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Loans | 3 Months Ended
--- | ---
Mar. 31, 2017
Receivables [Abstract] |
Loans | Loans Major classifications of loans at March 31, 2017 and December 31, 2016 are as follows (in thousands):
| March 31, 2017 |  | December 31, 2016
Commercial and industrial | $ | 40,039 |  |  | $ | 41,878 |
Commercial, secured by real estate | 475,594 |  |  | 477,275 |
Residential real estate | 260,853 |  |  | 265,788 |
Consumer | 17,646 |  |  | 19,173 |
Agricultural | 15,459 |  |  | 14,802 |
Other loans, including deposit overdrafts | 609 |  |  | 633 |
| 810,200 |  |  | 819,549 |
Deferred origination costs (fees), net | 281 |  |  | 254 |
| 810,481 |  |  | 819,803 |
Less allowance for loan losses | 3,328 |  |  | 3,575 |
Loans, net | $ | 807,153 |  |  | $ | 816,228 |
Loans acquired through mergers are recorded at fair value with no carryover of the acquired entity's previously established allowance for loan losses. The excess of expected cash flows over the estimated fair value of acquired loans is recognized as interest income over the remaining contractual lives of the loans using the level yield method. Subsequent decreases in expected cash flows will require additions to the allowance for loan losses. Subsequent improvements in expected cash flows result in the recognition of additional interest income over the then-remaining contractual lives of the loans. Impaired loans acquired are accounted for under FASB Accounting Standards Codification ("ASC") 310-30. Factors considered in evaluating whether an acquired loan was impaired include delinquency status and history, updated borrower credit status, collateral information, and updated loan-to-value information. The difference between contractually required payments at the time of acquisition and the cash flows expected to be collected is referred to as the nonaccretable difference. The interest component of the cash flows expected to be collected is referred to as the accretable yield and is recognized as interest income over the remaining contractual life of the loan using the level yield method. Subsequent decreases in expected cash flows will require additions to the allowance for loan losses. Subsequent improvements in expected cash flows will result in a reclassification from the nonaccretable difference to the accretable yield. Non-accrual, past-due, and accruing restructured loans as of March 31, 2017 and December 31, 2016 are as follows (in thousands):
| March 31, 2017 |  | December 31, 2016
Non-accrual loans: |  |  |
Commercial and industrial | $ | — |  |  | $ | — |
Commercial, secured by real estate | 2,609 |  |  | 4,312 |
Residential real estate | 926 |  |  | 1,079 |
Consumer | — |  |  | — |
Agricultural | 334 |  |  | 334 |
Total non-accrual loans | 3,869 |  |  | 5,725 |
Past-due 90 days or more and still accruing | 12 |  |  | 23 |
Total non-accrual and past-due 90 days or more and still accruing | 3,881 |  |  | 5,748 |
Accruing restructured loans | 11,606 |  |  | 11,731 |
Total | $ | 15,487 |  |  | $ | 17,479 |
The allowance for loan losses for the three months ended March 31, 2017 and 2016 are as follows (in thousands):
| Commercial & Industrial |  | Commercial, Secured by Real Estate |  | Residential Real Estate |  | Consumer |  | Agricultural |  | Other |  | Total
Three Months Ended March 31, 2017
Balance, beginning of period | $ | 350 |  |  | $ | 2,179 |  |  | $ | 885 |  |  | $ | 96 |  |  | $ | 60 |  |  | $ | 5 |  |  | $ | 3,575 |
Provision charged to expenses | (2 | ) |  | 90 |  |  | (107 | ) |  | 23 |  |  | 6 |  |  | 5 |  |  | 15 |
Losses charged off | — |  |  | (262 | ) |  | (17 | ) |  | (45 | ) |  | — |  |  | (30 | ) |  | (354 | )
Recoveries | 5 |  |  | — |  |  | 48 |  |  | 17 |  |  | — |  |  | 22 |  |  | 92 |
Balance, end of period | $ | 353 |  |  | $ | 2,007 |  |  | $ | 809 |  |  | $ | 91 |  |  | $ | 66 |  |  | $ | 2 |  |  | $ | 3,328 |
Three Months Ended March 31, 2016
Balance, beginning of period | $ | 244 |  |  | $ | 1,908 |  |  | $ | 854 |  |  | $ | 54 |  |  | $ | 66 |  |  | $ | 3 |  |  | $ | 3,129 |
Provision charged to expenses | — |  |  | (35 | ) |  | 66 |  |  | 61 |  |  | (10 | ) |  | 8 |  |  | 90 |
Losses charged off | — |  |  | (23 | ) |  | (28 | ) |  | (44 | ) |  | — |  |  | (23 | ) |  | (118 | )
Recoveries | 3 |  |  | 18 |  |  | 4 |  |  | 10 |  |  | — |  |  | 14 |  |  | 49 |
Balance, end of period | $ | 247 |  |  | $ | 1,868 |  |  | $ | 896 |  |  | $ | 81 |  |  | $ | 56 |  |  | $ | 2 |  |  | $ | 3,150 |
A breakdown of the allowance for loan losses and the loan portfolio by loan segment at March 31, 2017 and December 31, 2016 are as follows (in thousands):
| Commercial & Industrial |  | Commercial, Secured by Real Estate |  | Residential Real Estate |  | Consumer |  | Agricultural |  | Other |  | Total
March 31, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 8 |  |  | $ | 30 |  |  | $ | 81 |  |  | $ | 13 |  |  | $ | — |  |  | $ | — |  |  | $ | 132 |
Collectively evaluated for impairment | 345 |  |  | 1,977 |  |  | 728 |  |  | 78 |  |  | 66 |  |  | 2 |  |  | 3,196 |
Acquired credit impaired loans | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Balance, end of period | $ | 353 |  |  | $ | 2,007 |  |  | $ | 809 |  |  | $ | 91 |  |  | $ | 66 |  |  | $ | 2 |  |  | $ | 3,328 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 329 |  |  | $ | 12,036 |  |  | $ | 1,455 |  |  | $ | 63 |  |  | $ | 334 |  |  | $ | — |  |  | $ | 14,217 |
Collectively evaluated for impairment | 39,332 |  |  | 458,586 |  |  | 257,439 |  |  | 17,672 |  |  | 15,132 |  |  | 138 |  |  | 788,299 |
Acquired credit impaired loans | 405 |  |  | 4,654 |  |  | 2,426 |  |  | 9 |  |  | — |  |  | 471 |  |  | 7,965 |
Balance, end of period | $ | 40,066 |  |  | $ | 475,276 |  |  | $ | 261,320 |  |  | $ | 17,744 |  |  | $ | 15,466 |  |  | $ | 609 |  |  | $ | 810,481 |
December 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 9 |  |  | $ | 55 |  |  | $ | 100 |  |  | $ | 13 |  |  | $ | — |  |  | $ | — |  |  | $ | 177 |
Collectively evaluated for impairment | 341 |  |  | 1,832 |  |  | 785 |  |  | 83 |  |  | 60 |  |  | 5 |  |  | 3,106 |
Acquired credit impaired loans | — |  |  | 292 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 292 |
Balance, end of period | $ | 350 |  |  | $ | 2,179 |  |  | $ | 885 |  |  | $ | 96 |  |  | $ | 60 |  |  | $ | 5 |  |  | $ | 3,575 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 337 |  |  | $ | 12,580 |  |  | $ | 1,518 |  |  | $ | 52 |  |  | $ | 334 |  |  | $ | — |  |  | $ | 14,821 |
Collectively evaluated for impairment | 41,466 |  |  | 458,059 |  |  | 262,266 |  |  | 19,192 |  |  | 14,475 |  |  | 178 |  |  | 795,636 |
Acquired credit impaired loans | 98 |  |  | 6,305 |  |  | 2,471 |  |  | 17 |  |  | — |  |  | 455 |  |  | 9,346 |
Balance, end of period | $ | 41,901 |  |  | $ | 476,944 |  |  | $ | 266,255 |  |  | $ | 19,261 |  |  | $ | 14,809 |  |  | $ | 633 |  |  | $ | 819,803 |
The risk characteristics of LCNB's material loan portfolio segments are as follows: Commercial and Industrial Loans. LCNB’s commercial and industrial loan portfolio consists of loans for various purposes, including loans to fund working capital requirements (such as inventory and receivables financing) and purchases of machinery and equipment. LCNB offers a variety of commercial and industrial loan arrangements, including term loans, balloon loans, and lines of credit. Most commercial and industrial loans have a variable rate, with adjustment periods ranging from one month to five years. Adjustments are generally based on a publicly available index rate plus a margin. The margin varies based on the terms and collateral securing the loan. Commercial and industrial loans are offered to businesses and professionals for short and medium terms on both a collateralized and uncollateralized basis. Commercial and industrial loans typically are underwritten on the basis of the borrower’s ability to make repayment from the cash flow of the business. Collateral, when obtained, may include liens on furniture, fixtures, equipment, inventory, receivables, or other assets. As a result, such loans involve complexities, variables, and risks that require thorough underwriting and more robust servicing than other types of loans. Commercial, Secured by Real Estate Loans. Commercial real estate loans include loans secured by a variety of commercial, retail, and office buildings, religious facilities, multifamily (more than two-family) residential properties, construction and land development loans, and other land loans. Commercial real estate loan products generally amortize over five to twenty-five years and are payable in monthly principal and interest installments. Some have balloon payments due within one to ten years after the origination date. Many have adjustable interest rates with adjustment periods ranging from one to ten years, some of which are subject to established “floor” interest rates. Commercial real estate loans are underwritten based on the ability of the property, in the case of income producing property, or the borrower’s business to generate sufficient cash flow to amortize the debt. Secondary emphasis is placed upon global debt service, collateral value, financial strength of any guarantors, and other factors. Commercial real estate loans are generally originated with a 75% maximum loan to appraised value ratio. Residential Real Estate Loans. Residential real estate loans include loans secured by first or second mortgage liens on one to two-family residential property. Home equity lines of credit and mortgage loans secured by owner-occupied agricultural property are included in this category. First and second mortgage loans are generally amortized over five to thirty years with monthly principal and interest payments. Home equity lines of credit generally have a five year draw period with interest only payments followed by a repayment period with monthly payments based on the amount outstanding. LCNB offers both fixed and adjustable rate mortgage loans. Adjustable rate loans are available with adjustment periods ranging between one to ten years and adjust according to an established index plus a margin, subject to certain floor and ceiling rates. Home equity lines of credit have a variable rate based on the Wall Street Journal prime rate plus a margin. LCNB does not originate reverse mortgage loans or residential real estate loans generally considered to be “subprime.” Residential real estate loans are underwritten primarily based on the borrower’s ability to repay, prior credit history, and the value of the collateral. LCNB generally requires private mortgage insurance for first mortgage loans that have a loan to appraised value ratio of greater than 80%. Consumer Loans. LCNB’s portfolio of consumer loans generally includes secured and unsecured loans to individuals for household, family and other personal expenditures. Secured loans include loans to fund the purchase of automobiles, recreational vehicles, boats, and similar acquisitions. Consumer loans made by LCNB generally have fixed rates and terms ranging up to 72 months, depending upon the nature of the collateral, size of the loan, and other relevant factors. Consumer loans generally have higher interest rates, but pose additional risks of collectability and loss when compared to certain other types of loans. Collateral, if present, is generally subject to damage, wear, and depreciation. The borrower’s ability to repay is of primary importance in the underwriting of consumer loans. Agricultural Loans. LCNB’s portfolio of agricultural loans includes loans for financing agricultural production or for financing the purchase of equipment used in the production of agricultural products. LCNB’s agricultural loans are generally secured by farm machinery, livestock, crops, vehicles, or other agricultural related collateral. LCNB uses a risk-rating system to quantify loan quality. A loan is assigned to a risk category based on relevant information about the ability of the borrower to service the debt including, but not limited to, current financial information, historical payment experience, credit documentation, public information, and current economic trends. The categories used are:
• | Pass – loans categorized in this category are higher quality loans that do not fit any of the other categories described below.
• | Other Assets Especially Mentioned (OAEM) – loans in this category are currently protected but are potentially weak. These loans constitute a risk but not to the point of justifying a classification of substandard. The credit risk may be relatively minor yet constitute an undue risk in light of the circumstances surrounding a specific asset.
• | Substandard – loans in this category are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the possibility that LCNB will sustain some loss if the deficiencies are not corrected.
• | Doubtful – loans classified in this category have all the weaknesses inherent in loans 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.
A breakdown of the loan portfolio by credit quality indicators at March 31, 2017 and December 31, 2016 is as follows (in thousands):
| Pass |  | OAEM |  | Substandard |  | Doubtful |  | Total
March 31, 2017 |  |  |  |  |  |  |  |  |
Commercial & industrial | $ | 39,432 |  |  | $ | 239 |  |  | $ | 395 |  |  | $ | — |  |  | $ | 40,066 |
Commercial, secured by real estate | 445,157 |  |  | 6,378 |  |  | 23,741 |  |  | — |  |  | 475,276 |
Residential real estate | 257,044 |  |  | 186 |  |  | 4,090 |  |  | — |  |  | 261,320 |
Consumer | 17,682 |  |  | — |  |  | 62 |  |  | — |  |  | 17,744 |
Agricultural | 13,931 |  |  | — |  |  | 1,535 |  |  | — |  |  | 15,466 |
Other | 609 |  |  | — |  |  | — |  |  | — |  |  | 609 |
Total | $ | 773,855 |  |  | $ | 6,803 |  |  | $ | 29,823 |  |  | $ | — |  |  | $ | 810,481 |
December 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial & industrial | $ | 41,178 |  |  | $ | 304 |  |  | $ | 419 |  |  | $ | — |  |  | $ | 41,901 |
Commercial, secured by real estate | 443,781 |  |  | 5,479 |  |  | 27,684 |  |  | — |  |  | 476,944 |
Residential real estate | 261,839 |  |  | 442 |  |  | 3,974 |  |  | — |  |  | 266,255 |
Consumer | 19,182 |  |  | — |  |  | 79 |  |  | — |  |  | 19,261 |
Agricultural | 13,311 |  |  | — |  |  | 1,498 |  |  | — |  |  | 14,809 |
Other | 633 |  |  | — |  |  | — |  |  | — |  |  | 633 |
Total | $ | 779,924 |  |  | $ | 6,225 |  |  | $ | 33,654 |  |  | $ | — |  |  | $ | 819,803 |
A loan portfolio aging analysis at March 31, 2017 and December 31, 2016 is as follows (in thousands):
| 30-59 Days Past Due |  | 60-89 Days Past Due |  | Greater Than 90 Days Past Due |  | Total Past Due |  | Current |  | Total Loans Receivable |  | Total Loans Greater Than 90 Days and Accruing
March 31, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial & industrial | $ | 8 |  |  | $ | — |  |  | $ | — |  |  | $ | 8 |  |  | $ | 40,058 |  |  | $ | 40,066 |  |  | $ | — |
Commercial, secured by real estate | 201 |  |  | — |  |  | 622 |  |  | 823 |  |  | 474,453 |  |  | 475,276 |  |  | — |
Residential real estate | 1,303 |  |  | 75 |  |  | 706 |  |  | 2,084 |  |  | 259,236 |  |  | 261,320 |  |  | 12 |
Consumer | 26 |  |  | 8 |  |  | — |  |  | 34 |  |  | 17,710 |  |  | 17,744 |  |  | — |
Agricultural | — |  |  | 60 |  |  | 334 |  |  | 394 |  |  | 15,072 |  |  | 15,466 |  |  | — |
Other | 76 |  |  | — |  |  | — |  |  | 76 |  |  | 533 |  |  | 609 |  |  | — |
Total | $ | 1,614 |  |  | $ | 143 |  |  | $ | 1,662 |  |  | $ | 3,419 |  |  | $ | 807,062 |  |  | $ | 810,481 |  |  | $ | 12 |
December 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial & industrial | $ | 19 |  |  | $ | — |  |  | $ | — |  |  | $ | 19 |  |  | $ | 41,882 |  |  | $ | 41,901 |  |  | $ | — |
Commercial, secured by real estate | 99 |  |  | 69 |  |  | 127 |  |  | 295 |  |  | 476,649 |  |  | 476,944 |  |  | — |
Residential real estate | 686 |  |  | 80 |  |  | 727 |  |  | 1,493 |  |  | 264,762 |  |  | 266,255 |  |  | 20 |
Consumer | 59 |  |  | 16 |  |  | 3 |  |  | 78 |  |  | 19,183 |  |  | 19,261 |  |  | 3 |
Agricultural | 125 |  |  | — |  |  | — |  |  | 125 |  |  | 14,684 |  |  | 14,809 |  |  | — |
Other | 115 |  |  | — |  |  | — |  |  | 115 |  |  | 518 |  |  | 633 |  |  | — |
Total | $ | 1,103 |  |  | $ | 165 |  |  | $ | 857 |  |  | $ | 2,125 |  |  | $ | 817,678 |  |  | $ | 819,803 |  |  | $ | 23 |
Impaired loans, including acquired credit impaired loans, at March 31, 2017 and December 31, 2016 are as follows (in thousands):
| Recorded Investment |  | Unpaid Principal Balance |  | Related Allowance
March 31, 2017 |  |  |  |  |
With no related allowance recorded: |  |  |  |  |
Commercial & industrial | $ | 416 |  |  | $ | 548 |  |  | $ | — |
Commercial, secured by real estate | 14,765 |  |  | 15,968 |  |  | — |
Residential real estate | 3,190 |  |  | 4,188 |  |  | — |
Consumer | 17 |  |  | 18 |  |  | — |
Agricultural | 334 |  |  | 334 |  |  | — |
Other | 471 |  |  | 628 |  |  | — |
Total | $ | 19,193 |  |  | $ | 21,684 |  |  | $ | — |
With an allowance recorded: |  |  |  |  |  |  |  |
Commercial & industrial | $ | 318 |  |  | $ | 318 |  |  | $ | 8 |
Commercial, secured by real estate | 1,925 |  |  | 1,925 |  |  | 30 |
Residential real estate | 691 |  |  | 699 |  |  | 81 |
Consumer | 55 |  |  | 55 |  |  | 13 |
Agricultural | — |  |  | — |  |  | — |
Other | — |  |  | — |  |  | — |
Total | $ | 2,989 |  |  | $ | 2,997 |  |  | $ | 132 |
Total: |  |  |  |  |  |  |  |
Commercial & industrial | $ | 734 |  |  | $ | 866 |  |  | $ | 8 |
Commercial, secured by real estate | 16,690 |  |  | 17,893 |  |  | 30 |
Residential real estate | 3,881 |  |  | 4,887 |  |  | 81 |
Consumer | 72 |  |  | 73 |  |  | 13 |
Agricultural | 334 |  |  | 334 |  |  | — |
Other | 471 |  |  | 628 |  |  | — |
Total | $ | 22,182 |  |  | $ | 24,681 |  |  | $ | 132 |
December 31, 2016 |  |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |  |
Commercial & industrial | $ | 109 |  |  | $ | 263 |  |  | $ | — |
Commercial, secured by real estate | 14,195 |  |  | 15,522 |  |  | — |
Residential real estate | 3,238 |  |  | 4,286 |  |  | — |
Consumer | 26 |  |  | 27 |  |  | — |
Agricultural | 334 |  |  | 334 |  |  | — |
Other | 455 |  |  | 629 |  |  | — |
Total | $ | 18,357 |  |  | $ | 21,061 |  |  | $ | — |
With an allowance recorded: |  |  |  |  |  |  |  |
Commercial & industrial | $ | 326 |  |  | $ | 326 |  |  | $ | 9 |
Commercial, secured by real estate | 4,690 |  |  | 4,946 |  |  | 347 |
Residential real estate | 751 |  |  | 751 |  |  | 100 |
Consumer | 43 |  |  | 43 |  |  | 13 |
Agricultural | — |  |  | — |  |  | — |
Other | — |  |  | — |  |  | — |
Total | $ | 5,810 |  |  | $ | 6,066 |  |  | $ | 469 |
Total: |  |  |  |  |  |  |  |
Commercial & industrial | $ | 435 |  |  | $ | 589 |  |  | $ | 9 |
Commercial, secured by real estate | 18,885 |  |  | 20,468 |  |  | 347 |
Residential real estate | 3,989 |  |  | 5,037 |  |  | 100 |
Consumer | 69 |  |  | 70 |  |  | 13 |
Agricultural | 334 |  |  | 334 |  |  | — |
Other | 455 |  |  | 629 |  |  | — |
Total | $ | 24,167 |  |  | $ | 27,127 |  |  | $ | 469 |
The following presents information related to the average recorded investment and interest income recognized on impaired loans, including acquired credit impaired loans, for the three months ended March 31, 2017 and 2016 (in thousands):
| 2017 |  | 2016
| Average Recorded Investment |  | Interest Income Recognized |  | Average Recorded Investment |  | Interest Income Recognized
Three Months Ended March 31, |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |
Commercial & industrial | $ | 261 |  |  | $ | 26 |  |  | $ | 978 |  |  | $ | 29 |
Commercial, secured by real estate | 15,859 |  |  | 186 |  |  | 17,631 |  |  | 387 |
Residential real estate | 3,219 |  |  | 89 |  |  | 3,778 |  |  | 67 |
Consumer | 21 |  |  | — |  |  | 41 |  |  | 7 |
Agricultural | 334 |  |  | — |  |  | 422 |  |  | 12 |
Other | 463 |  |  | 18 |  |  | 495 |  |  | 20 |
Total | $ | 20,157 |  |  | $ | 319 |  |  | $ | 23,345 |  |  | $ | 522 |
With an allowance recorded: |  |  |  |  |  |  |
Commercial & industrial | $ | 322 |  |  | $ | 4 |  |  | $ | 352 |  |  | $ | 5 |
Commercial, secured by real estate | 1,931 |  |  | 24 |  |  | 2,624 |  |  | 19 |
Residential real estate | 704 |  |  | 8 |  |  | 834 |  |  | 10 |
Consumer | 52 |  |  | 1 |  |  | 61 |  |  | 1 |
Agricultural | — |  |  | — |  |  | — |  |  | — |
Other | — |  |  | — |  |  | — |  |  | — |
Total | $ | 3,009 |  |  | $ | 37 |  |  | $ | 3,871 |  |  | $ | 35 |
Total: |  |  |  |  |  |  |
Commercial & industrial | $ | 583 |  |  | $ | 30 |  |  | $ | 1,330 |  |  | $ | 34 |
Commercial, secured by real estate | 17,790 |  |  | 210 |  |  | 20,255 |  |  | 406 |
Residential real estate | 3,923 |  |  | 97 |  |  | 4,612 |  |  | 77 |
Consumer | 73 |  |  | 1 |  |  | 102 |  |  | 8 |
Agricultural | 334 |  |  | — |  |  | 422 |  |  | 12 |
Other | 463 |  |  | 18 |  |  | 495 |  |  | 20 |
Total | $ | 23,166 |  |  | $ | 356 |  |  | $ | 27,216 |  |  | $ | 557 |
Of the interest income recognized on impaired loans during the three months ended March 31, 2017 and 2016, approximately $0 and $0, respectively, were recognized on a cash basis. Loan modifications that were classified as troubled debt restructurings during the three months ended March 31, 2017 and 2016 are as follows (dollars in thousands):
| 2017 |  | 2016
| Number of Loans |  | Pre-Modification Recorded Balance |  | Post-Modification Recorded Balance |  | Number of Loans |  | Pre-Modification Recorded Balance |  | Post-Modification Recorded Balance
Three Months Ended March 31, |  |  |  |  |  |  |  |  |  |  |
Commercial & industrial | — |  |  | $ | — |  |  | $ | — |  |  | — |  |  | $ | — |  |  | $ | — |
Commercial, secured by real estate | — |  |  | — |  |  | — |  |  | 1 |  |  | 299 |  |  | 372 |
Residential real estate | 1 |  |  | 18 |  |  | 9 |  |  | 1 |  |  | 18 |  |  | 18 |
Consumer | 1 |  |  | 14 |  |  | 14 |  |  | 1 |  |  | 17 |  |  | 17 |
Total | 2 |  |  | $ | 32 |  |  | $ | 23 |  |  | 3 |  |  | $ | 334 |  |  | $ | 407 |
Each restructured loan is separately negotiated with the borrower and includes terms and conditions that reflect the borrower’s ability to pay the debt as modified. Modifications may include interest only payments for a period of time, temporary or permanent reduction of the loan’s interest rate, capitalization of delinquent interest, forgiveness of principal, or extensions of the maturity date. Post-modification balances of newly restructured troubled debt by type of modification for the three months ended March 31, 2017 and 2016 were as follows (dollars in thousands):
| Term Modification |  | Rate Modification |  | Interest Only |  | Principal Forgiveness |  | Combination |  | Total Modifications
Three Months Ended March 31, 2017 |  |  |  |  |  |  |  |  |  |  |
Commercial & industrial | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Commercial, secured by real estate | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Residential real estate | — |  |  | — |  |  | — |  |  | 9 |  |  | — |  |  | 9 |
Consumer | 14 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 14 |
Total | $ | 14 |  |  | $ | — |  |  | $ | — |  |  | $ | 9 |  |  | $ | — |  |  | $ | 23 |
Three Months Ended March 31, 2016 |  |  |  |  |  |  |  |  |  |  |
Commercial & industrial | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Commercial, secured by real estate | — |  |  | — |  |  | — |  |  | — |  |  | 372 |  |  | 372 |
Residential real estate | 18 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 18 |
Consumer | — |  |  | 17 |  |  | — |  |  | — |  |  | — |  |  | 17 |
Total | $ | 18 |  |  | $ | 17 |  |  | $ | — |  |  | $ | — |  |  | $ | 372 |  |  | $ | 407 |
LCNB is not committed to lend additional funds to borrowers whose loan terms were modified in a troubled debt restructuring. Two commercial, secured by real estate loans to the same borrower totaling $1,236,000 that were modified during the fourth quarter 2016 subsequently defaulted in February 2017. There were no troubled debt restructurings that subsequently defaulted within twelve months of the restructuring date for the three months ended March 31, 2016 and that remained in default at period end. Approximately $23,000 of impaired loans without a valuation allowance and $0 of impaired loans with a valuation allowance at March 31, 2017 consisted of loans that were modified during the three month ended March 31, 2017 and were determined to be troubled debt restructurings. Approximately $375,000 of impaired loans without a valuation allowance and $34,000 of impaired loans with a valuation allowance at March 31, 2016 consisted of loans that were modified during the three months ended March 31, 2016 and were determined to be troubled debt restructurings. Mortgage loans sold to and serviced for the Federal Home Loan Mortgage Corporation and other investors are not included in the accompanying consolidated balance sheets. The unpaid principal balances of those loans at March 31, 2017 and December 31, 2016 were approximately $99,324,000 and $100,982,000, respectively. The total recorded investment in residential consumer mortgage loans secured by residential real estate that was in the process of foreclosure at March 31, 2017 was $402,000.

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