Allowance For Loan Loss | 9 Months Ended |
Sep. 30, 2014 |
Receivables [Abstract] | ' |
Allowance for Credit Losses | ' |
Allowance for Loan Loss |
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While the Company manages its loan portfolio to avoid concentration by industry and loan size to lessen its credit risk exposure, inherent in the lending process is the risk of loss due to customer non-payment, or “credit risk.” The Company endeavors to minimize this risk through sound underwriting practices and the risk management function, however, management recognizes that loan losses will occur and that the amount of these losses will fluctuate depending on the risk characteristics of the loan portfolio and economic conditions. The allowance for loan losses is an estimate of probable credit risk inherent in the loan portfolio as of the specified balance sheet dates. |
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Allowance for probable loan losses methodology |
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On a quarterly basis, management prepares an estimate of the allowance necessary to cover estimated credit losses. The Company maintains the allowance at a level that it deems adequate to absorb all reasonably anticipated losses from specifically known and other credit risks associated with the portfolio. The Company uses a systematic methodology to measure the amount of estimated loan loss exposure inherent in the portfolio for purposes of establishing a sufficient allowance for loan losses. The methodology makes use of specific reserves for loans individually evaluated and deemed impaired, and general reserves for larger groups of homogeneous loans. In making its assessment on the adequacy of the allowance, management considers several quantitative and qualitative factors that could have an effect on the credit quality of the portfolio including, individual assessment of larger and high risk credits, delinquency trends and the level of non-performing loans, impaired and restructured loans, net charge-offs, the growth and composition of the loan portfolio, expansion in geographic market area and the strength of the local and national economy, among other factors. |
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There have been no material changes in the Company’s underwriting practices, credit risk management system, or to the allowance assessment methodology used to estimate loan loss exposure as reported in the Company’s most recent Annual Report on Form 10-K. Refer to heading “Allowance for probable loan losses methodology” contained in Note 4 “Allowance For Loan Losses,” to the Company’s consolidated financial statements contained in the Company’s 2013 Annual Report on Form 10-K for further discussion of management’s methodology used to estimate the loan loss exposure inherent in the portfolio for purposes of establishing a sufficient allowance. |
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The balances of loans as of September 30, 2014 by segment and evaluation method are summarized as follows: |
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(Dollars in thousands) | | Loans individually | | Loans collectively | | Total Loans | | | | | | | | | | | | | | | | |
evaluated for | evaluated for | | | | | | | | | | | | | | | | |
impairment | impairment | | | | | | | | | | | | | | | | |
Commercial real estate | | $ | 13,940 | | | $ | 829,708 | | | $ | 843,648 | | | | | | | | | | | | | | | | | |
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Commercial and industrial | | 10,877 | | | 386,113 | | | 396,990 | | | | | | | | | | | | | | | | | |
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Commercial construction | | 2,900 | | | 139,452 | | | 142,352 | | | | | | | | | | | | | | | | | |
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Residential | | 1,625 | | | 142,200 | | | 143,825 | | | | | | | | | | | | | | | | | |
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Home equity | | 205 | | | 77,778 | | | 77,983 | | | | | | | | | | | | | | | | | |
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Consumer | | 22 | | | 9,632 | | | 9,654 | | | | | | | | | | | | | | | | | |
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Deferred Fees | | — | | | (1,678 | ) | | (1,678 | ) | | | | | | | | | | | | | | | | |
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Total loans | | $ | 29,569 | | | $ | 1,583,205 | | | $ | 1,612,774 | | | | | | | | | | | | | | | | | |
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The balances of loans as of December 31, 2013 by segment and evaluation method are summarized as follows: |
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(Dollars in thousands) | | Loans individually | | Loans collectively | | Total Loans | | | | | | | | | | | | | | | | |
evaluated for | evaluated for | | | | | | | | | | | | | | | | |
impairment | impairment | | | | | | | | | | | | | | | | |
Commercial real estate | | $ | 15,139 | | | $ | 805,160 | | | $ | 820,299 | | | | | | | | | | | | | | | | | |
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Commercial and industrial | | 10,579 | | | 346,477 | | | 357,056 | | | | | | | | | | | | | | | | | |
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Commercial construction | | 3,358 | | | 129,149 | | | 132,507 | | | | | | | | | | | | | | | | | |
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Residential | | 619 | | | 132,102 | | | 132,721 | | | | | | | | | | | | | | | | | |
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Home equity | | 108 | | | 74,246 | | | 74,354 | | | | | | | | | | | | | | | | | |
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Consumer | | 23 | | | 8,620 | | | 8,643 | | | | | | | | | | | | | | | | | |
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Deferred Fees | | — | | | (1,524 | ) | | (1,524 | ) | | | | | | | | | | | | | | | | |
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Total loans | | $ | 29,826 | | | $ | 1,494,230 | | | $ | 1,524,056 | | | | | | | | | | | | | | | | | |
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Credit Quality Indicators |
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The level of adversely classified loans and delinquent and non-performing assets is largely a function of economic conditions, the overall banking environment, the Company's underwriting, and credit risk management standards. The Company’s commercial lending focus may entail significant additional risks compared to long term financing on existing, owner-occupied residential real estate. The Company endeavors to minimize this risk through sound underwriting practices and the risk management function. The credit risk management function focuses on a wide variety of factors, including, among others, current and expected economic conditions, the real estate market, the financial condition of borrowers, the ability of borrowers to adapt to changing conditions or circumstances affecting their business and the continuity of borrowers’ management teams. Early detection of credit issues is critical to minimize credit losses. Accordingly, management regularly monitors these factors, among others, through ongoing credit reviews by the Credit Department, an external loan review service, reviews by members of senior management and the Loan Committee of the Board of Directors. This review includes the assessment of internal credit quality indicators such as the risk classification of individual loans, adversely classified loans, past due and non-accrual loans, impaired and restructured loans, and the level of foreclosure activity, as well as trends in the general levels of these indicators. However, despite prudent loan underwriting and ongoing credit risk management, adverse changes within the Company's market area or deterioration in the local, regional or national economic conditions could negatively impact the portfolio's credit risk profile and the Company's asset quality in the future. |
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The loan portfolio has experienced a level of modest credit stabilization compared to the 2013 periods, as indicated by the improving statistics related to adversely classified, non-accrual, and impaired loans, and the low number and level of Other Real Estate Owned ("OREO") properties held as of September 30, 2014. Given the size and commercial mix of the Company's loan portfolio, management considers the current statistics to be reflective of the lagging effect that the regional economic environment has had on the local commercial markets and its impact on the credit profile of such a portfolio. |
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Adversely Classified Loans |
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The Company’s loan risk rating system classifies loans depending on risk of loss characteristics. The classifications range from “substantially risk free” for the highest quality loans and loans that are secured by cash collateral, to the more severe adverse classifications of “substandard,” “doubtful” and “loss” based on criteria established under banking regulations. |
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Loans classified as substandard include those loans characterized by the distinct possibility that the Company will sustain some loss if deficiencies are not corrected. These loans are inadequately protected by the sound net worth and paying capacity of the borrower; repayment has become increasingly reliant on collateral liquidation or reliance on guaranties; credit weaknesses are well-defined; and, borrower cash flow is insufficient to meet required debt service specified in loan terms and to meet other obligations, such as trade debt and tax payments. |
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Loans classified as doubtful have all the weaknesses inherent in a substandard rated loan with the added characteristic that the weaknesses make collection or full payment from liquidation, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The probability of loss is extremely high, but because of certain important and reasonably specific pending factors which may work to the advantage and strengthening of the loan, its classification as an estimated loss is deferred until more exact status may be determined. |
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Loans classified as loss are generally considered uncollectible at present, although long term recovery of part or all of loan proceeds may be possible. These “loss” loans would require a specific loss reserve or charge-off. |
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Adversely classified loans may be accruing or on non-accrual status and may be additionally designated as impaired or restructured, or some combination thereof. Loans which are evaluated to be of weaker credit quality are reviewed on a more frequent basis by management. |
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The following tables present the Company's credit risk profile for each class of loan in its portfolio by internally assigned risk rating category at the periods indicated. |
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| | September 30, 2014 | | | | | | | | |
| | Adversely Classified | | Not Adversely | | | | | | | | | | |
(Dollars in thousands) | | Substandard | | Doubtful | | Loss | | Classified | | Gross Loans | | | | | | | | |
Commercial real estate | | $ | 9,865 | | | $ | 1,207 | | | $ | 30 | | | $ | 832,546 | | | $ | 843,648 | | | | | | | | | |
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Commercial and industrial | | 11,242 | | | 49 | | | 90 | | | 385,609 | | | 396,990 | | | | | | | | | |
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Commercial construction | | 2,983 | | | — | | | — | | | 139,369 | | | 142,352 | | | | | | | | | |
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Residential | | 2,050 | | | — | | | — | | | 141,775 | | | 143,825 | | | | | | | | | |
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Home equity | | 495 | | | — | | | — | | | 77,488 | | | 77,983 | | | | | | | | | |
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Consumer | | 40 | | | — | | | — | | | 9,614 | | | 9,654 | | | | | | | | | |
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Total gross loans | | $ | 26,675 | | | $ | 1,256 | | | $ | 120 | | | $ | 1,586,401 | | | $ | 1,614,452 | | | | | | | | | |
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| | December 31, 2013 | | | | | | | | |
| | Adversely Classified | | Not Adversely | | | | | | | | | | |
(Dollars in thousands) | | Substandard | | Doubtful | | Loss | | Classified | | Gross Loans | | | | | | | | |
Commercial real estate | | $ | 13,545 | | | $ | 1,266 | | | $ | — | | | $ | 805,488 | | | $ | 820,299 | | | | | | | | | |
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Commercial and industrial | | 7,908 | | | 51 | | | 236 | | | 348,861 | | | 357,056 | | | | | | | | | |
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Commercial construction | | 3,358 | | | — | | | — | | | 129,149 | | | 132,507 | | | | | | | | | |
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Residential | | 1,012 | | | — | | | — | | | 131,709 | | | 132,721 | | | | | | | | | |
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Home equity | | 500 | | | — | | | — | | | 73,854 | | | 74,354 | | | | | | | | | |
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Consumer | | 40 | | | — | | | — | | | 8,603 | | | 8,643 | | | | | | | | | |
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Total gross loans | | $ | 26,363 | | | $ | 1,317 | | | $ | 236 | | | $ | 1,497,664 | | | $ | 1,525,580 | | | | | | | | | |
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The minor shift in adversely classified loan balances amongst the categories since the prior period was due to a variety of activity including: credit rating upgrades, primarily in commercial real estate; payoffs; the foreclosure sale of underlying collateral with payoff on a larger commercial real estate relationship; and charge-offs, primarily commercial real estate and commercial and industrial loans; partially offset by additional credit downgrades, particularly in commercial and industrial and residential mortgage loans during the period. |
Past Due and Non-Accrual Loans |
Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is generally discontinued when a loan becomes contractually past due, with respect to interest or principal, by 90 days, or when reasonable doubt exists as to the full and timely collection of interest or principal. When a loan is placed on non-accrual status, all interest previously accrued but not collected is reversed against current period interest income. Interest payments received on loans in a non-accrual status are generally applied to principal on the books of the Company. Interest accruals are resumed on such loans only when payments are brought current and have remained current for a period of 180 days and when, in the judgment of management, the collectability of both principal and interest is reasonably assured. Additionally, deposit accounts overdrawn for 90 or more days are included in the consumer non-accrual numbers below. |
The following tables present age analysis of past due loans as of the dates indicated. |
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Balance at September 30, 2014 | | | | |
(Dollars in thousands) | | Loans | | Loans | | Loans 90 or | | Total Past | | Current Loans | | Gross | | | | |
30-59 Days | 60-89 Days | More Days | Due Loans | Loans | | | | |
Past Due | Past Due | Past Due (non- | | | | | | |
| | accrual) | | | | | | |
Commercial real estate | | $ | 4,265 | | | $ | 2,902 | | | $ | 8,028 | | | $ | 15,195 | | | $ | 828,453 | | | $ | 843,648 | | | | | |
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Commercial and industrial | | 1,638 | | | 540 | | | 5,865 | | | 8,043 | | | 388,947 | | | 396,990 | | | | | |
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Commercial construction | | 3,833 | | | 68 | | | 669 | | | 4,570 | | | 137,782 | | | 142,352 | | | | | |
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Residential | | 537 | | | 685 | | | 1,677 | | | 2,899 | | | 140,926 | | | 143,825 | | | | | |
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Home equity | | 29 | | | — | | | 276 | | | 305 | | | 77,678 | | | 77,983 | | | | | |
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Consumer | | 18 | | | 13 | | | 25 | | | 56 | | | 9,598 | | | 9,654 | | | | | |
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Total gross loans | | $ | 10,320 | | | $ | 4,208 | | | $ | 16,540 | | | $ | 31,068 | | | $ | 1,583,384 | | | $ | 1,614,452 | | | | | |
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Balance at December 31, 2013 | | | | |
(Dollars in thousands) | | Loans | | Loans | | Loans 90 or | | Total Past | | Current Loans | | Gross Loans | | | | |
30-59 Days | 60-89 Days | More Days | Due Loans | | | | |
Past Due | Past Due | Past Due (non- | | | | | |
| | accrual) | | | | | |
Commercial real estate | | $ | 1,142 | | | $ | 1,575 | | | $ | 10,561 | | | $ | 13,278 | | | $ | 807,021 | | | $ | 820,299 | | | | | |
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Commercial and industrial | | 680 | | | 908 | | | 5,743 | | | 7,331 | | | 349,725 | | | 357,056 | | | | | |
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Commercial construction | | 196 | | | — | | | 1,118 | | | 1,314 | | | 131,193 | | | 132,507 | | | | | |
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Residential | | 1,110 | | | 127 | | | 633 | | | 1,870 | | | 130,851 | | | 132,721 | | | | | |
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Home equity | | 211 | | | 10 | | | 281 | | | 502 | | | 73,852 | | | 74,354 | | | | | |
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Consumer | | 106 | | | 18 | | | 10 | | | 134 | | | 8,509 | | | 8,643 | | | | | |
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Total gross loans | | $ | 3,445 | | | $ | 2,638 | | | $ | 18,346 | | | $ | 24,429 | | | $ | 1,501,151 | | | $ | 1,525,580 | | | | | |
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At September 30, 2014 and December 31, 2013, all loans 90 days or more past due were carried as non-accrual. Included in the consumer non-accrual numbers in the table above were $16 thousand and $3 thousand of overdraft deposit account balances 90 days or more past due at September 30, 2014 and December 31, 2013, respectively. Total non-performing loans amounted to $16.5 million and $18.3 million at September 30, 2014 and December 31, 2013, respectively. Non-accrual loans which were not adversely classified amounted to $229 thousand at September 30, 2014 and $577 thousand at December 31, 2013. These balances primarily represented the guaranteed portions of non-performing SBA loans. The majority of the non-accrual loan balances were also carried as impaired loans during the periods noted, and are discussed further below. The increase in loans 30-59 days past due occurred within the commercial portfolios at September 30, 2014, with the majority of these loans having subsequent payments made by mid-October. |
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The ratio of non-accrual loans to total loans amounted to 1.03% at September 30, 2014, 1.20% at December 31, 2013, and 1.35% at September 30, 2013. |
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At September 30, 2014, additional funding commitments for loans on non-accrual status totaled $100 thousand. The Company’s obligation to fulfill the additional funding commitments on non-accrual loans is generally contingent on the borrower’s compliance with the terms of the credit agreement. If the borrower is not in compliance, additional funding commitments may or may not be made at the Company’s discretion. |
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Impaired Loans |
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Impaired loans are individually significant loans for which management considers it probable that not all amounts due (principal and interest) in accordance with the original contractual terms will be collected. Impaired loans may be included within the non-accrual balances; however, not every loan in non-accrual status has been designated as impaired. Impaired loans include troubled debt restructured ("TDR") loans. Impaired loans exclude large groups of smaller-balance homogeneous loans, such as residential mortgage loans and consumer loans, which are collectively evaluated for impairment and loans that are measured at fair value, unless the loan is amended in a TDR. |
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Management does not set any minimum delay of payments as a factor in reviewing for impaired classification. Management considers the individual payment status, net worth and earnings potential of the borrower, and the value and cash flow of the collateral as factors to determine if a loan will be paid in accordance with its contractual terms. An impaired or TDR loan classification will be considered for upgrade based on the borrower's sustained performance over time and their improving financial condition. Consistent with the criteria for returning non-accrual loans to accrual status, the expectation of the borrower's ability to continue to service the loan in accordance the original or modified terms and the collectability of the remaining balance, and in the case of TDR loans, an interest rate at, or greater than, a market rate for a similar credit at the time of modification is assessed. |
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Impaired loans are individually evaluated for credit loss and a specific allowance reserve is assigned for the amount of the estimated credit loss. Refer to heading “Allowance for probable loan losses methodology” contained in Note 4 “Allowance For Loan Losses,” to the Company’s consolidated financial statements contained in the Company’s 2013 Annual Report on Form 10-K for further discussion of management’s methodology used to estimate specific reserves for impaired loans. |
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Total impaired loans amounted to $29.6 million and $29.8 million, at September 30, 2014 and December 31, 2013, respectively. Total accruing impaired loans amounted to $13.5 million and $11.9 million at September 30, 2014 and December 31, 2013, respectively, while non-accrual impaired loans amounted to $16.1 million and $17.9 million as of September 30, 2014 and December 31, 2013, respectively. |
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The following tables set forth the recorded investment in impaired loans and the related specific allowance allocated as of the dated indicated. |
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Balance at September 30, 2014 | | | | | | | | |
(Dollars in thousands) | | Unpaid | | Total recorded | | Recorded | | Recorded | | Related specific | | | | | | | | |
contractual | investment in | investment | investment | allowance | | | | | | | | |
principal balance | impaired loans | with no | with | | | | | | | | | |
| | allowance | allowance | | | | | | | | | |
Commercial real estate | | $ | 16,040 | | | $ | 13,940 | | | $ | 13,306 | | | $ | 634 | | | $ | 110 | | | | | | | | | |
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Commercial and industrial | | 11,986 | | | 10,877 | | | 4,046 | | | 6,831 | | | 2,198 | | | | | | | | | |
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Commercial construction | | 3,125 | | | 2,900 | | | 1,082 | | | 1,818 | | | 690 | | | | | | | | | |
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Residential | | 1,699 | | | 1,625 | | | 1,375 | | | 250 | | | 103 | | | | | | | | | |
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Home equity | | 208 | | | 205 | | | — | | | 205 | | | 46 | | | | | | | | | |
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Consumer | | 22 | | | 22 | | | — | | | 22 | | | 22 | | | | | | | | | |
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Total | | $ | 33,080 | | | $ | 29,569 | | | $ | 19,809 | | | $ | 9,760 | | | $ | 3,169 | | | | | | | | | |
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Balance at December 31, 2013 | | | | | | | | |
(Dollars in thousands) | | Unpaid | | Total recorded | | Recorded | | Recorded | | Related specific | | | | | | | | |
contractual | investment in | investment | investment | allowance | | | | | | | | |
principal balance | impaired loans | with no | with | | | | | | | | | |
| | allowance | allowance | | | | | | | | | |
Commercial real estate | | $ | 17,420 | | | $ | 15,139 | | | $ | 12,105 | | | $ | 3,034 | | | $ | 507 | | | | | | | | | |
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Commercial and industrial | | 12,220 | | | 10,579 | | | 4,902 | | | 5,677 | | | 2,901 | | | | | | | | | |
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Commercial construction | | 3,464 | | | 3,358 | | | 1,426 | | | 1,932 | | | 830 | | | | | | | | | |
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Residential | | 673 | | | 619 | | | 365 | | | 254 | | | 107 | | | | | | | | | |
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Home equity | | 110 | | | 108 | | | — | | | 108 | | | 31 | | | | | | | | | |
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Consumer | | 23 | | | 23 | | | — | | | 23 | | | 23 | | | | | | | | | |
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Total | | $ | 33,910 | | | $ | 29,826 | | | $ | 18,798 | | | $ | 11,028 | | | $ | 4,399 | | | | | | | | | |
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The reduction in related specific reserves on impaired loans was due primarily to increases in estimated current realizable collateral values and current charge-offs of previously allocated specific reserves on commercial relationships for which management deemed collectability of amounts due was unlikely based on current realizable collateral values, partially offset by additional reserves for newly impaired loans during the period. |
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The following table presents the average recorded investment in impaired loans and the related interest recognized during the three month periods indicated. |
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| | Three Months Ended September 30, 2014 | | Three Months Ended September 30, 2013 | | | | | | | | | | | | |
(Dollars in thousands) | | Average recorded | | Interest income | | Average recorded | | Interest income | | | | | | | | | | | | |
investment | recognized | investment | recognized | | | | | | | | | | | | |
Commercial real estate | | $ | 14,224 | | | $ | 75 | | | $ | 15,405 | | | $ | 42 | | | | | | | | | | | | | |
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Commercial and industrial | | 10,279 | | | 40 | | | 9,081 | | | 23 | | | | | | | | | | | | | |
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Commercial construction | | 3,174 | | | 27 | | | 3,540 | | | 17 | | | | | | | | | | | | | |
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Residential | | 1,294 | | | (2 | ) | | 741 | | | 3 | | | | | | | | | | | | | |
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Home equity | | 243 | | | (1 | ) | | 109 | | | — | | | | | | | | | | | | | |
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Consumer | | 25 | | | 1 | | | 18 | | | 1 | | | | | | | | | | | | | |
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Total | | $ | 29,239 | | | $ | 140 | | | $ | 28,894 | | | $ | 86 | | | | | | | | | | | | | |
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The following table presents the average recorded investment in impaired loans and the related interest recognized during the nine month periods indicated. |
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| | Nine Months Ended September 30, 2014 | | Nine Months Ended September 30, 2013 | | | | | | | | | | | | |
(Dollars in thousands) | | Average recorded | | Interest income | | Average recorded | | Interest income | | | | | | | | | | | | |
investment | recognized | investment | recognized | | | | | | | | | | | | |
Commercial real estate | | $ | 13,913 | | | $ | 169 | | | $ | 18,572 | | | $ | 191 | | | | | | | | | | | | | |
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Commercial and industrial | | 10,482 | | | 120 | | | 9,312 | | | 77 | | | | | | | | | | | | | |
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Commercial construction | | 3,243 | | | 79 | | | 3,114 | | | 50 | | | | | | | | | | | | | |
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Residential | | 1,032 | | | 1 | | | 785 | | | 7 | | | | | | | | | | | | | |
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Home equity | | 215 | | | (1 | ) | | 119 | | | — | | | | | | | | | | | | | |
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Consumer | | 25 | | | 1 | | | 17 | | | 1 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total | | $ | 28,910 | | | $ | 369 | | | $ | 31,919 | | | $ | 326 | | | | | | | | | | | | | |
| | | | | | | | | | | |
|
At September 30, 2014, additional funding commitments for impaired loans totaled $167 thousand. The Company's obligation to fulfill the additional funding commitments on impaired loans is generally contingent on the borrower's compliance with the terms of the credit agreement. If the borrower is not in compliance, additional funding commitments may or may not be made at the Company's discretion. |
|
Troubled Debt Restructures |
|
Loans are designated as a TDR when, as part of an agreement to modify the original contractual terms of the loan, the Bank grants the borrower a concession on the terms, that would not otherwise be considered, as a result of financial difficulties of the borrower. Typically, such concessions may consist of a reduction in interest rate to a below market rate, taking into account the credit quality of the note, or a deferment or reduction of payments (principal or interest) which materially alters the Bank’s position or significantly extends the note’s maturity date, such that the present value of cash flows to be received is materially less than those contractually established at the loan’s origination. All loans that are modified are reviewed by the Company to identify if a TDR has occurred. TDR loans are included in the impaired loan category and, as such, these loans are individually evaluated and a specific reserve is assigned for the amount of the estimated credit loss. |
|
Total TDR loans, included in the impaired loan figures above, as of September 30, 2014 and December 31, 2013, were $20.7 million and $20.9 million, respectively. TDR loans on accrual status amounted to $13.0 million and $11.4 million at September 30, 2014 and December 31, 2013, respectively. TDR loans included in non-performing loans amounted to $7.7 million and $9.5 million at September 30, 2014 and December 31, 2013, respectively. The Company continues to work with commercial relationships and enters into loan modifications to the extent deemed to be necessary or appropriate while attempting to achieve the best mutual outcome given the current economic environment. |
|
At September 30, 2014, additional funding commitments for TDR loans totaled $75 thousand. The Company's obligation to fulfill the additional funding commitments on TDR loans is generally contingent on the borrower's compliance with the terms of the credit agreement. If the borrower is not in compliance, additional funding commitments may or may not be made at the Company's discretion. |
|
Loans modified as trouble debt restructurings during the three month period ended September 30, 2014 are detailed below. |
|
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, 2014 | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | Number of | | Pre-modification | | Post-modification | | | | | | | | | | | | | | | | | |
restructurings | outstanding recorded | outstanding recorded | | | | | | | | | | | | | | | | | |
| investment | investment | | | | | | | | | | | | | | | | | |
Commercial real estate | | 2 | | | $ | 1,429 | | | $ | 1,429 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Commercial and industrial | | 2 | | | 43 | | | 43 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Commercial construction | | — | | | — | | | — | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Residential | | — | | | — | | | — | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Home equity | | — | | | — | | | — | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Consumer | | — | | | — | | | — | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total | | 4 | | | $ | 1,472 | | | $ | 1,472 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
|
|
Loans modified as troubled debt restructurings within the preceding twelve month period for which there was a subsequent payment default during the periods noted are detailed below. |
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, 2014 | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | Number of TDRs that defaulted | | Post- | | | | | | | | | | | | | | | | | | | | | |
modification outstanding | | | | | | | | | | | | | | | | | | | | | |
recorded investment | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | — | | | — | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Commercial construction | | — | | | — | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Residential | | 1 | | | 126 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Home Equity | | — | | | — | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Consumer | | — | | | — | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total | | 1 | | | $ | 126 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
|
|
Loans modified as troubled debt restructurings during the nine month period ended September 30, 2014 are detailed below. |
|
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended September 30, 2014 | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | Number of | | Pre-modification | | Post-modification | | | | | | | | | | | | | | | | | |
restructurings | outstanding recorded | outstanding recorded | | | | | | | | | | | | | | | | | |
| investment | investment | | | | | | | | | | | | | | | | | |
Commercial real estate | | 3 | | | $ | 1,979 | | | $ | 1,979 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Commercial and industrial | | 8 | | | 268 | | | 263 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Commercial construction | | — | | | — | | | — | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Residential | | 1 | | | 124 | | | 122 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Home equity | | 1 | | | 73 | | | 73 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Consumer | | — | | | — | | | — | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total | | 13 | | | $ | 2,444 | | | $ | 2,437 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
|
|
Loans modified as troubled debt restructurings within the preceding twelve month period for which there was a subsequent payment default during the period noted are detailed below. |
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended September 30, 2014 | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | Number of TDRs that defaulted | | Post- | | | | | | | | | | | | | | | | | | | | | |
modification outstanding | | | | | | | | | | | | | | | | | | | | | |
recorded investment | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | 1 | | | 66 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Commercial construction | | — | | | — | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Residential | | 1 | | | 126 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Home Equity | | — | | | — | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Consumer | | — | | | — | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total | | 2 | | | $ | 192 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
|
At September 30, 2014, there were specific reserves of $45 thousand allocated to the TDRs entered into during the 2014 period as management considered it likely the majority of principal would ultimately be collected. Interest payments received on non-accruing TDRs in the table above which were applied to principal and not recognized in interest income during the nine months ended September 30, 2014 amounted to $5 thousand. |
|
There were subsequent charge-offs of $66 thousand associated with the TDRs noted in the table above during the nine months ended September 30, 2014. |
|
|
|
Loans modified as troubled debt restructurings during the three month period ended September 30, 2013 are detailed below. |
|
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, 2013 | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | Number of | | Pre-modification | | Post-modification | | | | | | | | | | | | | | | | | |
restructurings | outstanding recorded | outstanding recorded | | | | | | | | | | | | | | | | | |
| investment | investment | | | | | | | | | | | | | | | | | |
Commercial real estate | | 1 | | | $ | 342 | | | $ | 291 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Commercial and industrial | | 1 | | | 89 | | | 42 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Commercial construction | | 1 | | | 769 | | | 769 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Residential | | — | | | — | | | — | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Home equity | | — | | | — | | | — | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Consumer | | — | | | — | | | — | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total | | 3 | | | $ | 1,200 | | | $ | 1,102 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
|
There were no loans modified as troubled debt restructurings within the twelve month period previous to September 30, 2013 for which there was a subsequent payment default during the three months ended September 30, 2013. |
|
Loans modified as troubled debt restructurings during the nine month period ended September 30, 2013 are detailed below. |
|
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended September 30, 2013 | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | Number of | | Pre-modification | | Post-modification | | | | | | | | | | | | | | | | | |
restructurings | outstanding recorded | outstanding recorded | | | | | | | | | | | | | | | | | |
| investment | investment | | | | | | | | | | | | | | | | | |
Commercial real estate | | 1 | | | $ | 342 | | | $ | 291 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Commercial and industrial | | 2 | | | 189 | | | 104 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Commercial construction | | 1 | | | 769 | | | 769 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Residential | | — | | | — | | | — | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Home equity | | — | | | — | | | — | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Consumer | | — | | | — | | | — | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total | | 4 | | | $ | 1,300 | | | $ | 1,164 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
|
Loans modified as troubled debt restructuring within the twelve month period previous to September 30, 2013 for which there was a subsequent payment default during the period noted are detailed below. |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended September 30, 2013 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | Number of TDRs that defaulted | | Post- | | | | | | | | | | | | | | | | | | | | | |
modification outstanding | | | | | | | | | | | | | | | | | | | | | |
recorded investment | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | 1 | | | $ | 137 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | 1 | | | 62 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Commercial construction | | 1 | | | 31 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Residential | | — | | | — | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Home Equity | | — | | | — | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Consumer | | — | | | — | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total | | 3 | | | $ | 230 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
|
There were subsequent charge-offs of $38 thousand associated with the TDRs noted in the table above during the nine months ended September 30, 2013. Included in the table above were two TDRs which defaulted, with total post modification outstanding balances of $168 thousand, and were subsequently transferred to OREO during the September 30, 2013 period. At September 30, 2013, specific reserves allocated to the TDRs entered into during the 2013 period amounted to $80 thousand, as management considered it likely that the majority of principal would ultimately be collected. |
|
Other Real Estate Owned |
|
Real estate acquired by the Company through foreclosure proceedings or the acceptance of a deed in lieu of foreclosure is classified as OREO. When property is acquired, it is generally recorded at the lesser of the loan’s remaining principal balance, net of any unamortized deferred fees, or the estimated fair value of the property acquired, less estimated costs to sell. Any loan balance in excess of the estimated realizable fair value on the date of transfer is charged to the allowance for loan losses on that date. All costs incurred thereafter in maintaining the property, as well as subsequent declines in fair value, are charged to non-interest expense. |
|
The carrying value of OREO at September 30, 2014 was $861 thousand and consisted of three properties; and as of December 31, 2013 was $114 thousand and consisted of one property. During the nine months ended September 30, 2014, two properties were added to OREO. There were no sales or subsequent write-down of OREO during the nine months ended September 30, 2014. There were $121 thousand of gains realized on OREO sales during the nine months ended September 30, 2013 and a subsequent write-down of $23 thousand was recorded during that period. |
|
Allowance for Loan Loss Activity |
|
The allowance for loan losses is established through a provision for loan losses, a direct charge to earnings. Loan losses are charged against the allowance when management believes that the collectability of the loan principal is unlikely. Recoveries on loans previously charged-off are credited to the allowance. |
|
The allowance for loan losses amounted to $27.0 million at both September 30, 2014 and December 31, 2013 compared to $26.0 million at September 30, 2013. The allowance for loan losses to total loans ratio was 1.68% at September 30, 2014 compared to 1.77% at both December 31, 2013 and September 30, 2013. The decline in the overall allowance to total loan ratio at September 30, 2014 primarily resulted from the increase in the outstanding loan balances and a reduction in specific reserves. Specific reserves declined due to current charge-offs, the majority of which were previously allocated specific reserves on commercial relationships for which management deemed collectability of amounts due was unlikely based on current realizable collateral values, partially offset by additional reserves for newly impaired loans during the period. |
|
Based on management’s judgment as to the existing credit risks inherent in the loan portfolio, as discussed above under the heading "Credit Quality Indicators," management believes that the Company’s allowance for loan losses is adequate to absorb probable losses from specifically known and other credit risks associated with the portfolio as of September 30, 2014. |
|
Changes in the allowance for loan losses by segment for the three months ended September 30, 2014, are presented below: |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | Cmml Real | | Cmml and | | Cmml | | Resid. | | Home | | Consumer | | Total |
Estate | Industrial | Constr | Mortgage | Equity |
Beginning Balance at June 30, 2014 | | $ | 13,065 | | | $ | 7,550 | | | $ | 3,741 | | | $ | 1,266 | | | $ | 685 | | | $ | 221 | | | $ | 26,528 | |
|
Provision | | 154 | | | 664 | | | (90 | ) | | (38 | ) | | 36 | | | 39 | | | 765 | |
|
Recoveries | | — | | | 286 | | | 17 | | | — | | | 1 | | | 2 | | | 306 | |
|
Less: Charge offs | | 92 | | | 256 | | | 134 | | | 46 | | | 27 | | | 15 | | | 570 | |
|
Ending Balance at September 30, 2014 | | $ | 13,127 | | | $ | 8,244 | | | $ | 3,534 | | | $ | 1,182 | | | $ | 695 | | | $ | 247 | | | $ | 27,029 | |
|
|
Changes in the allowance for loan losses by segment for the nine months ended September 30, 2014, are presented below: |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | Cmml Real | | Cmml and | | Cmml | | Resid. | | Home | | Consumer | | Total |
Estate | Industrial | Constr | Mortgage | Equity |
Beginning Balance at December 31, 2013 | | $ | 13,174 | | | $ | 8,365 | | | $ | 3,493 | | | $ | 1,057 | | | $ | 653 | | | $ | 225 | | | $ | 26,967 | |
|
Provision | | 248 | | | 512 | | | 128 | | | 171 | | | 68 | | | 38 | | | 1,165 | |
|
Recoveries | | — | | | 510 | | | 47 | | | — | | | 1 | | | 24 | | | 582 | |
|
Less: Charge offs | | 295 | | | 1,143 | | | 134 | | | 46 | | | 27 | | | 40 | | | 1,685 | |
|
Ending Balance at September 30, 2014 | | $ | 13,127 | | | $ | 8,244 | | | $ | 3,534 | | | $ | 1,182 | | | $ | 695 | | | $ | 247 | | | $ | 27,029 | |
|
Ending allowance balance: | | | | | | | | | | | | | | |
Allotted to loans individually evaluated for impairment | | $ | 110 | | | $ | 2,198 | | | $ | 690 | | | $ | 103 | | | $ | 46 | | | $ | 22 | | | $ | 3,169 | |
|
Allotted to loans collectively evaluated for impairment | | $ | 13,017 | | | $ | 6,046 | | | $ | 2,844 | | | $ | 1,079 | | | $ | 649 | | | $ | 225 | | | $ | 23,860 | |
|
|
|
Changes in the allowance for loan losses by segment for the three months ended September 30, 2013, are presented below: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | Cmml Real | | Cmml and | | Cmml | | Resid. | | Home | | Consumer | | Total |
Estate | Industrial | Constr | Mortgage | Equity |
Beginning Balance at June 30, 2013 | | $ | 13,020 | | | $ | 7,633 | | | $ | 3,154 | | | $ | 1,033 | | | $ | 682 | | | $ | 149 | | | $ | 25,671 | |
|
Provision | | 162 | | | 422 | | | 28 | | | (24 | ) | | (34 | ) | | 29 | | | 583 | |
|
Recoveries | | 34 | | | 15 | | | — | | | — | | | — | | | 3 | | | 52 | |
|
Less: Charge offs | | 192 | | | 70 | | | — | | | 36 | | | — | | | 9 | | | 307 | |
|
Balance at September 30, 2013 | | $ | 13,024 | | | $ | 8,000 | | | $ | 3,182 | | | $ | 973 | | | $ | 648 | | | $ | 172 | | | $ | 25,999 | |
|
|
|
Changes in the allowance for loan losses by segment for the nine months ended September 30, 2013, are presented below: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | Cmml Real | | Cmml and | | Cmml | | Resid. | | Home | | Consumer | | Total |
Estate | Industrial | Constr | Mortgage | Equity |
Beginning Balance at December 31, 2012 | | $ | 11,793 | | | $ | 7,297 | | | $ | 3,456 | | | $ | 854 | | | $ | 728 | | | $ | 126 | | | $ | 24,254 | |
|
Provision | | 1,342 | | | 850 | | | (324 | ) | | 27 | | | (57 | ) | | 62 | | | 1,900 | |
|
Recoveries | | 95 | | | 56 | | | 50 | | | 128 | | | 21 | | | 9 | | | 359 | |
|
Less: Charge offs | | 206 | | | 203 | | | — | | | 36 | | | 44 | | | 25 | | | 514 | |
|
Ending Balance at September 30, 2013 | | $ | 13,024 | | | $ | 8,000 | | | $ | 3,182 | | | $ | 973 | | | $ | 648 | | | $ | 172 | | | $ | 25,999 | |
|
Ending allowance balance: | | | | | | | | | | | | | | |
Allotted to loans individually evaluated for impairment | | $ | 544 | | | $ | 2,602 | | | $ | 875 | | | $ | 68 | | | $ | 34 | | | $ | 18 | | | $ | 4,141 | |
|
Allotted to loans collectively evaluated for impairment | | $ | 12,480 | | | $ | 5,398 | | | $ | 2,307 | | | $ | 905 | | | $ | 614 | | | $ | 154 | | | $ | 21,858 | |
|