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Loans and Related Allowance for Loan Losses
6 Months Ended
Jun. 30, 2020
Loans and Related Allowance for Loan Losses [Abstract]  
Loans and Related Allowance for Loan Losses

Note 3. Loans and Related Allowance for Loan Losses

The Company’s loans, net of deferred fees and costs, at June 30, 2020 and December 31, 2019 were comprised of the following (dollars in thousands):

June 30, 2020

December 31, 2019

 

    

Amount

% of Loans

Amount

% of Loans

 

Mortgage loans on real estate:

Residential 1‑4 family

$

205,787

 

17.66

%  

$

223,538

 

21.12

%

Commercial

 

443,923

 

38.09

 

396,858

 

37.50

Construction and land development

 

151,529

 

13.00

 

146,566

 

13.85

Second mortgages

 

6,136

 

0.53

 

6,639

 

0.63

Multifamily

 

76,587

 

6.57

 

72,978

 

6.90

Agriculture

 

7,122

 

0.61

 

8,346

 

0.79

Total real estate loans

 

891,084

 

76.46

 

854,925

 

80.79

Commercial loans

 

262,955

 

22.57

 

191,183

 

18.06

Consumer installment loans

 

10,257

 

0.88

 

11,163

 

1.05

All other loans

 

1,014

 

0.09

 

1,052

 

0.10

Total loans

$

1,165,310

 

100.00

%  

$

1,058,323

 

100.00

%

The Company held $12.0 million and $12.7 million in balances of loans guaranteed by the United States Department of Agriculture (USDA), which are included in various categories in the table above, at June 30, 2020 and December 31, 2019, respectively. As these loans are 100% guaranteed by the USDA, no loan loss allowance is required. These loan balances included a purchase premium of $940,000 and $1.0 million at June 30, 2020 and December 31, 2019, respectively. The purchase premium is amortized as an adjustment of the related loan yield on a straight line basis, which is substantially equivalent to the results obtained using the effective interest method.   Any unamortized purchase premium remaining on loans prepaid by the borrower is written off.  

During the second quarter of 2020, the Company originated loans under the Paycheck Protection Program (PPP) of the Small Business Administration (SBA).  These PPP loans totaled $83.5 million at June 30, 2020 and are included in commercial loans.  As these loans are 100% guaranteed by the SBA, no loan loss allowance is required. The majority of the PPP loans have a two year term; however, most are expected to be forgiven by the SBA as borrowers use the funds for qualified expenses. These loan balances included net fees of $2.3 million at June 30, 2020, which are being amortized as an adjustment of the related loan yield on a straight line basis, which is substantially equivalent to the results obtained using the effective interest method. Any unamortized fee remaining on loans forgiven or prepaid by the borrower is recorded as income.  

At June 30, 2020 and December 31, 2019, the Company’s allowance for loan losses was comprised of the following: (i) a specific valuation component calculated in accordance with FASB ASC 310, Receivables, (ii) a general valuation component calculated in accordance with FASB ASC 450, Contingencies, based on historical loan loss experience, current economic conditions and other qualitative risk factors, and (iii) an unallocated component to cover uncertainties that could affect management’s estimate of probable losses. Management identified loans subject to impairment in accordance with FASB ASC 310.

The following table summarizes information related to impaired loans as of and for the three and six months ended June 30, 2020 (dollars in thousands):

Three months ended

Six months ended

June 30, 2020

June 30, 2020

June 30, 2020

    

    

Unpaid

    

    

Recorded

Principal

Related

Average

Interest

Average

Interest

Investment (1)

Balance (2)

Allowance

Investment

Recognized

Investment

Recognized

With no related allowance recorded:

Mortgage loans on real estate:

Residential 1‑4 family

$

1,145

$

1,501

$

$

1,152

$

10

$

1,263

$

21

Commercial

 

3,534

 

4,247

 

 

3,114

 

34

 

3,151

 

68

Construction and land development

164

219

Multifamily

 

 

 

 

 

 

821

 

Total real estate loans

 

4,679

 

5,748

 

 

4,430

 

44

 

5,454

 

89

Commercial loans

 

350

 

964

 

 

175

 

 

117

 

Subtotal impaired loans with no valuation allowance

 

5,029

 

6,712

 

 

4,605

 

44

 

5,571

 

89

With an allowance recorded:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Mortgage loans on real estate:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Residential 1‑4 family

 

2,123

 

2,541

 

574

 

2,003

 

11

 

1,834

 

22

Commercial

 

86

 

555

 

23

 

92

 

2

 

187

 

4

Construction and land development

 

1,122

 

1,224

 

315

 

1,286

 

 

873

 

Agriculture

 

51

 

51

 

13

 

26

 

 

17

 

Total real estate loans

 

3,382

 

4,371

 

925

 

3,407

 

13

 

2,911

 

26

Commercial loans

 

700

 

700

 

184

 

1,164

 

3

 

928

 

7

Consumer installment loans

 

12

 

12

 

3

 

11

 

 

10

 

Subtotal impaired loans with a valuation allowance

 

4,094

 

5,083

 

1,112

 

4,582

 

16

 

3,849

 

33

Total:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Mortgage loans on real estate:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Residential 1‑4 family

 

3,268

 

4,042

 

574

 

3,155

 

21

 

3,097

 

43

Commercial

 

3,620

 

4,802

 

23

 

3,206

 

36

 

3,338

 

72

Construction and land development

 

1,122

 

1,224

 

315

 

1,450

 

 

1,092

 

Multifamily

 

 

 

 

 

 

821

 

Agriculture

 

51

 

51

 

13

 

26

 

 

17

 

Total real estate loans

 

8,061

 

10,119

 

925

 

7,837

 

57

 

8,365

 

115

Commercial loans

 

1,050

 

1,664

 

184

 

1,339

 

3

 

1,045

 

7

Consumer installment loans

 

12

 

12

 

3

 

11

 

 

10

 

Total impaired loans

$

9,123

$

11,795

$

1,112

$

9,187

$

60

$

9,420

$

122

(1)The amount of the investment in a loan, which is not net of a valuation allowance, but which does reflect any direct write-down of the investment.
(2)The contractual amount due, which reflects paydowns applied in accordance with loan documents, but which does not reflect any direct write-downs or valuation allowances.

The following table summarizes information related to impaired loans as of December 31, 2019 and for the three and six months ended June 30, 2019 (dollars in thousands):

Three months ended

Six months ended

December 31, 2019

June 30, 2019

June 30, 2019

    

    

Unpaid

    

    

Recorded

Principal

Related

Average

Interest

Average

Interest

Investment (1)

Balance (2)

Allowance

Investment

Recognized

Investment

Recognized

With no related allowance recorded:

Mortgage loans on real estate:

Residential 1‑4 family

$

1,483

$

1,850

$

$

1,534

$

11

$

1,543

$

21

Commercial

 

3,226

 

3,966

 

 

3,349

 

35

 

3,400

 

69

Construction and land development

328

328

Multifamily

 

2,463

 

2,463

 

 

2,539

 

 

2,546

 

Total real estate loans

 

7,500

 

8,607

 

 

7,422

 

46

 

7,489

 

90

Subtotal impaired loans with no valuation allowance

 

7,500

 

8,607

 

 

7,422

 

46

 

7,489

 

90

With an allowance recorded:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Mortgage loans on real estate:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Residential 1‑4 family

 

1,498

 

1,808

 

380

 

2,133

 

12

 

2,133

 

24

Commercial

 

378

 

876

 

87

 

722

 

2

 

998

 

4

Construction and land development

 

48

 

147

 

11

 

4,096

 

 

4,254

 

Total real estate loans

 

1,924

 

2,831

 

478

 

6,951

 

14

 

7,385

 

28

Commercial loans

 

454

 

460

 

105

 

1,822

 

5

 

1,875

 

9

Consumer installment loans

 

7

 

7

 

1

 

6

 

 

4

 

Subtotal impaired loans with a valuation allowance

 

2,385

 

3,298

 

584

 

8,779

 

19

 

9,264

 

37

Total:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Mortgage loans on real estate:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Residential 1‑4 family

 

2,981

 

3,658

 

380

 

3,667

 

23

 

3,676

 

45

Commercial

 

3,604

 

4,842

 

87

 

4,071

 

37

 

4,398

 

73

Construction and land development

 

376

 

475

 

11

 

4,096

 

 

4,254

 

Multifamily

 

2,463

 

2,463

 

 

2,539

 

 

2,546

 

Total real estate loans

 

9,424

 

11,438

 

478

 

14,373

 

60

 

14,874

 

118

Commercial loans

 

454

 

460

 

105

 

1,822

 

5

 

1,875

 

9

Consumer installment loans

 

7

 

7

 

1

 

6

 

 

4

 

Total impaired loans

$

9,885

$

11,905

$

584

$

16,201

$

65

$

16,753

$

127

(1)The amount of the investment in a loan, which is not net of a valuation allowance, but which does reflect any direct write-down of the investment.
(2)The contractual amount due, which reflects paydowns applied in accordance with loan documents, but which does not reflect any direct write-downs or valuation allowances.

Troubled debt restructures still accruing interest are loans that management expects to ultimately collect all principal and interest due, but not under the terms of the original contract. A reconciliation of impaired loans to nonaccrual loans at June 30, 2020 and December 31, 2019, is set forth in the table below (dollars in thousands):

    

June 30, 2020

    

December 31, 2019

Nonaccruals

$

4,225

$

5,292

Trouble debt restructure and still accruing

 

4,898

 

4,593

Total impaired

$

9,123

$

9,885

Interest income on nonaccrual loans, if recognized, is recorded using the cash basis method of accounting. There was an insignificant amount of cash basis income recognized during the three and six months ended June 30, 2020 and 2019. For the three months ended June 30, 2020 and 2019, estimated interest income of $100,000 and $196,000, respectively, would have been recorded if all such loans had been accruing interest according to their original contractual terms. For the six months ended June 30, 2020 and 2019, estimated interest income of $168,000 and $410,000, respectively, would have been recorded if all such loans had been accruing interest according to their original contractual terms.  

The following tables present an age analysis of past due status of loans by category as of June 30, 2020 and December 31, 2019 (dollars in thousands):

June 30, 2020

    

3089 Days

    

90+ Days Past

    

Total Past

    

    

Total Loans

Past Due

Due and Accruing

Nonaccrual

Due

Current

Receivable

Mortgage loans on real estate:

 

  

 

  

  

 

  

 

  

 

  

Residential 1‑4 family

$

1,999

$

$

1,697

$

3,696

$

202,091

$

205,787

Commercial

 

230

 

 

636

 

866

 

443,057

 

443,923

Construction and land development

 

 

 

1,122

 

1,122

 

150,407

 

151,529

Second mortgages

 

229

 

 

 

229

 

5,907

 

6,136

Multifamily

 

 

 

 

 

76,587

 

76,587

Agriculture

 

 

 

51

 

51

 

7,071

 

7,122

Total real estate loans

 

2,458

 

 

3,506

 

5,964

 

885,120

 

891,084

Commercial loans

 

362

 

 

707

 

1,069

 

261,886

 

262,955

Consumer installment loans

 

21

 

 

12

 

33

 

10,224

 

10,257

All other loans

 

 

 

 

 

1,014

 

1,014

Total loans

$

2,841

$

$

4,225

$

7,066

$

1,158,244

$

1,165,310

December 31, 2019

    

3089 Days

    

90+ Days Past

    

Total Past

    

    

Total Loans

Past Due

Due and Accruing

Nonaccrual

Due

Current

Receivable

Mortgage loans on real estate:

 

  

 

  

  

 

  

 

  

 

  

Residential 1‑4 family

$

1,308

$

$

1,378

$

2,686

$

220,852

$

223,538

Commercial

 

552

 

 

1,006

 

1,558

 

395,300

 

396,858

Construction and land development

 

166

 

 

376

 

542

 

146,024

 

146,566

Second mortgages

 

229

 

 

 

229

 

6,410

 

6,639

Multifamily

 

 

 

2,463

 

2,463

 

70,515

 

72,978

Agriculture

 

 

 

 

 

8,346

 

8,346

Total real estate loans

 

2,255

 

 

5,223

 

7,478

 

847,447

 

854,925

Commercial loans

 

1,085

 

946

 

62

 

2,093

 

189,090

 

191,183

Consumer installment loans

 

41

 

 

7

 

48

 

11,115

 

11,163

All other loans

 

 

 

 

 

1,052

 

1,052

Total loans

$

3,381

$

946

$

5,292

$

9,619

$

1,048,704

$

1,058,323

Activity in the allowance for loan losses on loans by segment for the three and six months ended June 30, 2020 and 2019 is presented in the following tables (dollars in thousands):

    

Three Months Ended June 30, 2020

Provision

March 31, 2020

Allocation

Charge-offs

Recoveries

June 30, 2020

Mortgage loans on real estate:

 

  

 

  

 

  

 

  

 

  

Residential 1‑4 family

$

2,935

$

547

$

$

13

$

3,495

Commercial

 

4,240

 

337

 

 

35

 

4,612

Construction and land development

 

1,354

 

(13)

 

 

1

 

1,342

Second mortgages

 

70

 

(26)

 

 

1

 

45

Multifamily

 

267

 

232

 

 

 

499

Agriculture

 

45

 

(1)

 

 

 

44

Total real estate loans

 

8,911

 

1,076

 

 

50

 

10,037

Commercial loans

 

2,546

 

37

 

(589)

 

64

 

2,058

Consumer installment loans

 

111

 

5

 

(29)

 

23

 

110

All other loans

 

8

 

 

 

 

8

Unallocated

 

243

 

(218)

 

 

 

25

Total loans

$

11,819

$

900

$

(618)

$

137

$

12,238

Three Months Ended June 30, 2019

Provision

    

March 31, 2019

    

Allocation

    

Charge-offs

    

Recoveries

    

June 30, 2019

Mortgage loans on real estate:

  

  

  

  

  

Residential 1‑4 family

$

3,339

$

(426)

$

(34)

$

15

$

2,894

Commercial

 

1,508

 

461

 

 

57

 

2,026

Construction and land development

 

1,210

 

154

 

 

35

 

1,399

Second mortgages

 

62

 

18

 

 

1

 

81

Multifamily

 

361

 

(169)

 

 

 

192

Agriculture

 

23

 

(23)

 

 

 

Total real estate loans

 

6,503

 

15

 

(34)

 

108

 

6,592

Commercial loans

 

1,958

 

86

 

(28)

 

2

 

2,018

Consumer installment loans

 

188

 

12

 

(40)

 

25

 

185

All other loans

 

6

 

15

 

 

 

21

Unallocated

 

6

 

(3)

 

 

 

3

Total loans

$

8,661

$

125

$

(102)

$

135

$

8,819

    

Six Months Ended June 30, 2020

Provision

December 31, 2019

Allocation

Charge-offs

Recoveries

June 30, 2020

Mortgage loans on real estate:

 

  

 

  

 

  

 

  

 

  

Residential 1‑4 family

$

2,685

$

781

$

$

29

$

3,495

Commercial

 

2,196

 

2,337

 

 

79

 

4,612

Construction and land development

 

1,044

 

214

 

 

84

 

1,342

Second mortgages

 

79

 

(36)

 

 

2

 

45

Multifamily

 

248

 

251

 

 

 

499

Agriculture

 

38

 

6

 

 

 

44

Total real estate loans

 

6,290

 

3,553

 

 

194

 

10,037

Commercial loans

 

1,980

 

619

 

(608)

 

67

 

2,058

Consumer installment loans

 

114

 

40

 

(104)

 

60

 

110

All other loans

 

7

 

1

 

 

 

8

Unallocated

 

38

 

(13)

 

 

 

25

Total loans

$

8,429

$

4,200

$

(712)

$

321

$

12,238

Six Months Ended June 30, 2019

Provision

    

December 31, 2018

    

Allocation

    

Charge-offs

    

Recoveries

    

June 30, 2019

Mortgage loans on real estate:

  

  

  

  

  

Residential 1‑4 family

$

2,281

$

429

$

(34)

$

218

$

2,894

Commercial

 

1,810

 

429

 

(277)

 

64

 

2,026

Construction and land development

 

1,161

 

197

 

(12)

 

53

 

1,399

Second mortgages

 

20

 

58

 

 

3

 

81

Multifamily

 

371

 

(179)

 

 

 

192

Agriculture

 

17

 

(17)

 

 

 

Total real estate loans

 

5,660

 

917

 

(323)

 

338

 

6,592

Commercial loans

 

1,894

 

377

 

(257)

 

4

 

2,018

Consumer installment loans

 

152

 

84

 

(100)

 

49

 

185

All other loans

 

12

 

9

 

 

 

21

Unallocated

 

1,265

 

(1,262)

 

 

 

3

Total loans

$

8,983

$

125

$

(680)

$

391

$

8,819

The increase in provision expense reflects the significant increase in commercial real estate and commercial loans classified as special mention due to the possible economic impact COVID-19 may have on these borrowers.  The allowance for loan losses could be further impacted by COVID-19; however, the amount of that impact is not currently estimable.

The following tables present information on the loans evaluated for impairment in the allowance for loan losses as of June 30, 2020 and December 31, 2019 (dollars in thousands):

June 30, 2020

Allowance for Loan Losses

Recorded Investment in Loans

    

Individually

    

Collectively

    

    

Individually

    

Collectively

    

Evaluated for

Evaluated for

Evaluated for

Evaluated for

Impairment

Impairment

Total

Impairment

Impairment

Total

Mortgage loans on real estate:

 

  

 

  

 

  

 

  

 

  

 

  

Residential 1‑4 family

$

574

$

2,921

$

3,495

$

3,268

$

202,519

$

205,787

Commercial

 

23

 

4,589

 

4,612

 

3,620

 

440,303

 

443,923

Construction and land development

 

315

 

1,027

 

1,342

 

1,122

 

150,407

 

151,529

Second mortgages

 

 

45

 

45

 

 

6,136

 

6,136

Multifamily

 

 

499

 

499

 

 

76,587

 

76,587

Agriculture

 

13

 

31

 

44

 

51

 

7,071

 

7,122

Total real estate loans

 

925

 

9,112

 

10,037

 

8,061

 

883,023

 

891,084

Commercial loans

 

184

 

1,874

 

2,058

 

1,050

 

261,905

 

262,955

Consumer installment loans

 

3

 

107

 

110

 

12

 

10,245

 

10,257

All other loans

 

 

8

 

8

 

 

1,014

 

1,014

Unallocated

 

 

25

 

25

 

 

 

Total loans

$

1,112

$

11,126

$

12,238

$

9,123

$

1,156,187

$

1,165,310

December 31, 2019

Allowance for Loan Losses

Recorded Investment in Loans

    

Individually

    

Collectively

    

    

Individually

    

Collectively

    

Evaluated for

Evaluated for

Evaluated for

Evaluated for

Impairment

Impairment

Total

Impairment

Impairment

Total

Mortgage loans on real estate:

 

  

 

  

 

  

 

  

 

  

 

  

Residential 1‑4 family

$

380

$

2,305

$

2,685

$

2,981

$

220,557

$

223,538

Commercial

 

87

 

2,109

 

2,196

 

3,604

 

393,254

 

396,858

Construction and land development

 

11

 

1,033

 

1,044

 

376

 

146,190

 

146,566

Second mortgages

 

 

79

 

79

 

 

6,639

 

6,639

Multifamily

 

 

248

 

248

 

2,463

 

70,515

 

72,978

Agriculture

 

 

38

 

38

 

 

8,346

 

8,346

Total real estate loans

 

478

 

5,812

 

6,290

 

9,424

 

845,501

 

854,925

Commercial loans

 

105

 

1,875

 

1,980

 

454

 

190,729

 

191,183

Consumer installment loans

 

1

 

113

 

114

 

7

 

11,156

 

11,163

All other loans

 

 

7

 

7

 

 

1,052

 

1,052

Unallocated

 

 

38

 

38

 

 

 

Total loans

$

584

$

7,845

$

8,429

$

9,885

$

1,048,438

$

1,058,323

Loans are monitored for credit quality on a recurring basis. These credit quality indicators are defined as follows:

Pass -  A pass loan is not adversely classified, as it does not display any of the characteristics for adverse classification. This category includes purchased loans that are 100% guaranteed by U.S. Government agencies of $12.0 million and $12.7 million at June 30, 2020 and December 31, 2019, respectively and PPP loans 100% guaranteed by the SBA of $83.5 million at June 30, 2020.

Special Mention -  A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention loans are not adversely classified and do not warrant adverse classification.

Substandard -  A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt.  These loans are characterized by the distinct possibility of loss if the deficiencies are not corrected.

Doubtful -  A doubtful loan has all the weaknesses inherent in a loan classified as substandard with the added characteristics that the weaknesses make collection or liquidation in full, highly questionable and improbable, on the basis of currently existing facts, conditions, and values. The possibility of loss is extremely high.

The following tables present the composition of loans by credit quality indicator at June 30, 2020 and December 31, 2019 (dollars in thousands):

June 30, 2020

Special

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

Mortgage loans on real estate:

Residential 1‑4 family

$

191,802

$

12,544

$

1,441

$

$

205,787

Commercial

 

318,456

 

123,432

 

2,035

 

 

443,923

Construction and land development

 

148,857

 

1,550

 

1,122

 

 

151,529

Second mortgages

 

5,156

 

980

 

 

 

6,136

Multifamily

 

69,930

 

6,657

 

 

 

76,587

Agriculture

 

6,653

 

418

 

51

 

 

7,122

Total real estate loans

 

740,854

 

145,581

 

4,649

 

 

891,084

Commercial loans

 

216,060

 

41,394

 

5,501

 

 

262,955

Consumer installment loans

 

10,198

 

47

 

12

 

 

10,257

All other loans

 

998

 

16

 

 

 

1,014

Total loans

$

968,110

$

187,038

$

10,162

$

$

1,165,310

December 31, 2019

Special

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

Mortgage loans on real estate:

 

  

 

  

 

  

 

  

 

  

Residential 1‑4 family

$

219,210

$

2,964

$

1,364

$

$

223,538

Commercial

 

391,251

 

3,188

 

2,419

 

 

396,858

Construction and land development

 

145,782

 

408

 

376

 

 

146,566

Second mortgages

 

6,096

 

543

 

 

 

6,639

Multifamily

 

70,515

 

 

2,463

 

 

72,978

Agriculture

 

8,098

 

248

 

 

 

8,346

Total real estate loans

 

840,952

 

7,351

 

6,622

 

 

854,925

Commercial loans

 

185,123

 

2,770

 

3,290

 

 

191,183

Consumer installment loans

 

11,140

 

16

 

7

 

 

11,163

All other loans

 

1,052

 

 

 

 

1,052

Total loans

$

1,038,267

$

10,137

$

9,919

$

$

1,058,323

In accordance with FASB Accounting Standards Update (ASU) 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring, the Company assesses all loan modifications to determine whether they are considered troubled debt restructurings (TDRs) under the guidance. The Company had 19 and 25 loans that met the definition of a TDR at June 30, 2020 and 2019, respectively.

During the three and six months ended June 30, 2020, the Company modified one commercial real estate loan that was considered to be a TDR. The Company granted the borrower six months interest only payment relief and no other changes were made to the loan structure. The loan is 100% guaranteed by the USDA and had a pre- and post-modification balance of $438,000. The Company had no loan modifications considered to be TDRs during the three and six months ended June 30, 2019.

 

A loan is considered to be in default if it is 90 days or more past due. There were no TDRs that had been restructured during the previous 12 months that resulted in default during the three and six months ended June 30, 2020. There were no TDRs that had been restructured during the previous 12 months that resulted in default during the three months ended June 30, 2019. During the six months ended June 30, 2019, one loan defaulted that had been restructured during the previous 12 months prior to the default. This multifamily real estate loan had a recorded investment of $2.6 million.

In the determination of the allowance for loan losses, management considers TDRs and subsequent defaults in these restructures by reviewing for impairment in accordance with FASB ASC 310-10-35, Receivables, Subsequent Measurement.

At June 30, 2020, the Company had 1-4 family mortgages in the amount of $94.2 million pledged as collateral to the Federal Home Loan Bank for a total borrowing capacity of $77.4 million.