Allowance for Loan Losses | Note 5 – Allowance for Loan Losses The following tables summarize the activity in the allowance for loan losses, and ending balance of loans, net of unearned fees for the periods indicated. Allowance for Loan Losses - December 31, 2019 (in thousands) Beginning Charge-offs Recoveries Provision Ending Balance Mortgage loans on real estate: Residential 1-4 family $ 2,676 $ (2) $ 54 $ (422) $ 2,306 Commercial 12,944 (746) 1,528 (1,731) 11,995 Total mortgage loans on real estate 15,620 (748) 1,582 (2,153) 14,301 Consumer: Home equity lines of credit 6,042 — 504 (974) 5,572 Home equity loans 1,540 (3) 431 (1,357) 611 Other 793 (765) 321 1,246 1,595 Total consumer loans 8,375 (768) 1,256 (1,085) 7,778 Commercial 6,090 (2,123) 525 657 5,149 Construction: Residential 1,834 — — 1,236 3,070 Commercial 663 — — (345) 318 Total construction 2,497 — — 891 3,388 Total $ 32,582 $ (3,639) $ 3,363 $ (1,690) $ 30,616 Allowance for Loan Losses – As of December 31, 2019 (in thousands) Loans pooled Individually Loans acquired Total allowance Mortgage loans on real estate: Residential 1-4 family $ 2,257 $ 49 $ — $ 2,306 Commercial 11,917 78 — 11,995 Total mortgage loans on real estate 14,174 127 — 14,301 Consumer: Home equity lines of credit 5,451 115 6 5,572 Home equity loans 567 44 — 611 Other 1,576 19 — 1,595 Total consumer loans 7,594 178 6 7,778 Commercial 4,519 630 — 5,149 Construction: Residential 3,070 — — 3,070 Commercial 318 — — 318 Total construction 3,388 — — 3,388 Total $ 29,675 $ 935 $ 6 $ 30,616 Loans, Net of Unearned fees – As of December 31, 2019 (in thousands) Loans pooled Individually Loans acquired Total loans, net Mortgage loans on real estate: Residential 1-4 family $ 503,021 $ 5,074 $ 1,413 $ 509,508 Commercial 2,804,812 8,649 5,321 2,818,782 Total mortgage loans on real estate 3,307,833 13,723 6,734 3,328,290 Consumer: Home equity lines of credit 331,437 2,074 789 334,300 Home equity loans 26,522 1,650 414 28,586 Other 82,514 140 2 82,656 Total consumer loans 440,473 3,864 1,205 445,542 Commercial 278,900 2,330 2,477 283,707 Construction: Residential 202,966 — — 202,966 Commercial 46,861 — — 46,861 Total construction 249,827 — — 249,827 Total $ 4,277,033 $ 19,917 $ 10,416 $ 4,307,366 Allowance for Loan Losses – Year Ended December 31, 2018 (in thousands) Beginning Charge-offs Recoveries Provision Ending Balance Mortgage loans on real estate: Residential 1-4 family $ 2,317 $ (77) $ — $ 436 $ 2,676 Commercial 11,441 (15) 68 1,450 12,944 Total mortgage loans on real estate 13,758 (92) 68 1,886 15,620 Consumer: Home equity lines of credit 5,800 (277) 846 (327) 6,042 Home equity loans 1,841 (24) 297 (574) 1,540 Other 586 (783) 288 702 793 Total consumer loans 8,227 (1,084) 1,431 (199) 8,375 Commercial 6,512 (1,188) 541 225 6,090 Construction: Residential 1,184 — — 650 1,834 Commercial 642 — — 21 663 Total construction 1,826 — — 671 2,497 Total $ 30,323 $ (2,364) $ 2,040 $ 2,583 $ 32,582 Allowance for Loan Losses – As of December 31, 2018 (in thousands) Loans Individually Loans acquired Total allowance Mortgage loans on real estate: Residential 1-4 family $ 2,620 $ 56 $ — $ 2,676 Commercial 12,737 91 116 12,944 Total mortgage loans on real estate 15,357 147 116 15,620 Consumer: Home equity lines of credit 5,838 198 6 6,042 Home equity loans 1,486 54 — 1,540 Other 779 14 — 793 Total consumer loans 8,103 266 6 8,375 Commercial 4,309 1,781 — 6,090 Construction: Residential 1,834 — — 1,834 Commercial 663 — — 663 Total construction 2,497 — — 2,497 Total $ 30,266 $ 2,194 $ 122 $ 32,582 Loans, Net of Unearned fees – As of December 31, 2018 (in thousands) Loans Individually Loans acquired Total allowance Mortgage loans on real estate: Residential 1-4 family $ 509,267 $ 4,321 $ 1,674 $ 515,262 Commercial 2,606,819 12,563 8,456 2,627,838 Total mortgage loans on real estate 3,116,086 16,884 10,130 3,143,100 Consumer: Home equity lines of credit 322,764 2,646 1,167 326,577 Home equity loans 33,142 3,103 439 36,684 Other 55,483 196 42 55,721 Total consumer loans 411,389 5,945 1,648 418,982 Commercial 268,885 5,218 2,445 276,548 Construction: Residential 121,296 — — 121,296 Commercial 62,088 — — 62,088 Total construction 183,384 — — 183,384 Total $ 3,979,744 $ 28,047 $ 14,223 $ 4,022,014 Allowance for Loan Losses – Year Ended December 31, 2017 (in thousands) Beginning Charge-offs Recoveries Provision Ending Balance Mortgage loans on real estate: Residential 1-4 family $ 2,748 $ (60) $ — $ (371) $ 2,317 Commercial 11,517 (186) 397 (287) 11,441 Total mortgage loans on real estate 14,265 (246) 397 (658) 13,758 Consumer: Home equity lines of credit 7,044 (98) 698 (1,844) 5,800 Home equity loans 2,644 (332) 242 (713) 1,841 Other 622 (1,186) 375 775 586 Total consumer loans 10,310 (1,616) 1,315 (1,782) 8,227 Commercial 5,831 (1,444) 428 1,697 6,512 Construction: Residential 1,417 (1,104) — 871 1,184 Commercial 680 — 1 (39) 642 Total construction 2,097 (1,104) 1 832 1,826 Total $ 32,503 $ (4,410) $ 2,141 $ 89 $ 30,323 Allowance for Loan Losses – As of December 31, 2017 (in thousands) Loans Individually Loans acquired Total allowance Mortgage loans on real estate: Residential 1-4 family $ 1,932 $ 230 $ 155 $ 2,317 Commercial 11,351 30 60 11,441 Total mortgage loans on real estate 13,283 260 215 13,758 Consumer: Home equity lines of credit 5,356 427 17 5,800 Home equity loans 1,734 107 — 1,841 Other 529 57 — 586 Total consumer loans 7,619 591 17 8,227 Commercial 4,624 1,848 40 6,512 Construction: Residential 1,184 — — 1,184 Commercial 642 — — 642 Total construction 1,826 — — 1,826 Total $ 27,352 $ 2,699 $ 272 $ 30,323 Loans, Net of Unearned fees – As of December 31, 2017 (in thousands) Loans pooled Individually Loans acquired Total Loans Mortgage loans on real estate: Residential 1-4 family $ 378,743 $ 5,298 $ 1,385 $ 385,426 Commercial 1,892,422 13,911 8,563 1,914,896 Total mortgage loans on real estate 2,271,165 19,209 9,948 2,300,322 Consumer: Home equity lines of credit 283,502 2,688 2,498 288,688 Home equity loans 41,076 1,470 485 43,031 Other 24,853 257 45 25,155 Total consumer loans 349,431 4,415 3,028 356,874 Commercial 213,358 4,470 2,584 220,412 Construction: Residential 67,790 140 — 67,930 Commercial 69,627 — — 69,627 Total construction 137,417 140 — 137,557 Total $ 2,971,371 $ 28,234 $ 15,560 $ 3,015,165 As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including, but not limited to, trends relating to (i) the level of criticized and classified loans, (ii) net charge-offs, (iii) non-performing loans, and (iv) delinquency within the portfolio. The Company utilizes a risk grading system to assign a risk grade to each of its loans. Loans are graded on a scale ranging from Pass to Loss. A description of the general characteristics of the risk grades is as follows: • Pass – This grade represents loans ranging from acceptable to very little or no credit risk. These loans typically meet most if not all policy standards in regard to: loan amount as a percentage of collateral value, debt service coverage, profitability, leverage, and working capital. • Special Mention – This grade represents “Other Assets Especially Mentioned” in accordance with regulatory guidelines and includes loans that display some potential weaknesses which, if left unaddressed, may result in deterioration of the repayment prospects for the asset or may inadequately protect the Company’s position in the future. These loans warrant more than normal supervision and attention. • Substandard – This grade represents “Substandard” loans in accordance with regulatory guidelines. Loans within this rating typically exhibit weaknesses that are well defined to the point that repayment is jeopardized. Loss potential is, however, not necessarily evident. The underlying collateral supporting the credit appears to have sufficient value to protect the Company from loss of principal and accrued interest, or the loan has been written down to the point where this is true. There is a definite need for a well-defined workout/rehabilitation program. • Doubtful – This grade represents “Doubtful” loans in accordance with regulatory guidelines. An asset classified as Doubtful has all the weaknesses inherent in a loan classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and financing plans. • Loss – This grade represents “Loss” loans in accordance with regulatory guidelines. A loan classified as Loss is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan, even though some recovery may be affected in the future. The portion of the loan that is graded loss should be charged off no later than the end of the quarter in which the loss is identified. The following tables present ending loan balances by loan category and risk grade for the periods indicated: Credit Quality Indicators Originated Loans – As of December 31, 2019 (in thousands) Pass Special Substandard Doubtful / Loss Total Originated Mortgage loans on real estate: Residential 1-4 family $ 366,149 $ 2,497 $ 4,455 $ — $ 373,101 Commercial 2,185,961 24,485 10,771 — 2,221,217 Total mortgage loans on real estate 2,552,110 26,982 15,226 — 2,594,318 Consumer: Home equity lines of credit 293,432 3,332 2,690 — 299,454 Home equity loans 22,318 1,192 1,833 — 25,343 Other 67,422 373 101 — 67,896 Total consumer loans 383,172 4,897 4,624 — 392,693 Commercial 254,554 3,826 4,201 262,581 Construction: Residential 191,434 — 247 — 191,681 Commercial 46,105 317 — — 46,422 Total construction 237,539 317 247 — 238,103 Total loans $ 3,427,375 $ 36,022 $ 24,298 $ — $ 3,487,695 Credit Quality Indicators PNCI Loans – As of December 31, 2019 (in thousands) Pass Special Substandard Doubtful / Loss Total PNCI Mortgage loans on real estate: Residential 1-4 family $ 131,820 $ 2,217 $ 957 $ — $ 134,994 Commercial 584,829 573 6,842 — 592,244 Total mortgage loans on real estate 716,649 2,790 7,799 — 727,238 Consumer: Home equity lines of credit 32,096 857 1,104 — 34,057 Home equity loans 2,774 — 55 — 2,829 Other 14,390 346 22 — 14,758 Total consumer loans 49,260 1,203 1,181 — 51,644 Commercial 18,602 1 46 — 18,649 Construction: Residential 7,083 4,202 — — 11,285 Commercial 439 — — — 439 Total construction 7,522 4,202 — — 11,724 Total loans $ 792,033 $ 8,196 $ 9,026 $ — $ 809,255 Credit Quality Indicators Originated Loans – As of December 31, 2018 (in thousands) Pass Special Substandard Doubtful / Loss Total Originated Mortgage loans on real estate: Residential 1-4 family $ 337,189 $ 1,724 $ 4,883 $ — $ 343,796 Commercial 1,861,627 33,483 15,871 — 1,910,981 Total mortgage loans on real estate 2,198,816 35,207 20,754 — 2,254,777 Consumer: Home equity lines of credit 279,491 2,309 2,653 — 284,453 Home equity loans 29,289 1,054 2,317 — 32,660 Other 33,606 341 73 — 34,020 Total consumer loans 342,386 3,704 5,043 — 351,133 Commercial 217,126 6,127 5,382 — 228,635 Construction: Residential 90,412 32 259 — 90,703 Commercial 55,863 345 — — 56,208 Total construction 146,275 377 259 — 146,911 Total loans $ 2,904,603 $ 45,415 $ 31,438 $ — $ 2,981,456 Credit Quality Indicators PNCI Loans – As of December 31, 2018 (in thousands) Pass Special Substandard Doubtful / Loss Total PNCI Mortgage loans on real estate: Residential 1-4 family $ 167,908 $ 1,086 $ 798 $ — $ 169,792 Commercial 701,868 3,085 3,448 — 708,401 Total mortgage loans on real estate 869,776 4,171 4,246 — 878,193 Consumer: Home equity lines of credit 38,780 1,124 1,053 — 40,957 Home equity loans 3,413 74 98 — 3,585 Other 21,481 173 5 — 21,659 Total consumer loans 63,674 1,371 1,156 — 66,201 Commercial 45,027 321 120 — 45,468 Construction: Residential 30,593 — — — 30,593 Commercial 5,880 — — — 5,880 Total construction 36,473 — — — 36,473 Total $ 1,014,950 $ 5,863 $ 5,522 $ — $ 1,026,335 Consumer loans, whether unsecured or secured by real estate, automobiles, or other personal property, are susceptible to three primary risks; non-payment due to income loss, over-extension of credit and, when the borrower is unable to pay, shortfall in collateral value. Typically non-payment is due to loss of job and will follow general economic trends in the marketplace driven primarily by rises in the unemployment rate. Loss of collateral value can be due to market demand shifts, damage to collateral itself or a combination of the two. Problem consumer loans are generally identified by payment history of the borrower (delinquency). The Bank manages its consumer loan portfolios by monitoring delinquency and contacting borrowers to encourage repayment, suggest modifications if appropriate, and, when continued scheduled payments become unrealistic, initiate repossession or foreclosure through appropriate channels. Collateral values may be determined by appraisals obtained through Bank approved, licensed appraisers, qualified independent third parties, public value information (blue book values for autos), sales invoices, or other appropriate means. Appropriate valuations are obtained at initiation of the credit and periodically (every 3-12 months depending on collateral type) once repayment is questionable and the loan has been classified. Commercial real estate loans generally fall into two categories, owner-occupied and non-owner occupied. Loans secured by owner occupied real estate are primarily susceptible to changes in the business conditions of the related business. This may be driven by, among other things, industry changes, geographic business changes, changes in the individual fortunes of the business owner, and general economic conditions and changes in business cycles. These same risks apply to commercial loans whether secured by equipment or other personal property or unsecured. Losses on loans secured by owner occupied real estate, equipment, or other personal property generally are dictated by the value of underlying collateral at the time of default and liquidation of the collateral. When default is driven by issues related specifically to the business owner, collateral values tend to provide better repayment support and may result in little or no loss. Alternatively, when default is driven by more general economic conditions, underlying collateral generally has devalued more and results in larger losses due to default. Loans secured by non-owner occupied real estate are primarily susceptible to risks associated with swings in occupancy or vacancy and related shifts in lease rates, rental rates or room rates. Most often these shifts are a result of changes in general economic or market conditions or overbuilding and resultant over-supply. Losses are dependent on value of underlying collateral at the time of default. Values are generally driven by these same factors and influenced by interest rates and required rates of return as well as changes in occupancy costs. Construction loans, whether owner occupied or non-owner occupied commercial real estate loans or residential development loans, are not only susceptible to the related risks described above but the added risks of construction itself including cost over-runs, mismanagement of the project, or lack of demand or market changes experienced at time of completion. Again, losses are primarily related to underlying collateral value and changes therein as described above. Problem C&I loans are generally identified by periodic review of financial information which may include financial statements, tax returns, rent rolls and payment history of the borrower (delinquency). Based on this information the Bank may decide to take any of several courses of action including demand for repayment, additional collateral or guarantors, and, when repayment becomes unlikely through borrower’s income and cash flow, repossession or foreclosure of the underlying collateral. Collateral values may be determined by appraisals obtained through Bank approved, licensed appraisers, qualified independent third parties, public value information (blue book values for autos), sales invoices, or other appropriate means. Appropriate valuations are obtained at initiation of the credit and periodically (every 3-12 months depending on collateral type) once repayment is questionable and the loan has been classified. Once a loan becomes delinquent and repayment becomes questionable, a Bank collection officer will address collateral shortfalls with the borrower and attempt to obtain additional collateral. If this is not forthcoming and payment in full is unlikely, the Bank will estimate its probable loss, using a recent valuation as appropriate to the underlying collateral less estimated costs of sale, and charge the loan down to the estimated net realizable amount. Depending on the length of time until ultimate collection, the Bank may revalue the underlying collateral and take additional charge-offs as warranted. Revaluations may occur as often as every 3-12 months depending on the underlying collateral and volatility of values. Final charge-offs or recoveries are taken when collateral is liquidated and actual loss is known. Unpaid balances on loans after or during collection and liquidation may also be pursued through lawsuit and attachment of wages or judgment liens on borrower’s other assets. The following tables show the ending balance of current and past due originated and PNCI loans by loan category as of the date indicated: Analysis of Originated Past Due Loans - As of December 31, 2019 (in thousands) 30-59 days 60-89 days > 90 days Total Past Current Total > 90 Days and Mortgage loans on real estate: Residential 1-4 family $ 60 $ 65 $ 1,957 $ 2,082 $ 371,019 $ 373,101 $ — Commercial 30 136 293 459 2,220,758 2,221,217 — Total mortgage loans on real estate 90 201 2,250 2,541 2,591,777 2,594,318 — Consumer: Home equity lines of credit — 93 712 805 298,649 299,454 — Home equity loans 36 216 132 384 24,959 25,343 — Other 120 — 4 124 67,772 67,896 — Total consumer loans 156 309 848 1,313 391,380 392,693 — Commercial 604 297 9 910 261,671 262,581 — Construction: Residential — — — — 191,681 191,681 — Commercial — — — — 46,422 46,422 — Total construction — — — — 238,103 238,103 — Total originated loans $ 850 $ 807 $ 3,107 $ 4,764 $ 3,482,931 $ 3,487,695 $ — Analysis of PNCI Past Due Loans - As of December 31, 2019 (in thousands) 30-59 days 60-89 days > 90 days Total Past Current Total > 90 Days and Mortgage loans on real estate: Residential 1-4 family $ — $ 305 $ — $ 305 $ 134,689 $ 134,994 $ — Commercial 268 — 2,137 2,405 589,839 592,244 — Total mortgage loans on real estate 268 305 2,137 2,710 724,528 727,238 — Consumer: Home equity lines of credit 87 260 243 590 33,467 34,057 — Home equity loans 51 — — 51 2,778 2,829 — Other — — 19 19 14,739 14,758 19 Total consumer loans 138 260 262 660 50,984 51,644 19 Commercial — — 51 51 18,598 18,649 — Construction: Residential — — — — 11,285 11,285 — Commercial — — — — 439 439 — Total construction — — — — 11,724 11,724 — Total PNCI loans $ 406 $ 565 $ 2,450 $ 3,421 $ 805,834 $ 809,255 $ 19 Analysis of Originated Past Due Loans - As of December 31, 2018 (in thousands) 30-59 days 60-89 days > 90 days Total Past Current Total > 90 Days and Mortgage loans on real estate: Residential 1-4 family $ 1,675 $ 132 $ 478 $ 2,285 $ 341,511 $ 343,796 $ — Commercial 431 1,200 296 1,927 1,909,054 1,910,981 — Total mortgage loans on real estate 2,106 1,332 774 4,212 2,250,565 2,254,777 — Consumer: Home equity lines of credit 908 47 609 1,564 282,889 284,453 — Home equity loans 1,043 24 214 1,281 31,379 32,660 — Other 298 17 — 315 33,705 34,020 — Total consumer loans 2,249 88 823 3,160 347,973 351,133 — Commercial 1,053 579 1,247 2,879 225,756 228,635 — Construction: Residential 209 — — 209 90,494 90,703 — Commercial — — — — 56,208 56,208 — Total construction 209 — — 209 146,702 146,911 — Total loans $ 5,617 $ 1,999 $ 2,844 $ 10,460 $ 2,970,996 $ 2,981,456 $ — Analysis of PNCI Past Due Loans - As of December 31, 2018 (in thousands) 30-59 60-89 > 90 days Total Past Current Total > 90 Days and Mortgage loans on real estate: Residential 1-4 family $ 1,009 $ 133 $ 156 $ 1,298 $ 168,494 $ 169,792 $ — Commercial 1,646 1,136 1,082 3,864 704,537 708,401 — Total mortgage loans on real estate 2,655 1,269 1,238 5,162 873,031 878,193 — Consumer: Home equity lines of credit 304 35 237 576 40,381 40,957 — Home equity loans 74 — — 74 3,511 3,585 — Other 160 — — 160 21,499 21,659 — Total consumer loans 538 35 237 810 65,391 66,201 — Commercial 678 145 113 936 44,532 45,468 — Construction: Residential — — — — 30,593 30,593 — Commercial — — — — 5,880 5,880 — Total construction — — — — 36,473 36,473 — Total loans $ 3,871 $ 1,449 $ 1,588 $ 6,908 $ 1,019,427 $ 1,026,335 $ — The following table shows the ending balance of non accrual loans by loan category as of the date indicated: Non Accrual Loans As of December 31, 2019 As of December 31, 2018 (in thousands) Originated PNCI Total Originated PNCI Total Mortgage loans on real estate: Residential 1-4 family $ 3,547 $ 876 $ 4,423 $ 3,244 $ 334 $ 3,578 Commercial 2,702 2,403 5,105 9,263 1,468 10,731 Total mortgage loans on real estate 6,249 3,279 9,528 12,507 1,802 14,309 Consumer: Home equity lines of credit 1,254 548 1,802 1,429 885 2,314 Home equity loans 1,181 31 1,212 1,722 47 1,769 Other 29 2 31 3 4 7 Total consumer loans 2,464 581 3,045 3,154 936 4,090 Commercial 2,038 51 2,089 3,755 120 3,875 Construction: Residential — — — — — — Commercial — — — — — — Total construction — — — — — — Total non accrual loans $ 10,751 $ 3,911 $ 14,662 $ 19,416 $ 2,858 $ 22,274 Interest income on originated non accrual loans that would have been recognized during the years ended December 31, 2019, 2018, and 2017, if all such loans had been current in accordance with their original terms, totaled $896,000, $1,584,000, and $1,067,000, respectively. Interest income actually recognized on these originated loans during the years ended December 31, 2019, 2018, and 2017 was $210,000, $486,000, and $530,000, respectively. Interest income on PNCI non accrual loans that would have been recognized during the years ended December 31, 2019, 2018, and 2017, if all such loans had been current in accordance with their original terms, totaled $305,000, $1,122,000, and $73,000, respectively. Interest income actually recognized on these PNCI loans during the years ended December 31, 2019, 2018, and 2017 was $162,000, $989,000, and $18,000, respectively. Impaired originated loans are those where management has concluded that it is probable that the borrower will be unable to pay all amounts due under the contractual terms. The following tables show the recorded investment (financial statement balance), unpaid principal balance, average recorded investment, and interest income recognized for impaired Originated and PNCI loans, segregated by those with no related allowance recorded and those with an allowance recorded for the periods indicated. Impaired Originated Loans - As of, or for the Twelve Months Ended, December 31, 2019 (in thousands) Unpaid Recorded Recorded Total recorded Related Average Interest income Mortgage loans on real estate: Residential 1-4 family $ 4,836 $ 3,434 $ 764 $ 4,198 $ 49 $ 4,388 $ 71 Commercial 6,543 4,401 1,845 6,246 78 9,343 86 Total mortgage loans on real estate 11,379 7,835 2,609 10,444 127 13,731 157 Consumer: Home equity lines of credit 1,315 1,267 1 1,268 1 1,679 35 Home equity loans 1,895 1,278 234 1,512 42 1,839 5 Other 47 3 25 28 7 33 2 Total consumer loans 3,257 2,548 260 2,808 50 3,551 42 Commercial 2,612 1,463 816 2,279 579 3,746 12 Construction: Residential — — — — — — — Commercial — — — — — — — Total construction — — — — — — — Total $ 17,248 $ 11,846 $ 3,685 $ 15,531 $ 756 $ 21,028 $ 211 Impaired PNCI Loans - As of, or for the Twelve Months Ended, December 31, 2019 (in thousands) Unpaid Recorded Recorded Total recorded Related Average Interest income Mortgage loans on real estate: Residential 1-4 family $ 945 $ 876 $ — $ 876 $ — $ 605 $ 9 Commercial 2,405 2,403 — 2,403 — 1,935 146 Total mortgage loans on real estate 3,350 3,279 — 3,279 — 2,540 155 Consumer: Home equity lines of credit 862 395 411 806 114 905 6 Home equity loans 159 20 118 138 2 189 — Other 112 59 53 112 12 111 — Total consumer loans 1,133 474 582 1,056 128 1,205 6 Commercial 59 — 51 51 51 86 — Construction: Residential — — — — — — — Commercial — — — — — — — Total construction — — — — — — — Total $ 4,542 $ 3,753 $ 633 $ 4,386 $ 179 $ 3,831 $ 161 Impaired Originated Loans - As of, or for the Twelve Months Ended, December 31, 2018 (in thousands) Unpaid Recorded Recorded Total recorded Related Average Interest income Mortgage loans on real estate: Residential 1-4 family $ 4,594 $ 3,663 $ 308 $ 3,971 $ 56 $ 3,517 $ 90 Commercial 13,081 10,676 1,765 12,441 42 13,115 137 Total mortgage loans on real estate 17,675 14,339 2,073 16,412 98 16,632 227 Consumer: Home equity lines of credit 1,900 1,749 111 1,860 71 1,885 43 Home equity loans 2,374 1,892 65 1,957 2 1,520 23 Other 3 — 3 3 3 17 2 Total consumer loans 4,277 3,641 179 3,820 76 3,422 68 Commercial 5,433 2,924 2,287 5,211 1,774 4,654 91 Construction: Residential — — — — — 5 — Commercial — — — — — — — Total construction — — — — — 5 — Total $ 27,385 $ 20,904 $ 4,539 $ 25,443 $ 1,948 $ 24,713 $ 386 Impaired PNCI Loans - As of, or for the Twelve Months Ended, December 31, 2018 (in thousands) Unpaid Recorded Recorded Total recorded Related Average Interest income Mortgage loans on real estate: Residential 1-4 family $ 375 $ 334 $ — $ 334 $ — $ 529 $ 5 Commercial 3,110 1,468 — 1,468 — 1,713 183 Total mortgage loans on real estate 3,485 1,802 — 1,802 — 2,242 188 Consumer: Home equity lines of credit 1,027 587 367 954 127 1,120 18 Home equity loans 252 47 197 244 101 155 — Other 106 21 85 106 11 114 — Total consumer loans 1,385 655 649 1,304 239 1,389 18 Commercial 120 113 7 120 7 60 1 Construction: Residential — — — — — — — Commercial — — — — — — — Total construction — — — — — — — Total $ 4,990 $ 2,570 $ 656 $ 3,226 $ 246 $ 3,691 $ 207 Impaired Originated Loans - As of, or for the Twelve Months Ended, December 31, 2017 (in thousands) Unpaid Recorded Recorded Total recorded Related Average Interest income Mortgage loans on real estate: Residential 1-4 family $ 4,023 $ 2,058 $ 1,881 $ 3,939 $ 230 $ 3,501 $ 143 Commercial 14,186 13,101 810 13,911 30 13,851 645 Total mortgage loans on real estate 18,209 15,159 2,691 17,850 260 17,352 788 Consumer: Home equity lines of credit 1,581 1,093 401 1,494 111 1,702 47 Home equity loans 1,627 1,107 198 1,305 10 1,193 24 Other 55 4 3 7 3 20 — Total consumer loans 3,263 2,204 602 2,806 124 2,915 71 Commercial 4,566 575 3,895 4,470 1,848 4,283 184 Construction: Residential 140 140 — 140 — 76 9 Commercial — — — — — — — Total construction 140 140 — 140 — 76 9 Total $ 26,178 $ 18,078 $ 7,188 $ 25,266 $ 2,232 $ 24,626 $ 1,052 Impaired PNCI Loans - As of, or for the Twelve Months Ended, December 31, 2017 (in thousands) Unpaid Recorded Recorded Total recorded Related Average Interest income Mortgage loans on real estate: Residential 1-4 family $ 1,404 $ 1,359 $ — $ 1,359 $ — $ 1,041 $ 24 Commercial — — — — — 979 — Total mortgage loans on real estate 1,404 1,359 — 1,359 — 2,020 24 Consumer: Home equity lines of credit 1,216 591 603 1,194 316 1,240 48 Home equity loans 178 44 121 165 97 117 6 Other 250 — 250 250 54 186 11 Total consumer loans 1,644 635 974 1,609 467 1,543 65 Commercial — — — — — — — Construction: Residential — — — — — — — Commercial — — — — — — — Total construction — — — — — — — Total $ 3,048 $ 1,994 $ 974 $ 2,968 $ 467 $ 3,563 $ 89 Originated loans classified as TDRs and impaired were $7,285,000, $10,253,000 and $12,517,000 at December 31, 2019, 2018 and 2017, respectively. PNCI loans classified as TDRs and impaired were $726,000, $615,000 and $1,352,000 at December 31, 2019, 2018 and 2017, respectively. The Company had no significant obligations to lend additional funds on Originated or PNCI TDRs as of December 31, 2019, 2018, or 2017. The following tables show certain information regarding Troubled Debt Restructurings that occurred during the periods indicated: TDR Information for the Year Ended December 31, 2019 (dollars in thousands) Number Pre-mod Post-mod Financial Number that Recorded Financial impact Mortgage loans on real estate: Residential 1-4 family 3 $ 659 $ 662 $ 30 — $ — $ — Commercial 2 60 67 — — — — Total mortgage loans on real estate 5 719 729 30 — — — Consumer: Home equity lines of credit 1 65 68 — — — — Home equity loans 2 149 147 29 — — — Other — — — — — — — Total consumer loans 3 214 215 29 — — — Commercial 10 1,918 1,885 — 1 7 — Construction: Residential — — — — — — — Commercial — — — — — — — Total construction — — — — — — — Total 18 $ 2,851 $ 2,829 $ 59 1 $ 7 $ — TDR Information for the Year Ended December 31, 2018 (dollars in thousands) Number Pre-mod Post-mod Financial Number that Recorded Financial impact Mortgage loans on real estate: Residential 1-4 family 1 $ 156 $ 156 $ — — $ — $ — Commercial 7 1,782 1,779 491 1 169 — Total mortgage loans on real estate 8 1,938 1,935 491 1 169 — Consumer: Home equity lines of credit 1 133 138 — 2 248 — Home equity loans 2 599 599 (35) — — — Other — — — — — — — Total consumer loans 3 732 737 (35) 2 248 — Commercial 6 1,098 1,083 325 3 148 — Construction: Residential — — — — — — — Commercial — — — — — — — Total construction — — — — — — — Total 17 $ 3,768 $ 3,755 $ 781 6 $ 565 $ — TDR Information for the Year Ended December 31, 2017 (dollars in thousands) Number Pre-mod Post-mod Financial Number that Recorded Financial impact Mortgage loans on real estate: Residential 1-4 family 1 $ 939 $ 939 $ 169 2 $ 223 $ — Commercial 8 3,721 3,695 (111) 1 219 — Total mortgage loans on real estate 9 4,660 4,634 58 3 442 — Consumer: Home equity lines of credit 3 187 187 27 1 127 (5) Home equity loans 1 252 252 — 1 55 — Other 1 14 14 11 — — — Total consumer loans 5 453 453 38 2 182 (5) Commercial 11 1,854 1,747 37 — Construction: Residential 1 144 144 — — — — Commercial — — — — — — — Total construction 1 144 144 — — — — Total 26 $ 7,111 $ 6,978 $ 133 5 $ 624 $ (5) Modifications classified as TDRs can include one or a combination of the following: rate modifications, term extensions, interest only modifications, either temporary or long-term, payment modifications, and collateral substitutions/additions. For all new TDRs, an impairment analysis is conducted. If the loan is determined to be collateral dependent, any additional amount of impairment will be calculated based on the difference between estimated collectible value and the current carrying balance of the loan. This difference could result in an increased provision and is typically charged off. If the asset is determined not to be collateral dependent, the impairment is measured on the net present value difference between the expected cash flows of the restructured loan and the cash flows which would have been received under the original terms. The effect of this could result in a requirement for additional provision to the reserve. The effect of these required provisions for the period are indicated above. Typically if a TDR defaults during the period, the loan is then considered collateral dependent and, if it was not already considered collateral dependent, an appropriate provision will be reserved or charge will be taken. The additional provisions required resulting from default of previously modified TDR’s are noted above. |