Loans

The composition of the loan portfolio, by class of loan, as of September 30, 2014 and December 31, 2013 was as follows:



	September 30, 2014						December 31, 2013
(In thousands)	Loan balance		Accrued interest receivable		Recorded investment		Loan balance		Accrued interest receivable		Recorded investment
Commercial, financial and agricultural *	$	809,550	$	3,144	$	812,694	$	825,432	$	3,079	$	828,511
Commercial real estate *	1,072,550		3,870		1,076,420		1,112,273		3,765		1,116,038
Construction real estate:
SEPH commercial land and development *	2,228		3		2,231		5,846		2		5,848
Remaining commercial	128,395		360		128,755		110,842		263		111,105
Mortgage	32,134		83		32,217		31,882		96		31,978
Installment	7,629		24		7,653		7,546		26		7,572
Residential real estate:
Commercial	409,017		1,017		410,034		407,387		904		408,291
Mortgage	1,175,069		1,726		1,176,795		1,143,088		1,559		1,144,647
HELOC	217,543		793		218,336		213,565		870		214,435
Installment	29,491		100		29,591		33,841		132		33,973
Consumer	883,648		2,767		886,415		723,733		2,775		726,508
Leases	3,179		56		3,235		3,404		23		3,427
Total loans	$	4,770,433	$	13,943	$	4,784,376	$	4,618,839	$	13,494	$	4,632,333

* Included within commercial, financial and agricultural loans, commercial real estate loans, and SEPH commercial land and development loans is an immaterial amount of consumer loans that are not broken out by class.

Credit Quality

The following tables present the recorded investment in nonaccrual loans, accruing troubled debt restructurings, and loans past due 90 days or more and still accruing by class of loan as of September 30, 2014 and December 31, 2013:



	September 30, 2014
(In thousands)	Nonaccrual loans		Accruing troubled debt restructurings		Loans past due 90 days or more and accruing		Total nonperforming loans
Commercial, financial and agricultural	$	22,462	$	781	$	—	$	23,243
Commercial real estate	20,292		1,011		—		21,303
Construction real estate:
SEPH commercial land and development	2,097		—		—		2,097
Remaining commercial	5,915		55		—		5,970
Mortgage	77		94		—		171
Installment	22		151		—		173
Residential real estate:
Commercial	23,224		416		—		23,640
Mortgage	19,758		11,623		842		32,223
HELOC	1,786		711		—		2,497
Installment	1,742		965		35		2,742
Consumer	3,096		1,405		954		5,455
Total loans	$	100,471	$	17,212	$	1,831	$	119,514



	December 31, 2013
(In thousands)	Nonaccrual loans		Accruing troubled debt restructurings		Loans past due 90 days or more and accruing		Total nonperforming loans
Commercial, financial and agricultural	$	20,633	$	107	$	80	$	20,820
Commercial real estate	39,588		2,234		2		41,824
Construction real estate:
SEPH commercial land and development	4,777		—		—		4,777
Remaining commercial	10,476		306		—		10,782
Mortgage	87		97		—		184
Installment	39		192		—		231
Residential real estate:
Commercial	32,495		913		—		33,408
Mortgage	20,564		11,708		549		32,821
HELOC	2,129		751		—		2,880
Installment	965		885		80		1,930
Consumer	3,463		1,616		1,016		6,095
Total loans	$	135,216	$	18,809	$	1,727	$	155,752

The following table provides additional information regarding those nonaccrual and accruing troubled debt restructured loans that were individually evaluated for impairment and those collectively evaluated for impairment as of September 30, 2014 and December 31, 2013.



	September 30, 2014						December 31, 2013
(In thousands)	Nonaccrual and accruing troubled debt restructurings		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Nonaccrual and accruing troubled debt restructurings		Loans individually evaluated for impairment		Loans collectively evaluated for impairment
Commercial, financial and agricultural	$	23,243	$	23,186	$	57	$	20,740	$	20,727	$	13
Commercial real estate	21,303		21,303		—		41,822		41,822		—
Construction real estate:
SEPH commercial land and development	2,097		2,097		—		4,777		4,777		—
Remaining commercial	5,970		5,970		—		10,782		10,782		—
Mortgage	171		—		171		184		—		184
Installment	173		—		173		231		—		231
Residential real estate:
Commercial	23,640		23,640		—		33,408		33,408		—
Mortgage	31,381		—		31,381		32,272		—		32,272
HELOC	2,497		—		2,497		2,880		—		2,880
Installment	2,707		—		2,707		1,850		—		1,850
Consumer	4,501		35		4,466		5,079		799		4,280
Total loans	$	117,683	$	76,231	$	41,452	$	154,025	$	112,315	$	41,710

All of the loans individually evaluated for impairment were evaluated using the fair value of the underlying collateral or the present value of expected future cash flows as the measurement method.

The following table presents loans individually evaluated for impairment by class of loan as of September 30, 2014 and December 31, 2013.



	September 30, 2014						December 31, 2013
(In thousands)	Unpaid principal balance		Recorded investment		Allowance for loan losses allocated		Unpaid principal balance		Recorded investment		Allowance for loan losses allocated
With no related allowance recorded:
Commercial, financial and agricultural	$	28,139	$	19,850	$	—	$	22,429	$	12,885	$	—
Commercial real estate	35,478		20,198		—		56,870		34,149		—
Construction real estate:
SEPH commercial land and development	14,933		2,097		—		23,722		4,777		—
Remaining commercial	1,542		466		—		8,429		6,872		—
Residential real estate:
Commercial	25,980		23,127		—		36,709		31,461		—
Consumer	—		—		—		799		799		—

With an allowance recorded:
Commercial, financial and agricultural	7,504		3,336		1,652		12,616		7,842		3,268
Commercial real estate	1,122		1,105		252		7,966		7,673		5,496
Construction real estate:
SEPH commercial land and development	—		—		—		—		—		—
Remaining commercial	5,504		5,504		1,951		3,909		3,910		1,132
Residential real estate:
Commercial	536		513		230		2,129		1,947		555
Consumer	35		35		35		—		—		—
Total	$	120,773	$	76,231	$	4,120	$	175,578	$	112,315	$	10,451

Management’s general practice is to proactively charge down loans individually evaluated for impairment to the fair value of the underlying collateral. At September 30, 2014 and December 31, 2013, there were $40.4 million and $58.1 million, respectively, of partial charge-offs on loans individually evaluated for impairment with no related allowance recorded and $4.2 million and $5.2 million, respectively, of partial charge-offs on loans individually evaluated for impairment that also had a specific reserve allocated.

The allowance for loan losses included specific reserves related to loans individually evaluated for impairment at September 30, 2014 and December 31, 2013 of $4.1 million and $10.5 million, respectively. These loans with specific reserves had a recorded investment of $10.5 million and $21.4 million as of September 30, 2014 and December 31, 2013, respectively.

Interest income on loans individually evaluated for impairment is recognized on a cash basis only when Park expects to receive the entire recorded investment of the loan. The following table presents the average recorded investment and interest income recognized subsequent to impairment on loans individually evaluated for impairment as of and for the three and nine months ended September 30, 2014 and September 30, 2013:



	Three Months Ended September 30, 2014						Three Months Ended September 30, 2013
(In thousands)	Recorded investment as of September 30, 2014		Average recorded investment		Interest income recognized		Recorded investment as of September 30, 2013		Average recorded investment		Interest income recognized
Commercial, financial and agricultural	$	23,186	$	18,764	$	68	$	19,871	$	20,803	$	124
Commercial real estate	21,303		30,644		327		41,009		41,417		329
Construction real estate:
SEPH commercial land and development	2,097		3,653		12		6,489		7,579		—
Remaining commercial	5,970		8,561		2		15,606		17,249		136
Residential real estate:
Commercial	23,640		27,765		255		34,477		34,860		115
Consumer	35		68		—		799		799		—
Total	$	76,231	$	89,455	$	664	$	118,251	$	122,707	$	704



	Nine Months Ended September 30, 2014						Nine Months Ended September 30, 2013
(In thousands)	Recorded investment as of September 30, 2014		Average recorded investment		Interest income recognized		Recorded investment as of September 30, 2013		Average recorded investment		Interest income recognized
Commercial, financial and agricultural	$	23,186	$	19,362	$	204	$	19,871	$	21,182	$	334
Commercial real estate	21,303		35,458		862		41,009		41,642		844
Construction real estate:
SEPH commercial land and development	2,097		4,130		134		6,489		9,722		—
Remaining commercial	5,970		9,587		56		15,606		19,118		548
Residential real estate:
Commercial	23,640		29,632		825		34,477		35,531		357
Consumer	35		521		—		799		561		—
Total	$	76,231	$	98,690	$	2,081	$	118,251	$	127,756	$	2,083

The following tables present the aging of the recorded investment in past due loans as of September 30, 2014 and December 31, 2013 by class of loan.



	September 30, 2014
(In thousands)	Accruing loans past due 30-89 days		Past due nonaccrual loans and loans past due 90 days or more and accruing*		Total past due		Total current		Total recorded investment
Commercial, financial and agricultural	$	7,814	$	8,640	$	16,454	$	796,240	$	812,694
Commercial real estate	800		11,110		11,910		1,064,510		1,076,420
Construction real estate:
SEPH commercial land and development	—		2,071		2,071		160		2,231
Remaining commercial	—		147		147		128,608		128,755
Mortgage	526		77		603		31,614		32,217
Installment	53		—		53		7,600		7,653
Residential real estate:
Commercial	525		19,091		19,616		390,418		410,034
Mortgage	12,629		11,225		23,854		1,152,941		1,176,795
HELOC	644		539		1,183		217,153		218,336
Installment	461		593		1,054		28,537		29,591
Consumer	11,018		3,482		14,500		871,915		886,415
Leases	—		—		—		3,235		3,235
Total loans	$	34,470	$	56,975	$	91,445	$	4,692,931	$	4,784,376

* Includes $1.8 million of loans past due 90 days or more and accruing. The remaining are past due, nonaccrual loans and accruing troubled debt restructurings.



	December 31, 2013
(in thousands)	Accruing loans past due 30-89 days		Past due nonaccrual loans and loans past due 90 days or more and accruing*		Total past due		Total current		Total recorded investment
Commercial, financial and agricultural	$	1,233	$	13,275	$	14,508	$	814,003	$	828,511
Commercial real estate	2,168		18,274		20,442		1,095,596		1,116,038
Construction real estate:
SEPH commercial land and development	—		4,242		4,242		1,606		5,848
Remaining commercial	—		3,463		3,463		107,642		111,105
Mortgage	264		75		339		31,639		31,978
Installment	207		14		221		7,351		7,572
Residential real estate:
Commercial	900		5,659		6,559		401,732		408,291
Mortgage	13,633		11,829		25,462		1,119,185		1,144,647
HELOC	571		402		973		213,462		214,435
Installment	696		436		1,132		32,841		33,973
Consumer	12,143		3,941		16,084		710,424		726,508
Leases	—		—		—		3,427		3,427
Total loans	$	31,815	$	61,610	$	93,425	$	4,538,908	$	4,632,333

* Includes $1.7 million of loans past due 90 days or more and accruing. The remaining are past due, nonaccrual loans and accruing troubled debt restructurings.

Credit Quality Indicators

Management utilizes past due information as a credit quality indicator across the loan portfolio. Past due information as of September 30, 2014 and December 31, 2013 is included in the tables above. The past due information is the primary credit quality indicator within the following classes of loans: (1) mortgage loans and installment loans in the construction real estate segment; (2) mortgage loans, HELOC and installment loans in the residential real estate segment; and (3) consumer loans. The primary credit indicator for commercial loans is based on an internal grading system that grades all commercial loans on a scale from 1 to 8. Credit grades are continuously monitored by the responsible loan officer and adjustments are made when appropriate. A grade of 1 indicates little or no credit risk and a grade of 8 is considered a loss. Commercial loans with grades of 1 to 4.5 (pass-rated) are considered to be of acceptable credit risk. Commercial loans graded a 5 (special mention) are considered to be watch list credits and a higher loan loss reserve percentage is allocated to these loans. Loans classified as special mention have potential weaknesses that require management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Commercial loans graded 6 (substandard), also considered watch list credits, are considered to represent higher credit risk and, as a result, a higher loan loss reserve percentage is allocated to these loans. Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or the value of the collateral pledged, if any. Loans so classified have a well defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that Park will sustain some loss if the deficiencies are not corrected. Commercial loans that are graded a 7 (doubtful) are shown as nonaccrual and Park generally charges these loans down to their fair value by taking a partial charge-off or recording a specific reserve. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Certain 6-rated loans and all 7-rated loans are included within the impaired category. A loan is deemed impaired when management determines the borrower's ability to perform in accordance with the contractual loan agreement is in doubt. Any commercial loan graded an 8 (loss) is completely charged off.

The tables below present the recorded investment by loan grade at September 30, 2014 and December 31, 2013 for all commercial loans:



	September 30, 2014
(In thousands)	5 Rated		6 Rated		Impaired		Pass Rated		Recorded Investment
Commercial, financial and agricultural *	$	3,444	$	136	$	23,243	$	785,871	$	812,694
Commercial real estate *	6,460		1,133		21,303		1,047,524		1,076,420
Construction real estate:
SEPH commercial land and development *	—		—		2,097		134		2,231
Remaining commercial	3,470		—		5,970		119,315		128,755
Residential real estate:
Commercial	1,412		540		23,640		384,442		410,034
Leases	—		—		—		3,235		3,235
Total Commercial Loans	$	14,786	$	1,809	$	76,253	$	2,340,521	$	2,433,369



	December 31, 2013
(In thousands)	5 Rated		6 Rated		Impaired		Pass Rated		Recorded Investment
Commercial, financial and agricultural *	$	6,055	$	532	$	20,740	$	801,184	$	828,511
Commercial real estate *	11,591		1,525		41,822		1,061,100		1,116,038
Construction real estate:
SEPH commercial land and development *	354		—		4,777		717		5,848
Remaining commercial	6,858		244		10,782		93,221		111,105
Residential real estate:
Commercial	5,033		397		33,408		369,453		408,291
Leases	—		—		—		3,427		3,427
Total Commercial Loans	$	29,891	$	2,698	$	111,529	$	2,329,102	$	2,473,220

Troubled Debt Restructurings (TDRs)

Management classifies loans as TDRs when a borrower is experiencing financial difficulties and Park has granted a concession to the borrower as part of a modification or in the loan renewal process. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of the borrower's debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Company’s internal underwriting policy. Management’s policy is to modify loans by extending the term or by granting a temporary or permanent contractual interest rate below the market rate, not by forgiving debt. Certain loans which were modified during the periods ended September 30, 2014 and September 30, 2013 did not meet the definition of a TDR as the modification was a delay in a payment that was considered to be insignificant. Management considers a forbearance period of up to three months or a delay in payment of up to 30 days to be insignificant. TDRs may be classified as accruing if the borrower has been current for a period of at least six months with respect to loan payments and management expects that the borrower will be able to continue to make payments in accordance with the terms of the restructured note. Management reviews all accruing TDRs quarterly to ensure payments continue to be made in accordance with the modified terms.

Management reviews renewals/modifications of loans previously identified as TDRs to consider if it is appropriate to remove the TDR classification. If the borrower is no longer experiencing financial difficulty and the renewal/modification does not contain a concessionary interest rate or other concessionary terms, management considers the potential removal of the TDR classification. If deemed appropriate, the TDR classification is removed as the borrower has complied with the terms of the loan at the date of the renewal/modification and there was a reasonable expectation that the borrower would continue to comply with the terms of the loan subsequent to the date of the renewal/modification. The majority of these TDRs were originally considered restructurings in a prior year as a result of a renewal/modification with an interest rate that was not commensurate with the risk of the underlying loan at the time of the renewal/modification. During the three-month and nine-month periods ended September 30, 2014, Park removed the TDR classification on $0.9 million and $2.5 million, respectively, of loans that met the requirements discussed above. During the three-month and nine-month periods ended September 30, 2013, Park removed the TDR classification on $0.7 million and $3.6 million, respectively, of loans that met the requirements discussed above.

At September 30, 2014 and December 31, 2013, there were $46.8 million and $76.3 million, respectively, of TDRs included in the nonaccrual loan totals. At September 30, 2014 and December 31, 2013, $14.5 million and $50.6 million of these nonaccrual TDRs were performing in accordance with the terms of the restructured note. As of September 30, 2014 and December 31, 2013, there were $17.2 million and $18.8 million, respectively, of TDRs included in accruing loan totals. Management will continue to review the restructured loans and may determine it appropriate to move certain of the loans back to accrual status in the future.

At September 30, 2014 and December 31, 2013, Park had commitments to lend $2.7 million and $4.0 million, respectively, of additional funds to borrowers whose outstanding loan terms had been modified in a TDR.

The specific reserve related to TDRs at September 30, 2014 and December 31, 2013 was $2.5 million and $7.5 million, respectively. Modifications made in 2013 and 2014 were largely the result of renewals, extending the maturity date of the loan, at terms consistent with the original note. These modifications were deemed to be TDRs primarily due to Park’s conclusion that the borrower would likely not have qualified for similar terms through another lender. Many of the modifications deemed to be TDRs were previously identified as impaired loans, and thus were also previously evaluated for impairment under ASC 310. Additional specific reserves of $258,000 and $537,000 were recorded during the three-month and nine-month periods ended September 30, 2014, respectively, as a result of TDRs identified in 2014. Additional specific reserves of $474,000 and $745,000 were recorded during the three-month and nine-month periods ended September 30, 2013, respectively, as a result of TDRs identified in 2013.

The terms of certain other loans were modified during the nine-month periods ended September 30, 2014 and September 30, 2013 that did not meet the definition of a TDR. Modified substandard commercial loans which did not meet the definition of a TDR had a total recorded investment as of September 30, 2014 and September 30, 2013 of $443,000 and $541,000, respectively. The renewal/modification of these loans: (1) involved a renewal/modification of the terms of a loan to a borrower who was not experiencing financial difficulties, (2) resulted in a delay in a payment that was considered to be insignificant, or (3) resulted in Park obtaining additional collateral or guarantees that improved the likelihood of the ultimate collection of the loan such that the modification was deemed to be at market terms. Modified consumer loans which did not meet the definition of a TDR had a total recorded investment as of September 30, 2014 and September 30, 2013 of $17.6 million and $19.6 million, respectively. Many of these loans were to borrowers who were not experiencing financial difficulties but who were looking to reduce their cost of funds.

The following tables detail the number of contracts modified as TDRs during the three-month and nine-month periods ended September 30, 2014 and September 30, 2013, as well as the recorded investment of these contracts at September 30, 2014 and September 30, 2013. The recorded investment pre- and post-modification is generally the same due to the fact that Park does not typically provide for forgiveness of principal.



	Three Months Ended September 30, 2014
(In thousands)	Number of Contracts	Accruing		Nonaccrual		Total Recorded Investment
Commercial, financial and agricultural	14	$	776	$	1,025	$	1,801
Commercial real estate	2	—		622		622
Construction real estate:
SEPH commercial land and development	—	—		—		—
Remaining commercial	—	—		—		—
Mortgage	—	—		—		—
Installment	—	—		—		—
Residential real estate:
Commercial	2	—		312		312
Mortgage	11	508		356		864
HELOC	2	—		29		29
Installment	3	133		9		142
Consumer	87	415		344		759
Total loans	121	$	1,832	$	2,697	$	4,529



	Three Months Ended September 30, 2013
(In thousands)	Number of Contracts	Accruing		Nonaccrual		Total Recorded Investment
Commercial, financial and agricultural	7	$	2,806	$	678	$	3,484
Commercial real estate	9	—		5,671		5,671
Construction real estate:
SEPH commercial land and development	—	—		—		—
Remaining commercial	—	—		—		—
Mortgage	—	—		—		—
Installment	1	15		—		15
Residential real estate:
Commercial	—	—		—		—
Mortgage	8	120		393		513
HELOC	6	129		—		129
Installment	5	52		41		93
Consumer	76	419		208		627
Total loans	112	$	3,541	$	6,991	$	10,532

Of those loans which were modified and determined to be a TDR during the three-month period ended September 30, 2014, $205,000 were on nonaccrual status as of December 31, 2013. Of those loans which were modified and determined to be a TDR during the three-month period ended September 30, 2013, $751,000 were on nonaccrual status as of December 31, 2012.



	Nine Months Ended September 30, 2014
(In thousands)	Number of Contracts	Accruing		Nonaccrual		Total Recorded Investment
Commercial, financial and agricultural	24	$	776	$	1,065	$	1,841
Commercial real estate	8	—		905		905
Construction real estate:
SEPH commercial land and development	—	—		—		—
Remaining commercial	2	—		207		207
Mortgage	—	—		—		—
Installment	1	—		—		—
Residential real estate:
Commercial	4	—		333		333
Mortgage	31	749		1,104		1,853
HELOC	7	93		195		288
Installment	9	228		12		240
Consumer	246	726		460		1,186
Total loans	332	$	2,572	$	4,281	$	6,853



	Nine Months Ended September 30, 2013
(In thousands)	Number of Contracts	Accruing		Nonaccrual		Total Recorded Investment
Commercial, financial and agricultural	21	$	2,813	$	1,052	$	3,865
Commercial real estate	16	—		6,635		6,635
Construction real estate:
SEPH commercial land and development	—	—		—		—
Remaining commercial	2	403		—		403
Mortgage	—	—		—		—
Installment	3	15		24		39
Residential real estate:
Commercial	14	—		2,574		2,574
Mortgage	41	1,513		1,616		3,129
HELOC	13	222		—		222
Installment	12	118		75		193
Consumer	251	754		287		1,041
Total loans	373	$	5,838	$	12,263	$	18,101

Of those loans which were modified and determined to be a TDR during the nine-month period ended September 30, 2014, $1.0 million were on nonaccrual status as of December 31, 2013. Of those loans which were modified and determined to be a TDR during the nine-month period ended September 30, 2013, $3.2 million were on nonaccrual status as of December 31, 2012.

The following tables present the recorded investment in financing receivables which were modified as TDRs within the previous 12 months and for which there was a payment default during the three-month and nine-month periods ended September 30, 2014 and September 30, 2013, respectively. For these tables, a loan is considered to be in default when it becomes 30 days contractually past due under the modified terms. The additional allowance for loan loss resulting from the defaults on TDR loans was immaterial.



	Three Months Ended September 30, 2014			Three Months Ended September 30, 2013
(In thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Commercial, financial and agricultural	3	$	62	7	$	554
Commercial real estate	—	—		4	634
Construction real estate:
SEPH commercial land and development	—	—		—	—
Remaining commercial	—	—		—	—
Mortgage	—	—		—	—
Installment	—	—		—	—
Residential real estate:
Commercial	2	194		3	2,293
Mortgage	18	1,205		21	1,645
HELOC	1	166		—	—
Installment	2	115		7	149
Consumer	54	486		58	328
Leases	—	—		—	—
Total loans	80	$	2,228	100	$	5,603

Of the $2.2 million in modified TDRs which defaulted during the three months ended September 30, 2014, $160,000 were accruing loans and $2.1 million were nonaccrual loans. Of the $5.6 million in modified TDRs which defaulted during the three months ended September 30, 2013, $376,000 were accruing loans and $5.2 million were nonaccrual loans.



	Nine Months Ended September 30, 2014			Nine Months Ended September 30, 2013
(In thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Commercial, financial and agricultural	4	$	111	12	$	977
Commercial real estate	—	—		5	670
Construction real estate:
SEPH commercial land and development	—	—		1	14
Remaining commercial	—	—		—	—
Mortgage	—	—		—	—
Installment	—	—		1	11
Residential real estate:
Commercial	2	194		9	2,906
Mortgage	21	1,354		25	2,024
HELOC	1	166		—	—
Installment	3	118		7	149
Consumer	65	564		68	411
Leases	—	—		—	—
Total loans	96	$	2,507	128	$	7,162

Of the $2.5 million in modified TDRs which defaulted during the nine months ended September 30, 2014, $261,000 were accruing loans and $2.2 million were nonaccrual loans. Of the $7.2 million in modified TDRs which defaulted during the nine months ended September 30, 2013, $496,000 were accruing loans and $6.7 million were nonaccrual loans.