Loans | Note 6. Loans The Company has several lending lines of business including SBA loans, direct lease financing, SBLOC and other specialty and consumer lending. The Company also originates loans for sale to other financial institutions which issue commercial mortgage backed securities or to secondary government guaranteed loan markets. These sales are accounted for as true sales and there is no continuing involvement in these loans after the sale. Servicing rights on these loans are not retained. The Company has elected fair value treatment for these loans to better reflect the economics of the transactions. At March 31, 2016, the fair value of these loans held for sale was $313.6 million and the unpaid principal balance was $303.5 million. Included in the loss on sale of loans in the Statement of Operations were gains recognized from changes in fair value of $4.2 million for the three months ended March 31, 2016. There were no changes in fair value related to credit risk. Interest earned on loans held for sale during the period held are recorded in Interest Income-Loans, including fees on the Statement of Operations. The Company analyzes credit risk prior to making loans on an individual loan basis. The Company considers relevant aspects of the borrowers’ financial position and cash flow, past borrower performance, management’s knowledge of market conditions, collateral and the ratio of loan amounts to estimated collateral value in making its credit determinations. Major classifications of loans, excluding loans held for sale, are as follows (in thousands): March 31, December 31, 2016 2015 SBA non real estate $ 71,220 $ 68,887 SBA commercial mortgage 120,415 114,029 SBA construction 9,736 6,977 SBA loans * 201,371 189,893 Direct lease financing 240,670 231,514 SBLOC 592,656 575,948 Other specialty lending 48,153 48,315 Other consumer loans 21,782 23,180 1,104,632 1,068,850 Unamortized loan fees and costs 9,421 9,227 Total loans, net of deferred loan costs $ 1,114,053 $ 1,078,077 Included in the table above are demand deposit overdrafts reclassified as loan balances totaling $2.3 million and $2.8 million at March 31, 2016 and December 31, 2015 respectively. Overdraft charge-offs and recoveries are reflected in the allowance for loan and lease losses. * The following table shows SBA loans and SBA loans hel d for sale for the period indic ated (in thousands): March 31, December 31, 2016 2015 SBA loans, including deferred fees and costs $ 209,605 $ 197,966 SBA loans included in held for sale 125,315 109,174 Total SBA loans $ 334,920 $ 307,140 The following table provides information about impaired loans at March 31 , 201 6 and December 31, 201 5 (in thousands): Recorded investment Unpaid principal balance Related allowance Average recorded investment Interest income recognized March 31, 2016 Without an allowance recorded SBA non real estate $ 262 $ 262 $ - $ 262 $ - Consumer - other 326 326 - 328 - Consumer - home equity 1,002 1,102 - 685 - With an allowance recorded - SBA non real estate 546 546 121 593 - Consumer - other - - - - - Consumer - home equity 263 263 44 545 - Total SBA non real estate 808 808 121 855 - Consumer - other 326 326 - 328 - Consumer - home equity 1,265 1,365 44 1,230 - December 31, 2015 Without an allowance recorded SBA non real estate $ 263 $ 263 $ - $ 228 $ - Consumer - other 330 330 - 338 - Consumer - home equity 368 368 - 966 - With an allowance recorded SBA non real estate 640 640 123 670 - Consumer - other - - - - - Consumer - home equity 827 927 26 800 - Total SBA non real estate 903 903 123 898 - Consumer - other 330 330 - 338 - Consumer - home equity 1,195 1,295 26 1,766 - The following tables summarize the Company’s non-accrual loans, loans past due 90 days and still accruing and other real estate owned for the periods indicated (the Company had no non-accrual leases at March 31 , 201 6 or December 31, 201 5 (in thousands) : March 31, December 31, 2016 2015 Non-accrual loans SBA non real estate $ 643 $ 733 Consumer 1,265 1,194 Total non-accrual loans 1,908 1,927 Loans past due 90 days or more 787 403 Total non-performing loans 2,695 2,330 Other real estate owned - - Total non-performing assets $ 2,695 $ 2,330 The Company’s loans that were modified as of March 31 , 201 6 and December 31, 201 5 and considered troubled debt restructurings are as follows ( dollars in thousands): March 31, 2016 December 31, 2015 Number Pre-modification recorded investment Post-modification recorded investment Number Pre-modification recorded investment Post-modification recorded investment SBA non real estate 2 $ 427 $ 427 1 $ 171 $ 171 Consumer 2 430 430 2 434 434 Total 4 $ 857 $ 857 3 $ 605 $ 605 The balances below provide information as to how the loans were modified as troubled debt restructurings loans as of March 31 , 201 6 and December 31, 201 5 (in thousands): March 31, 2016 December 31, 2015 Adjusted interest rate Extended maturity Combined rate and maturity Adjusted interest rate Extended maturity Combined rate and maturity SBA non real estate $ - $ 164 $ 262 $ - $ 171 $ - Consumer - 326 105 - 330 104 Total $ - $ 490 $ 367 $ - $ 501 $ 104 There were no loans that had been restructured within the last 12 months that have subsequently defaulted as of March 31, 2016. As of March 31, 201 6 and December 31, 201 5 , the Company ha d no commitments to lend additional funds to loan customers whose loan terms have been modified in troubled debt restructurings. A detail of the changes in the allowance for loan and lease losses by loan category is as follows (in thousands): SBA non real estate SBA commercial mortgage SBA construction Direct lease financing SBLOC Other specialty lending Other consumer loans Unallocated Total March 31, 2016 Beginning balance $ 844 $ 408 $ 48 $ 1,022 $ 762 $ 199 $ 936 $ 181 $ 4,400 Charge-offs - - - (20) - - (12) - (32) Recoveries - - - 6 - - 4 - 10 Provision (credit) 78 302 37 (174) (169) (69) (1) (4) - Ending balance $ 922 $ 710 $ 85 $ 834 $ 593 $ 130 $ 927 $ 177 $ 4,378 Ending balance: Individually evaluated for impairment $ 121 $ - $ - $ - $ - $ - $ 44 $ - $ 165 Ending balance: Collectively evaluated for impairment $ 801 $ 710 $ 85 $ 834 $ 593 $ 130 $ 883 $ 177 $ 4,213 Loans: Ending balance $ 71,220 $ 120,415 $ 9,736 $ 240,670 $ 592,656 $ 48,153 $ 21,782 $ 9,421 $ 1,114,053 Ending balance: Individually evaluated for impairment $ 808 $ - $ - $ - $ - $ - $ 1,591 $ - $ 2,399 Ending balance: Collectively evaluated for impairment $ 70,412 $ 120,415 $ 9,736 $ 240,670 $ 592,656 $ 48,153 $ 20,191 $ 9,421 $ 1,111,654 December 31, 2015 Beginning balance $ 385 $ 461 $ 114 $ 836 $ 562 $ 66 $ 1,181 $ 33 $ 3,638 Charge-offs (111) - - (30) - - (1,220) - (1,361) Recoveries - - - - - - 23 - 23 Provision (credit) 570 (53) (66) 216 200 133 952 148 2,100 Ending balance $ 844 $ 408 $ 48 $ 1,022 $ 762 $ 199 $ 936 $ 181 $ 4,400 Ending balance: Individually evaluated for impairment $ 123 $ - $ - $ - $ - $ - $ 26 $ - $ 149 Ending balance: Collectively evaluated for impairment $ 721 $ 408 $ 48 $ 1,022 $ 762 $ 199 $ 910 $ 181 $ 4,251 Loans: Ending balance $ 68,887 $ 114,029 $ 6,977 $ 231,514 $ 575,948 $ 48,315 $ 23,180 $ 9,227 $ 1,078,077 Ending balance: Individually evaluated for impairment $ 904 $ - $ - $ - $ - $ - $ 1,524 $ - $ 2,428 Ending balance: Collectively evaluated for impairment $ 67,983 $ 114,029 $ 6,977 $ 231,514 $ 575,948 $ 48,315 $ 21,656 $ 9,227 $ 1,075,649 March 31, 2015 Beginning balance $ 385 $ 461 $ 114 $ 836 $ 562 $ 66 $ 1,181 $ 33 3,638 Charge-offs (9) - - - - - (52) - (61) Recoveries - - - - - - 1 - 1 Provision (credit) 517 (167) (40) 236 28 (65) 97 59 665 Ending balance $ 893 $ 294 $ 74 $ 1,072 $ 590 $ 1 $ 1,227 $ 92 $ 4,243 Ending balance: Individually evaluated for impairment $ 280 $ - $ - $ - $ - $ - $ 439 $ - $ 719 Ending balance: Collectively evaluated for impairment $ 613 $ 294 $ 74 $ 1,072 $ 590 $ 1 $ 788 $ 92 $ 3,524 Loans: Ending balance $ 62,385 $ 84,430 $ 15,181 $ 220,559 $ 447,649 $ 1,862 $ 30,120 $ 8,715 $ 870,901 Ending balance: Individually evaluated for impairment $ 1,307 $ - $ - $ - $ - $ - $ 2,969 $ - $ 4,276 Ending balance: Collectively evaluated for impairment $ 61,078 $ 84,430 $ 15,181 $ 220,559 $ 447,649 $ 1,862 $ 27,151 $ 8,715 $ 866,625 The Company did no t have loans acquired with deteriorated credit quality at either March 31 , 201 6 or December 31, 201 5 . A detail of the Company’s delinquent loans by loan category is as follows (in thousands): 30-59 Days 60-89 Days Greater than Total Total March 31, 2016 past due past due 90 days Non-accrual past due Current loans SBA non real estate $ - $ - $ - $ 643 $ 643 $ 70,577 $ 71,220 SBA commercial mortgage - - - - - 120,415 120,415 SBA construction - - - - - 9,736 9,736 Direct lease financing 2,360 510 786 - 3,656 237,014 240,670 SBLOC - - - - - 592,656 592,656 Other specialty lending - - - - - 48,153 48,153 Consumer - other - 10 1 - 11 6,328 6,339 Consumer - home equity 294 1,099 - 1,265 2,658 12,785 15,443 Unamortized loan fees and costs - - - - - 9,421 9,421 $ 2,654 $ 1,619 $ 787 $ 1,908 $ 6,968 $ 1,107,085 $ 1,114,053 30-59 Days 60-89 Days Greater than Total Total December 31, 2015 past due past due 90 days Non-accrual past due Current loans SBA non real estate $ - $ - $ - $ 733 $ 733 $ 68,154 $ 68,887 SBA commercial mortgage - - - - - 114,029 114,029 SBA construction - - - - - 6,977 6,977 Direct lease financing 3,957 3,108 403 - 7,468 224,046 231,514 SBLOC - - - - - 575,948 575,948 Other specialty lending - - - - - 48,315 48,315 Consumer - other - 1 - - 1 6,844 6,845 Consumer - home equity - 1,398 - 1,194 2,592 13,743 16,335 Unamortized loan fees and costs - - - - - 9,227 9,227 $ 3,957 $ 4,507 $ 403 $ 1,927 $ 10,794 $ 1,067,283 $ 1,078,077 The Company evaluates its loans under an internal loan risk rating system as a means of identifying problem loans. The following table provides information by credit risk rating indicator for each segment of the loan portfolio , excluding loans held for sale , at the dates indicated (in thousands): March 31, 2016 Pass Special mention Substandard Doubtful Loss Unrated subject to review * Unrated not subject to review * Total loans SBA non real estate $ 55,815 $ - $ 1,188 $ - $ - $ 12,766 $ 1,451 $ 71,220 SBA commercial mortgage 93,998 - - - - 8,088 18,329 120,415 SBA construction 9,349 - - - - 387 - 9,736 Direct lease financing 96,813 - 752 - - 21,653 121,452 240,670 SBLOC 223,417 - - - - 10,795 358,444 592,656 Other specialty lending 46,479 - - - - - 1,674 48,153 Consumer 9,964 - 4,177 - - - 7,641 21,782 Unamortized loan fees and costs - - - - - - 9,421 9,421 $ 535,835 $ - $ 6,117 $ - $ - $ 53,689 $ 518,412 $ 1,114,053 December 31, 2015 SBA non real estate $ 55,682 $ - $ 904 $ - $ - $ 8,610 $ 3,691 $ 68,887 SBA commercial mortgage 92,859 - - - - 3,894 $ 17,276 114,029 SBA construction 6,977 - - - - - $ - 6,977 Direct lease financing 90,588 - 670 - - 17,200 $ 123,056 231,514 SBLOC 204,201 - - - - 19,372 $ 352,375 575,948 Other specialty lending 46,520 - - - - - $ 1,795 48,315 Consumer 7,631 70 3,473 - - 457 $ 11,549 23,180 Unamortized loan fees and costs - - - - - - $ 9,227 9,227 $ 504,458 $ 70 $ 5,047 $ - $ - $ 49,533 $ 518,969 $ 1,078,077 * For information on targeted loan review thresholds see “Allowance for Loan Losses” |