LOANS AND THE ALLOWANCE FOR LOAN LOSSES (Tables)

9 Months Ended

Sep. 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):

	September 30,		December 31,
	2020		2019
Cash, Securities and Other(1)	$	371,481	$	146,701
Construction and Development		105,717		28,120
1-4 Family Residential		446,959		400,134
Non-Owner Occupied CRE		243,564		165,179
Owner Occupied CRE		154,138		127,968
Commercial and Industrial		185,625		128,457
Total loans held for investment		1,507,484		996,559
Deferred costs (fees) and unamortized premiums/(unaccreted discounts), net		(1,408)		1,448
Allowance for loan losses		(11,845)		(7,875)
Loans, net	$	1,494,231	$	990,132

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⁽¹⁾ Includes PPP loans of $206.1 million as of September 30, 2020.

Schedule of loan modifications

The following presents loan modifications as a result of COVID-19 as of September 30, 2020 (dollars in thousands):

	Total Loans		# of Modified Loans		Outstanding Balance of Modified Loans		% of Total Loan Balance Modified
Cash, Securities and Other	$	371,481		1	$	1,496		0.40	%
Construction and Development		105,717		—		—		—
1-4 Family Residential		446,959		6		4,441		0.99
Non-Owner Occupied CRE		243,564		22		38,229		15.70
Owner Occupied CRE		154,138		10		17,524		11.37
Commercial and Industrial		185,625		5		5,048		2.72
Total Loans	$	1,507,484		44	$	66,738		4.43	%

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 costs (fees) and unamortized premiums/ (unaccreted discounts) which are not material) in loans past due as of September 30, 2020 and December 31, 2019 (in thousands):

	30-59		60-89		90 or		Total				Total
	Days		Days		More Days		Loans				Recorded
September 30, 2020	Past Due		Past Due		Past Due		Past Due		Current		Investment
Cash, Securities and Other	$	30	$	—	$	66	$	96	$	371,385	$	371,481
Construction and Development		—		—		—		—		105,717		105,717
1-4 Family Residential		4,883		1,197		—		6,080		440,879		446,959
Non-Owner Occupied CRE		1,022		—		—		1,022		242,542		243,564
Owner Occupied CRE		—		—		—		—		154,138		154,138
Commercial and Industrial		522		—		3,679		4,201		181,424		185,625
Total	$	6,457	$	1,197	$	3,745	$	11,399	$	1,496,085	$	1,507,484

	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):

	September 30,		December 31,
	2020		2019
Cash, Securities and Other	$	66	$	2,803
Commercial and Industrial		3,679		4,412
Total	$	3,745	$	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):

	September 30,		December 31,
	2020		2019
Accruing
Commercial and Industrial	$	6,136	$	5,055
Non-accrual
Cash, Securities, and Other		64		2,803
Commercial and Industrial		3,679		4,412
Allowance for loan losses associated with TDR		(1,421)		(833)
Net recorded investment	$	8,458	$	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):

	September 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:
Cash, Securities, and Other	$	2	$	2	$	2	$	—	$	—	$	—
Commercial and Industrial		3,419		3,419		1,421		4,412		4,412		833
Total	$	3,421	$	3,421	$	1,423	$	4,412	$	4,412	$	833
Impaired loans with no related valuation allowance:
Cash, Securities, and Other	$	64	$	64	$	—	$	2,803	$	2,803	$	—
Commercial and Industrial		6,396		6,396		—		5,055		5,055		—
Total	$	6,460	$	6,460	$	—	$	7,858	$	7,858	$	—
Total impaired loans:
Cash, Securities, and Other	$	66	$	66	$	2	$	2,803	$	2,803	$	—
Commercial and Industrial		9,815		9,815		1,421		9,467		9,467		833
Total	$	9,881	$	9,881	$	1,423	$	12,270	$	12,270	$	833

The recorded investment in loans in the previous tables excludes accrued interest, deferred costs (fees) and unamortized premiums/ (unaccreted 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 September 30, 2020 and 2019 are included in the table below (in thousands):

	Three Months Ended September 30,
	2020				2019
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans with a valuation allowance:
Cash, Securities, and Other	$	1	$	—	$	185	$	—
Commercial and Industrial		3,427		—		1,035		—
Total	$	3,428	$	—	$	1,220	$	—
Impaired loans with no related valuation allowance:
Cash, Securities, and Other	$	779	$	—	$	5,062	$	—
Commercial and Industrial		6,462		85		5,958		138
1-4 Family Residential		—		—		1,213		26
Total	$	7,241	$	85	$	12,233	$	164
Total impaired loans:
Cash, Securities, and Other	$	780	$	—	$	5,247	$	—
Commercial and Industrial		9,889		85		6,993		138
1-4 Family Residential		—		—		1,213		26
Total	$	10,669	$	85	$	13,453	$	164

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

	Nine Months Ended September 30,
	2020				2019
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans with a valuation allowance:
Cash, Securities, and Other	$	1	$	—	$	185	$	—
Commercial and Industrial		3,462		—		1,310		—
Total	$	3,463	$	—	$	1,495	$	—
Impaired loans with no related valuation allowance:
Cash, Securities, and Other	$	1,463	$	—	S	8,088	S	—
Commercial and Industrial		6,088		250		5,463		326
1-4 Family Residential		—		—		1,213		77
Total	$	7,551	$	250	$	14,764	$	403
Total impaired loans:
Cash, Securities, and Other	$	1,464	$	—	$	8,273	$	—
Commercial and Industrial		9,550		250		6,773		326
1-4 Family Residential		—		—		1,213		77
Total	$	11,014	$	250	$	16,259	$	403

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 September 30, 2020
Beginning balance	$	2,425	$	484	$	2,708	$	1,483	$	760	$	2,494	$	10,354
Provision for (recovery of) loan losses		192		249		392		207		309		147		1,496
Charge-offs		(6)		—		—		—		—		—		(6)
Recoveries		1		—		—		—		—		—		1
Ending balance	$	2,612	$	733	$	3,100	$	1,690	$	1,069	$	2,641	$	11,845
Changes in allowance for loan losses for the nine months ended September 30, 2020
Beginning balance	$	1,058	$	200	$	2,850	$	1,176	$	911	$	1,680	$	7,875
Provision for (recovery of) loan losses		1,571		533		250		514		158		961		3,987
Charge-offs		(30)		—		—		—		—		—		(30)
Recoveries		13		—		—		—		—		—		13
Ending balance	$	2,612	$	733	$	3,100	$	1,690	$	1,069	$	2,641	$	11,845
Allowance for loan losses at September 30, 2020 allocated to loans evaluated for impairment:
Individually	$	2	$	—	$	—	$	—	$	—	$	1,421	$	1,423
Collectively		2,610		733		3,100		1,690		1,069		1,220		10,422
Ending balance	$	2,612	$	733	$	3,100	$	1,690	$	1,069	$	2,641	$	11,845
Loans at September 30, 2020, evaluated for impairment:
Individually	$	66	$	—	$	—	$	—	$	—	$	9,815	$	9,881
Collectively		371,415		105,717		446,959		243,564		154,138		175,810		1,497,603
Ending balance	$	371,481	$	105,717	$	446,959	$	243,564	$	154,138	$	185,625	$	1,507,484

	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 September 30, 2019
Beginning balance	$	1,049	$	290	$	2,650	$	1,086	$	800	$	1,700	$	7,575
Provision for (recovery of) loan losses		258		18		27		(68)		76		(211)		100
Charge-offs		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		—		—
Ending balance	$	1,307	$	308	$	2,677	$	1,018	$	876	$	1,489	$	7,675
Changes in allowance for loan losses for the nine months ended September 30, 2019
Beginning balance	$	764	$	232	$	2,552	$	1,264	$	789	$	1,850	$	7,451
Provision for (recovery of) loan losses		535		76		125		(246)		87		(361)		216
Charge-offs		—		—		—		—		—		—		—
Recoveries		8		—		—		—		—		—		8
Ending balance	$	1,307	$	308	$	2,677	$	1,018	$	876	$	1,489	$	7,675
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
September 30, 2020	Pass		Mention		Substandard			Total
Cash, Securities and Other	$	371,415	$	—	$	66	$	371,481
Construction and Development		105,717		—		—		105,717
1-4 Family Residential		442,076		—		4,883		446,959
Non-Owner Occupied CRE		232,010		11,554		—		243,564
Owner Occupied CRE		153,656		482		—		154,138
Commercial and Industrial		173,061		—		12,564		185,625
Total	$	1,477,935	$	12,036	$	17,513	$	1,507,484

			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