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Note 3 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans
 3 Months Ended
Mar. 31, 2019
Notes to Financial Statements  
Allowance for Credit Losses [Text Block]
Note
3
:
     Allowance for Loan Losses, Nonperforming Assets and Impaired Loans
 
The allowance for loan losses methodology incorporates individual evaluation of impaired loans and collective evaluation of groups of non-impaired loans. The Company performs ongoing analysis of the loan portfolio to determine credit quality and to identify impaired loans. Credit quality is rated based on the loan’s payment history, the borrower’s current financial situation and value of the underlying collateral.
 
Impaired Loans
Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts will
not
be collected when due according to the contractual terms of the loan agreement. Impaired loans are those loans that have been modified in a troubled debt restructure (“TDR” or “restructure”) and larger, usually non-homogeneous loans that are in nonaccrual or exhibit payment history or financial status that indicate that collection probably will
not
occur when due according to the loan’s terms. Generally, impaired loans are given risk ratings that indicate higher risk, such as “classified” or “special mention.” Impaired loans are individually evaluated to determine appropriate reserves and are measured at the lower of the invested amount or the fair value. Impaired loans that are
not
troubled debt restructures and for which fair value measurement indicates an impairment loss are designated nonaccrual. A restructured loan that maintains current status for at least
six
months
may
be in accrual status. Please refer to the Company’s
2018
Form
10
-K, Note
1:
Summary of Significant Accounting Policies for additional information on evaluation of impaired loans and associated specific reserves, and policies regarding nonaccruals, past due status and charge-offs.
Troubled debt restructurings impact the estimation of the appropriate level of the allowance for loan losses. If the restructuring included forgiveness of a portion of principal or accrued interest, the charge-off is included in the historical charge-off rates applied to the collective evaluation methodology. Restructured loans are individually evaluated for impairment, and the amount of a restructured loan’s book value in excess of its fair value is accrued as a specific allocation in the allowance for loan losses. If a TDR loan payment exceeds
90
days past due, it is examined to determine whether the late payment indicates collateral dependency or cash flows below those that were used in the fair value measurement. TDRs, as well as all impaired loans, that are determined to be collateral dependent are charged down to fair value. Deficiencies indicated by impairment measurements for TDRs that are
not
collateral dependent
may
be accrued in the allowance for loan losses or charged off if deemed uncollectible.
 
Collectively-Evaluated Loans
The Company evaluated characteristics in the loan portfolio and determined major segments and smaller classes within each segment. These characteristics include collateral type, repayment sources, and (if applicable) the borrower’s business model. The methodology for calculating reserves for collectively-evaluated loans is applied at the class level.
 
Portfolio Segments and Classes
The segments and classes used in determining the allowance for loan losses are as follows.
Real Estate Construction
Construction, residential
Construction, other
 
Consumer Real Estate
Equity lines
Residential closed-end
first
liens
Residential closed-end junior liens
Investor-owned residential real estate
 
Commercial Real Estate
Multifamily real estate
Commercial real estate, owner-occupied
Commercial real estate, other
Commercial Non Real Estate
Commercial and industrial
 
Public Sector and IDA
Public sector and IDA
 
Consumer Non Real Estate
Credit cards
Automobile
Other consumer loans
 
Historical Loss Rates
The Company’s allowance methodology for collectively-evaluated loans applies historical loss rates by class to current class balances as part of the process of determining required reserves. Class loss rates are calculated as the net charge-offs for the class as a percentage of average class balance. The Company averages loss rates for the most recent
8
quarters to determine the historical loss rate for each class.
Two loss rates for each class are calculated: total net charge-offs for the class as a percentage of average class loan balance (“class loss rate”), and total net charge-offs for the class as a percentage of average classified loans in the class (“classified loss rate”). Classified loans are those with risk ratings of “substandard” or lower. Net charge-offs in both calculations include charge-offs and recoveries of classified and non-classified loans as well as those associated with impaired loans. Class historical loss rates are applied to non-classified loan balances at the reporting date, and classified historical loss rates are applied to classified balances at the reporting date. 
 
Risk Factors
In addition to historical loss rates, risk factors pertinent to credit risk for each class are analyzed to estimate reserves for collectively-evaluated loans. Factors include changes in national and local economic and business conditions, the nature and volume of classes within the portfolio, loan quality, loan officers’ experience, lending policies and the Company’s loan review system.
The analysis of certain factors results in standard allocations to all segments and classes. These factors include the risk from changes in lending policies, loan officers’ average years of experience, unemployment levels, bankruptcy rates, interest rate environment, and competition/legal/regulatory environments. Factors analyzed for each class, with resultant allocations based upon the level of risk assessed for each class, include the risk from changes in loan review, levels of past due loans, levels of nonaccrual loans, current class balance as a percentage of total loans, and the percentage of high risk loans within the class. Additionally, factors specific to each segment are analyzed and result in allocations to the segment. Please refer to Note
1:
Summary of Significant Accounting Policies of Form
10
-K for a discussion of risk factors pertinent to each class.
Real estate construction loans are subject to general risks from changing commercial building and housing market trends and economic conditions that
may
impact demand for completed properties and the costs of completion. These risks are measured by market-area unemployment rates, bankruptcy rates, building market trends, and interest rates.
The credit quality of consumer real estate is subject to risks associated with the borrower’s repayment ability and collateral value, measured generally by analyzing local unemployment and bankruptcy trends, local housing market trends, and interest rates.
The commercial real estate segment includes loans secured by multifamily residential real estate, commercial real estate occupied by the owner/borrower, and commercial real estate leased to non-owners. Loans in the commercial real estate segment are impacted by economic risks from changing commercial real estate markets, rental markets for multi-family housing and commercial buildings, business bankruptcy rates, local unemployment and interest rate trends that would impact the businesses housed by the commercial real estate.
Commercial non real estate loans are secured by collateral other than real estate, or are unsecured. Credit risk for commercial non real estate loans is subject to economic conditions, generally monitored by local business bankruptcy trends, and interest rates.
Public sector and IDA loans are extended to municipalities and related entities. Credit risk is based upon the entity’s ability to repay and interest rate trends.
Consumer non real estate includes credit cards, automobile and other consumer loans. Credit cards and certain other consumer loans are unsecured, while collateral is obtained for automobile loans and other consumer loans. Credit risk stems primarily from the borrower’s ability to repay, measured by average unemployment, average personal bankruptcy rates and interest rates.
 
Factor allocations applied to each class are increased for loans rated special mention and increased to a greater extent for loans rated classified. The Company allocates additional reserves for “high risk” loans. High risk loans include junior liens, interest only and high loan to value loans.
A detailed analysis showing the allowance roll-forward by portfolio segment and related loan balance by segment follows.
 
   
Activity in the Allowance for Loan Losses for the
Three
Months Ended
March 31
, 201
9
  
   
Real Estate Construction
    
Consumer
Real Estate
    
Commercial
Real Estate
    
Commercial
Non Real
Estate
    
Public
Sector and
IDA
    
Consumer Non
Real Estate
    
Unallocated
    
Total
  
Balance, December 31, 2018
  
$
398
    
$
2,049
    
$
2,798
    
$
602
    
$
583
    
$
750
    
$
210
    
$
7,390
  
Charge-offs
  
 
---
    
 
(16
)
  
 
(150
)
  
 
---
    
 
---
    
 
(162
)
  
 
---
    
 
(328
)
Recoveries
  
 
---
    
 
---
    
 
12
    
 
---
    
 
---
    
 
86
    
 
---
    
 
98
  
Provision for (recovery of) loan losses
    
70
      
58
    
 
327
    
 
(27
)
  
 
(58
)
  
 
---
    
 
(170
)
    
200
  
Balance,
March
3
1
, 201
9
  
$
468
    
$
2,091
    
$
2,987
    
$
575
    
$
525
    
$
674
    
$
40
    
$
7,360
  
 
   
A
ctivity in the Allowance for Loan Losses for the
Three
Months Ended
March 31
, 201
8
  
   
Real Estate Construction
    
Consumer Real Estate
    
Commercial
Real Estate
    
Commercial
Non Real
Estate
    
Public
Sector and
IDA
    
Consumer Non
Real Estate
    
Unallocated
    
Total
  
Balance, December 31, 2017
   $
337
     $
2,027
     $
3,044
     $
1,072
     $
419
     $
707
     $
319
     $
7,925
  
Charge-offs
    
---
      
---
      
---
      
---
      
---
      
(139
)
    
---
      
(139
)
Recoveries
    
---
      
---
      
12
      
7
      
---
      
58
      
---
      
77
  
Provision for (recovery of) loan losses
    
(42
)
    
(98
)
    
(266
)
    
(163
)
    
13
      
54
      
30
      
(472
)
Balance,
March 31
, 201
8
   $
295
     $
1,929
     $
2,790
     $
916
     $
432
     $
680
     $
349
     $
7,391
  
 
   
A
ctivity in the Allowance for Loan Losses for the Year Ended December 31, 201
8
  
   
Real Estate Construction
    
Consumer Real Estate
    
Commercial
Real Estate
    
Commercial
Non Real
Estate
    
Public
Sector and
IDA
    
Consumer Non
Real Estate
    
Unallocated
    
Total
  
Balance, December 31, 2017
   $
337
     $
2,027
     $
3,044
     $
1,072
     $
419
     $
707
     $
319
     $
7,925
  
Charge-offs
    
---
      
(38
)
    
---
      
(107
)
    
---
      
(544
)
    
---
      
(689
)
Recoveries
    
---
      
3
      
49
      
22
      
---
      
161
      
---
      
235
  
Provision for (recovery of) loan losses
    
61
      
57
      
(295
)
    
(385
)
    
164
      
426
      
(109
)
    
(81
)
Balance,
December 31
, 201
8
   $
398
     $
2,049
     $
2,798
     $
602
     $
583
     $
750
     $
210
     $
7,390
  
 
   
Allowance for Loan Losses as of
March 31
, 201
9
  
   
Real Estate Construction
    
Consumer
Real Estate
    
Commercial
Real Estate
    
Commercial
Non Real
Estate
    
Public
Sector and
IDA
    
Consumer Non
Real Estate
    
Unallocated
    
Total
  
Individually evaluated for impairment
  
$
---
    
$
3
    
$
---
    
$
129
    
$
---
    
$
---
    
$
---
    
$
132
  
Collectively evaluated for impairment
  
 
468
    
 
2,088
    
 
2,987
    
 
446
    
 
525
    
 
674
    
 
40
    
 
7,228
  
Total
  
$
468
    
$
2,091
    
$
2,987
    
$
575
    
$
525
    
$
674
    
$
40
    
$
7,360
  
 
   
Allowance for Loan Losses
as of
December 31, 201
8
  
   
Real Estate Construction
    
Consumer
Real Estate
    
Commercial
Real Estate
    
Commercial
Non Real
Estate
    
Public
Sector and
IDA
    
Consumer
Non Real
Estate
    
Unallocated
    
Total
  
Individually evaluated for impairment
   $
---
     $
4
     $
---
     $
135
     $
---
     $
---
     $
---
     $
139
  
Collectively evaluated for impairment
    
398
      
2,045
      
2,798
      
467
      
583
      
750
      
210
      
7,251
  
Total
   $
398
     $
2,049
     $
2,798
     $
602
     $
583
     $
750
     $
210
     $
7,390
  
 
   
Loans as of
March 31
, 201
9
  
   
Real Estate Construction
    
Consumer
Real Estate
    
Commercial
Real Estate
    
Commercial
Non Real
Estate
    
Public
Sector and
IDA
    
Consumer
Non Real
Estate
    
Unallocated
    
Total
  
Individually evaluated for impairment
  
$
---
    
$
1,187
    
$
4,151
    
$
989
    
$
---
    
$
10
    
$
---
    
$
6,337
  
Collectively evaluated for impairment
  
 
41,156
    
 
175,659
    
 
357,418
    
 
44,323
    
 
61,075
    
 
32,988
    
 
---
    
 
712,619
  
Total
  
$
41,156
    
$
176,846
    
$
361,569
    
$
45,312
    
$
61,075
    
$
32,998
    
$
---
    
$
718,956
  
 
   
Loans as of December 31, 201
8
  
   
Real Estate Construction
    
Consumer
Real Estate
    
Commercial
Real Estate
    
Commercial
Non Real
Estate
    
Public
Sector and
IDA
    
Consumer
Non Real
Estate
    
Unallocated
    
Total
  
Individually evaluated for impairment
   $
---
     $
1,452
     $
4,340
     $
1,015
     $
---
     $
13
     $
---
     $
6,820
  
Collectively evaluated for impairment
    
37,845
      
174,004
      
349,206
      
45,520
      
60,777
      
36,225
      
---
      
703,577
  
Total
   $
37,845
     $
175,456
     $
353,546
     $
46,535
     $
60,777
     $
36,238
     $
---
     $
710,397
  
 
A summary of ratios for the allowance for loan losses follows.
 
   
As of and for the
 
   
Three Months
Ended
March 31,
    
Year
E
nded
December 31,
  
   
2019
    
2018
    
2018
  
Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees and costs
  
 
1.02
%
    
1.12
%
    
1.04
%
Ratio of net charge-offs to average loans, net of unearned income and deferred fees and costs
(1)
  
 
0.13
%
    
0.04
%
    
0.07
%
 
(
1
)
Net charge-offs are on an annualized basis.
 
A summary of nonperforming assets follows.
 
   
March 31,
    
December 31,
  
   
2019
    
2018
    
2018
  
Nonperforming assets:
                        
Nonaccrual loans
  
$
294
     $
6
     $
311
  
Restructured loans in nonaccrual
  
 
3,440
      
2,758
      
3,109
  
Total nonperforming loans
  
 
3,734
      
2,764
      
3,420
  
Other real estate owned, net
  
 
2,025
      
2,741
      
2,052
  
Total nonperforming assets
  
$
5,759
     $
5,505
     $
5,472
  
Ratio of nonperforming assets to loans, net of unearned income and deferred fees and costs, plus other real estate owned
  
 
0.80
%
    
0.83
%
    
0.77
%
Ratio of allowance for loan losses to nonperforming loans
(1)
 
 
197.11
%
    
267.40
%
    
216.08
%
 
(
1
)
The Company defines nonperforming loans as nonaccrual loans and restructured loans that are nonaccrual. Nonperforming loans do
not
include loans
90
days past due and still accruing or accruing restructured loans.
 
A summary of loans past due
90
days or more and impaired loans follows.
 
   
March 31,
    
December 31,
  
   
2019
    
2018
    
2018
  
Loans past due 90 days or more and still accruing
  
$
55
     $
52
     $
35
  
Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees and costs
  
 
0.01
%
    
0.01
%
    
0.00
%
Accruing restructured loans
  
$
1,995
     $
7,890
     $
2,552
  
Impaired loans:
                        
Impaired loans with no valuation allowance
  
$
5,212
     $
10,233
     $
5,667
  
Impaired loans with a valuation allowance
  
 
1,125
      
1,448
      
1,153
  
Total impaired loans
  
$
6,337
     $
11,681
     $
6,820
  
Valuation allowance
  
 
(132
)
    
(169
)
    
(139
)
Impaired loans, net of allowance
  
$
6,205
     $
11,512
     $
6,681
  
Average recorded investment in impaired loans
(1)
  
$
6,597
     $
11,754
     $
9,788
  
Interest income recognized on impaired loans, after designation as impaired
  
$
49
     $
120
     $
250
  
Amount of income recognized on a cash basis
  
$
---
     $
---
     $
---
  
 
(
1
)
     
Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.
 
Nonaccrual loan relationships that meet the Company’s balance threshold of
$250
and all TDRs are designated as impaired. The Company also designates as impaired other loan relationships that meet the Company’s balance threshold of
$250
and for which the Company does
not
expect to collect according to the note’s contractual terms.
No
interest income was recognized on nonaccrual loans for the
three
months ended
March 31, 2019
or
March 31, 2018
or for the year ended
December 31, 2018.
 
A detailed analysis of investment in impaired loans and associated reserves, segregated by loan class follows.     
 
   
Impaired Loans as of March 31, 2019
  
   
Principal
Balance
   
Total
Recorded
Investment
(1)
    
Recorded
Investment
(1
)
for Which There is No
Related Allowance
    
Recorded
Investment
(1)
for
Which There is a
Related Allowance
    
Related
Allowance
 
Co
nsumer
Real Estate
(2)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Residential closed-end first liens
  
$
493
    
$
478
    
$
478
    
$
---
    
$
---
  
Residential closed-end junior liens
  
 
139
    
 
139
    
 
---
    
 
139
    
 
3
  
Investor-owned residential real estate
  
 
580
    
 
570
    
 
570
    
 
---
    
 
---
  
Commercial Real Estate
(2)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Multifamily
  
 
476
    
 
469
    
 
469
    
 
---
    
 
---
  
Commercial real estate, owner-occupied
  
 
1,201
    
 
1,199
    
 
1,199
    
 
---
    
 
---
  
Commercial real estate, other
  
 
2,867
    
 
2,483
    
 
2,483
    
 
---
    
 
---
  
Commercial Non Real Estate
(2)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Commercial and industrial
  
 
993
    
 
989
    
 
3
    
 
986
    
 
129
  
Consumer Non Real Estate
(2)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Automobile
  
 
10
    
 
10
    
 
10
    
 
---
    
 
---
  
Total
  
$
6,759
    
$
6,337
    
$
5,212
    
$
1,125
    
$
132
  
 
(
1
)
     
Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.
(
2
)     
Only classes with impaired loans are shown.
 
   
Impaired Loans as of December 31, 2018
  
   
Principal
Balance
   
Total
Recorded
Investment
(1)
    
Recorded
Investment
(1)
for Which There is No
Related Allowance
    
Recorded
Investment
(1)
for
Which There is a
Related Allowance
    
Related
Allowance
 
Co
nsumer
Real Estate
(2)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Residential closed-end first liens
   $
728
     $
719
     $
719
     $
---
     $
---
  
Residential closed-end junior liens
    
144
      
143
      
---
      
143
      
4
  
Investor-owned residential real estate
    
593
      
590
      
590
      
---
      
---
  
Commercial Real Estate
(2)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Multifamily real estate
    
485
      
483
      
483
      
---
      
---
  
Commercial real estate, owner occupied
    
1,363
      
1,363
      
1,363
      
---
      
---
  
Commercial real estate, other
    
2,867
      
2,494
      
2,494
      
---
      
---
  
Commercial Non Real Estate
(2)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Commercial and industrial
    
1,018
      
1,015
      
5
      
1,010
      
135
  
Consumer Non Real Estate
(2)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Automobile
    
13
      
13
      
13
      
---
      
---
  
Total
   $
7,211
     $
6,820
     $
5,667
     $
1,153
     $
139
  
   
(
1
)
Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.
(
2
)
 Only classes with impaired loans are shown.
 
The following tables show the average recorded investment and interest income recognized for impaired loans.
 
   
For the Three Months Ended
March 31, 2019
  
   
Average
Recorded
Investment
(1)
    
Interest
Income
Recognized
  
Co
nsumer
Real Estate
(2)
  
 
 
 
  
 
 
 
Residential closed-end first liens
  
$
710
    
$
9
  
Residential closed-end junior liens
  
 
142
    
 
2
  
Investor-owned residential real estate
  
 
570
    
 
9
  
Commercial Real Estate
(2)
  
 
 
 
  
 
 
 
Multifamily real estate
  
 
471
    
 
7
  
Commercial real estate, owner occupied
  
 
1,207
    
 
5
  
Commercial real estate, other
  
 
2,484
    
 
11
  
Commercial
Non Real Estate
(2)
  
 
 
 
  
 
 
 
Commercial and industrial
  
 
1,002
    
 
6
  
Consumer Non Real Estate
(2)
  
 
 
 
  
 
 
 
Automobile
  
 
11
    
 
---
  
Total
  
$
6,597
    
$
49
  
 
(
1
)
     
Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.
(
2
)
     Only classes with impaired loans are shown.
 
   
For the Three Months Ended
March 31, 2018
  
   
Average
Recorded
Investment
(1)
    
Interest
Income
Recognized
  
Real Estate Construction
(2)
  
 
 
 
  
 
 
 
Construction 1-4 family residential
   $
839
     $
38
  
Consumer Real Estate
(2)
  
 
 
 
  
 
 
 
Residential closed-end first liens
    
3,387
      
10
  
Residential closed-end junior liens
    
253
      
3
  
Investor-owned residential real estate
    
323
      
4
  
Commercial Real Estate
(2)
  
 
 
 
  
 
 
 
Multifamily real estate
    
372
      
4
  
Commercial real estate, owner occupied
    
2,648
      
50
  
Commercial real estate, other
    
2,384
      
---
  
Commercial Non Real Estate
(2)
  
 
 
 
  
 
 
 
Commercial and industrial
    
939
      
11
  
Consumer Non Real Estate
  
 
 
 
  
 
 
 
Automobile
    
609
      
---
  
Total
   $
11,754
     $
120
  
 
(
1
)
     Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.
(
2
)
     Only classes with impaired loans are shown.
 
   
For the Year Ended
December 31, 2018
  
   
Average
Recorded
Investment
(1)
    
Interest
Income
Recognized
  
Consumer
Real Estate
(2)
  
 
 
 
  
 
 
 
Residential closed-end first liens
   $
1,202
     $
41
  
Residential closed-end junior liens
    
159
      
9
  
Investor-owned residential real estate
    
808
      
23
  
Commercial Real Estate
(2)
  
 
 
 
  
 
 
 
Multifamily real estate
    
491
      
20
  
Commercial real estate, owner occupied
    
3,038
      
75
  
Commercial real estate, other
    
2,744
      
54
  
Commercial
Non Real Estate
(2)
  
 
 
 
  
 
 
 
Commercial and industrial
    
1,326
      
27
  
Co
nsumer
Non Real Estate
(2)
  
 
 
 
  
 
 
 
Automobile
    
20
      
1
  
Total
   $
9,788
     $
250
  
 
(
1
)
     Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.
(
2
)
     Only classes with impaired loans are shown.
 
The Company reviews nonaccrual loans on an individual loan basis to determine whether future payments are reasonably assured. To satisfy this criteria, the Company’s evaluation must determine that the underlying cause of the original delinquency or weakness that indicated nonaccrual status has been resolved, such as receipt of new guarantees, increased cash flows that cover the debt service or other resolution. Nonaccrual loans that demonstrate reasonable assurance of future payments and that have made at least
six
consecutive payments in accordance with repayment terms and timeframes
may
be returned to accrual status.
 
An analysis of past due and nonaccrual loans
follows.
 
March 31, 2019
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
30 – 89 Days
Past Due and
Accruing
   
90 or
M
ore
Days Past Due
    
90 or More Days
Past Due and
Accruing
    
Nonaccruals
(2)
  
Real Estate Construction
(1)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Construction, other
  
$
20
    
$
---
    
$
---
    
$
---
  
Consumer Real Estate
(1)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Residential closed-end first liens
  
 
1,225
    
 
41
    
 
19
    
 
270
 
Residential closed-end junior liens
  
 
176
    
 
---
    
 
---
    
 
---
  
Investor-owned residential real estate
  
 
---
    
 
240
    
 
---
    
 
240
  
Commercial Real Estate
(1)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Multifamily real estate
  
 
---
    
 
---
    
 
---
    
 
181
  
Commercial real estate, owner-occupied
  
 
---
    
 
262
    
 
---
    
 
560
  
Commercial real estate, other
  
 
---
    
 
---
    
 
---
    
 
2,483
  
Commercial Non Real Estate
(1)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Commercial and industrial
  
 
91
    
 
1
    
 
1
    
 
---
  
Consumer Non Real Estate
(1)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Credit cards
  
 
6
    
 
3
    
 
3
    
 
---
  
Automobile
  
 
261
    
 
31
    
 
31
    
 
---
  
Other consumer loans
  
 
43
    
 
1
    
 
1
    
 
---
  
Total
  
$
1,822
    
$
579
    
$
55
    
$
3,734
  
 
(
1
)
     Only classes with past-due or nonaccrual loans are shown.
(
2
)
     Includes current and past due loans in nonaccrual status. Includes impaired loans in nonaccrual status.
 
December 31, 2018
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
30 – 89 Days
Past Due and
Accruing
    
90 or
M
ore
Days Past Due
    
90 or More
Days Past Due
and Accruing
    
Nonaccruals
(2)
  
Consumer Real Estate
(1)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Residential closed-end first liens
   $
647
     $
119
     $
---
     $
278
  
Residential closed-end junior liens
    
11
      
---
      
---
      
---
  
Investor-owned residential real estate
    
---
      
---
      
---
      
451
  
Commercial Real Estate
(1)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Multifamily real estate
    
291
      
192
      
---
      
192
  
Commercial real estate, owner occupied
    
325
      
---
      
---
      
---
  
Commercial real estate, other
    
---
      
---
      
---
      
2,494
  
Commercial
Non Real Estate
(1)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Commercial and industrial
    
10
      
2
      
2
      
5
  
Consumer Non Real Estate
(1)
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Credit cards
    
5
      
---
      
---
      
---
  
Automobile
    
296
      
29
      
29
      
---
  
Other consumer loans
    
50
      
4
      
4
      
---
  
Total
   $
1,635
     $
346
     $
35
     $
3,420
  
 
(
1
)
     Only classes with past-due or nonaccrual loans are shown.
(
2
)
     Includes current and past due loans in nonaccrual status. Includes impaired loans in nonaccrual status.
 
The estimate of credit risk for non-impaired loans is obtained by applying allocations for internal and external factors. The allocations are increased for loans that exhibit greater credit quality risk.
Credit quality indicators, which the Company terms risk grades, are assigned through the Company’s credit review function for larger loans and selective review of loans that fall below credit review thresholds. Loans that do
not
indicate heightened risk are graded as “pass.” Loans that appear to have elevated credit risk because of frequent or persistent past due status, which is less than
75
days, or that show weakness in the borrower’s financial condition are risk graded “special mention.” Loans with frequent or persistent delinquency exceeding
75
days or that have a higher level of weakness in the borrower’s financial condition are graded “classified.” Classified loans have regulatory risk ratings of “substandard” and “doubtful.” Allocations are increased by
50%
and by
100%
for loans with grades of “special mention” and “classified,” respectively.
Determination of risk grades was completed for the portfolio as of
March 31, 2019
and
December 31, 2018.
 
The following displays collectively-evaluated loans by credit quality indicator.
 
March 31,
2019
   
Pass
(1)
    
Special
Mention
(1)
    
 
Classified
(1)
  
Real Estate
Construction
  
 
 
 
  
 
 
 
  
 
 
 
Construction, 1-4 family residential
  
$
8,436
    
$
---
    
$
---
  
Construction, other
  
 
32,700
    
 
20
    
 
---
  
Consumer Real Estate
  
 
 
 
  
 
 
 
  
 
 
 
Equity lines
  
 
16,290
    
 
39
    
 
97
  
Closed-end first liens
  
 
91,442
    
 
1,085
    
 
1,116
  
Closed-end junior liens
  
 
4,075
    
 
---
    
 
---
  
Investor-owned residential real estate
  
 
61,508
    
 
7
    
 
---
  
Commercial Real Estate
  
 
 
 
  
 
 
 
  
 
 
 
Multifamily residential real estate
  
 
98,155
    
 
---
    
 
---
  
Commercial real estate owner-occupied
  
 
125,961
    
 
72
    
 
32
  
Commercial real estate, other
  
 
133,198
    
 
---
    
 
---
  
Commercial
Non Real Estate
  
 
 
 
  
 
 
 
  
 
 
 
Commercial and industrial
  
 
44,193
    
 
86
    
 
44
  
Public Sector and IDA
  
 
 
 
  
 
 
 
  
 
 
 
States and political subdivisions
  
 
61,075
    
 
---
    
 
---
  
Consumer Non Real Estate
  
 
 
 
  
 
 
 
  
 
 
 
Credit cards
  
 
5,445
    
 
---
    
 
---
  
Automobile
  
 
15,615
    
 
71
    
 
53
  
Other consumer
  
 
11,785
    
 
11
    
 
8
  
Total
  
$
709,878
    
$
1,391
    
$
1,350
  
 
(
1
)
     
Excludes impaired, if any. 
 
    The following displays collectively-evaluated loans by credit quality indicator.
 
December 31,
201
8
   
Pass
(1)
    
Special
Mention
(1)
    
 
Classified
(1)
  
Real Estate
Construction
  
 
 
 
  
 
 
 
  
 
 
 
Construction, 1-4 family residential
   $
9,264
     $
---
    
$
---
  
Construction, other
    
28,560
      
21
    
 
---
  
Consumer
Real Estate
  
 
 
 
  
 
 
 
  
 
 
 
Equity lines
    
16,026
      
38
      
---
  
Closed-end first liens
    
92,253
      
994
      
582
  
Closed-end junior liens
    
3,954
      
---
      
---
  
Investor-owned residential real estate
    
60,157
      
---
      
---
  
Commercial Real Estate
  
 
 
 
  
 
 
 
  
 
 
 
Multifamily residential real estate
    
98,582
      
---
      
---
  
Commercial real estate owner-occupied
    
123,225
      
211
      
32
  
Commercial real estate, other
    
127,156
      
---
      
---
  
Commercial
Non Real Estate
  
 
 
 
  
 
 
 
  
 
 
 
Commercial and industrial
    
45,420
      
54
      
46
  
Public Sector and IDA
  
 
 
 
  
 
 
 
  
 
 
 
States and political subdivisions
    
60,777
      
---
      
---
  
Consumer Non Real Estate
  
 
 
 
  
 
 
 
  
 
 
 
Credit cards
    
5,724
      
---
      
---
  
Automobile
    
18,598
      
133
      
71
  
Other consumer
    
11,691
      
4
      
4
  
Total
   $
701,387
     $
1,455
     $
735
  
 
(
1
)
     
Excludes impaired, if any.
 
Sales
,
Purchases and Reclassification of Loans
The Company finances mortgages under “best efforts” contracts with mortgage purchasers. The mortgages are designated as held for sale upon initiation. There have been
no
major reclassifications from portfolio loans to held for sale. Occasionally, the Company purchases or sells participations in loans. All participation loans purchased met the Company’s normal underwriting standards at the time the participation was entered. Participation loans are included in the appropriate portfolio balances to which the allowance methodology is applied.
 
Troubled Debt Restructurings
 
From time to time the Company modifies loans in troubled debt restructurings. Total troubled debt restructurings amounted to
$5,435
at
March 31, 2019,
$5,661
at
December 31, 2018,
and
$10,648
at
March 31, 2018.
During the
three
month period ended
March 31, 2019,
no
loans were modified into a troubled debt restructuring.
 
The following table presents restructurings by class that occurred during the
three
month period ended
March 31, 2018.
 
   
Restructurings That Occurred During the Three Months Ended March 31, 2018
  
   
Number of
Contracts
    
Pre-Modification
Outstanding
Principal Balance
    
Post-Modification
Outstanding
Principal Balance
  
Real Estate Construction
  
 
 
 
  
 
 
 
  
 
 
 
Construction, other
  
 
2
    
$
2,882
    
$
2,882
  
Total
  
 
2
    
$
2,882
    
$
2,882
  
 
Each of the restructurings completed during the
three
-month period ended
March 31, 2018
provided payment relief to the borrowers without forgiving principal or interest. The
two
real estate construction loans were restructured to provide debt relief by extending the maturity and interest-only period for each loan. Impairment measurement, based on the fair value of the collateral, did
not
indicate a specific reserve for each of the real estate construction loans.
 
The Company analyzed its TDR portfolio for loans that defaulted during the
three
month periods ended
March 31, 2019
and
March 31, 2018,
and that were modified within
12
months prior to default. The Company defines default as
one
or more payments that occur more than
90
days past the due date, charge-offs, or foreclosure after the date of restructuring. Of the Company's TDRs at
March 31, 2019,
seven
consumer real estate loans totaling
$263,
all part of
one
relationship, defaulted within
12
months of modification. The impairment measurement is based upon the fair value of collateral, less estimated cost to sell, and resulted in
no
allocation.
One
commercial real estate loan defaulted within
12
months of modification. The impairment measurement is based upon the fair value of collateral, less estimated cost to sell, and resulted in
no
allocation. All of the defaulted loans are in nonaccrual status and the Company is working with the borrowers to recover its investment. Of the restructured loans that defaulted during the
three
month periods ended
March 31, 2018,
none
were modified within
12
months prior to default.