Loans Receivable and Allowance for Loan Losses | 6 Months Ended |
Jun. 30, 2014 |
Receivables [Abstract] | ' |
Loans Receivable and Allowance for Loan Losses | ' |
Loans Receivable and Allowance for Loan Losses |
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Loans receivable that management has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are stated at their outstanding unpaid principal balances, net of an allowance for loan losses (allowance or ALL) and any deferred fees and costs. Interest income is accrued on the unpaid principal balance. Loan origination fees and costs are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Company is generally amortizing these amounts over the contractual life of the loan or to the first review date if the loan is on demand. Certain qualifying loans of the Bank totaling $689.7 million at June 30, 2014, collateralize a letter of credit and a line of credit commitment the Bank has with the Federal Home Loan Bank (FHLB). |
A summary of the Bank's loans receivable at June 30, 2014 and December 31, 2013 is as follows: |
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(in thousands) | June 30, 2014 | | December 31, 2013 | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 467,587 | | | $ | 447,144 | | | | | | | | | | | | | | | | | | | | | |
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Commercial tax-exempt | 76,674 | | | 81,734 | | | | | | | | | | | | | | | | | | | | | |
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Owner occupied real estate | 308,708 | | | 302,417 | | | | | | | | | | | | | | | | | | | | | |
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Commercial construction and land development | 130,449 | | | 133,176 | | | | | | | | | | | | | | | | | | | | | |
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Commercial real estate | 544,544 | | | 473,188 | | | | | | | | | | | | | | | | | | | | | |
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Residential | 103,564 | | | 97,766 | | | | | | | | | | | | | | | | | | | | | |
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Consumer | 220,289 | | | 215,447 | | | | | | | | | | | | | | | | | | | | | |
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| 1,851,815 | | | 1,750,872 | | | | | | | | | | | | | | | | | | | | | |
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Less: allowance for loan losses | 24,271 | | | 23,110 | | | | | | | | | | | | | | | | | | | | | |
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Net loans receivable | $ | 1,827,544 | | | $ | 1,727,762 | | | | | | | | | | | | | | | | | | | | | |
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The following table summarizes nonaccrual loans by loan type at June 30, 2014 and December 31, 2013: |
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(in thousands) | June 30, 2014 | | December 31, 2013 | | | | | | | | | | | | | | | | | | | | |
Nonaccrual loans: | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 4,291 | | | $ | 10,217 | | | | | | | | | | | | | | | | | | | | | |
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Commercial tax-exempt | — | | | — | | | | | | | | | | | | | | | | | | | | | |
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Owner occupied real estate | 6,401 | | | 4,838 | | | | | | | | | | | | | | | | | | | | | |
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Commercial construction and land development | 9,028 | | | 8,587 | | | | | | | | | | | | | | | | | | | | | |
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Commercial real estate | 5,793 | | | 6,705 | | | | | | | | | | | | | | | | | | | | | |
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Residential | 6,341 | | | 7,039 | | | | | | | | | | | | | | | | | | | | | |
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Consumer | 2,479 | | | 2,577 | | | | | | | | | | | | | | | | | | | | | |
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Total nonaccrual loans | $ | 34,333 | | | $ | 39,963 | | | | | | | | | | | | | | | | | | | | | |
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Generally, the Bank's policy is to move a loan to nonaccrual status when it becomes 90 days past due or when the Bank does not believe it will collect all of the contractual principal and interest payments. In addition, when a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the ALL. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management's judgment as to the collectibility of principal. If a loan is substandard and accruing, accrued interest is recognized as income. Once a loan is on nonaccrual status, it is not returned to accrual status unless the loan has been current for at least six consecutive months and the borrower and/or any guarantors demonstrate the ability to repay the loan in accordance with its contractual terms. Under certain circumstances such as bankruptcy, if a loan is under collateralized, or if the borrower and/or guarantors do not show evidence of the ability to pay, the loan may be placed on nonaccrual status even though it is not past due by 90 days or more. The total nonaccrual loan balance of $34.3 million exceeds the balance of total loans that are 90 days past due of $23.1 million at June 30, 2014 as presented in the aging analysis tables that follow. |
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No additional funds were committed on nonaccrual loans including restructured loans that were nonaccruing. Typically, commitments are canceled and no additional advances are made when a loan is placed on nonaccrual. |
The following tables are an age analysis of past due loans receivable as of June 30, 2014 and December 31, 2013: |
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| | Past Due Loans | | | Recorded Investment in Loans 90 Days and Greater and Still Accruing | | | | | | |
(in thousands) | Current | 30-59 Days Past Due | 60-89 Days Past Due | 90 Days Past Due and Greater | Total Past Due | Total Loans Receivable | | | | | | |
June 30, 2014 | | | | | | | | | | | | | |
Commercial and industrial | $ | 461,180 | | $ | 2,375 | | $ | 207 | | $ | 3,825 | | $ | 6,407 | | $ | 467,587 | | $ | — | | | | | | | |
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Commercial tax-exempt | 76,674 | | — | | — | | — | | — | | 76,674 | | — | | | | | | | |
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Owner occupied real estate | 300,679 | | 1,738 | | 2,714 | | 3,577 | | 8,029 | | 308,708 | | — | | | | | | | |
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Commercial construction and | 126,404 | | 395 | | — | | 3,650 | | 4,045 | | 130,449 | | — | | | | | | | |
land development | | | | | | |
Commercial real estate | 538,283 | | 178 | | 253 | | 5,830 | | 6,261 | | 544,544 | | 2,292 | | | | | | | |
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Residential | 97,179 | | — | | 1,518 | | 4,867 | | 6,385 | | 103,564 | | 43 | | | | | | | |
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Consumer | 216,397 | | 1,776 | | 805 | | 1,311 | | 3,892 | | 220,289 | | — | | | | | | | |
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Total | $ | 1,816,796 | | $ | 6,462 | | $ | 5,497 | | $ | 23,060 | | $ | 35,019 | | $ | 1,851,815 | | $ | 2,335 | | | | | | | |
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| | Past Due Loans | | | Recorded Investment in Loans 90 Days and Greater and Still Accruing | | | | | | |
(in thousands) | Current | 30-59 Days Past Due | 60-89 Days Past Due | 90 Days Past Due and Greater | Total Past Due | Total Loans Receivable | | | | | | |
December 31, 2013 | | | | | | | | | | | | | |
Commercial and industrial | $ | 438,522 | | $ | 1,830 | | $ | 1,041 | | $ | 5,751 | | $ | 8,622 | | $ | 447,144 | | $ | 17 | | | | | | | |
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Commercial tax-exempt | 81,734 | | — | | — | | — | | — | | 81,734 | | — | | | | | | | |
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Owner occupied real estate | 295,278 | | 2,618 | | 1,674 | | 2,847 | | 7,139 | | 302,417 | | — | | | | | | | |
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Commercial construction and | 124,240 | | 3,355 | | 342 | | 5,239 | | 8,936 | | 133,176 | | — | | | | | | | |
land development | | | | | | |
Commercial real estate | 465,765 | | 2,142 | | 444 | | 4,837 | | 7,423 | | 473,188 | | 235 | | | | | | | |
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Residential | 85,352 | | 4,194 | | 6,304 | | 1,916 | | 12,414 | | 97,766 | | 117 | | | | | | | |
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Consumer | 210,906 | | 2,095 | | 1,335 | | 1,111 | | 4,541 | | 215,447 | | — | | | | | | | |
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Total | $ | 1,701,797 | | $ | 16,234 | | $ | 11,140 | | $ | 21,701 | | $ | 49,075 | | $ | 1,750,872 | | $ | 369 | | | | | | | |
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A summary of the ALL and balance of loans receivable by loan class and by impairment method as of June 30, 2014 and December 31, 2013 is detailed in the tables that follow: |
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(in thousands) | Comm. and industrial | Comm. tax-exempt | Owner occupied real estate | Comm. construction and land development | Comm. real estate | Residential | Con | Unallocated | Total |
sumer |
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June 30, 2014 | | | | | | | | | |
Allowance for loan losses: | | | | | | | | |
Individually evaluated | $ | 501 | | $ | — | | $ | 1,476 | | $ | 2,612 | | $ | — | | $ | 535 | | $ | 465 | | $ | — | | $ | 5,589 | |
for impairment |
Collectively evaluated | 6,599 | | 67 | | 757 | | 4,084 | | 4,840 | | 526 | | 868 | | 941 | | 18,682 | |
for impairment |
Total ALL | $ | 7,100 | | $ | 67 | | $ | 2,233 | | $ | 6,696 | | $ | 4,840 | | $ | 1,061 | | $ | 1,333 | | $ | 941 | | $ | 24,271 | |
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Loans receivable: | | | | | | | | | |
Loans evaluated | $ | 9,848 | | $ | — | | $ | 6,667 | | $ | 9,656 | | $ | 9,920 | | $ | 7,287 | | $ | 3,095 | | $ | — | | $ | 46,473 | |
individually |
Loans evaluated | 457,739 | | 76,674 | | 302,041 | | 120,793 | | 534,624 | | 96,277 | | 217,194 | | — | | 1,805,342 | |
collectively |
Total loans receivable | $ | 467,587 | | $ | 76,674 | | $ | 308,708 | | $ | 130,449 | | $ | 544,544 | | $ | 103,564 | | $ | 220,289 | | $ | — | | $ | 1,851,815 | |
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(in thousands) | Comm. and industrial | Comm. tax-exempt | Owner occupied real estate | Comm. construction and land development | Comm. real estate | Residential | Con | Unallocated | Total |
sumer |
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December 31, 2013 | | | | | | | | | |
Allowance for loan losses: | | | | | | | | |
Individually evaluated | $ | 1,559 | | $ | — | | $ | 1,366 | | $ | 1,660 | | $ | — | | $ | 524 | | $ | 476 | | $ | — | | $ | 5,585 | |
for impairment |
Collectively evaluated | 6,619 | | 72 | | 814 | | 3,899 | | 4,161 | | 436 | | 827 | | 697 | | 17,525 | |
for impairment |
Total ALL | $ | 8,178 | | $ | 72 | | $ | 2,180 | | $ | 5,559 | | $ | 4,161 | | $ | 960 | | $ | 1,303 | | $ | 697 | | $ | 23,110 | |
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Loans receivable: | | | | | | | | | |
Loans evaluated | $ | 13,055 | | $ | — | | $ | 5,822 | | $ | 11,669 | | $ | 10,953 | | $ | 7,979 | | $ | 3,121 | | $ | — | | $ | 52,599 | |
individually |
Loans evaluated | 434,089 | | 81,734 | | 296,595 | | 121,507 | | 462,235 | | 89,787 | | 212,326 | | — | | 1,698,273 | |
collectively |
Total loans receivable | $ | 447,144 | | $ | 81,734 | | $ | 302,417 | | $ | 133,176 | | $ | 473,188 | | $ | 97,766 | | $ | 215,447 | | $ | — | | $ | 1,750,872 | |
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The Bank may create a specific allowance for all of or a part of a particular loan in lieu of a charge-off or charge-down as a result of management's evaluation of impaired loans. In these instances, the Bank has determined that a loss is not imminent based upon available information surrounding the credit at the time of the analysis including, but not limited to, unresolved legal matters; however, management believes an allowance is appropriate to acknowledge the probable risk of loss. |
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Typically, commercial construction and land development and commercial real estate loans present a greater risk of nonpayment by a borrower than other types of loans. The market value of and cash flow from real estate, particularly real estate held for investment, can fluctuate significantly in a relatively short period of time. Commercial and industrial, tax exempt and owner occupied real estate loans generally carry a lower risk factor comparatively within the commercial portfolio because the repayment of these loans relies primarily on the cash flow from a business which is typically more stable and predictable. |
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Consumer loan collections are dependent on the borrower's continued financial stability and thus are more likely to be affected by adverse personal circumstances. Consumer and residential loans are also impacted by the market value of real estate. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount that can be recovered on these loans. The risk of nonpayment is affected by changes in economic conditions, the credit risks of a particular borrower, the term of the loan and, in the case of a collateralized loan, uncertainties as to the value of the collateral and other factors. |
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Management bases its quantitative analysis of probable future loan losses (when determining the ALL) on those loans collectively reviewed for impairment on a two-year period of actual historical losses. Management may increase or decrease the historical loss period at some point in the future based on the state of the local, regional and national economies and other factors. |
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The qualitative factors such as changes in levels and trends of charge-offs and delinquencies; material changes in the mix, volume or duration of the loan portfolio; changes in lending policies and procedures including underwriting standards; changes in the experience, ability and depth of lending management and other relevant staff; the existence and effect of any concentrations of credit; changes in the overall values of collateral; changes in the quality of the loan review program and changes in national and local economic trends and conditions among other things, are factors which have not been identified by the quantitative processes. The determination of qualitative factors inherently involves a higher degree of subjectivity and considers risk factors that may not have yet manifested themselves in historical loss experience. |
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The following tables summarize the transactions in the ALL for the three and six months ended June 30, 2014 and 2013: |
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(in thousands) | Comm. and industrial | Comm. tax-exempt | Owner occupied real estate | Comm. construction and land development | Comm. real estate | Residential | Consumer | Unallocated | Total |
2014 | | | | | | | | | |
Balance at April 1 | $ | 7,914 | | $ | 68 | | $ | 2,236 | | $ | 5,842 | | $ | 4,640 | | $ | 1,023 | | $ | 1,329 | | $ | 882 | | $ | 23,934 | |
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Provision charged to operating expenses | (557 | ) | (1 | ) | 125 | | 1,270 | | 99 | | 37 | | 68 | | 59 | | 1,100 | |
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Recoveries of loans previously charged-off | 244 | | — | | 43 | | 111 | | 101 | | 20 | | 16 | | — | | 535 | |
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Loans charged-off | (501 | ) | — | | (171 | ) | (527 | ) | — | | (19 | ) | (80 | ) | — | | (1,298 | ) |
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Balance at June 30 | $ | 7,100 | | $ | 67 | | $ | 2,233 | | $ | 6,696 | | $ | 4,840 | | $ | 1,061 | | $ | 1,333 | | $ | 941 | | $ | 24,271 | |
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(in thousands) | Comm. and industrial | Comm. tax-exempt | Owner occupied real estate | Comm. construction and land development | Comm. real estate | Residential | Consumer | Unallocated | Total |
2014 | | | | | | | | | |
Balance at January 1 | $ | 8,178 | | $ | 72 | | $ | 2,180 | | $ | 5,559 | | $ | 4,161 | | $ | 960 | | $ | 1,303 | | $ | 697 | | $ | 23,110 | |
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Provision charged to operating expenses | (1,472 | ) | (5 | ) | (37 | ) | 1,465 | | 1,221 | | 383 | | 201 | | 244 | | 2,000 | |
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Recoveries of loans previously charged-off | 1,249 | | — | | 286 | | 211 | | 174 | | 20 | | 39 | | — | | 1,979 | |
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Loans charged-off | (855 | ) | — | | (196 | ) | (539 | ) | (716 | ) | (302 | ) | (210 | ) | — | | (2,818 | ) |
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Balance at June 30 | $ | 7,100 | | $ | 67 | | $ | 2,233 | | $ | 6,696 | | $ | 4,840 | | $ | 1,061 | | $ | 1,333 | | $ | 941 | | $ | 24,271 | |
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(in thousands) | Comm. and industrial | Comm. tax-exempt | Owner occupied real estate | Comm. construction and land development | Comm. real estate | Residential | Consumer | Unallocated | Total |
2013 | | | | | | | | | |
Balance at April 1 | $ | 10,408 | | $ | 75 | | $ | 2,208 | | $ | 7,967 | | $ | 5,038 | | $ | 338 | | $ | 787 | | $ | 651 | | $ | 27,472 | |
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Provision charged to operating expenses | 1,175 | | (1 | ) | 51 | | (161 | ) | 162 | | 539 | | 468 | | (433 | ) | 1,800 | |
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Recoveries of loans previously charged-off | 194 | | — | | — | | 12 | | — | | — | | 22 | | — | | 228 | |
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Loans charged-off | (1,228 | ) | — | | (52 | ) | (8 | ) | (141 | ) | (14 | ) | (19 | ) | — | | (1,462 | ) |
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Balance at June 30 | $ | 10,549 | | $ | 74 | | $ | 2,207 | | $ | 7,810 | | $ | 5,059 | | $ | 863 | | $ | 1,258 | | $ | 218 | | $ | 28,038 | |
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(in thousands) | Comm. and industrial | Comm. tax-exempt | Owner occupied real estate | Comm. construction and land development | Comm. real estate | Residential | Consumer | Unallocated | Total |
2013 | | | | | | | | | |
Balance at January 1 | $ | 9,959 | | $ | 83 | | $ | 2,129 | | $ | 7,222 | | $ | 3,983 | | $ | 324 | | $ | 793 | | $ | 789 | | $ | 25,282 | |
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Provision charged to operating expenses | 1,522 | | (9 | ) | 311 | | 115 | | 1,299 | | 666 | | 767 | | (571 | ) | 4,100 | |
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Recoveries of loans previously charged-off | 332 | | — | | 3 | | 498 | | — | | 3 | | 58 | | — | | 894 | |
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Loans charged-off | (1,264 | ) | — | | (236 | ) | (25 | ) | (223 | ) | (130 | ) | (360 | ) | — | | (2,238 | ) |
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Balance at June 30 | $ | 10,549 | | $ | 74 | | $ | 2,207 | | $ | 7,810 | | $ | 5,059 | | $ | 863 | | $ | 1,258 | | $ | 218 | | $ | 28,038 | |
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The following table presents information regarding the Company's impaired loans as of June 30, 2014 and December 31, 2013. The recorded investment represents the contractual obligation less any charged off principal. |
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| June 30, 2014 | December 31, 2013 | | | | | | | | | |
(in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Recorded Investment | Unpaid Principal Balance | Related Allowance | | | | | | | | | |
Loans with no related allowance: | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 9,347 | | $ | 10,106 | | $ | — | | $ | 9,838 | | $ | 12,587 | | $ | — | | | | | | | | | | |
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Commercial tax-exempt | — | | — | | — | | — | | — | | — | | | | | | | | | | |
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Owner occupied real estate | 4,355 | | 4,692 | | — | | 4,456 | | 4,664 | | — | | | | | | | | | | |
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Commercial construction and land | 4,929 | | 5,988 | | — | | 8,514 | | 9,047 | | — | | | | | | | | | | |
development | | | | | | | | | |
Commercial real estate | 9,920 | | 12,202 | | — | | 10,953 | | 12,795 | | — | | | | | | | | | | |
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Residential | 4,218 | | 4,419 | | — | | 4,901 | | 5,366 | | — | | | | | | | | | | |
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Consumer | 2,630 | | 2,891 | | — | | 2,645 | | 2,868 | | — | | | | | | | | | | |
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Total impaired loans with no related | 35,399 | | 40,298 | | — | | 41,307 | | 47,327 | | — | | | | | | | | | | |
allowance | | | | | | | | | |
Loans with an allowance recorded: | | | | | | | | | | | | | | | |
Commercial and industrial | 501 | | 501 | | 501 | | 3,217 | | 3,217 | | 1,559 | | | | | | | | | | |
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Owner occupied real estate | 2,312 | | 2,312 | | 1,476 | | 1,366 | | 1,366 | | 1,366 | | | | | | | | | | |
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Commercial construction and land | 4,727 | | 4,727 | | 2,612 | | 3,155 | | 3,155 | | 1,660 | | | | | | | | | | |
development | | | | | | | | | |
Residential | 3,069 | | 3,069 | | 535 | | 3,078 | | 3,078 | | 524 | | | | | | | | | | |
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Consumer | 465 | | 465 | | 465 | | 476 | | 476 | | 476 | | | | | | | | | | |
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Total impaired loans with an | 11,074 | | 11,074 | | 5,589 | | 11,292 | | 11,292 | | 5,585 | | | | | | | | | | |
allowance recorded | | | | | | | | | |
Total impaired loans: | | | | | | | | | | | | | | | |
Commercial and industrial | 9,848 | | 10,607 | | 501 | | 13,055 | | 15,804 | | 1,559 | | | | | | | | | | |
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Commercial tax-exempt | — | | — | | — | | — | | — | | — | | | | | | | | | | |
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Owner occupied real estate | 6,667 | | 7,004 | | 1,476 | | 5,822 | | 6,030 | | 1,366 | | | | | | | | | | |
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Commercial construction and land | 9,656 | | 10,715 | | 2,612 | | 11,669 | | 12,202 | | 1,660 | | | | | | | | | | |
development | | | | | | | | | |
Commercial real estate | 9,920 | | 12,202 | | — | | 10,953 | | 12,795 | | — | | | | | | | | | | |
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Residential | 7,287 | | 7,488 | | 535 | | 7,979 | | 8,444 | | 524 | | | | | | | | | | |
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Consumer | 3,095 | | 3,356 | | 465 | | 3,121 | | 3,344 | | 476 | | | | | | | | | | |
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Total impaired loans | $ | 46,473 | | $ | 51,372 | | $ | 5,589 | | $ | 52,599 | | $ | 58,619 | | $ | 5,585 | | | | | | | | | | |
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The following table presents additional information regarding the Company's impaired loans for the three and six months ended June 30, 2014 and 2013: |
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| Three Months Ended | Six Months Ended | | | |
| June 30, 2014 | June 30, 2013 | June 30, 2014 | June 30, 2013 | | | |
(in thousands) | Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | | | |
Loans with no related allowance: | | | | | | | | | | |
Commercial and industrial | $ | 8,079 | | $ | 36 | | $ | 9,952 | | $ | 43 | | $ | 7,985 | | $ | 76 | | $ | 9,230 | | $ | 74 | | | | |
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Commercial tax-exempt | — | | — | | — | | — | | — | | — | | — | | — | | | | |
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Owner occupied real estate | 3,896 | | — | | 2,764 | | — | | 4,341 | | 10 | | 2,358 | | — | | | | |
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Commercial construction and | 4,133 | | 14 | | 7,806 | | 45 | | 6,187 | | 31 | | 7,915 | | 90 | | | | |
land development | | | |
Commercial real estate | 10,035 | | 40 | | 11,557 | | 111 | | 10,403 | | 88 | | 12,210 | | 256 | | | | |
| | |
Residential | 4,218 | | 14 | | 4,901 | | 19 | | 4,353 | | 27 | | 4,736 | | 36 | | | | |
| | |
Consumer | 2,796 | | 10 | | 3,305 | | 8 | | 2,715 | | 17 | | 3,184 | | 14 | | | | |
| | |
Total impaired loans with no | 33,157 | | 114 | | 40,285 | | 226 | | 35,984 | | 249 | | 39,633 | | 470 | | | | |
related allowance | | | |
Loans with an allowance recorded: | | | | | | | | | | |
Commercial and industrial | 2,341 | | — | | 5,312 | | — | | 2,793 | | — | | 5,251 | | — | | | | |
| | |
Owner occupied real estate | 2,325 | | — | | 1,418 | | — | | 2,006 | | — | | 1,427 | | — | | | | |
| | |
Commercial construction and | 6,148 | | — | | 7,816 | | — | | 4,813 | | — | | 7,829 | | — | | | | |
land development | | | |
Commercial real estate | — | | — | | 4,159 | | — | | — | | — | | 4,165 | | — | | | | |
| | |
Residential | 3,069 | | — | | 1,051 | | — | | 3,074 | | — | | 526 | | — | | | | |
| | |
Consumer | 465 | | — | | 164 | | — | | 471 | | — | | 82 | | — | | | | |
| | |
Total impaired loans with an | 14,348 | | — | | 19,920 | | — | | 13,157 | | — | | 19,280 | | — | | | | |
allowance recorded | | | |
Total impaired loans: | | | | | | | | | | | |
Commercial and industrial | 10,420 | | 36 | | 15,264 | | 43 | | 10,778 | | 76 | | 14,481 | | 74 | | | | |
| | |
Commercial tax-exempt | — | | — | | — | | — | | — | | — | | — | | — | | | | |
| | |
Owner occupied real estate | 6,221 | | — | | 4,182 | | — | | 6,347 | | 10 | | 3,785 | | — | | | | |
| | |
Commercial construction and | 10,281 | | 14 | | 15,622 | | 45 | | 11,000 | | 31 | | 15,744 | | 90 | | | | |
land development | | | |
Commercial real estate | 10,035 | | 40 | | 15,716 | | 111 | | 10,403 | | 88 | | 16,375 | | 256 | | | | |
| | |
Residential | 7,287 | | 14 | | 5,952 | | 19 | | 7,427 | | 27 | | 5,262 | | 36 | | | | |
| | |
Consumer | 3,261 | | 10 | | 3,469 | | 8 | | 3,186 | | 17 | | 3,266 | | 14 | | | | |
| | |
Total impaired loans | $ | 47,505 | | $ | 114 | | $ | 60,205 | | $ | 226 | | $ | 49,141 | | $ | 249 | | $ | 58,913 | | $ | 470 | | | | |
| | |
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Impaired loans averaged approximately $49.1 million and $58.9 million for the six months ended June 30, 2014 and 2013, respectively. All nonaccrual loans are considered impaired and interest income is handled as discussed earlier in the nonaccrual section of this Note 4. Interest income continued to accrue on certain impaired loans totaling $249,000 and $470,000 for the six months ended June 30, 2014 and 2013, respectively. |
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The Bank assigns loan risk ratings to commercial loans as credit quality indicators of its loan portfolio: pass, special mention, substandard accrual, substandard nonaccrual and doubtful. Monthly, we track loans that are no longer pass rated. We review the cash flow, operating results and financial condition of the borrower and any guarantors, as well as the collateral position against established policy guidelines as a means of providing a targeted list of loans and loan relationships that require additional attention within the loan portfolio. Special mention loans are those loans that are currently adequately protected, but potentially weak. The potential weaknesses may, if not corrected, weaken the loan's credit quality or inadvertently jeopardize our credit position in the future. Substandard accrual and substandard nonaccrual assets are characterized by well-defined weaknesses that jeopardize the liquidation of the debt and by the possibility that the Bank will sustain some loss if the weaknesses are not corrected. Substandard accrual loans would move from accrual to nonaccrual when the Bank does not believe it will collect all of its contractual principal and interest payments. Some identifiers used to determine the collectibility are as follows: when the loan is 90 days past due in principal or interest, there are triggering events in the borrower's or any guarantor's financial statements that show continuing deterioration, the borrower's or any guarantor's source of repayment is depleting, or if bankruptcy or other legal matters are present, regardless if the loan is 90 days past due or not. Doubtful loans have all of the weaknesses inherent in those classified as substandard accrual and substandard nonaccrual with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. Pass rated loans are reviewed throughout the year through the recurring review process of an independent loan review function and through the application of other credit metrics. |
Credit quality indicators for commercial loans broken out by loan type are presented in the following tables for the periods ended June 30, 2014 and December 31, 2013. There were no loans classified as doubtful for the periods ended June 30, 2014 or December 31, 2013. |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2014 | | | | | | | | | | | | |
(in thousands) | Pass | Special Mention | Substandard Accrual | Substandard Nonaccrual | Total | | | | | | | | | | | | |
Commercial credit exposure: | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial and industrial | $ | 429,140 | | $ | 18,826 | | $ | 15,330 | | $ | 4,291 | | $ | 467,587 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial tax-exempt | 76,674 | | — | | — | | — | | 76,674 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Owner occupied real estate | 289,836 | | 4,108 | | 8,363 | | 6,401 | | 308,708 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial construction and land development | 120,002 | | — | | 1,419 | | 9,028 | | 130,449 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial real estate | 533,125 | | 2,341 | | 3,285 | | 5,793 | | 544,544 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total | $ | 1,448,777 | | $ | 25,275 | | $ | 28,397 | | $ | 25,513 | | $ | 1,527,962 | | | | | | | | | | | | | |
| | | | | | | | | | | |
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| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2013 | | | | | | | | | | | | |
(in thousands) | Pass | Special Mention | Substandard Accrual | Substandard Nonaccrual | Total | | | | | | | | | | | | |
Commercial credit exposure: | | | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 410,530 | | $ | 8,064 | | $ | 18,333 | | $ | 10,217 | | $ | 447,144 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial tax-exempt | 81,734 | | — | | — | | — | | 81,734 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Owner occupied real estate | 285,416 | | 3,624 | | 8,539 | | 4,838 | | 302,417 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial construction and land development | 120,687 | | — | | 3,902 | | 8,587 | | 133,176 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial real estate | 464,408 | | 318 | | 1,757 | | 6,705 | | 473,188 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total | $ | 1,362,775 | | $ | 12,006 | | $ | 32,531 | | $ | 30,347 | | $ | 1,437,659 | | | | | | | | | | | | | |
| | | | | | | | | | | |
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Consumer loan credit exposures are rated either performing or nonperforming as detailed below at June 30, 2014 and December 31, 2013: |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2014 | | | | | | | | | | | | | | | | | | |
(in thousands) | Performing | Nonperforming | Total | | | | | | | | | | | | | | | | | | |
Consumer credit exposure: | | | | | | | | | | | | | | | | | | | | | |
Residential | $ | 97,223 | | $ | 6,341 | | $ | 103,564 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Consumer | 217,810 | | 2,479 | | 220,289 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total | $ | 315,033 | | $ | 8,820 | | $ | 323,853 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2013 | | | | | | | | | | | | | | | | | | |
(in thousands) | Performing | Nonperforming | Total | | | | | | | | | | | | | | | | | | |
Consumer credit exposure: | | | | | | | | | | | | | | | | | | | | | |
Residential | $ | 90,727 | | $ | 7,039 | | $ | 97,766 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Consumer | 212,870 | | 2,577 | | 215,447 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total | $ | 303,597 | | $ | 9,616 | | $ | 313,213 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
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A troubled debt restructuring (TDR) is a loan in which the contractual terms have been modified, resulting in the Bank granting a concession to a borrower who is experiencing financial difficulties, in order for the Bank to have a greater chance of collecting the indebtedness from the borrower. An additional benefit to the Bank in granting a concession is to possibly avoid foreclosure or repossession of loan collateral at a time when collateral values are low. |
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The following table presents the recorded investment at the time of restructure of new TDRs and their concession, modified during the three and six month periods ended June 30, 2014 and 2013. The recorded investment at the time of restructure was the same pre-modification and post-modification, therefore there was no financial effect of the modification on the recorded investment. The loans included are considered TDRs as a result of the Bank implementing one or more of the following concessions: granting a material extension of time, entering into a forbearance agreement, adjusting the interest rate, accepting interest only payments for an extended period of time, a change in the amortization period or a combination of any of these concessions. |
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New TDRs with Concession Type: | Three Months Ended | Six Months Ended | | | |
| June 30, 2014 | June 30, 2013 | June 30, 2014 | June 30, 2013 | | | |
(dollars in thousands) | Number of Contracts | | Recorded Investment at Time of Restructure | Number of Contracts | | Recorded Investment at Time of Restructure | Number of Contracts | | Recorded Investment at Time of Restructure | Number of Contracts | | Recorded Investment at Time of Restructure | | | |
Commercial and industrial: | | | | | | | | | | | | | | | |
Forbearance agreement | 1 | | | $ | 229 | | — | | | $ | — | | 1 | | | $ | 229 | | — | | | $ | — | | | | |
| | |
Change in amortization period | — | | | — | | 7 | | | 1,022 | | 3 | | | 261 | | 7 | | | 1,022 | | | | |
| | |
Combination of concessions | — | | | — | | 1 | | | 125 | | 1 | | | 30 | | 1 | | | 125 | | | | |
| | |
Owner occupied real estate: | | | | | | | | | | | | | | | |
Forbearance agreement | — | | | — | | — | | | — | | — | | | — | | 1 | | | 193 | | | | |
| | |
Accepting interest only for | 3 | | | 1,601 | | — | | | — | | 3 | | | 1,601 | | — | | | — | | | | |
a period of time | | | |
Change in amortization period | — | | | — | | — | | | — | | 1 | | | 128 | | — | | | — | | | | |
| | |
Commercial construction and land development: | | | | | | | | | | | | | | | |
Material extension of time | — | | | — | | 1 | | | 1,851 | | 1 | | | 242 | | 4 | | | 2,902 | | | | |
| | |
Forbearance agreement | 3 | | | 2,185 | | — | | | — | | 3 | | | 2,185 | | — | | | — | | | | |
| | |
Change in amortization period | — | | | — | | — | | | — | | 1 | | | 214 | | — | | | — | | | | |
| | |
Commercial real estate: | | | | | | | | | | | | | | | |
Change in amortization period | — | | | — | | — | | | — | | 14 | | | 1,893 | | — | | | — | | | | |
| | |
Combination of concessions | — | | | — | | 3 | | | 2,945 | | — | | | — | | 3 | | | 2,945 | | | | |
| | |
Residential: | | | | | | | | | | | | | | | |
Material extension of time | — | | | — | | — | | | — | | — | | | — | | 1 | | | 260 | | | | |
| | |
Interest rate adjustment | — | | | — | | — | | | — | | 1 | | | 143 | | — | | | — | | | | |
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Consumer: | | | | | | | | | | | | | | | |
Material extension of time | — | | | — | | — | | | — | | — | | | — | | 1 | | | 35 | | | | |
| | |
Total | 7 | | | $ | 4,015 | | 12 | | | $ | 5,943 | | 29 | | | $ | 6,926 | | 18 | | | $ | 7,482 | | | | |
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The following table represents loans receivable modified as TDR within the 12 months previous to June 30, 2014 and 2013, respectively, and that subsequently defaulted during the three and six month periods ended June 30, 2014 and 2013, respectively. The Bank's policy is to consider a loan past due or delinquent if payment is not received on or before the due date. |
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TDRs That Subsequently Payment Defaulted: | Three Months Ended | Six Months Ended | | | |
| June 30, 2014 | June 30, 2013 | June 30, 2014 | June 30, 2013 | | | |
(dollars in thousands) | Number of Contracts | | Recorded Investment | Number of Contracts | | Recorded Investment | Number of Contracts | | Recorded Investment | Number of Contracts | | Recorded Investment | | | |
Commercial and industrial | — | | | $ | — | | 9 | | | $ | 6,151 | | 7 | | | $ | 1,288 | | 10 | | | $ | 6,390 | | | | |
| | |
Owner occupied real estate | 1 | | | 871 | | 2 | | | 1,610 | | 4 | | | 1,792 | | 2 | | | 1,610 | | | | |
| | |
Commercial construction | — | | | — | | 2 | | | 2,628 | | 2 | | | 1,930 | | 3 | | | 6,119 | | | | |
and land development | | | |
Commercial real estate | — | | | — | | 3 | | | 2,942 | | — | | | — | | 4 | | | 6,217 | | | | |
| | |
Residential | 1 | | | 258 | | — | | | — | | 3 | | | 3,470 | | 1 | | | 259 | | | | |
| | |
Consumer | — | | | — | | — | | | — | | 1 | | | 476 | | 2 | | | 177 | | | | |
| | |
Total | 2 | | | $ | 1,129 | | 16 | | | $ | 13,331 | | 17 | | | $ | 8,956 | | 22 | | | $ | 20,772 | | | | |
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Of the 17 contracts that subsequently payment defaulted during the six month period ended June 30, 2014, eight were still in payment default at June 30, 2014. |
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All TDRs are considered impaired and, therefore, are individually evaluated for impairment in the calculation of the ALL. Prior to their classification as TDRs, certain of these loans had been collectively evaluated for impairment in the calculation of the ALL. |