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LOANS

12 Months Ended

Dec. 31, 2020

4. LOANS

The Company’s loan portfolio at the dates indicated is summarized below:


	December 31,		December 31,
	2020		2019
Commercial and industrial	$	309,961	$	169,291
Construction and land		22,696		36,321
Commercial real estate		1,144,560		1,093,142
Residential		164,724		156,764
Consumer		5,218		2,562
Total loans		1,647,159		1,458,080
Net deferred loan fees		(3,847)		(451)
Allowance for loan losses		(17,500)		(7,400)
Net loans	$	1,625,812	$	1,450,229

During the year ended December 31, 2020, the Bank participated in the PPP, a guaranteed unsecured loan program enacted under the CARES Act to provide near-term relief to help small businesses impacted by COVID-19 sustain operations. PPP loans included in commercial and industrial business loans totaled $136.5 million, all of which are fully guaranteed by the SBA. The Bank expects that the great majority of PPP borrowers will seek full or partial forgiveness of their loan obligations in accordance with the CARES Act.

For the years ended December 31, 2020 and 2019, impaired loans on nonaccrual were $8.4 million and $6.8 million, respectively. Interest foregone on nonaccrual loans was approximately $118,000 and $238,000 for the years ended December 31, 2020 and 2019, respectively.

As of December 31, 2020 and 2019, the Company had floating or variable rate loans totaling $936.7 million and $920.9 million, respectively. As of December 31, 2020, a total of $634.1 million have interest rate floors, of which $558.9 million are at their floors. As of December 31, 2019, a total of $578.6 million have interest rate floors, of which $406.1 million are at their floors.

The Company’s total impaired loans, including nonaccrual loans, accruing TDR loans and accreting PCI loans that have experienced post-acquisition declines in cash flows expected to be collected are summarized as follows:


	Commercial		Construction		Commercial
	and industrial		and land		real estate		Residential		Consumer		Total
December 31, 2020
Recorded investment in impaired loans:
With no specific allowance recorded	$	120	$	36	$	5,689	$	2,040	$	—	$	7,885
With a specific allowance recorded		728		—		451		155		—		1,334
Total recorded investment in impaired loans	$	848	$	36	$	6,140	$	2,195	$	—	$	9,219
Specific allowance on impaired loans		420		—		77		24		—		521
December 31, 2019
Recorded investment in impaired loans:
With no specific allowance recorded	$	436	$	2,737	$	2,505	$	1,488	$	1	$	7,167
With a specific allowance recorded		182		—		270		—		12		464
Total recorded investment in impaired loans	$	618	$	2,737	$	2,775	$	1,488	$	13	$	7,631
Specific allowance on impaired loans		95		—		64		—		12		171

Year ended December 31, 2020
Average recorded investment in impaired loans		$ 844		$ 2,095		$ 3,468		$ 1,731		$ 2		$ 8,140
Interest recognized		4		151		46		—		—		201
Year ended December 31, 2019
Average recorded investment in impaired loans		1,893		1,369		2,131		593		3		5,989
Interest recognized		34		—		33		6		—		73

In 2020 and 2019, the Company recorded no charge-offs related to restructured loans. As of December 31, 2020 and 2019, TDR loans had a related allowance of $35,000 and $171,000, respectively. There are no commitments to lend additional amounts to borrowers with outstanding loans that are classified as TDRs at December 31, 2020. As of December 31, 2020 and 2019, $798,000 and $789,000 of TDR loans were performing in accordance with their modified terms, respectively.

A summary of TDRs by type of concession and type of loan as of the years ended:


	Number of	Rate		Term		Rate & term
	loans	modification		modification		modification		Total
Year ended December 31, 2020
Commercial and industrial	2	$	—	$	31	$	—	$	31
Construction and land	—		—		—		—		—
Commercial real estate	2		—		1,180		—		1,180
Residential	1		—		155		—		155
Consumer	—		—		—		—		—
Total	5	$	—	$	1,366	$	—	$	1,366


	Number of	Rate		Term		Rate & term
	loans	modification		modification		modification		Total
Year ended December 31, 2019
Commercial and industrial	3	$	—	$	447	$	—	$	447
Construction and land	1		—		2,737		—		2,737
Commercial real estate	2		—		444		—		444
Residential	—		—		—		—		—
Consumer	—		—		—		—		—
Total	6	$	—	$	3,628	$	—	$	3,628

The following tables present information for loans by class, modified as TDRs, during the years indicated:


		Pre-Modification		Post-Modification
	Number of	Outstanding Recorded		Outstanding Recorded
	loans	Investment		Investment
Year ended December 31, 2020
Commercial and industrial	1	$	24	$	24
Construction and land	—		—		—
Commercial real estate	—		—		—
Residential	1		160		160
Consumer	—		—		—
Total	2	$	184	$	184


		Pre-Modification		Post-Modification
	Number of	Outstanding Recorded		Outstanding Recorded
	loans	Investment		Investment
Year ended December 31, 2019
Commercial and industrial	3	$	507	$	507
Construction and land	1		2,737		2,737
Commercial real estate	2		444		444
Residential	—		—		—
Consumer	—		—		—
Total	6	$	3,688	$	3,688

The following tables represent the internally assigned risk grade by class of loans at the years indicated:


			Special
	Pass		Mention		Substandard		Doubtful		Total
December 31, 2020
Commercial and industrial	$	295,245	$	10,466	$	4,250	$	—	$	309,961
Construction and land		22,346		313		37		—		22,696
Commercial real estate		1,112,085		26,329		6,146		—		1,144,560
Residential		161,161		1,333		2,230		—		164,724
Consumer		5,216		—		2		—		5,218
Total	$	1,596,053	$	38,441	$	12,665	$	—	$	1,647,159


			Special
	Pass		mention		Substandard		Doubtful		Total
December 31, 2019
Commercial and industrial	$	166,613	$	1,166	$	1,512	$	—	$	169,291
Construction and land		32,879		93		3,349		—		36,321
Commercial real estate		1,071,771		16,021		5,350		—		1,093,142
Residential		153,484		1,215		2,065		—		156,764
Consumer		2,541		—		21		—		2,562
Total	$	1,427,288	$	18,495	$	12,297	$	—	$	1,458,080

All loans modified due to COVID-19 are separately monitored and any request for continuation of relief beyond the initial modification will be reassessed at that time to determine if a further modification should be granted and if a downgrade in risk rating is appropriate.

The following table provides an aging of the Company’s loans receivable as of the years indicated:


															Recorded
					90 Days										investment >
	30–59 Days		60–89 Days		or more		Total						Total loans		90 days and
	past due		past due		past due		past due		Current		PCI loans		receivable		accruing
December 31, 2020
Commercial and industrial	$	265	$	128	$	707	$	1,100	$	308,239	$	622	$	309,961	$	—
Construction and land		65		—		269		334		22,311		51		22,696		233
Commercial real estate		254		406		1,518		2,178		1,129,966		12,416		1,144,560		—
Residential		80		155		1,412		1,647		160,556		2,521		164,724		—
Consumer		1		—		—		1		5,217		—		5,218		—
Total	$	665	$	689	$	3,906	$	5,260	$	1,626,289	$	15,610	$	1,647,159	$	233


															Recorded
					90 Days										investment >
	30–59 Days		60–89 Days		or more		Total						Total loans		90 days and
	past due		past due		past due		past due		Current		PCI loans		receivable		accruing
December 31, 2019
Commercial and industrial	$	923	$	1,480	$	207	$	2,610	$	166,137	$	544	$	169,291	$	26
Construction and land		325		88		2,961		3,374		32,724		223		36,321		224
Commercial real estate		4,668		4,698		1,460		10,826		1,068,211		14,105		1,093,142		—
Residential		531		122		1,392		2,045		152,261		2,458		156,764		—
Consumer		14		—		13		27		2,533		2		2,562		—
Total	$	6,461	$	6,388	$	6,033	$	18,882	$	1,421,866	$	17,332	$	1,458,080	$	250

PCI Loans

The unpaid principal balance and carrying value of the Company’s PCI loans at the years indicated are as follows:


	December 31, 2020				December 31, 2019
	Unpaid				Unpaid
	principal		Carrying		principal		Carrying
	balance		value		balance		value
Commercial and industrial	$	1,000	$	622	$	1,225	$	544
Construction and land		100		51		338		223
Commercial real estate		14,096		12,416		15,930		14,105
Residential		3,127		2,521		3,238		2,458
Consumer		—		—		8		2
Total	$	18,323	$	15,610	$	20,739	$	17,332

In connection with the Company's acquisitions, the contractual amount and timing of undiscounted principal and interest payments and the estimated amount and timing of undiscounted expected principal and interest payments were used to estimate the fair value of PCI loans at the acquisition date. The difference between these two amounts represented the nonaccretable difference. On the acquisition date, the amount by which the undiscounted expected cash flows exceed the estimated fair value of the acquired loans is the “accretable yield”. The accretable yield is then measured at each financial reporting date and represented the difference between the remaining undiscounted expected cash flows and the current carrying value of the loans. For PCI loans the accretable yield is accreted into interest income over the life of the estimated remaining cash flows. At each financial reporting date, the carrying value of each PCI loan is compared to an updated estimate of expected principal payment or recovery on each loan. To the extent that the loan carrying amount exceeds the updated expected principal payment or recovery, a provision of loan loss would be recorded as a charge to income and an allowance for loan loss established.

At December 31, 2020, the accretable and nonaccretable differences were approximately $383,000 and $2.3 million, respectively. At December 31, 2019, the accretable and nonaccretable differences were approximately $554,000 and $2.9 million, respectively. The Company increased the allowance for loan losses for PCI loans by $107,000 during the year ended December 31, 2020, compared to no increase during the year ended December 31, 2019.

The following table reflects the changes in the accretable yield of PCI loans for the years indicated:



	December 31,		December 31,
	2020		2019
Balance at beginning of period	$	554	$	256
Additions		291		492
Removals		(51)		632
Transfers from nonaccretable yield		—		94
Accretion		(411)		(920)
Balance at end of period	$	383	$	554