Loans and Allowance for Loan and Lease Losses | 12 Months Ended |
Dec. 31, 2013 |
Receivables [Abstract] | ' |
Loans and Allowance for Loan Losses | ' |
Loans and Allowance for Loan and Lease Losses |
The loan portfolio consisted of the following at: |
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| 31-Dec-13 | | 31-Dec-12 | | | | | | | | | | | | | | |
(Dollars in thousands) | Amount | | Percent | | Amount | | Percent | | | | | | | | | | | | | | |
Commercial loans | $ | 226,450 | | | 29.2 | % | | $ | 170,792 | | | 23.4 | % | | | | | | | | | | | | | | |
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Commercial real estate loans – owner occupied | 174,221 | | | 22.4 | % | | 165,922 | | | 22.7 | % | | | | | | | | | | | | | | |
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Commercial real estate loans – all other | 177,884 | | | 22.9 | % | | 150,189 | | | 20.6 | % | | | | | | | | | | | | | | |
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Residential mortgage loans – multi-family | 96,565 | | | 12.4 | % | | 105,119 | | | 14.4 | % | | | | | | | | | | | | | | |
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Residential mortgage loans – single family | 75,660 | | | 9.7 | % | | 87,263 | | | 11.9 | % | | | | | | | | | | | | | | |
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Land development loans | 18,458 | | | 2.4 | % | | 24,018 | | | 3.3 | % | | | | | | | | | | | | | | |
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Consumer loans | 7,599 | | | 1 | % | | 27,296 | | | 3.7 | % | | | | | | | | | | | | | | |
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Gross loans | 776,837 | | | 100 | % | | 730,599 | | | 100 | % | | | | | | | | | | | | | | |
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Deferred fee (income) costs, net | (53 | ) | | | | (461 | ) | | | | | | | | | | | | | | | | |
Allowance for loan and lease losses | (11,358 | ) | | | | (10,881 | ) | | | | | | | | | | | | | | | | |
Loans, net | $ | 765,426 | | | | | $ | 719,257 | | | | | | | | | | | | | | | | | |
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At December 31, 2013 and 2012, real estate loans of approximately $230 million and $162 million, respectively, were pledged to secure borrowings obtained from the Federal Home Loan Bank. |
Allowance for Loan and Lease Losses |
The ALLL represents our estimate of credit losses inherent in the loan portfolio at the balance sheet date. We employ economic models that are based on bank regulatory guidelines, industry standards and our own historical loan loss experience, as well as a number of more subjective qualitative factors, to determine both the sufficiency of the ALLL and the amount of the provisions that are required to be made for potential loan losses to increase or replenish the ALLL. |
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The ALLL is first determined by (i) analyzing all classified loans (graded as “Substandard” or “Doubtful” under our internal credit quality grading parameters) on non-accrual status for loss exposure and (ii) establishing specific reserves as needed. ASC 310-10 defines loan impairment as the existence of uncertainty concerning collection of all principal and interest in accordance with the contractual terms of a loan. For collateral dependent loans, impairment is typically measured by comparing the loan amount to the fair value of collateral, less estimated costs to sell, with a specific reserve established for any "shortfall" amount. Other methods can be used in estimating impairment, including market price and the present value of expected future cash flows discounted at the loan’s original interest rate. We are an active lender with the U.S. Small Business Administration (“SBA”) and many of the loans originated have a guaranteed percentage of the balances. The ALLL reserves are calculated against the non-guaranteed loan balances. |
On a quarterly basis, we utilize a classification migration model and individual loan review analytical tools as starting points for determining the adequacy of the ALLL for homogenous pools of loans that are not subject to specific reserve allocations. Our loss migration analysis tracks a certain number of quarters of loan loss history and industry loss factors to determine historical losses by classification category for each loan type, except certain consumer loans. We then apply these calculated loss factors, together with qualitative factors based on external economic conditions and trends and internal assessments, to the outstanding loan balances in each homogenous group of loans, and then, using our internal credit quality grading parameters, we grade the loans as “Pass,” “Special Mention,” “Substandard” or “Doubtful”. We also conduct individual loan review analysis, as part of the ALLL allocation process, applying specific monitoring policies and procedures in analyzing the existing loan portfolio. Set forth below is a summary of the activity in the ALLL during the years ended December 31, 2013, 2012 and 2011: |
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| December 31, | | | | | | | | | | | | | | | | |
| 2013 | | 2012 | | 2011 | | | | | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | | | | | |
Balance, beginning of year | $ | 10,881 | | | $ | 15,627 | | | $ | 18,101 | | | | | | | | | | | | | | | | | |
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Charged off loans | (6,458 | ) | | (8,574 | ) | | (2,736 | ) | | | | | | | | | | | | | | | | |
Recoveries on loans previously charged off | 2,430 | | | 1,878 | | | 1,095 | | | | | | | | | | | | | | | | | |
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Provision for loan and lease losses | 4,505 | | | 1,950 | | | (833 | ) | | | | | | | | | | | | | | | | |
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Balance, end of year | $ | 11,358 | | | $ | 10,881 | | | $ | 15,627 | | | | | | | | | | | | | | | | | |
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At December 31, 2013, the ALLL totaled $11.4 million, as compared to $10.9 million and $15.6 million at December 31, 2012 and 2011, respectively. The ALLL increased $0.5 million from December 31, 2012 to December 31, 2013 as a result of higher reserve factors over the quarterly loss migration cycle. The charge-offs stem primarily from the commercial loans resulting in higher allocation of reserves against that segment of the loan portfolio for the year ended December 31, 2013. The modest increase in reserves reflects a larger but improved portfolio as total impaired loans dropped to $24.2 million at December 31, 2013 from $39.3 million at December 31, 2012 and total past due loans declined to $5.5 million at December 31, 2013 from $13.5 million at December 31, 2012. The increase in the provision for loan and lease losses from December 31, 2012 to December 31, 2013 was primarily the result of a downgrade in credit quality for a commercial loan relationship of $10.7 million which resulted in additional required reserves of $2.6 million. |
Set forth below is information regarding loan balances and the related ALLL, by portfolio type, as of and for the years ended December 31, 2013, 2012 and 2011(excluding mortgage LHFS). |
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(Dollars in thousands) | Commercial | | Real Estate | | Land | | Consumer and | | Total | | | | | | | | |
Development | Single Family | | | | | | | | |
| Mortgages | | | | | | | | |
ALLL in the year ended December 31, 2013: | | | | | | | | | | | | | | | | | |
Balance at beginning of year | $ | 6,340 | | | $ | 3,487 | | | $ | 248 | | | $ | 806 | | | $ | 10,881 | | | | | | | | | |
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Charge offs | (5,945 | ) | | (308 | ) | | (5 | ) | | (200 | ) | | (6,458 | ) | | | | | | | | |
Recoveries | 2,337 | | | 5 | | | 54 | | | 34 | | | 2,430 | | | | | | | | | |
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Provision | 3,080 | | | 1,333 | | | (132 | ) | | 224 | | | 4,505 | | | | | | | | | |
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Balance at end of year | $ | 5,812 | | | $ | 4,517 | | | $ | 165 | | | $ | 864 | | | $ | 11,358 | | | | | | | | | |
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ALLL balance at end of year related to: | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | |
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Loans collectively evaluated for impairment | $ | 5,812 | | | $ | 4,517 | | | $ | 165 | | | $ | 864 | | | $ | 11,358 | | | | | | | | | |
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Loans balance at end of year: | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | $ | 10,484 | | | $ | 8,451 | | | $ | 391 | | | $ | 4,834 | | | $ | 24,160 | | | | | | | | | |
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Loans collectively evaluated for impairment | 215,966 | | | 440,219 | | | 18,067 | | | 78,425 | | | 752,677 | | | | | | | | | |
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Ending Balance | $ | 226,450 | | | $ | 448,670 | | | $ | 18,458 | | | $ | 83,259 | | | $ | 776,837 | | | | | | | | | |
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ALLL in the year ended December 31, 2012: | | | | | | | | | | | | | | | | | |
Balance at beginning of year | $ | 8,908 | | | $ | 5,777 | | | $ | 316 | | | $ | 626 | | | $ | 15,627 | | | | | | | | | |
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Charge offs | (6,664 | ) | | (1,184 | ) | | (158 | ) | | (568 | ) | | (8,574 | ) | | | | | | | | |
Recoveries | 1,657 | | | 198 | | | — | | | 23 | | | 1,878 | | | | | | | | | |
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Provision | 2,439 | | | (1,304 | ) | | 90 | | | 725 | | | 1,950 | | | | | | | | | |
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Balance at end of year | $ | 6,340 | | | $ | 3,487 | | | $ | 248 | | | $ | 806 | | | $ | 10,881 | | | | | | | | | |
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ALLL Balance at end of year related to: | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | $ | 2,428 | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,428 | | | | | | | | | |
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Loans collectively evaluated for impairment | $ | 3,912 | | | $ | 3,487 | | | $ | 248 | | | $ | 806 | | | $ | 8,453 | | | | | | | | | |
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Loans balance at end of year: | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | $ | 16,180 | | | $ | 21,918 | | | $ | 314 | | | $ | 839 | | | $ | 39,251 | | | | | | | | | |
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Loans collectively evaluated for impairment | 154,612 | | | 399,312 | | | 23,704 | | | 113,720 | | | 691,348 | | | | | | | | | |
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Ending Balance | $ | 170,792 | | | $ | 421,230 | | | $ | 24,018 | | | $ | 114,559 | | | $ | 730,599 | | | | | | | | | |
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ALLL in the year ended December 31, 2011: | | | | | | | | | | | | | | | | | |
Balance at beginning of year | $ | 10,017 | | | $ | 6,351 | | | $ | 830 | | | $ | 903 | | | $ | 18,101 | | | | | | | | | |
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Charge offs | (1,218 | ) | | (1,315 | ) | | (138 | ) | | (65 | ) | | (2,736 | ) | | | | | | | | |
Recoveries | 1,067 | | | 3 | | | — | | | 25 | | | 1,095 | | | | | | | | | |
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Provision | (958 | ) | | 738 | | | (376 | ) | | (237 | ) | | (833 | ) | | | | | | | | |
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Balance at end of year | $ | 8,908 | | | $ | 5,777 | | | $ | 316 | | | $ | 626 | | | $ | 15,627 | | | | | | | | | |
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ALLL Balance at end of year related to: | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | $ | 1,648 | | | $ | 1,135 | | | $ | — | | | $ | — | | | $ | 2,783 | | | | | | | | | |
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Loans collectively evaluated for impairment | $ | 7,260 | | | $ | 4,642 | | | $ | 316 | | | $ | 626 | | | $ | 12,844 | | | | | | | | | |
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Loans balance at end of year: | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | $ | 5,140 | | | $ | 10,088 | | | $ | 2,597 | | | $ | 570 | | | $ | 18,395 | | | | | | | | | |
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Loans collectively evaluated for impairment | 174,165 | | | 348,230 | | | 25,088 | | | 92,401 | | | 639,884 | | | | | | | | | |
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Ending Balance | $ | 179,305 | | | $ | 358,318 | | | $ | 27,685 | | | $ | 92,971 | | | $ | 658,279 | | | | | | | | | |
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Credit Quality |
The amounts of nonperforming assets and delinquencies that occur within our loan portfolio factors in our evaluation of the adequacy of the ALLL. |
The following table provides a summary of the delinquency status of loans by portfolio type at December 31, 2013 and 2012: |
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(Dollars in thousands) | 30-59 Days Past Due | | 60-89 Days Past Due | | 90 Days and Greater | | Total Past Due | | Current | | Total Loans Outstanding | | Loans >90 Days and Accruing |
At December 31, 2013 | | | | | | | | | | | | | |
Commercial loans | $ | — | | | $ | — | | | $ | 2,192 | | | $ | 2,192 | | | $ | 224,258 | | | $ | 226,450 | | | $ | — | |
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Commercial real estate loans – owner-occupied | — | | | — | | | — | | | — | | | 174,221 | | | 174,221 | | | — | |
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Commercial real estate loans – all other | — | | | — | | | 2,117 | | | 2,117 | | | 175,767 | | | 177,884 | | | — | |
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Residential mortgage loans – multi-family | — | | | — | | | — | | | — | | | 96,565 | | | 96,565 | | | — | |
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Residential mortgage loans – single family | 748 | | | — | | | — | | | 748 | | | 74,912 | | | 75,660 | | | — | |
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Land development loans | — | | | — | | | — | | | — | | | 18,458 | | | 18,458 | | | — | |
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Consumer loans | 450 | | | — | | | — | | | 450 | | | 7,149 | | | 7,599 | | | — | |
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Total | $ | 1,198 | | | $ | — | | | $ | 4,309 | | | $ | 5,507 | | | $ | 771,330 | | | $ | 776,837 | | | $ | — | |
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At December 31, 2012 | |
Commercial loans | $ | 1,321 | | | $ | 778 | | | $ | 4,295 | | | $ | 6,394 | | | $ | 164,398 | | | $ | 170,792 | | | $ | — | |
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Commercial real estate loans – owner-occupied | — | | | — | | | 3,232 | | | 3,232 | | | 162,690 | | | 165,922 | | | — | |
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Commercial real estate loans – all other | — | | | — | | | 2,599 | | | 2,599 | | | 147,590 | | | 150,189 | | | — | |
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Residential mortgage loans – multi-family | — | | | — | | | — | | | — | | | 105,119 | | | 105,119 | | | — | |
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Residential mortgage loans – single family | 259 | | | 378 | | | 359 | | | 996 | | | 86,267 | | | 87,263 | | | — | |
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Land development loans | — | | | — | | | 314 | | | 314 | | | 23,704 | | | 24,018 | | | — | |
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Consumer loans | — | | | — | | | — | | | — | | | 27,296 | | | 27,296 | | | — | |
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Total | $ | 1,580 | | | $ | 1,156 | | | $ | 10,799 | | | $ | 13,535 | | | $ | 717,064 | | | $ | 730,599 | | | $ | — | |
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As the above table indicates, total past due loans decreased by $8.0 million, to $5.5 million at December 31, 2013 from $13.5 million at December 31, 2012. Loans past due 90 days or more decreased by $6.5 million, to $4.3 million at December 31, 2013, from $10.8 million at December 31, 2012, primarily due to the foreclosure and transfers of $5.6 million of real estate loans to OREO and $1.9 million in commercial loan charge offs during the year ended December 31, 2013. |
Loans 30-89 days past due decreased by $1.5 million to $1.2 million at December 31, 2013 from $2.7 million at December 31, 2012, primarily due to two loans paying off an outstanding total balance of $1.1 million. |
Generally, the accrual of interest on a loan is discontinued when principal or interest payments become more than 90 days past due, unless we believe that the loan is adequately collateralized and it is in the process of collection. There were no loans 90 days or more past due and still accruing interest at December 31, 2013 or December 31, 2012. In certain instances, when a loan is placed on non-accrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received, except when the ultimate collectability of principal is probable, in which case such payments are applied to accrued and unpaid interest, which is credited to income. Non-accrual loans may be restored to accrual status when principal and interest become current and full repayment becomes expected. |
The following table provides information with respect to loans on nonaccrual status, by portfolio type, as of December 31, 2013 and 2012: |
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| December 31, | | | | | | | | | | | | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | | | | | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | | | | | | | | | |
Nonaccrual loans: | | | | | | | | | | | | | | | | | | | | | | | |
Commercial loans | $ | 5,371 | | | $ | 6,846 | | | | | | | | | | | | | | | | | | | | | |
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Commercial real estate loans – owner occupied | 1,773 | | | 3,232 | | | | | | | | | | | | | | | | | | | | | |
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Commercial real estate loans – all other | 2,117 | | | 6,424 | | | | | | | | | | | | | | | | | | | | | |
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Residential mortgage loans – single family | 1,874 | | | 839 | | | | | | | | | | | | | | | | | | | | | |
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Land development loans | 391 | | | 314 | | | | | | | | | | | | | | | | | | | | | |
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Total | $ | 11,526 | | | $ | 17,655 | | | | | | | | | | | | | | | | | | | | | |
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At December 31, 2013 nonaccrual loans totaled $11.5 million, down from $17.7 million at December 31, 2012, primarily due to (i) the restoration to accrual status of a $2.0 million commercial real estate loan as a result of a history of principal and interest payments in accordance with previously modified terms of the loan, (ii) the foreclosure of $5.6 million of nonperforming loans, comprised primarily of commercial real estate loans, and their resulting transfer to OREO, (iii) $5.5 million of impairment write-downs to nonperforming loans, and (iv) offset by $6.5 million of loans added to nonaccrual status. |
We classify our loan portfolio using internal credit quality ratings. The following table provides a summary of loans by portfolio type and our internal credit quality ratings as of December 31, 2013 and 2012, respectively. |
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| December 31, | | | | | | | | | | | | | | | | |
(Dollars in thousands) | 2013 | | 2012 | | Increase | | | | | | | | | | | | | | | | |
(Decrease) | | | | | | | | | | | | | | | | |
Pass: | | | | | | | | | | | | | | | | | | | | | |
Commercial loans | $ | 212,938 | | | $ | 146,952 | | | $ | 65,986 | | | | | | | | | | | | | | | | | |
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Commercial real estate loans – owner occupied | 167,947 | | | 162,689 | | | 5,258 | | | | | | | | | | | | | | | | | |
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Commercial real estate loans – all other | 161,970 | | | 135,274 | | | 26,696 | | | | | | | | | | | | | | | | | |
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Residential mortgage loans – multi family | 91,375 | | | 104,747 | | | (13,372 | ) | | | | | | | | | | | | | | | | |
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Residential mortgage loans – single family | 73,786 | | | 84,237 | | | (10,451 | ) | | | | | | | | | | | | | | | | |
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Land development loans | 10,047 | | | 12,461 | | | (2,414 | ) | | | | | | | | | | | | | | | | |
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Consumer loans | 7,599 | | | 27,296 | | | (19,697 | ) | | | | | | | | | | | | | | | | |
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Total pass loans | $ | 725,662 | | | $ | 673,656 | | | $ | 52,006 | | | | | | | | | | | | | | | | | |
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Special Mention: | | | | | | | | | | | | | | | | | | | | | |
Commercial loans | $ | 52 | | | $ | 2,381 | | | $ | (2,329 | ) | | | | | | | | | | | | | | | | |
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Commercial real estate loans – all other | — | | | 3,859 | | | (3,859 | ) | | | | | | | | | | | | | | | | |
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Residential mortgage loans – multi family | 5,190 | | | 373 | | | 4,817 | | | | | | | | | | | | | | | | | |
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Residential mortgage loans – single family | — | | | 990 | | | (990 | ) | | | | | | | | | | | | | | | | |
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Land development loans | — | | | 8,201 | | | (8,201 | ) | | | | | | | | | | | | | | | | |
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Total special mention loans | $ | 5,242 | | | $ | 15,804 | | | $ | (10,562 | ) | | | | | | | | | | | | | | | | |
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Substandard: | | | | | | | | | | | | | | | | | | | | | |
Commercial loans | $ | 13,396 | | | $ | 21,347 | | | $ | (7,951 | ) | | | | | | | | | | | | | | | | |
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Commercial real estate loans – owner occupied | 6,274 | | | 3,232 | | | 3,042 | | | | | | | | | | | | | | | | | |
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Commercial real estate loans – all other | 15,914 | | | 11,057 | | | 4,857 | | | | | | | | | | | | | | | | | |
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Residential mortgage loans – single family | 1,874 | | | 2,036 | | | (162 | ) | | | | | | | | | | | | | | | | |
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Land development loans | 8,410 | | | 3,355 | | | 5,055 | | | | | | | | | | | | | | | | | |
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Total substandard loans | $ | 45,868 | | | $ | 41,027 | | | $ | 4,841 | | | | | | | | | | | | | | | | | |
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Doubtful: | | | | | | | | | | | | | | | | | | | | | |
Commercial loans | $ | 65 | | | $ | 112 | | | $ | (47 | ) | | | | | | | | | | | | | | | | |
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Total doubtful loans | $ | 65 | | | $ | 112 | | | $ | (47 | ) | | | | | | | | | | | | | | | | |
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Total Outstanding Loans, gross: | $ | 776,837 | | | $ | 730,599 | | | $ | 46,238 | | | | | | | | | | | | | | | | | |
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As the above table indicates, loans totaled approximately $776.8 million at December 31, 2013, an increase of $46.2 million from $730.6 million at December 31, 2012. The disaggregation of the loan portfolio by risk rating in the table above reflects the following changes that occurred between December 31, 2013 and December 31, 2012: |
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• | Loans rated "Pass" totaled $725.7 million, an increase of $52.0 million from $673.7 million at December 31, 2012. The increase was primarily attributable to new loan growth in commercial loans of $55.7 million and commercial real estate loans - all other of $27.7 million offset by the payoffs in consumer loans of $19.7 million and single family mortgages of $11.6 million. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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• | Loans rated "Special Mention" totaled $5.2 million, a decrease of $10.6 million from $15.8 million at December 31, 2012. The decrease was primarily the result of the downgrade to "Substandard" of a $10.7 million loan relationship in current status, comprised of $9.5 million in commercial real estate loans-all other and a $1.1 million commercial loan, offset by net additions to "pass" grade. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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• | Loans rated "Substandard" totaled $45.9 million, an increase of $4.8 million from $41.0 million at December 31, 2012. This increase was primarily the result of approximately $24.6 million in loans downgraded to "Substandard", partially offset by $6.3 million of loan charge-offs, the foreclosure and transfer to OREO of $5.6 million of real estate loans and principal payments of $7.7 million. | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired Loans |
A loan generally is classified as impaired and placed on nonaccrual status when, in our opinion, principal or interest is not likely to be collected in accordance with the contractual terms of the loan agreement. We measure for impairments on a loan-by-loan basis, using either the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral if the loan is collateral dependent. |
The following table sets forth information regarding impaired loans, at December 31, 2013 and December 31, 2012: |
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| December 31, | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | 2013 | | 2012 | | | | | | | | | | | | | | | | | | | | |
Impaired loans: | | | | | | | | | | | | | | | | | | | | | |
Nonaccruing loans | $ | 5,590 | | | $ | 12,018 | | | | | | | | | | | | | | | | | | | | | |
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Nonaccruing restructured loans | 5,936 | | | 5,637 | | | | | | | | | | | | | | | | | | | | | |
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Accruing restructured loans (1) | 12,634 | | | 21,595 | | | | | | | | | | | | | | | | | | | | | |
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Accruing impaired loans | — | | | — | | | | | | | | | | | | | | | | | | | | | |
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Total impaired loans | $ | 24,160 | | | $ | 39,250 | | | | | | | | | | | | | | | | | | | | | |
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Impaired loans less than 90 days delinquent and included in total impaired loans | $ | 21,968 | | | $ | 28,452 | | | | | | | | | | | | | | | | | | | | | |
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-1 | See "Troubled Debt Restructurings" below for a description of accruing restructured loans at December 31, 2013 and December 31, 2012. | | | | | | | | | | | | | | | | | | | | | | | | | | |
The $15.1 million decrease in impaired loans to $24.2 million at December 31, 2013 from $39.3 million at December 31, 2012 was primarily attributable to the foreclosure and transfer to OREO of $5.6 million of nonaccrual loans, a $4.8 million note sale and $6.2 million in write downs to impaired loans. Accruing restructured loans were comprised of a number of loans performing in accordance with modified terms, which included lowering of interest rates, deferral of payments, or modifications to payment terms. Based on an internal analysis, using the current estimated fair values of the collateral or the discounted present values of the future estimated cash flows of the impaired loans, we concluded that, at December 31, 2013, no specific reserves were required on any impaired loans as all impaired loans were well secured and adequately collateralized. |
The table below contains additional information with respect to impaired loans, by portfolio type, as of and for the years ended December 31, 2013, 2012 and 2011: |
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(Dollars in thousands) | Recorded Investment | | Unpaid Principal Balance | | Related Allowance (1) | | Average Recorded Investment | | Interest Income Recognized | | | | | | | | |
2013 Loans with no specific reserves established: | | | | | | | | | | | | | | | | | |
Commercial loans | $ | 10,484 | | | $ | 13,908 | | | $ | — | | | $ | 8,691 | | | $ | 496 | | | | | | | | | |
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Commercial real estate loans – owner occupied | 1,773 | | | 1,872 | | | — | | | 3,121 | | | — | | | | | | | | | |
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Commercial real estate loans – all other | 6,678 | | | 6,711 | | | — | | | 12,119 | | | 188 | | | | | | | | | |
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Residential mortgage loans – multi-family | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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Residential mortgage loans – single family | 4,834 | | | 5,263 | | | — | | | 1,716 | | | 187 | | | | | | | | | |
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Land development loans | 391 | | | 409 | | | — | | | 302 | | | 12 | | | | | | | | | |
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Consumer loans | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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2013 Loans with specific reserves established: | | | | | | | | | | | | | | | | | |
Commercial loans | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | |
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Commercial real estate loans – owner occupied | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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Commercial real estate loans – all other | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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Residential mortgage loans – multi-family | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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Residential mortgage loans – single family | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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Land development loans | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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Consumer loans | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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2013 Total: | | | | | | | | | | | | | | | | | |
Commercial loans | $ | 10,484 | | | $ | 13,908 | | | $ | — | | | $ | 8,691 | | | $ | 496 | | | | | | | | | |
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Commercial real estate loans – owner occupied | 1,773 | | | 1,872 | | | — | | | 3,121 | | | — | | | | | | | | | |
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Commercial real estate loans – all other | 6,678 | | | 6,711 | | | — | | | 12,119 | | | 188 | | | | | | | | | |
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Residential mortgage loans – multi-family | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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Residential mortgage loans – single family | 4,834 | | | 5,263 | | | — | | | 1,716 | | | 187 | | | | | | | | | |
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Land development loans | 391 | | | 409 | | | — | | | 302 | | | 12 | | | | | | | | | |
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Consumer loans | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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2012 Loans with no specific reserves established: | | | | | | | | | | | | | | | | | |
Commercial loans | $ | 11,782 | | | $ | 12,770 | | | $ | — | | | $ | 7,733 | | | $ | 377 | | | | | | | | | |
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Commercial real estate loans – owner occupied | 4,644 | | | 4,649 | | | — | | | 5,584 | | | 92 | | | | | | | | | |
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Commercial real estate loans – all other | 17,274 | | | 17,317 | | | — | | | 10,893 | | | 703 | | | | | | | | | |
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Residential mortgage loans – multi-family | — | | | — | | | — | | | 45 | | | — | | | | | | | | | |
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Residential mortgage loans – single family | 839 | | | 1,033 | | | — | | | 1,050 | | | 41 | | | | | | | | | |
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Land development loans | 314 | | | 318 | | | — | | | 424 | | | 33 | | | | | | | | | |
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Consumer loans | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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2012 Loans with specific reserves established: | | | | | | | | | | | | | | | | | |
Commercial loans | $ | 4,398 | | | $ | 4,398 | | | $ | 2,428 | | | $ | 6,976 | | | $ | 221 | | | | | | | | | |
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Commercial real estate loans – owner occupied | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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Commercial real estate loans – all other | — | | | — | | | — | | | 2,053 | | | — | | | | | | | | | |
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Residential mortgage loans – multi-family | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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Residential mortgage loans – single family | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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Land development loans | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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Consumer loans | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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2012 Total: | | | | | | | | | | | | | | | | | |
Commercial loans | $ | 16,180 | | | $ | 17,168 | | | $ | 2,428 | | | $ | 14,709 | | | $ | 598 | | | | | | | | | |
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Commercial real estate loans – owner occupied | 4,644 | | | 4,649 | | | — | | | 5,584 | | | 92 | | | | | | | | | |
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Commercial real estate loans – all other | 17,274 | | | 17,317 | | | — | | | 12,946 | | | 703 | | | | | | | | | |
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Residential mortgage loans – multi-family | — | | | — | | | — | | | 45 | | | — | | | | | | | | | |
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Residential mortgage loans – single family | 839 | | | 1,033 | | | — | | | 1,050 | | | 41 | | | | | | | | | |
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Land development loans | 314 | | | 318 | | | — | | | 424 | | | 33 | | | | | | | | | |
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Consumer loans | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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2011 Loans with no specific reserves established: | | | | | | | | | | | | | | | | | |
Commercial loans | $ | 1,636 | | | $ | 2,361 | | | $ | — | | | $ | 1,395 | | | $ | 38 | | | | | | | | | |
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Commercial real estate loans – owner occupied | 3,583 | | | 3,583 | | | — | | | 4,621 | | | 340 | | | | | | | | | |
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Commercial real estate loans – all other | 96 | | | 96 | | | — | | | 3,420 | | | 3 | | | | | | | | | |
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Residential mortgage loans – multi-family | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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Residential mortgage loans – single family | 570 | | | 581 | | | — | | | 790 | | | 15 | | | | | | | | | |
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Construction loans | 2,047 | | | 2,215 | | | — | | | 621 | | | — | | | | | | | | | |
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Land development loans | 550 | | | 554 | | | — | | | 632 | | | 11 | | | | | | | | | |
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Consumer loans | — | | | — | | | — | | | 32 | | | — | | | | | | | | | |
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2011 Loans with specific reserves established: | | | | | | | | | | | | | | | | | |
Commercial loans | $ | 3,503 | | | $ | 3,527 | | | $ | 1,648 | | | $ | 1,722 | | | $ | 203 | | | | | | | | | |
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Commercial real estate loans – owner occupied | 2,016 | | | 2,016 | | | 659 | | | 3,015 | | | 48 | | | | | | | | | |
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Commercial real estate loans – all other | 4,214 | | | 4,818 | | | 347 | | | 9,281 | | | — | | | | | | | | | |
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Residential mortgage loans – multi-family | 180 | | | 180 | | | 129 | | | 45 | | | 14 | | | | | | | | | |
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Residential mortgage loans – single family | — | | | — | | | — | | | 273 | | | — | | | | | | | | | |
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Construction loans | — | | | — | | | — | | | 1,604 | | | — | | | | | | | | | |
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Land development loans | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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Consumer loans | — | | | — | | | — | | | — | | | — | | | | | | | | | |
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2011 Total: | | | | | | | | | | | | | | | | | |
Commercial loans | $ | 5,139 | | | $ | 5,888 | | | $ | 1,648 | | | $ | 3,117 | | | $ | 241 | | | | | | | | | |
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Commercial real estate loans – owner occupied | 5,599 | | | 5,599 | | | 659 | | | 7,636 | | | 388 | | | | | | | | | |
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Commercial real estate loans – all other | 4,310 | | | 4,914 | | | 347 | | | 12,701 | | | 3 | | | | | | | | | |
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Residential mortgage loans – multi-family | 180 | | | 180 | | | 129 | | | 45 | | | 14 | | | | | | | | | |
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Residential mortgage loans – single family | 570 | | | 581 | | | — | | | 1,063 | | | 15 | | | | | | | | | |
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Construction loans | 2,047 | | | 2,215 | | | — | | | 2,225 | | | — | | | | | | | | | |
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Land development loans | 550 | | | 554 | | | — | | | 632 | | | 11 | | | | | | | | | |
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Consumer loans | — | | | — | | | — | | | 32 | | | — | | | | | | | | | |
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-1 | When the discounted cash flows, collateral value or market price equals or exceeds the recorded investment in the loan, then specific reserves are not required to be set aside for the loan within the ALLL. This typically occurs when the impaired loans have been partially charged-off and/or there have been interest payments received and applied to the balance of the principal outstanding. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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At December 31, 2013 and December 31, 2012 there were $24.2 million and $34.9 million, respectively, of impaired loans for which no specific reserves had been allocated because these loans, in our judgment, were sufficiently collateralized. Of the impaired loans at December 31, 2013 for which no specific reserves were allocated, $19.5 million had been deemed impaired in the prior year. |
We had average investments in impaired loans of $25.9 million and $34.8 million during the years ended December 31, 2013 and December 31, 2012, respectively. The interest that would have been earned had the impaired loans remained current in accordance with their original terms was $0.5 million in 2013 and $1.5 million in 2012. |
Troubled Debt Restructurings |
Pursuant to the FASB's ASU No. 2011-2, A Creditor's Determination of whether a Restructuring is a Troubled Debt Restructuring ("ASU No. 2011-02"), the Bank's TDRs totaled $18.6 million and $27.2 million at December 31, 2013 and December 31, 2012, respectively. TDRs consist of loans to which modifications have been made for the purpose of alleviating temporary impairments of the borrowers' financial condition and cash flows. Those modifications have come in the forms of changes in amortization terms, reductions in interest rates, interest only payments and, in limited cases, concessions to outstanding loan balances. The modifications are made as part of workout plans we enter into with the borrower that are designed to provide a bridge for the borrowers' cash flow shortfalls in the near term. If a borrower works through the near term issues, then in most cases, the original contractual terms of the borrowers' loan will be reinstated. |
Of the $18.6 million of TDRs outstanding at December 31, 2013, $12.6 million were performing in accordance with their terms and accruing interest; and $5.9 million were not. Our impairment analysis determined no specific reserves were required after charging off $2.6 million of non-performing commercial loans in 2013. |
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| 31-Dec-13 | | | | | | | | | | | | | |
(Dollars in thousands) | Number of | | Pre-Modification | | Post-Modification | | End | | | | | | | | | | | | | |
Loans | Outstanding | Outstanding | of Period | | | | | | | | | | | | | |
| Recorded | Recorded | Balance | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | |
Performing | | | | | | | | | | | | | | | | | | | | |
Commercial loans | 2 | | | $ | 5,113 | | | $ | 5,113 | | | $ | 5,113 | | | | | | | | | | | | | | |
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Commercial real estate – all other | 4 | | | 7,980 | | | 7,538 | | | 4,560 | | | | | | | | | | | | | | |
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Residential mortgage loans – single family | 1 | | | 3,046 | | | 3,046 | | | 2,961 | | | | | | | | | | | | | | |
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| 7 | | | 16,139 | | | 15,697 | | | 12,634 | | | | | | | | | | | | | | |
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Nonperforming | | | | | | | | | | | | | | | | | | | | |
Commercial loans | 8 | | | 7,653 | | | 7,571 | | | 3,723 | | | | | | | | | | | | | | |
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Commercial real estate – owner occupied | 1 | | | 1,872 | | | 1,867 | | | 1,773 | | | | | | | | | | | | | | |
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Residential mortgage loans – single family | 1 | | | 171 | | | 64 | | | 49 | | | | | | | | | | | | | | |
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Land development loans | 1 | | | 439 | | | 439 | | | 391 | | | | | | | | | | | | | | |
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| 11 | | | 10,135 | | | 9,941 | | | 5,936 | | | | | | | | | | | | | | |
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Total Troubled Debt Restructurings | 18 | | | $ | 26,274 | | | $ | 25,638 | | | $ | 18,570 | | | | | | | | | | | | | | |
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| 31-Dec-12 | | | | | | | | | | | | | |
| Number of | | Pre-Modification | | Post-Modification | | End | | | | | | | | | | | | | |
loans | Outstanding | Outstanding | of Period | | | | | | | | | | | | | |
| Recorded | Recorded | Balance | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | |
Performing | | | | | | | | | | | | | | | | | | | | |
Commercial loans | 4 | | | $ | 9,754 | | | $ | 9,754 | | | $ | 9,334 | | | | | | | | | | | | | | |
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Commercial real estate – all other | 4 | | | 10,897 | | | 10,897 | | | 10,849 | | | | | | | | | | | | | | |
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Land development loans | 1 | | | 1,429 | | | 1,429 | | | 1,412 | | | | | | | | | | | | | | |
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| 9 | | | 22,080 | | | 22,080 | | | 21,595 | | | | | | | | | | | | | | |
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Nonperforming | | | | | | | | | | | | | | | | | | | | |
Commercial loans | 3 | | | 1,943 | | | 1,855 | | | 1,753 | | | | | | | | | | | | | | |
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Commercial real estate – all other | 2 | | | 6,814 | | | 6,685 | | | 3,825 | | | | | | | | | | | | | | |
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Residential mortgage loans – single family | 1 | | | 171 | | | 64 | | | 59 | | | | | | | | | | | | | | |
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| 6 | | | 8,928 | | | 8,604 | | | 5,637 | | | | | | | | | | | | | | |
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Total troubled debt restructurings | 15 | | | $ | 31,008 | | | $ | 30,684 | | | $ | 27,232 | | | | | | | | | | | | | | |
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| December 31, 2011 | | | | | | | | | | | | | |
| Number of | | Pre-Modification | | Post-Modification | | End | | | | | | | | | | | | | |
loans | Outstanding | Outstanding | of Period | | | | | | | | | | | | | |
| Recorded | Recorded | Balance | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | |
Nonperforming | | | | | | | | | | | | | | | | | | | | |
Commercial real estate – all other | 1 | | | $ | 4,942 | | | 4,818 | | | $ | 4,214 | | | | | | | | | | | | | | |
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Total troubled debt restructurings | 1 | | | $ | 4,942 | | | 4,818 | | | $ | 4,214 | | | | | | | | | | | | | | |
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As of December 31, 2013, TDRs totaled $18.6 million as compared to $27.2 million at December 31, 2012. The decline in TDRs was primarily the result of writing down a commercial loan relationship for $2.6 million, a pay-off on a land development loan of $1.4 million and a note sale of $4.8 million on a commercial real estate loan. |
During the years ended December 31, 2013, 2012 and 2011, we had no TDRs that were modified within the preceding 12-month period which subsequently defaulted. |