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Note 5 - Loans
 12 Months Ended
Dec. 31, 2017
Notes to Financial Statements  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
(
5
) Loans
 
The composition of loans by primary loan portfolio class follows:
 
   
December 31,
  
(In thousands)
  
2017
    
2016
  
Commercial and industrial
   $
779,014
     $
736,841
  
Construction and development, excluding undeveloped land
    
195,912
      
192,348
  
Undeveloped land
    
18,988
      
21,496
  
                 
Real estate mortgage:
                
Commercial investment
    
594,902
      
538,886
  
Owner occupied commercial
    
398,685
      
408,292
  
1-4 family residential
    
262,110
      
249,498
  
Home equity - first lien
    
57,110
      
55,325
  
Home equity - junior lien
    
63,981
      
67,519
  
                 
Subtotal: Real estate mortgage
    
1,376,788
      
1,319,520
  
                 
Consumer
    
38,868
      
35,170
  
                 
Total loans
   $
2,409,570
     $
2,305,375
  
 
Fees and costs of originating loans are deferred at origination and amortized over the life of the loan.
Loan balances reported herein include deferred loan origination fees, net of deferred loan costs. At
December 31, 2017
and
2016,
net deferred loan origination costs exceeded deferred loan origination fees, resulting in net negative balances of
$600
thousand and
$459
thousand, respectively. The higher net balance at
December 31, 2017,
as compared to the same point in
2016,
is primarily due to a reduction in origination fees attributed to lower loan volume, as well as increased costs arising from increases in salaries and benefits expenses.
 
Bancorp
’s credit exposure is diversified with secured and unsecured loans to individuals and businesses.
No
specific industry concentration exceeds
ten
percent of loans. While Bancorp has a diversified loan portfolio, a customer’s ability to honor contracts is somewhat dependent upon the economic stability and/or industry in which that customer does business. Loans outstanding and related unfunded commitments are primarily concentrated within Bancorp’s current market areas, which encompass the Louisville, Indianapolis and Cincinnati metropolitan markets.
 
Bancorp occasionally enters into loan participation agreements with other banks in the ordinary course of business to diversify credit risk. For certain sold participation loans, Bancorp has retained effective control of the loans, typically by restricting the participating institutions from pledging or selling their share of the loan without permission from Bancorp. US GAAP requires the participated portion of these loans to be recorded as secured borrowings. The participated portions of these loans are included in the commercial and industrial loan
(C&I) totals above, and a corresponding liability is reflected in other liabilities. At
December 31, 2017
and
2016,
the total participated portions of loans of this nature were
$18.2
million and
$15.8
million respectively.
 
Loans to directors and their associates, including loans to companies for which directors are principal owners and executive officers are presented in the following table.
 
(I
n thousands)
  
Year ended December 31,
  
Loans to directors and executive officers
  
2017
    
201
6
  
Balance as of January 1
   $
969
     $
866
  
New loans
    
–
      
–
  
Repayment of term loans
    
(175
 )    
(340
 )
Changes in balances of revolving lines of credit
    
(165
 )    
443
  
Balance as of December 31
   $
629
     $
969
  
 
None
of the loans to directors and executive officers were past due or considered potential problem loans during
201
7
or
2016.
 
The following tables present balance
s in the recorded investment in loans and allowance for loan losses by portfolio segment and based on impairment evaluation method as of
December 31, 2017,
2016
and
2015.
 
(In thousands)
  
Type of loan
    
 
 
 
   
 
 
 
  
Construction
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
 
 
 
  
and development
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
Commercial
    
excluding
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
and
    
undeveloped
    
Undeveloped
    
Real estate
    
 
 
 
  
 
 
 
December 31, 2017
  
industrial
    
land
    
land
    
mortgage
    
Consumer
    
Total
  
                                                 
Loans
   $
779,014
     $
195,912
     $
18,988
     $
1,376,788
     $
38,868
     $
2,409,570
  
                                                 
Loans individually evaluated for impairment
   $
1,176
     $
664
     $
474
     $
5,066
     $
–
     $
7,380
  
                                                 
Loans collectively evaluated for impairment
   $
777,838
     $
195,248
     $
18,514
     $
1,371,246
     $
38,868
     $
2,401,714
  
                                                 
Loans acquired with deteriorated credit quality
   $
–
     $
–
     $
–
     $
476
     $
–
     $
476
  
 
   
 
 
 
  
Construction
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
 
 
 
  
and development
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
Commercial
    
excluding
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
and
    
undeveloped
    
Undeveloped
    
Real estate
    
 
 
 
  
 
 
 
   
industrial
    
land
    
land
    
mortgage
    
Consumer
    
Total
  
Allowance for loan losses
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
At December 31, 2016
   $
10,483
     $
1,923
     $
684
     $
10,573
     $
344
     $
24,007
  
Provision (credit)
    
2,373
      
(199
 )    
(163
 )    
383
      
156
      
2,550
  
Charge-offs
    
(1,782
 )    
–
      
–
      
(98
 )    
(549
 )    
(2,429
 )
Recoveries
    
202
      
–
      
–
      
154
      
401
      
757
  
At December 31, 2017
   $
11,276
     $
1,724
     $
521
     $
11,012
     $
352
     $
24,885
  
                                                 
Allowance for loans individually evaluated for impairment
   $
34
     $
–
     $
–
     $
14
     $
–
     $
48
  
                                                 
Allowance for loans collectively evaluated for impairment
   $
11,242
     $
1,724
     $
521
     $
10,998
     $
352
     $
24,837
  
                                                 
Allowance for loans acquired with deteriorated credit quality
   $
–
     $
–
     $
–
     $
–
     $
–
     $
–
  
 
 
(In thousands)
  
Type of loan
    
 
 
 
   
 
 
 
  
Construction
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
 
 
 
  
and development
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
Commercial
    
excluding
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
and
    
undeveloped
    
Undeveloped
    
Real estate
    
 
 
 
  
 
 
 
December 31, 2016
  
industrial
    
land
    
land
    
mortgage
    
Consumer
    
Total
  
Loans
   $
736,841
     $
192,348
     $
21,496
     $
1,319,520
     $
35,170
     $
2,305,375
  
                                                 
Loans individually evaluated for impairment
   $
2,682
     $
538
     $
474
     $
2,516
     $
59
     $
6,269
  
                                                 
Loans collectively evaluated for impairment
   $
734,139
     $
191,810
     $
21,022
     $
1,316,400
     $
35,111
     $
2,298,482
  
                                                 
Loans acquired with deteriorated credit quality
   $
20
     $
–
     $
–
     $
604
     $
–
     $
624
  
 
   
 
 
 
  
Construction
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
 
 
 
  
and development
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
Commercial
    
excluding
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
and
    
undeveloped
    
Undeveloped
    
Real estate
    
 
 
 
  
 
 
 
   
industrial
    
land
    
land
    
mortgage
    
Consumer
    
Total
  
Allowance for loan losses
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
At December 31, 2015
   $
8,645
     $
1,760
     $
814
     $
10,875
     $
347
     $
22,441
  
Provision (credit)
    
2,775
      
275
      
(130
 )    
(68
 )    
148
      
3,000
  
Charge-offs
    
(1,216
 )    
(133
 )    
–
      
(576
 )    
(568
 )    
(2,493
 )
Recoveries
    
279
      
21
      
–
      
342
      
417
      
1,059
  
At December 31, 2016
   $
10,483
     $
1,923
     $
684
     $
10,573
     $
344
     $
24,007
  
                                                 
Allowance for loans individually evaluated for impairment
   $
1,207
     $
–
     $
1
     $
–
     $
59
     $
1,267
  
                                                 
Allowance for loans collectively evaluated for impairment
   $
9,276
     $
1,923
     $
683
     $
10,573
     $
285
     $
22,740
  
                                                 
Allowance for loans acquired with deteriorated credit quality
   $
–
     $
–
     $
–
     $
–
     $
–
     $
–
  
 
 
(In thousands)
  
Type of loan
    
 
 
 
   
 
 
 
  
Construction
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
 
 
 
  
and development
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
Commercial
    
excluding
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
and
    
undeveloped
    
Undeveloped
    
Real estate
    
 
 
 
  
 
 
 
December 31, 2015
  
industrial
    
land
    
land
    
mortgage
    
Consumer
    
Total
  
Loans
   $
644,398
     $
134,482
     $
21,185
     $
1,197,411
     $
35,531
     $
2,033,007
  
                                                 
Loans individually evaluated for impairment
   $
4,635
     $
–
     $
–
     $
4,050
     $
68
     $
8,753
  
                                                 
Loans collectively evaluated for impairment
   $
639,760
     $
134,160
     $
21,185
     $
1,192,864
     $
35,463
     $
2,023,432
  
                                                 
Loans acquired with deteriorated credit quality
   $
3
     $
322
     $
–
     $
497
     $
–
     $
822
  
 
   
 
 
 
  
Construction
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
 
 
 
  
and development
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
Commercial
    
excluding
    
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
   
and
    
undeveloped
    
Undeveloped
    
Real estate
    
 
 
 
  
 
 
 
   
industrial
    
land
    
land
    
mortgage
    
Consumer
    
Total
  
Allowance for loan losses
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
At December 31, 2014
   $
11,819
     $
721
     $
1,545
     $
10,541
     $
294
     $
24,920
  
Provision (credit)
    
793
      
1,065
      
(2,131
 )    
872
      
151
      
750
  
Charge-offs
    
(4,065
 )    
(26
 )    
–
      
(693
 )    
(597
 )    
(5,381
 )
Recoveries
    
98
      
–
      
1,400
      
155
      
499
      
2,152
  
At December 31, 2015
   $
8,645
     $
1,760
     $
814
     $
10,875
     $
347
     $
22,441
  
                                                 
Allowance for loans individually evaluated for impairment
   $
268
     $
–
     $
–
     $
208
     $
68
     $
544
  
                                                 
Allowance for loans collectively evaluated for impairment
   $
8,377
     $
1,760
     $
814
     $
10,667
     $
279
     $
21,897
  
                                                 
Allowance for loans acquired with deteriorated credit quality
   $
–
     $
–
     $
–
     $
–
     $
–
     $
–
  
 
 
The considerations by Bancorp in computing its allowance for loan losses are determined based on the various risk characteristics of each loan segment. Relevant risk characteristics are as follows:
 
 
●
Commercial and industrial loans: Loans in this category are made to businesses. Generally these loans are secured by assets of the business and repayment is expected from cash flows of the business. A
decline in the strength of the business or a weakened economy and resultant decreased consumer and/or business spending
may
have a negative effect on credit quality in this loan category.
 
 
●
Construction and development, excluding undeveloped land: Loans in this category primarily include owner-occupied and investment construction loans and commercial development projects. In most cases, construction loans require only interest to be paid during construction. Upon completion or stabilization, the construction loan
may
convert to permanent financing in the real estate mortgage segment, requiring principal amortization. Repayment of development loans is derived from sale of lots or units including any pre-sold units. Credit risk is affected by construction delays, cost overruns, market conditions and availability of permanent financing, to the extent such permanent financing is
not
being provided by Bancorp.
 
 
●
Undeveloped land: Loans in this category are secured by land acquired for development by the borrower, but for which
no
development has yet taken place. Credit risk is
primarily dependent upon financial strength of the borrower, but can also be affected by market conditions and time to sell lots at an adequate price. Credit risk is also affected by availability of permanent financing, including to the end user, to the extent such permanent financing is
not
being provided by Bancorp.
 
 
●
Real estate mortgage: Loans in this category are made to and secured by owner-occupied residential real estate, owner-occupied real estate used for business purposes, and income-producing investment properties. For owner-occupied residential and owner-occupied commercial real estate, repayment is dependent on financial strength of the borrower. For income-producing investment properties, repayment is dependent on financial strength of both the tenants and the borrower. Underlying properties are generally located in Bancorp
’s primary market area. Cash flows of income producing investment properties
may
be adversely impacted by a downturn in the economy as reflected in increased vacancy rates, which in turn, will have an effect on credit quality and property values. Overall health of the economy, including unemployment rates and real estate prices, has an effect on credit quality in this loan category.
 
 
●
Consumer: Loans in this category
may
be either secured or unsecured and repayment is dependent on credit quality of the individual borrower and, if applicable, adequacy of collateral securing the loan. Therefore, overall health of the economy, including unemployment rates
, as well as home and securities prices, will have a significant effect on credit quality in this loan category.
 
Bancorp ha
d loans that were acquired in a
2013
acquisition, for which there was, at acquisition, evidence of deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would
not
be collected.
15
of those
19
loans originally identified as such have subsequently paid off with full collection of all principal and interest owed. The remaining
four
loans were re-evaluated in
2017
and based upon performance to date and the expectation that all cash flow will be consistent with the contractual terms, the remaining loans were re-classified into the accretable category with the remaining credit discount to be amortized into income over the remaining lives of the loans. The carrying amount of those loans is included in the balance sheet amounts for total loans at
December 31, 2017
and
2016.
Changes in the interest component of the fair value adjustment for acquired impaired loans for the years ended
December 31, 2016
and
2017
are shown in the following table:
 
(In thousands)
  
Accretable
discount
    
Non-
accretable
discount
  
Balance at December 31, 2015
   $
3
     $
189
  
Accretion
    
(3
 )    
(41
 )
Reclassifications from (to) non-accretable difference
    
–
      
–
  
Disposals
    
–
      
–
  
Balance at December 31, 2016
    
–
      
148
  
                 
Accretion
    
–
      
(43
 )
Reclassifications from (to) non-accretable difference
    
105
      
(105
 )
Disposals
                
Balance at December 31, 2017
   $
105
     $
–
  
 
Accretion in the non-accretable discount column represents accretion recorded upon payoff of loans.
 
The following tables present loans individually evaluated for impairment as of
December 31,
201
7
and
2016.
 
 
(I
n thousands)
  
 
 
 
  
Unpaid
    
 
 
 
  
Average
  
   
Recorded
    
principal
    
Related
    
recorded
  
December 31, 2017
  
investment
    
balance
    
allowance
    
investment
  
                                 
Loans with no related allowance recorded:
                                
Commercial and industrial
   $
1,142
     $
2,202
     $
–
     $
411
  
Construction and development, excluding undeveloped land
    
664
      
834
      
–
      
559
  
Undeveloped land
    
474
      
506
      
–
      
425
  
                                 
Real estate mortgage
                                
Commercial investment
    
52
      
53
      
–
      
110
  
Owner occupied commercial
    
3,332
      
3,789
      
–
      
1,678
  
1-4 family residential
    
1,637
      
1,657
      
–
      
935
  
Home equity - first lien
    
–
      
–
      
–
      
–
  
Home equity - junior lien
    
31
      
31
      
–
      
186
  
Subtotal: Real estate mortgage
    
5,052
      
5,530
      
–
      
2,909
  
                                 
Consumer
    
–
      
–
      
–
      
–
  
Subtotal
   $
7,332
     $
9,072
     $
–
     $
4,304
  
                                 
Loans with an allowance recorded:
                                
Commercial and industrial
   $
34
     $
34
     $
34
     $
1,882
  
Construction and development, excluding undeveloped land
    
–
      
 
      
 
      
 
  
Undeveloped land
    
–
      
 
      
 
      
48
  
                                 
Real estate mortgage
                                
Commercial investment
    
–
      
–
      
–
      
–
  
Owner occupied commercial
    
–
      
–
      
–
      
–
  
1-4 family residential
    
14
      
14
      
14
      
5
  
Home equity - first lien
    
–
      
–
      
–
      
–
  
Home equity - junior lien
    
–
      
–
      
–
      
–
  
Subtotal: Real estate mortgage
    
14
      
14
      
14
      
5
  
                                 
Consumer
    
–
      
–
      
–
      
46
  
Subtotal
   $
48
     $
48
     $
48
     $
1,981
  
                                 
Total:
                                
Commercial and industrial
   $
1,176
     $
2,236
     $
34
     $
2,293
  
Construction and development, excluding undeveloped land
    
664
      
834
      
–
      
559
  
Undeveloped land
    
474
      
506
      
–
      
473
  
                                 
Real estate mortgage
                                
Commercial investment
    
52
      
53
      
–
      
110
  
Owner occupied commercial
    
3,332
      
3,789
      
–
      
1,678
  
1-4 family residential
    
1,651
      
1,671
      
14
      
940
  
Home equity - first lien
    
–
      
–
      
–
      
–
  
Home equity - junior lien
    
31
      
31
      
–
      
186
  
Subtotal: Real estate mortgage
    
5,066
      
5,544
      
14
      
2,914
  
                                 
Consumer
    
–
      
–
      
–
      
46
  
Total
   $
7,380
     $
9,120
     $
48
     $
6,285
  
 
 
(In thousands)
  
 
 
 
  
Unpaid
    
 
 
 
  
Average
  
   
Recorded
    
principal
    
Related
    
recorded
  
December 31, 2016
  
investment
    
balance
    
allowance
    
investment
  
                                 
Loans with no related allowance recorded:
                                
Commercial and industrial
   $
322
     $
465
     $
–
     $
1,947
  
Construction and development, excluding undeveloped land
    
538
      
708
      
–
      
108
  
Undeveloped land
    
233
      
265
      
–
      
76
  
                                 
Real estate mortgage
                                
Commercial investment
    
107
      
107
      
–
      
193
  
Owner occupied commercial
    
1,042
      
1,479
      
–
      
1,356
  
1-4 family residential
    
984
      
985
      
–
      
980
  
Home equity - first lien
    
–
      
–
      
–
      
3
  
Home equity - junior lien
    
383
      
383
      
–
      
315
  
Subtotal: Real estate mortgage
    
2,516
      
2,954
      
–
      
2,847
  
                                 
Consumer
    
–
      
–
      
–
      
18
  
Subtotal
   $
3,609
     $
4,392
     $
–
     $
4,996
  
                                 
Loans with an allowance recorded:
                                
Commercial and industrial
   $
2,360
     $
2,835
     $
1,207
     $
1,619
  
Construction and development, excluding undeveloped land
    
–
      
–
      
–
      
182
  
Undeveloped land
    
241
      
241
      
1
      
149
  
                                 
Real estate mortgage
                                
Commercial investment
    
–
      
–
      
–
      
–
  
Owner occupied commercial
    
–
      
–
      
–
      
554
  
1-4 family residential
    
–
      
–
      
–
      
–
  
Home equity - first lien
    
–
      
–
      
–
      
–
  
Home equity - junior lien
    
–
      
–
      
–
      
–
  
Subtotal: Real estate mortgage
    
–
      
–
      
–
      
554
  
                                 
Consumer
    
59
      
59
      
59
      
63
  
Subtotal
   $
2,660
     $
3,135
     $
1,267
     $
2,567
  
                                 
Total:
                                
Commercial and industrial
   $
2,682
     $
3,300
     $
1,207
     $
3,566
  
Construction and development, excluding undeveloped land
    
538
      
708
      
–
      
290
  
Undeveloped land
    
474
      
506
      
1
      
225
  
                                 
Real estate mortgage
    
–
      
–
      
–
      
–
  
Commercial investment
    
107
      
107
      
–
      
193
  
Owner occupied commercial
    
1,042
      
1,479
      
–
      
1,910
  
1-4 family residential
    
984
      
985
      
–
      
980
  
Home equity - first lien
    
–
      
–
      
–
      
3
  
Home equity - junior lien
    
383
      
383
      
–
      
315
  
Subtotal: Real estate mortgage
    
2,516
      
2,954
      
–
      
3,401
  
                                 
Consumer
    
59
      
59
      
59
      
81
  
Total
   $
6,269
     $
7,527
     $
1,267
     $
7,563
  
 
Differences between recorded investment amounts and unpaid principal balance amounts less related allowance are due to partial charge-offs which have occurred over the life of loans and fair value adjustments recorded for loans acquired.
 
Interest
paid on impaired or non-accrual loans that was used to reduce principal was
$338
thousand,
$307
thousand and
$521
thousand in
2017,
2016
and
2015,
respectively.  Interest income that would have been recorded if non-accrual loans were on a current basis in accordance with their original terms was
$159
thousand,
$149
thousand and
$465
thousand in
2017,
2016
and
2015,
respectively.
 
Impaired loans include non-accrual loans and loans accounted for as troubled debt restructurings (TDR
s), 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
$2
thousand and
$438
thousand at
December 31, 2017
and
2016,
respectively.
 
The following table presents the recorded investment in non-accrual loans as of
December 31,
201
7
and
2016.
 
   
December 31,
  
(In thousands)
  
2017
    
2016
  
                 
Commercial and industrial
   $
321
     $
1,767
  
Construction and development, excluding undeveloped land
    
664
      
538
  
Undeveloped land
    
474
      
474
  
                 
Real estate mortgage
                
Commercial investment
    
52
      
107
  
Owner occupied commercial
    
3,332
      
1,042
  
1-4 family residential
    
1,637
      
984
  
Home equity - first lien
    
–
      
–
  
Home equity - junior lien
    
31
      
383
  
Subtotal: Real estate mortgage
    
5,052
      
2,516
  
                 
Consumer
    
–
      
–
  
                 
Total
   $
6,511
     $
5,295
  
 
In the course of working with borrowers, Bancorp
may
elect to restructure the contractual terms of certain loans. A troubled debt restructuring (TDRs) occurs when, for economic or legal reasons related to a borrower
’s financial difficulties, Bancorp grants a concession to the borrower that it would
not
otherwise consider. Bancorp had
$869
thousand and
$974
thousand of accruing loans classified as TDRs, at
December 31, 2017
and
2016,
respectively. Two loans were designated as TDRs during
2017.
A commercial loan with a pre- and post-modification recorded investment of
$39
thousand was given a payment concession so as to enable the borrower to fulfill the loan agreement. A
1
-
4
family residential loan with a pre-modification recorded investment of
$12
thousand was renewed with interest capitalized resulting in a post-modification recorded investment of
$14
thousand. Specific reserves for the full amounts of both loans were established. Two other commercial loans were considered TDRs as of
December 31, 2017.
Loans reported in
2016
as TDRs consisted of
two
commercial loans, to a single borrower, and
one
consumer loan. Bancorp did
not
identify and report any additional loans as TDRs during the years ended
December 31, 2016
and
2015.
No
loans classified as TDRs in
2015,
2016
or
2017
subsequently defaulted within
12
months.
 
Loans accounted for as TDR
s are individually evaluated for impairment. At
December 31, 2017
loans reported as TDRs had a total allowance allocation of
$48
thousand, compared to
$207
thousand at
December 31, 2016.
At
December 31, 2017
and
2016,
Bancorp had
no
outstanding commitments to lend additional funds to borrowers whose loans have been classified as TDRs. As of
December 31, 2017
formal foreclosure proceedings were in process on
two
loans with a total recorded investment of
$62
thousand.
 
The following table presents the aging of the recorded investment in loans as of
December 31,
201
7
and
2016.
 
   
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
Recorded
  
(I
n thousands)
  
 
 
 
  
 
 
 
  
 
 
 
  
90 or more
    
 
 
 
  
 
 
 
  
investment
  
   
 
 
 
  
 
 
 
  
 
 
 
  
days past
    
 
 
 
  
 
 
 
  
> 90 days
  
   
 
 
 
  
30-59 days
    
60-89 days
    
due (includes)
    
Total
    
Total
    
and
  
December 31, 2017
  
Current
    
past due
    
past due
    
non-accrual)
    
past due
    
loans
    
accruing
  
                                                         
Commercial and industrial
   $
776,118
     $
2,571
     $
4
     $
321
     $
2,896
     $
779,014
     $
–
  
Construction and development, excluding undeveloped land
    
194,936
      
–
      
312
      
664
      
976
      
195,912
      
–
  
Undeveloped land
    
18,514
      
–
      
–
      
474
      
474
      
18,988
      
–
  
                                                         
Real estate mortgage
                                                        
Commercial investment
    
594,242
      
608
      
–
      
52
      
660
      
594,902
      
–
  
Owner occupied Commercial
    
394,623
      
455
      
275
      
3,332
      
4,062
      
398,685
      
–
  
1-4 family residential
    
259,994
      
172
      
307
      
1,637
      
2,116
      
262,110
      
–
  
Home equity - first lien
    
56,938
      
172
      
–
      
–
      
172
      
57,110
      
–
  
Home equity - junior lien
    
63,667
      
87
      
194
      
33
      
314
      
63,981
      
2
  
Subtotal:
Real estate mortgage
    
1,369,464
      
1,494
      
776
      
5,054
      
7,324
      
1,376,788
      
2
  
                                                         
Consumer
    
38,699
      
86
      
83
      
–
      
169
      
38,868
      
–
  
                                                         
Total
   $
2,397,731
     $
4,151
     $
1,175
     $
6,513
     $
11,839
     $
2,409,570
     $
2
  
                                                         
December 31, 2016
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Commercial and industrial
   $
734,682
     $
84
     $
290
     $
1,785
     $
2,159
     $
736,841
     $
18
  
Construction and development, excluding undeveloped land
    
191,810
      
–
      
–
      
538
      
538
      
192,348
      
–
  
Undeveloped land
    
21,022
      
–
      
–
      
474
      
474
      
21,496
      
–
  
                                                         
Real estate mortgage
                                                        
Commercial investment
    
537,998
      
631
      
64
      
193
      
888
      
538,886
      
86
  
Owner occupied commercial
    
406,726
      
342
      
–
      
1,224
      
1,566
      
408,292
      
182
  
1-4 family residential
    
246,730
      
1,174
      
576
      
1,018
      
2,768
      
249,498
      
34
  
Home equity - first lien
    
55,027
      
231
      
21
      
46
      
298
      
55,325
      
46
  
Home equity - junior lien
    
66,911
      
99
      
126
      
383
      
608
      
67,519
      
72
  
Subtotal: Real estate mortgage
    
1,313,392
      
2,477
      
787
      
2,864
      
6,128
      
1,319,520
      
420
  
                                                         
Consumer
    
34,965
      
28
      
105
      
72
      
205
      
35,170
      
–
  
                                                         
Total
   $
2,295,871
     $
2,589
     $
1,182
     $
5,733
     $
9,504
     $
2,305,375
     $
438
  
 
Consistent with regulatory guidance, 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 includ
e all risk-rated loans other than those classified as other assets especially mentioned, substandard, and doubtful, which are defined below:
 
 
●
Other assets especially mentioned (
“OAEM”): Loans classified as OAEM 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 Bancorp’s credit position at some future date.
 
 
●
Substandard: Loans classified as substandard are inadequately protected by the paying capacity of the obligor or of collateral pledged, if any. Loans so classified have well-defined weaknesses that
may
jeopardize repayment of the debt. Default is a distinct possibility if the deficiencies are
not
corrected.
 
 
●
Substandard non-performing: Loans classified as substandard non-performing have deteriorated beyond 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 weaknesses make collection or repayment in full
, on the basis of currently existing facts, conditions and values, highly questionable and improbable.
 
As of
December 31,
201
7
and
2016,
internally assigned risk grades of loans by category were as follows:
 
(In thousands
)
  
 
 
 
  
 
 
 
  
 
 
 
  
Substandar
d
    
 
 
 
  
Tota
l
  
December 31, 201
7
  
Pas
s
    
OAE
M
    
Substandar
d
    
non-performin
g
    
Doubtfu
l
    
loan
s
  
                                                 
Commercial and industria
l
   $
751,628
     $
12,032
     $
14,178
     $
1,176
     $ –     $
779,014
  
Construction an
d
development, excludin
g
undeveloped lan
d
    
195,248
      
–
      
–
      
664
       –      
195,912
  
Undeveloped lan
d
    
18,484
      
–
      
30
      
474
       –      
18,988
  
                                                 
Real estate mortgag
e
                                                
Commercial investmen
t
    
591,232
      
3,599
      
19
      
52
       –      
594,902
  
Owner occupie
d
commercia
l
    
383,455
      
8,683
      
3,215
      
3,332
       –      
398,685
  
1-4 family residentia
l
    
256,968
      
2,477
      
1,014
      
1,651
       –      
262,110
  
Home equity - first lie
n
    
57,110
      
–
      
–
      
–
       –      
57,110
  
Home equity -
junior lie
n
    
63,471
      
247
      
230
      
33
       –      
63,981
  
Subtotal: Real estate mortgag
e
    
1,352,236
      
15,006
      
4,478
      
5,068
       –      
1,376,788
  
                                                 
Consume
r
    
38,747
      
117
      
4
      
–
       –      
38,868
  
                                                 
Tota
l
   $
2,356,343
     $
27,155
     $
18,690
     $
7,382
     $ –     $
2,409,570
  
                                                 
December 31, 201
6
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Commercial and industria
l
   $
714,025
     $
14,266
     $
5,850
     $
2,700
     $ –     $
736,841
  
Construction an
d
development, excludin
g
undeveloped lan
d
    
191,455
      
–
      
355
      
538
       –      
192,348
  
Undeveloped lan
d
    
21,022
      
–
      
–
      
474
       –      
21,496
  
                                                 
Real estate mortgag
e
                                                
Commercial investmen
t
    
538,688
      
–
      
5
      
193
       –      
538,886
  
Owner occupie
d
Commercia
l
    
396,997
      
7,960
      
2,111
      
1,224
       –      
408,292
  
1-4 family residentia
l
    
247,888
      
–
      
592
      
1,018
       –      
249,498
  
Home equity - first lie
n
    
55,279
      
–
      
–
      
46
       –      
55,325
  
Home equity -
junior lien
    
66,710
      
–
      
426
      
383
       –      
67,519
  
Subtotal: Real estate mortgag
e
    
1,305,562
      
7,960
      
3,134
      
2,864
       –      
1,319,520
  
                                                 
Consume
r
    
35,039
      
–
      
–
      
131
       –      
35,170
  
                                                 
Tota
l
   $
2,267,103
     $
22,226
     $
9,339
     $
6,707
     $ –     $
2,305,375