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Note 3 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans

3 Months Ended

Mar. 31, 2021

Allowance for Credit Losses [Text Block]

Note 3: Allowance for Loan Losses, Nonperforming Assets and Impaired Loans

The allowance for loan losses methodology incorporates individual evaluation of impaired loans and collective evaluation of groups of non-impaired loans. The Company performs ongoing analysis of the loan portfolio to determine credit quality and to identify impaired loans. Credit quality is rated based on the loan’s payment history, the borrower’s current financial situation and value of the underlying collateral.

Impaired Loans

Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts will not be collected when due according to the contractual terms of the loan agreement. Impaired loans are those loans that have been modified in a TDR and larger, usually non-homogeneous loans that are in nonaccrual or exhibit payment history or financial status that indicate that collection probably will not occur when due according to the loan’s terms. Generally, impaired loans are given risk ratings that indicate higher risk, such as “classified” or “special mention.” Impaired loans are individually evaluated to determine appropriate reserves and are measured at the lower of the invested amount or the fair value. Impaired loans that are not TDRs and for which fair value measurement indicates an impairment loss are designated nonaccrual. A TDR loan that maintains current status for at least six months may accrue interest. Please refer to the Company’s 2020 Form 10-K, Note 1: Summary of Significant Accounting Policies for additional information on evaluation of impaired loans and associated specific reserves, and policies regarding nonaccruals, past due status and charge-offs.

TDRs impact the estimation of the appropriate level of the allowance for loan losses. If the restructuring included forgiveness of a portion of principal or accrued interest, the charge-off is included in the historical charge-off rates applied to the collective evaluation methodology. Restructured loans are individually evaluated for impairment, and the amount of a restructured loan’s book value in excess of its fair value is accrued as a specific allocation in the allowance for loan losses. If a TDR loan payment exceeds 90 days past due, it is examined to determine whether the late payment indicates collateral dependency or cash flows below those that were used in the fair value measurement. TDRs, as well as all impaired loans, that are determined to be collateral dependent are charged down to fair value. Deficiencies indicated by impairment measurements for TDRs that are not collateral dependent may be accrued in the allowance for loan losses or charged off if deemed uncollectible.

Collectively Evaluated Loans

The Company evaluated characteristics in the loan portfolio and determined major segments and smaller classes within each segment. These characteristics include collateral type, repayment sources, and (if applicable) the borrower’s business model. The methodology for calculating reserves for collectively evaluated loans is applied at the class level.

Portfolio Segments and Classes

The segments and classes used in determining the allowance for loan losses are as follows.

Real Estate Construction

Construction, residential

Construction, other

Consumer Real Estate

Equity lines

Residential closed-end first liens

Residential closed-end junior liens

Investor-owned residential real estate

Commercial Real Estate

Multifamily real estate

Commercial real estate, owner-occupied

Commercial real estate, other

Commercial Non-Real Estate

Commercial and industrial

Public Sector and IDA

Public sector and IDA

Consumer Non-Real Estate

Credit cards

Automobile

Other consumer loans

Historical Loss Rates

The Company’s allowance methodology for collectively evaluated loans applies historical loss rates by class to current class balances as part of the process of determining required reserves. Class loss rates are calculated as the net charge-offs for the class as a percentage of average class balance. The Company averages loss rates for the most recent eight quarters to determine the historical loss rate for each class.

Two loss rates for each class are calculated: total net charge-offs for the class as a percentage of average class loan balance (“class loss rate”), and total net charge-offs for the class as a percentage of average classified loans in the class (“classified loss rate”). Classified loans are those with risk ratings of “substandard” or lower. Net charge-offs in both calculations include charge-offs and recoveries of classified and non-classified loans as well as those associated with impaired loans. Class historical loss rates are applied to non-classified loan balances at the reporting date, and classified historical loss rates are applied to classified balances at the reporting date.

Risk Factors

In addition to historical loss rates, risk factors pertinent to credit risk for each class are analyzed to estimate reserves for collectively evaluated loans. Factors include changes in national and local economic and business conditions, the nature and volume of classes within the portfolio, loan quality, loan officers’ experience, lending policies and the Company’s loan review system.

The analysis of certain factors results in standard allocations to all segments and classes. These factors include the risk from changes in lending policies, loan officers’ average years of experience, and economic factors including unemployment levels, bankruptcy rates, interest rate environment, and competition/legal/regulatory environments. Also applied to all segments and classes is an economic factor implemented to address COVID-19 uncertainty: national unemployment filings. Typically the Company applies to the allowance calculation economic data specific to its market area. However, since local data is not available timely and historical analysis determined that local unemployment filings were closely correlated to national unemployment filings, the Company elected to allocate based upon national unemployment filings.

Factors analyzed for each class, with resultant allocations based upon the level of risk assessed for each class, include the risk from changes in loan review, levels of past due loans, levels of nonaccrual loans, current class balance as a percentage of total loans, and the percentage of high risk loans within the class. High risk loans include junior liens, interest only and high loan to value loans. During the 4th quarter of 2020 the Company implemented a new factor to account for potential increased risk of loans that have received multiple modifications and were still in the modification period at the reporting date. Additionally, factors specific to each segment are analyzed and result in allocations to the segment. Factor allocations applied to each class are increased for loans rated special mention and increased to a greater extent for loans rated classified. Please refer to the Company’s 2020 Form 10-K, Note 1: Summary of Significant Accounting Policies for a discussion of risk factors pertinent to each class.

Real estate construction loans are subject to general risks from changing commercial building and housing market trends and economic conditions that may impact demand for completed properties and the costs of completion. These risks are measured by market-area unemployment rates, bankruptcy rates, building market trends, and interest rates.

The credit quality of consumer real estate is subject to risks associated with the borrower’s repayment ability and collateral value, measured generally by analyzing local unemployment and bankruptcy trends, local housing market trends, and interest rates.

The commercial real estate segment includes loans secured by multifamily residential real estate, commercial real estate occupied by the owner/borrower, and commercial real estate leased to non-owners. Loans in the commercial real estate segment are impacted by economic risks from changing commercial real estate markets, rental markets for multi-family housing and commercial buildings, business bankruptcy rates, local unemployment and interest rate trends that would impact the businesses housed by the commercial real estate.

Commercial non-real estate loans are secured by collateral other than real estate, or are unsecured. Credit risk for commercial non-real estate loans is subject to economic conditions, generally monitored by local business bankruptcy trends, and interest rates.

Public sector and Industrial Development Authority (“IDA”) loans are extended to municipalities and related entities. Credit risk is based upon the entity’s ability to repay and interest rate trends.

Consumer non-real estate includes credit cards, automobile and other consumer loans. Credit cards and certain other consumer loans are unsecured, while collateral is obtained for automobile loans and other consumer loans. Credit risk stems primarily from the borrower’s ability to repay, measured by average unemployment, average personal bankruptcy rates and interest rates.

A detailed analysis showing the allowance roll-forward by portfolio segment and related loan balance by segment follows.

	Activity in the Allowance for Loan Losses for the Three Months Ended March 31, 2021
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate			Commercial Non-Real Estate			Public Sector and IDA			Consumer Non- Real Estate			Unallocated			Total
Balance, December 31, 2020	$	503	$	2,165	$	3,853		$	670		$	339		$	555		$	396		$	8,481
Charge-offs		-		-		-			-			-			(47	)		-			(47	)
Recoveries		-		-		12			2			-			38			-			52
Provision for (recovery of) loan losses		8		201		(3	)		(38	)		(28	)		(50	)		(40	)		50
Balance, March 31, 2021	$	511	$	2,366	$	3,862		$	634		$	311		$	496		$	356		$	8,536

	Activity in the Allowance for Loan Losses for the Three Months Ended March 31, 2020
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate		Commercial Non-Real Estate			Public Sector and IDA		Consumer Non- Real Estate			Unallocated		Total
Balance, December 31, 2019	$	400		$	1,895		$	2,559	$	555		$	478	$	650		$	326	$	6,863
Charge-offs		-			(44	)		-		(65	)		-		(66	)		-		(175	)
Recoveries		-			-			12		1			-		60			-		73
Provision for (recovery of) loan losses		(25	)		219			29		230			33		(25	)		18		479
Balance, March 31, 2020	$	375		$	2,070		$	2,600	$	721		$	511	$	619		$	344	$	7,240

Activity in the Allowance for Loan Losses for the Year Ended December 31, 2020

Real Estate Construction

Consumer Real Estate

Commercial Real Estate

Commercial Non-Real Estate

Public Sector and IDA

Consumer Non- Real Estate

Unallocated

Total

Balance, December 31, 2019
$ 400 $ 1,895 $ 2,559 $ 555 $ 478 $ 650 $ 326 $ 6,863

Charge-offs
- (85
)
(15
)
(372
)
- (248
)
- (720
)

Recoveries
- 18 145 9 - 175 - 347

Provision for (recovery of) loan losses
103 337 1,164 478 (139
)
(22
)
70 1,991

Balance, December 31, 2020
$ 503 $ 2,165 $ 3,853 $ 670 $ 339 $ 555 $ 396 $ 8,481

	Allowance for Loan Losses as of March 31, 2021
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non-Real Estate		Public Sector and IDA		Consumer Non- Real Estate		Unallocated		Total
Individually evaluated for impairment	$	-	$	2	$	-	$	16	$	-	$	-	$	-	$	18
Collectively evaluated for impairment		511		2,364		3,862		618		311		496		356		8,518
Total	$	511	$	2,366	$	3,862	$	634	$	311	$	496	$	356	$	8,536

	Allowance for Loan Losses as of December 31, 2020
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non-Real Estate		Public Sector and IDA		Consumer Non- Real Estate		Unallocated		Total
Individually evaluated for impairment	$	-	$	2	$	-	$	73	$	-	$	-	$	-	$	75
Collectively evaluated for impairment		503		2,163		3,853		597		339		555		396		8,406
Total	$	503	$	2,165	$	3,853	$	670	$	339	$	555	$	396	$	8,481

	Loans as of March 31, 2021
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non-Real Estate		Public Sector and IDA		Consumer Non- Real Estate		Unallocated		Total
Individually evaluated for impairment	$	-	$	193	$	*3,919*	$	826	$	-	$	1	$	-	$	4,939
Collectively evaluated for impairment		42,570		186,713		388,542		86,432		39,788		32,260		-		776,305
Total	$	42,570	$	186,906	$	392,461	$	87,258	$	39,788	$	32,261	$	-	$	781,244

	Loans as of December 31, 2020
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non-Real Estate		Public Sector and IDA		Consumer Non- Real Estate		Unallocated		Total
Individually evaluated for impairment	$	-	$	194	$	3,856	$	851	$	-	$	2	$	-	$	4,903
Collectively evaluated for impairment		42,266		181,588		389,259		77,920		40,983		33,108		-		765,124
Total	$	42,266	$	181,782	$	393,115	$	78,771	$	40,983	$	33,110	$	-	$	770,027

A summary of ratios for the allowance for loan losses follows.

	As of and for the
	Three Months Ended March 31,						Year Ended December 31,
	2021			2020			2020
Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees and costs⁽¹⁾		1.10	%		0.99	%		1.10	%
Ratio of net charge-offs to average loans, net of unearned income and deferred fees and costs⁽²⁾		0.00	%		0.06	%		0.05	%

⁽¹⁾	The ratio of the allowance for loan losses to the end of period loans, net of unearned income and deferred fees and costs at March 31, 2021 and December 31, 2020 include government-guaranteed SBA PPP loans, which do not require an allowance for loan losses. Excluding the PPP loans, the ratio would be 1.16% at both dates.
⁽²⁾	Net charge-offs are on an annualized basis.

A summary of nonperforming assets follows.

	March 31,						December 31,
	2021			2020			2020
Nonperforming assets:
Nonaccrual loans	$	784		$	261		$	846
Restructured loans in nonaccrual		2,907			3,191			2,839
Total nonperforming loans		3,691			3,452			3,685
Other real estate owned, net		957			1,584			1,553
Total nonperforming assets	$	4,648		$	5,036		$	5,238
Ratio of nonperforming assets to loans, net of unearned income and deferred fees and costs, plus other real estate owned		0.60	%		0.69	%		0.68	%
Ratio of allowance for loan losses to nonperforming loans⁽¹⁾		231.27	%		209.73	%		230.15	%

⁽¹⁾	The Company defines nonperforming loans as nonaccrual loans and restructured loans that are nonaccrual. Loans 90 days past due and still accruing and accruing restructured loans are excluded.

A summary of loans past due 90 days or more and impaired loans follows.

	March 31,						December 31,
	2021			2020			2020
Loans past due 90 days or more and still accruing	$	12		$	170		$	17
Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees and costs		0.00	%		0.02	%		0.00	%
Accruing restructured loans	$	1,378		$	1,592		$	1,410
Impaired loans:
Impaired loans with no valuation allowance	$	4,564		$	4,557		$	3,858
Impaired loans with a valuation allowance		375			1,114			1,045
Total impaired loans	$	4,939		$	5,671		$	4,903
Valuation allowance		(18	)		(110	)		(75	)
Impaired loans, net of allowance	$	4,921		$	5,561		$	4,828
Average recorded investment in impaired loans⁽¹⁾	$	4,956		$	5,677		$	5,093
Interest income recognized on impaired loans, after designation as impaired	$	46		$	26		$	54
Amount of income recognized on a cash basis	$	-		$	-		$	-

⁽¹⁾	Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

Nonaccrual loan relationships that meet the Company’s balance threshold of $250 and all TDRs are designated as impaired. The Company also designates as impaired other loan relationships that meet the Company’s balance threshold of $250 and for which the Company does not expect to collect according to the note’s contractual terms. No interest income was recognized on nonaccrual loans for the three months ended March 31, 2021 or March 31, 2020 or for the year ended December 31, 2020.

A detailed analysis of investment in impaired loans and associated reserves, segregated by loan class follows.

	Impaired Loans as of March 31, 2021
	Principal Balance		Total Recorded Investment⁽¹⁾		Recorded Investment⁽¹⁾for Which There is No Related Allowance		Recorded Investment⁽¹⁾ for Which There is a Related Allowance		Related Allowance
Consumer Real Estate⁽²⁾
Investor-owned residential real estate	$	193	$	193	$	-	$	193	$	2
Commercial Real Estate⁽²⁾
Commercial real estate, owner-occupied		3,846		3,265		3,265		-		-
Commercial real estate, other		654		654		654		-		-
Commercial Non-Real Estate⁽²⁾
Commercial and industrial		826		826		*644*		182		16
Consumer Non-Real Estate⁽²⁾
Automobile		1		1		1		-		-
Total	$	5,520	$	4,939	$	4,564	$	375	$	18

⁽¹⁾	Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

⁽²⁾	Only classes with impaired loans are shown.

	Impaired Loans as of December 31, 2020
	Principal Balance		Total Recorded Investment⁽¹⁾		Recorded Investment⁽¹⁾ for Which There is No Related Allowance		Recorded Investment⁽¹⁾ for Which There is a Related Allowance		Related Allowance
Consumer Real Estate⁽²⁾
Investor-owned residential real estate	$	194	$	194	$	-	$	194	$	2
Commercial Real Estate⁽²⁾
Commercial real estate, owner occupied		3,752		3,202		3,202		-		-
Commercial real estate, other		654		654		654		-		-
Commercial Non-Real Estate⁽²⁾
Commercial and industrial		851		851		-		851		73
Consumer Non-Real Estate⁽²⁾
Automobile		2		2		2		-		-
Total	$	5,453	$	4,903	$	3,858	$	1,045	$	75

⁽¹⁾	Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

⁽²⁾	Only classes with impaired loans are shown.

The following tables show the average recorded investment and interest income recognized for impaired loans.

	For the Three Months Ended March 31, 2021
	Average Recorded Investment⁽¹⁾		Interest Income Recognized
Consumer Real Estate⁽²⁾
Investor-owned residential real estate	$	194	$	3
Commercial Real Estate⁽²⁾
Commercial real estate, owner occupied		3,269		38
Commercial real estate, other		654		-
Commercial Non-Real Estate⁽²⁾
Commercial and industrial		838		5
Consumer Non-Real Estate⁽²⁾
Automobile		1		-
Total	$	4,956	$	46

	For the Three Months Ended March 31, 2020
	Average Recorded Investment⁽¹⁾		Interest Income Recognized
Consumer Real Estate⁽²⁾
Equity lines	$	100	$	2
Residential closed-end first liens		22		-
Investor-owned residential real estate		487		4
Commercial Real Estate⁽²⁾
Commercial real estate, owner occupied		3,309		6
Commercial real estate, other		838		8
Commercial Non-Real Estate⁽²⁾
Commercial and industrial		917		6
Consumer Non-Real Estate⁽²⁾
Automobile		4		-
Total	$	5,677	$	26

⁽¹⁾	Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

⁽²⁾	Only classes with impaired loans are shown.

For the Year Ended

December 31, 2020

Average

Recorded

Investment⁽¹⁾

Interest

Income

Recognized

Consumer Real Estate⁽²⁾

Investor-owned residential real estate
$ 196 $ 13

Commercial Real Estate⁽²⁾

Commercial real estate, owner occupied
3,217 19

Commercial real estate, other
790 -

Commercial Non-Real Estate⁽²⁾

Commercial and industrial
887 22

Consumer Non-Real Estate⁽²⁾

Automobile
3 -

Total
$ 5,093 $ 54

⁽¹⁾	Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

⁽²⁾	Only classes with impaired loans are shown.

The Company reviews nonaccrual loans on an individual loan basis to determine whether future payments are reasonably assured. To satisfy this criteria, the Company’s evaluation must determine that the underlying cause of the original delinquency or weakness that indicated nonaccrual status has been resolved, such as receipt of new guarantees, increased cash flows that cover the debt service or other resolution. Nonaccrual loans that demonstrate reasonable assurance of future payments and that have made at least six consecutive payments in accordance with repayment terms and timeframes may be returned to accrual status.

An analysis of past due and nonaccrual loansfollows.

March 31, 2021
	30 – 89 Days Past Due and Accruing		90 or More Days Past Due		90 or More Days Past Due and Accruing		Nonaccruals⁽²⁾
Real Estate Construction⁽¹⁾
Construction, other	$	16	$	-	$	-	$	-
Consumer Real Estate⁽¹⁾
Equity lines		29		-		-		-
Residential closed-end first liens		403		62		-		62
Investor-owned residential real estate		163		-		-		-
Commercial Real Estate⁽¹⁾
Commercial real estate, owner-occupied		-		461		-		2,907
Commercial real estate, other		-		654		-		654
Commercial Non-Real Estate⁽¹⁾
Commercial and industrial⁽³⁾		874		48		-		68
Consumer Non-Real Estate⁽¹⁾
Credit cards		4		1		1		-
Automobile		97		-		-		-
Other consumer loans		218		11		11		-
Total	$	1,804	$	1,237	$	12	$	3,691

⁽¹⁾	Only classes with past due or nonaccrual loans are shown.

⁽²⁾	Includes current and past due loans in nonaccrual status. Includes impaired loans in nonaccrual status.

⁽³⁾	Includes SBA PPP loans past due 30-89 days of $3

December 31, 2020

30 – 89 Days

Past Due and

Accruing

90 or More

Days Past Due

90 or More

Days Past Due

and Accruing

Nonaccruals⁽²⁾

Consumer Real Estate⁽¹⁾

Residential closed-end first liens
$ 365 $ 62 $ - $ 62

Investor-owned residential real estate
106 - - -

Commercial Real Estate⁽¹⁾

Commercial real estate, owner occupied
15 571 - 2,941

Commercial real estate, other
- 654 - 654

Commercial Non-Real Estate⁽¹⁾

Commercial and industrial
730 27 - 28

Consumer Non-Real Estate⁽¹⁾

Credit cards
7 3 3 -

Automobile
144 1 1 -

Other consumer loans
130 13 13 -

Total
$ 1,497 $ 1,331 $ 17 $ 3,685

⁽¹⁾	Only classes with past due or nonaccrual loans are shown.

⁽²⁾	Includes current and past due loans in nonaccrual status. Includes impaired loans in nonaccrual status.

The estimate of credit risk for non-impaired loans is obtained by applying allocations for internal and external factors. The allocations are increased for loans that exhibit greater credit quality risk.

Credit quality indicators, which the Company terms risk grades, are assigned through the Company’s credit review function for larger loans and selective review of loans that fall below credit review thresholds. Loans that do not indicate heightened risk are graded as “pass.” Consumer loans are risk graded “classified” when they become 60 days past due. Loans that are not consumer loans that appear to have elevated credit risk because of frequent or persistent past due status, which is less than 75 days, or that show weakness in the borrower’s financial condition are risk graded “special mention.” Loans that are not consumer loans with frequent or persistent delinquency exceeding 75 days or that exhibit a higher level of weakness in the borrower’s financial condition are graded classified. Classified loans have regulatory risk ratings of “substandard” and “doubtful.” Allocations are increased by 50% and by 100% for loans with grades of “special mention” and “classified,” respectively.

Determination of risk grades was completed for the portfolio as of March 31, 2021 and December 31, 2020.

The following displays collectively evaluated loans by credit quality indicator.

March 31, 2021

Pass⁽¹⁾

Special

Mention⁽¹⁾

Classified⁽¹⁾

Real Estate Construction

Construction, 1-4 family residential

8,902

Construction, other

33,668

Consumer Real Estate

Equity lines

13,486

Residential closed-end first liens

94,684

343

Residential closed-end junior liens

2,902

Investor-owned residential real estate

74,468

632

104

Commercial Real Estate

Multifamily residential real estate

90,194

261

Commercial real estate owner-occupied

144,790

543

Commercial real estate, other

146,197

6,520

Commercial Non-Real Estate

Commercial and industrial

86,363

Public Sector and IDA

States and political subdivisions

39,788

Consumer Non-Real Estate

Credit cards

4,437

Automobile

11,666

Other consumer

16,134

Total

767,679

8,021

605

⁽¹⁾	Excludes impaired, if any.

The following displays collectively evaluated loans by credit quality indicator.

December 31, 2020

	Pass⁽¹⁾		Special Mention⁽¹⁾		Classified⁽¹⁾
Real Estate Construction
Construction, 1-4 family residential	$	8,195	$	-	$	-
Construction, other		34,071		-		-
Consumer Real Estate
Equity lines		13,903		-		-
Residential closed-end first liens		92,241		66		284
Residential closed-end junior liens		3,003		-		-
Investor-owned residential real estate		71,450		641		-
Commercial Real Estate
Multifamily residential real estate		87,455		265		-
Commercial real estate owner-occupied		146,900		543		140
Commercial real estate, other		147,436		6,520		-
Commercial Non-Real Estate
Commercial and industrial		77,892		-		28
Public Sector and IDA
States and political subdivisions		40,983		-		-
Consumer Non-Real Estate
Credit cards		4,665		-		-
Automobile		12,024		-		6
Other consumer		16,398		-		15
Total	$	756,616	$	8,035	$	473

⁽¹⁾	Excludes impaired, if any.

Sales, Purchases and Reclassification of Loans

The Company finances mortgages under “best efforts” contracts with mortgage purchasers. The mortgages are designated as held for sale upon initiation. There have been no major reclassifications from portfolio loans to held for sale. Occasionally, the Company purchases or sells participations in loans. All participation loans purchased met the Company’s normal underwriting standards at the time the participation was entered. Participation loans are included in the appropriate portfolio balances to which the allowance methodology is applied.

Troubled Debt Restructurings

From time to time the Company modifies loans that result in TDR designation. Total TDRs amounted to $4,285 at March 31, 2021, $4,249 at December 31, 2020, and $4,783 at March 31, 2020. All of the Company’s TDR loans are fully funded and no further increase in credit is available.

TDRs Designated During the Reporting Period

During the three months ended March 31, 2021 the Company designated one loan as a TDR. During the three months ended March 31, 2020, the Company designated no additional loans as TDRs. The restructuring completed during the three-month period ended March 31, 2021 shifted the payment structure from interest-only to amortizing and reduced the interest rate to provide cash flow relief. No principal or interest was forgiven. The impairment measurement at March 31, 2021 was based upon the collateral method and did not result in a specific allocation.

The following table presents restructurings by class that occurred during the three month period ended March 31, 2021.

Restructurings That Occurred During the Three Months

Ended March 31, 2021

Number of

Contracts

Pre-Modification

Outstanding

Principal Balance

Post-Modification

Outstanding

Principal Balance

Commercial Real Estate

Commercial real estate owner-occupied

102

Total

102

Defaulted TDRs

The Company analyzed its TDR portfolio for loans that defaulted during the three month periods ended March 31, 2021 and March 31, 2020, and that were modified within 12 months prior to default. The Company designates three circumstances that indicate default: one or more payments that occur more than 90 days past the due date, charge-off, or foreclosure after the date of restructuring.

Of the Company’s TDRs at March 31, 2021 and March 31, 2020, none of the defaulted TDRs were modified within 12 months prior to default. All of the defaulted TDRs were in nonaccrual status as of March 31, 2021 and March 31, 2020.

COVID-19 Related Modifications

In order to aid borrowers negatively impacted by the COVID-19 pandemic, the Company provided modifications to qualifying loans. The CARES Act, passed at the beginning of the pandemic, Consolidated Appropriations Act (“CAA”), passed in December 2020, and regulatory guidance specify criteria that, if met, provide an election not to designate the loans as TDRs. All of the Company’s COVID-19 related modifications met the criteria and were not designated TDR. As of March 31, 2021, no loans were found to have exceeded the criteria, and none were designated TDR.