Loans and Allowance For Credit Losses | 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES Outstanding loans as of September 30, 2021 and December 31, 2020 are summarized below. Certain loans have been pledged to secure borrowing arrangements (see Note 4). Additionally, SBA loans include loans funded under the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was enacted as a result of the COVID-19 September 30, December 31, (Dollars in thousands) 2021 2020 Commercial and industrial $ 428,169 $ 414,548 Real estate - other 664,202 550,690 Real estate - construction and land 41,312 37,193 SBA 107,096 317,564 Other 61,193 49,075 Total loans, gross 1,301,972 1,369,070 Deferred loan origination costs, net 760 523 Allowance for credit losses (13,571 ) (14,111 ) Total loans, net $ 1,289,161 $ 1,355,482 The following table reflects the loan portfolio allocated by management’s internal risk ratings at September 30, 2021 and December 31, 2020. Commercial Real Estate and Real Estate Construction (Dollars in thousands) Industrial Other and Land SBA Other Total As of September 30, 2021 Grade: Pass $ 413,292 $ 653,813 $ 37,220 $ 105,164 $ 61,193 $ 1,270,682 Special Mention 10,933 4,661 1,288 1,000 — 17,882 Substandard 3,944 5,728 2,804 932 — 13,408 Total $ 428,169 $ 664,202 $ 41,312 $ 107,096 $ 61,193 $ 1,301,972 As of December 31, 2020 Grade: Pass $ 401,629 $ 540,153 $ 34,543 $ 315,277 $ 49,075 $ 1,340,677 Special Mention 9,013 2,911 872 859 — 13,655 Substandard 3,906 7,626 1,778 1,428 — 14,738 Total $ 414,548 $ 550,690 $ 37,193 $ 317,564 $ 49,075 $ 1,369,070 The following table reflects an aging analysis of the loan portfolio by the time past due at September 30, 2021 and December 31, 2020. (Dollars in thousands) 30 Days 60 Days 90+ Days Non-Accrual Current Total As of September 30, 2021 Commercial and industrial $ 134 $ — $ — $ — $ 428,035 $ 428,169 Real estate - other — 191 — 1,000 663,011 664,202 Real estate - construction and land — — — — 41,312 41,312 SBA — — — 233 106,863 107,096 Other — — — — 61,193 61,193 Total loans, gross $ 134 $ 191 $ — $ 1,233 $ 1,300,414 $ 1,301,972 As of December 31, 2020 Commercial and industrial $ — $ — $ — $ — $ 414,548 $ 414,548 Real estate - other 1,505 — — — 549,185 550,690 Real estate - construction and land — — — — 37,193 37,193 SBA — — — 234 317,330 317,564 Other — — — — 49,075 49,075 Total loans, gross $ 1,505 $ — $ — $ 234 $ 1,367,331 $ 1,369,070 The following table reflects the impairment methodology applied to gross loans by portfolio segment and the related allowance for credit losses as of September 30, 2021 and December 31, 2020. Commercial Real Estate and Real Estate Construction (Dollars in thousands) Industrial Other and Land SBA Other Total As of September 30, 2021 Gross loans: Loans individually evaluated for impairment $ — $ 1,000 $ — $ 233 $ — $ 1,233 Loans collectively evaluated for impairment 428,169 663,202 41,312 106,863 61,193 1,300,739 Total gross loans $ 428,169 $ 664,202 $ 41,312 $ 107,096 $ 61,193 $ 1,301,972 Allowance for loan losses: Loans individually evaluated for impairment $ — $ — $ — $ — $ — $ — Loans collectively evaluated for impairment 8,209 4,393 675 273 21 13,571 Total allowance for loan losses $ 8,209 $ 4,393 $ 675 $ 273 $ 21 $ 13,571 As of December 31, 2020 Gross loans: Loans individually evaluated for impairment $ 2,288 $ — $ — $ 689 $ — $ 2,977 Loans collectively evaluated for impairment 412,260 550,690 37,193 316,875 49,075 1,366,093 Total loans $ 414,548 $ 550,690 $ 37,193 $ 317,564 $ 49,075 $ 1,369,070 Allowance for loan losses: Loans individually evaluated for impairment $ 41 $ — $ — $ 259 $ — $ 300 Loans collectively evaluated for impairment 8,882 3,877 681 345 26 13,811 Total allowance for loan losses $ 8,923 $ 3,877 $ 681 $ 604 $ 26 $ 14,111 The following table reflects information related to impaired loans as of September 30, 2021 and December 31, 2020. Unpaid Average Interest Recorded Principal Related Recorded Income (Dollars in thousands) Investment Balance Allowance Investment Recognized As of September 30, 2021 With no related allowance recorded: Real estate - other $ 1,000 $ 1,000 $ — $ 1,000 $ 8 SBA $ 233 $ 755 $ — $ 1,973 $ 14 Total: Real estate - other $ 1,000 $ 1,000 $ — $ 1,000 $ 8 SBA $ 233 $ 755 $ — $ 1,973 $ 14 As of December 31, 2020 With no related allowance recorded: SBA $ 234 $ 479 $ — $ 1,917 $ — With an allowance recorded: Commercial and industrial $ 2,288 $ 2,288 $ 41 $ 2,137 $ 148 SBA $ 455 $ 455 $ 259 $ 3,921 $ 57 Total: Commercial and industrial $ 2,288 $ 2,288 $ 41 $ 2,137 $ 148 SBA $ 689 $ 934 $ 259 $ 5,838 $ 57 The following table reflects the changes in, and allocation of, the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2021 and 2020. Commercial Real Estate and Real Estate Construction (Dollars in thousands) Industrial Other and Land SBA Other Total Three months ended September 30, 2021 Beginning balance $ 8,133 $ 4,069 $ 697 $ 317 $ 24 $ 13,240 Provision for loan losses 45 324 (22 ) (44 ) (3 ) 300 Charge-offs — — — — — — Recoveries 31 — — — — 31 Ending balance $ 8,209 $ 4,393 $ 675 $ 273 $ 21 $ 13,571 Three months ended September 30, 2020 Beginning balance $ 7,851 $ 3,332 $ 956 $ 366 $ 19 $ 12,524 Provision for loan losses 772 276 (280 ) 79 3 850 Charge-offs — — — — — — Recoveries 11 — — — — 11 Ending balance $ 8,634 $ 3,608 $ 676 $ 445 $ 22 $ 13,385 Nine months ended September 30, 2021 Beginning balance $ 8,923 $ 3,877 $ 681 $ 604 $ 26 $ 14,111 Provision for loan losses (952 ) 516 (6 ) (53 ) (5 ) (500 ) Charge-offs — — — (278 ) — (278 ) Recoveries 238 — — — — 238 Ending balance $ 8,209 $ 4,393 $ 675 $ 273 $ 21 $ 13,571 Nine months ended September 30, 2020 Beginning balance $ 6,708 $ 3,281 $ 1,022 $ 50 $ 14 $ 11,075 Provision for loan losses 3,688 327 (346 ) 503 8 4,180 Charge-offs (1,868 ) — — (108 ) — (1,976 ) Recoveries 106 — — — — 106 Ending balance $ 8,634 $ 3,608 $ 676 $ 445 $ 22 $ 13,385 Interest forgone on nonaccrual loans totaled $31,000 and $23,000 for the three months ended September 30, 2021 and 2020, respectively, and $84,000 and $168,000 for the nine months ended September 30, 2021 and 2020, respectively. There was no interest recognized on a cash-basis on impaired loans for the three months and nine months ended September 30, 2021 and 2020, respectively. The recorded investment in impaired loans in the tables above excludes accrued interest receivable and net deferred loan origination costs due to their immateriality. Troubled Debt Restructurings At September 30, 2021 and December 31, 2020, the Company had no recorded investments or allocated specific reserves related to loans with terms that had been modified in troubled debt restructurings. The Company had no commitments as of September 30, 2021 and December 31, 2020 to customers with outstanding loans that were classified as troubled debt restructurings. There were no new troubled debt restructurings during the three and nine months ended September 30, 2021 and 2020. The Company had no troubled debt restructurings with a subsequent payment default within twelve months following the modification during the three and nine months ended September 30, 2021 and 2020. COVID-19 For additional information regarding the impact of COVID-19 |