LOANS AND THE ALLOWANCE FOR LOAN LOSSES (Tables)

9 Months Ended

Sep. 30, 2021

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,
	2021		2020
Cash, Securities and Other(1)	$	293,837	$	357,020
Construction and Development		132,141		131,111
1-4 Family Residential		502,439		455,038
Non-Owner Occupied CRE		358,369		281,943
Owner Occupied CRE		167,638		163,042
Commercial and Industrial(2)		148,959		146,031
Total loans held for investment		1,603,383		1,534,185
Deferred fees and unamortized premiums/(unaccreted discounts), net		(333)		(1,352)
Allowance for loan losses		(12,964)		(12,539)
Loans, net	$	1,590,086	$	1,520,294

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⁽¹⁾ Includes PPP loans of $61.9 million and $142.9 million as of September 30, 2021 and December 31, 2020, respectively.

⁽²⁾ Includes MSLP loans of $6.8 million and $6.6 million as of September 30, 2021 and December 31, 2020, respectively.

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 (fees) costs, and unamortized premiums/ (unaccreted discounts) which are not material) in loans past due as of September 30, 2021 and December 31, 2020 (in thousands):

	30-59		60-89		90 or		Total				Total
	Days		Days		More Days		Loans				Recorded
September 30, 2021	Past Due		Past Due		Past Due		Past Due		Current		Investment
Cash, Securities and Other	$	727	$	14	$	40	$	781	$	293,056	$	293,837
Construction and Development		—		2,522		—		2,522		129,619		132,141
1-4 Family Residential		483		—		83		566		501,873		502,439
Non-Owner Occupied CRE		—		—		—		—		358,369		358,369
Owner Occupied CRE		—		—		—		—		167,638		167,638
Commercial and Industrial		—		—		2,230		2,230		146,729		148,959
Total	$	1,210	$	2,536	$	2,353	$	6,099	$	1,597,284	$	1,603,383

	30-59		60-89		90 or		Total				Total
	Days		Days		More Days		Loans				Recorded
December 31, 2020	Past Due		Past Due		Past Due		Past Due		Current		Investment
Cash, Securities and Other	$	752	$	—	$	48	$	800	$	356,220	$	357,020
Construction and Development		—		—		—		—		131,111		131,111
1-4 Family Residential		1,283		—		—		1,283		453,755		455,038
Non-Owner Occupied CRE		—		—		—		—		281,943		281,943
Owner Occupied CRE		479		—		—		479		162,563		163,042
Commercial and Industrial		271		—		3,529		3,800		142,231		146,031
Total	$	2,785	$	—	$	3,577	$	6,362	$	1,527,823	$	1,534,185

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,
	2021		2020
Cash, Securities and Other	$	41	$	50
1-4 Family Residential		83		—
Owner Occupied CRE		1,250		479
Commercial and Industrial		2,984		3,529
Total	$	4,358	$	4,058

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 as of the dates noted (in thousands):

	September 30,		December 31,
	2021		2020
Non-accrual
Cash, Securities, and Other	$	9	$	48
Commercial and Industrial		2,230		3,529
Total		2,239		3,577
Allowance for loan losses associated with TDR		(1,751)		(1,619)
Net recorded investment	$	488	$	1,958

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, 2021						December 31, 2020
			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	$	32	$	32	$	32	$	2	$	2	$	2
Commercial and Industrial		2,230		2,230		1,751		3,419		3,419		1,619
Total	$	2,262	$	2,262	$	1,783	$	3,421	$	3,421	$	1,621
Impaired loans with no related valuation allowance:
Cash, Securities, and Other	$	9	$	9	$	—	$	48	$	48	$	—
1-4 Family Residential		83		83		—		—		—		—
Owner Occupied CRE		1,250		1,250		—		479		479		—
Commercial and Industrial		754		754		—		110		110		—
Total	$	2,096	$	2,096	$	—	$	637	$	637	$	—
Total impaired loans:
Cash, Securities, and Other	$	41	$	41	$	32	$	50	$	50	$	2
1-4 Family Residential		83		83		—		—		—		—
Owner Occupied CRE		1,250		1,250		—		479		479		—
Commercial and Industrial		2,984		2,984		1,751		3,529		3,529		1,619
Total	$	4,358	$	4,358	$	1,783	$	4,058	$	4,058	$	1,621

The recorded investment in loans in the previous tables excludes accrued interest, deferred (fees) costs, 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, 2021 and 2020 are included in the table below (in thousands):

	Three Months Ended September 30,
	2021				2020
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans with a valuation allowance:
Cash, Securities, and Other	$	18	$	—	$	1	$	—
Commercial and Industrial		2,635		—		3,427		—
Total	$	2,653	$	—	$	3,428	$	—
Impaired loans with no related valuation allowance:
Cash, Securities, and Other	$	10	$	—	$	779	$	—
Owner Occupied CRE		625		—		—		—
Commercial and Industrial		410		220		6,462		85
1-4 Family Residential		41		—		—		—
Total	$	1,086	$	220	$	7,241	$	85
Total impaired loans:
Cash, Securities, and Other	$	28	$	—	$	780	$	—
Owner Occupied CRE		625		—		—		—
Commercial and Industrial		3,045		220		9,889		85
1-4 Family Residential		41		—		—		—
Total	$	3,739	$	220	$	10,669	$	85

The average balance of impaired loans and interest income recognized on impaired loans during the nine months ended September 30, 2021 and 2020 are included in the table below (in thousands):

	Nine Months Ended September 30,
	2021				2020
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans with a valuation allowance:
Cash, Securities, and Other	$	10	$	—	$	1	$	—
Commercial and Industrial		3,027		21		3,462		—
Total	$	3,037	$	21	$	3,463	$	—
Impaired loans with no related valuation allowance:
Cash, Securities, and Other	$	22	$	—	$	1,463	$	—
Owner Occupied CRE		313		51		—		—
Commercial and Industrial		257		220		6,088		250
1-4 Family Residential		21		—		—		—
Total	$	613	$	271	$	7,551	$	250
Total impaired loans:
Cash, Securities, and Other	$	32	$	—	$	1,464	$	—
Owner Occupied CRE		313		51		—		—
Commercial and Industrial		3,284		241		9,550		250
1-4 Family Residential		21		—		—		—
Total	$	3,650	$	292	$	11,014	$	250

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

The following presents the activity in the Company’s allowance for loan losses by portfolio class for the periods presented (in thousands):

	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, 2021
Beginning balance	$	2,039	$	871	$	3,399	$	2,223	$	1,225	$	2,795	$	12,552
(Recovery of)/provision for loan losses		85		48		97		271		(67)		(28)		406
Charge-offs		—		—		—		—		—		—		—
Recoveries		6		—		—		—		—		—		6
Ending balance	$	2,130	$	919	$	3,496	$	2,494	$	1,158	$	2,767	$	12,964
Changes in allowance for loan losses for the nine months ended September 30, 2021
Beginning balance	$	2,579	$	932	$	3,233	$	2,004	$	1,159	$	2,632	$	12,539
(Recovery of)/provision for loan losses		(456)		(13)		263		490		(1)		135		418
Charge-offs		—		—		—		—		—		—		—
Recoveries		7		—		—		—		—		—		7
Ending balance	$	2,130	$	919	$	3,496	$	2,494	$	1,158	$	2,767	$	12,964
Allowance for loan losses as of September 30, 2021 allocated to loans evaluated for impairment:
Individually	$	32	$	—	$	—	$	—	$	—	$	1,751	$	1,783
Collectively		2,098		919		3,496		2,494		1,158		1,016		11,181
Ending balance	$	2,130	$	919	$	3,496	$	2,494	$	1,158	$	2,767	$	12,964
Loans as of September 30, 2021, evaluated for impairment:
Individually	$	41	$	—	$	83	$	—	$	1,250	$	2,984	$	4,358
Collectively		293,796		132,141		502,356		358,369		166,388		145,975		1,599,025
Ending balance	$	293,837	$	132,141	$	502,439	$	358,369	$	167,638	$	148,959	$	1,603,383

	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 as of December 31, 2020 allocated to loans evaluated for impairment:
Individually	$	2	$	—	$	—	$	—	$	—	$	1,619	$	1,621
Collectively		2,577		932		3,233		2,004		1,159		1,013		10,918
Ending balance	$	2,579	$	932	$	3,233	$	2,004	$	1,159	$	2,632	$	12,539
Loans as of December 31, 2020, evaluated for impairment:
Individually	$	50	$	—	$	—	$	—	$	479	$	3,529	$	4,058
Collectively		356,970		131,111		455,038		281,943		162,563		142,502		1,530,127
Ending balance	$	357,020	$	131,111	$	455,038	$	281,943	$	163,042	$	146,031	$	1,534,185

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

The following presents, by class and by credit quality indicator, the recorded investment in the Company’s loans as of September 30, 2021 and December 31, 2020 (in thousands):

			Special
September 30, 2021	Pass		Mention		Substandard			Total
Cash, Securities and Other	$	293,796	$	—	$	41	$	293,837
Construction and Development		129,618		2,523		—		132,141
1-4 Family Residential		502,356		—		83		502,439
Non-Owner Occupied CRE		352,429		5,940		—		358,369
Owner Occupied CRE		165,690		—		1,948		167,638
Commercial and Industrial		144,093		—		4,866		148,959
Total	$	1,587,982	$	8,463	$	6,938	$	1,603,383

			Special
December 31, 2020	Pass		Mention		Substandard			Total
Cash, Securities and Other	$	356,970	$	—	$	50	$	357,020
Construction and Development		131,111		—		—		131,111
1-4 Family Residential		451,918		—		3,120		455,038
Non-Owner Occupied CRE		275,627		6,316		—		281,943
Owner Occupied CRE		161,850		—		1,192		163,042
Commercial and Industrial		140,432		—		5,599		146,031
Total	$	1,517,908	$	6,316	$	9,961	$	1,534,185