Allowance for Loan Losses | NOTE 6: ALLOWANCE FOR LOAN LOSSES The following is a roll forward of the Bank’s allowance for loan losses for the following periods: (dollars in thousands) Beginning Provision for Charge-offs Recoveries Ending Quarter Ended September 30, 2015: Real estate loans: Residential properties $ 6,628 $ 291 $ — $ — $ 6,919 Commercial properties 1,912 298 (70 ) — 2,140 Commercial and industrial loans 1,917 77 — — 1,994 Consumer loans 343 (96 ) — — 247 Total $ 10,800 $ 570 $ (70 ) $ — $ 11,300 Nine Months Ended September 30, 2015: Real estate loans: Residential properties $ 6,586 $ 333 $ — $ — $ 6,919 Commercial properties 1,526 924 (310 ) — 2,140 Commercial and industrial loans 1,897 110 (13 ) — 1,994 Consumer loans 141 106 — — 247 Total $ 10,150 $ 1,473 $ (323 ) $ — $ 11,300 Year Ended December 31, 2014: Real estate loans: Residential properties $ 6,157 $ 429 $ — $ — $ 6,586 Commercial properties 1,440 86 — — 1,526 Commercial and industrial loans 2,149 (252 ) — — 1,897 Consumer loans 169 (28 ) — — 141 Total $ 9,915 $ 235 $ — $ — $ 10,150 The following table presents the balance in the allowance for loan losses and the recorded investment in loans by impairment method as of: (dollars in thousands) Allowance for Loan Losses Unaccreted Evaluated for Impairment Purchased Component Individually Collectively Impaired Total Other Loans September 30, 2015: Allowance for loan losses: Real estate loans: Residential properties $ — $ 6,849 $ — $ 6,849 $ 141 Commercial properties — 2,092 — 2,092 409 Land and construction — 118 — 118 46 Commercial and industrial loans 807 1,187 — 1,994 299 Consumer loans — 247 — 247 14 Total $ 807 $ 10,493 $ — $ 11,300 $ 909 Loans: Real estate loans: Residential properties $ — $ 999,720 $ — $ 999,720 $ 7,958 Commercial properties 6,366 323,248 358 329,972 45,983 Land and construction — 11,429 1,141 12,570 3,856 Commercial and industrial loans 7,748 145,348 5,163 158,259 30,360 Consumer loans 89 35,890 — 35,979 1,965 Total $ 14,203 $ 1,515,635 $ 6,662 $ 1,536,500 $ 90,122 December 31, 2014: Allowance for loan losses: Real estate loans: Residential properties $ — $ 6,586 $ — $ 6,586 $ 26 Commercial properties 26 1,500 — 1,526 193 Land and construction — — — — 4 Commercial and industrial loans 686 1,211 — 1,897 45 Consumer loans — 141 — 141 — Total $ 712 $ 9,438 $ — $ 10,150 $ 268 Loans: Real estate loans: Residential properties $ 43 $ 842,092 $ — $ 842,135 $ 2,861 Commercial properties 5,742 199,378 200 205,320 21,126 Land and construction — 4,309 — 4,309 1,099 Commercial and industrial loans 5,635 86,343 1,559 93,537 5,893 Consumer loans 116 20,962 47 21,125 8 Total $ 11,536 $ 1,153,084 $ 1,806 $ 1,166,426 $ 30,987 The column labeled “Unaccreted Credit Component Other Loans” represents the amount of unaccreted credit component discount for loans acquired in an acquisition that were not classified as purchased impaired or individually evaluated for impairment as of the dates indicated, and the stated principal balance of the related loans. The unaccreted credit component discount is equal to 1.01% and 0.86% of the stated principal balance of these loans as of September 30, 2015 and December 31, 2014, respectively. In addition to this unaccreted credit component discount, an additional $0.4 million of the ALLL has been provided for these loans as of September 30, 2015 and December 31, 2014. The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. The Bank analyzes loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as loans secured by multifamily or commercial real estate and commercial and industrial loans. This analysis is performed on an ongoing basis as new information is obtained. The Bank uses the following definitions for risk ratings: Pass: Loans classified as pass are strong credits with no existing or known potential weaknesses deserving of management’s close attention. Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Impaired: A loan is considered impaired, when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Additionally, all loans classified as troubled debt restructurings (“TDRs”) are considered impaired. Purchased credit impaired loans are not considered impaired loans for these purposes. Loans listed as pass include larger non-homogeneous loans not meeting the risk rating definitions above and smaller, homogeneous loans not assessed on an individual basis. Based on the most recent analysis performed, the risk category of loans by class of loans is as follows as of: (dollars in thousands) Pass Special Substandard Impaired Total September 30, 2015: Real estate loans: Residential properties $ 998,220 $ 1,500 $ — $ — $ 999,720 Commercial properties 323,248 — 358 6,366 329,972 Land and construction 11,429 — 1,141 — 12,570 Commercial and industrial loans 143,747 1,601 5,163 7,748 158,259 Consumer loans 35,890 — — 89 35,979 Total $ 1,512,534 $ 3,101 $ 6,662 $ 14,203 $ 1,536,500 December 31, 2014: Real estate loans: Residential properties $ 841,538 $ 554 $ — $ 43 $ 842,135 Commercial properties 198,112 1,266 200 5,742 205,320 Land and construction 4,309 — — — 4,309 Commercial and industrial loans 81,067 5,276 1,559 5,635 93,537 Consumer loans 20,962 — 47 116 21,125 Total $ 1,145,988 $ 7,096 $ 1,806 $ 11,536 $ 1,166,426 Impaired loans evaluated individually and any related allowance are as follows as of: With No Allowance Recorded With an Allowance Recorded (dollars in thousands) Unpaid Principal Balance Recorded Investment Unpaid Principal Balance Recorded Investment Related Allowance September 30, 2015 : Real estate loans: Residential properties $ — $ — $ — $ — $ — Commercial properties 6,607 6,367 — — — Commercial and industrial loans 4,455 4,291 3,457 3,457 807 Consumer loans 125 88 — — — Total $ 11,187 $ 10,746 $ 3,457 $ 3,457 $ 807 December 31, 2014 : Real estate loans: Residential properties $ 43 $ 43 $ — $ — $ — Commercial properties 5,568 5,568 174 174 26 Commercial and industrial loans 2,094 2,094 3,541 3,451 686 Consumer loans 116 116 — — — Total $ 7,821 $ 7,821 $ 3,715 $ 3,715 $ 712 The weighted average annualized average balance of the recorded investment for impaired loans, beginning from when the loan became impaired, and any interest income recorded on impaired loans after they became impaired is as follows for the: Nine months Ended Year Ended (dollars in thousands) Average Recorded Investment Interest Income after Impairment Average Recorded Investment Interest Income after Impairment Real estate loans: Residential properties $ 36 $ 2 $ 3,000 $ 25 Commercial properties 6,588 220 3,217 140 Commercial and industrial loans 8,067 343 1,196 241 Consumer loans 105 — 126 — Total $ 14,796 $ 565 $ 7,539 $ 406 There was no interest income recognized on a cash basis in either 2015 or 2014 on impaired loans. |