Loans and Allowance For Credit Losses | 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES Outstanding loans as of June 30, 2022 and December 31, 2021 are summarized below. Certain loans have been pledged to secure borrowing arrangements (see Note 4). June 30, December 31, (Dollars in thousands) 2022 2021 Commercial and industrial $ 589,562 474,281 Real estate - other 794,504 697,212 Real estate - construction and land 63,189 43,194 SBA 13,310 81,403 Other 39,814 80,559 Total loans, gross 1,500,379 1,376,649 Deferred loan origination costs, net 2,570 1,688 Allowance for credit losses (15,957 ) (14,081 ) Total loans, net $ 1,486,992 1,364,256 SBA loans include Paycheck Protection Program (“PPP”) loans funded under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was enacted as a result of the COVID-19. re-launch The following table reflects the loan portfolio allocated by management’s internal risk ratings at June 30, 2022 and December 31, 2021. Commercial Real Estate and Real Estate Construction (Dollars in thousands) Industrial Other and Land SBA Other Total As of June 30, 2022 Grade: Pass $ 572,866 $ 788,970 $ 60,282 $ 11,726 $ 39,814 $ 1,473,658 Special Mention 12,739 854 — 865 — 14,458 Substandard 3,957 4,680 2,907 719 — 12,263 Total $ 589,562 $ 794,504 $ 63,189 $ 13,310 $ 39,814 $ 1,500,379 As of December 31, 2021 Grade: Pass $ 450,913 $ 690,916 $ 39,074 $ 79,379 $ 80,559 $ 1,340,841 Special Mention 20,904 1,583 1,278 1,111 — 24,876 Substandard 2,464 4,713 2,842 913 — 10,932 Total $ 474,281 $ 697,212 $ 43,194 $ 81,403 $ 80,559 $ 1,376,649 The following table reflects an aging analysis of the loan portfolio by the time past due at June 30, 2022 and December 31, 2021. (Dollars in thousands) 30 Days 60 Days 90+ Days Non-Accrual Current Total As of June 30, 2022 Commercial and industrial $ 161 $ — $ — $ — $ 589,401 $ 589,562 Real estate - other — — — — 794,504 794,504 Real estate - construction and land — — — — 63,189 63,189 SBA — — — 549 12,761 13,310 Other — — — — 39,814 39,814 Total loans, gross $ 161 $ — $ — $ 549 $ 1,499,669 $ 1,500,379 As of December 31, 2021 Commercial and industrial $ — $ 2,597 $ — $ — $ 471,684 $ 474,281 Real estate - other — — — — 697,212 697,212 Real estate - construction and land — — — — 43,194 43,194 SBA — — — 232 81,171 81,403 Other — — — — 80,559 80,559 Total loans, gross $ — $ 2,597 $ — $ 232 $ 1,373,820 $ 1,376,649 The following table reflects the impairment methodology applied to gross loans by portfolio segment and the related allowance for credit losses as of June 30, 2022 and December 31, 2021. Commercial Real Estate and Real Estate Construction (Dollars in thousands) Industrial Other and Land SBA Other Total As of June 30, 2022 Gross loans: Loans individually evaluated for impairment $ — $ — $ — $ 549 $ — $ 549 Loans collectively evaluated for impairment 589,562 794,504 63,189 12,761 39,814 1,499,830 Total gross loans $ 589,562 $ 794,504 $ 63,189 $ 13,310 $ 39,814 $ 1,500,379 Allowance for loan losses: Loans individually evaluated for impairment $ — $ — $ — $ 159 $ — $ 159 Loans collectively evaluated for impairment 9,526 5,243 907 114 8 15,798 Total allowance for loan losses $ 9,526 $ 5,243 $ 907 $ 273 $ 8 $ 15,957 As of December 31, 2021 Gross loans: Loans individually evaluated for impairment $ — $ — $ — $ 731 $ — $ 731 Loans collectively evaluated for impairment 474,281 697,212 43,194 80,672 80,559 1,375,918 Total gross loans $ 474,281 $ 697,212 $ 43,194 $ 81,403 $ 80,559 $ 1,376,649 Allowance for loan losses: Loans individually evaluated for impairment $ — $ — $ — $ 142 $ — $ 142 Loans collectively evaluated for impairment 8,552 4,524 681 167 15 13,939 Total allowance for loan losses $ 8,552 $ 4,524 $ 681 $ 309 $ 15 $ 14,081 The following table reflects information related to impaired loans as of June 30, 2022 and December 31, 2021. (Dollars in thousands) Recorded Unpaid Related Average Interest As of June 30, 2022 With no related allowance recorded: SBA $ 57 $ 334 $ — $ 145 $ — With an allowance recorded: SBA $ 492 $ 492 $ 159 $ 495 $ 7 Total: SBA $ 549 $ 826 $ 159 $ 640 $ 7 As of December 31, 2021 With no related allowance recorded: SBA $ 232 $ 705 $ — $ 233 $ 14 With an allowance recorded: SBA $ 499 $ 499 $ 142 $ 477 $ 59 Total: SBA $ 731 $ 1,204 $ 142 $ 710 $ 73 The recorded investment in impaired loans in the table above excludes interest receivable and net deferred origination costs due to their immateriality. The following tables reflect the changes in, and allocation of, the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2022 and 2021. (Dollars in thousands) Commercial Real Estate Real Estate SBA Other Total Three months ended June 30, 2022 Beginning balance $ 8,876 $ 5,080 $ 783 $ 283 $ 10 $ 15,032 Provision for loan losses 650 163 124 (10 ) (2 ) 925 Charge-offs — — — — — — Recoveries — — — — — — Ending balance $ 9,526 $ 5,243 $ 907 $ 273 $ 8 $ 15,957 Net recoveries (charge-offs) / gross loans 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Three months ended June 30, 2021 Beginning balance $ 9,231 $ 3,957 $ 798 $ 575 $ 16 $ 14,577 Provision for loan losses (1,139 ) 112 (101 ) 20 8 (1,100 ) Charge-offs — — — (278 ) — (278 ) Recoveries 41 — — — — 41 Ending balance $ 8,133 $ 4,069 $ 697 $ 317 $ 24 $ 13,240 Net recoveries (charge-offs) / gross loans 0.01 % 0.00 % 0.00 % -0.14 % 0.00 % -0.02 % Six months ended June 30, 2022 Beginning balance $ 8,552 $ 4,524 $ 681 $ 309 $ 15 $ 14,081 Provision for loan losses 973 719 226 (36 ) (7 ) 1,875 Charge-offs — — — — — — Recoveries 1 — — — — 1 Ending balance $ 9,526 $ 5,243 $ 907 $ 273 $ 8 $ 15,957 Net recoveries (charge-offs) / gross loans 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Six months ended June 30, 2021 Beginning balance $ 8,923 $ 3,877 $ 681 $ 604 $ 26 $ 14,111 Provision for loan losses (997 ) 192 16 (9 ) (2 ) (800 ) Charge-offs — — — (278 ) — (278 ) Recoveries 207 — — — — 207 Ending balance $ 8,133 $ 4,069 $ 697 $ 317 $ 24 $ 13,240 Net recoveries (charge-offs) / gross loans 0.05 % 0.00 % 0.00 % -0.14 % 0.00 % -0.01 % Interest forgone on nonaccrual loans totaled $18,000 and $53,000 for the three months ended June 30, 2022 and 2021, respectively. Interest forgone on nonaccrual loans totaled $35,000 and $61,000 for the six months ended June 30, 2022 and 2021, respectively. There was no interest recognized on a cash-basis on impaired loans for the three months ended June 30, 2022 and 2021. Troubled Debt Restructurings At June 30, 2022 and December 31, 2021, 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 June 30, 2022 and December 31, 2021 to customers with outstanding loans that were classified as troubled debt restructurings. There were no new troubled debt restructurings during the three and six months ended June 30, 2022. The Company had no troubled debt restructurings with a subsequent payment default within twelve months following the modification during the three and six months ended June 30, 2022. |