CHFC 2018 Annual Report

The following schedule summarizes impaired loans to commercial borrowers and the related valuation allowance at December 31, 2018 and 2017 and partial loan charge-offs (confirmed losses) taken on these impaired loans: (Dollars in thousands) Amount Valuation Allowance Confirmed Losses Cumulative Inherent Loss Percentage December 31, 2018 Impaired loans — originated commercial loan portfolio: With valuation allowance and no charge-offs $ 46,112 $ 4,103 $ — 9% With valuation allowance and charge-offs 7,514 1,371 5,460 53% With charge-offs and no valuation allowance 9,350 — 3,556 28% Without valuation allowance or charge-offs 42,062 — — —% Total impaired loans to commercial borrowers $ 105,038 $ 5,474 $ 9,016 13% December 31, 2017 Impaired loans — originated commercial loan portfolio: With valuation allowance and no charge-offs $ 48,622 $ 4,618 $ — 9 % With valuation allowance and charge-offs 8,591 919 9,335 57 % With charge-offs and no valuation allowance 4,695 — 2,568 35 % Without valuation allowance or charge-offs 21,889 — — —% Total impaired loans to commercial borrowers $ 83,797 $ 5,537 $ 11,903 18 % After analyzing the various components of the customer relationships and evaluating the underlying collateral of impaired loans, we determined that impaired loans in the commercial loan portfolio totaling $53.6 million at December 31, 2018 required a specific allocation of the allowance for loan losses (valuation allowance) of $5.5 million, compared to $57.2 million of impaired loans in the commercial loan portfolio at December 31, 2017 which required a valuation allowance of $5.5 million. Nonperforming Loans The following schedule provides the composition of nonperforming loans, by major loan category, as of December 31, 2018 and 2017. December 31, 2018 2017 (Dollars in thousands) Amount Percent of Total Amount Percent of Total Commercial loan portfolio: Commercial $ 30,139 35.3% $ 19,691 31.2% Commercial real estate: Owner-occupied 16,056 18.8 19,070 30.2 Non-owner occupied 23,021 26.9 5,270 8.4 Vacant land 3,337 3.9 5,205 8.3 Commercial real estate 42,414 49.6 29,545 46.9 Real estate construction and land development 12 — 77 0.1 Subtotal — commercial loan portfolio 72,565 84.9 49,313 78.2 Consumer loan portfolio: Residential mortgage 7,988 9.4 8,635 13.7 Consumer installment 1,276 1.5 842 1.3 Home equity 3,604 4.2 4,305 6.8 Subtotal — consumer loan portfolio 12,868 15.1 13,782 21.8 Total nonperforming loans $ 85,433 100.0% $ 63,095 100.0% Total nonperforming loans were $85.4 million at December 31, 2018, an increase of $22.3 million, or 35.4%, compared to $63.1 million at December 31, 2017. The increase in nonperforming loans during 2018 was primarily attributable to one non- owner occupied loan relationship and one commercial loan relationship that we downgraded to nonaccrual status. Nonperforming 59