Loans and reserve for credit losses (Tables)

3 Months Ended

Mar. 31, 2014

Schedule of Accounts, Notes, Loans and Financing Receivable

The composition of the loan portfolio at March 31, 2014 and December 31, 2013 was as follows (dollars in thousands):



	March 31, 2014					December 31, 2013
	Amount			Percent		Amount			Percent
Commercial real estate:
Owner occupied	$	195,111		19.4	%	$	204,998		20.6	%
Non-owner occupied	348,597			34.6	%	347,014			34.8	%
Total commercial real estate loans	543,708			54.0	%	552,012			55.4	%
Construction	55,436			5.5	%	52,503			5.3	%
Residential real estate	100,550			10.0	%	101,557			10.2	%
Commercial and industrial	273,444			27.1	%	254,170			25.5	%
Consumer	34,216			3.4	%	35,990			3.6	%
Total loans	1,007,354			100.0	%	996,232			100.0	%

Less:
Deferred loan fees	(1,707		)			(1,757		)
Reserve for loan losses	(21,722		)			(20,857		)
Loans, net	$	983,925				$	973,618

Allowance for Credit Losses on Financing Receivables

Transactions and allocations in the reserve for loan losses and unfunded loan commitments, by portfolio segment, for the three months ended March 31, 2014 and 2013 were as follows (dollars in thousands):



	Commercial real estate			Construction			Residential real estate			Commercial and industrial			Consumer			Unallocated		Total
Three months ended March 31, 2014
Reserve for loan losses
Balance at December 31, 2013	$	9,565		$	535		$	2,381		$	6,261		$	1,401		$	714	$	20,857
Loan loss provision (credit)	(1,560		)	278			(55		)	(18		)	62			1,293		—
Recoveries	941			85			124			911			87			—		2,148
Loans charged off	(143		)	(296		)	(223		)	(314		)	(307		)	—		(1,283		)
Balance at end of period	$	8,803		$	602		$	2,227		$	6,840		$	1,243		$	2,007	$	21,722

Reserve for unfunded lending commitments
Balance at December 31, 2013	$	48		$	268		$	25		$	75		$	24		$	—	$	440
Provision for unfunded loan commitments	—			—			—			—			—			—		—
Balance at end of period	$	48		$	268		$	25		$	75		$	24		$	—	$	440

Reserve for credit losses
Reserve for loan losses	$	8,803		$	602		$	2,227		$	6,840		$	1,243		$	2,007	$	21,722
Reserve for unfunded lending commitments	48			268			25			75			24			—		440
Total reserve for credit losses	$	8,851		$	870		$	2,252		$	6,915		$	1,267		$	2,007	$	22,162



	Commercial real estate			Construction			Residential real estate			Commercial and industrial			Consumer			Unallocated			Total
Three months ended March 31, 2013
Reserve for loan losses
Balance at December 31, 2012	$	11,596		$	1,583		$	3,551		$	7,267		$	2,177		$	1,087		$	27,261
Loan loss provision (credit)	(280		)	316			182			125			86			(429		)	—
Recoveries	178			124			117			512			59			—			990
Loans charged off	(269		)	(787		)	(136		)	(2,228		)	(283		)	—			(3,703		)
Balance at end of period	$	11,225		$	1,236		$	3,714		$	5,676		$	2,039		$	658		$	24,548

Reserve for unfunded lending commitments
Balance at December 31, 2012	$	48		$	268		$	25		$	75		$	24		$	—		$	440
Provision for unfunded loan commitments	—			—			—			—			—			—			—
Balance at end of period	$	48		$	268		$	25		$	75		$	24		$	—		$	440

Reserve for credit losses
Reserve for loan losses	$	11,225		$	1,236		$	3,714		$	5,676		$	2,039		$	658		$	24,548
Reserve for unfunded lending commitments	48			268			25			75			24			—			440
Total reserve for credit losses	$	11,273		$	1,504		$	3,739		$	5,751		$	2,063		$	658		$	24,988

An individual loan is impaired when, based on current information and events, management believes that it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. The following table presents the reserve for loan losses and the recorded investment in loans by portfolio segment and impairment evaluation method at March 31, 2014 and December 31, 2013 (dollars in thousands):



	Reserve for loan losses						Recorded investment in loans
	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
March 31, 2014
Commercial real estate	$	660	$	8,143	$	8,803	$	29,121	$	514,587	$	543,708
Construction	—		602		602		1,739		53,697		55,436
Residential real estate	62		2,165		2,227		426		100,124		100,550
Commercial and industrial	286		6,554		6,840		5,238		268,206		273,444
Consumer	—		1,243		1,243		—		34,216		34,216
	$	1,008	$	18,707	19,715		$	36,524	$	970,830	$	1,007,354
Unallocated					2,007
					$	21,722

December 31, 2013
Commercial real estate	$	665	$	8,900	$	9,565	$	32,227	$	519,785	$	552,012
Construction	—		535		535		1,987		50,516		52,503
Residential real estate	62		2,319		2,381		430		101,127		101,557
Commercial and industrial	56		6,205		6,261		5,823		248,347		254,170
Consumer	—		1,401		1,401		—		35,990		35,990
	$	783	$	19,360	20,143		$	40,467	$	955,765	$	996,232
Unallocated					714
					$	20,857

Financing Receivable Credit Quality Indicators

The following table presents, by portfolio class, the recorded investment in loans by internally assigned grades at March 31, 2014 and December 31, 2013 (dollars in thousands):



	Loan grades
	Acceptable		Pass-Watch		Special Mention		Substandard		Total
March 31, 2014
Commercial real estate:
Owner occupied	$	145,041	$	17,945	$	10,777	$	21,348	$	195,111
Non-owner occupied	289,886		35,332		13,814		9,565		348,597
Total commercial real estate loans	434,927		53,277		24,591		30,913		543,708
Construction	50,188		2,322		1,798		1,128		55,436
Residential real estate	97,910		1,536		167		937		100,550
Commercial and industrial	257,166		8,572		1,571		6,135		273,444
Consumer	34,165		—		—		51		34,216
	$	874,356	$	65,707	$	28,127	$	39,164	$	1,007,354

December 31, 2013
Commercial real estate:
Owner occupied	$	147,865	$	19,798	$	14,730	$	22,605	$	204,998
Non-owner occupied	278,854		33,827		24,188		10,145		347,014
Total commercial real estate loans	426,719		53,625		38,918		32,750		552,012
Construction	46,274		2,772		2,131		1,326		52,503
Residential real estate	98,633		1,570		147		1,207		101,557
Commercial and industrial	242,053		3,518		2,694		5,905		254,170
Consumer	35,984		—		—		6		35,990
	$	849,663	$	61,485	$	43,890	$	41,194	$	996,232

Past Due Financing Receivables

The following table presents, by portfolio class, an age analysis of past due loans, including loans placed on non-accrual at March 31, 2014 and December 31, 2013 (dollars in thousands):



	30-89 days past due		90 days or more past due		Total past due		Current		Total loans
March 31, 2014
Commercial real estate:
Owner occupied	$	2,035	$	1,054	$	3,089	$	192,022	$	195,111
Non-owner occupied	792		—		792		347,805		348,597
Total commercial real estate loans	2,827		1,054		3,881		539,827		543,708
Construction	—		39		39		55,397		55,436
Residential real estate	362		235		597		99,953		100,550
Commercial and industrial	621		1,607		2,228		271,216		273,444
Consumer	94		51		145		34,071		34,216
	$	3,904	$	2,986	$	6,890	$	1,000,464	$	1,007,354
December 31, 2013
Commercial real estate:
Owner occupied	$	959	$	2,905	$	3,864	$	201,134	$	204,998
Non-owner occupied	—		—		—		347,014		347,014
Total commercial real estate loans	959		2,905		3,864		548,148		552,012
Construction	215		119		334		52,169		52,503
Residential real estate	436		163		599		100,958		101,557
Commercial and industrial	597		2,077		2,674		251,496		254,170
Consumer	53		6		59		35,931		35,990
	$	2,260	$	5,270	$	7,530	$	988,702	$	996,232

Impaired Financing Receivables

The following table presents information related to impaired loans, by portfolio class, at March 31, 2014 and December 31, 2013 (dollars in thousands):



	Impaired loans
	With a related allowance		Without a related allowance		Total recorded balance		Unpaid principal balance		Related allowance
March 31, 2014
Commercial real estate:
Owner occupied	$	2,754	$	3,629	$	6,383	$	8,561	$	647
Non-owner occupied	1,111		21,627		22,738		22,771		13
Total commercial real estate loans	3,865		25,256		29,121		31,332		660
Construction	689		1,050		1,739		1,740		—
Residential real estate	172		254		426		513		62
Commercial and industrial	3,845		1,393		5,238		6,077		286
Consumer	—		—		—		—		—
	$	8,571	$	27,953	$	36,524	$	39,662	$	1,008

December 31, 2013
Commercial real estate:
Owner occupied	$	2,772	$	6,582	$	9,354	$	12,707	$	652
Non-owner occupied	1,116		21,757		22,873		22,904		13
Total commercial real estate loans	3,888		28,339		32,227		35,611		665
Construction	751		1,236		1,987		2,029		—
Residential real estate	174		256		430		515		62
Commercial and industrial	4,074		1,749		5,823		6,701		56
Consumer	—		—		—		—		—
	$	8,887	$	31,580	$	40,467	$	44,856	$	783

At March 31, 2014 and December 31, 2013, the total recorded balance of impaired loans in the above table included $31.1 million and $33.2 million, respectively, of Troubled Debt Restructuring (“TDR”) loans which were not on non-accrual status.

The following table presents, by portfolio class, the average recorded investment in impaired loans for the three months ended March 31, 2014 and 2013 (dollars in thousands):



	Three Months Ended March 31,
	2014		2013
Commercial real estate:
Owner occupied	$	7,868	$	15,209
Non-owner occupied	22,806		28,250
Total commercial real estate loans	30,674		43,459
Construction	1,863		6,514
Residential real estate	428		4,836
Commercial and industrial	5,530		9,384
Consumer	—		1,788
	$	38,495	$	65,981

Schedule of Financing Receivables, Non Accrual Status

Information with respect to the Company’s non-accrual loans, by portfolio class, at March 31, 2014 and December 31, 2013 is as follows (dollars in thousands):



	March 31, 2014		December 31, 2013
Commercial real estate:
Owner occupied	$	2,572	$	4,443
Non-owner occupied	280		280
Total commercial real estate loans	2,852		4,723
Construction	106		236
Residential real estate	465		399
Commercial and industrial	2,398		1,868
Total non-accrual loans	$	5,821	$	7,226

Accruing loans which are contractually past due 90 days or more:
Commercial real estate:
Owner occupied	$	—	$	—
Non-owner occupied	—		—
Total commercial real estate loans	—		—
Construction	39		—
Residential real estate	—		—
Commercial and industrial	—		1,077
Consumer	51		6
Total accruing loans which are contractually past due 90 days or more	$	90	$	1,083

Troubled Debt Restructurings on Financing Receivables

The following table presents, by portfolio segment, information with respect to the Company’s loans that were modified and recorded as TDRs during the three months ended March 31, 2014 and 2013 (dollars in thousands):



	Three months ended March 31,
	2014			2013
	Number of loans	TDR outstanding recorded investment		Number of loans	TDR outstanding recorded investment
Commercial real estate	—	$	—	5	$	27,677
Construction	—	—		2	115
Residential real estate	—	—		3	152
Commercial and industrial	—	—		8	399
Consumer	—	—		12	358
	—	$	—	30	$	28,701

There were no loans modified and recorded as TDRs during the three months ended March 31, 2014. During the same period in 2013, TDR activity was primarily the result of remediation to bolster cash flow of stressed loans, and included the restructuring of a large CRE credit in the Bank’s loan portfolio.

At March 31, 2014 and 2013, the Company had remaining commitments to lend on loans accounted for as TDRs of $0 and $0.02 million, respectively.

The following table presents, by portfolio segment, the post modification recorded investment for TDRs restructured during the three months ended March 31, 2013 by the primary type of concession granted (dollars in thousands). There were no TDRs restructured during the three months ended March 31, 2014.



Three Months Ended March 31, 2013	Rate reduction		Term extension		Rate reduction and term extension		Total
Commercial real estate	$	3,809	$	2,368	$	21,500	$	27,677
Construction	—		115		—		115
Residential real estate	—		152		—		152
Commercial and industrial	174		173		52		399
Consumer	—		358		—		358
	$	3,983	$	3,166	$	21,552	$	28,701

The following table presents, by portfolio segment, the TDRs which had payment defaults during the three months ended March 31, 2014 and 2013 that had been previously restructured within the last twelve months prior to March 31, 2014 and 2013 (dollars in thousands):



	Three months ended March 31,
	2014			2013
	Number of loans	TDRs restructured in the period with a payment default		Number of loans	TDRs restructured in the period with a payment default
Commercial real estate	—	$	—	2	$	3,500
Construction	—	—		—	—
Residential real estate	—	—		—	—
Commercial and industrial loans	1	963		—	—
Consumer loans	—	—		—	—
	1	$	963	2	$	3,500



	Three months ended March 31,
	2014			2013
	Number of loans	TDR outstanding recorded investment		Number of loans	TDR outstanding recorded investment
Commercial real estate	—	$	—	5	$	27,677
Construction	—	—		2	115
Residential real estate	—	—		3	152
Commercial and industrial	—	—		8	399
Consumer	—	—		12	358
	—	$	—	30	$	28,701