The Company uses four different categories to classify loans in its portfolio based on the underlying collateral securing each loan. The loans grouped together in each category have been determined to share similar risk characteristics with respect to credit quality. Those four categories are commercial, financial and agriculture, commercial real estate, consumer real estate, consumer installment;

Commercial, financial and agriculture – Commercial, financial and agriculture loans include loans to business entities issued for commercial, industrial, or other business purposes. This type of commercial loan shares a similar risk characteristic in that unlike commercial real estate loans, repayment is largely dependent on cash flow generated from the operation of the business.

Commercial real estate – Commercial real estate loans are grouped as such because repayment is mainly dependent upon either the sale of the real estate, operation of the business occupying the real estate, or refinance of the debt obligation. This includes both owner occupied and non-owner occupied CRE secured loans, because they share similar risk characteristics related to these variables.

Consumer real estate – Consumer real estate loans consist primarily of loans secured by 1-4 family residential properties and/or residential lots. This includes loans for the purpose of constructing improvements on the residential property, as well as home equity lines of credit.

Consumer installment – Consumer installment loans are all loans issued to individuals that are not for any purpose related to operation of a business, and not secured by real estate. Repayment on these loans is mostly dependent on personal income, which may be impacted by general economic conditions.

The following table shows the composition of the loan portfolio by category ($in thousands):

Loans held for sale consist of mortgage loans originated by the Bank and sold into the secondary market. Commitments from investors to purchase the loans are obtained upon origination.

Activity in the allowance for loan losses for December 31, 2020, 2019 and 2018 was as follows:

The following tables provide the ending balances in the Company's loans (excluding mortgage loans held for sale) and allowance for loan losses, broken down by portfolio segment as of December 31, 2020 and 2019. The tables also provide additional detail as to the amount of our loans and allowance that correspond to individual versus collective impairment evaluation. The impairment evaluation corresponds to the Company's systematic methodology for estimating its Allowance for Loan Losses ($ in thousands).

For those PCI loans disclosed above, no impairment has been provided through the allowance for loan losses.

The following tables provide additional detail of impaired loans broken out according to class as of December 31, 2020, 2019 and 2018. The tables do not include PCI loans. The recorded investment included in the following table represents customer balances net of any partial charge-offs recognized on the loans, net of any deferred fees and costs. Recorded investment excludes any insignificant amount of accrued interest receivable on loans 90-days or more past due and still accruing. The unpaid balance represents the recorded balance prior to any partial charge-offs.

The cash basis interest earned in the chart above is materially the same as the interest recognized during impairment for the years ended December 31, 2020, 2019 and 2018.

The gross interest income that would have been recorded in the period that ended if the nonaccrual loans had been current in accordance with their original terms and had been outstanding throughout the period or since origination, if held for part of the twelve months for the years ended December 31, 2020, 2019 and 2018, was $1.5 million, $348 thousand and $782 thousand, respectively. The Company had no loan commitments to borrowers in nonaccrual status at December 31, 2020 and 2019.

We acquired loans with deteriorated credit quality in 2014, 2017, 2018,2019 and 2020. These loans were recorded at estimated fair value at the acquisition date with no carryover of the related allowance for loan losses. The acquired loans were segregated as of the acquisition date between those considered to be performing (acquired non-impaired loans) and those with evidence of credit deterioration (purchased credit impaired loans). Acquired loans are considered to be impaired if it is probable, based on current available information, that the Company will be unable to collect all cash flows as expected. If expected cash flows cannot reasonably be estimated as to what will be collected, there will not be any interest income recognized on these loans.

The following presents information regarding the contractually required payments receivable, cash flows expected to be collected and the estimated fair value of PCI loans acquired in the acquisitions from 2019 and 2020.

Total carrying amount purchased credit impaired loans were $11.6 million and the related purchase accounting discount was $2.9 million as of December 31, 2020, and $14.5 million and $3.4 million as of December 31, 2019, respectively. The outstanding balance of these loans is the undiscounted sum of all amounts, including amounts deemed principal, interest, fees, penalties, and other under the loans, owed at the reporting date, whether or not currently due and whether or not any such amounts have been charged off.

Changes in the carrying amount and accretable yield for purchased credit impaired loans were as follows for the year ended December 31, 2020 and 2019 ($ in thousands):

The following tables provide details of TDRs during the twelve months ended December 31, 2020, 2019 and 2018. The modifications included one of the following or a combination of the following: maturity date extensions, interest only payments,

amortizations were extended beyond what would be available on similar type loans, and payment waiver. No interest rate concessions were given on these nor were any of these loans written down.

The TDRs presented above increased the allowance for loan losses $127 thousand, $1.4 million and $105 thousand and resulted in no charge-offs for the years ended December 31, 2020, 2019 and 2018, respectively.

In response to the COVID-19 pandemic and its economic impact to its customers, the Company implemented a short-term modification program in accordance with interagency regulatory guidance to provide temporary payment relief to those borrowers directly impacted by COVI-19 who were not more than 30 days past due at the time of the modification. This program allowed for a deferral of payments for up two successive 90 day periods for a cumulative maximum of 180 days. Pursuant to interagency guidance, such short-term deferrals are not deemed to meet the criteria for reporting as TDRs. For borrowers requiring a longer-term modification following the short-term loan modification program the Company worked with these borrowers whose loans were not more 30 days past due at December 31, 2019 and who required modification as a result of COVID-19 to modify such loans under Section 4013 of the CARES Act. The balance of TDRs at December 31, 2020, 2019 and 2018, was $27.5 million, $32.0 million and $14.3 million, respectively. As of December 31, 2020, the Company had no additional amount committed on any loan classified as a TDR.

The following tables represents the Company’s TDRs for the year ended December 31, 2020, 2019 and 2018:

The following table presents loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the year ending December 2020, 2019 and 2018 ($ in thousands, except for number of loans):

The modifications described above included one of the following or a combination of the following: maturity date extensions, interest only payments, amortizations were extended beyond what would be available on similar type loans, and payment waiver. No interest rate concessions were given on these loans nor were any of these loans written down. The TDRs presented above increased the allowance for loan losses $81 thousand, $1.3 million, $99 thousand and resulted in no charge-offs as of December 31, 2020, 2019 and 2018, respectively.

The following tables summarize by class our loans (excluding mortgage loans held for sale) classified as past due in excess of 30 days or more in addition to those loans classified as nonaccrual including PCI loans:

(1)	Total loan amount as of December 31, 2020 includes $239.7 million in PPP loans.


	December 31, 2019
			Past Due 90						Total
	Past Due		Days or More						Past Due,
	30 to 89		and						Non accrual		Total
($ in thousands)	Days		Still Accruing		Non accrual		PCI		and PCI		Loans
Commercial, financial and agriculture	$	515	$	61	$	2,137	$	97	$	2,810	$	332,600
Commercial real estate		2,447		1,046		22,441		3,844		29,778		1,387,207
Consumer real estate		4,569		1,608		1,902		8,148		16,227		814,282
Consumer installment		226		—		260		6		492		42,458
Lease financing receivable		—		—		—		—		—		3,095
Obligations of states and subdivisions		—		—		—		—		—		20,716
Total	$	7,757	$	2,715	$	26,740	$	12,095	$	49,307	$	2,600,358

Additionally, the Company is working with borrowers impacted by COVID-19 and providing short-term (180 days or less) modifications in the form of interest only modifications or principal and interest deferrals. For the year ended December 31, 2020, we have modified approximately 1,627 loans for $672.3 million, of which 1,390 loans for $512.6 million were modified to defer monthly principal and interest payments and 237 loans for $159.7 million were modified from monthly principal and interest payments to interest only. As of December 31, 2020, the Bank had 70 deferred loans totaling approximately $82.0 million, of which 42 loans for $33.1 million were principal and payment deferrals and 28 loans for $48.9 million were interest only modifications.

The following table summarizes by class the deferred loans as of December 31, 2020 ($ in thousands):


		Unpaid
	Number	Principal
	of Loans	Balance
Commercial, financial and agriculture	16	$	7,701
Commercial real estate	44		69,718
Consumer real estate	10		4,589
Total	70	$	82,008

As of December 31, 2020, there were 33 loans for $37.3 million downgraded to special mention and 13 loans for $8.3 million downgraded to substandard. As of December 31, 2020, accrued interest receivable related to the short-term modifications totaled $9.2 million.

For the year ended December 31, 2020, we have approximately 2,961 PPP loans approved through the SBA for $239.7 million. These modifications are excluded from troubled debt restructuring classification under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators. PPP loans were excluded from the allowance for loan losses.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company uses the following definitions for risk ratings, which are consistent with the definitions used in supervisory guidance:

Pass: Loans classified as pass are deemed to possess average to superior credit quality, requiring no more than normal attention.

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net 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.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as 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.

As of December 31, 2020 and 2019, and based on the most recent analysis performed, the risk category of loans by class of loans (excluding mortgage loans held for sale) was as follows:


	Commercial,
December 31, 2020	Financial and		Commercial		Consumer		Consumer
($ in thousands)	Agriculture		Real Estate		Real Estate		Installment		Total
Pass	$	560,966	$	1,841,110	$	526,448	$	41,418	$	2,969,942
Special Mention		2,143		64,012		1,889		20		68,064
Substandard		11,875		66,535		13,397		132		91,939
Doubtful		1,653		23		—		—		1,676
Subtotal	$	576,637	$	1,971,680	$	541,734	$	41,570	$	3,131,621
Less:
Unearned Discount		—		7,943		—		—		7,943

Loans, net of unearned discount	$	576,637	$	1,963,737	$	541,734	$	41,570	$	3,123,678


	Commercial,
December 31, 2019	Financial and		Commercial		Consumer		Consumer
($ in thousands)	Agriculture		Real Estate		Real Estate		Installment		Total
Pass	$	327,205	$	1,645,496	$	499,426	$	41,008	$	2,513,135
Special Mention		3,493		8,876		1,194		21		13,584
Substandard		10,972		50,554		13,244		397		75,167
Doubtful		16		77		—		—		93
Subtotal	$	341,686	$	1,705,003	$	513,864	$	41,426	$	2,601,979
Less:
Unearned Discount		—		1,621		—		—		1,621

Loans, net of unearned discount	$	341,686	$	1,703,382	$	513,864	$	41,426	$	2,600,358