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Loans Receivable and Allowance for Loan Losses
 3 Months Ended
Mar. 31, 2013
Loans Receivable and Allowance for Loan Losses [Abstract]  
Loans Receivable and Allowance for Loan Losses

Note 3: Loans Receivable and Allowance for Loan Losses

A summary of the Company’s loan portfolio at March 31, 2013 and December 31, 2012 is as follows:

 

                 
    March 31,     December 31,  
    2013     2012  

Real Estate

                

Commercial

   $ 242,506,736     $ 247,495,321  

Residential

     118,785,047       119,033,025  

Construction

     4,997,991       4,997,991  

Construction to permanent

     9,454,753       4,851,768  

Commercial

     35,743,063       36,428,751  

Consumer home equity

     47,391,528       49,180,908  

Consumer installment

     2,064,770       2,162,718  
   

 

 

    

 

 

  

Total Loans

     460,943,888       464,150,482  

Premiums on purchased loans

     217,636       219,649  

Net deferred costs

     496,788       439,041  

Allowance for loan losses

     (5,717,148 )      (6,015,636 ) 
   

 

 

    

 

 

  

Loans receivable, net

   $ 455,941,164     $ 458,793,536  
   

 

 

    

 

 

  

 

The changes in the allowance for loan losses for the periods shown are as follows:

 

                 
   

Three months ended

March 31,

  
    2013     2012  

Balance, beginning of period

   $ 6,015,636     $ 9,384,672  

Provision for loan losses

     (29,786 )      (845,402 ) 

Loans charged-off

     (305,384 )      (102,483 ) 

Recoveries of loans previously charged-off

     36,682       24,156  
   

 

 

    

 

 

  

Balance, end of period

   $ 5,717,148     $ 8,460,943  
   

 

 

    

 

 

  

At March 31, 2013 and December 31, 2012, the unpaid balances of loans 90 days or more past maturity, and still accruing interest were $6.0 million and $2.2 million, respectively. Three of the four loans at March 31, 2013, totaling $1.6 million, were continuing to make interest payments, were past maturity and are in the process of being renewed. The other loan totaling $4.4 million was over 90 days past due as to payments, but was subsequently paid off.

The unpaid principal balances of loans on nonaccrual status and considered impaired were $19.0 million at March 31, 2013 and $23.8 million at December 31, 2012. If non-accrual loans had been performing in accordance with their contractual terms, the Company would have recorded approximately $306,000 of additional income during the quarter ended March 31, 2013 and $280,000 during the quarter ended March 31, 2012.

For the three months ended March 31, 2013 and 2012, the interest collected and recognized as income on impaired loans, which includes non-accrual loans, TDRs and loans that were previously classified as TDRs that have been upgraded, was approximately $125,000 and $225,000 respectively. The average recorded investment in impaired loans for the three months ended March 31, 2013 was $33.2 million.

At March 31, 2013, there were 9 loans totaling $16.0 million that were considered “troubled debt restructurings,” as compared to December 31, 2012 when there were 8 loans totaling $11.6 million, all of which were included in impaired loans. At March 31, 2013, 4 of the 9 loans aggregating $9.7 million were accruing loans and 5 loans aggregating $6.3 million were non-accruing loans.

The Company’s lending activities are conducted principally in Fairfield and New Haven Counties in Connecticut and Westchester County, New York City and Long Island, New York. The Company originates commercial real estate loans, commercial business loans, residential real estate loans and a variety of other consumer loans. In addition, the Company had originated loans for the construction of residential homes, residential developments and for land development projects. A moratorium on all new speculative construction loans was instituted by management in July 2008. All residential and commercial mortgage loans are collateralized primarily by first or second mortgages on real estate. The ability and willingness of borrowers to satisfy their loan obligations is dependent to some degree on the status of the regional economy as well as upon the regional real estate market. Accordingly, the ultimate collectability of a substantial portion of the loan portfolio and the recovery of a substantial portion of any resulting real estate acquired is susceptible to changes in market conditions.

 

The Company has established credit policies applicable to each type of lending activity in which it engages, evaluates the creditworthiness of each customer and, in most cases, extends credit of up to 75% of the market value of the collateral for commercial real estate at the date of the credit extension depending on the Company’s evaluation of the borrowers’ creditworthiness and type of collateral and up to 80% for residential 1-4 family real estate. In the case of construction loans, the maximum loan-to-value was 65% of the “as completed” market value. The market value of collateral is monitored on an ongoing basis and additional collateral is obtained when warranted. Real estate is the primary form of collateral. Other important forms of collateral are accounts receivable, inventory, other business assets, marketable securities and time deposits. While collateral provides assurance as a secondary source of repayment, the Company ordinarily requires the primary source of repayment to be based on the borrower’s ability to generate continuing cash flows on all loans not related to construction.

Risk characteristics of the Company’s portfolio classes include the following:

Commercial Real Estate Loans – In underwriting commercial real estate loans, the Company evaluates both the prospective borrower’s ability to make timely payments on the loan and the value of the property securing the loans. Repayment of such loans may be negatively impacted should the borrower default or should there be a substantial decline in the value of the property securing the loan or a decline in the general economic conditions. Where the owner occupies the property, the Company also evaluates the business’s ability to repay the loan on a timely basis. In addition, the Company may require personal guarantees, lease assignments and/or the guarantee of the operating company when the property is owner occupied. These types of loans may involve some additional risks because payments on such loans are dependent upon the successful operation of the business involved, therefore, repayment of such loans may be negatively impacted by adverse changes in economic conditions affecting the borrowers’ businesses.

Commercial and Industrial Loans – The Company’s commercial and industrial loan portfolio consists primarily of commercial business loans and lines of credit to businesses and professionals. These loans are usually made to finance the purchase of inventory or new or used equipment and for other short or long-term working capital purposes. These loans are generally secured by corporate assets, often with real estate as secondary collateral, but are also occasionally offered on an unsecured basis. In granting this type of loan, the Company primarily looks to the borrower’s cash flow as the source of repayment with collateral and personal guarantees, where obtained, as a secondary source. Commercial loans are often larger and may involve greater risks than other types of loans offered by the Company. Payments on such loans are often dependent upon the successful operation of the underlying business involved. Repayment of such loans may therefore be negatively impacted by adverse changes in economic conditions, management’s inability to effectively manage the business, claims of others against the borrower’s assets which may take priority over the Company’s claims against assets, death or disability of the borrower or loss of market for the borrower’s products or services.

Residential Real Estate Loans – Various loans secured by residential real estate properties are offered by the Company, including 1-4 family residential mortgages, multi-family residential loans and a variety of home equity line of credit products. Repayment of such loans may be negatively impacted should the borrower default, should there be a significant decline in the value of the property securing the loan or should there be decline in general economic conditions.

 

Construction Loans – Construction loans are short-term loans (generally up to 18 months) secured by land for both residential and commercial development. The loans are generally made for acquisition and improvements. Funds are disbursed as phases of construction are completed. In the past, the Company funded construction of single family homes, when no contract of sale existed, based upon the experience and the financial strength of the builder, the type and location of the property and other factors. Construction loans are generally personally guaranteed by the principal(s). Repayment of such loans may be negatively impacted by the builders’ inability to complete construction, by a downturn in the new construction market, by a significant increase in interest rates or by a decline in general economic conditions. The Company has had a moratorium in place since mid-2008 on new speculative construction loans.

Other Loans – The Company also offers installment loans and reserve lines of credit to individuals. Repayments of such loans are often dependent on the personal income of the borrower which may be negatively impacted by adverse changes in economic conditions. The Company does not place an emphasis on originating these types of loans.

The Company does not have any lending programs commonly referred to as subprime lending. Subprime lending generally targets borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burdened ratios.

 

The following table sets forth activity in our allowance for loan losses, by loan type, for the three months ended March 31, 2013. The following table also details the amount of loans receivable, net, that are evaluated individually, and collectively, for impairment, and the related portion of the allowance for loan losses that is allocated to each loan portfolio segment.

 

                                                                 
     Commercial     Commercial Real
Estate		     Construction     Construction
to Permanent		     Residential     Consumer     Unallocated     Total  

Three months ended March
31, 2013

                                                                

Allowance for loan losses:

                                                                

Beginning Balance

   $ 941,456     $ 3,509,395     $ 311,297     $ 18,720     $ 897,368     $ 216,698     $ 120,702     $ 6,015,636  

Charge-offs

     —         (15,000 )      —         —         (290,384 )      —         —         (305,384 ) 

Recoveries

     1,000       14,988       20,000       —         —         694       —         36,682  

Provision

     903,859       (1,017,272 )      (24,099 )      12,394       139,415       (99,044 )      54,961       (29,786 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

   $ 1,846,315     $ 2,492,111     $ 307,198     $ 31,114     $ 746,399     $ 118,348     $ 175,663     $ 5,717,148  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: individually evaluated for impairment

   $ 33,281     $ 706,027     $ 140,170     $ —       $ 116,599     $ 2,161     $ —       $ 998,238  

Ending balance: collectively evaluated for impairment

     1,813,034       1,786,084       167,028       31,114       629,800       116,187       175,663       4,718,910  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Allowance for Loan Losses

   $ 1,846,315     $ 2,492,111     $ 307,198     $ 31,114     $ 746,399     $ 118,348     $ 175,663     $ 5,717,148  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Loans ending balance

   $ 35,743,063     $ 242,506,736     $ 4,997,991     $ 9,454,753     $ 118,785,047     $ 49,456,298     $ —       $ 460,943,888  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: individually evaluated for impairment

   $ 182,258     $ 15,801,098     $ 1,862,038     $ 1,243,401     $ 13,246,901     $ 564,906     $ —       $ 32,900,602  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance : collectively evaluated for impairment

   $ 35,560,805     $ 226,705,638     $ 3,135,953     $ 8,211,352     $ 105,538,146     $ 48,891,392     $ —       $ 428,043,286  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table sets forth activity in our allowance for loan losses, by loan type, for the year ended December 31, 2012. The following table also details the amount of loans receivable, net, that are evaluated individually, and collectively, for impairment, and the related portion of the allowance for loan losses that is allocated to each loan portfolio segment.

 

                                                                 
     Commercial     Commercial
Real Estate		     Construction     Construction
to
Permanent		     Residential     Consumer     Unallocated     Total  

2012

                                                                

Allowance for loan losses:

                                                                

Beginning Balance

   $ 882,062     $ 4,018,746     $ 867,159     $ 547,333     $ 2,550,588     $ 458,762     $ 60,022     $ 9,384,672  

Charge-offs

     (48,414 )      (49,922 )      (101,391 )      —          (84,711 )      (785,918 )      —          (1,070,356 ) 

Recoveries

     10,861       66,951       —          —          —          2,731       —          80,543  

Provision

     96,947       (526,380 )      (454,471 )      (528,613 )      (1,568,509 )      541,123       60,680       (2,379,223 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

   $ 941,456     $ 3,509,395     $ 311,297     $ 18,720     $ 897,368     $ 216,698     $  120,702     $ 6,015,636  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: individually evaluated for impairment

   $ 33,280     $ 728,607     $ 120,616     $ —        $ 83,543     $ 2,368     $ —        $ 968,414  

Ending balance: collectively evaluated for impairment

     908,176       2,780,788       190,681       18,720       813,825       214,330       120,702       5,047,222  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Allowance for Loan Losses

   $ 941,456     $ 3,509,395     $ 311,297     $ 18,720     $ 897,368     $ 216,698     $ 120,702     $ 6,015,636  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Loans ending balance

   $ 36,428,751     $ 247,495,321     $ 4,997,991     $ 4,851,768     $ 119,033,025     $ 51,343,626     $ —        $ 464,150,482  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: individually evaluated for impairment

   $ 219,509     $ 15,909,103     $ 1,862,038     $ 1,258,710     $ 13,567,175     $ 566,543     $ —        $ 33,383,078  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance : collectively evaluated for impairment

   $ 36,209,242     $ 231,586,218     $ 3,135,953     $ 3,593,058     $ 105,465,850     $ 50,777,083     $ —        $ 430,767,404  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

 

The Company monitors the credit quality of its loans receivable on an ongoing manner. Credit quality is monitored by reviewing certain credit quality indicators. Management has determined that internally assigned risk ratings and loan-to-value ratios (LTVs), at period end, are the key credit quality indicators that best help management monitor the credit quality of the Company’s loans receivable. Loan-to-value ratios used by management in monitoring credit quality are based on current period loan balances and original values at time of origination (unless a current appraisal has been obtained as a result of the loan being deemed impaired or the loan is a maturing construction loan).

Appraisals on properties securing impaired loans and Other Real Estate Owned (“OREO”) are updated annually. Additionally, appraisals on construction loans are updated four months in advance of scheduled maturity dates. We update our impairment analysis monthly based on the most recent appraisal as well as other factors (such as senior lien positions, e.g. property taxes). We are subscribers to a national real estate valuation database service and use published information regarding home sales prices in the towns/counties where our collateral is located in CT and NY.

The majority of the Company’s impaired loans have been resolved through courses of action other than via bank liquidations of real estate collateral through OREO. These include normal loan payoffs, the traditional workout process, triggering personal guarantee obligations, and troubled debt restructurings. However, as loan workout efforts progress to a point where the bank’s liquidation of real estate collateral is the likely outcome, the impairment analysis is updated to reflect actual recent experience with bank sales of OREO properties.

A disposition discount is built into our impairment analysis and reflected in our allowance once a property is determined to be a likely OREO (e.g. foreclosure is probable). To determine the discount we compare the average sales prices of our prior OREO properties to the appraised value that was obtained as of the date when we took title to the property. The difference is the bank-owned disposition discount.

The Company has a risk rating system as part of the risk assessment of its loan portfolio. The Company’s lending officers are required to assign an Obligor and a Facility risk rating to each loan in their portfolio at origination, which is ratified or modified by the Committee to which the loan is submitted for approval. When the lender learns of important financial developments, the risk rating is reviewed accordingly, and adjusted if necessary. All loans are reviewed annually. Similarly, the Loan Committee can adjust a risk rating.

In addition, the Company engages a third party independent loan reviewer that performs quarterly reviews of a sample of loans, validating the Bank’s risk ratings assigned to such loans. The risk ratings play an important role in the establishment of the loan loss provision and to confirm the adequacy of the allowance for loan losses. Any upgrades to classified loans must be approved by the Board Loan Committee.

When assigning a risk rating to a loan, management utilizes the Bank’s internal eleven-point risk rating system. An asset is considered “special mention” when it has a potential weakness based on objective evidence, but does not currently expose the Company to sufficient risk to warrant classification in one of the following categories: An asset is considered “substandard” if it is not adequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets have well defined weaknesses based on objective evidence, and are characterized by the “distinct possibility” that the Company will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.”

During the quarter ended June 30, 2012, the Bank implemented enhancements to the allowance methodology, resulting in a reduction of the allowance for loan losses of $1.1 million for that period. In making this transition, the changes served to update and enhance the methodology to better reflect the direction of the current loan portfolio. The changes were threefold:

 

  • First, the Bank adopted a two year, instead of a three year, weighted average historical loss factor as the basis for the calculation of its historical loss experience. This is used to calculate expected losses in the pools identified in the Accounting Standards Codification (“ASC”) (Topic 450-20), “Loss Contingencies” pools prior to the application of qualitative risk adjustment factors. This change was made to be more responsive to the changing credit environment. This shorter average historical loss period will produce results more indicative of the current and expected behavior of the portfolio.

 

  • Second, the Bank adopted an Internal Risk Ratings Based (IRB) approach to calculating historical loss rates. This approach calibrates expected losses with actual risk assessment and equates the likelihood of loss to the level of risk in a credit facility rating. Previously, loss history was applied to categories of loans and qualitative adjustments were apportioned by risk rating within the categories.

 

  • Third, the Bank increased the detail of analysis within the segments, particularly within Commercial Real Estate lending, which is currently the Bank’s largest concentration overall, by expanding the number of ASC 450-20 pools. In all, ten sub-concentrations have been added to the analysis. The greater level of detail enables the Bank to better apply qualitative risk adjustment factors to the segments affected and to monitor changes in credit risk within the portfolio.

Charge-off generally commences in the month that the loan is classified “doubtful” and is fully charged off within six months of such classification. If the account is classified “loss” the full balance is charged off immediately. The full balance is charged off regardless of the potential recovery from the sale of the collateral. This amount is recognized as a recovery once the collateral is sold.

In accordance with FFIEC (“Federal Financial Institutions Examination Council”) published policies establishing uniform criteria for the classification of retail credit based on delinquency status, “Open-end” credits are charged-off when 180 days delinquent and “Closed-end” credits are charged-off when 120 days delinquent. Typically, consumer installment loans are charged off no later than 90 days past due.

 

The following table details the credit risk exposure of loans receivable, by loan type and credit quality indicator at March 31, 2013:

CREDIT RISK PROFILE BY CREDITWORTHINESS CATEGORY

 

                                                                                                                 
    Commercial     Commercial Real Estate     Construction     Construction to
Permanent		     Residential Real Estate     Consumer        
LTVs:   < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     Other     Total  

Internal Risk Rating

                                                                                                                

Pass

   $ 23,317,351     $ 3,126,861     $ 199,067,642     $ 8,628,492     $ —       $ —       $ 8,211,352     $ —       $ 81,041,574     $ 22,002,165     $ 44,177,701     $ 3,811,719     $ 725,939     $ 394,110,796  

Special Mention

     953,573       —         13,159,253       5,322,832       —         —         —         —         5,308,486       4,370,725       106,801       562,744       —         29,784,414  

Substandard

     8,172,070       173,208       3,763,012       12,565,505       3,135,953       1,862,038       —         1,243,401       2,517,811       3,544,286       13,394       58,000       —         37,048,678  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    $ 32,442,994     $ 3,300,069     $ 215,989,907     $ 26,516,829     $  3,135,953     $  1,862,038     $ 8,211,352     $ 1,243,401     $ 88,867,871     $ 29,917,176     $ 44,297,896     $ 4,432,463     $ 725,939     $ 460,943,888  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

CREDIT RISK PROFILE

 

                                                         
    Commercial     Commercial Real
Estate		     Construction     Construction to
Permanent		     Residential              
            Real Estate     Consumer     Totals  

Performing

   $ 35,560,805     $ 232,840,084     $ 3,135,953     $ 8,211,352     $ 112,722,950     $ 49,454,137     $ 441,925,281  

Non Performing

     182,258       9,666,652       1,862,038       1,243,401       6,062,097       2,161       19,018,607  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 35,743,063     $ 242,506,736     $ 4,997,991     $ 9,454,753     $ 118,785,047     $ 49,456,298     $ 460,943,888  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table details the credit risk exposure of loans receivable, by loan type and credit quality indicator at December 31, 2012:

CREDIT RISK PROFILE BY CREDITWORTHINESS CATEGORY

 

                                                                                                                 
    Commercial     Commercial Real Estate     Construction     Construction to
Permanent		     Residential Real Estate     Consumer        
LTVs:   < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     < 75%     >= 75%     Other     Total  

Internal Risk Rating

                                                                                                                

Pass

   $ 25,563,777     $ 1,241,109     $ 203,149,356     $ 9,182,622     $ —       $ —       $ 3,593,058     $ —       $ 77,368,459     $ 25,617,355     $ 46,102,332     $ 3,752,752     $ 765,469     $ 396,336,289  

Special Mention

     7,234,814       164,191       11,554,971       5,374,265       3,135,953       —         —         —         5,310,178       —         98,530       564,175       —         33,437,077  

Substandard

     2,014,401       210,459       8,503,630       9,730,477       —         1,862,038       —         1,258,710       2,524,186       8,212,847       2,368       58,000       —         34,377,116  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    $ 34,812,992     $ 1,615,759     $ 223,207,957     $ 24,287,364     $  3,135,953     $  1,862,038     $ 3,593,058     $ 1,258,710     $ 85,202,823     $ 33,830,202     $ 46,203,230     $ 4,374,927     $ 765,469     $ 464,150,482  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

CREDIT RISK PROFILE

 

                                                         
    Commercial     Commercial Real
Estate		     Construction     Construction to
Permanent		     Residential
Real Estate		     Consumer     Totals  

Performing

   $ 36,209,242     $ 237,764,844     $ 3,135,953     $ 3,593,058     $ 108,295,992     $ 51,341,258     $ 440,340,347  

Non Performing

     219,509       9,730,477       1,862,038       1,258,710       10,737,033       2,368       23,810,135  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 36,428,751     $ 247,495,321     $ 4,997,991     $ 4,851,768     $ 119,033,025     $ 51,343,626     $ 464,150,482  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table sets forth the detail, and delinquency status, of non-accrual loans and past due loans at March 31, 2013:

 

                                                         
    Non-Accrual and Past Due Loans  
    Non-Accrual Loans           Total Non-  

2013

   31-60 Days
Past Due		     61-90 Days
Past Due		     Greater Than
90 Days		     Total Past
Due		     Current     >90 Days Past
Due and
Accruing		     Accrual and
Past Due
Loans		  

Commercial

                                                        

Pass

   $  —       $ —       $ —       $ —       $ —       $ 250,000     $ 250,000  

Substandard

     —         —         182,258       182,258       —         500,000       682,258  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial

   $ —       $ —       $ 182,258     $ 182,258     $ —       $ 750,000     $ 932,258  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Commercial Real Estate

                                                        

Pass

   $ —       $  —       $ —       $ —       $ —       $ —       $ —    

Special Mention

     —         —         —         —         —         —         —    

Substandard

   $ —       $ —       $ 7,595,369     $ 7,595,369     $ 2,071,283     $ 860,762     $ 10,527,414  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial Real Estate

   $ —       $ —       $ 7,595,369     $ 7,595,369     $ 2,071,283     $ 860,762     $ 10,527,414  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction

                                                        

Substandard

   $ —       $ —       $ 1,862,038     $ 1,862,038     $ —       $ —       $ 1,862,038  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction

   $ —       $ —       $ 1,862,038     $ 1,862,038     $ —       $ —       $ 1,862,038  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction to Permanent

                                                        

Substandard

   $ —       $ —       $ —       $ —       $ 1,243,401     $ —       $ 1,243,401  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction to Permanent

   $ —       $ —       $ —       $ —       $ 1,243,401     $ —       $ 1,243,401  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Residential Real Estate

                                                        

Special Mention

   $ —       $ —       $ —       $ —       $ —       $ 4,370,724     $ 4,370,724  

Substandard

     —         —         5,166,677       5,166,677       895,420       —         6,062,097  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Residential Real Estate

   $ —       $ —       $ 5,166,677     $ 5,166,677     $ 895,420     $ 4,370,724     $ 10,432,821  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Consumer

                                                        

Substandard

   $ —       $ —       $ —       $ —       $ 2,161     $ —       $ 2,161  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Consumer

   $ —       $ —       $ —       $ —       $ 2,161     $ —       $ 2,161  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ —       $ —       $ 14,806,342     $ 14,806,342     $ 4,212,265     $  5,981,486     $ 25,000,093  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table sets forth the detail, and delinquency status, of non-accrual loans and past due loans at December 31, 2012:

 

                                                         
    Non-Accrual and Past Due Loans  
    Non-Accrual Loans           Total Non-  

2012

   31-60 Days
Past Due		     61-90 Days
Past Due		     Greater Than
90 Days		     Total Past
Due		     Current     >90 Days Past
Due and
Accruing		     Accrual and
Past Due
Loans		  

Commercial

                                                        

Special Mention

   $  —       $ —       $ —       $ —       $ —       $ 300,000     $ 300,000  

Substandard

     —         —         182,258       182,258       37,251       500,000       719,509  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial

   $ —       $ —       $ 182,258     $ 182,258     $ 37,251     $ 800,000     $ 1,019,509  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Commercial Real Estate

                                                        

Pass

   $ —       $ —       $ —       $ —       $ —       $ 566,936     $ 566,936  

Special Mention

     —         —         —         —         —         —         —    

Substandard

   $ —       $ —       $ 7,629,819     $ 7,629,819     $ 2,100,658     $ 867,361     $ 10,597,838  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial Real Estate

   $ —       $ —       $ 7,629,819     $ 7,629,819     $ 2,100,658     $  1,434,297     $ 11,164,774  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction

                                                        

Substandard

   $ —       $ —       $ 1,862,038     $ 1,862,038     $ —       $ —       $ 1,862,038  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction

   $ —       $ —       $ 1,862,038     $ 1,862,038     $ —       $ —       $ 1,862,038  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction to Permanent

                                                        

Substandard

   $ —       $ —       $ —       $ —       $ 1,258,710     $ —       $ 1,258,710  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction to Permanent

   $ —       $ —       $ —       $ —       $ 1,258,710     $ —       $ 1,258,710  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Residential Real Estate

                                                        

Substandard

   $ —       $ 358,123     $ 10,231,542     $ 10,589,665     $ 147,368     $ —       $ 10,737,033  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Residential Real Estate

   $ —       $ 358,123     $ 10,231,542     $ 10,589,665     $ 147,368     $ —       $ 10,737,033  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Consumer

                                                        

Substandard

   $ —       $ —       $ —       $ —       $ 2,368     $ —       $ 2,368  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Consumer

   $ —       $ —       $ —       $ —       $ 2,368     $ —       $ 2,368  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ —       $  358,123     $ 19,905,657     $ 20,263,780     $ 3,546,355     $ 2,234,297     $ 26,044,432  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Included in loans receivable are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers. The recorded balance of these non-accrual loans was $19.0 million and $23.8 million at March 31, 2013, and December 31, 2012 respectively. Generally, loans are placed on non-accruing status when they become 90 days or more delinquent, and remain on non-accrual status until they are brought current, have six months of performance under the loan terms, and factors indicating reasonable doubt about the timely collection of payments no longer exist. Therefore, loans may be current in accordance with their loan terms, or may be less than 90 days delinquent and still be on a non-accruing status. Additionally, certain loans that cannot demonstrate sufficient global cash flow to continue loan payments in the future and certain troubled debt restructures (TDRs) are placed on non-accrual status.

Loans past due ninety days or more, and still accruing interest were $6.0 million and $2.2 million at March 31, 2013, and December 31, 2012 respectively, and consisted of four loans at March 31, 2013. Three of the four loans at March 31, 2013, totaling $1.6 million, were continuing to make interest payments, were past maturity and are in the process of being renewed. The other loan totaling $4.4 million was over 90 days past due as to payments, but was subsequently paid off.

 

The following table sets forth the detail and delinquency status of loans receivable, by performing and non-performing loans at March 31, 2013.

 

                                                         
    Performing (Accruing) Loans              

2013

   31-60 Days
Past Due		     61-90 Days
Past Due		     Total Past
Due		     Current     Total
Performing
Loans		     Total Non-
Accrual and
Past Due
Loans		     Total Loans  

Commercial

                                                        

Pass

   $ 7,450     $ —       $ 7,450     $ 26,186,762     $ 26,194,212     $ 250,000     $ 26,444,212  

Special Mention

     6,664       —         6,664       946,909       953,573       —         953,573  

Substandard

     —         —         —         7,663,020       7,663,020       682,258       8,345,278  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial

   $ 14,114     $ —       $ 14,114     $ 34,796,691     $ 34,810,805     $ 932,258     $ 35,743,063  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Commercial Real Estate

                                                        

Pass

   $ —       $ —       $ —       $ 207,696,134     $ 207,696,134     $ —       $ 207,696,134  

Special Mention

     —         —         —         18,482,085       18,482,085       —         18,482,085  

Substandard

     —         —         —         5,801,103       5,801,103       10,527,414       16,328,517  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial Real Estate

   $ —       $ —       $ —       $ 231,979,322     $ 231,979,322     $ 10,527,414     $ 242,506,736  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction

                                                        

Pass

   $ —       $ —       $ —       $ —       $ —       $ —       $ —    

Special Mention

     —         —         —         —         —         —         —    

Substandard

     —         3,135,953       3,135,953       —         3,135,953       1,862,038       4,997,991  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction

   $ —       $ 3,135,953     $ 3,135,953     $ —       $ 3,135,953     $ 1,862,038     $ 4,997,991  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction to Permanent

                                                        

Pass

   $ —       $ —       $ —       $ 8,211,352     $ 8,211,352     $ —       $ 8,211,352  

Special Mention

     —         —         —         —         —         —         —    

Substandard

     —         —         —         —         —         1,243,401       1,243,401  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction to Permanent

   $ —       $ —       $ —       $ 8,211,352     $ 8,211,352     $ 1,243,401     $ 9,454,753  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Residential Real Estate

                                                        

Pass

   $ —       $ —       $ —       $ 103,043,739     $ 103,043,739     $ —       $ 103,043,739  

Special Mention

     —         —         —         5,308,487       5,308,487       4,370,724       9,679,211  

Substandard

     —         —         —         —         —         6,062,097       6,062,097  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Residential Real Estate

   $ —       $ —       $ —       $ 108,352,226     $ 108,352,226     $ 10,432,821     $ 118,785,047  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Consumer

                                                        

Pass

   $ 3,823     $ 14,130     $ 17,953     $ 48,697,406     $ 48,715,359     $ —       $ 48,715,359  

Special Mention

     7,670       —         7,670       661,875       669,545       —         669,545  

Substandard

     11,233       —         11,233       58,000       69,233       2,161       71,394  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Consumer

   $ 22,726     $ 14,130     $ 36,856     $ 49,417,281     $ 49,454,137     $ 2,161     $ 49,456,298  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $  36,840     $ 3,150,083     $  3,186,923     $ 432,756,872     $ 435,943,795     $ 25,000,093     $ 460,943,888  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table sets forth the detail and delinquency status of loans receivable, net, by performing and non-performing loans at December 31, 2012.

 

                                                         
    Performing (Accruing) Loans              

2012

   31-60 Days
Past Due		     Greater
Than 60
Days		     Total Past
Due		     Current     Total
Perfoming
Loans		     Total Non-
Accrual and
Past Due
Loans		     Total Loans  

Commercial

                                                        

Pass

   $ 10,171     $ —       $ 10,171     $ 26,494,715     $ 26,504,886     $ 300,000     $ 26,804,886  

Special Mention

     —         —         —         7,399,006       7,399,006       —         7,399,006  

Substandard

     —         —         —         1,505,350       1,505,350       719,509       2,224,859  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial

   $ 10,171     $ —       $ 10,171     $ 35,399,071     $ 35,409,242     $ 1,019,509     $ 36,428,751  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Commercial Real Estate

                                                        

Pass

   $ —       $ —       $ —       $ 211,765,042     $ 211,765,042     $ 566,936     $ 212,331,978  

Special Mention

     —         —         —         16,929,236       16,929,236       —         16,929,236  

Substandard

     —         —         —         7,636,269       7,636,269       10,597,838       18,234,107  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Commercial Real Estate

   $ —       $ —       $ —       $ 236,330,547     $ 236,330,547     $ 11,164,774     $ 247,495,321  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction

                                                        

Special Mention

   $ —       $ —       $ —       $ 3,135,953     $ 3,135,953     $ —       $ 3,135,953  

Substandard

     —         —         —         —         —         1,862,038       1,862,038  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction

   $ —       $ —       $ —       $ 3,135,953     $ 3,135,953     $ 1,862,038     $ 4,997,991  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Construction to Permanent

                                                        

Pass

   $ —       $ —       $ —       $ 3,593,058     $ 3,593,058     $ —       $ 3,593,058  

Substandard

     —         —         —         —         —         1,258,710       1,258,710  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Construction to Permanent

   $ —       $ —       $ —       $ 3,593,058     $ 3,593,058     $ 1,258,710     $ 4,851,768  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Residential Real Estate

                                                        

Pass

   $ 40,838     $ —       $ 40,838     $ 102,944,976     $ 102,985,814     $ —       $ 102,985,814  

Special Mention

     —         —         —         5,310,178       5,310,178       —         5,310,178  

Substandard

     —         —         —         —         —         10,737,033       10,737,033  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Residential Real Estate

   $ 40,838     $ —       $ 40,838     $ 108,255,154     $ 108,295,992     $ 10,737,033     $ 119,033,025  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Consumer

                                                        

Pass

   $ —       $ 12,443     $ 12,443     $ 50,608,110     $ 50,620,553     $ —       $ 50,620,553  

Special Mention

     —         —         —         662,705       662,705       —         662,705  

Substandard

     —         —         —         58,000       58,000       2,368       60,368  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Consumer

   $ —       $ 12,443     $ 12,443     $ 51,328,815     $ 51,341,258     $ 2,368     $ 51,343,626  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $  51,009     $ 12,443     $  63,452     $ 438,042,598     $ 438,106,050     $ 26,044,432     $ 464,150,482  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table summarizes impaired loans as of March 31, 2013:

 

                         
    Recorded
Investment		     Unpaid Principal
Balance		     Related Allowance  

With no related allowance recorded:

                        

Commercial

   $ 9,050     $ 93,944     $ —    

Commercial Real Estate

     10,163,815       10,973,038       —    

Construction

     —         —         —    

Construction to Permanent

     1,243,401       1,425,000          

Residential

     12,579,962       14,901,575       —    

Consumer

     562,745       562,744       —    
   

 

 

    

 

 

    

 

 

  

Total:

   $ 24,558,973     $ 27,956,301     $ —    

With an allowance recorded:

                        

Commercial

   $ 173,208     $ 350,000     $ 33,281  

Commercial Real Estate

     5,637,283       5,956,910       706,027  

Construction

     1,862,038       2,013,663       140,170  

Construction to Permanent

     —         —         —    

Residential

     666,939       668,604       116,599  

Consumer

     2,161       2,334       2,161  
   

 

 

    

 

 

    

 

 

  

Total:

   $ 8,341,629     $ 8,991,511     $ 998,238  

Commercial

   $ 182,258     $ 443,944     $ 33,281  

Commercial Real Estate

     15,801,098       16,929,948       706,027  

Construction

     1,862,038       2,013,663       140,170  

Construction to Permanent

     1,243,401       1,425,000       —    

Residential

     13,246,901       15,570,179       116,599  

Consumer

     564,906       565,078       2,161  
   

 

 

    

 

 

    

 

 

  

Total:

   $ 32,900,602     $ 36,947,812     $ 998,238  
   

 

 

    

 

 

    

 

 

  

Impaired loans consist of non-accrual loans, TDRs and loans that were previously classified as TDRs that have been upgraded.

 

The following table summarizes impaired loans as of December 31, 2012:

 

                         
    Recorded
Investment		     Unpaid Principal
Balance		     Related
Allowance		  

With no related allowance recorded:

                        

Commercial

   $ 46,301     $ 131,195     $ —    

Commercial Real Estate

     12,328,103       13,369,985       —    

Construction

     —         —         —    

Construction to Permanent

     1,258,710       1,425,000       —    

Residential

     10,760,965       12,786,388       —    

Consumer

     564,175       564,175       —    
   

 

 

    

 

 

    

 

 

  

Total:

   $ 24,958,254     $ 28,276,743     $ —    

With an allowance recorded:

                        

Commercial

   $ 173,208     $ 350,000     $ 33,280  

Commercial Real Estate

     3,581,000       3,606,947       728,607  

Construction

     1,862,038       2,013,663       120,616  

Construction to Permanent

     —         —         —    

Residential

     2,806,210       2,806,766       83,543  

Consumer

     2,368       2,506       2,368  
   

 

 

    

 

 

    

 

 

  

Total:

   $ 8,424,824     $ 8,779,882     $ 968,414  

Commercial

   $ 219,509     $ 481,195     $ 33,280  

Commercial Real Estate

     15,909,103       16,976,932       728,607  

Construction

     1,862,038       2,013,663       120,616  

Construction to Permanent

     1,258,710       1,425,000       —    

Residential

     13,567,175       15,593,154       83,543  

Consumer

     566,543       566,681       2,368  
   

 

 

    

 

 

    

 

 

  

Total:

   $ 33,383,078     $ 37,056,625     $ 968,414  
   

 

 

    

 

 

    

 

 

  

The recorded investment of impaired loans at March 31, 2013 and December 31, 2012 was $32.9 million and $33.4 million, with related allowances of $1.0 million and $1.0 million, respectively.

Included in the tables above at March 31, 2013 and December 31, 2012 are loans with carrying balances of $24.6 million and $25.0 million that required no specific reserves in our allowance for loan losses. Loans that did not require specific reserves at March 31, 2013 and December 31, 2012 have sufficient collateral values, less costs to sell, supporting the carrying balances of the loans. In some cases, there may be no specific reserves because the Company already charged-off the specific impairment. Once a borrower is in default, the Company is under no obligation to advance additional funds on unused commitments.

 

On a case-by-case basis, the Company may agree to modify the contractual terms of a borrower’s loan to remain competitive and assist customers who may be experiencing financial difficulty, as well as preserve the Company’s position in the loan. If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a troubled debt restructured loan.

The following table presents the total troubled debt restructured loans as of March 31, 2013:

 

                                                 
    Accrual     Non-accrual     Total  
    # of           # of           # of        
    Loans     Amount     Loans     Amount     Loans     Amount  

Commercial Real Estate

     —       $ —         2     $ 4,226,283       2     $ 4,226,283  

Residential Real Estate

     1       4,370,725       2       852,507       3       5,223,232  

Construction to permanent

     2       4,730,324       1       1,243,401       3       5,973,725  

Consumer home equity

     1       562,744       —         —         1       562,744  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Troubled Debt Restructurings

     4     $ 9,663,793       5     $ 6,322,191       9     $ 15,985,984  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

The following table presents the total troubled debt restructured loans as of December 31, 2012:

 

                                                 
    Accrual     Non-accrual     Total  
    # of           # of           # of        
    Loans     Amount     Loans     Amount     Loans     Amount  

Commercial Real Estate

     —       $ —         2     $ 4,255,658       2     $ 4,255,658  

Residential Real Estate

     —         —         3       5,519,232       3       5,519,232  

Construction to permanent

     —         —         1       1,258,710       1       1,258,710  

Commercial

     —         —         1       37,251       1       37,251  

Consumer home equity

     1       564,175       —         —         1       564,175  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Troubled Debt Restructurings

     1     $ 564,175       7     $ 11,070,851       8     $ 11,635,026  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Two loans were modified in a troubled debt restructuring during the three months ended March 31, 2013. The following table summarizes loans that were modified in a troubled debt restructuring during the three months ended March 31, 2013.

 

                                 
    Three months ended March 31, 2013  
          Pre-Modification           Post-Modification  
    Number of     Outstanding Recorded     Number of     Outstanding Recorded  
    Relationships     Investment     Relationships     Investment  

Troubled Debt Restructurings

                                

Construction to permanent

     2       4,730,324       2       4,730,324  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total Troubled Debt Restructurings

     2     $ 4,730,324       2     $ 4,730,324  
   

 

 

    

 

 

    

 

 

    

 

 

  

 

Substantially all of our troubled debt restructured loan modifications involve lowering the monthly payments on such loans through either a reduction in interest rate below market rate, an extension of the term of the loan, or a combination of these two methods. These modifications rarely result in the forgiveness of principal or accrued interest. In addition, we frequently obtain additional collateral or guarantor support when modifying commercial loans. If the borrower had demonstrated performance under the previous terms and our underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.

During the three months ended March 31, 2013, two construction to permanent loans to one borrower in the amount of $3.7 million and $1.0 million were downgraded due to the financial hardship of the borrower. One commercial loan that was a troubled debt restructured loan at December 31, 2012 for $37,000 was paid off.

All troubled debt restructurings are impaired loans, which are individually evaluated for impairment.