Loans Not Covered by FDIC Shared Loss Agreement (Non-Covered Loans) and Related Allowance for Loan Losses | 9 Months Ended |
Sep. 30, 2013 |
Receivables [Abstract] | ' |
Loans Not Covered by FDIC Shared Loss Agreement (Non-Covered Loans) and Related Allowance for Loan Losses | ' |
3 | LOANS NOT COVERED BY FDIC SHARED-LOSS AGREEMENT (NON-COVERED LOANS) AND RELATED ALLOWANCE FOR LOAN LOSSES | | | | | | | | | | | | | | | | | | | | | | | |
The Company’s non-covered loans at September 30, 2013 and December 31, 2012 were comprised of the following (dollars in thousands): |
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| | September 30, 2013 | | | December 31, 2012 | | | | | | | | | |
| | Amount | | | % of Non- | | | Amount | | | % of Non- | | | | | | | | | |
Covered Loans | Covered Loans | | | | | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | $ | 140,137 | | | | 24.63 | % | | $ | 135,420 | | | | 23.52 | % | | | | | | | | |
Commercial | | | 233,699 | | | | 41.07 | | | | 246,521 | | | | 42.83 | | | | | | | | | |
Construction and land development | | | 53,117 | | | | 9.33 | | | | 61,127 | | | | 10.62 | | | | | | | | | |
Second mortgages | | | 6,577 | | | | 1.16 | | | | 7,230 | | | | 1.26 | | | | | | | | | |
Multifamily | | | 34,640 | | | | 6.09 | | | | 28,683 | | | | 4.98 | | | | | | | | | |
Agriculture | | | 8,369 | | | | 1.47 | | | | 10,359 | | | | 1.8 | | | | | | | | | |
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Total real estate loans | | | 476,539 | | | | 83.75 | | | | 489,340 | | | | 85.01 | | | | | | | | | |
Commercial loans | | | 85,440 | | | | 15.01 | | | | 77,835 | | | | 13.52 | | | | | | | | | |
Consumer installment loans | | | 5,563 | | | | 0.98 | | | | 6,929 | | | | 1.2 | | | | | | | | | |
All other loans | | | 1,480 | | | | 0.26 | | | | 1,526 | | | | 0.27 | | | | | | | | | |
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Gross loans | | | 569,022 | | | | 100 | % | | | 575,630 | | | | 100 | % | | | | | | | | |
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Less unearned income on loans | | | (62 | ) | | | | | | | (148 | ) | | | | | | | | | | | | |
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Non-covered loans, net of unearned income | | $ | 568,960 | | | | | | | $ | 575,482 | | | | | | | | | | | | | |
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The Company held $39.7 million and $40.9 million in balances of loans guaranteed by the United States Department of Agriculture (USDA), which are included in various categories in the table above, at September 30, 2013 and December 31, 2012, respectively. As these loans are 100% guaranteed by the USDA, no loan loss provision is required. These loan balances included an unamortized purchase premium of $2.8 million and $3.4 million at September 30, 2013 and December 31, 2012, respectively. Unamortized purchase premium is recognized as an adjustment of the related loan yield using the interest method. |
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At September 30, 2013 and December 31, 2012, the Company’s allowance for credit losses was comprised of the following: (i) specific valuation allowances calculated in accordance with FASB ASC 310, Receivables, (ii) general valuation allowances calculated in accordance with FASB ASC 450, Contingencies, based on economic conditions and other qualitative risk factors, and (iii) historical valuation allowances calculated using historical loan loss experience. Management identified loans subject to impairment in accordance with ASC 310. |
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At September 30, 2013 and December 31, 2012, a portion of the construction and land development loans presented above contained interest reserve provisions. The Company follows standard industry practice to include interest reserves and capitalized interest in a construction loan. This practice recognizes interest as an additional cost of the project and, as a result, requires the borrower to put additional equity into the project. In order to monitor the project throughout its life to make sure the property is moving along as planned to ensure appropriateness of continuing to capitalize interest, the Company coordinates an independent property inspection in connection with each disbursement of loan funds. Until completion, there is generally no cash flow from which to make the interest payment. The Company does not advance additional interest reserves to keep a loan from becoming nonperforming. |
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There were no significant amounts of interest reserves recognized as interest income on construction loans with interest reserves for each of the three and nine months ended September 30, 2013 and 2012. Nonperforming construction loans with interest reserves were $4.1 million at each of September 30, 2013 and December 31, 2012. |
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Interest income on nonaccrual loans, if recognized, is recorded using the cash basis method of accounting. There were no significant amounts recognized during either of the three and nine months ended September 30, 2013 and 2012. For the three months ended September 30, 2013 and 2012, estimated interest income of $259,000 and $473,000, respectively, would have been recorded if all such loans had been accruing interest according to their original contractual terms. For the nine months ended September 30, 2013 and 2012, estimated interest income of $774,000 and $1.2 million, respectively, would have been recorded if all such loans had been accruing interest according to their original contractual terms. |
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The following table summarizes information related to impaired loans as of September 30, 2013 (dollars in thousands): |
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| | Recorded | | | Unpaid Principal | | | Related Allowance | | | | | | | | | | | | | |
Investment(1) | Balance(2) | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | $ | 4,042 | | | $ | 4,285 | | | $ | 1,023 | | | | | | | | | | | | | |
Commercial | | | 1,025 | | | | 1,098 | | | | 233 | | | | | | | | | | | | | |
Construction and land development | | | 4,309 | | | | 5,464 | | | | 552 | | | | | | | | | | | | | |
Second mortgages | | | 164 | | | | 258 | | | | 31 | | | | | | | | | | | | | |
Multifamily | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Agriculture | | | — | | | | — | | | | — | | | | | | | | | | | | | |
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Total real estate loans | | | 9,540 | | | | 11,105 | | | | 1,839 | | | | | | | | | | | | | |
Commercial loans | | | 127 | | | | 795 | | | | 17 | | | | | | | | | | | | | |
Consumer installment loans | | | 46 | | | | 47 | | | | 9 | | | | | | | | | | | | | |
All other loans | | | — | | | | — | | | | — | | | | | | | | | | | | | |
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Subtotal impaired loans with a valuation allowance | | | 9,713 | | | | 11,947 | | | | 1,865 | | | | | | | | | | | | | |
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With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | |
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Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | | 1,757 | | | | 1,838 | | | | — | | | | | | | | | | | | | |
Commercial | | | 1,763 | | | | 2,002 | | | | — | | | | | | | | | | | | | |
Construction and land development | | | 2,190 | | | | 4,797 | | | | — | | | | | | | | | | | | | |
Second mortgages | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Multifamily | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Agriculture | | | 208 | | | | 225 | | | | — | | | | | | | | | | | | | |
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Total real estate loans | | | 5,918 | | | | 8,862 | | | | — | | | | | | | | | | | | | |
Commercial loans | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Consumer installment loans | | | 7 | | | | 7 | | | | — | | | | | | | | | | | | | |
All other loans | | | — | | | | — | | | | — | | | | | | | | | | | | | |
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Subtotal impaired loans without a valuation allowance | | | 5,925 | | | | 8,869 | | | | — | | | | | | | | | | | | | |
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Total: | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | | 5,799 | | | | 6,123 | | | | 1,023 | | | | | | | | | | | | | |
Commercial | | | 2,788 | | | | 3,100 | | | | 233 | | | | | | | | | | | | | |
Construction and land development | | | 6,499 | | | | 10,261 | | | | 552 | | | | | | | | | | | | | |
Second mortgages | | | 164 | | | | 258 | | | | 31 | | | | | | | | | | | | | |
Multifamily | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Agriculture | | | 208 | | | | 225 | | | | — | | | | | | | | | | | | | |
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Total real estate loans | | | 15,458 | | | | 19,967 | | | | 1,839 | | | | | | | | | | | | | |
Commercial loans | | | 127 | | | | 795 | | | | 17 | | | | | | | | | | | | | |
Consumer installment loans | | | 53 | | | | 54 | | | | 9 | | | | | | | | | | | | | |
All other loans | | | — | | | | — | | | | — | | | | | | | | | | | | | |
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Total impaired loans | | $ | 15,638 | | | $ | 20,816 | | | $ | 1,865 | | | | | | | | | | | | | |
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-1 | The amount of the investment in a loan, which is not net of a valuation allowance, but which does reflect any direct write-down of the investment | | | | | | | | | | | | | | | | | | | | | | | |
-2 | The contractual amount due, which reflects paydowns applied in accordance with loan documents, but which does not reflect any direct write-downs | | | | | | | | | | | | | | | | | | | | | | | |
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The following table summarizes information related to impaired loans as of December 31, 2012 (dollars in thousands): |
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| | Recorded | | | Unpaid Principal | | | Related Allowance | | | | | | | | | | | | | |
Investment(1) | Balance(2) | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | $ | 3,838 | | | $ | 4,021 | | | $ | 897 | | | | | | | | | | | | | |
Commercial | | | 2,741 | | | | 2,827 | | | | 725 | | | | | | | | | | | | | |
Construction and land development | | | 7,412 | | | | 10,355 | | | | 850 | | | | | | | | | | | | | |
Second mortgages | | | 124 | | | | 170 | | | | 22 | | | | | | | | | | | | | |
Multifamily | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Agriculture | | | 250 | | | | 580 | | | | 20 | | | | | | | | | | | | | |
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Total real estate loans | | | 14,365 | | | | 17,953 | | | | 2,514 | | | | | | | | | | | | | |
Commercial loans | | | 509 | | | | 582 | | | | 121 | | | | | | | | | | | | | |
Consumer installment loans | | | 78 | | | | 79 | | | | 21 | | | | | | | | | | | | | |
All other loans | | | — | | | | — | | | | — | | | | | | | | | | | | | |
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Subtotal impaired loans with a valuation allowance | | | 14,952 | | | | 18,614 | | | | 2,656 | | | | | | | | | | | | | |
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With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | | 2,702 | | | | 3,094 | | | | — | | | | | | | | | | | | | |
Commercial | | | 3,076 | | | | 3,281 | | | | — | | | | | | | | | | | | | |
Construction and land development | | | 1,578 | | | | 1,961 | | | | — | | | | | | | | | | | | | |
Second mortgages | | | 48 | | | | 48 | | | | — | | | | | | | | | | | | | |
Multifamily | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Agriculture | | | — | | | | — | | | | — | | | | | | | | | | | | | |
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Total real estate loans | | | 7,404 | | | | 8,384 | | | | — | | | | | | | | | | | | | |
Commercial loans | | | — | | | | 183 | | | | — | | | | | | | | | | | | | |
Consumer installment loans | | | 9 | | | | 9 | | | | — | | | | | | | | | | | | | |
All other loans | | | — | | | | — | | | | — | | | | | | | | | | | | | |
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Subtotal impaired loans without a valuation allowance | | | 7,413 | | | | 8,576 | | | | — | | | | | | | | | | | | | |
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Total: | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | | 6,540 | | | | 7,115 | | | | 897 | | | | | | | | | | | | | |
Commercial | | | 5,817 | | | | 6,108 | | | | 725 | | | | | | | | | | | | | |
Construction and land development | | | 8,990 | | | | 12,316 | | | | 850 | | | | | | | | | | | | | |
Second mortgages | | | 172 | | | | 218 | | | | 22 | | | | | | | | | | | | | |
Multifamily | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Agriculture | | | 250 | | | | 580 | | | | 20 | | | | | | | | | | | | | |
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Total real estate loans | | | 21,769 | | | | 26,337 | | | | 2,514 | | | | | | | | | | | | | |
Commercial loans | | | 509 | | | | 765 | | | | 121 | | | | | | | | | | | | | |
Consumer installment loans | | | 87 | | | | 88 | | | | 21 | | | | | | | | | | | | | |
All other loans | | | — | | | | — | | | | — | | | | | | | | | | | | | |
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Total impaired loans | | $ | 22,365 | | | $ | 27,190 | | | $ | 2,656 | | | | | | | | | | | | | |
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-1 | The amount of the investment in a loan, which is not net of a valuation allowance, but which does reflect any direct write-down of the investment | | | | | | | | | | | | | | | | | | | | | | | |
-2 | The contractual amount due, which reflects paydowns applied in accordance with loan documents, but which does not reflect any direct write-downs | | | | | | | | | | | | | | | | | | | | | | | |
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The following table summarizes average recorded investment of impaired loans for the three and nine months ended September 30, 2013 and 2012 (dollars in thousands): |
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| | Three months ended | | | Nine months ended | | | | | | | | | |
| | September 30, 2013 | | | September 30, 2012 | | | September 30, 2013 | | | September 30, 2012 | | | | | | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | $ | 5,721 | | | $ | 6,843 | | | $ | 6,169 | | | $ | 6,828 | | | | | | | | | |
Commercial | | | 2,737 | | | | 9,631 | | | | 4,302 | | | | 11,677 | | | | | | | | | |
Construction and land development | | | 7,482 | | | | 10,214 | | | | 7,745 | | | | 11,006 | | | | | | | | | |
Second mortgages | | | 162 | | | | 156 | | | | 168 | | | | 187 | | | | | | | | | |
Multifamily | | | — | | | | — | | | | — | | | | — | | | | | | | | | |
Agriculture | | | 216 | | | | 54 | | | | 229 | | | | 54 | | | | | | | | | |
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Total real estate loans | | | 16,318 | | | | 26,898 | | | | 18,613 | | | | 29,752 | | | | | | | | | |
Commercial loans | | | 121 | | | | 699 | | | | 318 | | | | 838 | | | | | | | | | |
Consumer installment loans | | | 56 | | | | 160 | | | | 70 | | | | 150 | | | | | | | | | |
All other loans | | | — | | | | — | | | | — | | | | — | | | | | | | | | |
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Total impaired loans | | $ | 16,495 | | | $ | 27,757 | | | $ | 19,001 | | | $ | 30,740 | | | | | | | | | |
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The majority of impaired loans are also nonaccruing for which no interest income was recognized during each of the three and nine months ended September 30, 2013 and 2012. No significant amounts of interest income were recognized on accruing impaired loans for each of the three and nine months ended September 30, 2013 and 2012. |
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The following table presents non-covered nonaccruals by loan category as of September 30, 2013 and December 31, 2012 (dollars in thousands): |
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| | September 30, 2013 | | | December 31, 2012 | | | | | | | | | | | | | | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | $ | 4,492 | | | $ | 5,562 | | | | | | | | | | | | | | | | | |
Commercial | | | 1,530 | | | | 5,818 | | | | | | | | | | | | | | | | | |
Construction and land development | | | 6,500 | | | | 8,815 | | | | | | | | | | | | | | | | | |
Second mortgages | | | 135 | | | | 141 | | | | | | | | | | | | | | | | | |
Multifamily | | | — | | | | — | | | | | | | | | | | | | | | | | |
Agriculture | | | 208 | | | | 250 | | | | | | | | | | | | | | | | | |
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Total real estate loans | | | 12,865 | | | | 20,586 | | | | | | | | | | | | | | | | | |
Commercial loans | | | 127 | | | | 385 | | | | | | | | | | | | | | | | | |
Consumer installment loans | | | 52 | | | | 77 | | | | | | | | | | | | | | | | | |
All other loans | | | — | | | | — | | | | | | | | | | | | | | | | | |
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Total loans | | $ | 13,044 | | | $ | 21,048 | | | | | | | | | | | | | | | | | |
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Troubled debt restructures, special mention, and some substandard loans still accruing interest are loans that management expects to ultimately collect all principal and interest due, but not under the terms of the original contract. A reconciliation of impaired loans to nonaccrual loans at September 30, 2013 and December 31, 2012, is set forth in the table below (dollars in thousands): |
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| | September 30, 2013 | | | December 31, 2012 | | | | | | | | | | | | | | | | | |
Nonaccruals | | $ | 13,044 | | | $ | 21,048 | | | | | | | | | | | | | | | | | |
Trouble debt restructure and still accruing | | | 1,648 | | | | 847 | | | | | | | | | | | | | | | | | |
Special mention | | | 290 | | | | 299 | | | | | | | | | | | | | | | | | |
Substandard and still accruing | | | 656 | | | | 171 | | | | | | | | | | | | | | | | | |
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Total impaired | | $ | 15,638 | | | $ | 22,365 | | | | | | | | | | | | | | | | | |
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The following tables present an age analysis of past due status of non-covered loans by category as of September 30, 2013 and December 31, 2012 (dollars in thousands): |
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| | September 30, 2013 | |
| | 30-89 | | | 90 Days | | | Total | | | Current | | | Total | | | Recorded | |
Days | Past Due | Past | Loans | Investment |
Past | | Due | | 90 Days |
Due | | | | Past Due |
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Mortgage loans on real estate: | | | | | | | | | | | | | | | | |
Residential 1-4 family | | $ | 827 | | | $ | 4,492 | | | $ | 5,319 | | | $ | 134,818 | | | $ | 140,137 | | | $ | — | |
Commercial | | | 465 | | | | 1,530 | | | | 1,995 | | | | 231,704 | | | | 233,699 | | | | — | |
Construction and land development | | | 51 | | | | 6,500 | | | | 6,551 | | | | 46,566 | | | | 53,117 | | | | — | |
Second mortgages | | | 181 | | | | 135 | | | | 316 | | | | 6,261 | | | | 6,577 | | | | — | |
Multifamily | | | — | | | | — | | | | — | | | | 34,640 | | | | 34,640 | | | | — | |
Agriculture | | | — | | | | 208 | | | | 208 | | | | 8,161 | | | | 8,369 | | | | — | |
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Total real estate loans | | | 1,524 | | | | 12,865 | | | | 14,389 | | | | 462,150 | | | | 476,539 | | | | — | |
Commercial loans | | | 222 | | | | 127 | | | | 349 | | | | 85,091 | | | | 85,440 | | | | — | |
Consumer installment loans | | | 64 | | | | 52 | | | | 116 | | | | 5,447 | | | | 5,563 | | | | — | |
All other loans | | | — | | | | — | | | | — | | | | 1,480 | | | | 1,480 | | | | — | |
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Total loans | | $ | 1,810 | | | $ | 13,044 | | | $ | 14,854 | | | $ | 554,168 | | | $ | 569,022 | | | $ | — | |
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| | 31-Dec-12 | |
| | 30-89 | | | 90 Days | | | Total | | | Current | | | Total | | | Recorded | |
Days | Past Due | Past | Loans | Investment |
Past | | Due | | 90 Days |
Due | | | | Past Due |
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| | | | Accruing |
Mortgage loans on real estate: | | | | | | | | | | | | |
Residential 1-4 family | | $ | 1,433 | | | $ | 5,797 | | | $ | 7,230 | | | $ | 128,190 | | | $ | 135,420 | | | $ | 235 | |
Commercial | | | — | | | | 5,818 | | | | 5,818 | | | | 240,703 | | | | 246,521 | | | | — | |
Construction and land development | | | 298 | | | | 9,089 | | | | 9,387 | | | | 51,740 | | | | 61,127 | | | | 274 | |
Second mortgages | | | — | | | | 141 | | | | 141 | | | | 7,089 | | | | 7,230 | | | | — | |
Multifamily | | | — | | | | — | | | | — | | | | 28,683 | | | | 28,683 | | | | — | |
Agriculture | | | — | | | | 250 | | | | 250 | | | | 10,109 | | | | 10,359 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 1,731 | | | | 21,095 | | | | 22,826 | | | | 466,514 | | | | 489,340 | | | | 509 | |
Commercial loans | | | 85 | | | | 385 | | | | 470 | | | | 77,365 | | | | 77,835 | | | | — | |
Consumer installment loans | | | 40 | | | | 77 | | | | 117 | | | | 6,812 | | | | 6,929 | | | | — | |
All other loans | | | — | | | | — | | | | — | | | | 1,526 | | | | 1,526 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 1,856 | | | $ | 21,557 | | | $ | 23,413 | | | $ | 552,217 | | | $ | 575,630 | | | $ | 509 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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Activity in the allowance for loan losses on non-covered loans by segment is presented in the following tables (dollars in thousands): |
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2013 | | | | | |
| | Beginning of | | | Provision | | | Charge-offs | | | Recoveries | | | End of Period | | | | | |
Period | Allocation | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | $ | 3,938 | | | $ | (299 | ) | | $ | (119 | ) | | $ | 3 | | | $ | 3,523 | | | | | |
Commercial | | | 2,508 | | | | (69 | ) | | | — | | | | 5 | | | | 2,444 | | | | | |
Construction and land development | | | 2,865 | | | | 290 | | | | (758 | ) | | | 5 | | | | 2,402 | | | | | |
Second mortgages | | | 72 | | | | 99 | | | | (100 | ) | | | 41 | | | | 112 | | | | | |
Multifamily | | | 146 | | | | (26 | ) | | | — | | | | — | | | | 120 | | | | | |
Agriculture | | | 56 | | | | (38 | ) | | | — | | | | 39 | | | | 57 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 9,585 | | | | (43 | ) | | | (977 | ) | | | 93 | | | | 8,658 | | | | | |
Commercial loans | | | 1,772 | | | | 6 | | | | (5 | ) | | | 39 | | | | 1,812 | | | | | |
Consumer installment loans | | | 141 | | | | 38 | | | | (36 | ) | | | 16 | | | | 159 | | | | | |
All other loans | | | 25 | | | | (1 | ) | | | — | | | | — | | | | 24 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 11,523 | | | $ | — | | | $ | (1,018 | ) | | $ | 148 | | | $ | 10,653 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2012 | | | | | |
| | Beginning of | | | Provision | | | Charge-offs | | | Recoveries | | | End of Period | | | | | |
Period | Allocation | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | $ | 3,901 | | | $ | 792 | | | $ | (598 | ) | | $ | 3 | | | $ | 4,098 | | | | | |
Commercial | | | 2,773 | | | | 104 | | | | (1 | ) | | | 4 | | | | 2,880 | | | | | |
Construction and land development | | | 4,506 | | | | (1,190 | ) | | | (93 | ) | | | 1,467 | | | | 4,690 | | | | | |
Second mortgages | | | 233 | | | | (28 | ) | | | — | | | | 56 | | | | 261 | | | | | |
Multifamily | | | 216 | | | | 56 | | | | — | | | | — | | | | 272 | | | | | |
Agriculture | | | 34 | | | | 10 | | | | — | | | | — | | | | 44 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 11,663 | | | | (256 | ) | | | (692 | ) | | | 1,530 | | | | 12,245 | | | | | |
Commercial loans | | | 1,574 | | | | 274 | | | | (88 | ) | | | 52 | | | | 1,812 | | | | | |
Consumer installment loans | | | 274 | | | | (18 | ) | | | (39 | ) | | | 14 | | | | 231 | | | | | |
All other loans | | | 15 | | | | — | | | | — | | | | — | | | | 15 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 13,526 | | | $ | — | | | $ | (819 | ) | | $ | 1,596 | | | $ | 14,303 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2013 | | | | | |
| | Beginning of | | | Provision | | | Charge-offs | | | Recoveries | | | End of Period | | | | | |
Period | Allocation | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | $ | 3,985 | | | $ | (236 | ) | | $ | (280 | ) | | $ | 54 | | | $ | 3,523 | | | | | |
Commercial | | | 2,482 | | | | 1,439 | | | | (1,492 | ) | | | 15 | | | | 2,444 | | | | | |
Construction and land development | | | 3,773 | | | | (1,137 | ) | | | (915 | ) | | | 681 | | | | 2,402 | | | | | |
Second mortgages | | | 142 | | | | 24 | | | | (100 | ) | | | 46 | | | | 112 | | | | | |
Multifamily | | | 303 | | | | (183 | ) | | | — | | | | — | | | | 120 | | | | | |
Agriculture | | | 61 | | | | (37 | ) | | | (6 | ) | | | 39 | | | | 57 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 10,746 | | | | (130 | ) | | | (2,793 | ) | | | 835 | | | | 8,658 | | | | | |
Commercial loans | | | 1,961 | | | | 75 | | | | (302 | ) | | | 78 | | | | 1,812 | | | | | |
Consumer installment loans | | | 195 | | | | 49 | | | | (133 | ) | | | 48 | | | | 159 | | | | | |
All other loans | | | 18 | | | | 6 | | | | — | | | | — | | | | 24 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 12,920 | | | $ | — | | | $ | (3,228 | ) | | $ | 961 | | | $ | 10,653 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2012 | | | | | |
| | Beginning of | | | Provision | | | Charge-offs | | | Recoveries | | | End of Period | | | | | |
Period | Allocation | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | $ | 3,451 | | | $ | 2,095 | | | $ | (1,451 | ) | | $ | 3 | | | $ | 4,098 | | | | | |
Commercial | | | 3,048 | | | | 403 | | | | (639 | ) | | | 68 | | | | 2,880 | | | | | |
Construction and land development | | | 5,729 | | | | (1,744 | ) | | | (923 | ) | | | 1,628 | | | | 4,690 | | | | | |
Second mortgages | | | 296 | | | | (91 | ) | | | — | | | | 56 | | | | 261 | | | | | |
Multifamily | | | 224 | | | | 48 | | | | — | | | | — | | | | 272 | | | | | |
Agriculture | | | 25 | | | | 19 | | | | — | | | | — | | | | 44 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 12,773 | | | | 730 | | | | (3,013 | ) | | | 1,755 | | | | 12,245 | | | | | |
Commercial loans | | | 1,810 | | | | 216 | | | | (396 | ) | | | 182 | | | | 1,812 | | | | | |
Consumer installment loans | | | 241 | | | | 50 | | | | (114 | ) | | | 54 | | | | 231 | | | | | |
All other loans | | | 11 | | | | 4 | | | | — | | | | — | | | | 15 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 14,835 | | | $ | 1,000 | | | $ | (3,523 | ) | | $ | 1,991 | | | $ | 14,303 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Included in charge-offs for the nine months ended September 30, 2013, was a $500,000 writedown arising from the transfer of a loan from non-covered loans to loans held for sale. |
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The following tables present information on the non-covered loans evaluated for impairment in the allowance for loan losses as of September 30, 2013 and December 31, 2012 (dollars in thousands): |
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2013 | |
| | Allowance for Loan Losses | | | Recorded Investment in Loans | |
| | Individually | | | Collectively | | | Total | | | Individually | | | Collectively | | | Total | |
Evaluated for | Evaluated for | Evaluated for | Evaluated for |
Impairment(1) | Impairment | Impairment(1) | Impairment |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | $ | 1,081 | | | $ | 2,419 | | | $ | 3,500 | | | $ | 8,222 | | | $ | 131,915 | | | $ | 140,137 | |
Commercial | | | 291 | | | | 2,153 | | | | 2,444 | | | | 8,340 | | | | 225,359 | | | | 233,699 | |
Construction and land development | | | 731 | | | | 1,670 | | | | 2,401 | | | | 9,283 | | | | 43,834 | | | | 53,117 | |
Second mortgages | | | 39 | | | | 73 | | | | 112 | | | | 253 | | | | 6,324 | | | | 6,577 | |
Multifamily | | | — | | | | 144 | | | | 144 | | | | — | | | | 34,640 | | | | 34,640 | |
Agriculture | | | — | | | | 57 | | | | 57 | | | | 208 | | | | 8,161 | | | | 8,369 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 2,142 | | | | 6,516 | | | | 8,658 | | | | 26,306 | | | | 450,233 | | | | 476,539 | |
Commercial loans | | | 22 | | | | 1,790 | | | | 1,812 | | | | 242 | | | | 85,198 | | | | 85,440 | |
Consumer installment loans | | | 9 | | | | 150 | | | | 159 | | | | 55 | | | | 5,508 | | | | 5,563 | |
All other loans | | | — | | | | 24 | | | | 24 | | | | — | | | | 1,480 | | | | 1,480 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 2,173 | | | $ | 8,480 | | | $ | 10,653 | | | $ | 26,603 | | | $ | 542,419 | | | $ | 569,022 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2012 | |
| | Allowance for Loan Losses | | | Recorded Investment in Loans | |
| | Individually | | | Collectively | | | Total | | | Individually | | | Collectively | | | Total | |
Evaluated for | Evaluated for | Evaluated for | Evaluated for |
Impairment(1) | Impairment | Impairment(1) | Impairment |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | $ | 1,003 | | | $ | 2,982 | | | $ | 3,985 | | | $ | 10,340 | | | $ | 125,080 | | | $ | 135,420 | |
Commercial | | | 864 | | | | 1,618 | | | | 2,482 | | | | 15,636 | | | | 230,885 | | | | 246,521 | |
Construction and land development | | | 1,306 | | | | 2,467 | | | | 3,773 | | | | 14,173 | | | | 46,954 | | | | 61,127 | |
Second mortgages | | | 29 | | | | 113 | | | | 142 | | | | 234 | | | | 6,996 | | | | 7,230 | |
Multifamily | | | — | | | | 303 | | | | 303 | | | | — | | | | 28,683 | | | | 28,683 | |
Agriculture | | | 21 | | | | 40 | | | | 61 | | | | 250 | | | | 10,109 | | | | 10,359 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 3,223 | | | | 7,523 | | | | 10,746 | | | | 40,633 | | | | 448,707 | | | | 489,340 | |
Commercial loans | | | 125 | | | | 1,836 | | | | 1,961 | | | | 605 | | | | 77,230 | | | | 77,835 | |
Consumer installment loans | | | 22 | | | | 173 | | | | 195 | | | | 92 | | | | 6,837 | | | | 6,929 | |
All other loans | | | — | | | | 18 | | | | 18 | | | | — | | | | 1,526 | | | | 1,526 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 3,370 | | | $ | 9,550 | | | $ | 12,920 | | | $ | 41,330 | | | $ | 534,300 | | | $ | 575,630 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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(1) | The category “Individually Evaluated for Impairment” includes loans individually evaluated for impairment and determined not to be impaired. These loans totalled $11.0 million and $19.0 million at September 30, 2013 and December 31, 2012, respectively. The allowance for loans losses allocated to these loans was $308,000 and $714,000 at September 30, 2013 and December 31, 2012, respectively. | | | | | | | | | | | | | | | | | | | | | | | |
Non-covered loans are monitored for credit quality on a recurring basis. These credit quality indicators are defined as follows: |
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Pass - A pass loan is not adversely classified, as it does not display any of the characteristics for adverse classification. This category includes purchased loans that are 100% guaranteed by U.S. Government agencies of $39.7 million and $40.9 million at September 30, 2013 and December 31, 2012, respectively. |
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Special Mention - A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention loans are not adversely classified and do not warrant adverse classification. |
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Substandard - A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard generally have a well defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility of loss if the deficiencies are not corrected. |
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Doubtful - A doubtful loan has all the weaknesses inherent in a loan classified as substandard with the added characteristics that the weaknesses make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions, and values. |
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The following tables present the composition of non-covered loans by credit quality indicator at September 30, 2013 and December 31, 2012 (dollars in thousands): |
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2013 | | | | | |
| | Pass | | | Special | | | Substandard | | | Doubtful | | | Total | | | | | |
Mention | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | $ | 125,745 | | | $ | 7,476 | | | $ | 6,916 | | | $ | — | | | $ | 140,137 | | | | | |
Commercial | | | 213,623 | | | | 12,994 | | | | 6,926 | | | | 156 | | | | 233,699 | | | | | |
Construction and land development | | | 39,356 | | | | 4,478 | | | | 9,283 | | | | — | | | | 53,117 | | | | | |
Second mortgages | | | 5,810 | | | | 543 | | | | 224 | | | | — | | | | 6,577 | | | | | |
Multifamily | | | 34,640 | | | | — | | | | — | | | | — | | | | 34,640 | | | | | |
Agriculture | | | 8,161 | | | | — | | | | 208 | | | | — | | | | 8,369 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 427,335 | | | | 25,491 | | | | 23,557 | | | | 156 | | | | 476,539 | | | | | |
Commercial loans | | | 82,038 | | | | 3,161 | | | | 241 | | | | — | | | | 85,440 | | | | | |
Consumer installment loans | | | 5,298 | | | | 210 | | | | 55 | | | | — | | | | 5,563 | | | | | |
All other loans | | | 1,480 | | | | — | | | | — | | | | — | | | | 1,480 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 516,151 | | | $ | 28,862 | | | $ | 23,853 | | | $ | 156 | | | $ | 569,022 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2012 | | | | | |
| | Pass | | | Special | | | Substandard | | | Doubtful | | | Total | | | | | |
Mention | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | $ | 118,931 | | | $ | 6,496 | | | $ | 9,993 | | | $ | — | | | $ | 135,420 | | | | | |
Commercial | | | 209,347 | | | | 21,540 | | | | 15,478 | | | | 156 | | | | 246,521 | | | | | |
Construction and land development | | | 36,261 | | | | 10,954 | | | | 13,912 | | | | — | | | | 61,127 | | | | | |
Second mortgages | | | 6,519 | | | | 477 | | | | 234 | | | | — | | | | 7,230 | | | | | |
Multifamily | | | 27,514 | | | | 1,169 | | | | — | | | | — | | | | 28,683 | | | | | |
Agriculture | | | 10,109 | | | | — | | | | 250 | | | | — | | | | 10,359 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 408,681 | | | | 40,636 | | | | 39,867 | | | | 156 | | | | 489,340 | | | | | |
Commercial loans | | | 76,148 | | | | 1,205 | | | | 482 | | | | — | | | | 77,835 | | | | | |
Consumer installment loans | | | 6,617 | | | | 220 | | | | 92 | | | | — | | | | 6,929 | | | | | |
All other loans | | | 1,526 | | | | — | | | | — | | | | — | | | | 1,526 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 492,972 | | | $ | 42,061 | | | $ | 40,441 | | | $ | 156 | | | $ | 575,630 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
In accordance with FASB ASU 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring, the Company assesses all loan modifications to determine whether they are considered troubled debt restructurings (TDRs) under the guidance. During the three months ended September 30 2013, there were no loans modified, that were considered to be TDRs. During the nine months ended September 30, 2013, the Company modified one residential 1-4 family loan that was considered to be a TDR. The Company extended the term and lowered the interest rate for this loan, which had a pre- and post-modification balance of $174,000. |
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During the three months ended September 30, 2012, the Company modified two loans that were considered to be TDRs. The Company extended the terms for one of these loans and lowered the interest rate for one of these loans. The following table presents information relating to loans modified as TDRs during the three months ended September 30, 2012 (dollars in thousands): |
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, 2012 | | | | | | | | | | | | | | | |
| | Number | | Pre-Modification | | | Post-Modification | | | | | | | | | | | | | | | |
of | Outstanding | Outstanding | | | | | | | | | | | | | | |
Contracts | Recorded | Recorded | | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | 1 | | $ | 294 | | | $ | 294 | | | | | | | | | | | | | | | |
Commercial | | 1 | | | 2,979 | | | | 2,777 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | 2 | | | 3,273 | | | | 3,071 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | 2 | | $ | 3,273 | | | $ | 3,071 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
During the nine months ended September 30, 2012, the Company modified seven loans that were considered to be TDRs. The Company extended the terms for three of these loans and lowered the interest rate for six of these loans. The following table presents information relating to loans modified as TDRs during the nine months ended September 30, 2012 (dollars in thousands): |
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended September 30, 2012 | | | | | | | | | | | | | | | |
| | Number | | Pre-Modification | | | Post-Modification | | | | | | | | | | | | | | | |
of | Outstanding | Outstanding | | | | | | | | | | | | | | |
Contracts | Recorded | Recorded | | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 family | | 3 | | $ | 765 | | | $ | 765 | | | | | | | | | | | | | | | |
Commercial | | 2 | | | 4,150 | | | | 3,948 | | | | | | | | | | | | | | | |
Construction and land development | | 1 | | | 675 | | | | 675 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | 6 | | | 5,590 | | | | 5,388 | | | | | | | | | | | | | | | |
Commercial loans | | 1 | | | 74 | | | | 74 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | 7 | | $ | 5,664 | | | $ | 5,462 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
A loan is considered to be in default if it is 90 days or more past due. There was one TDR that had been restructured during the previous 12 months that resulted in default during the three and nine months ended September 30, 2013. This residential 1-4 family loan had a recorded investment of $173,000. |
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There were two TDRs that had been restructured during the previous 12 months that resulted in default during each of the three and nine months ended September 30, 2012. The following table presents information relating to TDRs that resulted in default during the three and nine months ended September 30, 2012 (dollars in thousands): |
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| | Three and nine months ended | | | | | | | | | | | | | | | | | |
September 30, 2012 | | | | | | | | | | | | | | | | |
| | Number | | | Recorded | | | | | | | | | | | | | | | | | |
of | Investment | | | | | | | | | | | | | | | | |
Contracts | | | | | | | | | | | | | | | | | |
Mortgage loans on real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
Construction and land development | | | 1 | | | $ | 668 | | | | | | | | | | | | | | | | | |
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Total real estate loans | | | 1 | | | | 668 | | | | | | | | | | | | | | | | | |
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Commercial loans | | | 1 | | | | 74 | | | | | | | | | | | | | | | | | |
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Total loans | | | 2 | | | $ | 742 | | | | | | | | | | | | | | | | | |
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In the determination of the allowance for loan losses, management considers TDRs and subsequent defaults in these restructures by reviewing for impairment in accordance with FASB ASC 310-10-35, Receivables, Subsequent Measurement. |
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On September 30, 2013, the Company entered into an agreement to sell $25.1 million of loans in the Georgia branches to Pinnacle Bank at a $250,000 premium (see Note 13). These loans were classified as loans held for sale at September 30, 2013. |
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At September 30, 2013, the Company had 1-4 family mortgages in the amount of $149.2 million pledged as collateral to the Federal Home Loan Bank for a total borrowing capacity of $92.4 million. |
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