¹Purchased Credit Impaired loans (“PCI loans”) are loans with evidence of credit deterioration at purchase.

For purposes of the disclosures required pursuant to the adoption of ASC 310, the loan portfolio was disaggregated into segments. A portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. There are five loan portfolio segments that include commercial real estate, consumer real estate, construction and land development, commercial and industrial, and consumer and other.

As previously mentioned in Note 1 – Presentation of Financial Information, the CARES Act established the PPP, administered directly by the SBA. The PPP provides loans of up to $10 million to small businesses who were affected by economic conditions as a result of COVID-19 to provide cash-flow assistance to employers who maintain their payroll (including healthcare and certain related expenses), mortgage interest, rent, leases, utilities and interest on existing debt during the COVID-19 emergency. PPP loans carry an interest rate of one percent, and a maturity of two or five years. These loans are fully guaranteed by the SBA and are not included in the Company’s loan loss allowance calculations. The loans may be eligible for forgiveness by the SBA to the extent that the proceeds are used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of up to 24 weeks after the loan is made as long as certain conditions are met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA will be repaid by the SBA to the Company. The SBA pays the Company fees for processing PPP loans and the fees are accounted for as loan origination fees and recognized over the contractual loan term as a yield adjustment on the loans. At March 31, 2021, the net deferred fees outstanding for the 2020 PPP loans is $1.9 million and $5.4 million for the 2021 PPP loans, respectively. PPP loans are included in the Commercial and Industrial loan class. As of March 31, 2021, the Company had 3,710 PPP loans outstanding, with an outstanding principal balance of $338.3 million and as of December 31, 2020, the Company had 2,863 PPP loans outstanding, with an outstanding principal balance of $288.9 million.

The composition of loans by loan classification for impaired and performing loan status is summarized in the tables below (in thousands):


					Construction		Commercial
	Commercial		Consumer		and Land		and		Consumer
	Real Estate		Real Estate		Development		Industrial		and Other		Total
March 31, 2021:
Performing loans	$	1,053,610	$	420,419	$	280,623	$	685,598	$	11,998	$	2,452,248
Impaired loans		3,154		2,470		—		109		—		5,733
		1,056,764		422,889		280,623		685,707		11,998		2,457,981
PCI loans		13,877		9,597		5,350		303		21		29,148
Total loans	$	1,070,641	$	432,486	$	285,973	$	686,010	$	12,019	$	2,487,129

December 31, 2020:
Performing loans	$	992,982	$	432,356	$	272,727	$	633,992	$	12,789	$	2,344,846
Impaired loans		3,871		1,316		—		146		—		5,333
		996,853		433,672		272,727		634,138		12,789		2,350,179
PCI loans		16,123		10,258		5,348		308		27		32,064
Total loans	$	1,012,976	$	443,930	$	278,075	$	634,446	$	12,816	$	2,382,243

The following tables show the allowance for loan losses allocation by loan classification for impaired, PCI, and performing loans (in thousands):


					Construction		Commercial		Consumer
	Commercial		Consumer		and Land		and		and
	Real Estate		Real Estate		Development		Industrial		Other		Total
March 31, 2021:
Performing loans	$	7,386	$	3,018	$	1,968	$	5,022	$	108	$	17,502
Impaired loans		251		132		—		109		—		492
		7,637		3,150		1,968		5,131		108		17,994
PCI loans		—		158		—		216		2		376
Total loans	$	7,637	$	3,308	$	1,968	$	5,347	$	110	$	18,370

December 31, 2020:
Performing loans	$	7,579	$	3,267	$	2,076	$	4,768	$	110	$	17,800
Impaired loans		—		116		—		121		—		237
		7,579		3,383		2,076		4,889		110		18,037
PCI loans		—		88		—		218		3		309
Total loans	$	7,579	$	3,471	$	2,076	$	5,107	$	113	$	18,346

The following tables detail the changes in the allowance for loan losses by loan classification (in thousands):


	Three Months Ended March 31, 2021
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and		Consumer
	Real Estate		Estate		Development		Industrial		and Other		Total
Beginning balance	$	7,579	$	3,471	$	2,076	$	5,107	$	113	$	18,346
Charged-off loans		—		—		—		—		(120)		(120)
Recoveries of charge-offs		3		16		—		3		55		77
Provision charged to expense		55		(179)		(108)		237		62		67
Ending balance	$	7,637	$	3,308	$	1,968	$	5,347	$	110	$	18,370


	Three Months Ended March 31, 2020
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and		Consumer
	Real Estate		Estate		Development		Industrial		and Other		Total
Beginning balance	$	4,508	$	2,576	$	1,127	$	1,957	$	75	$	10,243
Charged-off loans		—		(2)		—		(8)		(76)		(86)
Recoveries of charge-offs		2		6		2		42		22		74
Provision charged to expense		1,453		721		355		566		105		3,200
Ending balance	$	5,963	$	3,301	$	1,484	$	2,557	$	126	$	13,431

We maintain the allowance at a level that we deem appropriate to adequately cover the probable losses inherent in the loan portfolio. Our provision for loan losses for the three months ended March 31, 2021, is $67 thousand compared to $3.2 million in the same period of 2020, a decrease of $3.1 million. As of March 31, 2021, and December 31, 2020, our allowance for loan losses was $18.4 million and $18.3 million, respectively, which we deemed to be adequate at each of the respective dates. Our allowance for loan loss as a percentage of total loans was 0.74% at March 31, 2021 and 0.77% at December 31, 2020.

The following tables outline the amount of each loan classification and the amount categorized into each risk rating (in thousands):


	March 31, 2021
					Construction		Commercial
	Commercial		Consumer		and Land		and		Consumer
Non PCI Loans:	Real Estate		Real Estate		Development		Industrial		and Other		Total
Pass	$	1,011,291	$	418,604	$	280,299	$	680,635	$	11,908	$	2,402,737
Watch		38,170		1,234		245		4,489		52		44,190
Special mention		3,922		44		—		297		—		4,263
Substandard		3,381		3,007		79		238		38		6,743
Doubtful		—		—		—		48		—		48
Total		1,056,764		422,889		280,623		685,707		11,998		2,457,981

PCI Loans:
Pass		11,088		8,173		1,430		257		20		20,968
Watch		1,592		206		3,405		—		1		5,204
Special mention		17		58		—		—		—		75
Substandard		1,180		1,160		515		46		—		2,901
Doubtful		—		—		—		—		—		—
Total		13,877		9,597		5,350		303		21		29,148
Total loans	$	1,070,641	$	432,486	$	285,973	$	686,010	$	12,019	$	2,487,129


	December 31, 2020
					Construction		Commercial
	Commercial		Consumer		and Land		and		Consumer
Non PCI Loans:	Real Estate		Real Estate		Development		Industrial		and Other		Total
Pass	$	922,153	$	417,302	$	269,350	$	625,836	$	12,622	$	2,247,263
Watch		66,287		14,218		3,296		7,673		137		91,611
Special mention		4,446		46		—		320		—		4,812
Substandard		3,967		2,020		81		261		30		6,359
Doubtful		—		86		—		48		—		134
Total		996,853		433,672		272,727		634,138		12,789		2,350,179

PCI Loans:
Pass		11,072		8,382		1,008		262		25		20,749
Watch		3,381		224		3,820		—		2		7,427
Special mention		19		57		—		—		—		76
Substandard		1,651		1,595		520		46		—		3,812
Doubtful		—		—		—		—		—		—
Total		16,123		10,258		5,348		308		27		32,064
Total loans	$	1,012,976	$	443,930	$	278,075	$	634,446	$	12,816	$	2,382,243

Past Due Loans:

A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. Generally, management places a loan on nonaccrual when there is a clear indicator that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is generally when a loan is 90 days past due.

The following tables present an aging analysis of our loan portfolio (in thousands):


	March 31, 2021
	30-60 Days		61-89 Days		Past Due 90				Total
	Past Due and		Past Due and		Days or More				Past Due and		PCI		Current		Total
	Accruing		Accruing		and Accruing		Nonaccrual		Nonaccrual		Loans		Loans		Loans
Commercial real estate	$	565	$	—	$	1,495	$	3,155	$	5,215	$	13,877	$	1,051,549	$	1,070,641
Consumer real estate		968		1,336		—		1,481		3,785		9,597		419,104		432,486
Construction and land development		643		—		—		11		654		5,350		279,969		285,973
Commercial and industrial		666		12		—		60		738		303		684,969		686,010
Consumer and other		3		—		—		32		35		21		11,963		12,019
Total	$	2,845	$	1,348	$	1,495	$	4,739	$	10,427	$	29,148	$	2,447,554	$	2,487,129


	December 31, 2020
	30-60 Days		61-89 Days		Past Due 90				Total
	Past Due and		Past Due and		Days or More				Past Due and		PCI		Current		Total
	Accruing		Accruing		and Accruing		Nonaccrual		Nonaccrual		Loans		Loans		Loans
Commercial real estate	$	134	$	—	$	67	$	3,740	$	3,941	$	16,123	$	992,912	$	1,012,976
Consumer real estate		1,916		51		82		1,823		3,872		10,258		429,800		443,930
Construction and land development		245		—		—		12		257		5,348		272,470		278,075
Commercial and industrial		12		76		—		36		124		308		634,014		634,446
Consumer and other		14		5		—		22		41		27		12,748		12,816
Total	$	2,321	$	132	$	149	$	5,633	$	8,235	$	32,064	$	2,341,944	$	2,382,243

Impaired Loans:

The following is an analysis of the impaired loan portfolio, including PCI loans, detailing the related allowance recorded (in thousands):


	March 31, 2021						December 31, 2020
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
Impaired loans without a valuation allowance:
Commercial real estate	$	130	$	130	$	—	$	3,871	$	3,872	$	—
Consumer real estate		1,880		1,882		—		888		888		—
Construction and land development		—		—		—		—		—		—
Commercial and industrial		—		—		—		—		—		—
Consumer and other		—		—		—		—		—		—
		2,010		2,012		—		4,759		4,760		—

Impaired loans with a valuation allowance:
Commercial real estate		3,155		3,155		251		—		—		—
Consumer real estate		459		462		132		428		428		116
Construction and land development		—		—		—		—		—		—
Commercial and industrial		109		109		109		146		146		121
Consumer and other		—		—		—		—		—		—
		3,723		3,726		492		574		574		237
PCI loans:
Commercial real estate		—		—		—		—		—		—
Consumer real estate		1,210		1,347		158		1,827		2,086		88
Construction and land development		—		—		—		—		—		—
Commercial and industrial		266		233		216		270		234		218
Consumer and other		17		16		2		21		20		3
		1,493		1,596		376		2,118		2,340		309
Total impaired loans	$	7,226	$	7,334	$	868	$	7,451	$	7,674	$	546


	Three Months Ended March 31,
	2021				2020
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	2,001	$	1	$	196	$	3
Consumer real estate		1,384		12		550		4
Construction and land development		—		—		577		—
Commercial and industrial		—		—		—		—
Consumer and other		—		—		—		—
		3,385		13		1,323		7
Impaired loans with a valuation allowance:
Commercial real estate		1,577		102		198		2
Consumer real estate		444		5		984		9
Construction and land development		—		—		—		—
Commercial and industrial		128		2		159		2
Consumer and other		—		—		—		—
		2,149		109		1,341		13
PCI loans:
Commercial real estate		—		—		964		1
Consumer real estate		1,215		22		456		1
Construction and land development		—		—		231		—
Commercial and industrial		268		1		355		—
Consumer real estate		19		—		11		—
		1,502		23		2,017		2

Total impaired loans	$	7,036	$	145	$	4,681	$	22

Troubled Debt Restructurings:

At March 31, 2021, and December 31, 2020, impaired loans included loans that were classified as TDRs. The restructuring of a loan is considered a TDR if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession.

In assessing whether or not a borrower is experiencing financial difficulties, the Company considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (i) the debtor is currently in payment default on any of its debt; (ii) a payment default is probable in the foreseeable future without the modification; (iii) the debtor has declared or is in the process of declaring bankruptcy; and (iv) the debtor’s projected cash flow is sufficient to satisfy contractual payments due under the original terms of the loan without a modification.

The Company considers all aspects of the modification to loan terms to determine whether or not a concession has been granted to the borrower. Key factors considered by the Company include the debtor’s ability to access funds at a market rate for debt with similar risk characteristics, the significance of the modification relative to unpaid principal balance or collateral value of the debt, and the significance of a delay in the timing of payments relative to the original contractual terms of the loan.

The most common concessions granted by the Company generally include one or more modifications to the terms of the debt, such as (i) a reduction in the interest rate for the remaining life of the debt; (ii) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk; (iii) a temporary period of interest-only payments; and (iv) a reduction in the contractual payment amount for either a short period or remaining term of the loan.

As of March 31, 2021, and December 31, 2020, management had approximately $250 thousand and $257 thousand, respectively, in loans that met the criteria for TDR, none of which were on nonaccrual. A loan is placed back on accrual status when both principal and interest are current and it is probable that the Company will be able to collect all amounts due (both principal and interest) according to the terms of the loan agreement.

There were no loans that were modified as a TDR during the three month period ended March 31, 2021, and one loan that was modified during the three month period ended March 31, 2020. There were no loans that were modified as TDRs during the past three months and for which there was a subsequent payment default.

The Company began offering short-term loan modifications to assist borrowers during the COVID-19 national emergency. The Coronavirus Aid Relief and Economic Security (“CARES”) Act along with a joint agency statement issued by banking agencies, provides that short-term modifications made in response to COVID-19 does not need to be accounted for as a TDR. Accordingly, the Company does not account for such loan modifications as TDRs. See Note 1 Presentation of Financial Information for more information. At March 31, 2021, the Company had 10 loans remaining under COVID-19 modifications that amounted to $1.7 million, or 0.07% of the total loans outstanding.

Foreclosure Proceedings and Balances:

As of March 31, 2021, there was no residential property secured by real estate included in other real estate owned and there were three residential real estate loans totaling $448 thousand in the process of foreclosure.

Purchased Credit Impaired Loans:

The Company has acquired loans where there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans are as follows (in thousands):


	March 31,		December 31,
	2021		2020
Commercial real estate	$	21,221	$	23,787
Consumer real estate		12,011		12,692
Construction and land development		968		1,812
Commercial and industrial		6,463		6,521
Consumer and other		122		161
Total loans		40,785		44,973
Less: Remaining purchase discount		(11,637)		(12,909)
Total loans, net of purchase discount		29,148		32,064
Less: Allowance for loan losses		(376)		(309)
Carrying amount, net of allowance	$	28,772	$	31,755

Activity related to the accretable yield on loans acquired with deteriorated credit quality is as follows (in thousands):


	Three Months Ended
	March 31,
	2021		2020
Accretable yield, beginning of period	$	16,889	$	8,454
Additions		—		2,515
Accretion income		(1,931)		(2,077)
Reclassification		337		1,916
Other changes, net		(590)		171
Accretable yield, end of period	$	14,705	$	10,979