Loans and Credit Quality

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Loans and Credit Quality

Loans and Credit Quality

The following table presents total portfolio loans by portfolio segment and class of financing receivable, based on the Company's asset quality rating ("AQR") criteria:

(In Thousands)	Commercial		Real estate construction one-to-four family		Real estate construction other		Real estate term owner occupied		Real estate term non-owner occupied		Real estate term other		Consumer secured by 1st deeds of trust		Consumer other		Total
June 30, 2019
AQR Pass		$365,705		$37,521		$58,824		$117,492		$307,931		$40,767		$16,544		$23,235		$968,019
AQR Special Mention	4,149		—		—		3,786		17,807		—		—		—		25,742
AQR Substandard	17,403		1,492		—		5,713		—		1,198		304		151		26,261
AQR Doubtful	—		—		—		—		—		—		—		—		—
Subtotal		$387,257		$39,013		$58,824		$126,991		$325,738		$41,965		$16,848		$23,386		$1,020,022
Less: Unearned origination fees, net of origination costs																	(4,318		)
Total loans																		$1,015,704
December 31, 2018
AQR Pass		$315,112		$33,729		$72,256		$117,174		$307,126		$40,792		$18,768		$23,595		$928,552
AQR Special Mention	5,116		3,382		—		3,987		18,129		670		140		2		31,426
AQR Substandard	22,192		—		—		5,253		465		577		320		47		28,854
AQR Doubtful	—		—		—		—		—		—		—		1		1
Subtotal		$342,420		$37,111		$72,256		$126,414		$325,720		$42,039		$19,228		$23,645		$988,833
Less: Unearned origination fees, net of origination costs																	(4,487		)
Total loans																		$984,346

Loans are carried at their principal amount outstanding, net of charge-offs, unamortized fees and direct loan origination costs.  Loan balances are charged-off to the Allowance when management believes that collection of principal is unlikely.  Interest income on loans is accrued and recognized on the principal amount outstanding except for loans in a nonaccrual status.  All classes of loans are placed on nonaccrual and considered impaired when management believes doubt exists as to the collectability of the interest or principal.  Cash payments received on nonaccrual loans are directly applied to the principal balance.  Generally, a loan may be returned to accrual status when the delinquent principal and interest is brought current in accordance with the terms of the loan agreement.  Additionally, certain ongoing performance criteria, which generally includes a performance period of six months, must be met in order for a loan to be returned to accrual status.  Loans are reported as past due when installment payments, interest payments, or maturity payments are past due based on contractual terms.

Nonaccrual loans: Nonaccrual loans net of government guarantees totaled $16.9 million and $14.7 million at June 30, 2019 and December 31, 2018, respectively. Nonaccrual loans at the periods indicated are presented below by segment:

(In  Thousands)	30-59 Days Past Due			60-89 Days Past Due		Greater Than 90 Days Past Due			Current			Total
June 30, 2019
Commercial		$385			$—		$3,745			$7,077			$11,207
Real estate construction one-to-four family	—			—		—			1,492			1,492
Real estate term owner occupied	1,087			—		2,568			189			3,844
Real estate term other	621			—		577			—			1,198
Consumer secured by 1st deeds of trust	—			—		—			210			210
Consumer other	—			—		93			36			129
Total nonperforming loans	2,093			—		6,983			9,004			18,080
Government guarantees on nonaccrual loans	—			—		(102		)	(1,037		)	(1,139		)
Net nonaccrual loans		$2,093			$—		$6,881			$7,967			$16,941
December 31, 2018
Commercial		$1,329			$324		$1,287			$9,731			$12,671
Real estate term owner occupied	—			—		1,694			—			1,694
Real estate term other	—			—		577			—			577
Consumer secured by 1st deeds of trust	—			—		—			220			220
Consumer other	—			—		39			9			48
Total nonperforming loans	1,329			324		3,597			9,960			15,210
Government guarantees on nonaccrual loans	(269		)	—		—			(247		)	(516		)
Net nonaccrual loans		$1,060			$324		$3,597			$9,713			$14,694

Past Due Loans: Past due loans and nonaccrual loans at the periods indicated are presented below by segment:

(In Thousands)	30-59 Days Past Due Still Accruing		60-89 Days Past Due Still Accruing		Greater Than 90 Days Still Accruing		Total Past Due		Nonaccrual		Current		Total
June 30, 2019
Commercial		$4,800		$1,473		$—		$6,273		$11,207		$369,777		$387,257
Real estate construction one-to-four family	—		—		—		—		1,492		37,521		39,013
Real estate construction other	—		—		—		—		—		58,824		58,824
Real estate term owner occupied	987		—		—		987		3,844		122,160		126,991
Real estate term non-owner occupied	—		—		—		—		—		325,738		325,738
Real estate term other	—		—		—		—		1,198		40,767		41,965
Consumer secured by 1st deed of trust	29		180		—		209		210		16,429		16,848
Consumer other	233		—		—		233		129		23,024		23,386
Subtotal		$6,049		$1,653		$—		$7,702		$18,080		$994,240		$1,020,022
Less: Unearned origination fees,  net of origination costs													(4,318		)
Total														$1,015,704
December 31, 2018
Commercial		$872		$857		$—		$1,729		$12,671		$328,020		$342,420
Real estate construction one-to-four family	—		—		—		—		—		37,111		37,111
Real estate construction other	—		—		—		—		—		72,256		72,256
Real estate term owner occupied	1,197		—		—		1,197		1,694		123,523		126,414
Real estate term non-owner occupied	—		—		—		—		—		325,720		325,720
Real estate term other	—		—		—		—		577		41,462		42,039
Consumer secured by 1st deed of trust	224		100		—		324		220		18,684		19,228
Consumer other	190		—		—		190		48		23,407		23,645
Subtotal		$2,483		$957		$—		$3,440		$15,210		$970,183		$988,833
Less: Unearned origination fees,  net of origination costs													(4,487		)
Total														$984,346

Impaired Loans: The Company considers a loan to be impaired when it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Once a loan is determined to be impaired, the impairment is measured based on the present value of the expected future cash flows discounted at the loan’s effective interest rate, except that if the loan is collateral dependent, the impairment is measured by using the fair value of the loan’s collateral.  Nonperforming loans with an outstanding balance of $50,000 or greater are individually evaluated for impairment based upon the borrower’s overall financial condition, resources, and payment record, and the prospects for support from any financially responsible guarantors.

At June 30, 2019 and December 31, 2018, the recorded investment in loans that are considered to be impaired was $27.0 million and $31.7 million, respectively.  The following table presents information about impaired loans by class as of the periods indicated:

(In Thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
June 30, 2019
With no related allowance recorded
Commercial - AQR pass		$72		$72		$—
Commercial - AQR substandard	16,367		18,005		—
Real estate construction one-to-four family - AQR substandard	1,492		1,492		—
Real estate term owner occupied - AQR substandard	5,714		5,714		—
Real estate term non-owner occupied - AQR pass	269		269		—
Real estate term other - AQR pass	447		447		—
Real estate term other - AQR substandard	1,198		1,198		—
Consumer secured by 1st deeds of trust - AQR pass	126		126		—
Consumer secured by 1st deeds of trust - AQR substandard	304		304		—
Consumer other - AQR substandard	93		97		—
Subtotal		$26,082		$27,724		$—

With an allowance recorded
Commercial - AQR substandard	$914	$914	$6
Subtotal	$914	$914	$6

Total
Commercial - AQR pass		$72		$72		$—
Commercial - AQR substandard	17,281		18,919		6
Real estate construction one-to-four family - AQR substandard	1,492		1,492		—
Real estate term owner-occupied - AQR substandard	5,714		5,714		—
Real estate term non-owner occupied - AQR pass	269		269		—
Real estate term other - AQR pass	447		447		—
Real estate term other - AQR substandard	1,198		1,198		—
Consumer secured by 1st deeds of trust - AQR pass	126		126		—
Consumer secured by 1st deeds of trust - AQR substandard	304		304		—
Consumer other - AQR substandard	93		97		—
Total		$26,996		$28,638		$6

(In Thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
December 31, 2018
With no related allowance recorded
Commercial - AQR pass		$80		$80		$—
Commercial - AQR special mention	2,009		2,009		—
Commercial - AQR substandard	21,252		22,303		—
Real estate term owner occupied - AQR substandard	5,253		5,253		—
Real estate term non-owner occupied - AQR pass	295		295		—
Real estate term non-owner occupied - AQR substandard	465		465		—
Real estate term other - AQR pass	486		486		—
Real estate term other - AQR substandard	577		577		—
Consumer secured by 1st deeds of trust - AQR pass	129		129		—
Consumer secured by 1st deeds of trust - AQR substandard	320		320		—
Subtotal		$30,866		$31,917		$—

With an allowance recorded
Commercial - AQR substandard	$848	$1,352	$14
Subtotal	$848	$1,352	$14

Total
Commercial - AQR pass		$80		$80		$—
Commercial - AQR special mention	2,009		2,009		—
Commercial - AQR substandard	22,100		23,655		14
Real estate term owner occupied - AQR substandard	5,253		5,253		—
Real estate term non-owner occupied - AQR pass	295		295		—
Real estate term non-owner occupied - AQR substandard	465		465		—
Real estate term other - AQR pass	486		486		—
Real estate term other - AQR special mention	577		577		—
Consumer secured by 1st deeds of trust - AQR pass	129		129		—
Consumer secured by 1st deeds of trust - AQR substandard	320		320		—
Total		$31,714		$33,269		$14

The unpaid principal balance included in the tables above represents the recorded investment at the dates indicated, plus amounts charged off for book purposes. 

The following tables summarize our average recorded investment and interest income recognized on impaired loans for the three and six-month periods ended June 30,2019 and 2018:

Three Months Ended June 30,	2019						2018
(In Thousands)	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment			Interest Income Recognized
With no related allowance recorded
Commercial - AQR pass		$75			$1			$—			$—
Commercial - AQR special mention	—			—			2,223			34
Commercial - AQR substandard	17,192			95			30,657			172
Real estate construction one-to-four family - AQR substandard	1,958			—			—			—
Real estate term owner occupied- AQR substandard	5,877			14			4,575			53
Real estate term non-owner occupied- AQR pass	276			5			378			6
Real estate term non-owner occupied- AQR substandard	—			—			475			8
Real estate term other - AQR pass	457			8			527			7
Real estate term other - AQR substandard	1,213			—			—			—
Consumer secured by 1st deeds of trust - AQR pass	127			3			141			4
Consumer secured by 1st deeds of trust - AQR substandard	309			2			103			1
Consumer other - AQR substandard	95			—			—			—
Subtotal		$27,579			$128			$39,079			$285

With an allowance recorded
Commercial - AQR substandard	$917	$—	$378	$7
Subtotal	$917	$—	$378	$7

Total
Commercial - AQR pass		$75		$1		$—		$—
Commercial - AQR special mention	—		—		2,223		34
Commercial - AQR substandard	18,109		95		31,035		179
Real estate construction one-to-four family - AQR substandard	1,958		—		—		—
Real estate term owner-occupied - AQR substandard	5,877		14		4,575		53
Real estate term non-owner occupied - AQR pass	276		5		378		6
Real estate term non-owner occupied - AQR substandard	—		—		475		8
Real estate term other - AQR pass	457		8		527		7
Real estate term other - AQR substandard	1,213		—		—		—
Consumer secured by 1st deeds of trust - AQR pass	127		3		141		4
Consumer secured by 1st deeds of trust - AQR substandard	309		2		103		1
Consumer other - AQR substandard	95		—		—		—
Total Impaired Loans		$28,496		$128		$39,457		$292

Six Months Ended June 30,	2019						2018
(In Thousands)	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment			Interest Income Recognized
With no related allowance recorded
Commercial - AQR pass		$1,073			$35			$—			$—
Commercial - AQR special mention	—			—			2,232			65
Commercial - AQR substandard	16,995			185			24,637			257
Real estate construction one-to-four family - AQR substandard	2,427			—			—			—
Real estate term owner occupied- AQR substandard	5,895			48			4,583			77
Real estate term non-owner occupied- AQR pass	283			10			339			11
Real estate term non-owner occupied- AQR special mention	—			2			44			2
Real estate term non-owner occupied- AQR substandard	463			—			477			15
Real estate term other - AQR pass	467			16			539			16
Real estate term other - AQR substandard	897			—			—			—
Consumer secured by 1st deeds of trust - AQR pass	128			6			139			7
Consumer secured by 1st deeds of trust - AQR substandard	278			3			175			6
Consumer other - AQR substandard	48			—			—			—
Subtotal		$28,954			$305			$33,165			$456

With an allowance recorded
Commercial - AQR substandard		$881		$—		$3,773		$7
Commercial - AQR doubtful	—		—		27		—
Real estate term other - AQR substandard	328		—		—		—
Consumer secured by 1st deeds of trust - AQR substandard	108		—		120		—
Subtotal		$1,317		$—		$3,920		$7

Total
Commercial - AQR pass		$1,073		$35		$—		$—
Commercial - AQR special mention	—		—		2,232		65
Commercial - AQR substandard	17,876		185		28,410		264
Commercial - AQR doubtful	—		—		27		—
Real estate construction one-to-four family - AQR substandard	2,427		—		—		—
Real estate term owner-occupied - AQR substandard	5,895		48		4,583		77
Real estate term non-owner occupied - AQR pass	283		10		339		11
Real estate term non-owner occupied - AQR special mention	—		2		44		2
Real estate term non-owner occupied - AQR substandard	463		—		477		15
Real estate term other - AQR pass	467		16		539		16
Real estate term other - AQR substandard	1,225		—		—		—
Consumer secured by 1st deeds of trust - AQR pass	128		6		139		7
Consumer secured by 1st deeds of trust - AQR substandard	386		3		295		6
Consumer other - AQR substandard	48		—		—		—
Total Impaired Loans		$30,271		$305		$37,085		$463

Troubled Debt Restructurings: Loans classified as troubled debt restructurings (“TDR”) totaled $11.3 million and $14.8 million at June 30, 2019 and December 31, 2018, respectively.  A TDR is a loan to a borrower that is experiencing financial difficulty that has been modified from its original terms and conditions in such a way that the Company is granting the borrower a concession that it would not grant otherwise.  The Company has granted a variety of concessions to borrowers in the form of loan modifications.  The modifications granted can generally be described in the following categories:

Rate Modification:  A modification in which the interest rate is changed.

Term Modification:  A modification in which the maturity date, timing of payments, or frequency of payments is changed.

Payment Modification:  A modification in which the dollar amount of the payment is changed, or in which a loan is converted to interest only payments for a period of time is included in this category.

Combination Modification:  Any other type of modification, including the use of multiple categories above. 

AQR pass graded loans included above in the impaired loan data are loans classified as TDRs. By definition, TDRs are considered impaired loans. All of the Company's TDRs are included in impaired loans.

The following table presents the breakout between newly restructured loans that occurred during the six months ended June 30, 2019 and restructured loans that occurred prior to 2019 that are still included in portfolio loans:

	Accrual Status		Nonaccrual Status		Total Modifications
(In Thousands)
New Troubled Debt Restructurings
Commercial - AQR substandard		$318		$1,461		$1,779
Real estate term owner occupied - AQR substandard	—		189		189
Subtotal		$318		$1,650		$1,968
Existing Troubled Debt Restructurings		$1,327		$8,000		$9,327
Total		$1,645		$9,650		$11,295

The following tables present newly restructured loans that occurred during the six months ended June 30, 2019 and 2018, by concession (terms modified):

		June 30, 2019
	Number of Contracts	Rate Modification		Term Modification		Payment Modification		Combination Modification		Total Modifications
(In Thousands)
Pre-Modification Outstanding Recorded Investment:
Commercial - AQR substandard	5		$—		$—		$509		$1,350		$1,859
Real estate term owner occupied- AQR substandard	1	—		—		192		—		192
Total	6		$—		$—		$701		$1,350		$2,051
Post-Modification Outstanding Recorded Investment:
Commercial - AQR substandard	5		$—		$—		$433		$1,346		$1,779
Real estate term owner occupied- AQR substandard	1	—		—		189		—		189
Total	6		$—		$—		$622		$1,346		$1,968

		June 30, 2018
	Number of Contracts	Rate Modification		Term Modification		Payment Modification		Combination Modification		Total Modifications
(In Thousands)
Pre-Modification Outstanding Recorded Investment:
Commercial - AQR substandard	4		$—		$—		$2,704		$—		$2,704
Real estate term owner occupied- AQR substandard	2	—		—		1,694		—		1,694
Total	6		$—		$—		$4,398		$—		$4,398
Post-Modification Outstanding Recorded Investment:
Commercial - AQR substandard	4		$—		$—		$1,738		$—		$1,738
Real estate term owner occupied- AQR substandard	2	—		—		1,694		—		1,694
Total	6		$—		$—		$3,432		$—		$3,432

The Company had no commitments to extend additional credit to borrowers whose terms have been modified in TDRs. There were $64,000 in charge-offs in the six months ended June 30, 2019 on loans that were newly classified as TDRs during the same period.

All TDRs are also classified as impaired loans and are included in the loans individually evaluated for impairment in the calculation of the Allowance. There were two TDRs with specific impairment at June 30, 2019 and one at December 31, 2018.

The following table presents TDRs that defaulted within twelve months of restructure and defaulted during the six months ended June 30, 2019 and 2018:

		June 30, 2019			June 30, 2018
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
(In  Thousands)
Troubled Debt Restructurings that Subsequently Defaulted:
Commercial - AQR substandard	—		$—	2		$559
Total	—		$—	2		$559