| Loans and Allowance for Credit Losses |
Loans and Allowance for Credit Losses Loans Held for Sale Loans held for sale are comprised entirely of 1-4 family residential mortgage loans as of December 31, 2021 and 2020. Loans Held for Investment The Company adopted ASU 2016-13 effective January 1, 2021. Upon adoption, the Company changed its loan segments for purposes of the calculation of the ACL. Prior to January 1, 2021, the Company's loan segments were based on a combination of loan purpose and loan collateral. Effective January 1, 2021 and thereafter, the Company's loan segments are primarily based on loan collateral. The following table presents the Company's loan segments as of December 31, 2020 under the legacy segmentation and the new segmentation under ASU 2016-13: | | | | | | | (In Thousands) | Pre-ASU 2016-13 | | Commercial loans | $780,058 | | | Real estate construction one-to-four family | 38,467 | | | Real estate construction other | 80,315 | | | Real estate term owner occupied | 163,597 | | | Real estate term non-owner occupied | 309,074 | | | Real estate term other | 46,620 | | | Consumer secured by 1st deeds of trust | 15,585 | | | Consumer other | 22,069 | | | Subtotal | 1,455,785 | | | Unearned loan fees, net | (11,735) | | | Total portfolio loans | $1,444,050 | | | | | Post-ASU 2016-13 | | Commercial & industrial loans | $619,304 | | | Commercial real estate: | | | Owner occupied properties | 234,364 | | | Non-owner occupied and multifamily properties | 394,860 | | | Residential real estate: | | | 1-4 family residential properties secured by first liens | 33,463 | | | 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens | 18,114 | | | 1-4 family residential construction loans | 32,760 | | | Other construction, land development and raw land loans | 84,352 | | | Obligations of states and political subdivisions in the US | 15,274 | | | Agricultural production, including commercial fishing | 13,093 | | | Consumer loans | 5,794 | | | Other loans | 4,407 | | | Subtotal | $1,455,785 | | | Unearned loan fees, net | ($11,735) | | | Total portfolio loans | $1,444,050 | |
The following table presents amortized cost and unpaid principal balance of loans for the periods indicated: | | | | | | | | | | | | | | | | | | | | | | December 31, 2021 | December 31, 2020 | | (In Thousands) | Amortized Cost | Unpaid Principal | Difference | Amortized Cost | Unpaid Principal | Difference | | Commercial & industrial loans | $448,338 | | $454,106 | | ($5,768) | | $612,254 | | $619,304 | | ($7,050) | | | Commercial real estate: | | | | | | | | Owner occupied properties | 300,200 | | 301,623 | | (1,423) | | 233,320 | | 234,363 | | (1,043) | | | Non-owner occupied and multifamily properties | 435,311 | | 438,631 | | (3,320) | | 392,452 | | 394,860 | | (2,408) | | | Residential real estate: | | | | | | | | 1-4 family residential properties secured by first liens | 32,542 | | 32,602 | | (60) | | 33,415 | | 33,510 | | (95) | | | 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens | 19,610 | | 19,489 | | 121 | | 18,236 | | 18,114 | | 122 | | | 1-4 family residential construction loans | 36,222 | | 36,542 | | (320) | | 32,500 | | 32,760 | | (260) | | | Other construction, land development and raw land loans | 88,094 | | 88,604 | | (510) | | 83,463 | | 84,351 | | (888) | | | Obligations of states and political subdivisions in the US | 16,403 | | 16,565 | | (162) | | 15,318 | | 15,274 | | 44 | | | Agricultural production, including commercial fishing | 27,959 | | 28,082 | | (123) | | 12,968 | | 13,093 | | (125) | | | Consumer loans | 4,801 | | 4,763 | | 38 | | 5,734 | | 5,794 | | (60) | | | Other loans | 4,406 | | 4,422 | | (16) | | 4,390 | | 4,407 | | (17) | | | Total | 1,413,886 | | 1,425,429 | | (11,543) | | 1,444,050 | | 1,455,830 | | (11,780) | | | Allowance for credit losses | (11,739) | | | | (21,136) | | | | | $1,402,147 | | $1,425,429 | | ($11,543) | | $1,422,914 | | $1,455,830 | | ($11,780) | |
The difference between the amortized cost and unpaid principal balance is primarily net deferred origination fees totaling $11.5 million and $11.7 million at December 31, 2021 and 2020, respectively, and premiums and discounts associated with acquired loans totaling $0 and $47,000 at December 31, 2021 and 2020, respectively. Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $5.5 million and $7.1 million at December 31, 2021 and 2020, respectively, and was included in other assets in the Consolidated Balance Sheets. Amortized cost in the above table includes $118.2 million and $304.6 million as of December 31, 2021 and 2020, respectively, in PPP loans administered by the SBA within the Commercial & industrial loan segment. At December 31, 2021, approximately 75% of the Company’s loans, excluding PPP loans, are secured by real estate and 1% are unsecured. Approximately 24% are for general commercial uses, including professional, retail, and small businesses. Repayment is expected from the borrowers’ cash flow or, secondarily, the collateral. The Company’s exposure to credit loss, if any, is the outstanding amount of the loan if the collateral is determined to be of no value. Allowance for Credit Losses The activity in the ACL related to loans held for investment is as follows: | | | | | | | | | | | | | | | | | | | | | | Beginning Balance | Impact of adopting ASC 326 | Credit Loss Expense (Benefit) | Charge-offs | Recoveries | Ending Balance | | (In Thousands) | | 2021 | | | | | | | | Commercial | $7,973 | | ($7,973) | | $— | | $— | | $— | | — | | | Real estate construction 1-4 family | 679 | | (679) | | — | | — | | — | | — | | | Real estate construction other | 1,179 | | (1,179) | | — | | — | | — | | — | | | Real estate term owner occupied | 2,625 | | (2,625) | | — | | — | | — | | — | | | Real estate term non-owner occupied | 5,133 | | (5,133) | | — | | — | | — | | — | | | Real estate term other | 779 | | (779) | | — | | — | | — | | — | | | Consumer secured by 1st deed of trust | 261 | | (261) | | — | | — | | — | | — | | | Consumer other | 400 | | (400) | | — | | — | | — | | — | | | Unallocated | 2,107 | | (2,107) | | — | | — | | — | | — | | | Commercial & industrial loans | — | | 4,348 | | (122) | | (1,452) | | 253 | | 3,027 | | | Commercial real estate: | | | | | | | | Owner occupied properties | — | | 3,579 | | (412) | | — | | 9 | | 3,176 | | | Non-owner occupied and multifamily properties | — | | 4,944 | | (2,014) | | — | | — | | 2,930 | | | Residential real estate: | | | | | | | | 1-4 family residential properties secured by first liens | — | | 673 | | (234) | | — | | — | | 439 | | | 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens | — | | 419 | | (242) | | — | | 38 | | 215 | | | 1-4 family residential construction loans | — | | 454 | | (334) | | — | | — | | 120 | | | Other construction, land development and raw land loans | — | | 1,994 | | (359) | | — | | — | | 1,635 | | | Obligations of states and political subdivisions in the US | — | | 44 | | (12) | | — | | — | | 32 | | | Agricultural production, including commercial fishing | — | | 49 | | 11 | | — | | 31 | | 91 | | | Consumer loans | — | | 118 | | (65) | | — | | 14 | | 67 | | | Other loans | — | | 3 | | 4 | | — | | — | | 7 | | | Total | $21,136 | | ($4,511) | | ($3,779) | | ($1,452) | | $345 | | $11,739 | |
| | | | | | | | | | | | | | | | | | | Beginning Balance | Provision (benefit) | Charge-offs | Recoveries | Ending Balance | | (In Thousands) | | 2020 | | | | | | | Commercial | $6,604 | | $1,680 | | ($1,021) | | $710 | | $7,973 | | | Real estate construction 1-4 family | 643 | | 36 | | — | | — | | 679 | | | Real estate construction other | 1,017 | | 162 | | — | | — | | 1,179 | | | Real estate term owner occupied | 2,188 | | 522 | | (85) | | — | | 2,625 | | | Real estate term non-owner occupied | 5,180 | | (47) | | — | | — | | 5,133 | | | Real estate term other | 671 | | 106 | | — | | 2 | | 779 | | | Consumer secured by 1st deed of trust | 270 | | (9) | | — | | — | | 261 | | | Consumer other | 436 | | (46) | | (15) | | 25 | | 400 | | | Unallocated | 2,079 | | 28 | | — | | — | | 2,107 | | | Total | $19,088 | | $2,432 | | ($1,121) | | $737 | | $21,136 | |
As of December 31, 2021 the ACL decreased to $11.7 million. The Company primarily uses a DCF method to estimate ACL for loans. The Company utilizes and forecasts unemployment in Alaska as the primary loss driver in the DCF model. The Company also utilizes and forecasts either the one-year percentage change in the Alaska home price index or the one-year percentage change in the national commercial real estate price index as a second loss driver depending on the nature of the underlying loan pool and how well that loss driver correlates to expected future losses. Consistent forecasts of the loss drivers are used across the loan segments. At December 31, 2021, as compared to January 1, 2021, the Company forecasted a significantly lower unemployment rate in Alaska, a slightly higher one-year percentage change in the national commercial real estate price index, and a higher one-year percentage change in the Alaska home price index over the reasonable and supportable forecast period. Specifically regarding the forecasts used to calculate the December 31, 2021 ACL, management expects unemployment to decline each quarter in 2022 as compare to actual levels observed in Alaska as of December 2021. This rate is still above pre-pandemic levels over the forecast period, but is lower than rates previously projected by management. The Company also applies qualitative factors in our CECL model, and these factors also improved as of December 31, 2021 as compared to January 1, 2021 due to increases in oil prices. Additionally, the ACL for individually impaired loans decreased during the 2021 due to pay downs. These factors, which decreased the ACL during 2021, were only partially offset by an increase in loan balances. The following table presents loans individually and collectively evaluated for impairment and their respective allowance for credit loss allocations as of December 31, 2020, as determined in accordance with ASC 310 prior to the adoption of ASU 2016-13: | | | | | | | | | | | | | | | | | | | | | | | | | (In Thousands) | Loan Evaluation | | ALLL Allocations | | Individually | Collectively | Total | | Individually | Collectively | Total | | | | | | | | | | Commercial | $7,786 | | $764,682 | | $772,468 | | | $13 | | $7,960 | | $7,973 | | | Real estate construction 1-4 family | 702 | | $37,478 | | 38,180 | | | — | | 679 | | 679 | | | Real estate construction other | — | | $79,403 | | 79,403 | | | — | | 1,179 | | 1,179 | | | Real estate term owner occupied | 6,962 | | $155,762 | | 162,724 | | | — | | 2,625 | | 2,625 | | | Real estate term non-owner occupied | 770 | | $306,477 | | 307,247 | | | — | | 5,133 | | 5,133 | | | Real estate term other | 1,467 | | $44,763 | | 46,230 | | | — | | 779 | | 779 | | | Consumer secured by 1st deed of trust | 259 | | $15,289 | | 15,548 | | | — | | 261 | | 261 | | | Consumer other | 82 | | $22,168 | | 22,250 | | | — | | 400 | | 400 | | | Unallocated | — | | — | | — | | | — | | 2,107 | | 2,107 | | | Total | $18,028 | | $1,426,022 | | $1,444,050 | | | $13 | | $21,123 | | $21,136 | |
The following table presents information pertaining to impaired loans as of December 31, 2020, as determined in accordance with ASC 310 prior to the adoption of ASU 2016-13: | | | | | | | | | | | | | | | | | | | | | | Impaired Loans With a Valuation Allowance | | Impaired Loans Without a Valuation Allowance | | (In Thousands) | Recorded Investment | Unpaid Principal | Related Allowance | | Recorded Investment | Unpaid Principal | | | | | | | | | Commercial | $308 | | $308 | | $13 | | | $7,478 | | $8,287 | | | Real estate construction 1-4 family | — | | — | | — | | | 702 | | 702 | | | Real estate construction other | — | | — | | — | | | — | | — | | | Real estate term owner occupied | — | | — | | — | | | 6,962 | | 7,047 | | | Real estate term non-owner occupied | — | | — | | — | | | 771 | | 771 | | | Real estate term other | — | | — | | — | | | 1,467 | | 1,467 | | | Consumer secured by 1st deed of trust | — | | — | | — | | | 258 | | 258 | | | Consumer other | — | | — | | — | | | 82 | | 87 | | | Total | $308 | | $308 | | $13 | | | $17,720 | | $18,619 | |
The following table presents average impaired loans information, as determined in accordance with ASC 310 prior to the adoption of ASU 2016-13, and interest recognized on such loans, for the year ended December 31, 2020: | | | | | | | | | | (In Thousands) | Average Impaired Loans | Interest Recognized | | Commercial | $10,964 | | $147 | | | Real estate construction 1-4 family | 781 | | — | | | Real estate construction other | — | | — | | | Real estate term owner occupied | 6,739 | | 125 | | | Real estate term non-owner occupied | 562 | | 29 | | | Real estate term other | 1,551 | | 20 | | | Consumer secured by 1st deed of trust | 299 | | 12 | | | Consumer other | 86 | | — | | | Total | $20,982 | | $333 | |
Credit Quality Information As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management utilizes a loan risk grading system called the Asset Quality Rating (“AQR”) system to assign a risk classification to each of its loans. The risk classification is a dual rating system that contemplates both probability of default and risk of loss given default. Loans are graded on a scale of 1 to 10 and, loans graded 1 – 6 are considered “pass” grade loans. Loans graded 7 or higher are considered "classified" loans. A description of the general characteristics of the AQR risk classifications are as follows: Pass grade loans – 1 through 6: The borrower demonstrates sufficient cash flow to fund debt service, including acceptable profit margins, cash flows, liquidity and other balance sheet ratios. Historic and projected performance indicates that the borrower is able to meet obligations under most economic circumstances. The Company has competent management with an acceptable track record. The category does not include loans with undue or unwarranted credit risks that constitute identifiable weaknesses.
Classified loans: Special Mention – 7: A "special mention" credit has weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset at some future date.
Substandard – 8: A "substandard" credit is inadequately protected by the current worth and paying capacity of the obligor or by the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Doubtful – 9: An asset classified "doubtful" has all the weaknesses inherent in one that is classified "substandard-8" with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable. The loan has substandard characteristics, and available information suggests that it is unlikely that the loan will be repaid in its entirety.
Loss – 10: An asset classified "loss" is considered uncollectible and of such little value that its continuance on the books is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this basically worthless asset, even though partial recovery may be affected in the future.
The following tables present the Company's portfolio of risk-rated loans by grade and by year of origination. Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal of loan constitutes a current period origination. Generally, current period renewals of credit are re-underwritten at the point of renewal and considered current period originations for purposes of the table below.
| | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2021 | 2021 | 2020 | 2019 | 2018 | 2017 | Prior | Total | | (In Thousands) | | Commercial & industrial loans | | | | | | | | | Pass | $227,376 | | $54,478 | | $29,846 | | $37,339 | | $23,205 | | $44,554 | | $416,798 | | | Classified | 18,853 | | 714 | | 3,564 | | 3,118 | | 517 | | 4,774 | | 31,540 | | | Total commercial & industrial loans | $246,229 | | $55,192 | | $33,410 | | $40,457 | | $23,722 | | $49,328 | | $448,338 | | | | | | | | | | | Commercial real estate: | | | | | | | | | Owner occupied properties | | | | | | | | | Pass | $81,533 | | $83,975 | | $39,254 | | $14,841 | | $14,452 | | $57,717 | | $291,772 | | | Classified | — | | 1,399 | | — | | 522 | | — | | 6,507 | | 8,428 | | | Total commercial real estate owner occupied properties | $81,533 | | $85,374 | | $39,254 | | $15,363 | | $14,452 | | $64,224 | | $300,200 | | | | | | | | | | | Non-owner occupied and multifamily properties | | | | | | | Pass | $77,205 | | $77,961 | | $61,147 | | $34,307 | | $19,833 | | $154,561 | | $425,014 | | | Classified | — | | — | | — | | 10 | | 10,286 | | 1 | | 10,297 | | | Total commercial real estate non-owner occupied and multifamily properties | $77,205 | | $77,961 | | $61,147 | | $34,317 | | $30,119 | | $154,562 | | $435,311 | | | | | | | | | | | Residential real estate: | | | | | | | | | 1-4 family residential properties secured by first liens | | | | | | | Pass | $7,756 | | $8,023 | | $3,689 | | $531 | | $1,466 | | $8,812 | | $30,277 | | | Classified | 417 | | 1,077 | | 472 | | 90 | | — | | 209 | | 2,265 | | | Total residential real estate 1-4 family residential properties secured by first liens | $8,173 | | $9,100 | | $4,161 | | $621 | | $1,466 | | $9,021 | | $32,542 | | | | | | | | | | | 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens | | | | Pass | $5,806 | | $2,535 | | $3,229 | | $3,464 | | $259 | | $4,046 | | $19,339 | | | Classified | — | | — | | — | | 259 | | — | | 12 | | 271 | | | Total residential real estate 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens | $5,806 | | $2,535 | | $3,229 | | $3,723 | | $259 | | $4,058 | | $19,610 | | | | | | | | | | | 1-4 family residential construction loans | | | | | | | | | Pass | $21,409 | | $1,056 | | $1,707 | | $62 | | $— | | $11,879 | | $36,113 | | | Classified | — | | — | | — | | — | | 109 | | — | | 109 | | | Total residential real estate 1-4 family residential construction loans | $21,409 | | $1,056 | | $1,707 | | $62 | | $109 | | $11,879 | | $36,222 | | | | | | | | | | | Other construction, land development and raw land loans | | | | | | Pass | $39,624 | | $26,458 | | $11,044 | | $3,315 | | $139 | | $5,544 | | $86,124 | | | Classified | — | | — | | — | | 460 | | — | | 1,510 | | 1,970 | | | Total other construction, land development and raw land loans | $39,624 | | $26,458 | | $11,044 | | $3,775 | | $139 | | $7,054 | | $88,094 | | | | | | | | | | | Obligations of states and political subdivisions in the US | | | | | | Pass | $4,120 | | $812 | | $1,875 | | $343 | | $2,733 | | $6,520 | | $16,403 | | | Classified | — | | — | | — | | — | | — | | — | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | Total obligations of states and political subdivisions in the US | $4,120 | | $812 | | $1,875 | | $343 | | $2,733 | | $6,520 | | $16,403 | | | | | | | | | | | Agricultural production, including commercial fishing | | | | | | Pass | $19,970 | | $3,929 | | $810 | | $1,118 | | $741 | | $1,391 | | $27,959 | | | Classified | — | | — | | — | | — | | — | | — | | — | | | Total agricultural production, including commercial fishing | $19,970 | | $3,929 | | $810 | | $1,118 | | $741 | | $1,391 | | $27,959 | | | | | | | | | | | Consumer loans | | | | | | | | | Pass | $873 | | $815 | | $653 | | $403 | | $291 | | $1,766 | | $4,801 | | | Classified | — | | — | | — | | — | | — | | — | | — | | | Total consumer loans | $873 | | $815 | | $653 | | $403 | | $291 | | $1,766 | | $4,801 | | | | | | | | | | | Other loans | | | | | | | | | Pass | $2,028 | | $1,645 | | $430 | | $95 | | $— | | $208 | | $4,406 | | | Classified | — | | — | | — | | — | | — | | — | | — | | | Total other loans | $2,028 | | $1,645 | | $430 | | $95 | | $— | | $208 | | $4,406 | | | | | | | | | | | Total loans | | | | | | | | | Pass | $487,700 | | $261,687 | | $153,684 | | $95,818 | | $63,119 | | $296,998 | | $1,359,006 | | | Classified | 19,270 | | 3,190 | | 4,036 | | 4,459 | | 10,912 | | 13,013 | | 54,880 | | | Total loans | $506,970 | | $264,877 | | $157,720 | | $100,277 | | $74,031 | | $310,011 | | $1,413,886 | | | | | | | | | | | Total pass loans | $487,700 | | $261,687 | | $153,684 | | $95,818 | | $63,119 | | $296,998 | | $1,359,006 | | | Government guarantees | (145,713) | | (12,725) | | (14,429) | | (3,299) | | (306) | | (6,562) | | (183,034) | | | Total pass loans, net of government guarantees | $341,987 | | $248,962 | | $139,255 | | $92,519 | | $62,813 | | $290,436 | | $1,175,972 | | | | | | | | | | | Total classified loans | $19,270 | | $3,190 | | $4,036 | | $4,459 | | $10,912 | | $13,013 | | $54,880 | | | Government guarantees | (7,201) | | (1,259) | | — | | — | | — | | (10,571) | | (19,031) | | | Total classified loans, net government guarantees | $12,069 | | $1,931 | | $4,036 | | $4,459 | | $10,912 | | $2,442 | | $35,849 | |
The following table presents the Company's portfolio of risk-rated loans by grade as of December 31, 2020:
| | | | | | | | | | | | | Pass | Classified | Total | | (In Thousands) | | December 31, 2020 | | | | | Commercial | $758,362 | | $14,106 | | $772,468 | | | Real estate construction 1-4 family | 37,093 | | 1,087 | | 38,180 | | | Real estate construction other | 79,403 | | — | | 79,403 | | | Real estate term owner occupied | 152,734 | | 9,990 | | 162,724 | | | Real estate term non-owner occupied | 289,555 | | 17,692 | | 307,247 | | | Real estate term other | 42,900 | | 3,330 | | 46,230 | | | Consumer secured by 1st deed of trust | 15,404 | | 144 | | 15,548 | | | Consumer other | 22,144 | | 106 | | 22,250 | | | Portfolio loans | 1,397,595 | | 46,455 | | 1,444,050 | | | Government guarantees | (334,639) | | (14,587) | | (349,226) | | | Portfolio loans, net of government guarantees | $1,062,956 | | $31,868 | | $1,094,824 | |
Past Due Loans
The following tables present an aging of contractually past due loans as of the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (In Thousands) | 30-59 Days
Past Due | | 60-89 Days
Past Due | | Greater Than
90 Days Past Due | | Total Past
Due | | Current | | Total | | Greater Than 90 Days Past Due Still Accruing | | December 31, 2021 | | | | | | | | | | | | | | | Commercial & industrial loans | $206 | | | $51 | | | $469 | | | $726 | | | $447,612 | | | $448,338 | | | $— | | | Commercial real estate: | | | | | | | | | | | | | | | Owner occupied properties | 12 | | | — | | | 1,176 | | | 1,188 | | | 299,012 | | | 300,200 | | | — | | | Non-owner occupied and multifamily properties | — | | | — | | | — | | | — | | | 435,311 | | | 435,311 | | | — | | | Residential real estate: | | | | | | | | | | | | | | | 1-4 family residential properties secured by first liens | — | | | — | | | 90 | | | 90 | | | 32,452 | | | 32,542 | | | — | | | 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens | — | | | — | | | 139 | | | 139 | | | 19,471 | | | 19,610 | | | — | | | 1-4 family residential construction loans | — | | | — | | | 109 | | | 109 | | | 36,113 | | | 36,222 | | | — | | | Other construction, land development and raw land loans | — | | | — | | | 1,636 | | | 1,636 | | | 86,458 | | | 88,094 | | | — | | | Obligations of states and political subdivisions in the US | — | | | — | | | — | | | — | | | 16,403 | | | 16,403 | | | — | | | Agricultural production, including commercial fishing | — | | | — | | | — | | | — | | | 27,959 | | | 27,959 | | | — | | | Consumer loans | — | | | — | | | — | | | — | | | 4,801 | | | 4,801 | | | — | | | Other loans | — | | | — | | | — | | | — | | | 4,406 | | | 4,406 | | | — | | | Total | $218 | | | $51 | | | $3,619 | | | $3,888 | | | $1,409,998 | | | $1,413,886 | | | $— | | | December 31, 2020 | | | | | | | | | | | | | | | Commercial & industrial loans | $242 | | | $229 | | | $2,675 | | | $3,146 | | | $609,108 | | | $612,254 | | | $— | | | Commercial real estate: | | | | | | | | | | | | | | | Owner occupied properties | 2,203 | | | — | | | 2,459 | | | 4,662 | | | 228,658 | | | 233,320 | | | 449 | | | Non-owner occupied and multifamily properties | — | | | — | | | — | | | — | | | 392,452 | | | 392,452 | | | — | | | Residential real estate: | | | | | | | | | | | | | | | 1-4 family residential properties secured by first liens | 446 | | | — | | | — | | | 446 | | | 32,969 | | | 33,415 | | | — | | | 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens | 38 | | | — | | | 139 | | | 177 | | | 18,059 | | | 18,236 | | | — | | | 1-4 family residential construction loans | — | | | — | | | 702 | | | 702 | | | 31,798 | | | 32,500 | | | — | | | Other construction, land development and raw land loans | — | | | — | | | 1,545 | | | 1,545 | | | 81,918 | | | 83,463 | | | — | | | Obligations of states and political subdivisions in the US | — | | | — | | | — | | | — | | | 15,318 | | | 15,318 | | | — | | | Agricultural production, including commercial fishing | — | | | — | | | — | | | — | | | 12,968 | | | 12,968 | | | — | | | Consumer loans | — | | | — | | | 272 | | | 272 | | | 5,462 | | | 5,734 | | | — | | | Other loans | — | | | — | | | — | | | — | | | 4,390 | | | 4,390 | | | — | | | Total | $2,929 | | | $229 | | | $7,792 | | | $10,950 | | | $1,433,100 | | | $1,444,050 | | | $449 | |
Nonaccrual Loans Nonaccrual loans net of government guarantees totaled $10.7 million and $9.6 million at December 31, 2021 and December 31, 2020, respectively. The following table presents loans on nonaccrual status and loans on nonaccrual status for which there was no related allowance for credit losses: | | | | | | | | | | | | | | | | December 31, 2021 | December 31, 2020 | | (In Thousands) | Nonaccrual | Nonaccrual With No ACL | Nonaccrual | Nonaccrual With No ACL | | | | | | | Commercial & industrial loans | $4,350 | | $4,298 | | $3,848 | | $3,513 | | | Commercial real estate: | | | | | | Owner occupied properties | 3,506 | | 3,506 | | 4,620 | | 4,582 | | | | | | | | Residential real estate: | | | | | | 1-4 family residential properties secured by first liens | 1,778 | | 1,778 | | 160 | | 160 | | 1-4 family residential properties secured by junior liens
and revolving secured by 1-4 family first liens | 271 | | 215 | | 242 | | 221 | | | 1-4 family residential construction loans | 109 | | 109 | | 702 | | 702 | | | Other construction, land development and raw land loans | 1,636 | | 1,636 | | 1,545 | | 1,545 | | | | | | | | | | | | | Consumer loans | — | | — | | 3 | | — | | | | | | | | Total nonaccrual loans | 11,650 | | 11,542 | | 11,120 | | 10,723 | | | Government guarantees on nonaccrual loans | (978) | | (978) | | (1,483) | | (1,483) | | | Net nonaccrual loans | $10,672 | | $10,564 | | $9,637 | | $9,240 | |
Interest income which would have been earned on nonaccrual loans for 2021, 2020, and 2019 amounted to $744,000, $856,000, and $1.3 million, respectively.
There was $10,000 interest on nonaccrual loans reversed through interest income in 2021, and there was $12,000 in interest on nonaccrual loans reversed through interest income in 2020. There was no interest earned on nonaccrual loans with a principal balance during 2021 or 2020. However, the Company recognized interest income of $1.6 million, $924,000, and $301,000 in 2021, 2020, and 2019, respectively, related to interest collected on nonaccrual loans whose principal has been paid down to zero.
Troubled Debt Restructurings Loans classified as TDRs totaled $10.6 million and $7.9 million at December 31, 2021 and 2020, respectively. A TDR is a loan to a borrower that is experiencing financial difficulty that has been modified from its original terms and conditions in such a way that the Company is granting the borrower a concession that it would not grant otherwise. The provisions of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act included an election to not apply the guidance on accounting for TDRs to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) January 1, 2022 or (ii) 60 days after the end of the COVID-19 national emergency. The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019. The Company has elected to adopt these provisions of the CARES Act. As of December 31, 2021 and 2020, the Company has made the following types of loan modifications related to COVID-19, which are not classified as TDRs with principal balance outstanding of: | | | | | | | | | | | | | Loan Modifications due to COVID-19 as of December 31, 2021 | | (Dollars in thousands) | Interest Only | Full Payment Deferral | Total | | Portfolio loans | $49,219 | | $31 | | $49,250 | | | Number of modifications | 16 | | 1 | | 17 | |
| | | | | | | | | | | | | Loan Modifications due to COVID-19 as of December 31, 2020 | | (Dollars in thousands) | Interest Only | Full Payment Deferral | Total | | Portfolio loans | $43,379 | | $22,165 | | $65,544 | | | Number of modifications | 23 | | 11 | | 34 | |
The Company has granted a variety of concessions to borrowers in the form of loan modifications. The modifications granted can generally be described in the following categories:
Rate Modification: A modification in which the interest rate is changed. Term Modification: A modification in which the maturity date, timing of payments, or frequency of payments is changed. Payment Modification: A modification in which the dollar amount of the payment is changed, or in which a loan is converted to interest only payments for a period of time is included in this category. Combination Modification: Any other type of modification, including the use of multiple categories above. The following table presents the breakout between newly restructured loans that occurred during 2021 and restructured loans that occurred prior to 2021 that are still included in portfolio loans. As discussed above, the CARES Act provided banks an option to elect to not account for certain loan modifications related to COVID-19 as TDRs as long as the borrowers were not more than 30 days past due as of December 31, 2019. The below disclosed restructurings were not related to COVID-19 modifications: | | | | | | | | | | | | | | | | | | | | Accrual Status | | Nonaccrual Status | | Total Modifications | | (In Thousands) | | | | New Troubled Debt Restructurings | | | | | | | Commercial & industrial loans | $— | | | $3,118 | | | $3,118 | | | Commercial real estate: | | | | | | | Owner occupied properties | — | | | 350 | | | 350 | | | | | | | | | Residential real estate: | | | | | | | | | | | | | 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens | — | | | 139 | | | 139 | | | | | | | | | Other construction, land development and raw land loans | — | | | 577 | | | 577 | | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | — | | | 4,184 | | | 4,184 | | | Existing Troubled Debt Restructurings | 3,291 | | | 3,163 | | | 6,454 | | | Total | $3,291 | | | $7,347 | | | $10,638 | |
The following tables present newly restructured loans that occurred during 2021 and 2020, by concession (terms modified): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2021 | | (In Thousands) | Number of Contracts | | Rate Modification | | Term Modification | | Payment Modification | | Combination Modification | | Total Modifications | | Pre-Modification Outstanding Recorded Investment: | | | | Commercial & industrial loans | 2 | | $— | | | $3,792 | | | $— | | | $— | | | $3,792 | | | Commercial real estate: | | | | | | | | | | | | | Owner occupied properties | 1 | | — | | | 360 | | | — | | | — | | | 360 | | | Residential real estate: | | | | | | | | | | | | | 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens | 1 | | — | | | — | | | 139 | | | — | | | 139 | | | Other construction, land development and raw land loans | 1 | | — | | | 577 | | | — | | | — | | | 577 | | | Total | 5 | | $— | | | $4,729 | | | $139 | | | $— | | | $4,868 | | | Post-Modification Outstanding Recorded Investment: | | | | Commercial & industrial loans | 1 | | $— | | | $3,118 | | | $— | | | $— | | | $3,118 | | | Commercial real estate: | | | | | | | | | | | | | Owner occupied properties | 1 | | — | | | 350 | | | — | | | — | | | 350 | | | Residential real estate: | | | | | | | | | | | | | 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens | 1 | | — | | | — | | | 139 | | | — | | | 139 | | | Other construction, land development and raw land loans | 1 | | — | | | 577 | | | — | | | — | | | 577 | | | Total | 4 | | $— | | | $4,045 | | | $139 | | | $— | | | $4,184 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | (In Thousands) | Number of Contracts | | Rate Modification | | Term Modification | | Payment Modification | | Combination Modification | | Total Modifications | | Pre-Modification Outstanding Recorded Investment: | | | | Commercial & industrial loans | 2 | | $— | | | $3,249 | | | $164 | | | $— | | | $3,413 | | | Total | 2 | | $— | | | $3,249 | | | $164 | | | $— | | | $3,413 | | | Post-Modification Outstanding Recorded Investment: | | | | Commercial & industrial loans | 2 | | $— | | | $1,590 | | | $161 | | | $— | | | $1,751 | | | Total | 2 | | $— | | | $1,590 | | | $161 | | | $— | | | $1,751 | |
The Company had no commitments to extend additional credit to borrowers owing receivables whose terms have been modified in TDRs at December 31, 2021. There were zero charge-offs in 2021 and 2020 on loans that were later classified as a TDR. There were no loans that were restructured during 2021, 2020, or 2019 that also subsequently defaulted within the first twelve months of restructure in those same periods. Loans to Related Parties Certain directors, and companies of which directors are principal owners, have loans with the Company. Such transactions are made on substantially the same terms, including interest rates and collateral required, as those prevailing for similar transactions of unrelated parties. An analysis of the loan transactions for the years indicated follows: | | | | | | | | | | | | | | | | | | | (In Thousands) | 2021 | | 2020 | | 2019 | | Balance, beginning of the year | $217 | | | $309 | | | $— | | | Loans made | — | | | — | | | 309 | | | Repayments | 26 | | | 92 | | | — | | | Balance, end of year | $191 | | | $217 | | | $309 | |
The Company had $115,000 of unfunded loan commitments to these directors or their related interests on December 31, 2021 and $15,000 of unfunded loan commitments on December 31, 2020. Pledged Loans At December 31, 2021 and 2020, there were no loans pledged as collateral to secure public deposits.
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