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Loans and Allowance for Credit Losses
 6 Months Ended
Jun. 30, 2022
Receivables [Abstract]  
Loans and Allowance for Credit Losses Loans and Allowance for Credit Losses
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 June 30, 2022 and December 31, 2021 are summarized by type as follows:
June 30, 2022December 31, 2021
(dollars in thousands, except amounts in the footnote)Amount%Amount%
Commercial$1,394,835 20 %$1,354,317 19 %
PPP loans8,977 — %51,105 1 %
Income-producing - commercial real estate3,606,506 50 %3,385,298 48 %
Owner-occupied - commercial real estate1,080,249 15 %1,087,776 15 %
Real estate mortgage - residential72,793 1 %73,966 1 %
Construction - commercial and residential804,170 11 %896,319 13 %
Construction - C&I (owner-occupied)129,717 2 %159,579 2 %
Home equity53,193 1 %55,811 1 %
Other consumer4,246 — 1,427 — 
Total loans7,154,686 100 %7,065,598 100 %
Less: allowance for credit losses(72,665)(74,965)
Net loans (1)
$7,082,021 $6,990,633 

(1)Excludes accrued interest receivable of $34.4 million and $38.6 million at June 30, 2022 and December 31, 2021, respectively, which were recorded in other assets on the Consolidated Balance Sheets.
Unamortized net deferred fees amounted to $24.6 million and $26.9 million at June 30, 2022 and December 31, 2021, respectively.
As of June 30, 2022 and December 31, 2021, the Bank serviced $362.3 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 that 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 June 30, 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 51.2% of the outstanding ADC loan portfolio at June 30, 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 that are monitored on an ongoing basis and 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 include 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 and six months ended June 30, 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.

(dollars in thousands)CommercialIncome-Producing Commercial Real EstateOwner-Occupied -Commercial Real EstateReal Estate Mortgage ResidentialConstruction -Commercial and ResidentialHome EquityOther ConsumerTotal
Three Months Ended June 30, 2022
Allowance for credit losses:
Balance at beginning of period$12,946 $39,193 $10,515 $381 $7,973 $467 $30 $71,505 
Loans charged-off(38)— (1,355)— — — (3)(1,396)
Recoveries of loans previously charged-off442 — — — 1,627 — 1 2,070 
Net loans recovered (charged-off)404 — (1,355)— 1,627 — (2)674 
Provision for (reversal of) credit losses2,404 (5,073)3,636 409 (1,106)180 36 486 
Ending balance$15,754 $34,120 $12,796 $790 $8,494 $647 $64 $72,665 
Six Months Ended June 30, 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(552)— (1,355)— — — (3)(1,910)
Recoveries of loans previously charged-off496 — — — 1,627 — 2 2,125 
Net loans (charged-off) recovered(56)— (1,355)— 1,627 — (1)215 
Provision for (reversal of) credit losses1,335 (4,167)2,005 341 (2,232)173 30 (2,515)
Ending balance$15,754 $34,120 $12,796 $790 $8,494 $647 $64 $72,665 
Three Months Ended June 30, 2021
Allowance for credit losses:
Balance at beginning of period$23,701 $51,510 $14,315 $919 $10,683 $907 $35 $102,070 
Loans charged-off(1,541)(4,216)— — — — — (5,757)
Recoveries of loans previously charged-off150 — — — 6 — 2 158 
Net loans (charged-off) recovered(1,391)(4,216)— — 6 — 2 (5,599)
(Reversal of) provision for credit losses(962)(1,324)(1,320)(37)(262)(10)4 (3,911)
Ending balance$21,348 $45,970 $12,995 $882 $10,427 $897 $41 $92,560 
Six Months Ended June 30, 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(5,691)(5,216)— — (206)— (1)(11,114)
Recoveries of loans previously charged-off246 — — — 6 — 15 267 
Net loans (charged-off) recovered(5,445)(5,216)— — (200)— 14 (10,847)
Provision for (reversal of) credit losses224 (4,199)(1,005)(138)(902)(142)(10)(6,172)
Ending balance$21,348 $45,970 $12,995 $882 $10,427 $897 $41 $92,560 
The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of June 30, 2022 and December 31, 2021:

June 30, 2022December 31, 2021
Business/OtherBusiness/Other
(dollars in thousands)AssetsReal EstateAssetsReal Estate
Commercial$2,517 $6,764 $3,098 $6,821 
PPP loans— — 1,365 — 
Income-producing - commercial real estate3,120 8,154 3,193 19,378 
Owner-occupied - commercial real estate— 27 — 42 
Real estate mortgage - residential— 3,059 — 1,779 
Construction - commercial and residential— — — 3,093 
Home equity— 308 — 366 
Total$5,637 $18,312 $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 that 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 that 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, however, credits rated "Watch" or below are reviewed more frequently. Based on the most recent analysis performed, the amortized cost basis of loans by risk category, class and year of origination are as follows:

June 30, 2022 (dollars in thousands)Prior20182019202020212022Revolving Loans Amort. Cost BasisRevolving Loans Convert. to TermTotal
Commercial
Pass196,742 95,690 79,176 74,479 236,521 66,620 580,242 6,409 1,335,879 
Watch6,803 1,901 392 3,974 2,899 — 23,712 — 39,681 
Special Mention8,636 326 — — — — 277 — 9,239 
Substandard1,925 378 398 — — — 6,387 948 10,036 
Total214,106 98,295 79,966 78,453 239,420 66,620 610,618 7,357 1,394,835 
PPP loans
Pass— — — 2,768 6,209 — — — 8,977 
Total— — — 2,768 6,209 — — — 8,977 
Income producing - commercial real estate
Pass868,846 452,215 524,265 306,313 547,637 278,600 205,062 365 3,183,303 
Watch123,750 — 921 35,598 — — — — 160,269 
Special Mention100,960 46,561 4,238 — — — 47,695 — 199,454 
Substandard60,360 3,120 — — — — — — 63,480 
Total1,153,916 501,896 529,424 341,911 547,637 278,600 252,757 365 3,606,506 
Owner occupied - commercial real estate
Pass459,530 210,701 77,657 42,152 193,919 19,566 15,375 — 1,018,900 
Watch23,183 11,639 6,750 — — — 61 — 41,633 
Substandard19,716 — — — — — — — 19,716 
Total502,429 222,340 84,407 42,152 193,919 19,566 15,436 — 1,080,249 
Real estate mortgage - residential
Pass17,904 12,481 12,610 3,313 16,399 3,973 — — 66,680 
Watch3,054 — — — — — — — 3,054 
Substandard3,059 — — — — — — — 3,059 
Total24,017 12,481 12,610 3,313 16,399 3,973 — — 72,793 
Construction - commercial and residential
Pass41,691 91,582 91,196 200,264 124,853 90,531 117,522 — 757,639 
Watch44,426 — — — — — — 2,105 46,531 
Total86,117 91,582 91,196 200,264 124,853 90,531 117,522 2,105 804,170 
Construction - C&I (owner occupied)
Pass14,082 7,337 39,810 53,639 801 858 6,579 — 123,106 
Watch1,048 3,255 — 2,308 — — — — 6,611 
Total15,130 10,592 39,810 55,947 801 858 6,579 — 129,717 
Home equity
Pass2,040 — — 100 534 — 48,597 1,257 52,528 
Watch308 — 43 — — — 61 — 412 
Substandard57 — — — — — 196 — 253 
Total2,405 — 43 100 534 — 48,854 1,257 53,193 
Other consumer
Pass885 — — — — 2,492 812 — 4,189 
Watch— — — — — — 52 — 52 
Substandard— — — — — — 5 — 5 
Total885 — — — — 2,492 869 — 4,246 
Total Recorded Investment$1,999,005 $937,186 $837,456 $724,908 $1,129,772 $462,640 $1,052,635 $11,084 7,154,686 
December 31, 2021 (dollars in thousands)Prior20172018201920202021Revolving Loans Amort. Cost BasisRevolving Loans Convert. to TermTotal
Commercial
Pass$180,877 $58,693 $103,058 $90,874 $87,515 $211,563 $549,055 $6,023 $1,287,658 
Watch5,896 6,567 1,020 996 4,268 3,137 18,336 627 40,847 
Special Mention— 9,515 363 — — — 901 — 10,779 
Substandard4,205 778 1,850 437 — — 7,763 — 15,033 
Total190,978 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
Pass572,550 333,394 418,489 495,808 337,178 549,356 198,210 — 2,904,985 
Watch58,334 73,760 — 43,561 35,094 — — — 210,749 
Special Mention101,580 — 41,936 4,264 — — 47,692 — 195,472 
Substandard60,059 — 8,491 5,542 — — — — 74,092 
Total792,523 407,154 468,916 549,175 372,272 549,356 245,902 — 3,385,298 
Owner occupied - commercial real estate
Pass353,471 127,687 210,348 81,604 41,135 184,529 16,838 1,922 1,017,534 
Watch22,710 4,581 11,783 7,026 — — 62 — 46,162 
Special Mention— — — 2,122 — — — — 2,122 
Substandard21,958 — — — — — — — 21,958 
Total398,139 132,268 222,131 90,752 41,135 184,529 16,900 1,922 1,087,776 
Real estate mortgage - residential
Pass14,645 5,854 12,956 15,546 3,436 16,495 — — 68,932 
Watch3,255 — — — — — — — 3,255 
Substandard1,698 — — 81 — — — — 1,779 
Total19,598 5,854 12,956 15,627 3,436 16,495 — — 73,966 
Construction - commercial and residential
Pass32,815 139,756 171,152 142,599 160,952 71,799 127,956 1,773 848,802 
Watch506 43,918 — — — — — — 44,424 
Substandard— — — 3,093 — — — — 3,093 
Total33,321 183,674 171,152 145,692 160,952 71,799 127,956 1,773 896,319 
Construction - C&I (owner occupied)
Pass19,710 1,754 25,163 39,803 61,408 768 6,648 — 155,254 
Watch680 390 3,255 — — — — — 4,325 
Total20,390 2,144 28,418 39,803 61,408 768 6,648 — 159,579 
Home equity
Pass1,474 — — — 70 702 52,077 883 55,206 
Watch193 — — — — — — — 193 
Substandard46 — — 45 — — 58 263 412 
Total1,713 — — 45 70 702 52,135 1,146 55,811 
Other consumer
Pass370 — — — — — 1,002 — 1,372 
Substandard— — — — — — 55 — 55 
Total370 — — — — — 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 evaluates loans that are past-due 30 days or more. Management makes 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 June 30, 2022 and December 31, 2021:
(dollars in thousands)Loans 30-59 Days Past DueLoans 60-89 Days Past DueLoans 90 Days or More Past DueTotal Past Due LoansCurrent LoansNonaccrual LoansTotal Recorded Investment in Loans
June 30, 2022
Commercial$394 $339 $— $733 $1,385,813 $8,289 $1,394,835 
PPP loans— — — — 8,977 — 8,977 
Income producing - commercial real estate— — — — 3,599,570 6,936 3,606,506 
Owner occupied - commercial real estate283 — — 283 1,079,939 27 1,080,249 
Real estate mortgage - residential— — — — 69,511 3,282 72,793 
Construction - commercial and residential95 — — 95 804,075 — 804,170 
Construction - C&I (owner occupied)— 2,308 — 2,308 127,409 — 129,717 
Home equity443 — — 443 52,442 308 53,193 
Other consumer68 — — 68 4,178 — 4,246 
Total$1,283 $2,647 $— $3,930 $7,131,914 $18,842 $7,154,686 
December 31, 2021
Commercial$1,462 $672 $— $2,134 $1,343,307 $8,876 $1,354,317 
PPP loans1,765 825 — 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 estate419 19,108 — 19,527 1,068,207 42 1,087,776 
Real estate mortgage – residential1,372 — — 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 equity33 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 June 30, 2022 and December 31, 2021:
Nonaccrual withNonaccrual withTotal
No Allowancean AllowanceNonaccrual
(dollars in thousands)for Credit Lossfor Credit LossLoans
June 30, 2022
Commercial$5,797 $2,492 $8,289 
Income producing - commercial real estate3,816 3,120 6,936 
Owner occupied - commercial real estate27 — 27 
Real estate mortgage - residential1,361 1,921 3,282 
Home equity308 — 308 
Total (1)(2)
$11,309 $7,533 $18,842 
December 31, 2021
Commercial$5,806 $3,070 $8,876 
PPP loans (3)
1,365 — 1,365 
Income producing - commercial real estate3,920 9,536 13,456 
Owner occupied - commercial real estate42 — 42 
Real estate mortgage - residential1,779 231 2,010 
Construction - commercial and residential3,093 — 3,093 
Home equity366 — 366 
Total (1)(2)
$16,371 $12,837 $29,208 

(1)Excludes TDRs that were performing under their restructured terms totaling $5.3 million and $10.2 million at June 30, 2022 and December 31, 2021, respectively.
(2)Gross interest income of $532 thousand and approximately $1.5 million would have been recorded for the six months ended June 30, 2022 and 2021, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while $6 thousand and $44 thousand interest income was actually recorded on such loans for the six months ended June 30, 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.
(3)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.
Modifications
A modification of a loan constitutes a TDR when the borrower is experiencing financial difficulty and the modification constitutes a concession. The Company may offer 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.
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 June 30, 2022, substantially all of the borrowers granted deferrals under this program have returned to regular payment status.
The Company had no loan modifications that resulted in TDRs for the six months ended June 30, 2022 and 2021.
The Company had four TDRs at June 30, 2022 totaling approximately $5.3 million. All of these loans were performing under their modified terms as of June 30, 2022. The Company had seven TDRs at December 31, 2021, totaling $16.5 million.
During the three and six months ended June 30, 2022, three loans that had been modified as TDRs with a balance of $11.1 million, including two that previously were on nonperforming status, were sold, resulting in a charge of $1.4 million recorded in connection with the sale. During the six months ended June 30, 2021, one previously nonperforming restructured loan with a balance of $2.4 million had its collateral sold, resulting in the full collection of the loan's principal and a partial collection of delinquent interest.
For the first six months of 2022 there were no loans that were modified as a TDR that defaulted. For the first six months of 2021, one performing TDR loan, with a balance of $101 thousand, defaulted on its modified terms and was placed on nonaccrual status.
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.