Loans by Type

6 Months Ended

Jun. 30, 2021

Note 6 – Loans by Type

A summary of loan categories is as follows:

(In thousands)	June 30, 2021		December 31, 2020
Commercial and industrial	$	330,714	$	298,984
Real estate:
Commercial:
Mortgage		103,878		100,419
Construction		24,500		25,090
Faith-based:
Mortgage		331,235		333,661
Construction		24,051		23,818
Paycheck Protection Program (“PPP”)		56,642		109,704
Total loans	$	871,020	$	891,676

In support of the Coronavirus, Aid, Relief, and Economic Security Act (the “CARES Act”), the Bank processed nearly 460 applications for PPP loans of approximately $210,000,000 cumulatively during 2021 and 2020 to provide much-needed cash to small business and self-employed taxpayers during the COVID-19 crisis. The loans were primarily made to existing bank customers and are 100% guaranteed by the Small Business Administration (“SBA”) with no allowance for credit loss allocation. The Company has unaccreted PPP loan fees of $1,312,000 at June 30, 2021.

The following table presents the aging of loans past due by category at June 30, 2021 and December 31, 2020:

	Performing						Nonperforming
(In thousands)	Current		30-59 Days		60-89 Days		90 Days and Over		Non- accrual		Total Loans
June 30, 2021
Commercial and industrial	$	330,714	$	—	$	—	$	—	$	—	$	330,714
Real estate
Commercial:
Mortgage		103,878		—		—		—		—		103,878
Construction		24,500		—		—		—		—		24,500
Faith-based:
Mortgage		331,235		—		—		—		—		331,235
Construction		24,051		—		—		—		—		24,051
PPP		56,642		—		—		—		—		56,642
Total	$	871,020	$	—	$	—	$	—	$	—	$	871,020
December 31, 2020
Commercial and industrial	$	298,984	$	—	$	—	$	—	$	—	$	298,984
Real estate
Commercial:
Mortgage		100,419		—		—		—		—		100,419
Construction		25,090		—		—		—		—		25,090
Faith-based:
Mortgage		333,661		—		—		—		—		333,661
Construction		23,818		—		—		—		—		23,818
PPP		109,704		—		—		—		—		109,704
Total	$	891,676	$	—	$	—	$	—	$	—	$	891,676

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The following table presents the credit exposure of the loan portfolio by internally assigned credit grade as of June 30, 2021 and December 31, 2020:

(In thousands)	Loans Subject to Normal Monitoring¹		Performing Loans Subject to Special Monitoring²		Nonperforming Loans Subject to Special Monitoring²		Total Loans
June 30, 2021
Commercial and industrial	$	319,477	$	11,237	$	—	$	330,714
Real estate
Commercial:
Mortgage		103,637		241		—		103,878
Construction		24,500		—		—		24,500
Faith-based:
Mortgage		328,236		2,999		—		331,235
Construction		24,051		—		—		24,051
PPP		56,642		—		—		56,642
Total	$	856,543	$	14,477	$	—	$	871,020
December 31, 2020
Commercial and industrial	$	284,882	$	14,102	$	—	$	298,984
Real estate
Commercial:
Mortgage		99,044		1,375		—		100,419
Construction		25,090		—		—		25,090
Faith-based:
Mortgage		330,554		3,107		—		333,661
Construction		23,818		—		—		23,818
PPP		109,704		—		—		109,704
Total	$	873,092	$	18,584	$	—	$	891,676

¹ Loans subject to normal monitoring involve borrowers of acceptable-to-strong credit quality and risk, who have the apparent ability to satisfy their loan obligations.

² Loans subject to special monitoring possess some credit deficiency or potential weakness which requires a high level of management attention.

The company had no impaired loans as of June 30, 2021. The Company had one loan considered impaired in the amount of $2,500,000 at December 31, 2020 that was individually evaluated for impairment, resulting in a specific allowance for credit loss of $500,000 at December 31, 2020. Due to improvement in borrower conditions, this loan was no longer considered impaired at June 30, 2021.

There were no foreclosed loans recorded as other real estate owned (included in other assets) as of June 30, 2021 or December 31, 2020.

There were no loans considered troubled debt restructurings as of June 30, 2021. There were two loans that were considered troubled debt restructurings at December 31, 2020 and these loans were removed from troubled debt restructuring status during the first quarter of 2021.

The recorded investment by category for loans considered as troubled debt restructuring during the year ended December 31, 2020 is as follows:

(In thousands)	Number of Loans	Pre-Modification Outstanding Balance		Post-Modification Outstanding Balance
Commercial and industrial	1	$	8,773	$	8,773
Faith-based real estate	1		1,029		1,029
Total	2	$	9,802	$	9,802

During the year ended December 31, 2020, two loans were restructured to change the amortization schedule to reduce payments from the borrowers while the contractual interest rate remained unchanged. These loans did not have a specific allowance for credit loss allocated to them at December 31, 2020. There were no loans restructured that subsequently defaulted during the year ended December 31, 2020.

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A summary of the activity in allowance for credit losses (“ACL”) by category for the period ended June 30, 2021 and December 31, 2020 is as follows:

(In thousands)	C&I		CRE		Faith-based CRE		Construction		Total
Allowance for credit losses on loans:
Balance at December 31, 2020	$	4,635	$	1,175	$	5,717	$	417	$	11,944
Charge Offs		—		—		—		—		—
(Release of) provision for credit losses		(509)		(54)		(199)		(28)		($790)
Recoveries		2		—		15		—		17
Balance at June 30, 2021	$	4,128	$	1,121	$	5,533	$	389	$	11,171

The release of provision for credit losses during the six months ended June 30, 2021 is primarily due to improved economic conditions and the removal of specific allowance for credit loss allocations on impaired loans.

(In thousands)	C&I		CRE		Faith-based CRE		Construction		Total
Allowance for credit losses on loans:
Balance at December 31, 2019	$	4,874	$	1,528	$	3,842	$	312	$	10,556
Cumulative effect of accounting change (ASU 2016-13)		(526)		(401)		1,636		14		723
Balance at January 1, 2020		4,348		1,127		5,478		326		11,279
Provision for credit losses		268		48		238		91		645
Recoveries		19		—		1		—		20
Balance at December 31, 2020	$	4,635	$	1,175	$	5,717	$	417	$	11,944

The provision for credit losses during the year ended December 31, 2020 was due to the Company’s forecast of macroeconomic factors, which worsened during 2020, primarily due to the COVID-19 pandemic.