Loans Held-For-Investment

The following table presents, by recorded investment, the composition of the Company’s loans held-for-investment (net of deferred fees and costs) as of the dates indicated:



	December 31,
($ in thousands)	2018			2017
Real estate loans:
Commercial property	$	709,409		$	662,031
Residential property	233,816			168,560
SBA property	120,939			131,740
Construction	27,323			23,117
Total real estate loans	1,091,487			985,448
Commercial and industrial loans:
Commercial term	102,133			77,402
Commercial lines of credit	80,473			60,822
SBA commercial term	27,147			30,376
Trade finance	11,521			1,929
Total commercial and industrial loans	221,274			170,529
Other consumer loans	25,921			34,022
Loans held-for-investment	1,338,682			1,189,999
Allowance for loan losses	(13,167		)	(12,224		)
Net loans held-for-investment	$	1,325,515		$	1,177,775

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 December 31, 2018 and 2017, the Company had $2.4 million and none, respectively, of such loans outstanding.

Allowance for Loan Losses

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 periods indicated:



($ in thousands)	Real Estate			Commercial and Industrial			Consumer			Total
Balance at January 1, 2016	$	4,974		$	4,152		$	219		$	9,345
Charge-offs	—			(729		)	(38		)	(767		)
Recoveries on loans previously charged off	1			406			52			459
Provision (reversal) for loan losses	2,522			(172		)	(67		)	2,283
Balance at December 31, 2016	7,497			3,657			166			11,320
Charge-offs	(168		)	(1,320		)	(88		)	(1,576		)
Recoveries on loans previously charged off	1			580			72			653
Provision for loan losses	1,177			631			19			1,827
Balance at December 31, 2017	8,507			3,548			169			12,224
Charge-offs	(381		)	(272		)	(356		)	(1,009		)
Recoveries on loans previously charged off	213			356			152			721
Provision for loan losses	765			245			221			1,231
Balance at December 31, 2018	$	9,104		$	3,877		$	186		$	13,167

The following tables present the information on allowance for loan losses and recorded investments by portfolio segment and impairment methodology as of the dates indicated:



($ in thousands)	Real Estate		Commercial and Industrial		Consumer		Total
December 31, 2018
Allowance for loan losses:
Individually evaluated for impairment	$	1	$	93	$	—	$	94
Collectively evaluated for impairment	9,103		3,784		186		13,073
Total	$	9,104	$	3,877	$	186	$	13,167
Loans receivable:
Individually evaluated for impairment	$	1,156	$	320	$	—	$	1,476
Collectively evaluated for impairment	1,090,331		220,954		25,921		1,337,206
Total	$	1,091,487	$	221,274	$	25,921	$	1,338,682
December 31, 2017
Allowance for loan losses:
Individually evaluated for impairment	$	—	$	208	$	—	$	208
Collectively evaluated for impairment	8,507		3,340		169		12,016
Total	$	8,507	$	3,548	$	169	$	12,224
Loans receivable:
Individually evaluated for impairment	$	3,204	$	614	$	—	$	3,818
Collectively evaluated for impairment	982,244		169,915		34,022		1,186,181
Total	$	985,448	$	170,529	$	34,022	$	1,189,999

Credit Quality Indicators

The following table presents the risk categories for the recoded investment in loans by portfolio segment as of dates indicated:



($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2018
Real estate loans:
Commercial property	$	708,742	$	—	$	667	$	—	$	709,409
Residential property	233,514		—		302		—		233,816
SBA property	115,543		74		5,322		—		120,939
Construction	24,325		2,998		—		—		27,323
Commercial and industrial loans:
Commercial term	102,106		—		27		—		102,133
Commercial lines of credit	79,874		599		—		—		80,473
SBA commercial term	26,616		—		531		—		27,147
Trade finance	11,521		—		—		—		11,521
Other consumer loans	25,905		—		16		—		25,921
Total	$	1,328,146	$	3,671	$	6,865	$	—	$	1,338,682
December 31, 2017
Real estate loans:
Commercial property	$	656,711	$	4,812	$	508	$	—	$	662,031
Residential property	167,830		—		730		—		168,560
SBA property	126,069		2,487		3,184		—		131,740
Construction	23,117		—		—		—		23,117
Commercial and industrial loans:
Commercial term	77,227		—		175		—		77,402
Commercial lines of credit	60,812		—		10		—		60,822
SBA commercial term	30,003		4		369		—		30,376
Trade finance	1,929		—		—		—		1,929
Other consumer loans	33,997		—		25		—		34,022
Total	$	1,177,695	$	7,303	$	5,001	$	—	$	1,189,999

Past Due and Nonaccrual Loans

The following table presents the aging of past due recorded investment in accruing loans and nonaccrual loans by portfolio segment as of dates indicated:



	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
December 31, 2018
Real estate loans:
Residential property	$	95	$	—	$	—	$	302	$	397
SBA property	183		—		—		540		723
Commercial and industrial loans:
SBA commercial term	—		—		—		203		203
Other consumer loans	90		9		—		16		115
Total	$	368	$	9	$	—	$	1,061	$	1,438
December 31, 2017
Real estate loans:
Commercial property	$	—	$	—	$	—	$	318	$	318
Residential property	949		96		—		730		1,775
SBA property	—		—		—		1,810		1,810
Commercial and industrial loans:
Commercial term	—		—		—		4		4
Commercial lines of credit	—		—		—		10		10
SBA commercial term	2		—		—		338		340
Other consumer loans	262		32		—		24		318
Total	$	1,213	$	128	$	—	$	3,234	$	4,575

Nonaccrual loans included loans guaranteed by the U.S. government agency of none and $831 thousand at December 31, 2018 and 2017, respectively.

Impaired Loans

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
December 31, 2018
Real estate loans:
Residential property	$	302	$	303	$	—	$	—	$	—
SBA property	802		854		52		50		1
Commercial and industrial loans:
Commercial term	68		69		—		—		—
SBA commercial term	73		99		179		189		93
Total	$	1,245	$	1,325	$	231	$	239	$	94
December 31, 2017
Real estate loans:
Commercial property	$	316	$	494	$	—	$	—	$	—
Residential property	730		730		—		—		—
SBA property	2,158		3,639		—		—		—
Commercial and industrial loans:
Commercial term	199		216		—		—		—
Commercial lines of credit	10		20		—		—		—
SBA commercial term	126		288		279		354		208
Total	$	3,539	$	5,387	$	279	$	354	$	208

The following table presents information on the recorded investment in impaired loans by portfolio segment for the periods indicated:



	Year Ended December 31,
	2018				2017				2016
($ in thousands)	Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income
Real estate loans:
Commercial property	$	199	$	—	$	396	$	5	$	460	$	24
Residential property	281		—		—		—		—		—
SBA property	1,245		22		1,982		35		2,391		88
Commercial and industrial loans:
Commercial term	112		8		512		30		944		39
Commercial lines of credit	5		—		431		39		477		—
SBA commercial term	382		8		595		25		567		10
Total	$	2,224	$	38	$	3,916	$	134	$	4,839	$	161

The following presents a summary of interest foregone on impaired loans for the periods indicated:



	Year Ended December 31,
($ in thousands)	2018			2017			2016
Interest income that would have been recognized had impaired loans performed in accordance with their original terms	$	191		$	294		$	243
Less: interest income recognized on impaired loans on a cash basis	(38		)	(128		)	(120		)
Interest income foregone on impaired loans	$	153		$	166		$	123

Troubled Debt Restructurings

A TDR is a restructuring in which the Company, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. The restructuring of a loan includes, but is not limited to: (i) the transfer from the borrower to the Company of real estate, receivables from third parties, other assets, or an equity interest in full or partial satisfaction of the loan, (ii) a modification of the loan terms, such as a reduction of the stated interest rate, principal, or accrued interest or an extension of the maturity date at a stated interest rate lower than the current market rate for new debt with similar risk, or (iii) a combination of the above. A loan extended or renewed at a stated interest rate equal to the current interest rate for new debt with similar risk is not to be reported as a restructured loan.

The following table presents the composition of loans that were modified as TDRs by portfolio segment as of the dates indicated:



	December 31,
	2018						2017
($ in thousands)	Accruing		Nonaccrual		Total		Accruing		Nonaccrual		Total
Real estate loans:
Commercial property	$	—	$	—	$	—	$	—	$	318	$	318
SBA property	315		—		315		334		1,039		1,373
Commercial and industrial loans:
Commercial term	68		—		68		195		4		199
Commercial lines of credit	—		—		—		—		10		10
SBA commercial term	49		131		180		63		304		367
Total	$	432	$	131	$	563	$	592	$	1,675	$	2,267

The Company had no commitments to lend to customers with outstanding loans that were classified as TDRs as of December 31, 2018 and 2017.

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 $86 thousand and $208 thousand of allowance for loan losses as of December 31, 2018 and 2017, respectively.

The Company had no new loans that were modified as TDRs for the year ended December 31, 2018. The following table presents new loans that were modified as TDRs by portfolio segment for the years ended December 31, 2017 and 2016:



	Year Ended December 31,
	2017					2016
($ in thousands)	Number of Loans	Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Loans	Pre-Modification Recorded Investment		Post-Modification Recorded Investment
Real estate loans:
Commercial property	1	$	312	$	301	—	$	—	$	—
Commercial and industrial loans:
Commercial lines of credit	—	—		—		1	120		115
SBA commercial term	3	274		241		2	28		25
Total	4	$	586	$	542	3	$	148	$	140

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 periods indicated:



	Year Ended December 31,
	2018			2017			2016
($ in thousands)	Number of Loans	Recorded Investment at Date of Default		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	23
Total	—	$	—	—	$	—	1	$	23

Purchases, Sales, and Transfers

During the year ended December 31, 2018, the Company transferred $2.1 million of commercial property loans and $6.0 million of residential property loans to loans held-for-sale. The Company did not transfer any loans held-for-investment to loans held-for-sale during the year ended December 31, 2017. During the year ended December 31, 2016, the Company transferred $22.1 million of residential property loans to loans held-for-sale. The Company had no sales or purchases of loans held-for-investment during the years ended December 31, 2018, 2017 and 2016.

Loans Held-For-Sale

The following table presents a composition of loans held-for-sale as of the dates indicated:



	December 31,
($ in thousands)	2018		2017
Real estate loans:
Residential property	$	—	$	270
SBA property	5,481		3,857
Commercial and industrial loans:
SBA commercial term	300		1,170
Total	$	5,781	$	5,297