XML 67 R10.htm IDEA: XBRL DOCUMENT v2.4.1.9
Allowance For Loan Losses And Credit Quality Of Financing Receivables
 3 Months Ended
Mar. 31, 2015
Allowance For Loan Losses And Credit Quality Of Financing Receivables [Abstract]  
Allowance For Loan Losses And Credit Quality Of Financing Receivables

NOTE 4 – ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY OF FINANCING RECEIVABLES

 

The following table presents changes in the allowance for loan losses disaggregated by the class of loans receivable for the three months ended March 31, 2015 and 2014:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

Commercial

 

Residential

 

Consumer

 

 

 

 

 

and

 

 

 

 

Real

 

Real

 

and

 

 

 

 

(Dollars in thousands)

Industrial

 

Construction

 

Estate

 

Estate

 

Other

 

Unallocated

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

$
231 

 

$
383 

 

$
3,491 

 

$
903 

 

$
19 

 

$
614 

 

$
5,641 

Charge-offs

 
(19)

 

 

 -

 

 
(188)

 

 

 -

 

 
(7)

 

 

 -

 

 
(214)

Recoveries

 
4 

 

 

 -

 

 
12 

 

 
12 

 

 
3 

 

 

 -

 

 
31 

Provision

 
(78)

 

 
5 

 

 
472 

 

 
(74)

 

 
73 

 

 
(93)

 

 
305 

Ending balance

$
138 

 

$
388 

 

$
3,787 

 

$
841 

 

$
88 

 

$
521 

 

$
5,763 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

$
222 

 

 
308 

 

$
3,399 

 

$
941 

 

$
16 

 

$
535 

 

$
5,421 

Charge-offs

 

 -

 

 

 -

 

 
(358)

 

 
(86)

 

 
(13)

 

 

 -

 

 
(457)

Recoveries

 
12 

 

 

 -

 

 
4 

 

 
1 

 

 
3 

 

 

 -

 

 
20 

Provision

 
55 

 

 
7 

 

 
642 

 

 
6 

 

 
13 

 

 
(270)

 

 
453 

Ending balance

$
289 

 

$
315 

 

$
3,687 

 

$
862 

 

$
19 

 

$
265 

 

$
5,437 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table presents the balance of the allowance of loan losses and loans receivable by class at March 31, 2015 and December 31, 2014 disaggregated on the basis of our impairment methodology.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for Loan Losses

 

Loans Receivable

 

 

 

 

Balance

 

Balance

 

 

 

 

 

 

 

 

 

 

 

 

 

Related to

 

Related to

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually

 

Collectively

 

 

 

 

Individually

 

Collectively

 

 

 

 

Evaluated for

 

Evaluated for

 

 

 

 

Evaluated for

 

Evaluated for

(Dollars in thousands)

Balance

 

Impairment

 

Impairment

 

Balance

 

Impairment

 

Impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

$
138 

 

$
1 

 

$
137 

 

$
18,822 

 

$
21 

 

$
18,801 

Construction

 
388 

 

 

 -

 

 
388 

 

 
13,239 

 

 

 -

 

 
13,239 

Commercial real estate

 
3,787 

 

 
334 

 

 
3,453 

 

 
325,742 

 

 
5,944 

 

 
319,798 

Residential real estate

 
841 

 

 
108 

 

 
733 

 

 
114,663 

 

 
1,974 

 

 
112,689 

Consumer and other loans

 
88 

 

 
73 

 

 
15 

 

 
1,324 

 

 
138 

 

 
1,186 

Unallocated

 
521 

 

 

-

 

 

 -

 

 

 -

 

 

-

 

 

-

Total

$
5,763 

 

$
516 

 

$
4,726 

 

$
473,790 

 

$
8,077 

 

$
465,713 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

$
231 

 

$
51 

 

$
180 

 

$
20,549 

 

$
94 

 

$
20,455 

Construction

 
383 

 

 

 -

 

 
383 

 

 
12,379 

 

 

                    -

 

 
12,379 

Commercial real estate

 
3,491 

 

 
136 

 

 
3,355 

 

 
326,370 

 

 
5,105 

 

 
321,265 

Residential real estate

 
903 

 

 
101 

 

 
802 

 

 
111,498 

 

 
2,314 

 

 
109,184 

Consumer and other loans

 
19 

 

 

 -

 

 
19 

 

 
1,665 

 

 

 -

 

 
1,665 

Unallocated

 
614 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Total

$
5,641 

 

$
288 

 

$
4,739 

 

$
472,461 

 

$
7,513 

 

$
464,948 

 

An age analysis of loans receivable, which were past due as of March 31, 2015 and December 31, 2014, is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recorded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment

 

 

 

 

 

 

 

Greater

 

 

 

 

 

 

 

Total

 

> 90 Days

 

30-59 Days

 

60-89 days

 

Than

 

Total Past

 

 

 

 

Financing

 

and

(Dollars in thousands)

Past Due

 

Past Due

 

90 Days (a)

 

Due

 

Current

 

Receivables

 

Accruing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

$
10 

 

$
15 

 

$
20 

 

$
45 

 

$
18,777 

 

$
18,822 

 

$

 -

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
13,239 

 

 
13,239 

 

 

 -

Commercial real estate

 
2,165 

 

 
1,107 

 

 
4,917 

 

 
8,189 

 

 
317,553 

 

 
325,742 

 

 

 -

Residential real estate

 
879 

 

 

 -

 

 
1,557 

 

 
2,436 

 

 
112,227 

 

 
114,663 

 

 

 -

Consumer and other

 
2 

 

 

 -

 

 
139 

 

 
141 

 

 
1,183 

 

 
1,324 

 

 
1 

Total

$
3,056 

 

$
1,122 

 

$
6,633 

 

$
10,811 

 

$
462,979 

 

$
473,790 

 

$
1 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

$
9 

 

$

 -

 

$
94 

 

$
103 

 

$
20,446 

 

$
20,549 

 

$

 -

Construction

 
1,354 

 

 

 -

 

 

 -

 

 
1,354 

 

 
11,025 

 

 
12,379 

 

 

 -

Commercial real estate

 
2,395 

 

 
1,209 

 

 
3,936 

 

 
7,540 

 

 
318,830 

 

 
326,370 

 

 

 -

Residential real estate

 
555 

 

 
108 

 

 
1,978 

 

 
2,641 

 

 
108,857 

 

 
111,498 

 

 
85 

Consumer and other

 
5 

 

 

 -

 

 
1 

 

 
6 

 

 
1,659 

 

 
1,665 

 

 

 -

Total

$
4,318 

 

$
1,317 

 

$
6,009 

 

$
11,644 

 

$
460,817 

 

$
472,461 

 

$
85 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) includes loans greater than 90 days past due and still accruing and non-accrual loans.

 

Loans for which the accrual of interest has been discontinued at March 31, 2015 and December 31, 2014 were:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

March 31, 2015

 

December 31, 2014

 

 

 

 

 

 

Commercial and industrial

$
20 

 

$
94 

Commercial real estate

 
4,917 

 

 
3,936 

Residential real estate

 
1,557 

 

 
1,893 

Consumer and other

 
138 

 

 
1 

Total

$
6,632 

 

$
5,924 

 

In determining the adequacy of the allowance for loan losses, we estimate losses based on the identification of specific problem loans through our credit review process and also estimate losses inherent in other loans on an aggregate basis by loan type.  The credit review process includes the independent evaluation of the loan officer assigned risk ratings by the Chief Credit Officer and a third party loan review company.  Such risk ratings are assigned loss component factors that reflect our loss estimate for each group of loans.  It is management’s and the Board of Directors’ responsibility to oversee the lending process to ensure that all credit risks are properly identified, monitored, and controlled, and that loan pricing, terms and other safeguards against non-performance and default are commensurate with the level of risk undertaken and is rated as such based on a risk-rating system.  Factors considered in assigning risk ratings and loss component factors include: borrower specific information related to expected future cash flows and operating results, collateral values, financial condition, payment status and other information; levels of and trends in portfolio charge-offs and recoveries; levels in portfolio delinquencies; effects of changes in loan concentrations and observed trends in the economy and other qualitative measurements.

 

Our risk-rating system is consistent with the classification system used by regulatory agencies and with industry practices. Loan classifications of Substandard, Doubtful or Loss are consistent with the regulatory definitions of classified assets.  The classification system is as follows:    

 

·

Pass: This category represents loans performing to contractual terms and conditions and the primary source of repayment is adequate to meet the obligation.  We have five categories within the Pass classification depending on strength of repayment sources, collateral values and financial condition of the borrower. 

 

·

Special Mention:  This category represents loans performing to contractual terms and conditions; however the primary source of repayment or the borrower is exhibiting some deterioration or weaknesses in financial condition that could potentially threaten the borrowers’ future ability to repay our loan principal and interest or fees due.

 

·

Substandard: This category represents loans that the primary source of repayment has significantly deteriorated or weakened which has or could threaten the borrowers’ ability to make scheduled payments.  The weaknesses require close supervision by management and there is a distinct possibility that we could sustain some loss if the deficiencies are not corrected.  Such weaknesses could jeopardize the timely and ultimate collection of our loan principal and interest or fees due.  Loss may not be expected or evident, however, loan repayment is inadequately supported by current financial information or pledged collateral.

 

·

Doubtful: Loans so classified have all the inherent weaknesses of a substandard loan with the added provision that collection or liquidation in full is highly questionable and not reasonably assured.  The probability of at least partial loss is high, but extraneous factors might strengthen the asset to prevent loss. The validity of the extraneous factors must be continuously monitored. Once these factors are questionable the loan should be considered for full or partial charge-off.

 

·

Loss: Loans so classified are considered uncollectible, and of such little value that their continuance as active assets is not warranted.  Such loans are fully charged off.

The following tables illustrate our corporate credit risk profile by creditworthiness category as of March 31, 2015 and December 31, 2014: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Special

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

Pass

 

Mention

 

Substandard

 

Doubtful

 

Total

March 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

$
18,794 

 

$
8 

 

$
20 

 

$

 -

 

$
18,822 

Construction

 
13,239 

 

 

 -

 

 

 -

 

 

 -

 

 
13,239 

Commercial real estate

 
311,692 

 

 
7,519 

 

 
6,531 

 

 

 -

 

 
325,742 

Residential real estate

 
112,100 

 

 
451 

 

 
2,112 

 

 

 -

 

 
114,663 

Consumer and other

 
1,186 

 

 

 -

 

 
138 

 

 

 -

 

 
1,324 

 

$
457,011 

 

$
7,978 

 

$
8,801 

 

$

 -

 

$
473,790 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

$
20,446 

 

$
9 

 

$
94 

 

$

 -

 

$
20,549 

Construction

 
12,379 

 

 

 -

 

 

 -

 

 

 -

 

 
12,379 

Commercial real estate

 
312,172 

 

 
8,257 

 

 
5,941 

 

 

 -

 

 
326,370 

Residential real estate

 
108,587 

 

 
457 

 

 
2,454 

 

 

 -

 

 
111,498 

Consumer and other

 
1,527 

 

 
138 

 

 

 -

 

 

 -

 

 
1,665 

 

$
455,111 

 

$
8,861 

 

$
8,489 

 

$

 -

 

$
472,461 

 

The following table reflects information about our impaired loans by class as of March 31, 2015 and December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

 

 

December 31, 2014

 

 

 

 

Unpaid

 

 

 

 

 

 

 

 

Unpaid

 

 

 

 

Recorded

 

Principal

 

Related

 

 

Recorded

 

Principal

 

Related

(Dollars in thousands)

Investment

 

Balance

 

Allowance

 

 

Investment

 

Balance

 

Allowance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

$
20 

 

$
20 

 

$

 -

 

 

$

 -

 

$

 -

 

$

 -

Commercial real estate

 
2,351 

 

 
2,351 

 

 

 -

 

 

 
3,167 

 

 
3,736 

 

 

 -

Residential real estate

 
1,433 

 

 
1,432 

 

 

 -

 

 

 
1,829 

 

 
1,835 

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 
1 

 

 
1 

 

 
1 

 

 

 
94 

 

 
94 

 

 
51 

Commercial real estate

 
3,593 

 

 
4,162 

 

 
334 

 

 

 
1,938 

 

 
1,938 

 

 
136 

Residential real estate

 
541 

 

 
552 

 

 
108 

 

 

 
485 

 

 
489 

 

 
101 

Consumer and other

 
138 

 

 
138 

 

 
73 

 

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 
21 

 

 
21 

 

 
1 

 

 

 
94 

 

 
94 

 

 
51 

Commercial real estate

 
5,944 

 

 
6,513 

 

 
334 

 

 

 
5,105 

 

 
5,674 

 

 
136 

Residential real estate

 
1,974 

 

 
1,984 

 

 
108 

 

 

 
2,314 

 

 
2,324 

 

 
101 

Consumer and other

 
138 

 

 
138 

 

 
73 

 

 

 

 -

 

 

 -

 

 

 -

 

$
8,077 

 

$
8,656 

 

$
516 

 

 

$
7,513 

 

$
8,092 

 

$
288 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table presents the average recorded investment and income recognized for the three months ended March 31, 2015 and 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2015

 

For the Three Months Ended March 31, 2014

 

Average

 

Interest

 

Average

 

Interest

 

Recorded

 

Income

 

Recorded

 

Income

(Dollars in thousands)

Investment

 

Recognized

 

Investment

 

Recognized

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

$
10 

 

$

 -

 

$

 -

 

$

 -

Commercial real estate

 
2,759 

 

 
5 

 

 
4,968 

 

 
8 

Residential real estate

 
1,631 

 

 
1 

 

 
1,845 

 

 
20 

Total impaired loans without a related allowance

 
4,400 

 

 
6 

 

 
6,813 

 

 
28 

 

 

 

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 
47 

 

 

 -

 

 

 -

 

 

 -

Commercial real estate

 
2,766 

 

 
8 

 

 
5,319 

 

 
1 

Residential real estate

 
513 

 

 
3 

 

 
849 

 

 
4 

Consumer and other

 
69 

 

 

 -

 

 
1 

 

 

 -

Total impaired loans with an allowance

 
3,395 

 

 
11 

 

 
6,169 

 

 
5 

Total impaired loans

$
7,795 

 

$
17 

 

$
12,982 

 

$
33 

 

 

 

 

 

 

 

 

 

 

 

 

 

We recognize interest income on performing impaired loans as payments are received.  On non-performing impaired loans we do not recognize interest income as all payments are recorded as a reduction of principal on such loans.    

 

Impaired loans 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, postponement or forgiveness of principal, forbearance or other actions intended to maximize collection.  The concessions rarely result in the forgiveness of principal or accrued interest.  In addition, we attempt to obtain additional collateral or guarantor support when modifying such loans.  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.

 

The following table presents the recorded investment in troubled debt restructured loans, based on payment performance status:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Commercial Real Estate

 

Residential Real Estate

 

Total

 

 

 

 

 

 

 

 

 

March 31, 2015

 

 

 

 

 

 

 

 

Performing

$
1,162 

 

$
418 

 

$
1,580 

Non-performing

 
2,725 

 

 
223 

 

 
2,948 

Total

$
3,887 

 

$
641 

 

$
4,528 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

 

 

 

 

 

Performing

$
1,169 

 

$
421 

 

$
1,590 

Non-performing

 
2,730 

 

 
224 

 

 
2,954 

Total

$
3,899 

 

$
645 

 

$
4,544 

 

Troubled debt restructured loans are considered impaired and are included in the previous impaired loans disclosures in this footnote.  As of March 31, 2015, we have not committed to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

 

There were no troubled debt restructurings that occurred during the three months ended March 31, 2015 and 2014. 

 

 

There were no troubled debt restructurings for which there was a payment default within twelve months following the date of the restructuring for the three months ended March 31, 2015 and 2014.

 

We may obtain physical possession of residential real estate collateralizing a consumer mortgage loan via foreclosure on an in-substance repossession. As of March 31, 2015, we held foreclosed residential real estate properties with a carrying value of $281 thousand as a result of obtaining physical possession. In addition, as of March 31, 2015, we had consumer loans with a carrying value of $1.3 million collateralized by residential real estate property for which formal foreclosure proceedings were in process.