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Loans and Allowance for Credit Losses
 6 Months Ended
Jun. 30, 2021
Receivables [Abstract]  
Loans and Allowance for Credit Losses Loans and Allowance for Credit Losses
The Bank makes loans to customers primarily in the Washington, D.C. metropolitan area and surrounding communities. A substantial portion of the Bank’s loan portfolio consists of loans to businesses secured by real estate and other business assets.
Loans, net of unamortized net deferred fees, at June 30, 2021 and December 31, 2020 are summarized by type as follows:
June 30, 2021December 31, 2020
(dollars in thousands)Amount%Amount%
Commercial$1,359,157 19 %$1,437,433 19 %
PPP loans238,041 3 %454,771 6 %
Income producing - commercial real estate3,534,057 48 %3,687,000 47 %
Owner occupied - commercial real estate991,936 14 %997,694 13 %
Real estate mortgage - residential77,131 1 %76,592 1 %
Construction - commercial and residential835,733 12 %873,261 11 %
Construction - C&I (owner occupied)161,187 2 %158,905 2 %
Home equity60,559 1 %73,167 1 %
Other consumer1,757 — 1,389 — 
Total loans7,259,558 100 %7,760,212 100 %
Less: allowance for credit losses(92,560)(109,579)
Net loans (1)
$7,166,998 $7,650,633 
________________________________________
(1)Excludes accrued interest receivable of $43.5 million and $46.0 million at June 30, 2021 and December 31, 2020, respectively, which is recorded in other assets.
Unamortized net deferred fees amounted to $25.0 million and $30.8 million at June 30, 2021 and December 31, 2020, respectively.
As of June 30, 2021 and December 31, 2020, the Bank serviced $125 million and $124 million, respectively, of multifamily FHA loans, SBA loans and other loan participations that are not reflected as loan balances on the Consolidated Balance Sheets.
Loan Origination / Risk Management
Specific loan reserves are established based upon credit and/or collateral risks on an individual loan basis. The remainder of the portfolio, representing all loans not assigned an individual reserve, is segregated by call report codes and a loan-level PD/LGD cash flow method using an EAD model is applied. The loss rates are then modified to incorporate our reasonable and supportable forecast of future losses at the portfolio segment level, as well as any necessary qualitative adjustments.
The composition of the Company’s loan portfolio is heavily weighted toward commercial real estate, both owner occupied and income producing real estate. At June 30, 2021, owner occupied - commercial real estate and construction – C&I (owner occupied) represent approximately 16% of the loan portfolio. At June 30, 2021, non-owner occupied commercial real estate and real estate construction represented approximately 60% of the loan portfolio. The combined owner occupied and commercial real estate and construction loans represent approximately 76% of the loan portfolio. Real estate also serves as collateral for loans made for other purposes, resulting in 83% of all loans being secured by real estate. These loans are underwritten to mitigate lending risks typical of this type of loan such as declines in real estate values, changes in borrower cash flow and general economic conditions. The Bank typically requires a maximum loan to value of 80% and minimum cash flow debt service coverage of 1.15 to 1.0. Personal guarantees may be required, but may be limited. In making real estate commercial mortgage loans, the Bank generally requires that interest rates adjust not less frequently than five years.
The Company is also an active traditional commercial lender providing loans for a variety of purposes, including working capital, equipment and account receivable financing. This loan category represents approximately 19% of the loan portfolio at June 30, 2021 and was generally variable or adjustable rate. Personal guarantees are generally required, but may be limited. Non-PPP SBA loans represent approximately 1% of the commercial loan category. In originating SBA loans, the Company assumes the risk of non-payment on the unguaranteed portion of the credit as well as potential recourse to the SBA guarantees. The Company generally sells the guaranteed portion of the loan generating noninterest income from the gains on sale, as well as servicing income on the portion participated. SBA loans are subject to the same cash flow analyses as other commercial loans. SBA loans are subject to a maximum loan size established by the SBA as well as internal loan size guidelines.
Approximately 3% of the loan portfolio at June 30, 2021 consists of PPP loans to eligible customers. PPP loans are expected to primarily be repaid via forgiveness provisions (under the CARES Act and subsequent legislation) from the SBA. These loans are fully guaranteed as to principal and interest by the SBA and ultimately by the full faith and credit of the U.S. Government; as a result, they were approved utilizing different underwriting standards than the Bank's other commercial loans. PPP loans are included in the CECL model but do not carry an allowance for credit loss due to the aforementioned government guarantees.
Approximately 1% of the loan portfolio at June 30, 2021 consists of home equity loans and lines of credit and other consumer loans. These credits, while making up a small portion of the loan portfolio, demand the same emphasis on underwriting and credit evaluation as other types of loans advanced by the Bank.
Approximately 1% of the loan portfolio consists of residential mortgage loans. The repricing duration of these loans was 21 months at June 30, 2021. These credits represent first liens on residential property loans originated by the Bank. While the Bank’s general practice is to originate and sell (servicing released) loans made by its Residential Lending department, from time to time certain loan characteristics do not meet the requirements of third party investors and these loans are instead maintained in the Bank’s portfolio until they are resold to another investor at a later date or mature.
Loans are secured primarily by duly recorded first deeds of trust or mortgages. In some cases, the Bank may accept a recorded junior trust position. In general, borrowers will have a proven ability to build, lease, manage and/or sell a commercial or residential project and demonstrate satisfactory financial condition. Additionally, an equity contribution toward the project is customarily required.
Construction loans require that the financial condition and experience of the general contractor and major subcontractors be satisfactory to the Bank. Guaranteed, fixed price contracts are required whenever appropriate, along with payment and performance bonds or completion bonds for larger scale projects.
Loans intended for residential land acquisition, lot development and construction are made on the premise that the land: 1) is or will be developed for building sites for residential structures, and 2) will ultimately be utilized for construction or improvement of residential zoned real properties, including the creation of housing. Residential development and construction loans will finance projects such as single family subdivisions, planned unit developments, townhouses, and condominiums. Residential land acquisition, development and construction loans generally are underwritten with a maximum term of 36 months, including extensions approved at origination.
Commercial land acquisition and construction loans are secured by real property where loan funds will be used to acquire land and to construct or improve appropriately zoned real property for the creation of income producing or owner user commercial properties. Borrowers are generally required to put equity into each project at levels determined by the appropriate approval authority. Commercial land acquisition and construction loans generally are underwritten with a maximum term of 24 months.
Substantially all construction draw requests must be presented in writing on American Institute of Architects documents and certified either by the contractor, the borrower and/or the borrower’s architect. Each draw request shall also include the borrower’s soft cost breakdown certified by the borrower or their Chief Financial Officer. Prior to an advance, the Bank or its contractor inspects the project to determine that the work has been completed, to justify the draw requisition.
Commercial permanent loans are generally secured by improved real property which is generating income in the normal course of operation. Debt service coverage, assuming stabilized occupancy, must be satisfactory to support a permanent loan. The debt service coverage ratio is ordinarily at least 1.15 to 1.0. As part of the underwriting process, debt service coverage ratios are stress tested assuming a 200 basis point increase in interest rates from their current levels.
Commercial permanent loans generally are underwritten with a term not greater than 10 years or the remaining useful life of the property, whichever is lower. The preferred term is between 5 to 7 years, with amortization to a maximum of 25 years.
The Company’s loan portfolio includes acquisition, development and construction (“ADC”) real estate loans including both investment and owner occupied projects. ADC loans amounted to $1.4 billion at June 30, 2021. A portion of the ADC portfolio, both speculative and non-speculative, includes loan funded interest reserves at origination. ADC loans that provide for the use of interest reserves represent approximately 57.9% of the outstanding ADC loan portfolio at June 30, 2021. The decision to establish a loan-funded interest reserve is made upon origination of the ADC loan and is based upon a number of factors considered during underwriting of the credit including: (1) the feasibility of the project; (2) the experience of the
sponsor; (3) the creditworthiness of the borrower and guarantors; (4) the borrower equity contribution; and (5) the level of collateral protection. When appropriate, an interest reserve provides an effective means of addressing the cash flow characteristics of a properly underwritten ADC loan. The Company recognizes that one of the risks inherent in the use of interest reserves is the potential masking of underlying problems with the project and/or the borrower’s ability to repay the loan. In order to mitigate these inherent risks, the Company employs a series of reporting and monitoring mechanisms on all ADC loans, whether or not an interest reserve is provided, including: (1) construction and development timelines which are monitored on an ongoing basis which track the progress of a given project to the timeline projected at origination; (2) a construction loan administration department independent of the lending function; (3) third party independent construction loan inspection reports; (4) monthly interest reserve monitoring reports detailing the balance of the interest reserves approved at origination and the days of interest carry represented by the reserve balances as compared to the then current anticipated time to completion and/or sale of speculative projects; and (5) quarterly commercial real estate construction meetings among senior Company management, which includes monitoring of current and projected real estate market conditions. If a project has not performed as expected, it is not the customary practice of the Company to increase loan funded interest reserves.
The following tables detail activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2021 and 2020. PPP loans are excluded from these tables since they do not carry an allowance for credit loss, as these loans are fully guaranteed as to principal and interest by the SBA, whose guarantee is backed by the full faith and credit of the U.S. Government. Allocation of a portion of the allowance to one category of loans does not restrict the use of the allowance to absorb losses in other categories.
Income Producing -Owner Occupied -Real EstateConstruction -
CommercialCommercialMortgage -Commercial andHomeOther
(dollars in thousands)CommercialReal EstateReal EstateResidentialResidentialEquityConsumerTotal
Three Months Ended June 30, 2021
Allowance for credit losses:
Balance at beginning of period$23,701 $51,510 $14,315 $919 $10,683 $907 $35 $102,070 
Loans charged-off(1,541)(4,216)— — — — — (5,757)
Recoveries of loans previously charged-off150 — — — 6 — 2 158 
Net loans charged-off(1,391)— (4,216)— — — — — 6 — — — 2 (5,599)
Provision for credit losses(962)(1,324)(1,320)(37)(262)(10)4 (3,911)
Ending balance$21,348 $— $45,970 $— $12,995 $— $882 $— $10,427 $— $897 $— $41 $92,560 
Six Months Ended June 30, 2021
Allowance for credit losses:
Balance at beginning of period$26,569 $55,385 $14,000 $1,020 $11,529 $1,039 $37 $109,579 
Loans charged-off(5,691)(5,216)— — (206)— (1)(11,114)
Recoveries of loans previously charged-off246 — — — 6 — 15 267 
Net loans (charged-off) recoveries(5,445)(5,216)— — (200)— 14 (10,847)
Provision for credit losses- loans224 (4,199)(1,005)(138)(902)(142)(10)(6,172)
Ending balance$21,348 $45,970 $12,995 $882 $10,427 $897 $41 $92,560 
As of June 30, 2021
Allowance for credit losses:
Individually evaluated for impairment$4,941 $4,923 $436 $330 $— $172 $— $10,802 
Collectively evaluated for impairment16,407 41,047 12,559 552 10,427 725 41 81,758 
Ending balance$21,348 $45,970 $12,995 $882 $10,427 $897 $41 $92,560 
Three Months Ended June 30, 2020
Allowance for credit losses:
Balance at beginning of period, prior to adoption of ASC 32627,346 43,551 9,867 1,369 13,341 818 44 96,336 
Loans charged-off(7,145)— — — — — (7,145)
Recoveries of loans previously charged-off5 — — — — 1 6 
Net loans (charged-off) recoveries(7,140)— — — — — — — — — — 1 (7,139)
Provision for credit losses- loans7,872 8,312 2,474 181 467 294 (1)19,599 
Ending balance28,078 51,863 12,341 — 1,550 — 13,808 — 1,112 — 44 108,796 
Six Months Ended June 30, 2020
Allowance for credit losses:
Balance at beginning of period, prior to adoption of ASC 326$18,832 $29,265 $5,838 $1,557 $17,485 $656 $25 $73,658 
Impact of adopting ASC 326892 11,230 4,674 (301)(6,143)245 17 $10,614 
Loans charged-off(7,145)(550)— — (1,768)— — (9,463)
Recoveries of loans previously charged-off74 — — — — — 4 78 
Net loans (charged-off) recoveries(7,071)(550)— — (1,768)— 4 (9,385)
Provision for credit losses- loans15,425 11,918 1,829 294 4,234 211 (2)33,909 
Ending balance$28,078 $51,863 $12,341 $1,550 $13,808 $1,112 $44 $108,796 
As of June 30, 2020
Allowance for credit losses:
Individually evaluated for impairment$8,797 $5,260 $405 $746 $1,383 $107 $3 $16,701 
Collectively evaluated for impairment19,281 46,603 11,936 804 12,425 1,005 41 92,095 
Ending balance$28,078 $51,863 $12,341 $1,550 $13,808 $1,112 $44 $108,796 
We recorded a reversal of $3.9 million and a positive $19.7 million provision for credit losses (inclusive of the PCL on loans and AFS debt securities) for the three months ended June 30, 2021 and 2020, respectively, under CECL. We recorded a reversal of $6.2 million and a positive $34.0 million provision for credit losses for the six months ended June 30, 2021 and 2020, respectively, under CECL. We recorded $5.6 million and $7.1 million in net charge-offs during the three months ended June 30, 2021 and 2020, respectively. We also recorded $10.8 million and $9.4 million in net charge-offs during the six months ended June 30, 2021 and 2020, respectively.
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 amortized cost basis of collateral-dependent loans by class of loans as of June 30, 2021 and December 31, 2020:

June 30, 2021
(dollars in thousands)Business/Other AssetsReal Estate
Commercial$7,450 $8,520 
Income producing - commercial real estate3,193 27,342 
Owner occupied - commercial real estate— 7,058 
Real estate mortgage - residential— 1,938 
Construction - commercial and residential— 3,659 
Home equity— 564 
Other consumer— — 
Total$10,643 $49,081 
December 31, 2020
(dollars in thousands)Business/Other AssetsReal Estate
Commercial$11,326 $4,026 
Income producing - commercial real estate3,193 15,686 
Owner occupied - commercial real estate— 23,159 
Real estate mortgage - residential— 2,932 
Construction - commercial and residential— 206 
Home equity— 415 
Other consumer— — 
Total$14,519 $46,424 

Credit Quality Indicators
The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company’s primary credit quality indicators inform an internal credit risk rating system that categorizes loans into pass, watch, special mention, or classified categories. Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics that benefit from a case-by-case evaluation. These are typically loans to businesses or individuals in the classes which comprise the commercial portfolio segment. Groups of loans that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk rated and monitored collectively. These are typically loans to individuals in the classes which comprise the consumer portfolio segment.
The following are the definitions of the Company’s credit quality indicators:
Pass:Loans in all classes that comprise the commercial and consumer portfolio segments that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan agreement. Management believes that there is a low likelihood of loss related to those loans that are considered pass.
Watch:Loan paying as agreed with generally acceptable asset quality; however the obligor’s performance has not met expectations. Balance sheet and/or income statement has shown deterioration to the point that the obligor could not sustain any further setbacks. Credit is expected to be strengthened through improved obligor performance and/or additional collateral within a reasonable period of time.
Special Mention:Loans in the classes that comprise the commercial portfolio segment that have potential weaknesses that deserve management’s close attention. If not addressed, these potential weaknesses may result in deterioration of the repayment prospects for the loan. The special mention credit quality indicator is not used for classes of loans that comprise the consumer portfolio segment. Management believes that there is a moderate likelihood of some loss related to those loans that are considered special mention.
Classified:
Classified (a) Substandard – Loans inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard.
Classified (b) Doubtful – Loans that have all the weaknesses inherent in a loan classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the assets, its classification as an estimated loss is deferred until its more exact status may be determined.
Based on the most recent analysis performed, amortized cost basis of loans by risk category, class and year of origination is as follows:
June 30, 2021 (dollars in thousands)Prior20172018201920202021Total
Commercial
Pass445,359 206,252 194,852 136,249 163,994 96,633 1,243,339 
Watch32,128 11,393 16,407 6,720 10,750 1,944 79,342 
Special Mention1,384 10,386 3,346 3,977 900 — 19,993 
Substandard12,721 678 2,419 540 125 — 16,483 
Total491,592 — 228,709 — 217,024 — 147,486 — 175,769 — 98,577 1,359,157 
PPP loans
Pass— — — — — — — — 198,313 39,728 238,041 
Total— — — — — — — — 198,313 39,728 238,041 
Income producing - commercial real estate
Pass713,318 267,101 654,340 574,668 503,679 244,300 2,957,406 
Watch156,867 106,813 — 44,223 34,620 — 342,523 
Special Mention57,361 — 42,544 51,972 — — 151,877 
Substandard67,753 — 8,518 5,542 438 — 82,251 
Total995,299 — 373,914 — 705,402 — 676,405 — 538,737 — 244,300 3,534,057 
Owner occupied - commercial real estate
Pass403,599 133,224 132,309 65,422 46,712 19,429 800,695 
Watch26,454 3,254 11,982 8,783 2,043 — 52,516 
Special Mention355 — 81,634 19,084 — — 101,073 
Substandard25,776 1,786 1,693 8,397 — — 37,652 
Total456,184 — 138,264 — 227,618 — 101,686 — 48,755 — 19,429 991,936 
Real estate mortgage - residential
Pass18,663 10,160 13,430 16,922 4,789 10,673 74,637 
Watch598 — — — — — 598 
Substandard1,896 — — — — — 1,896 
Total21,157 — 10,160 — 13,430 — 16,922 — 4,789 — 10,673 77,131 
Construction - commercial and residential
Pass64,042 204,514 198,089 118,410 148,352 40,809 774,216 
Watch203 56,360 1,295 — — — 57,858 
Substandard— — 3,468 3,468 191 191 — — — 3,659 
Total64,245 — 260,874 — 202,852 — 118,601 — 148,352 — 40,809 835,733 
Construction - C&I (owner occupied)— 
Pass17,572 1,979 20,373 24,552 54,309 688 119,473 
Watch4,607 401 5,699 — — — 10,707 
Special Mention110 — — 15,182 15,715 — 31,007 
Total22,289 — 2,380 — 26,072 — 39,734 — 70,024 — 688 161,187 
Home Equity— 
Pass28,213 6,241 1,773 3,642 11,819 6,945 58,633 
Watch1,314 — — — — — 1,314 
Substandard564 — — 48 — — 612 
Total30,091 — 6,241 — 1,773 — 3,690 — 11,819 — 6,945 60,559 
Other Consumer— 
Pass1,502 55 58 77 26 33 1,751 
Substandard6 — — — — — 6 
Total1,508 — 55 — 58 — 77 — 26 — 33 1,757 
Total Recorded Investment$2,082,365 $— $1,020,597 $— $1,394,229 $— $1,104,601 $— $1,196,584 $— $461,182 7,259,558 
December 31, 2020 (dollars in thousands)Prior20162017201820192020Total
Commercial
Pass323,660 111,886 249,541 211,551 164,166 227,095 1,287,899 
Watch31,903 5,315 19,145 21,013 7,740 7,979 93,095 
Special Mention4,969 1,692 8,969 3,385 5,599 2,169 26,783 
Substandard17,679 5,803 1,820 3,525 829 — 29,656 
Total378,211 124,696 279,475 239,474 178,334 237,243 1,437,433 
PPP loans
Pass— — — — — 454,771 454,771 
Total— — — — — 454,771 454,771 
Income producing - commercial real estate— 
Pass560,915 347,946 397,953 622,276 643,388 512,387 3,084,865 
Watch152,367 62,912 91,636 89,852 44,555 34,195 475,517 
Special Mention213 — — — 51,969 — 52,182 
Substandard58,555 800 4,656 4,883 5,542 — 74,436 
Total772,050 411,658 494,245 717,011 745,454 546,582 3,687,000 
Owner occupied - commercial real estate
Pass343,371 100,272 111,996 136,644 59,681 49,584 801,548 
Watch16,014 5,011 2,640 10,338 15,501 — 49,504 
Special Mention418 — — 83,110 19,091 — 102,619 
Substandard28,228 784 1,908 2,048 10,151 904 44,023 
Total388,031 106,067 116,544 232,140 104,424 50,488 997,694 
Real estate mortgage - residential
Pass16,310 2,693 10,199 12,746 18,209 10,116 70,273 
Watch1,996 699 — 728 — — 3,423 
Substandard1,198 1,698 — — — — 2,896 
Total19,504 5,090 10,199 13,474 18,209 10,116 76,592 
Construction - commercial and residential
Pass21,290 60,486 266,788 297,480 105,679 71,297 823,020 
Watch929 — 42,751 3,448 — — 47,128 
Special Mention12 — — 2,895 — — 2,907 
Substandard— — 206 — — — 206 
Total22,231 60,486 309,745 303,823 105,679 71,297 873,261 
Construction - C&I (owner occupied)
Pass8,278 10,476 6,637 30,340 22,209 40,101 118,041 
Watch3,573 — 2,118 4,935 — — 10,626 
Special Mention124 — — — 14,436 15,678 30,238 
Total11,975 10,476 8,755 35,275 36,645 55,779 158,905 
Home Equity
Pass33,226 4,493 8,227 7,827 4,224 12,924 70,921 
Watch1,596 — — — — — 1,596 
Substandard603 — — — 47 — 650 
Total35,425 4,493 8,227 7,827 4,271 12,924 73,167 
Other Consumer
Pass929 190 64 74 94 31 1,382 
Substandard7 — — — — — 7 
Total936 190 64 74 94 31 1,389 
Total Recorded Investment$1,628,363 $723,156 $1,227,254 $1,549,098 $1,193,110 $1,439,231 $7,760,212 
The Company’s credit quality indicators are generally updated annually; however, credits rated watch or below are reviewed more frequently.
Nonaccrual and Past Due Loans
As part of the Company's comprehensive loan review process, management committees carefully evaluate loans that are past-due 30 days or more. The committees make a thorough assessment of the conditions and circumstances surrounding each delinquent loan. The Bank’s loan policy requires that loans be placed on nonaccrual if they are 90 days past-due, unless they are well secured and in the process of collection. Additionally, Credit Administration specifically analyzes the status of development and construction projects, sales activities and utilization of interest reserves in order to carefully and prudently assess potential increased levels of risk requiring additional reserves.
The table presents, by class of loan, an aging analysis and the recorded investments in loans past due as of June 30, 2021 and December 31, 2020:
LoansLoansLoansTotal Recorded
Current30-59 Days60-89 Days90 Days orTotal PastInvestment in
(dollars in thousands)LoansPast DuePast DueMore Past DueDue LoansNonaccrualLoans
June 30, 2021
Commercial$1,341,971 $1,477 $835 $— $2,312 $14,874 $1,359,157 
PPP loans238,041 — — — — — 238,041 
Income producing - commercial real estate3,512,671 — — — — 21,386 3,534,057 
Owner occupied - commercial real estate984,448 — 430 — 430 7,058 991,936 
Real estate mortgage - residential75,193 — — — — 1,938 77,131 
Construction - commercial and residential832,074 — — — — 3,659 835,733 
Construction - C&I (owner occupied)160,335 852 — — 852 — 161,187 
Home equity59,715 214 66 — 280 564 60,559 
Other consumer1,693 64 — — 64 — 1,757 
Total$7,206,141 $2,607 $1,331 $— $3,938 $49,479 $7,259,558 
December 31, 2020
Commercial$1,394,244 $6,411 $21,426 $— $27,837 $15,352 $1,437,433 
PPP loans454,771 — — — — — 454,771 
Income producing - commercial real estate3,616,207 — 51,913 — 51,913 18,880 3,687,000 
Owner occupied - commercial real estate960,364 10,630 3,542 — 14,172 23,158 997,694 
Real estate mortgage – residential72,231 1,430 — — 1,430 2,931 76,592 
Construction - commercial and residential869,723 2,992 340 — 3,332 206 873,261 
Construction- C&I (owner occupied)158,905 — — — — — 158,905 
Home equity67,732 467 4,552 — 5,019 416 73,167 
Other consumer1,367 21 1 — 22 — 1,389 
Total$7,595,544 $21,951 $81,774 $— $103,725 $60,943 $7,760,212 
The following presents the nonaccrual loans as of June 30, 2021 and December 31, 2020:
June 30, 2021
Nonaccrual withNonaccrual withTotal
No Allowancean AllowanceNonaccrual
(dollars in thousands)for Credit Lossfor Credit LossLoans
Commercial$7,454 $7,420 $14,874 
Income producing - commercial real estate5,271 16,115 21,386 
Owner occupied - commercial real estate5,272 1,786 7,058 
Real estate mortgage - residential240 1,698 1,938 
Construction - commercial and residential3,659 — 3,659 
Home equity367 197 564 
Total (1)(2)
$22,263 $27,216 $49,479 

December 31, 2020
Nonaccrual withNonaccrual withTotal
No Allowancean AllowanceNonaccrual
(dollars in thousands)for Credit Lossfor Credit LossLoans
Commercial$3,263 $12,089 $15,352 
Income producing - commercial real estate6,500 12,380 18,880 
Owner occupied - commercial real estate18,941 4,217 23,158 
Real estate mortgage - residential1,234 1,697 2,931 
Construction - commercial and residential— 206 206 
Home equity416 — 416 
Total (1)(2)
$30,354 $30,589 $60,943 

(1)Excludes TDRs that were performing under their restructured terms totaling $10.2 million at June 30, 2021 and $10.5 million at December 31, 2020.
(2)Gross interest income of $1.5 million and $3.7 million would have been recorded for the six months ended June 30, 2021 and December 31, 2020, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while $44 thousand interest was actually recorded on such loans for the six months ended June 30, 2021 or 2020. See Note 1 to the Consolidated Financial Statements for a description of the Company’s policy for placing loans on nonaccrual status.

Modifications
A modification of a loan constitutes a TDR when the borrower is experiencing financial difficulty and the modification constitutes a concession. The Company offers various types of concessions when modifying a loan. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often requested. The most common change in terms provided by the Company is an extension of an interest-only term. As of June 30, 2021, all performing TDRs were categorized as interest-only modifications.
Loans modified in a TDR for the Company may have the financial effect of increasing the specific allowance associated with the loan. An allowance for impaired consumer and commercial loans that have been modified in a TDR is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates.
In response to the COVID-19 pandemic and its economic impact to our customers, we implemented a short-term modification program that complies with the CARES Act and ASC 310-40 to provide temporary payment relief to those borrowers directly impacted by COVID-19 who were not more than 30 days past due as of December 31, 2019. This program allows for a deferral of payments for 90 days, which we extended for an additional 90 days, for a maximum of 180 days on a cumulative and successive basis. The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date. As of June 30, 2021, we had ongoing temporary modifications on approximately 31 loans representing approximately $77 million (approximately 1.1% of total loans) in outstanding balances, as compared to 36 loans representing approximately $72 million (approximately 0.9% of total loans) at December 31, 2020. Additionally, none of the deferrals are reflected in the Company's asset quality measures (i.e. non-performing loans) due to the provision of the CARES Act that permits U.S. financial institutions to temporarily suspend the GAAP requirements to treat such short-term loan modifications as TDR. Similar provisions have also been confirmed by interagency guidance issued by the federal banking agencies and confirmed with staff members of the Financial Accounting Standards Board.
The following table presents by class, the recorded investment of loans modified in TDRs held by the Company for the periods ended June 30, 2021 and 2020.
For the Six Months Ended June 30, 2021
IncomeOwner
NumberProducing -Occupied -Construction -
ofCommercialCommercialCommercial
(dollars in thousands)ContractsCommercialReal EstateReal EstateReal EstateTotal
Troubled debt restructurings          
Restructured accruing5 $1,096 $9,149 $— $— $10,245 
Restructured nonaccruing2 — 6,342 — — 6,342 
Total7 $1,096 $15,491 $— $— $16,587 
Specific allowance$364 $2,708 $— $— $3,072 
Restructured and subsequently defaulted$— $6,342 $— $— $6,342 
For the Six Months Ended June 30, 2020
IncomeOwner
NumberProducing -Occupied -Construction -
ofCommercialCommercialCommercial
(dollars in thousands)ContractsCommercialReal EstateReal EstateReal EstateTotal
Troubled debt restructurings
Restructured accruing10 $1,420 $10,016 $836 $— $12,272 
Restructured nonaccruing3 138 5,542 2,370 — 8,050 
Total13 $1,558 $15,558 $3,206 $— $20,322 
Specific allowance$257 $1,295 $— $— $1,552 
Restructured and subsequently defaulted$138 $5,542 $2,370 $— $8,050 
The Company had seven TDRs at June 30, 2021 totaling approximately $16.6 million. Five of these loans totaling approximately $10.2 million are performing under their modified terms as of June 30, 2021.
For the first six months of 2021 there were no performing TDR loans that defaulted on their modified terms; in the first six months of 2020, one performing TDR loan, with a balance of $5.5 million, defaulted on its modified terms and was placed on nonaccrual status.

A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual status. For the six months ended June 30, 2021, one previously nonperforming restructured loan had its collateral sold and all principal collected along with partial collection of delinquent interest; in addition, one restructured loan purchased as part of the 2014 acquisition of Virginia Heritage Bank has now had its full carrying value collected, while additional payments will recover previously written off principal and interest, and one nonperforming restructured loan was charged off. No similar transactions occurred during the three months ended June 30, 2021. During the six months ended June 30, 2021 and 2020, no loans were re-underwritten and removed from TDR status. Loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, the Company evaluates the loan for possible further impairment. The allowance may be increased, adjustments may be made in the allocation of the allowance or partial charge-offs may be taken to further write-down the carrying value of the loan. For the six months ended June 30, 2021 and 2020, there were no loans modified in a TDR.