Loans and Lease Finance Receivables and Allowance for Credit Losses | 5. LOANS AND LEASE FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES The following table provides a summary of total loans and lease finance receivables by type. March 31, 2021 December 31, 2020 (Dollars in thousands) Commercial real estate $ 5,596,781 $ 5,501,509 Construction 96,356 85,145 SBA 307,727 303,896 SBA - Paycheck Protection Program (PPP) 897,724 882,986 Commercial and industrial 753,708 812,062 Dairy & livestock and agribusiness 261,088 361,146 Municipal lease finance receivables 42,349 45,547 SFR mortgage 255,400 270,511 Consumer and other loans 81,924 86,006 Total loans, at amortized cost 8,293,057 8,348,808 Less: Allowance for credit losses (71,805 ) (93,692 ) Total loans and lease finance receivables, net $ 8,221,252 $ 8,255,116 As of March 31, 2021, 71.73% of the Company’s total loan portfolio consisted of real estate loans, with commercial real estate loans representing 67.49% of total loans. Substantially all of the Company’s real estate loans and construction loans are secured by real properties located in California. As of March 31, 2021, $327.4 million, or 5.85% of the total commercial real estate loans included loans secured by farmland, compared to $314.4 million, or 5.72%, at December 31, 2020. The loans secured by farmland included $129.2 million for loans secured by dairy & livestock land and $198.1 million for loans secured by agricultural land at March 31, 2021, compared to $132.9 million for loans secured by dairy & livestock land and $181.5 million for loans secured by agricultural land at December 31, 2020. As of March 31, 2021, dairy & livestock and agribusiness loans of $261.1 million were comprised of $229.1 million for dairy & livestock loans and $31.9 million for agribusiness loans, compared to $320.1 million for dairy & livestock loans and $41.0 million for agribusiness loans at December 31, 2020. At March 31, 2021 and December 31, 2020, loans totaling $6.07 billion and $6.07 billion, respectively, were pledged to secure the borrowings and available lines of credit from the FHLB and the Federal Reserve Bank. There were no held-for-sale Credit Quality Indicators We monitor credit quality by evaluating various risk attributes and utilize such information in our evaluation of the appropriateness of the allowance for credit losses. Internal credit risk ratings, within our loan risk rating system, are the credit quality indicators that we most closely monitor. An important element of our approach to credit risk management is our loan risk rating system. The originating officer assigns each loan an initial risk rating, which is reviewed and confirmed or changed, as appropriate, by credit management. Approvals are made based upon the amount of inherent credit risk specific to the transaction and are reviewed for appropriateness by senior line and credit management personnel. Credits are monitored by line and credit management personnel for deterioration or improvement in a borrower’s financial condition, which would impact the ability of the borrower to perform under the contract. Risk ratings are adjusted as necessary. Loans are risk rated into the following categories: Pass, Special Mention, Substandard, Doubtful and Loss. Each of these groups is assessed for the proper amount to be used in determining the adequacy of our allowance for losses. These categories can be described as follows: Pass — These loans, including loans on the Bank’s internal watch list, range from minimal credit risk to lower than average, but still acceptable, credit risk. Watch list loans usually require more than normal management attention. Loans on the watch list may involve borrowers with adverse financial trends, higher debt/equity ratios, or weaker liquidity positions, but not to the degree of being considered a defined weakness or problem loan where risk of loss may be apparent. Special Mention — Loans assigned to this category have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Substandard — Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Company will sustain some loss if deficiencies are not corrected. Doubtful — Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or the liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Loss — Loans classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this asset with insignificant value even though partial recovery may be affected in the future. The following table summarizes loans by type and origination year, according to our internal risk ratings as of the dates presented. Origination Year Revolving loans cost basis Revolving loans converted to term loans March 31, 2021 2021 2020 2019 2018 2017 Prior Total (Dollars in thousands) Commercial real estate loans: Risk Rating: Pass $ 282,950 $ 981,750 $ 678,640 $ 588,405 $ 569,006 $ 2,063,996 $ 180,542 $ 35,794 $ 5,381,083 Special Mention 10,420 9,254 11,441 25,826 50,811 66,570 4,609 9,890 188,821 Substandard - - 479 2,156 9,064 14,347 500 331 26,877 Doubtful & Loss - - - - - - - - - Total Commercial real estate loans: $ 293,370 $ 991,004 $ 690,560 $ 616,387 $ 628,881 $ 2,144,913 $ 185,651 $ 46,015 $ 5,596,781 Construction loans: Risk Rating: Pass $ 876 $ 19,034 $ 7,974 $ 6,380 $ 2,257 $ 4 $ 52,058 $ - $ 88,583 Special Mention - - - 7,773 - - - - 7,773 Substandard - - - - - - - - - Doubtful & Loss - - - - - - - - - Total Construction loans: $ 876 $ 19,034 $ 7,974 $ 14,153 $ 2,257 $ 4 $ 52,058 $ - $ 96,356 SBA loans: Risk Rating: Pass $ 20,599 $ 44,593 $ 12,742 $ 43,163 $ 55,759 $ 104,385 $ - $ 2,976 $ 284,217 Special Mention - - - - 5,408 6,864 - - 12,272 Substandard - - - 876 5,145 5,217 - - 11,238 Doubtful & Loss - - - - - - - - - Total SBA loans: $ 20,599 $ 44,593 $ 12,742 $ 44,039 $ 66,312 $ 116,466 $ - $ 2,976 $ 307,727 SBA - PPP loans: Risk Rating: Pass $ 314,940 $ 581,281 $ - $ - $ - $ - $ - $ - $ 896,221 Special Mention - - - - - - - - - Substandard - 1,503 - - - - - - 1,503 Doubtful & Loss - - - - - - - - - Total SBA - PPP loans: $ 314,940 $ 582,784 $ - $ - $ - $ - $ - $ - $ 897,724 Commercial and industrial loans: Risk Rating: Pass $ 31,474 $ 100,585 $ 147,772 $ 59,414 $ 50,335 $ 97,792 $ 219,271 $ 6,303 $ 712,946 Special Mention 486 1,781 1,881 1,732 856 4,798 10,485 247 22,266 Substandard 2,643 1,611 808 3,467 2,039 355 6,183 1,390 18,496 Doubtful & Loss - - - - - - - - - Total Commercial and industrial $ 34,603 $ 103,977 $ 150,461 $ 64,613 $ 53,230 $ 102,945 $ 235,939 $ 7,940 $ 753,708 Origination Year Revolving loans cost basis Revolving loans converted to term loans March 31, 2021 2021 2020 2019 2018 2017 Prior Total (Dollars in thousands) Dairy & livestock and agribusiness Risk Rating: Pass $ - $ 2,216 $ 1,660 $ 1,102 $ 256 $ 391 $ 227,667 $ 387 $ 233,679 Special Mention - - - 347 - 1,684 11,029 7,342 20,402 Substandard - - - 259 - - - 6,748 7,007 Doubtful & Loss - - - - - - - - - Total Dairy & livestock and $ - $ 2,216 $ 1,660 $ 1,708 $ 256 $ 2,075 $ 238,696 $ 14,477 $ 261,088 Municipal lease finance receivables loans: Risk Rating: Pass $ - $ 8,217 $ - $ 2,556 $ 10,248 $ 20,916 $ - $ - $ 41,937 Special Mention - - - - - 412 - - 412 Substandard - - - - - - - - - Doubtful & Loss - - - - - - - - - Total Municipal lease finance $ - $ 8,217 $ - $ 2,556 $ 10,248 $ 21,328 $ - $ - $ 42,349 SFR mortgage loans: Risk Rating: Pass $ 7,745 $ 61,021 $ 53,148 $ 27,117 $ 20,857 $ 81,721 $ 2 $ - $ 251,611 Special Mention - - - - - 195 - - 195 Substandard - - - - - 3,168 - 426 3,594 Doubtful & Loss - - - - - - - - - Total SFR mortgage loans: $ 7,745 $ 61,021 $ 53,148 $ 27,117 $ 20,857 $ 85,084 $ 2 $ 426 $ 255,400 Consumer and other loans: Risk Rating: Pass $ 2,618 $ 7,558 $ 1,833 $ 778 $ 878 $ 2,157 $ 61,735 $ 1,791 $ 79,348 Special Mention 975 - - - - 90 516 - 1,581 Substandard - - - - - 170 149 676 995 Doubtful & Loss - - - - - - - - - Total Consumer and other loans: $ 3,593 $ 7,558 $ 1,833 $ 778 $ 878 $ 2,417 $ 62,400 $ 2,467 $ 81,924 Total Loans: Risk Rating: Pass $ 661,202 $ 1,806,255 $ 903,769 $ 728,915 $ 709,596 $ 2,371,362 $ 741,275 $ 47,251 $ 7,969,625 Special Mention 11,881 11,035 13,322 35,678 57,075 80,613 26,639 17,479 253,722 Substandard 2,643 3,114 1,287 6,758 16,248 23,257 6,832 9,571 69,710 Doubtful & Loss - - - - - - - - - Total Loans: $ 675,726 $ 1,820,404 $ 918,378 $ 771,351 $ 782,919 $ 2,475,232 $ 774,746 $ 74,301 $ 8,293,057 Origination Year Revolving loans cost basis Revolving loans converted to term loans December 31, 2020 2020 2019 2018 2017 2016 Prior Total (Dollars in thousands) Commercial real estate loans: Risk Rating: Pass $ 979,499 $ 691,091 $ 607,753 $ 617,640 $ 550,105 $ 1,646,876 $ 192,583 $ 24,548 $ 5,310,095 Special Mention 9,332 7,162 30,049 43,870 17,398 49,840 5,720 994 164,365 Substandard - 491 2,157 7,382 2,528 13,790 360 341 27,049 Doubtful & Loss - - - - - - - - - Total Commercial real estate loans: $ 988,831 $ 698,744 $ 639,959 $ 668,892 $ 570,031 $ 1,710,506 $ 198,663 $ 25,883 $ 5,501,509 Construction loans: Risk Rating: Pass $ 14,511 $ 9,350 $ 14,945 $ 2,258 $ - $ 4 $ 44,077 $ - $ 85,145 Special Mention - - - - - - - - - Substandard - - - - - - - - - Doubtful & Loss - - - - - - - - - Total Construction loans: $ 14,511 $ 9,350 $ 14,945 $ 2,258 $ - $ 4 $ 44,077 $ - $ 85,145 SBA loans: Risk Rating: Pass $ 47,901 $ 12,821 $ 44,950 $ 58,839 $ 26,136 $ 86,085 $ - $ 2,976 $ 279,708 Special Mention - - - 5,446 1,336 5,648 - - 12,430 Substandard - - 904 5,503 1,554 3,797 - - 11,758 Doubtful & Loss - - - - - - - - - Total SBA loans: $ 47,901 $ 12,821 $ 45,854 $ 69,788 $ 29,026 $ 95,530 $ - $ 2,976 $ 303,896 SBA - PPP loans: Risk Rating: Pass $ 882,986 $ - $ - $ - $ - $ - $ - $ - $ 882,986 Special Mention - - - - - - - - - Substandard - - - - - - - - - Doubtful & Loss - - - - - - - - - Total SBA - PPP loans: $ 882,986 $ - $ - $ - $ - $ - $ - $ - $ 882,986 Commercial and industrial loans: Risk Rating: Pass $ 104,478 $ 168,050 $ 62,453 $ 56,043 $ 32,149 $ 76,019 $ 257,250 $ 6,058 $ 762,500 Special Mention 1,995 1,081 1,892 1,028 95 4,882 17,395 1,132 29,500 Substandard 4,346 860 3,996 2,282 285 94 6,677 1,522 20,062 Doubtful & Loss - - - - - - - - - Total Commercial and industrial loans: $ 110,819 $ 169,991 $ 68,341 $ 59,353 $ 32,529 $ 80,995 $ 281,322 $ 8,712 $ 812,062 Origination Year Revolving loans cost basis Revolving loans converted to term loans December 31, 2020 2020 2019 2018 2017 2016 Prior Total (Dollars in thousands) Dairy & livestock and agribusiness loans: Risk Rating: Pass $ 1,041 $ 1,765 $ 1,199 $ 5,680 $ 120 $ 320 $ 319,211 $ 363 $ 329,699 Special Mention 878 - 364 - - - 13,255 1,511 16,008 Substandard - - 784 693 2,285 - - 11,677 15,439 Doubtful & Loss - - - - - - - - - Total Dairy & livestock and agribusiness loans: $ 1,919 $ 1,765 $ 2,347 $ 6,373 $ 2,405 $ 320 $ 332,466 $ 13,551 $ 361,146 Municipal lease finance receivables loans: Risk Rating: Pass $ 8,478 $ - $ 2,556 $ 10,249 $ 3,586 $ 20,266 $ - $ - $ 45,135 Special Mention - - - - - 412 - - 412 Substandard - - - - - - - - - Doubtful & Loss - - - - - - - - - Total Municipal lease finance receivables loans: $ 8,478 $ - $ 2,556 $ 10,249 $ 3,586 $ 20,678 $ - $ - $ 45,547 SFR mortgage loans: Risk Rating: Pass $ 65,463 $ 59,596 $ 29,142 $ 22,452 $ 27,192 $ 62,593 $ 3 $ - $ 266,441 Special Mention - - - - - 452 - - 452 Substandard - - - - 229 2,957 - 432 3,618 Doubtful & Loss - - - - - - - - - Total SFR mortgage loans: $ 65,463 $ 59,596 $ 29,142 $ 22,452 $ 27,421 $ 66,002 $ 3 $ 432 $ 270,511 Consumer and other loans: Risk Rating: Pass $ 8,557 $ 2,077 $ 871 $ 969 $ 1,586 $ 961 $ 67,774 $ 1,688 $ 84,483 Special Mention - - - - - 91 517 22 630 Substandard - - - - - 172 - 721 893 Doubtful & Loss - - - - - - - - - Total Consumer and other loans: $ 8,557 $ 2,077 $ 871 $ 969 $ 1,586 $ 1,224 $ 68,291 $ 2,431 $ 86,006 Total Loans: Risk Rating: Pass $ 2,112,914 $ 944,750 $ 763,869 $ 774,130 $ 640,874 $ 1,893,124 $ 880,898 $ 35,633 $ 8,046,192 Special Mention 12,205 8,243 32,305 50,344 18,829 61,325 36,887 3,659 223,797 Substandard 4,346 1,351 7,841 15,860 6,881 20,810 7,037 14,693 78,819 Doubtful & Loss - - - - - - - - - Total Loans: $ 2,129,465 $ 954,344 $ 804,015 $ 840,334 $ 666,584 $ 1,975,259 $ 924,822 $ 53,985 $ 8,348,808 Allowance for Credit Losses Our allowance for credit losses is based upon lifetime loss rate models developed from an estimation framework that uses historical lifetime loss experiences to derive loss rates at a collective pool level. We measure the expected credit losses on a collective (pooled) basis for those loans that share similar risk characteristics. We have three collective loan pools: Commercial Real Estate, Commercial and Industrial, and Consumer. Our ACL amounts are largely driven by portfolio characteristics, including loss history and various risk attributes, and the economic outlook for certain macroeconomic variables. Risk attributes for commercial real estate loans include OLTV, origination year, loan seasoning, and macroeconomic variables that include GDP growth, commercial real estate price index and unemployment rate. Risk attributes for commercial and industrial loans include internal risk ratings, borrower industry sector, loan credit spreads and macroeconomic variables that include unemployment rate and BBB spread. The macroeconomic variables for Consumer include unemployment rate and GDP. The Commercial Real Estate methodology is applied over commercial real estate loans, a portion of construction loans, and a portion of SBA loans (excluding Payment Protection Program loans). The Commercial and Industrial methodology is applied over a substantial portion of the Company’s commercial and industrial loans, all dairy & livestock and agribusiness loans, municipal lease receivables, as well as the remaining portion of SBA loans (excluding Payment Protection Program loans). The Consumer methodology is applied to SFR mortgage loans, consumer loans, as well as the remaining construction loans. In addition to determining the quantitative life of loan loss rate to be applied against the amortized cost basis of the portfolio segments, management reviews current conditions and forecasts to determine whether adjustments are needed to ensure that the life of loan loss rates reflect both the current state of the portfolio, and expectations for macroeconomic changes. Our methodology for assessing the appropriateness of the allowance is reviewed on a regular basis and considers overall risks in the Bank’s loan portfolio. Refer to Note 3 – Summary of Significant Accounting Policies contained herein for a more detailed discussion concerning the allowance for credit losses. Our allowance for credit losses at March 31, 2021 decreased from the prior quarter end by $21.9 million, as a result of a $19.5 million recapture of provision for credit losses and net charge-offs of $2.4 million. The recapture of provision for credit losses was primarily due to the forecasted improvements in macroeconomic variables, with the greatest impact reflected in an $18.9 million decline in the ACL for Commercial Real Estate loans. During the first quarter of 2020, we recorded a provision for credit losses of $12.0 million, due to the initial forecast of a severe economic downturn from the COVID-19 Management believes that the ACL was appropriate at March 31, 2021 and December 31, 2020. As there is a high degree of uncertainty around the epidemiological assumptions and impact of government responses to the pandemic that impact our economic forecast, no assurance can be given that economic conditions that adversely affect the Company’s service areas or other circumstances will not be reflected in increased provisions for credit losses in the future. The following tables present the balance and activity related to the allowance for credit losses for held-for-investment Three Months Ended March 31, 2021 Ending Balance Charge-offs Recoveries (Recapture of) Ending Balance (Dollars in thousands) Commercial real estate $ 75,439 $ - $ - $ (18,867 ) $ 56,572 Construction 1,934 - 3 (59 ) 1,878 SBA 2,992 - 4 (484 ) 2,512 SBA - PPP - - - - - Commercial and industrial 7,142 (2,475 ) 2 1,770 6,439 Dairy & livestock and agribusiness 3,949 - - (1,227 ) 2,722 Municipal lease finance receivables 74 - - (39 ) 35 SFR mortgage 367 - 79 (148 ) 298 Consumer and other loans 1,795 - - (446 ) 1,349 Total allowance for credit losses $ 93,692 $ (2,475 ) $ 88 $ (19,500 ) $ 71,805 Three Months Ended March 31, 2020 Ending Balance, prior to adoption of ASU 2016-13 December 31, 2019 Impact of Adoption of ASU 2016-13 Charge-offs Recoveries Provision for (Recapture of) Credit Losses Ending Balance March 31, 2020 (Dollars in thousands) Commercial real estate $48,629 $ 3,547 $ - $ - $ 6,251 $ 58,427 Construction 858 655 - 3 3,116 4,632 SBA 1,453 1,818 - - 675 3,946 Commercial and industrial 8,880 (2,442 ) - 2 2,947 9,387 Dairy & livestock and agribusiness 5,255 (186 ) - - (803 ) 4,266 Municipal lease finance receivables 623 (416 ) - - 70 277 SFR mortgage 2,339 (2,043 ) - 206 (221 ) 281 Consumer and other loans 623 907 (86 ) 16 (35 ) 1,425 Total allowance for credit losses $68,660 $ 1,840 $ (86 ) $ 227 $ 12,000 $ 82,641 Past Due and Nonperforming Loans We seek to manage asset quality and control credit risk through diversification of the loan portfolio and the application of policies designed to promote sound underwriting and loan monitoring practices. The Bank’s Credit Management Division is in charge of monitoring asset quality, establishing credit policies and procedures and enforcing the consistent application of these policies and procedures across the Bank. Reviews of nonperforming, past due loans and larger credits, designed to identify potential charges to the allowance for credit losses, are conducted on an ongoing basis. These reviews consider such factors as the financial strength of borrowers and any guarantors, the value of the applicable collateral, loan loss experience, estimated credit losses, growth in the loan portfolio, prevailing economic conditions and other factors. Refer to Note 3 – Summary of Significant Accounting Policies 10-K The following table presents the recorded investment in, and the aging of, past due loans (including nonaccrual loans), by type of loans as of the dates presented. March 31, 2021 30-59 Days 60-89 Days Greater than 89 Total Loans Not Total Loans (Dollars in thousands) Commercial real estate Owner occupied $ - $ 211 $ 6,934 $ 7,145 $ 2,165,178 $ 2,172,323 Non-owner 178 - - 178 3,424,280 3,424,458 Construction Speculative (1) - - - - 80,857 80,857 Non-speculative - - - - 15,499 15,499 SBA 258 - 1,028 1,286 306,441 307,727 SBA - PPP - - - - 897,724 897,724 Commercial and industrial 452 689 2,606 3,747 749,961 753,708 Dairy & livestock and agribusiness - - 259 259 260,829 261,088 Municipal lease finance receivables - - - - 42,349 42,349 SFR mortgage 266 - 229 495 254,905 255,400 Consumer and other loans 21 - 193 214 81,710 81,924 Total loans $ 1,175 $ 900 $ 11,249 $ 13,324 $ 8,279,733 $ 8,293,057 (1) Speculative construction loans are generally for properties where there is no identified buyer or renter. December 31, 2020 30-59 Days 60-89 Days Greater than 89 Total Loans Not Total Loans (Dollars in thousands) Commercial real estate Owner occupied $ - $ - $ 7,208 $ 7,208 $ 2,136,051 $ 2,143,259 Non-owner - - - - 3,358,250 3,358,250 Construction Speculative (1) - - - - 72,126 72,126 Non-speculative - - - - 13,019 13,019 SBA 531 2,415 1,025 3,971 299,925 303,896 SBA - PPP - - - - 882,986 882,986 Commercial and industrial 608 811 2,338 3,757 808,305 812,062 Dairy & livestock and agribusiness - - 784 784 360,362 361,146 Municipal lease finance receivables - - - - 45,547 45,547 SFR mortgage - - 229 229 270,282 270,511 Consumer and other loans - - - - 86,006 86,006 Total loans $ 1,139 $ 3,226 $ 11,584 $ 15,949 $ 8,332,859 $ 8,348,808 (1) Speculative construction loans are generally for properties where there is no identified buyer or renter. Amortized cost of our finance receivables and loans that are on nonaccrual status, including loans with no allowance are presented as of March 31, 2021 and December 31, 2020 by type of loan. March 31, 2021 Nonaccrual Total Loans Past (Dollars in thousands) Commercial real estate Owner occupied $ 7,395 $ 7,395 $ - Non-owner - - - Construction Speculative (2) - - - Non-speculative - - - SBA 2,076 2,412 - SBA - PPP - - - Commercial and industrial 1,506 2,967 - Dairy & livestock and agribusiness - 259 - Municipal lease finance receivables - - - SFR mortgage 424 424 - Consumer and other loans 312 312 - Total loans $ 11,713 $ 13,769 $ - (1) As of March 31, 2021, $2.1 million of nonaccruing loans were current, $400,000 were 60-89 (2) Speculative construction loans are generally for properties where there is no identified buyer or renter. December 31, 2020 Nonaccrual Total Loans Past (Dollars in thousands) Commercial real estate Owner occupied $ 7,563 $ 7,563 $ - Non-owner - - - Construction Speculative (2) - - - Non-speculative - - - SBA 2,035 2,273 - SBA - PPP - - - Commercial and industrial 1,576 3,129 - Dairy & livestock and agribusiness 785 785 - Municipal lease finance receivables 430 - - SFR mortgage - 430 - Consumer and other loans 167 167 - Total loans $ 12,556 $ 14,347 $ - (1) As of December 31, 2020, $1.4 million of nonaccruing loans were current, $2,000 were 30-59 60-89 (2) Speculative construction loans are generally for properties where there is no identified buyer or renter. (3) Excludes $184,000 of guaranteed portion of nonaccrual SBA loans that are in process of collection. Collateral Dependent Loans A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table presents the recorded investment in collateral-dependent loans by type of loans as of the dates presented. March 31, 2021 Number of Dependent on Collateral Real Estate Business Assets Other (Dollars in thousands) Commercial real estate $ 7,689 $ - $ - 8 Construction - - - 11 SBA 1,826 418 168 - SBA - PPP - - - - Commercial and industrial 421 7,708 143 21 Dairy & livestock and agribusiness - 259 - 1 Municipal lease finance receivables - - - - SFR mortgage 424 - - 2 Consumer and other loans 312 - - 3 Total collateral-dependent loans $ 10,672 $ 8,385 $ 311 46 December 31, 2020 Number of Dependent on Collateral Real Estate Business Assets Other (Dollars in thousands) Commercial real estate $ 7,883 $ - $ - 8 Construction - - - - SBA 1,761 326 185 10 SBA - PPP - - - - Commercial and industrial 470 5,542 95 18 Dairy & livestock and agribusiness - 785 - 1 Municipal lease finance receivables - - - - SFR mortgage 430 - - 2 Consumer and other loans 168 - - 2 Total collateral-dependent loans $ 10,712 $ 6,653 $ 280 41 Reserve for Unfunded Loan Commitments The allowance for off-balance off-balance Troubled Debt Restructurings (“TDRs”) Loans that are reported as TDRs are considered impaired and charge-off Summary of Significant Accounting Policies, 10-K As of March 31, 2021, there were $5.8 million of loans classified as a TDR, all of which were performing. TDRs on accrual status are comprised of loans that were accruing interest at the time of restructuring or have demonstrated repayment performance in compliance with the restructured terms for a sustained period and for which the Company anticipates full repayment of both principal and interest. At March 31, 2021, performing TDRs were comprised of three commercial and industrial loans of $4.5 million, five SFR mortgage loans of $1.0 million, and one commercial real estate loan of $294,000. The majority of TDRs have no specific allowance allocated as any impairment amount is normally charged off at the time the loan is considered uncollectible. We have no The following table provides a summary of the activity related to TDRs for the periods presented. Three Months Ended March 31, 2021 2020 (Dollars in thousands) Performing TDRs: Beginning balance $ 2,159 $ 3,112 New modifications 4,643 - Payoffs/payments, net and other (989 ) (299 ) TDRs returned to accrual status - - TDRs placed on nonaccrual status - - Ending balance $ 5,813 $ 2,813 Nonperforming TDRs: Beginning balance $ - $ 244 New modifications - - Charge-offs - - Payoffs/payments, net and other - (244 ) TDRs returned to accrual status - - TDRs placed on nonaccrual status - - Ending balance $ - $ - Total TDRs $ 5,813 $ 2,813 The following table summarizes loans modified as TDRs for the period presented. Modifications (1) For the Three Months Ended March 31, 2021 Number of Pre-Modification Post-Modification Outstanding Financial Effect (Dollars in thousands) Commercial real estate: Interest rate reduction - $ - $ - $ - $ - - - - - - Commercial and industrial: Interest rate reduction - - - - - Change in amortization 2 4,643 4,643 4,443 - SFR mortgage: Interest rate reduction - - - - - - - - - - Total loans 2 $ 4,643 $ 4,643 $ 4,443 $ - (1) The tables above exclude modified loans that were paid off prior to the end of the period. (2) Financial effects resulting from modifications represent charge-offs and current allowance for credit losses at modification date. As of March 31, 2021 and 2020, there were no loans that were modified as a TDR within the previous 12 months that subsequently defaulted during the three months ended March 31, 2021 and 2020, respectively. |