Company Quick10K Filing
Quick10K
Trinity Capital
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-K 2014-12-31 Annual: 2014-12-31
8-K 2019-02-22 Other Events
8-K 2018-12-27 Other Events
8-K 2018-12-17
8-K 2018-11-09 Earnings, Exhibits
8-K 2018-11-01 Enter Agreement, Regulation FD, Other Events, Exhibits
8-K 2018-10-25 Officers
8-K 2018-09-05 Regulation FD
8-K 2018-08-27 Officers
8-K 2018-08-17 Officers, Exhibits
8-K 2018-08-10 Earnings, Exhibits
8-K 2018-07-31 Regulation FD
8-K 2018-05-30 Shareholder Vote
8-K 2018-04-20 Officers
8-K 2018-03-20
8-K 2018-03-08 Other Events
8-K 2018-02-27 Leave Agreement
8-K 2018-01-24 Amend Bylaw
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TCPP 2018-09-30
Part I - Financial Information
Item 1. Financial Statements
Note 1. Basis of Presentation
Note 2. Earnings (Loss) per Share Data
Note 3. Recent Accounting Pronouncements
Note 4. Restrictions on Cash and Due From Banks
Note 5. Investment Securities
Note 6. Loans and Allowance for Loan Losses
Note 7. Loan Servicing and Mortgage Servicing Rights
Note 8. Other Real Estate Owned
Note 9. Deposits
Note 10. Borrowings
Note 11. Junior Subordinated Debt
Note 12. Income Taxes
Note 13. Commitments and Off-Balance-Sheet Activities
Note 14. Preferred Equity Issues
Note 15. Stock Incentives
Note 16. Fair Value Measurements
Note 17. Regulatory Matters
Note 18. Subsequent Event
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex31_1.htm
EX-31.2 ex31_2.htm
EX-32.1 ex32_1.htm
EX-32.2 ex32_2.htm

Trinity Capital Earnings 2018-09-30

TCPP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 form10q.htm  
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2018
 
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                                                    to

Commission File Number 000-50266


TRINITY CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)

New Mexico
 
85-0242376
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
1200 Trinity Drive
Los Alamos, New Mexico
 
87544
(Address of principal executive offices)
 
(Zip Code)

(505) 662-5171
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes      No

 Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes     No

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Act. (Check one):

Large accelerated filer
Accelerated filer              
Non-accelerated filer     (do not check if a smaller reporting company) 
Smaller reporting company
Emerging growth company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes     No
 
As of October 31, 2018, there were 11,660,491 shares of voting common stock outstanding and 8,044,292 shares of non-voting common stock outstanding.
 

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
 
Item 1. Financial Statements and Supplementary Data
1
Item 2. Management's Discussions and Analysis of Financial Condition and Results of Operations
24
Item 3. Quantitative and Qualitative Disclosures About Market Risk
35
Item 4. Controls and Procedures
35
PART II – OTHER INFORMATION
 
Item 1. Legal Proceedings
36
Item 1A. Risk Factors
36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
36
Item 3. Defaults Upon Senior Securities
36
Item 4. Mine Safety Disclosures
36
Item 5. Other Information
36
Item 6. Exhibits
37
Signatures
38
 
1

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

TRINITY CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

(In thousands, except share and per share data)
           
 
 
September 30, 2018
   
December 31, 2017
 
ASSETS
           
Cash and due from banks
 
$
11,046
   
$
12,893
 
Interest-bearing deposits with banks
   
3,645
     
22,541
 
Cash and cash equivalents
   
14,691
     
35,434
 
Investment securities available for sale, at fair value
   
437,975
     
468,733
 
Investment securities held to maturity, at amortized cost (fair value of $7,151 and $7,369 as of September 30, 2018 and December 31, 2017, respectively)
   
7,769
     
7,854
 
Non-marketable equity securities
   
5,819
     
3,617
 
Loans held for sale, at lower of cost or market
   
6,815
     
-
 
Loans (net of allowance for loan losses of $9,528 and $13,803 as of September 30, 2018 and December 31, 2017, respectively)
   
695,296
     
686,341
 
Bank owned life insurance ("BOLI")
   
26,313
     
25,656
 
Premises and equipment, net
   
28,027
     
28,542
 
Other real estate owned ("OREO"), net
   
5,982
     
6,432
 
Deferred tax assets ("DTAs"), net
   
11,621
     
10,143
 
Other assets
   
13,283
     
14,781
 
Total assets
 
$
1,253,591
   
$
1,287,533
 
 
               
LIABILITIES AND SHAREHOLDERS' EQUITY
               
Liabilities
               
Deposits:
               
Noninterest-bearing
 
$
175,655
   
$
161,677
 
Interest-bearing
   
921,758
     
965,670
 
Total deposits
   
1,097,413
     
1,127,347
 
Borrowings
   
15,400
     
2,300
 
Junior subordinated debt
   
26,766
     
36,941
 
Other liabilities
   
6,243
     
15,399
 
Total liabilities
   
1,145,822
     
1,181,987
 
 
               
Stock owned by Employee Stock Ownership Plan ("ESOP") participants; 723,127 shares and 831,645 shares as of September 30, 2018 and December 31, 2017, respectively, at fair value
 
$
5,183
   
$
5,961
 
 
               
Commitments and contingencies (Note 13)
               
 
               
Stockholders' equity
               
Common stock voting, no par; 20,000,000 shares authorized; 11,660,491 and 11,364,862 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively
   
11,660
     
11,365
 
Common stock non-voting, no par; 20,000,000 shares authorized; 8,044,292 shares and 8,286,200 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively
   
8,044
     
8,286
 
Additional paid-in capital
   
36,222
     
35,071
 
Retained earnings
   
64,093
     
54,587
 
Common stock related to ESOP
   
(5,183
)
   
(5,961
)
Accumulated other comprehensive loss
   
(12,250
)
   
(3,763
)
Total shareholders' equity
   
102,586
     
99,585
 
Total liabilities and shareholders' equity
 
$
1,253,591
   
$
1,287,533
 
 
The accompanying notes are an integral part of these consolidated financial statements.

1

TRINITY CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

(In thousands, except per share data) 
 
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
   
2018
   
2017
   
2018
   
2017
 
Interest income:
                       
Loans held for sale
 
$
125
   
$
-
   
$
167
   
$
0
 
Loans, including fees
   
8,534
     
9,016
     
25,272
     
27,613
 
Interest and dividends on investment securities:
                               
Taxable
   
1,506
     
1,665
     
4,562
     
5,143
 
Nontaxable
   
1,042
     
506
     
3,127
     
1,085
 
Other interest income
   
78
     
275
     
256
     
574
 
Total interest income
   
11,285
     
11,462
     
33,384
     
34,415
 
 
                               
Interest expense:
                               
Deposits
   
424
     
432
     
1,255
     
1,333
 
Borrowings
   
131
     
37
     
313
     
114
 
Junior subordinated debt
   
363
     
599
     
1,501
     
1,912
 
Total interest expense
   
918
     
1,068
     
3,069
     
3,359
 
Net interest income
   
10,367
     
10,394
     
30,315
     
31,056
 
(Benefit) provision for loan losses
   
(1,000
)
   
(250
)
   
(1,480
)
   
(1,220
)
Net interest income after benefit for loan losses
   
11,367
     
10,644
     
31,795
     
32,276
 
 
                               
Noninterest income:
                               
Mortgage loan servicing fees
   
-
     
446
     
-
     
1,394
 
Trust and investment services fees
   
749
     
643
     
2,255
     
1,953
 
Service charges on deposits
   
226
     
202
     
712
     
784
 
Net gain on sale of OREO
   
191
     
130
     
764
     
800
 
Net gain on sale of loans
   
-
     
-
     
-
     
-
 
Net loss on sale of securities
   
-
     
-
     
-
     
(1,248
)
BOLI income
   
218
     
88
     
656
     
271
 
Mortgage referral fee income
   
288
     
431
     
874
     
1,175
 
Interchange fees
   
507
     
567
     
1,593
     
1,823
 
Other fees
   
301
     
312
     
936
     
984
 
Venture capital investment income
   
-
     
-
     
735
     
(21
)
Other noninterest income
   
18
     
13
     
32
     
85
 
Total noninterest income
   
2,498
     
2,832
     
8,557
     
8,000
 
 
                               
Noninterest expenses:
                               
Salaries and employee benefits
   
5,410
     
5,668
     
16,286
     
17,913
 
Occupancy
   
522
     
553
     
1,592
     
1,590
 
Data processing
   
952
     
1,132
     
2,894
     
3,557
 
Legal, professional and accounting fees
   
488
     
712
     
1,540
     
3,998
 
Change in value of Mortgage servicing rights ("MSRs")
   
-
     
677
     
-
     
1,406
 
Other noninterest expense
   
1,674
     
2,931
     
5,955
     
10,010
 
Total noninterest expenses
   
9,046
     
11,673
     
28,267
     
38,474
 
Income (loss) before provision for income taxes
   
4,819
     
1,803
     
12,085
     
1,802
 
Provision for income taxes
   
1,303
     
1,398
     
2,579
     
3,487
 
Net income (loss)
   
3,516
     
405
     
9,506
     
(1,685
)
Dividends and discount accretion on preferred shares
   
-
     
-
     
-
     
770
 
Net income (loss) attributable to common stockholders
 
$
3,516
   
$
405
   
$
9,506
   
$
(2,455
)
Basic earnings (loss) per common share
 
$
0.18
   
$
0.02
   
$
0.48
   
$
(0.16
)
Diluted earnings (loss) per common share
 
$
0.18
   
$
0.02
   
$
0.48
   
$
(0.16
)

The accompanying notes are an integral part of these consolidated financial statements.

2

TRINITY CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

 
 
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
 
 
2018
   
2017
   
2018
   
2017
 
 
 
(In thousands)
 
Net income (loss)
 
$
3,516
   
$
405
   
$
9,506
   
$
(1,685
)
Other comprehensive income:
                               
Unrealized (loss) gains on securities available for sale
   
(2,418
)
   
229
     
(11,415
)
   
2,343
 
Securities losses reclassified into earnings
   
-
     
-
     
-
     
1,248
 
Related income tax expense (benefit)
   
620
     
(106
)
   
2,928
     
(1,436
)
Other comprehensive (loss) income
   
(1,798
)
   
123
     
(8,487
)
   
2,155
 
Total comprehensive income (loss)
 
$
1,718
   
$
528
   
$
1,019
   
$
470
 

The accompanying notes are an integral part of these consolidated financial statements.

3

TRINITY CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)

   
Common stock
                                     
   
Voting
Issued
   
Held in
Treasury,
at cost
   
Non-voting
Issued
   
Preferred
Stock
   
Additional
Paid-in Capital
   
Retained
Earnings
   
Accumulated Other
Comprehensive
Income (Loss)
   
Common
Stock Related
to ESOP
   
Total
Stockholders'
Equity
 
Balance, December 31, 2016
 
$
9,509
   
$
-
   
$
-
   
$
74,007
   
$
(1,373
)
 
$
60,651
   
$
(5,495
)
 
$
(3,192
)
 
$
134,107
 
Net loss
                                           
(1,685
)
                   
(1,685
)
Other comprehensive income
                                                   
2,155
             
2,155
 
Redemption of Series A preferred shares
                           
(35,539
)
                                   
(35,539
)
Redemption of Series B preferred shares
                           
(1,777
)
                                   
(1,777
)
Dividends declared on preferred shares
                                           
(372
)
                   
(372
)
Series C preferred shares converted to non-voting common stock
                   
8,286
     
(37,089
)
   
28,803
                             
-
 
Common stock issued for board compensation
   
40
                             
153
                             
193
 
Amortization of preferred stock issuance costs
                           
398
             
(398
)
                   
-
 
Restricted stock units ("RSUs") vested
   
17
                             
(17
)
                           
-
 
RSUs compensation expense
                                   
91
                             
91
 
Balance, September 30, 2017
 
$
9,566
   
$
-
   
$
8,286
   
$
-
   
$
27,657
   
$
58,196
   
$
-3,340
   
$
-3,192
   
$
97,173
 

   
Common stock
                                     
   
Voting
Issued
   
Held in
Treasury,
at cost
   
Non-voting
Issued
   
Preferred
Stock
   
Additional
Paid-in Capital
   
Retained
Earnings
   
Accumulated Other
Comprehensive
Income (Loss)
   
Common
Stock Related
to ESOP
   
Total
Stockholders'
Equity
 
Balance, December 31, 2017
 
$
11,365
   
$
-
   
$
8,286
   
$
-
   
$
35,071
   
$
54,587
   
$
(3,763
)
 
$
(5,961
)
 
$
99,585
 
Net income
                                           
9,506
                     
9,506
 
Other comprehensive loss
                                                   
(8,487
)
           
(8,487
)
Rights offering costs
                                   
(2
)
                           
(2
)
Common stock issued to board
   
17
                             
115
                             
132
 
ESOP distributions
                                                           
778
     
778
 
RSU compensation expense
                                   
1,105
                             
1,105
 
Common stock issued for vested RSUs
   
36
                             
(67
)
                           
(31
)
Conversion from non-voting to voting common stock
   
242
             
(242
)
                                           
-
 
Balance, September 30, 2018
 
$
11,660
   
$
-
   
$
8,044
   
$
-
   
$
36,222
   
$
64,093
   
$
(12,250
)
 
$
(5,183
)
 
$
102,586
 

The accompanying notes are an integral part of these consolidated financial statements.

4

TRINITY CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 
 
 
Nine Months Ended September 30,
 
 
 
2018
   
2017
 
Cash Flows From Operating Activities
 
(Dollars in thousands)
 
Net income (loss)
 
$
9,506
     
(1,685
)
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
   
5,778
     
5,104
 
Benefit for loan losses
   
(1,480
)
   
(1,220
)
Net loss on sale of investment securities
   
-
     
1,248
 
Net gain on sale of loans
   
-
     
-
 
Gains and write-downs on OREO, net
   
(713
)
   
(166
)
Loss (gain) on disposal of premises and equipment
   
5
     
(37
)
Decrease in deferred income tax assets
   
1,451
     
1,081
 
Change in escrow liabilities
   
(5,306
)
   
712
 
Change in value of MSRs
   
-
     
1,406
 
BOLI income
   
(656
)
   
(271
)
Compensation expense recognized for restricted stock units
   
1,105
     
91
 
Decrease in accrued interest payable on sub debt
   
-
     
(9,676
)
Changes in operating assets and liabilities:
               
     Other assets
   
731
     
4,703
 
     Other liabilities
   
(3,849
)
   
(2,158
)
Net cash provided by (used in) operating activities before origination and gross sales of loans held for sale
   
6,572
     
(868
)
Gross sales of loans held for sale
   
-
     
-
 
Origination of loans held for sale
   
-
     
-
 
Net cash provided by (used in) operating activities
 
$
6,572
     
(868
)
 
Continued next page

5

TRINITY CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
(Unaudited)

 
 
Nine Months Ended September 30,
 
 
 
2018
   
2017
 
Cash Flows From Investing Activities
 
(Dollars in thousands)
 
Proceeds from maturities and paydowns of investment securities, available for sale
 
$
36,370
   
$
38,647
 
Proceeds from sale of investment securities, available for sale
   
-
     
56,543
 
Purchase of investment securities, available for sale
   
(21,824
)
   
(92,437
)
Purchase of investment securities, other
   
(1,479
)
   
(2
)
Proceeds from maturities and paydowns of investment securities, held to maturity
   
72
     
884
 
Proceeds from sale of investment securities, other
   
-
     
33
 
Purchase bank owned life insurance
   
-
     
-
 
Proceeds from sale of other real estate owned
   
2,358
     
3,251
 
Loans paid down (funded), net
   
(15,316
)
   
48,608
 
Purchases of premises and equipment
   
(450
)
   
(3,907
)
Proceeds from sale of premises and equipment
   
1
     
69
 
Net cash (used in) provided by investing activities
   
(268
)
   
51,689
 
Cash Flows From Financing Activities
               
Net increase (decrease) in demand deposits, NOW accounts and savings accounts
   
(3,954
)
   
(2,770
)
Net decrease in time deposits
   
(25,982
)
   
(37,331
)
Partial repayment of subordinated debt
   
(10,310
)
   
-
 
Proceeds from issuance of short-term borrowings
   
13,100
     
-
 
Redemption of preferred stock
   
-
     
(37,316
)
Decrease in dividends payable on preferred stock
   
-
     
(12,965
)
Issuance of common stock
   
99
     
193
 
Net cash used in (provided by) financing activities
   
(27,047
)
   
(90,189
)
Net decrease in cash and cash equivalents
   
(20,743
)
   
(39,368
)
Cash and cash equivalents:
               
Beginning of period
   
35,434
     
119,335
 
End of period
 
$
14,691
   
$
79,967
 
Supplemental Disclosures of Cash Flow Information
               
Cash payments for:
               
     Interest
 
$
3,412
   
$
13,118
 
Non-cash investing and financing activities:
               
Transfers from loans to other real estate owned
   
1,467
     
2,848
 
Sales of other real estate owned financed by loans by the Bank
   
315
     
-
 
Transfer from loans to loans held for sale
   
6,815
     
-
 
Transfer from venture capital to loans
   
-
     
150
 
Conversion of Series C preferred stock to non-voting common stock
   
-
     
37,089
 
Dividends declared on preferred stock
   
-
     
373
 
Conversion of non-voting common stock to voting common stock
   
242
     
-
 

The accompanying notes are an integral part of these consolidated financial statements.

6

Note 1. Basis of Presentation

Consolidation:  The accompanying unaudited consolidated financial statements include the consolidated balances and results of operations of Trinity Capital Corporation ("Trinity" or the "Company") and its wholly owned subsidiaries: Los Alamos National Bank (the "Bank") and TCC Advisors Corporation ("TCC Advisors"), collectively referred to as the "Company." Trinity Capital Trust I ("Trust I"), Trinity Capital Trust III ("Trust III"), Trinity Capital Trust IV ("Trust IV") and Trinity Capital Trust V ("Trust V"), collectively referred to as the "Trusts," are trust subsidiaries of Trinity. Trinity owns all of the outstanding common securities of the Trusts. The Trusts are considered variable interest entities ("VIEs") under Accounting Standards Codification ("ASC") Topic 810, "Consolidation."  Because Trinity is not the primary beneficiary of the Trusts, the financial statements of the Trusts are not included in the consolidated financial statements of the Company.  TCC Advisors Corporation and Trust I were dissolved in March 2018.

Basis of presentation: The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany items and transactions have been eliminated in consolidation.  The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America ("GAAP") and general practices within the financial services industry.  In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the year then ended.  Actual results could differ from those estimates.

The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for financial information and with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows of the Company on a consolidated basis, and all such adjustments are of a normal recurring nature. These financial statements and the notes thereto should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2017 (the "2017 Form 10-K"). Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 or any other period.

Reclassifications: Some items in the prior year financial statements have been reclassified to conform to the current presentation.  Reclassifications had no effect on prior year net income or shareholders' equity.

Note 2. Earnings (Loss) Per Share Data

Average number of shares used in calculation of basic and diluted earnings (loss) per common share were as follows for the three and nine months ended September 30, 2018 and 2017:
 
 
 
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
 
 
2018
   
2017
   
2018
   
2017
 
 
 
(In thousands, except share data)
 
Net income (loss)
 
$
3,516
   
$
405
   
$
9,506
   
$
(1,685
)
Dividends and discount accretion on preferred shares
   
-
     
-
     
-
     
770
 
Net income (loss) attributable to common stockholders
 
$
3,516
   
$
405
   
$
9,506
   
$
(2,455
)
Weighted average common shares issued
   
19,702,110
     
17,539,689
     
19,685,998
     
15,647,178
 
LESS: Weighted average treasury stock shares
   
-
     
-
     
-
     
-
 
Weighted average common shares outstanding, net
   
19,702,110
     
17,539,689
     
19,685,998
     
15,647,178
 
Basic earnings (loss) per common share
 
$
0.18
   
$
0.02
   
$
0.48
   
$
(0.16
)
Dilutive effect of stock-based compensation
   
255,541
     
13,134
     
244,759
     
-
 
Weighted average common shares outstanding including dilutive shares
   
19,957,651
     
17,552,823
     
19,930,757
     
15,647,178
 
Diluted earnings (loss) per common share
 
$
0.18
   
$
0.02
   
$
0.48
   
$
(0.16
)
 
Certain restricted stock units ("RSUs") were not included in the above calculation, as they would have had an anti-dilutive effect. There were no shares excluded from the calculation for the three months ended September 30, 2018September 30, 2017.  There were no shares excluded from the calculation for the nine months ended September 30, 2018.  The total number of excluded shares relating to such RSUs was approximately 97,000 shares for the nine months ended September 30, 2017.

Note 3. Recent Accounting Pronouncements

Newly effective standards:  In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606). This update requires an entity to recognize revenue as performance obligations are met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those goods or services. The following steps are applied in the updated guidance: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date.  This update deferred the effective date of ASU 2014-09 by one year, making it effective for annual reporting periods beginning after December 15, 2017 including interim reporting periods within that reporting period. The Company's revenue is primarily comprised of net interest income on financial assets and liabilities, which is explicitly excluded from the scope of this guidance, and non-interest income.  The Company has reviewed non-interest income, such as deposit fees, assets management and investment advisory fees, OREO gains and losses on sale, and credit card interchange fees.  The Company completed its overall assessment of revenue streams and related contracts affected by the guidance and adopted ASC 606 on January 1, 2018 with no impact on total shareholders' equity or net income.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825).  The amendments in this update require that public entities measure equity investments with readily determinable fair values, at fair value, with changes in their fair value recorded through net income.  This ASU clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset ("DTA") related to available for sale securities in combination with the entity's other DTA. This ASU also prescribes an exit price be used to determine the fair value of financial instruments not measured at fair value for disclosure in the fair value note.  The amendments within the update are effective for fiscal years and all interim periods beginning after December 15, 2017.  The Company has determined that the evaluation of DTA valuation allowance and the exit price for financial instruments are within scope for the Company.  The Company adopted this standard on January 1, 2018 and used a third-party to provide the exit pricing for Note 16, Fair Value Measurements, as required under ASU 2016-01.  The adoption of ASU 2016-01 did not have an impact on the Company's financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718).  ASU 2017-09 was effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  This ASU provides clarity on the guidance related to stock compensation when there have been changes to the terms or conditions of a share-based payment award to which an entity would be required to apply modification accounting under ASC 718.  The ASU provides the three following criteria must be met in order to not account for the effect of the modification of terms or conditions: the fair value, the vesting conditions and the classification as an equity or liability instrument of the modified award is the same as the original award immediately before the original award is modified. The Company adopted ASU 2017-09 on January 1, 2018.  The adoption of ASU 2017-09 did not have a material impact on the Company's Consolidated Financial Statements.

 
7

Newly Issued But Not Effective Accounting Standards: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those periods using a modified retrospective approach and early adoption is permitted. This ASU requires a lessee to record a right-to-use asset and liability representing the obligation to make lease payments for long-term leases.  It is expected that assets and liabilities will increase based on the present value of remaining lease payments for leases in place at the adoption date; however, this is not expected to be material to the Company's results of operations or financial position.  The Company continues to evaluate the extent of potential impact the new guidance will have on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.  The Company has created an internal committee focused on the implementation of ASU 2016-13 and is currently in the process of evaluating data needs and the effects of ASU 2016-13 on its financial statements and disclosures.  The Company is also working with a third party allowance for loan and lease losses ("ALLL") software provider to help with implementation.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this update modify the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The update is effective for interim and annual periods in fiscal years beginning after December 15, 2019, with early adoption permitted for the removed disclosures and delayed adoption until fiscal year 2020 permitted for the new disclosures. The removed and modified disclosures will be adopted on a retrospective basis, and the new disclosures will be adopted on a prospective basis. The adoption will not have a material effect on the Company's consolidated financial statements.


Note 4. Restrictions on Cash and Due From Banks

The Bank is required to maintain reserve balances in cash or on deposit with the Board of Governors of the Federal Reserve System ("FRB"), based on a percentage of deposits.  As of September 30, 2018 and December 31, 2017, the reserve requirement on deposit at the FRB was $0 due to the small balance of demand deposits and the balances maintained at the FRB.

Restricted cash included in "cash and due from banks" on the Consolidated Balance Sheets was $100 thousand and $0 at September 30, 2018 and December 31, 2017, respectively.  This restricted cash is maintained at a bank as collateral for our credit card portfolio.

The Company maintains some of its cash in bank deposit accounts at financial institutions other than its subsidiaries that, at times, may exceed federally insured limits.  The Company may lose all uninsured balances if one of the correspondent banks fails without warning.  The Company has not experienced any losses in such accounts.  The Company believes it is not exposed to any significant credit risk on cash and cash equivalents as the Company reviews this risk on a quarterly basis.

Note 5. Investment Securities

Amortized cost and fair values of investment securities are summarized as follows:

Securities Available for Sale:
 
Amortized Cost
   
Gross
Unrealized Gains
   
Gross
Unrealized Losses
   
Fair Value
 
 
 
(In thousands)
 
September 30, 2018
                       
U.S. government sponsored agencies
 
$
69,300
   
$
-
   
$
(2,296
)
 
$
67,004
 
State and political subdivisions
   
162,628
     
30
     
(5,114
)
   
157,544
 
Residential mortgage backed securities
   
95,703
     
37
     
(2,097
)
   
93,643
 
Residential collateralized mortgage obligations
   
15,119
     
48
     
(188
)
   
14,979
 
Commercial mortgage backed securities
   
109,725
     
-
     
(5,388
)
   
104,337
 
SBA pools
   
486
     
-
     
(18
)
   
468
 
Totals
 
$
452,961
   
$
115
   
$
(15,101
)
 
$
437,975
 
 
                               
December 31, 2017
                               
U.S. government sponsored agencies
 
$
69,315
   
$
-
   
$
(764
)
 
$
68,551
 
State and political subdivisions
   
157,652
     
1,306
     
(252
)
   
158,706
 
Residential mortgage backed securities
   
124,578
     
98
     
(1,593
)
   
123,083
 
Residential collateralized mortgage obligations
   
9,715
     
51
     
(80
)
   
9,686
 
Commercial mortgage backed securities
   
110,483
     
67
     
(2,388
)
   
108,162
 
SBA pools
   
560
     
-
     
(15
)
   
545
 
Totals
 
$
472,303
   
$
1,522
   
$
(5,092
)
 
$
468,733
 

Securities Held to Maturity
 
Amortized Cost
   
Gross
Unrealized Gains
   
Gross
Unrealized Losses
   
Fair Value
 
 
 
(In thousands)
 
September 30, 2018
                       
SBA pools
 
$
7,769
   
$
-
   
$
(618
)
 
$
7,151
 
Totals
 
$
7,769
   
$
-
   
$
(618
)
 
$
7,151
 
 
                               
December 31, 2017
                               
SBA pools
 
$
7,854
   
$
-
   
$
(485
)
 
$
7,369
 
Totals
 
$
7,854
   
$
-
   
$
(485
)
 
$
7,369
 

Realized net gains (losses) on sale and call of securities available for sale are summarized as follows:

 
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
 
2018
   
2017
   
2018
   
2017
 
 
(In thousands)
 
Gross realized gains
 
$
-
   
$
-
   
$
-
   
$
6
 
Gross realized losses
   
-
     
-
     
-
     
(1,254
)
Net gains (losses)
 
$
-
   
$
-
   
$
-
   
$
(1,248
)

 
8

There was no tax benefit for the three or nine months ended September 30, 2018 related to net realized gains and losses.  There was no tax benefit for the three months ended September 30, 2017 and a tax benefit of $482 thousand related to these net realized gains and losses for the nine months ended September 30, 2017.
A summary of unrealized loss information for investment securities, categorized by security type, as of September 30, 2018 and December 31, 2017 was as follows:

 
 
Less than 12 Months
   
12 Months or Longer
   
Total
 
 
 
Fair Value
   
Unrealized Losses
   
Fair Value
   
Unrealized Losses
   
Fair Value
   
Unrealized Losses
 
   
(In thousands)
 
 
Securities Available for Sale:
                                   
September 30, 2018
                                   
U.S. government sponsored agencies
 
$
26,449
   
$
(834
)
 
$
41,023
   
$
(1,462
)
 
$
67,472
   
$
(2,296
)
State and political subdivisions
   
111,103
     
(3,551
)
   
36,527
     
(1,563
)
   
147,630
     
(5,114
)
Residential mortgage backed securities
   
27,367
     
(653
)
   
59,894
     
(1,444
)
   
87,261
     
(2,097
)
Residential collateralized mortgage obligations
   
6,855
     
(52
)
   
4,234
     
(136
)
   
11,089
     
(188
)
Commercial mortgage backed securities
   
19,370
     
(614
)
   
84,965
     
(4,774
)
   
104,335
     
(5,388
)
SBA pools
   
-
     
-
     
468
     
(18
)
   
468
     
(18
)
Totals
 
$
191,144
   
$
(5,704
)
 
$
227,111
   
$
(9,397
)
 
$
418,255
   
$
(15,101
)
 
                                               
December 31, 2017
                                               
U.S. government sponsored agencies
 
$
49,070
   
$
(331
)
 
$
19,481
   
$
(433
)
 
$
68,551
   
$
(764
)
State and political subdivisions
   
23,217
     
(95
)
   
24,774
     
(157
)
   
47,991
     
(252
)
Residential mortgage backed securities
   
18,771
     
(199
)
   
88,100
     
(1,394
)
   
106,871
     
(1,593
)
Residential collateralized mortgage obligations
   
4,761
     
(67
)
   
3,502
     
(13
)
   
8,263
     
(80
)
Commercial mortgage backed securities
   
6,961
     
(94
)
   
81,042
     
(2,294
)
   
88,003
     
(2,388
)
SBA pools
   
-
     
-
     
545
     
(15
)
   
545
     
(15
)
Totals
 
$
102,780
   
$
(786
)
 
$
217,444
   
$
(4,306
)
 
$
320,224
   
$
(5,092
)
 
                                               
Securities Held to Maturity:
                                               
September 30, 2018
                                               
SBA pools
 
$
-
   
$
-
   
$
7,151
   
$
(618
)
 
$
7,151
   
$
(618
)
Totals
 
$
-
   
$
-
   
$
7,151
   
$
(618
)
 
$
7,151
   
$
(618
)
 
                                               
December 31, 2017
                                               
SBA pools
 
$
-
   
$
-
   
$
7,369
   
$
(485
)
 
$
7,369
   
$
(485
)
Totals
 
$
-
   
$
-
   
$
7,369
   
$
(485
)
 
$
7,369
   
$
(485
)

As of September 30, 2018, the Company's security portfolio consisted of 152 securities, 131 of which were in an unrealized loss position. As of September 30, 2018, $441.1 million in investment securities had unrealized losses with aggregate depreciation of 3.44% of the Company's amortized cost basis.  Of these securities, $244.3 million had a continuous unrealized loss position for twelve months or longer with an aggregate depreciation of 3.94%.  The unrealized losses relate principally to the general change in interest rates and illiquidity, and not credit quality, that has occurred since the securities purchase dates, and such unrecognized losses or gains will continue to vary with general interest rate level fluctuations in the future.  As management does not intend to sell the securities, and it is likely that it will not be required to sell the securities before their anticipated recovery, no declines are deemed to be other than temporary.

The amortized cost and fair value of investment securities, as of September 30, 2018, by contractual maturity are shown below.  Maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

 
 
Available for Sale
   
Held to Maturity
 
 
 
Amortized Cost
   
Fair Value
   
Amortized Cost
   
Fair Value
 
 
 
(In thousands)
 
One year or less
 
$
201
   
$
200
   
$
-
   
$
-
 
One to five years
   
71,007
     
68,699
     
-
     
-
 
Five to ten years
   
3,209
     
3,189
     
-
     
-
 
Over ten years
   
157,997
     
152,928
     
7,769
     
7,151
 
Subtotal
   
232,414
     
225,016
     
7,769
     
7,151
 
Residential mortgage backed securities
   
95,703
     
93,643
     
-
     
-
 
Residential collateralized mortgage obligations
   
15,119
     
14,979
     
-
     
-
 
Commercial mortgage backed securities
   
109,725
     
104,337
                 
Total
 
$
452,961
   
$
437,975
   
$
7,769
   
$
7,151
 

Securities with carrying amounts of $100.3 million and $87.4 million as of September 30, 2018 and December 31, 2017, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

9

Note 6. Loans and Allowance for Loan Losses

As of September 30, 2018 and December 31, 2017, loans consisted of:

 
 
September 30, 2018
   
December 31, 2017
 
 
 
(In thousands)
 
Commercial
 
$
63,539
   
$
61,388
 
Commercial real estate
   
404,790
     
378,802
 
Residential real estate
   
155,118
     
178,296
 
Construction real estate
   
72,550
     
63,569
 
Installment and other
   
9,998
     
18,952
 
Total loans
   
705,995
     
701,007
 
Unearned income
   
(1,171
)
   
(863
)
Gross loans
   
704,824
     
700,144
 
Allowance for loan losses
   
(9,528
)
   
(13,803
)
Net loans
 
$
695,296
   
$
686,341
 

Loan Origination/Risk Management. The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk.  Management and the Board of Directors review and approve these policies and procedures on an annual basis.  A reporting system supplements the review process by providing management with reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing and potential problem loans.  Management has identified the following categories in its loan portfolios:

Commercial loans: These loans are underwritten after evaluating and understanding the borrower's ability to operate profitably and prudently expand its business.  Underwriting standards are designed to promote relationship banking rather than transactional banking.  Management examines current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed.  Commercial loans are primarily made 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 and industrial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some 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 loans: These loans are subject to underwriting standards and processes similar to commercial loans, in addition to those of other real estate loans.  These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate.  Commercial real estate lending typically involves higher original amounts than other types of loans 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 properties securing the Company's commercial real estate portfolio are geographically concentrated in the markets in which the Company operates.  Management monitors and evaluates commercial real estate loans based on collateral, location and risk grade criteria.  The Company also utilizes third-party sources to provide insight and guidance about economic conditions and trends affecting market areas it serves.  In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans.  As of September 30, 2018, 24.8% of the outstanding principal balances of the Company's commercial real estate loans were secured by owner-occupied properties.

With respect to loans to developers and builders that are secured by non-owner occupied properties that the Company may originate from time to time, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success.

Construction real estate loans: These loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners.  Construction real estate loans are generally based upon estimates of costs and values associated with the completed project and 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 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 loans: Underwriting standards for residential real estate and home equity loans are heavily influenced by statutory requirements, which include, but are not limited to, maximum loan-to-value levels, debt-to-income levels, collection remedies, the number of such loans a borrower can have at one time and documentation requirements.

Installment loans: The Company originates consumer loans utilizing a credit scoring analysis to supplement the underwriting process.  To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed.  This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk.  Additionally, trend and outlook reports are reviewed by management on a regular basis.

The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company's policies and procedures, which include periodic internal reviews and reports to identify and address risk factors developing within the loan portfolio. The Company engages external independent loan reviews that assess and validate the credit risk program on a periodic basis.  Results of these reviews are presented to and reviewed by management and the Board of Directors.

10

The following table presents the contractual aging of the recorded investment in current and past due loans by category of loans as of September 30, 2018 and December 31, 2017, including nonaccrual loans:

 
 
Current
   
30-59 Days
Past Due
   
60-89 Days
Past Due
   
Loans Past Due
90 Days or More
   
Total
Past Due
   
Total
 
September 30, 2018
 
(In thousands)
 
Commercial
 
$
63,512
   
$
27
   
$
-
   
$
-
   
$
27
   
$
63,539
 
Commercial real estate
   
403,507
     
920
     
-
     
363
     
1,283
     
404,790
 
Residential real estate
   
151,872
     
1,811
     
266
     
1,169
     
3,246
     
155,118
 
Construction real estate
   
72,178
     
334
     
-
     
38
     
372
     
72,550
 
Installment and other
   
9,860
     
47
     
-
     
91
     
138
     
9,998
 
Total loans
 
$
700,929
   
$
3,139
   
$
266
   
$
1,661
   
$
5,066
   
$
705,995
 
 
                                               
Nonaccrual loan classification, included above
 
$
4,888
   
$
1,895
   
$
266
   
$
1,661
   
$
3,822
   
$
8,710
 
 
                                               
December 31, 2017
                                               
Commercial
 
$
59,703
   
$
173
   
$
1,475
   
$
37
   
$
1,685
   
$
61,388
 
Commercial real estate
   
371,640
     
5,490
     
-
     
1,672
     
7,162
     
378,802
 
Residential real estate
   
174,388
     
1,899
     
-
     
2,009
     
3,908
     
178,296
 
Construction real estate
   
59,291
     
423
     
74
     
3,781
     
4,278
     
63,569
 
Installment and other
   
18,705
     
80
     
81
     
86
     
247
     
18,952
 
Total loans
 
$
683,727
   
$
8,065
   
$
1,630
   
$
7,585
   
$
17,280
   
$
701,007
 
 
                                               
Nonaccrual loan classification, included above
 
$
3,858
   
$
5,859
   
$
38
   
$
7,585
   
$
13,482
   
$
17,340
 
 
The following table presents the recorded investment in nonaccrual loans and loans past due 90 days or more and still accruing interest by category of loans as of September 30, 2018 and December 31, 2017:

 
 
September 30, 2018
   
December 31, 2017
 
 
 
Nonaccrual
   
Loans Past Due
90 Days or More
and Still Accruing Interest
   
Nonaccrual
   
Loans Past Due
90 Days or More
and Still Accruing Interest
 
 
 
(In thousands)
 
Commercial
 
$
603
   
$
-
   
$
102
   
$
-
 
Commercial real estate
   
3,717
     
-
     
8,617
     
-
 
Residential real estate
   
4,125
     
-
     
4,599
     
-
 
Construction real estate
   
165
     
-
     
3,911
     
-
 
Installment and other
   
100
     
-
     
111
     
-
 
Total
 
$
8,710
   
$
-
   
$
17,340
   
$
-
 

The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans.  Under the Company's risk rating system, problem and potential problem loans are classified as "Special Mention," "Substandard," and "Doubtful." Loans that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses that deserve management's close attention are deemed to be Special Mention.  Substandard loans include those characterized by the likelihood that the Company will sustain some loss if the deficiencies are not corrected.  Loans classified as Doubtful have all the weaknesses inherent in those classified as 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.  Any time a situation warrants, the risk rating may be reviewed.

Loans not meeting the criteria above that are analyzed individually are considered to be pass-rated loans.  The following table presents the risk category by category of loans based on the most recent analysis performed as of September 30, 2018 and December 31, 2017:

 
 
Pass
   
Special Mention
   
Substandard
   
Doubtful
   
Total
 
September 30, 2018
 
(In thousands)
 
Commercial
 
$
58,035
   
$
3,779
   
$
1,725
   
$
-
   
$
63,539
 
Commercial real estate
   
384,653
     
3,592
     
16,545
     
-
     
404,790
 
Residential real estate
   
149,033
     
663
     
5,422
     
-
     
155,118
 
Construction real estate
   
71,549
     
876
     
125
     
-
     
72,550
 
Installment and other
   
9,900
     
-
     
98
     
-
     
9,998
 
Total
 
$
673,170
   
$
8,910
   
$
23,915
   
$
-
   
$
705,995
 
 
                                       
December 31, 2017
                                       
Commercial
 
$
58,769
   
$
2
   
$
2,617
   
$
-
   
$
61,388
 
Commercial real estate
   
359,768
     
4,762
     
14,272
     
-
     
378,802
 
Residential real estate
   
172,101
     
-
     
6,195
     
-
     
178,296
 
Construction real estate
   
56,661
     
917
     
5,991
     
-
     
63,569
 
Installment and other
   
18,523
     
-
     
429
     
-
     
18,952
 
Total
 
$
665,822
   
$
5,681
   
$
29,504
   
$
-
   
$
701,007
 

11

The following table shows all loans, including nonaccrual loans, by risk category and aging as of September 30, 2018 and December 31, 2017:

 
Pass
   
Special Mention
   
Substandard
   
Doubtful
   
Total
 
September 30, 2018
(In thousands)
 
Current
 
$
671,996
   
$
8,910
   
$
20,023
   
$
-
   
$
700,929
 
Past due 30-59 days
   
1,174
     
-
     
1,965
     
-
     
3,139
 
Past due 60-89 days
   
-
     
-
     
266
     
-
     
266
 
Past due 90 days or more
   
-
     
-
     
1,661
     
-
     
1,661
 
Total
 
$
673,170
   
$
8,910
   
$
23,915
   
$
-
   
$
705,995
 
 
                                       
December 31, 2017
   
Current
 
$
662,445
   
$
5,681
   
$
15,601
   
$
-
   
$
683,727
 
Past due 30-59 days
   
1,785
     
-
     
6,280
     
-
     
8,065
 
Past due 60-89 days
   
1,592
     
-
     
38
     
-
     
1,630
 
Past due 90 days or more
   
-
     
-
     
7,585
     
-
     
7,585
 
Total
 
$
665,822
   
$
5,681
   
$
29,504
   
$
-
   
$
701,007
 

As of September 30, 2018 and December 31, 2017, nonaccrual loans totaling $7.2 million and $17.3 million were classified as Substandard, respectively.
 
The following table presents loans individually evaluated for impairment by category of loans as of September 30, 2018 and December 31, 2017, showing the unpaid principal balance, the recorded investment of the loan (reflecting any loans with partial charge-offs), and the amount of allowance for loan losses specifically allocated for these impaired loans (if any):

 
 
September 30, 2018
   
December 31, 2017
 
 
 
Unpaid
Principal
Balance
   
Recorded
Investment
 
Allowance
for Loan Losses
Allocated
   
Unpaid
Principal
Balance
   
Recorded
Investment
 
Allowance
for Loan Losses
Allocated
 
 
 
(In thousands)
 
With no related allowance recorded:
                               
Commercial
 
$
110
   
$
110
       
$
184
   
$
182
     
Commercial real estate
   
6,494
     
3,517
         
4,294
     
4,154
     
Residential real estate
   
5,948
     
5,032
         
6,585
     
5,808
     
Construction real estate
   
1,889
     
1,863
         
7,471
     
6,049
     
Installment and other
   
293
     
292
         
349
     
348
     
With an allowance recorded:
                                       
Commercial
   
13,671
     
13,669
   
$
321
     
13,361
     
13,359
   
$
211
 
Commercial real estate
   
5,870
     
5,870
     
851
     
10,987
     
10,987
     
3,735
 
Residential real estate
   
5,344
     
5,343
     
943
     
6,774
     
6,774
     
943
 
Construction real estate
   
1,161
     
1,161
     
42
     
3,244
     
3,244
     
231
 
Installment and other
   
240
     
240
     
34
     
236
     
236
     
32
 
Total
 
$
41,020
   
$
37,097
   
$
2,191
   
$
53,485
   
$
51,141
   
$
5,152
 

The table above includes $31.6 million of troubled debt restructurings at September 30, 2018 and $38.9 million of troubled debt restructurings at December 31, 2017.

The following table presents loans individually evaluated for impairment by class of loans for the three and nine months ended September 30, 2018 and 2017, showing the average recorded investment and the interest income recognized:

 
 
Three Months Ended
   
Nine Months Ended
 
 
 
September 30, 2018
   
September 30, 2017
   
September 30, 2018
   
September 30, 2017
 
 
 
Average
Recorded
Investment
   
Interest
Income
Recognized
   
Average
Recorded
Investment
   
Interest
Income
Recognized
   
Average
Recorded
Investment
   
Interest
Income
Recognized
   
Average
Recorded
Investment
   
Interest
Income
Recognized
 
 
 
(In thousands)
 
With no related allowance recorded:
                                               
Commercial
 
$
112
   
$
2
   
$
6,834
   
$
184
   
$
167
   
$
4
   
$
4,411
   
$