Loans and Allowance for Credit Losses | Note 5. 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, 2019 and December 31, 2018 are summarized by type as follows: June 30, 2019 December 31, 2018 (dollars in thousands) Amount % Amount % Commercial $ 1,475,201 20 % $ 1,553,112 22 % Income producing - commercial real estate 3,666,815 50 % 3,256,900 46 % Owner occupied - commercial real estate 970,850 13 % 887,814 13 % Real estate mortgage - residential 105,191 1 % 106,418 2 % Construction - commercial and residential 1,012,789 14 % 1,039,815 15 % Construction - C&I (owner occupied) 76,324 1 % 57,797 1 % Home equity 83,447 1 % 86,603 1 % Other consumer 1,998 — 2,988 — Total loans 7,392,615 100 % 6,991,447 100 % Less: allowance for credit losses (72,086 ) (69,944 ) Net loans $ 7,320,529 $ 6,921,503 Unamortized net deferred fees amounted to $25.2 million and $26.5 million at June 30, 2019 and December 31, 2018, respectively. As of June 30, 2019 and December 31, 2018, the Bank serviced $101.8 million and $111.1 million, respectively, of multifamily FHA loans, SBA loans and other loan participations which are not reflected as loan balances on the Consolidated Balance Sheets. Loan Origination / Risk Management The Company’s goal is to mitigate risks in the event of unforeseen threats to the loan portfolio as a result of economic downturn or other negative influences. Plans for mitigating inherent risks in managing loan assets include: carefully enforcing loan policies and procedures, evaluating each borrower’s business plan during the underwriting process and throughout the loan term, identifying and monitoring primary and alternative sources for loan repayment, and obtaining collateral to mitigate economic loss in the event of liquidation. Specific loan reserves are established based upon credit and/or collateral risks on an individual loan basis. A risk rating system is employed to proactively estimate loss exposure and provide a measuring system for setting general and specific reserve allocations. The composition of the Company’s loan portfolio is heavily weighted toward commercial real estate, both owner occupied and income producing real estate. At June 30, 2019, owner occupied - commercial real estate and construction - C&I (owner occupied) represent approximately 14 % of the loan portfolio. At June 30, 2019, non-owner occupied commercial real estate and real estate construction represented approximately 64 % of the loan portfolio. The combined owner occupied and commercial real estate loans represent approximately 78 % of the loan portfolio. Real estate also serves as collateral for loans made for other purposes, resulting in 84 % of all loans being secured by real estate. These loans are underwritten to mitigate lending risks typical of this type of loan such as declines in real estate values, changes in borrower cash flow and general economic conditions. The Bank typically requires a maximum loan to value of 80 % and minimum cash flow debt service coverage of 1.15 to 1.0 . Personal guarantees may be required, but may be limited. In making real estate commercial mortgage loans, the Bank generally requires that interest rates adjust not less frequently thanfiveyears. The Company is also an active traditional commercial lender providing loans for a variety of purposes, including working capital, equipment and account receivable financing. This loan category represents approximately 2 0% of the loan portfolio at June 30, 2019 and was generally variable or adjustable rate. Commercial loans meet reasonable underwriting standards, including appropriate collateral and cash flow necessary to support debt service. Personal guarantees are generally required, but may be limited. SBA loans represent approximately2 % of the commercial loan category. In originating SBA loans, the Company assumes the risk of non-payment on the unguaranteed portion of the credit as well as potential repairs to the SBA guarantees. The Company generally sells the guaranteed portion of the loan generating noninterest income from the gains on sale, as well as servicing income on the portion participated. SBA loans are subject to the same cash flow analyses as other commercial loans. SBA loans are subject to a maximum loan size established by the SBA as well as internal loan size guidelines. Approximately 1 % of the loan portfolio at June 30, 2019 consists of home equity loans and lines of credit and other consumer loans. These credits, while making up a small portion of the loan portfolio, demand the same emphasis on underwriting and credit evaluation as other types of loans advanced by the Bank. Approximately 1 % of the loan portfolio consists of residential mortgage loans. The repricing duration of these loans was 20 months. These credits represent first liens on residential property loans originated by the Bank. While the Bank’s general practice is to originate and sell (servicing released) loans made by its Residential Lending department, from time to time certain loan characteristics do not meet the requirements of third party investors and these loans are instead maintained in the Bank’s portfolio until they are resold to another investor at a later date or mature. 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 Loan Committee. 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 which 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 than10 years or the remaining useful life of the property, whichever is lower. The preferred term is between5 to 7 years, with amortization to a maximum of25 years. The Company’s loan portfolio includes ADC real estate loans including both investment and owner occupied projects. ADC loans amounted to $1.62 billion at June 30, 2019. 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 71 % of the outstanding ADC loan portfolio at June 30, 2019. 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) 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 thatoneof 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 this inherent risk, 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 which are monitored on an ongoing basis which 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 includes monitoring of current and projected real estate market conditions. If a project has not performed as expected, it is not 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, 2019 and 2018. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. Income Producing - Commercial Owner Occupied - Commercial Real Estate Mortgage - Construction - Commercial and Home Other (dollars in thousands) Commercial Real Estate Real Estate Residential Residential Equity Consumer Total ThreeMonths Ended June 30, 2019 Allowance for credit losses: Balance at beginning of period $ 17,195 $ 26,765 $ 5,980 $ 681 $ 18,469 $ 605 $ 248 $ 69,943 Loans charged-off (1 ) (1,847 ) — — — — (2 ) (1,850 ) Recoveries of loans previously charged-off 37 302 2 2 37 — 13 393 Net loans charged-off 36 (1,545 ) 2 2 37 — 11 (1,457 ) Provision for credit losses 905 1,790 (226 ) 672 500 (24 ) (17 ) 3,600 Ending balance $ 18,136 $ 27,010 $ 5,756 $ 1,355 $ 19,006 $ 581 $ 242 $ 72,086 SixMonths Ended June 30, 2019 Allowance for credit losses: Balance at beginning of period $ 15,857 $ 28,034 $ 6,242 $ 965 $ 18,175 $ 599 $ 72 $ 69,944 Loans charged-off (5 ) (5,343 ) — — — — (2 ) (5,350 ) Recoveries of loans previously charged-off 167 302 2 3 37 — 21 532 Net loans (charged-off) recoveries 162 (5,041 ) 2 3 37 — 19 (4,818 ) Provision for credit losses 2,117 4,017 (488 ) 387 794 (18 ) 151 6,960 Ending balance $ 18,136 $ 27,010 $ 5,756 $ 1,355 $ 19,006 $ 581 $ 242 $ 72,086 As of June 30, 2019 Allowance for credit losses: Individually evaluated for impairment $ 7,905 $ 1,000 $ 475 $ 650 $ — $ — $ — $ 10,030 Collectively evaluated for impairment 10,231 26,010 5,281 705 19,006 581 242 62,056 Ending balance $ 18,136 $ 27,010 $ 5,756 $ 1,355 $ 19,006 $ 581 $ 242 $ 72,086 ThreeMonths Ended June 30, 2018 Allowance for credit losses: Balance at beginning of period $ 13,358 $ 26,468 $ 5,471 $ 734 $ 18,742 $ 699 $ 335 $ 65,807 Loans charged-off (408 ) — — — (517 ) — — (925 ) Recoveries of loans previously charged-off 23 2 1 1 35 10 5 77 Net loans (charged-off) recoveries (385 ) 2 1 1 (482 ) 10 5 (848 ) Provision for credit losses (767 ) 1,518 531 22 391 (36 ) (9 ) 1,650 Ending balance $ 12,206 $ 27,988 $ 6,003 $ 757 $ 18,651 $ 673 $ 331 $ 66,609 SixMonths Ended June 30, 2018 Allowance for credit losses: Balance at beginning of period $ 13,102 $ 25,376 $ 5,934 $ 944 $ 18,492 $ 770 $ 140 $ 64,758 Loans charged-off (1,261 ) (121 ) (132 ) — (517 ) — — (2,031 ) Recoveries of loans previously charged-off 26 2 2 3 95 127 8 263 Net loans (charged-off) recoveries (1,235 ) (119 ) (130 ) 3 (422 ) 127 8 (1,768 ) Provision for credit losses 339 2,731 199 (190 ) 581 (224 ) 183 3,619 Ending balance $ 12,206 $ 27,988 $ 6,003 $ 757 $ 18,651 $ 673 $ 331 $ 66,609 As of June 30, 2018 Allowance for credit losses: Individually evaluated for impairment $ 4,506 $ 3,543 $ 500 $ — $ — $ — $ 80 $ 8,629 Collectively evaluated for impairment 7,700 24,445 5,503 757 18,651 673 251 57,980 Ending balance $ 12,206 $ 27,988 $ 6,003 $ 757 $ 18,651 $ 673 $ 331 $ 66,609 The Company’s recorded investments in loans as of June 30, 2019 and December 31, 2018 related to each balance in the allowance for loan losses by portfolio segment and disaggregated on the basis of the Company’s impairment methodology was as follows: Income Producing - Owner Occupied - Real Estate Construction - Commercial Commercial Mortgage - Commercial and Home Other (dollars in thousands) Commercial Real Estate Real Estate Residential Residential Equity Consumer Total June 30, 2019 Recorded investment in loans: Individually evaluated for impairment $ 26,980 $ 37,900 $ 3,879 $ 5,367 $ 9,155 $ 487 $ — $ 83,768 Collectively evaluated for impairment 1,448,221 3,628,915 966,971 99,824 1,079,958 82,960 1,998 7,308,847 Ending balance $ 1,475,201 $ 3,666,815 $ 970,850 $ 105,191 $ 1,089,113 $ 83,447 $ 1,998 $ 7,392,615 December 31, 2018 Recorded investment in loans: Individually evaluated for impairment $ 8,738 $ 61,747 $ 5,307 $ 1,228 $ 7,012 $ 487 $ — $ 84,519 Collectively evaluated for impairment 1,544,374 3,195,153 882,507 105,190 1,090,600 86,116 2,988 6,906,928 Ending balance $ 1,553,112 $ 3,256,900 $ 887,814 $ 106,418 $ 1,097,612 $ 86,603 $ 2,988 $ 6,991,447 At June 30, 2019, nonperforming loans acquired from Fidelity & Trust Financial Corporation (“Fidelity”) and Virginia Heritage Bank (“Virginia Heritage”) have a carrying value of $273thousandand $155thousand, respectively, and an unpaid principal balance of $323thousandand $968thousand, respectively, and were evaluated separately in accordance with ASC Topic 310 -30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality 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 are to use 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 which 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 which 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 Classified (b) Doubtful The Company’s credit quality indicators are updated generally on a quarterly basis, but no less frequently than annually. The following table presents by class and by credit quality indicator, the recorded investment in the Company’s loans and leases as of June 30, 2019 and December 31, 2018. Watch and Total (dollars in thousands) Pass Special Mention Substandard Doubtful Loans June 30, 2019 Commercial $ 1,398,098 $ 50,123 $ 26,980 $ — $ 1,475,201 Income producing - commercial real estate 3,611,968 16,947 37,900 — 3,666,815 Owner occupied - commercial real estate 924,643 42,328 3,879 — 970,850 Real estate mortgage – residential 99,188 636 5,367 — 105,191 Construction - commercial and residential 1,079,958 — 9,155 — 1,089,113 Home equity 82,274 686 487 — 83,447 Other consumer 1,998 — — — 1,998 Total $ 7,198,127 $ 110,720 $ 83,768 $ — $ 7,392,615 December 31, 2018 Commercial $ 1,505,477 $ 25,584 $ 22,051 $ — $ 1,553,112 Income producing - commercial real estate 3,172,479 1,536 82,885 — 3,256,900 Owner occupied - commercial real estate 844,286 38,221 5,307 — 887,814 Real estate mortgage – residential 104,543 647 1,228 — 106,418 Construction - commercial and residential 1,090,600 — 7,012 — 1,097,612 Home equity 85,434 682 487 — 86,603 Other consumer 2,988 — — — 2,988 Total $ 6,805,807 $ 66,670 $ 118,970 $ — $ 6,991,447 Nonaccrual and Past Due Loans Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The following table presents, by class of loan, information related to nonaccrual loans as of June 30, 2019 and December 31, 2018. (dollars in thousands) June 30, December 31, Commercial $ 16,053 $ 7,115 Income producing - commercial real estate 4,563 1,766 Owner occupied - commercial real estate 1,510 2,368 Real estate mortgage - residential 5,640 1,510 Construction - commercial and residential 9,155 3,031 Home equity 487 487 Total nonaccrual loans ( 1)( 2) $ 37,408 $ 16,277 ( 1) Excludes troubled debt restructurings (“TDRs”) that were performing under their restructured terms totaling $8.6 million at June 30, 2019 and $24.0 million at December 31, 2018. ( 2) Gross interest income of $1.2 million and $321 thousand would have been recorded for thesixmonths ended June 30, 2019 and 2018, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while the interest actually recorded on such loans was $86 thousand and $6 thousand for thesixmonths ended June 30, 2019 and 2018, respectively. See Note 1 to the Consolidated Financial Statements for a description of the Company’s policy for placing loans on nonaccrual status. The following table presents, by class of loan, an aging analysis and the recorded investments in loans past due as of June 30, 2019 and December 31, 2018. Loans Loans Loans Total Recorded 30-59Days 60-89Days 90Days or Total Past Current Investment in (dollars in thousands) Past Due Past Due More Past Due Due Loans Loans Loans June 30, 2019 Commercial $ 4,784 $ 1,112 $ 16,053 $ 21,949 $ 1,453,252 $ 1,475,201 Income producing - commercial real estate 2,253 4,656 4,563 11,472 3,655,343 3,666,815 Owner occupied - commercial real estate 445 3,654 1,510 5,609 965,241 970,850 Real estate mortgage – residential — — 5,640 5,640 99,551 105,191 Construction - commercial and residential 2,011 1,866 9,155 13,032 1,076,081 1,089,113 Home equity 1,413 47 487 1,947 81,500 83,447 Other consumer 21 10 — 31 1,967 1,998 Total $ 10,927 $ 11,345 $ 37,408 $ 59,680 $ 7,332,935 $ 7,392,615 December 31, 2018 Commercial $ 4,535 $ 2,870 $ 7,115 $ 14,520 $ 1,538,592 $ 1,553,112 Income producing - commercial real estate 5,855 27,479 1,766 35,100 3,221,800 3,256,900 Owner occupied - commercial real estate 5,051 2,370 2,368 9,789 878,025 887,814 Real estate mortgage – residential 2,456 1,698 1,510 5,664 100,754 106,418 Construction - commercial and residential 4,392 — 3,031 7,423 1,090,189 1,097,612 Home equity 630 47 487 1,164 85,439 86,603 Other consumer — — — — 2,988 2,988 Total $ 22,919 $ 34,464 $ 16,277 $ 73,660 $ 6,917,787 $ 6,991,447 Impaired Loans Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged-off when deemed uncollectible. The following table presents, by class of loan, information related to impaired loans for the periods ended June 30, 2019 and December 31, 2018. Unpaid Recorded Recorded Contractual Investment Investment Total Average Recorded Investment Interest Income Recognized Principal With No With Recorded Related Quarter Year Quarter Year (dollars in thousands) Balance Allowance Allowance Investment Allowance To Date To Date To Date To Date June 30, 2019 Commercial $ 17,434 $ 5,003 $ 11,959 $ 16,962 $ 7,905 $ 14,972 $ 12,695 $ 84 $ 103 Income producing - commercial real estate 8,953 4,563 4,390 8,953 1,000 24,198 23,266 (165 ) 98 Owner occupied - commercial real estate 4,819 3,449 1,370 4,819 475 4,836 5,134 47 93 Real estate mortgage – residential 5,640 3,184 2,456 5,640 650 5,642 4,265 — — Construction - commercial and residential 10,315 9,155 — 9,155 — 6,093 5,072 15 15 Home equity 487 487 — 487 — 487 487 — — Other consumer — — — — — — — — — Total $ 47,648 $ 25,841 $ 20,175 $ 46,016 $ 10,030 $ 56,228 $ 50,919 $ (19 ) $ 309 December 31, 2018 Commercial $ 8,613 $ 2,057 $ 6,084 $ 8,141 $ 4,803 $ 10,306 $ 8,359 $ (126 ) $ 190 Income producing - commercial real estate 21,402 1,720 19,682 21,402 2,465 15,331 12,309 189 550 Owner occupied - commercial real estate 5,731 4,361 1,370 5,731 600 5,746 6,011 47 196 Real estate mortgage – residential 1,510 1,510 — 1,510 — 1,516 1,688 — 2 Construction - commercial and residential 3,031 3,031 — 3,031 1,050 3,031 2,028 — 68 Home equity 487 487 — 487 — 487 491 — — Other consumer — — — — — 46 69 — — Total $ 40,774 $ 13,166 $ 27,136 $ 40,302 $ 8,918 $ 36,463 $ 30,955 $ 110 $ 1,006 Modifications A modification of a loan constitutes a TDR when a borrower is experiencing financial difficulty and the modification constitutes a concession. The Company offers 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. As of June 30, 2019, all performing TDRs were categorized as interest-only modifications. 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 impaired 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. The following table presents by class, the recorded investment of loans modified in TDRs held by the Company for the periods ended June 30, 2019 and 2018. For theSixMonths Ended June 30, 2019 Number of Income Producing - Owner Occupied - Construction - (dollars in thousands) Contracts Commercial Commercial Real Estate Commercial Real Estate Commercial Real Estate Total Troubled debt restructurings Restructured accruing 7 $ 909 $ 4,390 $ 3,309 $ — $ 8,608 Restructured nonaccruing 4 2,831 — — — 2,831 Total 11 $ 3,740 $ 4,390 $ 3,309 $ — $ 11,439 Specific allowance $ — $ 1,000 $ — $ — $ 1,000 Restructured and subsequently defaulted $ $ 2,300 $ — $ — $ 1,847 For theSixMonths Ended June 30, 2018 Number of Income Producing - Owner Occupied - Construction - (dollars in thousands) Contracts Commercial Commercial Real Estate Commercial Real Estate Commercial Real Estate Total Troubled debt restructings Restructured accruing 9 $ 4,938 $ 9,138 $ 1,047 $ — $ 15,123 Restructured nonaccruing 4 1,211 — — — 1,211 Total 13 $ 6,149 $ 9,138 $ 1,047 $ — $ 16,334 Specific allowance $ 2,000 $ 3,500 $ — $ — $ 5,500 Restructured and subsequently defaulted $ — $ 937 $ — $ — $ 937 The Company had eleven TDR’s at June 30, 2019 totaling approximately $11.4 million.Sevenof these loans totaling approximately $8.6 million are performing under their modified terms. There wasoneperforming TDR totaling $2.3 million that defaulted on its modified terms which was reclassified to nonperforming loans during thesixmonths ended June 30, 2019. During thesixmonths ended June 30, 2018, there weretwoperforming TDRs totaling $937 thousand that defaulted on their modified terms which were reclassified to nonperforming loans. A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual. For thethreemonths ended June 30, 2019, there wasonerestructured loan totaling approximately $4.8 million that had its collateral property sold for approximately $3 million and the remaining $1.8 million was charged-off during the quarter, as compared to the same period in 2018, there wasonedefaulted loan totaling approximately $315 thousand that was charged-off. During thethreemonths ended June 30, 2019, there wasoneloan totaling $10.4 million that was re-underwritten intotwonew loans which provided better collateral for the Bank, as compared to thethreemonths ended June 30, 2018, there wasoneloan totaling $274 thousand that was partially paid off from the sale proceeds of the business which totaled approximately $236 thousand. The remaining balance on the loan of $38 thousand was charged-off. 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 impairment. 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. For thethreemonths ended June 30, 2019, there were no loans modified in a TDR, as compared to thethreemonths ended June 30, 2018 which hadtwoloans totaling $4.0 million modified in a TDR. |