Loans and Allowance For Credit Losses | 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES Outstanding loans as of September 30, 2022 and December 31, 2021 are summarized below. Certain loans have been pledged to secure borrowing arrangements (see Note 4). (Dollars in thousands) September 30, December 31, Commercial and industrial $ 643,131 474,281 Real estate - other 824,867 697,212 Real estate - construction and land 71,523 43,194 SBA 8,565 81,403 Other 39,815 80,559 Total loans, gross 1,587,901 1,376,649 Deferred loan origination costs, net 1,902 1,688 Allowance for credit losses (16,555 ) (14,081 ) Total loans, net $ 1,573,248 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 September 30, 2022 and December 31, 2021. (Dollars in thousands) Commercial Real Estate Real Estate SBA Other Total As of September 30, 2022 Grade: Pass $ 619,363 $ 816,546 $ 69,813 $ 7,488 $ 39,815 $ 1,553,025 Special Mention 20,438 3,658 — 503 — 24,599 Substandard 3,330 4,663 1,710 574 — 10,277 Total $ 643,131 $ 824,867 $ 71,523 $ 8,565 $ 39,815 $ 1,587,901 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 September 30, 2022 and December 31, 2021. (Dollars in thousands) 30 Days 60 Days 90+ Days Non-Accrual Current Total As of September 30, 2022 Commercial and industrial $ 524 $ — $ 161 $ — $ 642,446 $ 643,131 Real estate - other 4,060 — — — 820,807 824,867 Real estate - construction and land — — — — 71,523 71,523 SBA — — — 182 8,383 8,565 Other — — — — 39,815 39,815 Total loans, gross $ 4,584 $ — $ 161 $ 182 $ 1,582,974 $ 1,587,901 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 September 30, 2022 and December 31, 2021. (Dollars in thousands) Commercial Real Estate Real Estate SBA Other Total As of September 30, 2022 Gross loans: Loans individually evaluated for impairment $ — $ — $ — $ 182 $ — $ 182 Loans collectively evaluated for impairment 643,131 824,867 71,523 8,383 39,815 1,587,719 Total gross loans $ 643,131 $ 824,867 $ 71,523 $ 8,565 $ 39,815 $ 1,587,901 Allowance for loan losses: Loans individually evaluated for impairment $ — $ — $ — $ — $ — $ — Loans collectively evaluated for impairment 10,225 5,173 997 128 32 16,555 Total allowance for loan losses $ 10,225 $ 5,173 $ 997 $ 128 $ 32 $ 16,555 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 September 30, 2022 and December 31, 2021. (Dollars in thousands) Recorded Unpaid Related Average Interest As of September 30, 2022 With no related allowance recorded: SBA $ 182 $ 580 $ — $ 207 $ — With an allowance recorded: SBA $ — $ — $ — $ 249 $ — Total: SBA $ 182 $ 580 $ — $ 457 $ — 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 nine months ended September 30, 2022 and 2021. Commercial Real Estate and Real Estate Construction (Dollars in thousands) Industrial Other and Land SBA Other Total Three months ended September 30, 2022 Beginning balance $ 9,526 $ 5,243 $ 907 $ 273 $ 8 $ 15,957 Provision for loan losses 699 (70 ) 90 57 24 800 Charge-offs — — — (202 ) — (202 ) Recoveries — — — — — — Ending balance $ 10,225 $ 5,173 $ 997 $ 128 $ 32 $ 16,555 Net recoveries (charge-offs) / gross loans 0.00 % 0.00 % 0.00 % -2.36 % 0.00 % -0.01 % 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 Net recoveries (charge-offs) / gross loans 0.01 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Nine months ended September 30, 2022 Beginning balance $ 8,552 $ 4,524 $ 681 $ 309 $ 15 $ 14,081 Provision for loan losses 1,672 649 316 21 17 2,675 Charge-offs — — — (202 ) — (202 ) Recoveries 1 — — — — 1 Ending balance $ 10,225 $ 5,173 $ 997 $ 128 $ 32 $ 16,555 Net recoveries (charge-offs) / gross loans 0.00 % 0.00 % 0.00 % -2.36 % 0.00 % -0.01 % 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 Net recoveries (charge-offs) / gross loans 0.06 % 0.00 % 0.00 % -0.26 % 0.00 % 0.00 % Interest forgone on nonaccrual loans totaled $25,000 and $31,000 for the three months ended September 30, 2022 and 2021, respectively. Interest forgone on nonaccrual loans totaled $60,000 and $84,000 for the nine months ended September 30, 2022 and 2021, respectively. There was no interest recognized on a cash-basis on impaired loans for the three and nine months ended September 30, 2022 and 2021, respectively. Troubled Debt Restructurings At September 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 September 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 nine months ended September 30, 2022. 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, 2022. |