Note 3 - Loans and Allowance for Loan Losses

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE 3 – LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans originated for investment are stated at their principal amount outstanding adjusted for partial charge-offs, the allowance, and net deferred loan fees and costs. Interest income on loans is accrued over the term of the loans primarily using the simple interest method based on the principal balance outstanding. Interest is not accrued on loans where collectability is uncertain. Accrued interest is included in other assets in the Consolidated Balance Sheets. Loan origination fees and certain direct costs incurred to extend credit are deferred and amortized over the term of the loan or loan commitment period as an adjustment to the related loan yield.

Year-end loans disaggregated by class of loan within the loan portfolio segments were as follows:

	December 31, 2020					December 31, 2019					Percent Increase
	Balance		%			Balance		%			(Decrease)
Commercial:
Commercial and industrial (1)	$	1,145,423,000		35.6	%	$	846,551,000		29.6	%		35.3	%
Vacant land, land development, and residential construction		55,055,000		1.7			56,119,000		2.0			(1.9	)
Real estate – owner occupied		529,953,000		16.5			579,003,000		20.3			(8.5	)
Real estate – non-owner occupied		917,436,000		28.5			835,346,000		29.2			9.8
Real estate – multi-family and residential rental		146,095,000		4.6			124,525,000		4.4			17.3
Total commercial		2,793,962,000		86.9			2,441,544,000		85.5			14.4
Retail:
Home equity and other		61,620,000		1.9			75,374,000		2.6			(18.2	)
1-4 family mortgages		360,776,000		11.2			339,749,000		11.9			6.2
Total retail		422,396,000		13.1			415,123,000		14.5			1.8
Total loans	$	3,216,358,000		100.0	%	$	2,856,667,000		100.0	%		12.6	%

(1)  For December 31, 2020, includes $365 million in loans originated under the Paycheck Protection Program.

Concentrations within the loan portfolio were as follows at year-end:

	2020					2019
			Percentage of					Percentage of
	Balance		Loan Portfolio			Balance		Loan Portfolio
Commercial real estate loans to lessors of non-residential buildings	$	649,162,000		20.2	%	$	580,708,000		20.3	%

Year-end nonperforming loans were as follows:

	2020		2019
Loans past due 90 days or more still accruing interest	$	0	$	0
Nonaccrual loans		3,384,000		2,284,000
Total nonperforming loans	$	3,384,000	$	2,284,000

The recorded principal balance of nonperforming loans was as follows: 

	December 31, 2020		December 31, 2019
Commercial:
Commercial and industrial	$	172,000	$	0
Vacant land, land development, and residential construction		0		0
Real estate – owner occupied		619,000		134,000
Real estate – non-owner occupied		22,000		0
Real estate – multi-family and residential rental		0		2,000
Total commercial		813,000		136,000
Retail:
Home equity and other		242,000		255,000
1-4 family mortgages		2,329,000		1,893,000
Total retail		2,571,000		2,148,000
Total nonperforming loans	$	3,384,000	$	2,284,000

An age analysis of past due loans is as follows as of December 31, 2020:

	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Current		Total Loans		Recorded Balance > 89 Days and Accruing
Commercial:
Commercial and industrial	$	261,000	$	172,000	$	0	$	433,000	$	1,144,990,000	$	1,145,423,000	$	0
Vacant land, land development, and residential construction		0		0		0		0		55,055,000		55,055,000		0
Real estate – owner occupied		0		197,000		421,000		618,000		529,335,000		529,953,000		0
Real estate – non-owner occupied		0		0		23,000		23,000		917,413,000		917,436,000		0
Real estate – multi-family and residential rental		0		0		0		0		146,095,000		146,095,000		0
Total commercial		261,000		369,000		444,000		1,074,000		2,792,888,000		2,793,962,000		0
Retail:
Home equity and other		112,000		65,000		54,000		231,000		61,389,000		61,620,000		0
1- 4 family mortgages		1,147,000		247,000		342,000		1,736,000		359,040,000		360,776,000		0
Total retail		1,259,000		312,000		396,000		1,967,000		420,429,000		422,396,000		0
Total past due loans	$	1,520,000	$	681,000	$	840,000	$	3,041,000	$	3,213,317,000	$	3,216,358,000	$	0

An age analysis of past due loans is as follows as of December 31, 2019:

	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Current		Total Loans		Recorded Balance > 89 Days and Accruing
Commercial:
Commercial and industrial	$	0	$	0	$	0	$	0	$	846,551,000	$	846,551,000	$	0
Vacant land, land development, and residential construction		191,000		0		0		191,000		55,928,000		56,119,000		0
Real estate – owner occupied		0		0		134,000		134,000		578,869,000		579,003,000		0
Real estate – non-owner occupied		0		0		0		0		835,346,000		835,346,000		0
Real estate – multi-family and residential rental		0		0		0		0		124,525,000		124,525,000		0
Total commercial		191,000		0		134,000		325,000		2,441,219,000		2,441,544,000		0
Retail:
Home equity and other		171,000		65,000		20,000		256,000		75,118,000		75,374,000		0
1- 4 family mortgages		745,000		29,000		529,000		1,303,000		338,446,000		339,749,000		0
Total retail		916,000		94,000		549,000		1,559,000		413,564,000		415,123,000		0
Total past due loans	$	1,107,000	$	94,000	$	683,000	$	1,884,000	$	2,854,783,000	$	2,856,667,000	$	0

Impaired loans with no related allowance recorded were as follows as of December 31, 2020:

	Unpaid Contractual Principal Balance		Recorded Principal Balance		Related Allowance	Year-To- Date Average Recorded Principal Balance
With no related allowance recorded:
Commercial:
Commercial and industrial	$	6,242,000	$	6,242,000		$	7,874,000
Vacant land, land development and residential construction		0		0			187,000
Real estate – owner occupied		14,782,000		14,593,000			5,361,000
Real estate – non-owner occupied		341,000		341,000			227,000
Real estate – multi-family and residential rental		0		0			3,000
Total commercial		21,365,000		21,176,000			13,652,000
Retail:
Home equity and other		1,072,000		987,000			1,216,000
1-4 family mortgages		4,455,000		2,575,000			2,447,000
Total retail		5,527,000		3,562,000			3,663,000
Total with no related allowance recorded	$	26,892,000	$	24,738,000		$	17,315,000

Impaired loans with an allowance recorded and total impaired loans were as follows as of December 31, 2020:

	Unpaid Contractual Principal Balance		Recorded Principal Balance		Related Allowance		Year-To- Date Average Recorded Principal Balance
With an allowance recorded:
Commercial:
Commercial and industrial	$	343,000	$	343,000	$	53,000	$	971,000
Vacant land, land development and residential construction		0		0		0		77,000
Real estate – owner occupied		763,000		734,000		77,000		578,000
Real estate – non-owner occupied		162,000		162,000		8,000		100,000
Real estate – multi-family and residential rental		0		0		0		0
Total commercial		1,268,000		1,239,000		138,000		1,726,000
Retail:
Home equity and other		300,000		283,000		241,000		421,000
1-4 family mortgages		698,000		698,000		172,000		595,000
Total retail		998,000		981,000		413,000		1,016,000
Total with an allowance recorded	$	2,266,000	$	2,220,000	$	551,000	$	2,742,000
Total impaired loans:
Commercial	$	22,633,000	$	22,415,000	$	138,000	$	15,378,000
Retail		6,525,000		4,543,000		413,000		4,679,000
Total impaired loans	$	29,158,000	$	26,958,000	$	551,000	$	20,057,000

Impaired loans with no related allowance recorded were as follows as of December 31, 2019: 

	Unpaid Contractual Principal Balance		Recorded Principal Balance		Related Allowance	Year-To- Date Average Recorded Principal Balance
With no related allowance recorded:
Commercial:
Commercial and industrial	$	8,129,000	$	8,129,000		$	11,610,000
Vacant land, land development and residential construction		85,000		85,000			89,000
Real estate – owner occupied		715,000		667,000			1,520,000
Real estate – non-owner occupied		178,000		178,000			131,000
Real estate – multi-family and residential rental		29,000		9,000			44,000
Total commercial		9,136,000		9,068,000			13,394,000
Retail:
Home equity and other		1,279,000		1,209,000			1,203,000
1-4 family mortgages		3,272,000		1,968,000			2,078,000
Total retail		4,551,000		3,177,000			3,281,000
Total with no related allowance recorded	$	13,687,000	$	12,245,000		$	16,675,000

Impaired loans with an allowance recorded and total impaired loans were as follows as of December 31, 2019:

	Unpaid Contractual Principal Balance		Recorded Principal Balance		Related Allowance		Year-To- Date Average Recorded Principal Balance
With an allowance recorded:
Commercial:
Commercial and industrial	$	460,000	$	458,000	$	202,000	$	5,709,000
Vacant land, land development and residential construction		0		0		0		0
Real estate – owner occupied		1,078,000		1,078,000		982,000		1,672,000
Real estate – non-owner occupied		0		0		0		80,000
Real estate – multi-family and residential rental		0		0		0		54,000
Total commercial		1,538,000		1,536,000		1,184,000		7,515,000
Retail:
Home equity and other		502,000		485,000		356,000		658,000
1-4 family mortgages		358,000		356,000		83,000		660,000
Total retail		860,000		841,000		439,000		1,318,000
Total with an allowance recorded	$	2,398,000	$	2,377,000	$	1,623,000	$	8,833,000
Total impaired loans:
Commercial	$	10,674,000	$	10,604,000	$	1,184,000	$	20,909,000
Retail		5,411,000		4,018,000		439,000		4,599,000
Total impaired loans	$	16,085,000	$	14,622,000	$	1,623,000	$	25,508,000

Impaired loans for which no allocation of the allowance for loan losses has been made generally reflect situations whereby the loans have been charged-down to estimated fair value. Interest income recognized on accruing troubled debt restructurings totaled $1.3 million in 2020 and 2019, and $1.1 million during 2018. Interest income recognized on nonaccrual loans totaled less than $0.1 million in 2020, 2019 and 2018, reflecting the collection of interest at the time of principal pay-off. Lost interest income on nonaccrual loans totaled $0.2 million in 2020, $0.1 million in 2019, and $0.3 million in 2018.

Credit Quality Indicators. We utilize a comprehensive grading system for our commercial loans. All commercial loans are graded on a ten grade rating system. The rating system utilizes standardized grade paradigms that analyze several critical factors such as cash flow, operating performance, financial condition, collateral, industry condition and management. All commercial loans are graded at inception and reviewed and, if appropriate, re-graded at various intervals thereafter. The risk assessment for retail loans is primarily based on the type of collateral.

Loans by credit quality indicators were as follows as of December 31, 2020:

Commercial credit exposure – credit risk profiled by internal credit risk grades:

	Commercial and Industrial		Commercial Vacant Land, Land Development, and Residential Construction		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-Owner Occupied		Commercial Real Estate - Multi-Family and Residential Rental
Internal credit risk grade groupings:
Grades 1 – 4 (1)	$	828,706,000	$	22,547,000	$	315,134,000	$	396,700,000	$	91,711,000
Grades 5 – 7		306,614,000		32,398,000		185,541,000		520,395,000		54,111,000
Grades 8 – 9		10,103,000		110,000		29,278,000		341,000		273,000
Total commercial	$	1,145,423,000	$	55,055,000	$	529,953,000	$	917,436,000	$	146,095,000

Retail credit exposure – credit risk profiled by collateral type:

	Retail Home Equity and Other		Retail 1-4 Family Mortgages
Performing		61,378,000		358,447,000
Nonperforming		242,000		2,329,000
Total retail	$	61,620,000	$	360,776,000

(1) Included in Commercial and Industrial Loans Grades 1 – 4 are $365 million of loans originated under the Paycheck Protection Program.

Loans by credit quality indicators were as follows as of December 31, 2019:

Commercial credit exposure – credit risk profiled by internal credit risk grades:

	Commercial and Industrial		Commercial Vacant Land, Land Development, and Residential Construction		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-Owner Occupied		Commercial Real Estate - Multi-Family and Residential Rental
Internal credit risk grade groupings:
Grades 1 – 4	$	521,920,000	$	26,065,000	$	351,671,000	$	563,087,000	$	85,152,000
Grades 5 – 7		309,824,000		29,716,000		220,980,000		272,124,000		39,203,000
Grades 8 – 9		14,807,000		338,000		6,352,000		135,000		170,000
Total commercial	$	846,551,000	$	56,119,000	$	579,003,000	$	835,346,000	$	124,525,000

Retail credit exposure – credit risk profiled by collateral type:

	Retail Home Equity and Other		Retail 1-4 Family Mortgages
Performing		75,119,000		337,856,000
Nonperforming		255,000		1,893,000
Total retail	$	75,374,000	$	339,749,000

All commercial loans are graded using the following criteria:

Grade 1. “Exceptional” Loans with this rating contain very little, if any, risk.

Grade 2. “Outstanding” Loans with this rating have excellent and stable sources of repayment and conform to bank policy and regulatory requirements.

Grade 3. “Very Good” Loans with this rating have strong sources of repayment and conform to bank policy and regulatory requirements. These are loans for which repayment risks are acceptable.

Grade 4. “Good” Loans with this rating have solid sources of repayment and conform to bank policy and regulatory requirements. These are loans for which repayment risks are modest.

Grade 5. “Acceptable” Loans with this rating exhibit acceptable sources of repayment and conform with most bank policies and all regulatory requirements. These are loans for which repayment risks are satisfactory.

Grade 6. “Monitor” Loans with this rating are considered to have emerging weaknesses which may include negative current cash flow, high leverage, or operating losses. Generally, if further deterioration is observed, these credits will be downgraded to the criticized asset report.

Grade 7. “Special Mention” Loans with this rating have 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 at some future date.

Grade 8. “Substandard” Loans with this rating are inadequately protected by current sound net worth, paying capacity of the obligor, or of the pledged collateral, if any. A Substandard loan normally has one or more well-defined weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility of loss if the deficiencies are not corrected.

Grade 9. “Doubtful” Loans with this rating exhibit all the weaknesses inherent in the Substandard classification and where collection or liquidation in full is highly questionable and improbable.

Grade 10. “Loss” Loans with this rating are considered uncollectable, and of such little value that continuance as an active asset is not warranted.

The primary risk elements with respect to commercial loans are the financial condition of the borrower, the sufficiency of collateral, and timeliness of scheduled payments. We have a policy of requesting and reviewing periodic financial statements from commercial loan customers and employ a disciplined and formalized review of the existence of collateral and its value. The primary risk element with respect to each residential real estate loan and consumer loan is the timeliness of scheduled payments. We have a reporting system that monitors past due loans and have adopted policies to pursue creditors’ rights in order to preserve our collateral position.

The allowance for loan losses and recorded investments in loans for the year-ended December 31, 2020 are as follows:

	Commercial Loans			Retail Loans			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	21,070,000		$	2,749,000		$	70,000		$	23,889,000
Provision for loan losses		12,835,000			1,226,000			(11,000	)		14,050,000
Charge-offs		(613,000	)		(225,000	)		0			(838,000	)
Recoveries		487,000			379,000			0			866,000
Ending balance	$	33,779,000		$	4,129,000		$	59,000		$	37,967,000
Ending balance: individually evaluated for impairment	$	138,000		$	413,000		$	0		$	551,000
Ending balance: collectively evaluated for impairment	$	33,641,000		$	3,716,000		$	59,000		$	37,416,000
Total loans (*):
Ending balance	$	2,428,703,000		$	422,396,000					$	2,851,099,000
Ending balance: individually evaluated for impairment	$	22,415,000		$	4,543,000					$	26,958,000
Ending balance: collectively evaluated for impairment	$	2,406,288,000		$	417,853,000					$	2,824,141,000

(*) Excludes $365 million in loans originated under the Paycheck Protection Program.

The allowance for loan losses and recorded investments in loans for the year-ended December 31, 2019 are as follows:

	Commercial Loans			Retail Loans			Unallocated		Total
Allowance for loan losses:
Beginning balance	$	19,619,000		$	2,717,000		$	44,000	$	22,380,000
Provision for loan losses		1,578,000			146,000			26,000		1,750,000
Charge-offs		(455,000	)		(428,000	)		0		(883,000	)
Recoveries		328,000			314,000			0		642,000
Ending balance	$	21,070,000		$	2,749,000		$	70,000	$	23,889,000
Ending balance: individually evaluated for impairment	$	1,230,000		$	459,000		$	0	$	1,689,000
Ending balance: collectively evaluated for impairment	$	19,840,000		$	2,290,000		$	70,000	$	22,200,000
Total loans:
Ending balance	$	2,441,544,000		$	415,123,000				$	2,856,667,000
Ending balance: individually evaluated for impairment	$	10,604,000		$	4,018,000				$	14,622,000
Ending balance: collectively evaluated for impairment	$	2,430,940,000		$	411,105,000				$	2,842,045,000

The allowance for loan losses and recorded investments in loans for the year-ended December 31, 2018 are as follows:

	Commercial Loans			Retail Loans			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	16,747,000		$	2,661,000		$	93,000		$	19,501,000
Provision for loan losses		958,000			191,000			(49,000	)		1,100,000
Charge-offs		(674,000	)		(776,000	)		0			(1,450,000	)
Recoveries		2,588,000			641,000			0			3,229,000
Ending balance	$	19,619,000		$	2,717,000		$	44,000		$	22,380,000
Ending balance: individually evaluated for impairment	$	550,000		$	539,000		$	0		$	1,089,000
Ending balance: collectively evaluated for impairment	$	19,069,000		$	2,178,000		$	44,000		$	21,291,000
Total loans:
Ending balance	$	2,360,106,000		$	392,979,000					$	2,753,085,000
Ending balance: individually evaluated for impairment	$	19,291,000		$	4,617,000					$	23,908,000
Ending balance: collectively evaluated for impairment	$	2,340,815,000		$	388,362,000					$	2,729,177,000

Loans modified as troubled debt restructurings during the year-ended December 31, 2020 were as follows:

			Pre-		Post-
			Modification		Modification
			Recorded		Recorded
	Number of		Principal		Principal
	Contracts		Balance		Balance
Commercial:
Commercial and industrial		13	$	6,914,000	$	7,717,000
Vacant land, land development and residential construction		0		0		0
Real estate – owner occupied		8		14,663,000		14,663,000
Real estate – non-owner occupied		2		319,000		318,000
Real estate – multi-family and residential rental		0		0		0
Total commercial		23		21,896,000		22,698,000
Retail:
Home equity and other		16		451,000		452,000
1-4 family mortgages		6		151,000		148,000
Total retail		22		602,000		600,000
Total		45	$	22,498,000	$	23,298,000

Loans modified as troubled debt restructurings during the year-ended December 31, 2019 were as follows:

			Pre-		Post-
			Modification		Modification
			Recorded		Recorded
	Number of		Principal		Principal
	Contracts		Balance		Balance
Commercial:
Commercial and industrial		5	$	435,000	$	435,000
Vacant land, land development and residential construction		1		87,000		87,000
Real estate – owner occupied		2		1,669,000		1,669,000
Real estate – non-owner occupied		0		0		0
Real estate – multi-family and residential rental		0		0		0
Total commercial		8		2,191,000		2,191,000
Retail:
Home equity and other		20		295,000		296,000
1-4 family mortgages		8		310,000		310,000
Total retail		28		605,000		606,000
Total		36	$	2,796,000	$	2,797,000

The following loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due during the year-ended December 31, 2020 (amounts as of period end):

	Number of Contracts		Recorded Principal Balance
Commercial:
Commercial and industrial		0	$	0
Vacant land, land development and residential construction		0		0
Real estate – owner occupied		0		0
Real estate – non-owner occupied		0		0
Real estate – multi-family and residential rental		0		0
Total commercial		0		0
Retail:
Home equity and other		0		0
1-4 family mortgages		0		0
Total retail		0		0
Total		0	$	0

The following loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due during the year-ended December 31, 2019 (amounts as of period end):

	Number of Contracts		Recorded Principal Balance
Commercial:
Commercial and industrial		0	$	0
Vacant land, land development and residential construction		0		0
Real estate – owner occupied		0		0
Real estate – non-owner occupied		0		0
Real estate – multi-family and residential rental		0		0
Total commercial		0		0
Retail:
Home equity and other		1		20,000
1-4 family mortgages		2		106,000
Total retail		3		126,000
Total		3	$	126,000

Activity for loans categorized as troubled debt restructurings during the year-ended December 31, 2020 is as follows:

	Commercial and			Commercial Vacant Land, Land Development, and Residential			Commercial Real Estate - Owner			Commercial Real Estate - Non-Owner			Commercial Real Estate - Multi-Family and Residential
	Industrial			Construction			Occupied			Occupied			Rental
Commercial Loan Portfolio:
Beginning Balance	$	8,587,000		$	85,000		$	1,145,000		$	178,000		$	7,000
Charge-Offs		0			0			0			0			0
Payments		(11,260,000	)		(85,000	)		(3,765,000	)		(585,000	)		(7,000	)
Transfers to ORE		0			0			0			0			0
Net Additions/Deletions		9,087,000			0			17,417,000			887,000			0
Ending Balance	$	6,414,000		$	0		$	14,797,000		$	480,000		$	0

	Retail Home Equity and Other			Retail 1-4 Family Mortgages
Retail Loan Portfolio:
Beginning Balance	$	1,415,000		$	724,000
Charge-Offs		0			0
Payments		(881,000	)		(68,000	)
Transfers to ORE		0			0
Net Additions/Deletions		612,000			150,000
Ending Balance	$	1,146,000		$	806,000

Activity for loans categorized as troubled debt restructurings during the year-ended December 31, 2019 is as follows:

	Commercial and Industrial			Commercial Vacant Land, Land Development, and Residential Construction			Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-Owner Occupied			Commercial Real Estate - Multi-Family and Residential Rental
Commercial Loan Portfolio:
Beginning Balance	$	14,138,000		$	0		$	3,100,000		$	210,000		$	24,000
Charge-Offs		0			0			0			0			0
Payments		(20,364,000	)		(2,000	)		(3,820,000	)		(32,000	)		(17,000	)
Transfers to ORE		0			0			(97,000	)		0			0
Net Additions/Deletions		14,813,000			87,000			1,962,000			0			0
Ending Balance	$	8,587,000		$	85,000		$	1,145,000		$	178,000		$	7,000

	Retail Home Equity and Other			Retail 1-4 Family Mortgages
Retail Loan Portfolio:
Beginning Balance	$	1,402,000		$	578,000
Charge-Offs		(18,000	)		0
Payments		(272,000	)		(162,000	)
Transfers to ORE		0			0
Net Additions/Deletions		303,000			308,000
Ending Balance	$	1,415,000		$	724,000

Activity for loans categorized as troubled debt restructurings during the year-ended December 31, 2018 is as follows:

	Commercial and			Commercial Vacant Land, Land Development, and Residential			Commercial Real Estate - Owner			Commercial Real Estate - Non-Owner			Commercial Real Estate - Multi-Family and Residential
	Industrial			Construction			Occupied			Occupied			Rental
Commercial Loan Portfolio:
Beginning Balance	$	3,990,000		$	383,000		$	2,026,000		$	237,000		$	41,000
Charge-Offs		(505,000	)		0			0			0			0
Payments		(792,000	)		(383,000	)		(6,663,000	)		(27,000	)		(17,000	)
Transfers to ORE		0			0			(93,000	)		0			0
Net Additions/Deletions		11,445,000			0			7,830,000			0			0
Ending Balance	$	14,138,000		$	0		$	3,100,000		$	210,000		$	24,000

	Retail Home Equity and Other			Retail 1-4 Family Mortgages
Retail Loan Portfolio:
Beginning Balance	$	1,346,000		$	539,000
Charge-Offs		(30,000	)		0
Payments		(323,000	)		(41,000	)
Transfers to ORE		(82,000	)		0
Net Additions/Deletions		491,000			80,000
Ending Balance	$	1,402,000		$	578,000

The allowance related to loans categorized as troubled debt restructurings was as follows:

	December 31, 2020		December 31, 2019
Commercial:
Commercial and industrial	$	53,000	$	202,000
Vacant land, land development, and residential construction		0		0
Real estate – owner occupied		59,000		982,000
Real estate – non-owner occupied		8,000		0
Real estate – multi-family and residential rental		0		0
Total commercial		120,000		1,184,000
Retail:
Home equity and other		202,000		311,000
1-4 family mortgages		145,000		83,000
Total retail		347,000		394,000
Total related allowance	$	467,000	$	1,578,000

In general, our policy dictates that a renewal or modification of an 8- or 9-rated commercial loan meets the criteria of a troubled debt restructuring, although we review and consider all renewed and modified loans as part of our troubled debt restructuring assessment procedures. Loan relationships rated 8 contain significant financial weaknesses, resulting in a distinct possibility of loss, while relationships rated 9 reflect vital financial weaknesses, resulting in a highly questionable ability on our part to collect principal. We believe borrowers warranting such ratings would have difficulty obtaining financing from other market participants. Thus, due to the lack of comparable market rates for loans with similar risk characteristics, we believe 8- or 9-rated loans renewed or modified were done so at below market rates. Loans that are identified as troubled debt restructurings are considered impaired and are individually evaluated for impairment when assessing these credits in our allowance for loan losses calculation.