The following table summarizes the primary segments of the loan portfolio at September 30, 2021 and December 31, 2020:

The commercial and industrial portfolio in the table above includes $30.3 million and $114.0 million of PPP loans at September 30, 2021 and December 31, 2020, respectively, which are 100% guaranteed by the SBA, and no allowance for loan loss (“ALL”) has been assigned to them.

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention and Substandard within the internal risk rating system at September 30, 2021 and December 31, 2020:

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans at September 30, 2021 and December 31, 2020:

The current status of commercial and industrial loans includes $30.3 million and $114.0 million of PPP loans at September 30, 2021 and December 31, 2020, respectively.

Non-accrual loans that have been subject to partial charge-offs totaled $0.5 million at September 30, 2021 and $0.4 million at December 31, 2020. Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $0.2 million at September 30, 2021 and $0.4 million at December 31, 2020. Foreclosure and repossession activities were temporarily suspended as a result of COVID-19 but resumed during the third quarter 2021. Management continues to conform to federal and state mandates relative to the foreclosure processes for both Federal Backed and Non-Federal Backed mortgages. As a percentage of the loan portfolio, accruing loans past due 30 days or more decreased to 0.20%, including PPP loans, or 0.21% excluding PPP loans, compared to 0.20% at December 31, 2020.

The following table summarizes the primary segments of the ALL at September 30, 2021 and December 31, 2020, segregated by the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment:

The evaluation of the need and amount of a specific allocation of the ALL and whether a loan can be removed from impairment status is made on a quarterly basis.

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not required at September 30, 2021 and December 31, 2020:

The following tables present the activity in the ALL for the nine and three month periods ended September 30, 2021 and 2020:



(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Unallocated		Total
ALL balance at January 1, 2021	$	5,543	$	2,339	$	2,584	$	5,150	$	370	$	500	$	16,486
Charge-offs		—		(85)		—		(141)		(266)		—		(492)
Recoveries		—		172		511		49		112		—		844
Provision		1,183		484		(695)		(1,460)		626		(70)		68
ALL balance at September 30, 2021	$	6,726	$	2,910	$	2,400	$	3,598	$	842	$	430	$	16,906
ALL balance at January 1, 2020	$	2,882	$	3,674	$	1,341	$	3,828	$	312	$	500	$	12,537
Charge-offs		—		(1,144)		(232)		(108)		(274)		—		(1,758)
Recoveries		69		29		149		66		116		—		429
Provision		2,343		(136)		926		1,621		227		—		4,981
ALL balance at September 30, 2020	$	5,294	$	2,423	$	2,184	$	5,407	$	381	$	500	$	16,189



(in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Residential Mortgage		Consumer		Unallocated		Total
ALL balance at July 1, 2021	$	5,675	$	2,500	$	2,944	$	4,859	$	590	$	500	$	17,068
Charge-offs		—		(4)		—		(59)		(91)		—		(154)
Recoveries		—		62		473		20		34		—		589
Provision		1,051		352		(1,017)		(1,222)		309		(70)		(597)
ALL balance at September 30, 2021	$	6,726	$	2,910	$	2,400	$	3,598	$	842	$	430	$	16,906
ALL balance at July 1, 2020	$	4,527	$	4,498	$	1,997	$	5,106	$	386	$	500	$	17,014
Charge-offs		—		(1,113)		—		(10)		(51)		—		(1,174)
Recoveries		3		7		133		18		28		—		189
Provision		764		(969)		54		293		18		—		160
ALL balance at September 30, 2020	$	5,294	$	2,423	$	2,184	$	5,407	$	381	$	500	$	16,189

The ALL is based on estimates, and actual losses may vary from current estimates. Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date.

The following tables present the average recorded investment in impaired loans by class and related interest income recognized for the periods indicated:


	Nine months ended						For the year ended		Nine months ended
	September 30, 2021						December 31, 2020		September 30, 2020
(in thousands)	Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis			Average investment	Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis
Commercial real estate
Non owner-occupied	$	3,518	$	9	$	—	$	131	$	134	$	6	$	—
All other CRE		2,984		95		—		3,203		3,201		109		—
Acquisition and development
1-4 family residential construction		256		9		—		278		282		9		—
All other A&D		599		9		—		6,709		8,243		9		1
Commercial and industrial		—		—		—		16		16		—		—
Residential mortgage
Residential mortgage – term		2,642		56		5		2,593		2,531		62		—
Residential mortgage – home equity		449		—		—		604		651		—		3
Consumer		17		—		—		20		18		—		—
Total	$	10,465	$	178	$	5	$	13,554	$	15,076	$	195	$	4



	Three months ended						Three months ended
	September 30, 2021						September 30, 2020
(in thousands)	Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis		Average investment		Interest income recognized on an accrual basis		Interest income recognized on a cash basis
Commercial real estate
Non owner-occupied	$	4,631	$	3	$	—	$	127	$	3	$	—
All other CRE		2,787		26		—		3,278		36		—
Acquisition and development
1-4 family residential construction		249		3		—		276		3		—
All other A&D		602		3		—		8,158		3		—
Commercial and industrial		—		—		—		18		—		—
Residential mortgage
Residential mortgage – term		2,500		17		—		2,565		19		—
Residential mortgage – home equity		451		—		—		474		—		—
Consumer		9		—		—		33		—		—
Total	$	11,229	$	52	$	—	$	14,929	$	64	$	—

The Bank modifies loan terms in the normal course of business. Among other reasons, modifications might be made in an effort to retain the loan relationship, to remain competitive in the current interest rate environment and/or to re-amortize or extend the loan’s term to better match the loan’s payment stream with the borrower’s cash flow. A modified loan is considered to be a TDR when the modification occurs in connection with a determination by the Bank that the borrower is troubled (i.e., experiencing financial difficulties). In deciding whether to modify a loan, the Bank evaluates the probability that the borrower will be in payment default on any of its debt obligations in the foreseeable future without modification. To make this determination, the Bank performs a global financial review of the borrower and loan guarantors to assess their current abilities to meet their financial obligations.

Section 4013 of the CARES Act allows financial institutions to suspend application of certain current TDRs accounting guidance under ASC 310-40 for loan modifications related to the COVID-19 pandemic made between March 1, 2020 and the earlier of January 1, 2022 or 60 days after the end of the COVID-19 national emergency, provided certain criteria are met. This relief can be applied to loan modifications for borrowers that defer or delay the payment of principal or interest, or change the interest rate on the loan and that were not more than 30 days past due as of December 31, 2019. In April 2020, federal and state banking regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus to provide further interpretation of when a borrower is experiencing financial difficulty, specifically indicating that if the modification is either short-term (i.e., up to nine months) or mandated by a federal or state government in response to the COVID-19 pandemic, the borrower is not experiencing financial difficulty under ASC 310-40. The Corporation continues to prudently work with borrowers negatively impacted by the COVID-19 pandemic while managing credit risks and recognizing appropriate allowance for credit losses on its loan portfolio. See Note 2 to the financial statements included elsewhere in this report for additional information.

There were 14 loans totaling $3.8 million and $4.0 million that were classified as TDRs at September 30, 2021 and December 31, 2020, respectively. The following tables present the volume and recorded investment in TDRs at the times they were modified, by class and type of modification that occurred during the periods indicated:



	Temporary Rate Modification			Extension of Maturity			Modification of Payment and Other Terms
(in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Nine months ended September 30, 2021
Commercial real estate
Non owner-occupied	—	$	—	1	$	109	—	$	—
All other CRE	—		—	—		—	—		—
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	1		202	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	—		—	1		215	—		—
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	—	$	—	3	$	526	—	$	—


	Temporary Rate Modification			Extension of Maturity			Modification of Payment and Other Terms
(in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Nine months ended September 30, 2020
Commercial real estate
Non owner-occupied	—	$	—	—	$	—	—	$	—
All other CRE	—		—	—		—	1		2,226
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	2		430	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	1		46	2		457	3		356
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	1	$	46	4	$	887	4	$	2,582

During the nine month period ended September 30, 2021, there were no new TDRs and three existing TDRs that had reached their modification maturity date and was re-modified. The Bank had no significant commitments to lend additional funds to TDRs.

During the nine month period ended September 30, 2020, there were no new TDRs but nine existing TDRs that had reached their modification maturity dates were re-modified. These modifications did not impact the ALL. During the nine months ended September 30, 2021 and 2020, there were no payment defaults.

The following tables present the volume and recorded investment in TDRs at the times they were modified, by class and type of modification that occurred during the periods indicated:



	Temporary Rate Modification			Extension of Maturity			Modification of Payment and Other Terms
(in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Three months ended September 30, 2021
Commercial real estate
Non owner-occupied	—	$	—	—	$	—	—	$	—
All other CRE	—		—	—		—	—		—
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	1		202	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	—		—	1		215	—		—
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	—	$	—	2	$	417	—	$	—

	Temporary Rate Modification			Extension of Maturity			Modification of Payment and Other Terms
(in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Three months ended September 30, 2020
Commercial real estate
Non owner-occupied	—	$	—	—	$	—	—	$	—
All other CRE	—		—	—		—	—		—
Acquisition and development
1-4 family residential construction	—		—	—		—	—		—
All other A&D	—		—	1		213	—		—
Commercial and industrial	—		—	—		—	—		—
Residential mortgage
Residential mortgage – term	—		—	1		227	1		111
Residential mortgage – home equity	—		—	—		—	—		—
Consumer	—		—	—		—	—		—
Total	—	$	—	2	$	440	1	$	111

During the three month period ended September 30, 2021, there were no new TDRs and two existing TDRs that had reached their modification maturity dates and were re-modified. The Bank had no significant commitments to lend additional funds to TDR borrowers.

During the three month period ended Sept 30, 2020, there were no new TDRs but two existing TDRs that had reached their modification maturity dates were re-modified. These re-modifications did not impact the ALL. During the three months ended September 30, 2021 and 2020, there were no payment defaults under TDRs.