The Company’s primary lending emphasis is the origination of commercial business and commercial real estate loans and mortgage warehouse lines of credit. Based on the composition of the loan portfolio, the primary inherent risks are deteriorating credit quality, a decline in the economy and a decline in New Jersey real estate market values. Any one, or a combination, of these events may adversely affect the loan portfolio and may result in increased delinquencies, loan losses and increased future provision levels.



	2017
(Dollars in thousands)	30-59 Days		60-89 Days		Greater than 90 Days		Total Past Due		Current		Total Loans Receivable		Recorded Investment > 90 Days Accruing		Nonaccrual Loans
Commercial real estate	$	540	$	—	$	2,465	$	3,005	$	305,919	$	308,924	$	—	$	2,465
Mortgage warehouse lines	—		—		—		—		189,412		189,412		—		—
Construction	—		$	—	—		$	—	136,412		136,412		—		—
Commercial business	180		545		619		1,344		91,562		92,906		—		4,212
Residential real estate	911		256		69		1,236		39,258		40,494		—		69
Loans to individuals	119		—		116		235		20,790		21,025		—		368
Other	—		—		—		—		183		183		—		—
	$	1,750	$	801	$	3,269	$	5,820	$	783,536	789,356		$	—	$	7,114
Deferred loan costs, net											550
Total											$	789,906



	2016
(Dollars in thousands)	30-59 Days		60-89 Days		Greater than 90 Days		Total Past Due		Current		Total Loans Receivable		Recorded Investment > 90 Days Accruing		Nonaccrual Loans
Commercial real estate	$	741	$	942	$	2,707	$	4,390	$	237,794	$	242,184	$	—	$	3,187
Mortgage warehouse lines	—		—		—		—		216,259		216,259		—		—
Construction	—		—		186		$	186	95,849		96,035		—		186
Commercial business	113		115		790		1,018		98,841		99,859		—		920
Residential real estate	564		—		392		956		43,835		44,791		—		544
Loans to individuals	—		29		361		390		23,346		23,736		24		337
Other	—		—		—		—		207		207		—		—
	$	1,418	$	144	$	4,436	$	6,940	$	716,131	723,071		$	24	$	5,174
Deferred loan costs, net											1,737
Total											$	724,808

As provided by ASC 310-30, the excess of cash flows expected at acquisition over the initial investment in the loan is recognized as interest income over the life of the loan. At December 31, 2017 and 2016, there were no PCI loans and $439,000 of PCI loans, respectively, that were not classified as non-performing loans due to the accretion of income based on their original contract terms.

Management reviews the adequacy of the allowance for loan losses on at least a quarterly basis to ensure that the provision for loan losses has been charged against earnings in an amount necessary to maintain the allowance at a level that is adequate based on management’s assessment of probable estimated losses. The Company’s methodology for assessing the adequacy of the allowance for loan losses consists of several key elements and is consistent with U.S. GAAP and interagency supervisory guidance. The allowance for loan losses methodology consists of two major components. The first component is an estimation of losses associated with individually identified impaired loans, which follows ASC Topic 310. The second major component estimates losses under ASC Topic 450, which provides guidance for estimating losses on groups of loans with similar risk characteristics. The Company’s methodology results in an allowance for loan losses which includes a specific reserve for impaired loans, an allocated reserve and an unallocated portion.

When analyzing groups of loans under ASC Topic 450, the Company follows the Interagency Policy Statement on the Allowance for Loan and Lease Losses. The methodology considers the Company’s historical loss experience adjusted for changes in trends, conditions, and other relevant factors that affect repayment of the loans as of the evaluation date. These adjustment factors, known as qualitative factors, include:

The methodology includes the segregation of the loan portfolio into loan classes with a further segregation into risk rating categories, such as special mention, substandard, doubtful, and loss. This allows for an allocation of the allowance for loan losses by loan type; however, the allowance is available to absorb any loan loss without restriction. Larger balance, non-homogeneous loans representing significant individual credit exposures are evaluated individually through the internal loan review process. It is this process that produces the watch list for loans that have indications of credit weakness. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated. Based on these reviews, an estimate of probable losses for the individual larger-balance loans are determined, whenever possible, and used to establish specific loan loss reserves. In general, for non-homogeneous loans not individually assessed and for homogeneous groups, such as residential mortgages and consumer credits, the loans are collectively evaluated based on delinquency status, loan type, and historical losses. These loan groups are then internally risk rated.

The watch list includes loans that are assigned a rating of special mention, substandard, doubtful and loss. Loans assigned a rating of special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as doubtful have all the weaknesses inherent in loans classified as substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans rated as doubtful in whole, or in part, are placed in non-accrual status. Loans classified as a loss are considered uncollectible and are charged off against the allowance for loan losses.

The specific allowance for impaired loans is established for specific loans that have been identified by management as being impaired. These loans are considered to be impaired primarily because the loans have not performed according to payment terms and there is reason to believe that repayment of the loan principal in whole, or in part, is unlikely. The specific portion of the allowance is the total amount of potential unconfirmed losses for these individual impaired loans. To assist in determining the fair value of loan collateral, the Company often utilizes independent third party qualified appraisal firms which, in turn, employ their own criteria and assumptions that may include occupancy rates, rental rates and property expenses, among others.

The second category of reserves consists of the allocated portion of the allowance. The allocated portion of the allowance is determined by taking pools of loans outstanding that have similar characteristics and applying historical loss experience for each pool. This estimate represents the potential unconfirmed losses within the portfolio. Individual loan pools are created for commercial business loans and commercial real estate loans, construction loans, warehouse lines of credit and various types of loans to individuals. The historical loss estimation for each loan pool is then adjusted for qualitative factors such as economic trends, concentrations of credit, trends in the volume of loans, portfolio quality, delinquencies and non-accrual trends. These factors are evaluated for each class of the loan portfolio and may have positive or negative effects on the allocated allowance for the loan portfolio segment. The aggregate amount resulting from the application of these qualitative factors determines the overall risk for the portfolio and results in an allocated allowance for each of the loan segments.

The Company also maintains an unallocated allowance. The unallocated allowance is used to cover any factors or conditions which may cause a potential loan loss but are not specifically identifiable. It is prudent to maintain an unallocated portion of the allowance because no matter how detailed an analysis of potential loan losses is performed, these estimates, by definition, lack precision. Management must make estimates using assumptions and information that is often subjective and changing rapidly.

The Company offers a variety of commercial loan services, including term loans, lines of credit and loans secured by equipment and receivables. A broad range of short-to-medium term commercial loans, both secured and unsecured, are made available to businesses for working capital (including inventory and receivables), business expansion (including acquisition and development of real estate and improvements) and the purchase of equipment and machinery. Commercial business loans are granted based on the borrower's

ability to generate cash flow to support its debt obligations and other cash related expenses. A borrower's ability to repay commercial business loans is substantially dependent on the success of the business itself and on the quality of its management. As a general practice, the Company takes as collateral a security interest in any available real estate, equipment, inventory, receivables or other personal property of its borrowers, although the Company occasionally makes commercial business loans on an unsecured basis. Generally, the Company requires personal guarantees of its commercial business loans to offset the risks associated with such loans.

Much of the Company's lending is in northern and central New Jersey. As a result of this geographic concentration, a significant broad-based deterioration in economic conditions in New Jersey and the New York City metropolitan area could have a material adverse impact on the Company's loan portfolio. A prolonged decline in economic conditions in our market area could restrict borrowers' ability to pay outstanding principal and interest on loans when due. The value of assets pledged as collateral may decline and the proceeds from the sale or liquidation of these assets may not be sufficient to repay the loan.

Commercial real estate loans are made to businesses to expand their facilities and operations and to real estate operators to finance the acquisition of income producing properties. The Company's loan policy requires that borrowers have sufficient cash flow to meet the debt service requirements and the value of the property meets the loan-to-value criteria set in the loan policy. The Company monitors loan concentrations by borrower, by type of property and by location and other criteria.

The Company's commercial real estate portfolio is largely secured by real estate collateral located in the State of New Jersey. Conditions in the real estate markets in which the collateral for the Company's loans are located strongly influence the level of the Company's non-performing loans. A decline in the New Jersey real estate market could adversely affect the Company's loan portfolio. Decreases in local real estate values would adversely affect the value of property used as collateral for the Company's loans. Adverse changes in the economy also may have a negative effect on the ability of our borrowers to make timely repayments of their loans.

Construction financing is provided to businesses to expand their facilities and operations and to real estate developers for the acquisition, development and construction of residential and commercial properties. First mortgage construction loans are made to developers and builders primarily for single family homes and multi-family buildings that are presold or are to be sold or leased on a speculative basis.

The Company lends to builders and developers with established relationships, successful operating histories and sound financial resources. Management has established underwriting and monitoring criteria to minimize the inherent risks of real estate construction lending. The risks associated with speculative construction lending include the borrower's inability to complete the construction process on time and within budget, the sale or rental of the project within projected absorption periods and the economic risks associated with real estate collateral. Such loans may include financing the development and/or construction of residential subdivisions. This activity may involve financing land purchases and infrastructure development (i.e., roads, utilities, etc.) as well as construction of residences or multi-family dwellings for subsequent sale by the developer/builder. Because the sale or rental of developed properties is integral to the success of developer business, loan repayment may be especially subject to the volatility of real estate market values.

The Company’s Mortgage Warehouse Funding Group provides revolving lines of credit that are available to licensed mortgage banking companies. The warehouse line of credit is used by the mortgage banker to originate one-to-four family residential mortgage loans that are pre-sold into the secondary mortgage market, which includes state and national banks, national mortgage banking firms, insurance companies and government-sponsored enterprises, including the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and others. On average, an advance under the warehouse line of credit remains outstanding for a period of less than 30 days, with repayment coming directly from the sale of the loan into the secondary mortgage market. Interest and a transaction fee are collected by the Company at the time of repayment.

As a separate segment of the total portfolio, the warehouse loan portfolio is individually analyzed as a whole for allowance for loan losses purposes. Warehouse lines of credit are subject to the same inherent risks as other commercial lending, but the overall degree of risk differs. While the Company’s loss experience with this type of lending has been non-existent since the product was introduced in 2008, there are other risks unique to this lending that still must be considered in assessing the adequacy of the allowance for loan losses. These unique risks may include, but are not limited to, (i) credit risks relating to the mortgage bankers that borrow from us, (ii) the risk of intentional misrepresentation or fraud by any of such mortgage bankers, (iii) changes in the market value of mortgage loans originated by the mortgage banker, the sale of which is the expected source of repayment of the borrowings under a warehouse line of credit, due to changes in interest rates during the time in warehouse or (iv) unsalable or impaired mortgage loans so originated,

The Company’s consumer loan portfolio segment is comprised of residential real estate loans, loans to individuals and other loans. Individual loan pools are created for the various types of loans to individuals. The principal risk is the borrower becomes unemployed or has a significant reduction in income.

2. Above Average - Loans to companies whose balance sheets show excellent liquidity and long-term debt is on well-spread schedules of repayment easily covered by cash flow. Such companies have been consistently profitable and have diversification in their product lines or sources of revenue. The continuation of profitable operations for the foreseeable future is likely. Management is comprised of a mix of ages, experience and backgrounds, and management succession is in place. Sources of raw materials and, for service companies, the sources of revenue are abundant. Future needs have been planned for. Character and management ability of individuals or company principals are excellent. Loans to individuals are supported by high net worths and liquid assets.

3. Good - Loans to companies whose balance sheets show good liquidity and cash flow adequate to meet maturities of long-term debt with a comfortable margin. Such companies have established profitable records over a number of years, and there has been growth in net worth. Operating ratios are in line with those of the industry, and expenses are in proper relationship to the volume of business done and the profits achieved. Management is well-balanced and competent in their responsibilities. Economic environment is favorable; however, competition is strong. The prospects for growth are good. Loans in this category do not meet the collateral requirements of loans in categories 1 and 2 above. Loans to individuals are supported by good net worth but whose supporting assets are illiquid.

3w. Watch - Included in this category are loans evidencing problems identified by Company management that require closer supervision. Such problems have not developed to the point which requires a "special mention" rating. This category also covers situations where the Company does not have adequate current information upon which credit quality can be determined. The account officer has the obligation to correct these deficiencies within 30 days from the time of notification.

4. Special Mention - A "special mention" loan has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Company's credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

5. Substandard - A "substandard" loan is inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

6. Doubtful - A loan classified as "doubtful" has all the weaknesses inherent in a loan classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.

7. Loss - A loan classified as "loss" is considered uncollectible and of such little value that its continuance on the books is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desireable to defer writing off this loan even though partial recovery may occur in the future.



Commercial Credit Exposure by Internally Assigned Grade	2017
(In thousands)	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse Lines		Residential Real Estate
Pass	$	136,180	$	84,746	$	289,203	$	189,412	$	39,539
Special Mention	232		3,454		13,267		—		666
Substandard	—		1,252		6,454		—		289
Doubtful	—		3,454		—		—		—
Total	$	136,412	$	92,906	$	308,924	$	189,412	$	40,494



Consumer Credit Exposure by Payment Activity	2017
(In thousands)	Loans to Individuals		Other
Performing	$	20,657	$	183
Nonperforming	368		—
Total	$	21,025	$	183



Commercial Credit Exposure by Internally Assigned Grade	2016
(In thousands)	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse Lines		Residential Real Estate
Pass	$	95,548	$	92,117	$	223,226	$	216,259	$	43,950
Special Mention	301		7,102		14,334		—		244
Substandard	186		611		4,624		—		597
Doubtful	—		29		—		—		—
Total	$	96,035	$	99,859	$	242,184	$	216,259	$	44,791



Consumer Credit Exposure by Payment Activity	2016
(In thousands)	Loans to Individuals		Other
Performing	$	23,375	$	207
Nonperforming	361		—
Total	$	23,736	$	207

Loans are considered to be impaired when, based on current information and events, it is determined that the Company will not be able to collect all amounts due according to the loan contract, including scheduled interest payments. When a loan is placed on non-accrual status, it is also considered to be impaired. Loans are placed on non-accrual status when: (1) the full collection of interest or principal becomes uncertain; or (2) they are contractually past due 90 days or more as to interest or principal payments unless the loans are both well secured and in the process of collection.



	2017
(Dollars in thousands)	Construction		Commercial Business			Commercial Real Estate		Mortgage Warehouse Lines			Residential Real Estate			Loans to Individuals			Other			Unallocated			Deferred Fees		Total
Allowance for loan losses:
Beginning balance	$	1,204	$	1,732		$	2,574	$	973		$	367		$	112		$	—		$	532				$	7,494
Provision (credit) charged to operations	499		2			358		(121		)	126			(2		)	(13		)	(249		)			600
Loans charged off	—		(61		)	—		—			(101		)	—			—			—					(162		)
Recoveries of loans charged off	—		47			17		—			—			4			13			—					81
Ending balance	$	1,703	$	1,720		$	2,949	$	852		$	392		$	114		$	—		$	283				$	8,013

Individually evaluated for impairment	$	—	$	592		$	92	$	—		$	—		$	—		$	—		$	—				$	684
Collectively evaluated for impairment	1,703		1,128			2,460		852			392			114			—			283					7,329
Ending balance	$	1,703	$	1,720		$	2,949	$	852		$	392		$	114		$	—		$	283				$	8,013
Loans receivables:
Loans acquired with deteriorated credit quality	$	—	$	274		$	590	$	—		$	—		$	—		$	—		$	—		$	—	$	864
Individually evaluated for impairment	232		4,459			5,713		—			69			368			—			—			—		10,841
Collectively evaluated for impairment	$	136,180	88,173			$	302,621	189,412			40,425			$	20,657		183			—			550		778,201
Total	$	136,412	$	92,906		$	308,924	$	189,412		$	40,494		$	21,025		$	183		$	—		$	550	$	789,906



	2016
(In thousands)	Construction		Commercial Business			Commercial Real Estate			Mortgage Warehouse Lines		Residential Real Estate		Loans to Individuals			Other			Unallocated		Deferred Fees		Total
Allowance for loan losses:
Beginning balance	$	1,025	$	2,005		$	3,049		$	866	$	288	$	109		$	—		$	218			$	7,560
(Credit) provision charged to operations	179		(177		)	(800		)	107		79		(3		)	1			314				(300		)
Loans charged off	—		(97		)	(60		)	—		—		—			(1		)	—				(158		)
Recoveries of loans charged off	—		1			385			—		—		6						—				392
Ending balance	$	1,204	$	1,732		$	2,574		$	973	$	367	$	112		$	—		$	532			$	7,494

Individually evaluated for impairment	$	7	$	101		$	114		$	—	$	38	$	—		$	—		$	—			$	260
Collectively evaluated for impairment	1,197		1,631			2,460			973		329		112			—			532				7,234
Ending balance	$	1,204	$	1,732		$	2,574		$	973	$	367	$	112		$	—		$	532			$	7,494
Loans receivable:
Loans acquired with deteriorated credit quality	$	—	$	191		$	930		$	—	$	—	$	—		$	—		$	—	$	—	$	1,121
Individually evaluated for impairment	391		947			3,817			—		544		337			—			—		—		6,036
Collectively evaluated for impairment	95,644		98,721			237,437			216,259		44,247		23,399			207			—		1,737		717,651
Total	$	96,035	$	99,859		$	242,184		$	216,259	$	44,791	$	23,736		$	207		$	—	$	1,737	$	724,808



	2015
(In thousands)	Construction			Commercial Business			Commercial Real Estate			Mortgage Warehouse Lines			Residential Real Estate		Loans to Individuals			Other			Unallocated			Deferred Fees	Total
Allowance for loan losses:
Beginning balance	$	1,215		$	1,761		$	2,393		$	896		$	197	$	129		$	2		$	332			$	6,925
(Credit) provision charged to operations	(190		)	347			1,010			(30		)	91		(13		)	(1		)	(114		)		1,100
Loans charged off	—			(116		)	(361		)	—			—		(13		)	(1		)	—				(491		)
Recoveries of loans charged off	—			13			7			—			—		6			—			—				26
Ending balance	$	1,025		$	2,005		$	3,049		$	866		$	288	$	109		$	—		$	218			$	7,560

When a loan is identified as impaired, the measurement of impairment is based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the sole remaining source of repayment for the loan is the liquidation of the collateral. In such cases, the current fair value of the collateral less selling costs is used. If the value of the impaired loan is less than the recorded investment in the loan, the impairment is recognized through an allowance estimate or a charge to the allowance.



	2017
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Year to Date 2017 Average Recorded Investment		Year to Date 2017 Interest Income Recognized
With no related allowance:
Commercial:
Construction	$	232	$	232	$	—	$	209	$	12
Commercial business	1,271		1,419		—		828		153
Commercial real estate	1,348		1,372		—		2,772		128
Mortgage warehouse lines	—		—		—		—		—
	2,851		3,023		—		3,809		293
Consumer:
Residential real estate	69		123		—		142		—
Loans to individuals	368		438		—		342		—
Other	—		—		—		—		—
	437		561		—		484		—
With no related allowance	3,288		3,584		—		4,293		293
With an allowance:
Commercial:
Construction	—		—		—		86		—
Commercial business	3,462		3,464		592		2,864		84
Commercial real estate	4,955		5,748		92		3,005		188
Mortgage warehouse lines	—		—		—		—		—
	8,417		9,212		684		5,955		272
Consumer:
Residential real estate	—		—		—		75		—
Loans to individuals	—		—		—		—		—
Other	—		—		—		—		—
	—		—		—		75		—
With an allowance	8,417		9,212		684		6,030		272

Total:
Construction	232		232		—		295		12
Commercial business	4,733		4,883		592		3,692		237
Commercial real estate	6,303		7,120		92		5,777		316
Mortgage warehouse lines	—		—		—		—		—
Residential real estate	69		123		—		217		—
Loans to individuals	368		438		—		342		—
Other	—		—		—		—		—
	$	11,705	$	12,796	$	684	$	10,323	$	565



	December 31, 2016
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Year to Date 2016 Average Recorded Investment		Year to Date 2016 Interest Income Recognized
With no related allowance:
Commercial:
Construction	$	186	$	186	$	—	$	260	$	—
Commercial business	883		1,054		—		623		14
Commercial real estate	1,380		1,380		—		1,528		74
Mortgage warehouse lines	—		—		—		—		—
	2,449		2,620		—		2,411		88
Consumer:
Residential real estate	244		244		—		725		—
Loans to individuals	337		337		—		281		—
Other	—		—		—		—		—
	581		581		—		1,006		—
With no related allowance	3,030		3,201		—		3,417		88
With an allowance:
Commercial:
Construction	205		205		7		51		9
Commercial business	255		255		101		238		—
Commercial real estate	3,367		3,367		114		3,603		19
Mortgage warehouse lines	—		—		—		—		—
	3,827		3,827		222		3,892		28
Consumer:
Residential real estate	300		316		38		200		—
Loans to individuals	—		—		—		—		—
Other	—		—		—		—		—
	300		316		38		200		—
With an allowance	4,127		4,143		260		4,092		28

Total:
Construction	391		391		7		311		9
Commercial business	1,138		1,309		101		861		14
Commercial real estate	4,747		4,747		114		5,131		93
Mortgage warehouse lines	—		—		—		—		—
Residential real estate	544		560		38		925		—
Loans to individuals	337		337		—		281		—
Other	—		—		—		—		—
	$	7,157	$	7,344	$	260	$	7,509	$	116



(Dollars in thousands)	Year to Date 2015 Average Recorded Investment		Year to Date 2015 Interest Income Recognized
With no related allowance:
Commercial:
Construction	$	477	$	27
Commercial business	492		23
Commercial real estate	2,998		94
Mortgage warehouse lines	—		—
	3,967		144
Consumer:
Residential real estate	981		—
Loans to individuals	88		—
Other	—		—
	88		—
With no related allowance	5,036		144
With an allowance:
Commercial:
Construction	—		—
Commercial business	307		5
Commercial real estate	4,200		154
Mortgage warehouse lines	—		—
	4,507		159
Consumer:
Residential real estate	100		—
Loans to individuals	175		—
Other	—		—
	275		—
With an allowance	4,882		159

Total:
Construction	477		27
Commercial business	799		28
Commercial real estate	7,198		248
Mortgage warehouse lines	—		—
Residential real estate	1,081		—
Loans to individuals	263		—
Other	—		—
	$	9,818	$	303

Purchased Credit-Impaired Loans ("PCI") are loans acquired at a discount that is due in part to credit quality. Acquired loans totaling $2.6 million were deemed to be PCI at February 7, 2014 and were initially recorded at fair value (as determined by the present value of expected future cash flows) with no valuation allowance (i.e., the allowance for loan losses).

In the normal course of business, the Company may consider modifying loan terms for various reasons. These reasons may include as a retention strategy to compete in the current interest rate environment or to re-amortize or extend a loan term to better match the loan’s payment stream with the borrower’s cash flow. A modified loan would be considered a troubled debt restructuring (“TDR”) if the Company grants a concession to a borrower and has determined that the borrower is troubled (i.e., experiencing financial difficulties).

If the Company restructures a loan to a troubled borrower, the loan terms (i.e., interest rate, payment, amortization period, maturity date) may be modified in various ways to enable the borrower to cover the modified debt service payments based on current financial information and cash flow adequacy. If a borrower’s hardship is thought to be temporary, then modified terms may only be offered for that time period. Where possible, the Company would attempt to obtain additional collateral and/or secondary repayment sources at the time of the restructure in order to put the Company in the best possible position if the borrower is not able to meet the modified terms. The Company will not offer modified terms if it believes that modifying the loan terms will only delay an inevitable permanent default.

In evaluating whether a restructuring constitutes a troubled debt restructuring, applicable guidance requires that a creditor must separately conclude that the restructuring constitutes a concession and the borrower is experiencing financial difficulties. The following table is a breakdown of troubled debt restructurings, all of which are classified as impaired, which occurred during the years ended December 31, 2017 and 2016: