Produce State Bank
Loan Restructuring Watch
Loan modification trends and credit-stress indicators as of 2026-03-31. Surfaces what conventional asset-quality metrics hide.
What this page shows
When a borrower can't make their loan payments on the original schedule, the bank can either let the loan default — which forces them to recognize a loss and write the loan down — or quietly modify the terms (lower payments, extend the maturity, capitalize missed interest) so the loan keeps performing on paper. A modified loan doesn't hit the bank's noncurrent ratio, doesn't move into nonaccrual, and doesn't draw down the allowance for loan losses. Investors and depositors looking only at headline credit metrics miss it entirely.
Until 2023, the Federal Reserve's Call Report required banks to disclose every modification cumulatively, going back several years, as a "Troubled Debt Restructuring" or TDR. After ASU 2022-02 took effect at the start of 2023Q1, the TDR concept was retired and replaced with a much narrower, rolling 12-month "Loan Modifications for Borrowers Experiencing Financial Difficulty" (FFIEC schedule RC-C Memo 10-12). The cumulative exposure number went away. The chart below shows BOTH regimes — the vertical reference line marks the cutover so you can see how the published number drops once the rule changed (it almost always does, because cumulative balances roll off).
The headline metric to watch is Performing Modifications as a percent of total loans. These are loans that have already been restructured (the original contract failed) but are still classified as "in compliance with modified terms" — meaning they haven't yet rolled into delinquency or nonaccrual. Industry-published backtested 3-year failure-rate analysis (2025) shows that banks with performing modifications above 5% of total loans failed within three years at a 42% rate, compared with 7% for banks below 1%. The Restructuring Failure Curve below plots this bank against those bands.
Headline figures
- Performing modifications
- $0 HK25 — in compliance with modified terms
- Nonaccrual modifications
- $0 HK28 — already non-performing
- Total modified
- $0 0.00% of total loans
True Loss Coverage Ratio
Modification history
The vertical reference line marks 2023Q1 — the FDIC ASU 2022-02 cutover. Before that date banks reported cumulative TDR balances; after, only a rolling 12-month modification window.
Per-portfolio Hidden Stress Index
Hidden Stress Index = (modifications $ + 30-89 PD $ + 90+ PD $ + nonaccrual $) ÷ outstanding $. Per-class RC-N delinquency and nonaccrual are wired from the FFIEC facsimile. Per-class modification splits (RC-C Memo 10-12, post-2024) remain pending — the Modified $ column still shows a Pending badge until those MDRMs are validated against an actual filer. Bands use absolute thresholds (2% watch / 5% risk) until the cross-bank peer-median export is published.
| Portfolio | Outstanding $ | Modified $ | Modified % | Hidden Stress IndexABS |
|---|---|---|---|---|
1-4 family residentialRCON5367+RCON5368+RCON1797 | $15.7M | —Pending | — | 0.68% |
Multifamily residentialRCON1460 | $3.5M | —Pending | — | 0.00% |
CRE — nonfarm nonresidentialRCONF160+RCONF161 | $10.4M | —Pending | — | 0.00% |
Construction & land developmentRCONF158+RCONF159 | $0 | —Pending | — | — |
Commercial & industrialLNCI | $9.5M | —Pending | — | 0.52% |
Agricultural productionRCON1590 | $8.7M | —Pending | — | 2.06% |
FarmlandRCON1420 | $9.7M | —Pending | — | 1.60% |
Credit cardRCONB538 | $15.0K | —Pending | — | 0.00% |
Automobile loansRCONK137 | $2.4M | —Pending | — | 1.67% |
Other consumerLNCONOTH | $1.4M | —Pending | — | 1.47% |
Loans to depository institutionsRCON1288 | $0 | —Pending | — | — |
Lease financingRCON2165 | $0 | —Pending | — | — |
Restructuring Failure Curve
Bank's cumulative modified % of total loans, plotted against backtested 3-year failure-rate bands. Higher is worse. Source: industry-published 2025 backtest analysis — not a Visbanking-published study.
Definitions + sources
- Modification (post-2023)
- FFIEC RC-C Memo 10-12 "Loan Modifications for Borrowers Experiencing Financial Difficulty". MDRMs
HK25(in compliance),HK26(30-89 PD),HK27(90+ PD),HK28(nonaccrual). BothRCFD*(consolidated, large banks) andRCON*(domestic-only) are pulled; RCFD is preferred when filed. - Hidden Stress Index
- (Modifications + 30-89 PD + 90+ PD + Nonaccrual) ÷ Outstanding, computed per portfolio. Captures stress that conventional NPL ratios miss because modified loans don't roll into noncurrent.
- True Loss Coverage Ratio
- ALLL ÷ (Adjusted NPL + Performing Modifications), where Adjusted NPL = NCLN − govt-guaranteed nonaccrual (RC-N Memo 2, MDRM
HK67). Strips out exposure that won't generate loss and adds back performing modifications. - Restructuring Failure Curve
- Background bands are 3-year historic failure rates by stratum: <1% = 7%, 1-2% = 17%, 2-3% = 22.6%, 3-5% = 27%, >5% = 42%. Source: industry-published 2025 backtest analysis. Not a Visbanking study.
- Source data
- FFIEC RC-C, RC-N, RC-N Memo 2, RI-B Part II, RC-R via
CallReport_Financials+CallReport_FdicData.
Per-class delinquency totals (30-89 PD, 90+ PD, nonaccrual) for all 12 portfolios are sourced from RC-N MDRMs validated against the DataEngine NA/P3/P9 formula library. Per-class modification splits (RC-C Memo 10-12 by class, post-2024) are still flagged Pending in the Modified $ column — those MDRMs are not yet established in our codebase. The bank-wide HK25-HK28 modification totals shown in the headline tiles and modification history chart are unaffected.
Generated: 2026-05-12 00:56:37 UTC