Note 3 - Loans and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2013

Loans And Allowance For Credit Losses [Abstract]

Loans And Allowance For Credit Losses [Text Block]

Note 3: Loans and Allowance for Credit Losses

A summary of the major categories of loans outstanding is shown in the following tables:

	At December 31, 2013
	Commercial			Commercial Real Estate			Construction			Residential Real Estate			Consumer Installment & Other			Total
	(In thousands)
Originated loans	$	338,824		$	596,653		$	10,723		$	176,196		$	400,888		$	1,523,284
Purchased covered loans:
Impaired		5			2,835			-			-			247			3,087
Non impaired		20,061			172,727			3,223			8,558			53,947			258,516
Purchase discount		(1,530	)		(8,122	)		(50	)		(434	)		(797	)		(10,933	)
Purchased non-covered loans:
Impaired		635			2,520			-			-			147			3,302
Non impaired		6,890			33,192			-			999			12,652			53,733
Purchase discount		(726	)		(786	)		-			(262	)		(1,471	)		(3,245	)
Total	$	364,159		$	799,019		$	13,896		$	185,057		$	465,613		$	1,827,744

	At December 31, 2012
	Commercial			Commercial Real Estate			Construction			Residential Real Estate			Consumer Installment & Other			Total
	(In thousands)
Originated loans	$	340,116		$	632,927		$	7,984		$	222,458		$	460,698		$	1,664,183
Purchased covered loans:
Impaired		308			7,585			1,824			-			257			9,974
Non impaired		59,135			247,534			5,462			9,374			66,932			388,437
Purchase discount		(8,459	)		(15,140	)		(279	)		(433	)		(1,817	)		(26,128	)
Purchased non-covered loans:
Impaired		1,261			6,763			-			-			297			8,321
Non impaired		9,840			38,673			1,619			3,110			18,554			71,796
Purchase discount		(870	)		(1,748	)		(95	)		(474	)		(2,039	)		(5,226	)
Total	$	401,331		$	916,594		$	16,515		$	234,035		$	542,882		$	2,111,357

Changes in the carrying amount of impaired purchased covered loans were as follows:

	For the Years Ended December 31,
	2013			2012
Impaired purchased covered loans	(In thousands)
Carrying amount at the beginning of the period	$	7,865		$	18,591
Reductions during the period		(5,363	)		(10,726	)
Carrying amount at the end of the period	$	2,502		$	7,865

Changes in the carrying amount of impaired purchased non-covered loans were as follows:

	For the Years Ended December 31,
	2013			2012
Impaired purchased non-covered loans	(In thousands)
Carrying amount at the beginning of the period	$	6,764		$	15,572
Reductions during the period		(4,330	)		(8,808	)
Carrying amount at the end of the period	$	2,434		$	6,764

Changes in the accretable yield for purchased loans were as follows:

	For the Years Ended December 31,
	2013			2012
Accretable Yield:	(In thousands)
Balance at the beginning of the period	$	4,948		$	9,990
Reclassification from nonaccretable difference		12,504			12,121
Accretion		(14,947	)		(17,163	)
Balance at the end of the period	$	2,505		$	4,948
Accretion	$	(14,947	)	$	(17,163	)
Reduction in FDIC indemnification asset		11,438			13,207
(Increase) in interest income	$	(3,509	)	$	(3,956	)

The following summarizes activity in the allowance for credit losses:

	Allowance for Credit Losses For the Year Ended December 31, 2013
	Commercial			Commercial Real Estate			Construction		Residential Real Estate			Consumer Installment and Other			Purchased Non-covered Loans			Purchased Covered Loans			Unallocated		Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	6,445		$	10,063		$	484	$	380		$	3,194		$	-		$	1,005		$	8,663	$	30,234
Additions:
Provision		(1,158	)		2,813			118		134			1,949			385			2,570			1,189		8,000
Deductions:
Chargeoffs		(2,857	)		(997	)		-		(109	)		(4,097	)		(385	)		(2,286	)		-		(10,731	)
Recoveries		1,575			191			-		-			2,152			-			272			-		4,190
Net loan losses		(1,282	)		(806	)		-		(109	)		(1,945	)		(385	)		(2,014	)		-		(6,541	)
Balance at end of period		4,005			12,070			602		405			3,198			-			1,561			9,852		31,693
Liability for off-balance sheet credit exposure		1,658			-			37		-			497			-			-			501		2,693
Total allowance for credit losses	$	5,663		$	12,070		$	639	$	405		$	3,695		$	-		$	1,561		$	10,353	$	34,386

	Allowance for Credit Losses For the Year Ended December 31, 2012
	Commercial			Commercial Real Estate			Construction			Residential Real Estate			Consumer Installment and Other			Purchased Non-covered Loans			Purchased Covered Loans			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	6,012		$	10,611		$	2,342		$	781		$	3,072		$	-		$	-		$	9,779		$	32,597
Additions:
Provision		5,967			451			135			755			3,084			110			1,814			(1,116	)		11,200
Deductions:
Chargeoffs		(6,851	)		(1,202	)		(2,217	)		(1,156	)		(5,685	)		(110	)		(953	)		-			(18,174	)
Recoveries		1,317			203			224			-			2,723			-			144			-			4,611
Net loan losses		(5,534	)		(999	)		(1,993	)		(1,156	)		(2,962	)		(110	)		(809	)		-			(13,563	)
Balance at end of period		6,445			10,063			484			380			3,194			-			1,005			8,663			30,234
Liability for off-balance sheet credit exposure		1,734			9			-			-			419			-			-			531			2,693
Total allowance for credit losses	$	8,179		$	10,072		$	484		$	380		$	3,613		$	-		$	1,005		$	9,194		$	32,927

	Allowance for Credit Losses For the Year Ended December 31, 2011
	Commercial			Commercial Real Estate			Construction			Residential Real Estate			Consumer Installment and Other			Purchased Covered Loans			Unallocated		Total
	(In thousands)
Allowance for loan losses:
Balance at beginning of period	$	8,094		$	9,607		$	3,260		$	617		$	6,372		$	-		$	7,686	$	35,636
Additions:
Provision		3,069			2,336			1,248			903			564			987			2,093		11,200
Deductions:
Chargeoffs		(8,280	)		(1,332	)		(2,167	)		(739	)		(6,754	)		(987	)		-		(20,259	)
Recoveries		3,129			-			1			-			2,890			-			-		6,020
Net loan losses		(5,151	)		(1,332	)		(2,166	)		(739	)		(3,864	)		(987	)		-		(14,239	)
Balance at end of period		6,012			10,611			2,342			781			3,072			-			9,779		32,597
Liability for off-balance sheet credit exposure		1,660			-			34			-			198			-			801		2,693
Total allowance for credit losses	$	7,672		$	10,611		$	2,376		$	781		$	3,270		$	-		$	10,580	$	35,290

The allowance for credit losses and recorded investment in loans evaluated for impairment follow:

	Allowance for Credit Losses and Recorded Investment in Loans Evaluated for Impairment At December 31, 2013
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Purchased Non- covered Loans		Purchased Covered Loans		Unallocated		Total
	(In thousands)
Allowance for credit losses:
Individually evaluated for impairment	$	100	$	1,243	$	-	$	-	$	-	$	-	$	153	$	-	$	1,496
Collectively evaluated for impairment		5,563		10,827		639		405		3,695		-		1,408		10,353		32,890
Purchased loans with evidence of credit deterioration		-		-		-		-		-		-		-		-		-
Total	$	5,663	$	12,070	$	639	$	405	$	3,695	$	-	$	1,561	$	10,353	$	34,386
Carrying value of loans:
Individually evaluated for impairment	$	3,901	$	3,357		-		-		-	$	3,785	$	9,999		-	$	21,042
Collectively evaluated for impairment		334,923		593,296		10,723		176,196		400,888		47,571		238,169		-		1,801,766
Purchased loans with evidence of credit deterioration		-		-		-		-		-		2,434		2,502		-		4,936
Total	$	338,824	$	596,653	$	10,723	$	176,196	$	400,888	$	53,790	$	250,670	$	-	$	1,827,744

	Allowance for Credit Losses and Recorded Investment in Loans Evaluated for Impairment At December 31, 2012
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Purchased Non- covered Loans		Purchased Covered Loans		Unallocated		Total
	(In thousands)
Allowance for credit losses:
Individually evaluated for impairment	$	1,865	$	134	$	-	$	-	$	100	$	-	$	753	$	-	$	2,852
Collectively evaluated for impairment		6,314		9,938		484		380		3,513		-		252		9,194		30,075
Purchased loans with evidence of credit deterioration		-		-		-		-		-		-		-		-		-
Total	$	8,179	$	10,072	$	484	$	380	$	3,613	$	-	$	1,005	$	9,194	$	32,927
Carrying value of loans:
Individually evaluated for impairment	$	5,153	$	4,161	$	-	$	-	$	-	$	3,029	$	16,680	$	-	$	29,023
Collectively evaluated for impairment		334,963		628,766		7,984		222,458		460,698		65,098		347,738		-		2,067,705
Purchased loans with evidence of credit deterioration		-		-		-		-		-		6,764		7,865		-		14,629
Total	$	340,116	$	632,927	$	7,984	$	222,458	$	460,698	$	74,891	$	372,283	$	-	$	2,111,357

The Bank’s customers are small businesses, professionals and consumers. Given the scale of these borrowers, corporate credit rating agencies do not evaluate the borrowers’ financial condition. The Bank maintains a Loan Review Department which reports directly to the Board of Directors. The Loan Review Department performs independent evaluations of loans and assigns credit risk grades to evaluated loans using grading standards employed by bank regulatory agencies. Loans judged to carry lower-risk attributes are assigned a “pass” grade, with a minimal likelihood of loss. Loans judged to carry higher-risk attributes are referred to as “classified loans,” and are further disaggregated, with increasing expectations for loss recognition, as “substandard,” “doubtful,” and “loss.” Loan Review evaluations occur every calendar quarter.  If the Bank becomes aware of deterioration in a borrower’s performance or financial condition between Loan Review examinations, assigned risk grades will be re-evaluated promptly. Credit risk grades assigned by the Loan Review Department are subject to review by the Bank’s regulatory authority during regulatory examinations.

The following summarizes the credit risk profile by internally assigned grade:

	Credit Risk Profile by Internally Assigned Grade At December 31, 2013
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Purchased Non-covered Loans			Purchased Covered Loans (1)			Total
	(In thousands)
Grade:
Pass	$	329,667	$	554,991	$	10,274	$	174,113	$	399,377	$	41,490		$	196,882		$	1,706,794
Substandard		8,142		41,662		449		2,083		1,127		14,587			64,624			132,674
Doubtful		1,015		-		-		-		19		958			97			2,089
Loss		-		-		-		-		365		-			-			365
Default risk purchase discount		-		-		-		-		-		(3,245	)		(10,933	)		(14,178	)
Total	$	338,824	$	596,653	$	10,723	$	176,196	$	400,888	$	53,790		$	250,670		$	1,827,744

(1) Credit risk profile reflects internally assigned grade of purchased covered loans without regard to FDIC indemnification.

	Credit Risk Profile by Internally Assigned Grade At December 31, 2012
	Commercial		Commercial Real Estate		Construction		Residential Real Estate		Consumer Installment and Other		Purchased Non-covered Loans			Purchased Covered Loans (1)			Total
	(In thousands)
Grade:
Pass	$	324,452	$	599,472	$	7,518	$	219,655	$	459,076	$	51,901		$	274,976		$	1,937,050
Substandard		11,413		33,455		466		2,803		1,158		27,066			122,815			199,176
Doubtful		4,251		-		-		-		46		1,145			470			5,912
Loss		-		-		-		-		418		5			150			573
Default risk purchase discount		-		-		-		-		-		(5,226	)		(26,128	)		(31,354	)
Total	$	340,116	$	632,927	$	7,984	$	222,458	$	460,698	$	74,891		$	372,283		$	2,111,357

 (1) Credit risk profile reflects internally assigned grade of purchased covered loans without regard to FDIC indemnification.

The following tables summarize loans by delinquency and nonaccrual status:

	Summary of Loans by Delinquency and Nonaccrual Status At December 31, 2013
	Current and Accruing		30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		Past Due 90 days or More and Accruing		Nonaccrual		Total Loans
	(In thousands)
Commercial	$	336,497	$	677	$	383	$	-	$	1,267	$	338,824
Commercial real estate		586,619		4,012		2,473		-		3,549		596,653
Construction		10,275		-		-		-		448		10,723
Residential real estate		173,082		2,789		325		-		-		176,196
Consumer installment & other		396,725		3,035		606		410		112		400,888
Total originated loans		1,503,198		10,513		3,787		410		5,376		1,523,284
Purchased non-covered loans		45,755		4,237		180		-		3,618		53,790
Purchased covered loans		236,577		845		940		-		12,308		250,670
Total	$	1,785,530	$	15,595	$	4,907	$	410	$	21,302	$	1,827,744

	Summary of Loans by Delinquency and Nonaccrual Status At December 31, 2012
	Current and Accruing		30-59 Days Past Due and Accruing		60-89 Days Past Due and Accruing		Past Due 90 days or More and Accruing		Nonaccrual		Total Loans
	(In thousands)
Commercial	$	333,474	$	754	$	278	$	-	$	5,610	$	340,116
Commercial real estate		616,276		7,941		2,809		-		5,901		632,927
Construction		7,984		-		-		-		-		7,984
Residential real estate		220,032		1,510		683		-		233		222,458
Consumer installment & other		455,007		4,021		1,184		455		31		460,698
Total originated loans		1,632,773		14,226		4,954		455		11,775		1,664,183
Purchased non-covered loans		65,567		1,757		64		4		7,499		74,891
Purchased covered loans		352,619		4,811		1,677		155		13,021		372,283
Total	$	2,050,959	$	20,794	$	6,695	$	614	$	32,295	$	2,111,357

The following is a summary of the effect of nonaccrual loans on interest income:

	For the Years Ended December 31,
	2013			2012			2011
	(In thousands)
Interest income that would have been recognized had the loans performed in accordance with their original terms	$	2,816		$	4,337		$	7,132
Less: Interest income recognized on nonaccrual loans		(1,352	)		(2,605	)		(4,290	)
Total reduction of interest income	$	1,464		$	1,732		$	2,842

There were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status at December 31, 2013 and December 31, 2012.

The following summarizes impaired loans:

	Impaired Loans At December 31, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
Impaired loans with no related allowance recorded:
Commercial	$	3,931	$	4,498	$	-
Commercial real estate		11,002		13,253		-
Construction		2,483		2,947		-
Consumer installment and other		2,014		2,133		-
Impaired loans with an allowance recorded:
Commercial		1,000		2,173		100
Commercial real estate		9,773		12,482		1,396
Total:
Commercial	$	4,931	$	6,671	$	100
Commercial real estate		20,775		25,735		1,396
Construction		2,483		2,947		-
Consumer installment and other		2,014		2,133		-

	Impaired Loans At December 31, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
Impaired loans with no related allowance recorded:
Commercial	$	3,100	$	9,506	$	-
Commercial real estate		24,135		27,972		-
Construction		2,363		2,992		-
Residential real estate		668		668		-
Consumer installment and other		2,328		2,616		-
Impaired loans with an allowance recorded:
Commercial		12,129		13,739		2,588
Commercial real estate		4,038		4,038		164
Total:
Commercial	$	15,229	$	23,245	$	2,588
Commercial real estate		28,173		32,010		164
Construction		2,363		2,992		-
Residential real estate		668		668		-
Consumer installment and other		2,328		2,616		-

Impaired loans include troubled debt restructured loans. Impaired loans at December 31, 2013, included $5,453 thousand of restructured loans, including $529 thousand that were on nonaccrual status. Impaired loans at December 31, 2012, included $6,678 thousand of restructured loans, including $988 thousand that were on nonaccrual status.

	Impaired Loans
	For the Years Ended
	December 31, 2013				December 31, 2012
	Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income
	(In thousands)				(In thousands)
Commercial	$	10,566	$	222	$	12,996	$	239
Commercial real estate		27,186		763		28,420		1,225
Construction		2,400		80		6,651		216
Residential real estate		362		-		818		-
Consumer installment and other		1,469		38		2,611		43
Total	$	41,983	$	1,103	$	51,496	$	1,723

The following tables provide information on troubled debt restructurings:

	Troubled Debt Restructurings At December 31, 2013
	Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance
	(In thousands)
Commercial		4	$	3,427	$	3,164	$	-
Commercial real estate		2		2,291		2,289		-
Total		6	$	5,718	$	5,453	$	-

	Troubled Debt Restructurings At December 31, 2012
	Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance
	(In thousands)
Commercial		3	$	1,318	$	1,196	$	797
Commercial real estate		2		5,391		5,482		-
Total		5	$	6,709	$	6,678	$	797

	Troubled Debt Restructurings At December 31, 2011
	Number of Contracts		Pre-Modification Carrying Value		Period-End Carrying Value		Period-End Individual Impairment Allowance
	(In thousands)
Commercial		2	$	326	$	321	$	-
Construction		1		3,183		3,126		1,794
Total		3	$	3,509	$	3,447	$	1,794

During the year ended December 31, 2013, the Company modified five loans with a total carrying value of $4,966 thousand that were considered troubled debt restructurings. The concessions granted in the five restructurings completed in 2013 consisted of modification of payment terms to lower the interest rate and extend the maturity date to allow for deferred principal repayment. During the years ended December 31, 2012 and 2011, the Company modified three loans in each period with carrying values totaling $5,821 thousand and $3,509 thousand, respectively that were considered troubled debt restructurings. The concessions granted in the restructurings completed in 2012 and 2011 largely consisted of modifications of payment terms extending maturity dates to allow for deferred principal repayment. During the year ended December 31, 2013 a commercial real estate loan with a carrying value of $3,954 thousand defaulted within 12 months of the modification date. During the year ended December 31, 2012, troubled debt restructured construction and commercial loans with carrying values totaling $3,068 thousand and $988 thousand, respectively, defaulted. During the year ended December 31, 2011, no troubled debt restructurings defaulted. A troubled debt restructuring is considered to be in default when payments are ninety days or more past due.

The Company pledges loans to secure borrowings from the Federal Home Loan Bank (FHLB). The carrying value of the FHLB advances was $20,577 thousand and $25,799 thousand at December 31, 2013 and December 31, 2012, respectively. The loans restricted due to collateral requirements approximate $24,242 thousand and $32,084 thousand at December 31, 2013 and December 31, 2012, respectively. The amount of loans pledged exceeds collateral requirements. The FHLB does not have the right to sell or repledge such loans.

There were no loans held for sale at December 31, 2013 and December 31, 2012.