Note 6 - Loans Receivable and Allowance for Loan Losses | 3 Months Ended |
Mar. 31, 2014 |
Receivables [Abstract] | ' |
Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | ' |
NOTE 6 – LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES |
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Loans receivable, which management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Company is generally amortizing these amounts over the contractual life of the loan. |
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The loans receivable portfolio is segmented into commercial and consumer loans. Commercial loans consist of the following classes: commercial and industrial, real estate-construction and real estate-commercial. Consumer loans consist of the following classes: real estate-residential and consumer. |
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For all classes of loans receivable, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest previously accrued on these loans is reversed from income. Interest received on nonaccrual loans including impaired loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments. |
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The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded loan commitments and is recorded in other liabilities on the consolidated balance sheet, which at March 31, 2014 and December 31, 2013, the Company had no such reserves. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectable are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. |
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The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a monthly evaluation of the adequacy of the allowance. The allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available. |
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The allowance consists of specific, general and unallocated components. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of the loan. The specific component relates to loans that are classified as impaired. When a loan is impaired, there are three acceptable methods under ASC 310-10-35 for measuring the impairment: |
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| 1 | The loan’s observable market price; | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| 2 | The fair value of the underlying collateral; or | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| 3 | The present value (PV) of expected future cash flows. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Loans that are considered “collateral-dependent” should be evaluated under the “Fair market value of collateral.” Loans that are still expected to be supported by repayment from the borrower should be evaluated under the “Present value of future cash flows.” |
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For the most part, the Company measures impairment under the “Fair market value of collateral” for any loan that would rely on the value of collateral for recovery in the event of default. The individual impairment analysis for each loan is clearly documented as to the chosen valuation method. |
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The general component covers pools of loans by loan class including commercial and industrial, real estate-construction and real estate-commercial not considered impaired as well as smaller balance homogeneous loans such as real estate-residential and consumer. |
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These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These qualitative risk factors include: |
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| 1 | Changes in lending policy and procedures, including changes in underwriting standards and collection practices not previously considered in estimating credit losses. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| 2 | Changes in relevant economic and business conditions. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| 3 | Changes in nature and volume of the loan portfolio and in the terms of loans. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| 4 | Changes in experience, ability and depth of lending management and staff. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| 5 | Changes in the volume and severity of past due loans, the volume of non-accrual loans and the volume and severity of adversely classified loans. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| 6 | Changes in the quality of the loan review system. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| 7 | Changes in the value of underlying collateral for collateral-dependent loans. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| 8 | The existence and effect of any concentration of credit and changes in the level of such concentrations. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| 9 | The effect of other external forces such as competition, legal and regulatory requirements on the level of estimated credit losses in the existing portfolio. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Each factor is assigned a risk value to reflect low, moderate or high risk assessments based on management’s best judgment using current market, macro and other relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation in each factor and accompanies the allowance for loan loss calculation. |
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An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. |
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A loan is considered impaired when it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and industrial, real estate-commercial, real estate-construction, real estate-residential and consumer loans by 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. |
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An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value. The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral. |
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For commercial loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property. |
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For commercial loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets. |
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The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments, for commercial and consumer loans. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans criticized special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristics that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectable and are charged to the allowance for loan losses. Loans not classified are rated pass. |
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In addition, federal and state regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate. |
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The components of the loan portfolio at March 31, 2014 and December 31, 2013 are as follows: |
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| | March 31, | | | December 31, | | | | | | | | | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | | | | | | | | | |
| | (In Thousands) | | | | | | | | | | | | | | | | | | | | | |
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Commercial and industrial | | $ | 89,632 | | | $ | 98,289 | | | | | | | | | | | | | | | | | | | | | |
Real estate – construction | | | 82,651 | | | | 83,060 | | | | | | | | | | | | | | | | | | | | | |
Real estate – commercial | | | 360,286 | | | | 364,352 | | | | | | | | | | | | | | | | | | | | | |
Real estate – residential | | | 28,853 | | | | 25,588 | | | | | | | | | | | | | | | | | | | | | |
Consumer | | | 31,669 | | | | 32,413 | | | | | | | | | | | | | | | | | | | | | |
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| | | 593,091 | | | | 603,702 | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses | | | (7,567 | ) | | | (7,872 | ) | | | | | | | | | | | | | | | | | | | | |
Unearned fees | | | (789 | ) | | | (886 | ) | | | | | | | | | | | | | | | | | | | | |
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Net Loans | | $ | 584,735 | | | $ | 594,944 | | | | | | | | | | | | | | | | | | | | | |
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The performance and credit quality of the loan portfolio is monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the past due status as of March 31, 2014 and December 31, 2013: |
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| | 30-59 Days | | | 60-89 Days | | | 90 Days & | | | Total Past | | | Current | | | Total Loans | | | Loans | |
Past Due | Past Due | Greater | Due | Receivable | Receivable |
| | | | | >90 Days and |
| | | | | Accruing |
March 31, 2014: | | | | | | | | | | (In Thousands) | | | | | | | | | |
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Commercial and industrial | | $ | - | | | $ | 30 | | | $ | 145 | | | $ | 175 | | | $ | 89,457 | | | $ | 89,632 | | | $ | - | |
Real estate – construction | | | 630 | | | | 2,546 | | | | - | | | | 3,176 | | | | 79,475 | | | | 82,651 | | | | - | |
Real estate – commercial | | | 7 | | | | 442 | | | | 6,068 | | | | 6,517 | | | | 353,769 | | | | 360,286 | | | | - | |
Real estate – residential | | | 416 | | | | - | | | | 579 | | | | 995 | | | | 27,858 | | | | 28,853 | | | | - | |
Consumer | | | - | | | | 102 | | | | 488 | | | | 590 | | | | 31,079 | | | | 31,669 | | | | - | |
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Total | | $ | 1,053 | | | $ | 3,120 | | | $ | 7,280 | | | $ | 11,453 | | | $ | 581,638 | | | $ | 593,091 | | | $ | - | |
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| | 30-59 Days | | | 60-89 Days | | | 90 Days & | | | Total Past | | | Current | | | Total Loans | | | Loans | |
Past Due | Past Due | Greater | Due | Receivable | Receivable |
| | | | | >90 Days and |
| | | | | Accruing |
31-Dec-13 | | | | | | | | | | (In Thousands) | | | | | | | | | |
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Commercial and industrial | | $ | 673 | | | $ | 408 | | | $ | 17 | | | $ | 1,098 | | | $ | 97,191 | | | $ | 98,289 | | | $ | - | |
Real estate – construction | | | 5,483 | | | | 1,647 | | | | 225 | | | | 7,355 | | | | 75,705 | | | | 83,060 | | | | - | |
Real estate – commercial | | | 399 | | | | 536 | | | | 5,483 | | | | 6,418 | | | | 357,934 | | | | 364,352 | | | | - | |
Real estate – residential | | | - | | | | 580 | | | | - | | | | 580 | | | | 25,008 | | | | 25,588 | | | | - | |
Consumer | | | 22 | | | | - | | | | 284 | | | | 306 | | | | 32,107 | | | | 32,413 | | | | - | |
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Total | | $ | 6,577 | | | $ | 3,171 | | | $ | 6,009 | | | $ | 15,757 | | | $ | 587,945 | | | $ | 603,702 | | | $ | - | |
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The following table presents non-accrual loans by classes of the loan portfolio at March 31, 2014 and December 31, 2013: |
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| | March 31, | | | December 31, | | | | | | | | | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | | | | | | | | | |
| | (In Thousands) | | | | | | | | | | | | | | | | | | | | | |
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Commercial and industrial | | $ | 145 | | | $ | 17 | | | | | | | | | | | | | | | | | | | | | |
Real estate – construction | | | - | | | | 225 | | | | | | | | | | | | | | | | | | | | | |
Real estate – commercial | | | 6,068 | | | | 5,483 | | | | | | | | | | | | | | | | | | | | | |
Real estate – residential | | | 579 | | | | - | | | | | | | | | | | | | | | | | | | | | |
Consumer | | | 488 | | | | 284 | | | | | | | | | | | | | | | | | | | | | |
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Total | | $ | 7,280 | | | $ | 6,009 | | | | | | | | | | | | | | | | | | | | | |
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Loans whose terms are modified are classified as troubled debt restructurings if the Company grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a temporary reduction in interest rate or a modification of a loan’s amortization schedule. Non-accrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after the modification is in place. Loans classified as troubled debt restructurings are designated as impaired. Modifications involving troubled borrowers may include a modification of a loan’s amortization schedule, reduction in the stated interest rate and rescheduling of future cash flows. |
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The Company’s troubled debt restructured modifications are typically made on terms typically up to 12 months in order to aggressively monitor and track performance. The short-term modifications performances are monitored for continued payment performance for an additional period of time after the expiration of the concession. Balance reductions and annualized loss rates are also important metrics that are monitored. The main objective of the modification programs is to reduce the payment burden for the borrower and improve the net present value of the Company’s expected cash flows. |
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The following table presents newly troubled debt restructured loans that occurred during the three months ended March 31, 2014 and 2013: |
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| | Three months ended March 31, 2014 | | | | | | | | | | | | | | | | | |
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| | Number of | | | Pre-Modification | | | Post-Modification | | | | | | | | | | | | | | | | | |
Contracts | Outstanding | Outstanding | | | | | | | | | | | | | | | | |
| Recorded | Recorded | | | | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | | | |
Troubled Debt Restructuring: | | (Dollars in Thousands) | | | | | | | | | | | | | | | | | |
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Commercial and industrial | | | 2 | | | $ | 515 | | | $ | 515 | | | | | | | | | | | | | | | | | |
Real estate – construction | | | 1 | | | | 190 | | | | 190 | | | | | | | | | | | | | | | | | |
Real estate – commercial | | | 4 | | | | 2,319 | | | | 2,319 | | | | | | | | | | | | | | | | | |
Real estate – residential | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | |
Consumer | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | |
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Total | | | 7 | | | $ | 3,024 | | | $ | 3,024 | | | | | | | | | | | | | | | | | |
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| | Three months ended March 31, 2013 | | | | | | | | | | | | | | | | | |
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| | Number of | | | Pre-Modification | | | Post-Modification | | | | | | | | | | | | | | | | | |
Contracts | Outstanding | Outstanding | | | | | | | | | | | | | | | | |
| Recorded | Recorded | | | | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | | | |
Troubled Debt Restructuring: | | (Dollars in Thousands) | | | | | | | | | | | | | | | | | |
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Commercial and industrial | | | 2 | | | $ | 1,146 | | | $ | 1,146 | | | | | | | | | | | | | | | | | |
Real estate – construction | | | 1 | | | | 389 | | | | 389 | | | | | | | | | | | | | | | | | |
Real estate – commercial | | | 4 | | | | 5,514 | | | | 5,514 | | | | | | | | | | | | | | | | | |
Real estate – residential | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | |
Consumer | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 7 | | | $ | 7,049 | | | $ | 7,049 | | | | | | | | | | | | | | | | | |
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The Company classifies all troubled debt restructurings as impaired loans. Impaired loans are individually assessed to determine that the loan’s carrying value is not in excess of the estimated fair value of the collateral (less cost to sell), if the loan is collateral dependent, or the present value of the expected future cash flows, if the loan is not collateral dependent. Management performs a detailed evaluation of each impaired loan and generally obtains updated appraisals as part of the evaluation. In addition, management adjusts estimated fair value down to appropriately consider recent market conditions, our willingness to accept a lower sales price to effect a quick sale, and costs to dispose of any supporting collateral. |
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Our troubled debt restructured loans are generally structured with short-term payment plans. The extent of these plans is generally made on terms up to twelve-month payments and all the loans identified as troubled debt restructured as of March 31, 2014, generally involve a temporary reduction in interest rate or a modification of a loan’s amortization schedule. The Company has not extended maturities, recasted legal documents and/or forgiven any interest or principal. |
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As of March 31, 2014, loans modified in a troubled debt restructuring totaled $27.9 million, including $20.2 million that are current, $630,000 that are 30-59 days past due, $2.0 million that are 60-89 days past due and seven non-accrual loans totaling $5.1 million. As a result of our impairment evaluation, the Company established an allowance of $647,000 against seven loans classified as troubled debt restructuring as of March 31, 2014. |
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The following tables represent financing receivables modified as troubled debt restructurings and with a payment default, with the payment default occurring within 12 months of the restructure date, and the payment default occurring during the three and nine months ended March 31, 2014 and 2013: |
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| | Three months ended | | | | | | | | | | | | | | | | | | | | | |
31-Mar-14 | | | | | | | | | | | | | | | | | | | | |
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| | Number of | | | Recorded | | | | | | | | | | | | | | | | | | | | | |
Contracts | Investment | | | | | | | | | | | | | | | | | | | | |
Troubled Debt Restructuring That Subsequently Defaulted: | | (Dollars in Thousands) | | | | | | | | | | | | | | | | | | | | | |
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Commercial and industrial | | | 1 | | | $ | 17 | | | | | | | | | | | | | | | | | | | | | |
Real estate – construction | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | |
Real estate – commercial | | | 3 | | | | 2,543 | | | | | | | | | | | | | | | | | | | | | |
Real estate – residential | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | |
Consumer | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 4 | | | $ | 2,560 | | | | | | | | | | | | | | | | | | | | | |
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| | Three months ended | | | | | | | | | | | | | | | | | | | | | |
31-Mar-13 | | | | | | | | | | | | | | | | | | | | |
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| | Number of | | | Recorded | | | | | | | | | | | | | | | | | | | | | |
Contracts | Investment | | | | | | | | | | | | | | | | | | | | |
Troubled Debt Restructuring That Subsequently Defaulted: | | (Dollars in Thousands) | | | | | | | | | | | | | | | | | | | | | |
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Commercial and industrial | | | - | | | $ | - | | | | | | | | | | | | | | | | | | | | | |
Real estate – construction | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | |
Real estate – commercial | | | 1 | | | | 2,608 | | | | | | | | | | | | | | | | | | | | | |
Real estate – residential | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | |
Consumer | | | 1 | | | | 145 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 2 | | | $ | 2,753 | | | | | | | | | | | | | | | | | | | | | |
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During the three months ended March 31, 2014, two real estate commercial loans totaling $2.5 million were placed on non-accrual status that were previously troubled debt restructured loans. The Company recorded charge-offs of $609,000 for these loans, which had been previously fully reserved. These loans were individually analyzed for impairment at the time of default and it was determined that the collateral was in excess of the combined outstanding principal and interest of the loans and therefore no additional specific reserve was recorded nor charge-off was taken. It is the Company’s policy to classify a troubled debt restructured loan that is either 90 days or greater delinquent or that has been placed in a non-accrual status as a subsequently defaulted troubled debt restructured loan. |
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The following tables summarize information in regards to impaired loans by loan portfolio class at or for the three months ended March 31, 2014 and at or for the year ended December 31, 2013: |
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| | At or for the three months ended March 31, 2014 | | | | | | | | | |
| | Recorded | | | Unpaid | | | Related | | | Average | | | Interest | | | | | | | | | |
Investment, | Principal | Allowance | Recorded | Income | | | | | | | | |
Net of | Balance | | Investment | Recognized | | | | | | | | |
Charge-offs | | | | | | | | | | | | |
March 31, 2014: | | (In Thousands) | | | | | | | | | |
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With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 146 | | | $ | 146 | | | $ | - | | | $ | 146 | | | $ | 2 | | | | | | | | | |
Real estate – construction | | | 6,634 | | | | 6,634 | | | | - | | | | 6,749 | | | | 83 | | | | | | | | | |
Real estate – commercial | | | 10,937 | | | | 11,398 | | | | - | | | | 11,130 | | | | 88 | | | | | | | | | |
Real estate – residential | | | 972 | | | | 972 | | | | - | | | | 974 | | | | 10 | | | | | | | | | |
Consumer | | | 918 | | | | 958 | | | | - | | | | 944 | | | | 5 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 495 | | | $ | 495 | | | $ | 124 | | | $ | 531 | | | $ | 6 | | | | | | | | | |
Real estate – construction | | | 2,676 | | | | 2,676 | | | | 47 | | | | 2,527 | | | | 30 | | | | | | | | | |
Real estate – commercial | | | 7,652 | | | | 7,986 | | | | 476 | | | | 7,802 | | | | 73 | | | | | | | | | |
Real estate – residential | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | |
Consumer | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 641 | | | $ | 641 | | | $ | 124 | | | $ | 677 | | | $ | 8 | | | | | | | | | |
Real estate – construction | | | 9,310 | | | | 9,310 | | | | 47 | | | | 9,276 | | | | 113 | | | | | | | | | |
Real estate – commercial | | | 18,589 | | | | 19,384 | | | | 476 | | | | 18,932 | | | | 161 | | | | | | | | | |
Real estate – residential | | | 972 | | | | 972 | | | | - | | | | 974 | | | | 10 | | | | | | | | | |
Consumer | | | 918 | | | | 958 | | | | - | | | | 944 | | | | 5 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | 30,430 | | | $ | 31,265 | | | $ | 647 | | | $ | 30,803 | | | $ | 297 | | | | | | | | | |
|
| | At year end December 31, 2013 | | | | | | | | | |
| | Recorded | | | Unpaid | | | Related | | | Average | | | Interest | | | | | | | | | |
Investment, | Principal | Allowance | Recorded | Income | | | | | | | | |
Net of | Balance | | Investment | Recognized | | | | | | | | |
Charge-offs | | | | | | | | | | | | |
| | (In Thousands) | | | | | | | | | |
31-Dec-13 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 147 | | | $ | 147 | | | $ | - | | | $ | 152 | | | $ | 7 | | | | | | | | | |
Real estate – construction | | | 6,786 | | | | 6,786 | | | | - | | | | 5,703 | | | | 275 | | | | | | | | | |
Real estate – commercial | | | 15,160 | | | | 15,346 | | | | - | | | | 15,464 | | | | 536 | | | | | | | | | |
Real estate – residential | | | 395 | | | | 395 | | | | - | | | | 395 | | | | 2 | | | | | | | | | |
Consumer | | | 477 | | | | 477 | | | | - | | | | 483 | | | | 8 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | | | | | | | |
Real estate – construction | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | |
Real estate – commercial | | | 6,165 | | | | 6,165 | | | | 832 | | | | 6,330 | | | | 221 | | | | | | | | | |
Real estate – residential | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | |
Consumer | | | 243 | | | | 243 | | | | 40 | | | | 244 | | | | 10 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 147 | | | $ | 147 | | | $ | - | | | $ | 152 | | | $ | 7 | | | | | | | | | |
Real estate – construction | | | 6,786 | | | | 6,786 | | | | - | | | | 5,703 | | | | 275 | | | | | | | | | |
Real estate – commercial | | | 21,325 | | | | 21,511 | | | | 832 | | | | 21,794 | | | | 757 | | | | | | | | | |
Real estate – residential | | | 395 | | | | 395 | | | | - | | | | 395 | | | | 2 | | | | | | | | | |
Consumer | | | 720 | | | | 720 | | | | 40 | | | | 727 | | | | 18 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | 29,373 | | | $ | 29,559 | | | $ | 872 | | | $ | 28,771 | | | $ | 1,059 | | | | | | | | | |
|
The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of March 31, 2014 and December 31, 2013: |
|
| | Pass | | | Special | | | Substandard | | | Doubtful | | | Total | | | | | | | | | |
Mention | | | | | | | | |
March 31, 2014: | | (In Thousands) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 88,674 | | | $ | 507 | | | $ | 451 | | | $ | - | | | $ | 89,632 | | | | | | | | | |
Real estate – construction | | | 73,195 | | | | - | | | | 9,456 | | | | - | | | | 82,651 | | | | | | | | | |
Real estate – commercial | | | 339,549 | | | | 8,378 | | | | 12,359 | | | | - | | | | 360,286 | | | | | | | | | |
Real estate – residential | | | 28,172 | | | | - | | | | 681 | | | | - | | | | 28,853 | | | | | | | | | |
Consumer | | | 30,739 | | | | 40 | | | | 890 | | | | - | | | | 31,669 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 560,329 | | | $ | 8,925 | | | $ | 23,837 | | | $ | - | | | $ | 593,091 | | | | | | | | | |
|
| | Pass | | | Special | | | Substandard | | | Doubtful | | | Total | | | | | | | | | |
Mention | | | | | | | | |
31-Dec-13 | | (In Thousands) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 97,299 | | | $ | 531 | | | $ | 459 | | | $ | - | | | $ | 98,289 | | | | | | | | | |
Real estate – construction | | | 73,810 | | | | - | | | | 9,250 | | | | - | | | | 83,060 | | | | | | | | | |
Real estate – commercial | | | 343,912 | | | | 6,384 | | | | 14,056 | | | | - | | | | 364,352 | | | | | | | | | |
Real estate – residential | | | 25,485 | | | | - | | | | 103 | | | | - | | | | 25,588 | | | | | | | | | |
Consumer | | | 31,590 | | | | 135 | | | | 688 | | | | - | | | | 32,413 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 572,096 | | | $ | 7,050 | | | $ | 24,556 | | | $ | - | | | $ | 603,702 | | | | | | | | | |
|
The following tables present the balance in the allowance for loan losses at March 31, 2014 and December 31, 2013 disaggregated on the basis of the Company’s impairment method by class of loans receivable along with the balance of loans receivable by class disaggregated on the basis of the Company’s impairment methodology: |
|
| | Allowance for Loan Losses | | | Loans Receivable | | | | | |
| | Balance | | | Balance | | | Balance | | | Balance | | | Balance | | | Balance | | | | | |
Related to | Related to | Individually | Collectively | | | | |
Loans | Loans | Evaluated for | Evaluated for | | | | |
Individually | Collectively | Impairment | Impairment | | | | |
Evaluated | Evaluated | | | | | | |
for | for | | | | | | |
Impairment | Impairment | | | | | | |
March 31, 2014: | | | | | | | | | | (In Thousands) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 1,079 | | | $ | 124 | | | $ | 955 | | | $ | 89,632 | | | $ | 641 | | | $ | 88,991 | | | | | |
Real estate – construction | | | 1,489 | | | | 47 | | | | 1,442 | | | | 82,651 | | | | 9,310 | | | | 73,341 | | | | | |
Real estate – commercial | | | 4,143 | | | | 476 | | | | 3,667 | | | | 360,286 | | | | 18,589 | | | | 341,697 | | | | | |
Real estate – residential | | | 217 | | | | - | | | | 217 | | | | 28,853 | | | | 972 | | | | 27,881 | | | | | |
Consumer | | | 538 | | | | - | | | | 538 | | | | 31,669 | | | | 918 | | | | 30,751 | | | | | |
Unallocated | | | 101 | | | | - | | | | 101 | | | | - | | | | - | | | | - | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 7,567 | | | $ | 647 | | | $ | 6,920 | | | $ | 593,091 | | | $ | 30,430 | | | $ | 562,661 | | | | | |
|
| | Allowance for Loan Losses | | | Loans Receivable | | | | | |
| | Balance | | | Balance | | | Balance | | | Balance | | | Balance | | | Balance | | | | | |
Related to | Related to | Individually | Collectively | | | | |
Loans | Loans | Evaluated for | Evaluated for | | | | |
Individually | Collectively | Impairment | Impairment | | | | |
Evaluated | Evaluated | | | | | | |
for | for | | | | | | |
Impairment | Impairment | | | | | | |
December 31, 2013: | | | | | | | | | | (In Thousands) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 1,052 | | | $ | - | | | $ | 1,052 | | | $ | 98,289 | | | $ | 147 | | | $ | 98,142 | | | | | |
Real estate – construction | | | 1,494 | | | | - | | | | 1,494 | | | | 83,060 | | | | 6,786 | | | | 76,274 | | | | | |
Real estate – commercial | | | 4,407 | | | | 832 | | | | 3,575 | | | | 364,352 | | | | 21,325 | | | | 343,027 | | | | | |
Real estate – residential | | | 190 | | | | - | | | | 190 | | | | 25,588 | | | | 395 | | | | 25,193 | | | | | |
Consumer | | | 594 | | | | 40 | | | | 554 | | | | 32,413 | | | | 720 | | | | 31,693 | | | | | |
Unallocated | | | 135 | | | | - | | | | 135 | | | | - | | | | - | | | | - | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 7,872 | | | $ | 872 | | | $ | 7,000 | | | $ | 603,702 | | | $ | 29,373 | | | $ | 574,329 | | | | | |
|
During the second quarter of 2013, certain types of loans were reclassified due to their purpose and overall risk characteristics. Therefore, balances on certain loans within the allowance for loan losses as of March 31, 2013 were reclassified to conform to the March 31, 2014 presentation. |
|
The following table presents the change in the allowance for loan losses by classes of loans for the three months ended March 31, 2014 and 2013: |
|
Allowance for Loan Losses | | Commercial | | | Real Estate - | | | Real Estate - | | | Real Estate - | | | Consumer | | | Unallocated | | | Total | |
and | Commercial | Construction | Residential |
Industrial | | | |
| | | | | | | | | | (In Thousands) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance, January 1, 2014 | | $ | 1,052 | | | $ | 4,407 | | | $ | 1,494 | | | $ | 190 | | | $ | 594 | | | $ | 135 | | | $ | 7,872 | |
Charge-offs | | | - | | | | (609 | ) | | | - | | | | - | | | | (40 | ) | | | - | | | | (649 | ) |
Recoveries | | | 40 | | | | - | | | | - | | | | 20 | | | | 1 | | | | - | | | | 61 | |
Provision | | | (13 | ) | | | 345 | | | | (5 | ) | | | 7 | | | | (17 | ) | | | (34 | ) | | | 283 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance, March 31, 2014 | | $ | 1,079 | | | $ | 4,143 | | | $ | 1,489 | | | $ | 217 | | | $ | 538 | | | $ | 101 | | | $ | 7,567 | |
|
Allowance for Loan Losses | | Commercial | | | Real Estate - | | | Real Estate - | | | Real Estate - | | | Consumer | | | Unallocated | | | Total | |
and | Commercial | Construction | Residential |
Industrial | | | |
| | | | | | | | | | (In Thousands) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance, January 1, 2013 | | $ | 1,354 | | | $ | 3,791 | | | $ | 1,720 | | | $ | 217 | | | $ | 740 | | | $ | 162 | | | $ | 7,984 | |
Charge-offs | | | (170 | ) | | | - | | | | - | | | | (60 | ) | | | - | | | | - | | | | (230 | ) |
Recoveries | | | 261 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 261 | |
Provision | | | (151 | ) | | | (35 | ) | | | 375 | | | | 34 | | | | (48 | ) | | | 5 | | | | 180 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance, March 31, 2013 | | $ | 1,294 | | | $ | 3,756 | | | $ | 2,095 | | | $ | 191 | | | $ | 692 | | | $ | 167 | | | $ | 8,195 | |
|