
($ in thousands)	June 30, 2020		December 31, 2019
Real estate loans:
Commercial property	$	813,409	$	803,014
Residential property	223,923		235,046
SBA property	122,675		129,837
Construction	20,432		19,164
Total real estate loans	1,180,439		1,187,061
Commercial and industrial loans:
Commercial term	98,936		103,380
Commercial lines of credit	96,339		111,768
SBA commercial term	22,650		25,332
SBA PPP	133,675		—
Total commercial and industrial loans	351,600		240,480
Other consumer loans	21,550		23,290
Loans held-for-investment	1,553,589		1,450,831
Allowance for loan losses	(20,248)		(14,380)
Net loans held-for-investment	$	1,533,341	$	1,436,451

In the ordinary course of business, the Company may grant loans to certain officers and directors, and the companies with which they are associated. As of June 30, 2020 and December 31, 2019, the Company had $3.9 million and $3.8 million, respectively, of such loans outstanding.

The Company provided modifications, including payment deferments and interest only payments, to customers that are adversely affected by the COVID-19. The loan modifications met all criteria under the CARES Act. Therefore, the modified loans were not considered TDRs or reported as past due as of June 30, 2020. The following table presents a summary of loans with modifications related to the COVID-19 pandemic by portfolio segment as of June 30, 2020:


	Modification Type
($ in thousands)	Payment Deferment		Interest Only Payment		Total
June 30, 2020
Real estate loans:
Commercial property	$	369,716	$	9,850	$	379,566
Residential property	44,804		—		44,804


Commercial and industrial loans:
Commercial term	53,277		4,882		58,159


Other consumer loans	1,507		—		1,507
Total	$	469,304	$	14,732	$	484,036

The increase in risks associated with economic and business conditions as a result from the COVID-19 pandemic resulted an increase in allowance for loan losses of $4.2 million and $6.8 million for the three and six months ended June 30, 2020.

The SBA guarantee on PPP loans cannot be separated from the loan and therefore is not a separate unit of account. The Company considered the SBA guarantee in the allowance for loan evaluation and determined that it is not required to reserve additional allowance for loan losses on SBA PPP loans at June 30, 2020.

The following table presents the activities in allowance for loan losses by portfolio segment, which is consistent with the Company’s methodology for determining allowance for loan losses, for the three months ended June 30, 2020 and 2019:



($ in thousands)	Real Estate		Commercial and Industrial		Other Consumer		Total
Balance at April 1, 2020	$	11,948	$	4,549	$	177	$	16,674
Charge-offs	(111)		(241)		(63)		(415)
Recoveries on loans previously charged off	—		114		20		134
Provision (reversal) for loan losses	3,708		(85)		232		3,855
Balance at June 30, 2020	$	15,545	$	4,337	$	366	$	20,248

Balance at April 1, 2019	$	9,324	$	3,608	$	205	$	13,137
Charge-offs	(17)		(168)		(67)		(252)
Recoveries on loans previously charged off	—		33		16		49
Provision (reversal) for loan losses	404		(47)		37		394
Balance at June 30, 2019	$	9,711	$	3,426	$	191	$	13,328



($ in thousands)	Real Estate		Commercial and Industrial		Other Consumer		Total
Balance at January 1, 2020	$	9,854	$	4,354	$	172	$	14,380
Charge-offs	(138)		(916)		(139)		(1,193)
Recoveries on loans previously charged off	56		205		49		310
Provision for loan losses	5,773		694		284		6,751
Balance at June 30, 2020	$	15,545	$	4,337	$	366	$	20,248

Balance at January 1, 2019	$	9,104	$	3,877	$	186	$	13,167
Charge-offs	(19)		(168)		(111)		(298)
Recoveries on loans previously charged off	4		74		72		150
Provision (reversal) for loan losses	622		(357)		44		309
Balance at June 30, 2019	$	9,711	$	3,426	$	191	$	13,328


($ in thousands)	Real Estate		Commercial and Industrial		Other Consumer		Total
June 30, 2020
Allowance for loan losses:
Individually evaluated for impairment	$	1	$	—	$	—	$	1
Collectively evaluated for impairment	15,544		4,337		366		20,247
Total	$	15,545	$	4,337	$	366	$	20,248
Loans receivable:
Individually evaluated for impairment	$	1,971	$	2,398	$	—	$	4,369
Collectively evaluated for impairment	1,178,468		349,202		21,550		1,549,220
Total	$	1,180,439	$	351,600	$	21,550	$	1,553,589
December 31, 2019
Allowance for loan losses:
Individually evaluated for impairment	$	4	$	15	$	—	$	19
Collectively evaluated for impairment	9,850		4,339		172		14,361
Total	$	9,854	$	4,354	$	172	$	14,380
Loans receivable:
Individually evaluated for impairment	$	2,158	$	2,401	$	—	$	4,559
Collectively evaluated for impairment	1,184,903		238,079		23,290		1,446,272
Total	$	1,187,061	$	240,480	$	23,290	$	1,450,831

The Company classifies 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, collateral adequacy, credit documentation, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans in regards to credit risk. This analysis typically includes non-homogeneous loans, such as commercial property and commercial and industrial loans, and is performed on an ongoing basis as new information is obtained. The Company uses the following definitions for risk ratings:

Special Mention - Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.


($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
June 30, 2020
Real estate loans:
Commercial property	$	813,072	$	—	$	337	$	—	$	813,409
Residential property	223,923		—		—		—		223,923
SBA property	119,566		71		3,038		—		122,675
Construction	20,432		—		—		—		20,432
Commercial and industrial loans:
Commercial term	98,936		—		—		—		98,936
Commercial lines of credit	94,371		—		1,968		—		96,339
SBA commercial term	22,254		—		396		—		22,650
SBA PPP	133,675		—		—		—		133,675
Other consumer loans	21,480		—		70		—		21,550
Total	$	1,547,709	$	71	$	5,809	$	—	$	1,553,589
December 31, 2019
Real estate loans:
Commercial property	$	802,373	$	—	$	641	$	—	$	803,014
Residential property	235,046		—		—		—		235,046
SBA property	124,135		72		5,630		—		129,837
Construction	17,453		1,711		—		—		19,164
Commercial and industrial loans:
Commercial term	103,380		—		—		—		103,380
Commercial lines of credit	109,880		—		1,888		—		111,768
SBA commercial term	24,677		—		655		—		25,332
Other consumer loans	23,242		—		48		—		23,290
Total	$	1,440,186	$	1,783	$	8,862	$	—	$	1,450,831


	Still Accruing
($ in thousands)	30 to 59 Days Past Due		60 to 89 Days Past Due		90 or More Days Past Due		Nonaccrual		Total Past Due and Nonaccrual
June 30, 2020
Real estate loans:

Residential property	$	262	$	—	$	696	$	—	$	958
SBA property	—		—		—		1,351		1,351

Commercial and industrial loans:

Commercial lines of credit	—		—		—		1,968		1,968
SBA commercial term	—		—		—		381		381
Other consumer loans	49		113		—		70		232
Total	$	311	$	113	$	696	$	3,770	$	4,890
December 31, 2019
Real estate loans:

Residential property	$	—	$	697	$	—	$	—	$	697
SBA property	794		—		—		442		1,236

Commercial and industrial loans:

Commercial lines of credit	—		—		—		1,888		1,888
SBA commercial term	—		189		287		159		635
Other consumer loans	99		39		—		48		186
Total	$	893	$	925	$	287	$	2,537	$	4,642

Loans are considered impaired in the following cases: (i) the loan is on nonaccrual, (ii) when principal or interest payments on the loan have been contractually past due for 90 days or more, unless the loan is both well-collateralized and in the process of collection, (iii) the loan is classified as a troubled debt restructuring (“TDR”) where terms not typically granted by the Company were offered to the borrower, (iv) when current information or events make it unlikely to collect the loan balance in full according to the contractual terms of the loan agreement, (v) there is a deterioration in the borrower’s financial condition that raises uncertainty as to timely collection of either principal or interest, or (vi) full payment of both principal and interest of the loan according to the original contractual terms is in doubt.

The following table presents loans individually evaluated for impairment by portfolio segment as of the dates indicated. The recorded investment presents customer balances net of any partial charge-offs recognized on the loans and net of any deferred fees and costs.


	With No Allowance Recorded						With an Allowance Recorded
($ in thousands)	Recorded Investment		Unpaid Principal Balance		Recorded Investment		Unpaid Principal Balance		Related Allowance
June 30, 2020
Real estate loans:
Commercial property	$	337	$	335	$	—	$	—	$	—

SBA property	1,458		1,596		176		176		1

Commercial and industrial loans:
Commercial term	26		26		—		—		—
Commercial lines of credit	1,968		1,968		—		—		—
SBA commercial term	404		446		—		—		—

Total	$	4,193	$	4,371	$	176	$	176	$	1
December 31, 2019
Real estate loans:
Commercial property	$	339	$	338	$	—	$	—	$	—

SBA property	1,699		1,828		120		154		4

Commercial and industrial loans:
Commercial term	28		28		—		—		—
Commercial lines of credit	1,888		1,888		—		—		—
SBA commercial term	457		495		28		28		15

Total	$	4,411	$	4,577	$	148	$	182	$	19


	Three Months Ended June 30,
	2020						2019
($ in thousands)	Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income
Real estate loans:
Commercial property	$	337	$	6	$	—	$	—

SBA property	1,692		4		1,666		6

Commercial and industrial loans:
Commercial term	26		1		52		1
Commercial lines of credit	2,074		—		—		—
SBA commercial term	418		—		59		1

Total	$	4,547	$	11	$	1,777	$	8


	Six Months Ended June 30,
	2020						2019
($ in thousands)	Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income
Real estate loans:
Commercial property	$	338	$	11	$	—	$	—
Residential property	—		—		76		—
SBA property	1,728		9		1,507		12

Commercial and industrial loans:
Commercial term	26		1		57		2
Commercial lines of credit	2,254		—		—		—
SBA commercial term	480		1		150		2

Total	$	4,826	$	22	$	1,790	$	16


	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2020		2019		2020		2019
Interest income that would have been recognized had impaired loans performed in accordance with their original terms	$	67	$	32	$	146	$	64
Less: interest income recognized on impaired loans on a cash basis	(11)		(8)		(22)		(16)
Interest income foregone on impaired loans	$	56	$	24	$	124	$	48


	June 30, 2020										December 31, 2019
($ in thousands)	Accruing		Nonaccrual		Total		Accruing		Nonaccrual		Total
Real estate loans:
Commercial property	$	337	$	—	$	337	$	339	$	—	$	339

SBA property	282		40		322		294		121		415

Commercial and industrial loans:
Commercial term	26		—		26		28		—		28

SBA commercial term	24		—		24		39		—		39

Total	$	669	$	40	$	709	$	700	$	121	$	821


	Three Months Ended June 30,
	2020								2019
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real estate loans:


SBA property ⁽¹⁾	—	—		—		1	131		131






Total	—	$	—	$	—	1	$	131	$	131


	Six Months Ended June 30,
	2020								2019
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real estate loans:


SBA property ⁽¹⁾	—	—		—		1	131		131

Commercial and industrial loans:


SBA commercial term ⁽¹⁾	2	$	37	$	37	—	$	—	$	—

Total	2	$	37	$	37	1	$	131	$	131

The determination of the allowance for loan losses related to TDRs depends on the collectability of principal and interest, according to the modified repayment terms. Loans that were modified as TDRs were individually evaluated for impairment and the Company allocated none and $4 thousand of allowance for loan losses as of June 30, 2020 and December 31, 2019, respectively.

There were no loans that were modified as TDRs for which there was a payment default within twelve months following the modification for the three months ended June 30, 2020 and 2019. The following table presents information on loans that were modified as TDRs for which there was a payment default within twelve months following the modification for the six months ended June 30, 2020 and 2019:


	Six Months Ended June 30,
	2020				2019
($ in thousands)	Number of Loans	Recorded Investment at Date of Default		Number of Loans	Recorded Investment at Date of Default





Commercial and industrial loans:


SBA commercial term	1	$	26	—	$	—

Total	1	$	26	—	$	—


	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2020		2019		2020		2019
Real estate loans:

Residential property	$	—	$	—	$	1,125	$	303


Commercial and industrial loans:


SBA commercial term	—		—		230		—

Total	$	—	$	—	$	1,355	$	303

Loans held-for-sale are carried at the lower of cost or fair value. When a determination is made at the time of commitment to originate as held-for-investment, it is the Company’s intent to hold these loans to maturity or for the “foreseeable future,” subject to periodic reviews under the Company’s management evaluation processes, including asset/liability management and credit risk management. When the Company subsequently changes its intent to hold certain loans, the loans are transferred to held-for-sale at the lower of cost or fair value. Certain loans are transferred to held-for-sale with write-downs to allowance for loan losses.