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Loans Receivable and Allowance for Loan Losses | 9 Months Ended
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Sep. 30, 2013
Receivables [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 September 30, 2013 and December 31, 2012 is as follows:
|  | September 30, |  |  | December 31, |
|  | 2013 |  |  | 2012 |
Real Estate |  |  |  |  |  |  |  |
Commercial |  | $ | 223,883,646 |  |  | $ | 247,495,321 |
Residential |  |  | 113,349,382 |  |  |  | 119,033,025 |
Construction |  |  | 335,000 |  |  |  | 4,997,991 |
Construction to permanent |  |  | 10,225,669 |  |  |  | 4,851,768 |
Commercial |  |  | 40,002,905 |  |  |  | 36,428,751 |
Consumer home equity |  |  | 45,445,108 |  |  |  | 49,180,908 |
Consumer installment |  |  | 1,991,345 |  |  |  | 2,162,718 |
Total Loans |  |  | 435,233,055 |  |  |  | 464,150,482 |
Premiums on purchased loans |  |  | 202,452 |  |  |  | 219,649 |
Net deferred costs |  |  | 636,992 |  |  |  | 439,041 |
Allowance for loan losses |  |  | (6,216,070 | ) |  |  | (6,015,636 | )
Loans receivable, net |  | $ | 429,856,429 |  |  | $ | 458,793,536 |
The changes in the allowance for loan losses for the periods shown are as follows:
|  | Three months ended |  |  | Nine months ended |
|  | September 30, |  |  | September 30, |
|  | 2013 |  |  | 2012 |  |  | 2013 |  |  | 2012 |
Balance, beginning of period |  | $ | 5,322,070 |  |  | $ | 6,673,648 |  |  | $ | 6,015,636 |  |  | $ | 9,384,672 |
Provision for loan losses |  |  | 1,000,000 |  |  |  | — |  |  |  | 970,214 |  |  |  | (2,558,827 | )
Loans charged-off |  |  | (123,143 | ) |  |  | (3,997 | ) |  |  | (840,317 | ) |  |  | (197,220 | )
Recoveries of loans previously charged-off |  |  | 17,143 |  |  |  | 22,080 |  |  |  | 70,537 |  |  |  | 63,106 |
Balance, end of period |  | $ | 6,216,070 |  |  | $ | 6,691,731 |  |  | $ | 6,216,070 |  |  | $ | 6,691,731 |
At September 30, 2013 and December 31, 2012, the unpaid balances of loans 90 days or more past due and still accruing interest were $1.8 million and $2.2 million, respectively. Three of the 4 loans at September 30, 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 $214,000 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 $20.7 million at September 30, 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 $281,000 of additional income during the quarter ended September 30, 2013 and $521,000 during the quarter ended September 30, 2012. If non-accrual loans had been performing in accordance with their contractual terms, the Company would have recorded approximately $960,000 of additional income for the nine months ended September 30, 2013 and $1.1 million for the nine months ended September 30, 2012. For the three months ended September 30, 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 $627,000 and $76,000 respectively. For the nine months ended September 30, 2013 and 2012, the interest income collected and recognized on impaired loans was approximately $847,000 and $514,000 respectively. The average recorded investment in impaired loans for the three and nine months ended September 30, 2013 was $32.2 million and $32.3 million respectively. At September 30, 2013, there were 4 loans totaling $4.6 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 September 30, 2013, 1 of the 4 loans aggregating $1.0 million were accruing loans and 3 loans aggregating $3.6 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. 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 September 30, 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.
Three months ended September 30, 2013 |  | Commercial |  |  | Commercial Real Estate |  |  | Construction |  |  | Construction to Permanent |  |  | Residential |  |  | Consumer |  |  | Unallocated |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning Balance |  | $ | 1,721,688 |  |  | $ | 1,953,084 |  |  | $ | 236,484 |  |  | $ | 23,594 |  |  | $ | 933,961 |  |  | $ | 243,949 |  |  | $ | 209,310 |  |  | $ | 5,322,070 |
Charge-offs |  |  | (14,571 | ) |  |  | — |  |  |  | (106,764 | ) |  |  | — |  |  |  | — |  |  |  | (1,808 | ) |  |  | — |  |  |  | (123,143 | )
Recoveries |  |  | 1,243 |  |  |  | 14,987 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 913 |  |  |  | — |  |  |  | 17,143 |
Provision |  |  | 1,051,322 |  |  |  | (166,784 | ) |  |  | (13,502 | ) |  |  | 892 |  |  |  | 86,114 |  |  |  | (14,191 | ) |  |  | 56,149 |  |  |  | 1,000,000 |
Ending Balance |  | $ | 2,759,682 |  |  | $ | 1,801,287 |  |  | $ | 116,218 |  |  | $ | 24,486 |  |  | $ | 1,020,075 |  |  | $ | 228,863 |  |  | $ | 265,459 |  |  | $ | 6,216,070 |
Ending balance: individually evaluated for impairment |  | $ | 2,200,000 |  |  | $ | 513,112 |  |  | $ | 116,218 |  |  | $ | — |  |  | $ | 325,690 |  |  | $ | 1,861 |  |  | $ | — |  |  | $ | 3,156,881 |
Ending balance: collectively evaluated for impairment |  |  | 559,682 |  |  |  | 1,288,175 |  |  |  | — |  |  |  | 24,486 |  |  |  | 694,385 |  |  |  | 227,002 |  |  |  | 265,459 |  |  |  | 3,059,189 |
Total Allowance for Loan Losses |  | $ | 2,759,682 |  |  | $ | 1,801,287 |  |  | $ | 116,218 |  |  | $ | 24,486 |  |  | $ | 1,020,075 |  |  | $ | 228,863 |  |  | $ | 265,459 |  |  | $ | 6,216,070 |
Total Loans ending balance |  | $ | 40,002,905 |  |  | $ | 223,883,646 |  |  | $ | 335,000 |  |  | $ | 10,225,669 |  |  | $ | 113,349,382 |  |  | $ | 47,436,453 |  |  | $ | — |  |  | $ | 435,233,055 |
Ending balance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
individually evaluated for impairment |  | $ | 6,109,493 |  |  | $ | 13,442,936 |  |  | $ | 335,000 |  |  | $ | 1,212,951 |  |  | $ | 8,733,016 |  |  | $ | 653,344 |  |  | $ | — |  |  | $ | 30,486,740 |
Ending balance : |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
collectively evaluated for impairment |  | $ | 33,893,412 |  |  | $ | 210,440,710 |  |  | $ | — |  |  | $ | 9,012,718 |  |  | $ | 104,616,366 |  |  | $ | 46,783,109 |  |  | $ | — |  |  | $ | 404,746,315 |
The following table sets forth activity in our allowance for loan losses, by loan type, for the nine months ended September 30, 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.
Nine months ended September 30, 2013 |  | Commercial |  |  | Commercial Real Estate |  |  | Construction |  |  | Construction to Permanent |  |  | Residential |  |  | Consumer |  |  | Unallocated |  |  | Total |
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 |  |  | (14,571 | ) |  |  | (290,000 | ) |  |  | (129,868 | ) |  |  | — |  |  |  | (385,117 | ) |  |  | (20,761 | ) |  |  | — |  |  |  | (840,317 | )
Recoveries |  |  | 3,243 |  |  |  | 44,963 |  |  |  | 20,000 |  |  |  | — |  |  |  | 612 |  |  |  | 1,719 |  |  |  | — |  |  |  | 70,537 |
Provision |  |  | 1,829,554 |  |  |  | (1,463,071 | ) |  |  | (85,211 | ) |  |  | 5,766 |  |  |  | 507,212 |  |  |  | 31,207 |  |  |  | 144,757 |  |  |  | 970,214 |
Ending Balance |  | $ | 2,759,682 |  |  | $ | 1,801,287 |  |  | $ | 116,218 |  |  | $ | 24,486 |  |  | $ | 1,020,075 |  |  | $ | 228,863 |  |  | $ | 265,459 |  |  | $ | 6,216,070 |
Ending balance: individually evaluated for impairment |  | $ | 2,200,000 |  |  | $ | 513,112 |  |  | $ | 116,218 |  |  | $ | — |  |  | $ | 325,690 |  |  | $ | 1,861 |  |  | $ | — |  |  | $ | 3,156,881 |
Ending balance: collectively evaluated for impairment |  |  | 559,682 |  |  |  | 1,288,175 |  |  |  | — |  |  |  | 24,486 |  |  |  | 694,385 |  |  |  | 227,002 |  |  |  | 265,459 |  |  |  | 3,059,189 |
Total Allowance for Loan Losses |  | $ | 2,759,682 |  |  | $ | 1,801,287 |  |  | $ | 116,218 |  |  | $ | 24,486 |  |  | $ | 1,020,075 |  |  | $ | 228,863 |  |  | $ | 265,459 |  |  | $ | 6,216,070 |
Total Loans ending balance |  | $ | 40,002,905 |  |  | $ | 223,883,646 |  |  | $ | 335,000 |  |  | $ | 10,225,669 |  |  | $ | 113,349,382 |  |  | $ | 47,436,453 |  |  | $ | — |  |  | $ | 435,233,055 |
Ending balance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
individually evaluated for impairment |  | $ | 6,109,493 |  |  | $ | 13,442,936 |  |  | $ | 335,000 |  |  | $ | 1,212,951 |  |  | $ | 8,733,016 |  |  | $ | 653,344 |  |  | $ | — |  |  | $ | 30,486,740 |
Ending balance : |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
collectively evaluated for impairment |  | $ | 33,893,412 |  |  | $ | 210,440,710 |  |  | $ | — |  |  | $ | 9,012,718 |  |  | $ | 104,616,366 |  |  | $ | 46,783,109 |  |  | $ | — |  |  | $ | 404,746,315 |
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.
2012 |  | Commercial |  |  | Commercial Real Estate |  |  | Construction |  |  | Construction to Permanent |  |  | Residential |  |  | Consumer |  |  | Unallocated |  |  | Total |
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 the most recent appraisal, which may be the original appraisal. 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 September 30, 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 |  | $ | 27,830,172 |  |  | $ | 3,712,583 |  |  | $ | 193,051,087 |  |  | $ | 7,029,296 |  |  | $ | — |  |  | $ | — |  |  | $ | 9,012,718 |  |  | $ | — |  |  | $ | 82,973,466 |  |  | $ | 24,781,210 |  |  | $ | 42,243,549 |  |  | $ | 4,458,999 |  |  | $ | 633,192 |  |  | $ | 395,726,272 |
Special Mention |  |  | 175,632 |  |  |  | — |  |  |  | 8,277,203 |  |  |  | 2,526,863 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 10,979,698 |
Substandard |  |  | 8,284,518 |  |  |  | — |  |  |  | 2,733,499 |  |  |  | 10,265,698 |  |  |  | — |  |  |  | 335,000 |  |  |  | — |  |  |  | 1,212,951 |  |  |  | 2,497,660 |  |  |  | 3,097,046 |  |  |  | 42,713 |  |  |  | 58,000 |  |  |  | — |  |  |  | 28,527,085 |
|  | $ | 36,290,322 |  |  | $ | 3,712,583 |  |  | $ | 204,061,789 |  |  | $ | 19,821,857 |  |  | $ | — |  |  | $ | 335,000 |  |  | $ | 9,012,718 |  |  | $ | 1,212,951 |  |  | $ | 85,471,126 |  |  | $ | 27,878,256 |  |  | $ | 42,286,262 |  |  | $ | 4,516,999 |  |  | $ | 633,192 |  |  | $ | 435,233,055 |
CREDIT RISK PROFILE
|  | Commercial |  |  | Commercial Real Estate |  |  | Construction |  |  | Construction to Permanent |  |  | Residential Real Estate |  |  | Consumer |  |  | Totals |
Performing |  | $ | 33,893,412 |  |  | $ | 216,488,334 |  |  | $ | — |  |  | $ | 9,012,718 |  |  | $ | 107,754,676 |  |  | $ | 47,343,058 |  |  | $ | 414,492,198 |
Non Performing |  |  | 6,109,493 |  |  |  | 7,395,312 |  |  |  | 335,000 |  |  |  | 1,212,951 |  |  |  | 5,594,706 |  |  |  | 93,395 |  |  |  | 20,740,857 |
Total |  | $ | 40,002,905 |  |  | $ | 223,883,646 |  |  | $ | 335,000 |  |  | $ | 10,225,669 |  |  | $ | 113,349,382 |  |  | $ | 47,436,453 |  |  | $ | 435,233,055 |
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 September 30, 2013:
|  | Non-Accrual and Past Due Loans |
|  | Non-Accrual Loans |  |  |  |  |  |  |
|  | 31-60 Days Past Due |  |  | 61-90 Days Past Due |  |  | Greater Than 90 Days |  |  | Total Past Due |  |  | Current |  |  | >90 Days Past Due and Accruing |  |  | Total Non- Accrual and Past Due Loans |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Substandard |  | $ | — |  |  | $ | — |  |  | $ | 6,109,493 |  |  | $ | 6,109,493 |  |  | $ | — |  |  | $ | 749,999 |  |  | $ | 6,859,492 |
Total Commercial |  | $ | — |  |  | $ | — |  |  | $ | 6,109,493 |  |  | $ | 6,109,493 |  |  | $ | — |  |  | $ | 749,999 |  |  | $ | 6,859,492 |
Commercial Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 214,005 |  |  | $ | 214,005 |
Substandard |  | $ | — |  |  | $ | — |  |  | $ | 7,395,312 |  |  | $ | 7,395,312 |  |  | $ | — |  |  | $ | 847,562 |  |  | $ | 8,242,874 |
Total Commercial Real Estate |  | $ | — |  |  | $ | — |  |  | $ | 7,395,312 |  |  | $ | 7,395,312 |  |  | $ | — |  |  | $ | 1,061,567 |  |  | $ | 8,456,879 |
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Substandard |  | $ | — |  |  | $ | — |  |  | $ | 335,000 |  |  | $ | 335,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 335,000 |
Total Construction |  | $ | — |  |  | $ | — |  |  | $ | 335,000 |  |  | $ | 335,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 335,000 |
Construction to Permanent |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Substandard |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,212,951 |  |  | $ | — |  |  | $ | 1,212,951 |
Total Construction to Permanent |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,212,951 |  |  | $ | — |  |  | $ | 1,212,951 |
Residential Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Substandard |  | $ | — |  |  | $ | — |  |  | $ | 5,209,929 |  |  | $ | 5,209,929 |  |  | $ | 384,777 |  |  | $ | — |  |  | $ | 5,594,706 |
Total Residential Real Estate |  | $ | — |  |  | $ | — |  |  | $ | 5,209,929 |  |  | $ | 5,209,929 |  |  | $ | 384,777 |  |  | $ | — |  |  | $ | 5,594,706 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Substandard |  | $ | — |  |  | $ | 33,534 |  |  | $ | 59,861 |  |  | $ | 93,395 |  |  | $ | — |  |  | $ | — |  |  | $ | 93,395 |
Total Consumer |  | $ | — |  |  | $ | 33,534 |  |  | $ | 59,861 |  |  | $ | 93,395 |  |  | $ | — |  |  | $ | — |  |  | $ | 93,395 |
Total |  | $ | — |  |  | $ | 33,534 |  |  | $ | 19,109,595 |  |  | $ | 19,143,129 |  |  | $ | 1,597,728 |  |  | $ | 1,811,566 |  |  | $ | 22,552,423 |
$6.1 million of the commercial substandard loans reported above was subsequently modified and brought current as to principal and interest. 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 |  |  |  |
|  | 31-60 Days Past Due |  |  | 61-90 Days Past Due |  |  | Greater Than 90 Days |  |  | Total Past Due |  |  | Current |  |  | >90 Days Past Due and Accruing |  |  | Total Non- 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 |
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 $20.7 million and $23.8 million at September 30, 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 $1.8 million and $2.2 million at September 30, 2013, and December 31, 2012 respectively, and consisted of 4 loans at September 30, 2013. Three of the 4 loans at September 30, 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 $214,000 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 September 30, 2013.
|  | Performing (Accruing) Loans |  |  |  |  |  |  |
|  | 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 |  | $ | — |  |  | $ | 25,000 |  |  | $ | 25,000 |  |  | $ | 31,517,755 |  |  | $ | 31,542,755 |  |  | $ | — |  |  | $ | 31,542,755 |
Special Mention |  |  | 17,403 |  |  |  | — |  |  |  | 17,403 |  |  |  | 158,229 |  |  |  | 175,632 |  |  |  | — |  |  |  | 175,632 |
Substandard |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,425,026 |  |  |  | 1,425,026 |  |  |  | 6,859,492 |  |  |  | 8,284,518 |
Total Commercial |  | $ | 17,403 |  |  | $ | 25,000 |  |  | $ | 42,403 |  |  | $ | 33,101,010 |  |  | $ | 33,143,413 |  |  | $ | 6,859,492 |  |  | $ | 40,002,905 |
Commercial Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 199,866,378 |  |  | $ | 199,866,378 |  |  | $ | 214,005 |  |  | $ | 200,080,383 |
Special Mention |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 10,804,066 |  |  |  | 10,804,066 |  |  |  | — |  |  |  | 10,804,066 |
Substandard |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,756,323 |  |  |  | 4,756,323 |  |  |  | 8,242,874 |  |  |  | 12,999,197 |
Total Commercial Real Estate |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 215,426,767 |  |  | $ | 215,426,767 |  |  | $ | 8,456,879 |  |  | $ | 223,883,646 |
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Special Mention |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Substandard |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 335,000 |  |  |  | 335,000 |
Total Construction |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 335,000 |  |  | $ | 335,000 |
Construction to Permanent |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 9,012,718 |  |  | $ | 9,012,718 |  |  | $ | — |  |  | $ | 9,012,718 |
Special Mention |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Substandard |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,212,951 |  |  |  | 1,212,951 |
Total Construction to Permanent |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 9,012,718 |  |  | $ | 9,012,718 |  |  | $ | 1,212,951 |  |  | $ | 10,225,669 |
Residential Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 86,107 |  |  | $ | — |  |  | $ | 86,107 |  |  | $ | 107,668,569 |  |  | $ | 107,754,676 |  |  | $ | — |  |  | $ | 107,754,676 |
Special Mention |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Substandard |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 5,594,706 |  |  |  | 5,594,706 |
Total Residential Real Estate |  | $ | 86,107 |  |  | $ | — |  |  | $ | 86,107 |  |  | $ | 107,668,569 |  |  | $ | 107,754,676 |  |  | $ | 5,594,706 |  |  | $ | 113,349,382 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 47,335,740 |  |  | $ | 47,335,740 |  |  | $ | — |  |  | $ | 47,335,740 |
Special Mention |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Substandard |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 7,318 |  |  |  | 7,318 |  |  |  | 93,395 |  |  |  | 100,713 |
Total Consumer |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 47,343,058 |  |  | $ | 47,343,058 |  |  | $ | 93,395 |  |  | $ | 47,436,453 |
Total |  | $ | 103,510 |  |  | $ | 25,000 |  |  | $ | 128,510 |  |  | $ | 412,552,122 |  |  | $ | 412,680,632 |  |  | $ | 22,552,423 |  |  | $ | 435,233,055 |
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 |  |  |  |  |  |  |
|  | 31-60 Days Past Due |  |  | Greater Than 60 Days |  |  | Total Past Due |  |  | Current |  |  | Total Performing 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 September 30, 2013:
|  | Recorded Investment |  |  | Unpaid Principal Balance |  |  | Related Allowance |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 9,050 |  |  | $ | 103,309 |  |  | $ | — |
Commercial Real Estate |  |  | 10,154,788 |  |  |  | 10,863,318 |  |  |  | — |
Construction |  |  | — |  |  |  | — |  |  |  | — |
Construction to Permanent |  |  | 1,212,951 |  |  |  | 1,425,000 |  |  |  |  |
Residential |  |  | 8,087,483 |  |  |  | 8,215,052 |  |  |  | — |
Consumer |  |  | 651,483 |  |  |  | 672,679 |  |  |  | — |
Total: |  | $ | 20,115,755 |  |  | $ | 21,279,358 |  |  | $ | — |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 6,100,443 |  |  | $ | 6,166,667 |  |  | $ | 2,200,000 |
Commercial Real Estate |  |  | 3,288,148 |  |  |  | 3,606,643 |  |  |  | 513,112 |
Construction |  |  | 335,000 |  |  |  | 486,625 |  |  |  | 116,218 |
Construction to Permanent |  |  | — |  |  |  | — |  |  |  | — |
Residential |  |  | 645,533 |  |  |  | 2,647,198 |  |  |  | 325,690 |
Consumer |  |  | 1,861 |  |  |  | 2,098 |  |  |  | 1,861 |
Total: |  | $ | 10,370,985 |  |  | $ | 12,909,231 |  |  | $ | 3,156,881 |
Commercial |  | $ | 6,109,493 |  |  | $ | 6,269,976 |  |  | $ | 2,200,000 |
Commercial Real Estate |  |  | 13,442,936 |  |  |  | 14,469,961 |  |  |  | 513,112 |
Construction |  |  | 335,000 |  |  |  | 486,625 |  |  |  | 116,218 |
Construction to Permanent |  |  | 1,212,951 |  |  |  | 1,425,000 |  |  |  | — |
Residential |  |  | 8,733,016 |  |  |  | 10,862,250 |  |  |  | 325,690 |
Consumer |  |  | 653,344 |  |  |  | 674,777 |  |  |  | 1,861 |
Total: |  | $ | 30,486,740 |  |  | $ | 34,188,589 |  |  | $ | 3,156,881 |
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 September 30, 2013 and December 31, 2012 was $30.5 million and $33.4 million, with related allowances of $3.2 million and $1.0 million, respectively. Included in the tables above at September 30, 2013 and December 31, 2012 are loans with carrying balances of $20.1 million and $25.0 million that required no specific reserves in our allowance for loan losses. Loans that did not require specific reserves at September 30, 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 September 30, 2013:
|  | Accrual |  |  | Non-accrual |  |  | Total |
|  | # of |  |  |  |  |  | # of |  |  |  |  |  | # of |  |  |  |
|  | Loans |  |  | Amount |  |  | Loans |  |  | Amount |  |  | Loans |  |  | Amount |
Commercial Real Estate |  |  | — |  |  | $ | — |  |  |  | 1 |  |  | $ | 1,880,000 |  |  |  | 1 |  |  | $ | 1,880,000 |
Residential Real Estate |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | 500,000 |  |  |  | 1 |  |  |  | 500,000 |
Construction to permanent |  |  | 1 |  |  |  | 1,003,299 |  |  |  | 1 |  |  |  | 1,212,951 |  |  |  | 2 |  |  |  | 2,216,250 |
Total Troubled Debt Restructurings |  |  | 1 |  |  | $ | 1,003,299 |  |  |  | 3 |  |  | $ | 3,592,951 |  |  |  | 4 |  |  | $ | 4,596,250 |
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 |
No loans were modified in a troubled debt restructuring during the three months ended September 30, 2013. The following table summarizes loans that were modified in a troubled debt restructuring during the nine months ended September 30, 2013.
|  | Nine months ended September 30, 2013 |
|  | Number of Relationships |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Number of Relationships |  |  | Post-Modification Outstanding Recorded Investment |
Troubled Debt Restructurings |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction to permanent |  |  | 2 |  |  |  | 4,730,324 |  |  |  | 2 |  |  |  | 4,698,372 |
Total Troubled Debt Restructurings |  |  | 2 |  |  | $ | 4,730,324 |  |  |  | 2 |  |  | $ | 4,698,372 |
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 nine months ended September 30, 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. The loan for $3.7 million has since been upgraded. Three troubled debt restructured loans, a commercial loan for $37,000, a residential real estate loan for $4.4 million and a commercial real estate loan for $2.0 million have since paid off. Two troubled debt restructured loans, a home equity installment loan for $563,000 and a residential real estate loan for 347,000 were upgraded due to the improvement in the borrower’s financial condition. All troubled debt restructurings are impaired loans, which are individually evaluated for impairment.

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