The following table summarizes the composition of our loan portfolio. Total gross loans are recorded net of deferred loan fees and costs, which totaled $4.6 million as of September 30, 2021 and $3.9 million as of December 31, 2020.

The information in the following tables summarizes the loan maturity distribution by type and related interest rate characteristics based on the contractual maturities of individual loans, including loans which may be subject to renewal at their contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification of terms upon maturity. Actual repayments of loans may differ from the maturities reflected below, because borrowers have the right to prepay obligations with or without prepayment penalties.


	December 31, 2020
			After one
	One year		but within		After five
(dollars in thousands)	or less		five years		years		Total
Commercial
Owner occupied RE	$	22,232		136,031		275,057		433,320
Non-owner occupied RE		39,359		335,249		210,661		585,269
Construction		21,824		15,785		23,858		61,467
Business		76,662		140,959		89,978		307,599
Total commercial loans		160,077		628,024		599,554		1,387,655
Consumer
Real estate		14,205		54,863		467,243		536,311
Home equity		4,824		23,835		128,298		156,957
Construction		1,629		1,234		37,662		40,525
Other		6,438		11,413		3,568		21,419
Total consumer		27,096		91,345		636,771		755,212
Total gross loan, net of deferred fees	$	187,173		719,369		1,236,325		2,142,867
Loans maturing after one year with:
Fixed interest rates							$	1,590,171
Floating interest rates								365,523

Paycheck Protection Program (“PPP”)

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act or the “Act”) to provide emergency assistance and health care response for individuals, families, and businesses affected by the coronavirus pandemic. The Small Business Administration (“SBA”) received funding and authority through the Act to modify existing loan programs and establish a new loan program to assist small businesses nationwide adversely impacted by the COVID-19 emergency. The Act temporarily permits the SBA to guarantee 100% of certain loans under a new program titled the “Paycheck Protection Program” and also provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the PPP.

We became an approved SBA lender in March 2020 and processed 853 loans under the PPP for a total of $97.5 million during the second quarter of 2020. On June 26, 2020, we completed the sale of our PPP loan portfolio to The Loan Source Inc., together with its servicing partner, ACAP SME LLC, receiving net lender fees of $2.2 million during the three months ended June 30, 2020.

The SBA offered a second round of PPP loans through May 31, 2021; however, we did not originate any new PPP loans. We did, however, receive referral fees of approximately $268,000 during the three months ended June 30, 2021 from The Loan Source Inc. for PPP loans they originated to our clients.

Portfolio Segment Methodology

Commercial

Commercial loans are assessed for estimated losses by grading each loan using various risk factors identified through periodic reviews. The Company applies historic grade-specific loss factors to each loan class. In the development of statistically derived loan grade loss factors, the Company observes historical losses over 20 quarters for each loan grade. These loss estimates are adjusted as appropriate based on additional analysis of external loss data or other risks identified from current economic conditions and credit quality trends. The allowance also includes an amount for the estimated impairment on nonaccrual commercial loans and commercial loans modified in a troubled debt restructuring (“TDR”), whether on accrual or nonaccrual status.

Consumer

For consumer loans, the Company determines the allowance on a collective basis utilizing historical losses over 20 quarters to represent its best estimate of inherent loss. The Company pools loans, generally by loan class with similar risk characteristics. The allowance also includes an amount for the estimated impairment on nonaccrual consumer loans and consumer loans modified in a TDR, whether on accrual or nonaccrual status.

Credit Quality Indicators

Commercial

We manage a consistent process for assessing commercial loan credit quality by monitoring its loan grading trends and past due statistics. All loans are subject to individual risk assessment. Our risk categories include Pass, Special Mention, Substandard, and Doubtful, each of which is defined by our banking regulatory agencies. Delinquency statistics are also an important indicator of credit quality in the establishment of our allowance for loan losses.

We categorize our loans into risk categories based on relevant information about the ability of the borrower to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. A description of the general characteristics of the risk grades is as follows:

•

Pass—These loans range from minimal credit risk to average credit risk; however, still have acceptable credit risk.

•

Special mention—A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date.

•

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

•

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

The following tables provide past due information for outstanding commercial loans and include loans on nonaccrual status as well as accruing TDRs.


	September 30, 2021
	Owner		Non-owner
(dollars in thousands)	occupied RE		occupied RE		Construction		Business		Total
Current	$	470,351		621,383		87,892		305,804		1,485,430
30-59 days past due		263		-		-		696		959
60-89 days past due		-		7,138		-		1,469		8,607
Greater than 90 Days		-		-		-		-		-
	$	470,614		628,521		87,892		307,969		1,494,996


	December 31, 2020
	Owner		Non-owner
(dollars in thousands)	occupied RE		occupied RE		Construction		Business		Total
Current	$	432,711		584,565		61,467		307,261		1,386,004
30-59 days past due		403		282		-		35		720
60-89 days past due		-		-		-		266		266
Greater than 90 Days		206		422		-		37		665
	$	433,320		585,269		61,467		307,599		1,387,655

As of September 30, 2021 and December 31, 2020, loans 30 days or more past due represented 0.49% and 0.17% of the Company’s total loan portfolio, respectively. Commercial loans 30 days or more past due were 0.40% and 0.08% of the Company’s total loan portfolio as of September 30, 2021 and December 31, 2020, respectively.

The tables below provide a breakdown of outstanding commercial loans by risk category.


	September 30, 2021
	Owner		Non-owner
(dollars in thousands)	occupied RE		occupied RE		Construction		Business		Total
Pass	$	469,715		544,427		87,892		301,291		1,403,325
Special mention		333		48,540		-		2,651		51,524
Substandard		566		35,554		-		4,027		40,147
Doubtful		-		-		-		-		-
	$	470,614		628,521		87,892		307,969		1,494,996


	December 31, 2020
	Owner		Non-owner
(dollars in thousands)	occupied RE		occupied RE		Construction		Business		Total
Pass	$	430,291		576,095		61,328		301,838		1,369,552
Special mention		624		587		-		1,703		2,914
Substandard		2,405		8,587		139		4,058		15,189
Doubtful		-		-		-		-		-
	$	433,320		585,269		61,467		307,599		1,387,655

Consumer

The Company manages a consistent process for assessing consumer loan credit quality by monitoring its loan grading trends and past due statistics. All loans are subject to individual risk assessment. The Company’s categories include Pass, Special Mention, Substandard, and Doubtful, which are defined above. Delinquency statistics are also an important indicator of credit quality in the establishment of the allowance for loan losses.

The following tables provide past due information for outstanding consumer loans and include loans on nonaccrual status as well as accruing TDRs.


	September 30, 2021
(dollars in thousands)	Real estate		Home equity		Construction		Other		Total
Current	$	647,722		153,505		57,419		33,301		891,947
30-59 days past due		-		1,510		-		-		1,510
60-89 days past due		-		34		-		6		40
Greater than 90 Days		554		-		-		-		554
	$	648,276		155,049		57,419		33,307		894,051


	December 31, 2020
(dollars in thousands)	Real estate		Home equity		Construction		Other		Total
Current	$	534,648		156,657		40,525		21,419		753,249
30-59 days past due		-		-		-		-		-
60-89 days past due		332		-		-		-		332
Greater than 90 Days		1,331		300		-		-		1,631
	$	536,311		156,957		40,525		21,419		755,212

Consumer loans 30 days or more past due were 0.09% of total loans as of both September 30, 2021 and December 31, 2020.

The tables below provide a breakdown of outstanding consumer loans by risk category.


	September 30, 2021
(dollars in thousands)	Real estate		Home equity		Construction		Other		Total
Pass	$	640,595		149,136		57,419		33,120		880,270
Special mention		3,326		3,162		-		137		6,625
Substandard		4,355		2,751		-		50		7,156
Doubtful		-		-		-		-		-
	$	648,276		155,049		57,419		33,307		894,051


	December 31, 2020
(dollars in thousands)	Real estate		Home equity		Construction		Other		Total
Pass	$	530,515		152,154		40,525		21,290		744,484
Special mention		1,968		1,005		-		91		3,064
Substandard		3,828		3,798		-		38		7,664
Doubtful		-		-		-		-		-
	$	536,311		156,957		40,525		21,419		755,212

Nonperforming assets

The following table shows the nonperforming assets and the related percentage of nonperforming assets to total assets and gross loans. Generally, a loan is placed on nonaccrual status when it becomes 90 days past due as to principal or interest, or when the Company believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. A payment of interest on a loan that is classified as nonaccrual is recognized as a reduction in principal when received.

Following is a summary of our nonperforming assets, including nonaccruing TDRs.


(dollars in thousands)	September 30, 2021			December 31, 2020
Commercial
Owner occupied RE	$	-			-
Non-owner occupied RE		7,400			1,143
Construction		-			139
Business		1,469			195
Consumer
Real estate		1,461			2,536
Home equity		818			547
Construction		-			-
Other		-			-
Nonaccruing troubled debt restructurings		2,730			3,509
Total nonaccrual loans, including nonaccruing TDRs		13,878			8,069
Other real estate owned		-			1,169
Total nonperforming assets	$	13,878			9,238
Nonperforming assets as a percentage of:
Total assets		0.50	%		0.37	%
Gross loans		0.58	%		0.43	%
Total loans over 90 days past due	$	554			2,296
Loans over 90 days past due and still accruing		-			-
Accruing troubled debt restructurings		4,044			4,893

Impaired Loans

The table below summarizes key information for impaired loans. The Company’s impaired loans include loans on nonaccrual status and loans modified in a TDR, whether on accrual or nonaccrual status. These impaired loans may have estimated impairment which is included in the allowance for loan losses. The Company’s commercial and consumer impaired loans are evaluated individually to determine the related allowance for loan losses.


			September 30, 2021
			Recorded investment
					Impaired loans		Impaired loans
	Unpaid				with no related		with related		Related
	Principal		Impaired		allowance for		allowance for		allowance for
(dollars in thousands)	Balance		loans		loan losses		loan losses		loan losses
Commercial
Owner occupied RE	$	1,269		1,269		1,269		-		-
Non-owner occupied RE		9,283		8,238		7,400		838		167
Construction		-		-		-		-		-
Business		3,333		3,303		1,469		1,834		788
Total commercial		13,885		12,810		10,138		2,672		955
Consumer
Real estate		3,035		2,936		2,109		828		139
Home equity		2,190		2,049		1,992		56		56
Construction		-		-		-		-		-
Other		126		126		-		126		15
Total consumer		5,351		5,111		4,101		1,010		210
Total	$	19,236		17,921		14,239		3,682		1,165


			December 31, 2020
			Recorded investment
				Impaired loans		Impaired loans
	Unpaid			with no related		with related		Related
	Principal		Impaired	allowance for		allowance for		allowance for
(dollars in thousands)	Balance		loans	loan losses		loan losses		loan losses
Commercial
Owner occupied RE	$	1,753	1,649		1,497		152		76
Non-owner occupied RE		3,212	2,188		705		1,483		366
Construction		141	139		139		-		-
Business		2,892	2,449		279		2,170		897
Total commercial		7,998	6,425		2,620		3,805		1,339
Consumer
Real estate		4,362	4,031		3,108		923		190
Home equity		2,498	2,371		2,096		275		163
Construction		-	-		-		-		-
Other		135	135		-		135		17
Total consumer		6,995	6,537		5,204		1,333		370
Total	$	14,993	12,962		7,824		5,138		1,709

The following table provides the average recorded investment in impaired loans and the amount of interest income recognized on impaired loans after impairment by portfolio segment and class.


	Three months ended September 30, 2021					Three months ended September 30, 2020
	Average		Recognized		Average		Recognized
	recorded		interest		recorded		interest
(dollars in thousands)	investment		income		investment		income
Commercial
Owner occupied RE	$	1,269		17		2,985		40
Non-owner occupied RE		5,125		227		3,880		63
Construction		-		-		72		2
Business		2,665		61		2,506		51
Total commercial		9,059		305		9,443		156
Consumer
Real estate		3,609		-		3,063		58
Home equity		1,859		30		2,540		22
Construction		-		-		-		-
Other		127		1		139		1
Total consumer		5,595		31		5,742		81
Total	$	14,654		336		15,185		237


	Nine months ended					Nine months ended				Year ended
	September 30, 2021					September 31, 2020				December 31, 2020
	Average		Recognized		Average		Recognized		Average		Recognized
	recorded		interest		recorded		interest		recorded		interest
(dollars in thousands)	investment		income		investment		income		investment		income
Commercial
Owner occupied RE	$	1,419		49		2,617		73		2,423		88
Non-owner occupied RE		3,643		321		4,724		165		4,217		221
Construction		69		-		36		2		56		6
Business		2,497		115		2,270		98		2,306		243
Total commercial		7,628		485		9,647		338		9,002		558
Consumer
Real estate		3,911		102		3,207		98		3,372		170
Home equity		1,944		64		2,067		39		2,128		5
Construction		-		-		-		-		-		-
Other		130		3		143		3		141		79
Total consumer		5,985		169		5,417		140		5,641		254
Total	$	13,613		654		15,064		478		14,643		812

Allowance for Loan Losses

The allowance for loan losses is management’s estimate of credit losses inherent in the loan portfolio. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The Company has an established process to determine the adequacy of the allowance for loan losses that assesses the losses inherent in the portfolio. While the Company attributes portions of the allowance to specific portfolio segments, the entire allowance is available to absorb credit losses inherent in the total loan portfolio. The Company’s process involves procedures to appropriately consider the unique risk characteristics of the commercial and consumer loan portfolio segments. For each portfolio segment, impairment is measured individually for each impaired loan. The Company’s allowance levels are influenced by loan volume, loan grade or delinquency status, historic loss experience and other economic conditions.

The following table summarizes the activity related to the allowance for loan losses by commercial and consumer portfolio segments:


	Three months ended September 30, 2021
	Commercial											Consumer
	Owner			Non-owner
	occupied			occupied								Real			Home
(dollars in thousands)	RE			RE			Construction		Business			Estate			Equity			Construction			Other			Total
Balance, beginning of period	$	7,099			13,223			951		6,722			10,028			2,562			753			574			41,912
Provision for loan losses		(1,159	)		(1,558	)		149		(1,246	)		(1,469	)		(598	)		(28	)		(91	)		(6,000	)
Loan charge-offs		-			(159	)		-		(84	)		-			-			-			-			(243	)
Loan recoveries		-			129			-		58			18			193			-			8			406
Net loan recoveries (charge-offs)		-			(30	)		-		(26	)		18			193			-			8			163
Balance, end of period	$	5,940			11,635			1,100		5,450			8,577			2,157			725			491			36,075
Net charge-offs (recoveries) to average loans (annualized)																									(0.03	%)
Allowance for loan losses to gross loans																									1.51	%
Allowance for loan losses to nonperforming loans																									259.95	%

	Three months ended September 30, 2020
	Commercial										Consumer
	Owner		Non-owner
	occupied		occupied								Real		Home
(dollars in thousands)	RE		RE			Construction		Business			Estate		Equity			Construction		Other			Total
Balance, beginning of period	$	5,800		8,791			977		5,841			6,538		2,641			615		399			31,602
Provision for loan losses		2,105		2,461			217		2,274			2,936		850			87		170			11,100
Loan charge-offs		-		(375	)		-		(564	)		-		(100	)		-		(25	)		(1,064	)
Loan recoveries		-		554			-		14			2		-			-		11			581
Net loan recoveries (charge-offs)		-		179			-		(550	)		2		(100	)		-		(14	)		(483	)
Balance, end of period	$	7,905		11,431			1,194		7,565			9,476		3,391			702		555			42,219
Net charge-offs to average loans (annualized)																						0.09	%
Allowance for loan losses to gross loans																						2.03	%
Allowance for loan losses to nonperforming loans																						482.43	%

	Nine months ended September 30, 2021
	Commercial												Consumer
	Owner			Non-owner
	occupied			occupied								Real			Home
(dollars in thousands)	RE			RE			Construction			Business		Estate			Equity		Construction			Other			Total
Balance, beginning of period	$	8,145			12,049			1,154		7,845			10,453		3,249			747			507			44,149
Provision for loan losses		(2,299	)		(509	)		(54	)	(2,256	)		(1,894	)	(1,149	)		(22	)		(17	)		(8,200	)
Loan charge-offs		-			(158	)		-		(353	)		-		(139	)		-			(8	)		(658	)
Loan recoveries		94			253			-		214			18		196			-			9			784
Net loan recoveries (charge-offs)		94			95			-		(139	)		18		57			-			1			126
Balance, end of period	$	5,940			11,635			1,100		5,450			8,577		2,157			725			491			36,075
Net charge-offs (recoveries) to average loans (annualized)																								(0.01	%)

	Nine months ended September 30, 2020
	Commercial							Consumer
	Owner		Non-owner
	occupied		occupied					Real	Home
(dollars in thousands)	RE		RE		Construction	Business		Estate	Equity			Construction		Other		Total
Balance, beginning of period	$	2,835	4,304		541	3,692		3,278		1,447			268	277			16,642
Provision for loan losses		5,070	8,081		653	4,562		6,187		1,976			434	337			27,300
Loan charge-offs		-	(1,508	)	-	(735	)	-		(100	)		-	(70	)		(2,413	)
Loan recoveries		-	554		-	46		11		68			-	11			690
Net loan recoveries (charge-offs)		-	(954	)	-	(689	)	11		(32	)		-	(59	)		(1,723	)
Balance, end of period	$	7,905	11,431		1,194	7,565		9,476		3,391			702	555			42,219
Net charge-offs to average loans (annualized)																	0.11	%

The following table disaggregates the allowance for loan losses and recorded investment in loans by impairment methodology.


	September 30, 2021
	Allowance for loan losses				Recorded investment in loans
(dollars in thousands)	Commercial		Consumer	Total	Commercial	Consumer	Total
Individually evaluated	$	955	210	1,165	12,810	5,111	17,921
Collectively evaluated		23,170	11,740	34,910	1,482,186	888,940	2,371,126
Total	$	24,125	11,950	36,075	1,494,996	894,051	2,389,047


	December 31, 2020
	Allowance for loan losses				Recorded investment in loans
(dollars in thousands)	Commercial		Consumer	Total	Commercial	Consumer	Total
Individually evaluated	$	1,339	370	1,709	6,425	6,537	12,962
Collectively evaluated		27,826	14,614	42,440	1,381,230	748,675	2,129,905
Total	$	29,165	14,984	44,149	1,387,655	755,212	2,142,867