| LOANS AND ALLOWANCE FOR LOAN LOSSES | NOTE 4 — LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans
Net loans are stated at their outstanding recorded investment, net of deferred fees and costs, unearned income and the allowance for loan losses. Interest on loans is recognized as income over the term of each loan, generally, by the accrual method. Loan origination fees and certain direct loan origination costs have been deferred with the net amount amortized using the straight line method or the interest method over the contractual life of the related loans as an interest yield adjustment.
Residential mortgage loans held for sale are carried at the lower of cost or market on an aggregate basis determined by independent pricing from appropriate federal or state agency investors. These loans are sold without recourse. Loans held for sale amounted to $1,664,000 and $365,000 at September 30, 2019 and December 31, 2018, respectively.
The loans receivable portfolio is segmented into commercial, residential and consumer loans. Commercial loans consist of the following classes: Commercial and Industrial, and Commercial Real Estate.
Commercial and Industrial Lending
The Corporation originates commercial and industrial loans primarily to businesses located in its primary market area and surrounding areas. These loans are used for various business purposes, which include short-term loans and lines of credit to finance machinery and equipment, inventory and accounts receivable. Generally, the maximum term for loans extended on machinery and equipment is based on the projected useful life of such machinery and equipment. Most business lines of credit are written on demand and are reviewed annually.
Commercial and industrial loans are generally secured with short-term assets; however, in many cases, additional collateral such as real estate is provided as additional security for the loan. Loan-to-value maximum thresholds have been established by the Corporation and are specific to the type of collateral. Collateral values may be determined using invoices, inventory reports, accounts receivable aging reports, business financial statements, collateral appraisals, etc. Commercial and industrial loans are typically supported by personal guarantees of the borrower.
In underwriting commercial and industrial loans, an analysis is performed to evaluate the borrower’s character and capacity to repay the loan, the adequacy of the borrower’s capital and collateral, as well as the conditions affecting the borrower. Evaluation of the borrower’s past, present and future cash flows is also an important aspect of the Corporation’s analysis of the borrower’s ability to repay.
Commercial and industrial loans generally present a higher level of risk than other types of loans due primarily to the effect of general economic conditions. Commercial and industrial loans are typically made on the basis of the borrower’s ability to make repayment from cash flows from the borrower’s primary business activities. As a result, the availability of funds for the repayment of commercial and industrial loans is dependent on the success of the business itself, which in turn, is likely to be dependent upon the general economic environment.
Commercial Real Estate Lending
The Corporation engages in commercial real estate lending in its primary market area and surrounding areas. The Corporation’s commercial real estate portfolio is secured primarily by commercial retail space, commercial office buildings, residential housing and hotels. Generally, commercial real estate loans have terms that do not exceed twenty years, have loan-to-value ratios of up to eighty percent of the value of the collateral property, and are typically supported by personal guarantees of the borrowers.
In underwriting these loans, the Corporation performs a thorough analysis of the financial condition of the borrower, the borrower’s credit history, and the reliability and predictability of the cash flow generated by the property securing the loan. The value of the property is determined by either independent appraisers or internal evaluations by Bank officers.
Commercial real estate loans generally present a higher level of risk than residential real estate secured loans. Repayment of loans secured by commercial real estate is typically dependent upon the successful operation of the related real estate project and/or the effect of the general economic conditions on income producing properties.
Residential Real Estate Lending (Including Home Equity)
The Corporation’s residential real estate portfolio is comprised of one-to-four family residential mortgage loan originations, home equity term loans and home equity lines of credit. These loans are generated by the Corporation’s marketing efforts, its present customers, walk-in customers and referrals. These loans originate primarily within or with customers from the Corporation’s market area.
The Corporation’s one-to-four family residential mortgage originations are secured primarily by properties located in its primary market area and surrounding areas. The Corporation offers fixed-rate mortgage loans with terms up to a maximum of thirty years for both permanent structures and those under construction. Loans with terms of thirty years are normally held for sale and sold without recourse; most of the residential mortgages held in the Corporation’s residential real estate portfolio have maximum terms of twenty years. Generally, the majority of the Corporation’s residential mortgage loans originate with a loan-to-value of eighty percent or less, or those with primary mortgage insurance at ninety-five percent or less. Home equity term loans are secured by the borrower’s primary residence and typically have a maximum loan-to-value of eighty percent and a maximum term of fifteen years. In general, home equity lines of credit are secured by the borrower’s primary residence with a maximum loan-to-value of eighty percent and a maximum term of twenty years.
In underwriting one-to-four family residential mortgage loans, the Corporation evaluates the borrower’s ability to make monthly payments, the borrower’s repayment history and the value of the property securing the loan. The ability and willingness to repay is assessed based upon the borrower’s employment history, current financial conditions and credit background. A majority of the properties securing residential real estate loans made by the Corporation are appraised by independent appraisers. The Corporation generally requires mortgage loan borrowers to obtain an attorney’s title opinion or title insurance and fire and property insurance, including flood insurance, if applicable.
Residential mortgage loans, home equity term loans and home equity lines of credit generally present a lower level of risk than consumer loans because they are secured by the borrower’s primary residence. Risk is increased when the Corporation is in a subordinate position, especially to another lender, for the loan collateral.
Consumer Lending
The Corporation offers a variety of secured and unsecured consumer loans, including vehicle loans, stock loans and loans secured by financial institution deposits. These loans originate primarily within or with customers from the Corporation’s market area.
Consumer loan terms vary according to the type and value of collateral and creditworthiness of the borrower. In underwriting personal loans, a thorough analysis is performed regarding the borrower’s willingness and financial ability to repay the loan as agreed. The ability and willingness to repay is assessed based upon the borrower’s employment history, current financial condition and credit background.
Consumer loans may entail greater credit risk than residential real estate loans, particularly in the case of personal loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles or recreational equipment. In such cases, repossessed collateral for a defaulted personal loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, personal loan collections are dependent on the borrower’s continuing financial stability and therefore, are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.
Delinquent Loans
Generally, a loan is considered to be past-due when scheduled loan payments are in arrears 10 days or more. Delinquent notices are generated automatically when a loan is 10 or 15 days past-due, depending on loan type. Collection efforts continue on past-due loans that have not been brought current, when it is believed that some chance exists for improvement in the status of the loan. Past-due loans are continually evaluated with the determination for charge-off being made when no reasonable chance remains that the status of the loan can be improved.
Commercial and Industrial and Commercial Real Estate loans are charged off in whole or in part when they become sufficiently delinquent based upon the terms of the underlying loan contract and when a collateral deficiency exists. Because all or part of the contractual cash flows are not expected to be collected, the loan is considered to be impaired, and the Bank estimates the impairment based on its analysis of the cash flows or collateral estimated at fair value less cost to sell.
Residential Real Estate and Consumer loans are charged off when they become sufficiently delinquent based upon the terms of the underlying loan contract and when the value of the underlying collateral is not sufficient to support the loan balance and a loss is expected. At that time, the amount of estimated collateral deficiency, if any, is charged off for loans secured by collateral, and all other loans are charged off in full. Loans with collateral are charged down to the estimated fair value of the collateral less cost to sell.
Existing loans in which the borrower has declared bankruptcy are considered on a case by case basis to determine whether repayment is likely to occur (eg. reaffirmation by the borrower with demonstrated repayment ability). Otherwise, loans are charged off in full or written down to the estimated fair value of collateral less cost to sell.
Generally, a loan is classified as non-accrual and the accrual of interest on such a loan is discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan may currently be performing. A loan may remain on accrual status if it is well secured (or supported by a strong guarantee) and in the process of collection. When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against interest income. Certain non-accrual loans may continue to perform; that is, payments are still being received. Generally, the payments are applied to principal. These loans remain under constant scrutiny, and if performance continues, interest income may be recorded on a cash basis based on management's judgment regarding the collectability of principal.
Allowance for Loan Losses
The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses and subsequent recoveries, if any, are credited to the allowance.
The allowance for loan losses is maintained at a level estimated by management to be adequate to absorb potential loan losses. Management’s periodic evaluation of the adequacy of the allowance for loan losses is based on the Corporation’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay (including the timing of future payments), the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions, and other relevant factors. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change.
The allowance consists of specific, general and unallocated components. The specific component relates to loans that are individually classified as impaired. Select loans are not aggregated for collective impairment evaluation, as such; all loans are subject to individual impairment evaluation should the facts and circumstances pertinent to a particular loan suggest that such evaluation is necessary. Factors considered by management in determining impairment include payment status and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. If a loan is impaired, a portion of the allowance may be allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from collateral. Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loans may be reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Corporation determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.
The general component covers all other loans not identified as impaired and is based on historical losses and qualitative factors. The historical loss component of the allowance is determined by losses recognized by portfolio segment over a time period that management has determined represents the current credit cycle. Qualitative factors impacting each portfolio segment may include: delinquency trends, loan volume trends, Bank policy changes, management processes and oversight, economic trends (including change in consumer and business disposable incomes, unemployment and under-employment levels, and other conditions), concentrations by industry or product, internal and external loan review processes, collateral value and market conditions, and external factors including regulatory issues and competition.
The unallocated component of the allowance is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.
A reserve for unfunded lending commitments is provided for possible credit losses on off-balance sheet credit exposures. The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded loan commitments and, if necessary, is recorded in other liabilities on the consolidated balance sheets. As of September 30, 2019 and December 31, 2018, the amount of the reserve for unfunded lending commitments was $104,000 and $117,000, respectively.
The Corporation is subject to periodic examination by its federal and state examiners, and may be required by such regulators to recognize additions to the allowance for loan losses based on their assessment of credit information available to them at the time of their examinations.
A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the original loan agreement. Under current accounting standards, the allowance for loan losses related to impaired loans is based on discounted cash flows using the loan’s effective interest rate at inception or the fair value of the collateral for certain collateral dependent loans.
The restructuring of a loan is considered a “troubled debt restructuring” if both the following conditions are met: (i) the borrower is experiencing financial difficulties, and (ii) the Bank has granted a concession. The most common concessions granted include one or more modifications to the terms of the debt, such as (a) a reduction in the interest rate for the remaining life of the debt, (b) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk, (c) a temporary period of interest-only payments, and (d) a reduction in the contractual payment amount for either a short period or remaining term of the loan. A less common concession is the forgiveness of a portion of the principal.
The determination of whether a borrower is experiencing financial difficulties takes into account not only the current financial condition of the borrower, but also the potential financial condition of the borrower were a concession not granted. Similarly, the determination of whether a concession has been granted is very subjective in nature. For example, simply extending the term of a loan at its original interest rate or even at a higher interest rate could be interpreted as a concession unless the borrower could readily obtain similar credit terms from a different lender.
Loans modified in a troubled debt restructuring are considered impaired and may or may not be placed on non-accrual status until the Bank determines the future collection of principal and interest is reasonably assured, which generally requires that the borrower demonstrates a period of performance according to the restructured terms of six months.
The Bank utilizes a risk grading matrix as a tool for managing credit risk in the loan portfolio and assigns an asset quality rating (risk grade) to all Commercial and Industrial, Commercial Real Estate, Residential Real Estate and Consumer borrowings. An asset quality rating is assigned using the guidance provided in the Bank’s loan policy. Primary responsibility for assigning the asset quality rating rests with the credit department. The asset quality rating is validated periodically by both an internal and external loan review process.
The commercial loan grading system focuses on a borrower’s financial strength and performance, experience and depth of management, primary and secondary sources of repayment, the nature of the business and the outlook for the particular industry. Primary emphasis is placed on financial condition and trends. The grade also reflects current economic and industry conditions; as well as other variables such as liquidity, cash flow, revenue/earnings trends, management strengths or weaknesses, quality of financial information, and credit history.
The loan grading system for Residential Real Estate and Consumer loans focuses on the borrower’s credit score and credit history, debt-to-income ratio and income sources, collateral position and loan-to-value ratio.
Risk grade characteristics are as follows:
Risk Grade 1 – MINIMAL RISK through Risk Grade 6 – MANAGEMENT ATTENTION (Pass Grade Categories)
Risk is evaluated via examination of several attributes including but not limited to financial trends, strengths and weaknesses, likelihood of repayment when considering both cash flow and collateral, sources of repayment, leverage position, management expertise, and repayment history.
At the low-risk end of the rating scale, a risk grade of 1 – Minimal Risk is the grade reserved for loans with exceptional credit fundamentals and virtually no risk of default or loss. Loan grades then progress through escalating ratings of 2 through 6 based upon risk. Risk Grade 2 – Modest Risk are loans with sufficient cash flows; Risk Grade 3 – Average Risk are loans with key balance sheet ratios slightly above the borrower’s peers; Risk Grade 4 – Acceptable Risk are loans with key balance sheet ratios usually near the borrower’s peers, but one or more ratios may be higher; and Risk Grade 5 – Marginally Acceptable are loans with strained cash flow, increasing leverage and/or weakening markets. Risk Grade 6 – Management Attention are loans with weaknesses resulting from declining performance trends and the borrower’s cash flows may be temporarily strained. Loans in this category are performing according to terms, but present some type of potential concern.
Risk Grade 7 − SPECIAL MENTION (Non-Pass Category)
Generally, these loans are currently protected, but are “potentially weak.” They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard.
Assets in this category are protected but have potential weakness which may, if not checked or corrected, weaken the asset or inadequately protect the Bank’s credit position at some future date. No loss of principal or interest is envisioned; however, they constitute an undue credit risk that may be minor but is unwarranted in light of the circumstances surrounding a specific asset. Risk is increasing beyond that at which the loan originally would have been granted. Historically, cash flows are inconsistent; financial trends show some deterioration. Liquidity and leverage are above industry averages. Financial information could be incomplete or inadequate. A Special Mention asset has potential weaknesses that deserve management’s close attention.
Risk Grade 8 − SUBSTANDARD (Non-Pass Category)
Generally, these assets are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have “well-defined” weaknesses that jeopardize the full liquidation of the debt.
These loans are characterized by the distinct possibility that the Bank will sustain some loss if the aggregate amount of substandard assets is not fully covered by the liquidation of the collateral used as security. Substandard loans have a high probability of payment default and require more intensive supervision by Bank management.
Risk Grade 9 − DOUBTFUL (Non-Pass Category)
Generally, loans graded doubtful have all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point whereby the basis of current information, conditions, and values, collection or liquidation in full is deemed to be highly improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors that may work to strengthen the asset, its classification is deferred until, for example, a proposed merger, acquisition, liquidation procedure, capital injection, perfection of liens on additional collateral and/or refinancing plan is completed. Loans are graded doubtful if they contain weaknesses so serious that collection or liquidation in full is questionable.
The following table presents the classes of the loan portfolio summarized by risk rating as of September 30, 2019 and December 31, 2018:
Commercial and
Industrial
Commercial Real Estate
September 30,
December 31,
September 30,
December 31,
(Dollars in thousands)
2019
2018
2019
2018
Grade:
1-6 Pass
$
84,067
$
90,835
$
365,318
$
329,126
7 Special Mention
3
6
947
5,249
8 Substandard
1,083
1,219
12,662
13,403
9 Doubtful
―
―
―
―
Add (deduct): Unearned discount and
―
―
―
―
Net deferred loan fees and costs
585
160
738
698
Total loans
$
85,738
$
92,220
$
379,665
$
348,476
Residential Real Estate
Including Home Equity
Consumer
September 30,
December 31,
September 30,
December 31,
2019
2018
2019
2018
Grade:
1-6 Pass
$
158,795
$
158,755
$
5,703
$
5,854
7 Special Mention
118
121
54
1
8 Substandard
1,082
941
37
9
9 Doubtful
—
—
—
—
Add (deduct): Unearned discount and
—
—
—
—
Net deferred loan fees and costs
(98)
(76)
91
91
Total loans
$
159,897
$
159,741
$
5,885
$
5,955
Total Loans
September 30,
December 31,
2019
2018
Grade:
1-6 Pass
$
613,883
$
584,570
7 Special Mention
1,122
5,377
8 Substandard
14,864
15,572
9 Doubtful
—
—
Add (deduct): Unearned discount and
—
—
Net deferred loan fees and costs
1,316
873
Total loans
$
631,185
$
606,392
Commercial and Industrial and Commercial Real Estate include loans categorized as tax-free in the amounts of $20,190,000 and $2,047,000 at September 30, 2019 and $24,161,000 and $2,164,000 at December 31, 2018. Loans held for sale amounted to $1,664,000 at September 30, 2019 and $365,000 at December 31, 2018.
The activity in the allowance for loan losses, by loan class, is summarized below for the periods indicated.
Commercial
Commercial
Residential
(Dollars in thousands)
and Industrial
Real Estate
Real Estate
Consumer
Unallocated
Total
As of and for the three month period ended September 30, 2019:
Allowance for Loan Losses:
Beginning balance
$
643
$
3,899
$
1,641
$
111
$
478
$
6,772
Charge-offs
—
—
(16)
(18)
—
(34)
Recoveries
5
—
—
2
—
7
Provision
(18)
150
16
15
12
175
Ending Balance
$
630
$
4,049
$
1,641
$
110
$
490
$
6,920
Commercial
Commercial
Residential
(Dollars in thousands)
and Industrial
Real Estate
Real Estate
Consumer
Unallocated
Total
As of and for the nine month period ended September 30, 2019:
Allowance for Loan Losses:
Beginning balance
$
724
$
3,700
$
1,650
$
117
$
554
$
6,745
Charge-offs
—
(64)
(44)
(43)
—
(151)
Recoveries
6
—
2
5
—
13
Provision
(100)
413
33
31
(64)
313
Ending Balance
$
630
$
4,049
$
1,641
$
110
$
490
$
6,920
Ending balance: individually evaluated for impairment
$
—
$
1
$
—
$
―
$
―
$
1
Ending balance: collectively evaluated for impairment
$
630
$
4,048
$
1,641
$
110
$
490
$
6,919
Loans Receivable:
Ending Balance
$
85,738
$
379,665
$
159,897
$
5,885
$
―
$
631,185
Ending balance: individually evaluated for impairment
$
1,095
$
11,264
$
805
$
—
$
—
$
13,164
Ending balance: collectively evaluated for impairment
$
84,643
$
368,401
$
159,092
$
5,885
$
—
$
618,021
Commercial
Commercial
Residential
(Dollars in thousands)
and Industrial
Real Estate
Real Estate
Consumer
Unallocated
Total
As of and for the three month period ended September 30, 2018:
Allowance for Loan Losses:
Beginning balance
$
907
$
3,980
$
1,688
$
105
$
266
$
6,946
Charge-offs
(10)
(117)
(25)
(14)
—
(166)
Recoveries
30
60
—
1
—
91
Provision
(169)
(385)
18
19
517
—
Ending Balance
$
758
$
3,538
$
1,681
$
111
$
783
$
6,871
Commercial
Commercial
Residential
(Dollars in thousands)
and Industrial
Real Estate
Real Estate
Consumer
Unallocated
Total
As of and for the nine month period ended September 30, 2018:
Allowance for Loan Losses:
Beginning balance
$
949
$
4,067
$
1,656
$
111
$
704
$
7,487
Charge-offs
(18)
(577)
(131)
(35)
—
(761)
Recoveries
31
60
—
4
—
95
Provision
(204)
(12)
156
31
79
50
Ending Balance
$
758
$
3,538
$
1,681
$
111
$
783
$
6,871
Ending balance: individually evaluated for impairment
$
—
$
2
$
16
$
—
$
—
$
18
Ending balance: collectively evaluated for impairment
$
758
$
3,536
$
1,665
$
111
$
783
$
6,853
Loans Receivable:
Ending Balance
$
97,146
$
332,987
$
161,547
$
6,040
$
—
$
597,720
Ending balance: individually evaluated for impairment
$
1,157
$
10,938
$
857
$
—
$
—
$
12,952
Ending balance: collectively evaluated for impairment
$
95,989
$
322,049
$
160,690
$
6,040
$
—
$
584,768
Commercial
Commercial
Residential
(Dollars in thousands)
and Industrial
Real Estate
Real Estate
Consumer
Unallocated
Total
As of and for the year ended December 31, 2018
Allowance for Loan Losses:
Beginning balance
$
949
$
4,067
$
1,656
$
111
$
704
$
7,487
Charge-offs
(18)
(783)
(181)
(57)
—
(1,039)
Recoveries
31
60
—
6
—
97
Provision
(238)
356
175
57
(150)
200
Ending Balance
$
724
$
3,700
$
1,650
$
117
$
554
$
6,745
Ending balance: individually evaluated for impairment
$
—
$
1
$
—
$
—
$
—
$
1
Ending balance: collectively evaluated for impairment
$
724
$
3,699
$
1,650
$
117
$
554
$
6,744
Loans Receivable:
Ending Balance
$
92,220
$
348,476
$
159,741
$
5,955
$
—
$
606,392
Ending balance: individually evaluated for impairment
$
1,126
$
15,890
$
577
$
—
$
—
$
17,593
Ending balance: collectively evaluated for impairment
$
91,094
$
332,586
$
159,164
$
5,955
$
—
$
588,799
Of the $895,000 in foreclosed assets held for resale at September 30, 2019, $39,000 was represented by land and $856,000 was represented by commercial real estate. Of the $1,163,000 in foreclosed assets held for resale at December 31, 2018, $268,000 was represented by residential real estate, $39,000 was represented by land, and $856,000 was represented by commercial real estate. At September 30, 2019 and December 31, 2018, all foreclosed assets were held as the result of obtaining physical possession. Consumer mortgage loans secured by residential real estate for which the Bank has entered into formal foreclosure proceedings but for which physical possession of the property has yet to be obtained amounted to $649,000 at September 30, 2019 and $718,000 at December 31, 2018. These balances were not included in foreclosed assets held for resale at September 30, 2019 or December 31, 2018.
From time to time, the Bank may agree to modify the contractual terms of a borrower’s loan. In cases where the modifications represent a concession to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring (“TDR”).
The outstanding recorded investment of TDRs as of September 30, 2019 and December 31, 2018 was $8,843,000 and $13,777,000, respectively. The decrease in TDRs at September 30, 2019 as compared to December 31, 2018 is mainly attributable to one large loan to a real estate developer specializing in commercial office space that carried a value of $4,296,000 and was modified as a TDR during the fourth quarter of 2018; the loan was subsequently paid off during the nine months ended September 30, 2019. There were no unfunded commitments on TDRs at September 30, 2019 and December 31, 2018.
During the three months ended September 30, 2019, no loans were modified as TDRs as compared to the same period in 2018, when one loan with a combined post modification balance of $26,000 was modified as a TDR. The loan modification for the three months ended September 30, 2018 consisted of one term modification .
During the nine months ended September 30, 2019, no loans were modified as TDRs as compared to the same period in 2018, when ten loans with a combined post modification balance of $1,180,000 were classified as TDRs. The loan modifications for the nine months ended September 30, 2018 consisted of one interest rate modification, two term modifications, and seven payment modifications .
The following table presents the outstanding recorded investment of TDRs at the dates indicated:
September 30,
December 31,
(Dollars in thousands)
2019
2018
Non-accrual TDRs
$
112
$
80
Accruing TDRs
8,731
13,697
Total
$
8,843
$
13,777
At September 30, 2019, nine Commercial Real Estate loans classified as TDRs with a combined recorded investment of $661,000 and one Commercial and Industrial loan classified as a TDR with a recorded investment of $3,000 were not in compliance with the terms of their restructure, compared to September 30, 2018 when ten Commercial Real Estate loans classified as TDRs with a combined recorded investment of $561,000 were not in compliance with the terms of their restructure.
During the three months ended September 30, 2019, no loans that were modified as TDRs during the preceding twelve months had experienced payment defaults, compared to the three months ended September 30, 2018 when three Commercial Real Estate loans with a combined outstanding recorded investment of $144,000 that were modified as TDRs during the preceding twelve months had experienced payment defaults. During the nine months ended September 30, 2019, no loans that were modified as TDRs during the preceding twelve months had experienced payment defaults, compared to the nine months ended September 30, 2018 when five Commercial Real Estate loans with a combined outstanding recorded investment of $190,000 that were modified as TDRs during the preceding twelve months had experienced payment defaults.
The following table present |
