| LOANS AND ALLOWANCE | NOTE 7: LOANS AND ALLOWANCE The Corporation’s loan and allowance policies are as follows: Loans Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or payoffs, are reported at their outstanding principal balances, adjusted for any charge-offs, the allowance for loan losses, any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term. Discounts and premiums on purchased residential real estate loans are amortized to income using the interest method over the remaining period to contractual maturity, adjusted for anticipated prepayments. Discounts and premiums on purchased consumer loans are recognized over the expected lives of the loans using methods that approximate the interest method. Generally, loans are placed on nonaccrual status at 90 days past due and interest is considered a loss, unless the loan is well-secured and in the process of collection. Past due status is based on contractual terms of the loan. For all loan classes, the entire balance of the loan is considered past due if the minimum payment contractually required to be paid is not received by the contractual due date. For all loan classes, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful. Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. The Corporation’s policy is to promptly charge these loans off in the period the uncollectible loss is reasonably determined. For all loan portfolio segments except one-to-four family residential properties and consumer, the Corporation promptly charges off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral. The Corporation charges off one-to-four family residential and consumer loans, or portions thereof, when the Corporation reasonably determines the amount of the loss. The Corporation adheres to timeframes established by applicable regulatory guidance which provides for the charge-down of one-to-four family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 180 days past due, charge-off of unsecured open-end loans when the loan is 180 days past due, and charge-down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which the Corporation can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off. For all loan classes, when loans are placed on nonaccrual, or charged off, interest accrued but not collected is reversed against interest income. Subsequent payments on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. In general, loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. However, for impaired loans and troubled debt restructured, which is included in impaired loans, the Corporation requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status. Interest income on credit-impaired loans purchased in an acquisition is allocated to income as accretion on those loans, over the life of the loan. When cash payments are received on impaired loans in each loan class, the Corporation records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the loan. Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms. Allowance for Loan Losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated on at least a quarterly basis by management and is based upon management’s periodic review of the collectability of the loans in light of several factors, including historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical charge-off experience by segment. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Corporation over the prior five years. Previously, m anagement utilized a three-year historical loss experience methodology. Given the loss experiences of financial institutions over the last five years, management believes it is appropriate to utilize a five-year look-back period for loss history and made this change effective in 2013. A loan is considered impaired when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. For impaired loans where the Corporation utilizes the discounted cash flows to determine the level of impairment, the Corporation includes the entire change in the present value of cash flows as provision expense. Segments of loans with similar risk characteristics, including individually evaluated loans not determined to be impaired, are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Corporation does not separately identify individual consumer and residential loans for impairment measurements. The following table presents the breakdown of loans as of September 30, 2015 and December 31, 2014.
September 30, 2015
December 31, 2014
(Unaudited)
(In Thousands)
Construction/Land
$
21,192
$
26,055
One-to-four family residential
129,730
133,904
Multi-family residential
25,326
20,936
Nonresidential
125,873
122,894
Commercial
28,128
27,861
Consumer
4,278
3,894
334,527
335,544
Unamortized deferred loan costs
517
513
Undisbursed loans in process
(1,647
)
(57
)
Allowance for loan losses
(3,727
)
(4,005
)
Total loans
$
329,670
$
331,995 The risk characteristics of each loan portfolio segment are as follows: Construction, Land and Land Development The Construction, Land and Land Development segments include loans for raw land, loans to develop raw land preparatory to building construction, and construction loans of all types. Construction and development loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction and development loans are generally based on estimates of costs and value associated with the complete project. These estimates may be inaccurate. These loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Corporation until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest-rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing. Land loans are secured by raw land held as an investment, for future development, or as collateral for other use. Management monitors and evaluates these loans based on collateral, geography and risk grade criteria. One-to-Four Family Residential and Consumer With respect to residential loans that are secured by one-to-four family residences and are usually owner occupied, the Corporation generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. This segment also includes residential loans secured by non-owner occupied one-to-four family residences. Management tracks the level of owner-occupied residential loans versus non-owner-occupied residential loans as a of our recent loss history relates to these loans. Home equity loans are typically secured by a subordinate interest in one-to-four family residences, and consumer are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers. Nonresidential (including agricultural land) and Multi-family Residential These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Nonresidential and multi-family residential real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Nonresidential and multi-family residential real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Corporation’s nonresidential and multi-family residential real estate portfolio are diverse in terms of type and geographic location. Management monitors and evaluates these loans based on collateral, geography and risk grade criteria. As a general rule, the Corporation avoids financing single-purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied residential real estate loans versus non-owner-occupied residential loans. Commercial Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. The following tables present the activity in the allowance for loan losses for the three and nine-month periods ended and information regarding the breakdown of the balance in the allowance for loan losses and the recorded investment in loans, both presented by portfolio class and impairment method, as of and December 31, 2014.
Construction/ Land
1-4 Family
Multi-Family
Nonresidential
Commercial
Consumer
Total
(Unaudited; In Thousands)
Three Months Ended September 30, 2015
Balances at beginning of period:
$
922
$
1,387
$
27
$
1,240
$
87
$
12
$
3,675
Provision for losses
(253
)
150
19
94
49
40
99
Loans charged off
-
(11
)
-
(13
)
-
(34
)
(58
)
Recoveries on loans
-
2
-
1
-
8
11
Balances at end of period
$
669
$
1,528
$
46
$
1,322
$
136
$
26
$
3,727
Nine Months Ended September 30, 2015
Balances at beginning of period:
$
740
$
1,977
$
28
$
1,107
$
151
$
2
$
4,005
Provision for losses
(138
)
210
(2
)
136
3
88
297
Loans charged off
-
(665
)
-
(13
)
(18
)
(91
)
(787
)
Recoveries on loans
67
6
20
92
-
27
212
Balances at end of period
$
669
$
1,528
$
46
$
1,322
$
136
$
26
$
3,727
As of September 30, 2015
Allowance for losses:
Individually evaluated for impairment:
$
391
$
181
$
-
$
310
$
-
$
8
$
890
Collectively evaluated for impairment:
278
1,237
46
912
136
18
2,627
Loans acquired with a deteriorated credit quality:
-
110
-
100
-
-
210
Balances at end of period
$
669
$
1,528
$
46
$
1,322
$
136
$
26
$
3,727
Loans:
Individually evaluated for impairment:
$
3,318
$
4,609
$
-
$
4,367
$
251
$
-
$
12,545
Collectively evaluated for impairment:
17,818
124,203
25,326
121,108
27,864
4,276
320,595
Loans acquired with a deteriorated credit quality:
56
918
-
398
13
2
1,387
Balances at end of period
$
21,192
$
129,730
$
25,326
$
125,873
$
28,128
$
4,278
$
334,527
Construction/ Land
1-4 Family
Multi-Family
Nonresidential
Commercial
Consumer
Total
(Unaudited; In Thousands)
Three Months Ended September 30, 2014
Balances at beginning of period:
$
676
$
1,391
$
303
$
1,232
$
152
$
8
$
3,762
Provision for losses
(90
)
290
(18
)
(36
)
(26
)
29
149
Loans charged off
-
(9
)
-
(20
)
-
(46
)
(75
)
Recoveries on loans
77
2
-
1
5
19
104
Balances at end of period
$
663
$
1,674
$
285
$
1,177
$
131
$
10
$
3,940
Nine Months Ended September 30, 2014
Balances at beginning of period:
$
676
$
1,749
$
404
$
1,470
$
189
$
22
$
4,510
Provision for losses
(90
)
513
392
(439
)
(77
)
48
347
Loans charged off
-
(629
)
(511
)
(94
)
-
(118
)
(1,352
)
Recoveries on loans
77
41
-
240
19
58
435
Balances at end of period
$
663
$
1,674
$
285
$
1,177
$
131
$
10
$
3,940
Construction/ Land
1-4 Family
Multi-Family
Nonresidential
Commercial
Consumer
Total
(In Thousands)
As of December 31, 2014
Allowance for losses:
Individually evaluated for impairment:
$
391
$
816
$
-
$
310
$
76
$
-
$
1,593
Collectively evaluated for impairment:
349
1,023
28
745
75
2
2,222
Loans acquired with a deteriorated credit quality:
-
138
-
52
-
-
190
Balances at end of period
$
740
$
1,977
$
28
$
1,107
$
151
$
2
$
4,005
Loans:
Individually evaluated for impairment:
$
4,047
$
4,448
$
1,013
$
3,315
$
379
$
8
$
13,210
Collectively evaluated for impairment:
21,597
128,421
19,923
119,176
27,468
3,876
320,461
Loans acquired with a deteriorated credit quality:
411
1,035
-
403
14
10
1,873
Balances at end of period
$
26,055
$
133,904
$
20,936
$
122,894
$
27,861
$
3,894
$
335,544
The following tables present the credit risk profile of the Corporation’s loan portfolio based on rating category as of September 30, 2015 and December 31, 2014
September 30, 2015
Total Portfolio
Pass
Special Mention
Substandard
Doubtful
(Unaudited; In Thousands)
Construction/Land
$
21,192
$
17,818
$
-
$
3,374
$
-
1-4 family residential
129,730
123,318
1,197
5,135
80
Multi-family residential
25,326
25,285
41
-
-
Nonresidential
125,873
120,345
1,337
4,188
3
Commercial
28,128
27,859
26
243
-
Consumer
4,278
4,278
-
-
-
Total loans
$
334,527
$
318,904
$
2,601
$
12,940
$
83
December 31, 2014
Total Portfolio
Pass
Special Mention
Substandard
Doubtful
(In Thousands)
Construction/Land
$
26,055
$
21,907
$
31
$
4,117
$
-
1-4 family residential
133,904
124,969
2,817
6,013
105
Multi-family residential
20,936
19,881
42
1,013
-
Nonresidential
122,894
117,336
2,486
2,923
149
Commercial
27,861
27,432
9
355
65
Consumer
3,894
3,875
-
19
-
Total loans
$
335,544
$
315,400
$
5,385
$
14,440
$
319 Credit Quality Indicators The Corporation categorizes loans into risk categories based on relevant information about the ability of the 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 Corporation analyzes loans individually on an ongoing basis by classifying the loans as to credit risk and assigning grade classifications. Loan grade classifications of special mention, substandard, doubtful, or loss are reported to the Corporation’s board of directors monthly. The Corporation uses the following definitions for credit risk grade classifications: Pass: Special Mention: Substandard:
· An expected loan payment is in excess of 90 days past due (non-performing), or non-earning.
· The financial condition of the borrower has deteriorated to such a point that close monitoring is necessary. Payments do not necessarily have to be past due.
· Repayment from the primary source of repayment is gone or impaired .
· The borrower has filed for bankruptcy protection.
· The loans are inadequately protected by the net worth and cash flow of the borrower.
· The guarantors have been called upon to make payments.
· The borrower has exhibited a continued inability to reduce principal (although interest payment may be current).
· The Corporation is considering a legal action against the borrower.
· The collateral position has deteriorated to a point where there is a possibility the Corporation may sustain some loss. This may be due to the financial condition or to a reduction in the value of the collateral.
· Although loss may not seem likely, the Corporation Doubtful: The Corporation evaluates the loan risk grading system definitions and allowance for loan loss methodology on an ongoing basis. No significant changes were made to either during the quarter or fiscal year. The following tables present the Corporation’s loan portfolio aging analysis as of September 30, 2015 and December 31, 2014:
September 30, 2015
30-59 Days Past Due
60-89 Days Past Due
Greater than 90 Days
Total Past Due
Current
Purchased Credit Impaired Loans
Total Loans Receivables
(Unaudited; In Thousands)
Construction/Land
$
-
$
4
$
-
$
4
$
21,132
$
56
$
21,192
1-4 family residential
561
542
1,011
2,114
126,698
918
129,730
Multi-family residential
-
-
-
-
25,326
-
25,326
Nonresidential
171
371
1,998
2,540
122,935
398
125,873
Commercial
88
-
-
88
28,027
13
28,128
Consumer
13
2
-
15
4,261
2
4,278
$
833
$
919
$
3,009
$
4,761
$
328,379
$
1,387
$
334,527
December 31, 2014
30-59 Days Past Due
60-89 Days Past Due
Greater than 90 Days
Total Past Due
Current
Purchased Credit Impaired Loans
Total Loans Receivables
(In Thousands)
Construction/Land
$
-
$
-
$
187
$
187
$
25,457
$
411
$
26,055
1-4 family residential
418
760
2,855
4,033
128,836
1,035
133,904
Multi-family residential
-
-
-
-
20,936
-
20,936
Nonresidential
458
-
1,745
2,203
120,288
403
122,894
Commercial
-
-
116
116
27,731
14
27,861
Consumer
25
10
10
45
3,839
10
3,894
$
901
$
770
$
4,913
$
6,584
$
327,087
$
1,873
$
335,544 At September 30, 2015, there was one one-to-four family residential loan of $67,000 that was past due 90 days or more and accruing. At December 31, 2014, there were four loans, totaling $28,000, that were past due 90 days or more and accruing. Of those, there was one commercial loan of $25,000, a one-to-four family residential loan in the amount of $1,000, and the remaining $2,000 was for two consumer loans. At September 30, 2015, the Corporation held residential real estate held for sale as a result of foreclosure (REO) totaling $82,000 and residential real estate in the process of foreclosure of $271,000. This compares to $452,000 and $2,611,000, respectively, as of September 30, 2014. The following table presents the Corporation’s nonaccrual loans as of September 30, 2015 and December 31, 2014, which includes both non-performing troubled debt restructured and loans contractually delinquent 90 days or more (in thousands):
September 30, 2015
December 31, 2014
(Unaudited)
Construction/Land
$
1,819
$
2,148
One-to-four family residential
1,861
4,214
Multi-family residential
-
1,013
Nonresidential and agricultural land
3,203
3,132
Commercial
111
230
Consumer and other
-
8
Total nonaccrual loans
$
6,994
$
10,745 A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Corporation will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include non-performing commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. The following tables present information pertaining to the principal balances and specific valuation allocations for impaired loans, as of September 30, 2015 (unaudited; in thousands):
Impaired loans without a specific allowance:
Recorded Investment
Unpaid Principal Balance
Specific
Construction/Land
$
1,648
$
1,649
$
-
1-4 family residential
4,047
4,631
-
Multi-family residential
-
-
-
Nonresidential
3,437
3,462
-
Commercial
238
239
-
Consumer
-
-
-
$
9,370
$
9,981
$
-
Impaired loans with a specific allowance:
Recorded Investment
Unpaid Principal Balance
Specific
Construction/Land
$
1,670
$
1,684
$
391
1-4 family residential
562
575
181
Multi-family residential
-
-
-
Nonresidential
930
930
310
Commercial
13
13
8
Consumer
-
-
-
$
3,175
$
3,202
$
890
Total impaired loans:
Recorded Investment
Unpaid Principal Balance
Specific
Construction Land
$
3,318
$
3,333
$
391
1-4 family residential
4,609
5,206
181
Multi-family residential
-
-
-
Nonresidential
4,367
4,392
310
Commercial
251
252
8
Consumer
-
-
-
$
12,545
$
13,183
$
890 The following is a summary by class of information related to the average recorded investment and interest income recognized on impaired loans for the three and nine months ended September 30, 2015 and 2014.
Three Months Ended September 30, 2015
Three Months Ended September 30, 2014
Average Investment
Interest Income Recognized
Average
Interest Income Recognized
(Unaudited; In Thousands)
Construction/Land
$
3,287
$
25
$
3,953
$
26
1-4 family residential
3,257
46
4,630
40
Multi-family residential
-
-
1,000
4
Nonresidential
3,188
26
3,975
21
Commercial
218
3
304
2
Consumer
-
-
-
-
$
9,950
$
100
$
13,862
$
93
Nine Months Ended September 30, 2015
Nine Months Ended September 30, 2014
Average Investment
Interest Income Recognized
Average
Interest Income Recognized
(Unaudited; In Thousands)
Construction/Land
$
3,592
$
98
$
4,078
$
105
1-4 family residential
3,487
139
5,081
133
Multi-family residential
-
-
1,014
16
Nonresidential
3,232
80
3,977
85
Commercial
280
18
332
13
Consumer
3
-
-
-
$
10,594
$
335
$
14,482
$
352 For the three and nine months ended September 30, 2015, interest income recognized on a cash basis included above was $49,000 and $206,000, respectively. For the three and nine months ended September 30, 2014, interest income recognized on a cash basis included above was $59,000 and $243,000, respectively. The following tables present information pertaining to the principal balances and specific valuation allocations for impaired loans as of December 31, 2014 (in thousands):
Impaired loans without a specific allowance:
Recorded Investment
Unpaid Principal Balance
Specific
Construction/Land
$
2,300
$
2,342
$
-
1-4 family residential
1,952
1,962
-
Multi-family residential
1,013
1,013
-
Nonresidential
2,360
2,614
-
Commercial
250
251
-
Consumer
8
9
-
$
7,883
$
8,191
$
-
Impaired loans with a specific allowance:
Recorded Investment
Unpaid Principal Balance
Specific
Construction/Land
$
1,747
$
1,761
$
391
1-4 family residential
2,496
2,512
816
Multi-family residential
-
-
-
Nonresidential
955
955
310
Commercial
129
268
76
Consumer
-
-
-
$
5,327
$
5,496
$
1,593
Total impaired loans:
Recorded Investment
Unpaid Principal Balance
Specific
Construction/Land
$
4,047
$
4,103
$
391
1-4 family residential
4,448
4,474
816
Multi-family residential
1,013
1,013
-
Nonresidential
3,315
3,569
310
Commercial
379
519
76
Consumer
8
9
-
$
13,210
$
13,687
$
1,593 Troubled Debt Restructurings In the course of working with borrowers, the Corporation may choose to restructure the contractual terms of certain loans. In restructuring the loan, the Corporation attempts to work out an alternative payment schedule with the borrower in order to optimize collectability of the loan. Any loans that are modified, whether through a new agreement replacing the old or via changes to an existing loan agreement, are reviewed by the Corporation to identify if a troubled debt restructuring (“TDR”) has occurred. A troubled debt restructuring occurs when, for economic or legal reasons related to a borrower’s financial difficulties, the Corporation grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status, and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two. If such efforts by the Corporation do not result in a satisfactory arrangement, the loan is referred to legal counsel, at which time foreclosure proceedings are initiated. At any time prior to a sale of the property at foreclosure, the Corporation may terminate foreclosure proceedings if the borrower is able to work out a satisfactory payment plan. Nonaccrual loans, including TDRs that have not met the six month minimum performance criterion, are reported in this report as non-performing loans. On at least a quarterly basis, the Corporation reviews all TDR loans to determine if the loan meets this criterion. A loan is generally classified as nonaccrual when the Corporation believes that receipt of principal and interest is questionable under the terms of the loan agreement. Most generally, this is at 90 or more days past due. For all loan classes, it is the Corporation’s policy to have any restructured loans which are on nonaccrual status prior to being restructured, remain on nonaccrual status until six months of satisfactory borrower performance, at which time management would consider their return to accrual status. Loans reported as TDR as of 30, 2015 totaled $5.1 million. TDR loans reported as nonaccrual (non-performing) loans, and included in total nonaccrual (non-performing) loans, were $3.3 million at September 30, 2015. The remaining TDR loans, totaling $1.8 million, were accruing at September 30, 2015 and reported as performing loans. All TDRs are considered impaired by the Corporation for the life of the loan and reflected so in the Corporation’s analysis of the allowance for credit losses. As a result, the determination of the amount of impaired loans for each portfolio segment within troubled debt restructurings is the same as detailed previously above. At September , the Corporation had 21 loans that were modified in troubled debt restructurings and impaired. The modification of terms of such loans included one or a combination of the following: an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan. The following tables present information regarding troubled debt restructurings by class as of the three-month and nine-month periods ended , and new troubled debt restructuring for the three-month and nine-month periods ended September 30, 2015 and 2014:
For the Three Months Ended September 30, 2015
Number of Loans
Pre-Modification Recorded Balance
Post-Modification Recorded Balance
(Unaudited; In Thousands)
Construction/Land
1
$
149
$
149
One-to-four family residential
-
-
-
Multi-family residential
-
-
-
Nonresidential and agricultural land
-
-
-
Commercial
-
-
-
1
$
149
$
149
For the Three Months Ended September 30, 2014
Number of Loans
Pre-Modification Recorded Balance
Post-Modification Recorded Balance
(Unaudited; In Thousands)
Construction/Land
3
$
1,830
$
1,985
One-to-four family residential
1
485
485
Multi-family residential
1
1,019
1,019
Nonresidential and agricultural land
1
43
46
Commercial
1
130
153
7
$
3,507
$
3,688
For the Nine Months Ended September 30, 2015
Number of Loans
Pre-Modification Recorded Balance
Post-Modification Recorded Balance
(Unaudited; In Thousands)
Construction/Land
7
$
3,473
$
3,473
One-to-four family residential
-
-
-
Multi-family residential
-
-
-
Nonresidential and agricultural land
-
-
-
Commercial
2
76
66
9
$
3,549
$
3,539
For the Nine Months Ended September 30, 2014
Number of Loans
Pre-Modification Recorded Balance
Post-Modification Recorded Balance
Construction/Land
5
$
4,278
$
4,473
One-to-four family residential
7
2,606
2,876
Multi-family residential
2
2,087
2,102
Nonresidential and agricultural land
2
243
209
Commercial
5
201
240
21
$
9,415
$
9,900 The following tables present information regarding post-modification balances of newly restructured troubled debt by type of modification for the three months ended September 30, 2015 and 2014.
September 30, 2015
Interest Only
Term
Combination
Total Modifications
(Unaudited; In Thousands)
Construction/Land
$
149
$
-
$
-
$
149
One-to-four family residential
-
-
-
-
Multi-family residential
-
-
-
-
Nonresidential
-
-
-
-
Commercial
-
-
-
-
$
149
$
-
$
-
$
149
September 30, 2014
Interest Only
Term
Combination
Total Modifications
(Unaudited; In Thousands)
Construction/Land
$
155
$
1,830
$
-
$
1,985
One-to-four family residential
-
485
-
485
Multi-family residential
-
1,019
-
1,019
Nonresidential
-
-
46
46
Commercial
-
-
153
153
$
155
$
3,334
$
199
$
3,688 The following tables present information regarding post-modification balances of newly restructured troubled debt by type of modification for the nine months ended September 30, 2015 and 2014.
September 30, 2015
Interest Only
Term
Combination
Total Modifications
(Unaudited; In Thousands)
Construction/Land
$
149
$
3,324
$
-
$
3,473
One-to-four family residential
-
-
-
-
Multi-family residential
-
-
-
-
Nonresidential
-
-
66
66
Commercial
-
-
-
-
$
149
$
3,324
$
66
$
3,539
September 30, 2014
Interest Only
Term
Combination
Total |
