XML 25 R13.htm IDEA: XBRL DOCUMENT

Loans

12 Months Ended

Dec. 31, 2020

NOTE 5 — LOANS

Loans consisted of the following at December 31, 2020 and 2019:



(In thousands)	2020		2019
Commercial real estate	$	438,949	$	418,356
Commercial (1)		565,976		451,791
Residential real estate		32,785		45,695
Construction and land development		28,927		46,763
Consumer		5,547		12,737
Mortgage warehouse		265,379		—
		1,337,563		975,342
Allowance for loan losses		(18,518)		(13,844)
Deferred loan fees, net (2)		(4,235)		(2,212)
Net loans	$	1,314,810	$	959,286

(1) Includes $41.8 million in PPP loans at December 31, 2020. There were no PPP loans at December 31, 2019.

(2) Includes $993,000 in deferred fees related to PPP loans at December 31, 2020. There were no deferred fees related to PPP loans at December 31, 2019.

The following tables set forth information regarding the allowance for loans and gross impaired loans by portfolio segment as of and for the years ended December 31, 2020 and 2019:



							Construction
	Commercial				Residential		and Land				Mortgage
(In thousands)	Real Estate		Commercial		Real Estate		Development		Consumer		Warehouse		Unallocated		Total
December 31, 2020
Allowance for loan losses:
Beginning balance	$	6,104	$	6,086	$	254	$	749	$	650	$	—	$	1	$	13,844
Charge-offs		(117)		(176)		—		(24)		(772)		—		—		(1,089)
Recoveries		—		7		4		—		155		—		—		166
Provision (credit)		108		4,626		(74)		(278)		553		663		(1)		5,597
Ending balance	$	6,095	$	10,543	$	184	$	447	$	586	$	663	$	—	$	18,518
Ending balance:
Individually evaluated
for impairment	$	—	$	2,024	$	—	$	—	$	—	$	—	$	—	$	2,024
Ending balance:
Collectively evaluated
for impairment		6,095		8,519		184		447		586		663		—		16,494
Total allowance for loan
losses ending balance	$	6,095	$	10,543	$	184	$	447	$	586	$	663	$	—	$	18,518
Loans (1):
Ending balance:
Individually evaluated
for impairment	$	21,039	$	4,458	$	162	$	—	$	—		—			$	25,659
Ending balance:
Collectively evaluated
for impairment		417,910		561,518		32,623		28,927		5,547		265,379				1,311,904
Total loans ending balance	$	438,949	$	565,976	$	32,785	$	28,927	$	5,547	$	265,379			$	1,337,563

(1) Balances represent gross loans. The difference between gross loans versus recorded investment, which would consist of unpaid principal balance, net of charge-offs, interest payments received applied to principal and unamortized deferred loan origination fees and costs, is not material.



							Construction
	Commercial				Residential		and Land				Mortgage
(In thousands)	Real Estate		Commercial		Real Estate		Development		Consumer		Warehouse		Unallocated		Total
December 31, 2019
Allowance for loan losses:
Beginning balance	$	4,152	$	5,742	$	251	$	738	$	710	$	—	$	87	$	11,680
Charge-offs		—		(1,950)		—		—		(1,355)		—		—		(3,305)
Recoveries		—		35		7		—		101		—		—		143
Provision (credit)		1,952		2,259		(4)		11		1,194		—		(86)		5,326
Ending balance	$	6,104	$	6,086	$	254	$	749	$	650	$	—	$	1	$	13,844
Ending balance:
Individually evaluated
for impairment	$	1,508	$	174	$	—	$	—	$	—	$	—	$	—	$	1,682
Ending balance:
Collectively evaluated
for impairment		4,596		5,912		254		749		650		—		1		12,162
Total allowance for loan
losses ending balance	$	6,104	$	6,086	$	254	$	749	$	650	$	—	$	1	$	13,844
Loans (1):
Ending balance:
Individually evaluated
for impairment	$	20,990	$	3,326	$	182	$	165	$	—	$	—			$	24,663
Ending balance:
Collectively evaluated
for impairment		397,366		448,465		45,513		46,598		12,737		—				950,679
Total loans ending balance	$	418,356	$	451,791	$	45,695	$	46,763	$	12,737	$	—			$	975,342

At December 31, 2020 and 2019, loans with an aggregate principal balance of $360.5 million and $450.6 million, respectively, were pledged to secure possible borrowings from the Federal Reserve Bank.

The following tables set forth information regarding non-accrual loans and loan delinquencies by portfolio segment at December 31, 2020 and 2019:



													90 Days
					90 Days		Total						or More
	30 - 59		60 - 89		or More		Past		Total		Total		Past Due		Nonaccrual
(In thousands)	Days		Days		Past Due		Due		Current		Loans		and Accruing		Loans
December 31, 2020
Commercial real estate	$	—	$	—	$	—	$	—	$	438,949	$	438,949	$	—	$	—
Commercial		4,358		—		291		4,649		561,327		565,976		—		4,198
Residential real estate		255		346		1,030		1,631		31,154		32,785		—		1,156
Construction and
land development		—		—		—		—		28,927		28,927		—		—
Consumer		61		21		64		146		5,401		5,547		—		65
Mortgage warehouse		—		—		—		—		265,379		265,379		—		—
Total	$	4,674	$	367	$	1,385	$	6,426	$	1,331,137	$	1,337,563	$	—	$	5,419
December 31, 2019
Commercial real estate	$	473	$	18,256	$	1,368	$	20,097	$	398,259	$	418,356	$	—	$	1,701
Commercial		529		85		484		1,098		450,693		451,791		—		2,955
Residential real estate		715		154		832		1,701		43,994		45,695		—		969
Construction and
land development		—		—		165		165		46,598		46,763		—		165
Consumer		111		58		38		207		12,530		12,737		—		37
Mortgage warehouse		—		—		—		—		—		—		—		—
Total	$	1,828	$	18,553	$	2,887	$	23,268	$	952,074	$	975,342	$	—	$	5,827

Information about the Company’s impaired loans by portfolio segment was as follows at December 31, 2020 and 2019:


			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
(In thousands)	Investment		Balance		Allowance		Investment		Recognized
December 31, 2020
With no related allowance recorded:
Commercial real estate	$	21,039	$	21,312	$	—	$	21,356	$	350
Commercial		434		441		—		476		19
Residential real estate		162		162		—		164		8
Construction and land development		—		—		—		—		—
Consumer		—		—		—		—		—
Mortgage warehouse		—		—		—		—		—
Total impaired with no related allowance	$	21,635	$	21,915	$	—	$	21,996	$	377
With an allowance recorded:
Commercial real estate	$	—	$	—	$	—	$	—	$	—
Commercial		4,024		4,605		2,024		4,177		1
Residential real estate		—		—		—		—		—
Construction and land development		—		—		—		—		—
Consumer		—		—		—		—		—
Mortgage warehouse		—		—		—		—		—
Total impaired with an allowance recorded	$	4,024	$	4,605	$	2,024	$	4,177	$	1
Total
Commercial real estate	$	21,039	$	21,312	$	—	$	21,356	$	350
Commercial		4,458		5,046		2,024		4,653		20
Residential real estate		162		162		—		164		8
Construction and land development		—		—		—		—		—
Consumer		—		—		—		—		—
Mortgage warehouse		—		—		—		—		—
Total impaired loans	$	25,659	$	26,520	$	2,024	$	26,173	$	378



			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
(In thousands)	Investment		Balance		Allowance		Investment		Recognized
December 31, 2019
With no related allowance recorded:
Commercial real estate	$	2,070	$	2,082	$	—	$	2,144	$	59
Commercial		1,348		1,745		—		2,323		26
Residential real estate		182		182		—		303		16
Construction and land development		165		165		—		273		—
Consumer		—		—		—		—		—
Total impaired with no related allowance	$	3,765	$	4,174	$	—	$	5,043	$	101
With an allowance recorded:
Commercial real estate	$	18,920	$	18,921	$	1,508	$	18,921	$	—
Commercial		1,978		2,085		174		2,972		—
Residential real estate		—		—		—		—		—
Construction and land development		—		—		—		—		—
Consumer		—		—		—		—		—
Total impaired with an allowance recorded	$	20,898	$	21,006	$	1,682	$	21,893	$	—
Total
Commercial real estate	$	20,990	$	21,003	$	1,508	$	21,065	$	59
Commercial		3,326		3,830		174		5,295		26
Residential real estate		182		182		—		303		16
Construction and land development		165		165		—		273		—
Consumer		—		—		—		—		—
Total impaired loans	$	24,663	$	25,180	$	1,682	$	26,936	$	101

The following summarizes TDRs entered into during the years ended December 31, 2020 and 2019:



	Year Ended December 31,
	2020					2019
(Dollars in thousands)	Number of Contracts	Pre- ‎Modification ‎Outstanding ‎Recorded ‎Investment		Post-Modification ‎Outstanding ‎Recorded ‎Investment		Number of Contracts	Pre- ‎Modification ‎Outstanding ‎Recorded ‎Investment		Post-Modification ‎Outstanding ‎Recorded ‎Investment
Troubled debt restructurings:
Commercial real estate	9	$	18,811	$	20,311	—	$	—	$	—
Commercial	1		81		81	2		2,640		2,640
	10	$	18,892	$	20,392	2	$	2,640	$	2,640

In 2020, the Bank approved 10 TDRs. Of the 10 TDRs, seven were for one commercial real estate loan relationship totaling $20.1 million. The Bank analyzed the relationship and modified the relationship as follows:

$16.5 million was placed on interest-only payments for three years at a reduced rate;

$2.1 million was restructured to amortize and pay out over a 10-year term at a reduced rate; and

$1.5 million was advanced for necessary capital expenditures. The advance was placed on interest-only payments for three years at a reduced rate.

Upon completion of the restructuring in the first quarter, the commercial relationship was placed on non-accrual status and after demonstrating the ability to pay the loan under the restructured terms, it was taken off non-accrual status in the fourth quarter of 2020.

The Bank approved two TDRs for another commercial real estate relationship totaling $165,000. These loans have a reduced rate for a period of two years. The Bank also approved one TDR for a commercial loan totaling $81,000. This commercial loan was placed on an extended 6-month interest-only period with a new term and re-amortization to follow. As of December 31, 2020, these loans were paying in accordance with the restructured terms.

In 2019, the Bank approved two troubled debt restructures totaling $2.6 million. Both commercial loans were placed on an extended 12-month interest-only period with re-amortization to follow. As of December 31, 2020, one of the two loans was paid off. The remaining loan is paying as agreed upon in the modified terms.

As of December 31, 2020, an impairment analysis was performed and specific reserves of $157,000 were allocated to the relationships approved as TDRs in 2019 and 2020.

The total recorded investment in TDRs was $23.3 million and $4.2 million at December 31, 2020 and 2019, respectively. At December 31, 2020, there were no commitments to lend additional funds to borrowers whose loans were modified in troubled debt restructurings.

Additionally, the Company is working with borrowers impacted by COVID-19 and providing modifications to allow for deferral of interest or principal and interest payments on an as-needed and case-by-case basis. These modifications are excluded from troubled debt restructuring classification under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators. As previously noted, loan modifications and payment deferrals as a result of COVID-19 that meet the criteria established under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators are excluded from evaluation of TDR classification and will continue to be reported as current during the payment deferral period. The Company’s policy is to continue to accrue interest during the deferral period. Loans not meeting the CARES Act or regulatory guidance are evaluated for TDR and non-accrual treatment under the Company’s existing policies and procedures. Loan modifications made pursuant to the CARES Act or interagency guidance that were in payment deferral at December 31, 2020 totaled approximately $44.0 million. There were eight commercial real estate loans that amounted to $12.4 million, 28 commercial and industrial loans that amounted to $22.4 million, and one residential mortgage loan that amounted to $177,000. There were no consumer loans that were in payment deferral at December 31, 2020 based on modifications made pursuant to the CARES Act or interagency guidance.

Credit Quality Information

The Company utilizes a seven grade internal loan rating system for commercial real estate, construction and land development, commercial loans and mortgage warehouse as follows:

Loans rated 1-3: Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 4: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 5: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

Loans rated 6: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 7: Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted.

On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate, construction and land development, and commercial loans.

On an annual basis, or more often if needed, the Company completes a credit recertification on all mortgage warehouse originators.

For residential real estate loans, the Company initially assesses credit quality based upon the borrower’s ability to pay and rates such loans as pass. Ongoing monitoring is based upon the borrower’s payment activity.

Consumer loans are not formally rated.

The following tables present the Company’s loans by risk rating and portfolio segment at December 31, 2020 and 2019:


							Construction
	Commercial				Residential		and Land				Mortgage
(In thousands)	Real Estate		Commercial		Real Estate		Development		Consumer		Warehouse		Total
December 31, 2020
Grade:
Pass	$	401,541	$	538,449	$	—	$	28,927	$	—	$	265,379	$	1,234,296
Special mention		17,702		13,625		—		—		—		—		31,327
Substandard		19,706		13,902		1,560		—		—		—		35,168
Not formally rated		—		—		31,225		—		5,547		—		36,772
Total	$	438,949	$	565,976	$	32,785	$	28,927	$	5,547	$	265,379	$	1,337,563
December 31, 2019
Grade:
Pass	$	396,217	$	433,076	$	—	$	46,598	$	—	$	—	$	875,891
Special mention		1,936		14,044		—		—		—		—		15,980
Substandard		20,203		4,671		1,379		165		—		—		26,418
Not formally rated		—		—		44,316		—		12,737		—		57,053
Total	$	418,356	$	451,791	$	45,695	$	46,763	$	12,737	$	—	$	975,342

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of mortgage and other loans serviced for others were $14.0 million and $16.0 million at December 31, 2020 and 2019, respectively.

Certain directors and executive officers of the Company and companies in which they have significant ownership interests were customers of the Bank during 2020. The following is a summary of the loans to such persons and their companies at December 31, 2020 and 2019:



(In thousands)
Beginning balance, January 1, 2019	$	11,957
Advances		5,303
Principal payments		(13,555)
Ending balance, December 31, 2019	$	3,705
Beginning balance, January 1, 2020	$	3,705
Advances		12,329
Principal payments		(656)
Ending balance, December 31, 2020	$	15,378