Loans

6 Months Ended

Jun. 30, 2020

Loans

Loans

Note 4: Loans

The following table presents the components of the loan portfolio at June 30, 2020 and December 31, 2019:

	June 30,		December 31,
	2020		2019
Commercial	$	302,536	$	276,035
Paycheck Protection Program		180,228		—
Construction and Land Development		191,768		196,776
Real Estate Mortgage:
1-4 Family Mortgage		289,456		260,611
Multifamily		522,491		515,014
CRE Owner Occupied		73,539		66,584
CRE Non-owner Occupied		627,651		592,545
Total Real Estate Mortgage Loans		1,513,137		1,434,754
Consumer and Other		6,109		4,473
Total Loans, Gross		2,193,778		1,912,038
Allowance for Loan Losses		(27,633)		(22,526)
Net Deferred Loan Fees		(10,287)		(5,512)
Total Loans, Net	$	2,155,858	$	1,884,000

The following table presents the activity in the allowance for loan losses, by segment, for the three months ended June 30, 2020 and 2019:

			Paycheck		Construction						CRE		CRE
			Protection		and Land		1--4 Family				Owner		Non-owner		Consumer
Three Months Ended June 30, 2020	Commercial		Program		Development		Mortgage		Multifamily		Occupied		Occupied		and Other		Unallocated		Total
Allowance for Loan Losses:
Beginning Balance	$	3,557	$	—	$	2,131	$	3,202	$	6,556	$	938	$	8,003	$	92	$	106	$	24,585
Provision for Loan Losses		1,633		90		42		74		141		26		320		82		592		3,000
Loans Charged-off		—		—		—		—		—		—		—		(1)		—		(1)
Recoveries of Loans		2		—		—		46		—		—		—		1		—		49
Total Ending Allowance Balance	$	5,192	$	90	$	2,173	$	3,322	$	6,697	$	964	$	8,323	$	174	$	698	$	27,633
Three Months Ended June 30, 2019
Allowance for Loan Losses:
Beginning Balance	$	3,361	$	—	$	2,097	$	2,611	$	4,715	$	790	$	6,349	$	61	$	623	$	20,607
Provision for Loan Losses		(181)		—		148		63		279		54		136		5		96		600
Loans Charged-off		—		—		—		—		—		—		—		(3)		—		(3)
Recoveries of Loans		1		—		1		153		—		—		—		3		—		158
Total Ending Allowance Balance	$	3,181	$	—	$	2,246	$	2,827	$	4,994	$	844	$	6,485	$	66	$	719	$	21,362

The following table presents the activity in the allowance for loan losses, by segment, for the six months ended June 30, 2020 and 2019:

			Paycheck		Construction						CRE		CRE
			Protection		and Land		1--4 Family				Owner		Non-owner		Consumer
Six Months Ended June 30, 2020	Commercial		Program		Development		Mortgage		Multifamily		Occupied		Occupied		and Other		Unallocated		Total
Allowance for Loan Losses:
Beginning Balance	$	3,058	$	—	$	2,202	$	2,839	$	5,824	$	792	$	6,972	$	85	$	754	$	22,526
Provision for Loan Losses		2,164		90		(29)		435		873		172		1,351		100		(56)		5,100
Loans Charged-off		(34)		—		—		—		—		—		—		(14)		—		(48)
Recoveries of Loans		4		—		—		48		—		—		—		3		—		55
Total Ending Allowance Balance	$	5,192	$	90	$	2,173	$	3,322	$	6,697	$	964	$	8,323	$	174	$	698	$	27,633
Six Months Ended June 30, 2019
Allowance for Loan Losses:
Beginning Balance	$	2,898	$	—	$	2,451	$	2,597	$	4,644	$	808	$	5,872	$	65	$	696	$	20,031
Provision for Loan Losses		299		—		(206)		68		350		36		613		17		23		1,200
Loans Charged-off		(19)		—		—		—		—		—		—		(20)		—		(39)
Recoveries of Loans		3		—		1		162		—		—		—		4		—		170
Total Ending Allowance Balance	$	3,181	$	—	$	2,246	$	2,827	$	4,994	$	844	$	6,485	$	66	$	719	$	21,362

The following tables present the balance in the allowance for loan losses and the recorded investment in loans, by segment, based on impairment method as of June 30, 2020 and December 31, 2019:

			Paycheck		Construction						CRE		CRE
			Protection		and Land		1--4 Family				Owner		Non-owner		Consumer
Allowance for Loan Losses at June 30, 2020	Commercial		Program		Development		Mortgage		Multifamily		Occupied		Occupied		and Other		Unallocated		Total
Individually Evaluated for Impairment	$	34	$	—	$	—	$	—	$	—	$	—	$	—	$	33	$	—	$	67
Collectively Evaluated for Impairment		5,158		90		2,173		3,322		6,697		964		8,323		141		698		27,566
Totals	$	5,192	$	90	$	2,173	$	3,322	$	6,697	$	964	$	8,323	$	174	$	698	$	27,633
Allowance for Loan Losses at December 31, 2019
Individually Evaluated for Impairment	$	31	$	—	$	—	$	—	$	—	$	—	$	—	$	14	$	—	$	45
Collectively Evaluated for Impairment		3,027		—		2,202		2,839		5,824		792		6,972		71		754		22,481
Totals	$	3,058	$	—	$	2,202	$	2,839	$	5,824	$	792	$	6,972	$	85	$	754	$	22,526

			Paycheck		Construction						CRE		CRE
			Protection		and Land		1--4 Family				Owner		Non-owner		Consumer
Loans at June 30, 2020	Commercial		Program		Development		Mortgage		Multifamily		Occupied		Occupied		and Other		Total
Individually Evaluated for Impairment	$	254	$	—	$	164	$	1,229	$	—	$	1,840	$	220	$	33	$	3,740
Collectively Evaluated for Impairment		302,282		180,228		191,604		288,227		522,491		71,699		627,431		6,076		2,190,038
Totals	$	302,536	$	180,228	$	191,768	$	289,456	$	522,491	$	73,539	$	627,651	$	6,109	$	2,193,778
Loans at December 31, 2019
Individually Evaluated for Impairment	$	273	$	—	$	176	$	1,059	$	—	$	236	$	—	$	14	$	1,758
Collectively Evaluated for Impairment		275,762		—		196,600		259,552		515,014		66,348		592,545		4,459		1,910,280
Totals	$	276,035	$	—	$	196,776	$	260,611	$	515,014	$	66,584	$	592,545	$	4,473	$	1,912,038

The following table presents information regarding total carrying amounts and total unpaid principal balances of impaired loans by loan segment as of June 30, 2020 and December 31, 2019:

	June 30, 2020						December 31, 2019
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
Loans With No Related Allowance for Loan Losses:
Commercial	$	145	$	145	$	—	$	167	$	167	$	—
Construction and Land Development		164		773		—		176		785		—
Real Estate Mortgage:
HELOC and 1-4 Family Junior Mortgage		305		492		—		302		489		—
1st REM - Rentals		924		924		—		757		757		—
CRE Owner Occupied		1,840		1,840		—		236		236		—
CRE Non Owner Occupied		220		220		—		—		—		—
Totals		3,598		4,394		—		1,638		2,434		—
Loans With An Allowance for Loan Losses:
Commercial		109		111		34		106		109		31
Consumer and Other		33		33		33		14		14		14
Totals		142		144		67		120		123		45
Grand Totals	$	3,740	$	4,538	$	67	$	1,758	$	2,557	$	45

The following table presents information regarding the average balances and interest income recognized on impaired loans by loan segment for the three and six months ended June 30, 2020 and 2019:

	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
	Average		Interest		Average		Interest		Average		Interest		Average		Interest
	Investment		Recognized		Investment		Recognized		Investment		Recognized		Investment		Recognized
Loans With No Related Allowance for Loan Losses:
Commercial	$	150	$	3	$	552	$	8	$	156	$	5	$	565	$	16
Construction and Land Development		168		—		2,796		87		172		—		2,899		87
Real Estate Mortgage:
HELOC and 1-4 Family Junior Mortgage		329		—		156		2		329		—		156		4
1st REM - 1-4 Family		—		—		617		12		—		—		617		12
1st REM - Rentals		926		11		635		9		929		22		1,451		18
CRE Owner Occupied		1,844		25		434		6		1,840		50		441		13
CRE Non Owner Occupied		222		3		—		—		224		6		—		—
Consumer and Other		—		—		54		—		—		—		55		—
Totals		3,639		42		5,244		124		3,650		83		6,184		150
Loans With An Allowance for Loan Losses:
Commercial		109		—		137		2		110		1		137		2
Real Estate Mortgage:
HELOC and 1-4 Family Junior Mortgage		—		—		305		—		—		—		306		—
1st REM - Rentals		—		—		—		—		—		—		191		—
Consumer and Other		34		1		—		—		34		1		—		—
		143		1		442		2		144		2		634		2
Grand Totals	$	3,782	$	43	$	5,686	$	126	$	3,794	$	85	$	6,818	$	152

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The process of analyzing loans for changes in risk rating is ongoing through routine monitoring of the portfolio and annual internal credit reviews for credits meeting certain thresholds.

The following tables present the risk category of loans by loan segment as of June 30, 2020 and December 31, 2019, based on the most recent analysis performed by management:

	June 30, 2020
	Pass		Watch		Substandard		Total
Commercial	$	280,767	$	21,515	$	254	$	302,536
Paycheck Protection Program		180,228		—		—		180,228
Construction and Land Development		191,472		132		164		191,768
Real Estate Mortgage:
HELOC and 1-4 Family Junior Mortgage		30,142		137		—		30,279
1st REM - 1-4 Family		39,235		123		174		39,532
LOCs and 2nd REM - Rentals		19,759		474		305		20,538
1st REM - Rentals		197,594		763		750		199,107
Multifamily		522,491		—		—		522,491
CRE Owner Occupied		70,881		818		1,840		73,539
CRE Non-owner Occupied		605,742		21,689		220		627,651
Consumer and Other		6,076		—		33		6,109
Totals	$	2,144,387	$	45,651	$	3,740	$	2,193,778

	December 31, 2019
	Pass			Watch			Substandard		Total
Commercial	$	275,741	$		21	$		273	$	276,035
Construction and Land Development		196,462			138			176		196,776
Real Estate Mortgage:
HELOC and 1-4 Family Junior Mortgage		28,483			138			—		28,621
1st REM - 1-4 Family		36,370			124			177		36,671
LOCs and 2nd REM - Rentals		17,890			479			302		18,671
1st REM - Rentals		174,781			1,287			580		176,648
Multifamily		515,014			—			—		515,014
CRE Owner Occupied		65,411			—			1,173		66,584
CRE Non-owner Occupied		589,457			3,088			—		592,545
Consumer and Other		4,459			—			14		4,473
Totals	$	1,904,068		$	5,275		$	2,695	$	1,912,038

The following tables present the aging of the recorded investment in past due loans by loan segment as of June 30, 2020 and December 31, 2019:

	Accruing Interest
			30-89 Days		90 Days or
June 30, 2020	Current		Past Due		More Past Due		Nonaccrual		Total
Commercial	$	302,508	$	21	$	—	$	7	$	302,536
Paycheck Protection Program		180,228		—		—		—		180,228
Construction and Land Development		191,604		—		—		164		191,768
Real Estate Mortgage:
HELOC and 1-4 Family Junior Mortgage		30,279		—		—		—		30,279
1st REM - 1-4 Family		39,532		—		—		—		39,532
LOCs and 2nd REM - Rentals		20,233		—		—		305		20,538
1st REM - Rentals		198,981		—		—		126		199,107
Multifamily		522,491		—		—		—		522,491
CRE Owner Occupied		73,407		132		—		—		73,539
CRE Non-owner Occupied		627,651		—		—		—		627,651
Consumer and Other		6,109		—		—		—		6,109
Totals	$	2,193,023	$	153	$	—	$	602	$	2,193,778

	Accruing Interest
			30-89 Days		90 Days or
December 31, 2019	Current		Past Due		More Past Due		Nonaccrual		Total
Commercial	$	276,028	$	—	$	—	$	7	$	276,035
Construction and Land Development		196,600		—		—		176		196,776
Real Estate Mortgage:
HELOC and 1-4 Family Junior Mortgage		28,621		—		—		—		28,621
1st REM - 1-4 Family		36,671		—		—		—		36,671
LOCs and 2nd REM - Rentals		18,527		—		—		144		18,671
1st REM - Rentals		176,114		400		—		134		176,648
Multifamily		515,014		—		—		—		515,014
CRE Owner Occupied		66,584		—		—		—		66,584
CRE Non-owner Occupied		592,545		—		—		—		592,545
Consumer and Other		4,470		3		—		—		4,473
Totals	$	1,911,174	$	403	$	—	$	461	$	1,912,038

At June 30, 2020, there were four loans classified as troubled debt restructurings with a current outstanding balance of $830. At December 31, 2019, there were three loans classified as troubled debt restructurings with an outstanding balance of $452. There was one new loan classified as a troubled debt restructuring during the six month period ended June 30, 2020 and no loans classified as troubled debt restructurings during the previous twelve months subsequently defaulted during the six months ended June 30, 2020.

In response to the COVID-19 pandemic, the Company has developed programs for clients who are experiencing business and personal disruptions due to the COVID-19 pandemic pursuant to which the Company may provide loan payment deferrals or interest-only modifications. In accordance with interagency regulatory guidance and the CARES Act, qualifying loans modified in response to the COVID-19 pandemic will not be considered troubled debt restructurings.

The following table presents a summary of closed loan modifications made in response to the COVID-19 pandemic, by loan segment and modification type, as of June 30, 2020:

	Interest-Only			Payment Deferral			Total
	Amount		# of Loans	Amount		# of Loans	Amount		# of Loans
Commercial	$	17,615	36	$	13,355	14	$	30,970	50
Construction and Land Development		133	1		—	—		133	1
Real Estate Mortgage:
1 - 4 Family Mortgage		8,037	22		420	2		8,457	24
Multifamily		41,320	6		16,251	3		57,571	9
CRE Owner Occupied		7,397	14		1,502	3		8,899	17
CRE Nonowner Occupied		100,805	41		86,175	18		186,980	59
Consumer and Other		—	—		—	—		—	—
Totals	$	175,307	120	$	117,703	40	$	293,010	160