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Loans and Allowance for Loan Losses
 9 Months Ended
Sep. 30, 2012
Loans and Allowance for Loan Losses

(6) Loans and Allowance for Loan Losses

The allowance for loan losses is maintained by the Corporation at a level considered by Management to be adequate to cover probable credit losses inherent in the loan portfolio. The amount of the provision for loan losses charged to operating expenses is the amount necessary, in the estimation of Management, to maintain the allowance for loan losses at an adequate level. While Management’s periodic analysis of the allowance for loan losses may dictate portions of the allowance be allocated to specific problem loans, the entire amount is available for any loan charge-offs that may occur. Loan losses are charged off against the allowance when Management believes that the full collectability of the loan is unlikely. Recoveries of amounts previously charged-off are credited to the allowance.

The allowance is comprised of a general allowance for unidentified problem loans and a specific allowance for identified problem loans. The general allowance is determined by applying estimated loss factors to the credit exposures from outstanding loans. The methodology applies to the Corporation’s total loan portfolio including the performing portion of commercial and commercial real estate loans, real estate, and all types of other loans. The loss factors are applied accordingly on a portfolio basis. Loss factors are based on the Corporation’s historical loss experience and are reviewed for appropriateness on a quarterly basis, along with other factors affecting the collectability of the loan portfolio. These other factors include but are not limited to: changes in lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices; changes in national and local economic and business conditions, including the condition of various market segments; changes in the nature and volume of the portfolio; changes in the experience, ability, and depth of lending management and staff; changes in the volume and severity of past due and classified loans, the volume of nonaccrual loans, troubled debt restructurings and other loan modifications; the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and the effect of external factors, such as legal and regulatory requirements, on the level of estimated credit losses in the Corporation’s current portfolio. Specific allowances are established for all impaired loans when Management has determined that, due to identified significant conditions, it is probable that a loss will be incurred.

Activity in the loan balances and the allowance for loan losses by segment at September 30, 2012 and September 30, 2011 are summarized as follows:

 

                                                                                                                      

Nine Months Ended September 30, 2012

                                           
     Commercial
Real Estate		     Commercial     Residential
Real Estate		     Home
Equity Loans		     Indirect     Consumer     Total  
Allowance for loan losses:    (Dollars in thousands)  

Balance, beginning of period

    $ 10,714      $ 1,409      $ 1,331      $ 2,289      $ 891      $ 429      $ 17,063   

Losses charged off

      (2,057 )      (213 )      (1,267 )      (851 )      (738 )      (252 )      (5,378 ) 

Recoveries

      39        24        86        31        244        36        460   

Provision charged to expense

      3,064        (466 )      1,551        661        615        17        5,442   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance, end of period

    $ 11,760      $ 754      $ 1,701      $ 2,130      $ 1,012      $ 230      $ 17,587   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                                                                                      

Three Months Ended September 30, 2012

                                           
     Commercial
Real Estate		     Commercial     Residential
Real Estate		     Home
Equity Loans		     Indirect     Consumer     Total  
Allowance for loan losses:    (Dollars in thousands)  

Balance, beginning of period

    $ 11,396      $ 840      $ 1,716      $ 2,146      $ 985      $ 217      $ 17,300   

Losses charged off

      (738 )      (48 )      (292 )      (296 )      (161 )      (146 )      (1,681 ) 

Recoveries

      9        4        3        16        54        7        93   

Provision charged to expense

      1,093        (42 )      274        264        134        152        1,875   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance, end of period

    $ 11,760      $ 754      $ 1,701      $ 2,130      $ 1,012      $ 230      $ 17,587   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

As of September 30, 2012

                                           

Ending allowance balance attributable to loans:

               

Individually evaluated for impairment

    $ 2,525      $ 69      $ 2      $ —        $ —        $ —        $ 2,596   

Collectively evaluated for impairment

      9,235        685        1,699        2,130        1,012        230        14,991   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total ending allowance balance

    $ 11,760      $ 754      $ 1,701      $ 2,130      $ 1,012      $ 230      $ 17,587   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loans:

               

Individually evaluated for impairment

    $ 25,310      $ 340      $ 1,179      $ —        $ —        $ —        $ 26,829   

Collectively evaluated for impairment

      386,614        71,582        67,370        125,108        195,358        12,854        858,886   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total ending loans balance

    $ 411,924      $ 71,922      $ 68,549      $ 125,108      $ 195,358      $ 12,854      $ 885,715   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                                                                                      

Nine Months Ended September 30, 2011

                                           
     Commercial
Real Estate		     Commercial     Residential
Real Estate		     Home
Equity Loans		     Indirect     Consumer     Total  
Allowance for loan losses:    (Dollars in thousands)  

Balance, beginning of period

    $ 11,127      $ 1,317      $ 805      $ 1,512      $ 904      $ 471      $ 16,136   

Losses charged off

      (2,669 )      (236 )      (1,746 )      (957 )      (264 )      (490 )      (6,362 ) 

Recoveries

      249        38        49        15        77        98        526   

Provision charged to expense

      3,079        6        2,142        1,744        234        340        7,545   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance, end of period

    $ 11,786      $ 1,125      $ 1,250      $ 2,314      $ 951      $ 419      $ 17,845   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                                                                                      

Three Months Ended September 30, 2011

                                           
Allowance for loan losses:    (Dollars in thousands)  

Balance, beginning of period

    $ 11,681      $ 1,182      $ 1,249      $ 1,891      $ 921      $ 427      $ 17,351   

Losses charged off

      (577 )      (13 )      (443 )      (548 )      (117 )      (53 )      (1,751 ) 

Recoveries

      34        2        9        42        44        14        145   

Provision charged to expense

      648        (46 )      435        929        103        31        2,100   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance, end of period

    $ 11,786      $     1,125      $     1,250      $        2,314      $    951      $     419      $ 17,845   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

As of September 30, 2011

                                           

Ending allowance balance attributable to loans:

               

Individually evaluated for impairment

    $ 5,602      $ 166      $ 302      $ —        $ —        $ —        $ 6,070   

Collectively evaluated for impairment

      6,184        959        948        2,314        951        419        11,775   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total ending allowance balance

    $ 11,786      $ 1,125      $ 1,250      $ 2,314      $ 951      $ 419      $ 17,845   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loans:

               

Individually evaluated for impairment

    $ 35,349      $ 771      $ 2,126      $ —        $ —        $ —        $ 38,246   

Collectively evaluated for impairment

      351,542        71,908        66,711        130,143        158,885        12,877        792,066   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total ending loans balance

    $ 386,891      $ 72,679      $ 68,837      $ 130,143      $ 158,885      $ 12,877      $ 830,312   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Delinquencies

Delinquencies are a sign of weakness in credit quality. Lending staff at the Corporation monitor the financial performance and delinquency of borrowers in its portfolios. Lenders are responsible for managing delinquencies by following up with borrowers and arranging for payments. The Corporation determines if a commercial or commercial real estate loan is delinquent based on the number of days past due according to the contractual terms of the loan. For residential, home equity and consumer loans, the Corporation considers the borrower delinquent if the borrower is in arrears by two or more monthly payments. The following procedure is followed in managing delinquent accounts:

 

  •  

15-30 days past due- a collection notice is sent reminding the borrower of past due status and the urgency of bringing the account current.

 

  •  

45 days past due- a default letter is sent declaring the loan in default and advising the borrower that legal action will be necessary if the account is not brought current immediately.

 

  •  

60 days past due- an “attorney letter” accelerating the loan is sent advising the borrower that legal proceeding to collect the debt will begin immediately.

 

Management monitors delinquencies and potential problem loans on a recurring basis. At September 30, 2012 there was $29,083 in total past due loans or 3.28% of total loans compared to $31,315 or 3.71% of total loans at December 31, 2011. A table showing total loan delinquencies as of September 30, 2012 and December 31, 2011 by loan segment is as follows:

 

Age Analysis of Past Due Loans as of September 30, 2012                                                 
(Dollars in thousands)    30-59 Days
Past Due		      60-89
Days
Past  Due		      Greater
than
90  Days		      Total Past
Due		      Current      Total Loans      Recorded
Investment >
90 Days and
Accruing		  

Commercial real estate

    $ 2,646       $ 1,210       $ 15,397       $ 19,253       $ 392,671       $ 411,924       $ —     

Commercial

      38         19         399         456         71,466         71,922         —     

Residential real estate

      538         1,218         3,286         5,042         63,507         68,549         —     

Home equity loans

      1,191         378         1,631         3,200         121,908         125,108         —     

Indirect

      657         146         56         859         194,499         195,358      

Consumer

      61         49         163         273         12,581         12,854         —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 5,131       $ 3,020       $ 20,932       $ 29,083       $ 856,632       $ 885,715       $ —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

Age Analysis of Past Due Loans as of December 31, 2011                                                 
(Dollars in thousands)    30-59 Days
Past Due		      60-89
Days
Past  Due		      Greater
than
90  Days		      Total Past
Due		      Current      Total Loans      Recorded
Investment >
90 Days and
Accruing		  

Commercial real estate

    $ 290       $ 804       $ 19,023       $ 20,117       $ 361,735       $ 381,852       $ —     

Commercial

      54         249         805         1,108         75,462         76,570         —     

Residential real estate

      545         1,172         3,554         5,271         59,253         64,524         —     

Home equity loans

      1,942         181         1,666         3,789         123,169         126,958         —     

Indirect

      664         71         124         859         179,230         180,089      

Consumer

      131         12         28         171         12,924         13,095         —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 3,626       $ 2,489       $ 25,200       $ 31,315       $ 811,773       $ 843,088       $ —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

Impaired Loans

A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the loan contract. Residential mortgage, installment and other consumer loans are evaluated collectively for impairment. Individual commercial loans are evaluated for impairment. Impaired loans are written down by the establishment of a specific allowance where necessary. Interest income recognized on impaired loans while considered impaired was immaterial for the periods reported. Information regarding impaired loans as of September 30, 2012 and June 30, 2011 is as follows:

 

                                                                          
     At September 30, 2012      Three Months Ended
September 30, 2012		      Nine Months Ended
September 30, 2012		  
     Recorded
Investment		      Unpaid
Principal
Balance		      Related
Allowance		      Average Recorded
Balance		      Average Recorded
Balance		  
(Dollars in thousands)                                   

With no related allowance recorded:

               

Commercial real estate

    $ 6,168       $ 8,935       $ —         $ 7,204       $ 9,246   

Commercial

      156         156         —           164         269   

Residential real estate

      1,080         1,987         —           966         1,052   

Home equity loans

      —           —           —           —           —     

Indirect

      —           —           —           —           —     

Consumer

      —           —           —           —           —     

With allowance recorded:

               

Commercial real estate

      19,142         23,652         2,525         19,502         19,376   

Commercial

      184         184         69         159         216   

Residential real estate

      99         136         2         85         79   

Home equity loans

      —           —           —           —           —     

Indirect

      —           —           —           —           —     

Consumer

      —           —           —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 26,829       $ 35,050       $ 2,596       $ 28,080       $ 30,238   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

                                                                          
     At December 31, 2011      Three Months Ended
September 30, 2011		      Nine Months Ended
September 30, 2011		  
     Recorded
Investment		      Unpaid
Principal
Balance		      Related
Allowance		      Average Recorded
Balance		      Average Recorded
Balance		  
(Dollars in thousands)                                   

With no related allowance recorded:

               

Commercial real estate

    $ 12,585       $ 20,138       $ —         $ 19,406       $ 10,278   

Commercial

      386         386         —           406         432   

Residential real estate

      1,069         1,897         —           1,321         1,399   

Home equity loans

      —           —           —           —           —     

Indirect

      —           —           —           —           —     

Consumer

      —           —           —           —           —     

With allowance recorded:

               

Commercial real estate

      19,161         19,823         3,747         24,612         24,941   

Commercial

      319         794         148         751         681   

Residential real estate

      72         72         37         1,321         1,399   

Home equity loans

      —           —           —           —           —     

Indirect

      —           —           —           —           —     

Consumer

      —           —           —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 33,592       $ 43,110       $ 3,932       $ 47,817       $ 39,130   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Nonaccrual loans at September 30, 2012 were $32,584 compared to $34,471 at December 31, 2011.

 

Loans On NonAccrual Status

 

     September 30, 2012     December 31, 2011  
     (Dollars in thousands)  

Commercial real estate

    $ 20,629      $ 21,512   

Commercial

      484        1,072   

Residential real estate

      6,317        6,551   

Home equity loans

      4,178        4,365   

Indirect

      637        711   

Consumer

      339        260   
  

 

 

    

 

 

  

Total Nonaccrual Loans

    $ 32,584      $ 34,471   
  

 

 

    

 

 

  

Percentage of nonaccrual loans to portfolio loans

      3.68 %      4.09 % 

Percentage of nonaccrual loans to total assets

      2.70 %      2.95 % 

Troubled Debt Restructuring

A restructuring of a debt constitutes a troubled debt restructuring if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. That concession either stems from an agreement between the creditor and the debtor or is imposed by law or a court. The Corporation adheres to ASC 310-40, Troubled Debt Restructurings by Creditors, to determine whether a troubled debt structuring applies in a particular instance. As of September 30, 2012, the Corporation had five loans that were classified as troubled debt restructurings which totaled $2,861. As of December 31, 2011, the Corporation had five loans that were classified as a troubled debt restructuring in the amount of $3,099. The Corporation has allocated $364 and $307 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2012 and December 31, 2011, respectively. There are no commitments to lend additional amounts to borrowers with loans that are classified as troubled debt restructurings at September 30, 2012 and December 31, 2011.

 

Information regarding TDR loans for the three and nine months end September 30, 2012 and 2011 is as follows:

 

     For the Nine Months Ended
September 30, 2012		      For the Three Months Ended
September 30, 2012		  
     (Dollars in thousands)      (Dollars in thousands)  
     Number of
Contracts		      Post-Modification
Outstanding
Recorded Investment		      Number of
Contracts		      Post-Modification
Outstanding
Recorded Investment		  

Troubled Debt Restructurings

            

Commercial Real Estate

      4       $ 2,861         —         $ —     
     

 

 

        

 

 

  

 

     For the Three Months Ended
September 30, 2011		      For the Nine Months Ended
September 30, 2011		  
     (Dollars in thousands)      (Dollars in thousands)  
     Number of
Contracts		      Post-Modification
Outstanding
Recorded Investment		      Number of
Contracts		      Post-Modification
Outstanding
Recorded Investment		  

Troubled Debt Restructurings

            

Commercial Real Estate

      —         $ —           1       $ 391   
     

 

 

        

 

 

  

Credit Risk Grading

Sound credit systems, practices and procedures such as credit risk grading systems; effective credit review and examination processes; effective loan monitoring, problem identification, and resolution processes; and a conservative loss recognition process and charge-off policy are integral to Management’s proper assessment of the adequacy of the allowance. Many factors are considered when grades are assigned to individual loans such as current and historic delinquency, financial statements of the borrower, current net realizable value of collateral and the general economic environment and specific economic trends affecting the portfolio. Commercial, commercial real estate and residential construction loans are assigned internal credit risk grades. The loan’s internal credit risk grade is reviewed on at least an annual basis and more frequently if needed based on specific borrower circumstances. Credit quality indicators used in Management’s periodic analysis of the adequacy of the allowance include the Corporation’s internal credit risk grades which are described below and are included in the table below for September 30, 2012 and December 31, 2011:

 

  •  

Grades 1 -5: defined as “Pass” credits — loans which are protected by the borrower’s current net worth and paying capacity or by the value of the underlying collateral. Pass credits are current or have not displayed a significant past due history.

 

  •  

Grade 6: defined as “Special Mention” credits — loans where a potential weakness or risk exists, which could cause a more serious problem if not monitored. Loans listed for special mention generally demonstrate a history of repeated delinquencies, which may indicate a deterioration of the repayment abilities of the borrower.

 

  •  

Grade 7: defined as “Substandard” credits — loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

 

  •  

Grade 8: defined as “Doubtful” credits — loans classified as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable.

 

  •  

Grade 9: defined as “Loss” credits — loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted.

For residential, home equity, indirect and consumer loan segments, the Corporation monitors credit quality using a combination of the delinquency status of the loan and/or the Corporation’s internal credit risk grades as indicated above.

 

The following table presents the recorded investment of commercial, commercial real estate and residential construction loans by internal credit risk grade and the recorded investment in residential, home equity, indirect and consumer loans based on delinquency status as of September 30, 2012 and December 31, 2011:

 

                                                                                                                                                  
     Commercial
Real Estate		      Commercial      Residential
Real Estate*		      Home Equity
Loans		      Indirect      Consumer      Total  
Commercial Credit Exposure    September 30, 2012  
     (Dollars in thousands)  

Loans graded by internal credit risk grade:

                     

Grade 1 - Minimal

    $ —         $ 114       $ —         $ —         $ —         $ —         $ 114   

Grade 2 - Modest

      —           —           —           —           —           —           —     

Grade 3 - Better than average

      1,551         10         —           —           —           —           1,561   

Grade 4 - Average

      33,278         4,681         229         —           —           —           38,188   

Grade 5 - Acceptable

      339,226         63,610         5,733         —           —           —           408,569   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total Pass Credits

      374,055         68,415         5,962         —           —           —           448,432   

Grade 6 - Special mention

      6,415         3,023         44         —           —           —           9,482   

Grade 7 - Substandard

      31,454         484         1,477         —           —           —           33,415   

Grade 8 - Doubtful

      —           —           —           —           —           —           —     

Grade 9 - Loss

      —           —           —           —           —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total loans internally credit risk graded

      411,924         71,922         7,483         —           —           —           491,329   

Loans not monitored by internal risk grade:

                     

Current loans not internally risk graded

      —           —           57,545         121,908         194,499         12,581         386,533   

30-59 days past due loans not internally risk graded

      —           —           538         1,191         657         61         2,447   

60-89 days past due loans not internally risk graded

      —           —           1,218         378         146         49         1,791   

90+ days past due loans not internally risk graded

      —           —           1,765         1,631         56         163         3,615   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total loans not internally credit risk graded

      —           —           61,066         125,108         195,358         12,854         394,386   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total loans internally and not internally credit risk graded

    $ 411,924       $ 71,922       $ 68,549       $ 125,108       $ 195,358       $ 12,854       $ 885,715   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

                                                                                                                                                  
     Commercial
Real Estate		      Commercial      Residential
Real Estate*		      Home Equity
Loans		      Indirect      Consumer      Total  
Commercial Credit Exposure    December 31, 2011  
     (Dollars in thousands)  

Loans graded by internal credit risk grade:

                     

Grade 1 - Minimal

    $ —         $ 3,157       $ —         $ —         $ —         $ —         $ 3,157   

Grade 2 - Modest

      —           —           —           —           —           —           —     

Grade 3 - Better than average

      1,602         19         —           —           —           —           1,621   

Grade 4 - Average

      44,527         5,322         237         —           —           —           50,086   

Grade 5 - Acceptable

      278,458         63,880         4,835         —           —           —           347,173   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total Pass Credits

      324,587         72,378         5,072         —           —           —           402,037   

Grade 6 - Special mention

      16,390         2,947         157         —           —           —           19,494   

Grade 7 - Substandard

      40,875         1,245         1,830         —           —           —           43,950   

Grade 8 - Doubtful

      —           —           —           —           —           —           —     

Grade 9 - Loss

      —           —           —           —           —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total loans internally credit risk graded

      381,852         76,570         7,059         —           —           —           465,481   

Loans not monitored by internal risk grade:

                     

Current loans not internally risk graded

      —           —           53,276         123,169         179,230         12,924         368,599   

30-59 days past due loans not internally risk graded

      —           —           545         1,942         664         131         3,282   

60-89 days past due loans not internally risk graded

      —           —           1,172         181         71         12         1,436   

90+ days past due loans not internally risk graded

      —           —           2,472         1,666         124         28         4,290   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total loans not internally credit risk graded

      —           —           57,465         126,958         180,089         13,095         377,607   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total loans internally and not internally credit risk graded

    $ 381,852       $ 76,570       $ 64,524       $ 126,958       $ 180,089       $ 13,095       $ 843,088   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

* Residential loans include conventional 1-4 family residential property loans and conventional 1-4 family residential property loans used to finance the cost of construction when upon completion of construction the loan converts into a permanent mortgage.

The Corporation adheres to underwriting standards consistent with its Loan Policy for indirect and consumer loans. Final approval of a consumer credit depends on the repayment ability of the borrower. Repayment ability generally requires the determination of the borrower’s capacity to meet current and proposed debt service requirements. A borrower’s repayment ability is monitored based on delinquency, generally for time periods of 30 to 59 days past due, 60 to 89 days past due and greater than 90 days past due. This information is provided in the above delinquent loan table. Additionally, a good indicator of repayment ability is a borrower’s credit history. A borrower’s credit history is evaluated though the use of credit reports and/or an automated underwriting system. A borrower’s credit score is an indication of a person’s creditworthiness that is used to access the likelihood that a borrower will repay their debts. A credit score is generally based upon a person’s past credit history and is a number between 300 and 850—the higher the number, the more creditworthy the person is deemed to be.