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Loans and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2022

The Bank makes loans to customers primarily in the Washington, D.C. metropolitan area and surrounding communities. A substantial portion of the Bank's loan portfolio consists of loans to businesses secured by real estate and other business assets.

Loans, net of unamortized net deferred fees, at March 31, 2022 and December 31, 2021 are summarized by type as follows:


	March 31, 2022				December 31, 2021
(dollars in thousands, except amounts in the footnote)	Amount		%		Amount		%
Commercial	$	1,377,615	19	%	$	1,354,317	19	%
PPP loans	35,744		1	%	51,105		1	%
Income-producing - commercial real estate	3,543,795		50	%	3,385,298		48	%
Owner-occupied - commercial real estate	1,104,982		15	%	1,087,776		15	%
Real estate mortgage - residential	72,238		1	%	73,966		1	%
Construction - commercial and residential	783,101		11	%	896,319		13	%
Construction - C&I (owner-occupied)	140,282		2	%	159,579		2	%
Home equity	54,804		1	%	55,811		1	%
Other consumer	1,246		—		1,427		—
Total loans	7,113,807		100	%	7,065,598		100	%
Less: allowance for credit losses	(71,505)				(74,965)
Net loans (1)	$	7,042,302			$	6,990,633

(1)Excludes accrued interest receivable of $36.9 million and $38.6 million at March 31, 2022 and December 31, 2021, respectively, which were recorded in other assets on the Consolidated Balance Sheets.

Unamortized net deferred fees amounted to $23.7 million and $26.9 million at March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022 and December 31, 2021, the Bank serviced $339.5 million and $351.1 million, respectively, of multifamily FHA loans, SBA loans and other loan participations that are not reflected as loan balances on the Consolidated Balance Sheets.

Real estate loans are secured primarily by duly recorded first deeds of trust or mortgages. In some cases, the Bank may accept a recorded junior trust position. In general, borrowers will have a proven ability to build, lease, manage and/or sell a commercial or residential project and demonstrate satisfactory financial condition. Additionally, an equity contribution toward the project is customarily required.

Construction loans require that the financial condition and experience of the general contractor and major subcontractors be satisfactory to the Bank. Guaranteed, fixed price contracts are required whenever appropriate, along with payment and performance bonds or completion bonds for larger scale projects.

Loans intended for residential land acquisition, lot development and construction are made on the premise that the land: 1) is or will be developed for building sites for residential structures, and 2) will ultimately be utilized for construction or improvement of residential zoned real properties, including the creation of housing. Residential development and construction loans will finance projects such as single family subdivisions, planned unit developments, townhouses, and condominiums. Residential land acquisition, development and construction loans generally are underwritten with a maximum term of 36 months, including extensions approved at origination.

Commercial land acquisition and construction loans are secured by real property where loan funds will be used to acquire land and to construct or improve appropriately zoned real property for the creation of income producing or owner user commercial properties. Borrowers are generally required to put equity into each project at levels determined by the appropriate approval authority. Commercial land acquisition and construction loans generally are underwritten with a maximum term of 24 months.

Substantially all construction draw requests must be presented in writing on American Institute of Architects documents and certified either by the contractor, the borrower and/or the borrower's architect. Each draw request shall also include the borrower's soft cost breakdown certified by the borrower or their Chief Financial Officer. Prior to an advance, the Bank or its contractor inspects the project to determine that the work has been completed, to justify the draw requisition.

Commercial permanent loans are generally secured by improved real property which is generating income in the normal course of operation. Debt service coverage, assuming stabilized occupancy, must be satisfactory to support a permanent loan. The debt service coverage ratio is ordinarily at least 1.15 to 1.0. As part of the underwriting process, debt service coverage ratios are stress tested assuming a 200 basis point increase in interest rates from their current levels.

Commercial permanent loans generally are underwritten with a term not greater than 10 years or the remaining useful life of the property, whichever is lower. The preferred term is between 5 to 7 years, with amortization to a maximum of 25 years.

The Company's loan portfolio includes acquisition, development and construction ("ADC") real estate loans including both investment and owner occupied projects. ADC loans amounted to $1.5 billion at March 31, 2022. A portion of the ADC portfolio, both speculative and non-speculative, includes loan-funded interest reserves at origination. ADC loans that provide for the use of interest reserves represent approximately 57.2% of the outstanding ADC loan portfolio at March 31, 2022. The decision to establish a loan-funded interest reserve is made upon origination of the ADC loan and is based upon a number of factors considered during underwriting of the credit including: (1) the feasibility of the project; (2) the experience of the sponsor; (3) the creditworthiness of the borrower and guarantors; (4) the borrower equity contribution; and (5) the level of collateral protection. When appropriate, an interest reserve provides an effective means of addressing the cash flow characteristics of a properly underwritten ADC loan. The Company recognizes that one of the risks inherent in the use of interest reserves is the potential masking of underlying problems with the project and/or the borrower's ability to repay the loan. In order to mitigate these inherent risks, the Company employs a series of reporting and monitoring mechanisms on all ADC loans, whether or not an interest reserve is provided, including: (1) construction and development timelines which are monitored on an ongoing basis which track the progress of a given project to the timeline projected at origination; (2) a construction loan administration department independent of the lending function; (3) third party independent construction loan inspection reports; (4) monthly interest reserve monitoring reports detailing the balance of the interest reserves approved at origination and the days of interest carry represented by the reserve balances as compared to the then current anticipated time to completion and/or sale of speculative projects; and (5) quarterly commercial real estate construction meetings among senior Company management, which includes monitoring of current and projected real estate market conditions. If a project has performed as expected, it is the customary practice of the Company to increase loan-funded interest reserves.

The following tables detail activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2022 and 2021. PPP loans are excluded from these tables since they do not carry an allowance for credit loss, as these loans are fully guaranteed as to principal and interest by the SBA, whose guarantee is backed by the full faith and credit of the U.S. Government. Allocation of a portion of the allowance to one category of loans does not restrict the use of the allowance to absorb losses in other categories.


			Income-Producing -		Owner-Occupied -		Real Estate		Construction -
			Commercial		Commercial		Mortgage -		Commercial and		Home		Other
(dollars in thousands)	Commercial		Real Estate		Real Estate		Residential		Residential		Equity		Consumer		Total
Three Months Ended March 31, 2022
Allowance for credit losses:
Balance at beginning of period	$	14,475	$	38,287	$	12,146	$	449	$	9,099	$	474	$	35	$	74,965
Loans charged-off	(514)		—		—		—		—		—		—		(514)
Recoveries of loans previously charged-off	54		—		—		—		—		—		1		55
Net loans charged-off	(460)		—		—		—		—		—		1		(459)
Provision for (reversal of) credit losses	(1,069)		906		(1,631)		(68)		(1,126)		(7)		(6)		(3,001)
Ending balance	$	12,946	$	39,193	$	10,515	$	381	$	7,973	$	467	$	30	$	71,505










Three Months Ended March 31, 2021
Allowance for credit losses:
Balance at beginning of period	$	26,569	$	55,385	$	14,000	$	1,020	$	11,529	$	1,039	$	37	$	109,579
Loans charged-off	(4,150)		(1,000)		—		—		(206)		—		(1)		(5,357)
Recoveries of loans previously charged-off	96		—		—		—		—		—		13		109
Net loans (charged-off) recovered	(4,054)		(1,000)		—		—		(206)		—		12		(5,248)
Provision for (reversal of) credit losses	1,186		(2,875)		315		(101)		(640)		(132)		(14)		(2,261)
Ending balance	23,701		51,510		14,315		919		10,683		907		35		102,070

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2022 and December 31, 2021:


	March 31, 2022				December 31, 2021
(dollars in thousands)	Business/Other Assets		Real Estate		Business/Other Assets		Real Estate
Commercial	$	2,222	$	6,784	$	3,098	$	6,821
PPP loans	106		—		1,365		—
Income-producing - commercial real estate	3,120		19,316		3,193		19,378
Owner-occupied - commercial real estate	—		33		—		42
Real estate mortgage - residential	—		1,698		—		1,779
Construction - commercial and residential	—		—		—		3,093
Home equity	—		365		—		366

Total	$	5,448	$	28,196	$	7,656	$	31,479

Credit Quality Indicators

The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company's primary credit quality indicators inform an internal credit risk rating system that categorizes loans into pass, watch, special mention, or classified categories. Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics that benefit from a case-by-case evaluation. These are typically loans to businesses or individuals in the classes which comprise the commercial portfolio segment. Groups of loans that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk rated and monitored collectively. These are typically loans to individuals in the classes which comprise the consumer portfolio segment.

The following are the definitions of the Company's credit quality indicators:


Pass:			Loans in all classes that comprise the commercial and consumer portfolio segments that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan agreement. Management believes that there is a low likelihood of loss related to those loans that are considered pass.

Watch:			Loan paying as agreed with generally acceptable asset quality; however the obligor's performance has not met expectations. Balance sheet and/or income statement has shown deterioration to the point that the obligor could not sustain any further setbacks. Credit is expected to be strengthened through improved obligor performance and/or additional collateral within a reasonable period of time.

Special Mention:			Loans in the classes that comprise the commercial portfolio segment that have potential weaknesses that deserve management's close attention. If not addressed, these potential weaknesses may result in deterioration of the repayment prospects for the loan. The special mention credit quality indicator is not used for classes of loans that comprise the consumer portfolio segment. Management believes that there is a moderate likelihood of some loss related to those loans that are considered special mention.

Classified:			Classified (a) Substandard – Loans inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard.

			Classified (b) Doubtful – Loans that have all the weaknesses inherent in a loan classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the assets, its classification as an estimated loss is deferred until its more exact status may be determined.

The Company's credit quality indicators are generally updated annually, and; however, credits rated watch or below are reviewed more frequently. Based on the most recent analysis performed, amortized cost basis of loans by risk category, class and year of origination are as follows:


March 31, 2022 (dollars in thousands)	Prior	2018	2019	2020	2021	2022	Revolving Loans Amort. Cost Basis	Revolving Loans Convert. to Term	Total
Commercial
Pass	219,550	98,054	86,957	76,823	243,084	14,286	573,964	216	1,312,934
Watch	12,922	1,964	297	4,167	2,903	—	22,753	—	45,006
Special Mention	9,074	351	—	—	—	—	662	—	10,087
Substandard	1,415	418	421	—	—	—	7,334	—	9,588
Total	242,961	100,787	87,675	80,990	245,987	14,286	604,713	216	1,377,615
PPP loans
Pass	—	—	—	6,587	29,051	—	—	—	35,638
Substandard	—	—	—	106	—	—	—	—	106
Total	—	—	—	6,693	29,051	—	—	—	35,744
Income producing - commercial real estate
Pass	988,558	465,207	530,134	317,332	550,262	67,095	190,847	369	3,109,804
Watch	123,945	—	—	35,320	—	—	—	—	159,265
Special Mention	101,260	46,887	4,250	—	—	—	47,686	—	200,083
Substandard	65,981	3,120	5,542	—	—	—	—	—	74,643
Total	1,279,744	515,214	539,926	352,652	550,262	67,095	238,533	369	3,543,795
Owner occupied - commercial real estate
Pass	479,223	228,705	81,347	42,715	188,852	6,453	2,341	—	1,029,636
Watch	23,557	11,708	6,789	—	—	—	13,571	—	55,625


Substandard	19,721		—		—		—		—		—		—			—		19,721
Total	522,501		240,413		88,136		42,715		188,852		6,453		15,912			—		1,104,982
Real estate mortgage - residential
Pass	20,520		12,856		13,038		3,421		16,438		1,208		—			—		67,481
Watch	3,059		—		—		—		—		—		—			—		3,059
Substandard	1,698		—		—		—		—		—		—			—		1,698
Total	25,277		12,856		13,038		3,421		16,438		1,208		—			—		72,238
Construction - commercial and residential
Pass	57,078		112,990		86,863		180,491		98,376		73,655		129,231			—		738,684
Watch	44,417		—		—		—		—		—		—			—		44,417

Total	101,495		112,990		86,863		180,491		98,376		73,655		129,231			—		783,101
Construction - C&I (owner occupied)
Pass	14,219		7,391		44,884		62,084		779		—		6,612			—		135,969
Watch	1,059		3,254		—		—		—		—		—			—		4,313

Total	15,278		10,645		44,884		62,084		779		—		6,612			—		140,282
Home equity
Pass	2,081		—		—		101		547		—		50,011			1,597		54,337
Watch	58		—		—		—		—		—		—			—		58
Substandard	308		—		44		—		—		—		57			—		409
Total	2,447		—		44		101		547		—		50,068			1,597		54,804
Other consumer
Pass	338		—		—		—		—		—		853			—		1,191
Watch	—		—		—		—		—		—		50			—		50
Substandard	—		—		—		—		—		—		5			—		5
Total	338		—		—		—		—		—		908			—		1,246
Total Recorded Investment	$	2,190,041	$	992,905	$	860,566	$	729,147	$	1,130,292	$	162,697	$	1,045,977		$	2,182	7,113,807

December 31, 2021 (dollars in thousands)	Prior		2017		2018		2019		2020		2021		Revolving Loans Amort. Cost Basis			Revolving Loans Convert. to Term		Total
Commercial
Pass	$	180,877	$	58,693	$	103,058	$	90,874	$	87,515	$	211,563	$	549,055		$	6,023	$	1,287,658
Watch	5,896		6,567		1,020		996		4,268		3,137		18,336			627		40,847
Special Mention	—		9,515		363		—		—		—		901			—		10,779
Substandard	4,205		778		1,850		437		—		—		7,763			—		15,033
Total	190,978		75,553		106,291		92,307		91,783		214,700		576,055			6,650		1,354,317
PPP loans
Pass	—		—		—		—		16,840		32,900		—			—		49,740
Substandard	—		—		—		—		1,365		—		—			—		1,365
Total	—		—		—		—		18,205		32,900		—			—		51,105
Income producing - commercial real estate
Pass	572,550		333,394		418,489		495,808		337,178		549,356		198,210			—		2,904,985
Watch	58,334		73,760		—		43,561		35,094		—		—			—		210,749
Special Mention	101,580		—		41,936		4,264		—		—		47,692			—		195,472
Substandard	60,059		—		8,491		5,542		—		—		—			—		74,092
Total	792,523		407,154		468,916		549,175		372,272		549,356		245,902			—		3,385,298
Owner occupied - commercial real estate
Pass	353,471		127,687		210,348		81,604		41,135		184,529		16,838			1,922		1,017,534
Watch	22,710		4,581		11,783		7,026		—		—		62			—		46,162
Special Mention	—		—		—		2,122		—		—		—			—		2,122
Substandard	21,958		—		—		—		—		—		—			—		21,958
Total	398,139		132,268		222,131		90,752		41,135		184,529		16,900			1,922		1,087,776
Real estate mortgage - residential
Pass	14,645		5,854		12,956		15,546		3,436		16,495		—		—	—		68,932
Watch	3,255		—		—		—		—		—		—		—	—		3,255


Substandard	1,698		—		—		81		—		—		—		—	—		1,779
Total	19,598		5,854		12,956		15,627		3,436		16,495		—			—		73,966
Construction - commercial and residential
Pass	32,815		139,756		171,152		142,599		160,952		71,799		127,956		—	1,773		848,802
Watch	506		43,918		—		—		—		—		—		—	—		44,424

Substandard	—		—		—		3,093		—		—		—		—	—		3,093
Total	33,321		183,674		171,152		145,692		160,952		71,799		127,956			1,773		896,319
Construction - C&I (owner occupied)
Pass	19,710		1,754		25,163		39,803		61,408		768		6,648		—	—		155,254
Watch	680		390		3,255		—		—		—		—		—	—		4,325

Total	20,390		2,144		28,418		39,803		61,408		768		6,648			—		159,579
Home equity
Pass	1,474		—		—		—		70		702		52,077		—	883		55,206
Watch	193		—		—		—		—		—		—		—	—		193
Substandard	46		—		—		45		—		—		58		—	263		412
Total	1,713		—		—		45		70		702		52,135			1,146		55,811
Other consumer
Pass	370		—		—		—		—		—		1,002		—	—		1,372
Substandard	—		—		—		—		—		—		55		—	—		55
Total	370		—		—		—		—		—		1,057			—		1,427
Total Recorded Investment	$	1,457,032	$	806,647	$	1,009,864	$	933,401	$	749,261	$	1,071,249	$	1,026,653		$	11,491	$	7,065,598

Nonaccrual and Past Due Loans

As part of the Company's comprehensive loan review process, management committees carefully evaluate loans that are past-due 30 days or more. The committees make a thorough assessment of the conditions and circumstances surrounding each delinquent loan. The Bank's loan policy requires that loans be placed on nonaccrual if they are 90 days past-due, unless they are well secured and in the process of collection. Additionally, Credit Administration specifically analyzes the status of development and construction projects, sales activities and utilization of interest reserves in order to carefully and prudently assess potential increased levels of risk requiring additional reserves.

The table presents, by class of loan, an aging analysis and the recorded investments in loans past due as of March 31, 2022 and December 31, 2021:


	Loans		Loans		Loans								Total Recorded
	30-59 Days		60-89 Days		90 Days or		Total Past		Current		Nonaccrual		Investment in
(dollars in thousands)	Past Due		Past Due		More Past Due		Due Loans		Loans		Loans		Loans
March 31, 2022
Commercial	$	2,368	$	853	$	—	$	3,221	$	1,366,403	$	7,991	$	1,377,615
PPP loans	2,462		544		—		3,006		32,632		106		35,744
Income producing - commercial real estate	8,540		—		—		8,540		3,521,924		13,331		3,543,795
Owner occupied - commercial real estate	136		—		—		136		1,104,813		33		1,104,982
Real estate mortgage - residential	1,572		—		—		1,572		68,740		1,926		72,238
Construction - commercial and residential	—		—		—		—		783,101		—		783,101
Construction - C&I (owner occupied)	2,310		—		—		2,310		137,972		—		140,282
Home equity	—		—		—		—		54,439		365		54,804
Other consumer	3		—		—		3		1,243		—		1,246
Total	$	17,391	$	1,397	$	—	$	18,788	$	7,071,267	$	23,752	$	7,113,807

December 31, 2021
Commercial	$	1,462	$	672	$	—	$	2,134	$	1,343,307	$	8,876	$	1,354,317
PPP loans	1,765		825		—		2,590		47,150		1,365		51,105
Income producing - commercial real estate	—		—		—		—		3,371,842		13,456		3,385,298
Owner occupied - commercial real estate	419		19,108		—		19,527		1,068,207		42		1,087,776
Real estate mortgage – residential	1,372		—		—		1,372		70,584		2,010		73,966
Construction - commercial and residential	—		—		—		—		893,226		3,093		896,319
Construction- C&I (owner occupied)	—		—		—		—		159,579		—		159,579
Home equity	33		187		—		220		55,225		366		55,811
Other consumer	—		—		—		—		1,427		—		1,427
Total	$	5,051	$	20,792	$	—	$	25,843	$	7,010,547	$	29,208	$	7,065,598

The following presents the nonaccrual loans as of March 31, 2022 and December 31, 2021:


	Nonaccrual with		Nonaccrual with		Total
	No Allowance		an Allowance		Nonaccrual
(dollars in thousands)	for Credit Loss		for Credit Loss		Loans
March 31, 2022
Commercial	$	5,546	$	2,445	$	7,991
PPP loans (1)	106		—		106
Income producing - commercial real estate	3,869		9,462		13,331
Owner occupied - commercial real estate	33		—		33
Real estate mortgage - residential	1,698		228		1,926

Home equity	365		—		365
Total (1)(2)	$	11,617	$	12,135	$	23,752

December 31, 2021
Commercial	$	5,806	$	3,070	$	8,876
PPP loans (1)	1,365		—		1,365
Income producing - commercial real estate	3,920		9,536		13,456
Owner occupied - commercial real estate	42		—		42
Real estate mortgage - residential	1,779		231		2,010
Construction - commercial and residential	3,093		—		3,093
Home equity	366		—		366
Total (1)(2)	$	16,371	$	12,837	$	29,208

(1)The CARES Act created the PPP, a program designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks. These loans are intended to guarantee payroll and other costs to help those businesses remain viable and allow their workers to pay their bills.

(2)Excludes TDRs that were performing under their restructured terms totaling $10.1 million and $10.2 million at March 31, 2022 and December 31, 2021, respectively.

(3)Gross interest income of $325 thousand and approximately $800 thousand would have been recorded for the three months ended March 31, 2022 and 2021, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while no interest income was actually recorded on such loans for the three months ended March 31, 2022 and 2021 respectively. See Note 1 to the Consolidated Financial Statements for a description of the Company's policy for placing loans on nonaccrual status.

Modifications

A modification of a loan constitutes a TDR when the borrower is experiencing financial difficulty and the modification constitutes a concession. The Company offers various types of concessions when modifying a loan. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often requested.

Commercial mortgage and construction loans modified in a TDR often involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or substituting or adding a new borrower or guarantor. Construction loans modified in a TDR may also involve extending the interest-only payment period. As of March 31, 2022 and December 31, 2021, all performing TDRs were categorized as interest-only modifications.

Loans modified in a TDR for the Company may have the financial effect of increasing the specific allowance associated with the loan. An allowance for consumer and commercial loans that have been modified in a TDR is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates.

In response to the COVID-19 pandemic and its economic impact to our customers, we implemented a short-term modification program that complied with the CARES Act and ASC 310-40 to provide temporary payment relief to those borrowers directly impacted by COVID-19 who were not more than 30 days past due as of December 31, 2019. This program allowed for a deferral of payments for 90 days, which we extended for an additional 90 days for certain borrowers, for a maximum of 180 days on a cumulative and successive basis. The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date. Additionally, none of the deferrals are reflected in the Company's asset quality measures (i.e. non-performing loans) due to the provision of the CARES Act that permits U.S. financial institutions to temporarily suspend the GAAP requirements to treat such short-term loan modifications as TDR. Similar provisions have also been confirmed by interagency guidance issued by the federal banking agencies and confirmed with staff members of the Financial Accounting Standards Board. As of March 31, 2022, substantially all of the borrowers granted deferrals under this program have returned to regular payment status.

The following table presents by class, the recorded investment of loans modified in TDRs held by the Company for the three months ended March 31, 2022 and 2021.


				Income
	Number			Producing -
	of			Commercial
(dollars in thousands)	Loans	Commercial		Real Estate		Total
Three Months Ended March 31, 2022
Troubled debt restructurings
Restructured accruing	5	$	1,016	$	9,105	$	10,121
Restructured nonaccruing	2	—		6,342		6,342
Total	7	$	1,016	$	15,447	$	16,463

Individually-evaluated allowance		$	170	$	2,285	$	2,455

Restructured and subsequently defaulted		$	—	$	6,342	$	6,342

Three Months Ended March 31, 2021
Troubled debt restructurings
Restructured accruing	5	$	1,157	$	9,171	$	10,328
Restructured nonaccruing	3	101		6,342		6,443
Total	8	$	1,258	$	15,513	$	16,771

Individually-evaluated allowance		$	547	$	2,976	$	3,523

Restructured and subsequently defaulted		$	101	$	6,342	$	6,443

The Company had seven TDRs at March 31, 2022 totaling approximately $16.5 million. Five of these loans totaling approximately $10.1 million were performing under their modified terms as of March 31, 2022.

For the first three months of 2022 there were two performing TDR loans that defaulted on their modified terms. For the first three months of 2021, one performing TDR loan, with a balance of $101 thousand, defaulted on its modified terms and was placed on nonaccrual status.

For the three months ended March 31, 2021, one previously nonperforming restructured loan had its collateral sold and all principal collected along with partial collection of delinquent interest; in addition, one restructured loan purchased as part of the 2014 acquisition of Virginia Heritage Bank has now had its full carrying value collected, while additional payments will recover previously written off principal and interest, and zero nonperforming restructured loan was charged off. No similar transactions occurred during the three months ended March 31, 2022.

Commercial and consumer loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, the Company evaluates the loan for possible further loss. The allowance may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan.