LOANS AND THE ALLOWANCE FOR LOAN LOSSES (Tables)

6 Months Ended

Jun. 30, 2022

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 (dollars in thousands):

	June 30,		December 31,
	2022		2021
Cash, Securities and Other(1)	$	180,738	$	261,190
Consumer and Other(2)		47,855		34,758
Construction and Development		162,426		178,716
1-4 Family Residential		732,725		580,872
Non-Owner Occupied CRE		489,111		482,622
Owner Occupied CRE		224,597		212,426
Commercial and Industrial(3)		312,696		203,584
Total loans held for investment		2,150,148		1,954,168
Deferred fees and unamortized premiums/(unaccreted discounts), net(4)		(3,754)		(5,031)
Allowance for loan losses		(14,357)		(13,732)
Loans, net	$	2,132,037	$	1,935,405

______________________________________

⁽¹⁾ Includes PPP loans of $10.7 million and $46.8 million as of June 30, 2022 and December 31, 2021, respectively.

⁽²⁾ Includes $21.1 million of unsecured consumer loans held for investment measured at fair value as of June 30, 2022.

⁽³⁾ Includes MSLP loans of $6.8 million as of June 30, 2022 and December 31, 2021.

⁽⁴⁾ Includes fair value adjustments on loans held for investment accounted for under the fair value option.

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, and unamortized premiums/(unaccreted discounts), which are not material) in loans past due as of the dates noted (dollars in thousands):

	30-59		60-89		90 or		Total				Total
	Days		Days		More Days		Loans				Recorded
June 30, 2022	Past Due		Past Due		Past Due		Past Due		Current		Investment
Cash, Securities and Other	$	3,803	$	149	$	4	$	3,956	$	176,782	$	180,738
Consumer and Other		36		35		8		79		47,776		47,855
Construction and Development		—		805		—		805		161,621		162,426
1-4 Family Residential		9,705		—		—		9,705		723,020		732,725
Non-Owner Occupied CRE		—		—		—		—		489,111		489,111
Owner Occupied CRE		—		278		—		278		224,319		224,597
Commercial and Industrial		19,021		47		1,893		20,961		291,735		312,696
Total	$	32,565	$	1,314	$	1,905	$	35,784	$	2,114,364	$	2,150,148

	30-59		60-89		90 or		Total				Total
	Days		Days		More Days		Loans				Recorded
December 31, 2021	Past Due		Past Due		Past Due		Past Due		Current		Investment
Cash, Securities and Other	$	745	$	—	$	6	$	751	$	260,439	$	261,190
Consumer and Other		454		—		2		456		34,302		34,758
Construction and Development		2,758		—		—		2,758		175,958		178,716
1-4 Family Residential		1,449		—		—		1,449		579,423		580,872
Non-Owner Occupied CRE		—		2,548		—		2,548		480,074		482,622
Owner Occupied CRE		1,419		—		—		1,419		211,007		212,426
Commercial and Industrial		748		—		2,200		2,948		200,636		203,584
Total	$	7,573	$	2,548	$	2,208	$	12,329	$	1,941,839	$	1,954,168

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 (dollars in thousands):

	June 30,		December 31,
	2022		2021
Cash, Securities and Other	$	4	$	6
Consumer and Other		2		2
1-4 Family Residential		68		75
Owner Occupied CRE		1,200		1,241
Commercial and Industrial		2,603		2,938
Total	$	3,877	$	4,262

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 (dollars in thousands):

	June 30,		December 31,
	2022		2021
Accruing
Non-Owner Occupied CRE	$	46	$	55
Non-accrual
Cash, Securities, and Other		4		6
1-4 Family Residential		68		75
Owner Occupied CRE		1,200		1,241
Commercial and Industrial		2,603		2,938
Total		3,921		4,315
Allowance for loan losses associated with TDR		(261)		(1,751)
Net recorded investment	$	3,660	$	2,564

Summary of impaired loans by portfolio and related valuation allowance

The following presents impaired loans by portfolio and related valuation allowance during the periods presented (dollars in thousands):

	June 30, 2022						December 31, 2021
			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:
Consumer and Other	$	2	$	2	$	2	$	2	$	2	$	2
Commercial and Industrial		1,893		1,893		261		2,190		2,190		1,751
Total	$	1,895	$	1,895	$	263	$	2,192	$	2,192	$	1,753
Impaired loans with no related valuation allowance:
Cash, Securities, and Other	$	4	$	4	$	—	$	6	$	6	$	—
1-4 Family Residential		68		68		—		75		75		—
Owner Occupied CRE		1,200		1,200		—		1,241		1,241		—
Commercial and Industrial		710		710		—		748		748		—
Total	$	1,982	$	1,982	$	—	$	2,070	$	2,070	$	—
Total impaired loans:
Cash, Securities, and Other	$	4	$	4	$	—	$	6	$	6	$	—
Consumer and Other		2		2		2		2		2		2
1-4 Family Residential		68		68		—		75		75		—
Owner Occupied CRE		1,200		1,200		—		1,241		1,241		—
Commercial and Industrial		2,603		2,603		261		2,938		2,938		1,751
Total	$	3,877	$	3,877	$	263	$	4,262	$	4,262	$	1,753

The recorded investment in loans in the previous tables excludes accrued interest, deferred 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 following presents the average balance of impaired loans and interest income recognized on impaired loans during the periods presented (dollars in thousands):

	Three Months Ended June 30,
	2022				2021
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans with a valuation allowance:
Cash, Securities, and Other	$	—	$	—	$	2	$	—
Consumer and Other		2		—		2		—
Commercial and Industrial		2,041		—		3,230		21
Total	$	2,043	$	—	$	3,234	$	21
Impaired loans with no related valuation allowance:
Cash, Securities, and Other	$	4	$	—	$	15	$	—
Owner Occupied CRE		1,211		—		—		51
Commercial and Industrial		723		—		82		—
1-4 Family Residential		70		—		—		—
Total	$	2,008	$	—	$	97	$	51
Total impaired loans:
Cash, Securities, and Other	$	4	$	—	$	17	$	—
Consumer and Other		2		—		2		—
Owner Occupied CRE		1,211		—		—		51
Commercial and Industrial		2,764		—		3,312		21
1-4 Family Residential		70		—		—		—
Total	$	4,051	$	—	$	3,331	$	72

	Six Months Ended June 30,
	2022				2021
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans with a valuation allowance:
Cash, Securities, and Other	$	—	$	—	$	1	$	—
Consumer and Other		2		—		1		—
Commercial and Industrial		2,089		—		2,162		21
Total	$	2,091	$	—	$	2,164	$	21
Impaired loans with no related valuation allowance:
Cash, Securities, and Other	$	4	$	—	$	20	$	—
Owner Occupied CRE		1,221		—		—		51
Commercial and Industrial		731		*		58		—
1-4 Family Residential		72		—		—		—
Total	$	2,028	$	—	$	78	$	51
Total impaired loans:
Cash, Securities, and Other	$	4	$	—	$	21	$	—
Consumer and Other		2		—		1		—
Owner Occupied CRE		1,221		—		—		51
Commercial and Industrial		2,820		*		2,220		21
1-4 Family Residential		72		—		—		—
Total	$	4,119	$	—	$	2,242	$	72

______________________________________

* The Company recognized an immaterial amount of interest income during the period.

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 during the periods presented (dollars in thousands):

	Cash,		Consumer		Construction		1-4		Non-Owner		Owner		Commercial
	Securities		and		and		Family		Occupied		Occupied		and
	and Other		Other		Development		Residential		CRE		CRE		Industrial		Total
Changes in allowance for loan losses for the three months ended June 30, 2022
Beginning balance	$	1,440	$	283	$	954	$	3,789	$	2,867	$	1,328	$	3,224	$	13,885
(Release)/provision for loan losses		(246)		(16)		120		1,056		368		149		(912)		519
Charge-offs		—		(95)		—		—		—		—		—		(95)
Recoveries		—		48		—		—		—		—		—		48
Ending balance	$	1,194	$	220	$	1,074	$	4,845	$	3,235	$	1,477	$	2,312	$	14,357
Changes in allowance for loan losses for the six months ended June 30, 2022
Beginning balance	$	1,598	$	266	$	1,092	$	3,553	$	2,952	$	1,292	$	2,979	$	13,732
(Release)/provision for loan losses		(404)		58		(18)		1,292		283		185		(667)		729
Charge-offs		—		(192)		—		—		—		—		—		(192)
Recoveries		—		88		—		—		—		—		—		88
Ending balance	$	1,194	$	220	$	1,074	$	4,845	$	3,235	$	1,477	$	2,312	$	14,357
Allowance for loan losses as of June 30, 2022 allocated to loans evaluated for impairment:
Individually	$	—	$	2	$	—	$	—	$	—	$	—	$	261	$	263
Collectively		1,194		218		1,074		4,845		3,235		1,477		2,051		14,094
Ending balance	$	1,194	$	220	$	1,074	$	4,845	$	3,235	$	1,477	$	2,312	$	14,357
Loans as of June 30, 2022:
Individually evaluated for impairment	$	4	$	2	$	—	$	68	$	—	$	1,200	$	2,603	$	3,877
Collectively evaluated for impairment		180,734		26,704		162,426		732,657		489,111		223,397		310,093		2,125,122
Measured at fair value		—		21,149		—		—		—		—		—		21,149
Ending balance	$	180,738	$	47,855	$	162,426	$	732,725	$	489,111	$	224,597	$	312,696	$	2,150,148

	Cash,		Consumer		Construction		1-4		Non-Owner		Owner		Commercial
	Securities		and		and		Family		Occupied		Occupied		and
	and Other		Other		Development		Residential		CRE		CRE		Industrial		Total
Changes in allowance for loan losses for the three months ended June 30, 2021
Beginning balance	$	2,380	$	193	$	766	$	3,152	$	2,211	$	1,123	$	2,714	$	12,539
(Release)/provision for loan losses		(537)		2		105		247		12		102		81		12
Charge-offs		—		—		—		—		—		—		—		—
Recoveries		—		1		—		—		—		—		—		1
Ending balance	$	1,843	$	196	$	871	$	3,399	$	2,223	$	1,225	$	2,795	$	12,552
Changes in allowance for loan losses for the six months ended June 30, 2021
Beginning balance	$	2,439	$	140	$	932	$	3,233	$	2,004	$	1,159	$	2,632	$	12,539
(Release)/provision for loan losses		(596)		55		(61)		166		219		66		163		12
Charge-offs		—		—		—		—		—		—		—		—
Recoveries		—		1		—		—		—		—		—		1
Ending balance	$	1,843	$	196	$	871	$	3,399	$	2,223	$	1,225	$	2,795	$	12,552
Allowance for loan losses as of December 31, 2021 allocated to loans evaluated for impairment:
Individually	$	—	$	2	$	—	$	—	$	—	$	—	$	1,751	$	1,753
Collectively		1,598		264		1,092		3,553		2,952		1,292		1,228		11,979
Ending balance	$	1,598	$	266	$	1,092	$	3,553	$	2,952	$	1,292	$	2,979	$	13,732
Loans as of December 31, 2021:
Individually evaluated for impairment	$	6	$	2	$	—	$	75	$	—	$	1,241	$	2,938	$	4,262
Collectively evaluated for impairment		261,184		34,756		178,716		580,797		482,622		211,185		200,646		1,949,906
Ending balance	$	261,190	$	34,758	$	178,716	$	580,872	$	482,622	$	212,426	$	203,584	$	1,954,168

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 the dates noted (dollars in thousands):

			Special
June 30, 2022	Pass		Mention		Substandard		Not Rated			Total
Cash, Securities and Other	$	180,734	$	—	$	4	$	—	$	180,738
Consumer and Other		26,704		—		2		21,149		47,855
Construction and Development		162,426		—		—		—		162,426
1-4 Family Residential		732,657		—		68		—		732,725
Non-Owner Occupied CRE		483,848		5,263		—		—		489,111
Owner Occupied CRE		222,714		—		1,883		—		224,597
Commercial and Industrial		305,765		2,693		4,238		—		312,696
Total	$	2,114,848	$	7,956	$	6,195	$	21,149	$	2,150,148

			Special
December 31, 2021	Pass		Mention		Substandard		Not Rated			Total
Cash, Securities and Other	$	261,184	$	—	$	6	$	—	$	261,190
Consumer and Other		34,756		—		2		—		34,758
Construction and Development		176,194		2,522		—		—		178,716
1-4 Family Residential		580,797		—		75		—		580,872
Non-Owner Occupied CRE		476,670		5,952		—		—		482,622
Owner Occupied CRE		210,493		—		1,933		—		212,426
Commercial and Industrial		198,368		401		4,815		—		203,584
Total	$	1,938,462	$	8,875	$	6,831	$	—	$	1,954,168