
($ in thousands)	September 30, 2020		December 31, 2019
Real estate loans:
Commercial property	$	853,708	$	803,014
Residential property	212,804		235,046
SBA property	128,038		129,837
Construction	19,803		19,164
Total real estate loans	1,214,353		1,187,061
Commercial and industrial loans:
Commercial term	90,867		103,380
Commercial lines of credit	92,222		111,768
SBA commercial term	23,011		25,332
SBA PPP	136,418		—
Total commercial and industrial loans	342,518		240,480
Other consumer loans	21,933		23,290
Loans held-for-investment	1,578,804		1,450,831
Allowance for loan losses	(24,546)		(14,380)
Net loans held-for-investment	$	1,554,258	$	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 September 30, 2020 and December 31, 2019, the Company had $3.9 million and $3.8 million, respectively, of such loans outstanding.


($ in thousands)	Number of Loans	Amount
Loan amount:
$50,000 or less	1,043	$	21,551
Over $50,000 and less than $350,000	499	60,679
Over $350,000 and less than $2,000,000	69	45,813
$2,000,000 or more	3	8,375
Total	1,614	$	136,418

The Company provided modifications, including payment deferments and interest only payments, to customers that are adversely affected by the COVID-19. The loan modifications were accounted for under section 4013 of the CARES Act and, therefore, the modified loans were not considered TDRs as of September 30, 2020. All types of modifications have initial modification terms of 6-months or less. At September 30, 2020, all loans under modified terms related to the COVID-19 had remaining modification terms of 4-months or less. The following table presents a summary of loans under modified terms related to the COVID-19 pandemic by portfolio segment as of September 30, 2020:


	Modification Type
($ in thousands)	Payment Deferment		Interest Only Payment		Total
September 30, 2020
Real estate loans:
Commercial property	$	135,165	$	2,397	$	137,562
Residential property	19,233		—		19,233


Commercial and industrial loans:
Commercial term	11,797		2,960		14,757

SBA commercial term	—		72		72

Total	$	166,195	$	5,429	$	171,624

The Company had loans under modified terms related to the COVID-19 pandemic of $171.6 million and $484.0 million at September 30, 2020 and June 30, 2020, respectively. The decrease was primarily due to expirations of modifications of $220.5 million, early terminations of modifications of $106.7 million, partially offset by subsequent modifications of $19.8 million and new modifications of $1.9 million during the three months ended September 30, 2020.

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 $4.3 million and $11.1 million for the three and nine months ended September 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 losses evaluation and determined that it is not required to reserve an allowance on SBA PPP loans at September 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 September 30, 2020 and 2019:



($ in thousands)	Real Estate		Commercial and Industrial		Other Consumer		Total
Balance at July 1, 2020	$	15,545	$	4,337	$	366	$	20,248
Charge-offs	—		—		(102)		(102)
Recoveries on loans previously charged off	—		18		56		74
Provision (reversal) for loan losses	2,556		1,686		84		4,326
Balance at September 30, 2020	$	18,101	$	6,041	$	404	$	24,546

Balance at July 1, 2019	$	9,711	$	3,426	$	191	$	13,328
Charge-offs	—		(179)		(47)		(226)
Recoveries on loans previously charged off	—		38		56		94
Provision (reversal) for loan losses	(33)		(6)		(63)		(102)
Balance at September 30, 2019	$	9,678	$	3,279	$	137	$	13,094



($ 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)		(241)		(1,295)
Recoveries on loans previously charged off	56		223		105		384
Provision for loan losses	8,329		2,380		368		11,077
Balance at September 30, 2020	$	18,101	$	6,041	$	404	$	24,546

Balance at January 1, 2019	$	9,104	$	3,877	$	186	$	13,167
Charge-offs	(19)		(347)		(158)		(524)
Recoveries on loans previously charged off	4		112		128		244
Provision (reversal) for loan losses	589		(363)		(19)		207
Balance at September 30, 2019	$	9,678	$	3,279	$	137	$	13,094


($ in thousands)	Real Estate		Commercial and Industrial		Other Consumer		Total
September 30, 2020
Allowance for loan losses:
Individually evaluated for impairment	$	9	$	79	$	—	$	88
Collectively evaluated for impairment	18,092		5,962		404		24,458
Total	$	18,101	$	6,041	$	404	$	24,546
Loans receivable:
Individually evaluated for impairment	$	1,535	$	1,940	$	—	$	3,475
Collectively evaluated for impairment	1,212,818		340,578		21,933		1,575,329
Total	$	1,214,353	$	342,518	$	21,933	$	1,578,804
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
September 30, 2020
Real estate loans:
Commercial property	$	852,325	$	1,048	$	335	$	—	$	853,708
Residential property	212,804		—		—		—		212,804
SBA property	125,497		—		2,541		—		128,038
Construction	19,803		—		—		—		19,803
Commercial and industrial loans:
Commercial term	87,241		3,626		—		—		90,867
Commercial lines of credit	90,697		—		1,525		—		92,222
SBA commercial term	22,547		72		392		—		23,011
SBA PPP	136,418		—		—		—		136,418
Other consumer loans	21,866		—		67		—		21,933
Total	$	1,569,198	$	4,746	$	4,860	$	—	$	1,578,804
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


($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
September 30, 2020
Real estate loans:
Commercial property	$	137,219	$	343	$	—	$	—	$	137,562
Residential property	19,233		—		—		—		19,233


Commercial and industrial loans:
Commercial term	11,131		3,626		—		—		14,757

SBA commercial term	—		72		—		—		72


Total	$	167,583	$	4,041	$	—	$	—	$	171,624


	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
September 30, 2020
Real estate loans:

Residential property	$	189	$	—	$	699	$	—	$	888
SBA property	—		—		—		923		923

Commercial and industrial loans:

Commercial lines of credit	—		—		—		1,525		1,525
SBA commercial term	—		—		—		378		378
Other consumer loans	108		3		—		67		178
Total	$	298	$	3	$	699	$	2,893	$	3,893
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 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
September 30, 2020
Real estate loans:
Commercial property	$	335	$	334	$	—	$	—	$	—

SBA property	977		1,071		223		221		9

Commercial and industrial loans:
Commercial term	22		22		—		—		—
Commercial lines of credit	1,231		1,231		294		294		79
SBA commercial term	393		417		—		—		—

Total	$	2,958	$	3,075	$	517	$	515	$	88
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 September 30,
	2020				2019
($ in thousands)	Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income
Real estate loans:
Commercial property	$	336	$	6	$	341	$	6

SBA property	1,203		4		1,896		5

Commercial and industrial loans:
Commercial term	24		—		43		1
Commercial lines of credit	1,747		—		327		—
SBA commercial term	395		—		105		1

Total	$	3,705	$	10	$	2,712	$	13


	Nine Months Ended September 30,
	2020				2019
($ in thousands)	Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income
Real estate loans:
Commercial property	$	337	$	17	$	114	$	6
Residential property	—		—		50		—
SBA property	1,554		13		1,637		17

Commercial and industrial loans:
Commercial term	25		1		52		3
Commercial lines of credit	2,085		—		109		—
SBA commercial term	451		1		135		3

Total	$	4,452	$	32	$	2,097	$	29


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2020		2019		2020		2019
Interest income that would have been recognized had impaired loans performed in accordance with their original terms	$	53	$	49	$	198	$	113
Less: interest income recognized on impaired loans on a cash basis	(10)		(13)		(32)		(29)
Interest income foregone on impaired loans	$	43	$	36	$	166	$	84


	September 30, 2020						December 31, 2019
($ in thousands)	Accruing		Nonaccrual		Total		Accruing		Nonaccrual		Total
Real estate loans:
Commercial property	$	335	$	—	$	335	$	339	$	—	$	339

SBA property	277		38		315		294		121		415

Commercial and industrial loans:
Commercial term	22		—		22		28		—		28

SBA commercial term	15		—		15		39		—		39

Total	$	649	$	38	$	687	$	700	$	121	$	821


	Three Months Ended September 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:
Commercial property	—	$	—	$	—	1	$	341	$	341

SBA property (1)	—	—		—		1	123		123






Total	—	$	—	$	—	2	$	464	$	464


	Nine Months Ended September 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:
Commercial property	—	$	—	$	—	1	$	341	$	341

SBA property (1)	—	—		—		2	254		254

Commercial and industrial loans:


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

Total	2	$	37	$	37	3	$	595	$	595

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 September 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 September 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 nine months ended September 30, 2020 and 2019:


	Nine Months Ended September 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 September 30,				Nine Months Ended September 30,
($ in thousands)	2020		2019		2020		2019
Real estate loans:

Residential property	$	—	$	522	$	1,125	$	824


Commercial and industrial loans:


SBA commercial term	—		—		230		—

Total	$	—	$	522	$	1,355	$	824

The Company had no purchases of loans held-for-investment during the three and nine months ended September 30, 2020. The Company purchased residential property loans of $893 thousand during the three and nine months ended September 30, 2019.

The Company had no sales of loans held-for-investment during the three and nine months ended September 30, 2020 and 2019. When the Company changes its intent to hold loans for investment, the loans are transferred to held-for-sale.

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.