Business loans secured by real estate are loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment. This loan portfolio includes CRE owner-occupied, franchise loans secured by real estate, and SBA loans secured by real estate, which are collateralized by real property other than hotel/motel real property.


	September 30,		December 31,
	2020		2019
	(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner-occupied	$	2,707,930	$	2,070,141
Multifamily	5,142,069		1,575,726
Construction and land	337,872		438,786
SBA secured by real estate	57,610		68,431
Total investor loans secured by real estate	8,245,481		4,153,084
Business loans secured by real estate
CRE owner-occupied	2,119,788		1,846,554
Franchise real estate secured	359,329		353,240
SBA secured by real estate	84,126		88,381
Total business loans secured by real estate	2,563,243		2,288,175
Commercial loans
Commercial and industrial	1,820,995		1,393,270
Franchise non-real estate secured	515,980		564,357
SBA non-real estate secured	16,748		17,426

Total commercial loans	2,353,723		1,975,053
Retail loans
Single family residential	243,359		255,024
Consumer	45,034		50,975
Total retail loans	288,393		305,999
Gross loans held for investment (1)	13,450,840		8,722,311
Allowance for credit losses for loans held for investment (2)	(282,503)		(35,698)
Loans held for investment, net	$	13,168,337	$	8,686,613

Loans held for sale, at lower of cost or fair value	$	1,032	$	1,672

(2) The allowance for credit losses as of December 31, 2019 was the allowance for loan and lease losses (“ALLL”) accounted for under ASC 450 and ASC 310, which is reflective of probable incurred losses as of the balance sheet date. The allowance for credit losses at September 30, 2020 is accounted for under ASC 326, which is reflective of estimated expected lifetime credit losses.

The Company participated in the SBA PPP program under the CARES Act during the second quarter of 2020 and originated SBA PPP loans. At June 30, 2020, the Company’s SBA PPP loan balance was $1.13 billion. In July 2020, the Company concluded the sale of its entire SBA PPP loan portfolio with an aggregate amortized cost of $1.13 billion to a seasoned and experienced non-bank lender and servicer of SBA loans, resulting in improved balance sheet liquidity and a gain on sale of approximately of $18.9 million, net of net deferred origination fees and net purchase discounts.

The Company generally retains the servicing rights of the guaranteed portion of SBA loans sold, for which the Company records a servicing asset initially at fair value within its other assets category. Servicing assets are subsequently measured using the amortization method and amortized to noninterest income. Servicing assets are evaluated for impairment based on the fair value of the assets as compared to carrying amount. At September 30, 2020 and December 31, 2019, the servicing asset totaled $5.9 million and $7.7 million, respectively, and was included in other assets in the Company’s consolidated statement of financial condition. Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount. Impairment is recognized through a valuation allowance, to the extent the fair value is less than the carrying amount. At September 30, 2020 and December 31, 2019, the Company determined that no valuation allowance was necessary.

Opus entered into securitization sales on December 23, 2016 with the Federal Home Loan Mortgage Corporation (“Freddie Mac”). The transaction involved the sale of $509 million in originated multifamily loans through a Freddie Mac-sponsored transaction. One class of Freddie Mac guaranteed structured pass-through certificates was issued and purchased entirely by Opus. In connection with the Opus acquisition, the Company's continuing involvement includes sub-servicing responsibilities, general representations and warranties, and reimbursement obligations. Servicing responsibilities on loan sales generally include obligations to collect and remit payments of principal and interest, provide foreclosure services, manage payments of taxes and insurance premiums, and otherwise administer the underlying loans. In connection with the securitization transaction, Freddie Mac was designated as the master servicer and appointed the Company to perform sub-servicing responsibilities, which generally include the servicing responsibilities described above with the exception of the servicing of foreclosed or defaulted loans. The overall management, servicing, and resolution of defaulted loans and foreclosed loans are separately designated to the special servicer, a third-party institution that is independent of the master servicer and the Company. The master servicer has the right to terminate the Company in its role as sub-servicer and direct such responsibilities accordingly.

General representations and warranties associated with loan sales and securitization sales require the Company to uphold various assertions that pertain to the underlying loans at the time of the transaction, including, but not limited to, compliance with relevant laws and regulations, absence of fraud, enforcement of liens, no environmental damages, and maintenance of relevant environmental insurance. Such representations and warranties are limited to those that do not meet the quality represented at the transaction date and do not pertain to a decline in value or future payment defaults. In circumstances where the Company breaches its representations and warranties, the Company would generally be required to cure such instances through a repurchase or substitution of the subject

To the extent the ultimate resolution of defaulted loans results in contractual principal and interest payments that are deficient, the Company is obligated to reimburse Freddie Mac for such amounts, not to exceed 10% of the original principal amount of the loans comprising the securitization pool at the closing date of December 23, 2016. The liability recorded for Company’s exposure to the reimbursement agreement with Freddie Mac was $540,000 as of September 30, 2020.

Loans sold and serviced for others are not included in the accompanying consolidated statements of financial condition. The unpaid principal balance of loans and participations serviced for others were $727.2 million at September 30, 2020 and $633.8 million at December 31, 2019, including loans transferred through securitization with Freddie Mac of $111.1 million and SBA participations serviced for others of $437.4 million at September 30, 2020, and SBA participations serviced for others of $475.3 million at December 31, 2019, respectively.

As of September 30, 2020, the Company’s loan portfolio was primarily collateralized by various forms of real estate and business assets located predominately in California. The Company’s loan portfolio contains concentrations of credit in multifamily real estate, commercial non-owner-occupied real estate, commercial owner-occupied real estate loans, and commercial and industrial business loans. The Bank maintains policies approved by the Bank’s Board of Directors (the “Bank Board”) that address these concentrations and diversifies its loan portfolio through loan originations, purchases, and sales to meet approved concentration levels. While management believes that the collateral presently securing these loans is adequate, there can be no assurances that a significant deterioration in the California real estate market or economy would not expose the Company to significantly greater credit risk.

Under applicable laws and regulations, the Bank may not make secured loans to one borrower in excess of 25% of the Bank’s unimpaired capital plus surplus and likewise in excess of 15% of the Bank’s unimpaired capital plus surplus for unsecured loans. These loans-to-one borrower limitations result in a dollar limitation of $800.1 million for secured loans and $480.1 million for unsecured loans at September 30, 2020. In order to manage concentration risk, the Bank maintains a house lending limit well below these statutory maximums. At September 30, 2020, the Bank’s largest aggregate outstanding balance of loans to one borrower was $126.4 million comprised of $101.5 million and $24.9 million of secured CRE non-owner-occupied and unsecured C&I credit, respectively.

The Company’s credit quality and credit risk are controlled in two distinct management processes. The first is the loan origination process, wherein the Bank underwrites credit quality and chooses which risks it is willing to accept. The Company maintains a comprehensive credit policy, which sets forth maximum tolerances for key elements of loan risk. The policy identifies and sets forth specific guidelines for analyzing each of the loan products the Company offers from both an individual and portfolio-wide basis. The credit policy is reviewed annually by the Bank Board. The Bank’s underwriters ensure key risk factors are analyzed with nearly all underwriting including a comprehensive global cash flow analysis of the prospective borrowers.

The second is in the ongoing measurement and oversight of the loan portfolio, where existing credit risk is measured and monitored, and where performance issues are dealt with in a timely and comprehensive fashion. Credit risk is managed within the loan portfolio by the Company’s portfolio managers based on a comprehensive credit and portfolio review policy. This policy requires a program of financial data collection and analysis, comprehensive loan reviews, property and/or business inspections, and monitoring of portfolio concentrations and trends. The portfolio managers also monitor borrowing bases under asset-based lines of credit, loan covenants, and other conditions associated with the Company’s business loans as a means to help identify potential credit risk. Individual loans, excluding the homogeneous loan portfolio, are reviewed at least every two years and in most cases, more often, including the assignment or confirmation of a risk grade.

Risk grades are based on a six-grade Pass scale, along with Special Mention, Substandard, Doubtful, and Loss classifications, as such classifications are defined by the regulatory agencies. The assignment of risk grades allows the Company to, among other things, identify the risk associated with each credit in the portfolio and to provide a basis for estimating credit losses inherent in the portfolio. Risk grades are reviewed regularly with the Company’s Credit and Portfolio Review Committee, and the portfolio management and risk grading process is

•Substandard assets are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. These assets are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. OREO acquired from foreclosure is also classified as Substandard.

The Bank’s portfolio managers also manage loan performance risks, collections, workouts, bankruptcies, and foreclosures. A special department, whose portfolio managers have professional expertise in these areas, typically handles or advises on these types of matters. Loan performance risks are mitigated by our portfolio managers acting promptly and assertively to address problem credits when they are identified. Collection efforts commence immediately upon non-payment, and the portfolio managers seek to promptly determine the appropriate steps to minimize the Company’s risk of loss. When foreclosure will maximize the Company’s recovery for a non-performing loan, the portfolio managers will take appropriate action to initiate the foreclosure process.

When a loan is graded as special mention, substandard, or doubtful, the Company obtains an updated valuation of the underlying collateral. If, through the Company’s credit risk management process, it is determined the ultimate repayment of a loan will come from the foreclosure upon and ultimate sale of the underlying collateral, the loan is deemed collateral dependent and evaluated individually to determine an appropriate ACL for the loan. The ACL for such loans is measured as the amount by which the fair value of the underlying collateral, less estimated costs to sell, is less than the amortized cost of the loan. The Company typically continues to obtain or confirm updated valuations of underlying collateral for special mention and classified loans on an annual or biennial basis in order to have the most current indication of fair value of the underlying collateral securing the loan. Additionally, once a loan is identified as collateral dependent, due to the likelihood of foreclosure, and repayment of the loan is expected to come from the eventual sale of the underlying collateral, an analysis of the underlying collateral is performed at least quarterly. Changes in the estimated fair value of the collateral are reflected in the lifetime ACL for the loan. Balances deemed to be uncollectable are promptly charged-off.


	Term Loans by Vintage
	2020		2019		2018		2017		2016		Prior		Revolving		Revolving Converted to Term During the Period		Total
September 30, 2020	(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner-occupied
Pass	$	190,701	$	566,855	$	475,363	$	314,190	$	290,179	$	852,044	$	11,031	$	—	$	2,700,363
Special mention	—		—		1,839		435		—		1,816		—		—		4,090
Substandard	—		—		202		—		517		2,199		559		—		3,477

Multifamily
Pass	638,349		1,735,235		964,740		750,548		412,893		639,171		574		—		5,141,510

Substandard	—		—		—		559		—		—		—		—		559

Construction and land
Pass	25,240		145,709		104,702		33,023		19,932		7,997		374		—		336,977

Substandard	—		—		895		—		—		—		—		—		895

SBA secured by real estate
Pass	494		10,412		11,058		14,842		6,712		9,037		—		—		52,555

Substandard	—		163		2,117		698		399		1,678		—		—		5,055

Total investor loans secured by real estate	$	854,784	$	2,458,374	$	1,560,916	$	1,114,295	$	730,632	$	1,513,942	$	12,538	$	—	$	8,245,481
Business loans secured by real estate
CRE owner-occupied
Pass	$	210,662	$	412,186	$	358,157	$	346,906	$	235,040	$	505,999	$	4,593	$	—	$	2,073,543
Special mention	—		15,827		—		10,268		4,186		2,008		—		—		32,289
Substandard	—		—		3,636		725		2,666		6,679		250		—		13,956

Franchise real estate secured
Pass	20,507		87,749		74,459		102,756		31,512		42,346		—		—		359,329



SBA secured by real estate
Pass	2,643		7,658		14,054		17,110		9,643		26,768		95		—		77,971

Substandard	—		—		22		1,994		914		3,225		—		—		6,155

Total loans secured by business real estate	$	233,812	$	523,420	$	450,328	$	479,759	$	283,961	$	587,025	$	4,938	$	—	$	2,563,243


	Credit Risk Grades
	Pass		Special Mention		Substandard		Total Gross Loans
December 31, 2019	(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner-occupied	$	2,067,875	$	1,178	$	1,088	$	2,070,141
Multifamily	1,575,510		—		216		1,575,726
Construction and land	438,769		—		17		438,786
SBA secured by real estate	65,835		973		1,623		68,431
Total investor loans secured by real estate	4,147,989		2,151		2,944		4,153,084
Business loans secured by real estate
CRE owner-occupied	1,831,853		11,167		3,534		1,846,554
Franchise real estate secured	352,319		921		—		353,240
SBA secured by real estate	83,106		1,842		3,433		88,381
Total business loans secured by real estate	2,267,278		13,930		6,967		2,288,175
Commercial loans
Commercial and industrial	1,359,662		13,226		20,382		1,393,270
Franchise non-real estate secured	546,594		6,930		10,833		564,357
SBA not secured by real estate	13,933		485		3,008		17,426
Total commercial loans	1,920,189		20,641		34,223		1,975,053
Retail loans
Single family residential	254,463		—		561		255,024
Consumer loans	50,921		—		54		50,975
Total retail loans	305,384		—		615		305,999
Total gross loans	$	8,640,840	$	36,722	$	44,749	$	8,722,311


			Days Past Due
	Current		30-59		60-89		90+		Total
September 30, 2020	(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner-occupied	$	2,707,169	$	—	$	—	$	761	$	2,707,930
Multifamily	5,142,069		—		—		—		5,142,069
Construction and land	336,977		—		—		895		337,872
SBA secured by real estate	56,346		673		—		591		57,610
Total investor loans secured by real estate	8,242,561		673		—		2,247		8,245,481
Business loans secured by real estate
CRE owner-occupied	2,114,484		—		250		5,054		2,119,788
Franchise real estate secured	359,329		—		—		—		359,329
SBA secured by real estate	83,116		—		—		1,010		84,126
Total business loans secured by real estate	2,556,929		—		250		6,064		2,563,243
Commercial loans
Commercial and industrial	1,810,027		5,717		836		4,415		1,820,995
Franchise non-real estate secured	508,237		—		—		7,743		515,980
SBA not secured by real estate	15,691		320		—		737		16,748

Total commercial loans	2,333,955		6,037		836		12,895		2,353,723
Retail loans
Single family residential	242,985		374		—		—		243,359
Consumer loans	45,034		—		—		—		45,034
Total retail loans	288,019		374		—		—		288,393
Totals	$	13,421,464	$	7,084	$	1,086	$	21,206	$	13,450,840

Beginning on January 1, 2020, the Company evaluates loans collectively for purposes of determining the ACL in accordance with ASC 326. Collective evaluation is based on aggregating loans deemed to possess similar risk characteristics. In certain instances the Company may identify loans that it believes no longer possess risk characteristics similar to other loans in the portfolio. These loans are typically identified from a substandard or worse internal risk grade, since the specific attributes and risks associated with such loans tend to become unique as the credit deteriorates. Such loans are typically nonperforming, modified through a TDR, and/or are deemed collateral dependent, where the ultimate repayment of the loan is expected to come from the operation of or eventual sale of the collateral. Loans that are deemed by management to no longer possess risk characteristics similar to other loans in the portfolio are evaluated individually for purposes of determining an appropriate lifetime ACL. The Company uses a discounted cash flow approach, using the loan’s effective interest rate, for determining the ACL on individually evaluated loans, unless the loan is deemed collateral dependent, which requires evaluation based on the estimated fair value of the underlying collateral, less estimated costs to sell. The Company may increase or decrease the ACL for collateral dependent individually evaluated loans based on changes in the estimated fair value of the collateral. Changes in the ACL for all other individually evaluated loans is based substantially on the Company’s evaluation of cash flows expected to be received from such loans.

As of September 30, 2020, $26.5 million of loans were individually evaluated, and the ACL attributed to such loans was $2.0 million. At September 30, 2020, $8.8 million of individually evaluated loans were evaluated using a discounted cash flow approach and $17.7 million of individually evaluated loans were evaluated based on the underlying value of the collateral.

Prior to the adoption of ASC 326 on January 1, 2020, the Company classified loans as impaired when, based on current information and events, it was probable that the Company would be unable to collect all amounts due according to the contractual terms of the loan agreement or it was determined that the likelihood of the Company receiving all scheduled payments, including interest, when due was remote. Credit losses on impaired loans were determined separately based on the guidance in ASC 310. Beginning January 1, 2020, the Company accounts for credit losses on all loans in accordance with ASC 326, which eliminates the concept of an impaired loan within the context of determining credit losses, and requires all loans to be evaluated for credit losses collectively. Loans are only evaluated individually when they are deemed to no longer possess similar risk characteristics with other loans within the portfolio.

Prior to the adoption of ASC 326, the Company reviewed loans for impairment when the loan was classified as substandard or worse, delinquent 90 days, determined by management to be collateral dependent, or when the borrower filed bankruptcy or was granted a loan modification in a TDR. Measurement of impairment was based on the loan’s expected future cash flows discounted at the loan’s effective interest rate, measured by reference to an observable market value, if one existed, or the fair value of the collateral if the loan was deemed collateral dependent. Valuation allowances were determined on a loan-by-loan basis or by aggregating loans with similar risk characteristics. Charge-offs were recorded when amounts were no longer deemed collectable.


	Impaired Loans
	Unpaid Principal Balance		Recorded Investment		With Specific Allowance		Without Specific Allowance		Specific Allowance for Impaired Loans
	(Dollars in thousands)
December 31, 2019
Investor loans secured by real estate
CRE non-owner-occupied	$	1,184	$	1,088	$	—	$	1,088	$	—


SBA secured by real estate	772		390		—		390		—
Business loans secured by real estate


SBA secured by real estate	1,743		1,517		—		1,517		—
Commercial loans
Commercial and industrial	7,755		7,529		—		7,529		—
Franchise non-real estate secured	10,835		10,834		—		10,834		—
SBA non-real estate secured	1,555		1,118		—		1,118		—
Retail loans
Single family residential	412		366		—		366		—

Totals	$	24,256	$	22,842	$	—	$	22,842	$	—


	Impaired Loans
	September 30, 2019
	Three Months Ended				Nine Months Ended
	Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)
	(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner-occupied	$	421	$	—	$	194	$	—

Construction and land	320		—		160		—
SBA secured by real estate	406		—		1,196		—
Business loans secured by real estate
CRE owner-occupied	845		—		662		—
Franchise real estate secured	—		—		2,516		—
SBA secured by real estate	969		—		692		—
Commercial loans
Commercial and industrial	10,170		104		9,925		303
Franchise non-real estate secured	679		—		385		—
SBA non-real estate secured	1,113		—		1,081		—
Retail loans
Single family residential	373		—		383		—
Consumer loans	—		—		25		—
Totals	$	15,296	$	104	$	17,219	$	303

We sometimes modify or restructure loans when the borrower is experiencing financial difficulties by making a concession to the borrower in the form of changes in the amortization terms, reductions in the interest rates, the acceptance of interest only payments and, in limited cases, concessions to the outstanding loan balances. These loans are classified as TDRs. TDRs are loans modified for the purpose of alleviating temporary impairments to the borrower’s financial condition or cash flows. A workout plan between us and the borrower is designed to provide a bridge for borrower cash flow shortfalls in the near term. A TDR loan may be returned to accrual status when the loan is brought current, has performed in accordance with the contractual restructured terms for a time frame of at least six months, and the ultimate collectability of the total contractual restructured principal and interest in no longer in doubt. At September 30, 2020, there were no loans modified as TDRs. At December 31, 2019, TDRs consisted of two loans aggregating $3.0 million, both of which were current and on accrual status. During the three months and nine months ended September 30, 2020 and 2019, there were no loans modified as TDRs. During the three months and nine months ended September 30, 2020 and 2019, there were no TDRs that experienced payment defaults after modifications within the previous 12 months.

The CARES Act, signed into law on March 27, 2020, permits financial institutions to suspend requirements under U.S. GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the coronavirus emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019. On April 7, 2020, federal bank regulators issued a joint interagency statement that allows lenders to conclude that a borrower is not experiencing financial difficulty if short-term (e.g., six months or less) modifications are made in response to the COVID-19 pandemic, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented.

For COVID-19 related loan modifications in the form of payment deferrals, the delinquency status will not advance and loans that were accruing at the time that the relief is provided will generally not be placed on nonaccrual status during the deferral period. Interest income will continue to be recognized over the contractual life of the loan. However, the Company, through its credit portfolio management activities, has continued to monitor facts and circumstances associated with the underlying credit quality of loans modified under the provisions of the CARES Act in an effort to identify any loans where the accrual of interest during the modification period is no longer appropriate. In such cases, the Company ceases the accrual of interest and all previously accrued and uncollected interest is promptly reversed against current period interest income. The Company has determined none of the COVID-19 related loan modifications need to be characterized as TDRs. As of September 30, 2020, 54 loans with an aggregate amortized cost of $118.3 million, of which 12 loans totaling $24.5 million were acquired in connection with the acquisition of Opus, were modified due to COVID-19 hardship under the CARES Act, which represent 0.9% of total loans held for investment as of that date. See Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Troubled Debt Restructurings for additional information.

Prior to the adoption of ASC 326, the Company accounted for PCI loans and income recognition thereof in accordance with ASC Subtopic 310-30 Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality. PCI loans are loans that as of the date of their acquisition have experienced deterioration in credit quality between origination and acquisition and for which it was probable, at acquisition, that not all contractually required payments would be collected. Following the adoption of ASC 326 on January 1, 2020, the Company analyzes acquired loans for more-than-insignificant deterioration in credit quality since their origination. Such loans are classified as purchased credit deteriorated loans. Please also see Note 3 - Significant Accounting Policies for more information concerning the accounting for PCD loans.

Prior to the adoption of ASC 326, the Company measured the amount by which the undiscounted expected cash future flows on PCI loans exceeded the estimated fair value of the loan on the date of acquisition as the “accretable yield,” representing the amount of estimated future interest income on the loan. The amount of accretable yield was re-measured at each financial reporting date, representing the difference between the remaining undiscounted expected cash flows and the current carrying value of the PCI loan. Following the adoption of ASC 326, the Company accounts for interest income on PCD loans using the interest method, whereby any purchase discounts or premiums are accreted or amortized into interest income as an adjustment of the loan’s yield. An accretable yield is not determined for PCD loans.

Upon the adoption of ASC 326, acquired loans classified as PCD are recorded at an initial amortized cost, which is comprised of the purchase price of the loans (or initial fair value) and the initial ACL determined for the loans, which is added to the purchase price of the loans, and any resulting discount or premium related to factors other than credit. The Company had no such loans at adoption.


	June 1, 2020
	Investor Loans Secured by Real Estate		Business Loans Secured by Real Estate		Commercial Loans		Retail Loans		Total
	(Dollars in thousands)
Par value (unpaid principal balance)	$	704,441	$	105,578	$	80,184	$	6,280	$	896,483
Allowance for credit losses (1)	(13,786)		(4,083)		(25,635)		(381)		(43,885)
(Discount) premium related to factors other than credit	(8,696)		(2,512)		138		(294)		(11,364)
Purchase price (initial fair value)	$	681,959	$	98,983	$	54,687	$	5,605	$	841,234

(1) The initial gross ACL determined for PCD loans was $43.9 million as of the acquisition date. Of this amount, approximately $22.7 million relates to net uncollectable balances such as loans that were fully or partially charged off prior to acquisition. Therefore, the net impact to the ACL related to PCD loans was an increase of $21.2 million.

When loans are placed on nonaccrual status, previously accrued but unpaid interest is promptly reversed from earnings. Payments received on nonaccrual loans are generally applied as a reduction to the loan principal balance. If the likelihood of further loss is remote, the Company will recognize interest on a cash basis only. Loans may be returned to accruing status if the Company believes that all remaining principal and interest is fully collectible and there has been at least three months of sustained repayment performance since the loan was placed on nonaccrual.

The Company typically does not accrue interest on loans 90 days or more past due or when, in the opinion of management, there is reasonable doubt as to the timely collection of principal or interest. However, when such loans are well secured and in the process of collection, the Company may continue with the accrual of interest. The Company had no loans 90 days or more past due and still accruing at September 30, 2020 and December 31, 2019. Nonaccrual loans totaled $27.2 million at September 30, 2020 and $8.5 million as of December 31, 2019.


	Nonaccrual Loans (1)
	Collateral Dependent Loans		ACL		Non-Collateral Dependent Loans		ACL		Total Nonaccrual Loans (2)		Nonaccrual Loans with No ACL
September 30, 2020	(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner-occupied	$	2,838	$	—	$	—	$	—	$	2,838	$	2,838

Construction and land	895		—		—		—		895		895
SBA secured by real estate	1,264		—		—		—		1,264		1,264
Total investor loans secured by real estate	4,997		—		—		—		4,997		4,997
Business loans secured by real estate
CRE owner-occupied	6,105		—		—		—		6,105		6,105

SBA secured by real estate	1,084		—		—		—		1,084		1,084
Total business loans secured by real estate	7,189		—		—		—		7,189		7,189
Commercial loans
Commercial and industrial	4,309		557		1,790		266		6,099		2,809
Franchise non-real estate secured	—		—		7,742		1,165		7,742		—
SBA non-real estate secured	737		—		—		—		737		737
Total commercial loans	5,046		557		9,532		1,431		14,578		3,546
Retail loans
Single family residential	450		—		—		—		450		450

Total retail loans	450		—		—		—		450		450
Totals nonaccrual loans	$	17,682	$	557	$	9,532	$	1,431	$	27,214	$	16,182

Loans that have been classified as collateral dependent are loans where substantially all repayment of the loan is expected to come from the operation of or eventual liquidation of the collateral. Collateral dependent loans are evaluated individually for purposes of determining the ACL for each loan. The ACL is determined based on the estimated fair value of the collateral. Estimates for costs to sell are included in the determination of the ACL when liquidation of the collateral is anticipated. In cases where the loan is well secured and the estimated value of the collateral exceeds the amortized cost of the loan, no ACL is recorded.


	September 30, 2020
	Office Properties		Industrial Properties		Retail Properties		Land Properties		Hotel Properties		Residential Properties		Business Assets		Total
	(Dollars in thousands)
Investor loan secured by real estate
CRE non-owner-occupied	$	—	$	—	$	2,636	$	—	$	202	$	—	$	—	$	2,838

Construction and land	—		—		—		—		—		895		—		895
SBA secured by real estate	—		—		—		—		1,264		—		—		1,264
Total investor loans secured by real estate	—		—		2,636		—		1,466		895		—		4,997
Business loans secured by real estate
CRE owner-occupied	—		801		—		5,304		—		—		—		6,105

SBA secured by real estate	304		758		—		—		—		22		—		1,084
Total business loans secured by real estate	304		1,559		—		5,304		—		22		—		7,189
Commercial loans
Commercial and industrial	—		—		—		—		—		—		4,309		4,309

SBA non-real estate secured	—		—		—		—		—		—		737		737
Total commercial loans	—		—		—		—		—		—		5,046		5,046
Retail loans
Single family residential	—		—		—		—		—		450		—		450

Total retail loans	—		—		—		—		—		450		—		450
Totals collateral dependent loans	$	304	$	1,559	$	2,636	$	5,304	$	1,466	$	1,367	$	5,046	$	17,682