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Loans
 9 Months Ended
Sep. 30, 2012
Loans  
Loans

(3)                     Loans

 

The composition of loans by primary loan portfolio segment follows:

 

(in thousands)

 

September 30, 2012

 

December 31, 2011

 

Commercial and industrial

 

$

419,568

 

$

393,729

 

Construction and development

 

138,165

 

147,637

 

Real estate mortgage

 

980,179

 

966,665

 

Consumer

 

40,378

 

36,814

 

 

 

 

 

 

 

Total loans

 

$

1,578,290

 

$

1,544,845

 

 

The following table presents the balance in the recorded investment in loans and allowance for loan losses by portfolio segment and based on impairment method as of September 30, 2012 and December 31, 2011.

 

 

 

Type of loan

 

 

 

 

 

September 30, 2012

 

Commercial

 

Construction

 

Real estate

 

 

 

 

 

 

 

(in thousands)

 

and industrial

 

and development

 

mortgage

 

Consumer

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance

 

$

419,568

 

$

138,165

 

$

980,179

 

$

40,378

 

 

 

$

1,578,290

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance: loans with an allowance recorded

 

$

9,730

 

$

12,038

 

$

8,187

 

$

4

 

 

 

$

29,959

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance: loans with no related allowance recorded

 

$

409,838

 

$

126,127

 

$

971,992

 

$

40,374

 

 

 

$

1,548,331

 

 

 

 

Commercial

 

Construction

 

Real estate

 

 

 

 

 

 

 

 

 

and industrial

 

and development

 

mortgage

 

Consumer

 

Unallocated

 

Total

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance December 31, 2011

 

$

7,364

 

$

3,546

 

$

11,182

 

$

540

 

$

7,113

 

$

29,745

 

Provision

 

2,658

 

1,476

 

3,551

 

(203

)

1,543

 

9,025

 

Charge-offs

 

(4,464

)

(1,334

)

(1,980

)

(589

)

—

 

(8,367

)

Recoveries

 

19

 

—

 

215

 

608

 

—

 

842

 

Ending balance September 30, 2012

 

$

5,577

 

$

3,688

 

$

12,968

 

$

356

 

$

8,656

 

$

31,245

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance: allowance for loans with related allowance recorded

 

$

427

 

$

2,308

 

$

279

 

$

—

 

 

 

$

3,014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance: allowance for loans with no related allowance recorded

 

$

5,150

 

$

1,380

 

$

12,689

 

$

356

 

$

8,656

 

$

28,231

 

 

 

 

 

Type of loan

 

 

 

 

 

December 31, 2011

 

Commercial

 

Construction

 

Real estate

 

 

 

 

 

 

 

(in thousands)

 

and industrial

 

and development

 

mortgage

 

Consumer

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance

 

$

393,729

 

$

147,637

 

$

966,665

 

$

36,814

 

 

 

$

1,544,845

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance: loans with an allowance recorded

 

$

5,459

 

$

2,416

 

$

14,170

 

$

94

 

 

 

$

22,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance: loans with no related allowance recorded

 

$

388,270

 

$

145,221

 

$

952,495

 

$

36,720

 

 

 

$

1,522,706

 

 

 

 

Commercial

 

Construction

 

Real estate

 

 

 

 

 

 

 

 

 

and industrial

 

and development

 

mortgage

 

Consumer

 

Unallocated

 

Total

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance December 31, 2010

 

$

2,796

 

$

2,280

 

$

12,272

 

$

623

 

$

7,572

 

$

25,543

 

Provision

 

5,475

 

2,859

 

4,592

 

133

 

(459

)

12,600

 

Charge-offs

 

(1,015

)

(1,593

)

(5,840

)

(673

)

—

 

(9,121

)

Recoveries

 

108

 

—

 

158

 

457

 

—

 

723

 

Ending balance December 31, 2011

 

$

7,364

 

$

3,546

 

$

11,182

 

$

540

 

$

7,113

 

$

29,745

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance: allowance for loans with related allowance recorded

 

$

954

 

$

10

 

$

1,597

 

$

—

 

 

 

$

2,561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance: allowance for loans with no related allowance recorded

 

$

6,410

 

$

3,536

 

$

9,585

 

$

540

 

$

7,113

 

$

27,184

 

 

Bancorp did not have any loans acquired with deteriorated credit quality at September 30, 2012 or December 31, 2011.

 

Management uses the following portfolio segments of loans when assessing and monitoring the risk and performance of the loan portfolio:

 

·                  Commercial and industrial

·                  Construction and development

·                  Real estate mortgage

·                  Consumer

 

The following table presents loans individually evaluated for impairment as of September 30, 2012 and December 31, 2011.

 

 

 

 

 

Unpaid

 

 

 

Average

 

September 30, 2012

 

Recorded

 

principal

 

Related

 

recorded

 

(in thousands)

 

investment

 

balance

 

allowance

 

investment

 

 

 

 

 

 

 

 

 

 

 

Loans with no related allowance recorded

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

8,165

 

$

12,827

 

 

 

$

6,099

 

Construction and development

 

118

 

381

 

 

 

2,534

 

Real estate mortgage

 

6,722

 

9,674

 

 

 

4,997

 

Consumer

 

4

 

29

 

 

 

25

 

Subtotal

 

15,009

 

22,911

 

 

 

13,655

 

 

 

 

 

 

 

 

 

 

 

Loans with an allowance recorded

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

1,565

 

1,565

 

427

 

3,635

 

Construction and development

 

11,920

 

13,745

 

2,308

 

4,784

 

Real estate mortgage

 

1,465

 

1,465

 

279

 

6,981

 

Consumer

 

—

 

—

 

—

 

—

 

Subtotal

 

14,950

 

16,775

 

3,014

 

15,400

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

9,730

 

$

14,392

 

$

427

 

$

9,734

 

Construction and development

 

12,038

 

14,126

 

2,308

 

7,318

 

Real estate mortgage

 

8,187

 

11,139

 

279

 

11,978

 

Consumer

 

4

 

29

 

—

 

25

 

Total

 

$

29,959

 

$

39,686

 

$

3,014

 

$

29,055

 

 

 

 

 

 

 

Unpaid

 

 

 

Average

 

December 31, 2011

 

Recorded

 

principal

 

Related

 

recorded

 

(in thousands)

 

investment

 

balance

 

allowance

 

investment

 

 

 

 

 

 

 

 

 

 

 

Loans with no related allowance recorded

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

694

 

$

920

 

 

 

$

951

 

Construction and development

 

2,316

 

2,316

 

 

 

1,979

 

Real estate mortgage

 

6,453

 

6,453

 

 

 

6,353

 

Consumer

 

94

 

94

 

 

 

83

 

Subtotal

 

9,557

 

9,783

 

 

 

9,366

 

 

 

 

 

 

 

 

 

 

 

Loans with an allowance recorded

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

4,765

 

6,415

 

954

 

2,447

 

Construction and development

 

100

 

100

 

10

 

20

 

Real estate mortgage

 

7,717

 

11,962

 

1,597

 

7,249

 

Consumer

 

—

 

—

 

—

 

10

 

Subtotal

 

12,582

 

18,477

 

2,561

 

9,726

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

5,459

 

$

7,335

 

$

954

 

$

3,398

 

Construction and development

 

2,416

 

2,416

 

10

 

1,999

 

Real estate mortgage

 

14,170

 

18,415

 

1,597

 

13,602

 

Consumer

 

94

 

94

 

—

 

93

 

Total

 

$

22,139

 

$

28,260

 

$

2,561

 

$

19,092

 

 

Differences between the recorded investment amounts and the unpaid principal balance amounts are due to partial charge-offs which have occurred over the life of the loans.

 

Impaired loans include non-accrual loans and loans accounted for as troubled debt restructuring (TDR), which continue to accrue interest. Non-performing loans include the balance of impaired loans plus any loans over 90 days past due and still accruing interest.  Loans past due more than 90 days or more and still accruing interest amounted to $1,228,000 at September 30, 2012, and $1,160,000 at December 31, 2011.

 

The following table presents the recorded investment in non-accrual loans as of September 30, 2012 and December 31, 2011.

 

(in thousands)

 

September 30, 2012

 

December 31, 2011

 

 

 

 

 

 

 

Commercial and industrial

 

$

2,720

 

$

2,665

 

Construction and development

 

12,038

 

2,416

 

Real estate mortgage

 

7,686

 

13,562

 

Consumer

 

4

 

94

 

 

 

 

 

 

 

Total

 

$

22,448

 

$

18,737

 

 

On September 30, 2012 and 2011, Bancorp had $7.5 million and $3.9 million of loans classified as TDR, respectively.  The following table presents the recorded investment in loans modified and classified as TDR during the nine months ended September 30, 2012 and 2011.

 

 

 

 

 

Pre-modification

 

Post-modification

 

September 30, 2012

 

Number of

 

outstanding recorded

 

outstanding recorded

 

(dollars in thousands)

 

contracts

 

investment

 

investment

 

 

 

 

 

 

 

 

 

Commercial & industrial

 

3

 

$

5,752

 

$

5,752

 

Real estate mortgage

 

2

 

505

 

505

 

Total

 

5

 

$

6,257

 

$

6,257

 

 

 

 

 

 

Pre-modification

 

Post-modification

 

September 30, 2011

 

Number of

 

outstanding recorded

 

outstanding recorded

 

(dollars in thousands)

 

contracts

 

investment

 

investment

 

 

 

 

 

 

 

 

 

Commercial & industrial

 

3

 

$

1,583

 

$

1,583

 

Real estate mortgage

 

2

 

2,099

 

2,099

 

Total

 

5

 

$

3,682

 

$

3,682

 

 

The following table presents the recorded investment in loans accounted for as TDR that have defaulted as of September 30, 2012.

 

September 30, 2012

 

Number of

 

 

 

(dollars in thousands)

 

Contracts

 

Recorded investment

 

 

 

 

 

 

 

Commercial & industrial

 

1

 

$

619

 

Real estate mortgage

 

1

 

294

 

Total

 

2

 

$

913

 

 

The loans in the table above are related to one borrower and management estimates minimal loss exposure to this credit after consideration of collateral.  Prior to 2012, Bancorp had not experienced loans accounted for as TDR that subsequently defaulted.  At September 30, 2012, loans accounted for as TDR included modifications from original terms due to bankruptcy proceedings and modifications of amortization periods due to customer financial difficulties.  Some loans accounted for as TDR included temporary suspension of principal payments, resulting in payment of interest only.  There has been no forgiveness of principal for loans accounted for as TDR.  Loans accounted for as TDR, which have not defaulted, are individually evaluated for impairment and, at September 30, 2012, had a total allowance allocation of $298,000, compared to $1,167,000 at December 31, 2011.

 

The following table presents the aging of the recorded investment in past due loans as of September 30, 2012 and December 31, 2011.

 

 

 

 

 

 

 

Greater

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

than

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

90 days

 

 

 

 

 

 

 

Recorded

 

 

 

 

 

 

 

past due

 

 

 

 

 

 

 

investment >

 

September 30, 2012

 

30-59 days

 

60-89 days

 

(includes

 

Total

 

 

 

Total

 

90 days and

 

(in thousands)

 

past due

 

past due

 

non-accrual)

 

past due

 

Current

 

loans

 

accruing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

1,735

 

$

608

 

$

2,720

 

$

5,063

 

$

414,505

 

$

419,568

 

$

—

 

Construction and development

 

413

 

86

 

12,038

 

12,537

 

125,628

 

138,165

 

—

 

Real estate mortgage

 

11,034

 

3,710

 

7,686

 

22,430

 

957,749

 

980,179

 

1,228

 

Consumer

 

13

 

2

 

1,232

 

1,247

 

39,131

 

40,378

 

—

 

Total

 

$

13,195

 

$

4,406

 

$

23,676

 

$

41,277

 

$

1,537,013

 

$

1,578,290

 

$

1,228

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

989

 

$

162

 

$

2,665

 

$

3,816

 

$

389,913

 

$

393,729

 

$

—

 

Construction and development

 

86

 

—

 

2,416

 

2,502

 

145,135

 

147,637

 

—

 

Real estate mortgage

 

8,520

 

957

 

14,722

 

24,199

 

942,466

 

966,665

 

1,160

 

Consumer

 

336

 

—

 

94

 

430

 

36,384

 

36,814

 

—

 

Total

 

$

9,931

 

$

1,119

 

$

19,897

 

$

30,947

 

$

1,513,898

 

$

1,544,845

 

$

1,160

 

 

Bancorp categorizes loans into credit 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.  Pass-rated loans included all risk-rated loans other than those classified as special mention, substandard, and doubtful, which are defined below:

 

·                  Special Mention:  Loans classified as special mention have a potential weakness that deserves management’s close attention.  These potential weaknesses may result in deterioration of repayment prospects for the loan or of the Bank’s credit position at some future date.

 

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

 

·                  Substandard non-performing:  Loans classified as substandard-non-performing have all the characteristics of substandard loans and have been placed on non-accrual status or have been accounted for as troubled debt restructurings.

 

·                  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 repayment in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

 

As of September 30, 2012 and December 31, 2011, the risk categories of loans were as follows:

 

Credit risk profile by internally assigned grade

(in thousands)

 

 

 

Commercial
and industrial

 

Construction
and
development

 

Real estate
mortgage

 

Consumer

 

Total

 

September 30, 2012

 

 

 

 

 

 

 

 

 

 

 

Grade

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

396,682

 

$

119,296

 

$

917,279

 

$

40,374

 

$

1,473,631

 

Special mention

 

11,097

 

6,831

 

26,770

 

—

 

44,698

 

Substandard

 

3,317

 

—

 

26,711

 

—

 

30,028

 

Substandard non-performing

 

8,472

 

12,038

 

9,419

 

4

 

29,933

 

Doubtful

 

—

 

—

 

—

 

—

 

—

 

Total

 

$

419,568

 

$

138,165

 

$

980,179

 

$

40,378

 

$

1,578,290

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

356,090

 

$

132,846

 

$

896,217

 

$

36,709

 

$

1,421,862

 

Special mention

 

15,154

 

6,007

 

33,818

 

11

 

54,990

 

Substandard

 

17,026

 

6,368

 

21,300

 

—

 

44,694

 

Substandard non-performing

 

5,459

 

2,416

 

15,330

 

94

 

23,299

 

Doubtful

 

—

 

—

 

—

 

—

 

—

 

Total

 

$

393,729

 

$

147,637

 

$

966,665

 

$

36,814

 

$

1,544,845