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Note 3 - Loans and Allowance for Loan Losses | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | NOTE 3 – LOANS AND ALLOWANCE FOR LOAN LOSSES Loans originated for investment are stated at their principal amount outstanding adjusted for partial charge-offs, the allowance, and net deferred loan fees and costs. Interest income on loans is accrued over the term of the loans primarily using the simple interest method based on the principal balance outstanding. Interest is not accrued on loans where collectability is uncertain. Accrued interest is included in other assets in the Consolidated Balance Sheets. Loan origination fees and certain direct costs incurred to extend credit are deferred and amortized over the term of the loan or loan commitment period as an adjustment to the related loan yield. Year-end loans disaggregated by class of loan within the loan portfolio segments were as follows:
|  | December 31, 2021 |  |  | December 31, 2020 |  |  | Percent Increase |
|  | Balance |  |  | % |  |  | Balance |  |  | % |  |  | (Decrease) |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial (1) |  | $ | 1,137,419,000 |  |  |  | 32.9 | % |  | $ | 1,145,423,000 |  |  |  | 35.9 | % |  |  | (0.7 | %)
Vacant land, land development, and residential construction |  |  | 43,239,000 |  |  |  | 1.3 |  |  |  | 55,055,000 |  |  |  | 1.7 |  |  |  | (21.5 | )
Real estate – owner occupied |  |  | 565,758,000 |  |  |  | 16.4 |  |  |  | 529,953,000 |  |  |  | 16.6 |  |  |  | 6.8 |
Real estate – non-owner occupied |  |  | 1,027,415,000 |  |  |  | 29.7 |  |  |  | 917,436,000 |  |  |  | 28.7 |  |  |  | 12.0 |
Real estate – multi-family and residential rental |  |  | 176,593,000 |  |  |  | 5.1 |  |  |  | 146,095,000 |  |  |  | 4.6 |  |  |  | 20.9 |
Total commercial |  |  | 2,950,424,000 |  |  |  | 85.4 |  |  |  | 2,793,962,000 |  |  |  | 87.5 |  |  |  | 5.6 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity and other |  |  | 60,488,000 |  |  |  | 1.8 |  |  |  | 61,620,000 |  |  |  | 1.9 |  |  |  | (1.8 | )
1-4 family mortgages |  |  | 442,547,000 |  |  |  | 12.8 |  |  |  | 337,888,000 |  |  |  | 10.6 |  |  |  | 31.0 |
Total retail |  |  | 503,035,000 |  |  |  | 14.6 |  |  |  | 399,508,000 |  |  |  | 12.5 |  |  |  | 25.9 |
Total loans |  | $ | 3,453,459,000 |  |  |  | 100.0 | % |  | $ | 3,193,470,000 |  |  |  | 100.0 | % |  |  | 8.1 | %
(1) For December 31, 2021, and December 31, 2020, includes $40.1 million and $365 million in loans originated under the Paycheck Protection Program, respectively. Concentrations within the loan portfolio were as follows at year-end:
|  | 2021 |  |  | 2020 |
|  |  |  |  |  | Percentage |  |  |  |  |  |  | Percentage |
|  | Balance |  |  | of Loan Portfolio |  |  | Balance |  |  | of Loan Portfolio |
Commercial real estate loans to lessors of non-residential buildings |  | $ | 737,589,000 |  |  |  | 21.4 | % |  | $ | 649,162,000 |  |  |  | 20.3 | %
Year-end nonperforming loans were as follows:
|  | 2021 |  |  | 2020 |
Loans past due 90 days or more still accruing interest |  | $ | 155,000 |  |  | $ | 0 |
Nonaccrual loans |  |  | 2,313,000 |  |  |  | 3,384,000 |
Total nonperforming loans |  | $ | 2,468,000 |  |  | $ | 3,384,000 |
The recorded principal balance of nonperforming loans was as follows:
|  | December 31, 2021 |  |  | December 31, 2020 |
Commercial: |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 663,000 |  |  | $ | 172,000 |
Vacant land, land development, and residential construction |  |  | 0 |  |  |  | 0 |
Real estate – owner occupied |  |  | 0 |  |  |  | 619,000 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 22,000 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |
Total commercial |  |  | 663,000 |  |  |  | 813,000 |
Retail: |  |  |  |  |  |  |  |
Home equity and other |  |  | 119,000 |  |  |  | 242,000 |
1-4 family mortgages |  |  | 1,686,000 |  |  |  | 2,329,000 |
Total retail |  |  | 1,805,000 |  |  |  | 2,571,000 |
Total nonperforming loans |  | $ | 2,468,000 |  |  | $ | 3,384,000 |
An age analysis of past due loans is as follows as of December 31, 2021:
|  | 30 – 59 Days Past Due |  |  | 60 – 89 Days Past Due |  |  | Greater Than 89 Days Past Due |  |  | Total Past Due |  |  | Current |  |  | Total Loans |  |  | Recorded Balance > 89 Days and Accruing |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 14,000 |  |  | $ | 0 |  |  | $ | 193,000 |  |  | $ | 207,000 |  |  | $ | 1,137,212,000 |  |  | $ | 1,137,419,000 |  |  | $ | 155,000 |
Vacant land, land development, and residential construction |  |  | 13,000 |  |  |  | 0 |  |  |  | 0 |  |  |  | 13,000 |  |  |  | 43,226,000 |  |  |  | 43,239,000 |  |  |  | 0 |
Real estate – owner occupied |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 565,758,000 |  |  |  | 565,758,000 |  |  |  | 0 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 1,027,415,000 |  |  |  | 1,027,415,000 |  |  |  | 0 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 176,593,000 |  |  |  | 176,593,000 |  |  |  | 0 |
Total commercial |  |  | 27,000 |  |  |  | 0 |  |  |  | 193,000 |  |  |  | 220,000 |  |  |  | 2,950,204,000 |  |  |  | 2,950,424,000 |  |  |  | 155,000 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity and other |  |  | 132,000 |  |  |  | 2,000 |  |  |  | 20,000 |  |  |  | 154,000 |  |  |  | 60,334,000 |  |  |  | 60,488,000 |  |  |  | 0 |
1- 4 family mortgages |  |  | 1,265,000 |  |  |  | 241,000 |  |  |  | 82,000 |  |  |  | 1,588,000 |  |  |  | 440,959,000 |  |  |  | 442,547,000 |  |  |  | 0 |
Total retail |  |  | 1,397,000 |  |  |  | 243,000 |  |  |  | 102,000 |  |  |  | 1,742,000 |  |  |  | 501,293,000 |  |  |  | 503,035,000 |  |  |  | 0 |
Total past due loans |  | $ | 1,424,000 |  |  | $ | 243,000 |  |  | $ | 295,000 |  |  | $ | 1,962,000 |  |  | $ | 3,451,497,000 |  |  | $ | 3,453,459,000 |  |  | $ | 155,000 |
An age analysis of past due loans is as follows as of December 31, 2020:
|  | 30 – 59 Days Past Due |  |  | 60 – 89 Days Past Due |  |  | Greater Than 89 Days Past Due |  |  | Total Past Due |  |  | Current |  |  | Total Loans |  |  | Recorded Balance > 89 Days and Accruing |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 261,000 |  |  | $ | 172,000 |  |  | $ | 0 |  |  | $ | 433,000 |  |  | $ | 1,144,990,000 |  |  | $ | 1,145,423,000 |  |  | $ | 0 |
Vacant land, land development, and residential construction |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 55,055,000 |  |  |  | 55,055,000 |  |  |  | 0 |
Real estate – owner occupied |  |  | 0 |  |  |  | 197,000 |  |  |  | 421,000 |  |  |  | 618,000 |  |  |  | 529,335,000 |  |  |  | 529,953,000 |  |  |  | 0 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 0 |  |  |  | 23,000 |  |  |  | 23,000 |  |  |  | 917,413,000 |  |  |  | 917,436,000 |  |  |  | 0 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 146,095,000 |  |  |  | 146,095,000 |  |  |  | 0 |
Total commercial |  |  | 261,000 |  |  |  | 369,000 |  |  |  | 444,000 |  |  |  | 1,074,000 |  |  |  | 2,792,888,000 |  |  |  | 2,793,962,000 |  |  |  | 0 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity and other |  |  | 112,000 |  |  |  | 65,000 |  |  |  | 54,000 |  |  |  | 231,000 |  |  |  | 61,389,000 |  |  |  | 61,620,000 |  |  |  | 0 |
1- 4 family mortgages |  |  | 1,147,000 |  |  |  | 247,000 |  |  |  | 342,000 |  |  |  | 1,736,000 |  |  |  | 336,152,000 |  |  |  | 337,888,000 |  |  |  | 0 |
Total retail |  |  | 1,259,000 |  |  |  | 312,000 |  |  |  | 396,000 |  |  |  | 1,967,000 |  |  |  | 397,541,000 |  |  |  | 399,508,000 |  |  |  | 0 |
Total past due loans |  | $ | 1,520,000 |  |  | $ | 681,000 |  |  | $ | 840,000 |  |  | $ | 3,041,000 |  |  | $ | 3,190,429,000 |  |  | $ | 3,193,470,000 |  |  | $ | 0 |
Impaired loans with no related allowance recorded were as follows as of December 31, 2021:
|  | Unpaid Contractual Principal Balance |  |  | Recorded Principal Balance |  | Related Allowance |  | Year-To-Date Average Recorded Principal Balance |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 2,893,000 |  |  | $ | 2,818,000 |  |  |  | $ | 3,632,000 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |  |  |  |  | 0 |
Real estate – owner occupied |  |  | 9,674,000 |  |  |  | 9,674,000 |  |  |  |  | 12,634,000 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 0 |  |  |  |  | 131,000 |
Real estate – multi-family and residential rental |  |  | 91,000 |  |  |  | 91,000 |  |  |  |  | 37,000 |
Total commercial |  |  | 12,658,000 |  |  |  | 12,583,000 |  |  |  |  | 16,434,000 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity and other |  |  | 1,173,000 |  |  |  | 1,107,000 |  |  |  |  | 1,096,000 |
1-4 family mortgages |  |  | 3,166,000 |  |  |  | 2,025,000 |  |  |  |  | 2,327,000 |
Total retail |  |  | 4,339,000 |  |  |  | 3,132,000 |  |  |  |  | 3,423,000 |
Total with no related allowance recorded |  | $ | 16,997,000 |  |  | $ | 15,715,000 |  |  |  | $ | 19,857,000 |
Impaired loans with an allowance recorded and total impaired loans were as follows as of December 31, 2021:
|  | Unpaid Contractual Principal Balance |  |  | Recorded Principal Balance |  |  | Related Allowance |  |  | Year-To-Date Average Recorded Principal Balance |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 2,192,000 |  |  | $ | 2,192,000 |  |  | $ | 266,000 |  |  | $ | 1,732,000 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Real estate – owner occupied |  |  | 761,000 |  |  |  | 761,000 |  |  |  | 84,000 |  |  |  | 803,000 |
Real estate – non-owner occupied |  |  | 146,000 |  |  |  | 146,000 |  |  |  | 4,000 |  |  |  | 154,000 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Total commercial |  |  | 3,099,000 |  |  |  | 3,099,000 |  |  |  | 354,000 |  |  |  | 2,689,000 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity and other |  |  | 160,000 |  |  |  | 140,000 |  |  |  | 123,000 |  |  |  | 214,000 |
1-4 family mortgages |  |  | 412,000 |  |  |  | 412,000 |  |  |  | 69,000 |  |  |  | 537,000 |
Total retail |  |  | 572,000 |  |  |  | 552,000 |  |  |  | 192,000 |  |  |  | 751,000 |
Total with an allowance recorded |  | $ | 3,671,000 |  |  | $ | 3,651,000 |  |  | $ | 546,000 |  |  | $ | 3,440,000 |
Total impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 15,757,000 |  |  | $ | 15,682,000 |  |  | $ | 354,000 |  |  | $ | 19,123,000 |
Retail |  |  | 4,911,000 |  |  |  | 3,684,000 |  |  |  | 192,000 |  |  |  | 4,174,000 |
Total impaired loans |  | $ | 20,668,000 |  |  | $ | 19,366,000 |  |  | $ | 546,000 |  |  | $ | 23,297,000 |
Impaired loans with no related allowance recorded were as follows as of December 31, 2020:
|  | Unpaid Contractual Principal Balance |  |  | Recorded Principal Balance |  | Related Allowance |  | Year-To-Date Average Recorded Principal Balance |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 6,242,000 |  |  | $ | 6,242,000 |  |  |  | $ | 7,874,000 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |  |  |  |  | 187,000 |
Real estate – owner occupied |  |  | 14,782,000 |  |  |  | 14,593,000 |  |  |  |  | 5,361,000 |
Real estate – non-owner occupied |  |  | 341,000 |  |  |  | 341,000 |  |  |  |  | 227,000 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |  |  |  |  | 3,000 |
Total commercial |  |  | 21,365,000 |  |  |  | 21,176,000 |  |  |  |  | 13,652,000 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity and other |  |  | 1,072,000 |  |  |  | 987,000 |  |  |  |  | 1,216,000 |
1-4 family mortgages |  |  | 4,455,000 |  |  |  | 2,575,000 |  |  |  |  | 2,447,000 |
Total retail |  |  | 5,527,000 |  |  |  | 3,562,000 |  |  |  |  | 3,663,000 |
Total with no related allowance recorded |  | $ | 26,892,000 |  |  | $ | 24,738,000 |  |  |  | $ | 17,315,000 |
Impaired loans with an allowance recorded and total impaired loans were as follows as of December 31, 2020:
|  | Unpaid Contractual Principal Balance |  |  | Recorded Principal Balance |  |  | Related Allowance |  |  | Year-To-Date Average Recorded Principal Balance |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 343,000 |  |  | $ | 343,000 |  |  | $ | 53,000 |  |  | $ | 971,000 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 77,000 |
Real estate – owner occupied |  |  | 763,000 |  |  |  | 734,000 |  |  |  | 77,000 |  |  |  | 578,000 |
Real estate – non-owner occupied |  |  | 162,000 |  |  |  | 162,000 |  |  |  | 8,000 |  |  |  | 100,000 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Total commercial |  |  | 1,268,000 |  |  |  | 1,239,000 |  |  |  | 138,000 |  |  |  | 1,726,000 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity and other |  |  | 300,000 |  |  |  | 283,000 |  |  |  | 241,000 |  |  |  | 421,000 |
1-4 family mortgages |  |  | 698,000 |  |  |  | 698,000 |  |  |  | 172,000 |  |  |  | 595,000 |
Total retail |  |  | 998,000 |  |  |  | 981,000 |  |  |  | 413,000 |  |  |  | 1,016,000 |
Total with an allowance recorded |  | $ | 2,266,000 |  |  | $ | 2,220,000 |  |  | $ | 551,000 |  |  | $ | 2,742,000 |
Total impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 22,633,000 |  |  | $ | 22,415,000 |  |  | $ | 138,000 |  |  | $ | 15,378,000 |
Retail |  |  | 6,525,000 |  |  |  | 4,543,000 |  |  |  | 413,000 |  |  |  | 4,679,000 |
Total impaired loans |  | $ | 29,158,000 |  |  | $ | 26,958,000 |  |  | $ | 551,000 |  |  | $ | 20,057,000 |
Impaired loans for which no allocation of the allowance for loan losses has been made generally reflect situations whereby the loans have been charged-down to estimated fair value. Interest income recognized on accruing troubled debt restructurings totaled $1.5 million in 2021, and $1.3 million in 2020 and 2019. Interest income recognized on nonaccrual loans totaled less than $0.1 million in 2021, 2020 and 2019, reflecting the collection of interest at the time of principal pay-off. Lost interest income on nonaccrual loans totaled $0.1 million in 2021, $0.2 million in 2020, and $0.1 million in 2019. Credit Quality Indicators. We utilize a comprehensive grading system for our commercial loans. All commercial loans are graded on a ten grade rating system. The rating system utilizes standardized grade paradigms that analyze several critical factors such as cash flow, operating performance, financial condition, collateral, industry condition and management. All commercial loans are graded at inception and reviewed and, if appropriate, re-graded at various intervals thereafter. The risk assessment for retail loans is primarily based on the type of collateral. Loans by credit quality indicators were as follows as of December 31, 2021: Commercial credit exposure – credit risk profiled by internal credit risk grades:
|  | Commercial and Industrial |  |  | Commercial Vacant Land, Land Development, and Residential Construction |  |  | Commercial Real Estate - Owner Occupied |  |  | Commercial Real Estate - Non-Owner Occupied |  |  | Commercial Real Estate - Multi-Family and Residential Rental |
Internal credit risk grade groupings: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Grades 1 – 4 (1) |  | $ | 729,224,000 |  |  | $ | 28,390,000 |  |  | $ | 346,082,000 |  |  | $ | 503,482,000 |  |  | $ | 119,473,000 |
Grades 5 – 7 |  |  | 398,378,000 |  |  |  | 14,730,000 |  |  |  | 208,060,000 |  |  |  | 511,280,000 |  |  |  | 56,968,000 |
Grades 8 – 9 |  |  | 9,817,000 |  |  |  | 119,000 |  |  |  | 11,616,000 |  |  |  | 12,653,000 |  |  |  | 152,000 |
Total commercial |  | $ | 1,137,419,000 |  |  | $ | 43,239,000 |  |  | $ | 565,758,000 |  |  | $ | 1,027,415,000 |  |  | $ | 176,593,000 |
Retail credit exposure – credit risk profiled by collateral type:
|  | Retail Home Equity and Other |  |  | Retail 1-4 Family Mortgages |
Performing |  |  | 60,369,000 |  |  |  | 440,861,000 |
Nonperforming |  |  | 119,000 |  |  |  | 1,686,000 |
Total retail |  | $ | 60,488,000 |  |  | $ | 442,547,000 |
| (1) | Included in Commercial and Industrial Loans Grades 1 – 4 are $40.1 million of loans originated under the Paycheck Protection Program.
Loans by credit quality indicators were as follows as of December 31, 2020: Commercial credit exposure – credit risk profiled by internal credit risk grades:
|  | Commercial and Industrial |  |  | Commercial Vacant Land, Land Development, and Residential Construction |  |  | Commercial Real Estate - Owner Occupied |  |  | Commercial Real Estate - Non-Owner Occupied |  |  | Commercial Real Estate - Multi-Family and Residential Rental |
Internal credit risk grade groupings: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Grades 1 – 4 (1) |  | $ | 828,706,000 |  |  | $ | 22,547,000 |  |  | $ | 315,134,000 |  |  | $ | 396,700,000 |  |  | $ | 91,711,000 |
Grades 5 – 7 |  |  | 306,614,000 |  |  |  | 32,398,000 |  |  |  | 185,541,000 |  |  |  | 520,395,000 |  |  |  | 54,111,000 |
Grades 8 – 9 |  |  | 10,103,000 |  |  |  | 110,000 |  |  |  | 29,278,000 |  |  |  | 341,000 |  |  |  | 273,000 |
Total commercial |  | $ | 1,145,423,000 |  |  | $ | 55,055,000 |  |  | $ | 529,953,000 |  |  | $ | 917,436,000 |  |  | $ | 146,095,000 |
Retail credit exposure – credit risk profiled by collateral type:
|  | Retail Home Equity and Other |  |  | Retail 1-4 Family Mortgages |
Performing |  |  | 61,378,000 |  |  |  | 335,559,000 |
Nonperforming |  |  | 242,000 |  |  |  | 2,329,000 |
Total retail |  | $ | 61,620,000 |  |  | $ | 337,888,000 |
| (1) | Included in Commercial and Industrial Loans Grades 1 – 4 are $365 million of loans originated under the Paycheck Protection Program.
All commercial loans are graded using the following criteria:
| Grade 1. | “Exceptional” Loans with this rating contain very little, if any, risk.
| Grade 2. | “Outstanding” Loans with this rating have excellent and stable sources of repayment and conform to bank policy and regulatory requirements.
| Grade 3. | “Very Good” Loans with this rating have strong sources of repayment and conform to bank policy and regulatory requirements. These are loans for which repayment risks are acceptable.
| Grade 4. | “Good” Loans with this rating have solid sources of repayment and conform to bank policy and regulatory requirements. These are loans for which repayment risks are modest.
| Grade 5. | “Acceptable” Loans with this rating exhibit acceptable sources of repayment and conform with most bank policies and all regulatory requirements. These are loans for which repayment risks are satisfactory.
| Grade 6. | “Monitor” Loans with this rating are considered to have emerging weaknesses which may include negative current cash flow, high leverage, or operating losses. Generally, if further deterioration is observed, these credits will be downgraded to the criticized asset report.
| Grade 7. | “Special Mention” Loans with this rating have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan at some future date.
| Grade 8. | “Substandard” Loans with this rating are inadequately protected by current sound net worth, paying capacity of the obligor, or of the pledged collateral, if any. A Substandard loan normally has one or more well-defined weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility of loss if the deficiencies are not corrected.
| Grade 9. | “Doubtful” Loans with this rating exhibit all the weaknesses inherent in the Substandard classification and where collection or liquidation in full is highly questionable and improbable.
| Grade 10. | “Loss” Loans with this rating are considered uncollectable, and of such little value that continuance as an active asset is not warranted.
The primary risk elements with respect to commercial loans are the financial condition of the borrower, the sufficiency of collateral, and timeliness of scheduled payments. We have a policy of requesting and reviewing periodic financial statements from commercial loan customers and employ a disciplined and formalized review of the existence of collateral and its value. The primary risk element with respect to each residential real estate loan and consumer loan is the timeliness of scheduled payments. We have a reporting system that monitors past due loans and have adopted policies to pursue creditors’ rights in order to preserve our collateral position. The allowance for loan losses and recorded investments in loans for the year-ended December 31, 2021 are as follows (dollars in thousands):
|  | Commercial and industrial |  |  | Commercial vacant land, land development and residential construction |  |  | Commercial real estate – owner occupied |  |  | Commercial real estate – non-owner occupied |  |  | Commercial real estate – multi-family and residential rental |  |  | Home equity and other |  |  | 1 – 4 family mortgages |  |  | Unallocated |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 9,424 |  |  | $ | 679 |  |  | $ | 8,246 |  |  | $ | 13,611 |  |  | $ | 1,819 |  |  | $ | 889 |  |  | $ | 3,240 |  |  | $ | 59 |  |  | $ | 37,967 |
Provision for loan losses |  |  | 2,030 |  |  |  | (618 | ) |  |  | (3,308 | ) |  |  | (310 | ) |  |  | (150 | ) |  |  | (301 | ) |  |  | (1,629 | ) |  |  | (14 | ) |  |  | (4,300 | )
Charge-offs |  |  | (882 | ) |  |  | (15 | ) |  |  | (12 | ) |  |  | 0 |  |  |  | 0 |  |  |  | (43 | ) |  |  | (92 | ) |  |  | 0 |  |  |  | (1,044 | )
Recoveries |  |  | 210 |  |  |  | 374 |  |  |  | 1,119 |  |  |  | 0 |  |  |  | 26 |  |  |  | 81 |  |  |  | 930 |  |  |  | 0 |  |  |  | 2,740 |
Ending balance |  | $ | 10,782 |  |  | $ | 420 |  |  | $ | 6,045 |  |  | $ | 13,301 |  |  | $ | 1,695 |  |  | $ | 626 |  |  | $ | 2,449 |  |  | $ | 45 |  |  | $ | 35,363 |
Ending balance: individually evaluated for impairment |  | $ | 266 |  |  | $ | 0 |  |  | $ | 84 |  |  | $ | 0 |  |  | $ | 4 |  |  | $ | 123 |  |  | $ | 69 |  |  | $ | 0 |  |  | $ | 546 |
Ending balance: collectively evaluated for impairment |  | $ | 10,516 |  |  | $ | 420 |  |  | $ | 5,961 |  |  | $ | 13,301 |  |  | $ | 1,691 |  |  | $ | 503 |  |  | $ | 2,380 |  |  | $ | 45 |  |  | $ | 34,817 |
Total loans (*): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 1,097,309 |  |  | $ | 43,239 |  |  | $ | 565,758 |  |  | $ | 1,027,415 |  |  | $ | 176,593 |  |  | $ | 60,488 |  |  | $ | 442,547 |  |  |  |  |  |  | $ | 3,413,349 |
Ending balance: individually evaluated for impairment |  | $ | 5,010 |  |  | $ | 0 |  |  | $ | 10,435 |  |  | $ | 146 |  |  | $ | 91 |  |  | $ | 1,247 |  |  | $ | 2,437 |  |  |  |  |  |  | $ | 19,366 |
Ending balance: collectively evaluated for impairment |  | $ | 1,092,299 |  |  | $ | 43,239 |  |  | $ | 555,323 |  |  | $ | 1,027,269 |  |  | $ | 176,502 |  |  | $ | 59,241 |  |  | $ | 440,110 |  |  |  |  |  |  | $ | 3,393,983 |
(*) Excludes $40.1 million in loans originated under the Paycheck Protection Program. The allowance for loan losses and recorded investments in loans for the year-ended December 31, 2020 are as follows (dollars in thousands):
|  | Commercial and industrial |  |  | Commercial vacant land, land development and residential construction |  |  | Commercial real estate – owner occupied |  |  | Commercial real estate – non-owner occupied |  |  | Commercial real estate – multi-family and residential rental |  |  | Home equity and other |  |  | 1 – 4 family mortgages |  |  | Unallocated |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 6,659 |  |  | $ | 466 |  |  | $ | 6,291 |  |  | $ | 6,761 |  |  | $ | 893 |  |  | $ | 861 |  |  |  | 1,888 |  |  | $ | 70 |  |  | $ | 23,889 |
Provision for loan losses |  |  | 2,921 |  |  |  | 289 |  |  |  | 1,881 |  |  |  | 6,837 |  |  |  | 907 |  |  |  | 58 |  |  |  | 1,168 |  |  |  | (11 | ) |  |  | 14,050 |
Charge-offs |  |  | (247 | ) |  |  | (113 | ) |  |  | (235 | ) |  |  | 0 |  |  |  | (18 | ) |  |  | (96 | ) |  |  | (129 | ) |  |  | 0 |  |  |  | (838 | )
Recoveries |  |  | 91 |  |  |  | 37 |  |  |  | 309 |  |  |  | 13 |  |  |  | 37 |  |  |  | 66 |  |  |  | 313 |  |  |  | 0 |  |  |  | 866 |
Ending balance |  | $ | 9,424 |  |  | $ | 679 |  |  | $ | 8,246 |  |  | $ | 13,611 |  |  | $ | 1,819 |  |  | $ | 889 |  |  | $ | 3,240 |  |  | $ | 59 |  |  | $ | 37,967 |
Ending balance: individually evaluated for impairment |  | $ | 53 |  |  | $ | 0 |  |  | $ | 77 |  |  | $ | 8 |  |  | $ | 0 |  |  | $ | 241 |  |  | $ | 172 |  |  | $ | 0 |  |  | $ | 551 |
Ending balance: collectively evaluated for impairment |  | $ | 9,371 |  |  | $ | 679 |  |  | $ | 8,169 |  |  | $ | 13,603 |  |  | $ | 1,819 |  |  | $ | 648 |  |  | $ | 3,068 |  |  | $ | 59 |  |  | $ | 37,416 |
Total loans (*): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 780,164 |  |  | $ | 55,055 |  |  | $ | 529,953 |  |  | $ | 917,436 |  |  | $ | 146,095 |  |  | $ | 61,620 |  |  | $ | 337,888 |  |  |  |  |  |  | $ | 2,828,211 |
Ending balance: individually evaluated for impairment |  | $ | 6,585 |  |  | $ | 0 |  |  | $ | 15,327 |  |  | $ | 503 |  |  | $ | 0 |  |  | $ | 1,270 |  |  | $ | 3,273 |  |  |  |  |  |  | $ | 26,958 |
Ending balance: collectively evaluated for impairment |  | $ | 773,579 |  |  | $ | 55,055 |  |  | $ | 514,626 |  |  | $ | 916,933 |  |  | $ | 146,095 |  |  | $ | 60,350 |  |  | $ | 334,615 |  |  |  |  |  |  | $ | 2,801,253 |
(*) Excludes $365 million in loans originated under the Paycheck Protection Program. The allowance for loan losses and recorded investments in loans for the year-ended December 31, 2019 are as follows (dollars in thousands):
|  | Commercial and industrial |  |  | Commercial vacant land, land development and residential construction |  |  | Commercial real estate – owner occupied |  |  | Commercial real estate – non-owner occupied |  |  | Commercial real estate – multi-family and residential rental |  |  | Home equity and other |  |  | 1 – 4 family mortgages |  |  | Unallocated |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 6,168 |  |  | $ | 337 |  |  | $ | 5,866 |  |  | $ | 6,408 |  |  | $ | 840 |  |  | $ | 883 |  |  |  | 1,834 |  |  | $ | 44 |  |  | $ | 22,380 |
Provision for loan losses |  |  | 764 |  |  |  | 105 |  |  |  | 331 |  |  |  | 342 |  |  |  | 36 |  |  |  | (19 | ) |  |  | 165 |  |  |  | 26 |  |  |  | 1,750 |
Charge-offs |  |  | (393 | ) |  |  | (12 | ) |  |  | (48 | ) |  |  | (2 | ) |  |  | 0 |  |  |  | (66 | ) |  |  | (362 | ) |  |  | 0 |  |  |  | (883 | )
Recoveries |  |  | 120 |  |  |  | 36 |  |  |  | 142 |  |  |  | 13 |  |  |  | 17 |  |  |  | 63 |  |  |  | 251 |  |  |  | 0 |  |  |  | 642 |
Ending balance |  | $ | 6,659 |  |  | $ | 466 |  |  | $ | 6,291 |  |  | $ | 6,761 |  |  | $ | 893 |  |  | $ | 861 |  |  | $ | 1,888 |  |  | $ | 70 |  |  | $ | 23,889 |
Ending balance: individually evaluated for impairment |  | $ | 202 |  |  | $ | 0 |  |  | $ | 982 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 356 |  |  | $ | 83 |  |  | $ | 0 |  |  | $ | 1,623 |
Ending balance: collectively evaluated for impairment |  | $ | 6,457 |  |  | $ | 466 |  |  | $ | 5,309 |  |  | $ | 6,761 |  |  | $ | 893 |  |  | $ | 505 |  |  | $ | 1,805 |  |  | $ | 70 |  |  | $ | 22,266 |
Total loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 846,551 |  |  | $ | 56,119 |  |  | $ | 579,003 |  |  | $ | 835,346 |  |  | $ | 124,525 |  |  | $ | 75,374 |  |  | $ | 339,749 |  |  |  |  |  |  | $ | 2,856,667 |
Ending balance: individually evaluated for impairment |  | $ | 8,587 |  |  | $ | 85 |  |  | $ | 1,745 |  |  | $ | 178 |  |  | $ | 9 |  |  | $ | 1,694 |  |  | $ | 2,324 |  |  |  |  |  |  | $ | 14,622 |
Ending balance: collectively evaluated for impairment |  | $ | 837,964 |  |  | $ | 56,034 |  |  | $ | 577,258 |  |  | $ | 835,168 |  |  | $ | 124,516 |  |  | $ | 73,680 |  |  | $ | 337,425 |  |  |  |  |  |  | $ | 2,842,045 |
Loans modified as troubled debt restructurings during the year-ended December 31, 2021 were as follows:
|  |  |  |  |  | Pre- |  |  | Post- |
|  |  |  |  |  | Modification |  |  | Modification |
|  |  |  |  |  | Recorded |  |  | Recorded |
|  | Number of |  |  | Principal |  |  | Principal |
|  | Contracts |  |  | Balance |  |  | Balance |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 10 |  |  | $ | 3,017,000 |  |  | $ | 3,016,000 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Real estate – owner occupied |  |  | 1 |  |  |  | 692,000 |  |  |  | 692,000 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Real estate – multi-family and residential rental |  |  | 1 |  |  |  | 93,000 |  |  |  | 93,000 |
Total commercial |  |  | 12 |  |  |  | 3,802,000 |  |  |  | 3,801,000 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |
Home equity and other |  |  | 4 |  |  |  | 485,000 |  |  |  | 482,000 |
1-4 family mortgages |  |  | 2 |  |  |  | 46,000 |  |  |  | 46,000 |
Total retail |  |  | 6 |  |  |  | 531,000 |  |  |  | 528,000 |
Total |  |  | 18 |  |  | $ | 4,333,000 |  |  | $ | 4,329,000 |
Loans modified as troubled debt restructurings during the year-ended December 31, 2020 were as follows:
|  |  |  |  |  | Pre- |  |  | Post- |
|  |  |  |  |  | Modification |  |  | Modification |
|  |  |  |  |  | Recorded |  |  | Recorded |
|  | Number of |  |  | Principal |  |  | Principal |
|  | Contracts |  |  | Balance |  |  | Balance |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 13 |  |  | $ | 6,914,000 |  |  | $ | 7,717,000 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Real estate – owner occupied |  |  | 8 |  |  |  | 14,663,000 |  |  |  | 14,663,000 |
Real estate – non-owner occupied |  |  | 2 |  |  |  | 319,000 |  |  |  | 318,000 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Total commercial |  |  | 23 |  |  |  | 21,896,000 |  |  |  | 22,698,000 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |
Home equity and other |  |  | 16 |  |  |  | 451,000 |  |  |  | 452,000 |
1-4 family mortgages |  |  | 6 |  |  |  | 151,000 |  |  |  | 148,000 |
Total retail |  |  | 22 |  |  |  | 602,000 |  |  |  | 600,000 |
Total |  |  | 45 |  |  | $ | 22,498,000 |  |  | $ | 23,298,000 |
The following loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due during the year-ended December 31, 2021 (amounts as of period end):
|  | Number of Contracts |  |  | Recorded Principal Balance |
Commercial: |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 0 |  |  | $ | 0 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |
Real estate – owner occupied |  |  | 0 |  |  |  | 0 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 0 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |
Total commercial |  |  | 0 |  |  |  | 0 |
Retail: |  |  |  |  |  |  |  |
Home equity and other |  |  | 0 |  |  |  | 0 |
1-4 family mortgages |  |  | 0 |  |  |  | 0 |
Total retail |  |  | 0 |  |  |  | 0 |
Total |  |  | 0 |  |  | $ | 0 |
The following loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due during the year-ended December 31, 2020 (amounts as of period end):
|  | Number of Contracts |  |  | Recorded Principal Balance |
Commercial: |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 0 |  |  | $ | 0 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |
Real estate – owner occupied |  |  | 0 |  |  |  | 0 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 0 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |
Total commercial |  |  | 0 |  |  |  | 0 |
Retail: |  |  |  |  |  |  |  |
Home equity and other |  |  | 0 |  |  |  | 0 |
1-4 family mortgages |  |  | 0 |  |  |  | 0 |
Total retail |  |  | 0 |  |  |  | 0 |
Total |  |  | 0 |  |  | $ | 0 |
Activity for loans categorized as troubled debt restructurings during the year-ended December 31, 2021 is as follows:
|  | Commercial and |  |  | Commercial Vacant Land, Land Development, and Residential |  |  | Commercial Real Estate - Owner |  |  | Commercial Real Estate - Non-Owner |  |  | Commercial Real Estate - Multi-Family and Residential |
|  | Industrial |  |  | Construction |  |  | Occupied |  |  | Occupied |  |  | Rental |
Commercial Loan Portfolio: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning Balance |  | $ | 6,414,000 |  |  | $ | 0 |  |  | $ | 14,797,000 |  |  | $ | 480,000 |  |  | $ | 0 |
Charge-Offs |  |  | (17,000 | ) |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Payments |  |  | (4,278,000 | ) |  |  | 0 |  |  |  | (5,048,000 | ) |  |  | (334,000 | ) |  |  | (1,000 | )
Transfers to ORE |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Net Additions/Deletions |  |  | 2,854,000 |  |  |  | 0 |  |  |  | 686,000 |  |  |  | 0 |  |  |  | 92,000 |
Ending Balance |  | $ | 4,973,000 |  |  | $ | 0 |  |  | $ | 10,435,000 |  |  | $ | 146,000 |  |  | $ | 91,000 |
|  | Retail Home Equity and Other |  |  | Retail 1-4 Family Mortgages |
Retail Loan Portfolio: |  |  |  |  |  |  |  |
Beginning Balance |  | $ | 1,146,000 |  |  | $ | 806,000 |
Charge-Offs |  |  | 0 |  |  |  | 0 |
Payments |  |  | (426,000 | ) |  |  | (224,000 | )
Transfers to ORE |  |  | 0 |  |  |  | 0 |
Net Additions/Deletions |  |  | 482,000 |  |  |  | 45,000 |
Ending Balance |  | $ | 1,202,000 |  |  | $ | 627,000 |
Activity for loans categorized as troubled debt restructurings during the year-ended December 31, 2020 is as follows:
|  | Commercial and |  |  | Commercial Vacant Land, Land Development, and Residential |  |  | Commercial Real Estate - Owner |  |  | Commercial Real Estate - Non-Owner |  |  | Commercial Real Estate - Multi-Family and Residential |
|  | Industrial |  |  | Construction |  |  | Occupied |  |  | Occupied |  |  | Rental |
Commercial Loan Portfolio: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning Balance |  | $ | 8,587,000 |  |  | $ | 85,000 |  |  | $ | 1,145,000 |  |  | $ | 178,000 |  |  | $ | 7,000 |
Charge-Offs |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Payments |  |  | (11,260,000 | ) |  |  | (85,000 | ) |  |  | (3,765,000 | ) |  |  | (585,000 | ) |  |  | (7,000 | )
Transfers to ORE |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Net Additions/Deletions |  |  | 9,087,000 |  |  |  | 0 |  |  |  | 17,417,000 |  |  |  | 887,000 |  |  |  | 0 |
Ending Balance |  | $ | 6,414,000 |  |  | $ | 0 |  |  | $ | 14,797,000 |  |  | $ | 480,000 |  |  | $ | 0 |
|  | Retail Home Equity and Other |  |  | Retail 1-4 Family Mortgages |
Retail Loan Portfolio: |  |  |  |  |  |  |  |
Beginning Balance |  | $ | 1,415,000 |  |  | $ | 724,000 |
Charge-Offs |  |  | 0 |  |  |  | 0 |
Payments |  |  | (881,000 | ) |  |  | (68,000 | )
Transfers to ORE |  |  | 0 |  |  |  | 0 |
Net Additions/Deletions |  |  | 612,000 |  |  |  | 150,000 |
Ending Balance |  | $ | 1,146,000 |  |  | $ | 806,000 |
Activity for loans categorized as troubled debt restructurings during the year-ended December 31, 2019 is as follows:
|  | Commercial and Industrial |  |  | Commercial Vacant Land, Land Development, and Residential Construction |  |  | Commercial Real Estate - Owner Occupied |  |  | Commercial Real Estate - Non-Owner Occupied |  |  | Commercial Real Estate - Multi-Family and Residential Rental |
Commercial Loan Portfolio: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning Balance |  | $ | 14,138,000 |  |  | $ | 0 |  |  | $ | 3,100,000 |  |  | $ | 210,000 |  |  | $ | 24,000 |
Charge-Offs |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Payments |  |  | (20,364,000 | ) |  |  | (2,000 | ) |  |  | (3,820,000 | ) |  |  | (32,000 | ) |  |  | (17,000 | )
Transfers to ORE |  |  | 0 |  |  |  | 0 |  |  |  | (97,000 | ) |  |  | 0 |  |  |  | 0 |
Net Additions/Deletions |  |  | 14,813,000 |  |  |  | 87,000 |  |  |  | 1,962,000 |  |  |  | 0 |  |  |  | 0 |
Ending Balance |  | $ | 8,587,000 |  |  | $ | 85,000 |  |  | $ | 1,145,000 |  |  | $ | 178,000 |  |  | $ | 7,000 |
|  | Retail Home Equity and Other |  |  | Retail 1-4 Family Mortgages |
Retail Loan Portfolio: |  |  |  |  |  |  |  |
Beginning Balance |  | $ | 1,402,000 |  |  | $ | 578,000 |
Charge-Offs |  |  | (18,000 | ) |  |  | 0 |
Payments |  |  | (272,000 | ) |  |  | (162,000 | )
Transfers to ORE |  |  | 0 |  |  |  | 0 |
Net Additions/Deletions |  |  | 303,000 |  |  |  | 308,000 |
Ending Balance |  | $ | 1,415,000 |  |  | $ | 724,000 |
The allowance related to loans categorized as troubled debt restructurings was as follows:
|  | December 31, 2021 |  |  | December 31, 2020 |
Commercial: |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 266,000 |  |  | $ | 53,000 |
Vacant land, land development, and residential construction |  |  | 0 |  |  |  | 0 |
Real estate – owner occupied |  |  | 84,000 |  |  |  | 59,000 |
Real estate – non-owner occupied |  |  | 5,000 |  |  |  | 8,000 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |
Total commercial |  |  | 355,000 |  |  |  | 120,000 |
Retail: |  |  |  |  |  |  |  |
Home equity and other |  |  | 95,000 |  |  |  | 202,000 |
1-4 family mortgages |  |  | 69,000 |  |  |  | 145,000 |
Total retail |  |  | 164,000 |  |  |  | 347,000 |
Total related allowance |  | $ | 519,000 |  |  | $ | 467,000 |
In general, our policy dictates that a renewal or modification of an 8- or 9-rated commercial loan meets the criteria of a troubled debt restructuring, although we review and consider all renewed and modified loans as part of our troubled debt restructuring assessment procedures. Loan relationships rated 8 contain significant financial weaknesses, resulting in a distinct possibility of loss, while relationships rated 9 reflect vital financial weaknesses, resulting in a highly questionable ability on our part to collect principal. We believe borrowers warranting such ratings would have difficulty obtaining financing from other market participants. Thus, due to the lack of comparable market rates for loans with similar risk characteristics, we believe 8- or 9-rated loans renewed or modified were done so at below market rates. Loans that are identified as troubled debt restructurings are considered impaired and are individually evaluated for impairment when assessing these credits in our allowance for loan losses calculation.

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -URI http://asc.fasb.org/subtopic&trid=2196772 + Details
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