Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | Note 5 - Loans and Allowance for Credit Losses The Bank makes loans to customers primarily in the Washington, D.C. metropolitan area and surrounding communities. A substantial portion of the Bank’s loan portfolio consists of loans to businesses secured by real estate and other business assets. Loans, net of unamortized net deferred fees, at December 31, 2016 2015 December 31, 2016 December 31, 2015 (dollars in thousands) Amount % Amount % Commercial $ 1,200,728 21 % $ 1,052,257 21 % Income producing - commercial real estate 2,509,517 44 % 2,115,478 42 % Owner occupied - commercial real estate 640,870 12 % 498,103 10 % Real estate mortgage - residential 152,748 3 % 147,365 3 % Construction - commercial and residential 932,531 16 % 985,607 20 % Construction - C&I (owner occupied) 126,038 2 % 79,769 2 % Home equity 105,096 2 % 112,885 2 % Other consumer 10,365 - 6,904 - Total loans 5,677,893 100 % 4,998,368 100 % Less: Allowance for Credit Losses (59,074 ) (52,687 ) Net loans $ 5,618,819 $ 4,945,681 Unamortized net deferred fees amounted to $22.3 $18.4 December 31, 2016 2015, $120 $144 December 31, 2016 2015, Loans acquired from Virginia Heritage totaled $804 $801 $3.0 310 30 “Accounting for Certain Loans or Debt Securities Acquired in a Transfer” 310 30”). 2016. The Company sold the indirect consumer loan portfolio acquired in the Merger, amounting to approximately $80.3 $900 July 24, 2015. As of December 31, 2016 2015, $128.8 $78.8 Loan Origination/Risk Management The Company’s goal is to mitigate risks in the event of unforeseen threats to the loan portfolio as a result of economic downturn or other negative influences. Plans for mitigating inherent risks in managing loan assets include carefully enforcing loan policies and procedures, evaluating each borrower’s business plan during the underwriting process and throughout the loan term, identifying and monitoring primary and alternative sources for loan repayment, and obtaining collateral to mitigate economic loss in the event of liquidation. Specific loan reserves are established based upon credit and/or collateral risks on an individual loan basis. A risk rating system is employed to proactively estimate loss exposure and provide a measuring system for setting general and specific reserve allocations. The composition of the Company’s loan portfolio is heavily weighted toward commercial real estate, both owner occupied and income producing real estate. At December 31, 2016, 14% December 31, 2016, 60% 74% 80% 1.15 1.0. may five The Company is also an active traditional commercial lender providing loans for a variety of purposes, including working capital, equipment and account receivable financing. This loan category represents approximately 21% December 31, 2016 may 2% Approximately 2% December 31, 2016 Approximately 3% 22 first third Loans are secured primarily by duly recorded first may Construction loans require that the financial condition and experience of the general contractor and major subcontractors be satisfactory to the Bank. Guaranteed, fixed price contracts are required whenever appropriate, along with payment and performance bonds or completion bonds for larger scale projects. Loans intended for residential land acquisition, lot development and construction are made on the premise that the land: 1) 2) 36 Commercial land acquisition and construction loans are secured by real property where loan funds will be used to acquire land and to construct or improve appropriately zoned real property for the creation of income producing or owner user commercial properties. Borrowers are generally required to put equity into each project at levels determined by the appropriate Loan Committee. Commercial land acquisition and construction loans generally are underwritten with a maximum term of 24 Substantially all construction draw requests must be presented in writing on American Institute of Architects documents and certified either by the contractor, the borrower and/or the borrower’s architect. Each draw request shall also include the borrower’s soft cost breakdown certified by the borrower or their Chief Financial Officer. Prior to an advance, the Bank or its contractor inspects the project to determine that the work has been completed, to justify the draw requisition. Commercial permanent loans are secured by improved real property which is generating income in the normal course of operation. Debt service coverage, assuming stabilized occupancy, must be satisfactory to support a permanent loan. The debt service coverage ratio is ordinarily at least 1.15 1.00. 200 Commercial permanent loans generally are underwritten with a term not greater than 10 5 7 25 The Company’s loan portfolio includes ADC real estate loans including both investment and owner occupied projects. ADC loans amounted to $1.06 December 31, 2016. 67% December 31, 2016. (1) (2) (3) (4) (5) one (1) (2) (3) third (4) (5) From time to time the Company may may may may may The following tables detail activity in the allowance for credit losses by portfolio segment for the years ended December 31, 2016 2015. one Income Producing Owner Occupied Real Estate Construction Commercial Commercial Mortgage Commercial and Home Other (dollars in thousands) Commercial Real Estate Real Estate Residential Residential Equity Consumer Total For the Year Ended December 31, 2016 Allowance for credit losses: Balance at beginning of period $ 11,563 $ 14,122 $ 3,279 $ 1,268 $ 21,088 $ 1,292 $ 75 $ 52,687 Loans charged-off (3,745 ) (2,341 ) - - - (217 ) (37 ) (6,340 ) Recoveries of loans previously charged-off 220 908 3 7 215 12 31 1,396 Net loans charged-off (3,525 ) (1,433 ) 3 7 215 (205 ) (6 ) (4,944 ) Provision for credit losses 6,662 8,416 728 9 (4,816 ) 241 91 11,331 Ending balance $ 14,700 $ 21,105 $ 4,010 $ 1,284 $ 16,487 $ 1,328 $ 160 $ 59,074 For the Year Ended December 31, 2016 Allowance for credit losses: Individually evaluated for impairment $ 2,671 $ 1,943 $ 350 $ - $ 522 $ - $ 113 $ 5,599 Collectively evaluated for impairment 12,029 19,162 3,660 1,284 15,965 1,328 47 53,475 Ending balance $ 14,700 $ 21,105 $ 4,010 $ 1,284 $ 16,487 $ 1,328 $ 160 $ 59,074 For the Year Ended December 31, 2015 Allowance for credit losses: Balance at beginning of period $ 13,222 $ 11,442 $ 2,954 $ 1,259 $ 15,625 $ 1,469 $ 104 $ 46,075 Loans charged-off (4,693 ) (651 ) - - (1,884 ) (1,142 ) (228 ) (8,598 ) Recoveries of loans previously charged-off 195 26 3 7 206 25 110 572 Net loans charged-off (4,498 ) (625 ) 3 7 (1,678 ) (1,117 ) (118 ) (8,026 ) Provision for credit losses 2,839 3,305 322 2 7,141 940 89 14,638 Ending balance $ 11,563 $ 14,122 $ 3,279 $ 1,268 $ 21,088 $ 1,292 $ 75 $ 52,687 For the Year Ended December 31, 2015 Allowance for credit losses: Individually evaluated for impairment $ 3,478 $ 1,033 $ 400 $ - $ 950 $ 38 $ 3 $ 5,902 Collectively evaluated for impairment 8,085 13,089 2,879 1,268 20,138 1,254 72 46,785 Ending balance $ 11,563 $ 14,122 $ 3,279 $ 1,268 $ 21,088 $ 1,292 $ 75 $ 52,687 The Company’s recorded investments in loans as of December 31, 2016 December 31, 2015 Income Producing Owner occupied Real Estate Construction Commercial Commercial Mortgage Commercial and Home Other (dollars in thousands) Commercial Real Estate Real Estate Residential Residential Equity Consumer Total December 31, 2016 Recorded investment in loans: Individually evaluated for impairment $ 10,437 $ 15,057 $ 2,093 $ 241 $ 6,517 $ - $ 126 $ 34,471 Collectively evaluated for impairment 1,190,291 2,494,460 638,777 152,507 1,052,052 105,096 10,239 5,643,422 Ending balance $ 1,200,728 $ 2,509,517 $ 640,870 $ 152,748 $ 1,058,569 $ 105,096 $ 10,365 $ 5,677,893 December 31, 2015 Recorded investment in loans: Individually evaluated for impairment $ 13,008 $ 6,118 $ 1,753 $ - $ 10,454 $ 161 $ 22 $ 31,516 Collectively evaluated for impairment 1,039,249 2,109,360 496,350 147,365 1,054,922 112,724 6,882 4,966,852 Ending balance $ 1,052,257 $ 2,115,478 $ 498,103 $ 147,365 $ 1,065,376 $ 112,885 $ 6,904 $ 4,998,368 At December 31, 2016, $491 $587 $548 $1.6 310 30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality various impaired loans were recorded at estimated fair value with any excess being charged-off or treated as a non-accretable discount. Subsequent downward adjustments to the valuation of impaired loans acquired will result in additional loan loss provisions and related allowance for credit losses. Subsequent upward adjustments to the valuation of impaired loans acquired will result in accretable discounts. No adjustments have been made to the fair value amounts of impaired loans subsequent to the allowable period of adjustment from the date of acquisition. Credit Quality Indicators The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company's primary credit quality indicators are to use an internal credit risk rating system that categorizes loans into pass, watch, special mention, or classified categories. Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics that benefit from a case-by-case evaluation. These are typically loans to businesses or individuals in the classes which comprise the commercial portfolio segment. Groups of loans that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk rated and monitored collectively. These are typically loans to individuals in the classes which comprise the consumer portfolio segment. The following are the definitions of the Company's credit quality indicators: Pass: Loans in all classes that comprise the commercial and consumer portfolio segments that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan agreement. Management believes that there is a low likelihood of loss related to those loans that are considered pass. Watch: Loan paying as agreed with generally acceptable asset quality; however the obligor’s performance has not met expectations. Balance sheet and/or income statement has shown deterioration to the point that the obligor could not sustain any further setbacks. Credit is expected to be strengthened through improved obligor performance and/or additional collateral within a reasonable period of time. Special Mention: Loans in the classes that comprise the commercial portfolio segment that have potential weaknesses that deserve management's close attention. If not addressed, these potential weaknesses may Classified: Classified (a) Substandard Classified (b) Doubtful may may The Company's credit quality indicators are updated generally on a quarterly basis, but no less frequently than annually. The following table presents by class and by credit quality indicator, the recorded investment in the Company's loans and leases as of December 31, 2016 2015. Watch and Total (dollars in thousands) Pass Special Mention Substandard Doubtful Loans December 31, 2016 Commercial $ 1,160,185 $ 30,106 $ 10,437 $ - $ 1,200,728 Income producing - commercial real estate 2,489,407 5,053 15,057 - 2,509,517 Owner occupied - commercial real estate 630,827 7,950 2,093 - 640,870 Real estate mortgage – residential 151,831 676 241 - 152,748 Construction - commercial and residential 1,051,445 607 6,517 - 1,058,569 Home equity 103,484 1,612 - - 105,096 Other consumer 10,237 2 126 - 10,365 Total $ 5,597,416 $ 46,006 $ 34,471 $ - $ 5,677,893 December 31, 2015 Commercial $ 1,021,427 $ 17,822 $ 13,008 $ - $ 1,052,257 Income producing - commercial real estate 2,096,032 13,328 6,118 - 2,115,478 Owner occupied - commercial real estate 488,496 7,854 1,753 - 498,103 Real estate mortgage – residential 146,651 714 - - 147,365 Construction - commercial and residential 1,049,926 4,996 10,454 - 1,065,376 Home equity 110,870 1,854 161 - 112,885 Other consumer 6,877 5 22 - 6,904 Total $ 4,920,279 $ 46,573 $ 31,516 $ - $ 4,998,368 Non a ccrual and Past Due Loans Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may may The following table presents, by class of loan, information related to nonaccrual loans as of December 31, 2016 2015. (dollars in thousands) December 31, 2016 December 31, 2015 Commercial $ 2,490 $ 4,940 Income producing - commercial real estate 10,539 5,961 Owner occupied - commercial real estate 2,093 1,268 Real estate mortgage - residential 555 329 Construction - commercial and residential 2,072 557 Home equity - 161 Other consumer 126 23 Total nonaccrual loans (1)(2) $ 17,875 $ 13,239 (1) Excludes troubled debt restructurings (“TDRs”) that were performing under their restructured terms totaling $3.5 December 31, 2016, $11.8 December 31, 2015. (2) Gross interest income of $1.2 2016 $48 1 The following table presents, by class of loan, an aging analysis and the recorded investments in loans past due as of December 31, 2016 2015. Loans Loans Loans Total Recorded 30-59 Days 60-89 Days 90 Days or Total Past Current Investment in (dollars in thousands) Past Due Past Due More Past Due Due Loans Loans Loans December 31, 2016 Commercial $ 1,634 $ 757 $ 2,490 $ 4,881 $ 1,195,847 $ 1,200,728 Income producing - commercial real estate 511 - 10,539 11,050 2,498,467 2,509,517 Owner occupied - commercial real estate 3,987 3,328 2,093 9,408 631,462 640,870 Real estate mortgage – residential 1,015 163 555 1,733 151,015 152,748 Construction - commercial and residential 360 1,342 2,072 3,774 1,054,795 1,058,569 Home equity - - - - 105,096 105,096 Other consumer 101 9 126 236 10,129 10,365 Total $ 7,608 $ 5,599 $ 17,875 $ 31,082 $ 5,646,811 $ 5,677,893 December 31, 2015 Commercial $ 4,130 $ 1,364 $ 4,940 $ 10,434 $ 1,041,823 $ 1,052,257 Income producing - commercial real estate 2,841 - 5,961 8,802 2,106,676 2,115,478 Owner occupied - commercial real estate 3,189 902 1,268 5,359 492,744 498,103 Real estate mortgage – residential - - 329 329 147,036 147,365 Construction - commercial and residential - 5,020 557 5,577 1,059,799 1,065,376 Home equity - 77 161 238 112,647 112,885 Other consumer 56 60 23 139 6,765 6,904 Total $ 10,216 $ 7,423 $ 13,239 $ 30,878 $ 4,967,490 $ 4,998,368 Impaired Loans Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible. The following table presents, by class of loan, information related to impaired loans for the years ended December 31, 2016 2015. Unpaid Recorded Recorded Contractual Investment Investment Total Average Recorded Investment Interest Income Recognized Principal With No With Recorded Related Quarter Year Quarter Year (dollars in thousands) Balance Allowance Allowance Investment Allowance To Date To Date To Date To Date December 31, 2016 Commercial $ 8,296 $ 2,532 $ 3,095 $ 5,627 $ 2,671 $ 12,620 $ 12,755 $ 79 $ 191 Income producing - commercial real estate 14,936 5,048 9,888 14,936 1,943 16,742 17,533 54 198 Owner occupied - commercial real estate 2,483 1,691 792 2,483 350 2,233 2,106 - 13 Real estate mortgage – residential 555 555 - 555 - 246 249 - - Construction - commercial and residential 2,072 1,535 537 2,072 522 5,091 5,174 - - Home equity - - - - - 78 89 - - Other consumer 126 - 126 126 113 42 32 2 4 Total $ 28,468 $ 11,361 $ 14,438 $ 25,799 $ 5,599 $ 37,052 $ 37,938 $ 135 $ 406 December 31, 2015 Commercial $ 9,555 $ 2,396 $ 3,715 $ 6,111 $ 3,478 $ 9,671 $ 10,309 $ 21 $ 69 Income producing - commercial real estate 11,814 1,190 9,931 11,121 1,033 10,675 10,294 95 354 Owner occupied - commercial real estate 1,753 946 807 1,753 400 1,772 1,810 - - Real estate mortgage – residential 329 329 - 329 - - - - - Construction - commercial and residential 5,577 - 5,577 5,577 950 8,031 7,594 (93 ) 205 Home equity 161 116 45 161 38 411 650 - - Other consumer 23 20 3 23 3 47 31 (1 ) 1 Total $ 29,212 $ 4,997 $ 20,078 $ 25,075 $ 5,902 $ 30,607 $ 30,688 $ 22 $ 629 Modifications A modification of a loan constitutes a TDR when a borrower is experiencing financial difficulty and the modification constitutes a concession. The Company offers various types of concessions when modifying a loan. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often requested. Commercial mortgage and construction loans modified in a TDR often involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or substituting or adding a new borrower or guarantor. Construction loans modified in a TDR may December 31, 2016, Loans modified in a TDR for the Company may The following table presents, by class, the recorded investment of loans modified in TDRs held by the Company during the years ended December 31, 2016 2015. For the Year Ended December 31, 2016 Number of Income Producing - Owner Occupied - Construction - (dollars in thousands) Contracts Commercial Commercial Real Estate Commercial Real Estate Commercial Real Estate Total Troubled debt restructings Restructured accruing 7 $ 3,137 $ 4,397 $ 390 $ - $ 7,924 Restructured non-accruing 3 434 - - 4,933 5,367 Total 10 $ 3,571 $ 4,397 $ 390 $ 4,933 $ 13,291 Specific allowance $ 855 $ 920 $ - $ - $ 1,775 Restructured and subsequently defaulted $ - $ - $ - $ - $ - For the Year Ended December 31, 2015 Number of Income Producing - Owner Occupied - Construction - (dollars in thousands) Contracts Commercial Commercial Real Estate Commercial Real Estate Commercial Real Estate Total Troubled debt restructings Restructured accruing 7 $ 1,171 $ 5,160 $ 485 $ 5,020 $ 11,836 Restructured non-accruing 1 211 - - - 211 Total 8 $ 1,382 $ 5,160 $ 485 $ 5,020 $ 12,047 Specific allowance $ 49 $ 6 $ - $ 600 $ 655 Restructured and subsequently defaulted $ - $ - $ - $ - $ - The Company had ten December 31, 2016, $8.9 eight $12.1 December 31, 2015. December 31, 2016, seven $3.5 2016, four $2.2 four $1.9 December 31, 2015. During the year ended December 31, 2016, two $5.2 December 31, 2015, 2016, two 90 December 31, 2015. may may may The criteria used to determine if a loan should be considered for charge off relates to its ultimate collectability includes the following: ● All or a portion of the loan is deemed uncollectible; ● Repayment is dependent upon secondary may Loans may 310. Loans approved for non-accrual status, or charge off, should be managed by the Chief Credit Officer or as dictated by the Directors Loan Committee and/or Credit Review Committee. The Chief Credit Officer is expected to position the loan in the best possible posture for recovery, including, among other actions, liquidating collateral, obtaining additional collateral, filing suit to obtain judgment or restructuring of repayment terms. A review of charged off loans should be made on a monthly basis to assess the possibility of recovery from renewed collection efforts. All charged off loans that are deemed to have the possibility of recovery, whether partial or full, shall be actively pursued. Charged off loans that are deemed uncollectible will be placed in an inactive file with documentation supporting the suspension of further collection efforts. In the process of collecting problem loans the Bank may may may For purchased loans acquired that are not deemed impaired at acquisition, credit marks representing the principal losses expected over the life of the loans are a component of the initial fair value. Subsequent to the purchase date, the methods utilized to estimate the required allowance for credit losses for these loans is similar to originated loans; however, the Company records a provision for loan losses only when the required allowance exceeds any remaining credit mark. The remaining differences between the purchase price and the unpaid principal balance at the date of acquisition are recorded in interest income over the life of the loans. The following table presents changes in the credit mark accretable yield, which includes income recognized from contractual interest cash flows, for the dates indicated. (dollars in thousands) 2016 2015 Balance at January 1, $ (6,008 ) $ (10,298 ) Net reclassifications from nonaccretable yield - - Accretion 1,564 4,290 Balance at December 31, $ (4,444 ) $ (6,008 ) Related Party Loans Certain directors and executive officers have had loan transactions with the Company. Such loans were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with outsiders. The following table summarizes changes in amounts of loans outstanding, both direct and indirect, to those persons during 2016 2015. (dollars in thousands) 2016 2015 Balance at January 1, $ 29,949 $ 17,082 Additions 31,158 23,578 Repayments (8,537 ) (10,711 ) Balance at December 31, $ 52,570 $ 29,949 |