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 – Three Months Ended March 31, 2019 (in thousands) Beginning Balance Charge-offs Recoveries Provision (benefit) Ending Balance Mortgage loans on real estate: Residential 1-4 family $ 2,676 $ — $ 2 $ (178 ) $ 2,500 Commercial 12,944 — 1,381 (1,995 ) 12,330 Total mortgage loans on real estate 15,620 — 1,383 (2,173 ) 14,830 Consumer: Home equity lines of credit 6,042 — 95 (122 ) 6,015 Home equity loans 1,540 — 87 (341 ) 1,286 Other 793 (207 ) 75 379 1,040 Total consumer loans 8,375 (207 ) 257 (84 ) 8,341 Commercial 6,090 (519 ) 168 339 6,078 Construction: Residential 1,834 — — 574 2,408 Commercial 663 — — (256 ) 407 Total construction 2,497 — — 318 2,815 Total $ 32,582 $ (726 ) $ 1,808 $ (1,600 ) $ 32,064 Allowance for Loan Losses – As of March 31, 2019 (in thousands) Loans pooled for evaluation Individually evaluated for impairment Loans acquired with deteriorated credit quality Total allowance for loan losses Mortgage loans on real estate: Residential 1-4 family $ 2,445 $ 55 $ — $ 2,500 Commercial 12,293 36 1 12,330 Total mortgage loans on real estate 14,738 91 1 14,830 Consumer: Home equity lines of credit 5,879 130 6 6,015 Home equity loans 1,216 70 — 1,286 Other 1,023 17 — 1,040 Total consumer loans 8,118 217 6 8,341 Commercial 4,636 1,442 — 6,078 Construction: Residential 2,408 — — 2,408 Commercial 407 — — 407 Total construction 2,815 — — 2,815 Total $ 30,307 $ 1,750 $ 7 $ 32,064 Loans, Net of Unearned fees – As of March 31, 2019 (in thousands) Loans pooled for evaluation Individually evaluated for impairment Loans acquired with deteriorated credit quality Total loans, net of unearned fees Mortgage loans on real estate: Residential 1-4 family $ 517,038 $ 3,789 $ 1,585 $ 522,412 Commercial 2,592,994 7,911 6,022 2,606,927 Total mortgage loans on real estate 3,110,032 11,700 7,607 3,129,339 Consumer: Home equity lines of credit 314,609 2,556 1,088 318,253 Home equity loans 32,618 1,983 436 35,037 Other 64,891 130 41 65,062 Total consumer loans 412,118 4,669 1,565 418,352 Commercial 261,933 4,676 2,554 269,163 Construction: Residential 145,784 — — 145,784 Commercial 71,693 — — 71,693 Total construction 217,477 — — 217,477 Total $ 4,001,560 $ 21,045 $ 11,726 $ 4,034,331 Allowance for Loan Losses – Year Ended December 31, 2018 (in thousands) Beginning Charge-offs Recoveries Provision Ending 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 pooled 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 pooled for evaluation Individually evaluated for impairment Loans acquired with deteriorated credit quality Total loans, net of unearned fees 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 – Three Months Ended March 31, 2018 (in thousands) Beginning Charge-offs Recoveries Provision Ending Balance Mortgage loans on real estate: Residential 1-4 family $ 2,317 $ (1 ) $ — $ (146 ) $ 2,170 Commercial 11,441 — 15 39 11,495 Total mortgage loans on real estate 13,758 (1 ) 15 (107 ) 13,665 Consumer: Home equity lines of credit 5,800 (80 ) 209 (517 ) 5,412 Home equity loans 1,841 — 14 (119 ) 1,736 Other 586 (194 ) 78 100 570 Total consumer loans 8,227 (274 ) 301 (536 ) 7,718 Commercial 6,512 (205 ) 50 35 6,392 Construction: Residential 1,184 — — 167 1,351 Commercial 642 — — 205 847 Total construction 1,826 — — 372 2,198 Total $ 30,323 $ (480 ) $ 366 $ (236 ) $ 29,973 Allowance for Loan Losses – As of March 31, 2018 (in thousands) Loans pooled for evaluation Individually evaluated for impairment Loans acquired with deteriorated credit quality Total allowance for loan losses Mortgage loans on real estate: Residential 1-4 family $ 1,910 $ 190 $ 70 $ 2,170 Commercial 11,281 154 60 11,495 Total mortgage loans on real estate 13,191 344 130 13,665 Consumer: Home equity lines of credit 4,956 448 8 5,412 Home equity loans 1,606 130 — 1,736 Other 514 56 — 570 Total consumer loans 7,076 634 8 7,718 Commercial 4,249 2,113 30 6,392 Construction: Residential 1,351 — — 1,351 Commercial 847 — — 847 Total construction 2,198 — — 2,198 Total $ 26,714 $ 3,091 $ 168 $ 29,973 Loans, Net of Unearned fees – As of March 31, 2018 (in thousands) Loans pooled for evaluation Individually evaluated for impairment Loans acquired with deteriorated credit quality Total loans, net Mortgage loans on real estate: Residential 1-4 family $ 378,832 $ 5,535 $ 1,744 $ 386,111 Commercial 1,954,120 11,110 8,038 1,973,268 Total mortgage loans on real estate 2,332,952 16,645 9,782 2,359,379 Consumer: Home equity lines of credit 279,140 2,450 1,661 283,251 Home equity loans 39,774 1,673 485 41,932 Other 23,285 278 43 23,606 Total consumer loans 342,199 4,401 2,189 348,789 Commercial 208,889 4,621 2,505 216,015 Construction: Residential 71,462 136 — 71,598 Commercial 73,952 — — 73,952 Total construction 145,414 136 — 145,550 Total $ 3,029,454 $ 25,803 $ 14,476 $ 3,069,733 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 • Special Mention • Substandard • Doubtful • Loss The following tables present ending loan balances by loan category and risk grade for the periods indicated: Credit Quality Indicators Originated Loans– As of March 31, 2019 (in thousands) Pass Special Mention Substandard Doubtful / Loss Total Originated Loans Mortgage loans on real estate: Residential 1-4 family $ 350,256 $ 1,807 $ 5,496 $ — $ 357,559 Commercial 1,886,958 33,094 9,456 — 1,929,508 Total mortgage loans on real estate 2,237,214 34,901 14,952 — 2,287,067 Consumer: Home equity lines of credit 273,144 2,867 3,064 — 279,075 Home equity loans 27,328 1,533 2,384 — 31,245 Other 44,611 309 100 — 45,020 Total consumer loans 345,083 4,709 5,548 — 355,340 Commercial 214,758 7,896 4,660 — 227,314 Construction: Residential 115,432 — 256 — 115,688 Commercial 64,238 338 — — 64,576 Total construction 179,670 338 256 — 180,264 Total loans $ 2,976,725 $ 47,844 $ 25,416 $ — $ 3,049,985 Credit Quality Indicators PNCI Loans – As of March 31, 2019 (in thousands) Pass Special Mention Substandard Doubtful / Loss Total PNCI Loans Mortgage loans on real estate: Residential 1-4 family $ 161,351 $ 1,109 $ 808 $ — $ 163,268 Commercial 665,630 2,727 3,040 — 671,397 Total mortgage loans on real estate 826,981 3,836 3,848 — 834,665 Consumer: Home equity lines of credit 35,888 925 1,277 — 38,090 Home equity loans 3,174 98 84 — 3,356 Other 19,790 208 3 — 20,001 Total consumer loans 58,852 1,231 1,364 — 61,447 Commercial 38,762 201 332 — 39,295 Construction: Residential 30,096 — — — 30,096 Commercial 6,872 — 245 — 7,117 Total construction 36,968 — 245 — 37,213 Total loans $ 961,563 $ 5,268 $ 5,789 $ — $ 972,620 Credit Quality Indicators Originated Loans– As of December 31, 2018 (in thousands) Pass Special Mention Substandard Doubtful / Loss Total Originated Loans 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 Mention Substandard Doubtful / Loss Total PNCI Loans 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, payment performance will follow general economic trends in the marketplace driven primarily by rises in the unemployment rate; non-payment is likely due to loss of employment. 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 and current performance of the borrower (delinquency). The Bank manages its consumer loan portfolios by monitoring delinquency and contacting borrowers to encourage repayment, suggesting modifications if appropriate, and, when continued scheduled payments become unrealistic, initiating repossession or foreclosure through appropriate channels. 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 commercial 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 or revaluations are obtained at initiation of the credit and periodically, but not less than every twelve 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 table shows the ending balance of current and past due originated loans by loan category as of the date indicated: Analysis of Originated Past Due Loans - As of March 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 $ 2,231 $ — $ 396 $ 2,627 $ 354,932 $ 357,559 $ — Commercial 767 — 901 1,668 1,927,840 1,929,508 — Total mortgage loans on real estate 2,998 — 1,297 4,295 2,282,772 2,287,067 — Consumer: Home equity lines of credit 1,774 11 362 2,147 276,928 279,075 — Home equity loans 512 24 163 699 30,546 31,245 17 Other 151 — 9 160 44,860 45,020 9 Total consumer loans 2,437 35 534 3,006 352,334 355,340 26 Commercial 1,122 453 371 1,946 225,368 227,314 14 Construction: Residential 785 — — 785 114,903 115,688 — Commercial — — — — 64,576 64,576 — Total construction 785 — — 785 179,479 180,264 — Total originated loans $ 7,342 $ 488 $ 2,202 $ 10,032 $ 3,039,953 $ 3,049,985 $ 40 The following table shows the ending balance of current and past due PNCI loans by loan category as of the date indicated: Analysis of PNCI Past Due Loans - As of March 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 $ 1,457 $ 270 $ — $ 1,727 $ 161,541 $ 163,268 $ — Commercial 2,898 — 949 3,847 667,550 671,397 — Total mortgage loans on real estate 4,355 270 949 5,574 829,091 834,665 — Consumer: Home equity lines of credit 418 — 1 419 37,671 38,090 — Home equity loans 14 — — 14 3,342 3,356 — Other 151 — — 151 19,850 20,001 — Total consumer loans 583 — 1 584 60,863 61,447 — Commercial 2 99 233 334 38,961 39,295 — Construction: Residential — — — — 30,096 30,096 — Commercial — — — — 7,117 7,117 — Total construction — — — — 37,213 37,213 — Total PNCI loans $ 4,940 $ 369 $ 1,183 $ 6,492 $ 966,128 $ 972,620 $ — The following table shows the ending balance of current and past due originated loans by loan category as of the date indicated: 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 $ — The following table shows the ending balance of current and past due PNCI loans by loan category as of the date indicated: Analysis of PNCI 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 $ 1,009 $ 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 $ — Interest income on originated nonaccrual loans that would have been recognized during the three months ended March 31, 2019 and 2018, if all such loans had been current in accordance with their original terms, totaled $279,000 and $285,000, respectively. Interest income actually recognized on these originated loans during the three months ended March 31, 2019 and 2018 was $33,000 and $22,000, respectively. Interest income on PNCI nonaccrual loans that would have been recognized during the three months ended March 31, 2019 and 2018, if all such loans had been current in accordance with their original terms, totaled $121,000 and $27,000, respectively. Interest income actually recognized on these PNCI loans during the three months ended March 31, 2019 and 2018 was $60,000 and $0. The following table shows the ending balance of nonaccrual originated and PNCI loans by loan category as of the date indicated: Non Accrual Loans As of March 31, 2019 As of December 31, 2018 (in thousands) Originated PNCI Total Originated PNCI Total Mortgage loans on real estate: Residential 1-4 family $ 3,066 $ 308 $ 3,374 $ 3,244 $ 334 $ 3,578 Commercial 4,493 1,445 5,938 9,263 1,468 10,731 Total mortgage loans on real estate 7,559 1,753 9,312 12,507 1,802 14,309 Consumer: Home equity lines of credit 1,366 501 1,867 1,429 885 2,314 Home equity loans 1,599 36 1,635 1,722 47 1,769 Other 28 4 32 3 4 7 Total consumer loans 2,993 541 3,534 3,154 936 4,090 Commercial 3,144 332 3,476 3,755 120 3,875 Construction: Residential — — — — — — Commercial — — — — — — Total construction — — — — — — Total non accrual loans $ 13,696 $ 2,626 $ 16,322 $ 19,416 $ 2,858 $ 22,274 Impaired originated loans are those where management has concluded that it is probable that the borrower will be unable to pay all amounts due in accordance with the original contractual terms of the loan agreement. 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 Three Months Ended, March 31, 2019 (in thousands) Unpaid principal balance Recorded investment with no related allowance Recorded investment with related allowance Total recorded investment Related Allowance Average recorded investment Interest income recognized Mortgage loans on real estate: Residential 1-4 family $ 4,148 $ 3,481 $ — $ 3,481 $ 55 $ 4,029 $ 6 Commercial 6,771 5,874 592 6,466 37 9,453 22 Total mortgage loans on real estate 10,919 9,355 592 9,947 92 13,482 28 Consumer: Home equity lines of credit 1,857 1,737 58 1,795 18 1,943 4 Home equity loans 2,333 1,639 120 1,759 20 1,963 — Other 46 — 28 28 9 33 — Total consumer loans 4,236 3,376 206 3,582 47 3,939 4 Commercial 4,538 2,301 2,043 4,344 1,223 4,778 — Construction: Residential — — — — — — — Commercial — — — — — — — Total construction — — — — — — — Total $ 19,693 $ 15,032 $ 2,841 $ 17,873 $ 1,362 $ 22,199 $ 32 Impaired PNCI Loans – As of, or for the Three Months Ended, March 31, 2019 (in thousands) Unpaid principal balance Recorded investment with no related allowance Recorded investment with related allowance Total recorded investment Related Allowance Average recorded investment Interest income recognized Mortgage loans on real estate: Residential 1-4 family $ 344 $ 308 $ — $ 308 $ — $ 321 $ — Commercial 3,089 1,445 — 1,445 — 1,456 58 Total mortgage loans on real estate 3,433 1,753 — 1,753 — 1,777 58 Consumer: Home equity lines of credit 831 401 360 761 112 883 — Home equity loans 242 102 122 224 50 232 — Other 102 64 38 102 7 106 — Total consumer loans 1,175 567 520 1,087 169 1,221 — Commercial 335 113 219 332 219 226 2 Construction: Residential — — — — — — — Commercial — — — — — — — Total construction — — — — — — — Total $ 4,943 $ 2,433 $ 739 $ 3,172 $ 388 $ 3,224 $ 60 Impaired Originated Loans – As of, or for the Twelve Months Ended, December 31, 2018 (in thousands) Unpaid principal balance Recorded investment with no related allowance Recorded investment with related allowance Total recorded investment Related Allowance Average recorded investment Interest income recognized 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 principal balance Recorded investment with no related allowance Recorded investment with related allowance Total recorded investment Related Allowance Average recorded investment Interest income recognized 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 Three Months Ended, March 31, 2018 (in thousands) Unpaid principal balance Recorded investment with no related allowance Recorded investment with related allowance Total recorded investment Related Allowance Average recorded investment Interest income recognized Mortgage loans on real estate: Residential 1-4 family $ 4,378 $ 2,678 $ 1,525 $ 4,203 $ 190 $ 4,071 $ 28 Commercial 11,407 9,848 1,262 11,110 154 12,510 44 Total mortgage loans on real estate 15,785 12,526 2,787 15,313 344 16,581 72 Consumer: Home equity lines of credit 1,478 888 527 1,415 146 1,455 10 Home equity loans 1,744 1,193 196 1,389 10 1,347 2 Other 4 — 4 4 4 6 — Total consumer loans 3,226 2,081 727 2,808 160 2,808 12 Commercial 4,756 881 3,740 4,621 2,113 4,545 26 Construction: Residential 136 136 — 136 — 138 2 Commercial — — — — — — — Total construction 136 136 — 136 — 138 2 Total $ 23,903 $ 15,624 $ 7,254 $ 22,878 $ 2,617 $ 24,072 $ 112 Impaired PNCI Loans – As of, or for the Three Months Ended, March 31, 2018 (in thousands) Unpaid principal balance Recorded investment with no related allowance Recorded investment with related allowance Total recorded investment Related Allowance Average recorded investment Interest income recognized Mortgage loans on real estate: Residential 1-4 family $ 1,390 $ 1,332 $ — $ 1,332 $ — $ 1,345 $ 2 Commercial — — — — — — — Total mortgage loans on real estate 1,390 1,332 — 1,332 — 1,345 2 Consumer: Home equity lines of credit 1,065 501 534 1,035 302 1,114 5 Home equity loans 298 40 244 284 120 225 3 Other 274 28 246 274 52 262 2 Total consumer loans 1,637 569 1,024 1,593 474 1,601 10 Commercial — — — — — — Construction: Residential — — — — — — — Commercial — — — — — — — Total construction — — — — — — — Total $ 3,027 $ 1,901 $ 1,024 $ 2,925 $ 474 $ 2,946 $ 12 Originated loans classified as TDRs and impaired were $9,547,000, $10,253,000, and $9,871,000 at March 31, 2019, December 31, 2018, and March 31, 2018, respectively. PNCI loans classified as TDRs and impaired were $823,000, $615,000, and $1,471,000 at March 31, 2019, December 31, 2018 and March 31, 2018, respectively. The Company had no significant obligations to lend additional funds on Originated or PNCI TDRs as of March 31, 2019, December 31, 2018, or March 31, 2018. The following tables show certain information regarding TDRs that occurred during the periods indicated: TDR Information for the Three Months Ended March 31, 2019 (dollars in thousands) Number Pre-mod outstanding principal balance Post-mod outstanding principal balance Financial impact due to TDR taken as additional provision Number that defaulted during the period Recorded investment of TDRs that defaulted during the period Financial impact due to the default of previous TDR taken as charge- offs or additional provisions Mortgage loans on real estate: Residential 1-4 family 1 $ 163 $ 162 $ — — $ — $ — Commercial — — — — — — — Total mortgage loans on real estate 1 163 162 — — — — Consumer: Home equity lines of credit — — — — — — — Home equity loans 1 121 120 1 — — — Other — — — — — — — Total consumer loans 1 121 120 1 — — — Commercial 2 15 15 — 1 7 — Construction: Residential — — — — — — — Commercial — — — — — — — Total construction — — — — — — — Total 4 $ 299 $ 297 $ 1 1 $ 7 $ — TDR Information for the Three Months Ended March 31, 2018 (dollars in thousands) Number Pre-mod outstanding principal balance Post-mod outstanding principal balance Financial impact due to TDR taken as additional provision Number that defaulted during the period Recorded investment of TDRs that defaulted during the period Financial impact due to the default of previous TDR taken as charge- offs or additional provisions Mortgage loans on real estate: Residential 1-4 family — $ — $ — $ — — $ — $ — Commercial 1 384 384 11 1 169 — Total mortgage loans on real estate 1 384 384 11 1 169 — Consumer: Home equity lines of credit 1 133 138 — — — — Home equity loans 1 121 121 — — — — Other — — — — — — — Total consumer loans 2 254 259 — — — — Commercial — — — — — — — Construction: Residential — — — — — — — Commercial — — — — — — — Total construction — — — — — — — Total 3 $ 638 $ 643 $ 11 1 $ 169 $ — 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. |