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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended March 31, 2024
   
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from ____ to ____
   

Commission File Number: 000-28344

FIRST COMMUNITY CORPORATION
(Exact name of registrant as specified in its charter)
 
South Carolina 57-1010751
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   

5455 Sunset Boulevard, Lexington, South Carolina 29072

(Address of principal executive offices) (Zip Code)

(803) 951-2265

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of exchange on which registered
Common stock, par value $1.00 per share FCCO The Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes    No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   Accelerated filer
Non-accelerated Filer    Smaller reporting company x
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: On May 11, 2024, 7,629,005 shares of the issuer’s common stock, par value $1.00 per share, were issued and outstanding.

 
 

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION 1
Item 1. Financial Statements 1
  Consolidated Balance Sheets 1
  Consolidated Statements of Income 2
  Consolidated Statements of Comprehensive Income 3
  Consolidated Statements of Changes in Shareholders’ Equity 4
  Consolidated Statements of Cash Flows 5
  Notes to Consolidated Financial Statements 6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
Item 3. Quantitative and Qualitative Disclosures About Market Risk 47
Item 4. Controls and Procedures 47
     
PART II – OTHER INFORMATION 48
Item 1.  Legal Proceedings 48
Item 1A. Risk Factors 48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 48
Item 3. Defaults Upon Senior Securities 48
Item 4. Mine Safety Disclosures 48
Item 5. Other Information 48
Item 6. Exhibits 49
     
SIGNATURES 50

 

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

FIRST COMMUNITY CORPORATION

CONSOLIDATED BALANCE SHEETS

   March 31,     
(Dollars in thousands, except par values)  2024   December 31, 
   (Unaudited)   2023 
ASSETS        
Cash and due from banks  $20,804   $27,908 
Interest-bearing bank balances   122,778    66,787 
Investment securities available-for-sale   274,349    282,226 
Investment securities held-to-maturity, fair value of $201,753 and $205,518 at March 31, 2024 and December 31, 2023, respectively, net of allowance for credit losses — investments   215,230    217,170 
Other investments, at cost   5,504    6,800 
Loans held-for-sale   1,719    4,433 
Loans held-for-investment   1,157,305    1,134,019 
Less, allowance for credit losses – loans   12,459    12,267 
Net loans held-for-investment   1,144,846    1,121,752 
Property and equipment – net   30,444    30,589 
Lease right-of-use asset   3,172    3,248 
Bank owned life insurance   30,369    30,174 
Other real estate owned   622    622 
Intangible assets   564    604 
Goodwill   14,637    14,637 
Other assets   21,953    20,738 
Total assets  $1,886,991   $1,827,688 
LIABILITIES          
Deposits:          
Non-interest bearing  $443,257   $432,333 
Interest bearing   1,134,810    1,078,668 
Total deposits   1,578,067    1,511,001 
Securities sold under agreements to repurchase   81,833    62,863 
Federal Home Loan Bank advances   60,000    90,000 
Junior subordinated debt   14,964    14,964 
Lease liability   3,357    3,426 
Other liabilities   15,277    14,375 
Total liabilities   1,753,498    1,696,629 
SHAREHOLDERS’ EQUITY          
Preferred stock, par value $1.00 per share, 10,000,000 shares authorized; none issued and outstanding        
Common stock, par value $1.00 per share; 20,000,000 shares authorized; issued and outstanding 7,629,005 at March 31, 2024 and 7,606,172 at December 31, 2023   7,629    7,606 
Nonvested restricted stock and stock units   1,920    2,181 
Additional paid in capital   93,556    93,167 
Retained earnings   57,830    56,296 
Accumulated other comprehensive loss   (27,442)   (28,191)
Total shareholders’ equity   133,493    131,059 
Total liabilities and shareholders’ equity  $1,886,991   $1,827,688 

 

See Notes to Consolidated Financial Statements

1

 

FIRST COMMUNITY CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

         
(Dollars in thousands, except per share amounts)  Three Months ended March 31, 
   2024   2023 
Interest and dividend income:          
Loans, including fees  $15,550   $11,159 
Investment securities – taxable   4,189    4,061 
Investment securities – non taxable   357    375 
Other short term investments and CDs   1,160    295 
Total interest income   21,256    15,890 
Interest expense:          
Deposits   7,203    1,993 
Securities sold under agreement to repurchase   609    356 
Other borrowed money   1,367    1,184 
Total interest expense   9,179    3,533 
Net interest income   12,077    12,357 
Provision for credit losses   129    70 
Net interest income after provision for credit losses   11,948    12,287 
Non-interest income:          
Deposit service charges   259    232 
Mortgage banking income   425    155 
Investment advisory fees and non-deposit commissions   1,358    1,067 
Other   1,142    1,121 
Total non-interest income   3,184    2,575 
Non-interest expense:          
Salaries and employee benefits   7,101    6,331 
Occupancy   790    830 
Equipment   330    336 
Marketing and public relations   566    346 
FDIC Insurance assessments   278    182 
Other real estate expense, net   12    (133)
Amortization of intangibles   39    39 
Other   2,689    2,505 
Total non-interest expense   11,805    10,436 
Net income before tax   3,327    4,426 
Income tax expense   730    963 
Net income  $2,597   $3,463 
           
Basic earnings per common share  $0.34   $0.46 
Diluted earnings per common share  $0.34   $0.45 

 

See Notes to Consolidated Financial Statements

2

 

FIRST COMMUNITY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

         
   Three months ended March 31, 
(Dollars in thousands)  2024   2023 
Net income  $2,597   $3,463 
Other comprehensive income:          
Unrealized gain during the period on available-for-sale securities, net of tax benefit of $80 and expense of $689, respectively   408    2,593 
Reclassification adjustment for amortization of unrealized losses on securities transferred from available-for-sale to held-to-maturity, net of tax expense of $91 and $85, respectively   341    320 
Other comprehensive income   749    2,913 
Comprehensive income  $3,346   $6,376 

 

See Notes to Consolidated Financial Statements

3

 

FIRST COMMUNITY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

                       Accumulated     
   Common       Additional   Nonvested       Other     
(Dollars in thousands)  Shares   Common   Paid-in   Restricted   Retained   Comprehensive     
   Issued   Stock   Capital   Stock   Earnings   Loss   Total 
Balance, December 31, 2022   7,578   $7,578   $92,683   $1,461   $49,025   $(32,386)  $118,361 
Net income                   3,463        3,463 
Adoption of new accounting standard-CECL net of tax of $90                   (337)       (337)
Other comprehensive income net of tax expense of $774                       2,913    2,913 
Issuance of common stock-share based compensation   2    2    39    (69)           (28)
Issuance of restricted stock   8    8    146    (154)            
Grant restricted stock units               72            72 
Amortization of compensation on restricted stock               191            191 
Shares forfeited   (5)   (5)   (100)               (105)
Dividends: Common ($0.14 per share)                   (1,057)       (1,057)
Dividend reinvestment plan   5    5    103                108 
Balance, March 31, 2023   7,588   $7,588   $92,871   $1,501   $51,094   $(29,473)  $123,581 
                                    
Balance, December 31, 2023   7,606   $7,606   $93,167   $2,181   $56,296   $(28,191)  $131,059 
Net income                   2,597        2,597 
Other comprehensive income net of tax expense of $11                       749    749 
Issuance of common stock-share based compensation   9    9    160    (273)           (104)
Issuance of restricted stock   14    14    228    (242)            
Grant restricted stock units               70            70 
Amortization of compensation on restricted stock               184            184 
Shares forfeited   (6)   (6)   (97)               (103)
Dividends: Common ($0.14 per share)                   (1,063)       (1,063)
Dividend reinvestment plan   6    6    98                104 
Balance, March 31, 2024   7,629   $7,629   $93,556   $1,920   $57,830   $(27,442)  $133,493 

 

See Notes to Consolidated Financial Statements

4

 

FIRST COMMUNITY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Three months ended
March 31,
 
(Dollars in thousands)  2024   2023 
Cash flows from operating activities:          
Net income  $2,597   $3,463 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation   424    427 
Net premium amortization on investment securities available-for-sale   (1,030)   (620)
Net premium amortization on investment securities held-to-maturity   (156)   (134)
Provision for credit losses   129    70 
Origination of loans held-for-sale   (50,253)   (5,213)
Sale of loans held-for-sale   52,967    5,680 
Amortization of intangibles   39    39 
Accretion on acquired loans       (20)
(Gain) loss on fair value of equity securities   (21)   2 
Increase in other assets   (912)   (559)
Increase in other liabilities   918    843 
Net cash provided by operating activities   4,702    3,978 
Cash flows from investing activities:          
Purchase of investment securities available-for-sale       (6,025)
Purchase of other investment securities       (1,577)
Maturity/call of investment securities available-for-sale   9,236    5,331 
Maturity/call of investment securities held-to-maturity   2,096    5,698 
Proceeds from sale of other investment securities   1,316     
Increase in loans   (23,308)   (11,829)
Purchase of property and equipment   (279)   (492)
Net cash used in investing activities   (10,939)   (8,894)
Cash flows from financing activities:          
Increase in deposit accounts   67,066    34,775 
Increase in securities sold under agreements to repurchase   18,970    8,232 
Decrease in Fed Funds Borrowed       (22,000)
Advances from the Federal Home Loan Bank       124,000 
Repayment of advances from the Federal Home Loan Bank   (30,000)   (89,000)
Shares retired / forfeited   (103)   (105)
Dividends paid: Common Stock   (1,063)   (1,057)
Restricted Stock Units Granted   70    72 
Cost of issuance of common stock-deferred compensation   (104)   (28)
Change in non-vested restricted stock   184    191 
Dividend reinvestment plan   104    108 
Net cash provided by financing activities   55,124    55,188 
Net increase in cash and cash equivalents   48,887    50,272 
Cash and cash equivalents at beginning of period   94,695    37,401 
Cash and cash equivalents at end of period  $143,582   $87,673 
Supplemental disclosure:          
Cash paid (received) during the period for:          
Interest  $8,703   $3,137 
Income taxes  $(18)  $ 
Non-cash investing and financing activities:          
Unrealized gain on available-for-sale securities, net of tax  $408   $2,593 
Amortization of unrealized losses on securities from transfer of available-for-sale securities to held-to-maturity, net of tax   341    320 
Recognition of operating lease liability       3,602 

 

See Notes to Consolidated Financial Statements

5

 

Notes to Consolidated Financial Statements (Unaudited)

Note 1 - Nature of Business and Basis of Presentation

Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated balance sheets, and the consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows of First Community Corporation (the “Company”) and its wholly owned subsidiary, First Community Bank (the “Bank”) (collectively, the “Company”) present fairly in all material respects the Company’s financial position at March 31, 2024 and December 31, 2023, and the Company’s results of operations for the three months ended March 31, 2024 and 2023, and cash flows for the three months ended March 31, 2024 and 2023. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

In the opinion of management, all adjustments necessary to fairly present the consolidated financial position and consolidated results of operations have been made. All such adjustments are of a normal, recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements and notes thereto are presented in accordance with the instructions for Quarterly Reports on Form 10-Q. The information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 should be referred to in connection with these unaudited interim financial statements.

Recently Issued Accounting Pronouncements

The following is a summary of recent authoritative pronouncements:

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This amendment is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments require disclosure of incremental segment information on an annual and interim basis for all public entities. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, and interim periods with fiscal years beginning after December 15, 2024. Early adoption is permitted.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This amendment is intended to enhance the transparency and decision usefulness of income tax disclosures by requiring public business entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. For public business entities, the amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

6

 

Note 2 - Earnings Per Common Share

Basic earnings per share is calculated by dividing net income by the weighted-average shares of common stock outstanding during the period, excluding non-vested restricted shares. Dilutive earnings per share is calculated by dividing net income by the weighted-average shares of common stock outstanding during the period plus the maximum dilutive effect on common stock issuable upon exercise of stock options or vesting of restricted stock units. Stock options and unvested restricted stock units are considered common stock equivalents and are only included in the calculation of dilutive earnings per common share if the effect is dilutive.

 

The following reconciles the numerator and denominator of the basic and diluted earnings per common share computation: 

         
   Three months 
   Ended March 31, 
(In thousands except average market price and per share data)  2024   2023 
Numerator (Net income available to common shareholders)  $2,597   $3,463 
Denominator          
Weighted average common shares outstanding for:          
Basic shares   7,601    7,555 
Dilutive securities:          
Deferred compensation   79    89 
Diluted common shares outstanding   7,680    7,644 
Earnings per common share:          
Basic   0.34    0.46 
Diluted   0.34    0.45 
The average market price used in calculating assumed number of shares  $17.78   $20.34 

 

Note 3 - Investment Securities

The amortized cost and estimated fair values of investment securities are summarized below. As of March 31, 2024 and December 31, 2023, there was no allowance for credit losses on available-for-sale securities. 

AVAILABLE-FOR-SALE:

       Gross   Gross     
   Amortized   Unrealized   Unrealized     
(Dollars in thousands)  Cost   Gains   Losses   Fair Value 
March 31, 2024                    
US Treasury securities  $15,800   $   $(2,670)  $13,130 
Government Sponsored Enterprises   2,500        (376)   2,124 
Mortgage-backed securities   253,480    14    (16,797)   236,697 
Small Business Administration pools   15,173    23    (493)   14,703 
Corporate and other securities   8,758        (1,063)   7,695 
Total  $295,711   $37   $(21,399)  $274,349 
                     
       Gross   Gross     
   Amortized   Unrealized   Unrealized     
(Dollars in thousands)  Cost   Gains   Losses   Fair Value 
December 31, 2023                    
US Treasury securities  $20,791   $   $(2,445)  $18,346 
Government Sponsored Enterprises   2,500        (371)   2,129 
Mortgage-backed securities   255,757    15    (17,613)   238,159 
Small Business Administration pools   16,108    24    (411)   15,721 
Corporate and other securities   8,759         (888)   7,871 
Total  $303,915   $39   $(21,728)  $282,226 

7

 

HELD-TO-MATURITY:

       Gross   Gross     
   Amortized   Unrealized   Unrealized     
(Dollars in thousands)  Cost   Gains   Losses   Fair Value 
March 31, 2024                    
Mortgage-backed securities  $110,781   $   $(9,341)  $101,440 
State and local government   104,449    41    (4,177)   100,313 
Total  $215,230   $41   $(13,518)  $201,753 
                     
(Dollars in thousands)  Amortized
Cost
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
   Fair Value 
December 31, 2023                    
Mortgage-backed securities  $112,740        (8,490)  $104,250 
State and local government   104,430    283    (3,445)   101,268 
Total  $217,170    283    (11,935)  $205,518 

 

There were no gross realized gains or gross realized losses from the sale of available-for-sale investment securities during the three months ended March 31, 2024 and 2023.

For available-for-sale securities, management evaluates all investments in an unrealized loss position on a quarterly basis, or more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings.

If either of the above criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors. In making the assessment, the Company may consider various factors including the extent to which fair value is less than amortized cost, performance on any underlying collateral, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal payments and adverse conditions specifically related to the security. If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected are compared to the amortized cost basis of the security and any excess is recorded as an allowance for credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any amount of unrealized loss that has not been recorded through an allowance for credit loss is recognized in other comprehensive income.

Changes in the allowance for credit loss are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance for credit loss when management believes an available-for-sale security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. At March 31, 2024, there was no allowance for credit loss related to the available-for-sale securities portfolio.

The following tables show gross unrealized losses and fair values of available-for-sale securities for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous loss position, as of March 31, 2024.

                         
March 31, 2024  Less than 12 months   12 months or more   Total 
Available-for-sale securities:  Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
(Dollars in thousands)  Value   Loss   Value   Loss   Value   Loss 
US Treasury Securities  $   $   $13,130   $2,670   $13,130   $2,670 
Government Sponsored Enterprise           2,124    376    2,124    376 
Mortgage-backed securities   9,779    556    222,380    16,241    232,159    16,797 
Small Business Administration pools   4,540    100    7,044    393    11,584    493 
Corporate and other securities   3,374    372    4,316    691    7,690    1,063 
Total  $17,693   $1,028   $248,994   $20,371   $266,687   $21,399 

8

 

The following table shows gross unrealized losses by fair values of available-for-sale securities, aggregated by investment category and length of time that individual securities have been in a continuous loss position as of December 31, 2023.

                         
December 31, 2023  Less than 12 months   12 months or more   Total 
Available-for-sale securities:  Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
(Dollars in thousands)  Value   Loss   Value   Loss   Value   Loss 
US Treasury Securities  $   $   $18,346   $2,445   $18,346   $2,445 
Government Sponsored Enterprise           2,129    371    2,129    371 
Mortgage-backed securities   8,164    423    223,844    17,190    232,008    17,613 
Small Business Administration pools   4,253    45    7,638    366    11,891    411 
Corporate and other securities   1,880    115    4,236    773    6,116    888 
Total  $14,297   $583   $256,193   $21,145   $270,490   $21,728 

 

The following table shows a roll forward of the allowance for credit losses on held to maturity securities for the three months ended March 31, 2024 and 2023.

   Three Months 
   Ended 
(Dollars in thousands)  March 31, 2024 
Allowance for Credit Losses on Held-to-Maturity Securities:     
State and local government     
Beginning balance, December 31, 2023  $(30)
Recovery of (provision) for credit losses   1 
Ending balance, March 31, 2024  $(29)
      
   Three Months 
   Ended 
(Dollars in thousands)  March 31, 2023 
Allowance for Credit Losses on Held-to-Maturity Securities:     
State and local government     
Beginning balance, December 31, 2022  $ 
Adjustment for adoption of ASC 326   (43)
Recovery of (provision) for credit losses   1 
Ending balance, March 31, 2023  $(42)
      

At March 31, 2024, the Company had no securities held-to-maturity that were past due 30 days or more as to principal or interest payments. The Company had no securities held-to-maturity classified as non-accrual at March 31, 2024.

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. The held-to-maturity portfolio consists of mortgage-backed and municipal securities. Securities are generally rated BBB- or higher. Securities are analyzed individually to establish a CECL reserve.

The estimate of expected credit losses is primarily based on the ratings assigned to the securities by debt rating agencies and the average of the annual historical loss rates associated with those ratings. The Company then multiplies those loss rates, as adjusted for any modifications to reflect current conditions and reasonable and supportable forecasts as considered necessary, by the remaining lives of each individual security to arrive at a lifetime expected loss amount. Management classifies the held-to-maturity portfolio into the following major security types: mortgage-backed securities or state and local governments.

All the mortgage-backed securities (“MBS”) held by the Company are issued by government-sponsored corporations. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. As a result, no allowance for credit losses was recorded on held-to-maturity MBS as of March 31, 2024. The state and local governments securities held by the Company are highly rated by major rating agencies.

9

 

The Company monitors the credit quality of the debt securities held to maturity through the use of credit ratings (Moody’s) on a quarterly basis. In the event that Moody’s does not provide a rating, the comparable S&P rating is used and converted to a Moody’s rating. The following table summarizes the amortized cost of debt securities held to maturity for the three months ended March 31, 2024 and 2023, aggregated by credit quality indicators.

   Three Months   Three Months 
   Ended   Ended 
(Dollars in thousands)  March 31, 2024   March 31, 2023 
Rating:          
Aaa  $157,897   $162,072 
Aa1/Aa2/Aa3   55,297    57,072 
A1/A2   2,066    3,993 
Allowance for Credit Losses on Held-to-Maturity Securities   (29)   (42)
Total  $215,231   $223,095 
           

The following table shows the amortized cost and fair value of investment securities at March 31, 2024, by expected maturity. Expected maturities differ from contractual maturities because borrowers may have the right to call or prepay the obligations with or without prepayment penalties. Mortgage-backed securities are included in the year corresponding with the remaining expected life.

   Available-for-sale 
March 31, 2024  Amortized   Fair 
(Dollars in thousands)  Cost   Value 
Due in one year or less  $6   $6 
Due after one year through five years   10,106    9,760 
Due after five years through ten years   38,168    33,656 
Due after ten years   247,431    230,927 
Total  $295,711   $274,349 
     
   Held-To-Maturity 
March 31, 2024  Amortized   Fair 
(Dollars in thousands)  Cost   Value 
Due in one year or less  $2,718   $2,672 
Due after one year through five years   48,943    46,815 
Due after five years through ten years   65,572    62,564 
Due after ten years   98,026    89,731 
Allowance for Credit Losses on Held-to-Maturity Securities   (29)   (29)
Total  $215,230   $201,753 

10

 

Note 4 - Loans

The following table summarizes the composition of our loan portfolio. Total loans are recorded net of deferred loan fees and costs, which totaled $2.2 million and $2.2 million as of March 31, 2024 and December 31, 2023, respectively. 

   March 31,   December 31, 
(Dollars in thousands)  2024   2023 
Commercial   $78,787   $78,134 
Real estate:          
Construction    136,445    118,225 
Mortgage-residential   99,833    94,796 
Mortgage-commercial   792,333    791,947 
Consumer:          
Home equity    33,637    34,752 
Other    16,270    16,165 
Total loans, net of deferred loan fees and costs  $1,157,305   $1,134,019 

 

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a monthly basis. Loans not meeting the criteria below that are analyzed individually as part of the analysis are considered as pass rated loans. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with 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.

11

 

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of March 31, 2024:

                                     
   Term Loans by year of Origination 
($ in thousands)  2020   2021   2022   2023   2024   Prior   Revolving   Revolving
Converted
to Term
   Total 
Commercial                                             
Pass  $1,247   $22,778   $7,973   $9,806   $5,577   $9,779   $21,506   $44   $78,710 
Special mention                       23            23 
Substandard       54                            54 
Total commercial   1,247    22,832    7,973    9,806    5,577    9,802    21,506    44    78,787 
                                              
Current period gross write-offs       24                            24 
Real estate construction                                             
Pass       5,073    38,295    58,814    2,691    6,317    25,255        136,445 
Total real estate construction       5,073    38,295    58,814    2,691    6,317    25,255        136,445 
                                              
Current period gross write-offs                                    
                                              
Real estate mortgage-residential                                             
Pass   10,195    6,123    33,413    33,037    565    9,988    1,037    4,867    99,225 
Special mention   222                    174            396 
Substandard                       212            212 
Total real estate mortgage-residential   10,417    6,123    33,413    33,037    565    10,374    1,037    4,867    99,833 
                                              
Current period gross write-offs                                    
                                              
Real estate mortgage-commercial                                             
Pass   92,867    129,577    201,446    112,448    13,659    227,031    14,828    99    791,955 
Special mention       123                162            285 
Substandard                       93            93 
Total real estate mortgage-commercial   92,867    129,700    201,446    112,448    13,659    227,286    14,828    99    792,333 
                                              
Current period gross write-offs                                    
                                              
Consumer - home equity                                             
Pass                           32,467        32,467 
Special mention                           111        111 
Substandard                           1,059        1,059 
Total consumer - home equity                           33,637        33,637 
                                              
Current period gross write-offs                                    
                                              
Consumer - other                                             
Pass   171    373    1,010    1,816    496    1,272    11,114        16,252 
Special mention               18                    18 
Substandard                                    
Total consumer - other   171    373    1,010    1,834    496    1,272    11,114        16,270 
                                              
Current period gross write-offs                           25        25 

12

 

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of December 31, 2023:

                                     
   Term Loans by year of Origination 
($ in thousands)  2019   2020   2021   2022   2023   Prior   Revolving   Revolving
Converted
to Term
   Total 
Commercial                                             
Pass  $1,149   $1,375   $23,226   $9,018   $12,950   $9,230   $21,033   $49   $78,030 
Special mention                       26            26 
Substandard           78                        78 
Total commercial   1,149    1,375    23,304    9,018    12,950    9,256    21,033    49    78,134 
                                              
Current period gross write-offs       20                            20 
Real estate construction                                             
Pass   6,864        5,074    39,514    47,992        18,781        118,225 
Total real estate construction   6,864        5,074    39,514    47,992        18,781        118,225 
                                              
Current period gross write-offs                                    
                                              
Real estate mortgage-residential                                             
Pass   1,894    10,548    6,219    28,843    28,517    8,420    977    8,962    94,380 
Special mention       25                177            202 
Substandard                       214            214 
Total real estate mortgage-residential   1,894    10,573    6,219    28,843    28,517    8,811    977    8,962    94,796 
                                              
Current period gross write-offs                                    
                                              
Real estate mortgage-commercial                                             
Pass   47,962    95,120    136,892    201,380    106,125    189,983    14,038    329    791,829 
Special mention                       21            21 
Substandard                       97            97 
Total real estate mortgage-commercial   47,962    95,120    136,892    201,380    106,125    190,101    14,038    329    791,947