LOANS AND THE ALLOWANCE FOR LOAN LOSSES (Tables)

6 Months Ended

Jun. 30, 2020

LOANS AND THE ALLOWANCE FOR LOAN LOSSES

Summary of the Company's loans

The following presents a summary of the Company’s loans as of the dates noted (in thousands):

	June 30,		December 31,
	2020		2019
Cash, Securities and Other(1)	$	371,111	$	146,701
Construction and Development		74,793		28,120
1-4 Family Residential		418,409		400,134
Non-Owner Occupied CRE		229,150		165,179
Owner Occupied CRE		117,426		127,968
Commercial and Industrial		213,271		128,457
Total loans		1,424,160		996,559
Deferred costs (fees) and unamortized premium/(unaccreted discounts), net		(1,720)		1,448
Allowance for loan losses		(10,354)		(7,875)
Loans, net	$	1,412,086	$	990,132

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⁽¹⁾ Includes PPP loans of $204.6 million as of June 30, 2020.

Schedule of loan modifications

The Company modified 98 loans, including acquired loans, across multiple industries in the amount of $176.9 million during the six months ended June 30, 2020.

	Total Loans		# of Loans Modified		Outstanding Balance of Modified Loans		% of Total Loan Balance Modified
Cash, Securities and Other	$	371,111		7	$	5,570		1.50	%
Construction and Development		74,793		1		3,814		5.10
1-4 Family Residential		418,409		31		41,690		9.96
Non-Owner Occupied CRE		229,150		30		65,491		28.58
Owner Occupied CRE		117,426		10		17,524		14.92
Commercial and Industrial		213,271		19		42,765		20.05
Total Loans	$	1,424,160		98	$	176,854		12.42	%

Summary of aging analysis of the recorded investments in loans past due

The following presents, by class, an aging analysis of the recorded investments (excluding accrued interest receivable, deferred loan fees, deferred costs, unamortized premium, and unaccreted discounts which are not material) in loans past due as of June 30, 2020 and December 31, 2019 (in thousands):

	30-59		60-89		90 or		Total				Total
	Days		Days		More Days		Loans				Recorded
June 30, 2020	Past Due		Past Due		Past Due		Past Due		Current		Investment
Cash, Securities and Other	$	1,199	$	400	$	1,493	$	3,092	$	368,019	$	371,111
Construction and Development		2,567		—		—		2,567		72,226		74,793
1-4 Family Residential		3,151		737		—		3,888		414,521		418,409
Non-Owner Occupied CRE		—		—		—		—		229,150		229,150
Owner Occupied CRE		—		—		—		—		117,426		117,426
Commercial and Industrial		379		—		3,506		3,885		209,386		213,271
Total	$	7,296	$	1,137	$	4,999	$	13,432	$	1,410,728	$	1,424,160

	30-59		60-89		90 or		Total				Total
	Days		Days		More Days		Loans				Recorded
December 31, 2019	Past Due		Past Due		Past Due		Past Due		Current		Investment
Cash, Securities and Other	$	525	$	—	$	—	$	525	$	146,176	$	146,701
Construction and Development		—		—		—		—		28,120		28,120
1-4 Family Residential		5,688		—		—		5,688		394,446		400,134
Non-Owner Occupied CRE		—		—		—		—		165,179		165,179
Owner Occupied CRE		—		—		—		—		127,968		127,968
Commercial and Industrial		—		3,110		907		4,017		124,440		128,457
Total	$	6,213	$	3,110	$	907	$	10,230	$	986,329	$	996,559

Schedule of recorded investment in non accrual loans by class

The following presents the recorded investment in non-accrual loans by class as of the dates noted (in thousands):

	June 30,		December 31,
	2020		2019
Cash, Securities and Other	$	1,493	$	2,803
Commercial and Industrial		4,325		4,412
Total	$	5,818	$	7,215

Summary of the unpaid principal balance of loans classified as TDRs

The following presents a summary of the unpaid principal balance of loans classified as TDRs by loan type and delinquency status as of the dates noted (in thousands):

	June 30,		December 31,
	2020		2019
Accruing
Commercial and Industrial	$	5,636	$	5,055
Non-accrual
Cash, Securities, and Other		1,493		2,803
Commercial and Industrial		4,325		4,412
Allowance for loan associated with TDR		(1,179)		(833)
Net recorded investment	$	10,275	$	11,437

Summary of impaired loans by portfolio and related valuation allowance

The following table presents impaired loans by portfolio and related valuation allowance as of the periods presented (in thousands):

	June 30, 2020						December 31, 2019
			Unpaid		Allowance				Unpaid		Allowance
	Total		Contractual		for		Total		Contractual		for
	Recorded		Principal		Loan		Recorded		Principal		Loan
	Investment		Balance		Losses		Investment		Balance		Losses
Impaired loans with a valuation allowance:
Commercial and Industrial	$	3,434	$	3,434	$	1,179	$	4,412	$	4,412	$	833
Total	$	3,434	$	3,434	$	1,179	$	4,412	$	4,412	$	833
Impaired loans with no related valuation allowance:
Cash, Securities, and Other	$	1,493	$	1,493	$	—	$	2,803	$	2,803	$	—
Commercial and Industrial		6,527		6,527		—		5,055		5,055		—
Total	$	8,020	$	8,020	$	—	$	7,858	$	7,858	$	—
Total impaired loans:
Cash, Securities, and Other	$	1,493	$	1,493	$	—	$	2,803	$	2,803	$	—
Commercial and Industrial		9,961		9,961		1,179		9,467		9,467		833
Total	$	11,454	$	11,454	$	1,179	$	12,270	$	12,270	$	833

The recorded investment in loans in the previous tables excludes accrued interest, deferred loan fees and costs and unamortized premium/discounts which are not material. Interest income, if any, was recognized on the cash basis on non-accrual loans.

The average balance of impaired loans and interest income recognized on impaired loans during the three months ended June 30, 2020 and 2019 are included in the table below (in thousands):

	Three Months Ended June 30,
	2020				2019
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans with a valuation allowance:
Commercial and Industrial	$	3,462	$	—	$	1,235	$	—
Total	$	3,462	$	—	$	1,235	$	—
Impaired loans with no related valuation allowance:
Cash, Securities, and Other	$	1,493	$	—	$	8,042	$	—
Commercial and Industrial		5,998		84		5,268		68
1-4 Family Residential		—		—		412		26
Total	$	7,491	$	84	$	13,722	$	94
Total impaired loans:
Cash, Securities, and Other	$	1,493	$	—	$	8,042	$	—
Commercial and Industrial		9,460		84		6,503		68
1-4 Family Residential		—		—		412		26
Total	$	10,953	$	84	$	14,957	$	94

The average balance of impaired loans and interest income recognized on impaired loans during the six months ended June 30, 2020 and 2019 are included in the table below (in thousands):

	Six Months Ended June 30,
	2020				2019
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans with a valuation allowance:
Commercial and Industrial	$	3,476	$	—	$	1,398	$	—
Total	$	3,476	$	—	$	1,398	$	—
Impaired loans with no related valuation allowance:
Cash, Securities, and Other	$	1,925	$	—	$	9,072	$	—
Commercial and Industrial		5,991		165		5,131		188
1-4 Family Residential		—		—		412		51
Total	$	7,916	$	165	$	14,615	$	239
Total impaired loans:
Cash, Securities, and Other	$	1,925	$	—	$	9,072	$	—
Commercial and Industrial		9,467		165		6,529		188
1-4 Family Residential		—		—		412		51
Total	$	11,392	$	165	$	16,013	$	239

Schedule of activity in the Company's allowance for loan losses by portfolio class

	Cash,		Construction		1-4		Non-Owner		Owner		Commercial
	Securities		and		Family		Occupied		Occupied		and
	and Other		Development		Residential		CRE		CRE		Industrial		Total
Changes in allowance for loan losses for the three months ended June 30, 2020
Beginning balance	$	1,092	$	186	$	3,008	$	1,403	$	884	$	1,669	$	8,242
Provision for (recovery of) loan losses		1,345		298		(300)		80		(124)		825		2,124
Charge-offs		(24)		—		—		—		—		—		(24)
Recoveries		12		—		—		—		—		—		12
Ending balance	$	2,425	$	484	$	2,708	$	1,483	$	760	$	2,494	$	10,354
Changes in allowance for loan losses for the six months ended June 30, 2020
Beginning balance	$	1,058	$	200	$	2,850	$	1,176	$	911	$	1,680	$	7,875
Provision for (recovery of) loan losses		1,379	$	284	$	(142)	$	307	$	(151)	$	814		2,491
Charge-offs		(24)	$	—	$	—	$	—	$	—	$	—		(24)
Recoveries		12	$	—	$	—	$	—	$	—	$	—		12
Ending balance	$	2,425	$	484	$	2,708	$	1,483	$	760	$	2,494	$	10,354
Allowance for loan losses at June 30, 2020 allocated to loans evaluated for impairment:
Individually	$	—	$	—	$	—	$	—	$	—	$	1,179	$	1,179
Collectively		2,425		484		2,708		1,483		760		1,315		9,175
Ending balance	$	2,425	$	484	$	2,708	$	1,483	$	760	$	2,494	$	10,354
Loans at June 30, 2020, evaluated for impairment:
Individually	$	1,493	$	—	$	—	$	—	$	—	$	9,961	$	11,454
Collectively		369,618		74,793		418,409		229,150		117,426		203,310		1,412,706
Ending balance	$	371,111	$	74,793	$	418,409	$	229,150	$	117,426	$	213,271	$	1,424,160

	Cash,		Construction		1-4		Non-Owner		Owner		Commercial
	Securities		and		Family		Occupied		Occupied		and
	and Other		Development		Residential		CRE		CRE		Industrial		Total
Changes in allowance for loan losses for the three months ended June 30, 2019
Beginning balance	$	877	$	266	$	2,588	$	1,235	$	780	$	1,899	$	7,645
Provision for (recovery of) loan losses		164		24		62		(149)		20		(199)		(78)
Charge-offs		—		—		—		—		—		—		—
Recoveries		8		—		—		—		—		—		8
Ending balance	$	1,049	$	290	$	2,650	$	1,086	$	800	$	1,700	$	7,575
Changes in allowance for loan losses for the six months ended June 30, 2019
Beginning balance	$	764	$	232	$	2,552	$	1,264	$	789	$	1,850	$	7,451
Provision for (recovery of) loan losses		277		58		98		(178)		11		(150)		116
Charge-offs		—		—		—		—		—		—		—
Recoveries		8		—		—		—		—		—		8
Ending balance	$	1,049	$	290	$	2,650	$	1,086	$	800	$	1,700	$	7,575
Allowance for loan losses at December 31, 2019 allocated to loans evaluated for impairment:
Individually	$	—	$	—	$	—	$	—	$	—	$	833	$	833
Collectively		1,058		200		2,850		1,176		911		847		7,042
Ending balance	$	1,058	$	200	$	2,850	$	1,176	$	911	$	1,680	$	7,875
Loans at December 31, 2019, evaluated for impairment:
Individually	$	2,803	$	—	$	—	$	—	$	—	$	9,467	$	12,270
Collectively		143,898		28,120		400,134		165,179		127,968		118,990		984,289
Ending balance	$	146,701	$	28,120	$	400,134	$	165,179	$	127,968	$	128,457	$	996,559

Summary of recorded investment in the Company's loans by class and by credit quality indicator

			Special
June 30, 2020	Pass		Mention		Substandard			Total
Cash, Securities and Other	$	369,618	$	—	$	1,493	$	371,111
Construction and Development		74,793		—		—		74,793
1-4 Family Residential		413,514		—		4,895		418,409
Non-Owner Occupied CRE		223,903		5,247		—		229,150
Owner Occupied CRE		116,933		493		—		117,426
Commercial and Industrial		200,556		—		12,715		213,271
Total	$	1,399,317	$	5,740	$	19,103	$	1,424,160

			Special
December 31, 2019	Pass		Mention		Substandard			Total
Cash, Securities and Other	$	143,898	$	—	$	2,803	$	146,701
Construction and Development		28,120		—		—		28,120
1-4 Family Residential		395,224		—		4,910		400,134
Non-Owner Occupied CRE		164,021		1,158		—		165,179
Owner Occupied CRE		127,968		—		—		127,968
Commercial and Industrial		114,241		—		14,216		128,457
Total	$	973,472	$	1,158	$	21,929	$	996,559