Loans Receivable And Allowance For Loan Losses | 90 Days and Accruing March 31, 2019: (In Thousands) Commercial and industrial $ — $ — $ 600 $ 600 $ 111,557 $ 112,157 $ — Real estate – construction — — 2,833 2,833 137,446 140,279 — Real estate – commercial — — 54 54 577,216 577,270 — Real estate – residential 901 — 227 1,128 88,327 89,455 — Consumer 117 — 194 311 29,811 30,122 — Total $ 1,018 $ — $ 3,908 $ 4,926 $ 944,357 $ 949,283 $ — 30-59 Days Past Due 60-89 Days Past Due 90 Days & Greater Total Past Due Current Total Loans Receivable Loans Receivable >90 Days and Accruing December 31, 2018: (In Thousands) Commercial and industrial $ 100 $ — $ 765 $ 865 $ 108,497 $ 109,362 $ — Real estate – construction 3,575 — 150 3,725 141,140 144,865 — Real estate – commercial 563 — 54 617 551,932 552,549 — Real estate – residential — 564 227 791 83,332 84,123 — Consumer — — 194 194 30,950 31,144 — Total $ 4,238 $ 564 $ 1,390 $ 6,192 $ 915,851 $ 922,043 $ — The following table presents non-accrual loans by classes of the loan portfolio at March 31, 2019 and December 31, 2018 : March 31, December 31, 2019 2018 (In Thousands) Commercial and industrial $ 600 $ 765 Real estate – construction 2,833 150 Real estate – commercial 54 54 Real estate – residential 227 227 Consumer 194 194 Total $ 3,908 $ 1,390 There were no new troubled debt restructurings ("TDRs") that occurred during the three months ended March 31, 2019 or 2018 . Loans whose terms are modified are classified as TDRs if the Company grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a TDR generally involve a temporary reduction in interest rate or a modification of a loan’s amortization schedule. Non-accrual TDRs are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after the modification is in place. Loans classified as TDRs, including those restored to accrual status, are designated as impaired. The Company’s TDR modifications are made on terms typically up to 12 months in order to aggressively monitor and track performance of the credit. The short-term modifications are monitored for continued performance for an additional period of time after the expiration of the concession. Balance reductions and annualized loss rates are also important metrics that are monitored. The main objective of the modification program is to reduce the payment burden for the borrower and to deleverage the Company’s exposure. Impaired loans are individually assessed to determine that the loan’s carrying value is not in excess of the estimated fair value of the collateral (less cost to sell), if the loan is collateral dependent, or the present value of the expected future cash flows, if the loan is not collateral dependent. Management performs a detailed evaluation of each impaired loan and generally obtains updated appraisals as part of the evaluation. In addition, management adjusts estimated fair value down to appropriately consider recent market conditions, our willingness to accept a lower sales price to effect a quick sale, and costs to dispose of any supporting collateral. At March 31, 2019 , TDRs totaled $7.4 million , including $6.7 million that were current and five non-accrual loans totaling $711,000 . As of December 31, 2018 , TDRs totaled $7.7 million , including $6.8 million that were current and six non-accrual loans totaling $877,000 . At both March 31, 2019 and December 31, 2018 , the Company had no specific reserve against any loan relationship classified as TDR. There were no loans receivable modified as TDRs and with a payment default occurring within 12 months of the restructure date, and the payment default occurring during the three months ended March 31, 2019 and 2018 , respectively. It is the Company’s policy to classify a TDR that is either 90 days or greater delinquent or that has been placed on a non-accrual status as a subsequently defaulted TDR. The following tables summarize information in regards to both the recorded investment balance information for impaired loans by loan portfolio class at March 31, 2019 and December 31, 2018 , and the average recorded investment balance information for impaired loans by loan portfolio class for the three months ended March 31, 2019 and 2018 , respectively: As of March 31, 2019 For the three months ended March 31, 2019 Recorded Investment, Net of Charge-offs Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized (In Thousands) With no related allowance recorded: Commercial and industrial $ 3,922 $ 3,922 $ — $ 3,862 $ 43 Real estate – construction 5,765 6,007 — 5,884 34 Real estate – commercial 166 166 — 167 1 Real estate – residential 587 587 — 588 5 Consumer 194 194 — 194 — With an allowance recorded: Commercial and industrial $ — $ — $ — $ — $ — Real estate – construction — — — — — Real estate – commercial — — — — — Real estate – residential — — — — — Consumer — — — — — Total: Commercial and industrial $ 3,922 $ 3,922 $ — $ 3,862 $ 43 Real estate – construction 5,765 6,007 — 5,884 34 Real estate – commercial 166 166 — 167 1 Real estate – residential 587 587 — 588 5 Consumer 194 194 — 194 — Total $ 10,634 $ 10,876 $ — $ 10,695 $ 83 As of December 31, 2018 For the three months ended March 31, 2018 Recorded Investment, Net of Charge-offs Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized (In Thousands) With no related allowance recorded: Commercial and industrial $ 4,200 $ 4,200 $ — $ 3,203 $ 33 Real estate – construction 3,082 3,082 — 3,145 33 Real estate – commercial 168 168 — 334 2 Real estate – residential 589 589 — 1,085 5 Consumer 194 194 234 — With an allowance recorded: Commercial and industrial $ — $ — $ — $ — $ — Real estate – construction — — — — — Real estate – commercial — — — — — Real estate – residential — — — — — Consumer — — — — — Total: Commercial and industrial $ 4,200 $ 4,200 $ — $ 3,203 $ 33 Real estate – construction 3,082 3,082 — 3,145 33 Real estate – commercial 168 168 — 334 2 Real estate – residential 589 589 — 1,085 5 Consumer 194 194 234 — Total $ 8,233 $ 8,233 $ — $ 8,001 $ 73 The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of March 31, 2019 and December 31, 2018 : Pass Special Mention Substandard Doubtful Total (In Thousands) March 31, 2019: Commercial and industrial $ 107,647 $ 116 $ 4,394 $ — $ 112,157 Real estate – construction 134,514 1,569 4,196 — 140,279 Real estate – commercial 573,886 2,656 728 — 577,270 Real estate – residential 89,228 — 227 — 89,455 Consumer 29,762 — 360 — 30,122 Total $ 935,037 $ 4,341 $ 9,905 $ — $ 949,283 Pass Special Mention Substandard Doubtful Total (In Thousands) December 31, 2018: Commercial and industrial $ 104,557 $ 126 $ 4,679 $ — $ 109,362 Real estate – construction 138,858 1,577 4,430 — 144,865 Real estate – commercial 549,083 2,722 744 — 552,549 Real estate – residential 83,896 — 227 — 84,123 Consumer 30,782 — 362 — 31,144 Total $ 907,176 $ 4,425 $ 10,442 $ — $ 922,043 The following tables present the balance in the allowance for loan losses at March 31, 2019 and December 31, 2018 disaggregated on the basis of the Company’s impairment method by class of loans receivable along with the balance of loans receivable by class disaggregated on the basis of the Company’s impairment methodology: Allowance for Loan Losses Loans Receivable Balance Balance Related to Loans Individually Evaluated for Impairment Balance Related to Loans Collectively Evaluated for Impairment Balance Balance Individually Evaluated for Impairment Balance Collectively Evaluated for Impairment (In Thousands) March 31, 2019: Commercial and industrial $ 773 $ — $ 773 $ 112,157 $ 3,922 $ 108,235 Real estate – construction 2,011 — 2,011 140,279 5,765 134,514 Real estate – commercial 7,487 — 7,487 577,270 166 577,104 Real estate – residential 711 — 711 89,455 587 88,868 Consumer 135 — 135 30,122 194 29,928 Unallocated 465 — 465 — — — Total $ 11,582 $ — $ 11,582 $ 949,283 $ 10,634 $ 938,649 Allowance for Loan Losses Loans Receivable Balance Balance Related to Loans Individually Evaluated for Impairment Balance Related to Loans Collectively Evaluated for Impairment Balance Balance Individually Evaluated for Impairment Balance Collectively Evaluated for Impairment (In Thousands) December 31, 2018: Commercial and industrial $ 745 $ — $ 745 $ 109,362 $ 4,200 $ 105,162 Real estate – construction 2,049 — 2,049 144,865 3,082 141,783 Real estate – commercial 7,283 — 7,283 552,549 168 552,381 Real estate – residential 668 — 668 84,123 589 83,534 Consumer 147 — 147 31,144 194 30,950 Unallocated 506 — 506 — — — Total $ 11,398 $ — $ 11,398 $ 922,043 $ 8,233 $ 913,810 During the fourth quarter of 2018, Management employed a more refined estimation in determining the risk levels assigned to each of its qualitative factors in the allowance for loan losses. While this did not result in a significant change to the allowance for loan losses as a whole, it did result in increasing or decreasing the provision for certain loan categories that the Company either had experienced more or less historical net charge-offs. The following table presents the change in the allowance for loan losses by classes of loans for the three months ended March 31, 2019 and 2018 : Allowance for Loan Losses Commercial and Industrial Real Estate - Construction Real Estate - Commercial Real Estate - Residential Consumer Unallocated Total Beginning balance, January 1, 2019 $ 745 $ 2,049 $ 7,283 $ 668 $ 147 $ 506 $ 11,398 Charge-offs — (242 ) — — (5 ) — (247 ) Recoveries — — 4 — 2 — 6 Provision 28 204 200 43 (9 ) (41 ) 425 Ending balance, March 31, 2019 $ 773 $ 2,011 $ 7,487 $ 711 $ 135 $ 465 $ 11,582 Allowance for Loan Losses Commercial and Industrial Real Estate - Construction Real Estate - Commercial Real Estate - Residential Consumer Unallocated Total (In Thousands) Beginning balance, January 1, 2018 $ 930 $ 1,389 $ 7,325 $ 502 $ 174 $ 348 $ 10,668 Charge-offs (115 ) — — — — — (115 ) Recoveries — 3 6 — — — 9 Provision 152 97 54 (3 ) (18 ) 118 400 Ending balance, March 31, 2018 $ 967 $ 1,489 $ 7,385 $ 499 $ 156 $ 466 $ 10,962" id="sjs-B4">LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES Loans receivable, which management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Company is generally amortizing these amounts over the contractual life of the loan. Loans held for sale are designated at time of origination. They generally consist of newly originated fixed rate residential mortgage loans and salable SBA loans and are recorded at the lower of aggregate cost or estimated fair value in the aggregate. The Company typically retains adjustable-rate mortgages ("ARM") loans in its portfolio, however occasionally, the Company may elect to sell a small pool of these loans as a part of its strategy to manage interest rate risk. During the three months ended March 31, 2019 and 2018, the Company transferred $1.9 million and $5.0 million , respectively, from held for investment to held for sale. Gains from such sales were $37,000 and $100,000 for the three months ended March 31, 2019 and 2018, respectively. Transfers from held for investment occur at the lower of cost or fair value, less costs to sell. Gains are recognized on a settlement-date basis and are determined by the difference between the net sales proceeds and the carrying value of the loans, including any net deferred fees or costs. Depending on the type of loan sold, servicing may or may not be retained. The loans receivable portfolio is segmented into five categories, those being a) Commercial and industrial, b) Real estate-construction (consisting of both residential and commercial construction), c) Real estate-commercial, d) Real estate-residential, and e) Consumer. For all classes of loans receivable, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest previously accrued on these loans is reversed from income. Interest received on nonaccrual loans, including impaired loans, generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments. The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded loan commitments and is recorded in other liabilities on the consolidated balance sheet, which at March 31, 2019 and December 31, 2018 , the Company had no such reserves. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectable are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a monthly evaluation of the adequacy of the allowance. The allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available. The allowance consists of specific, general and unallocated components. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of the loan. The specific component relates to loans that are classified as impaired. When a loan is impaired, there are three acceptable methods under ASC 310-10-35 for measuring the impairment: 1. The loan’s observable market price; 2. The fair value of the underlying collateral; or 3. The present value (PV) of expected future cash flows. Loans that are considered “collateral-dependent” should be evaluated under the “Fair market value of collateral.” Loans that are still expected to be supported by repayment from the borrower should be evaluated under the “Present value of future cash flows.” For the most part, the Company measures impairment under the “Fair market value of collateral” for any loan that would rely on the value of collateral for recovery in the event of default. The individual impairment analysis for each loan is clearly documented as to the chosen valuation method. The general component covers pools of loans by loan class including commercial and industrial, real estate-construction and real estate-commercial not considered impaired as well as smaller balance homogeneous loans such as real estate-residential and consumer. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These qualitative risk factors include: 1. Changes in lending policy and procedures, including changes in underwriting standards and collection practices not previously considered in estimating credit losses. 2. Changes in relevant economic and business conditions. 3. Changes in nature and volume of the loan portfolio and in the terms of loans. 4. Changes in experience, ability and depth of lending management and staff. 5. Changes in the volume and severity of past due loans, the volume of non-accrual loans and the volume and severity of adversely classified loans. 6. Changes in the quality of the loan review system. 7. Changes in the value of underlying collateral for collateral-dependent loans. 8. The existence and effect of any concentration of credit and changes in the level of such concentrations. 9. The effect of other external forces such as competition, legal and regulatory requirements on the level of estimated credit losses in the existing portfolio. Each factor is assigned a risk value to reflect low, moderate or high risk assessments based on management’s best judgment using current market, macro and other relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation in each factor and accompany the allowance for loan loss calculation. During the fourth quarter of 2018, Management employed a more refined estimation in determining the risk levels assigned to each of its qualitative factors in the allowance for loan losses. While this did not result in a significant change to the allowance for loan losses as a whole, it did result in increasing or decreasing the provision for certain loan categories that the Company either had experienced more or less historical net charge-offs. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. A loan is considered impaired when it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and industrial, real estate-commercial, real estate-construction, real estate-residential and consumer loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value. The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral. For commercial loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property. For commercial loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets. The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments, for commercial and consumer loans. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans classified special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristics that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectable and are charged to the allowance for loan losses. Loans not classified are rated pass. In addition, federal and state regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate. The components of the loan portfolio held for investment at March 31, 2019 and December 31, 2018 are as follows: March 31, December 31, 2019 2018 (In Thousands) Commercial and industrial $ 112,157 $ 109,362 Real estate – construction 140,279 144,865 Real estate – commercial 577,270 552,549 Real estate – residential 89,455 84,123 Consumer 30,122 31,144 949,283 922,043 Allowance for loan losses (11,582 ) (11,398 ) Net unearned fees (790 ) (742 ) Net Loans $ 936,911 $ 909,903 The performance and credit quality of the loan portfolio is monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the past due status as of March 31, 2019 and December 31, 2018 : 30-59 Days Past Due 60-89 Days Past Due 90 Days & Greater Total Past Due Current Total Loans Receivable Loans Receivable >90 Days and Accruing March 31, 2019: (In Thousands) Commercial and industrial $ — $ — $ 600 $ 600 $ 111,557 $ 112,157 $ — Real estate – construction — — 2,833 2,833 137,446 140,279 — Real estate – commercial — — 54 54 577,216 577,270 — Real estate – residential 901 — 227 1,128 88,327 89,455 — Consumer 117 — 194 311 29,811 30,122 — Total $ 1,018 $ — $ 3,908 $ 4,926 $ 944,357 $ 949,283 $ — 30-59 Days Past Due 60-89 Days Past Due 90 Days & Greater Total Past Due Current Total Loans Receivable Loans Receivable >90 Days and Accruing December 31, 2018: (In Thousands) Commercial and industrial $ 100 $ — $ 765 $ 865 $ 108,497 $ 109,362 $ — Real estate – construction 3,575 — 150 3,725 141,140 144,865 — Real estate – commercial 563 — 54 617 551,932 552,549 — Real estate – residential — 564 227 791 83,332 84,123 — Consumer — — 194 194 30,950 31,144 — Total $ 4,238 $ 564 $ 1,390 $ 6,192 $ 915,851 $ 922,043 $ — The following table presents non-accrual loans by classes of the loan portfolio at March 31, 2019 and December 31, 2018 : March 31, December 31, 2019 2018 (In Thousands) Commercial and industrial $ 600 $ 765 Real estate – construction 2,833 150 Real estate – commercial 54 54 Real estate – residential 227 227 Consumer 194 194 Total $ 3,908 $ 1,390 There were no new troubled debt restructurings ("TDRs") that occurred during the three months ended March 31, 2019 or 2018 . Loans whose terms are modified are classified as TDRs if the Company grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a TDR generally involve a temporary reduction in interest rate or a modification of a loan’s amortization schedule. Non-accrual TDRs are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after the modification is in place. Loans classified as TDRs, including those restored to accrual status, are designated as impaired. The Company’s TDR modifications are made on terms typically up to 12 months in order to aggressively monitor and track performance of the credit. The short-term modifications are monitored for continued performance for an additional period of time after the expiration of the concession. Balance reductions and annualized loss rates are also important metrics that are monitored. The main objective of the modification program is to reduce the payment burden for the borrower and to deleverage the Company’s exposure. Impaired loans are individually assessed to determine that the loan’s carrying value is not in excess of the estimated fair value of the collateral (less cost to sell), if the loan is collateral dependent, or the present value of the expected future cash flows, if the loan is not collateral dependent. Management performs a detailed evaluation of each impaired loan and generally obtains updated appraisals as part of the evaluation. In addition, management adjusts estimated fair value down to appropriately consider recent market conditions, our willingness to accept a lower sales price to effect a quick sale, and costs to dispose of any supporting collateral. At March 31, 2019 , TDRs totaled $7.4 million , including $6.7 million that were current and five non-accrual loans totaling $711,000 . As of December 31, 2018 , TDRs totaled $7.7 million , including $6.8 million that were current and six non-accrual loans totaling $877,000 . At both March 31, 2019 and December 31, 2018 , the Company had no specific reserve against any loan relationship classified as TDR. There were no loans receivable modified as TDRs and with a payment default occurring within 12 months of the restructure date, and the payment default occurring during the three months ended March 31, 2019 and 2018 , respectively. It is the Company’s policy to classify a TDR that is either 90 days or greater delinquent or that has been placed on a non-accrual status as a subsequently defaulted TDR. The following tables summarize information in regards to both the recorded investment balance information for impaired loans by loan portfolio class at March 31, 2019 and December 31, 2018 , and the average recorded investment balance information for impaired loans by loan portfolio class for the three months ended March 31, 2019 and 2018 , respectively: As of March 31, 2019 For the three months ended March 31, 2019 Recorded Investment, Net of Charge-offs Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized (In Thousands) With no related allowance recorded: Commercial and industrial $ 3,922 $ 3,922 $ — $ 3,862 $ 43 Real estate – construction 5,765 6,007 — 5,884 34 Real estate – commercial 166 166 — 167 1 Real estate – residential 587 587 — 588 5 Consumer 194 194 — 194 — With an allowance recorded: Commercial and industrial $ — $ — $ — $ — $ — Real estate – construction — — — — — Real estate – commercial — — — — — Real estate – residential — — — — — Consumer — — — — — Total: Commercial and industrial $ 3,922 $ 3,922 $ — $ 3,862 $ 43 Real estate – construction 5,765 6,007 — 5,884 34 Real estate – commercial 166 166 — 167 1 Real estate – residential 587 587 — 588 5 Consumer 194 194 — 194 — Total $ 10,634 $ 10,876 $ — $ 10,695 $ 83 As of December 31, 2018 For the three months ended March 31, 2018 Recorded Investment, Net of Charge-offs Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized (In Thousands) With no related allowance recorded: Commercial and industrial $ 4,200 $ 4,200 $ — $ 3,203 $ 33 Real estate – construction 3,082 3,082 — 3,145 33 Real estate – commercial 168 168 — 334 2 Real estate – residential 589 589 — 1,085 5 Consumer 194 194 234 — With an allowance recorded: Commercial and industrial $ — $ — $ — $ — $ — Real estate – construction — — — — — Real estate – commercial — — — — — Real estate – residential — — — — — Consumer — — — — — Total: Commercial and industrial $ 4,200 $ 4,200 $ — $ 3,203 $ 33 Real estate – construction 3,082 3,082 — 3,145 33 Real estate – commercial 168 168 — 334 2 Real estate – residential 589 589 — 1,085 5 Consumer 194 194 234 — Total $ 8,233 $ 8,233 $ — $ 8,001 $ 73 The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of March 31, 2019 and December 31, 2018 : Pass Special Mention Substandard Doubtful Total (In Thousands) March 31, 2019: Commercial and industrial $ 107,647 $ 116 $ 4,394 $ — $ 112,157 Real estate – construction 134,514 1,569 4,196 — 140,279 Real estate – commercial 573,886 2,656 728 — 577,270 Real estate – residential 89,228 — 227 — 89,455 Consumer 29,762 — 360 — 30,122 Total $ 935,037 $ 4,341 $ 9,905 $ — $ 949,283 Pass Special Mention Substandard Doubtful Total (In Thousands) December 31, 2018: Commercial and industrial $ 104,557 $ 126 $ 4,679 $ — $ 109,362 Real estate – construction 138,858 1,577 4,430 — 144,865 Real estate – commercial 549,083 2,722 744 — 552,549 Real estate – residential 83,896 — 227 — 84,123 Consumer 30,782 — 362 — 31,144 Total $ 907,176 $ 4,425 $ 10,442 $ — $ 922,043 The following tables present the balance in the allowance for loan losses at March 31, 2019 and December 31, 2018 disaggregated on the basis of the Company’s impairment method by class of loans receivable along with the balance of loans receivable by class disaggregated on the basis of the Company’s impairment methodology: Allowance for Loan Losses Loans Receivable Balance Balance Related to Loans Individually Evaluated for Impairment Balance Related to Loans Collectively Evaluated for Impairment Balance Balance Individually Evaluated for Impairment Balance Collectively Evaluated for Impairment (In Thousands) March 31, 2019: Commercial and industrial $ 773 $ — $ 773 $ 112,157 $ 3,922 $ 108,235 Real estate – construction 2,011 — 2,011 140,279 5,765 134,514 Real estate – commercial 7,487 — 7,487 577,270 166 577,104 Real estate – residential 711 — 711 89,455 587 88,868 Consumer 135 — 135 30,122 194 29,928 Unallocated 465 — 465 — — — Total $ 11,582 $ — $ 11,582 $ 949,283 $ 10,634 $ 938,649 Allowance for Loan Losses Loans Receivable Balance Balance Related to Loans Individually Evaluated for Impairment Balance Related to Loans Collectively Evaluated for Impairment Balance Balance Individually Evaluated for Impairment Balance Collectively Evaluated for Impairment (In Thousands) December 31, 2018: Commercial and industrial $ 745 $ — $ 745 $ 109,362 $ 4,200 $ 105,162 Real estate – construction 2,049 — 2,049 144,865 3,082 141,783 Real estate – commercial 7,283 — 7,283 552,549 168 552,381 Real estate – residential 668 — 668 84,123 589 83,534 Consumer 147 — 147 31,144 194 30,950 Unallocated 506 — 506 — — — Total $ 11,398 $ — $ 11,398 $ 922,043 $ 8,233 $ 913,810 During the fourth quarter of 2018, Management employed a more refined estimation in determining the risk levels assigned to each of its qualitative factors in the allowance for loan losses. While this did not result in a significant change to the allowance for loan losses as a whole, it did result in increasing or decreasing the provision for certain loan categories that the Company either had experienced more or less historical net charge-offs. The following table presents the change in the allowance for loan losses by classes of loans for the three months ended March 31, 2019 and 2018 : Allowance for Loan Losses Commercial and Industrial Real Estate - Construction Real Estate - Commercial Real Estate - Residential Consumer Unallocated Total Beginning balance, January 1, 2019 $ 745 $ 2,049 $ 7,283 $ 668 $ 147 $ 506 $ 11,398 Charge-offs — (242 ) — — (5 ) — (247 ) Recoveries — — 4 — 2 — 6 Provision 28 204 200 43 (9 ) (41 ) 425 Ending balance, March 31, 2019 $ 773 $ 2,011 $ 7,487 $ 711 $ 135 $ 465 $ 11,582 Allowance for Loan Losses Commercial and Industrial Real Estate - Construction Real Estate - Commercial Real Estate - Residential Consumer Unallocated Total (In Thousands) Beginning balance, January 1, 2018 $ 930 $ 1,389 $ 7,325 $ 502 $ 174 $ 348 $ 10,668 Charge-offs (115 ) — — — — — (115 ) Recoveries — 3 6 — — — 9 Provision 152 97 54 (3 ) (18 ) 118 400 Ending balance, March 31, 2018 $ 967 $ 1,489 $ 7,385 $ 499 $ 156 $ 466 $ 10,962 |