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Loans and Allowance for Loan Losses | 9 Months Ended
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Sep. 30, 2019
Loans and Allowances for Loan Losses |
Loans and Allowance for Loan Losses | (2) Loans and Allowance for Loan Losses Loans A summary of loans, by major class within the Company’s loan portfolio, at September 30, 2019 and December 31, 2018 is as follows:
|  | September 30, |  | December 31,
(in thousands) |  | 2019 |  | 2018
Commercial, financial, and agricultural |  | $ | 193,267 |  | $ | 207,720
Real estate construction - residential |  |  | 23,782 |  |  | 28,610
Real estate construction - commercial |  |  | 124,389 |  |  | 106,784
Real estate mortgage - residential |  |  | 248,435 |  |  | 241,517
Real estate mortgage - commercial |  |  | 530,010 |  |  | 529,536
Installment and other consumer |  |  | 31,635 |  |  | 32,460
Total loans |  | $ | 1,151,518 |  | $ | 1,146,627
The Bank grants real estate, commercial, installment, and other consumer loans to customers located within the Missouri communities surrounding Jefferson City, Columbia, Clinton, Warsaw, Springfield, and the greater Kansas City metropolitan area. As such, the Bank is susceptible to changes in the economic environment in these communities. The Bank does not have a concentration of credit in any one economic sector. Installment and other consumer loans consist primarily of the financing of automotive vehicles. At September 30, 2019, loans of $501.0 million were pledged to the Federal Home Loan Bank as collateral for borrowings and letters of credit. Allowance for Loan Losses The following table illustrates the changes in the allowance for loan losses by portfolio segment:
|  | Three Months Ended September 30, 2019
|  | Commercial, |  | Real Estate |  | Real Estate |  | Real Estate |  | Real Estate |  | Installment |  |  |  |  |  |
|  | Financial, & |  | Construction - |  | Construction - |  | Mortgage - |  | Mortgage - |  | and Other |  | Un- |  |  |
(in thousands) |  | Agricultural |  | Residential |  | Commercial |  | Residential |  | Commercial |  | Consumer |  | allocated |  | Total
Balance at beginning of period |  | $ | 2,783 |  | $ | 69 |  | $ | 704 |  | $ | 1,772 |  | $ | 6,109 |  | $ | 307 |  | $ | 139 |  | $ | 11,883
Additions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for loan losses |  |  | 155 |  |  | 3 |  |  | 97 |  |  | 252 |  |  | (15) |  |  | 62 |  |  | (104) |  |  | 450
Deductions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans charged off |  |  | 61 |  |  | — |  |  | — |  |  | 86 |  |  | 6 |  |  | 60 |  |  | — |  |  | 213
Less recoveries on loans |  |  | (12) |  |  | (12) |  |  | — |  |  | (8) |  |  | (7) |  |  | (19) |  |  | — |  |  | (58)
Net loan charge-offs (recoveries) |  |  | 49 |  |  | (12) |  |  | — |  |  | 78 |  |  | (1) |  |  | 41 |  |  | — |  |  | 155
Balance at end of period |  | $ | 2,889 |  | $ | 84 |  | $ | 801 |  | $ | 1,946 |  | $ | 6,095 |  | $ | 328 |  | $ | 35 |  | $ | 12,178
|  | Nine Months Ended September 30, 2019
|  | Commercial, |  | Real Estate |  | Real Estate |  | Real Estate |  | Real Estate |  | Installment |  |  |  |  |  |
|  | Financial, & |  | Construction - |  | Construction - |  | Mortgage - |  | Mortgage - |  | and Other |  | Un- |  |  |
(in thousands) |  | Agricultural |  | Residential |  | Commercial |  | Residential |  | Commercial |  | Consumer |  | allocated |  | Total
Balance at beginning of period |  | $ | 3,237 |  | $ | 140 |  | $ | 757 |  | $ | 2,071 |  | $ | 4,914 |  | $ | 334 |  | $ | 199 |  | $ | 11,652
Additions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for loan losses |  |  | (232) |  |  | (81) |  |  | 44 |  |  | 30 |  |  | 1,193 |  |  | 60 |  |  | (164) |  |  | 850
Deductions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans charged off |  |  | 255 |  |  | — |  |  | — |  |  | 266 |  |  | 21 |  |  | 151 |  |  | — |  |  | 693
Less recoveries on loans |  |  | (139) |  |  | (25) |  |  | — |  |  | (111) |  |  | (9) |  |  | (85) |  |  | — |  |  | (369)
Net loan charge-offs (recoveries) |  |  | 116 |  |  | (25) |  |  | — |  |  | 155 |  |  | 12 |  |  | 66 |  |  | — |  |  | 324
Balance at end of period |  | $ | 2,889 |  | $ | 84 |  | $ | 801 |  | $ | 1,946 |  | $ | 6,095 |  | $ | 328 |  | $ | 35 |  | $ | 12,178
|  | Three Months Ended September 30, 2018
|  | Commercial, |  | Real Estate |  | Real Estate |  | Real Estate |  | Real Estate |  | Installment |  |  |  |  |  |
|  | Financial, & |  | Construction - |  | Construction - |  | Mortgage - |  | Mortgage - |  | and Other |  | Un- |  |  |
(in thousands) |  | Agricultural |  | Residential |  | Commercial |  | Residential |  | Commercial |  | Consumer |  | allocated |  | Total
Balance at beginning of period |  | $ | 3,943 |  | $ | 201 |  | $ | 905 |  | $ | 2,109 |  | $ | 3,630 |  | $ | 413 |  | $ | 11 |  | $ | 11,212
Additions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for loan losses |  |  | (420) |  |  | 26 |  |  | (159) |  |  | 255 |  |  | 444 |  |  | 39 |  |  | 65 |  |  | 250
Deductions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans charged off |  |  | 75 |  |  | — |  |  | — |  |  | 32 |  |  | 5 |  |  | 74 |  |  | — |  |  | 186
Less recoveries on loans |  |  | (38) |  |  | (13) |  |  | — |  |  | (9) |  |  | (2) |  |  | (20) |  |  | — |  |  | (82)
Net loan charge-offs (recoveries) |  |  | 37 |  |  | (13) |  |  | — |  |  | 23 |  |  | 3 |  |  | 54 |  |  | — |  |  | 104
Balance at end of period |  | $ | 3,486 |  | $ | 240 |  | $ | 746 |  | $ | 2,341 |  | $ | 4,071 |  | $ | 398 |  | $ | 76 |  | $ | 11,358
|  | Nine Months Ended September 30, 2018
|  | Commercial, |  | Real Estate |  | Real Estate |  | Real Estate |  | Real Estate |  | Installment |  |  |  |  |  |
|  | Financial, & |  | Construction - |  | Construction - |  | Mortgage - |  | Mortgage - |  | and Other |  | Un- |  |  |
(in thousands) |  | Agricultural |  | Residential |  | Commercial |  | Residential |  | Commercial |  | Consumer |  | allocated |  | Total
Balance at beginning of period |  | $ | 3,325 |  | $ | 170 |  | $ | 807 |  | $ | 1,689 |  | $ | 4,437 |  |  | 345 |  | $ | 79 |  | $ | 10,852
Additions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for loan losses |  |  | 478 |  |  | 80 |  |  | (31) |  |  | 672 |  |  | (366) |  |  | 170 |  |  | (3) |  |  | 1,000
Deductions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans charged off |  |  | 378 |  |  | 48 |  |  | 30 |  |  | 64 |  |  | 34 |  |  | 181 |  |  | — |  |  | 735
Less recoveries on loans |  |  | (61) |  |  | (38) |  |  | — |  |  | (44) |  |  | (34) |  |  | (64) |  |  | — |  |  | (241)
Net loan charge-offs (recoveries) |  |  | 317 |  |  | 10 |  |  | 30 |  |  | 20 |  |  | — |  |  | 117 |  |  | — |  |  | 494
Balance at end of period |  | $ | 3,486 |  | $ | 240 |  | $ | 746 |  | $ | 2,341 |  | $ | 4,071 |  | $ | 398 |  | $ | 76 |  | $ | 11,358
Loans, or portions of loans, are charged off to the extent deemed uncollectible or a loss is confirmed. Loan charge-offs reduce the allowance for loan losses, and recoveries of loans previously charged off are added back to the allowance. If management determines that it is probable that all amounts due on a loan will not be collected under the original terms of the loan agreement, the loan is considered to be impaired. These loans are evaluated individually for impairment, and in conjunction with current economic conditions and loss experience, specific reserves are estimated as further discussed below. Loans not individually evaluated are aggregated by risk characteristics and reserves are recorded using a consistent methodology that considers historical loan loss experience by loan type, delinquencies, current economic conditions, loan risk ratings and industry concentration. Beginning with the first quarter 2019, management adjusted the look-back period to begin with loss history in the first quarter 2012 and continue to include this starting point going forward. Management determined that with the current economic recovery continuing to set records for its length, the look-back period needed to be expanded to account for this extended economic cycle. This ever increasing look-back period will then be adjusted once a loss producing downturn is recognized by allowing the look-back period to shift forward by eliminating the earliest loss period and replenishing it with losses from the most recent period. Prior to 2019, the Company utilized a five-year look-back period, which was considered a representative historical loss period. The look-back period is consistently evaluated for relevance given the current facts and circumstances. The following table illustrates the allowance for loan losses and recorded investment by portfolio segment:
|  | Commercial, |  | Real Estate |  | Real Estate |  | Real Estate |  | Real Estate |  | Installment |  |  |  |  |  |
|  | Financial, and |  | Construction - |  | Construction - |  | Mortgage - |  | Mortgage - |  | and Other |  | Un- |  |  |
(in thousands) |  | Agricultural |  | Residential |  | Commercial |  | Residential |  | Commercial |  | Consumer |  | allocated |  | Total
September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 361 |  | $ | — |  | $ | — |  | $ | 296 |  | $ | 34 |  | $ | 17 |  | $ | — |  | $ | 708
Collectively evaluated for impairment |  |  | 2,528 |  |  | 84 |  |  | 801 |  |  | 1,650 |  |  | 6,061 |  |  | 311 |  |  | 35 |  |  | 11,470
Total |  | $ | 2,889 |  | $ | 84 |  | $ | 801 |  | $ | 1,946 |  | $ | 6,095 |  | $ | 328 |  | $ | 35 |  | $ | 12,178
Loans outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 1,578 |  | $ | — |  | $ | 145 |  | $ | 3,902 |  | $ | 1,469 |  | $ | 161 |  | $ | — |  | $ | 7,255
Collectively evaluated for impairment |  |  | 191,689 |  |  | 23,782 |  |  | 124,244 |  |  | 244,533 |  |  | 528,541 |  |  | 31,474 |  |  | — |  |  | 1,144,263
Total |  | $ | 193,267 |  | $ | 23,782 |  | $ | 124,389 |  | $ | 248,435 |  | $ | 530,010 |  | $ | 31,635 |  | $ | — |  | $ | 1,151,518
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 551 |  | $ | — |  | $ | — |  | $ | 579 |  | $ | 37 |  | $ | 27 |  | $ | — |  | $ | 1,194
Collectively evaluated for impairment |  |  | 2,686 |  |  | 140 |  |  | 757 |  |  | 1,492 |  |  | 4,877 |  |  | 307 |  |  | 199 |  |  | 10,458
Total |  | $ | 3,237 |  | $ | 140 |  | $ | 757 |  | $ | 2,071 |  | $ | 4,914 |  | $ | 334 |  | $ | 199 |  | $ | 11,652
Loans outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 2,428 |  | $ | — |  | $ | 153 |  | $ | 4,793 |  | $ | 850 |  | $ | 254 |  | $ | — |  | $ | 8,478
Collectively evaluated for impairment |  |  | 205,292 |  |  | 28,610 |  |  | 106,631 |  |  | 236,724 |  |  | 528,686 |  |  | 32,206 |  |  | — |  |  | 1,138,149
Total |  | $ | 207,720 |  | $ | 28,610 |  | $ | 106,784 |  | $ | 241,517 |  | $ | 529,536 |  | $ | 32,460 |  | $ | — |  | $ | 1,146,627
Impaired Loans Loans evaluated under ASC 310‑10‑35 include loans which are individually evaluated for impairment. All other loans are collectively evaluated for impairment under ASC 450‑20. Impaired loans individually evaluated for impairment totaled $7.3 million and $8.5 million at September 30, 2019 and December 31, 2018, respectively, and are comprised of loans on non-accrual status and loans which have been classified as troubled debt restructurings (TDRs). The net carrying value of impaired loans is based on the fair values of collateral obtained through independent appraisals or internal evaluations, or by discounting the total expected future cash flows. At September 30, 2019, $2.9 million of impaired loans were evaluated based on the fair value less estimated selling costs of the loans' collateral compared to $3.8 million at December 31, 2018. Once the impairment amount is calculated, a specific reserve allocation is recorded. At September 30, 2019, $708,000 of the Company’s allowance for loan losses was allocated to impaired loans totaling $7.3 million compared to $1.2 million of the Company’s allowance for loan losses allocated to impaired loans totaling approximately $8.5 million at December 31, 2018. Management determined that $1.6 million, or 23%, of total impaired loans required no reserve allocation at September 30, 2019 compared to $2.1 million, or 25%, at December 31, 2018, primarily due to adequate collateral values, acceptable payment history and adequate cash flow ability. The categories of impaired loans at September 30, 2019 and December 31, 2018 are as follows:
|  | September 30, |  | December 31,
(in thousands) |  | 2019 |  | 2018
Non-accrual and non-performing TDRs |  | $ | 4,623 |  | $ | 5,414
Performing TDRs |  |  | 2,632 |  |  | 3,064
Total impaired loans |  | $ | 7,255 |  | $ | 8,478
The following tables provide additional information about impaired loans at September 30, 2019 and December 31, 2018, respectively, segregated between loans for which an allowance has been provided and loans for which no allowance has been provided.
|  |  |  |  | Unpaid |  |  |
|  | Recorded |  | Principal |  | Specific
(in thousands) |  | Investment |  | Balance |  | Reserves
September 30, 2019 |  |  |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  | $ | 496 |  | $ | 837 |  | $ | —
Real estate - construction commercial |  |  | 145 |  |  | 177 |  |  | —
Real estate - residential |  |  | 606 |  |  | 684 |  |  | —
Real estate - commercial |  |  | 377 |  |  | 394 |  |  |
Installment and other consumer |  |  | 13 |  |  | 13 |  |  | —
Total |  | $ | 1,637 |  | $ | 2,105 |  | $ | —
With an allowance recorded: |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  | $ | 1,082 |  | $ | 1,163 |  | $ | 361
Real estate - residential |  |  | 3,296 |  |  | 3,635 |  |  | 296
Real estate - commercial |  |  | 1,092 |  |  | 1,219 |  |  | 34
Installment and other consumer |  |  | 148 |  |  | 176 |  |  | 17
Total |  | $ | 5,618 |  | $ | 6,193 |  | $ | 708
Total impaired loans |  | $ | 7,255 |  | $ | 8,298 |  | $ | 708
|  |  |  |  | Unpaid |  |  |
|  | Recorded |  | Principal |  | Specific
(in thousands) |  | Investment |  | Balance |  | Reserves
December 31, 2018 |  |  |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  | $ | 1,264 |  | $ | 1,550 |  | $ | —
Real estate - construction commercial |  |  | 153 |  |  | 180 |  |  | —
Real estate - residential |  |  | 561 |  |  | 602 |  |  | —
Real estate - commercial |  |  | 115 |  |  | 119 |  |  | —
Total |  | $ | 2,093 |  | $ | 2,451 |  | $ | —
With an allowance recorded: |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  | $ | 1,164 |  | $ | 1,236 |  | $ | 551
Real estate - residential |  |  | 4,232 |  |  | 4,458 |  |  | 579
Real estate - commercial |  |  | 735 |  |  | 1,093 |  |  | 37
Installment and other consumer |  |  | 254 |  |  | 280 |  |  | 27
Total |  | $ | 6,385 |  | $ | 7,067 |  | $ | 1,194
Total impaired loans |  | $ | 8,478 |  | $ | 9,518 |  | $ | 1,194
The following table presents by class, information related to the average recorded investment and interest income recognized on impaired loans during the periods indicated.
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2019 |  | 2018 |  | 2019 |  | 2018
|  |  |  |  | Interest |  |  |  |  | Interest |  |  |  |  | Interest |  |  |  |  | Interest
|  | Average |  | Recognized |  | Average |  | Recognized |  | Average |  | Recognized |  | Average |  | Recognized
|  | Recorded |  | For the |  | Recorded |  | For the |  | Recorded |  | For the |  | Recorded |  | For the
(in thousands) |  | Investment |  | Period Ended |  | Investment |  | Period Ended |  | Investment |  | Period Ended |  | Investment |  | Period Ended
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  | $ | 851 |  | $ | — |  | $ | 1,375 |  | $ | — |  | $ | 1,036 |  | $ | — |  | $ | 1,334 |  | $ | 1
Real estate - construction commercial |  |  | 146 |  |  | — |  |  | 161 |  |  | — |  |  | 149 |  |  | — |  |  | 82 |  |  | —
Real estate - residential |  |  | 1,301 |  |  | — |  |  | 1,037 |  |  | 3 |  |  | 651 |  |  | — |  |  | 929 |  |  | 9
Real estate - commercial |  |  | 380 |  |  | — |  |  | 120 |  |  | 3 |  |  | 393 |  |  | — |  |  | 30 |  |  | 22
Installment and other consumer |  |  | 4 |  |  | — |  |  | 91 |  |  | — |  |  | 3 |  |  | — |  |  | 34 |  |  | —
Total |  | $ | 2,682 |  | $ | — |  | $ | 2,784 |  | $ | 6 |  | $ | 2,232 |  | $ | — |  | $ | 2,409 |  | $ | 32
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  | $ | 1,086 |  | $ | 9 |  | $ | 1,423 |  | $ | 8 |  | $ | 1,095 |  | $ | 30 |  | $ | 1,507 |  | $ | 23
Real estate - construction residential |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 15 |  |  | —
Real estate - construction commercial |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 24 |  |  | —
Real estate - residential |  |  | 2,818 |  |  | 21 |  |  | 4,076 |  |  | 25 |  |  | 3,881 |  |  | 68 |  |  | 4,211 |  |  | 71
Real estate - commercial |  |  | 1,112 |  |  | 9 |  |  | 1,443 |  |  | 13 |  |  | 788 |  |  | 25 |  |  | 1,649 |  |  | 24
Installment and other consumer |  |  | 188 |  |  | 1 |  |  | 197 |  |  | — |  |  | 221 |  |  | 2 |  |  | 186 |  |  | 1
Total |  | $ | 5,204 |  | $ | 40 |  | $ | 7,139 |  | $ | 46 |  | $ | 5,985 |  | $ | 125 |  | $ | 7,592 |  | $ | 119
Total impaired loans |  | $ | 7,886 |  | $ | 40 |  | $ | 9,923 |  | $ | 52 |  | $ | 8,217 |  | $ | 125 |  | $ | 10,001 |  | $ | 151
The recorded investment varies from the unpaid principal balance primarily due to partial charge-offs taken resulting from current appraisals received. The amount recognized as interest income on impaired loans continuing to accrue interest, primarily related to troubled debt restructurings, was $40,000 and $125,000 for the three and nine months ended September 30, 2019, respectively, compared to $52,000 and $151,000 for the three and nine months ended September 30, 2018, respectively. The average recorded investment in impaired loans is calculated on a monthly basis during the periods reported. Delinquent and Non-Accrual Loans The delinquency status of loans is determined based on the contractual terms of the notes. Borrowers are generally classified as delinquent once payments become 30 days or more past due. The Company’s policy is to discontinue the accrual of interest income on any loan when, in the opinion of management, the ultimate collectability of interest or principal is no longer probable. In general, loans are placed on non-accrual when they become 90 days or more past due. However, management considers many factors before placing a loan on non-accrual, including the delinquency status of the loan, the overall financial condition of the borrower, the progress of management’s collection efforts and the value of the underlying collateral. Subsequent interest payments received on non-accrual loans are applied to principal if any doubt exists as to the collectability of such principal; otherwise, such receipts are recorded as interest income on a cash basis. Non-accrual loans are returned to accrual status when, in the opinion of management, the financial condition of the borrower indicates that the timely collectability of interest and principal is probable and the borrower demonstrates the ability to pay under the terms of the note through a sustained period of repayment performance, which is generally six months. The following table provides aging information for the Company’s past due and non-accrual loans at September 30, 2019 and December 31, 2018.
|  | Current or |  |  |  |  | 90 Days |  |  |  |  |  |
|  | Less Than |  |  |  |  | Past Due |  |  |  |  |  |
|  | 30 Days |  | 30 - 89 Days |  | And Still |  |  |  |  |  |
(in thousands) |  | Past Due |  | Past Due |  | Accruing |  | Non-Accrual |  | Total
September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, Financial, and Agricultural |  | $ | 192,142 |  | $ | 98 |  | $ | — |  | $ | 1,027 |  | $ | 193,267
Real Estate Construction - Residential |  |  | 23,782 |  |  | — |  |  | — |  |  | — |  |  | 23,782
Real Estate Construction - Commercial |  |  | 124,177 |  |  | 67 |  |  | — |  |  | 145 |  |  | 124,389
Real Estate Mortgage - Residential |  |  | 245,379 |  |  | 705 |  |  | 193 |  |  | 2,158 |  |  | 248,435
Real Estate Mortgage - Commercial |  |  | 528,539 |  |  | 360 |  |  | — |  |  | 1,111 |  |  | 530,010
Installment and Other Consumer |  |  | 31,402 |  |  | 106 |  |  | 4 |  |  | 123 |  |  | 31,635
Total |  | $ | 1,145,421 |  | $ | 1,336 |  | $ | 197 |  | $ | 4,564 |  | $ | 1,151,518
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, Financial, and Agricultural |  | $ | 205,597 |  | $ | 266 |  | $ | — |  | $ | 1,857 |  | $ | 207,720
Real Estate Construction - Residential |  |  | 28,404 |  |  | 206 |  |  | — |  |  | — |  |  | 28,610
Real Estate Construction - Commercial |  |  | 106,531 |  |  | 100 |  |  | — |  |  | 153 |  |  | 106,784
Real Estate Mortgage - Residential |  |  | 235,734 |  |  | 2,907 |  |  | 156 |  |  | 2,720 |  |  | 241,517
Real Estate Mortgage - Commercial |  |  | 527,968 |  |  | 1,094 |  |  | — |  |  | 474 |  |  | 529,536
Installment and Other Consumer |  |  | 32,002 |  |  | 242 |  |  | 6 |  |  | 210 |  |  | 32,460
Total |  | $ | 1,136,236 |  | $ | 4,815 |  | $ | 162 |  | $ | 5,414 |  | $ | 1,146,627
Credit Quality The Company categorizes loans into risk categories based upon an internal rating system reflecting management’s risk assessment. Loans are placed on watch status when one or more weaknesses are identified that may result in the borrower being unable to meet repayment terms or the Company’s credit position could deteriorate at some future date. Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Loans so classified may have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. Such loans are characterized by the distinct possibility that the Company may sustain some loss if the deficiencies are not corrected. A loan is classified as a troubled debt restructuring (TDR) when a borrower is experiencing financial difficulties that lead to the restructuring of a loan, and the Company grants concessions to the borrower in the restructuring that it would not otherwise consider. Loans classified as TDRs that are accruing interest are classified as performing TDRs. Loans classified as TDRs, that are not accruing interest are classified as nonperforming TDRs and are included with all other nonaccrual loans for presentation purposes. It is the Company’s policy to discontinue the accrual of interest income on loans when management believes that the collection of interest or principal is doubtful. The following table presents the risk categories by class at September 30, 2019 and December 31, 2018.
|  | Commercial, |  | Real Estate |  | Real Estate |  | Real Estate |  | Real Estate |  | Installment |  |  |
|  | Financial, & |  | Construction - |  | Construction - |  | Mortgage - |  | Mortgage - |  | and other |  |  |
(in thousands) |  | Agricultural |  | Residential |  | Commercial |  | Residential |  | Commercial |  | Consumer |  | Total
At September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Watch |  | $ | 13,083 |  | $ | 679 |  | $ | 7,172 |  | $ | 14,453 |  | $ | 36,393 |  | $ | — |  | $ | 71,780
Substandard |  |  | 1,257 |  |  | — |  |  | — |  |  | 1,336 |  |  | 685 |  |  | 3 |  |  | 3,281
Performing TDRs |  |  | 551 |  |  | — |  |  | — |  |  | 1,685 |  |  | 358 |  |  | 38 |  |  | 2,632
Non-accrual and non-performing TDRs |  |  | 1,027 |  |  | — |  |  | 145 |  |  | 2,217 |  |  | 1,111 |  |  | 123 |  |  | 4,623
Total |  | $ | 15,918 |  | $ | 679 |  | $ | 7,317 |  | $ | 19,691 |  | $ | 38,547 |  | $ | 164 |  | $ | 82,316
At December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Watch |  | $ | 8,871 |  | $ | 588 |  | $ | 4,063 |  | $ | 12,790 |  | $ | 36,408 |  | $ | 8 |  | $ | 62,728
Substandard |  |  | 53 |  |  | — |  |  | — |  |  | 1,411 |  |  | 702 |  |  | 3 |  |  | 2,169
Performing TDRs |  |  | 570 |  |  | — |  |  | — |  |  | 2,073 |  |  | 377 |  |  | 44 |  |  | 3,064
Non-accrual and non-performing TDRs |  |  | 1,857 |  |  | — |  |  | 153 |  |  | 2,720 |  |  | 474 |  |  | 210 |  |  | 5,414
Total |  | $ | 11,351 |  | $ | 588 |  | $ | 4,216 |  | $ | 18,994 |  | $ | 37,961 |  | $ | 265 |  | $ | 73,375
Troubled Debt Restructurings At September 30, 2019, loans classified as TDRs totaled $4.0 million, of which $1.4 million were classified as non-performing TDRs and $2.6 million were classified as performing TDRs. At December 31, 2018, loans classified as TDRs totaled $5.0 million, of which $2.0 million were classified as non-performing TDRs and $3.0 million were classified as performing TDRs. Both performing and nonperforming TDRs are considered impaired loans. When an individual loan is determined to be a TDR, the amount of impairment is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the underlying collateral less applicable selling costs. Accordingly, specific reserves of $471,000 and $543,000 related to TDRs were allocated to the allowance for loan losses at September 30, 2019 and December 31, 2018, respectively. The following table summarizes loans that were modified as TDRs during the periods indicated.
|  | Three Months Ended September 30,
|  | 2019 |  | 2018
|  | Recorded Investment (1) |  | Recorded Investment (1)
|  | Number of |  | Pre- |  | Post- |  | Number of |  | Pre- |  | Post-
(in thousands) |  | Contracts |  | Modification |  | Modification |  | Contracts |  | Modification |  | Modification
Troubled Debt Restructurings |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  | — |  | $ | — |  | $ | — |  | 2 |  | $ | 353 |  | $ | 353
Installment and other consumer |  | — |  |  | — |  |  | — |  | 1 |  |  | 112 |  |  | 53
Total |  | — |  | $ | — |  | $ | — |  | 3 |  | $ | 465 |  | $ | 406
|  | Nine Months Ended September 30,
|  | 2019 |  | 2018
|  | Recorded Investment (1) |  | Recorded Investment (1)
|  | Number of |  | Pre- |  | Post- |  | Number of |  | Pre- |  | Post-
(in thousands) |  | Contracts |  | Modification |  | Modification |  | Contracts |  | Modification |  | Modification
Troubled Debt Restructurings |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  | 2 |  | $ | 80 |  | $ | 76 |  | 2 |  | $ | 353 |  | $ | 353
Real estate mortgage - residential |  | — |  |  | — |  |  | — |  | 1 |  |  | 75 |  |  | 74
Installment and other consumer |  | — |  |  | — |  |  | — |  | 5 |  |  | 160 |  |  | 3
Total |  | 2 |  | $ | 80 |  | $ | 76 |  | 8 |  | $ | 588 |  | $ | 430
| (1) |  | The amounts reported post-modification are inclusive of all partial pay-downs and charge-offs, and no portion of the debt was forgiven. Loans modified as a TDR that were fully paid down, charged-off or foreclosed upon during the period ended are not reported.
The Company’s portfolio of loans classified as TDRs include concessions for the borrower given financial condition such as interest rates below the current market rate, deferring principal payments, and extending maturity dates. There were no loans and two loans meeting the TDR criteria that were modified during the three and nine months ended September 30, 2019, compared to three and eight loans during the three and nine months ended September 30, 2018. The Company considers a TDR to be in default when it is 90 days or more past due under the modified terms, a charge-off occurs, or it is the process of foreclosure. There was one loan and no loans modified as a TDR that defaulted during any of the three and nine months ended September 30, 2019 and 2018, respectively, and within twelve months of their modification date. See Lending and Credit Management section for further information.

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