| LOANS AND ALLOWANCE FOR LOAN LOSSES | 6. LOANS AND ALLOWANCE FOR LOAN LOSSES The activity in the Company's allowance for loan losses (“ALLL”) for the three and six month periods ended June 30, 2015 and 2014 and related asset balances at June 30, 2015 and December 31, 2014 is summarized as follows:
For the Three Months Ended June 30, 2015
Faith-
Based Residential
Commercial Non- Real Other
(Dollars in thousands) Commercial Real Estate Profit Estate Consumer Loans Unallocated Total
ALLL:
Total ending ALLL balances as of March 31, 2015 $ 271 $ 602 $ 1,440 $ 589 $ 29 $ 210 $ 305 $ 3,446
For the three months ended June 30, 2015
Charge-offs — — — (7 ) (1 ) (3 ) — (11 )
Recoveries — — — 2 1 1 — 4
Provision for loan losses 5 342 10 (190 ) (6 ) (4 ) (157 ) —
Total ending ALLL balances as of June 30, 2015 $ 276 $ 944 $ 1,450 $ 394 $ 23 $ 204 $ 148 $ 3,439
For the Three Months Ended June 30, 2014
Faith-
Based Residential
Commercial Non- Real Other
(Dollars in thousands) Commercial Real Estate Profit Estate Consumer Loans Unallocated Total
ALLL:
Total ending ALLL balances as of March 31, 2014 $ 178 $ 699 $ 1,796 $ 612 $ 19 $ 37 $ 145 $ 3,486
For the three months ended June 30, 2014
Charge-offs — — — (24 ) (15 ) (5 ) — (44 )
Recoveries — — — 5 1 1 — 7
Provision for loan losses (69 ) 81 (110 ) 52 22 76 (52 ) —
Total ending ALLL balances as of June 30, 2014 $ 109 $ 780 $ 1,686 $ 645 $ 27 $ 109 $ 93 $ 3,449
For the Six Months Ended June 30, 2015
Faith-
Based Residential
Commercial Non- Real Other
(Dollars in thousands) Commercial Real Estate Profit Estate Consumer Loans Unallocated Total
ALLL:
Total ending ALLL balances as of December 31, 2014 $ 353 $ 579 $ 1,234 $ 685 $ 28 $ 265 $ 296 $ 3,440
For the six months ended June 30, 2015
Charge-offs — — — (7 ) (1 ) (7 ) — (15 )
Recoveries — — — 12 1 1 — 14
Provision for loan losses (77 ) 365 216 (296 ) (5 ) (55 ) (148 ) —
Total ending ALLL balances as of June 30, 2015 $ 276 $ 944 $ 1,450 $ 394 $ 23 $ 204 $ 148 $ 3,439
For the Six Months Ended June 30, 2014
Faith-
Based Residential
Commercial Non- Real Other
(Dollars in thousands) Commercial Real Estate Profit Estate Consumer Loans Unallocated Total
ALLL:
Total ending ALLL balances as of December 31, 2013 $ 184 $ 808 $ 1,883 $ 493 $ 19 $ 106 $ — $ 3,493
For the six months ended June 30, 2014
Charge-offs — — — (31 ) (16 ) (11 ) — (58 )
Recoveries — — — 9 1 4 — 14
Provision for loan losses (75 ) (28 ) (197 ) 174 23 10 93 —
Total ending ALLL balances as of June 30, 2014 $ 109 $ 780 $ 1,686 $ 645 $ 27 $ 109 $ 93 $ 3,449
June 30, 2015
Faith
Based
Commercial Non- Residential Other
(Dollars in thousands) Commercial Real Estate Profit Real Estate Consumer Loans Unallocated Total
ALLL:
Ending ALLL balance attributable to loans:
Individually evaluated for impairment $ 2 $ 321 $ 347 $ 16 $ — $ — $ — $ 686
Collectively evaluated for impairment 274 623 1,103 378 23 204 148 2,753
Total ending ALLL balance $ 276 $ 944 $ 1,450 $ 394 $ 23 $ 204 $ 148 $ 3,439
Loans:
Loans individually evaluated for impairment $ 2 $ 8,911 $ 16,897 $ 2,743 $ 2 $ — $ — $ 28,555
Loans collectively evaluated for impairment 7,169 37,269 76,575 21,007 1,061 4,543 — 147,624
Total ending loans balance $ 7,171 $ 46,180 $ 93,472 $ 23,750 $ 1,063 $ 4,543 $ — $ 176,179
December 31, 2014
Faith
Based
Commercial Non- Residential Other
(Dollars in thousands) Commercial Real Estate Profit Real Estate Consumer Loans Unallocated Total
ALLL:
Ending ALLL balance attributable to loans:
Individually evaluated for impairment $ — $ 11 $ 6 $ 259 $ — $ — $ — $ 276
Collectively evaluated for impairment 353 568 1,228 426 28 265 296 3,164
Total ending ALLL balance $ 353 $ 579 $ 1,234 $ 685 $ 28 $ 265 $ 296 $ 3,440
Loans:
Loans individually evaluated for impairment $ — $ 9,012 $ 16,807 $ 4,450 $ — $ — $ — $ 30,269
Loans collectively evaluated for impairment 7,253 31,051 78,555 22,176 1,232 4,552 — 144,819
Total ending loans balance $ 7,253 $ 40,063 $ 95,362 $ 26,626 $ 1,232 $ 4,552 $ — $ 175,088 The Bank experienced $ 7 37 0.02 0.08 1 44 0.00 0.05 0.06 Loans A portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its ALLL. The composition of the loan portfolio, net of deferred fees and costs, by loan classification as of June 30, 2015 and December 31, 2014 was as follows:
(Dollars in thousands) June 30, 2015 December 31, 2014
Commercial $ 7,171 $ 7,253
Commercial real estate:
Construction 9,236 2,557
Owner occupied 18,127 18,013
Other 18,817 19,493
Faith-based non-profit:
Construction 3,515 6,156
Owner occupied 86,797 84,499
Other 3,160 4,707
Residential real estate:
First mortgage 17,083 18,995
Multifamily 2,810 3,001
Home equity 3,735 4,124
Construction 122 506
Consumer 1,063 1,232
Other loans 4,543 4,552
Loans, net of deferred fees 176,179 175,088
ALLL (3,439 ) (3,440 )
Loans, net of ALLL $ 172,740 $ 171,648 The Bank has a concentration of loans to faith-based non-profit organizations, in which the Bank has specialized lending experience. As of June 30, 2015, the percentage of loans in this segment, which included construction, real estate secured, and lines of credit, comprised 53.06 42.16 Non-Performing Loans and Leases When a loan is placed on non-accrual status, regardless of class, the accrued and unpaid interest receivable is reversed and the loan is accounted for on the cash or cost recovery method until qualifying for return to accrual status. All payments received on non-accrual loans and leases are applied against the principal balance of the loan or lease. Loans may be returned to accrual status when all principal and interest amounts contractually due (including any arrearages) are reasonably assured of repayment within a reasonable period, the borrower has demonstrated payment performance for a minimum of six months in accordance with the original or revised contractual terms of the loan, and when doubt about repayment is resolved. Generally, for all classes of loans and leases, a charge-off is recorded when it is probable that a loss has been incurred and when it is possible to determine a reasonable estimate of the loss. For all classes of commercial loans and leases, a charge-off is determined on a subjective basis after due consideration of the debtor's prospects for repayment and the fair value of collateral. For closed-end consumer loans, the entire outstanding balance of the loan is charged-off during the month that the loan becomes 120 days past due as to principal or interest. Consumer loans with non-real estate collateral are written down to the value of the collateral, less estimated costs to sell, if repossession of collateral is assured and in process. For residential mortgage and home equity loan classes, a partial charge-off is recorded at 120 days past due as to principal or interest for the amount that the loan balance exceeds the fair value of the collateral less estimated costs to sell. Impaired Loans For all classes of commercial loans, a quarterly evaluation of specific individual commercial borrowers with identified weaknesses is performed to identify impaired loans. The identification of specific borrowers for review is based on a review of non-accrual loans as well as those loans specifically identified by management as exhibiting above average levels of risk. When a loan has been identified as being impaired, the amount of impairment is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the estimated fair value of the collateral, less any selling costs, if the loan is collateral-dependent. If the measurement of the impaired loan is less than the recorded investment in the loan (net of deferred loan fees or costs and unamortized premiums or discounts), impairment is recognized by creating or adjusting an existing allocation of the ALLL, or by recording a partial charge-off of the loan to its estimated fair value. Interest payments made on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest income may be accrued or recognized on a cash basis. Income Recognition on Impaired and Non-accrual Loans Loans may be returned to accrual status when all principal and interest amounts contractually due (including arrearages) are reasonably assured of repayment within a reasonable period of time, and the borrower has demonstrated payment performance for a minimum of six months in accordance with the contractual terms involving payments of cash or cash equivalents. During the non-accrual period, all payments received will be applied to principal. After a loan is returned to accruing status, foregone interest will be accreted to interest income on a pro-rata basis over the remaining term of the loan if full repayment of principal and interest is reasonably assured. In the case where a non-accrual loan had been partially charged off, recognition of interest on a cash basis is limited to that which would have been recognized on the remaining loan balance at the contractual interest rate. Receipts in excess of that amount are recorded as recoveries to the ALLL until prior charged off balances have been fully recovered.
The following tables present loans not past due and the aging of past due loans as of June 30, 2015 and December 31, 2014:
90 Days
June 30, 2015 30-59 Days 60-89 Days Or More Total Past
(Dollars in thousands) Past Due Past Due Past Due Due Current Total
Commercial $ — $ 3 $ — $ 3 $ 7,168 $ 7,171
Commercial real estate:
Construction — — — — 9,236 9,236
Owner occupied — — — — 18,127 18,127
Other — 151 3,397 3,548 15,269 18,817
Faith-based non-profit:
Construction — — — — 3,515 3,515
Owner occupied 630 — 789 1,419 85,378 86,797
Other — — — — 3,160 3,160
Residential real estate:
First mortgage 87 239 1,111 1,437 15,646 17,083
Multifamily — — — — 2,810 2,810
Home equity — — 18 18 3,717 3,735
Construction — — — — 122 122
Consumer 10 — 2 12 1,051 1,063
Other loans — — — — 4,543 4,543
Total $ 727 $ 393 $ 5,317 $ 6,437 $ 169,742 $ 176,179
90 Days
December 31, 2014 30-59 Days 60-89 Days Or More Total Past
(Dollars in thousands) Past Due Past Due Past Due Due Current Total
Commercial $ 3 $ — $ — $ 3 $ 7,250 $ 7,253
Commercial real estate:
Construction — — — — 2,557 2,557
Owner occupied 69 321 42 432 17,581 18,013
Other 25 1,188 3,602 4,815 14,678 19,493
Faith-based non-profit:
Construction — — — — 6,156 6,156
Owner occupied 1,923 435 674 3,032 81,467 84,499
Other — — 15 15 4,692 4,707
Residential real estate:
First mortgage 745 103 3,322 4,170 14,825 18,995
Multifamily — — — — 3,001 3,001
Home equity 47 — 23 70 4,054 4,124
Construction — — — — 506 506
Consumer 11 — — 11 1,221 1,232
Other loans — 8 — 8 4,544 4,552
Total $ 2,823 $ 2,055 $ 7,678 $ 12,556 $ 162,532 $ 175,088 At June 30, 2015 and December 31, 2014, the total recorded investment in impaired loans amounted to $28.6 million and $30.7 million, respectively. The recorded investment and related information for impaired loans is summarized as follows for June 30, 2015, December 31, 2014 and June 30, 2014:
June 30, 2015
For the Six Months Ended For the Three Months Ended
Unpaid Average Average
Principal Recorded ALLL Interest Recorded Interest Recorded
(Dollars in thousands) Balance Investment Allocated Earned Investment Earned Investment
With no related allowance recorded:
Commercial $ 6 $ — $ — $ — $ — $ — $ —
Commercial real estate:
Construction 77 77 — 3 78 2 78
Owner occupied 69 69 — 4 49 4 42
Other 3,995 3,762 — 19 3,834 15 3,862
Faith based non-profit:
Construction — — — — — — —
Owner occupied 1,446 1,448 — 33 5,668 — 7,747
Other — — — — — — —
Residential real estate:
First mortgage 2,344 2,303 — 101 2,473 42 2,618
Multifamily — — — — — — —
Home equity 197 152 — 4 100 3 67
Construction — — — — — — —
Consumer 40 2 — — 1 — 1
Impaired loans with no allowance recorded $ 8,174 $ 7,813 $ — $ 164 $ 12,203 $ 66 $ 14,415
With an allowance recorded:
Commercial $ 2 $ 2 $ 2 $ — $ 2 $ — $ 1
Commercial real estate:
Construction 272 272 1 10 275 5 277
Owner occupied 4,663 4,677 317 95 4,749 38 4779
Other 71 72 3 2 18 2 —
Faith based non-profit:
Construction — — — — — — —
Owner occupied 15,451 15,506 347 373 11,097 223 9,061
Other — — — — — — —
Residential real estate:
First mortgage 287 287 15 — 1,186 — 1,471
Multifamily — — — — — — —
Home equity 4 4 1 — 59 — 94
Construction — — — — — — —
Consumer — — — — — — —
Impaired loans with allowance recorded $ 20,750 $ 20,820 $ 686 $ 480 $ 17,386 $ 268 $ 15,683
Impaired loans $ 28,924 $ 28,633 $ 686 $ 644 $ 29,589 $ 334 $ 30,098
December 31, 2014
For the Twelve Months Ended
Unpaid Average
Principal Recorded ALLL Interest Recorded
(Dollars in thousands) Balance Investment Allocated Earned Investment
With no related allowance recorded:
Commercial $ — $ — $ — $ — $ —
Commercial real estate:
Construction 77 78 — 6 186
Owner occupied 42 42 — 16 2,818
Other 3,855 3,872 — 100 3,017
Faith based non-profit:
Construction — — — — —
Owner occupied 9,744 9,764 — 558 9,937
Other — — — — 40
Residential real estate:
First mortgage 2,894 2,881 — 172 2,717
Multifamily — — — — —
Home equity 20 20 — 2 70
Construction — — — — —
Consumer — — — — 8
Impaired loans with no allowance recorded $ 16,632 $ 16,657 $ — $ 854 $ 18,793
With an allowance recorded:
Commercial $ — $ — $ — $ — $ —
Commercial real estate:
Construction 278 279 1 23 176
Owner occupied 4,760 4,800 10 200 1,164
Other — — — — 1,714
Faith based non-profit:
Construction — — — — —
Owner occupied 7,063 7,361 6 327 6,801
Other — — — — —
Residential real estate:
First mortgage 1,426 1,427 242 76 644
Multifamily — — — — —
Home equity 145 145 17 6 112
Construction — — — — —
Consumer — — — — —
Impaired loans with allowance recorded $ 13,672 $ 14,012 $ 276 $ 632 $ 10,611
Impaired loans $ 30,304 $ 30,669 $ 276 $ 1,486 $ 29,404
June 30, 2014
For the Six Months Ended For the Three Months Ended
Unpaid Average Average
Principal Recorded ALLL Interest Recorded Interest Recorded
(Dollars in thousands) Balance Investment Allocated Earned Investment Earned Investment
With no
Commercial $ — $ — $ — $ — $ — $ — $ —
Commercial real estate:
Construction 78 78 — 3 291 — 219
Owner occupied 3,133 3,135 — 41 3,159 8 3,147
Other 3,367 3,379 — 61 2,655 55 2,124
Faith based non-profit:
Construction — — — — — — —
Owner occupied 9,202 9,226 — 285 10,116 157 8,872
Other — — — — — — —
Residential real estate:
First mortgage 2,583 2,574 — 47 2,795 28 2,659
Multifamily — — — — — — —
Home equity 23 23 — — 66 — 53
Construction — — — — — — —
Consumer 8 8 — — 9 — 8
Impaired loans with no $ 18,394 $ 18,423 $ — $ 437 $ 19,091 $ 248 $ 17,082
With an allowance recorded:
Commercial $ — $ — $ — $ — $ — $ — $ —
Commercial real estate:
Construction 279 279 29 12 70 12 140
Owner occupied — — — — — — —
Other 2,172 2,179 34 48 2,883 — 3,427
Faith based non-profit:
Construction — — — — — — —
Owner occupied 7,278 7,296 576 177 6,744 75 7,693
Other — — — — — — —
Residential real estate:
First mortgage 567 548 182 5 554 3 536
Multifamily — — — — — — —
Home equity 166 166 31 4 113 2 122
Construction — — — — — — —
Consumer — — — — — — —
Impaired loans with allowance recorded $ 10,462 $ 10,468 $ 852 $ 246 $ 10,364 $ 92 $ 11,918
Impaired loans $ 28,856 $ 28,891 $ 852 $ 683 $ 29,455 $ 340 $ 29,000 Reserve for Credit Losses Allowance for Loan Losses (“ALLL”) The ALLL is management's estimate of probable losses that are inherent in the loan portfolio. The ALLL is based on regular quarterly assessments. The methodologies for measuring the appropriate level of the ALLL include the combination of a quantitative historical loss history by loan type and a qualitative analysis for loans not classified as impaired or TDRs Accounting Standards Codification 450 reserve ("ASC 450 reserve"), and a specific allowance method for impaired and TDR loans ("ASC 310 reserve"). The qualitative analysis for the ASC 450 reserve is patterned after the guidelines provided under Securities Exchange Commission (“SEC”) Staff Accounting Bulletin 102 and the Federal Financial Institutions Examination Council (“FFIEC”) Interagency Policy Statement on the Allowance for Loan and Lease Losses and include the following:
• Changes in lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices;
• Changes in national economic and business conditions and developments and the effect of unemployment on African Americans, who are the majority of our customers;
• Changes in the nature and volume of the loan portfolio;
• Changes in the experience, ability, and depth of lending management and staff;
• Changes in trends of the volume and severity of past due and classified loans; and changes in trends in the volume of non-accrual loans, troubled debt restructurings and classified loans;
• Changes in the quality of the loan review system and the degree of oversight by the Bank's Board of Directors;
• The existence and effect of any concentrations of credit, and changes in the level of such concentrations; and
• The effect of external factors such as competition and legal and regulatory requirements. Management has developed, from historical loan and economic information, quantitative drivers for certain qualitative factors. Management has identified which factors, by nature, are subjective, such as lending policies, competition and regulatory requirements. The quantitative drivers of qualitative factors, to which different weights are assigned based on management's judgment, are reviewed and updated quarterly based on an updated four-year rolling data for periods beginning December 31, 2014 and previously an eight-quarter rolling data. The quantitative loss history is based on a four-year rolling history of losses incurred by different loan types within the loan portfolio for periods beginning December 31, 2014 and previously an eight-quarter rolling history of losses. The change in methodology resulted in a $ 375 A specific ALLL is established for loans identified as impaired or TDRs, based on significant conditions or circumstances related to the specific credits. The specific allowance amounts are determined by a method prescribed by ASC 310, Receivables. For commercial business, faith-based non-profit, real estate and certain consumer loans, the measurement of loan impairment is based on the present value of the expected future cash flows, discounted at the loan's effective interest rate, or on the fair value of the loan's collateral if the loan is collateral dependent. Most consumer loans are smaller balance and homogeneous, and are evaluated for impairment on a collective basis, applying the quantitative loss history and the qualitative factors. Impairment losses are included in the ALLL through a charge to the provision for loan losses. The Company uses several credit quality indicators to manage credit risk on an ongoing basis. The Company's credit risk rating system was developed to aid in the risk management process by grouping credits with similar risk profiles into pass (which includes internal watch), special mention, or criticized categories, which includes substandard, doubtful, and loss. Credit risk ratings are applied individually to all classes of loans. Internal credit reviews and external contracted credit review examinations are used to determine and validate loan risk grades. The credit review system takes into consideration factors such as: borrower's background and experience; historical and current financial condition; credit history and payment performance; economic conditions and their impact on various industries; type, market value and volatility of the market value of collateral; lien position; and the financial strength of guarantors.
The process of assessing the adequacy of the ALLL is necessarily subjective. Further, and particularly in periods of economic downturns, it is reasonably possible that future credit losses may exceed historical loss levels and may also exceed management's current estimates of incurred losses inherent within the loan portfolio. As such, there can be no assurance that future loan charge-offs will not exceed management's current estimate of what constitutes a reasonable ALLL. The Company and the Bank are subject to periodic examination by their federal and state regulators, and may be required by such regulators to recognize additions to the allowance for loan losses based on the regulators' assessment of credit information available to them at the time of their examinations. Reserve for Unfunded Commitments 17 34 The following table presents non-accrual loans and loans past due over 90 days still on accrual by class of loans as of June 30, 2015 and December 31, 2014, respectively:
90 Days
or More
Past Due
June 30, 2015 Still
(Dollars in thousands) Non-accrual Number Accruing Number
Commercial $ 2 1 $ — —
Commercial real estate:
Construction — — — —
Owner occupied — — — —
Other 3,608 4 50 1
Faith-based non-profit:
Construction — — — —
Owner occupied 487 2 303 1
Other — — — —
Residential real estate:
First mortgage 2,102 31 47 5
Multifamily — — — —
Home equity 156 5 — —
Construction — — — —
Consumer 2 1 — —
Other loans — — — —
Total $ 6,357 44 $ 400 7
90 Days
or More
Past Due
December 31, 2014 Still
(Dollars in thousands) Non-accrual Number Accruing Number
Commercial $ — — $ — —
Commercial real estate:
Construction — — — —
Owner occupied 42 1 — —
Other 2,860 3 771 1
Faith-based non-profit:
Construction — — — —
Owner occupied 133 2 541 2
Other — — 15 1
Residential real estate:
First mortgage 2,720 33 1,696 8
Multifamily — — — —
Home equity 165 7 — —
Construction — — — —
Consumer — — — 1
Other loans — — — —
Total $ 5,920 46 $ 3,023 13 Non-accrual loans and loans past due over 90 days still accruing interest include both smaller balance homogenous loans that are collectively evaluated for impairment and individually classified impaired loans. Loans for which principal or interest is in default for 90 days or more are classified as a non-accrual unless they are well secured and in process of collection. Those loans over 90 days still accruing interest were in the process of modification. In these cases, the borrowers are still making payments. Borrowers have continued to make payments on these loans while administrative and legal due processes are proceeding which will enable the Bank to extend or modify maturity dates. The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans for reserves according to the loan's classification as to credit risk. This analysis includes non-homogenous loans, such as commercial, commercial real estate and faith-based non–profit entities, and mortgage loans in process of foreclosure for which the loan to value does not support repayment in full. This analysis is performed on at least a quarterly basis. The Company uses the following definitions for risk ratings:
• Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date. Management believes that there is a moderate likelihood of some loss related to those loans and leases that are considered special mention.
• Substandard. Loans classified as substandard are inadequately protected by the current sound financial repayment capacity and debt service coverage of the obligor or of the collateral pledge, if any. Loans so classified have a well-defined weakness or weaknesses that may jeopardize the liquidation of our repayment according to the original terms of the debt. In addition to commercial and faith-based non-profit loans with identified weaknesses, substandard loans include loans within the mortgage and consumer portfolio segments that are past due 90 days or more as to principal or interest if the loan to value does not support full repayment. Substandard loans are evaluated for impairment on an individual loan basis unless the substandard loan is a smaller homogeneous loan that is not a TDR and is not in the process of foreclosure. These loans exhibit a distinct possibility that the Company will sustain some loss if the deficiencies related to the loss are not corrected in a timely manner.
• Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
• Loss. Based on current facts and circumstances, loans classified as loss are not expected to be repaid, or that collateral will be difficult to liquidate. Loans classified as loss are charged off to the ALLL with board approval.
• Pass. Loans not identified as special mention, substandard, doubtful or loss are classified as pass. The following is a breakdown of loans by risk categories at June 30, 2015 and December 31, 2014:
June 30, 2015
(Dollars in thousands) Pass Special Mention Substandard Doubtful Total
Commercial $ 1,436 $ 2,962 $ 2,773 $ — $ 7,171
Commercial real estate:
Construction 8,887 — 349 — 9,236
Owner occupied 17,770 288 69 — 18,127
Other 13,681 502 4,634 — 18,817
Faith-based non-profit:
Construction 3,515 — — — 3,515
Owner occupied 70,911 8,295 7,591 — 86,797
Other 3,160 — — — 3,160
Residential real estate:
First mortgage 14,337 21 2,725 — 17,083
Multifamily 2,721 30 59 — 2,810
Home equity 3,535 — 200 — 3,735
Construction 122 — — — 122
Consumer 1,044 12 7 — 1,063
Other loans 4,543 — — — 4,543
Total $ 145,662 $ 12,110 $ 18,407 $ — $ 176,179
December 31, 2014
(Dollars in thousands) Pass Special Mention Substandard Doubtful Total
Commercial $ 1,279 $ 3,159 $ 2,815 $ — $ 7,253
Commercial real estate:
Construction 2,202 — 355 — 2,557
Owner occupied 17,596 306 111 — 18,013
Other 14,263 457 4,773 — 19,493
Faith-based non-profit:
Construction 6,156 — — — 6,156
Owner occupied 68,963 6,160 9,376 — 84,499
Other 4,707 — — — 4,707
Residential real estate:
First mortgage 14,328 88 4,579 — 18,995
Multifamily 2,910 31 60 — 3,001
Home equity 3,910 — 214 — 4,124
Construction 506 — — — 506
Consumer 1,213 14 5 — 1,232
Other loans 4,552 — — — 4,552
Total $ 142,585 $ 10,215 $ 22,288 $ — $ 175,088 Loans Modified as a TDR The following tables present TDRs as of June 30, 2015 and December 31, 2014.
Troubled Debt Restructurings
June 30, 2015
Non-accrual Total
Accrual Status Status Modifications
(Dollars in thousands) Number Amount Number Amount Number Amount
Commercial real estate:
Construction 2 $ 349 — $ — 2 $ 349
Owner occupied 4 4,732 — — 4 4,732
Other 2 223 2 2,813 4 3,036
Faith-based non-profit:
Owner occupied 20 16,410 1 22 21 16,432
Other — — — — — —
Residential real estate:
First mortgage 3 144 2 147 5 291
Total 31 $ 21,858 5 $ 2,982 36 $ 24,840
Troubled Debt Restructurings
December 31, 2014
Non-accrual Total
Accrual Status Status Modifications
(Dollars in thousands) Number Amount Number Amount Number Amount
Commercial real estate:
Construction 2 $ 355 — $ — 2 $ 355
Owner occupied 4 4,760 — — 4 4,760
Other 2 224 2 2,830 4 3,054
Faith-based non-profit:
Owner occupied 20 16,391 1 22 21 16,413
Other — — — — — —
Residential real estate:
First mortgage 1 23 2 164 3 187
Total 29 $ 21,753 5 $ 3,016 34 $ 24,769 No Two 129 No The following table shows loans newly restructured during the six months ended June 30, 2015. There were no restructures during the three months ended June 30, 2015 or the three or six months ended June 30, 2014.
TDR Modificactions For the Six Months Ended June 30, 2015
Pre-modification Outstanding Post-Modification Outstanding
(Dollars in thousands) Number of loans Recorded Investment Recorded Investment
Below market interest rates
Residential real estate:
First mortgage 2 $ 129 $ 125
Total 2 $ 129 $ 125 There were no loans modified as TDRs and with a payment default, with the payment default occurring within 12 months of the restructure date, and the payment default occurring during the three or six months ended June 30, 2015 and 2014. The Company defines default as the loan becoming 90 days or more past due, foreclosed upon or charged-off. TDR defaults can result in a higher ALLL and a corresponding higher provision for loan losses because they generally negatively impact the timing of and expected collections from these impaired loans. Impaired loans, which include TDRs, are evaluated for specific additions to the ALLL by subtracting the recorded investment in these impaired loans from their fair values. Fair values are generally determined by the present value of future cash flows, collateral value, or liquidation value. Defaults generally reduce the present value of the future cash flows and can negatively influence the collateral values if the declining real estate values are affecting the sale of collateral. |
