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Loans, Allowance for Credit Losses, and Asset Quality Information | 9 Months Ended
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Sep. 30, 2021
Receivables [Abstract] |
Loans, Allowance for Credit Losses, and Asset Quality Information | Loans, Allowance for Credit Losses, and Asset Quality Information The following is a summary of the major categories of total loans outstanding:
($ in thousands) | September 30, 2021 |  | December 31, 2020
| Amount |  | Percentage |  | Amount |  | Percentage
All loans: |  |  |  |  |  |  |
Commercial, financial, and agricultural | $ | 612,554 |  |  | 12 | % |  | $ | 782,549 |  |  | 17 | %
Real estate – construction, land development & other land loans | 588,103 |  |  | 12 | % |  | 570,672 |  |  | 12 | %
Real estate – mortgage – residential (1-4 family) first mortgages | 914,266 |  |  | 19 | % |  | 972,378 |  |  | 21 | %
Real estate – mortgage – home equity loans / lines of credit | 281,219 |  |  | 6 | % |  | 306,256 |  |  | 6 | %
Real estate – mortgage – commercial and other | 2,423,341 |  |  | 50 | % |  | 2,049,203 |  |  | 43 | %
Consumer loans | 53,747 |  |  | 1 | % |  | 53,955 |  |  | 1 | %
Subtotal | 4,873,230 |  |  | 100 | % |  | 4,735,013 |  |  | 100 | %
Unamortized net deferred loan fees | (3,389) |  |  |  |  | (3,698) |  |  |
Total loans | $ | 4,869,841 |  |  |  |  | $ | 4,731,315 |  |  |
Included in the line item "Commercial, financial, and agricultural" in the table above are PPP loans totaling $66.9 million and $240.5 million at September 30, 2021 and December 31, 2020, respectively. PPP loans are fully guaranteed by the SBA. Included in unamortized net deferred loan fees are approximately $4.3 million and $6.0 million at September 30, 2021 and December 31, 2020, respectively, in unamortized net deferred loan fees associated with PPP loans. These fees are being amortized under the effective interest method over the terms of the loans. Accelerated amortization is recorded in the periods in which principal amounts are forgiven in accordance with the terms of the program. Also included in the table above are various non-PPP SBA loans, with additional information on these loans presented in the table below.
($ in thousands) | September 30, 2021 |  | December 31, 2020
Guaranteed portions of non-PPP SBA loans included in table above | $ | 27,542 |  |  | 33,959 |
Unguaranteed portions of non-PPP SBA loans included in table above | 123,518 |  |  | 135,703 |
Total non-PPP SBA loans included in the table above | $ | 151,060 |  |  | 169,662 |
Sold portions of non-PPP SBA loans with servicing retained - not included in tables above | $ | 424,662 |  |  | 395,398 |
At September 30, 2021 and December 31, 2020, there was a remaining unaccreted discount on the retained portion of sold non-PPP SBA loans amounting to $6.6 million and $7.3 million, respectively. As of September 30, 2021, unamortized discounts on acquired loans totaled $4.8 million. At December 31, 2020, there were remaining accretable discounts of $7.9 million, related to purchased non-impaired loans. The discounts are amortized as yield adjustments over the respective lives of the loans, so long as the loans perform. At December 31, 2020, the carrying value of PCI loans was $8.6 million. The following table presents changes in the accretable yield for PCI loans for the nine months ended September 30, 2020.
Accretable Yield for PCI loans | For the Nine Months Ended September 30, 2020
Balance at beginning of period | $ | 4,149 |
Accretion | (927) |
Reclassification from (to) nonaccretable difference | 400 |
Other, net | (481) |
Balance at end of period | 3,141 |
During the first nine months of 2020, the Company received $446,000 in payments that exceeded the carrying amount of the related PCI loans, of which $352,000 was recognized as loan discount accretion income, $80,000 was recorded as additional loan interest income, and $14,000 was recorded as a recovery. Nonperforming assets are defined as nonaccrual loans, TDRs, loans past due 90 or more days and still accruing interest, and foreclosed real estate. Nonperforming assets are summarized as follows.
($ in thousands) | September 30, 2021 |  | December 31, 2020
Nonperforming assets |  |  |
Nonaccrual loans | $ | 31,268 |  |  | 35,076 |
TDRs - accruing | 7,600 |  |  | 9,497 |
Accruing loans > 90 days past due | — |  |  | — |
Total nonperforming loans | 38,868 |  |  | 44,573 |
Foreclosed real estate | 1,819 |  |  | 2,424 |
Total nonperforming assets | $ | 40,687 |  |  | 46,997 |
At both September 30, 2021 and December 31, 2020, the Company had $1.9 million in residential mortgage loans in process of foreclosure. The following table is a summary of the Company’s nonaccrual loans by major categories for the periods indicated.
|  | CECL |  | Incurred Loss
($ in thousands) |  | September 30, 2021 |  | December 31, 2020
|  | Nonaccrual Loans with No Allowance |  | Nonaccrual Loans with an Allowance |  | Total Nonaccrual Loans |  | Nonaccrual Loans
Commercial, financial, and agricultural |  | $ | 510 |  |  | 9,019 |  |  | 9,529 |  |  | 9,681 |
Real estate – construction, land development & other land loans |  | — |  |  | 373 |  |  | 373 |  |  | 643 |
Real estate – mortgage – residential (1-4 family) first mortgages |  | 735 |  |  | 3,599 |  |  | 4,334 |  |  | 6,048 |
Real estate – mortgage – home equity loans / lines of credit |  | — |  |  | 1,018 |  |  | 1,018 |  |  | 1,333 |
Real estate – mortgage – commercial and other |  | 10,951 |  |  | 4,972 |  |  | 15,923 |  |  | 17,191 |
Consumer loans |  | — |  |  | 91 |  |  | 91 |  |  | 180 |
Total |  | $ | 12,196 |  |  | 19,072 |  |  | 31,268 |  |  | 35,076 |
Interest income recognized during the period on nonaccrual loans was immaterial. The following table represents the accrued interest receivables written off by reversing interest income during the nine months ended September 30, 2021.
($ in thousands) | For the Nine Months Ended September 30, 2021
Commercial, financial, and agricultural | $ | 160 |
Real estate – construction, land development & other land loans | — |
Real estate – mortgage – residential (1-4 family) first mortgages | 20 |
Real estate – mortgage – home equity loans / lines of credit | 11 |
Real estate – mortgage – commercial and other | 446 |
Consumer loans | — |
Total | $ | 637 |
The following table presents an analysis of the payment status of the Company’s loans as of September 30, 2021.
($ in thousands) | Accruing 30-59 Days Past Due |  | Accruing 60-89 Days Past Due |  | Accruing 90 Days or More Past Due |  | Nonaccrual Loans |  | Accruing Current |  | Total Loans Receivable
Commercial, financial, and agricultural | $ | 584 |  |  | 60 |  |  | — |  |  | 9,529 |  |  | 602,381 |  |  | 612,554 |
Real estate – construction, land development & other land loans | — |  |  | — |  |  | — |  |  | 373 |  |  | 587,730 |  |  | 588,103 |
Real estate – mortgage – residential (1-4 family) first mortgages | 668 |  |  | 738 |  |  | — |  |  | 4,334 |  |  | 908,526 |  |  | 914,266 |
Real estate – mortgage – home equity loans / lines of credit | 606 |  |  | 67 |  |  | — |  |  | 1,018 |  |  | 279,528 |  |  | 281,219 |
Real estate – mortgage – commercial and other | 346 |  |  | 334 |  |  | — |  |  | 15,923 |  |  | 2,406,738 |  |  | 2,423,341 |
Consumer loans | 127 |  |  | 34 |  |  | — |  |  | 91 |  |  | 53,495 |  |  | 53,747 |
Total | $ | 2,331 |  |  | 1,233 |  |  | — |  |  | 31,268 |  |  | 4,838,398 |  |  | 4,873,230 |
Unamortized net deferred loan fees |  |  |  |  |  |  |  |  |  |  | (3,389) |
Total loans |  |  |  |  |  |  |  |  |  |  | $ | 4,869,841 |
The following table presents an analysis of the payment status of the Company’s loans as of December 31, 2020.
($ in thousands) | Accruing 30-59 Days Past Due |  | Accruing 60-89 Days Past Due |  | Accruing 90 Days or More Past Due |  | Nonaccrual Loans |  | Accruing Current |  | Total Loans Receivable
Commercial, financial, and agricultural | $ | 1,464 |  |  | 1,101 |  |  | — |  |  | 9,681 |  |  | 770,166 |  |  | 782,412 |
Real estate – construction, land development & other land loans | 572 |  |  | — |  |  | — |  |  | 643 |  |  | 569,307 |  |  | 570,522 |
Real estate – mortgage – residential (1-4 family) first mortgages | 10,146 |  |  | 869 |  |  | — |  |  | 6,048 |  |  | 951,088 |  |  | 968,151 |
Real estate – mortgage – home equity loans / lines of credit | 1,088 |  |  | 42 |  |  | — |  |  | 1,333 |  |  | 303,693 |  |  | 306,156 |
Real estate – mortgage – commercial and other | 2,540 |  |  | 3,111 |  |  | — |  |  | 17,191 |  |  | 2,022,422 |  |  | 2,045,264 |
Consumer loans | 180 |  |  | 36 |  |  | — |  |  | 180 |  |  | 53,521 |  |  | 53,917 |
Purchased credit impaired | 328 |  |  | 112 |  |  | 719 |  |  | — |  |  | 7,432 |  |  | 8,591 |
Total | $ | 16,318 |  |  | 5,271 |  |  | 719 |  |  | 35,076 |  |  | 4,677,629 |  |  | 4,735,013 |
Unamortized net deferred loan fees |  |  |  |  |  |  |  |  |  |  | (3,698) |
Total loans |  |  |  |  |  |  |  |  |  |  | $ | 4,731,315 |
Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The Company reviews individually evaluated loans on nonaccrual with a net book balance of $250,000 or greater for designation as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. The following table presents an analysis of collateral-dependent loans of the Company as of September 30, 2021.
($ in thousands) | Residential Property |  | Business Assets |  | Land |  | Commercial Property |  | Other |  | Total Collateral-Dependent Loans
Commercial, financial, and agricultural | $ | — |  |  | 4,663 |  |  | — |  |  | — |  |  | — |  |  | 4,663 |
Real estate – construction, land development & other land loans | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Real estate – mortgage – residential (1-4 family) first mortgages | 735 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 735 |
Real estate – mortgage – home equity loans / lines of credit | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Real estate – mortgage – commercial and other | — |  |  | — |  |  | — |  |  | 13,848 |  |  | — |  |  | 13,848 |
Consumer loans | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 735 |  |  | 4,663 |  |  | — |  |  | 13,848 |  |  | — |  |  | 19,246 |
Under CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required. The Company's policy is to obtain third-party appraisals on any significant pieces of collateral. For loans secured by real estate, the Company's policy is to write nonaccrual loans down to 90% of the appraised value, which considers estimated selling costs. For real estate collateral that is in industries that are undergoing heightened stress, the Company often discounts the collateral values by an additional 10-25% due to additional discounts that are estimated to be incurred in a near-term sale. For non real-estate collateral secured loans, the Company generally writes nonaccrual loans down to 75% of the appraised value, which provides for selling costs and liquidity discounts that are usually incurred when disposing of non real-estate collateral. For reviewed loans that are not on nonaccrual basis, the Company assigns a specific allowance based on the parameters noted above. The Company does not believe that there is significant over-coverage of collateral for any of the loan types noted above. The following table presents the activity in the allowance for loan losses for all loans for the three and nine months ended September 30, 2021 (under the CECL methodology).
($ in thousands) | Commercial, Financial, and Agricultural |  | Real Estate – Construction, Land Development & Other Land Loans |  | Real Estate – Residential (1-4 Family) First Mortgages |  | Real Estate – Mortgage – Home Equity Lines of Credit |  | Real Estate – Mortgage – Commercial and Other |  | Consumer Loans |  | Unallocated |  | Total
As of and for the three months ended September 30, 2021
Beginning balance | $ | 14,809 |  |  | 10,104 |  |  | 8,651 |  |  | 3,737 |  |  | 25,358 |  |  | 2,363 |  |  | — |  |  | 65,022 |
Charge-offs | (899) |  |  | — |  |  | (24) |  |  | — |  |  | (4) |  |  | (178) |  |  | — |  |  | (1,105) |
Recoveries | 398 |  |  | 98 |  |  | 176 |  |  | 311 |  |  | 79 |  |  | 49 |  |  | — |  |  | 1,111 |
Provisions/(Reversals) | (808) |  |  | 2,187 |  |  | (1,032) |  |  | (546) |  |  | (1,336) |  |  | 135 |  |  | — |  |  | (1,400) |
Ending balance | $ | 13,500 |  |  | 12,389 |  |  | 7,771 |  |  | 3,502 |  |  | 24,097 |  |  | 2,369 |  |  | — |  |  | 63,628 |
As of and for the nine months ended September 30, 2021
Beginning balance | $ | 11,316 |  |  | 5,355 |  |  | 8,048 |  |  | 2,375 |  |  | 23,603 |  |  | 1,478 |  |  | 213 |  |  | 52,388 |
Adjustment for implementation of CECL | 3,067 |  |  | 6,140 |  |  | 2,584 |  |  | 2,580 |  |  | (257) |  |  | 674 |  |  | (213) |  |  | 14,575 |
Charge-offs | (2,887) |  |  | (66) |  |  | (138) |  |  | (139) |  |  | (1,838) |  |  | (485) |  |  | — |  |  | (5,553) |
Recoveries | 1,065 |  |  | 784 |  |  | 499 |  |  | 540 |  |  | 419 |  |  | 311 |  |  | — |  |  | 3,618 |
Provisions/(Reversals) | 939 |  |  | 176 |  |  | (3,222) |  |  | (1,854) |  |  | 2,170 |  |  | 391 |  |  | — |  |  | (1,400) |
Ending balance | $ | 13,500 |  |  | 12,389 |  |  | 7,771 |  |  | 3,502 |  |  | 24,097 |  |  | 2,369 |  |  | — |  |  | 63,628 |
The following table presents the activity in the allowance for loan losses for the year ended December 31, 2020 (under the Incurred Loss methodology).
($ in thousands) | Commercial, Financial, and Agricultural |  | Real Estate – Construction, Land Development & Other Land Loans |  | Real Estate – Residential (1-4 Family) First Mortgages |  | Real Estate – Mortgage – Home Equity Lines of Credit |  | Real Estate – Mortgage – Commercial and Other |  | Consumer Loans |  | Unallocated |  | Total
As of and for the year ended December 31, 2020
Beginning balance | $ | 4,553 |  |  | 1,976 |  |  | 3,832 |  |  | 1,127 |  |  | 8,938 |  |  | 972 |  |  | — |  |  | 21,398 |
Charge-offs | (5,608) |  |  | (51) |  |  | (478) |  |  | (524) |  |  | (968) |  |  | (873) |  |  | — |  |  | (8,502) |
Recoveries | 745 |  |  | 1,552 |  |  | 754 |  |  | 487 |  |  | 621 |  |  | 294 |  |  | — |  |  | 4,453 |
Provisions | 11,626 |  |  | 1,878 |  |  | 3,940 |  |  | 1,285 |  |  | 15,012 |  |  | 1,085 |  |  | 213 |  |  | 35,039 |
Ending balance | $ | 11,316 |  |  | 5,355 |  |  | 8,048 |  |  | 2,375 |  |  | 23,603 |  |  | 1,478 |  |  | 213 |  |  | 52,388 |
Ending balances as of December 31, 2020: Allowance for loan losses
Individually evaluated for impairment | $ | 3,546 |  |  | 30 |  |  | 800 |  |  | — |  |  | 2,175 |  |  | — |  |  | — |  |  | 6,551 |
Collectively evaluated for impairment | $ | 7,742 |  |  | 5,325 |  |  | 7,141 |  |  | 2,375 |  |  | 21,428 |  |  | 1,475 |  |  | 213 |  |  | 45,699 |
Purchased credit impaired | $ | 28 |  |  | — |  |  | 107 |  |  | — |  |  | — |  |  | 3 |  |  | — |  |  | 138 |
Loans receivable as of December 31, 2020:
Ending balance – total | $ | 782,549 |  |  | 570,672 |  |  | 972,378 |  |  | 306,256 |  |  | 2,049,203 |  |  | 53,955 |  |  | — |  |  | 4,735,013 |
Unamortized net deferred loan fees |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (3,698) |
Total loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 4,731,315 |
Ending balances as of December 31, 2020: Loans
Individually evaluated for impairment | $ | 7,700 |  |  | 677 |  |  | 9,303 |  |  | 15 |  |  | 18,582 |  |  | 4 |  |  | — |  |  | 36,281 |
Collectively evaluated for impairment | $ | 774,712 |  |  | 569,845 |  |  | 958,848 |  |  | 306,141 |  |  | 2,026,682 |  |  | 53,913 |  |  | — |  |  | 4,690,141 |
Purchased credit impaired | $ | 137 |  |  | 150 |  |  | 4,227 |  |  | 100 |  |  | 3,939 |  |  | 38 |  |  | — |  |  | 8,591 |
The following table presents the activity in the allowance for loan losses for the three and nine months ended September 30, 2020 (under the Incurred Loss methodology).
($ in thousands) | Commercial, Financial, and Agricultural |  | Real Estate – Construction, Land Development & Other Land Loans |  | Real Estate – Residential (1-4 Family) First Mortgages |  | Real Estate – Mortgage – Home Equity Lines of Credit |  | Real Estate – Mortgage – Commercial and Other |  | Consumer Loans |  | Unallocated |  | Total
As of and for the three months ended September 30, 2020
Beginning balance | $ | 5,989 |  |  | 5,677 |  |  | 8,339 |  |  | 2,359 |  |  | 18,755 |  |  | 1,223 |  |  | — |  |  | 42,342 |
Charge-offs | (325) |  |  | (6) |  |  | (4) |  |  | (23) |  |  | — |  |  | (310) |  |  | — |  |  | (668) |
Recoveries | 126 |  |  | 213 |  |  | 279 |  |  | 207 |  |  | 482 |  |  | 125 |  |  | — |  |  | 1,432 |
Provisions | 2,986 |  |  | 388 |  |  | 82 |  |  | (83) |  |  | 2,369 |  |  | 308 |  |  | 70 |  |  | 6,120 |
Ending balance | $ | 8,776 |  |  | 6,272 |  |  | 8,696 |  |  | 2,460 |  |  | 21,606 |  |  | 1,346 |  |  | 70 |  |  | 49,226 |
As of and for the nine months ended September 30, 2020
Beginning balance | $ | 4,553 |  |  | 1,976 |  |  | 3,832 |  |  | 1,127 |  |  | 8,938 |  |  | 972 |  |  | — |  |  | 21,398 |
Charge-offs | (4,256) |  |  | (51) |  |  | (478) |  |  | (404) |  |  | (545) |  |  | (707) |  |  | — |  |  | (6,441) |
Recoveries | 603 |  |  | 856 |  |  | 594 |  |  | 373 |  |  | 584 |  |  | 251 |  |  | — |  |  | 3,261 |
Provisions | 7,876 |  |  | 3,491 |  |  | 4,748 |  |  | 1,364 |  |  | 12,629 |  |  | 830 |  |  | 70 |  |  | 31,008 |
Ending balance | $ | 8,776 |  |  | 6,272 |  |  | 8,696 |  |  | 2,460 |  |  | 21,606 |  |  | 1,346 |  |  | 70 |  |  | 49,226 |
Ending balance as of September 30, 2020: Allowance for loan losses
Individually evaluated for impairment | $ | 1,814 |  |  | 56 |  |  | 820 |  |  | — |  |  | 1,624 |  |  | — |  |  | — |  |  | 4,314 |
Collectively evaluated for impairment | $ | 6,921 |  |  | 6,216 |  |  | 7,760 |  |  | 2,460 |  |  | 19,982 |  |  | 1,342 |  |  | 70 |  |  | 44,751 |
Purchased credit impaired | $ | 41 |  |  | — |  |  | 116 |  |  | — |  |  | — |  |  | 4 |  |  | — |  |  | 161 |
Loans receivable as of September 30, 2020
Ending balance – total | $ | 804,831 |  |  | 653,120 |  |  | 1,017,087 |  |  | 310,326 |  |  | 1,983,622 |  |  | 50,189 |  |  | — |  |  | 4,819,175 |
Unamortized net deferred loan fees |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (5,439) |
Total loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 4,813,736 |
Ending balances as of September 30, 2020: Loans
Individually evaluated for impairment | $ | 7,001 |  |  | 853 |  |  | 9,657 |  |  | 319 |  |  | 16,349 |  |  | — |  |  | — |  |  | 34,179 |
Collectively evaluated for impairment | $ | 797,654 |  |  | 652,117 |  |  | 1,002,254 |  |  | 309,911 |  |  | 1,963,303 |  |  | 50,141 |  |  | — |  |  | 4,775,380 |
Purchased credit impaired | $ | 176 |  |  | 150 |  |  | 5,176 |  |  | 96 |  |  | 3,970 |  |  | 48 |  |  | — |  |  | 9,616 |
The following table presents loans individually evaluated for impairment by class of loans, excluding PCI loans, as of December 31, 2020.
($ in thousands) | Recorded Investment |  | Unpaid Principal Balance |  | Related Allowance |  | Average Recorded Investment
Impaired loans with no related allowance recorded: |  |  |  |  |  |  |
Commercial, financial, and agricultural | $ | 3,688 |  |  | 4,325 |  |  | — |  |  | 750 |
Real estate – mortgage – construction, land development & other land loans | 554 |  |  | 694 |  |  | — |  |  | 308 |
Real estate – mortgage – residential (1-4 family) first mortgages | 4,115 |  |  | 4,456 |  |  | — |  |  | 4,447 |
Real estate – mortgage –home equity loans / lines of credit | 15 |  |  | 27 |  |  | — |  |  | 264 |
Real estate – mortgage –commercial and other | 11,763 |  |  | 13,107 |  |  | — |  |  | 9,026 |
Consumer loans | 4 |  |  | 4 |  |  | — |  |  | 1 |
Total impaired loans with no allowance | $ | 20,139 |  |  | 22,613 |  |  | — |  |  | 14,796 |
Impaired loans with an allowance recorded: |  |  |  |  |  |  |
Commercial, financial, and agricultural | $ | 4,012 |  |  | 4,398 |  |  | 3,546 |  |  | 5,139 |
Real estate – mortgage – construction, land development & other land loans | 123 |  |  | 131 |  |  | 30 |  |  | 502 |
Real estate – mortgage – residential (1-4 family) first mortgages | 5,188 |  |  | 5,361 |  |  | 800 |  |  | 5,186 |
Real estate – mortgage –home equity loans / lines of credit | — |  |  | — |  |  | — |  |  | 21 |
Real estate – mortgage –commercial and other | 6,819 |  |  | 7,552 |  |  | 2,175 |  |  | 5,786 |
Consumer loans | — |  |  | — |  |  | — |  |  | — |
Total impaired loans with allowance | $ | 16,142 |  |  | 17,442 |  |  | 6,551 |  |  | 16,634 |
Interest income recorded on impaired loans during the year ended December 31, 2020 was $1.1 million, and reflects interest income collected on nonaccrual loans prior to them being placed on nonaccrual status and interest income recorded on accruing TDRs. The Company tracks credit quality based on its internal risk ratings. Upon origination, a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower’s credit score, the loan-to-value ratio, the debt-to-income ratio, etc. Loans that are risk-graded as substandard during the origination process are declined. After loans are initially graded, they are monitored regularly for credit quality based on many factors, such as payment history, the borrower’s financial status, and changes in collateral value. Loans can be downgraded or upgraded depending on management’s evaluation of these factors. Internal risk-grading policies are consistent throughout each loan type. The following describes the Company’s internal risk grades in ascending order of likelihood of loss:
| Risk Grade | Description
Pass: |  |
| 1 | Loans with virtually no risk, including cash secured loans.
| 2 | Loans with documented significant overall financial strength. These loans have minimum chance of loss due to the presence of multiple sources of repayment – each clearly sufficient to satisfy the obligation.
| 3 | Loans with documented satisfactory overall financial strength. These loans have a low loss potential due to presence of at least two clearly identified sources of repayment – each of which is sufficient to satisfy the obligation under the present circumstances.
| 4 | Loans to borrowers with acceptable financial condition. These loans could have signs of minor operational weaknesses, lack of adequate financial information, or loans supported by collateral with questionable value or marketability.
| 5 | Loans that represent above average risk due to minor weaknesses and warrant closer scrutiny by management. Collateral is generally required and felt to provide reasonable coverage with realizable liquidation values in normal circumstances. Repayment performance is satisfactory.
| P (Pass) | Consumer loans (<$500,000) that are of satisfactory credit quality with borrowers who exhibit good personal credit history, average personal financial strength and moderate debt levels. These loans generally conform to Company policy, but may include approved mitigated exceptions to the guidelines.
Special Mention: |  |
| 6 | Existing loans with defined weaknesses in primary source of repayment that, if not corrected, could cause a loss to the Company.
Classified: |  |
| 7 | An existing loan inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged, if any. These loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.
| 8 | Loans that have a well-defined weakness that make the collection or liquidation in full highly questionable and improbable. Loss appears imminent, but the exact amount and timing is uncertain.
| 9 | Loans that are considered uncollectible and are in the process of being charged-off. This grade is a temporary grade assigned for administrative purposes until the charge-off is completed.
| F (Fail) | Consumer loans (<$500,000) with a well-defined weakness, such as exceptions of any kind with no mitigating factors, history of paying outside the terms of the note, insufficient income to support the current level of debt, etc.
The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination or renewal as of September 30, 2021.
| Term Loans by Year of Origination |  |  |  |
($ in thousands) | 2021 |  | 2020 |  | 2019 |  | 2018 |  | 2017 |  | Prior |  | Revolving |  | Total
Commercial, financial, and agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 177,374 |  |  | 136,471 |  |  | 88,627 |  |  | 70,541 |  |  | 15,904 |  |  | 19,406 |  |  | 84,328 |  |  | 592,651 |
Special Mention | 14 |  |  | 613 |  |  | 3,467 |  |  | 2,823 |  |  | 192 |  |  | 5 |  |  | 2,702 |  |  | 9,816 |
Classified | 15 |  |  | 679 |  |  | 1,404 |  |  | 7,583 |  |  | 72 |  |  | 12 |  |  | 322 |  |  | 10,087 |
Total commercial, financial, and agricultural | 177,403 |  |  | 137,763 |  |  | 93,498 |  |  | 80,947 |  |  | 16,168 |  |  | 19,423 |  |  | 87,352 |  |  | 612,554 |
Real estate – construction, land development & other land loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | 350,577 |  |  | 139,023 |  |  | 47,604 |  |  | 9,676 |  |  | 11,717 |  |  | 9,290 |  |  | 12,828 |  |  | 580,715 |
Special Mention | 43 |  |  | 749 |  |  | 5,135 |  |  | — |  |  | 111 |  |  | 12 |  |  | 11 |  |  | 6,061 |
Classified | 579 |  |  | 317 |  |  | 117 |  |  | 183 |  |  | 14 |  |  | 117 |  |  | — |  |  | 1,327 |
Total real estate – construction, land development & other land loans | 351,199 |  |  | 140,089 |  |  | 52,856 |  |  | 9,859 |  |  | 11,842 |  |  | 9,419 |  |  | 12,839 |  |  | 588,103 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | 169,818 |  |  | 206,945 |  |  | 111,517 |  |  | 74,291 |  |  | 83,813 |  |  | 239,602 |  |  | 7,315 |  |  | 893,301 |
Special Mention | 1,007 |  |  | 571 |  |  | 193 |  |  | 141 |  |  | 315 |  |  | 3,052 |  |  | 95 |  |  | 5,374 |
Classified | 316 |  |  | 155 |  |  | 540 |  |  | 1,296 |  |  | 653 |  |  | 11,760 |  |  | 871 |  |  | 15,591 |
Total real estate – mortgage – residential (1-4 family) first mortgages | 171,141 |  |  | 207,671 |  |  | 112,250 |  |  | 75,728 |  |  | 84,781 |  |  | 254,414 |  |  | 8,281 |  |  | 914,266 |
Real estate – mortgage – home equity loans / lines of credit |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | 1,453 |  |  | 345 |  |  | 548 |  |  | 1,340 |  |  | 268 |  |  | 1,251 |  |  | 268,863 |  |  | 274,068 |
Special Mention | — |  |  | — |  |  | 16 |  |  | — |  |  | — |  |  | 19 |  |  | 1,080 |  |  | 1,115 |
Classified | 78 |  |  | 109 |  |  | 68 |  |  | — |  |  | — |  |  | 496 |  |  | 5,285 |  |  | 6,036 |
Total real estate – mortgage – home equity loans / lines of credit | 1,531 |  |  | 454 |  |  | 632 |  |  | 1,340 |  |  | 268 |  |  | 1,766 |  |  | 275,228 |  |  | 281,219 |
Real estate – mortgage – commercial and other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | 882,823 |  |  | 651,882 |  |  | 261,293 |  |  | 164,575 |  |  | 148,376 |  |  | 216,052 |  |  | 60,035 |  |  | 2,385,036 |
Special Mention | 4,109 |  |  | 4,918 |  |  | 4,613 |  |  | 2,049 |  |  | 1,890 |  |  | 222 |  |  | 545 |  |  | 18,346 |
Classified | 6,726 |  |  | 133 |  |  | 1,871 |  |  | 6,291 |  |  | 4,327 |  |  | 611 |  |  | — |  |  | 19,959 |
Total real estate – mortgage – commercial and other | 893,658 |  |  | 656,933 |  |  | 267,777 |  |  | 172,915 |  |  | 154,593 |  |  | 216,885 |  |  | 60,580 |  |  | 2,423,341 |
Consumer loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | 12,826 |  |  | 24,684 |  |  | 3,770 |  |  | 1,994 |  |  | 792 |  |  | 653 |  |  | 8,704 |  |  | 53,423 |
Special Mention | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Classified | 3 |  |  | 58 |  |  | 22 |  |  | 10 |  |  | 6 |  |  | 35 |  |  | 190 |  |  | 324 |
Total consumer loans | 12,829 |  |  | 24,742 |  |  | 3,792 |  |  | 2,004 |  |  | 798 |  |  | 688 |  |  | 8,894 |  |  | 53,747 |
Total | $ | 1,607,761 |  |  | 1,167,652 |  |  | 530,805 |  |  | 342,793 |  |  | 268,450 |  |  | 502,595 |  |  | 453,174 |  |  | 4,873,230 |
Unamortized net deferred loan fees |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (3,389) |
Total loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 4,869,841 |
At September 30, 2021, as derived from the table above, the Company had $40.7 million in loans graded as Special Mention and $53.3 million in loans graded as Classified, which includes all nonaccrual loans. In the table above, substantially all of the "Classified Loans" have grades of 7 or Fail, with those categories having similar levels of risk. The amount of revolving lines of credit that converted to term loans during the period was immaterial. The following table presents the Company’s recorded investment in loans by credit quality indicators as of December 31, 2020.
($ in thousands) | Pass |  | Special Mention Loans |  | Classified Accruing Loans |  | Classified Nonaccrual Loans |  | Total
Commercial, financial, and agricultural | $ | 762,091 |  |  | 9,553 |  |  | 1,087 |  |  | 9,681 |  |  | 782,412 |
Real estate – construction, land development & other land loans | 560,845 |  |  | 7,877 |  |  | 1,157 |  |  | 643 |  |  | 570,522 |
Real estate – mortgage – residential (1-4 family) first mortgages | 943,455 |  |  | 7,609 |  |  | 11,039 |  |  | 6,048 |  |  | 968,151 |
Real estate – mortgage – home equity loans / lines of credit | 297,795 |  |  | 1,468 |  |  | 5,560 |  |  | 1,333 |  |  | 306,156 |
Real estate – mortgage – commercial and other | 1,988,684 |  |  | 34,588 |  |  | 4,801 |  |  | 17,191 |  |  | 2,045,264 |
Consumer loans | 53,488 |  |  | 80 |  |  | 169 |  |  | 180 |  |  | 53,917 |
Purchased credit impaired | 6,901 |  |  | 85 |  |  | 1,605 |  |  | — |  |  | 8,591 |
Total | $ | 4,613,259 |  |  | 61,260 |  |  | 25,418 |  |  | 35,076 |  |  | 4,735,013 |
Unamortized net deferred loan fees |  |  |  |  |  |  |  |  | (3,698) |
Total loans |  |  |  |  |  |  |  |  | 4,731,315 |
Troubled Debt Restructurings The restructuring of a loan is considered a TDR if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, extension of terms and other actions intended to minimize potential losses. The vast majority of the Company’s TDRs modified during the periods ended September 30, 2021 and September 30, 2020 related to interest rate reductions combined with extension of terms. The Company does not generally grant principal forgiveness. The Company’s TDRs can be classified as either nonaccrual or accruing based on the loan’s payment status. The TDRs that are nonaccrual are reported within the nonaccrual loan totals presented previously. As of September 30, 2021, the Company had granted short-term deferrals related to the COVID-19 pandemic for $1.8 million of loans that were otherwise performing prior to modification. Pursuant to the CARES Act and banking regulator guidance, these loans are not considered TDRs. The following table presents information related to loans that were modified in a TDR during the three months ended September 30, 2021 and 2020.
($ in thousands) | For the three months ended September 30, 2021 |  | For the three months ended September 30, 2020
| Number of Contracts |  | Pre- Modification Restructured Balances |  | Post- Modification Restructured Balances |  | Number of Contracts |  | Pre- Modification Restructured Balances |  | Post- Modification Restructured Balances
TDRs – Accruing |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural | — |  |  | $ | — |  |  | $ | — |  |  | — |  |  | $ | — |  |  | $ | — |
Real estate – construction, land development & other land loans | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Real estate – mortgage – residential (1-4 family) first mortgages | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Real estate – mortgage – home equity loans / lines of credit | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Real estate – mortgage – commercial and other | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Consumer loans | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
TDRs – Nonaccrual |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Real estate – construction, land development & other land loans | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Real estate – mortgage – residential (1-4 family) first mortgages | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Real estate – mortgage – home equity loans / lines of credit | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Real estate – mortgage – commercial and other | — |  |  | — |  |  | — |  |  | 1 |  |  | 2,344 |  |  | 2,344 |
Consumer loans | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total TDRs arising during period | — |  |  | $ | — |  |  | $ | — |  |  | 1 |  |  | $ | 2,344 |  |  | $ | 2,344 |
The following table presents information related to loans that were modified in a TDR during the nine months ended September 30, 2021 and 2020.
($ in thousands) | For the nine months ended September 30, 2021 |  | For the nine months ended September 30, 2020
| Number of Contracts |  | Pre- Modification Restructured Balances |  | Post- Modification Restructured Balances |  | Number of Contracts |  | Pre- Modification Restructured Balances |  | Post- Modification Restructured Balances
TDRs – Accruing |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural | — |  |  | $ | — |  |  | $ | — |  |  | 2 |  |  | $ | 143 |  |  | $ | 143 |
Real estate – construction, land development & other land loans | — |  |  | — |  |  | — |  |  | 1 |  |  | 67 |  |  | 67 |
Real estate – mortgage – residential (1-4 family) first mortgages | 1 |  |  | 33 |  |  | 33 |  |  | 2 |  |  | 75 |  |  | 78 |
Real estate – mortgage – home equity loans / lines of credit | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Real estate – mortgage – commercial and other | 1 |  |  | 160 |  |  | 160 |  |  | — |  |  | — |  |  | — |
Consumer loans | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
TDRs – Nonaccrual |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural | 3 |  |  | 826 |  |  | 823 |  |  | — |  |  | — |  |  | — |
Real estate – construction, land development & other land loans | 1 |  |  | 75 |  |  | 75 |  |  | — |  |  | — |  |  | — |
Real estate – mortgage – residential (1-4 family) first mortgages | 1 |  |  | 263 |  |  | 263 |  |  | — |  |  | — |  |  | — |
Real estate – mortgage – home equity loans / lines of credit | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Real estate – mortgage – commercial and other | 3 |  |  | 1,569 |  |  | 1,569 |  |  | 1 |  |  | 2,344 |  |  | 2,344 |
Consumer loans | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total TDRs arising during period | 10 |  |  | $ | 2,926 |  |  | $ | 2,923 |  |  | 6 |  |  | $ | 2,629 |  |  | $ | 2,632 |
Accruing TDRs that were modified in the previous twelve months and that defaulted during the three months ended September 30, 2021 and 2020 are presented in the table below. The Company considers a loan to have defaulted when it becomes 90 or more days delinquent under the modified terms, has been transferred to nonaccrual status, or has been transferred to foreclosed real estate.
($ in thousands) | For the Three Months Ended September 30, 2021 |  | For the Three Months Ended September 30, 2020
| Number of Contracts |  | Recorded Investment |  | Number of Contracts |  | Recorded Investment
Accruing TDRs that subsequently defaulted |  |  |  |  |  |  |
Real estate – mortgage – residential (1-4 family first mortgages) | — |  |  | $ | — |  |  | — |  |  | $ | — |
Real estate – mortgage – commercial and other | — |  |  | — |  |  | — |  |  | — |
Total accruing TDRs that subsequently defaulted | — |  |  | $ | — |  |  | — |  |  | $ | — |
Accruing TDRs that were modified in the previous twelve months and that defaulted during the nine months ended September 30, 2021 and 2020 are presented in the table below.
($ in thousands) | For the Nine Months Ended September 30, 2021 |  | For the Nine Months Ended September 30, 2020
| Number of Contracts |  | Recorded Investment |  | Number of Contracts |  | Recorded Investment
Accruing TDRs that subsequently defaulted |  |  |  |  |  |  |
Real estate – mortgage – residential (1-4 family first mortgages) | — |  |  | $ | — |  |  | — |  |  | $ | — |
Real estate – mortgage – commercial and other | — |  |  | — |  |  | 1 |  |  | 274 |
Total accruing TDRs that subsequently defaulted | — |  |  | $ | — |  |  | 1 |  |  | $ | 274 |
Allowance for Credit Losses - Unfunded Loan Commitments In addition to the allowance for credit losses on loans, the Company maintains an allowance for lending-related commitments such as unfunded loan commitments and letters of credit. Under CECL, the Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for lending-related commitments on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans, and are discussed in Note 2. The allowance for credit losses for unfunded loan commitments of $11.1 million and $0.6 million at September 30, 2021 and December 31, 2020, respectively, is separately classified on the balance sheet within the line items "Other Liabilities". The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the nine months ended September 30, 2021.
($ in thousands) | Total Allowance for Credit Losses - Unfunded Loan Commitments
Beginning balance at December 31, 2020 | $ | 582 |
Adjustment for implementation of CECL on January 1, 2021 | 7,504 |
Charge-offs | — |
Recoveries | — |
Provisions for credit losses on unfunded commitments | 2,988 |
Ending balance at September 30, 2021 | $ | 11,074 |
Allowance for Credit Losses - Securities Held to Maturity As previously discussed, the allowance for credit losses for securities held to maturity was immaterial at September 30, 2021.

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