018       3,597,750  

Total real estate mortgage

    6,933,413       10,448       6,943,861  

Consumer

    66,312       90       66,402  

Total

  $ 11,670,127     $ 17,841     $ 11,687,968  

 

Loans by past due status as of June 30, 2023 and December 31, 2022 were as follows:

 

June 30, 2023

 

Past Due Status (Accruing Loans)

                                 
                           

Total Past

   

Total

                   

Nonaccrual

 
   

30-59 Days

   

60-89 Days

   

90+ Days

   

Due

   

Nonaccrual

   

Current

   

Total Loans

   

With no ACL

 
                                                                 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 3,280     $ 596     $ 142     $ 4,018     $ 7,796     $ 2,974,639     $ 2,986,453     $ 3,815  

Real estate - construction

    -       19       -       19       -       1,397,713       1,397,732       -  

Real estate - mortgage:

                                                               

Owner-occupied commercial

    2,279       670       -       2,949       5,506       2,285,547       2,294,002       5,505  

1-4 family mortgage

    1,356       3,274       1,307       5,937       3,089       1,158,212       1,167,238       109  

Other mortgage

    -       -       4,431       4,431       506       3,681,497       3,686,434       506  

Total real estate - mortgage

    3,635       3,944       5,738       13,317       9,101       7,125,256       7,147,674       6,120  

Consumer

    49       29       67       145       -       72,890       73,035       -  

Total

  $ 6,964     $ 4,588     $ 5,947     $ 17,499     $ 16,897     $ 11,570,498     $ 11,604,894     $ 9,935  

 

December 31, 2022

 

Past Due Status (Accruing Loans)

                                 
                           

Total Past

   

Total

                   

Nonaccrual

 
   

30-59 Days

   

60-89 Days

   

90+ Days

   

Due

   

Nonaccrual

   

Current

   

Total Loans

   

With no ACL

 
                                                                 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 1,075     $ 409     $ 195     $ 1,679     $ 7,108     $ 3,136,530     $ 3,145,317     $ 3,238  

Real estate - construction

    -       711       -       711       -       1,531,677       1,532,388       -  

Real estate - mortgage:

                                                               

Owner-occupied commercial

    83       452       -       535       3,312       2,195,433       2,199,280       57  

1-4 family mortgage

    405       580       594       1,579       1,524       1,143,728       1,146,831       491  

Other mortgage

    231       -       4,512       4,743       506       3,592,501       3,597,750       -  

Total real estate - mortgage

    719       1,032       5,106       6,857       5,342       6,931,662       6,943,861       548  

Consumer

    174       128       90       392       -       66,010       66,402       621  

Total

  $ 1,968     $ 2,280     $ 5,391     $ 9,639     $ 12,450     $ 11,665,879     $ 11,687,968     $ 4,407  

 

Under the current expected credit losses (“CECL”) methodology, the allowance for credit losses ("ACL") is measured on a collective basis for pools of loans with similar risk characteristics. For loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. For all loan segments collectively evaluated, losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable forecast period losses are reverted to long-term historical averages. The estimated loan losses for all loan segments are adjusted for changes in qualitative factors not inherently considered in the quantitative analyses.         

 

The Company uses the discounted cash flow (“DCF”) method to estimate ACL for all loan pools except for commercial and industrial ("C&I") revolving lines of credit and credit cards. Commercial and industrial ("C&I") revolving lines of credit and credit cards are members of the Commercial, financial and agricultural and Consumer portfolios, respectively. For all loan pools utilizing the DCF method, the Company utilizes and forecasts national unemployment rate as a loss driver. The Company also utilizes and forecasts GDP growth as a second loss driver for its agricultural and consumer loan pools.  Consistent forecasts of the loss drivers are used across the loan segments.  At June 30, 2023 and December 31, 2022, the Company utilized a reasonable and supportable forecast period of twelve months followed by a six-month straight-line reversion to long term averages.  The Company leveraged economic projections from reputable and independent sources to inform its loss driver forecasts.  The Company expects national unemployment to be generally unchanged and national GDP growth rate to improve compared to the December 31, 2022 forecast.

 

The Company uses a loss-rate method to estimate expected credit losses for its C&I revolving lines of credit and credit card pools.  The C&I revolving lines of credit pool incorporates a probability of default (“PD”) and loss given default (“LGD”) modeling approach.  This approach involves estimating the pool average life and then using historical correlations of default and loss experience over time to calculate the lifetime PD and LGD.  These two inputs are then applied to the outstanding pool balance.  The credit card pool incorporates a remaining life modeling approach, which utilizes an attrition-based method to estimate the remaining life of the pool.  A quarterly average loss rate is then calculated using the Company’s historical loss data. The model reduces the pool balance quarterly on a straight-line basis over the estimated life of the pool. The quarterly loss rate is multiplied by the outstanding balance at each period-end resulting in an estimated loss for each quarter. The sum of estimated loss for all quarters is the total calculated reserve for the pool.  Management has applied the loss-rate method to C&I lines of credit and to credit cards due to their generally short-term nature.  An expected loss ratio is applied based on internal and peer historical losses.

 

Each loan pool is adjusted for qualitative factors not inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation.  The Company considers factors that are relevant within the qualitative framework which include the following:  lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.

 

Inherent risks in the loan portfolio will differ based on type of loan. Specific risk characteristics by loan portfolio segment are listed below:

 

Commercial, financial and agricultural loans include risks associated with the  borrower’s cash flow, debt service coverage, and management’s expertise.  These loans are subject to the risk that the Company may have difficulty converting collateral to a liquid asset if necessary, as well as risks associated with the  degree of specialization, mobility, and general collectability in a default situation. These commercial loans may be subject to many different types of risks, including fraud, bankruptcy, economic downturn, deteriorated or non-existent collateral, and changes in interest rates.

 

Real estate construction loans include risks associated with the borrower’s credit-worthiness, contractor’s qualifications, borrower and contractor performance, and the overall risk and complexity of the proposed project.  Construction lending is also subject to risks associated with sub-market dynamics, including population, employment trends and household income.  During times of economic stress, this type of loan has typically had a greater degree of risk than other loan types.  

 

Real estate mortgage loans consist of loans secured by commercial and residential real estate.  Commercial real estate lending is dependent upon successful management, marketing and expense supervision necessary to maintain the property.  Repayment of these loans may be adversely affected by conditions in the real estate market or the general economy.  Also, commercial real estate loans typically involve relatively large loan balances to a single borrower.  Residential real estate lending risks are generally less significant than those of other loans.  Real estate lending risks include fluctuations in the value of real estate, bankruptcies, economic downturn and customer financial problems.

 

Consumer loans carry a moderate degree of risk compared to other loans.  They are generally more risky than traditional residential real estate loans but less risky than commercial loans.  Risk of default is usually determined by the well-being of the local economies.  During times of economic stress, there is usually some level of job loss both nationally and locally, which directly affects the ability of the consumer to repay debt.

 

The following table presents changes in the ACL, segregated by loan type, for the three and six months ended June 30, 2023 and June 30, 2022.

 

   

Commercial,

                                 
   

financial and

   

Real estate -

   

Real estate -

                 
   

agricultural

   

construction

   

mortgage

   

Consumer

   

Total

 
                                         
   

(In Thousands)

 
   

Three Months Ended June 30, 2023

 

Allowance for credit losses:

                                       

Balance at April 1, 2023

  $ 42,895     $ 40,483     $ 63,157     $ 2,430     $ 148,965  

Charge-offs

    (4,336 )     -       (131 )     (133 )     (4,600 )

Recoveries

    1,232       -       -       21       1,253  

Provision

    3,674       (40 )     3,211       (191 )     6,654  

Balance at June 30, 2023

  $ 43,465     $ 40,443     $ 66,237     $ 2,127     $ 152,272  
                                         
   

Three Months Ended June 30, 2022

 

Allowance for credit losses:

                                       

Balance at April 1, 2022

  $ 41,417     $ 27,821     $ 48,548     $ 1,677     $ 119,463  

Charge-offs

    (1,666 )     -       (23 )     (124 )     (1,813 )

Recoveries

    1,217       -       -       13       1,230  

Provision

    642       8,172       268       426       9,507  

Balance at June 30, 2022

  $ 41,610     $ 35,993     $ 48,793     $ 1,992     $ 128,387  
                                         
   

Six Months Ended June 30, 2023

 

Allowance for credit losses:

                                       

Balance at January 1, 2023

  $ 42,830     $ 42,889     $ 58,652     $ 1,926     $ 146,297  

Charge-offs

    (5,593 )     -       (157 )     (501 )     (6,273 )

Recoveries

    1,360       3       1       32       1,396  

Provision

    4,868       (2,449 )     7,740       692       10,851  

Balance at June 30, 2023

  $ 43,465     $ 40,443     $ 66,237     $ 2,127     $ 152,272  
                                         
   

Six Months Ended June 30, 2022

 

Allowance for credit losses:

                                       

Balance at January 1, 2022

  $ 41,869     $ 26,994     $ 45,829     $ 1,968     $ 116,660  

Charge-offs

    (4,240 )     -       (51 )     (199 )     (4,489 )

Recoveries

    1,322       -       -       25       1,347  

Provision

    2,659       8,999       3,014       198       14,869  

Balance at June 30, 2022

  $ 41,610     $ 35,993     $ 48,793     $ 1,992     $ 128,387  

 

We maintain an ACL on unfunded lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a drawdown on the commitment. The ACL on unfunded loan commitments is classified as a liability account on the Consolidated Balance Sheet within other liabilities, while the corresponding provision for these credit losses is recorded as a component of other expense. The ACL on unfunded commitments was $575,000 at June 30, 2023 and $575,000 at December 31, 2022. There was no provision expense the three and six months ended June 30, 2023, respectively, and provision expense was $0 and $300,000 for the three and six months ended June 30, 2022, respectively.

 

Loans that no longer share similar risk characteristics with collectively evaluated pools are estimated on an individual basis. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table summarizes collateral-dependent gross loans held for investment by collateral type as follows:

 

           

Accounts

                           

ACL

 

June 30, 2023

 

Real Estate

   

Receivable

   

Equipment

   

Other

   

Total

   

Allocation

 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 20,596     $ 7,944     $ 830     $ 23,962     $ 53,332     $ 11,166  

Real estate - construction

    -       -       -       1,011       1,011       2  

Real estate - mortgage:

                                               

Owner-occupied commercial

    12,034       -       -       48       12,082       226  

1-4 family mortgage

    11,259       -       -       -       11,259       78  

Other mortgage

    4,850       -       -       -       4,850       385  

Total real estate - mortgage

    28,143       -       -       48       28,191       689  

Consumer

    -       -       -       -       -       -  

Total

  $ 48,739     $ 7,944     $ 830     $ 25,021     $ 82,534     $ 11,857  

 

           

Accounts

                           

ACL

 

December 31, 2022

 

Real Estate

   

Receivable

   

Equipment

   

Other

   

Total

   

Allocation

 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 20,061     $ 12,092     $ 837     $ 24,998     $ 57,988     $ 9,910  

Real estate - construction

    -       -       -       1,198       1,198       7  

Real estate - mortgage:

                                               

Owner-occupied commercial

    8,573       -       -       74       8,647       154  

1-4 family mortgage

    3,260       -       -       -       3,260       316  

Other mortgage

    12,311       -       -       -       12,311       -  

Total real estate - mortgage

    24,144       -       -       74       24,218       470  

Consumer

    -       -       -       -       -       -  

Total

  $ 44,205     $ 12,092     $ 837     $ 26,270     $ 83,404     $ 10,387  

 

On March 22, 2020, an Interagency Statement was issued by banking regulators that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19. Additionally, Section 4013 of the CARES Act further provides that a qualified loan modification is exempt by law from classification as a Troubled Debt Restructuring (“TDR”) as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak declared by the President of the United States under the National Emergencies Act terminates. The Interagency Statement was subsequently revised in April 2020 to clarify the interaction of the original guidance with Section 4013 of the CARES Act, as well as setting forth the banking regulators’ views on consumer protection considerations. On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act 2021, which extended the period established by Section 4013 of the CARES Act to the earlier of January 1, 2022 or the date that is 60 days after the date on which the national COVID-19 emergency terminates. In accordance with such guidance, the Bank offered short-term modifications made in response to COVID-19 to borrowers who are current and otherwise not past due. These include short-term (180 days or less) modifications in the form of payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.

 

The Bank adopted the Financial Accounting Standards Board's ("FASB") Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measure of TDRs and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.

 

The table below details the amortized cost basis at the end of the reporting period for loans made to borrowers experiencing financial difficulty that were modified during the three and six months ended June 30, 2023:

 

   

Three months ended June 30, 2023

 
           

Payment Deferral

                 
   

Term

   

and Term

           

Percentage of

 
   

Extensions

   

Extensions

   

Total

   

Total Loans

 
   

(In Thousands)

 
                                 

Commercial, financial and agricultural

  $ 2,951     $ -     $ 2,951       0.03

%

Owner-occupied commercial

    2,511       -       2,511       0.02

%

Total

  $ 5,462     $ -     $ 5,462       0.05

%

 

   

Six months ended June 30, 2023

 
           

Payment Deferral

                 
   

Term

   

and Term

           

Percentage of

 
   

Extensions

   

Extensions

   

Total

   

Total Loans

 
   

(In Thousands)

 
                                 

Commercial, financial and agricultural

  $ 42,052     $ -     $ 42,052       0.36

%

Real estate - construction

    200       -       200       -

%

Owner-occupied commercial

    11,703       701       12,404       0.11

%

1-4 family mortgage

    214       -       214       -

%

Other mortgage

    11,254       359       11,613       0.10

%

Total

  $ 65,423     $ 1,060     $ 66,483       0.57

%

 

The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2023:

 

   

Three months ended June 30, 2023

 
           

Total Payment

 
   

Term Extensions

   

Deferral

 
   

(In months)

   

(In Thousands)

 

Commercial, financial and agricultural

    9 to 65     $ -  

Real estate - construction

    -       -  

Owner-occupied commercial

    9 to 60       -  

1-4 family mortgage

    -       -  

Other mortgage

    -       -  

 

   

Six months ended June 30, 2023

 
           

Total Payment

 
   

Term Extensions

   

Deferral

 
   

(In months)

   

(In Thousands)

 

Commercial, financial and agricultural

    3 to 65     $ -  

Real estate - construction

    6       -  

Owner-occupied commercial

    3 to 60       49  

1-4 family mortgage

    3       -  

Other mortgage

    3 to 36       59  

 

No loans modified on or after January 1, 2023, the date the Company adopted ASU 2022-02, were past due greater than 30 days or on non-accrual as of June 30, 2023.

 

As of June 30, 2023, the Company did not have any loans made to borrowers experiencing financial difficulty that were modified during the three and six months of June 30, 2023 that subsequently defaulted. For purposes of this disclosure, default is defined as 90 days past due and still accruing or placement on nonaccrual status.

 

TDRs at December 31, 2022 and June 30, 2022 totaled $2.5 million and $2.1 million, respectively.  The portion of those TDRs accruing interest at December 31, 2022 and June 30, 2022 totaled $431,000 and $421,000, respectively.  There were no modifications made to new TDRs or renewals of existing TDRs for the three and six months ended June 30, 2022.There were no loans which were modified in the previous twelve months (i.e., the twelve months prior to default) that defaulted during the three and six months ended  June 30, 2022. For purposes of this disclosure, default is defined as 90 days past due and still accruing or placement on nonaccrual status.