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LOANS AND PAYMENT PLAN RECEIVABLES (FY)
 9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Loans [Abstract]    
LOANS AND PAYMENT PLAN RECEIVABLES
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 September 30, follows:

Commercial
Mortgage
Installment
Payment Plan
Receivables(1)
Subjective
Allocation
Total
(In thousands)
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
5,100
 
$
8,145
 
$
900
 
$
—
 
$
6,441
 
$
20,586
 
Additions (deductions) Provision for loan losses
 
(97
)
 
68
 
 
(33
)
 
—
 
 
644
 
 
582
 
Recoveries credited to the allowance
 
340
 
 
587
 
 
285
 
 
—
 
 
—
 
 
1,212
 
Loans charged against the allowance
 
(92
)
 
(471
)
 
(339
)
 
—
 
 
—
 
 
(902
)
Balance at end of period
$
5,251
 
$
8,329
 
$
813
 
$
—
 
$
7,085
 
$
21,478
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
6,039
 
$
9,956
 
$
1,139
 
$
52
 
$
5,526
 
$
22,712
 
Additions (deductions) Provision for loan losses
 
(153
)
 
(247
)
 
208
 
 
—
 
 
17
 
 
(175
)
Recoveries credited to the allowance
 
474
 
 
195
 
 
236
 
 
—
 
 
—
 
 
905
 
Loans charged against the allowance
 
(365
)
 
(561
)
 
(473
)
 
—
 
 
—
 
 
(1,399
)
Balance at end of period
$
5,995
 
$
9,343
 
$
1,110
 
$
52
 
$
5,543
 
$
22,043
 
(1)Payment plan receivables were reclassified to held for sale at December 31, 2016. See note #15.

An analysis of the allowance for loan losses by portfolio segment for the nine months ended September 30, follows:

Commercial
Mortgage
Installment
Payment
Plan
Receivables(1)
Subjective
Allocation
Total
(In thousands)
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
4,880
 
$
8,681
 
$
1,011
 
$
—
 
$
5,662
 
$
20,234
 
Additions (deductions) Provision for loan losses
 
(197
)
 
(593
)
 
173
 
 
—
 
 
1,423
 
 
806
 
Recoveries credited to the allowance
 
946
 
 
1,264
 
 
788
 
 
—
 
 
—
 
 
2,998
 
Loans charged against the allowance
 
(378
)
 
(1,023
)
 
(1,159
)
 
—
 
 
—
 
 
(2,560
)
Balance at end of period
$
5,251
 
$
8,329
 
$
813
 
$
—
 
$
7,085
 
$
21,478
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
5,670
 
$
10,391
 
$
1,181
 
$
56
 
$
5,272
 
$
22,570
 
Additions (deductions) Provision for loan losses
 
(1,220
)
 
(885
)
 
399
 
 
(4
)
 
271
 
 
(1,439
)
Recoveries credited to the allowance
 
1,944
 
 
871
 
 
808
 
 
—
 
 
—
 
 
3,623
 
Loans charged against the allowance
 
(399
)
 
(1,034
)
 
(1,278
)
 
—
 
 
—
 
 
(2,711
)
Balance at end of period
$
5,995
 
$
9,343
 
$
1,110
 
$
52
 
$
5,543
 
$
22,043
 
(1)Payment plan receivables were reclassified to held for sale at December 31, 2016. See note #15.

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

Commercial
Mortgage
Installment
Subjective
Allocation
Total
(In thousands)
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
967
 
$
5,823
 
$
271
 
$
—
 
$
7,061
 
Collectively evaluated for impairment
 
4,284
 
 
2,506
 
 
542
 
 
7,085
 
 
14,417
 
Total ending allowance balance
$
5,251
 
$
8,329
 
$
813
 
$
7,085
 
$
21,478
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
10,257
 
$
54,322
 
$
4,215
 
 
 
 
$
68,794
 
Collectively evaluated for impairment
 
829,073
 
 
730,050
 
 
315,146
 
 
 
 
 
1,874,269
 
Total loans recorded investment
 
839,330
 
 
784,372
 
 
319,361
 
 
 
 
 
1,943,063
 
Accrued interest included in recorded investment
 
2,080
 
 
3,026
 
 
863
 
 
 
 
 
5,969
 
Total loans
$
837,250
 
$
781,346
 
$
318,498
 
 
 
 
$
1,937,094
 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
2,244
 
$
6,579
 
$
329
 
$
—
 
$
9,152
 
Collectively evaluated for impairment
 
2,636
 
 
2,102
 
 
682
 
 
5,662
 
 
11,082
 
Total ending allowance balance
$
4,880
 
$
8,681
 
$
1,011
 
$
5,662
 
$
20,234
 
Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
15,767
 
$
59,151
 
$
4,913
 
 
 
 
$
79,831
 
Collectively evaluated for impairment
 
790,228
 
 
481,828
 
 
261,474
 
 
 
 
 
1,533,530
 
Total loans recorded investment
 
805,995
 
 
540,979
 
 
266,387
 
 
 
 
 
1,613,361
 
Accrued interest included in recorded investment
 
1,978
 
 
2,364
 
 
771
 
 
 
 
 
5,113
 
Total loans
$
804,017
 
$
538,615
 
$
265,616
 
 
 
 
$
1,608,248
 

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

90+ and
Still
Accruing
Non-
Accrual
Total Non-
Performing
Loans
(In thousands)
September 30, 2017
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
—
 
$
72
 
$
72
 
Land, land development and construction - real estate
 
—
 
 
10
 
 
10
 
Commercial and industrial
 
—
 
 
706
 
 
706
 
Mortgage
 
 
 
 
 
 
 
 
 
1-4 family
 
—
 
 
5,207
 
 
5,207
 
Resort lending
 
—
 
 
1,411
 
 
1,411
 
Home equity - 1st lien
 
—
 
 
258
 
 
258
 
Home equity - 2nd lien
 
—
 
 
221
 
 
221
 
Purchased loans
 
—
 
 
—
 
 
—
 
Installment
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
—
 
 
97
 
 
97
 
Home equity - 2nd lien
 
—
 
 
224
 
 
224
 
Boat lending
 
—
 
 
69
 
 
69
 
Recreational vehicle lending
 
—
 
 
25
 
 
25
 
Other
 
—
 
 
110
 
 
110
 
Total recorded investment
$
—
 
$
8,410
 
$
8,410
 
Accrued interest included in recorded investment
$
—
 
$
—
 
$
—
 
December 31, 2016
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
—
 
$
628
 
$
628
 
Land, land development and construction - real estate
 
—
 
 
105
 
 
105
 
Commercial and industrial
 
—
 
 
4,430
 
 
4,430
 
Mortgage
 
 
 
 
 
 
 
 
 
1-4 family
 
—
 
 
5,248
 
 
5,248
 
Resort lending
 
—
 
 
1,507
 
 
1,507
 
Home equity - 1st lien
 
—
 
 
222
 
 
222
 
Home equity - 2nd lien
 
—
 
 
317
 
 
317
 
Purchased loans
 
—
 
 
—
 
 
—
 
Installment
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
—
 
 
266
 
 
266
 
Home equity - 2nd lien
 
—
 
 
289
 
 
289
 
Boat lending
 
—
 
 
219
 
 
219
 
Recreational vehicle lending
 
—
 
 
21
 
 
21
 
Other
 
—
 
 
112
 
 
112
 
Total recorded investment
$
—
 
$
13,364
 
$
13,364
 
Accrued interest included in recorded investment
$
—
 
$
—
 
$
—
 

An aging analysis of loans by class follows:

Loans Past Due
Loans not
Past Due
Total
Loans
30-59 days
60-89 days
90+ days
Total
(In thousands)
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
425
 
$
—
 
$
30
 
$
455
 
$
271,747
 
$
272,202
 
Land, land development and construction - real estate
 
10
 
 
—
 
 
—
 
 
10
 
 
67,793
 
 
67,803
 
Commercial and industrial
 
120
 
 
149
 
 
65
 
 
334
 
 
498,991
 
 
499,325
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
1,929
 
 
919
 
 
5,207
 
 
8,055
 
 
553,928
 
 
561,983
 
Resort lending
 
363
 
 
135
 
 
1,411
 
 
1,909
 
 
91,370
 
 
93,279
 
Home equity - 1st lien
 
460
 
 
—
 
 
258
 
 
718
 
 
35,826
 
 
36,544
 
Home equity - 2nd lien
 
597
 
 
195
 
 
221
 
 
1,013
 
 
56,677
 
 
57,690
 
Purchased loans
 
3
 
 
1
 
 
—
 
 
4
 
 
34,872
 
 
34,876
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
115
 
 
86
 
 
97
 
 
298
 
 
9,925
 
 
10,223
 
Home equity - 2nd lien
 
161
 
 
23
 
 
224
 
 
408
 
 
10,103
 
 
10,511
 
Boat lending
 
112
 
 
69
 
 
69
 
 
250
 
 
131,153
 
 
131,403
 
Recreational vehicle lending
 
52
 
 
4
 
 
25
 
 
81
 
 
93,687
 
 
93,768
 
Other
 
108
 
 
50
 
 
110
 
 
268
 
 
73,188
 
 
73,456
 
Total recorded investment
$
4,455
 
$
1,631
 
$
7,717
 
$
13,803
 
$
1,929,260
 
$
1,943,063
 
Accrued interest included in recorded investment
$
53
 
$
24
 
$
—
 
$
77
 
$
5,892
 
$
5,969
 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
—
 
$
—
 
$
383
 
$
383
 
$
287,255
 
$
287,638
 
Land, land development and construction - real estate
 
74
 
 
—
 
 
31
 
 
105
 
 
51,670
 
 
51,775
 
Commercial and industrial
 
100
 
 
1,385
 
 
66
 
 
1,551
 
 
465,031
 
 
466,582
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
2,361
 
 
869
 
 
5,248
 
 
8,478
 
 
306,063
 
 
314,541
 
Resort lending
 
—
 
 
—
 
 
1,507
 
 
1,507
 
 
101,541
 
 
103,048
 
Home equity - 1st lien
 
149
 
 
—
 
 
222
 
 
371
 
 
28,645
 
 
29,016
 
Home equity - 2nd lien
 
470
 
 
218
 
 
317
 
 
1,005
 
 
54,232
 
 
55,237
 
Purchased loans
 
13
 
 
2
 
 
—
 
 
15
 
 
39,122
 
 
39,137
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
311
 
 
48
 
 
266
 
 
625
 
 
12,025
 
 
12,650
 
Home equity - 2nd lien
 
238
 
 
41
 
 
289
 
 
568
 
 
13,390
 
 
13,958
 
Boat lending
 
184
 
 
33
 
 
219
 
 
436
 
 
102,489
 
 
102,925
 
Recreational vehicle lending
 
68
 
 
33
 
 
21
 
 
122
 
 
74,413
 
 
74,535
 
Other
 
289
 
 
30
 
 
112
 
 
431
 
 
61,888
 
 
62,319
 
Total recorded investment
$
4,257
 
$
2,659
 
$
8,681
 
$
15,597
 
$
1,597,764
 
$
1,613,361
 
Accrued interest included in recorded investment
$
45
 
$
19
 
$
—
 
$
64
 
$
5,049
 
$
5,113
 

Impaired loans are as follows:

September 30,
2017
December 31,
2016
(In thousands)
Impaired loans with no allocated allowance
 
 
 
 
 
 
TDR
$
349
 
$
1,782
 
Non - TDR
 
186
 
 
1,107
 
Impaired loans with an allocated allowance
 
 
 
 
 
 
TDR - allowance based on collateral
 
2,320
 
 
3,527
 
TDR - allowance based on present value cash flow
 
65,449
 
 
72,613
 
Non - TDR - allowance based on collateral
 
202
 
 
491
 
Total impaired loans
$
68,506
 
$
79,520
 
Amount of allowance for loan losses allocated
 
 
 
 
 
 
TDR - allowance based on collateral
$
641
 
$
1,868
 
TDR - allowance based on present value cash flow
 
6,329
 
 
7,146
 
Non - TDR - allowance based on collateral
 
91
 
 
138
 
Total amount of allowance for loan losses allocated
$
7,061
 
$
9,152
 

Impaired loans by class are as follows(1):

September 30, 2017
December 31, 2016
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
(In thousands)
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
—
 
$
—
 
$
—
 
$
517
 
$
768
 
$
—
 
Land, land development & construction-real estate
 
—
 
 
—
 
 
—
 
 
31
 
 
709
 
 
—
 
Commercial and industrial
 
535
 
 
557
 
 
—
 
 
2,341
 
 
3,261
 
 
—
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
2
 
 
472
 
 
—
 
 
2
 
 
387
 
 
—
 
Resort lending
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Home equity - 1st lien
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Home equity - 2nd lien
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
1
 
 
71
 
 
—
 
 
—
 
 
66
 
 
—
 
Home equity - 2nd lien
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Boat lending
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Recreational vehicle lending
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Other
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
538
 
 
1,100
 
 
—
 
 
2,891
 
 
5,191
 
 
—
 
 
 
September 30, 2017
December 31, 2016
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
(In thousands)
With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
6,975
 
 
7,121
 
 
482
 
 
7,737
 
 
7,880
 
 
554
 
Land, land development & construction-real estate
 
169
 
 
197
 
 
10
 
 
239
 
 
244
 
 
36
 
Commercial and industrial
 
2,578
 
 
2,612
 
 
475
 
 
4,902
 
 
5,246
 
 
1,654
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
37,872
 
 
39,393
 
 
3,517
 
 
41,701
 
 
43,479
 
 
4,100
 
Resort lending
 
16,098
 
 
16,169
 
 
2,264
 
 
16,898
 
 
16,931
 
 
2,453
 
Home equity - 1st lien
 
171
 
 
238
 
 
30
 
 
235
 
 
242
 
 
10
 
Home equity - 2nd lien
 
179
 
 
213
 
 
12
 
 
315
 
 
398
 
 
16
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
1,791
 
 
1,921
 
 
85
 
 
1,994
 
 
2,117
 
 
118
 
Home equity - 2nd lien
 
1,969
 
 
1,994
 
 
161
 
 
2,415
 
 
2,443
 
 
182
 
Boat lending
 
1
 
 
6
 
 
1
 
 
1
 
 
6
 
 
—
 
Recreational vehicle lending
 
93
 
 
93
 
 
5
 
 
109
 
 
108
 
 
6
 
Other
 
360
 
 
377
 
 
19
 
 
394
 
 
426
 
 
23
 
 
68,256
 
 
70,334
 
 
7,061
 
 
76,940
 
 
79,520
 
 
9,152
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
6,975
 
 
7,121
 
 
482
 
 
8,254
 
 
8,648
 
 
554
 
Land, land development & construction-real estate
 
169
 
 
197
 
 
10
 
 
270
 
 
953
 
 
36
 
Commercial and industrial
 
3,113
 
 
3,169
 
 
475
 
 
7,243
 
 
8,507
 
 
1,654
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
37,874
 
 
39,865
 
 
3,517
 
 
41,703
 
 
43,866
 
 
4,100
 
Resort lending
 
16,098
 
 
16,169
 
 
2,264
 
 
16,898
 
 
16,931
 
 
2,453
 
Home equity - 1st lien
 
171
 
 
238
 
 
30
 
 
235
 
 
242
 
 
10
 
Home equity - 2nd lien
 
179
 
 
213
 
 
12
 
 
315
 
 
398
 
 
16
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
1,792
 
 
1,992
 
 
85
 
 
1,994
 
 
2,183
 
 
118
 
Home equity - 2nd lien
 
1,969
 
 
1,994
 
 
161
 
 
2,415
 
 
2,443
 
 
182
 
Boat lending
 
1
 
 
6
 
 
1
 
 
1
 
 
6
 
 
—
 
Recreational vehicle lending
 
93
 
 
93
 
 
5
 
 
109
 
 
108
 
 
6
 
Other
 
360
 
 
377
 
 
19
 
 
394
 
 
426
 
 
23
 
Total
$
68,794
 
$
71,434
 
$
7,061
 
$
79,831
 
$
84,711
 
$
9,152
 
Accrued interest included in recorded investment
$
288
 
 
 
 
 
 
 
$
311
 
 
 
 
 
 
 
(1)There were no impaired purchased mortgage loans at September 30, 2017 or December 31, 2016.

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

2017
2016
Average
Recorded
Investment
Interest
Income
Recognized
Average
Recorded
Investment
Interest
Income
Recognized
(In thousands)
With no related allowance recorded
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
—
 
$
—
 
$
551
 
$
—
 
Land, land development & construction-real estate
 
—
 
 
—
 
 
133
 
 
—
 
Commercial and industrial
 
445
 
 
8
 
 
—
 
 
—
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
127
 
 
7
 
 
12
 
 
3
 
Resort lending
 
—
 
 
—
 
 
—
 
 
—
 
Home equity - 1st lien
 
—
 
 
—
 
 
—
 
 
—
 
Home equity - 2nd lien
 
—
 
 
—
 
 
—
 
 
—
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
1
 
 
1
 
 
—
 
 
3
 
Home equity - 2nd lien
 
—
 
 
—
 
 
—
 
 
—
 
Boat lending
 
—
 
 
—
 
 
—
 
 
—
 
Recreational vehicle lending
 
—
 
 
—
 
 
—
 
 
—
 
Other
 
—
 
 
1
 
 
—
 
 
—
 
 
573
 
 
17
 
 
696
 
 
6
 
With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
7,311
 
 
91
 
 
8,000
 
 
111
 
Land, land development & construction-real estate
 
171
 
 
2
 
 
1,117
 
 
3
 
Commercial and industrial
 
2,878
 
 
26
 
 
7,145
 
 
69
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
38,533
 
 
462
 
 
44,256
 
 
470
 
Resort lending
 
16,175
 
 
153
 
 
17,372
 
 
161
 
Home equity - 1st lien
 
201
 
 
1
 
 
241
 
 
2
 
Home equity - 2nd lien
 
180
 
 
2
 
 
280
 
 
6
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
1,808
 
 
40
 
 
2,140
 
 
34
 
Home equity - 2nd lien
 
2,058
 
 
26
 
 
2,585
 
 
37
 
Boat lending
 
1
 
 
—
 
 
2
 
 
—
 
Recreational vehicle lending
 
98
 
 
1
 
 
114
 
 
2
 
Other
 
361
 
 
6
 
 
424
 
 
7
 
 
69,775
 
 
810
 
 
83,676
 
 
902
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
7,311
 
 
91
 
 
8,551
 
 
111
 
Land, land development & construction-real estate
 
171
 
 
2
 
 
1,250
 
 
3
 
Commercial and industrial
 
3,323
 
 
34
 
 
7,145
 
 
69
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
38,660
 
 
469
 
 
44,268
 
 
473
 
Resort lending
 
16,175
 
 
153
 
 
17,372
 
 
161
 
Home equity - 1st lien
 
201
 
 
1
 
 
241
 
 
2
 
Home equity - 2nd lien
 
180
 
 
2
 
 
280
 
 
6
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
1,809
 
 
41
 
 
2,140
 
 
37
 
Home equity - 2nd lien
 
2,058
 
 
26
 
 
2,585
 
 
37
 
Boat lending
 
1
 
 
—
 
 
2
 
 
—
 
Recreational vehicle lending
 
98
 
 
1
 
 
114
 
 
2
 
Other
 
361
 
 
7
 
 
424
 
 
7
 
Total
$
70,348
 
$
827
 
$
84,372
 
$
908
 
(1)There were no impaired purchased mortgage loans during the three month periods ended September 30, 2017 and 2016, respectively.

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

2017
2016
Average
Recorded
Investment
Interest
Income
Recognized
Average
Recorded
Investment
Interest
Income
Recognized
(In thousands)
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
222
 
$
—
 
$
632
 
$
2
 
Land, land development & construction-real estate
 
8
 
 
—
 
 
405
 
 
7
 
Commercial and industrial
 
808
 
 
16
 
 
616
 
 
21
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
64
 
 
16
 
 
12
 
 
9
 
Resort lending
 
—
 
 
—
 
 
—
 
 
—
 
Home equity - 1st lien
 
—
 
 
—
 
 
—
 
 
—
 
Home equity - 2nd lien
 
—
 
 
—
 
 
—
 
 
—
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
1
 
 
4
 
 
—
 
 
4
 
Home equity - 2nd lien
 
—
 
 
—
 
 
4
 
 
—
 
Boat lending
 
—
 
 
—
 
 
—
 
 
—
 
Recreational vehicle lending
 
—
 
 
—
 
 
—
 
 
—
 
Other
 
—
 
 
1
 
 
—
 
 
—
 
 
1,103
 
 
37
 
 
1,669
 
 
43
 
With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
7,525
 
 
300
 
 
8,153
 
 
318
 
Land, land development & construction-real estate
 
187
 
 
6
 
 
1,352
 
 
29
 
Commercial and industrial
 
3,488
 
 
98
 
 
5,929
 
 
151
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
39,716
 
 
1,420
 
 
45,728
 
 
1,447
 
Resort lending
 
16,485
 
 
464
 
 
17,705
 
 
480
 
Home equity - 1st lien
 
218
 
 
5
 
 
223
 
 
6
 
Home equity - 2nd lien
 
217
 
 
5
 
 
231
 
 
11
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
1,874
 
 
107
 
 
2,233
 
 
118
 
Home equity - 2nd lien
 
2,210
 
 
96
 
 
2,723
 
 
122
 
Boat lending
 
1
 
 
—
 
 
2
 
 
—
 
Recreational vehicle lending
 
103
 
 
4
 
 
117
 
 
5
 
Other
 
373
 
 
19
 
 
443
 
 
23
 
 
72,397
 
 
2,524
 
 
84,839
 
 
2,710
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
7,747
 
 
300
 
 
8,785
 
 
320
 
Land, land development & construction-real estate
 
195
 
 
6
 
 
1,757
 
 
36
 
Commercial and industrial
 
4,296
 
 
114
 
 
6,545
 
 
172
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
39,780
 
 
1,436
 
 
45,740
 
 
1,456
 
Resort lending
 
16,485
 
 
464
 
 
17,705
 
 
480
 
Home equity - 1st lien
 
218
 
 
5
 
 
223
 
 
6
 
Home equity - 2nd lien
 
217
 
 
5
 
 
231
 
 
11
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
1,875
 
 
111
 
 
2,233
 
 
122
 
Home equity - 2nd lien
 
2,210
 
 
96
 
 
2,727
 
 
122
 
Boat lending
 
1
 
 
—
 
 
2
 
 
—
 
Recreational vehicle lending
 
103
 
 
4
 
 
117
 
 
5
 
Other
 
373
 
 
20
 
 
443
 
 
23
 
Total
$
73,500
 
$
2,561
 
$
86,508
 
$
2,753
 
(1)There were no impaired purchased mortgage loans during the nine month periods ended September 30, 2017 and 2016, respectively.

Cash receipts on impaired loans on non-accrual status are generally applied to the principal balance.

Troubled debt restructurings follow:

September 30, 2017
Commercial
Retail(1)
Total
(In thousands)
Performing TDRs
$
9,431
 
$
53,755
 
$
63,186
 
Non-performing TDRs(2)
 
401
 
 
4,531
(3)
 
4,932
 
Total
$
9,832
 
$
58,286
 
$
68,118
 
December 31, 2016
Commercial
Retail(1)
Total
(In thousands)
Performing TDRs
$
10,560
 
$
59,726
 
$
70,286
 
Non-performing TDRs(2)
 
3,565
 
 
4,071
(3)
 
7,636
 
Total
$
14,125
 
$
63,797
 
$
77,922
 
(1)Retail loans include mortgage and installment portfolio segments.
(2)Included in non-performing loans table above.
(3)Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.

We allocated $7.0 million and $9.0 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2017 and December 31, 2016, respectively.

During the nine months ended September 30, 2017 and 2016, 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 230 months in certain circumstances.

Loans that have been classified as troubled debt restructurings during the three-month periods ended September 30 follow(1):

Number of
Contracts
Pre-modification
Recorded
Balance
Post-modification
Recorded
Balance
(Dollars in thousands)
2017
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
—
 
$
—
 
$
—
 
Land, land development & construction-real estate
 
—
 
 
—
 
 
—
 
Commercial and industrial
 
—
 
 
—
 
 
—
 
Mortgage
 
 
 
 
 
 
 
 
 
1-4 family
 
1
 
 
93
 
 
95
 
Resort lending
 
—
 
 
—
 
 
—
 
Home equity - 1st lien
 
—
 
 
—
 
 
—
 
Home equity - 2nd lien
 
—
 
 
—
 
 
—
 
Installment
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
—
 
 
—
 
 
—
 
Home equity - 2nd lien
 
2
 
 
51
 
 
50
 
Boat lending
 
—
 
 
—
 
 
—
 
Recreational vehicle lending
 
—
 
 
—
 
 
—
 
Other
 
1
 
 
10
 
 
10
 
Total
 
4
 
$
154
 
$
155
 
2016
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
2
 
$
180
 
$
180
 
Land, land development & construction-real estate
 
—
 
 
—
 
 
—
 
Commercial and industrial
 
2
 
 
175
 
 
158
 
Mortgage
 
 
 
 
 
 
 
 
 
1-4 family
 
2
 
 
204
 
 
207
 
Resort lending
 
—
 
 
—
 
 
—
 
Home equity - 1st lien
 
—
 
 
—
 
 
—
 
Home equity - 2nd lien
 
2
 
 
77
 
 
78
 
Installment
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
2
 
 
82
 
 
85
 
Home equity - 2nd lien
 
1
 
 
7
 
 
7
 
Boat lending
 
—
 
 
—
 
 
—
 
Recreational vehicle lending
 
—
 
 
—
 
 
—
 
Other
 
1
 
 
34
 
 
34
 
Total
 
12
 
$
759
 
$
749
 
(1)There were no purchased mortgage loans classified as troubled debt restructurings during the three month periods ended September 30, 2017 and 2016, respectively.

Loans that have been classified as troubled debt restructurings during the nine-month periods ended September 30 follow(1):

Number of
Contracts
Pre-modification
Recorded
Balance
Post-modification
Recorded
Balance
(Dollars in thousands)
2017
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
—
 
$
—
 
$
—
 
Land, land development & construction-real estate
 
—
 
 
—
 
 
—
 
Commercial and industrial
 
12
 
 
786
 
 
786
 
Mortgage
 
 
 
 
 
 
 
 
 
1-4 family
 
3
 
 
142
 
 
144
 
Resort lending
 
1
 
 
189
 
 
189
 
Home equity - 1st lien
 
—
 
 
—
 
 
—
 
Home equity - 2nd lien
 
—
 
 
—
 
 
—
 
Installment
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
2
 
 
34
 
 
37
 
Home equity - 2nd lien
 
7
 
 
300
 
 
301
 
Boat lending
 
—
 
 
—
 
 
—
 
Recreational vehicle lending
 
—
 
 
—
 
 
—
 
Other
 
1
 
 
10
 
 
10
 
Total
 
26
 
$
1,461
 
$
1,467
 
2016
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
4
 
$
290
 
$
290
 
Land, land development & construction-real estate
 
—
 
 
—
 
 
—
 
Commercial and industrial
 
6
 
 
1,933
 
 
1,916
 
Mortgage
 
 
 
 
 
 
 
 
 
1-4 family
 
5
 
 
396
 
 
470
 
Resort lending
 
1
 
 
116
 
 
117
 
Home equity - 1st lien
 
1
 
 
107
 
 
78
 
Home equity - 2nd lien
 
2
 
 
77
 
 
78
 
Installment
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
6
 
 
141
 
 
145
 
Home equity - 2nd lien
 
5
 
 
133
 
 
136
 
Boat lending
 
—
 
 
—
 
 
—
 
Recreational vehicle lending
 
—
 
 
—
 
 
—
 
Other
 
2
 
 
46
 
 
46
 
Total
 
32
 
$
3,239
 
$
3,276
 
(1)There were no purchased mortgage loans classified as troubled debt restructurings during the nine month periods ended September 30, 2017 and 2016, respectively.

The troubled debt restructurings described above for 2017 increased the allowance for loan losses by $0.02 million and resulted in zero charge offs during the three months ended September 30, 2017, and increased the allowance by $0.08 million and resulted in zero charge offs during the nine months ended September 30, 2017.

The troubled debt restructurings described above for 2016 increased the allowance for loan losses by $0.34 million and resulted in charge offs of $0.02 million during the three months ended September 30, 2016, and increased the allowance by $0.69 million and resulted in charge offs of $0.02 million during the nine months ended September 30, 2016.

Six commercial and industrial loans with a recorded balance of $0.16 million that have been classified as troubled debt restructurings during the past twelve months subsequently defaulted during the three and nine month periods ended September 30, 2017. These subsequent defaults resulted in an increase in the allowance of $0.02 million and $0.04 million during the three and nine month periods ended September 30, 2017, respectively and resulted in charge-offs of $0.05 million during both the three and nine month periods ended September 30, 2017. There were no troubled debt restructurings that subsequently defaulted within twelve months following the modification during the three and nine months ended September 30, 2017 for any other loan class.

There were no troubled debt restructurings that subsequently defaulted within twelve months following the modification during the three and nine months ended September 30, 2016.

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

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, and (d) 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. These ratings include 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, respectively. These ratings include 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
Non-watch
1-6
Watch
7-8
Substandard
Accrual
9
Non-
Accrual
10-11
Total
(In thousands)
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
268,781
 
$
3,037
 
$
312
 
$
72
 
$
272,202
 
Land, land development and construction - real estate
 
67,730
 
 
63
 
 
—
 
 
10
 
 
67,803
 
Commercial and industrial
 
474,022
 
 
22,217
 
 
2,380
 
 
706
 
 
499,325
 
Total
$
810,533
 
$
25,317
 
$
2,692
 
$
788
 
$
839,330
 
Accrued interest included in total
$
1,991
 
$
80
 
$
9
 
$
—
 
$
2,080
 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
282,886
 
$
3,787
 
$
337
 
$
628
 
$
287,638
 
Land, land development andconstruction - real estate
 
51,603
 
 
67
 
 
—
 
 
105
 
 
51,775
 
Commercial and industrial
 
449,365
 
 
9,788
 
 
2,998
 
 
4,431
 
 
466,582
 
Total
$
783,854
 
$
13,642
 
$
3,335
 
$
5,164
 
$
805,995
 
Accrued interest included in total
$
1,915
 
$
52
 
$
11
 
$
—
 
$
1,978
 

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 semi-annually.

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

Mortgage(1)
1-4 Family
Resort
Lending
Home Equity
1st Lien
Home Equity
2nd Lien
Purchased
Loans
Total
(In thousands)
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800 and above
$
62,145
 
$
11,336
 
$
8,491
 
$
8,896
 
$
7,790
 
$
98,658
 
750-799
 
227,676
 
 
33,287
 
 
15,619
 
 
21,092
 
 
18,559
 
 
316,233
 
700-749
 
130,480
 
 
25,629
 
 
6,583
 
 
13,819
 
 
7,978
 
 
184,489
 
650-699
 
77,357
 
 
12,441
 
 
3,304
 
 
7,970
 
 
429
 
 
101,501
 
600-649
 
26,947
 
 
4,648
 
 
1,090
 
 
2,439
 
 
—
 
 
35,124
 
550-599
 
15,547
 
 
2,777
 
 
365
 
 
1,507
 
 
—
 
 
20,196
 
500-549
 
8,766
 
 
1,404
 
 
540
 
 
1,319
 
 
—
 
 
12,029
 
Under 500
 
3,692
 
 
89
 
 
253
 
 
169
 
 
—
 
 
4,203
 
Unknown
 
9,373
 
 
1,668
 
 
299
 
 
479
 
 
120
 
 
11,939
 
Total
$
561,983
 
$
93,279
 
$
36,544
 
$
57,690
 
$
34,876
 
$
784,372
 
Accrued interest included in total
$
2,134
 
$
374
 
$
165
 
$
260
 
$
93
 
$
3,026
 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800 and above
$
36,534
 
$
10,484
 
$
6,048
 
$
8,392
 
$
8,462
 
$
69,920
 
750-799
 
102,382
 
 
41,999
 
 
10,006
 
 
20,113
 
 
20,984
 
 
195,484
 
700-749
 
69,337
 
 
24,727
 
 
5,706
 
 
12,360
 
 
9,115
 
 
121,245
 
650-699
 
50,621
 
 
13,798
 
 
4,106
 
 
8,167
 
 
437
 
 
77,129
 
600-649
 
25,270
 
 
5,769
 
 
1,674
 
 
3,067
 
 
—
 
 
35,780
 
550-599
 
13,747
 
 
3,030
 
 
455
 
 
1,699
 
 
—
 
 
18,931
 
500-549
 
9,215
 
 
1,438
 
 
486
 
 
981
 
 
—
 
 
12,120
 
Under 500
 
5,145
 
 
92
 
 
255
 
 
279
 
 
—
 
 
5,771
 
Unknown
 
2,290
 
 
1,711
 
 
280
 
 
179
 
 
139
 
 
4,599
 
Total
$
314,541
 
$
103,048
 
$
29,016
 
$
55,237
 
$
39,137
 
$
540,979
 
Accrued interest included in total
$
1,466
 
$
450
 
$
111
 
$
226
 
$
111
 
$
2,364
 
(1)Credit scores have been updated within the last twelve months.
 
 
Installment(1)
Home
Equity
1st Lien
Home
Equity
2nd Lien
Boat
Lending
Recreational
Vehicle
Lending
Other
Total
(In thousands)
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800 and above
$
1,085
 
$
869
 
$
26,168
 
$
26,312
 
$
10,655
 
$
65,089
 
750-799
 
1,938
 
 
2,721
 
 
67,402
 
 
48,183
 
 
26,546
 
 
146,790
 
700-749
 
1,601
 
 
2,236
 
 
25,945
 
 
14,261
 
 
16,433
 
 
60,476
 
650-699
 
2,193
 
 
1,864
 
 
9,164
 
 
3,627
 
 
8,990
 
 
25,838
 
600-649
 
1,429
 
 
1,429
 
 
1,730
 
 
838
 
 
2,334
 
 
7,760
 
550-599
 
1,252
 
 
919
 
 
468
 
 
244
 
 
894
 
 
3,777
 
500-549
 
616
 
 
398
 
 
243
 
 
125
 
 
434
 
 
1,816
 
Under 500
 
92
 
 
56
 
 
64
 
 
11
 
 
130
 
 
353
 
Unknown
 
17
 
 
19
 
 
219
 
 
167
 
 
7,040
 
 
7,462
 
Total
$
10,223
 
$
10,511
 
$
131,403
 
$
93,768
 
$
73,456
 
$
319,361
 
Accrued interest included in total
$
42
 
$
44
 
$
322
 
$
236
 
$
219
 
$
863
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800 and above
$
1,354
 
$
1,626
 
$
21,422
 
$
23,034
 
$
8,911
 
$
56,347
 
750-799
 
2,478
 
 
3,334
 
 
50,508
 
 
35,827
 
 
21,918
 
 
114,065
 
700-749
 
1,920
 
 
2,686
 
 
20,045
 
 
11,049
 
 
13,183
 
 
48,883
 
650-699
 
2,852
 
 
2,541
 
 
7,559
 
 
3,205
 
 
8,913
 
 
25,070
 
600-649
 
1,691
 
 
1,775
 
 
1,846
 
 
821
 
 
2,269
 
 
8,402
 
550-599
 
1,231
 
 
1,063
 
 
882
 
 
280
 
 
833
 
 
4,289
 
500-549
 
981
 
 
692
 
 
440
 
 
189
 
 
511
 
 
2,813
 
Under 500
 
114
 
 
220
 
 
73
 
 
16
 
 
211
 
 
634
 
Unknown
 
29
 
 
21
 
 
150
 
 
114
 
 
5,570
 
 
5,884
 
Total
$
12,650
 
$
13,958
 
$
102,925
 
$
74,535
 
$
62,319
 
$
266,387
 
Accrued interest included in total
$
54
 
$
59
 
$
264
 
$
203
 
$
191
 
$
771
 
(1)Credit scores have been updated within the last twelve months.

Foreclosed residential real estate properties included in other real estate and repossessed assets on our Condensed Consolidated Statements of Financial Condition totaled $1.7 million and $1.9 million at September 30, 2017 and December 31, 2016, respectively. Retail mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements totaled $1.2 million and $1.0 million at September 30, 2017 and December 31, 2016, respectively.

NOTE 4 – LOANS AND PAYMENT PLAN RECEIVABLES

Our loan portfolios at December 31 follow:

2016
2015
(In thousands)
Real estate(1)
 
 
 
 
 
 
Residential first mortgages
$
453,348
 
$
432,215
 
Residential home equity and other junior mortgages
 
105,550
 
 
106,297
 
Construction and land development
 
77,287
 
 
62,629
 
Other(2)
 
525,748
 
 
498,706
 
Consumer
 
234,632
 
 
193,350
 
Commercial
 
206,607
 
 
180,424
 
Agricultural
 
5,076
 
 
6,830
 
Payment plan receivables(3)
 
—
 
 
34,599
 
Total loans
$
1,608,248
 
$
1,515,050
 
(1)Includes both residential and non-residential commercial loans secured by real estate.
(2)Includes loans secured by multi-family residential and non-farm, non-residential property.
(3)Payment plan receivables were reclassified to held for sale at December 31, 2016. See note #1.

Loans include net deferred loan costs of $4.1 million and $2.2 million at December 31, 2016 and 2015, respectively. Payment plan receivables totaling $36.9 million at December 31, 2015, are presented net of unamortized discount of $2.3 million at December 31, 2015. These payment plan receivables had effective yields of 13% at December 31, 2015.

In August 2016 and December 2015, we purchased $15.0 million and $32.6 million, respectively of single-family residential fixed rate jumbo mortgage loans from two separate Michigan-based financial institutions. These mortgage loans were all on properties located in Michigan, had weighted average interest rates (after a 0.25% servicing fee) of 3.65% and 3.94%, respectively and weighted average remaining contractual maturities of 332 months and 344 months, respectively.

An analysis of the allowance for loan losses by portfolio segment for the years ended December 31 follows:

Commercial
Mortgage
Installment
Payment
Plan
Receivables
Subjective
Allocation
Total
(In thousands)
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
5,670
 
$
10,391
 
$
1,181
 
$
56
 
$
5,272
 
$
22,570
 
Additions (deductions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for loan losses
 
(1,945
)
 
(158
)
 
401
 
 
(4
)
 
397
 
 
(1,309
)
Recoveries credited to allowance
 
2,472
 
 
1,047
 
 
1,100
 
 
—
 
 
—
 
 
4,619
 
Loans charged against the allowance
 
(1,317
)
 
(2,599
)
 
(1,671
)
 
—
 
 
—
 
 
(5,587
)
Reclassification to loans held for sale
 
—
 
 
—
 
 
—
 
 
(52
)
 
(7
)
 
(59
)
Balance at end of period
$
4,880
 
$
8,681
 
$
1,011
 
$
—
 
$
5,662
 
$
20,234
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
5,445
 
$
13,444
 
$
1,814
 
$
64
 
$
5,223
 
$
25,990
 
Additions (deductions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for loan losses
 
(737
)
 
(1,744
)
 
(274
)
 
(8
)
 
49
 
 
(2,714
)
Recoveries credited to allowance
 
2,656
 
 
1,258
 
 
1,108
 
 
—
 
 
—
 
 
5,022
 
Loans charged against the allowance
 
(1,694
)
 
(2,567
)
 
(1,467
)
 
—
 
 
—
 
 
(5,728
)
Balance at end of period
$
5,670
 
$
10,391
 
$
1,181
 
$
56
 
$
5,272
 
$
22,570
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
6,827
 
$
17,195
 
$
2,246
 
$
97
 
$
5,960
 
$
32,325
 
Additions (deductions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for loan losses
 
(1,683
)
 
(1,029
)
 
349
 
 
(36
)
 
(737
)
 
(3,136
)
Recoveries credited to allowance
 
4,914
 
 
1,397
 
 
1,104
 
 
5
 
 
—
 
 
7,420
 
Loans charged against the allowance
 
(4,613
)
 
(4,119
)
 
(1,885
)
 
(2
)
 
—
 
 
(10,619
)
Balance at end of period
$
5,445
 
$
13,444
 
$
1,814
 
$
64
 
$
5,223
 
$
25,990
 

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

Commercial
Mortgage
Installment
Payment
Plan
Receivables
Subjective
Allocation
Total
(In thousands)
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
2,244
 
$
6,579
 
$
329
 
$
—
 
$
—
 
$
9,152
 
Collectively evaluated for impairment
 
2,636
 
 
2,102
 
 
682
 
 
—
 
 
5,662
 
 
11,082
 
Total ending allowance balance
$
4,880
 
$
8,681
 
$
1,011
 
$
—
 
$
5,662
 
$
20,234
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
15,767
 
$
59,151
 
$
4,913
 
$
—
 
 
 
 
$
79,831
 
Collectively evaluated for impairment
 
790,228
 
 
481,828
 
 
261,474
 
 
—
 
 
 
 
 
1,533,530
 
Total loans recorded investment
 
805,995
 
 
540,979
 
 
266,387
 
 
—
 
 
 
 
 
1,613,361
 
Accrued interest included in recorded investment
 
1,978
 
 
2,364
 
 
771
 
 
—
 
 
 
 
 
5,113
 
Total loans
$
804,017
 
$
538,615
 
$
265,616
 
$
—
 
 
 
 
$
1,608,248
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
2,708
 
$
7,818
 
$
457
 
$
—
 
$
—
 
$
10,983
 
Collectively evaluated for impairment
 
2,962
 
 
2,573
 
 
724
 
 
56
 
 
5,272
 
 
11,587
 
Total ending allowance balance
$
5,670
 
$
10,391
 
$
1,181
 
$
56
 
$
5,272
 
$
22,570
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
16,868
 
$
66,375
 
$
5,888
 
$
—
 
 
 
 
$
89,131
 
Collectively evaluated for impairment
 
733,399
 
 
433,931
 
 
228,827
 
 
34,599
 
 
 
 
 
1,430,756
 
Total loans recorded investment
 
750,267
 
 
500,306
 
 
234,715
 
 
34,599
 
 
 
 
 
1,519,887
 
Accrued interest included in recorded investment
 
1,869
 
 
2,270
 
 
698
 
 
—
 
 
 
 
 
4,837
 
Total loans
$
748,398
 
$
498,036
 
$
234,017
 
$
34,599
 
 
 
 
$
1,515,050
 

Non-performing loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. If these loans had continued to accrue interest in accordance with their original terms, approximately $0.5 million, $0.6 million and $0.8 million of interest income would have been recognized in 2016, 2015 and 2014, respectively. Interest income recorded on these loans was approximately zero during the years ended 2016, 2015 and 2014.

Loans on non-accrual status and past due more than 90 days (“Non-performing Loans”) at December 31 follow:

90+ and
Still
Accruing
Non-
Accrual
Total Non-
Performing
Loans
(In thousands)
2016
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
—
 
$
628
 
$
628
 
Land, land development and construction - real estate
 
—
 
 
105
 
 
105
 
Commercial and industrial
 
—
 
 
4,430
 
 
4,430
 
Mortgage
 
 
 
 
 
 
 
 
 
1-4 family
 
—
 
 
5,248
 
 
5,248
 
Resort lending
 
—
 
 
1,507
 
 
1,507
 
Home equity - 1st lien
 
—
 
 
222
 
 
222
 
Home equity - 2nd lien
 
—
 
 
317
 
 
317
 
Purchased loans
 
—
 
 
—
 
 
—
 
Installment
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
—
 
 
266
 
 
266
 
Home equity - 2nd lien
 
—
 
 
289
 
 
289
 
Loans not secured by real estate
 
—
 
 
351
 
 
351
 
Other
 
—
 
 
1
 
 
1
 
Total recorded investment
$
—
 
$
13,364
 
$
13,364
 
Accrued interest included in recorded investment
$
—
 
$
—
 
$
—
 
2015
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
—
 
$
1,027
 
$
1,027
 
Land, land development and construction - real estate
 
49
 
 
401
 
 
450
 
Commercial and industrial
 
69
 
 
2,028
 
 
2,097
 
Mortgage
 
 
 
 
 
 
 
 
 
1-4 family
 
—
 
 
4,744
 
 
4,744
 
Resort lending
 
—
 
 
1,094
 
 
1,094
 
Home equity - 1st lien
 
—
 
 
187
 
 
187
 
Home equity - 2nd lien
 
—
 
 
147
 
 
147
 
Purchased loans
 
—
 
 
2
 
 
2
 
Installment
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
—
 
 
106
 
 
106
 
Home equity - 2nd lien
 
—
 
 
443
 
 
443
 
Loans not secured by real estate
 
—
 
 
421
 
 
421
 
Other
 
—
 
 
2
 
 
2
 
Payment plan receivables
 
 
 
 
 
 
 
 
 
Full refund
 
—
 
 
2
 
 
2
 
Partial refund
 
—
 
 
2
 
 
2
 
Other
 
—
 
 
1
 
 
1
 
Total recorded investment
$
118
 
$
10,607
 
$
10,725
 
Accrued interest included in recorded investment
$
2
 
$
—
 
$
2
 

An aging analysis of loans by class at December 31 follows:

Loans Past Due
Loans not
Past Due
Total
Loans
30-59 days
60-89 days
90+ days
Total
(In thousands)
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
—
 
$
—
 
$
383
 
$
383
 
$
287,255
 
$
287,638
 
Land, land development and construction - real estate
 
74
 
 
—
 
 
31
 
 
105
 
 
51,670
 
 
51,775
 
Commercial and industrial
 
100
 
 
1,385
 
 
66
 
 
1,551
 
 
465,031
 
 
466,582
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
2,361
 
 
869
 
 
5,248
 
 
8,478
 
 
306,063
 
 
314,541
 
Resort lending
 
—
 
 
—
 
 
1,507
 
 
1,507
 
 
101,541
 
 
103,048
 
Home equity - 1st lien
 
149
 
 
—
 
 
222
 
 
371
 
 
28,645
 
 
29,016
 
Home equity - 2nd lien
 
470
 
 
218
 
 
317
 
 
1,005
 
 
54,232
 
 
55,237
 
Purchased loans
 
13
 
 
2
 
 
—
 
 
15
 
 
39,122
 
 
39,137
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
311
 
 
48
 
 
266
 
 
625
 
 
12,025
 
 
12,650
 
Home equity - 2nd lien
 
238
 
 
41
 
 
289
 
 
568
 
 
13,390
 
 
13,958
 
Loans not secured by real estate
 
533
 
 
95
 
 
351
 
 
979
 
 
236,022
 
 
237,001
 
Other
 
8
 
 
1
 
 
1
 
 
10
 
 
2,768
 
 
2,778
 
Total recorded investment
$
4,257
 
$
2,659
 
$
8,681
 
$
15,597
 
$
1,597,764
 
$
1,613,361
 
Accrued interest included in recorded investment
$
45
 
$
19
 
$
—
 
$
64
 
$
5,049
 
$
5,113
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
203
 
$
209
 
$
647
 
$
1,059
 
$
305,155
 
$
306,214
 
Land, land development and construction - real estate
 
—
 
 
—
 
 
252
 
 
252
 
 
44,231
 
 
44,483
 
Commercial and industrial
 
785
 
 
16
 
 
151
 
 
952
 
 
398,618
 
 
399,570
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
1,943
 
 
640
 
 
4,744
 
 
7,327
 
 
269,880
 
 
277,207
 
Resort lending
 
307
 
 
—
 
 
1,094
 
 
1,401
 
 
114,619
 
 
116,020
 
Home equity - 1st lien
 
50
 
 
—
 
 
187
 
 
237
 
 
22,327
 
 
22,564
 
Home equity - 2nd lien
 
439
 
 
54
 
 
147
 
 
640
 
 
50,618
 
 
51,258
 
Purchased loans
 
9
 
 
1
 
 
2
 
 
12
 
 
33,245
 
 
33,257
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
315
 
 
107
 
 
106
 
 
528
 
 
16,707
 
 
17,235
 
Home equity - 2nd lien
 
231
 
 
149
 
 
443
 
 
823
 
 
19,727
 
 
20,550
 
Loans not secured by real estate
 
567
 
 
83
 
 
421
 
 
1,071
 
 
193,680
 
 
194,751
 
Other
 
15
 
 
3
 
 
2
 
 
20
 
 
2,159
 
 
2,179
 
Payment plan receivables
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Full refund
 
492
 
 
62
 
 
2
 
 
556
 
 
21,294
 
 
21,850
 
Partial refund
 
415
 
 
228
 
 
2
 
 
645
 
 
5,834
 
 
6,479
 
Other
 
110
 
 
3
 
 
1
 
 
114
 
 
6,156
 
 
6,270
 
Total recorded investment
$
5,881
 
$
1,555
 
$
8,201
 
$
15,637
 
$
1,504,250
 
$
1,519,887
 
Accrued interest included in recorded investment
$
53
 
$
17
 
$
2
 
$
72
 
$
4,765
 
$
4,837
 

Impaired loans are as follows:

December 31,
2016
2015
(In thousands)
Impaired loans with no allocated allowance
 
 
 
 
 
 
TDR
$
1,782
 
$
2,518
 
Non - TDR
 
1,107
 
 
203
 
Impaired loans with an allocated allowance
 
 
 
 
 
 
TDR - allowance based on collateral
 
3,527
 
 
4,810
 
TDR - allowance based on present value cash flow
 
72,613
 
 
81,002
 
Non - TDR - allowance based on collateral
 
491
 
 
260
 
Non - TDR - allowance based on present value cash flow
 
—
 
 
—
 
Total impaired loans
$
79,520
 
$
88,793
 
 
 
 
 
 
 
Amount of allowance for loan losses allocated
 
 
 
 
 
 
TDR - allowance based on collateral
$
1,868
 
$
2,436
 
TDR - allowance based on present value cash flow
 
7,146
 
 
8,471
 
Non - TDR - allowance based on collateral
 
138
 
 
76
 
Non - TDR - allowance based on present value cash flow
 
—
 
 
—
 
Total amount of allowance for loan losses allocated
$
9,152
 
$
10,983
 

Impaired loans by class as of December 31 are as follows(1):

2016
2015
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
(In thousands)
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
517
 
$
768
 
$
—
 
$
641
 
$
851
 
$
—
 
Land, land development & construction-real estate
 
31
 
 
709
 
 
—
 
 
818
 
 
1,393
 
 
—
 
Commercial and industrial
 
2,341
 
 
3,261
 
 
—
 
 
1,245
 
 
1,241
 
 
—
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
2
 
 
387
 
 
—
 
 
23
 
 
183
 
 
—
 
Resort lending
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Home equity - 1st lien
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Home equity - 2nd lien
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
—
 
 
66
 
 
—
 
 
—
 
 
76
 
 
—
 
Home equity - 2nd lien
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Loans not secured by real estate
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Other
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
2,891
 
 
5,191
 
 
—
 
 
2,727
 
 
3,744
 
 
—
 
 
 
2016
2015
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
(In thousands)
With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
7,737
 
 
7,880
 
 
554
 
 
8,377
 
 
9,232
 
 
516
 
Land, land development & construction-real estate
 
239
 
 
244
 
 
36
 
 
1,690
 
 
1,778
 
 
296
 
Commercial and industrial
 
4,902
 
 
5,246
 
 
1,654
 
 
4,097
 
 
4,439
 
 
1,896
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
41,701
 
 
43,479
 
 
4,100
 
 
47,792
 
 
49,808
 
 
5,132
 
Resort lending
 
16,898
 
 
16,931
 
 
2,453
 
 
18,148
 
 
18,319
 
 
2,662
 
Home equity - 1st lien
 
235
 
 
242
 
 
10
 
 
168
 
 
172
 
 
9
 
Home equity - 2nd lien
 
315
 
 
398
 
 
16
 
 
244
 
 
325
 
 
15
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
1,994
 
 
2,117
 
 
118
 
 
2,364
 
 
2,492
 
 
143
 
Home equity - 2nd lien
 
2,415
 
 
2,443
 
 
182
 
 
2,929
 
 
2,951
 
 
271
 
Loans not secured by real estate
 
504
 
 
540
 
 
29
 
 
587
 
 
658
 
 
42
 
Other
 
—
 
 
—
 
 
—
 
 
8
 
 
8
 
 
1
 
 
76,940
 
 
79,520
 
 
9,152
 
 
86,404
 
 
90,182
 
 
10,983
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
8,254
 
 
8,648
 
 
554
 
 
9,018
 
 
10,083
 
 
516
 
Land, land development & construction-real estate
 
270
 
 
953
 
 
36
 
 
2,508
 
 
3,171
 
 
296
 
Commercial and industrial
 
7,243
 
 
8,507
 
 
1,654
 
 
5,342
 
 
5,680
 
 
1,896
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
41,703
 
 
43,866
 
 
4,100
 
 
47,815
 
 
49,991
 
 
5,132
 
Resort lending
 
16,898
 
 
16,931
 
 
2,453
 
 
18,148
 
 
18,319
 
 
2,662
 
Home equity - 1st lien
 
235
 
 
242
 
 
10
 
 
168
 
 
172
 
 
9
 
Home equity - 2nd lien
 
315
 
 
398
 
 
16
 
 
244
 
 
325
 
 
15
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
1,994
 
 
2,183
 
 
118
 
 
2,364
 
 
2,568
 
 
143
 
Home equity - 2nd lien
 
2,415
 
 
2,443
 
 
182
 
 
2,929
 
 
2,951
 
 
271
 
Loans not secured by real estate
 
504
 
 
540
 
 
29
 
 
587
 
 
658
 
 
42
 
Other
 
—
 
 
—
 
 
—
 
 
8
 
 
8
 
 
1
 
Total
$
79,831
 
$
84,711
 
$
9,152
 
$
89,131
 
$
93,926
 
$
10,983
 
Accrued interest included in recorded investment
$
311
 
 
 
 
 
 
 
$
338
 
 
 
 
 
 
 
(1)There were no impaired payment plan receivables or purchased mortgage loans at December 31, 2016 or 2015.

Average recorded investment in and interest income earned on impaired loans by class for the years ended December 31 follows(1):

2016
2015
2014
Average
Recorded
Investment
Interest
Income
Recognized
Average
Recorded
Investment
Interest
Income
Recognized
Average
Recorded
Investment
Interest
Income
Recognized
(In thousands)
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
609
 
$
2
 
$
4,520
 
$
387
 
$
7,660
 
$
250
 
Land, land development & construction-real estate
 
330
 
 
7
 
 
952
 
 
79
 
 
1,145
 
 
64
 
Commercial and industrial
 
961
 
 
54
 
 
2,125
 
 
257
 
 
3,351
 
 
152
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
10
 
 
16
 
 
19
 
 
11
 
 
29
 
 
—
 
Resort lending
 
—
 
 
—
 
 
12
 
 
—
 
 
40
 
 
1
 
Home equity - 1st lien
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Home equity - 2nd lien
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
—
 
 
5
 
 
—
 
 
5
 
 
—
 
 
2
 
Home equity - 2nd lien
 
3
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Loans not secured by real estate
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Other
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
 
1,913
 
 
84
 
 
7,628
 
 
739
 
 
12,225
 
 
469
 
With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
8,069
 
 
427
 
 
12,677
 
 
439
 
 
12,772
 
 
677
 
Land, land development & construction-real estate
 
1,129
 
 
31
 
 
2,219
 
 
54
 
 
3,939
 
 
149
 
Commercial and industrial
 
5,723
 
 
189
 
 
6,663
 
 
104
 
 
8,500
 
 
294
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
44,923
 
 
1,918
 
 
50,421
 
 
2,140
 
 
55,877
 
 
2,286
 
Resort lending
 
17,544
 
 
619
 
 
18,448
 
 
670
 
 
19,458
 
 
753
 
Home equity - 1st lien
 
226
 
 
10
 
 
161
 
 
8
 
 
160
 
 
6
 
Home equity - 2nd lien
 
248
 
 
14
 
 
172
 
 
13
 
 
57
 
 
2
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
2,185
 
 
147
 
 
2,539
 
 
176
 
 
2,837
 
 
174
 
Home equity - 2nd lien
 
2,661
 
 
162
 
 
3,055
 
 
193
 
 
3,359
 
 
188
 
Loans not secured by real estate
 
546
 
 
35
 
 
653
 
 
37
 
 
719
 
 
35
 
Other
 
4
 
 
—
 
 
10
 
 
1
 
 
14
 
 
1
 
 
83,258
 
 
3,552
 
 
97,018
 
 
3,835
 
 
107,692
 
 
4,565
 
 
 
2016
2015
2014
Average
Recorded
Investment
Interest
Income
Recognized
Average
Recorded
Investment
Interest
Income
Recognized
Average
Recorded
Investment
Interest
Income
Recognized
(In thousands)
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
8,678
 
 
429
 
 
17,197
 
 
826
 
 
20,432
 
 
927
 
Land, land development & construction-real estate
 
1,459
 
 
38
 
 
3,171
 
 
133
 
 
5,084
 
 
213
 
Commercial and industrial
 
6,684
 
 
243
 
 
8,788
 
 
361
 
 
11,851
 
 
446
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
44,933
 
 
1,934
 
 
50,440
 
 
2,151
 
 
55,906
 
 
2,286
 
Resort lending
 
17,544
 
 
619
 
 
18,460
 
 
670
 
 
19,498
 
 
754
 
Home equity - 1st lien
 
226
 
 
10
 
 
161
 
 
8
 
 
160
 
 
6
 
Home equity - 2nd lien
 
248
 
 
14
 
 
172
 
 
13
 
 
57
 
 
2
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
2,185
 
 
152
 
 
2,539
 
 
181
 
 
2,837
 
 
176
 
Home equity - 2nd lien
 
2,664
 
 
162
 
 
3,055
 
 
193
 
 
3,359
 
 
188
 
Loans not secured by real estate
 
546
 
 
35
 
 
653
 
 
37
 
 
719
 
 
35
 
Other
 
4
 
 
—
 
 
10
 
 
1
 
 
14
 
 
1
 
Total
$
85,171
 
$
3,636
 
$
104,646
 
$
4,574
 
$
119,917
 
$
5,034
 
(1)There were no impaired payment plan receivables or purchased mortgage loans during the years ending December 31, 2016, 2015 and 2014.

Our average investment in impaired loans was approximately $85.2 million, $104.6 million and $119.9 million in 2016, 2015 and 2014, respectively. Cash receipts on impaired loans on non-accrual status are generally applied to the principal balance. Interest income recognized on impaired loans was approximately $3.6 million, $4.6 million and $5.0 million in 2016, 2015 and 2014, respectively, of which the majority of these amounts were received in cash and related primarily to performing TDR’s.

Troubled debt restructurings at December 31 follow:

2016
Commercial
Retail(1)
Total
(In thousands)
Performing TDR's
$
10,560
 
$
59,726
 
$
70,286
 
Non-performing TDR's(2)
 
3,565
 
 
4,071
(3)
 
7,636
 
Total
$
14,125
 
$
63,797
 
$
77,922
 
2015
Commercial
Retail(1)
Total
(In thousands)
Performing TDR's
$
13,318
 
$
68,194
 
$
81,512
 
Non-performing TDR's(2)
 
3,041
 
 
3,777
(3)
 
6,818
 
Total
$
16,359
 
$
71,971
 
$
88,330
 
(1)Retail loans include mortgage and installment loan segments.
(2)Included in non-performing loans table above.
(3)Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.

We have allocated $9.0 million and $10.9 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2016 and 2015, respectively. We have committed to lend additional amounts totaling up to $0.04 million at both December 31, 2016 and 2015, respectively, to customers with outstanding loans that are classified as troubled debt restructurings.

The terms of certain loans were modified as troubled debt restructurings and 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 230 months in certain circumstances.

Loans that have been classified as troubled debt restructurings during the years ended December 31 follow(1):

Number of
Contracts
Pre-modification
Recorded
Balance
Post-modification
Recorded
Balance
(Dollars in thousands)
2016
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
4
 
$
290
 
$
290
 
Land, land development & construction-real estate
 
—
 
 
—
 
 
—
 
Commercial and industrial
 
9
 
 
2,044
 
 
2,027
 
Mortgage
 
 
 
 
 
 
 
 
 
1-4 family
 
9
 
 
927
 
 
1,004
 
Resort lending
 
1
 
 
116
 
 
117
 
Home equity - 1st lien
 
1
 
 
107
 
 
78
 
Home equity - 2nd lien
 
2
 
 
77
 
 
78
 
Installment
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
6
 
 
141
 
 
145
 
Home equity - 2nd lien
 
6
 
 
154
 
 
157
 
Loans not secured by real estate
 
2
 
 
46
 
 
46
 
Other
 
—
 
 
—
 
 
—
 
Total
 
40
 
$
3,902
 
$
3,942
 
 
 
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
2
 
$
229
 
$
227
 
Land, land development & construction-real estate
 
—
 
 
—
 
 
—
 
Commercial and industrial
 
17
 
 
3,188
 
 
2,960
 
Mortgage
 
 
 
 
 
 
 
 
 
1-4 family
 
8
 
 
1,345
 
 
1,128
 
Resort lending
 
1
 
 
313
 
 
307
 
Home equity - 1st lien
 
1
 
 
20
 
 
20
 
Home equity - 2nd lien
 
1
 
 
27
 
 
27
 
Installment
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
6
 
 
220
 
 
186
 
Home equity - 2nd lien
 
8
 
 
228
 
 
217
 
Loans not secured by real estate
 
2
 
 
19
 
 
25
 
Other
 
—
 
 
—
 
 
—
 
Total
 
46
 
$
5,589
 
$
5,097
 
 
 
Number of
Contracts
Pre-modification
Recorded
Balance
Post-modification
Recorded
Balance
(Dollars in thousands)
2014
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
4
 
$
426
 
$
389
 
Land, land development & construction-real estate
 
2
 
 
55
 
 
44
 
Commercial and industrial
 
13
 
 
2,236
 
 
1,606
 
Mortgage
 
 
 
 
 
 
 
 
 
1-4 family
 
15
 
 
1,576
 
 
1,570
 
Resort lending
 
6
 
 
1,583
 
 
1,572
 
Home equity - 1st lien
 
1
 
 
17
 
 
14
 
Home equity - 2nd lien
 
1
 
 
85
 
 
84
 
Installment
 
 
 
 
 
 
 
 
 
Home equity - 1st lien
 
13
 
 
631
 
 
523
 
Home equity - 2nd lien
 
9
 
 
400
 
 
400
 
Loans not secured by real estate
 
6
 
 
114
 
 
106
 
Other
 
—
 
 
—
 
 
—
 
Total
 
70
 
$
7,123
 
$
6,308
 
(1)There were no payment plan receivables or purchased mortgage loans classified as troubled debt restructurings during the years ending 2016, 2015 and 2014.

The troubled debt restructurings described above increased (decreased) the AFLL by $(0.1) million, $0.4 million and $0.2 million during the years ended December 31, 2016, 2015 and 2014, respectively and resulted in charge offs of $0.53 million, $0.16 million and $0.04 million during the years ended December 31, 2016, 2015 and 2014, respectively.

Loans that have been classified as troubled debt restructured during the past twelve months and that have subsequently defaulted during the years ended December 31 follows:

Number of
Contracts
Recorded
Balance
(Dollars in thousands)
2016
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
Income producing - real estate
 
—
 
$
—
 
Land, land development & construction-real estate
 
—
 
 
—
 
Commercial and industrial
 
1
 
 
1,767
 
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
 
—
 
 
—
 
Total
 
1
 
$
1,767
 
 
 
Number of
Contracts
Recorded
Balance
(Dollars in thousands)
2015
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
Income producing - real estate
 
—
 
$
—
 
Land, land development & construction-real estate
 
—
 
 
—
 
Commercial and industrial
 
2
 
 
157
 
Mortgage
 
 
 
 
 
 
1-4 family
 
2
 
 
73
 
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
 
1
 
 
4
 
Other
 
—
 
 
—
 
Total
 
5
 
$
234
 
 
 
 
 
 
 
2014
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
Income producing - real estate
 
—
 
$
—
 
Land, land development & construction-real estate
 
—
 
 
—
 
Commercial and industrial
 
2
 
 
319
 
Mortgage
 
 
 
 
 
 
1-4 family
 
1
 
 
125
 
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
 
—
 
 
—
 
Total
 
3
 
$
444
 

A loan is generally considered to be in payment default once it is 90 days contractually past due under the modified terms for commercial loans and installment loans and when four consecutive payments are missed for mortgage loans.

The troubled debt restructurings that subsequently defaulted described above increased (decreased) the AFLL by $(0.17) million, $(0.03) million and $0.02 million during the years ended December 31, 2016, 2015 and 2014, respectively and resulted in charge offs of $0.51 million, zero and zero during the years ended December 31, 2016, 2015 and 2014, respectively.

The terms of certain other loans were modified during the years ending December 31, 2016, 2015 and 2014 that did not meet the definition of a troubled debt restructuring. The modification of these loans could have included modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant.

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 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) financial performance 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 at December 31:

Commercial
Non-watch
1-6
Watch
7-8
Substandard
Accrual
9
Non-
Accrual
10-11
Total
(In thousands)
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
282,886
 
$
3,787
 
$
337
 
$
628
 
$
287,638
 
Land, land development and construction - real estate
 
51,603
 
 
67
 
 
—
 
 
105
 
 
51,775
 
Commercial and industrial
 
449,365
 
 
9,788
 
 
2,998
 
 
4,431
 
 
466,582
 
Total
$
783,854
 
$
13,642
 
$
3,335
 
$
5,164
 
$
805,995
 
Accrued interest included in total
$
1,915
 
$
52
 
$
11
 
$
—
 
$
1,978
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
$
296,898
 
$
6,866
 
$
1,423
 
$
1,027
 
$
306,214
 
Land, land development and construction - real estate
 
40,844
 
 
2,995
 
 
243
 
 
401
 
 
44,483
 
Commercial and industrial
 
371,357
 
 
19,502
 
 
6,683
 
 
2,028
 
 
399,570
 
Total
$
709,099
 
$
29,363
 
$
8,349
 
$
3,456
 
$
750,267
 
Accrued interest included in total
$
1,729
 
$
108
 
$
32
 
$
—
 
$
1,869
 

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 semi-annually. The following tables summarize credit scores by loan class for our mortgage and installment loan segments at December 31:

Mortgage(1)
1-4
Family
Resort
Lending
Home
Equity
1st Lien
Home
Equity
2nd Lien
Purchased
Loans
Total
(In thousands)
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800 and above
$
36,534
 
$
10,484
 
$
6,048
 
$
8,392
 
$
8,462
 
$
69,920
 
750-799
 
102,382
 
 
41,999
 
 
10,006
 
 
20,113
 
 
20,984
 
 
195,484
 
700-749
 
69,337
 
 
24,727
 
 
5,706
 
 
12,360
 
 
9,115
 
 
121,245
 
650-699
 
50,621
 
 
13,798
 
 
4,106
 
 
8,167
 
 
437
 
 
77,129
 
600-649
 
25,270
 
 
5,769
 
 
1,674
 
 
3,067
 
 
—
 
 
35,780
 
550-599
 
13,747
 
 
3,030
 
 
455
 
 
1,699
 
 
—
 
 
18,931
 
500-549
 
9,215
 
 
1,438
 
 
486
 
 
981
 
 
—
 
 
12,120
 
Under 500
 
5,145
 
 
92
 
 
255
 
 
279
 
 
—
 
 
5,771
 
Unknown
 
2,290
 
 
1,711
 
 
280
 
 
179
 
 
139
 
 
4,599
 
Total
$
314,541
 
$
103,048
 
$
29,016
 
$
55,237
 
$
39,137
 
$
540,979
 
Accrued interest included in total
$
1,466
 
$
450
 
$
111
 
$
226
 
$
111
 
$
2,364
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800 and above
$
28,760
 
$
13,943
 
$
4,374
 
$
7,696
 
$
2,310
 
$
57,083
 
750-799
 
78,802
 
 
40,888
 
 
7,137
 
 
17,405
 
 
23,283
 
 
167,515
 
700-749
 
56,519
 
 
31,980
 
 
4,341
 
 
11,022
 
 
6,940
 
 
110,802
 
650-699
 
51,813
 
 
17,433
 
 
3,203
 
 
7,691
 
 
—
 
 
80,140
 
600-649
 
27,966
 
 
4,991
 
 
1,467
 
 
3,684
 
 
—
 
 
38,108
 
550-599
 
16,714
 
 
3,070
 
 
1,027
 
 
1,918
 
 
—
 
 
22,729
 
500-549
 
10,610
 
 
1,051
 
 
572
 
 
1,295
 
 
—
 
 
13,528
 
Under 500
 
4,708
 
 
554
 
 
244
 
 
265
 
 
—
 
 
5,771
 
Unknown
 
1,315
 
 
2,110
 
 
199
 
 
282
 
 
724
 
 
4,630
 
Total
$
277,207
 
$
116,020
 
$
22,564
 
$
51,258
 
$
33,257
 
$
500,306
 
Accrued interest included in total
$
1,396
 
$
477
 
$
87
 
$
196
 
$
114
 
$
2,270
 
(1)Credit scores have been updated within the last twelve months.
Installment(1)
Home
Equity
1st Lien
Home
Equity
2nd Lien
Loans not
Secured by
Real Estate
Other
Total
(In thousands)
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800 and above
$
1,354
 
$
1,626
 
$
53,281
 
$
86
 
$
56,347
 
750-799
 
2,478
 
 
3,334
 
 
107,460
 
 
793
 
 
114,065
 
700-749
 
1,920
 
 
2,686
 
 
43,456
 
 
821
 
 
48,883
 
650-699
 
2,852
 
 
2,541
 
 
19,053
 
 
624
 
 
25,070
 
600-649
 
1,691
 
 
1,775
 
 
4,638
 
 
298
 
 
8,402
 
550-599
 
1,231
 
 
1,063
 
 
1,942
 
 
53
 
 
4,289
 
500-549
 
981
 
 
692
 
 
1,095
 
 
45
 
 
2,813
 
Under 500
 
114
 
 
220
 
 
276
 
 
24
 
 
634
 
Unknown
 
29
 
 
21
 
 
5,800
 
 
34
 
 
5,884
 
Total
$
12,650
 
$
13,958
 
$
237,001
 
$
2,778
 
$
266,387
 
Accrued interest included in total
$
54
 
$
59
 
$
638
 
$
20
 
$
771
 
 
 
Installment(1)
Home
Equity
1st Lien
Home
Equity
2nd Lien
Loans not
Secured by
Real Estate
Other
Total
(In thousands)
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800 and above
$
1,792
 
$
1,782
 
$
44,254
 
$
58
 
$
47,886
 
750-799
 
4,117
 
 
5,931
 
 
86,800
 
 
531
 
 
97,379
 
700-749
 
2,507
 
 
3,899
 
 
34,789
 
 
694
 
 
41,889
 
650-699
 
3,508
 
 
4,182
 
 
16,456
 
 
499
 
 
24,645
 
600-649
 
2,173
 
 
2,153
 
 
4,979
 
 
200
 
 
9,505
 
550-599
 
1,800
 
 
1,346
 
 
1,997
 
 
109
 
 
5,252
 
500-549
 
1,056
 
 
855
 
 
1,170
 
 
61
 
 
3,142
 
Under 500
 
223
 
 
370
 
 
385
 
 
23
 
 
1,001
 
Unknown
 
59
 
 
32
 
 
3,921
 
 
4
 
 
4,016
 
Total
$
17,235
 
$
20,550
 
$
194,751
 
$
2,179
 
$
234,715
 
Accrued interest included in total
$
78
 
$
83
 
$
520
 
$
17
 
$
698
 
(1)Credit scores have been updated within the last twelve months.

Mepco is a wholly-owned subsidiary of our Bank that operates a vehicle service contract payment plan business throughout the United States. As discussed in note #1 all payment plan receivables have been reclassified to held for sale at December 31, 2016. In addition, see note #11 for more information about Mepco’s business. As of December 31, 2015, approximately 63.2% of Mepco’s outstanding payment plan receivables related to programs in which a third party insurer or risk retention group was 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 18.7% of Mepco’s outstanding payment plan receivables as of December 31, 2015, related 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 related to programs in which there was no insurer or risk retention group that had 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 monitored financial information on the counterparties as we evaluated 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 at December 31:

Payment Plan Receivables
Full
Refund
Partial
Refund
Other
Total
(In thousands)
2015
 
 
 
 
 
 
 
 
 
 
 
 
AM Best rating
 
 
 
 
 
 
 
 
 
 
 
 
A+
$
—
 
$
6
 
$
—
 
$
6
 
A
 
2,712
 
 
5,203
 
 
—
 
 
7,915
 
A-
 
3,418
 
 
1,177
 
 
6,265
 
 
10,860
 
Not rated
 
15,720
 
 
93
 
 
5
 
 
15,818
 
Total
$
21,850
 
$
6,479
 
$
6,270
 
$
34,599
 

Although Mepco has contractual recourse against various counterparties for refunds owing upon cancellation of vehicle service contracts, see note #11 below regarding certain risks and difficulties associated with collecting these refunds.

Mortgage loans serviced for others are not reported as assets on the Consolidated Statements of Financial Condition. The principal balances of these loans at December 31 follow:

2016
2015
(In thousands)
Mortgage loans serviced for:
 
 
 
 
 
 
Fannie Mae
$
944,703
 
$
898,443
 
Freddie Mac
 
622,885
 
 
707,891
 
Ginnie Mae
 
85,290
 
 
37,884
 
Other
 
6,115
 
 
107
 
Total
$
1,658,993
 
$
1,644,325
 

Custodial deposit accounts maintained in connection with mortgage loans serviced for others totaled $18.9 million and $21.8 million, at December 31, 2016 and 2015, respectively.

If we do not remain well capitalized for regulatory purposes (see note #20), meet certain minimum capital levels or certain profitability requirements or if we incur a rapid decline in net worth, we could lose our ability to sell and/or service loans to these investors. This could impact our ability to generate gains on the sale of loans and generate servicing income. A forced liquidation of our servicing portfolio could also impact the value that could be recovered on this asset. Fannie Mae has the most stringent eligibility requirements covering capital levels, profitability and decline in net worth. Fannie Mae requires seller/servicers to be well capitalized for regulatory purposes. For the profitability requirement, we cannot record four or more consecutive quarterly losses and experience a 30% decline in net worth over the same period. Finally, our net worth cannot decline by more than 25% in one quarter or more than 40% over two consecutive quarters. The highest level of capital we are required to maintain is at least $2.5 million plus 0.25% of loans serviced for Freddie Mac.

An analysis of capitalized mortgage loan servicing rights for the years ended December 31 follows:

2016
2015
2014
(In thousands)
Balance at beginning of year
$
12,436
 
$
12,106
 
$
13,710
 
Originated servicing rights capitalized
 
3,119
 
 
2,697
 
 
1,823
 
Amortization
 
(2,850
)
 
(2,868
)
 
(2,509
)
Change in valuation allowance
 
966
 
 
501
 
 
(918
)
Balance at end of year
$
13,671
 
$
12,436
 
$
12,106
 
Valuation allowance
$
2,306
 
$
3,272
 
$
3,773
 
Loans sold and serviced that have had servicing rights capitalized
$
1,657,996
 
$
1,643,086
 
$
1,661,269
 

The fair value of capitalized mortgage loan servicing rights was $14.2 million and $12.9 million at December 31, 2016 and 2015, respectively. Fair value was determined using an average coupon rate of 4.20%, average servicing fee of 0.256%, average discount rate of 10.07% and an average Public Securities Association (“PSA”) prepayment rate of 175 for December 31, 2016; and an average coupon rate of 4.32%, average servicing fee of 0.254%, average discount rate of 10.04% and an average PSA prepayment rate of 203 for December 31, 2015.