| Loans and Allowance for Loan Losses | Note 4: Loans and Allowance for Loan Losses Classes of loans at December 31, include:
2017 2016
Mortgage loans on real estate
Residential 1-4 family $ 45,844,543 $ 45,311,103
Commercial 37,260,090 41,477,480
Agricultural 40,129,028 38,271,758
Home equity 10,117,647 11,606,002
Total mortgage loans on real estate 133,351,308 136,666,343
Commercial loans 26,934,790 21,617,744
Agricultural 13,400,651 14,649,622
Consumer 15,760,797 14,543,356
189,447,546 187,477,065
Less
Net deferred loan fees 10,486 21,667
Allowance for loan losses 2,879,510 3,007,395
Net loans $ 186,557,550 $ 184,448,003 The Company’s loan portfolio includes loan participations purchased from other institutions. The outstanding balance of these purchased loans totaled $13,832,942 and $11,960,699 as of December 31, 2017 and 2016, respectively. Participations purchased during the years ended December 31, 2017 and 2016 totaled $2,440,146 and $2,157,442, respectively. The Company believes that sound loans are a necessary and desirable means of employing funds available for investment. Recognizing the Company’s obligations to its depositors and to the communities it serves, authorized personnel are expected to seek to develop and make sound, profitable loans that resources permit and that opportunity affords. The Company maintains lending policies and procedures designed to focus lending efforts on the types, locations, and duration of loans most appropriate for the business model and markets. The Company’s principal lending activities include the origination of one-to
four-family residential mortgage loans, multi-family loans, commercial real estate loans, agricultural loans, home equity lines of credits, commercial business loans, and consumer loans. The primary lending market includes the Illinois counties of Morgan, Cass, Macoupin and Montgomery and the surrounding counties. Generally, loans are collateralized by assets, primarily real estate, of the borrowers and guaranteed by individuals. The loans are expected to be repaid from cash flows of the borrowers or from proceeds from the sale of selected assets of the borrowers. Loan originations are derived from a number of sources such as real estate broker referrals, existing customers, builders, attorneys and walk-in customers. Upon receipt of a loan application, a credit report is obtained to verify specific information relating to the applicant’s employment, income, and credit standing. In the case of a real estate loan, an appraisal of the real estate intended to secure the proposed loan is undertaken by an independent appraiser approved by the Company. A loan application file is first reviewed by a loan officer in the loan department who checks applications for accuracy and completeness, and verifies the information provided. The financial resources of the borrower and the borrower’s credit history, as well as the collateral securing the loan, are considered an integral part of each risk evaluation prior to approval. All residential real estate loans are then verified by our loan risk management department prior to closing. The board of directors has established individual lending authorities for each loan officer by loan type. Loans over an individual officer’s lending limit must be approved by the officers’ loan committee consisting of the chairman of the board, president, chief lending officer and all lending officers, which meets three times a week, and has lending authority up to $750,000 depending on the type of loan. Loans to borrowers with an aggregate principal balance over this limit, up to $1.0 million, must be approved by the directors’ loan committee, which meets weekly and consists of the chairman of the board, president, senior vice president, chief lending officer and at least two outside directors, plus all lending officers as non-voting members. The board of directors approves all loans to borrowers with an aggregate principal balance over $1.0 million. The board of directors ratifies all loans that are originated. Once the loan is approved, the applicant is informed and a closing date is scheduled. Loan commitments are typically funded within 45 days. If the loan is approved, the borrower must provide proof of fire and casualty insurance on the property serving as collateral which insurance must be maintained during the full term of the loan; flood insurance is required in certain instances. Title insurance is generally required on loans secured by real property. One- to four-family Mortgage Loans Fixed-rate one- to four-family residential mortgage loans are generally conforming loans, underwritten according to secondary market guidelines. The Company generally originates both fixed- and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits established by the Federal Housing Finance Agency for the secondary market. The Company originates for resale to the secondary market fixed-rate one- to four-family residential mortgage loans with terms of 15 years or more. The fixed-rate mortgage loans amortize monthly with principal and interest due each month. Residential real estate loans often remain outstanding for significantly shorter periods than their contractual terms because borrowers may refinance or prepay loans at their option. The Company offers fixed-rate one- to four-family residential mortgage loans with terms of up to 30 years without prepayment penalty. The Company currently offers adjustable-rate mortgage loans for terms ranging up to 30 years. It generally offers adjustable-rate mortgage loans that adjust between one and five years on the anniversary date of origination. Interest rate adjustments are up to two hundred basis points per year, with a cap of up to six hundred basis points on interest rate increases over the life of the loan. In a rising interest rate environment, such rate limitations may prevent adjustable-rate mortgage loans from repricing to market interest rates, which would have an adverse effect on net interest income. In the low interest rate environment that has existed over the past two years, the adjustable-rate portfolio has repriced downward resulting in lower interest income from this portion of the loan portfolio. The Company has used different interest indices for adjustable-rate mortgage loans in the past such as the average yield on U.S. Treasury securities, adjusted to a constant maturity of either one year, three years or five years. The origination of fixed-rate mortgage loans versus adjustable-rate mortgage loans is monitored on an ongoing basis and is affected significantly by the level of market interest rates, customer preference, interest rate risk position and competitors’ loan products. Adjustable-rate mortgage loans make the loan portfolio more interest rate sensitive and provides an alternative for those borrowers who meet the underwriting criteria, but are unable to qualify for a fixed-rate mortgage. However, as the interest income earned on adjustable-rate mortgage loans varies with prevailing interest rates, such loans do not offer predictable cash flows in the same manner as long-term, fixed-rate loans. Adjustable-rate mortgage loans carry increased credit risk associated with potentially higher monthly payments by borrowers as general market interest rates increase. During periods of rising interest rates, the risk of delinquencies and defaults on adjustable-rate mortgage loans increases due to the upward adjustment of interest costs to the borrower, which may result in increased loan losses. Residential first mortgage loans customarily include due-on-sale clauses, which gives the Company the right to declare a loan immediately due and payable in the event, among other things, that the borrower sells or otherwise disposes of the underlying real property serving as collateral for the loan. Due-on-sale clauses are a means of increasing the interest rate on the mortgage portfolio during periods of rising interest rates. When underwriting residential real estate loans, the Company reviews and verifies each loan applicant’s income and credit history. Management believes that stability of income and past credit history are integral parts in the underwriting process. Generally, the applicant’s total monthly mortgage payment, including all escrow amounts, is limited to 30% of the applicant’s total monthly income. In addition, total monthly obligations of the applicant,
including mortgage payments, should not generally exceed 43% of total monthly income. Written appraisals are generally required on real estate property offered to secure an applicant’s loan. For one- to four-family real estate loans with loan to value ratios of over 80%, private mortgage insurance is generally required. Fire and casualty insurance is also required on all properties securing real estate loans. Title insurance may be required, as circumstances warrant. The Company does not offer an “interest only” mortgage loan product on one- to four-family residential properties (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan). They also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan. The Company does not offer a “subprime loan” program (loans that generally target borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (traditionally defined as loans having less than full documentation). Commercial and Agricultural Real Estate Loans Underwriting standards for commercial and agricultural real estate loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan. The income approach is primarily utilized to determine whether income generated from the applicant’s business or real estate offered as collateral is adequate to repay the loan. There is an emphasis on the ratio of the property’s projected net cash flows to the loan’s debt service requirement (generally requiring a minimum ratio of 120%). In underwriting a loan, the value of the real estate offered as collateral in relation to the proposed loan amount is considered. Generally, the loan amount cannot be greater than 80% of the value of the real estate. Written appraisals are usually obtained from either licensed or certified appraisers on all commercial and agricultural real estate loans in excess of $250,000. Creditworthiness of the applicant is assessed by reviewing a credit report, financial statements and tax returns of the applicant, as well as obtaining other public records regarding the applicant. Loans secured by commercial and agricultural real estate generally involve a greater degree of credit risk than one- to four-family residential mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the effects of general economic conditions on
income producing properties and the successful operation or management of the properties securing the loans. Furthermore, the repayment of loans secured by commercial and agricultural real estate is typically dependent upon the successful operation of the related business and real estate property. If the cash flows from the project are reduced, the borrower’s ability to repay the loan may be impaired. Commercial and Agricultural Business Loans Underwriting standards for commercial and agricultural business loans include a determination of the applicant’s ability to meet existing obligations and payments on the proposed loan from normal cash flows generated in the applicant’s business. Financial strength of each applicant is assessed through the review of financial statements and tax returns provided by the applicant. The creditworthiness of an applicant is derived from a review of credit reports as well as a search of public records. Business loans are periodically reviewed following origination. Financial statements are requested at least annually and reviewed for substantial deviations or changes that might affect repayment of the loan. Loan officers also visit the premises of borrowers to observe the business premises, facilities, and personnel and to inspect the pledged collateral. Underwriting standards for business loans are different for each type of loan depending on the financial strength of the applicant and the value of collateral offered as security. Home Equity and Consumer Loans The principal types of other consumer loans offered are loans secured by automobiles, deposit accounts, and mobile homes. Unsecured consumer loans are also generated. Consumer loans are generally offered on a fixed-rate basis. Automobile loans with maturities of up to 60 months are generally offered for new automobiles. Loans secured by used automobiles will have maximum terms which vary depending upon the age of the
automobile. Automobile loans with a loan-to-value ratio below the greater of 80% of the purchase price or 100% of NADA loan value are generally originated, although the loan-to-value ratio may be greater or less depending on the borrower’s credit history, debt to income ratio, home ownership and other banking relationships with the Company. Underwriting standards for consumer loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan. The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income. The length of employment with the borrower’s present employer is also considered, as well as the amount of time the borrower has lived in the local area. Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount. Consumer loans entail greater risks than one- to four-family residential mortgage loans, particularly consumer loans secured by rapidly depreciating assets such as automobiles or loans that are unsecured. Collateral repossessed after a default may not provide an adequate source of repayment of the outstanding loan balance because of damage, loss or depreciation. Further, consumer loan payments are dependent on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Such events would increase the risk of loss on unsecured loans. Finally, the application of various Federal and state laws, including Federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans in the event of a default. The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2017 and 2016:
December 31, 2017
1-4 Family Commercial Agricultural Commercial Agricultural Home Equity Consumer Unallocated Total
Allowance for loan losses:
Balance, beginning of year $ 832,000 $ 1,044,553 $ 191,359 $ 301,478 $ 167,469 $ 173,626 $ 182,653 $ 114,257 $ 3,007,395
Provision (credit) charged to expense (127,286 ) 95,961 34,119 (305,586 ) 121,453 (81,824 ) 88,872 (5,709 ) (180,000 )
Losses charged off (51,695 ) (315,766 ) — (2,706 ) — — (39,692 ) — (409,859 )
Recoveries 24,088 21,297 — 404,386 — 4,100 8,103 — 461,974
Balance, end of year $ 677,107 $ 846,045 $ 225,478 $ 397,572 $ 288,922 $ 95,902 $ 239,936 $ 108,548 $ 2,879,510
Ending balance: individually evaluated for impairment $ 176,635 $ 472,393 $ — $ 132,901 $ 144,438 $ — $ — $ — $ 926,367
Ending balance: collectively evaluated for impairment $ 500,472 $ 373,652 $ 225,478 $ 264,671 $ 144,484 $ 95,902 $ 239,936 $ 108,548 $ 1,953,143
Loans:
Ending balance $ 45,844,543 $ 37,260,090 $ 40,129,028 $ 26,934,790 $ 13,400,651 $ 10,117,647 $ 15,760,797 $ — $ 189,447,546
Ending balance: individually evaluated for impairment $ 663,366 $ 1,434,722 $ — $ 553,950 $ 375,951 $ 43,683 $ — $ — $ 3,071,672
Ending balance: collectively evaluated for impairment $ 45,181,177 $ 35,825,368 $ 40,129,028 $ 26,380,840 $ 13,024,700 $ 10,073,964 $ 15,760,797 $ — $ 186,375,874
December 31, 2016
1-4 Family Commercial Agricultural Commercial Agricultural Home Equity Consumer Unallocated Total
Allowance for loan losses:
Balance, beginning of year $ 829,604 $ 917,526 $ 201,918 $ 386,620 $ 163,346 $ 149,253 $ 169,381 $ 101,946 $ 2,919,594
Provision charged to
expense 14,683 112,411 (10,559 ) (85,258 ) 4,123 22,273 50,016 12,311 120,000
Losses charged off (38,171 ) — — — — — (43,777 ) — (81,948 )
Recoveries 25,884 14,616 — 116 — 2,100 7,033 — 49,749
Balance, end of year $ 832,000 $ 1,044,553 $ 191,359 $ 301,478 $ 167,469 $ 173,626 $ 182,653 $ 114,257 $ 3,007,395
Ending balance: individually evaluated for impairment $ 304,922 $ 723,481 $ — $ 56,409 $ — $ — $ — $ — $ 1,084,812
Ending balance: collectively evaluated for impairment $ 527,078 $ 321,072 $ 191,359 $ 245,069 $ 167,469 $ 173,626 $ 182,653 $ 114,257 $ 1,922,583
Loans:
Ending balance $ 45,311,103 $ 41,477,480 $ 38,271,758 $ 21,617,744 $ 14,649,622 $ 11,606,002 $ 14,543,356 $ — $ 187,477,065
Ending balance: individually evaluated for impairment $ 713,151 $ 1,658,323 $ — $ 155,067 $ — $ 54,011 $ — $ — $ 2,580,552
Ending balance: collectively evaluated for impairment $ 44,597,952 $ 39,819,157 $ 38,271,758 $ 21,462,677 $ 14,649,622 $ 11,551,991 $ 14,543,356 $ — $ 184,896,513 There have been no changes to the Company’s accounting policies or methodology from the prior periods. 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 analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on all loans at origination. In addition, lending relationships over $750,000 and watch list credits over $250,000 are reviewed annually by our independent loan review in order to verify risk ratings. The Company uses the following definitions for risk ratings: Special Mention Substandard Doubtful Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans. During the periods presented, none of our loans were classified as Doubtful. The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of December 31, 2017 and 2016:
1-4 Family Commercial Real Estate Agricultural Real Estate Commercial
2017 2016 2017 2016 2017 2016 2017 2016
Pass $ 43,254,380 $ 42,327,337 $ 35,239,108 $ 39,078,740 $ 39,892,528 $ 38,271,758 $ 26,367,452 $ 21,141,466
Special Mention 809,345 1,016,025 310,770 429,877 — — 8,819 100,234
Substandard 1,780,818 1,967,741 1,710,212 1,968,863 236,500 — 558,519 376,044
Total $ 45,844,543 $ 45,311,103 $ 37,260,090 $ 41,477,480 $ 40,129,028 $ 38,271,758 $ 26,934,790 $ 21,617,744
Agricultural Business Home Equity Consumer
2017 2016 2017 2016 2017 2016
Pass $ 12,507,114 $ 13,845,865 $ 9,893,063 $ 10,790,377 $ 15,043,520 $ 14,361,125
Special Mention 139,306 803,757 75,347 70,983 17,092 10,575
Substandard 754,231 — 149,237 744,642 700,185 171,656
Total $ 13,400,651 $ 14,649,622 $ 10,117,647 $ 11,606,002 $ 15,760,797 $ 14,543,356 The following tables present the Company’s loan portfolio aging analysis as of December 31, 2017 and 2016:
December 31, 2017
30-59 Days 60-89 Days Greater Than Total Past Current Total Loans Total Loans >
1-4 Family $ 243,627 $ 169,154 $ 157,550 $ 570,331 $ 45,274,212 $ 45,844,543 $ —
Commercial real estate — 139,467 19,195 158,662 37,101,428 37,260,090 —
Agricultural real estate — — — — 40,129,028 40,129,028 —
Commercial 5,485 — 4,317 9,802 26,924,988 26,934,790 —
Agricultural business — — — — 13,400,651 13,400,651 —
Home equity 20,082 75,247 — 95,329 10,022,318 10,117,647 —
Consumer 74,459 105,845 11,307 191,611 15,569,186 15,760,797 —
Total $ 343,653 $ 489,713 $ 192,369 $ 1,025,735 $ 188,421,811 $ 189,447,546 $ —
December 31, 2016
30-59 Days 60-89 Days Greater Than Total Past Current Total Loans Total Loans >
1-4 Family $ 237,783 $ 136,340 $ 544,425 $ 918,548 $ 44,392,555 $ 45,311,103 $ —
Commercial real estate — 16,273 — 16,273 41,461.207 41,477,480 —
Agricultural real estate — — — — 38,271,758 38,271,758 —
Commercial — 41,474 13,309 54,783 21,562,961 21,617,744 —
Agricultural business — — — — 14,649,622 14,649,622 —
Home equity 151,482 — — 151,482 11,454,520 11,606,002 —
Consumer 68,077 17,757 72,150 157,984 14,385,372 14,543,356 —
Total $ 457,342 $ 211,844 $ 629,884 $ 1,299,070 $ 186,177,995 $ 187,477,065 $ — 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 Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming 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. Impairment is measured on a loan-by-loan basis by either the present value of the expected future cash flows, the loan’s observable market value, or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. Significant restructured loans are considered impaired in determining the adequacy of the allowance for loan losses. The Company actively seeks to reduce its investment in impaired loans. The primary tools to work through impaired loans are settlement with the borrowers or guarantors, foreclosure of the underlying collateral, or restructuring. The Company will restructure loans when the borrower demonstrates the inability to comply with the terms of the loan, but can demonstrate the ability to meet acceptable restructured terms. Restructurings generally include one or more of the following restructuring options: reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection. Significant restructured loans in compliance with modified terms are classified as impaired. The following tables present impaired loans for the years ended December 31, 2017 and 2016:
December 31, 2017
Recorded Unpaid Specific Average Interest Interest
Loans without a specific valuation allowance
1-4 Family $ 223,997 $ 223,997 $ — $ 244,463 $ 12,789 $ 12,771
Commercial real estate 444,500 444,500 — 951,010 41,732 40,184
Commercial 421,049 421,049 — 473,657 24,123 23,768
Home equity 43,683 43,683 — 52,350 3,617 3,393
Loans with a specific valuation allowance
1-4 Family 439,369 439,369 176,635 434,203 21,596 20,823
Commercial real estate 990,222 990,222 472,393 1,071,991 61,601 63,773
Commercial 132,901 132,901 132,901 145,858 2,608 1,545
Agricultural 375,951 375,951 144,438 381,803 18,053 26,240
Total:
1-4 family 663,366 663,366 176,635 678,666 34,385 33,594
Commercial real estate 1,434,722 1,434,722 472,393 2,023,001 103,333 103,957
Commercial 553,950 553,950 132,901 619,515 26,731 25,313
Agricultural 375,951 375,951 144,438 381,803 18,053 26,240
Home equity 43,683 43,683 — 52,350 3,617 3,393
Total $ 3,071,672 $ 3,071,672 $ 926,367 $ 3,755,335 $ 186,119 $ 192,497
December 31, 2016
Recorded Unpaid Specific Average Interest Interest
Loans without a specific valuation allowance
1-4 Family $ 39,598 $ 39,598 $ — $ 41,880 $ 2,653 $ 2,888
Commercial real estate 120,172 120,172 — 272,557 13,499 14,061
Commercial 61,483 61,483 — 87,359 4,332 4,419
Home equity 54,011 54,011 — 54,067 3,670 3,871
Loans with a specific valuation allowance
1-4 Family 673,553 673,553 304,922 719,834 41,323 34,208
Commercial real estate 1,538,151 1,538,151 723,481 1,572,203 68,918 64,878
Commercial 93,584 93,584 56,409 165,473 7,580 7,814
Total:
1-4 family 713,151 713,151 304,922 761,714 43,976 37,096
Commercial real estate 1,658,323 1,658,323 723,481 1,844,760 82,417 78,939
Commercial 155,067 155,067 56,409 252,832 11,912 12,233
Home equity 54,011 54,011 — 54,067 3,670 3,871
Total $ 2,580,552 $ 2,580,552 $ 1,084,812 $ 2,913,373 $ 141,975 $ 132,139 The following table presents the Company’s nonaccrual loans at December 31, 2017 and 2016. This table excludes performing troubled debt restructurings.
2017 2016
1-4 family $ 366,992 $ 590,514
Commercial real estate 1,057,663 708,922
Agricultural real estate — —
Commercial 137,471 16,561
Agricultural business — —
Home equity 86,239 49,542
Consumer 104,360 164,472
Total $ 1,752,725 $ 1,530,011 At December 31, 2017 and 2016, the Company had a number of loans that were modified in troubled debt restructurings (TDRs). 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 table presents the recorded balance, at original cost, of troubled debt restructurings, as of December 31, 2017 and 2016.
2017 2016
1-4 family $ 677,031 $ 836,867
Commercial real estate 965,926 1,362,088
Agricultural real estate 236,500 —
Commercial 343,414 245,710
Agricultural business 93,914 —
Home equity 4,417 6,009
Consumer 80,011 81,880
Total $ 2,401,213 $ 2,532,554 The following table presents the recorded balance, at original cost, of troubled debt restructurings, which were performing according to the terms of the restructuring, as of December 31, 2017 and 2016.
2017 2016
1-4 family $ 677,031 $ 666,744
Commercial real estate 826,459 1,362,088
Agricultural real estate 236,500 —
Commercial 343,414 245,710
Agricultural business 93,914 —
Home equity 4,417 6,009
Consumer 65,006 57,540
Total $ 2,246,741 $ 2,338,091 The following table presents loans modified as troubled debt restructurings during the years ended December 31, 2017 and 2016.
Year Ended Year Ended
Number of Recorded Number of Recorded
1-4 family 2 $ 103,621 1 $ 40,395
Commercial real estate 1 139,467 1 708,922
Agricultural real estate 1 236,500 — —
Commercial 1 132,901 1 217,725
Agricultural business 1 93,914 — —
Home equity — — — —
Consumer 3 13,974 — —
Total 9 $ 720,377 3 $ 967,042 2017 Modifications The Company modified two one- to four-family residential real estate loans, with a recorded investment in the aggregate of $103,621, which were deemed TDRs. One loan was restructured after bankruptcy to lower the rate and the other was extended three months with the interest capitalized. The Company modified one commercial real estate loan with a total recorded balance of $139,467, which was deemed a TDR. The loan was restructured to extend the term and lower the rate. The Company modified one agricultural real estate loan in the amount of $236,500, which was deemed a TDR, as the amortization period was extended. The Company modified one commercial loan with a total recorded balance of $132,901, which was deemed a TDR. The loan was modified to extend the term and capitalize interest. The Company modified one agricultural loan in the amount of $93,914, which was deemed a TDR, as the payment schedule was extended nine months. The Company modified three consumer loans in the aggregate amount of $13,974 which were deemed TDRs. The loans were modified to extend the term and lower the payments. The modifications did not result in a write-off of the principal balance nor was there a significant difference between the pre modification balance and the post-modification balance. 2016 Modifications The Company modified a one- to four-family residential real estate loan, with a recorded investment of $40,395, which was deemed a TDR. The loan was restructured to combine three loans and capitalize delinquent real estate taxes. The Company modified one commercial real estate loan with a recorded balance of $708,922, which was deemed a TDR. The loan was restructured after bankruptcy to extend the term, lower the rate, and capitalize the interest to a second note. The Company modified one commercial loan with a total recorded balance of $217,725, which was deemed a TDR. The loan was modified to allow for interest-only payments for four months. The modifications did not result in a write-off of the principal balance nor was there a significant difference between the pre modification balance and the post-modification balance. TDRs with Defaults Management considers the level of defaults within the various portfolios when evaluating qualitative adjustments used to determine the adequacy of the allowance for loan losses. During the year ended December 31, 2017, one residential real estate loan of $32,523, two commercial real estate loans of $786,224, two commercial loans of $133,153, and two consumer loans of $66,035 were considered TDRs in default as they were in a nonaccrual status. During the year ended December 31, 2016, three residential real estate loans of $170,123 were considered TDRs in default as they were more than 90 days past due at December 31, 2016. In addition, one commercial real estate loan of $708,922, one commercial loan of $3,252, and two consumer loans of $76,106 were considered TDRs in default as they were in a nonaccrual status but are performing in accordance with their modified terms. At December 31, 2017 and 2016, the balance of real estate owned was $10,500 and $0, respectively, with foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property. At December 31, 2017 and 2016, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process is $156,468 and $143,634, respectively. |
