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Loans
 6 Months Ended
Jun. 30, 2014
Loans [Abstract]  
Loans
4.    Loans

Our assessment of the allowance for loan losses is based on an evaluation of the loan portfolio, recent loss experience, current economic conditions and other pertinent factors.
 
An analysis of the allowance for loan losses by portfolio segment for the three months ended June 30, follows:

 
 
  
  
  
Payment
  
  
 
 
 
  
  
  
Plan
  
  
 
 
 
Commercial
  
Mortgage
  
Installment
  
Receivables
  
Unallocated
  
Total
 
 
 
(In thousands)
 
2014
 
  
  
  
  
  
 
Balance at beginning of period
 
$
5,763
  
$
17,000
  
$
2,061
  
$
87
  
$
5,526
  
$
30,437
 
Additions (deductions)
Provision for loan losses
  
(1,070
)
  
(579
)
  
(76
)
  
(6
)
  
(114
)
  
(1,845
)
Recoveries credited to allowance
  
2,138
   
400
   
352
   
1
   
-
   
2,891
 
Loans charged against the allowance
  
(1,656
)
  
(1,279
)
  
(349
)
  
(2
)
  
-
   
(3,286
)
Balance at end of period
 
$
5,175
  
$
15,542
  
$
1,988
  
$
80
  
$
5,412
  
$
28,197
 
 
                        
2013
                        
Balance at beginning of period
 
$
10,058
  
$
20,163
  
$
3,162
  
$
129
  
$
7,253
  
$
40,765
 
Additions (deductions)
Provision for loan losses
  
(1,404
)
  
(349
)
  
141
   
(12
)
  
(483
)
  
(2,107
)
Recoveries credited to allowance
  
3,181
   
450
   
306
   
21
   
-
   
3,958
 
Loans charged against the allowance
  
(3,599
)
  
(1,605
)
  
(613
)
  
(13
)
  
-
   
(5,830
)
Balance at end of period
 
$
8,236
  
$
18,659
  
$
2,996
  
$
125
  
$
6,770
  
$
36,786
 
 
An analysis of the allowance for loan losses by portfolio segment for the six months ended June 30, follows:

 
 
  
  
  
Payment
  
  
 
 
 
  
  
  
Plan
  
  
 
 
 
Commercial
  
Mortgage
  
Installment
  
Receivables
  
Unallocated
  
Total
 
 
 
(In thousands)
 
2014
 
  
  
  
  
  
 
Balance at beginning of period
 
$
6,827
  
$
17,195
  
$
2,246
  
$
97
  
$
5,960
  
$
32,325
 
Additions (deductions)
                        
Provision for loan losses
  
(563
)
  
(386
)
  
100
   
(20
)
  
(548
)
  
(1,417
)
Recoveries credited to allowance
  
2,493
   
858
   
603
   
5
   
-
   
3,959
 
Loans charged against the allowance
  
(3,582
)
  
(2,125
)
  
(961
)
  
(2
)
  
-
   
(6,670
)
Balance at end of period
 
$
5,175
  
$
15,542
  
$
1,988
  
$
80
  
$
5,412
  
$
28,197
 
 
                        
2013
                        
Balance at beginning of period
 
$
11,402
  
$
21,447
  
$
3,378
  
$
144
  
$
7,904
  
$
44,275
 
Additions (deductions)
                        
Provision for loan losses
  
(1,676
)
  
(488
)
  
516
   
(16
)
  
(1,134
)
  
(2,798
)
Recoveries credited to allowance
  
3,717
   
1,072
   
592
   
28
   
-
   
5,409
 
Loans charged against the allowance
  
(5,207
)
  
(3,372
)
  
(1,490
)
  
(31
)
  
-
   
(10,100
)
Balance at end of period
 
$
8,236
  
$
18,659
  
$
2,996
  
$
125
  
$
6,770
  
$
36,786
 

Allowance for loan losses and recorded investment in loans by portfolio segment follows:

 
 
  
  
  
Payment
  
  
 
 
 
  
  
  
Plan
  
  
 
 
 
Commercial
  
Mortgage
  
Installment
  
Receivables
  
Unallocated
  
Total
 
 
 
(In thousands)
 
June 30, 2014
 
  
  
  
  
  
 
Allowance for loan losses:
 
  
  
  
  
  
 
Individually evaluated for impairment
 
$
2,482
  
$
10,029
  
$
718
  
$
-
  
$
-
  
$
13,229
 
Collectively evaluated for impairment
  
2,693
   
5,513
   
1,270
   
80
   
5,412
   
14,968
 
Total ending allowance balance
 
$
5,175
  
$
15,542
  
$
1,988
  
$
80
  
$
5,412
  
$
28,197
 
 
                        
Loans
                        
Individually evaluated for impairment
 
$
36,764
  
$
75,899
  
$
6,960
  
$
-
      
$
119,623
 
Collectively evaluated for impairment
  
618,953
   
398,512
   
194,902
   
49,838
       
1,262,205
 
Total loans recorded investment
  
655,717
   
474,411
   
201,862
   
49,838
       
1,381,828
 
Accrued interest included in recorded investment
  
1,469
   
2,209
   
656
   
-
       
4,334
 
Total loans
 
$
654,248
  
$
472,202
  
$
201,206
  
$
49,838
      
$
1,377,494
 
 
                        
December 31, 2013
                        
Allowance for loan losses:
                        
Individually evaluated for impairment
 
$
3,878
  
$
10,488
  
$
792
  
$
-
  
$
-
  
$
15,158
 
Collectively evaluated for impairment
  
2,949
   
6,707
   
1,454
   
97
   
5,960
   
17,167
 
Total ending allowance balance
 
$
6,827
  
$
17,195
  
$
2,246
  
$
97
  
$
5,960
  
$
32,325
 
 
                        
Loans
                        
Individually evaluated for impairment
 
$
40,623
  
$
78,022
  
$
7,068
  
$
-
      
$
125,713
 
Collectively evaluated for impairment
  
596,235
   
410,887
   
185,676
   
60,638
       
1,253,436
 
Total loans recorded investment
  
636,858
   
488,909
   
192,744
   
60,638
       
1,379,149
 
Accrued interest included in recorded investment
  
1,624
   
2,276
   
679
   
-
       
4,579
 
Total loans
 
$
635,234
  
$
486,633
  
$
192,065
  
$
60,638
      
$
1,374,570
 

Loans on non-accrual status and past due more than 90 days (“Non-performing Loans”) follow:

 
 
90+ and
  
  
Total Non-
 
 
 
Still
  
Non-
  
Performing
 
 
 
Accruing
  
Accrual
  
Loans
 
 
 
(In thousands)
 
June 30, 2014
 
  
  
 
Commercial
 
  
  
 
Income producing - real estate
 
$
-
  
$
1,454
  
$
1,454
 
Land, land development and construction - real estate
  
-
   
687
   
687
 
Commercial and industrial
  
126
   
2,842
   
2,968
 
Mortgage
           
1-4 family
  
-
   
6,373
   
6,373
 
Resort lending
  
-
   
2,838
   
2,838
 
Home equity - 1st lien
  
-
   
392
   
392
 
Home equity - 2nd lien
  
-
   
917
   
917
 
Installment
            
Home equity - 1st lien
  
-
   
730
   
730
 
Home equity - 2nd lien
  
-
   
586
   
586
 
Loans not secured by real estate
  
-
   
387
   
387
 
Other
  
-
   
2
   
2
 
Payment plan receivables
            
Full refund
  
-
   
8
   
8
 
Partial refund
  
-
   
-
   
-
 
Other
  
-
   
3
   
3
 
Total recorded investment
 
$
126
  
$
17,219
  
$
17,345
 
Accrued interest included in recorded investment
 
$
2
  
$
-
  
$
2
 
December 31, 2013
            
Commercial
            
Income producing - real estate
 
$
-
  
$
1,899
  
$
1,899
 
Land, land development and construction - real estate
  
-
   
1,036
   
1,036
 
Commercial and industrial
  
-
   
2,434
   
2,434
 
Mortgage
            
1-4 family
  
-
   
6,594
   
6,594
 
Resort lending
  
-
   
2,668
   
2,668
 
Home equity - 1st lien
  
-
   
415
   
415
 
Home equity - 2nd lien
  
-
   
689
   
689
 
Installment
            
Home equity - 1st lien
  
-
   
938
   
938
 
Home equity - 2nd lien
  
-
   
571
   
571
 
Loans not secured by real estate
  
-
   
638
   
638
 
Other
  
-
   
-
   
-
 
Payment plan receivables
            
Full refund
  
-
   
20
   
20
 
Partial refund
  
-
   
3
   
3
 
Other
  
-
   
-
   
-
 
Total recorded investment
 
$
-
  
$
17,905
  
$
17,905
 
Accrued interest included in recorded investment
 
$
-
  
$
-
  
$
-
 

An aging analysis of loans by class follows:

 
 
Loans Past Due
  
Loans not
  
Total
 
 
 
30-59 days
  
60-89 days
  
90+ days
  
Total
  
Past Due
  
Loans
 
 
 
(In thousands)
 
June 30, 2014
 
  
  
  
  
  
 
Commercial
 
  
  
  
  
  
 
Income producing - real estate
 
$
77
  
$
-
  
$
1,051
  
$
1,128
  
$
241,402
  
$
242,530
 
Land, land development and construction - real estate
  
41
   
-
   
241
   
282
   
33,758
   
34,040
 
Commercial and industrial
  
617
   
413
   
2,354
   
3,384
   
375,763
   
379,147
 
Mortgage
                        
1-4 family
  
3,314
   
1,023
   
6,373
   
10,710
   
265,569
   
276,279
 
Resort lending
  
607
   
677
   
2,838
   
4,122
   
133,432
   
137,554
 
Home equity - 1st lien
  
173
   
-
   
392
   
565
   
18,798
   
19,363
 
Home equity - 2nd lien
  
396
   
61
   
917
   
1,374
   
39,841
   
41,215
 
Installment
                        
Home equity - 1st lien
  
306
   
149
   
730
   
1,185
   
23,680
   
24,865
 
Home equity - 2nd lien
  
310
   
26
   
586
   
922
   
33,048
   
33,970
 
Loans not secured by real estate
  
429
   
198
   
387
   
1,014
   
139,535
   
140,549
 
Other
  
15
   
9
   
2
   
26
   
2,452
   
2,478
 
Payment plan receivables
                        
Full refund
  
842
   
273
   
8
   
1,123
   
36,357
   
37,480
 
Partial refund
  
260
   
42
   
-
   
302
   
5,522
   
5,824
 
Other
  
140
   
36
   
3
   
179
   
6,355
   
6,534
 
Total recorded investment
 
$
7,527
  
$
2,907
  
$
15,882
  
$
26,316
  
$
1,355,512
  
$
1,381,828
 
Accrued interest included in recorded investment
 
$
70
  
$
24
  
$
2
  
$
96
  
$
4,238
  
$
4,334
 
 
                        
December 31, 2013
                        
Commercial
                        
Income producing - real estate
 
$
1,014
  
$
428
  
$
878
  
$
2,320
  
$
249,313
  
$
251,633
 
Land, land development and construction - real estate
  
781
   
129
   
256
   
1,166
   
30,670
   
31,836
 
Commercial and industrial
  
1,155
   
1,665
   
318
   
3,138
   
350,251
   
353,389
 
Mortgage
                        
1-4 family
  
3,750
   
224
   
6,594
   
10,568
   
270,855
   
281,423
 
Resort lending
  
698
   
234
   
2,668
   
3,600
   
142,356
   
145,956
 
Home equity - 1st lien
  
172
   
-
   
415
   
587
   
18,214
   
18,801
 
Home equity - 2nd lien
  
663
   
73
   
689
   
1,425
   
41,304
   
42,729
 
Installment
                        
Home equity - 1st lien
  
557
   
134
   
938
   
1,629
   
25,513
   
27,142
 
Home equity - 2nd lien
  
536
   
136
   
571
   
1,243
   
36,701
   
37,944
 
Loans not secured by real estate
  
833
   
281
   
638
   
1,752
   
123,295
   
125,047
 
Other
  
22
   
12
   
-
   
34
   
2,577
   
2,611
 
Payment plan receivables
                        
Full refund
  
1,364
   
349
   
20
   
1,733
   
46,344
   
48,077
 
Partial refund
  
190
   
20
   
3
   
213
   
4,840
   
5,053
 
Other
  
122
   
4
   
-
   
126
   
7,382
   
7,508
 
Total recorded investment
 
$
11,857
  
$
3,689
  
$
13,988
  
$
29,534
  
$
1,349,615
  
$
1,379,149
 
Accrued interest included in recorded investment
 
$
100
  
$
26
  
$
-
  
$
126
  
$
4,453
  
$
4,579
 

Impaired loans are as follows :

 
 
June 30,
  
December 31,
 
 
 
2014
  
2013
 
Impaired loans with no allocated allowance
 
(In thousands)
 
TDR
 
$
12,147
  
$
13,006
 
Non - TDR
  
240
   
334
 
Impaired loans with an allocated allowance
        
TDR - allowance based on collateral
  
9,493
   
10,085
 
TDR - allowance based on present value cash flow
  
96,720
   
101,131
 
Non - TDR - allowance based on collateral
  
615
   
688
 
Non - TDR - allowance based on present value cash flow
  
-
   
-
 
Total impaired loans
 
$
119,215
  
$
125,244
 
 
        
Amount of allowance for loan losses allocated
        
TDR - allowance based on collateral
 
$
2,208
  
$
3,127
 
TDR - allowance based on present value cash flow
  
10,852
   
11,777
 
Non - TDR - allowance based on collateral
  
169
   
254
 
Non - TDR - allowance based on present value cash flow
  
-
   
-
 
Total amount of allowance for loan losses allocated
 
$
13,229
  
$
15,158
 

Impaired loans by class  are as follows (1):

 
 
June 30, 2014
  
December 31, 2013
 
 
 
  
Unpaid
  
  
  
Unpaid
  
 
 
 
Recorded
  
Principal
  
Related
  
Recorded
  
Principal
  
Related
 
 
 
Investment
  
Balance
  
Allowance
  
Investment
  
Balance
  
Allowance
 
With no related allowance recorded:
 
(In thousands)
  
 
Commercial
 
  
  
  
  
  
 
Income producing - real estate
 
$
7,923
  
$
7,906
  
$
-
  
$
7,042
  
$
7,178
  
$
-
 
Land, land development & construction-real estate
  
872
   
1,411
   
-
   
2,185
   
3,217
   
-
 
Commercial and industrial
  
3,538
   
3,520
   
-
   
4,110
   
4,087
   
-
 
Mortgage
                        
1-4 family
  
57
   
62
   
-
   
8
   
8
   
-
 
Resort lending
  
35
   
163
   
-
   
35
   
163
   
-
 
Home equity - 1st lien
  
-
   
-
   
-
   
-
   
-
   
-
 
Home equity - 2nd lien
  
-
   
-
   
-
   
-
   
-
   
-
 
Installment
                        
Home equity - 1st lien
  
-
   
37
   
-
   
-
   
-
   
-
 
Home equity - 2nd lien
  
-
   
-
   
-
   
-
   
-
   
-
 
Loans not secured by real estate
  
-
   
-
   
-
   
-
   
-
   
-
 
Other
  
-
   
-
   
-
   
-
   
-
   
-
 
 
  
12,425
   
13,099
   
-
   
13,380
   
14,653
   
-
 
With an allowance recorded:
                        
Commercial
                        
Income producing - real estate
  
12,047
   
13,304
   
732
   
14,538
   
15,631
   
1,161
 
Land, land development & construction-real estate
  
4,148
   
5,341
   
630
   
3,366
   
4,130
   
686
 
Commercial and industrial
  
8,236
   
7,747
   
1,120
   
9,382
   
9,529
   
2,031
 
Mortgage
                        
1-4 family
  
56,254
   
59,341
   
6,813
   
57,612
   
60,768
   
7,236
 
Resort lending
  
19,349
   
20,326
   
3,183
   
20,171
   
20,608
   
3,221
 
Home equity - 1st lien
  
166
   
180
   
16
   
154
   
164
   
11
 
Home equity - 2nd lien
  
38
   
116
   
17
   
42
   
118
   
20
 
Installment
                        
Home equity - 1st lien
  
2,841
   
3,017
   
215
   
2,959
   
3,115
   
254
 
Home equity - 2nd lien
  
3,421
   
3,421
   
411
   
3,352
   
3,347
   
462
 
Loans not secured by real estate
  
684
   
801
   
91
   
741
   
902
   
75
 
Other
  
14
   
14
   
1
   
16
   
16
   
1
 
 
  
107,198
   
113,608
   
13,229
   
112,333
   
118,328
   
15,158
 
Total
                        
Commercial
                        
Income producing - real estate
  
19,970
   
21,210
   
732
   
21,580
   
22,809
   
1,161
 
Land, land development & construction-real estate
  
5,020
   
6,752
   
630
   
5,551
   
7,347
   
686
 
Commercial and industrial
  
11,774
   
11,267
   
1,120
   
13,492
   
13,616
   
2,031
 
Mortgage
                        
1-4 family
  
56,311
   
59,403
   
6,813
   
57,620
   
60,776
   
7,236
 
Resort lending
  
19,384
   
20,489
   
3,183
   
20,206
   
20,771
   
3,221
 
Home equity - 1st lien
  
166
   
180
   
16
   
154
   
164
   
11
 
Home equity - 2nd lien
  
38
   
116
   
17
   
42
   
118
   
20
 
Installment
                        
Home equity - 1st lien
  
2,841
   
3,054
   
215
   
2,959
   
3,115
   
254
 
Home equity - 2nd lien
  
3,421
   
3,421
   
411
   
3,352
   
3,347
   
462
 
Loans not secured by real estate
  
684
   
801
   
91
   
741
   
902
   
75
 
Other
  
14
   
14
   
1
   
16
   
16
   
1
 
Total
 
$
119,623
  
$
126,707
  
$
13,229
  
$
125,713
  
$
132,981
  
$
15,158
 
 
                        
Accrued interest included in recorded investment
 
$
408
          
$
469
         

(1) There were no impaired payment plan receivables at June 30, 2014 or December 31, 2013.

Average recorded investment in and interest income earned on impaired loans by class for the three month periods ending June 30, follows (1):

 
 
2014
  
2013
 
 
 
Average
  
Interest
  
Average
  
Interest
 
 
 
Recorded
  
Income
  
Recorded
  
Income
 
 
 
Investment
  
Recognized
  
Investment
  
Recognized
 
With no related allowance recorded:
 
(In thousands)
 
Commercial
 
  
  
  
 
Income producing - real estate
 
$
8,403
  
$
86
  
$
4,856
  
$
42
 
Land, land development & construction-real estate
  
821
   
15
   
3,212
   
42
 
Commercial and industrial
  
3,352
   
26
   
4,400
   
76
 
Mortgage
                
1-4 family
  
33
   
-
   
4
   
-
 
Resort lending
  
35
   
-
   
35
   
-
 
Home equity line of credit - 1st lien
  
-
   
-
   
-
   
-
 
Home equity line of credit - 2nd lien
  
-
   
-
   
-
   
-
 
Installment
                
Home equity installment - 1st lien
  
-
   
1
   
2,020
   
28
 
Home equity installment - 2nd lien
  
-
   
-
   
2,313
   
33
 
Loans not secured by real estate
  
-
   
-
   
599
   
7
 
Other
  
-
   
-
   
19
   
-
 
 
  
12,644
   
128
   
17,458
   
228
 
With an allowance recorded:
                
Commercial
                
Income producing - real estate
  
12,780
   
141
   
20,745
   
176
 
Land, land development & construction-real estate
  
4,418
   
40
   
6,837
   
55
 
Commercial and industrial
  
8,615
   
80
   
11,886
   
88
 
Mortgage
                
1-4 family
  
56,778
   
589
   
62,011
   
682
 
Resort lending
  
19,485
   
195
   
21,916
   
222
 
Home equity line of credit - 1st lien
  
160
   
2
   
156
   
-
 
Home equity line of credit - 2nd lien
  
40
   
-
   
42
   
-
 
Installment
                
Home equity installment - 1st lien
  
2,861
   
44
   
1,023
   
8
 
Home equity installment - 2nd lien
  
3,453
   
48
   
1,074
   
12
 
Loans not secured by real estate
  
715
   
7
   
221
   
4
 
Other
  
15
   
1
   
-
   
-
 
 
  
109,320
   
1,147
   
125,911
   
1,247
 
Total
                
Commercial
                
Income producing - real estate
  
21,183
   
227
   
25,601
   
218
 
Land, land development & construction-real estate
  
5,239
   
55
   
10,049
   
97
 
Commercial and industrial
  
11,967
   
106
   
16,286
   
164
 
Mortgage
                
1-4 family
  
56,811
   
589
   
62,015
   
682
 
Resort lending
  
19,520
   
195
   
21,951
   
222
 
Home equity line of credit - 1st lien
  
160
   
2
   
156
   
-
 
Home equity line of credit - 2nd lien
  
40
   
-
   
42
   
-
 
Installment
                
Home equity installment - 1st lien
  
2,861
   
45
   
3,043
   
36
 
Home equity installment - 2nd lien
  
3,453
   
48
   
3,387
   
45
 
Loans not secured by real estate
  
715
   
7
   
820
   
11
 
Other
  
15
   
1
   
19
   
-
 
Total
 
$
121,964
  
$
1,275
  
$
143,369
  
$
1,475
 

(1)There were no impaired payment plan receivables during the three month periods ended June 30, 2014 and 2013, respectively.

Average recorded investment in and interest income earned on impaired loans by class for the six month periods ending June 30, follows (1):

 
 
2014
  
2013
 
 
 
Average
  
Interest
  
Average
  
Interest
 
 
 
Recorded
  
Income
  
Recorded
  
Income
 
 
 
Investment
  
Recognized
  
Investment
  
Recognized
 
With no related allowance recorded:
 
(In thousands)
 
Commercial
 
  
  
  
 
Income producing - real estate
 
$
7,949
  
$
186
  
$
4,587
  
$
105
 
Land, land development & construction-real estate
  
1,276
   
28
   
3,243
   
84
 
Commercial and industrial
  
3,605
   
66
   
3,803
   
114
 
Mortgage
                
1-4 family
  
24
   
-
   
3
   
-
 
Resort lending
  
35
   
-
   
23
   
-
 
Home equity line of credit - 1st lien
  
-
   
-
   
-
   
-
 
Home equity line of credit - 2nd lien
  
-
   
-
   
-
   
-
 
Installment
                
Home equity installment - 1st lien
  
-
   
1
   
2,022
   
52
 
Home equity installment - 2nd lien
  
-
   
-
   
2,301
   
62
 
Loans not secured by real estate
  
-
   
-
   
602
   
15
 
Other
  
-
   
-
   
19
   
1
 
 
  
12,889
   
281
   
16,603
   
433
 
With an allowance recorded:
                
Commercial
                
Income producing - real estate
  
13,366
   
281
   
20,706
   
313
 
Land, land development & construction-real estate
  
4,067
   
82
   
7,494
   
111
 
Commercial and industrial
  
8,871
   
158
   
13,335
   
228
 
Mortgage
                
1-4 family
  
57,056
   
1,219
   
62,727
   
1,388
 
Resort lending
  
19,713
   
386
   
22,532
   
441
 
Home equity line of credit - 1st lien
  
158
   
3
   
125
   
1
 
Home equity line of credit - 2nd lien
  
41
   
1
   
42
   
1
 
Installment
                
Home equity installment - 1st lien
  
2,894
   
89
   
1,087
   
20
 
Home equity installment - 2nd lien
  
3,419
   
97
   
1,103
   
25
 
Loans not secured by real estate
  
724
   
17
   
212
   
6
 
Other
  
15
   
1
   
-
   
-
 
 
  
110,324
   
2,334
   
129,363
   
2,534
 
Total
                
Commercial
                
Income producing - real estate
  
21,315
   
467
   
25,293
   
418
 
Land, land development & construction-real estate
  
5,343
   
110
   
10,737
   
195
 
Commercial and industrial
  
12,476
   
224
   
17,138
   
342
 
Mortgage
                
1-4 family
  
57,080
   
1,219
   
62,730
   
1,388
 
Resort lending
  
19,748
   
386
   
22,555
   
441
 
Home equity line of credit - 1st lien
  
158
   
3
   
125
   
1
 
Home equity line of credit - 2nd lien
  
41
   
1
   
42
   
1
 
Installment
                
Home equity installment - 1st lien
  
2,894
   
90
   
3,109
   
72
 
Home equity installment - 2nd lien
  
3,419
   
97
   
3,404
   
87
 
Loans not secured by real estate
  
724
   
17
   
814
   
21
 
Other
  
15
   
1
   
19
   
1
 
Total
 
$
123,213
  
$
2,615
  
$
145,966
  
$
2,967
 

(1)There were no impaired payment plan receivables during the six month periods ended June 30, 2014 and 2013, respectively.

Our average investment in impaired loans was approximately $122.0 million and $143.4 million for the three-month periods ended June 30, 2014 and 2013, respectively and $123.2 million and $146.0 million for the six-month periods ended June 30, 2014 and 2013, respectively.  Cash receipts on impaired loans on non-accrual status are generally applied to the principal balance.  Interest income recognized on impaired loans during the three months ending June 30, 2014 and 2013 was approximately $1.3 million and $1.5 million, respectively and was approximately $2.6 million and $3.0 million during the six months ending June 30, 2014 and 2013, respectively.

Troubled debt restructurings follow:
 
  
June 30, 2014
 
  
Commercial
  
Retail
  
Total
 
  
(In thousands)
 
Performing TDR's
 
$
31,678
  
$
77,044
  
$
108,722
 
Non-performing TDR's(1)
  4,128   5,510(2)   9,638 
Total
 
$
35,806
  
$
82,554
  
$
118,360
 
 
 
 
December 31, 2013
 
  
Commercial
  
Retail
  
Retail
 
  
(In thousands)
 
Performing TDR's
 
$
35,134
  
$
79,753
  
$
114,887
 
Non-performing TDR's(1)
  
4,347
   4,988(2)   9,335 
Total
 
$
39,481
  
$
84,741
  
$
124,222
 

(1) Included in non-performing loans table above.
(2) Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.

We allocated $13.1 million and $14.9 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of June 30, 2014 and December 31, 2013, respectively.

During the six months ended June 30, 2014 and 2013, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans generally included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan have generally been for periods ranging from 9 months to 36 months but have extended to as much as 480 months in certain circumstances. Modifications involving an extension of the maturity date have generally been for periods ranging from 1 month to 60 months but have extended to as much as 240 months in certain circumstances.

Loans that have been classified as troubled debt restructurings during the three-month periods ended June 30 follow:

 
 
  
Pre-modification
  
Post-modification
 
 
 
Number of
  
Recorded
  
Recorded
 
 
 
Contracts
  
Balance
  
Balance
 
 
 
(Dollars in thousands)
 
2014
 
  
  
 
Commercial
 
  
  
 
Income producing - real estate
  
1
  
$
141
  
$
122
 
Land, land development & construction-real estate
  
1
   
15
   
15
 
Commercial and industrial
  
2
   
1,177
   
1,439
 
Mortgage
            
1-4 family
  
3
   
226
   
229
 
Resort lending
  
1
   
339
   
341
 
Home equity - 1st lien
  
1
   
17
   
14
 
Home equity - 2nd lien
  
-
   
-
   
-
 
Installment
            
Home equity - 1st lien
  
2
   
314
   
294
 
Home equity - 2nd lien
  
2
   
73
   
72
 
Loans not secured by real estate
  
-
   
-
   
-
 
Other
  
-
   
-
   
-
 
Total
  
13
  
$
2,302
  
$
2,526
 
 
            
2013
            
Commercial
            
Income producing - real estate
  
2
  
$
395
  
$
287
 
Land, land development & construction-real estate
  
-
   
-
   
-
 
Commercial and industrial
  
2
   
72
   
70
 
Mortgage
            
1-4 family
  
6
   
482
   
451
 
Resort lending
  
1
   
234
   
231
 
Home equity - 1st lien
  
-
   
-
   
-
 
Home equity - 2nd lien
  
-
   
-
   
-
 
Installment
            
Home equity - 1st lien
  
6
   
153
   
144
 
Home equity - 2nd lien
  
4
   
64
   
66
 
Loans not secured by real estate
  
1
   
27
   
27
 
Other
  
-
   
-
   
-
 
Total
  
22
  
$
1,427
  
$
1,276
 

Loans that have been classified as troubled debt restructurings during the six-month periods ended June 30 follow:

 
 
  
Pre-modification
  
Post-modification
 
 
 
Number of
  
Recorded
  
Recorded
 
 
 
Contracts
  
Balance
  
Balance
 
 
 
(Dollars in thousands)
 
2014
 
  
  
 
Commercial
 
  
  
 
Income producing - real estate
  
3
  
$
354
  
$
332
 
Land, land development & construction-real estate
  
1
   
15
   
15
 
Commercial and industrial
  
6
   
1,367
   
1,628
 
Mortgage
            
1-4 family
  
7
   
950
   
968
 
Resort lending
  
3
   
633
   
634
 
Home equity - 1st lien
  
1
   
17
   
14
 
Home equity - 2nd lien
  
-
   -    -  
Installment
            
Home equity - 1st lien
  
5
   
420
   
372
 
Home equity - 2nd lien
  
5
   
294
   
292
 
Loans not secured by real estate
  
2
   
33
   
29
 
Other
  
-
   
-
   
-
 
Total
  
33
  
$
4,083
  
$
4,284
 
 
            
2013
            
Commercial
            
Income producing - real estate
  
5
  
$
4,478
  
$
3,877
 
Land, land development & construction-real estate
  
1
   
16
   
-
 
Commercial and industrial
  
15
   
912
   
810
 
Mortgage
            
1-4 family
  
13
   
1,273
   
1,235
 
Resort lending
  
4
   
1,033
   
1,022
 
Home equity - 1st lien
  
1
   
95
   
96
 
Home equity - 2nd lien
  
-
   
-
   
-
 
Installment
            
Home equity - 1st lien
  
13
   
326
   
317
 
Home equity - 2nd lien
  
10
   
212
   
212
 
Loans not secured by real estate
  
3
   
84
   
54
 
Other
  
-
   
-
   
-
 
Total
  
65
  
$
8,429
  
$
7,623
 

The troubled debt restructurings described above for 2014 decreased the allowance for loan losses by $0.1 million and resulted in $0.02 million of charge offs during the three months ended June 30, 2014 and increased the allowance by $0.1 million and resulted in $0.03 million of charge offs during the six months ended June 30, 2014.

The troubled debt restructurings described above for 2013 increased the allowance for loan losses by $0.1 million and resulted in zero charge offs during the three months ended June 30, 2013 and increased the allowance by $0.2 million and resulted in $0.3 million of charge offs during the six months ended June 30, 2013.

Loans that have been classified as troubled debt restructurings during the past twelve months and that have subsequently defaulted during the three-month periods ended June 30 follow:

 
 
Number of
  
Recorded
 
 
 
Contracts
  
Balance
 
 
 
(Dollars in thousands)
 
2014
 
  
 
Commercial
 
  
 
Income producing - real estate
  
-
  
$
-
 
Land, land development & construction-real estate
  
-
   
-
 
Commercial and industrial
  
1
   
253
 
Mortgage
        
1-4 family
  
-
   
-
 
Resort lending
  
-
   
-
 
Home equity - 1st lien
  
-
   
-
 
Home equity - 2nd lien
  
-
   
-
 
Installment
        
Home equity - 1st lien
  
-
   
-
 
Home equity - 2nd lien
  
-
   
-
 
Loans not secured by real estate
  
-
   
-
 
Other
  
-
   
-
 
 
  
1
  
$
253
 
 
        
2013
        
Commercial
        
Income producing - real estate
  
-
  
$
-
 
Land, land development & construction-real estate
  
-
   
-
 
Commercial and industrial
  
-
   
-
 
Mortgage
        
1-4 family
  
-
   
-
 
Resort lending
  
-
   
-
 
Home equity - 1st lien
  
-
   
-
 
Home equity - 2nd lien
  
-
   
-
 
Installment
        
Home equity - 1st lien
  
-
   
-
 
Home equity - 2nd lien
  
1
   
22
 
Loans not secured by real estate
  
-
   
-
 
Other
  
-
   
-
 
 
  
1
  
$
22
 

Loans that have been classified as troubled debt restructurings during the past twelve months and that have subsequently defaulted during the six-month periods ended June 30 follow:

 
 
Number of
  
Recorded
 
 
 
Contracts
  
Balance
 
 
 
(Dollars in thousands)
 
2014
 
  
 
Commercial
 
  
 
Income producing - real estate
  
-
  
$
-
 
Land, land development & construction-real estate
  
-
   
-
 
Commercial and industrial
  
1
   
253
 
Mortgage
        
1-4 family
  
-
   
-
 
Resort lending
  
-
   
-
 
Home equity - 1st lien
  
-
   
-
 
Home equity - 2nd lien
  
-
   
-
 
Installment
        
Home equity - 1st lien
  
-
   
-
 
Home equity - 2nd lien
  
-
   
-
 
Loans not secured by real estate
  
-
   
-
 
Other
  
-
   
-
 
 
  
1
  
$
253
 
 
        
2013
        
Commercial
        
Income producing - real estate
  
-
  
$
-
 
Land, land development & construction-real estate
  
1
   
334
 
Commercial and industrial
  
2
   
143
 
Mortgage
        
1-4 family
  
1
   
106
 
Resort lending
  
1
   
156
 
Home equity - 1st lien
  
-
   
-
 
Home equity - 2nd lien
  
-
   
-
 
Installment
        
Home equity - 1st lien
  
-
   
-
 
Home equity - 2nd lien
  
1
   
22
 
Loans not secured by real estate
  
-
   
-
 
Other
  
-
   
-
 
 
  
6
  
$
761
 

A loan is considered to be in payment default generally once it is 90 days contractually past due under the modified terms.

The troubled debt restructurings that subsequently defaulted described above for 2014 increased the allowance for loan losses by $0.2 million and resulted in zero charge offs during the three months ended June 30, 2014 and increased the allowance for loan losses by $0.2 million and resulted in zero charge offs during the six months ended June 30, 2014.

The troubled debt restructurings that subsequently defaulted described above for 2013 decreased the allowance for loan losses by $0.01 million and resulted in $0.02 million of charge offs during the three months ended June 30, 2013 and increased the allowance for loan losses by $0.05 million and resulted in charge offs of $0.12 million during the six months ended June 30, 2013.

In order to determine whether a borrower is experiencing financial difficulty, we perform an evaluation of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under our internal underwriting policy.

Credit Quality Indicators – As part of our on-going monitoring of the credit quality of our loan portfolios, we track certain credit quality indicators including (a) weighted-average risk grade of commercial loans, (b) the level of classified commercial loans (c) credit scores of mortgage and installment loan borrowers (d) insurance industry ratings of certain counterparties for payment plan receivables and (e) delinquency history and non-performing loans.

For commercial loans we use a loan rating system that is similar to those employed by state and federal banking regulators. Loans are graded on a scale of 1 to 12. A description of the general characteristics of the ratings follows:

Rating 1 through 6: These loans are generally referred to as our “non-watch” commercial credits that include very high or exceptional credit fundamentals through acceptable credit fundamentals.

Rating 7 and 8: These loans are generally referred to as our “watch” commercial credits. This rating includes loans to borrowers that exhibit potential credit weakness or downward trends. If not checked or cured these trends could weaken our asset or credit position. While potentially weak, no loss of principal or interest is envisioned with these ratings.

Rating 9: These loans are generally referred to as our “substandard accruing” commercial credits. This rating includes loans to borrowers that exhibit a well-defined weakness where payment default is probable and loss is possible if deficiencies are not corrected. Generally, loans with this rating are considered collectible as to both principal and interest primarily due to collateral coverage.

Rating 10 and 11: These loans are generally referred to as our “substandard - non-accrual” and “doubtful” commercial credits. This rating includes loans to borrowers with weaknesses that make collection of debt in full, on the basis of current facts, conditions and values at best questionable and at worst improbable. All of these loans are placed in non-accrual.

Rating 12: These loans are generally referred to as our “loss” commercial credits. This rating includes loans to borrowers that are deemed incapable of repayment and are charged-off.

The following table summarizes loan ratings by loan class for our commercial loan segment:

 
 
Commercial
 
 
 
  
  
Substandard
  
Non-
  
 
 
 
Non-watch
  
Watch
  
Accrual
  
Accrual
  
 
 
 1-6  7-8  9  10-11  
Total
 
 
         
(In thousands)
      
 
June 30, 2014
                 
 
Income producing - real estate
 
$
225,104
  
$
14,394
  
$
1,578
  
$
1,454
  
$
242,530
 
Land, land development and construction - real estate
  
23,433
   
9,377
   
543
   
687
   
34,040
 
Commercial and industrial
  
345,007
   
24,282
   
7,016
   
2,842
   
379,147
 
Total
 
$
593,544
  
$
48,053
  
$
9,137
  
$
4,983
  
$
655,717
 
Accrued interest included in total
 
$
1,312
  
$
127
  
$
30
  
$
-
  
$
1,469
 
 
                    
December 31, 2013
                    
Income producing - real estate
 
$
227,957
  
$
17,882
  
$
3,895
  
$
1,899
  
$
251,633
 
Land, land development and construction - real estate
  
25,654
   
4,829
   
317
   
1,036
   
31,836
 
Commercial and industrial
  
318,183
   
26,303
   
6,469
   
2,434
   
353,389
 
Total
 
$
571,794
  
$
49,014
  
$
10,681
  
$
5,369
  
$
636,858
 
Accrued interest included in total
 
$
1,433
  
$
147
  
$
44
  
$
-
  
$
1,624
 

For each of our mortgage and installment segment classes we generally monitor credit quality based on the credit scores of the borrowers. These credit scores are generally updated at least annually.

The following tables summarize credit scores by loan class for our mortgage and installment loan segments:

  
Mortgage (1)
 
  
  
  
Home
  
Home
  
 
  
  
Resort
  
Equity
  
Equity
  
 
  
1-4 Family
  
Lending
  
1st Lien
  
2nd Lien
  
Total
 
  
(In thousands)
 
June 30, 2014
  
  
  
  
  
 
800 and above
  
$
27,501
  
$
14,476
  
$
3,471
  
$
5,536
  
$
50,984
 
750-799
   
62,721
   
52,210
   
5,889
   
11,184
   
132,004
 
700-749
   
53,004
   
34,112
   
3,076
   
8,637
   
98,829
 
650-699
   
46,330
   
19,308
   
2,692
   
6,589
   
74,919
 
600-649   
32,528
   
6,077
   
1,837
   
5,081
   
45,523
 
550-599   
22,983
   
4,985
   
1,076
   
2,156
   
31,200
 
500-549   
16,805
   
2,672
   
716
   
1,308
   
21,501
 
Under 500
   
5,817
   
892
   
362
   
536
   
7,607
 
Unknown
   
8,590
   
2,822
   
244
   
188
   
11,844
 
Total
  
$
276,279
  
$
137,554
  
$
19,363
  
$
41,215
  
$
474,411
 
Accrued interest included in total
  
$
1,299
  
$
611
  
$
94
  
$
205
  
$
2,209
 
                      
December 31, 2013
                     
800 and above
  
$
23,924
  
$
13,487
  
$
3,650
  
$
5,354
  
$
46,415
 
750-799   
60,728
   
56,880
   
4,560
   
11,809
   
133,977
 
700-749
   
58,269
   
35,767
   
3,289
   
8,628
   
105,953
 
650-699
   
49,771
   
21,696
   
2,316
   
7,145
   
80,928
 
600-649
   
34,991
   
8,555
   
2,621
   
5,141
   
51,308
 
550-599
   
24,616
   
3,261
   
1,165
   
2,485
   
31,527
 
500-549
   
14,823
   
2,271
   
644
   
1,560
   
19,298
 
Under 500
   
9,492
   
1,160
   
323
   
360
   
11,335
 
Unknown
   
4,809
   
2,879
   
233
   
247
   
8,168
 
Total
  
$
281,423
  
$
145,956
  
$
18,801
  
$
42,729
  
$
488,909
 
Accrued interest included in total
  
$
1,300
  
$
650
  
$
97
  
$
229
  
$
2,276
 

(1) Credit scores have been updated within the last twelve months.

  
Installment(1)
 
  
Home
  
Home
  
Loans not
  
  
 
  
Equity
  
Equity
  
Secured by
  
  
 
  
1st Lien
  
2nd Lien
  
Real Estate
  
Other
  
Total
 
  
(In thousands)
 
June 30, 2014
  
  
  
  
  
 
800 and above
  
$
2,887
  
$
2,979
  
$
27,022
  
$
127
  
$
33,015
 
750-799
   
5,758
   
10,656
   
59,405
   
497
   
76,316
 
700-749
   
4,369
   
7,573
   
26,885
   
705
   
39,532
 
650-699
   
4,197
   
6,335
   
14,972
   
544
   
26,048
 
600-649
   
3,169
   
2,739
   
5,340
   
287
   
11,535
 
550-599
   
2,487
   
1,786
   
2,480
   
136
   
6,889
 
500-549
   
1,517
   
1,408
   
1,172
   
111
   
4,208
 
Under 500
   
401
   
443
   
653
   
36
   
1,533
 
Unknown
   
80
   
51
   
2,620
   
35
   
2,786
 
Total
  
$
24,865
  
$
33,970
  
$
140,549
  
$
2,478
  
$
201,862
 
Accrued interest included in total
  
$
102
  
$
124
  
$
410
  
$
20
  
$
656
 
                      
December 31, 2013
                     
800 and above
  
$
2,977
  
$
3,062
  
$
23,649
  
$
53
  
$
29,741
 
750-799
   
6,585
   
11,197
   
48,585
   
557
   
66,924
 
700-749
   
4,353
   
9,487
   
25,343
   
683
   
39,866
 
650-699
   
4,815
   
6,832
   
15,256
   
646
   
27,549
 
600-649
   
3,173
   
2,824
   
5,289
   
258
   
11,544
 
550-599
   
2,843
   
2,084
   
2,785
   
213
   
7,925
 
500-549
   
1,483
   
1,715
   
1,732
   
130
   
5,060
 
Under 500
   
751
   
663
   
516
   
29
   
1,959
 
Unknown
   
162
   
80
   
1,892
   
42
   
2,176
 
Total
  
$
27,142
  
$
37,944
  
$
125,047
  
$
2,611
  
$
192,744
 
Accrued interest included in total
  
$
114
  
$
144
  
$
399
  
$
22
  
$
679
 

(1) Credit scores have been updated within the last twelve months.

Mepco Finance Corporation (“Mepco”) is a wholly-owned subsidiary of our Bank that operates a vehicle service contract payment plan business throughout the United States. See Note #14 for more information about Mepco’s business. As of June 30, 2014, approximately 75.2% of Mepco’s outstanding payment plan receivables relate to programs in which a third party insurer or risk retention group is obligated to pay Mepco the full refund owing upon cancellation of the related service contract (including with respect to both the portion funded to the service contract seller and the portion funded to the administrator). These receivables are shown as “Full Refund” in the table below. Another approximately 11.7% of Mepco’s outstanding payment plan receivables as of June 30, 2014, relate to programs in which a third party insurer or risk retention group is obligated to pay Mepco the refund owing upon cancellation only with respect to the unearned portion previously funded by Mepco to the administrator (but not to the service contract seller). These receivables are shown as “Partial Refund” in the table below. The balance of Mepco’s outstanding payment plan receivables relate to programs in which there is no insurer or risk retention group that has any contractual liability to Mepco for any portion of the refund amount. These receivables are shown as “Other” in the table below. For each class of our payment plan receivables we monitor financial information on the counterparties as we evaluate the credit quality of this portfolio.

The following table summarizes credit ratings of insurer or risk retention group counterparties by class of payment plan receivable:

  
Payment Plan Receivables
 
  
Full
  
Partial
  
  
 
  
Refund
  
Refund
  
Other
  
Total
 
  
(In thousands)
 
June 30, 2014
  
  
  
  
 
AM Best rating
  
  
  
  
 
A+
 
$
-
  
$
22
  
$
-
  
$
22
 
A  
15,513
   
4,569
   
-
   
20,082
 
A-
   
1,564
   
930
   
6,534
   
9,028
 
Not rated
   
20,403
   
303
   
-
   
20,706
 
Total
  
$
37,480
  
$
5,824
  
$
6,534
  
$
49,838
 
                  
December 31, 2013
                 
AM Best rating
                 
A
 
$
20,203
  
$
4,221
  
$
-
  
$
24,424
 
A-
   
4,058
   
832
   
7,496
   
12,386
 
Not rated
   
23,816
   
-
   
12
   
23,828
 
Total
  
$
48,077
  
$
5,053
  
$
7,508
  
$
60,638
 

Although Mepco has contractual recourse against various counterparties for refunds owing upon cancellation of vehicle service contracts, see Note #14 below regarding certain risks and difficulties associated with collecting these refunds.