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 September 30, 2019 (in thousands) Beginning Charge-offs Recoveries Provision Ending Balance Mortgage loans on real estate: Residential 1-4 family $ 2,576 $ — $ 48 $ (218) $ 2,406 Commercial 12,099 (746) 126 462 11,941 Total mortgage loans on real estate 14,675 (746) 174 244 14,347 Consumer: Home equity lines of credit 5,859 — 27 (152) 5,734 Home equity loans 1,242 (3) 156 (133) 1,262 Other 1,451 (188) 79 211 1,553 Total consumer loans 8,552 (191) 262 (74) 8,549 Commercial 6,745 (585) 84 (557) 5,687 Construction: Residential 2,538 — — 119 2,657 Commercial 358 — — (61) 297 Total construction loans 2,896 — — 58 2,954 Total $ 32,868 $ (1,522) $ 520 $ (329) $ 31,537 Allowance for Loan Losses – Nine months ended September 30, 2019 (in thousands) Beginning Charge-offs Recoveries Provision Ending Balance Mortgage loans on real estate: Residential 1-4 family $ 2,676 $ (2) $ 53 $ (321) $ 2,406 Commercial 12,944 (746) 1,517 (1,774) 11,941 Total mortgage loans on real estate 15,620 (748) 1,570 (2,095) 14,347 Consumer: Home equity lines of credit 6,042 — 305 (613) 5,734 Home equity loans 1,540 (3) 414 (689) 1,262 Other 793 (548) 262 1,046 1,553 Total consumer loans 8,375 (551) 981 (256) 8,549 Commercial 6,090 (1,242) 337 502 5,687 Construction: Residential 1,834 — — 823 2,657 Commercial 663 — — (366) 297 Total construction loans 2,497 — — 457 2,954 Total $ 32,582 $ (2,541) $ 2,888 $ (1,392) $ 31,537 Allowance for Loan Losses – As of September 30, 2019 (in thousands) Loans pooled Individually Loans acquired Total allowance Mortgage loans on real estate: Residential 1-4 family $ 2,315 $ 91 $ — $ 2,406 Commercial 11,915 26 — 11,941 Total mortgage loans on real estate 14,230 117 — 14,347 Consumer: Home equity lines of credit 5,644 84 6 5,734 Home equity loans 1,216 46 — 1,262 Other 1,535 18 — 1,553 Total consumer loans 8,395 148 6 8,549 Commercial 4,428 1,259 — 5,687 Construction: Residential 2,657 — — 2,657 Commercial 297 — — 297 Total construction loans 2,954 — — 2,954 Total $ 30,007 $ 1,524 $ 6 $ 31,537 Loans, Net of Unearned fees – As of September 30, 2019 (in thousands) Loans pooled Individually Loans acquired Total loans, net Mortgage loans on real estate: Residential 1-4 family $ 499,620 $ 4,757 $ 1,417 $ 505,794 Commercial 2,727,228 9,005 5,129 2,741,362 Total mortgage loans on real estate 3,226,848 13,762 6,546 3,247,156 Consumer: Home equity lines of credit 329,129 1,917 826 331,872 Home equity loans 27,793 2,156 421 30,370 Other 80,146 149 2 80,297 Total consumer loans 437,068 4,222 1,249 442,539 Commercial 271,447 4,501 2,510 278,458 Construction: Residential 169,034 — — 169,034 Commercial 45,161 — — 45,161 Total construction loans 214,195 — — 214,195 Total $ 4,149,558 $ 22,485 $ 10,305 $ 4,182,348 Allowance for Loan Loses – 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 loans 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 loans 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 Individually Loans acquired Total loans, net 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 loans 183,384 — — 183,384 Total $ 3,979,744 $ 28,047 $ 14,223 $ 4,022,014 Allowance for Loan Losses – Three Months Ended September 30, 2018 (in thousands) Beginning Charge-offs Recoveries Provision Ending Balance Mortgage loans on real estate: Residential 1-4 family $ 1,991 $ (25) $ — $ 434 $ 2,400 Commercial 11,607 — 15 1,257 12,879 Total mortgage loans on real estate 13,598 (25) 15 1,691 15,279 Consumer: Home equity lines of credit 5,048 (172) 151 194 5,221 Home equity loans 1,532 (23) 139 (55) 1,593 Other 557 (229) 63 309 700 Total consumer loans 7,137 (424) 353 448 7,514 Commercial 6,378 (693) 202 337 6,224 Construction: Residential 1,434 — — 192 1,626 Commercial 977 — — (17) 960 Total construction loans 2,411 — — 175 2,586 Total $ 29,524 $ (1,142) $ 570 $ 2,651 $ 31,603 Allowance for Loan Losses – Nine months ended September 30, 2018 (in thousands) Beginning Charge-offs Recoveries Provision Ending Balance Mortgage loans on real estate: Residential 1-4 family $ 2,317 $ (77) $ — $ 160 $ 2,400 Commercial 11,441 (15) 51 1,402 12,879 Total mortgage loans on real estate 13,758 (92) 51 1,562 15,279 Consumer: Home equity lines of credit 5,800 (276) 677 (980) 5,221 Home equity loans 1,841 (23) 176 (401) 1,593 Other 586 (597) 208 503 700 Total consumer loans 8,227 (896) 1,061 (878) 7,514 Commercial 6,512 (952) 331 333 6,224 Construction: Residential 1,184 — — 442 1,626 Commercial 642 — — 318 960 Total construction loans 1,826 — — 760 2,586 Total $ 30,323 $ (1,940) $ 1,443 $ 1,777 $ 31,603 Allowance for Loan Losses – As of September 30, 2018 (in thousands) Loans pooled Individually Loans acquired Total allowance Mortgage loans on real estate: Residential 1-4 family $ 2,313 $ 57 $ 30 $ 2,400 Commercial 12,552 268 59 12,879 Total mortgage loans on real estate 14,865 325 89 15,279 Consumer: Home equity lines of credit 5,046 168 7 5,221 Home equity loans 1,418 175 — 1,593 Other 597 103 — 700 Total consumer loans 7,061 446 7 7,514 Commercial 4,353 1,857 14 6,224 Construction: Residential 1,626 — — 1,626 Commercial 960 — — 960 Total construction loans 2,586 — — 2,586 Total $ 28,865 $ 2,628 $ 110 $ 31,603 Loans, Net of Unearned fees – As of September 30, 2018 (in thousands) Loans pooled Individually Loans acquired Total loans, net Mortgage loans on real estate: Residential 1-4 family $ 517,935 $ 4,781 $ 1,698 $ 524,414 Commercial 2,586,659 13,244 7,885 2,607,788 Total mortgage loans on real estate 3,104,594 18,025 9,583 3,132,202 Consumer: Home equity lines of credit 327,649 2,188 1,299 331,136 Home equity loans 37,840 2,406 447 40,693 Other 49,171 243 42 49,456 Total consumer loans 414,660 4,837 1,788 421,285 Commercial 282,588 4,632 2,427 289,647 Construction: Residential 114,574 — — 114,574 Commercial 69,728 — — 69,728 Total construction loans 184,302 — — 184,302 Total $ 3,986,144 $ 27,494 $ 13,798 $ 4,027,436 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 September 30, 2019 (in thousands) Pass Special Substandard Doubtful / Loss Total Originated Mortgage loans on real estate: Residential 1-4 family $ 348,668 $ 2,743 $ 4,235 $ — $ 355,646 Commercial 2,063,991 38,150 7,168 — 2,109,309 Total mortgage loans on real estate 2,412,659 40,893 11,403 — 2,464,955 Consumer: Home equity lines of credit 288,554 3,378 2,479 — 294,411 Home equity loans 23,819 1,184 2,031 — 27,034 Other 63,648 452 53 — 64,153 Total consumer loans 376,021 5,014 4,563 — 385,598 Commercial 242,308 8,968 5,103 256,379 Construction: Residential 158,657 — 250 — 158,907 Commercial 44,380 324 — — 44,704 Total construction loans 203,037 324 250 — 203,611 Total loans $ 3,234,025 $ 55,199 $ 21,319 $ — $ 3,310,543 Credit Quality Indicators PNCI Loans – As of September 30, 2019 (in thousands) Pass Special Substandard Doubtful / Loss Total PNCI Mortgage loans on real estate: Residential 1-4 family $ 145,141 $ 1,617 $ 1,973 $ — $ 148,731 Commercial 618,372 2,674 5,878 — 626,924 Total mortgage loans on real estate 763,513 4,291 7,851 — 775,655 Consumer: Home equity lines of credit 34,660 891 1,084 — 36,635 Home equity loans 2,841 — 74 — 2,915 Other 15,792 341 9 — 16,142 Total consumer loans 53,293 1,232 1,167 — 55,692 Commercial 19,399 1 169 19,569 Construction: Residential 5,980 4,147 — — 10,127 Commercial 457 — — — 457 Total construction loans 6,437 4,147 — — 10,584 Total loans $ 842,642 $ 9,671 $ 9,187 $ — $ 861,500 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 loans 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 loans 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 September 30, 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 $ 289 $ 66 $ 1,187 $ 1,542 $ 354,104 $ 355,646 $ — Commercial 117 48 — 165 2,109,144 2,109,309 — Total mortgage loans on real estate 406 114 1,187 1,707 2,463,248 2,464,955 — Consumer: Home equity lines of credit 890 282 624 1,796 292,615 294,411 — Home equity loans 253 105 137 495 26,539 27,034 6 Other 134 138 4 276 63,877 64,153 — Total consumer loans 1,277 525 765 2,567 383,031 385,598 6 Commercial 955 227 272 1,454 254,925 256,379 30 Construction: Residential — — — — 158,907 158,907 — Commercial — — — — 44,704 44,704 — Total construction loans — — — — 203,611 203,611 — Total originated loans $ 2,638 $ 866 $ 2,224 $ 5,728 $ 3,304,815 $ 3,310,543 $ 36 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 September 30, 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 $ — $ 52 $ 243 $ 295 $ 148,436 $ 148,731 $ — Commercial — — 949 949 625,975 626,924 — Total mortgage loans on real estate — 52 1,192 1,244 774,411 775,655 — Consumer: Home equity lines of credit 182 122 — 304 36,331 36,635 — Home equity loans — 14 232 246 2,669 2,915 — Other 54 7 — 61 16,081 16,142 — Total consumer loans 236 143 232 611 55,081 55,692 — Commercial — — 174 174 19,395 19,569 — Construction: Residential — — — — 10,127 10,127 — Commercial — — — — 457 457 — Total construction loans — — — — 10,584 10,584 — Total PNCI loans $ 236 $ 195 $ 1,598 $ 2,029 $ 859,471 $ 861,500 $ — 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 loans 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 loans — — — — 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 September 30, 2019 and 2018, if all such loans had been current in accordance with their original terms, totaled $124,000 and $338,000, respectively. Interest income actually recognized on these originated loans during the three months ended September 30, 2019 and 2018 was $59,000 and $59,000, respectively. Interest income on PNCI nonaccrual loans that would have been recognized during the three months ended September 30, 2019 and 2018, if all such loans had been current in accordance with their original terms, totaled $201,000 and $39,000, respectively. Interest income actually recognized on these PNCI loans during the three months ended September 30, 2019 and 2018 was $92,000 and $12,000. Interest income on originated nonaccrual loans that would have been recognized during the nine months ended September 30, 2019 and 2018, if all such loans had been current in accordance with their original terms, totaled $692,000 and $964,000, respectively. Interest income actually recognized on these originated loans during the nine months ended September 30, 2019 and 2018 was $145,000 and $133,000, respectively. Interest income on PNCI nonaccrual loans that would have been recognized during the nine months ended September 30, 2019 and 2018, if all such loans had been current in accordance with their original terms, totaled $322,000 and $93,000, respectively. Interest income actually recognized on these PNCI loans during the nine months ended September 30, 2019 and 2018 was $152,000 and $23,000. 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 September 30, 2019 As of December 31, 2018 (in thousands) Originated PNCI Total Originated PNCI Total Mortgage loans on real estate: Residential 1-4 family $ 2,820 $ 908 $ 3,728 $ 3,244 $ 334 $ 3,578 Commercial 2,532 3,253 5,785 9,263 1,468 10,731 Total mortgage loans on real estate 5,352 4,161 9,513 12,507 1,802 14,309 Consumer: Home equity lines of credit 1,188 426 1,614 1,429 885 2,314 Home equity loans 1,405 263 1,668 1,722 47 1,769 Other 90 3 93 3 4 7 Total consumer loans 2,683 692 3,375 3,154 936 4,090 Commercial 3,225 174 3,399 3,755 120 3,875 Construction: Residential — — — — — — Commercial — — — — — — Total construction — — — — — — Total non accrual loans $ 11,260 $ 5,027 $ 16,287 $ 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. The average recorded investment in impaired loans and interest income recognized on impaired loans during the three months ended September 30, 2019 and 2018 was not considered significant for financial reporting purposes. Impaired Originated Loans – As of, or for the Nine months ended September 30, 2019 (in thousands) Unpaid Recorded Recorded Total recorded Related Average Interest income Mortgage loans on real estate: Residential 1-4 family $ 4,461 $ 3,053 $ 796 $ 3,849 $ 91 $ 4,214 $ 32 Commercial 6,006 4,423 1,329 5,752 26 9,096 59 Total mortgage loans on real estate 10,467 7,476 2,125 9,601 117 13,310 91 Consumer: Home equity lines of credit 1,279 1,232 — 1,232 — 1,662 26 Home equity loans 2,157 1,542 238 1,780 46 1,973 5 Other 74 3 51 54 14 46 1 Total consumer loans 3,510 2,777 289 3,066 60 3,681 32 Commercial 4,760 611 3,716 4,327 1,199 4,769 22 Construction: Residential — — — — — — — Commercial — — — — — — — Total construction loans — — — — — — — Total $ 18,737 $ 10,864 $ 6,130 $ 16,994 $ 1,376 $ 21,760 $ 145 Impaired PNCI Loans – As of, or for the Nine months ended September 30, 2019 (in thousands) Unpaid Recorded Recorded Total recorded Related Average Interest income Mortgage loans on real estate: Residential 1-4 family $ 959 $ 908 $ — $ 908 $ — $ 621 $ 9 Commercial 3,255 3,253 — 3,253 — 2,360 134 Total mortgage loans on real estate 4,214 4,161 — 4,161 — 2,981 143 Consumer: Home equity lines of credit 741 444 241 685 84 844 — Home equity loans 395 376 — 376 — 308 9 Other 95 72 23 95 4 103 — Total consumer loans 1,231 892 264 1,156 88 1,255 9 Commercial 181 113 60 173 60 147 Construction: Residential — — — — — — — Commercial — — — — — — — Total construction loans — — — — — — — Total $ 5,626 $ 5,166 $ 324 $ 5,490 $ 148 $ 4,383 $ 152 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 loans — — — — — 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 loans — — — — — — — Total $ 4,990 $ 2,570 $ 656 $ 3,226 $ 246 $ 3,691 $ 207 Impaired Originated Loans – As of, or for the Nine months ended September 30, 2018 (in thousands) Unpaid Recorded Recorded Total recorded Related Average Interest income Mortgage loans on real estate: Residential 1-4 family $ 4,185 $ 3,251 $ 311 $ 3,562 $ 57 $ 3,883 $ 67 Commercial 12,553 9,619 2,370 11,989 268 11,549 208 Total mortgage loans on real estate 16,738 12,870 2,681 15,551 325 15,432 275 Consumer: Home equity lines of credit 1,444 1,346 59 1,405 19 1,410 32 Home equity loans 2,554 1,960 157 2,117 30 1,753 24 Other 3 — 3 3 3 3 — Total consumer loans 4,001 3,306 219 3,525 52 3,166 56 Commercial 4,868 2,135 2,497 4,632 1,857 4,626 78 Construction: Residential — — — — — 68 — Commercial — — — — — — — Total construction loans — — — — — 68 — Total $ 25,607 $ 18,311 $ 5,397 $ 23,708 $ 2,234 $ 23,292 $ 409 Impaired PNCI Loans – As of, or for the Nine months ended September 30, 2018 (in thousands) Unpaid Recorded Recorded Total recorded Related Average Interest income Mortgage loans on real estate: Residential 1-4 family $ 1,302 $ 1,219 $ — $ 1,219 $ — $ 1,275 $ — Commercial 1,255 1,255 — 1,255 — 627 58 Total mortgage loans on real estate 2,557 2,474 — 2,474 — 1,902 58 Consumer: Home equity lines of credit 852 625 158 783 149 909 13 Home equity loans 296 50 239 289 145 287 9 Other 240 — 240 240 100 257 7 Total consumer loans 1,388 675 637 1,312 394 1,453 29 Commercial — — — — — — — Construction: Residential — — — — — — — Commercial — — — — — — — Total construction loans — — — — — — — Total $ 3,945 $ 3,149 $ 637 $ 3,786 $ 394 $ 3,355 $ 87 Originated loans classified as TDRs and impaired were $8,556,000, $10,253,000, and $8,845,000 at September 30, 2019, December 31, 2018, and September 30, 2018, respectively. PNCI loans classified as TDRs and impaired were $738,000, $615,000, and $840,000 at September 30, 2019, December 31, 2018 and September 30, 2018, respectively. The Company had no significant obligations to lend additional funds on Originated or PNCI TDRs as of September 30, 2019, December 31, 2018, or September 30, 2018. The following tables show certain information regarding TDRs that occurred during the periods indicated: TDR Information for the three months ended September 30, 2019 (dollars in thousands) Number Pre-mod Post-mod Financial Number that Recorded Financial impact Mortgage loans on real estate: Residential 1-4 family 2 $ 496 $ 500 $ 30 — $ — $ — Commercial 2 60 67 — — — — Total mortgage loans on real estate 4 556 567 30 — — — Consumer: Home equity lines of credit — — — — — — — Home equity loans — — — — — — — Other — — — — — — — Total consumer loans — — — — — — — Commercial 4 150 148 (2) — — — Construction: Residential — — — — — — — Commercial — — — — — — — Total construction loans — — — — — — — Total 4 $ 706 $ 715 $ 28 — $ — $ — TDR Information for the nine months ended September 30, 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 loans — — — — — — — Total 18 $ 2,851 $ 2,829 $ 59 $ 1 $ 7 $ — TDR Information for the three months ended September 30, 2018 (dollars in thousands) Number Pre-mod Post-mod Fin |