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Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2022

Loans and Allowance for Loan Losses [Abstract]

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or payoffs, are reported at their outstanding principal balances adjusted for any charge-offs, the allowance for loan losses, any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term. Generally, all loan classes are placed on nonaccrual status not later than 90 days past due, unless the loan is well-secured and in the process of collection. All interest accrued, but not collected, for loans that are placed on nonaccrual or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the non-collectability of a loan balance is probable. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as new information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based on current information and events, it is probable that State Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration each of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial, agricultural, and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

When State Bank moves a loan to nonaccrual status, total unpaid interest accrued to date is reversed from income. Subsequent payments are applied to the outstanding principal balance with the interest portion of the payment recorded on the balance sheet as a contra-loan. Interest received on impaired loans may be realized once all contractual principal amounts are received or when a borrower establishes a history of six consecutive timely principal and interest payments. It is at the discretion of management to determine when a loan is placed back on accrual status upon receipt of six consecutive timely payments.

Large groups of smaller balance homogenous loans are collectively evaluated for impairment. Accordingly, State Bank does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

Categories of loans at June 30, 2022 and December 31, 2021 include:

	Total Loans						Nonaccrual Loans
($ in thousands)	June 2022			December 2021			June 2022		December 2021

Commercial & industrial	$	127,434		$	122,250		$	140	$	143
Commercial real estate - owner occupied		129,496			118,891			88		88
Commercial real estate - nonowner occupied		274,583			262,277			271		466
Agricultural		60,490			57,403			-		-
Residential real estate		241,776			206,424			3,176		2,484
Home equity line of credit (HELOC)		44,142			41,682			291		464
Consumer		17,303			13,474			32		7
Total loans	$	895,224		$	822,401		$	3,998	$	3,652

Net deferred costs (fees)	$	387		$	313

Total loans, net deferred costs (fees)	$	895,611		$	822,714

Allowance for loan losses	$	(13,801	)	$	(13,805	)

The risk characteristics of each loan portfolio segment are as follows:

Commercial & Industrial and Agricultural

Commercial & industrial and agricultural loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may include a personal guarantee. Short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial Real Estate (Owner and Nonowner Occupied)

Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The characteristics of properties securing the Company’s commercial real estate portfolio are diverse, but with geographic location almost entirely in the Company’s market area. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. In general, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied versus non-owner-occupied commercial real estate loans.

Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews and financial analysis of the developers and property owners. Construction loans are generally based on estimates of costs and value associated with the completed project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

Residential Real Estate, HELOC and Consumer

Residential and consumer loans consist of two segments – residential mortgage loans and personal loans. Residential mortgage loans are secured by 1-4 family residences and are generally owner-occupied, and the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. HELOCs are typically secured by a subordinate interest in 1-4 family residences, and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles. Some consumer personal loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that these loans are of smaller individual amounts and spread over a large number of borrowers.

The following tables present the activity in the allowance for loan losses for the three and six months ended June 30, 2022 and June 30, 2021, and the recorded investment in loans based on portfolio segment and impairment method as of June 30, 2022 and December 31, 2021.

($ in thousands)
For the Three Months Ended June 30, 2022	Commercial & industrial			Commercial real estate			Agricultural		Residential real estate		Consumer			Total

Beginning balance	$	1,892		$	6,883		$	547	$	3,502	$	980		$	13,804
Charge offs		-			-			-		-		(9	)		(9	)
Recoveries		-			-			-		-		6			6
Provision		(64	)		(212	)		13		249		14			-
Ending balance	$	1,828		$	6,671		$	560	$	3,751	$	991		$	13,801

For the Six Months Ended June 30, 2022	Commercial & industrial			Commercial real estate			Agricultural			Residential real estate		Consumer			Total

Beginning balance	$	1,890		$	6,781		$	599		$	3,515	$	1,020		$	13,805
Charge offs		-			-			-			-		(18	)		(18	)
Recoveries		-			-			-			-		14			14
Provision		(62	)		(110	)		(39	)		236		(25	)		-
Ending balance	$	1,828		$	6,671		$	560		$	3,751	$	991		$	13,801

For the Three Months Ended June 30, 2021	Commercial & industrial			Commercial real estate		Agricultural		Residential real estate			Consumer			Total

Beginning balance	$	2,959		$	6,177	$	473	$	2,608		$	1,109		$	13,326
Charge offs		-			-		-		(22	)		(4	)		(26	)
Recoveries		-			-		-		-			6			6
Provision		(1,241	)		495		21		839			(114	)		-
Ending balance	$	1,718		$	6,672	$	494	$	3,425		$	997		$	13,306

For the Six Months Ended June 30, 2021	Commercial & industrial			Commercial real estate		Agricultural			Residential real estate			Consumer			Total

Beginning balance	$	3,074		$	5,451	$	496		$	2,534		$	1,019		$	12,574
Charge offs		-			-		-			(43	)		(35	)		(78	)
Recoveries		-			-		-			49			11			60
Provision		(1,356	)		1,221		(2	)		885			2			750
Ending balance	$	1,718		$	6,672	$	494		$	3,425		$	997		$	13,306

Loans Receivable at June 30, 2022	Commercial & industrial		Commercial real estate		Agricultural		Residential real estate		Consumer		Total
Allowance:
Ending balance:
individually evaluated for impairment	$	-	$	-	$	-	$	167	$	4	$	171
Ending balance:
collectively evaluated for impairment	$	1,828	$	6,671	$	560	$	3,584	$	987	$	13,630
Totals	$	1,828	$	6,671	$	560	$	3,751	$	991	$	13,801

Loans:
Ending balance:
individually evaluated for impairment	$	117	$	295	$	-	$	2,997	$	131	$	3,540
Ending balance:
collectively evaluated for impairment	$	127,317	$	403,784	$	60,490	$	238,779	$	61,314	$	891,684
Totals	$	127,434	$	404,079	$	60,490	$	241,776	$	61,445	$	895,224

Loans Receivable at December 31, 2021	Commercial & industrial		Commercial real estate		Agricultural		Residential real estate		Consumer		Total
Allowance:
Ending balance:
individually evaluated for impairment	$	-	$	10	$	-	$	120	$	3	$	133
Ending balance:
collectively evaluated for impairment	$	1,890	$	6,771	$	599	$	3,395	$	1,017	$	13,672
Totals	$	1,890	$	6,781	$	599	$	3,515	$	1,020	$	13,805

Loans:
Ending balance:
individually evaluated for impairment	$	118	$	354	$	-	$	2,307	$	135	$	2,914
Ending balance:
collectively evaluated for impairment	$	122,132	$	380,814	$	57,403	$	204,117	$	55,021	$	819,487
Totals	$	122,250	$	381,168	$	57,403	$	206,424	$	55,156	$	822,401

Credit Risk Profile

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes loans with an outstanding balance greater than $100,000 and non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Pass (grades 1 – 4): Loans which management has determined to be performing as expected and in agreement with the terms established at the time of loan origination.

Special Mention (5): Assets have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Ordinarily, special mention credits have characteristics which corrective management action would remedy.

Substandard (6): Loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful (7): Loans classified as doubtful have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current known facts, conditions and values, highly questionable and improbable.

Loss (8): Loans are considered uncollectable and of such little value that continuing to carry them as assets on the Company’s financial statement is not warranted. Loans will be classified as Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

The following tables present the credit risk profile of the Company’s loan portfolio based on rating category as of June 30, 2022 and December 31, 2021.

($ in thousands) June 30, 2022	Commercial & industrial		Commercial real estate - owner occupied		Commercial real estate - nonowner occupied		Agricultural		Residential real estate		HELOC		Consumer		Total

Pass (1 - 4)	$	126,532	$	126,444	$	269,015	$	60,490	$	238,272	$	43,851	$	17,272	$	881,876
Special Mention (5)		600		2,964		5,292		-		-		-		-		8,856
Substandard (6)		161		-		5		-		3,479		291		31		3,967
Doubtful (7)		141		88		271		-		25		-		-		525
Loss (8)		-		-		-		-		-		-		-		-
Total Loans	$	127,434	$	129,496	$	274,583	$	60,490	$	241,776	$	44,142	$	17,303	$	895,224

December 31, 2021	Commercial & industrial		Commercial real estate - owner occupied		Commercial real estate - nonowner occupied		Agricultural		Residential real estate		HELOC		Consumer		Total

Pass (1 - 4)	$	121,285	$	111,232	$	253,269	$	57,403	$	203,295	$	41,218	$	13,467	$	801,169
Special Mention (5)		659		7,571		5,694		-		-		-		-		13,924
Substandard (6)		188		-		2,848		-		3,102		464		7		6,609
Doubtful (7)		118		88		466		-		27		-		-		699
Loss (8)		-		-		-		-		-		-		-		-
Total Loans	$	122,250	$	118,891	$	262,277	$	57,403	$	206,424	$	41,682	$	13,474	$	822,401

The Company evaluates the loan risk grading system definitions and allowance for loan loss methodology on an ongoing basis. The following tables present the Company’s loan portfolio aging analysis as of June 30, 2022 and December 31, 2021.

($ in thousands)	30-59 Days		60-89 Days		Greater Than 90 Days		Total Past				Total Loans
June 30, 2022	Past Due		Past Due		Past Due		Due		Current		Receivable

Commercial & industrial	$	156	$	-	$	140	$	296	$	127,138	$	127,434
Commercial real estate - owner occupied		48		-		88		136		129,360		129,496
Commercial real estate - nonowner occupied		255		-		71		326		274,257		274,583
Agricultural		-		-		-		-		60,490		60,490
Residential real estate		23		374		1,361		1,758		240,018		241,776
HELOC		118		94		134		346		43,796		44,142
Consumer		18		19		22		59		17,244		17,303
Total Loans	$	618	$	487	$	1,816	$	2,921	$	892,303	$	895,224

	30-59 Days		60-89 Days		Greater Than 90 Days		Total Past				Total Loans
December 31, 2021	Past Due		Past Due		Past Due		Due		Current		Receivable

Commercial & industrial	$	166	$	25	$	118	$	309	$	121,941	$	122,250
Commercial real estate - owner occupied		-		-		88		88		118,803		118,891
Commercial real estate - nonowner occupied		221		233		246		700		261,577		262,277
Agricultural		-		-		-		-		57,403		57,403
Residential real estate		265		716		1,344		2,325		204,099		206,424
HELOC		53		80		248		381		41,301		41,682
Consumer		20		14		7		41		13,433		13,474
Total Loans	$	725	$	1,068	$	2,051	$	3,844	$	818,557	$	822,401

All loans past due 90 days are systematically placed on nonaccrual status.

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable State Bank will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

The following tables present impaired loan information as of and for the three and six months ended June 30, 2022 and 2021, and for the twelve months ended December 31, 2021:

($ in thousands)	Recorded		Unpaid Principal		Related		Average Recorded		Interest Income
Six Months Ended June 30, 2022	Investment		Balance		Allowance		Investment		Recognized

With no related allowance recorded:
Commercial & industrial	$	117	$	202	$	-	$	216	$	1
Commercial real estate - owner occupied		88		88		-		88		-
Commercial real estate - nonowner occupied		207		207		-		350		11
Agricultural		-		-		-		-		-
Residential real estate		1,750		1,816		-		2,011		35
HELOC		19		19				23		1
Consumer		-		-		-		-		-
With a specific allowance recorded:
Commercial & industrial		-		-		-		-		-
Commercial real estate - owner occupied		-		-		-		-		-
Commercial real estate - nonowner occupied		-		-		-		-		-
Agricultural		-		-		-		-		-
Residential real estate		1,247		1,247		167		1,279		1
HELOC		112		112		4		125		1
Consumer		-		-		-		-		-
Totals:
Commercial & industrial	$	117	$	202	$	-	$	216	$	1
Commercial real estate - owner occupied	$	88	$	88	$	-	$	88	$	-
Commercial real estate - nonowner occupied	$	207	$	207	$	-	$	350	$	11
Agricultural	$	-	$	-	$	-	$	-	$	-
Residential real estate	$	2,997	$	3,063	$	167	$	3,290	$	36
HELOC	$	131	$	131	$	4	$	148	$	2
Consumer	$	-	$	-	$	-	$	-	$	-

($ in thousands)	Average Recorded		Interest Income
Three Months Ended June 30, 2022	Investment		Recognized

With no related allowance recorded:
Commercial & industrial	$	216	$	1
Commercial real estate - owner occupied		88		-
Commercial real estate - nonowner occupied		348		6
Agricultural		-		-
Residential real estate		2,002		16
HELOC		21		-
Consumer		-		-
With a specific allowance recorded:
Commercial & industrial		-		-
Commercial real estate - owner occupied		-		-
Commercial real estate - nonowner occupied		-		-
Agricultural		-		-
Residential real estate		1,278		15
HELOC		123		1
Consumer		-		-
Totals:
Commercial & industrial	$	216	$	1
Commercial real estate - owner occupied	$	88	$	-
Commercial real estate - nonowner occupied	$	348	$	6
Agricultural	$	-	$	-
Residential real estate	$	3,280	$	31
HELOC	$	144	$	1
Consumer	$	-	$	-

($ in thousands)	Recorded		Unpaid Principal		Related		Average Recorded		Interest Income
Twelve Months Ended December 31, 2021	Investment		Balance		Allowance		Investment		Recognized

With no related allowance recorded:
Commercial & industrial	$	118	$	204	$	-	$	217	$	2
Commercial real estate - owner occupied		88		88		-		88		-
Commercial real estate - nonowner occupied		223		223		-		357		28
Agricultural		-		-		-		-		-
Residential real estate		1,391		1,458		-		1,663		60
HELOC		33		33				41		2
Consumer		-		-		-		-		-
With a specific allowance recorded:
Commercial & industrial		-		-		-		-		-
Commercial real estate - owner occupied		-		-		-		-		-
Commercial real estate - nonowner occupied		43		173		10		173		-
Agricultural		-		-		-		-		-
Residential real estate		916		916		120		933		20
HELOC		102		102		3		124		5
Consumer		-		-		-		-		-
Totals:
Commercial & industrial	$	118	$	204	$	-	$	217	$	2
Commercial real estate - owner occupied	$	88	$	88	$	-	$	88	$	-
Commercial real estate - nonowner occupied	$	266	$	396	$	10	$	530	$	28
Agricultural	$	-	$	-	$	-	$	-	$	-
Residential real estate	$	2,307	$	2,374	$	120	$	2,596	$	80
HELOC	$	135	$	135	$	3	$	165	$	7
Consumer	$	-	$	-	$	-	$	-	$	-

	Six Months Ended				Three Months Ended
($ in thousands)	Average Recorded		Interest Income		Average Recorded		Interest Income
June 30, 2021	Investment		Recognized		Investment		Recognized

With no related allowance recorded:
Commercial & industrial	$	855	$	22	$	849	$	11
Commercial real estate - owner occupied		88		-		88		-
Commercial real estate - nonowner occupied		532		15		531		8
Agricultural		-		-		-		-
Residential real estate		1,453		26		1,447		13
HELOC		46		1		44		-
Consumer		6		-		5		-
With a specific allowance recorded:
Commercial & industrial		-		-		-		-
Commercial real estate - owner occupied		-		-		-		-
Commercial real estate - nonowner occupied		579		-		579		-
Agricultural		-		-		-		-
Residential real estate		645		9		644		4
HELOC		129		3		127		1
Consumer		-		-		-		-
Totals:
Commercial & industrial	$	855	$	22	$	849	$	11
Commercial real estate - owner occupied	$	88	$	-	$	88	$	-
Commercial real estate - nonowner occupied	$	1,111	$	15	$	1,110	$	8
Agricultural	$	-	$	-	$	-	$	-
Residential real estate	$	2,098	$	35	$	2,091	$	17
HELOC	$	175	$	4	$	171	$	1
Consumer	$	6	$	-	$	5	$	-

Impaired loans less than $100,000 are included in groups of homogenous loans. These loans are evaluated based on delinquency status.

Interest income recognized on a cash basis does not materially differ from interest income recognized on an accrual basis.

Troubled Debt Restructured (TDR) Loans

TDRs are modified loans where a concession was provided to a borrower experiencing financial difficulties. Loan modifications are considered TDRs when the concessions provided are not available to the borrower through either normal channels or other sources. However, not all loan modifications are TDRs.

TDR Concession Types

The Company’s standards relating to loan modifications consider, among other factors, minimum verified income requirements, cash flow analysis, and collateral valuations. Each potential loan modification is reviewed individually and the terms of the loan are modified to meet a borrower’s specific circumstances at a point in time. All loan modifications, including those classified as TDRs, are reviewed and approved by management. The types of concessions provided to borrowers include:

●

Interest rate reduction: A reduction of the stated interest rate to a nonmarket rate for the remaining original life of the loan. The Company also may grant interest rate concessions for a limited timeframe on a case by case basis.

●

Amortization or maturity date change: A change in the amortization or maturity date beyond what the collateral supports, including a concession that does any of the following:

(1)

Lengthens the amortization period of the amortized principal beyond market terms. This concession reduces the minimum monthly payment and increases the amount of the balloon payment at the end of the term of the loan. Principal is generally not forgiven.

(2)

Reduces the amount of loan principal to be amortized. This concession also reduces the minimum monthly payment and increases the amount of the balloon payment at the end of the term of the loan. Principal is generally not forgiven.

(3)

Extends the maturity date or dates of the debt beyond what the collateral supports. This concession generally applies to loans without a balloon payment at the end of the term of the loan. In addition, there may be instances where renewing loans potentially require non-market terms and would then be reclassified as TDRs.

●

Other: A concession that is not categorized as one of the concessions described above. These concessions include, but are not limited to: principal forgiveness, collateral concessions, covenant concessions, and reduction of accrued interest. Principal forgiveness may result from any TDR modification of any concession type.

The Company had no new TDR activity in the three and six months ended June 30, 2022, and June 30, 2021, respectively. The Company had one TDR, a residential loan with a recorded balance of $62,000,that during the past twelve months defaulted on its modified contractual agreement.

On March 22, 2020, a statement was issued by the Company’s bank regulators and titled the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” (the “Interagency Statement”) that encouraged financial institutions to work prudently with borrowers unable to meet the contractual payment obligations due to the effects of COVID-19. Additionally, Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (the “CARES Act”) further provided that a qualified loan modification is exempt by law from classification as a troubled debt restructure as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2021 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak under the National Emergencies Act (50 U.S.C. 1601 et seq.) terminates. As of June 30, 2022, all loans previously modified under Section 4013 of the CARES Act had returned to normal payment terms.