Loans | Note 4 - Loans Loans consist of the following: (Dollars in thousands) March 31, 2021 December 31, 2020 Loans held for sale $ 144,950 $ 191,512 LHFI: Loans secured by real estate: Commercial real estate $ 1,441,071 $ 1,370,928 Construction/land/land development 548,236 531,860 Residential real estate 904,753 885,120 Total real estate 2,894,060 2,787,908 Commercial and industrial (1) 1,834,498 1,817,862 Mortgage warehouse lines of credit 1,090,347 1,084,001 Consumer 17,277 17,991 Total loans accounted for at amortized cost 5,836,182 5,707,762 Loans accounted for at fair value 13,578 17,011 Total LHFI (2) 5,849,760 5,724,773 Less: Allowance for loan losses 85,136 86,670 LHFI, net $ 5,764,624 $ 5,638,103 ____________________________ (1) Includes $584.1 million and $546.5 million of PPP loans at March 31, 2021 and December 31, 2020, respectively. (2) Includes net deferred loan fees of $15.9 million and $13.7 million at March 31, 2021, and December 31, 2020, respectively. Included in total loans held for investment ("LHFI") were $13.6 million and $17.0 million of commercial real estate loans for which the fair value option was elected at March 31, 2021 and December 31, 2020, respectively. The Company mitigates the interest rate component of fair value risk on loans at fair value by entering into derivative interest rate contracts. See Note 5 - Fair Value of Financial Instruments for more information on loans for which the fair value option has been elected. The Company has been a participating lender in the Paycheck Protection Program ("PPP"). At March 31, 2021, there were approximately $584.1 million in PPP loans outstanding included in the Company’s commercial and industrial loan portfolio, including $11.5 million in net deferred loan fees. PPP loans have a maximum maturity of two years and earn interest at 1%. PPP loans are fully guaranteed by the U.S. government and can be forgiven by the SBA if the borrower uses the proceeds to pay specified expenses. The Company believes that the majority of its PPP loans will ultimately be forgiven by the SBA in accordance with the terms of the program. Credit quality indicators. As part of the Company's commitment to manage the credit quality of its loan portfolio, management annually updates and evaluates certain credit quality indicators, which include but are not limited to (i) weighted-average risk rating of the loan portfolio, (ii) net charge-offs, (iii) level of non-performing loans, (iv) level of classified loans (defined as substandard, doubtful and loss), and (v) the general economic conditions in the states in which the Company operates. The Company maintains an internal risk rating system where ratings are assigned to individual loans based on assessed risk. Loan risk ratings are the primary indicator of credit quality for the loan portfolio and are continually evaluated to ensure they are appropriate based on currently available information. The following is a summary description of the Company's internal risk ratings: • Pass (1-6) Loans within this risk rating are further categorized as follows: Minimal risk (1) Well-collateralized by cash equivalent instruments held by the Bank. Moderate risk (2) Borrowers with excellent asset quality and liquidity. Borrowers' capitalization and liquidity exceed industry norms. Borrowers in this category have significant levels of liquid assets and have a low level of leverage. Better than average risk (3) Borrowers with strong financial strength and excellent liquidity that consistently demonstrate strong operating performance. Borrowers in this category generally have a sizable net worth that can be converted into liquid assets within 12 months. Average risk (4) Borrowers with sound credit quality and financial performance, including liquidity. Borrowers are supported by sufficient cash flow coverage generated through operations across the full business cycle. Marginally acceptable risk (5) Loans generally meet minimum requirements for an acceptable loan in accordance with lending policy, but possess one or more attributes that cause the overall risk profile to be higher than the majority of newly approved loans. Watch (6) A passing loan with one or more factors that identify a potential weakness in the overall ability of the borrower to repay the loan. These weaknesses are generally mitigated by other factors that reduce the risk of delinquency or loss. • Special Mention (7) This grade is intended to be temporary and includes borrowers whose credit quality has deteriorated and is at risk of further decline. • Substandard (8) This grade includes "Substandard" loans under regulatory guidelines. Substandard loans exhibit a well-defined weakness that jeopardizes debt repayment in accordance with contractual agreements, even though the loan may be performing. These obligations are characterized by the distinct possibility that a loss may be incurred if these weaknesses are not corrected and repayment may be dependent upon collateral liquidation or secondary source of repayment. • Doubtful (9) This grade includes "Doubtful" loans under regulatory guidelines. Such loans are placed on nonaccrual status and repayment may be dependent upon collateral with no readily determinable valuation or valuations that are highly subjective in nature. Repayment for these loans is considered improbable based on currently existing facts and circumstances. • Loss (0) This grade includes "Loss" loans under regulatory guidelines. Loss loans are charged-off or written down when repayment is not expected. In connection with the review of the loan portfolio, the Company considers risk elements attributable to particular loan types or categories in assessing the quality of individual loans. The list of loans to be reviewed for possible individual evaluation consists of nonaccrual commercial loans over $100,000 with direct exposure, unsecured loans over 90 days past due, commercial loans classified substandard or worse over $100,000 with direct exposure, troubled debt restructurings ("TDRs"), consumer loans greater than $100,000 with a FICO score under 625, loans greater than $100,000 in which the borrower has filed bankruptcy, and all loans 180 days or more past due. Loans under $50,000 will be evaluated collectively in designated pools unless a loss exposure has been identified. Some additional risk elements considered by loan type include: • for commercial real estate loans, the debt service coverage ratio, operating results of the owner in the case of owner occupied properties, the loan to value ratio, the age and condition of the collateral and the volatility of income, property value and future operating results typical of properties of that type; • for construction, land and land development loans, the perceived feasibility of the project, including the ability to sell developed lots or improvements constructed for resale or the ability to lease property constructed for lease, the quality and nature of contracts for presale or prelease, if any, experience and ability of the developer and loan to value ratio; • for residential mortgage loans, the borrower's ability to repay the loan, including a consideration of the debt to income ratio and employment and income stability, the loan-to-value ratio, and the age, condition and marketability of the collateral; and • for commercial and industrial loans, the debt service coverage ratio (income from the business in excess of operating expenses compared to loan repayment requirements), the operating results of the commercial, industrial or professional enterprise, the borrower's business, professional and financial ability and expertise, the specific risks and volatility of income and operating results typical for businesses in that category and the value, nature and marketability of collateral. The following table reflects recorded investments in loans by credit quality indicator and origination year at March 31, 2021, excluding loans held for sale and loans accounted for at fair value. The Company had an immaterial amount of revolving loans converted to term loans at March 31, 2021. Term Loans Amortized Cost Basis by Origination Year (Dollars in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Commercial real estate: (1) Pass $ 130,211 $ 394,179 $ 290,815 $ 289,673 $ 148,317 $ 124,443 $ 21,263 $ 1,398,901 Special mention 4,383 — — 1,154 20,707 — 2,110 28,354 Classified 1,904 3,473 1,587 2,782 1,427 2,529 114 13,816 Total commercial real estate loans $ 136,498 $ 397,652 $ 292,402 $ 293,609 $ 170,451 $ 126,972 $ 23,487 $ 1,441,071 Current period gross charge-offs $ — $ — $ — $ — $ 2 $ 26 $ — $ 28 Current period gross recoveries — — — — — 3 — 3 Current period net charge-offs (recoveries) $ — $ — $ — $ — $ 2 $ 23 $ — $ 25 (1) Excludes $13.6 million of commercial real estate loans at fair value, which are not included in the loss estimation methodology due to the fair value option election. Construction/land/land development: Pass $ 40,706 $ 193,152 $ 142,872 $ 119,935 $ 12,716 $ 2,505 $ 17,490 $ 529,376 Special mention — — 10,242 135 1,003 — — 11,380 Classified 306 317 1,079 716 1,508 291 3,263 7,480 Total construction/land/land development loans $ 41,012 $ 193,469 $ 154,193 $ 120,786 $ 15,227 $ 2,796 $ 20,753 $ 548,236 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Current period gross recoveries — — — — — — — — Current period net charge-offs (recoveries) $ — $ — $ — $ — $ — $ — $ — $ — Residential real estate: Pass $ 53,633 $ 354,359 $ 118,406 $ 114,721 $ 101,869 $ 89,887 $ 52,920 $ 885,795 Special mention 1,447 185 — — 801 196 — 2,629 Classified 94 1,658 2,354 2,955 2,214 6,826 228 16,329 Total residential real estate loans $ 55,174 $ 356,202 $ 120,760 $ 117,676 $ 104,884 $ 96,909 $ 53,148 $ 904,753 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Current period gross recoveries — — — — — 9 — 9 Current period net charge-offs (recoveries) $ — $ — $ — $ — $ — $ (9) $ — $ (9) Term Loans Amortized Cost Basis by Origination Year (Dollars in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Commercial and industrial: Pass $ 254,777 $ 700,996 $ 137,792 $ 103,342 $ 22,396 $ 33,753 $ 471,812 $ 1,724,868 Special mention 217 4,631 2,275 25,902 408 14,458 4,125 52,016 Classified 4,474 1,228 11,786 5,753 4,942 10,198 19,233 57,614 Total commercial and industrial loans $ 259,468 $ 706,855 $ 151,853 $ 134,997 $ 27,746 $ 58,409 $ 495,170 $ 1,834,498 Current period gross charge-offs $ — $ 4 $ 54 $ — $ 362 $ 1,282 $ 1,253 $ 2,955 Current period gross recoveries — — 13 — 11 76 8 108 Current period net charge-offs (recoveries) $ — $ 4 $ 41 $ — $ 351 $ 1,206 $ 1,245 $ 2,847 Mortgage Warehouse Lines of Credit: Pass $ — $ — $ — $ — $ — $ — $ 1,090,347 $ 1,090,347 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Current period gross recoveries — — — — — — — — Current period net charge-offs (recoveries) $ — $ — $ — $ — $ — $ — $ — $ — Consumer: Pass $ 1,858 $ 5,477 $ 2,656 $ 1,276 $ 154 $ 148 $ 5,652 $ 17,221 Classified — 28 9 1 — 5 13 56 Total consumer loans $ 1,858 $ 5,505 $ 2,665 $ 1,277 $ 154 $ 153 $ 5,665 $ 17,277 Current period gross charge-offs $ — $ — $ 22 $ 2 $ — $ 6 $ 14 $ 44 Current period gross recoveries — — — — — 13 — 13 Current period net charge-offs (recoveries) $ — $ — $ 22 $ 2 $ — $ (7) $ 14 $ 31 The following table reflects recorded investments in loans by credit quality indicator and origination year at December 31, 2020, excluding loans held for sale and loans accounted for at fair value. The Company had an immaterial amount of revolving loans converted to term loans at December 31, 2020. Term Loans Amortized Cost Basis by Origination Year (Dollars in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Basis Total Commercial real estate: (1) Pass $ 393,317 $ 290,394 $ 312,051 $ 154,445 $ 46,132 $ 106,994 $ 18,419 $ 1,321,752 Special mention 824 113 2,410 20,691 — 1,656 2,145 27,839 Classified 2,806 1,678 6,704 6,586 1,476 1,093 994 21,337 Total commercial real estate loans $ 396,947 $ 292,185 $ 321,165 $ 181,722 $ 47,608 $ 109,743 $ 21,558 $ 1,370,928 Current period gross charge-offs $ — $ — $ — $ 3,622 $ 199 $ 1,103 $ — $ 4,924 Current period gross recoveries — — — — — 19 — 19 Current period net charge-offs $ — $ — $ — $ 3,622 $ 199 $ 1,084 $ — $ 4,905 (1) Excludes $17.0 million of commercial real estate loans at fair value, which are not included in the loss estimation methodology due to the fair value option election. Term Loans Amortized Cost Basis by Origination Year (Dollars in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Basis Total Construction/land/land development: Pass $ 189,311 $ 150,281 $ 138,000 $ 12,907 $ 1,812 $ 1,157 $ 18,892 $ 512,360 Special mention 323 10,421 135 1,003 — — — 11,882 Classified — 1,811 726 1,507 143 168 3,263 7,618 Total construction/land/land development loans $ 189,634 $ 162,513 $ 138,861 $ 15,417 $ 1,955 $ 1,325 $ 22,155 $ 531,860 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Current period gross recoveries — — — — — 1 — 1 Current period net charge-offs (recoveries) $ — $ — $ — $ — $ — $ (1) $ — $ (1) Residential real estate: Pass $ 367,652 $ 143,368 $ 103,450 $ 102,272 $ 41,522 $ 50,094 $ 53,854 $ 862,212 Special mention 188 — 29 1,875 9,287 803 — 12,182 Classified 1,857 2,403 2,982 511 1,344 1,533 96 10,726 Total residential real estate loans $ 369,697 $ 145,771 $ 106,461 $ 104,658 $ 52,153 $ 52,430 $ 53,950 $ 885,120 Current period gross charge-offs $ 94 $ 271 $ — $ 283 $ — $ 44 $ — $ 692 Current period gross recoveries — — — — — 202 — 202 Current period net charge-offs (recoveries) $ 94 $ 271 $ — $ 283 $ — $ (158) $ — $ 490 Commercial and industrial: Pass $ 851,780 $ 153,722 $ 110,092 $ 29,413 $ 9,927 $ 26,964 $ 511,220 $ 1,693,118 Special mention 4,860 2,059 26,438 423 — 14,843 8,077 56,700 Classified 5,436 12,250 5,859 5,450 5,950 6,707 26,392 68,044 Total commercial and industrial loans $ 862,076 $ 168,031 $ 142,389 $ 35,286 $ 15,877 $ 48,514 $ 545,689 $ 1,817,862 Current period gross charge-offs $ 189 $ 204 $ 87 $ 121 $ 3,228 $ 469 $ 2,404 $ 6,702 Current period gross recoveries — 42 20 81 185 112 582 1,022 Current period net charge-offs $ 189 $ 162 $ 67 $ 40 $ 3,043 $ 357 $ 1,822 $ 5,680 Mortgage Warehouse Lines of Credit: Pass $ — $ — $ — $ — $ — $ — $ 1,084,001 $ 1,084,001 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Current period gross recoveries — — — — — — — — Current period net charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Consumer: Pass $ 6,702 $ 3,318 $ 1,578 $ 203 $ 116 $ 83 $ 5,935 $ 17,935 Classified 28 8 — — 6 1 13 56 Total consumer loans $ 6,730 $ 3,326 $ 1,578 $ 203 $ 122 $ 84 $ 5,948 $ 17,991 Current period gross charge-offs $ — $ 39 $ 23 $ 8 $ — $ 4 $ 2 $ 76 Current period gross recoveries — — 1 7 5 7 4 24 Current period net charge-offs (recoveries) $ — $ 39 $ 22 $ 1 $ (5) $ (3) $ (2) $ 52 The following tables present the Company's loan portfolio aging analysis at the dates indicated: March 31, 2021 (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Loans Past Due 90 Days or More Total Past Due Current Loans Total Loans Receivable Accruing Loans 90 or More Days Past Due Loans secured by real estate: Commercial real estate (1) $ 1,055 $ — $ 571 $ 1,626 $ 1,453,023 $ 1,454,649 $ — Construction/land/land development 257 253 1,832 2,342 545,894 548,236 — Residential real estate 2,287 4,361 3,116 9,764 894,989 904,753 — Total real estate 3,599 4,614 5,519 13,732 2,893,906 2,907,638 — Commercial and industrial 791 165 11,825 12,781 1,821,717 1,834,498 — Mortgage warehouse lines of credit — — — — 1,090,347 1,090,347 — Consumer 58 1 2 61 17,216 17,277 — Total LHFI $ 4,448 $ 4,780 $ 17,346 $ 26,574 $ 5,823,186 $ 5,849,760 $ — ____________________________ (1) Includes $13.6 million of commercial real estate loans at fair value December 31, 2020 (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Loans Past Due 90 Days or More Total Past Due Current Loans Total Loans Receivable Accruing Loans 90 or More Days Past Due Loans secured by real estate: Commercial real estate (1) $ 1,072 $ — $ 3,172 $ 4,244 $ 1,383,695 $ 1,387,939 $ — Construction/land/land development 369 1 2,328 2,698 529,162 531,860 — Residential real estate 3,774 134 364 4,272 880,848 885,120 — Total real estate 5,215 135 5,864 11,214 2,793,705 2,804,919 — Commercial and industrial 703 1,097 12,625 14,425 1,803,437 1,817,862 — Mortgage warehouse lines of credit — — — — 1,084,001 1,084,001 — Consumer 113 9 2 124 17,867 17,991 — Total LHFI $ 6,031 $ 1,241 $ 18,491 $ 25,763 $ 5,699,010 $ 5,724,773 $ — ____________________________ (1) Includes $17.0 million of commercial real estate loans at fair value The following tables detail activity in the allowance for loan credit losses by portfolio segment. Accrued interest of $20.2 million and $12.6 million was not included in the book value for the purposes of calculating the allowance at March 31, 2021 and March 31, 2020, respectively. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. Three Months Ended March 31, 2021 (Dollars in thousands) Beginning Balance Charge-offs Recoveries Provision (Benefit) (1) Ending Balance Loans secured by real estate: Commercial real estate $ 15,430 $ 28 $ 3 $ 2,992 $ 18,397 Construction/land/land development 8,191 — — (802) 7,389 Residential real estate 9,418 — 9 (1,133) 8,294 Commercial and industrial 51,857 2,955 108 332 49,342 Mortgage warehouse lines of credit 856 — — 67 923 Consumer 918 44 13 (96) 791 Total $ 86,670 $ 3,027 $ 133 $ 1,360 $ 85,136 ____________________________ (1) The $1.4 million provision for credit losses on the consolidated statements of income includes a $1.4 million net loan loss provision, and a $52,000 provision for off-balance sheet commitments for the three months ended March 31, 2021. Three Months Ended March 31, 2020 (Dollars in thousands) Beginning Balance Impact of Adopting ASC 326 Charge-offs Recoveries Provision (1) Ending Balance Loans secured by real estate: Commercial real estate $ 10,013 $ (5,052) $ 172 $ 2 $ 4,463 $ 9,254 Construction/land/land development 3,711 1,141 — — 202 5,054 Residential real estate 6,332 (2,526) 49 149 589 4,495 Commercial and industrial 16,960 7,296 1,180 169 12,578 35,823 Mortgage warehouse lines of credit 262 29 — — 488 779 Consumer 242 360 24 4 76 658 Total $ 37,520 $ 1,248 $ 1,425 $ 324 $ 18,396 $ 56,063 ____________________________ (1) The $18.5 million provision for credit losses on the consolidated statements of income includes a $18.4 million net loan loss provision and a $135,000 provision for off-balance sheet commitments for the three months ended March 31, 2020. The decrease in provision expense compared to the quarter ended March 31, 2020, was primarily due to improvement in forecasted economic conditions during the quarter ended March 31, 2021, as compared to forecasted worsening economic conditions during the quarter ended March 31, 2020. The Company's credit quality profile in relation to the allowance for loan credit losses drove a decline of $1.6 million in the collective reserve during the three months ended March 31, 2021, of which a $1.1 million decrease was related to qualitative factor changes across the Company’s risk pools for the three months ended March 31, 2021. Six commercial and industrial loans, reflecting four loan relationships, were written down during the quarter ended March 31, 2021, totaling $2.8 million. The provision for loan credit losses for the first quarter of 2020 was driven by a significant increase in uncertainty related to the economic impact of the current COVID-19 pandemic. Based upon the requirement of CECL, economic forecasts are essential for estimating the life of loan losses. The increased risk, as reflected in current and forecast adjustments, resulted in approximately $11.2 million in provision expense across the Company’s risk pools. An additional $6.0 million in provision expense was due to the current and forecast effects of individually evaluated loans. The provision for commercial real estate loans includes approximately $3.0 million in increased credit allowances related to individually evaluated loans. The provision for commercial and industrial loans includes $5.4 million related to current and forecast factors as well as approximately $3.0 million related to individually evaluated loans. The only significant charge-off in commercial and industrial loans during the first quarter of 2020 was for $732,000 on an operating loan secured by equipment. The following tables show the recorded investment in loans by loss estimation methodology at March 31, 2021, and December 31, 2020. March 31, 2021 Collectively Evaluated Individually Evaluated (Dollars in thousands) Probability of Default Fair Value of Collateral Discounted Cash Flow Total Loans secured by real estate: Commercial real estate (1) $ 1,438,054 $ 571 $ 2,446 $ 1,441,071 Construction/land/land development 545,796 2,112 328 548,236 Residential real estate 894,416 8,482 1,855 904,753 Commercial and industrial 1,814,453 9,388 10,657 1,834,498 Mortgage warehouse lines of credit 1,090,347 — — 1,090,347 Consumer 17,275 2 — 17,277 Total $ 5,800,341 $ 20,555 $ 15,286 $ 5,836,182 ____________________________ (1) Excludes $13.6 million of commercial real estate loans at fair value, which are not included in the loss estimation methodology due to the fair value option election. December 31, 2020 Collectively Evaluated Individually Evaluated (Dollars in thousands) Probability of Default Fair Value of Collateral Discounted Cash Flow Total Loans secured by real estate: Commercial real estate (1) $ 1,365,284 $ 3,173 $ 2,471 $ 1,370,928 Construction/land/land development 528,894 2,621 345 531,860 Residential real estate 879,015 2,009 4,096 885,120 Commercial and industrial 1,804,049 3,152 10,661 1,817,862 Mortgage warehouse lines of credit 1,084,001 — — 1,084,001 Consumer 17,991 — — 17,991 Total $ 5,679,234 $ 10,955 $ 17,573 $ 5,707,762 ____________________________ (1) Excludes $17.0 million of commercial real estate loans at fair value, which are not included in the loss estimation methodology due to the fair value option election. The following tables show the allowance for loan credit losses by loss estimation methodology at March 31, 2021, and December 31, 2020. March 31, 2021 Collectively Evaluated Individually Evaluated (Dollars in thousands) Probability of Default Fair Value of Collateral Discounted Cash Flow Total Loans secured by real estate: Commercial real estate $ 18,388 $ — $ 9 $ 18,397 Construction/land/land development 7,258 131 — 7,389 Residential real estate 7,992 — 302 8,294 Commercial and industrial 41,488 3,201 4,653 49,342 Mortgage warehouse lines of credit 923 — — 923 Consumer 789 2 — 791 Total $ 76,838 $ 3,334 $ 4,964 $ 85,136 December 31, 2020 Collectively Evaluated Individually Evaluated (Dollars in thousands) Probability of Default Fair Value of Collateral Discounted Cash Flow Total Loans secured by real estate: Commercial real estate $ 14,896 $ 525 $ 9 $ 15,430 Construction/land/land development 8,062 128 1 8,191 Residential real estate 8,983 — 435 9,418 Commercial and industrial 44,714 1,707 5,436 51,857 Mortgage warehouse lines of credit 856 — — 856 Consumer 918 — — 918 Total $ 78,429 $ 2,360 $ 5,881 $ 86,670 Note that the Company is not using the collateral maintenance agreement practical expedient. All fair value of collateral is real estate related. Collateral-dependent loans consist primarily of commercial real estate and commercial and industrial loans. These loans are individually evaluated when foreclosure is probable or when the repayment of the loan is expected to be provided substantially through the operation or sale of the underlying collateral. Loan balances are charged down to the underlying collateral value when they are deemed uncollectible. Nonaccrual LHFI were as follows: Nonaccrual With No Nonaccrual (Dollars in thousands) Loans secured by real estate: March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020 Commercial real estate $ 1,012 $ 1,053 $ 1,085 $ 3,704 Construction/land/land development 955 1,319 2,431 2,962 Residential real estate 8,901 2,436 10,692 6,530 Total real estate 10,868 4,808 14,208 13,196 Commercial and industrial 76 82 19,094 12,897 Consumer — — 56 56 Total nonaccrual loans $ 10,944 $ 4,890 $ 33,358 $ 26,149 All interest accrued but not received for loans placed on nonaccrual status is reversed against interest income. Subsequent receipts on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. At March 31, 2021, the Company had no funding commitments for which the terms have been modified in TDRs. For the three months ended March 31, 2021 and 2020, gross interest income that would have been recorded had the nonaccruing loans been current in accordance with their original terms was $341,000 and $354,000, respectively. No interest income was recorded on these loans while they were considered nonaccrual during the three months ended March 31, 2021 and 2020. The Company elects the fair value option for recording residential mortgage loans held for sale, as well as certain commercial real estate loans in accordance with U.S. GAAP. The Company had $963,000 of nonaccrual mortgage loans held for sale that were recorded using the fair value option election at March 31, 2021, compared to $681,000 at December 31, 2020. There were no nonaccrual LHFI that were recorded using the fair value option election at March 31, 2021, or December 31, 2020. Certain borrowers are currently unable to meet their contractual payment obligations because of the adverse effects of COVID-19. To help mitigate these effects, loan customers may apply for a deferral of payments, or portions thereof, for up to 90 days. The CARES Act and related guidance from the federal banking agencies provide financial institutions the option to temporarily suspend requirements under GAAP related to classification of certain loan modifications as TDRs to account for the current and anticipated effects of COVID-19. The CARES Act, as amended by the Consolidated Appropriations Act, 2021, specified that COVID-19 related loan modifications executed between March 1, 2020 and the earlier of (i) 60 days after the date of termination of the national emergency declared by the President and (ii) January 1, 2022, on loans that were current as of December 31, 2019 are not TDRs. Additionally, under guidance from the federal banking agencies, other short-term modifications made on a good faith basis in response to COVID-19 to borrowers that were current prior to any relief are not TDRs under ASC Subtopic 310-40, “Troubled Debt Restructuring by Creditors.” These modifications include short-term (e.g., up to six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant. At March 31, 2021, the Company had 24 loans totaling $5.3 million under COVID-19 related forbearance agreements that were not treated as TDRs pursuant to the CARES Act and interagency guidance compared to 49 loans totaling $97.7 million at December 31, 2020. Loans classified as TDRs, excluding the impact of forbearances granted due to COVID-19, were as follows: (Dollars in thousands) March 31, 2021 December 31, 2020 TDRs Nonaccrual TDRs $ 5,515 $ 5,671 Performing TDRs 3,237 3,314 Total $ 8,752 $ 8,985 There were no loans classified as TDR's during the three months ended March 31, 2021. The tables below summarize loans classified as TDR's by loan and concession type during the three months ended March 31, 2020. Three Months Ended March 31, 2020 (Dollars in thousands) Number of Loans Restructured Pre-Modification Recorded Balance Term Concessions Interest Rate Concessions Combination of Term and Rate Concessions Total Modifications Commercial and industrial 2 $ 128 $ 127 $ — $ — $ 127 Total 2 $ 128 $ 127 $ — $ — $ 127 During the three months ended March 31, 2021, no loans defaulted after having been modified as a TDR within the previous 12 months. During the three months ended March 31, 2020, two loans with a combined outstanding principal balance of $2.3 million defaulted after having been modified as a TDR within the previous 12 months. A payment default is defined as a loan that was 90 or more days past due. The modifications made during the three months ended March 31, 2020, did not significantly impact the Company's determination of the allowance for loan credit losses. The Company monitors the performance of the modified loans to their restructured terms on an ongoing basis. In the event of a subsequent default, the allowance for loan credit losses continues to be reassessed on the basis of an individual evaluation of each loan. |