6. IMPAIRED AND NONPERFORMING LOANS AND LEASES AND OTHER REAL ESTATE OWNED

9 Months Ended

Sep. 30, 2018

IMPAIRED AND NONPERFORMING LOANS AND LEASES AND OTHER REAL ESTATE OWNED

IMPAIRED AND NONPERFORMING LOANS AND LEASES AND OTHER REAL ESTATE OWNED

At September 30, 2018 and December 31, 2017, the recorded investment in nonperforming loans and leases was approximately $376,000 and $1,892,000, respectively. Nonperforming loans and leases include all such loans and leases that are either placed on nonaccrual status or are 90 days past due as to principal or interest but still accrue interest because such loans are well-secured and in the process of collection. The Company considers a loan to be impaired when, based on current information and events, it is probable that it will be unable to collect all amounts due (principal and interest) according to the contractual terms of the original loan agreement. At September 30, 2018, the recorded investment in loans and leases that were considered to be impaired totaled $9,261,000, which includes $346,000 in nonaccrual loans and leases and $8,915,000 in performing loans and leases. Of the total impaired loans of $9,261,000, loans totaling $6,348,000 were deemed to require no specific reserve and loans totaling $2,913,000 were deemed to require a related valuation allowance of $181,000. At December 31, 2017, the recorded investment in loans and leases that were considered to be impaired totaled $13,757,000, which includes $1,892,000 in nonaccrual loans and leases and $11,865,000 in performing loans and leases. Of the total impaired loans of $13,757,000, loans totaling $7,601,000 were deemed to require no specific reserve and loans totaling $6,156,000 were deemed to require a related valuation allowance of $355,000.

At September 30, 2018 and December 31, 2017, the recorded investment in other real estate owned (“OREO”) was $961,000. At September 30, 2018 the Company did not own any residential OREO properties nor were there any residential properties in the process of foreclosure. During the first nine months of 2018, the Company did not add any new or sell any of the OREO properties, nor did we decrease the book value on any of the properties. The September 30, 2018 OREO balance of $961,000 consisted of one parcel of land zoned for commercial use. Nonperforming assets at September 30, 2018 and December 31, 2017 are summarized as follows:

(dollars in thousands)	September 30, 2018			December 31, 2017
Nonaccrual loans and leases that are current to terms (less than 30 days past due)	$	30		$	1,603
Nonaccrual loans and leases that are past due		346			289
Loans and leases past due 90 days and accruing interest		—			—
Other real estate owned		961			961
Total nonperforming assets	$	1,337		$	2,853
Nonperforming loans and leases to total loans and leases		0.12	%		0.60	%
Total nonperforming assets to total assets		0.20	%		0.44	%

Impaired loans and leases as of and for the periods ended September 30, 2018 and December 31, 2017 are summarized as follows:

(dollars in thousands)	As of September 30, 2018						As of December 31, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial	$	—	$	—	$	—	$	1,598	$	2,671	$	—
Real estate-commercial		5,955		6,189		—		5,674		5,907		—
Real estate-residential		325		412		—		329		416		—
Consumer		68		68		—		—		—		—
Subtotal	$	6,348	$	6,669	$	—	$	7,601	$	8,994	$	—
With an allowance recorded:
Real estate-commercial	$	2,181	$	2,262	$	118	$	4,396	$	4,483	$	261
Real estate-multi-family		—		—		—		474		474		21
Real estate-residential		732		732		63		1,286		1,286		73
Subtotal	$	2,913	$	2,994	$	181	$	6,156	$	6,243	$	355
Total:
Commercial	$	—	$	—	$	—	$	1,598	$	2,671	$	—
Real estate-commercial		8,136		8,451		118		10,070		10,390		261
Real estate-multi-family		—		—		—		474		474		21
Real estate-residential		1,057		1,144		63		1,615		1,702		73
Consumer		68		68		—		—		—		—
	$	9,261	$	9,663	$	181	$	13,757	$	15,237	$	355

The following table presents the average balance related to impaired loans and leases for the periods indicated (dollars in thousands):

	Average Recorded Investments for the three months ended				Average Recorded Investments for the nine months ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Commercial	$	—	$	2,369	$	—	$	2,391
Real estate-commercial		6,289		13,139		6,010		13,220
Real estate-multi-family		—		477		—		479
Real estate-residential		326		1,973		327		2,003
Consumer		68		—		69		—
Total	$	6,683	$	17,958	$	6,406	$	18,093

The following table presents the interest income recognized on impaired loans and leases for the periods indicated (dollars in thousands):

	Interest Income Recognized for the three months ended				Interest Income Recognized for the nine months ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Commercial	$	—	$	115	$	—	$	114
Real estate-commercial		85		320		243		503
Real estate-multi-family		—		17		—		25
Real estate-residential		5		39		14		76
Consumer		1		2		2		2
Total	$	91	$	493	$	259	$	720