NOTE 6 – LOANS

The composition of net loans receivable at December 31, 2019 and 2018 is as follows:


(Dollars in thousands)	December 31, 2019		December 31, 2018
Commercial and industrial	$	124,937	$	81,709
Construction		125,291		142,321
Commercial real estate		995,220		878,449
Residential real estate		382,567		370,955
Consumer and other		2,097		2,393
Total loans receivable		1,630,112		1,475,827
Unearned net loan origination fees		(1,266)		(1,052)
Allowance for loan losses		(10,267)		(8,775)
Net loans receivable	$	1,618,579	$	1,466,000

Mortgage loans serviced for others are not included in the accompanying balance sheets. The total amount of loans serviced for the benefit of others was approximately $218 thousand and $229 thousand at December 31, 2019 and 2018, respectively. Mortgage servicing rights were immaterial at December 31, 2019 and 2018.

Purchased Credit Impaired Loans

The carrying value of loans acquired in the Community acquisition and accounted for in accordance with ASC Subtopic 310‑30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality,” was $2.5 million at December 31, 2019, which was $1.1 million less than the balance at the time of acquisition on January 4, 2018. Under ASC Subtopic 310‑30, these loans, referred to as purchased credit impaired (“PCI”) loans, may be aggregated and accounted for as pools of loans if the loans being aggregated have common risk characteristics. The Company elected to account for the loans with evidence of credit deterioration individually rather than aggregate them into pools. The difference between the undiscounted cash flows expected at acquisition and the investment in the acquired loans, or the “accretable yield,” is recognized as interest income utilizing the level-yield method over the life of each loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “non-accretable difference,” are not recognized as a yield adjustment, as a loss accrual or as a valuation allowance.

Increases in expected cash flows subsequent to the acquisition are recognized prospectively through an adjustment of the yield on the loans over the remaining life, while decreases in expected cash flows are recognized as impairments through a loss provision and an increase in the allowance for loan and lease losses. Valuation allowances (recognized in the allowance for loan and lease losses) on these impaired loans reflect only losses incurred after the acquisition (representing all cash flows that were expected at acquisition but currently are not expected to be received).

The following table presents changes in the accretable yield for PCI loans:


	Year ended		Year ended
(Dollars in thousands)	December 31, 2019		December 31, 2018
Accretable yield, beginning balance	$	539	$	—
Acquisition of impaired loans		—		846
Accretable yield amortized to interest income		(314)		(307)
Reclassification from non-accretable difference		—		—
Accretable yield, ending balance	$	225	$	539