6. Credit Quality and Allowance for Loan Losses

The following briefly describes the distinction between originated and acquired loans and certain significant accounting policies relevant to each category.

Originated Loans

Loans originated for investment are reported at the principal balance outstanding net of unearned income. Interest on loans and accretion of unearned income are computed in a manner that approximates a level yield on recorded principal. Interest on loans is recorded as income is earned. The accrual of interest on an originated loan is discontinued when it is probable the borrower will not be able to meet payment obligations as they become due. The Company maintains an allowance for loan losses on originated loans that represents management’s estimate of probable losses incurred in this portfolio category.

Acquired Loans

Loans that were acquired as a result of our acquisitions of certain assets and liabilities of Statewide Bank (“Statewide”) of Covington, Louisiana, on March 12, 2010, and the acquisitions of GS Financial Corp. (“GSFC”), the former holding company of Guaranty Savings Bank of Metairie, Louisiana, on July 15, 2011, Britton & Koontz Capital Corporation (“Britton & Koontz”), the former holding company of Britton & Koontz Bank, N.A. (“Britton & Koontz Bank”) of Natchez, Mississippi on February 14, 2014, and Louisiana Bancorp, Inc. (“Louisiana Bancorp”), the former holding company of Bank of New Orleans (“BNO”) of Metairie, Louisiana on September 15, 2015 are referred to as “Acquired Loans.”

Acquired Loans were recorded at estimated fair value at the acquisition date with no carryover of the related allowance for loan losses. The acquired loans were segregated between those considered to be performing (“acquired performing”) and those with evidence of credit deterioration (“acquired impaired”), and then further segregated into loan pools designed to facilitate the estimation of expected cash flows. The fair value estimate for each pool of acquired performing and acquired impaired loans was based on the estimate of expected cash flows, both principal and interest, from that pool, discounted at prevailing market interest rates.

The difference between the fair value of an acquired performing loan pool and the contractual amounts due at the acquisition date (the “fair value discount”) is accreted into income over the estimated life of the pool. Management estimates an allowance for loan losses for acquired performing loans using a methodology similar to that used for originated loans. The allowance determined for each loan pool is compared to the remaining fair value discount for that pool. If the allowance amount calculated under the Company’s methodology is greater than the Company’s remaining discount, the additional amount called for is added to the reported allowance through a provision for loan losses. If the allowance amount calculated under the Company’s methodology is less than the Company’s recorded discount, no additional allowance or provision is recognized. Actual losses first reduce any remaining nonaccretable discount for the loan pool. Once the nonaccretable discount is fully depleted, losses are applied against the allowance established for that pool. Acquired performing loans are placed on nonaccrual status and considered and reported as nonperforming or past due using the same criteria applied to the originated portfolio.

The excess of cash flows expected to be collected from an acquired impaired loan pool over the pool’s estimated fair value at acquisition is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the pool. Each pool of acquired impaired loans is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.

Management recasts the estimate of cash flows expected to be collected on each acquired impaired loan pool periodically. If the present value of expected cash flows for a pool is less than its carrying value, an impairment is recognized by an increase in the allowance for loan losses and a charge to the provision for loan losses. If the present value of expected cash flows for a pool is greater than its carrying value, any previously established allowance for loan losses is reversed and any remaining difference increases the accretable yield, which will be taken into interest income over the remaining life of the loan pool. Acquired impaired loans are generally not subject to individual evaluation for impairment and are not reported with impaired loans, even if they would otherwise qualify for such treatment.

The allowance for loan losses and recorded investment in loans as of the dates indicated are as follows.


	As of September 30, 2017
	Originated Loans
*(dollars in thousands)*	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Acquired Loans		Total
Allowance for loan losses:
One- to four-family first mortgage	$	1,553	$	—	$	59	$	1,612
Home equity loans and lines		713		348		62		1,123
Commercial real estate		4,604		—		77		4,681
Construction and land		1,677		—		7		1,684
Multi-family residential		351		—		—		351
Commercial and industrial		2,460		865		176		3,501
Consumer		469		—		3		472

Total allowance for loan losses	$	11,827	$	1,213	$	384	$	13,424


	As of September 30, 2017
	Originated Loans
*(dollars in thousands)*	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Acquired Loans⁽¹⁾		Total
Recorded investment in loans:
One- to four-family first mortgage	$	193,987	$	—	$	139,655	$	333,642
Home equity loans and lines		53,836		932		35,356		90,124
Commercial real estate		367,243		23		98,286		465,552
Construction and land		122,788		—		1,766		124,554
Multi-family residential		30,635		—		15,497		46,132
Commercial and industrial		116,988		4,940		6,856		128,784
Consumer		37,398		—		1,207		38,605

Total loans	$	922,875	$	5,895	$	298,623	$	1,227,393


	As of December 31, 2016
	Originated Loans
*(dollars in thousands)*	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Acquired Loans		Total
Allowance for loan losses:
One- to four-family first mortgage	$	1,397	$	39	$	75	$	1,511
Home equity loans and lines		654		—		74		728
Commercial real estate		4,158		19		—		4,177
Construction and land		1,763		—		19		1,782
Multi-family residential		361		—		—		361
Commercial and industrial		2,579		737		123		3,439
Consumer		513		—		—		513

Total allowance for loan losses	$	11,425	$	795	$	291	$	12,511


	As of December 31, 2016
	Originated Loans
*(dollars in thousands)*	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Acquired Loans⁽¹⁾		Total
Recorded investment in loans:
One- to four-family first mortgage	$	176,392	$	252	$	165,239	$	341,883
Home equity loans and lines		47,865		—		40,956		88,821
Commercial real estate		321,361		462		105,692		427,515
Construction and land		138,955		—		2,212		141,167
Multi-family residential		26,941		—		19,428		46,369
Commercial and industrial		126,791		4,844		8,175		139,810
Consumer		40,827		—		1,441		42,268

Total loans	$	879,132	$	5,558	$	343,143	$	1,227,833

⁽¹⁾	$9.3 million and $13.1 million in acquired loans were deemed to be acquired impaired loans and were accounted for under ASC 310-30 at September 30, 2017 and December 31, 2016, respectively.

A summary of activity in the allowance for loan losses for the nine months ended September 30, 2017 and September 30, 2016 follows.


	For the Nine Months Ended September 30, 2017
*(dollars in thousands)*	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Originated loans:
Allowance for loan losses:
One- to four-family first mortgage	$	1,436	$	—		$	—	$	117		$	1,553
Home equity loans and lines		654		(10	)		18		399			1,061
Commercial real estate		4,177		(4	)		—		431			4,604
Construction and land		1,763		—			—		(86	)		1,677
Multi-family residential		361		—			—		(10	)		351
Commercial and industrial		3,316		(358	)		203		164			3,325
Consumer		513		(58	)		5		9			469

Total allowance for loan losses	$	12,220	$	(430	)	$	226	$	1,024		$	13,040

Acquired loans:
Allowance for loan losses:
One- to four-family first mortgage	$	75	$	—		$	—	$	(16	)	$	59
Home equity loans and lines		74		—			—		(12	)		62
Commercial real estate		—		—			—		77			77
Construction and land		19		—			—		(12	)		7
Multi-family residential		—		—			—		—			—
Commercial and industrial		123		—			—		53			176

Consumer		—		—			—		3			3

Total allowance for loan losses	$	291	$	—		$	—	$	93		$	384

Total loans:
Allowance for loan losses:
One- to four-family first mortgage	$	1,511	$	—		$	—	$	101		$	1,612
Home equity loans and lines		728		(10	)		18		387			1,123
Commercial real estate		4,177		(4	)		—		508			4,681
Construction and land		1,782		—			—		(98	)		1,684
Multi-family residential		361		—			—		(10	)		351
Commercial and industrial		3,439		(358	)		203		217			3,501
Consumer		513		(58	)		5		12			472

Total allowance for loan losses	$	12,511	$	(430	)	$	226	$	1,117		$	13,424


	For the Nine Months Ended September 30, 2016
*(dollars in thousands)*	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Originated loans:
Allowance for loan losses:
One- to four-family first mortgage	$	1,372	$	—		$	—	$	32		$	1,404
Home equity loans and lines		536		(9	)		2		133			662
Commercial real estate		3,152		—			1		883			4,036
Construction and land		1,360		—			51		260			1,671
Multi-family residential		173		—			—		169			342
Commercial and industrial		2,010		(128	)		43		1,250			3,175
Consumer		571		(112	)		4		69			532

Total allowance for loan losses	$	9,174	$	(249	)	$	101	$	2,796		$	11,822


Acquired loans:
Allowance for loan losses:
One- to four-family first mortgage	$	92	$	—		$	—	$	8		$	100
Home equity loans and lines		224		—			—		(150	)		74
Commercial real estate		—		—			—		—			—
Construction and land		57		—			—		17			74
Multi-family residential		—		—			—		—			—
Commercial and industrial		—		—			94		29			123
Consumer		—		—			—		—			—

Total allowance for loan losses	$	373	$	—		$	94	$	(96	)	$	371

Total loans:
Allowance for loan losses:
One- to four-family first mortgage	$	1,464	$	—		$	—	$	40		$	1,504
Home equity loans and lines		760		(9	)		2		(17	)		736
Commercial real estate		3,152		—			1		883			4,036
Construction and land		1,417		—			51		277			1,745
Multi-family residential		173		—			—		169			342
Commercial and industrial		2,010		(128	)		137		1,279			3,298
Consumer		571		(112	)		4		69			532

Total allowance for loan losses	$	9,547	$	(249	)	$	195	$	2,700		$	12,193

The following tables present the Company’s loan portfolio by credit quality classification as of the dates indicated.


	September 30, 2017
*(dollars in thousands)*	Pass		Special Mention		Substandard		Doubtful		Total
Originated loans:
One- to four-family first mortgage	$	191,783	$	367	$	1,837	$	—	$	193,987
Home equity loans and lines		52,588		292		1,888		—		54,768
Commercial real estate		357,342		746		9,178		—		367,266
Construction and land		121,459		215		1,114		—		122,788
Multi-family residential		30,635		—		—		—		30,635
Commercial and industrial		104,566		3,471		13,891		—		121,928
Consumer		36,955		122		321		—		37,398

Total originated loans	$	895,328	$	5,213	$	28,229	$	—	$	928,770

Acquired loans:
One- to four-family first mortgage	$	136,775	$	507	$	2,373	$	—	$	139,655
Home equity loans and lines		35,210		28		118		—		35,356
Commercial real estate		95,265		1,855		1,166		—		98,286
Construction and land		1,296		—		470		—		1,766
Multi-family residential		15,333		—		164		—		15,497
Commercial and industrial		4,107		—		2,749		—		6,856
Consumer		1,175		32		—		—		1,207

Total acquired loans	$	289,161	$	2,422	$	7,040	$	—	$	298,623


Total:
One- to four-family first mortgage	$	328,558	$	874	$	4,210	$	—	$	333,642
Home equity loans and lines		87,798		320		2,006		—		90,124
Commercial real estate		452,607		2,601		10,344		—		465,552
Construction and land		122,755		215		1,584		—		124,554
Multi-family residential		45,968		—		164		—		46,132
Commercial and industrial		108,673		3,471		16,640		—		128,784
Consumer		38,130		154		321		—		38,605

Total loans	$	1,184,489	$	7,635	$	35,269	$	—	$	1,227,393


	December 31, 2016
*(dollars in thousands)*	Pass		Special Mention		Substandard		Doubtful		Total
Originated loans:
One- to four-family first mortgage	$	175,045	$	276	$	1,323	$	—	$	176,644
Home equity loans and lines		46,536		331		998		—		47,865
Commercial real estate		311,517		822		9,484		—		321,823
Construction and land		138,000		22		933		—		138,955
Multi-family residential		26,941		—		—		—		26,941
Commercial and industrial		114,962		5,979		10,694		—		131,635
Consumer		40,369		98		360		—		40,827

Total originated loans	$	853,370	$	7,528	$	23,792	$	—	$	884,690

Acquired loans:
One- to four-family first mortgage	$	162,037	$	245	$	2,957	$	—	$	165,239
Home equity loans and lines		40,812		47		97		—		40,956
Commercial real estate		101,546		2,758		1,388		—		105,692
Construction and land		1,537		71		604		—		2,212
Multi-family residential		19,250		—		178		—		19,428
Commercial and industrial		4,843		—		3,332		—		8,175
Consumer		1,401		38		2		—		1,441

Total acquired loans	$	331,426	$	3,159	$	8,558	$	—	$	343,143

Total:
One- to four-family first mortgage	$	337,082	$	521	$	4,280	$	—	$	341,883
Home equity loans and lines		87,348		378		1,095		—		88,821
Commercial real estate		413,063		3,580		10,872		—		427,515
Construction and land		139,537		93		1,537		—		141,167
Multi-family residential		46,191		—		178		—		46,369
Commercial and industrial		119,805		5,979		14,026		—		139,810
Consumer		41,770		136		362		—		42,268

Total loans	$	1,184,796	$	10,687	$	32,350	$	—	$	1,227,833

The above classifications follow regulatory guidelines and can generally be described as follows:

•

Pass loans are of satisfactory quality.

•

Special mention loans have an existing weakness that could cause future impairment, including the deterioration of financial ratios, past due status, questionable management capabilities and possible reduction in the collateral values.

•

Substandard loans have an existing specific and well-defined weakness that may include poor liquidity and deterioration of financial performance. Such loans may be past due and related deposit accounts experiencing overdrafts. Immediate corrective action is necessary.

•

Doubtful loans have specific weaknesses that are severe enough to make collection or liquidation in full highly questionable and improbable.

In addition, residential loans are classified using an inter-agency regulatory methodology that incorporates, among other factors, the extent of delinquencies and loan-to-value ratios. These classifications were the most current available as of the dates indicated and were generally updated within the quarter.

Age analysis of past due loans as of the dates indicated are as follows.


	September 30, 2017
*(dollars in thousands)*	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current Loans		Total Loans
Originated loans:
Real estate loans:
One- to four-family first mortgage	$	4,187	$	429	$	401	$	5,017	$	188,970	$	193,987
Home equity loans and lines		100		9		13		122		54,646		54,768
Commercial real estate		1,180		—		384		1,564		365,702		367,266
Construction and land		302		200		—		502		122,286		122,788
Multi-family residential		—		—		—		—		30,635		30,635

Total real estate loans		5,769		638		798		7,205		762,239		769,444

Other loans:
Commercial and industrial		28		497		521		1,046		120,882		121,928
Consumer		361		95		171		627		36,771		37,398

Total other loans		389		592		692		1,673		157,653		159,326

Total originated loans	$	6,158	$	1,230	$	1,490	$	8,878	$	919,892	$	928,770

Acquired loans:
Real estate loans:
One- to four-family first mortgage	$	1,300	$	488	$	1,502	$	3,290	$	136,365	$	139,655
Home equity loans and lines		231		—		42		273		35,083		35,356
Commercial real estate		—		44		209		253		98,033		98,286
Construction and land		15		32		—		47		1,719		1,766
Multi-family residential		—		—		—		—		15,497		15,497

Total real estate loans		1,546		564		1,753		3,863		286,697		290,560

Other loans:
Commercial and industrial		—		—		—		—		6,856		6,856
Consumer		4		8		—		12		1,195		1,207

Total other loans		4		8		—		12		8,051		8,063

Total acquired loans	$	1,550	$	572	$	1,753	$	3,875	$	294,748	$	298,623


Total loans:
Real estate loans:
One- to four-family first mortgage	$	5,487	$	917	$	1,903	$	8,307	$	325,335	$	333,642
Home equity loans and lines		331		9		55		395		89,729		90,124
Commercial real estate		1,180		44		593		1,817		463,735		465,552
Construction and land		317		232		—		549		124,005		124,554
Multi-family residential		—		—		—		—		46,132		46,132

Total real estate loans		7,315		1,202		2,551		11,068		1,048,936		1,060,004

Other loans:
Commercial and industrial		28		497		521		1,046		127,738		128,784
Consumer		365		103		171		639		37,966		38,605

Total other loans		393		600		692		1,685		165,704		167,389

Total loans	$	7,708	$	1,802	$	3,243	$	12,753	$	1,214,640	$	1,227,393


	December 31, 2016
*(dollars in thousands)*	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current Loans		Total Loans
Originated loans:
Real estate loans:
One- to four-family first mortgage	$	651	$	—	$	563	$	1,214	$	175,430	$	176,644
Home equity loans and lines		37		29		—		66		47,799		47,865
Commercial real estate		475		—		587		1,062		320,761		321,823
Construction and land		467		—		12		479		138,476		138,955
Multi-family residential		—		—		—		—		26,941		26,941

Total real estate loans		1,630		29		1,162		2,821		709,407		712,228

Other loans:
Commercial and industrial		656		706		650		2,012		129,623		131,635
Consumer		531		97		192		820		40,007		40,827

Total other loans		1,187		803		842		2,832		169,630		172,462

Total originated loans	$	2,817	$	832	$	2,004	$	5,653	$	879,037	$	884,690

Acquired loans:
Real estate loans:
One- to four-family first mortgage	$	1,471	$	969	$	2,025	$	4,465	$	160,774	$	165,239
Home equity loans and lines		136		27		38		201		40,755		40,956
Commercial real estate		—		—		1,164		1,164		104,528		105,692
Construction and land		21		—		30		51		2,161		2,212
Multi-family residential		19		—		—		19		19,409		19,428

Total real estate loans		1,647		996		3,257		5,900		327,627		333,527

Other loans:
Commercial and industrial		—		—		—		—		8,175		8,175
Consumer		2		8		2		12		1,429		1,441

Total other loans		2		8		2		12		9,604		9,616

Total acquired loans	$	1,649	$	1,004	$	3,259	$	5,912	$	337,231	$	343,143


Total loans:
Real estate loans:
One- to four-family first mortgage	$	2,122	$	969	$	2,588	$	5,679	$	336,204	$	341,883
Home equity loans and lines		173		56		38		267		88,554		88,821
Commercial real estate		475		—		1,751		2,226		425,289		427,515
Construction and land		488		—		42		530		140,637		141,167
Multi-family residential		19		—		—		19		46,350		46,369

Total real estate loans		3,277		1,025		4,419		8,721		1,037,034		1,045,755

Other loans:
Commercial and industrial		656		706		650		2,012		137,798		139,810
Consumer		533		105		194		832		41,436		42,268

Total other loans		1,189		811		844		2,844		179,234		182,078

Total loans	$	4,466	$	1,836	$	5,263	$	11,565	$	1,216,268	$	1,227,833

Excluding Acquired Loans with deteriorated credit quality, the Company did not have any loans greater than 90 days past due and accruing as of September 30, 2017 or December 31, 2016.

The following table summarizes the accretable yield on loans accounted for under ASC 310-30 as of the dates indicated.


	For the Nine Months Ended
*(dollars in thousands)*	September 30, 2017			September 30, 2016
Balance at beginning of period	$	(11,091	)	$	(16,792	)
Accretion		2,495			5,155

Transfers from nonaccretable difference to accretable yield		(1,208	)		(879	)

Balance at end of period	$	(9,804	)	$	(12,516	)

The following table summarizes information pertaining to Originated Loans, which were deemed impaired loans as of the dates indicated.


	As of September 30, 2017
*(dollars in thousands)*	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
One- to four-family first mortgage	$	—	$	—	$	—	$	—	$	—
Home equity loans and lines		473		476		—		370		18
Commercial real estate		23		33		—		18		1
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		2,952		3,131		—		3,209		133
Consumer		—		—		—		—		—

Total	$	3,448	$	3,640	$	—	$	3,597	$	152


With an allowance recorded:
One- to four-family first mortgage	$	—	$	—	$	—	$	55	$	—
Home equity loans and lines		459		460		348		358		17
Commercial real estate		—		—		—		395		—
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		1,988		2,102		865		1,985		80
Consumer		—		—		—		—		—

Total	$	2,447	$	2,562	$	1,213	$	2,793	$	97

Total impaired Originated Loans:
One- to four-family first mortgage	$	—	$	—	$	—	$	55	$	—
Home equity loans and lines		932		936		348		728		35
Commercial real estate		23		33		—		413		1
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		4,940		5,233		865		5,194		213
Consumer		—		—		—		—		—

Total	$	5,895	$	6,202	$	1,213	$	6,390	$	249


	As of December 31, 2016
*(dollars in thousands)*	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
One- to four-family first mortgage	$	—	$	—	$	—	$	—	$	—
Home equity loans and lines		—		—		—		—		—
Commercial real estate		—		—		—		—		—
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		3,144		3,178		—		262		166
Consumer		—		—		—		—		—

Total	$	3,144	$	3,178	$	—	$	262	$	166

With an allowance recorded:
One- to four-family first mortgage	$	252	$	260	$	39	$	93	$	13
Home equity loans and lines		—		—		—		—		—
Commercial real estate		462		483		19		423		14
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		1,700		1,737		737		1,635		87
Consumer		—		—		—		—		—

Total	$	2,414	$	2,480	$	795	$	2,151	$	114

Total impaired loans:
One- to four-family first mortgage	$	252	$	260	$	39	$	93	$	13
Home equity loans and lines		—		—		—		—		—
Commercial real estate		462		483		19		423		14
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		4,844		4,915		737		1,897		253
Consumer		—		—		—		—		—

Total	$	5,558	$	5,658	$	795	$	2,413	$	280


	As of September 30, 2016
*(dollars in thousands)*	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
One- to four-family first mortgage	$	—	$	—	$	—	$	—	$	—
Home equity loans and lines		—		—		—		—		—
Commercial real estate		—		—		—		—		—
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		—		—		—		—		—
Consumer		—		—		—		—		—

Total	$	—	$	—	$	—	$	—	$	—

With an allowance recorded:
One- to four-family first mortgage	$	75	$	81	$	28	$	79	$	4
Home equity loans and lines		—		—		—		—		—
Commercial real estate		619		650		64		375		17
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		3,554		3,593		547		1,290		149
Consumer		—		—		—		—		—

Total	$	4,248	$	4,324	$	639	$	1,744	$	170

Total impaired loans:
One- to four-family first mortgage	$	75	$	81	$	28	$	79	$	4
Home equity loans and lines		—		—		—		—		—
Commercial real estate		619		650		64		375		17
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		3,554		3,593		547		1,290		149
Consumer		—		—		—		—		—

Total	$	4,248	$	4,324	$	639	$	1,744	$	170

The following table summarizes information pertaining to nonaccrual loans as of dates indicated.


	September 30, 2017						December 31, 2016
*(dollars in thousands)*	Originated		Acquired⁽¹⁾		Total		Originated		Acquired⁽¹⁾		Total
Nonaccrual loans⁽²⁾:
One- to four-family first mortgage	$	1,425	$	877	$	2,302	$	891	$	833	$	1,724
Home equity loans and lines		1,823		100		1,923		998		90		1,088
Commercial real estate		3,255		—		3,255		1,799		164		1,963
Construction and land		—		—		—		12		63		75
Multi-family residential		—		—		—		—		—		—
Commercial and industrial		9,657		243		9,900		8,230		312		8,542
Consumer		321		—		321		360		1		361

Total	$	16,481	$	1,220	$	17,701	$	12,290	$	1,463	$	13,753

⁽¹⁾

Table excludes acquired loans which were being accounted for under ASC 310-30 because they continue to earn interest from accretable yield regardless of their status as past due or otherwise not in compliance with their contractual terms. Acquired loans with deteriorated credit quality, which were being accounted for under ASC 310-30 and which were 90 days or more past due, totaled $1.5 million and $2.7 million as of September 30, 2017 and December 31, 2016, respectively.

⁽²⁾

Nonaccrual loans include loans restructured and placed on nonaccrual status. Originated restructured nonaccrual loans totaled $8.9 million and $10.0 million at September 30, 2017 and December 31, 2016, respectively. Acquired restructured nonaccrual loans totaled $457,000 and $435,000 at September 30, 2017 and December 31, 2016, respectively.

As of September 30, 2017, the Company had no outstanding commitments to lend additional funds to any customer whose loan was classified as impaired.

Troubled Debt Restructurings

During the course of its lending operations, the Company periodically grants concessions to its customers in an attempt to protect as much of its investment as possible and to minimize risk of loss. These concessions may include restructuring the terms of a customer loan to alleviate the burden of the customer’s near-term cash requirements. The Company must conclude that the restructuring of a loan to a borrower who is experiencing financial difficulties constitutes a “concession”. The Company defines a concession as a modification of existing terms granted to a borrower for economic or legal reasons related to the borrower’s financial difficulties that the Company would otherwise not consider. The concession either is granted through an agreement with the customer or is imposed by a court or by law. Concessions include modifying original loan terms to reduce or defer cash payments required as part of the loan agreement, including but not limited to:

•

a reduction of the stated interest rate for the remaining original life of the debt,

•

an extension of the maturity date or dates at an interest rate lower than the current market rate for new debt with similar risk characteristics,

•

a reduction of the face amount or maturity amount of the debt, or

•

a reduction of accrued interest receivable on the debt.

In its determination of whether the customer is experiencing financial difficulties, the Company considers numerous indicators, including, but not limited to:

•

whether the customer is currently in default on its existing loan, or is in an economic position where it is probable the customer will be in default on its loan in the foreseeable future without a modification,

•

whether the customer has declared or is in the process of declaring bankruptcy,

•

whether there is substantial doubt about the customer’s ability to continue as a going concern,

•

whether, based on its projections of the customer’s current capabilities, the Company believes the customer’s future cash flows will be insufficient to service the debt, including interest, in accordance with the contractual terms of the existing agreement for the foreseeable future, and

•

whether, without modification, the customer cannot obtain sufficient funds from other sources at an effective interest rate equal to the current market rate for similar debt for a non-troubled debtor.

If the Company concludes that both a concession has been granted and the concession was granted to a customer experiencing financial difficulties, the Company identifies the loan as a TDR. For purposes of the determination of an allowance for loan losses on TDRs, such loans are reviewed for specific impairment in accordance with the Company’s allowance for loan loss methodology. If it is determined that losses are probable on such TDRs, either because of delinquency or other credit quality indicators, the Company specifically allocates a portion of the allowance for loan losses to these loans.

Information about the Company’s TDRs is presented in the following tables.


	As of September 30, 2017
*(dollars in thousands)*	Current		Past Due Greater Than 30 Days and Accruing		Nonaccrual TDRs		Total TDRs
Originated loans:

Real estate loans:
One- to four-family first mortgage	$	300	$	67	$	487	$	854
Home equity loans and lines		312		44		836		1,192
Commercial real estate		—		99		1,505		1,604
Construction and land		177		—		—		177
Multi-family residential		—		—		—		—

Total real estate loans		789		210		2,828		3,827

Other loans:
Commercial and industrial		—		—		5,917		5,917
Consumer		—		—		192		192

Total other loans		—		—		6,109		6,109

Total originated loans	$	789	$	210	$	8,937	$	9,936

Acquired loans:
Real estate loans:
One- to four-family first mortgage	$	218	$	4	$	120	$	342
Home equity loans and lines		—		—		94		94
Commercial real estate		1,139		—		—		1,139
Construction and land		—		—		—		—
Multi-family residential		—		—		—		—

Total real estate loans		1,357		4		214		1,575

Other loans:
Commercial and industrial		1,567		—		243		1,810
Consumer		—		—		—		—

Total other loans		1,567		—		243		1,810

Total acquired loans	$	2,924	$	4	$	457	$	3,385

Total loans:
Real estate loans:
One- to four-family first mortgage	$	518	$	71	$	607		1,196
Home equity loans and lines		312		44		930		1,286
Commercial real estate		1,139		99		1,505		2,743
Construction and land		177		—		—		177
Multi-family residential		—		—		—		—

Total real estate loans		2,146		214		3,042		5,402

Other loans:
Commercial and industrial		1,567		—		6,160		7,727
Consumer		—		—		192		192

Total other loans		1,567		—		6,352		7,919

Total loans	$	3,713	$	214	$	9,394	$	13,321


	As of December 31, 2016
*(dollars in thousands)*	Current		Past Due Greater Than 30 Days and Accruing		Nonaccrual TDRs		Total TDRs
Originated loans:
Real estate loans:
One- to four-family first mortgage	$	276	$	—	$	327	$	603
Home equity loans and lines		331		—		988		1,319
Commercial real estate		102		—		1,717		1,819
Construction and land		562		—		—		562
Multi-family residential		—		—		—		—

Total real estate loans		1,271		—		3,032		4,303

Other loans:
Commercial and industrial		—		—		6,775		6,775
Consumer		—		—		168		168

Total other loans		—		—		6,943		6,943

Total originated loans	$	1,271	$	—	$	9,975	$	11,246

Acquired loans:
Real estate loans:
One- to four-family first mortgage	$	292	$	86	$	60	$	438
Home equity loans and lines		—		—		62		62
Commercial real estate		288		860		—		1,148
Construction and land		—		—		—		—
Multi-family residential		—		—		—		—

Total real estate loans		580		946		122		1,648

Other loans:
Commercial and industrial		1,853		—		313		2,166
Consumer		—		—		—		—

Total other loans		1,853		—		313		2,166

Total acquired loans	$	2,433	$	946	$	435	$	3,814

Total loans:
Real estate loans:
One- to four-family first mortgage	$	568	$	86	$	387	$	1,041
Home equity loans and lines		331		—		1,050		1,381
Commercial real estate		390		860		1,717		2,967
Construction and land		562		—		—		562
Multi-family residential		—		—		—		—

Total real estate loans		1,851		946		3,154		5,951

Other loans:
Commercial and industrial		1,853		—		7,088		8,941
Consumer		—		—		168		168

Total other loans		1,853		—		7,256		9,109

Total loans	$	3,704	$	946	$	10,410	$	15,060

The following table summarizes information pertaining to loans modified as of the periods indicated.


	For the Nine Months Ended
	September 30, 2017						September 30, 2016
*(dollars in thousands)*	Number of Contracts		Pre- modification Outstanding Recorded Investment		Post- modification Outstanding Recorded Investment		Number of Contracts		Pre- modification Outstanding Recorded Investment		Post- modification Outstanding Recorded Investment
Troubled debt restructurings:
One- to four-family first mortgage		5	$	268	$	263		7	$	1,098	$	648
Home equity loans and lines		2		38		37		3		939		930
Commercial real estate		1		431		431		4		1,006		893
Construction and land		—		—		—		1		351		211
Multi-family residential		—		—		—		—		—		—
Commercial and industrial		1		1,439		1,146		16		3,717		3,698

Other consumer		2		60		57		1		51		40

Total		11	$	2,236	$	1,934		32	$	7,162	$	6,420

None of the performing troubled debt restructurings as of September 30, 2017 had defaulted subsequent to the restructuring through the date the financial statements were available to be issued.