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Loans
 9 Months Ended
Sep. 30, 2014
Loans  
Loans

5) Loans

        Loans were as follows:

 
   September 30,
2014		   December 31,
2013		  
 
   (Dollars in thousands)
  

Loans held-for-investment:

              

Commercial

   $ 436,481   $ 393,074  

Real estate:

              

Commercial and residential

     464,991     423,288  

Land and construction

     53,064     31,443  

Home equity

     61,079     51,815  

Consumer

     14,609     15,677  
           
​ ​ ​ ​ ​ ​ ​ ​

Loans

     1,030,224     915,297  

Deferred loan origination fees, net

     (628 )   (384 )
           
​ ​ ​ ​ ​ ​ ​ ​

Loans, net of deferred fees

     1,029,596     914,913  

Allowance for loan losses

     (18,541 )   (19,164 )
           
​ ​ ​ ​ ​ ​ ​ ​

Loans, net

   $ 1,011,055   $ 895,749  
           
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
           

        Changes in the allowance for loan losses were as follows for the periods indicated:

 
   Three Months Ended September 30, 2014  
 
   Commercial   Real Estate   Consumer   Total  
 
   (Dollars in thousands)
  

Balance, beginning of period

   $ 11,454   $ 7,069   $ 69   $ 18,592  

Charge-offs

     (132 )   —     (25 )   (157 )

Recoveries

     123     7     —     130  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net (charge-offs) recoveries

     (9 )   7     (25 )   (27 )

Provision (credit) for loan losses

     163     (205 )   18     (24 )
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Balance, end of period

   $ 11,608   $ 6,871   $ 62   $ 18,541  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   


 

 
   Three Months Ended September 30, 2013  
 
   Commercial   Real Estate   Consumer   Total  
 
   (Dollars in thousands)
  

Balance, beginning of period

   $ 12,811   $ 6,388   $ 143   $ 19,342  

Charge-offs

     (254 )   (40 )   —     (294 )

Recoveries

     820     7     1     828  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net recoveries

     566     (33 )   1     534  

Provision (credit) for loan losses

     (10 )   (461 )   (63 )   (534 )
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Balance, end of period

   $ 13,367   $ 5,894   $ 81   $ 19,342  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   


 

 
   Nine Months Ended September 30, 2014  
 
   Commercial   Real Estate   Consumer   Total  
 
   (Dollars in thousands)
  

Balance, beginning of period

   $ 12,533   $ 6,548   $ 83   $ 19,164  

Charge-offs

     (726 )   —     (25 )   (751 )

Recoveries

     309     51     —     360  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net (charge-offs) recoveries

     (417 )   51     (25 )   (391 )

Provision (credit) for loan losses

     (508 )   272     4     (232 )
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Balance, end of period

   $ 11,608   $ 6,871   $ 62   $ 18,541  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   


 

 
   Nine Months Ended September 30, 2013  
 
   Commercial   Real Estate   Consumer   Total  
 
   (Dollars in thousands)
  

Balance, beginning of period

   $ 12,866   $ 6,034   $ 127   $ 19,027  

Charge-offs

     (1,213 )   (96 )   —     (1,309 )

Recoveries

     2,158     269     1     2,428  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net recoveries

     945     173     1     1,119  

Provision (credit) for loan losses

     (444 )   (313 )   (47 )   (804 )
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Balance, end of period

   $ 13,367   $ 5,894   $ 81   $ 19,342  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

        The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment, based on the impairment method at the following period-ends:

 
   September 30, 2014  
 
   Commercial   Real Estate   Consumer   Total  
 
   (Dollars in thousands)
  

Allowance for loan losses:

                          

Ending allowance balance attributable to loans:

                          

Individually evaluated for impairment

   $ 606   $ 124   $ —   $ 730  

Collectively evaluated for impairment

     11,002     6,747     62     17,811  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total allowance balance

   $ 11,608   $ 6,871   $ 62   $ 18,541  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

Loans:

                          

Individually evaluated for impairment

   $ 3,398   $ 3,806   $ 6   $ 7,210  

Collectively evaluated for impairment

     433,083     575,328     14,603     1,023,014  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total loan balance

   $ 436,481   $ 579,134   $ 14,609   $ 1,030,224  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   


 

 
   December 31, 2013  
 
   Commercial   Real Estate   Consumer   Total  
 
   (Dollars in thousands)
  

Allowance for loan losses:

                          

Ending allowance balance attributable to loans:

                          

Individually evaluated for impairment

   $ 1,694   $ 741   $ 21   $ 2,456  

Collectively evaluated for impairment

     10,839     5,807     62     16,708  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total allowance balance

   $ 12,533   $ 6,548   $ 83   $ 19,164  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

Loans:

                          

Individually evaluated for impairment

   $ 4,906   $ 6,790   $ 122   $ 11,818  

Collectively evaluated for impairment

     388,168     499,756     15,555     903,479  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total loan balance

   $ 393,074   $ 506,546   $ 15,677   $ 915,297  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

        The following table presents loans held-for-investment individually evaluated for impairment by class of loans as of September 30, 2014 and December 31, 2013. The recorded investment included in the following table represents loan principal net of any partial charge-offs recognized on the loans. The unpaid principal balance represents the recorded balance prior to any partial charge-offs.

 
   September 30, 2014   December 31, 2013  
 
   Unpaid
Principal
Balance		   Recorded
Investment		   Allowance
for Loan
Losses
Allocated		   Unpaid
Principal
Balance		   Recorded
Investment		   Allowance
for Loan
Losses
Allocated		  
 
   (Dollars in thousands)
  

With no related allowance recorded:

                                      

Commercial

   $ 2,923   $ 2,361   $ —   $ 1,999   $ 1,915   $ —  

Real estate:

                                      

Commercial and residential

     2,531     1,672     —     2,831     2,831     —  

Land and construction

     2,144     1,655     —     1,761     1,761     —  

Home Equity

     355     355     —     377     377     —  

Consumer

     6     6     —     —     —     —  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total with no related allowance recorded

     7,959     6,049     —     6,968     6,884     —  

With an allowance recorded:

    
 		    
 		    
 		    
 		    
 		    
 		  

Commercial

     1,037     1,037   $ 606     3,225     2,991     1,694  

Real estate:

                                      

Commercial and residential

     —     —     —     1,531     1,531     451  

Home Equity

     124     124     124     290     290     290  

Consumer

     —     —     —     122     122     21  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total with an allowance recorded

     1,161     1,161     730     5,168     4,934     2,456  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 9,120   $ 7,210   $ 730   $ 12,136   $ 11,818   $ 2,456  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                           

        The following tables present interest recognized and cash-basis interest earned on impaired loans for the periods indicated:

 
   Three Months Ended September 30, 2014  
 
    
   Real Estate    
    
  
 
   Commercial   Commercial and
Residential		   Land and
Construction		   Home
Equity		   Consumer   Total  
 
   (Dollars in thousands)
  

Average of impaired loans during the period

   $ 3,790   $ 2,273   $ 1,672   $ 513   $ 19   $ 8,267  

Interest income during impairment

   $ —   $ —   $ —   $ —   $ —   $ —  

Cash-basis interest earned

   $ —   $ —   $ —   $ —   $ —   $ —  


 

 
   Three Months Ended September 30, 2013  
 
    
   Real Estate    
    
  
 
   Commercial   Commercial and
Residential		   Land and
Construction		   Home
Equity		   Consumer   Total  
 
   (Dollars in thousands)
  

Average of impaired loans during the period

   $ 5,539   $ 5,032   $ 1,989   $ 2,393   $ 133   $ 15,086  

Interest income during impairment

   $ —   $ —   $ —   $ —   $ —   $ —  

Cash-basis interest earned

   $ —   $ —   $ —   $ —   $ —   $ —  


 

 
   Nine Months Ended September 30, 2014  
 
    
   Real Estate    
    
  
 
   Commercial   Commercial and
Residential		   Land and
Construction		   Home
Equity		   Consumer   Total  
 
   (Dollars in thousands)
  

Average of impaired loans during the period

   $ 4,411   $ 3,034   $ 1,705   $ 575   $ 69   $ 9,794  

Interest income during impairment

   $ 56   $ —   $ —   $ —   $ —   $ 56  

Cash-basis interest earned

   $ —   $ —   $ —   $ —   $ —   $ —  


 

 
   Nine Months Ended September 30, 2013  
 
    
   Real Estate    
    
  
 
   Commercial   Commercial and
Residential		   Land and
Construction		   Home
Equity		   Consumer   Total  
 
   (Dollars in thousands)
  

Average of impaired loans during the period

   $ 7,342   $ 5,061   $ 2,095   $ 2,414   $ 138   $ 17,050  

Interest income during impairment

   $ —   $ —   $ —   $ —   $ —   $ —  

Cash-basis interest earned

   $ —   $ —   $ —   $ —   $ —   $ —  

        Nonperforming loans include both smaller dollar balance homogenous loans that are collectively evaluated for impairment and individually classified loans. Nonperforming loans were as follows at period-end:

 
   September 30,    
  
 
   December 31,
2013		  
 
   2014   2013  
 
   (Dollars in thousands)
  

Nonaccrual loans—held-for-investment

   $ 7,010   $ 14,615   $ 11,326  

Restructured and loans over 90 days past due and still accruing

     200     502     492  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total nonperforming loans

   $ 7,210   $ 15,117   $ 11,818  
               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
               

Other restructured loans

   $ —   $ 10   $ —  

Impaired loans, excluding loans held-for-sale

   $ 7,210   $ 15,127   $ 11,818  

        The following table presents the nonperforming loans by class for the periods indicated:

 
   September 30, 2014   December 31, 2013  
 
   Nonaccrual   Restructured and
Loans Over 90 Days
Past Due and
Still Accruing		   Total   Nonaccrual   Restructured and
Loans Over 90 Days
Past Due and
Still Accruing		   Total  
 
   (Dollars in thousands)
  

Commercial

   $ 3,198   $ 200   $ 3,398   $ 4,414   $ 492   $ 4,906  

Real estate:

                                      

Commercial and residential

     1,672     —     1,672     4,363     —     4,363  

Land and construction

     1,655     —     1,655     1,761     —     1,761  

Home equity

     479     —     479     666     —     666  

Consumer

     6     —     6     122     —     122  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 7,010   $ 200   $ 7,210   $ 11,326   $ 492   $ 11,818  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                           

        The following tables present the aging of past due loans by class for the periods indicated:

 
   September 30, 2014  
 
   30 - 59
Days
Past Due		   60 - 89
Days
Past Due		   90 Days or
Greater
Past Due		   Total
Past Due		   Loans Not
Past Due		   Total  
 
   (Dollars in thousands)
  

Commercial

   $ 344   $ 131   $ 2,197   $ 2,672   $ 433,809   $ 436,481  

Real estate:

                                      

Commercial and residential

     —     —     1,065     1,065     463,926     464,991  

Land and construction

     308     —     —     308     52,756     53,064  

Home equity

     —     —     124     124     60,955     61,079  

Consumer

     —     —     —     —     14,609     14,609  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 652   $ 131   $ 3,386   $ 4,169   $ 1,026,055   $ 1,030,224  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                           


 

 
   December 31, 2013  
 
   30 - 59
Days
Past Due		   60 - 89
Days
Past Due		   90 Days or
Greater
Past Due		   Total
Past Due		   Loans Not
Past Due		   Total  
 
   (Dollars in thousands)
  

Commercial

   $ 3,314   $ 428   $ 2,865   $ 6,607   $ 386,467   $ 393,074  

Real estate:

                                      

Commercial and residential

     1,559     —     1,065     2,624     420,664     423,288  

Land and construction

     —     —     —     —     31,443     31,443  

Home equity

     28     —     290     318     51,497     51,815  

Consumer

     —     —     89     89     15,588     15,677  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 4,901   $ 428   $ 4,309   $ 9,638   $ 905,659   $ 915,297  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                           

        Past due loans 30 days or greater totaled $4,169,000 and $9,638,000 at September 30, 2014 and December 31, 2013, respectively, of which $3,809,000 and $5,900,000 were on nonaccrual. At September 30, 2014, there were also $3,201,000 loans less than 30 days past due included in nonaccrual loans held for investment. At December 31, 2013, there were also $5,426,000 loans less than 30 days past due included in nonaccrual loans held for investment. Management's classification of a loan as "nonaccrual" is an indication that there is reasonable doubt as to the full recovery of principal or interest on the loan. At that point, the Company stops accruing interest income, and reverses any uncollected interest that had been accrued as income. The Company begins recognizing interest income only as cash interest payments are received and it has been determined the collection of all outstanding principal is not in doubt. The loans may or may not be collateralized, and collection efforts are pursued.

Credit Quality Indicators

        Concentrations of credit risk arise when a number of customers are engaged in similar business activities, or activities in the same geographic region, or have similar features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. The Company's loan portfolio is concentrated in commercial (primarily manufacturing, wholesale, and service) and real estate lending, with the balance in consumer loans. While no specific industry concentration is considered significant, the Company's lending operations are located in the Company's market areas that are dependent on the technology and real estate industries and their supporting companies. Thus, the Company's borrowers could be adversely impacted by a downturn in these sectors of the economy which could reduce the demand for loans and adversely impact the borrowers' ability to repay their loans.

        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 is performed on a quarterly basis. Nonclassified loans generally include those loans that are expected to be repaid in accordance with contractual loans terms. Classified loans are those loans that are assigned a substandard, substandard-nonaccrual, or doubtful risk rating using the following definitions:

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

        Substandard-Nonaccrual.    Loans classified as substandard-nonaccrual are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any, and it is probable that the Company will not receive payment of the full contractual principal and interest. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. In addition, the Company no longer accrues interest on the loan because of the underlying weaknesses.

        Doubtful.    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 currently existing facts, conditions, and values, highly questionable and improbable.

        Loss.    Loans classified as loss are considered uncollectable or of so little value that their continuance as assets is not warranted. This classification does not necessarily mean that a loan has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery would occur. Loans classified as loss are immediately charged off against the allowance for loan losses. Therefore, there is no balance to report at September 30, 2014 or December 31, 2013.

        The following table provides a summary of the loan portfolio by loan type and credit quality classification at period end:

 
   September 30, 2014   December 31, 2013  
 
   Nonclassified   Classified*   Total   Nonclassified   Classified*   Total  
 
   (Dollars in thousands)
  

Commercial

   $ 428,372   $ 8,109   $ 436,481   $ 380,806   $ 12,268   $ 393,074  

Real estate:

                                      

Commercial and residential

     458,671     6,320     464,991     416,992     6,296     423,288  

Land and construction

     51,408     1,656     53,064     29,682     1,761     31,443  

Home equity

     59,945     1,134     61,079     48,818     2,997     51,815  

Consumer

     14,252     357     14,609     15,336     341     15,677  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 1,012,648   $ 17,576   $ 1,030,224   $ 891,634   $ 23,663   $ 915,297  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                           
*
Classified loans in the table above include Small Business Administration ("SBA") guarantees.

        In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Company's underwriting policy.

        The recorded investment of troubled debt restructurings at September 30, 2014 was $1,638,000, which included $1,438,000 of nonaccrual loans and $200,000 of accruing loans. The book balance of troubled debt restructurings at December 31, 2013 was $3,722,000, which included $3,230,000 of nonaccrual loans and $492,000 of accruing loans. Approximately $147,000 and $1,186,000 in specific reserves were established with respect to these loans as of September 30, 2014 and December 31, 2013, respectively. As of September 30, 2014 and December 31, 2013, the Company had no additional amounts committed on any loan classified as a troubled debt restructuring.

        There were no new loans modified as troubled debt restructurings during the three and nine month periods ended September 30, 2014 and 2013.

        A loan is considered to be in payment default when it is 30 days contractually past due under the modified terms. There were no defaults on troubled debt restructurings, within twelve months following the modification, during the three and nine month periods ended September 30, 2014 and 2013.

        A loan that is a troubled debt restructuring on nonaccrual status may return to accruing status after a period of at least six months of consecutive payments in accordance with the modified terms.