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Loans and Allowance For Loan Losses

12 Months Ended

Dec. 31, 2021

4. LOANS AND ALLOWANCE FOR LOAN LOSSES

Outstanding loans as of December 31, 2021 and 2020 are summarized below. Certain loans have been pledged to secure borrowing arrangements (see Note 7). Additionally, SBA loans include loans funded under the Paycheck Protection Program under the CARES Act, which was enacted as a result of the

COVID-19

pandemic (see Note 2).


(Dollars in thousands)	December 31, 2021			December 31, 2020
Commercial and industrial		474,281			414,548
Real estate - other		697,212			550,690
Real estate - construction and land		43,194			37,193
SBA		81,403			317,564
Other		80,559			49,075

Total loans, gross		1,376,649			1,369,070
Deferred loan origination costs, net		1,688			523
Allowance for loan losses		(14,081	)		(14,111	)

Total loans, net		1,364,256			1,355,482

The following table reflects the loan portfolio allocated by management’s internal risk ratings at December 31, 2021 and 2020.


(Dollars in thousands)	Commercial and Industrial		Real Estate Other		Real Estate Construction and Land		SBA		Other		Total
As of December 31, 2021
Grade:
Pass	$	450,913	$	690,916	$	39,074	$	79,379	$	80,559	$	1,340,841
Special Mention		20,904		1,583		1,278		1,111		—		24,876
Substandard		2,464		4,713		2,842		913		—		10,932

Total	$	474,281	$	697,212	$	43,194	$	81,403	$	80,559	$	1,376,649

As of December 31, 2020
Grade:
Pass	$	401,629	$	540,153	$	34,543	$	315,277	$	49,075	$	1,340,677
Special Mention		9,013		2,911		872		859		—		13,655
Substandard		3,906		7,626		1,778		1,428		—		14,738

Total	$	414,548	$	550,690	$	37,193	$	317,564	$	49,075	$	1,369,070

The following table reflects an aging analysis of the loan portfolio by the time past due at December 31, 2021 and 2020.


(Dollars in thousands)	30 Days		60 Days		90+ Days		Non-Accrual		Current		Total
As of December 31, 2021
Commercial and industrial	$	—	$	2,597	$	—	$	—	$	471,684	$	474,281
Real estate - other		—		—		—		—		697,212		697,212
Real estate - construction and land		—		—		—		—		43,194		43,194
SBA		—		—		—		232		81,171		81,403
Other		—		—		—		—		80,559		80,559

Total loans, gross	$	—	$	2,597	$	—	$	232	$	1,373,820	$	1,376,649

As of December 31, 2020
Commercial and industrial	$	—	$	—	$	—	$	—	$	414,548	$	414,548
Real estate - other		1,505		—		—		—		549,185		550,690
Real estate - construction and land		—		—		—		—		37,193		37,193
SBA		—		—		—		234		317,330		317,564
Other		—		—		—		—		49,075		49,075

Total loans, gross	$	1,505	$	—	$	—	$	234	$	1,367,331	$	1,369,070

The following table reflects the impairment methodology applied to gross loans by portfolio segment and the related allowance for loan losses as of December 31, 2021 and 2020.


(Dollars in thousands)	Commercial and Industrial		Real Estate Other		Real Estate Construction and Land		SBA		Other		Total
As of December 31, 2021
Gross loans:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	731	$	—	$	731
Loans collectively evaluated for impairment		474,281		697,212		43,194		80,672		80,559		1,375,918

Total gross loans	$	474,281	$	697,212	$	43,194	$	81,403	$	80,559	$	1,376,649

Allowance for loan losses:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	142	$	—	$	142
Loans collectively evaluated for impairment		8,552		4,524		681		167		15		13,939

Total allowance for loan losses	$	8,552	$	4,524	$	681	$	309	$	15	$	14,081

As of December 31, 2020
Gross loans:
Loans individually evaluated for impairment	$	2,288	$	—	$	—	$	689	$	—	$	2,977
Loans collectively evaluated for impairment		412,260		550,690		37,193		316,875		49,075		1,366,093

Total gross loans	$	414,548	$	550,690	$	37,193	$	317,564	$	49,075	$	1,369,070

Allowance for loan losses:
Loans individually evaluated for impairment	$	41	$	—	$	—	$	259	$	—	$	300
Loans collectively evaluated for impairment		8,882		3,877		681		345		26		13,811

Total allowance for loan losses	$	8,923	$	3,877	$	681	$	604	$	26	$	14,111

The following table reflects information related to impaired loans as of December 31, 2021 and 2020.


(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
As of December 31, 2021
With no related allowance recorded:
SBA	$	232	$	705	$	—	$	233	$	14

With an allowance recorded:
SBA	$	499	$	499	$	142	$	477	$	59
Total:
SBA	$	731	$	1,204	$	142	$	710	$	73
As of December 31, 2020
With no related allowance recorded:
SBA	$	234	$	479	$	—	$	1,917	$	—

With an allowance recorded:
Commercial and industrial	$	2,288	$	2,288	$	41	$	2,137	$	148
SBA	$	455	$	455	$	259	$	3,921	$	57
Total:
Commercial and industrial	$	2,288	$	2,288	$	41	$	2,137	$	148
SBA	$	689	$	934	$	259	$	5,838	$	57

The recorded investment in impaired loans in the tables above excludes accrued interest receivable and net deferred origination costs due to their immateriality.

The following table reflects the changes in, and allocation of, the allowance for loan losses by portfolio segment for the years ended December 31, 2021 and 2020.


(Dollars in thousands)	Commercial and Industrial			Real Estate Other		Real Estate Construction and Land			SBA			Other			Total

Year ended December 31, 2021
Beginning balance	$	8,923		$	3,877	$	681		$	604		$	26		$	14,111
Provision for loan losses		(615	)		647		—			(17	)		(11	)		4
Charge-offs		—			—		—			(278	)		—			(278	)
Recoveries		244			—		—			—			—			244

Ending balance	$	8,552		$	4,524	$	681		$	309		$	15		$	14,081


Year ended December 31, 2020
Beginning balance	$	6,708		$	3,281	$	1,022		$	50		$	14		$	11,075
Provision for loan losses		3,951			596		(341	)		662			12			4,880
Charge-offs		(1,868	)		—		—			(108	)		—			(1,976	)
Recoveries		132			—		—			—			—			132

Ending balance	$	8,923		$	3,877	$	681		$	604		$	26		$	14,111

Interest forgone on nonaccrual loans was $43,000 and $174,000 for the years ended December 31, 2021 and 2020, respectively. There was no interest recognized on a cash-basis on impaired loans for the years ended December 31, 2021 and 2020, respectively.

Troubled Debt Restructurings

At December 31, 2021 and 2020, the Company had no recorded investments or allocated specific reserves related to loans with terms that had been modified in troubled debt restructurings.

The Company had no commitments as of December 31, 2021 and 2020 to customers with outstanding loans that were classified as troubled debt restructurings. There were no new troubled debt restructurings during the years ended December 31, 2021 and 2020.

The Company had no troubled debt restructurings with a subsequent payment default within twelve months following the modification during the years ended December 31, 2021 and 2020.

COVID-19

For additional information regarding the impact of

COVID-19

on the loan portfolio, see Footnote 2.