(1)

Beginning with March 31, 2020, gross loans are presented net of deferred loan fees by respective class of financing receivables.

s of December 31, 2020, 70.16% of the Company’s total gross loan portfolio consisted of real estate loans, with commercial real estate loans representing 65.90% of total loans. Substantially all of the Company’s real estate loans and construction loans are secured by real properties located in California. As of December 31, 2020, $314.4 million, or 5.72% of the total commercial real estate loans included loans secured by farmland, compared to $241.8 million, or 4.50%, at December 31, 2019. The loans secured by farmland included $132.9 million for loans secured by dairy & livestock land and $181.5 million for loans secured by agricultural land at December 31, 2020, compared to $125.9 million for loans secured by dairy & livestock land and $115.9 million for loans secured by agricultural land at December 31, 2019. As of December 31, 2020, dairy & livestock and agribusiness loans of $361.1 million were comprised of $320.1 million for dairy & livestock loans and $41.0 million for agribusiness loans, compared to $323.5 million for dairy & livestock loans and $60.2 million for agribusiness loans at December 31, 2019.

At December 31, 2020 and 2019, loans totaling $6.07 billion and $6.03 billion, respectively, were pledged to secure the borrowings and available lines of credit from the FHLB and the Federal Reserve Bank.

There were no outstanding loans

held-for-sale

as of December 31, 2020 and 2019.

Credit Quality Indicators

We monitor credit quality by evaluating various risk attributes and utilize such information in our evaluation of the appropriateness of the allowance for credit losses. Internal credit risk ratings, within our loan risk rating system, are the credit quality indicators that we most closely monitor.

An important element of our approach to credit risk management is our loan risk rating system. The originating officer assigns each loan an initial risk rating, which is reviewed and confirmed or changed, as appropriate, by credit management. Approvals are made based upon the amount of inherent credit risk specific to the transaction and are reviewed for appropriateness by senior line and credit management personnel. Credits are monitored by line and credit management personnel for deterioration or improvement in a borrower’s financial condition, which would impact the ability of the borrower to perform under the contract. Risk ratings are adjusted as necessary.

Loans are risk rated into the following categories: Pass, Special Mention, Substandard, Doubtful and Loss. Each of these groups is assessed for the proper amount to be used in determining the adequacy of our allowance for losses. These categories can be described as follows:

Pass — These loans, including loans on the Bank’s internal watch list, range from minimal credit risk to lower than average, but still acceptable, credit risk. Watch list loans usually require more than normal management attention. Loans on the watch list may involve borrowers with adverse financial trends, higher debt/equity ratios, or weaker liquidity positions, but not to the degree of being considered a defined weakness or problem loan where risk of loss may be apparent.

Special Mention — Loans assigned to this category have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

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

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

Loss — Loans classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this asset with insignificant value even though partial recovery may be affected in the future.

The following table summarizes loans by type, according to our internal risk ratings as of the dates presented.


	Origination Year												Revolving loans amortized cost basis		Revolving loans converted to term loans
December 31, 2020	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term loans		Total
	(Dollars in thousands)
Commercial real estate loans:
Risk Rating:
Pass	$	979,499	$	691,091	$	607,753	$	617,640	$	550,105	$	1,646,876	$	192,583	$	24,548	$	5,310,095
Special Mention		9,332		7,162		30,049		43,870		17,398		49,840		5,720		994		164,365
Substandard		-		491		2,157		7,382		2,528		13,790		360		341		27,049
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total Commercial real estate loans:	$	988,831	$	698,744	$	639,959	$	668,892	$	570,031	$	1,710,506	$	198,663	$	25,883	$	5,501,509

Construction loans:
Risk Rating:
Pass	$	14,511	$	9,350	$	14,945	$	2,258	$	-	$	4	$	44,077	$	-	$	85,145
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total Construction loans:	$	14,511	$	9,350	$	14,945	$	2,258	$	-	$	4	$	44,077	$	-	$	85,145

SBA loans:
Risk Rating:
Pass	$	47,901	$	12,821	$	44,950	$	58,839	$	26,136	$	86,085	$	-	$	2,976	$	279,708
Special Mention		-		-		-		5,446		1,336		5,648		-		-		12,430
Substandard		-		-		904		5,503		1,554		3,797		-		-		11,758
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total SBA loans:	$	47,901	$	12,821	$	45,854	$	69,788	$	29,026	$	95,530	$	-	$	2,976	$	303,896

SBA - PPP loans:
Risk Rating:
Pass	$	882,986	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	882,986
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total SBA - PPP loans:	$	882,986	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	882,986

Commercial and industrial loans:
Risk Rating:
Pass	$	104,478	$	168,050	$	62,453	$	56,043	$	32,149	$	76,019	$	257,250	$	6,058	$	762,500
Special Mention		1,995		1,081		1,892		1,028		95		4,882		17,395		1,132		29,500
Substandard		4,346		860		3,996		2,282		285		94		6,677		1,522		20,062
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total Commercial and industrial loans:	$	110,819	$	169,991	$	68,341	$	59,353	$	32,529	$	80,995	$	281,322	$	8,712	$	812,062


Dairy & livestock and agribusiness loans:
Risk Rating:
Pass	$	1,041	$	1,765	$	1,199	$	5,680	$	120	$	320	$	319,211	$	363	$	329,699
Special Mention		878		-		364		-		-		-		13,255		1,511		16,008
Substandard		-		-		784		693		2,285		-		-		11,677		15,439
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total Dairy & livestock and agribusiness loans:	$	1,919	$	1,765	$	2,347	$	6,373	$	2,405	$	320	$	332,466	$	13,551	$	361,146

Municipal lease finance receivables loans:
Risk Rating:
Pass	$	8,478	$	-	$	2,556	$	10,249	$	3,586	$	20,266	$	-	$	-	$	45,135
Special Mention		-		-		-		-		-		412		-		-		412
Substandard		-		-		-		-		-		-		-		-		-
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total Municipal lease finance receivables loans:	$	8,478	$	-	$	2,556	$	10,249	$	3,586	$	20,678	$	-	$	-	$	45,547


	Origination Year												Revolving loans amortized cost basis		Revolving loans converted to term loans
December 31, 2020	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term loans		Total
	(Dollars in thousands)
SFR mortgage loans:
Risk Rating:
Pass	$	65,463	$	59,596	$	29,142	$	22,452	$	27,192	$	62,593	$	3	$	-	$	266,441
Special Mention		-		-		-		-		-		452		-		-		452
Substandard		-		-		-		-		229		2,957		-		432		3,618
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total SFR mortgage loans:	$	65,463	$	59,596	$	29,142	$	22,452	$	27,421	$	66,002	$	3	$	432	$	270,511

Consumer and other loans:
Risk Rating:
Pass	$	8,557	$	2,077	$	871	$	969	$	1,586	$	961	$	67,774	$	1,688	$	84,483
Special Mention		-		-		-		-		-		91		517		22		630
Substandard		-		-		-		-		-		172		-		721		893
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total Consumer and other loans:	$	8,557	$	2,077	$	871	$	969	$	1,586	$	1,224	$	68,291	$	2,431	$	86,006

Gross loans:
Risk Rating:
Pass	$	2,112,914	$	944,750	$	763,869	$	774,130	$	640,874	$	1,893,124	$	880,898	$	35,633	$	8,046,192
Special Mention		12,205		8,243		32,305		50,344		18,829		61,325		36,887		3,659		223,797
Substandard		4,346		1,351		7,841		15,860		6,881		20,810		7,037		14,693		78,819
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total Gross loans:	$	2,129,465	$	954,344	$	804,015	$	840,334	$	666,584	$	1,975,259	$	924,822	$	53,985	$	8,348,808

The following table summarizes loans by type, according to our internal risk ratings as of the date presented.


	December 31, 2019
	Pass		Special Mention		Substandard		Doubtful & Loss		Total
	(Dollars in thousands)
Commercial real estate
Owner occupied	$	1,977,007	$	78,208	$	28,435	$	-	$	2,083,650
Non-owner occupied		3,280,580		10,005		382		-		3,290,967
Construction
Speculative		106,895		-		-		-		106,895
Non-speculative		10,030		-		-		-		10,030
SBA		283,430		11,032		10,546		-		305,008
Commercial and industrial		895,234		35,473		4,420		-		935,127
Dairy & livestock and agribusiness		320,670		35,920		27,119		-		383,709
Municipal lease finance receivables		52,676		470		-		-		53,146
SFR mortgage		280,010		1,957		1,501		-		283,468
Consumer and other loans		114,870		421		1,028		-		116,319

Total gross loans	$	7,321,402	$	173,486	$	73,431	$	-	$	7,568,319

Allowance for Credit Losses

The allowance for credit losses for 2020 is based upon lifetime loss rate models developed from an estimation framework that uses historical lifetime loss experiences to derive loss rates at a collective pool level. We measure the expected credit losses on a collective (pooled) basis for those loans that share similar risk characteristics. We have three collective loan pools: Commercial Real Estate, Commercial and Industrial, and Consumer. Our ACL amounts are largely driven by portfolio characteristics, including loss history and various risk attributes, and the economic outlook for certain macroeconomic variables. Risk attributes for commercial real estate loans include OLTV, origination year, loan seasoning, and macroeconomic variables that include GDP growth, commercial real estate price index and unemployment rate. Risk attributes for commercial and industrial loans include internal risk ratings, borrower industry sector, loan credit spreads and macroeconomic variables that include unemployment rate and BBB spread. The macroeconomic variables for Consumer include unemployment rate and GDP. The Commercial Real Estate methodology is applied over commercial real estate loans, a portion of construction loans, and a portion of SBA loans (excluding Payment Protection Program loans). The Commercial and Industrial methodology is applied over a substantial portion of the Company’s commercial and industrial loans, all dairy & livestock and agribusiness loans, municipal lease receivables, as well as the remaining portion of SBA loans (excluding Payment Protection Program loans). The Consumer methodology is applied to SFR mortgage loans, consumer loans, as well as the remaining construction loans. In addition to determining the quantitative life of loan loss rate to be applied against the amortized cost basis of the portfolio segments, management reviews current conditions and forecasts to determine whether adjustments are needed to ensure that the life of loan loss rates reflect both the current state of the portfolio, and expectations for macroeconomic changes. Our methodology for assessing the appropriateness of the allowance is reviewed on a regular basis and considers overall risks in the Bank’s loan portfolio. Refer to Note 3 –

Summary of Significant Accounting Policies

contained herein for a more detailed discussion concerning the allowance for credit losses.

Our allowance for credit losses decreased in the fourth quarter by $177,000, as a result of net charge-offs of $177,000. There was no provision for credit losses in the fourth quarter of 2020. Our allowance for credit losses at December 31, 2020 was $93.7 million or 1.12% of total loans. For the year ended December 31, 2020, the ACL increased by $25.0 million, including a $1.8 million increase from the adoption of CECL on January 1, 2020. The increase in the ACL was primarily due to $23.5 million in provision for credit losses recorded in the first half of 2020 resulting from the forecasted changes in macroeconomic variables related to the

COVID-19

pandemic. Our economic forecast continues to be a blend of multiple forecasts produced by Moody

’s

including

Moody’s baseline forecast

as well as upside and downside forecasts. The baseline forecast

continues to

represent the largest

weighting in our multi-weighted forecast scenario

while due to economic uncertainty a greater weighting was placed on the downside economic forecast, relative to the upside forecast. Our

forecast assumes GDP will increase by

2.5

% in

2021

and then grow by

3.6

% in 202

and

202

. The unemployment rate is forecasted to be

7.7

% in 2021,

before declining to

7.2

% percent in 2022

and

5.7

in 2023.

Management believes that the ACL was appropriate at December 31, 2020 and 2019.

As t

here is a high degree of uncertainty around the epidemiological assumptions and impact of government responses to the pandemic that impact our economic forecast, no assurance can be given that economic conditions that adversely affect the Company’s service areas or other circumstances will not be reflected in increased provisions for credit losses in the future.

The following tables present the balance and activity related to the allowance for credit losses for

held-for-investment

loans by type for the periods presented.


	Year Ended December 31, 2020
	Ending Balance, prior to adoption of ASU 2016-13 December 31, 2019		Impact of Adoption of ASU 2016-13			Charge- offs			Recoveries		Provision for (Recapture of) Credit Losses			Ending Balance December 31, 2020
	(Dollars in thousands)
Commercial real estate	$	48,629	$	3,547		$	-		$	-	$	23,263		$	75,439
Construction		858		655			-			11		410			1,934
SBA		1,453		1,818			(362	)		72		11			2,992
SBA - PPP		-		-			-			-		-			-
Commercial and industrial		8,880		(2,442	)		(195	)		10		889			7,142
Dairy & livestock and agribusiness		5,255		(186	)		-			-		(1,120	)		3,949
Municipal lease finance receivables		623		(416	)		-			-		(133	)		74
SFR mortgage		2,339		(2,043	)		-			206		(135	)		367
Consumer and other loans		623		907			(109	)		59		315			1,795

Total allowance for credit losses	$	68,660	$	1,840		$	(666	)	$	358	$	23,500		$	93,692


	Year Ended December 31, 2019
	Ending Balance December 31, 2018		Charge- offs			Recoveries		Provision for (Recapture of) Loan Losses			Ending Balance December 31, 2019
	(Dollars in thousands)
Commercial real estate	$	45,097	$	-		$	-	$	3,532		$	48,629
Construction		981		-			12		(135	)		858
SBA		1,078		(321	)		9		687			1,453
Commercial and industrial		7,528		(48	)		255		1,145			8,880
Dairy & livestock and agribusiness		5,225		(78	)		19		89			5,255
Municipal lease finance receivables		775		-			-		(152	)		623
SFR mortgage		2,197		-			196		(54	)		2,339
Consumer and other loans		732		(7	)		10		(112	)		623

Total allowance for loan losses	$	63,613	$	(454	)	$	501	$	5,000		$	68,660


	Year Ended December 31, 2018
	Ending Balance December 31, 2017		Charge- offs			Recoveries		Provision for (Recapture of) Loan Losses			Ending Balance December 31, 2018
	(Dollars in thousands)
Commercial real estate	$	41,722	$	-		$	-	$	3,212		$	44,934
Construction		984		-			2,506		(2,509	)		981
SBA		869		(257	)		20		430			1,062
Commercial and industrial		7,280		(10	)		82		168			7,520
Dairy & livestock and agribusiness		4,647		-			19		549			5,215
Municipal lease finance receivables		851		-			-		(76	)		775
SFR mortgage		2,112		(13	)		51		46			2,196
Consumer and other loans		753		(11	)		141		(157	)		726
PCI loans		367		-			-		(163	)		204

Total allowance for loan losses	$	59,585	$	(291	)	$	2,819	$	1,500		$	63,613

The following table presents the recorded investment in loans

held-for-investment

and the related ACL by loan type, based on the Company’s methodology for determining the ACL for the periods presented.


	December 31, 2019
	Recorded Investment in Loans				Allowance for Loan Losses
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
	(Dollars in thousands)
Commercial real estate	$	1,121	$	5,373,496	$	-	$	48,629
Construction		-		116,925		-		858
SBA		2,568		302,440		257		1,196
Commercial and industrial		1,344		933,783		251		8,629
Dairy & livestock and agribusiness		-		383,709		-		5,255
Municipal lease finance receivables		-		53,146		-		623
SFR mortgage		2,979		280,489		-		2,339
Consumer and other loans		377		115,942		-		623

Total	$	8,389	$	7,559,930	$	508	$	68,152

Past Due and Nonperforming Loans

We seek to manage asset quality and control credit risk through diversification of the loan portfolio and the application of policies designed to promote sound underwriting and loan monitoring practices. The Bank’s Credit Management Division is in charge of monitoring asset quality, establishing credit policies and procedures and enforcing the consistent application of these policies and procedures across the Bank. Reviews of nonperforming, past due loans and larger credits, designed to identify potential charges to the allowance for credit losses, and to determine the adequacy of the ACL, are conducted on an ongoing basis. These reviews consider such factors as the financial strength of borrowers and any guarantors, the value of the applicable collateral, loan loss experience, estimated credit losses, growth in the loan portfolio, prevailing economic conditions and other factors. Refer to Note 3 –

Summary of Significant Accounting Policies

, included herein, for additional discussion concerning the Bank’s policy for past due and nonperforming loans.

The following table presents the recorded investment in, and the aging of, past due loans (including nonaccrual loans), by type of loans as of the date presented.


	December 31, 2020
	30-59 Days Past Due		60-89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Loans Not Past Due		Total Loans and Financing Receivables
	(Dollars in thousands)
Commercial real estate
Owner occupied	$	-	$	-	$	7,208	$	7,208	$	2,136,051	$	2,143,259
Non-owner occupied		-		-		-		-		3,358,250		3,358,250
Construction
Speculative (1)		-		-		-		-		72,126		72,126
Non-speculative		-		-		-		-		13,019		13,019
SBA		531		2,415		1,025		3,971		299,925		303,896
SBA - PPP		-		-		-		-		882,986		882,986
Commercial and industrial		608		811		2,338		3,757		808,305		812,062
Dairy & livestock and agribusiness		-		-		784		784		360,362		361,146
Municipal lease finance receivables		-		-		-		-		45,547		45,547
SFR mortgage		-		-		229		229		270,282		270,511
Consumer and other loans		-		-		-		-		86,006		86,006

Total gross loans	$	1,139	$	3,226	$	11,584	$	15,949	$	8,332,859	$	8,348,808

(1)

Speculative construction loans are generally for properties where there is no identified buyer or renter.

Following the adoption of CECL on January 1, 2020, the definitions of impairment and related impaired loan disclosures were removed. Under CECL, amortized cost of our finance receivables and loans that are on nonaccrual status, including loans with no allowance, are presented as of December 31, 2020 by type of loan.


	December 31, 2020
	Nonaccrual with No Allowance for Credit Losses		Total Nonaccrual (1) (3)		Loans Past Due Over 89 Days Still Accruing
	(Dollars in thousands)
Commercial real estate
Owner occupied	$	7,563	$	7,563	$	-
Non-owner occupied		-		-		-
Construction
Speculative (2)		-		-		-
Non-speculative		-		-		-
SBA		2,035		2,273		-
SBA - PPP		-		-		-
Commercial and industrial		1,576		3,129		-
Dairy & livestock and agribusiness		785		785		-
Municipal lease finance receivables		430		-		-
SFR mortgage		-		430		-
Consumer and other loans		167		167		-

Total gross loans	$	12,556	$	14,347	$	-

(1)

As of December 31, 2020, $1.4 million of nonaccruing loans were current, $2,000 were

30-59

days past due, $1.3 million were

60-89

days past due, and $11.6 million were 90+ days past due.

(2)

Speculative construction loans are generally for properties where there is no identified buyer or renter.

(3)

Excludes $184,000 of guaranteed portion of nonaccrual SBA loans that are in process of collection.

The following table presents the recorded investment in, and the aging of, past due and nonaccrual loans, by type of loans as of the date presented.


	December 31, 2019
	30-59 Days Past Due		60-89 Days Past Due		Total Past Due and Accruing		Nonaccrual (1) (3)		Current		Total Loans and Financing Receivables
	(Dollars in thousands)
Commercial real estate
Owner occupied	$	-	$	-	$	-	$	479	$	2,083,171	$	2,083,650
Non-owner occupied		-		-		-		245		3,290,722		3,290,967
Construction
Speculative (2)		-		-		-		-		106,895		106,895
Non-speculative		-		-		-		-		10,030		10,030
SBA		870		532		1,402		2,032		301,574		305,008
Commercial and industrial		2		-		2		1,266		933,859		935,127
Dairy & livestock and agribusiness		-		-		-		-		383,709		383,709
Municipal lease finance receivables		-		-		-		-		53,146		53,146
SFR mortgage		6		243		249		878		282,341		283,468
Consumer and other loans		-		-		-		377		115,942		116,319

Total gross loans	$	878	$	775	$	1,653	$	5,277	$	7,561,389	$	7,568,319

(1)

As of December 31, 2019, $1.2 million of nonaccruing loans were current, $59,000 were

30-59

days past due, $1.1 million were

60-89

days past due and $2.9 million were 90+ days past due.

(2)

Speculative construction loans are generally for properties where there is no identified buyer or renter.

(3)

Excludes $2.0 million of guaranteed portion of nonaccrual SBA loans that are in process of collection.

Impaired Loans (prior to adoption of CECL)

Following the adoption of CECL as of January 1, 2020, the definitions of impairment and related impaired loan disclosures were removed. As a result of the change, the following tables present information about our impaired loans and lease finance receivables, individually evaluated for Impairment by type of loans, as of December 31, 2019 and 2018, prior to the date of adoption of the amendments to the credit loss standard.


	As of and For the Year Ended December 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
					(Dollars in thousands)
With no related allowance recorded:
Commercial real estate
Owner occupied	$	479	$	613	$	-	$	505	$	-
Non-owner occupied		642		643		-		681		26
Construction
Speculative		-		-		-		-		-
Non-speculative		-		-		-		-		-
SBA		2,243		2,734		-		2,389		41
Commercial and industrial		1,091		1,261		-		1,369		4
Dairy & livestock and agribusiness		-		-		-		-		-
Municipal lease finance receivables		-		-		-		-		-
SFR mortgage		2,979		3,310		-		3,043		86
Consumer and other loans		377		514		-		396		-

Total		7,811		9,075		-		8,383		157


With a related allowance recorded:
Commercial real estate
Owner occupied		-		-		-		-		-
Non-owner occupied		-		-		-		-		-
Construction
Speculative		-		-		-		-		-
Non-speculative		-		-		-		-		-
SBA		325		324		257		327		-
Commercial and industrial		253		347		251		699		-
Dairy & livestock and agribusiness		-		-		-		-		-
Municipal lease finance receivables		-		-		-		-		-
SFR mortgage		-		-		-		-		-
Consumer and other loans		-		-		-		-		-

Total		578		671		508		1,026		-

Total impaired loans	$	8,389	$	9,746	$	508	$	9,409	$	157


	As of and For the Year Ended December 31, 2018 (1)
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
					(Dollars in thousands)
With no related allowance recorded:
Commercial real estate
Owner occupied	$	589	$	705	$	-	$	624	$	-
Non-owner occupied		2,808		4,324		-		4,585		32
Construction
Speculative		-		-		-		-		-
Non-speculative		-		-		-		-		-
SBA		3,467		5,746		-		3,919		44
Commercial and industrial		7,436		11,457		-		7,718		7
Dairy & livestock and agribusiness		-		-		-		-		-
Municipal lease finance receivables		-		-		-		-		-
SFR mortgage		5,349		6,270		-		5,484		80
Consumer and other loans		418		526		-		459		-

Total		20,067		29,028		-		22,789		163

With a related allowance recorded:
Commercial real estate
Owner occupied		-		-		-		-		-
Non-owner occupied		3,143		3,144		478		3,144		-
Construction
Speculative		-		-		-		-		-
Non-speculative		-		-		-		-		-
SBA		-		-		-		-		-
Commercial and industrial		189		191		3		203		-
Dairy & livestock and agribusiness		78		78		12		78		-
Municipal lease finance receivables		-		-		-		-		-
SFR mortgage		-		-		-		-		-
Consumer and other loans		68		100		68		76		-

Total		3,478		3,513		561		3,501		-

Total impaired loans	$	23,545	$	32,541	$	561	$	26,290	$	163

(1)

Excludes PCI loans.

Collateral Dependent Loans

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table presents the recorded investment in collateral-dependent loans by type of loans as of the date presented.


	December 31, 2020						Number of Loans Dependent on Collateral
	Real Estate		Business Assets		Other		Number of Loans Dependent on Collateral
	(Dollars in thousands)

Commercial real estate	$	7,883	$	-	$	-		8
Construction		-		-		-		-
SBA		1,761		326		185		10
SBA - PPP		-		-		-		-
Commercial and industrial		470		5,542		95		18
Dairy & livestock and agribusiness		-		785		-		1
Municipal lease finance receivables		-		-		-		-
SFR mortgage		430		-		-		2
Consumer and other loans		168		-		-		2

Total collateral-dependent loans	$	10,712	$	6,653	$	280		41

Reserve for Unfunded Loan Commitments

The allowance for

off-balance

sheet credit exposure relates to commitments to extend credit, letters of credit and undisbursed funds on lines of credit. The Company evaluates credit risk associated with the

off-balance

sheet loan commitments in the same manner as it evaluates credit risk associated with the loan and lease portfolio. As a result of the adoption of ASU

2016-13,

the reserve for unfunded loan commitments included a transition adjustment of $41,000 as of January 1, 2020. There was no provision or recapture of provision for unfunded commitments for the years ended December 31, 2020 and 2019, compared with a recapture of provision for unfunded loan commitments of $250,000 for the year ended December 31, 2018. As of December 31, 2020 and 2019, the balance in this reserve was $9.0 million and was included in other liabilities.

Troubled Debt Restructurings

Loans that are reported as TDRs are considered impaired and

charge-off

amounts are taken on an individual loan basis, as deemed appropriate. The majority of restructured loans are loans for which the terms of repayment have been renegotiated, resulting in a reduction in interest rate or deferral of principal. Refer to Note 3 —

Summary of Significant Accounting Policies, Troubled Debt Restructurings

, included herein.

As of December 31, 2020, there were $2.2 million of loans classified as a TDR, all of which were performing. TDRs on accrual status are comprised of loans that were accruing interest at the time of restructuring or have demonstrated repayment performance in compliance with the restructured terms for a sustained period and for which the Company anticipates full repayment of both principal and interest. At December 31, 2020, performing TDRs were comprised of seven SFR mortgage loans of $1.8 million, one commercial real estate loan of $320,000, and one commercial and industrial loan of $43,000.

The majority of TDRs have no specific allowance allocated as any impairment amount is normally charged off at the time a probable loss is determined. We have no allocated allowance to TDRs as of December 31, 2020 and December 31, 2019.

The following table provides a summary of the activity related to TDRs for the periods presented.


	Year Ended December 31,
	2020			2019
	(Dollars in thousands)
Performing TDRs:
Beginning balance	$	3,112		$	3,594
New modifications		-			-
Payoffs/payments, net and other		(953	)		(482	)
TDRs returned to accrual status		-			-
TDRs placed on nonaccrual status		-			-

Ending balance	$	2,159		$	3,112

Nonperforming TDRs:
Beginning balance	$	244		$	3,509
New modifications		-			-
Charge-offs		-			(78	)
Transfer to OREO		-			(2,275	)
Payoffs/payments, net and other		(244	)		(912	)
TDRs returned to accrual status		-			-
TDRs placed on nonaccrual status		-			-

Ending balance	$	-		$	244

Total TDRs	$	2,159		$	3,356

The following tables summarize loans modified as TDRs for the periods presented. There were no loans that were modified as TDRs for the years ended December 31, 2020 and 2019.

Modifications (1)


	For the Year Ended December 31, 2018 (2)
	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Outstanding Recorded Investment at December 31, 2018		Financial Effect Resulting From Modifications (3)
	(Dollars in thousands)
Commercial real estate:
Interest rate reduction		-	$	-	$	-	$	-	$	-
Change in amortization period or maturity		-		-		-		-		-
Commercial and industrial:
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		1		38		38		20		-
Dairy & livestock and agribusiness:
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		-		-		-		-		-
SFR mortgage:
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		1		311		311		300		-
Consumer:
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		1		278		278		267		-

Total loans		3	$	627	$	627	$	587	$	-

(1)

The tables above exclude modified loans that were paid off prior to the end of the period.

(2)

Excludes PCI loans.

(3)

Financial effects resulting from modifications represent charge-offs and specific allowance recorded at modification date.

As of December 31, 2020 and 2019, there were no loans that were modified as a TDR within the previous 12 months that subsequently defaulted.

In accordance with regulatory guidance, if borrowers are less than 30 days past due on their loans, upon implementation of the modification program, or as allowed under the CARES Act if borrowers are less than 30 days past due on their loans as of December 31, 2019, and enter into short-term loan modifications offered as a result of

COVID-19,

their loans generally continue to be considered performing loans and continue to accrue interest during the period of the loan modification. For borrowers who are 30 days or more past due when entering into loan modifications offered as a result of

COVID-19,

we evaluate the loan modifications under our existing troubled debt restructuring framework, and where such a loan modification would result in a concession to a borrower experiencing financial difficulty, the loan will be accounted for as a TDR and will generally not accrue interest. For all borrowers who enroll in these loan modification programs offered as a result of

COVID-19,

the delinquency status of the borrowers is frozen, resulting in a static delinquency metric during the deferral period. Upon exiting the deferral program, the measurement of loan delinquency will resume where it had left off upon entry into the program.