A modification of a loan constitutes a troubled debt restructuring (“TDR”) when a borrower is experiencing financial difficulty and the modification involves providing a concession to the existing loan contract. The Company offers various types of concessions when modifying loans to troubled borrowers, however, forgiveness of principal is rarely granted. Concessions offered are term extensions, capitalizing accrued interest, reducing interest rates to below current market rates or a combination of any of these. Combinations from time to time may include allowing a customer to be placed on interest-only payments. The presentations below in the “other” category are TDRs with a combination of concessions. At the time of a TDR, additional collateral or a guarantor may be requested.

Loans modified as TDRs are typically already on non-accrual status and in some cases, partial charge-offs may have already been taken against the outstanding loan balance. The Company classifies TDR loans as impaired loans and evaluates the need for an allowance for loan loss on a loan-by-loan basis. An allowance is based on either 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 underlying collateral less any selling costs, if the loan is deemed to be collateral dependent.

At March 31, 2022, the Company had $3.3 million in TDRs outstanding, of which one with a balance totaling $38,000 was on a non-accruing basis. Comparatively, the Company had $3.8 million of outstanding TDRs, of which one with a balance of $39,000 was on a non-accruing basis, at December 31, 2021.

There were no loans modified as TDRs during both three-month periods ended March 31, 2022 and 2021.

During the twelve months ended March 31, 2022, there was one TDR for which there was a payment default. During the twelve months ended March 31, 2021, there were no TDRs for which there was a payment default.

A default on a TDR is defined as being past due 90 days or being out of compliance with the modification agreement. As previously mentioned, the Company considers TDRs to be impaired loans and has $155,000 in the allowance for loan losses as of March 31, 2022, as a direct result of these TDRs. At March 31, 2021, there was $139,000 in the allowance for loan losses related to TDRs.

The following table presents the status of the types of loans modified as TDRs within the previous twelve months as of March 31, 2022 and 2021:

	Paid In Full				Paying as restructured				Converted to non-accrual				Foreclosure/ Default
	Number of Loans		Recorded Investments		Number of Loans		Recorded Investments		Number of Loans		Recorded Investments		Number of Loans		Recorded Investments
	(dollars in thousands)
March 31, 2022
Below market interest rate		1	$	218		—	$	—		—	$	—		—	$	—
Extended payment Terms		—		—		—		—		—		—		—		—
Forgiveness of Principal/Other		6		814		6		2,339		—		—		—		—
Total		7	$	1,032		6	$	2,339		—	$	—		—	$	—

March 31, 2021
Below market interest rate		—	$	—		—	$	—		—	$	—		—	$	—
Extended payment Terms		—		—		—		—		—		—		—		—
Forgiveness of Principal/Other		6		639		5		1,745		—		—		1		41
Total		6	$	639		5	$	1,745		—	$	—		1	$	41

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, which was signed into law on March 27, 2020, allowed the Company to suspend the TDR classifications described above in an effort to provide relief to borrowers impacted by COVID-19. The Consolidated Appropriations Act, 2021 (CAA), which was signed into law on December 27, 2020, extended the expiration of TDR suspensions as set forth in the CARES Act until the earlier of (i) January 1, 2022 or (ii) 60 days after the national emergency terminates. The Company elected to adopt this suspension until January 1, 2022 in accordance with the CAA. Modifications of loans subsequent to March 1, 2020 for COVID-19 reasons, and that were current as of December 31, 2019, were not considered TDRs and are tracked internally as “COVID-19 Modifications”. As of March 31, 2022 and December 31, 2021, the Company had no current outstanding loans modified for COVID-19 related reasons.