Note 5 - Loans and Allowance for Loan Losses | 9 Months Ended |
Sep. 30, 2013 |
Receivables [Abstract] | ' |
Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | ' |
Note 5 – Loans and Allowance for Loan Losses |
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The Company’s loan portfolio was comprised of the following at: |
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| | 30-Sep-13 | | | 31-Dec-12 | | | | | | | | | | | | | | | | | |
| | PCI loans | | | All other | | | Total | | | PCI loans | | | All other | | | Total | | | | | | | | | | | | | | | | | |
loans | loans | | | | | | | | | | | | | | | | |
| | (dollars in thousands) | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 6,488 | | | $ | 125,035 | | | $ | 131,523 | | | $ | 7,323 | | | $ | 111,809 | | | $ | 119,132 | | | | | | | | | | | | | | | | | |
Commercial real estate (CRE) - owner-occupied | | | 39,545 | | | | 233,795 | | | | 273,340 | | | | 44,925 | | | | 254,491 | | | | 299,416 | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 64,087 | | | | 307,816 | | | | 371,903 | | | | 85,959 | | | | 285,998 | | | | 371,957 | | | | | | | | | | | | | | | | | |
Acquisition, construction and development (AC&D) | | | 29,165 | | | | 113,619 | | | | 142,784 | | | | 39,541 | | | | 101,120 | | | | 140,661 | | | | | | | | | | | | | | | | | |
Other commercial | | | 142 | | | | 3,799 | | | | 3,941 | | | | 742 | | | | 4,886 | | | | 5,628 | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 139,427 | | | | 784,064 | | | | 923,491 | | | | 178,490 | | | | 758,304 | | | | 936,794 | | | | | | | | | | | | | | | | | |
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Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 34,784 | | | | 139,996 | | | | 174,780 | | | | 40,483 | | | | 148,049 | | | | 188,532 | | | | | | | | | | | | | | | | | |
Home equity lines of credit (HELOC) | | | 1,736 | | | | 144,748 | | | | 146,484 | | | | 1,949 | | | | 161,676 | | | | 163,625 | | | | | | | | | | | | | | | | | |
Residential construction | | | 7,459 | | | | 39,040 | | | | 46,499 | | | | 11,265 | | | | 41,547 | | | | 52,812 | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 1,356 | | | | 23,369 | | | | 24,725 | | | | 2,095 | | | | 13,458 | | | | 15,553 | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 45,335 | | | | 347,153 | | | | 392,488 | | | | 55,792 | | | | 364,730 | | | | 420,522 | | | | | | | | | | | | | | | | | |
Total loans | | | 184,762 | | | | 1,131,217 | | | | 1,315,979 | | | | 234,282 | | | | 1,123,034 | | | | 1,357,316 | | | | | | | | | | | | | | | | | |
Deferred costs (fees) | | | - | | | | 363 | | | | 363 | | | | - | | | | (609 | ) | | | (609 | ) | | | | | | | | | | | | | | | | |
Total loans, net of deferred costs (fees) | | $ | 184,762 | | | $ | 1,131,580 | | | $ | 1,316,342 | | | $ | 234,282 | | | $ | 1,122,425 | | | $ | 1,356,707 | | | | | | | | | | | | | | | | | |
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Included in the September 30, 2013 and December 31, 2012 loan totals are $76.0 million and $101.7 million, respectively, of covered loans pursuant to FDIC loss share agreements assumed by the Bank in connection with the Citizens South merger. At September 30, 2013, approximately $72.7 million of the covered loans are included in PCI loans and $3.3 million is included in all other loans. At December 31, 2012, $96.9 million of the covered loans are included in PCI loans and $4.8 million is included in all other loans. |
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At September 30, 2013 and December 31, 2012, the Company had sold participations in loans aggregating $6.0 million and $10.8 million, respectively, to other financial institutions on a nonrecourse basis. Collections on loan participations and remittances to participating institutions conform to customary banking practices. |
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The Bank accepts residential mortgage loan applications and funds loans of qualified borrowers. Funded loans are sold with limited recourse to investors under the terms of pre-existing commitments. The Bank executes all of its loan sales agreements under best efforts contracts with investors. The Company does not service residential mortgage loans for the benefit of others. |
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Loans sold with limited recourse are 1-4 family residential mortgages originated by the Company and sold to various other financial institutions. Various recourse agreements exist, but generally range from thirty days to twelve months. The Company’s exposure to credit loss in the event of nonperformance by the other party to the loan is represented by the contractual notional amount of the loan. Since none of the loans have ever been returned to the Company, the amount of total loans sold with limited recourse does not necessarily represent future cash requirements. The Company uses the same credit policies in making loans held for sale as it does for on-balance sheet instruments. Total loans sold with limited recourse in the nine months ended September 30, 2013 were $92.5 million. Total loans sold with limited recourse in the nine months ended September 30, 2012 were $47.4 million. |
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At September 30, 2013 and December 31, 2012, the carrying value of loans pledged as collateral on FHLB borrowings totaled $318.8 million and $144.2 million, respectively. At September 30, 2013 and December 31, 2012, the carrying value of loans pledged as collateral on the Federal Reserve Discount Window totaled $157.4 million and $83.1 million, respectively. |
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Concentrations of Credit - Loans are primarily made within the Company’s operating footprint of North Carolina, South Carolina and Georgia. Real estate loans can be affected by the condition of the local real estate market. Commercial and industrial loans can be affected by the local economic conditions. The commercial loan portfolio has concentrations in business loans secured by real estate including construction loans and real estate development loans. Primary concentrations in the consumer loan portfolio include home equity lines of credit and residential mortgages. At September 30, 2013 and December 31, 2012, the Company had no loans outstanding with non-U.S. entities. |
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Allowance for Loan Losses -The following tables present, by portfolio segment, the activity in the allowance for loan losses for the three and nine months ended September 30, 2013 and September 30, 2012. |
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| | Commercial and industrial | | | CRE - | | | CRE - | | | AC&D | | | Other | | | Residential mortgage | | | Home | | | Residential construction | | | Other | | | Total | |
owner- | investor | commercial | equity | loans to |
occupied | income | | lines of | individuals |
| producing | | credit | |
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For the three months ended September 30, 2013 | | (dollars in thousands) | |
Allowance for Loan Losses, excluding PCI: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 1,585 | | | $ | 343 | | | $ | 1,419 | | | $ | 3,930 | | | $ | 4 | | | $ | 267 | | | $ | 1,311 | | | $ | 518 | | | $ | 86 | | | $ | 9,463 | |
Provision for loan losses | | | 539 | | | | 57 | | | | 26 | | | | (1,240 | ) | | | 1 | | | | 284 | | | | 357 | | | | (44 | ) | | | 20 | | | | - | |
Charge-offs | | | (634 | ) | | | (12 | ) | | | (9 | ) | | | (88 | ) | | | - | | | | (125 | ) | | | (68 | ) | | | - | | | | (22 | ) | | | (958 | ) |
Recoveries | | | 52 | | | | 1 | | | | 26 | | | | - | | | | 1 | | | | 32 | | | | 16 | | | | 2 | | | | 11 | | | | 141 | |
Net charge-offs | | | (582 | ) | | | (11 | ) | | | 17 | | | | (88 | ) | | | 1 | | | | (93 | ) | | | (52 | ) | | | 2 | | | | (11 | ) | | | (817 | ) |
Balance, end of period | | $ | 1,542 | | | $ | 389 | | | $ | 1,462 | | | $ | 2,602 | | | $ | 6 | | | $ | 458 | | | $ | 1,616 | | | $ | 476 | | | $ | 95 | | | $ | 8,646 | |
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PCI Impairment Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 216 | | | $ | - | | | $ | 1 | | | $ | 445 | | | $ | - | | | $ | 394 | | | $ | 3 | | | $ | 289 | | | $ | 36 | | | $ | 1,384 | |
PCI impairment charge-offs | | | (216 | ) | | | - | | | | - | | | | (163 | ) | | | - | | | | (311 | ) | | | - | | | | (233 | ) | | | (36 | ) | | | (959 | ) |
PCI impairment recoveries | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Net PCI impairment charge-offs | | | (216 | ) | | | - | | | | - | | | | (163 | ) | | | - | | | | (311 | ) | | | - | | | | (233 | ) | | | (36 | ) | | | (959 | ) |
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PCI release of provision for loan losses | | | - | | | | - | | | | (1 | ) | | | (282 | ) | | | - | | | | (77 | ) | | | (3 | ) | | | (56 | ) | | | - | | | | (419 | ) |
Benefit attributable to FDIC loss share agreements | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Total provision for loan losses charged to operations | | | - | | | | - | | | | (1 | ) | | | (282 | ) | | | - | | | | (77 | ) | | | (3 | ) | | | (56 | ) | | | - | | | | (419 | ) |
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Provision for loan losses recorded through FDIC loss share receivable | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Balance, end of period | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 6 | | | $ | - | | | $ | - | | | $ | - | | | $ | 6 | |
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Total Allowance for Loan Losses | | $ | 1,542 | | | $ | 389 | | | $ | 1,462 | | | $ | 2,602 | | | $ | 6 | | | $ | 464 | | | $ | 1,616 | | | $ | 476 | | | $ | 95 | | | $ | 8,652 | |
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For the nine months ended September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for Loan Losses, excluding PCI: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 849 | | | $ | 496 | | | $ | 1,102 | | | $ | 4,157 | | | $ | 8 | | | $ | 454 | | | $ | 1,463 | | | $ | 1,046 | | | $ | 49 | | | $ | 9,624 | |
Provision for loan losses | | | 1,740 | | | | (64 | ) | | | 131 | | | | (2,206 | ) | | | (3 | ) | | | 69 | | | | 756 | | | | (616 | ) | | | 66 | | | | (127 | ) |
Charge-offs | | | (1,190 | ) | | | (52 | ) | | | (230 | ) | | | (94 | ) | | | - | | | | (128 | ) | | | (660 | ) | | | (49 | ) | | | (52 | ) | | | (2,455 | ) |
Recoveries | | | 143 | | | | 9 | | | | 459 | | | | 745 | | | | 1 | | | | 63 | | | | 57 | | | | 95 | | | | 32 | | | | 1,604 | |
Net charge-offs | | | (1,047 | ) | | | (43 | ) | | | 229 | | | | 651 | | | | 1 | | | | (65 | ) | | | (603 | ) | | | 46 | | | | (20 | ) | | | (851 | ) |
Balance, end of period | | $ | 1,542 | | | $ | 389 | | | $ | 1,462 | | | $ | 2,602 | | | $ | 6 | | | $ | 458 | | | $ | 1,616 | | | $ | 476 | | | $ | 95 | | | $ | 8,646 | |
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PCI Impairment Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 225 | | | $ | - | | | $ | - | | | $ | 542 | | | $ | - | | | $ | 200 | | | $ | - | | | $ | - | | | $ | - | | | $ | 967 | |
PCI impairment charge-offs | | | (216 | ) | | | - | | | | (16 | ) | | | (177 | ) | | | (386 | ) | | | (311 | ) | | | - | | | | (233 | ) | | | (36 | ) | | | (1,375 | ) |
PCI impairment recoveries | | | - | | | | - | | | | - | | | | 25 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 25 | |
Net PCI impairment charge-offs | | | (216 | ) | | | - | | | | (16 | ) | | | (152 | ) | | | (386 | ) | | | (311 | ) | | | - | | | | (233 | ) | | | (36 | ) | | | (1,350 | ) |
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PCI provision for loan losses | | | (9 | ) | | | - | | | | 16 | | | | (390 | ) | | | 386 | | | | 117 | | | | - | | | | 233 | | | | 36 | | | | 389 | |
Benefit attributable to FDIC loss share agreements | | | (104 | ) | | | - | | | | (1 | ) | | | (192 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (297 | ) |
Total provision for loan losses charged to operations | | | (113 | ) | | | - | | | | 15 | | | | (582 | ) | | | 386 | | | | 117 | | | | - | | | | 233 | | | | 36 | | | | 92 | |
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Provision for loan losses recorded through FDIC loss share receivable | | | 104 | | | | - | | | | 1 | | | | 192 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 297 | |
Balance, end of period | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 6 | | | $ | - | | | $ | - | | | $ | - | | | $ | 6 | |
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Total Allowance for Loan Losses | | $ | 1,542 | | | $ | 389 | | | $ | 1,462 | | | $ | 2,602 | | | $ | 6 | | | $ | 464 | | | $ | 1,616 | | | $ | 476 | | | $ | 95 | | | $ | 8,652 | |
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| | Commercial and industrial | | | CRE - | | | CRE - | | | AC&D | | | Other | | | Residential mortgage | | | Home | | | Residential construction | | | Other | | | Total | |
owner- | investor | commercial | equity | loans to |
occupied | income producing | | lines of | individuals |
| | | credit | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
For the three months ended September 30, 2012 | | (dollars in thousands) | |
Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 1,180 | | | $ | 397 | | | $ | 1,326 | | | $ | 3,710 | | | $ | 10 | | | $ | 792 | | | $ | 1,370 | | | $ | 606 | | | $ | 40 | | | $ | 9,431 | |
Provision for loan losses | | | 153 | | | | (14 | ) | | | 412 | | | | (524 | ) | | | 1 | | | | (22 | ) | | | (21 | ) | | | (12 | ) | | | (3 | ) | | | (30 | ) |
PCI provision for loan losses | | | 67 | | | | - | | | | - | | | | - | | | | - | | | | (30 | ) | | | - | | | | - | | | | - | | | | 37 | |
Charge-offs | | | (146 | ) | | | (56 | ) | | | (500 | ) | | | (383 | ) | | | - | | | | (5 | ) | | | (8 | ) | | | - | | | | (4 | ) | | | (1,102 | ) |
Recoveries | | | 19 | | | | - | | | | 48 | | | | 658 | | | | - | | | | 10 | | | | 5 | | | | 124 | | | | 7 | | | | 871 | |
Net charge-offs | | | (127 | ) | | | (56 | ) | | | (452 | ) | | | 275 | | | | - | | | | 5 | | | | (3 | ) | | | 124 | | | | 3 | | | | (231 | ) |
Ending balance | | $ | 1,206 | | | $ | 327 | | | $ | 1,286 | | | $ | 3,461 | | | $ | 11 | | | $ | 745 | | | $ | 1,346 | | | $ | 718 | | | $ | 40 | | | $ | 9,207 | |
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For the nine months ended September 30, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 703 | | | $ | 740 | | | $ | 2,106 | | | $ | 3,883 | | | $ | 17 | | | $ | 309 | | | $ | 1,898 | | | $ | 455 | | | $ | 43 | | | $ | 10,154 | |
Provision for loan losses | | | 1,009 | | | | (283 | ) | | | 199 | | | | (616 | ) | | | 88 | | | | 304 | | | | (412 | ) | | | 467 | | | | (18 | ) | | | 738 | |
PCI provision for loan losses | | | 67 | | | | - | | | | - | | | | - | | | | - | | | | 224 | | | | - | | | | - | | | | - | | | | 291 | |
Charge-offs | | | (543 | ) | | | (130 | ) | | | (1,075 | ) | | | (740 | ) | | | (94 | ) | | | (104 | ) | | | (173 | ) | | | (328 | ) | | | (5 | ) | | | (3,192 | ) |
Recoveries | | | 37 | | | | - | | | | 56 | | | | 934 | | | | - | | | | 12 | | | | 33 | | | | 124 | | | | 20 | | | | 1,216 | |
Net charge-offs | | | (506 | ) | | | (130 | ) | | | (1,019 | ) | | | 194 | | | | (94 | ) | | | (92 | ) | | | (140 | ) | | | (204 | ) | | | 15 | | | | (1,976 | ) |
Ending balance | | $ | 1,206 | | | $ | 327 | | | $ | 1,286 | | | $ | 3,461 | | | $ | 11 | | | $ | 745 | | | $ | 1,346 | | | $ | 718 | | | $ | 40 | | | $ | 9,207 | |
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The following table presents, by portfolio segment, the balance in the allowance for loan losses disaggregated on the basis of the Company’s impairment measurement method and the related recorded investment in loans at September 30, 2013 and December 31, 2012. |
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| | Commercial | | | CRE - | | | CRE - | | | AC&D | | | Other | | | Residential mortgage | | | Home | | | Residential construction | | | Other | | | Total | |
and industrial | owner- | investor | commercial | equity | loans to |
| occupied | income | | lines of | individuals |
| | producing | | credit | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At September 30, 2013 | | (dollars in thousands) | |
Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 16 | | | $ | 24 | | | $ | 202 | | | $ | - | | | $ | - | | | $ | 182 | | | $ | 509 | | | $ | 13 | | | $ | - | | | $ | 946 | |
Collectively evaluated for impairment | | | 1,526 | | | | 365 | | | | 1,260 | | | | 2,602 | | | | 6 | | | | 276 | | | | 1,107 | | | | 463 | | | | 95 | | | | 7,700 | |
| | | 1,542 | | | | 389 | | | | 1,462 | | | | 2,602 | | | | 6 | | | | 458 | | | | 1,616 | | | | 476 | | | | 95 | | | | 8,646 | |
Purchased credit-impaired | | | - | | | | - | | | | - | | | | - | | | | - | | | | 6 | | | | - | | | | - | | | | - | | | | 6 | |
Total | | $ | 1,542 | | | $ | 389 | | | $ | 1,462 | | | $ | 2,602 | | | $ | 6 | | | $ | 464 | | | $ | 1,616 | | | $ | 476 | | | $ | 95 | | | $ | 8,652 | |
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Recorded Investment in Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 326 | | | $ | 2,266 | | | $ | 3,850 | | | $ | 2,275 | | | $ | 153 | | | $ | 4,951 | | | $ | 3,287 | | | $ | 79 | | | $ | 62 | | | $ | 17,249 | |
Collectively evaluated for impairment | | | 124,709 | | | | 231,529 | | | | 303,966 | | | | 111,344 | | | | 3,646 | | | | 135,045 | | | | 141,461 | | | | 38,961 | | | | 23,307 | | | | 1,113,968 | |
| | | 125,035 | | | | 233,795 | | | | 307,816 | | | | 113,619 | | | | 3,799 | | | | 139,996 | | | | 144,748 | | | | 39,040 | | | | 23,369 | | | | 1,131,217 | |
Purchased credit-impaired | | | 6,488 | | | | 39,545 | | | | 64,087 | | | | 29,165 | | | | 142 | | | | 34,784 | | | | 1,736 | | | | 7,459 | | | | 1,356 | | | | 184,762 | |
Total | | $ | 131,523 | | | $ | 273,340 | | | $ | 371,903 | | | $ | 142,784 | | | $ | 3,941 | | | $ | 174,780 | | | $ | 146,484 | | | $ | 46,499 | | | $ | 24,725 | | | $ | 1,315,979 | |
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At December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 115 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 249 | | | $ | 351 | | | $ | - | | | $ | - | | | $ | 715 | |
Collectively evaluated for impairment | | | 734 | | | | 496 | | | | 1,102 | | | | 4,157 | | | | 8 | | | | 205 | | | | 1,112 | | | | 1,046 | | | | 49 | | | | 8,909 | |
| | | 849 | | | | 496 | | | | 1,102 | | | | 4,157 | | | | 8 | | | | 454 | | | | 1,463 | | | | 1,046 | | | | 49 | | | | 9,624 | |
Purchased credit-impaired | | | 225 | | | | - | | | | - | | | | 542 | | | | - | | | | 200 | | | | - | | | | - | | | | - | | | | 967 | |
Total | | $ | 1,074 | | | $ | 496 | | | $ | 1,102 | | | $ | 4,699 | | | $ | 8 | | | $ | 654 | | | $ | 1,463 | | | $ | 1,046 | | | $ | 49 | | | $ | 10,591 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Recorded Investment in Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 607 | | | $ | 2,337 | | | $ | 4,243 | | | $ | 4,855 | | | $ | 168 | | | $ | 3,463 | | | $ | 1,925 | | | $ | 71 | | | $ | 73 | | | $ | 17,742 | |
Collectively evaluated for impairment | | | 111,202 | | | | 252,154 | | | | 281,755 | | | | 96,265 | | | | 4,718 | | | | 144,586 | | | | 159,751 | | | | 41,476 | | | | 13,385 | | | | 1,105,292 | |
| | | 111,809 | | | | 254,491 | | | | 285,998 | | | | 101,120 | | | | 4,886 | | | | 148,049 | | | | 161,676 | | | | 41,547 | | | | 13,458 | | | | 1,123,034 | |
Purchased credit-impaired | | | 7,323 | | | | 44,925 | | | | 85,959 | | | | 39,541 | | | | 742 | | | | 40,483 | | | | 1,949 | | | | 11,265 | | | | 2,095 | | | | 234,282 | |
Total | | $ | 119,132 | | | $ | 299,416 | | | $ | 371,957 | | | $ | 140,661 | | | $ | 5,628 | | | $ | 188,532 | | | $ | 163,625 | | | $ | 52,812 | | | $ | 15,553 | | | $ | 1,357,316 | |
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The Company’s allowance for loan loss methodology includes four components, as described below: |
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1) Specific Reserve Component. Specific reserves represent the current impairment estimate on specific loans, for which it is probable that the Company will be unable to collect all amounts due according to contractual terms based on current information and events. Impairment measurement reflects only a deterioration of credit quality and not changes in market rates that may cause a change in the fair value of the impaired loan. The amount of impairment may be measured in one of three ways, including (i) calculating the present value of expected future cash flows, discounted at the loan’s interest rate implicit in the original document and deducting estimated selling costs, if any; (ii) observing quoted market prices for identical or similar instruments traded in active markets, or employing model-based valuation techniques for which all significant assumptions are observable in the market; and (iii) determining the fair value of collateral, which is utilized for both collateral dependent loans and for loans when foreclosure is probable. |
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Impaired loans with a balance less than or equal to $150 thousand are viewed in two groups: those which have experienced charge-offs and those recorded at legal balance. Those loans which have experienced charge-offs have no additional reserve applied unless specifically calculated at a point in time when the loan balance exceeded $150 thousand. Those loans recorded at their legal balance are based on a pooled probability of default and loss given default calculation. |
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2) Quantitative Reserve Component. Quantitative reserves represent the current loss contingency estimate on pools of loans, which is an estimate of the amount for which it is probable that the Company will be unable to collect all amounts due on homogeneous groups of loans according to contractual terms should one or more events occur, excluding those loans specifically identified above. During the fourth quarter of 2011, the Company introduced two enhancements to this component of the allowance. First, management completed its previously disclosed project to collect and evaluate internal loan loss data and now incorporates the Company’s historical loss experience in this component. Previously, given the Company’s limited operating history, this component of the allowance for loan losses was based on the historical loss experience of comparable institutions. Second, the methodology now segregates loans by product. |
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This component of the allowance for loan losses is based on the historical loss experience of the Company. This loss experience is collected quarterly by evaluating internal loss data. The estimated historical loss rates are grouped by loan product type. The Company utilizes average historical losses to represent management’s estimate of losses inherent in that portfolio. The historical look back period is estimated by loan type and the Company applies the appropriate historical loss period which best reflects the inherent loss in the portfolio considering prevailing market conditions. A minimum reserve is utilized when the Company has insufficient internal loss history. Minimums are determined by analyzing Federal Reserve Bank charge-off data for all insured federal- and state-chartered commercial banks. |
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During the third quarter of 2013, the Company further segregated the AC&D portfolio into three collateral types: (i) CRE construction, (ii) 1-4 family construction and (iii) development (lots and land). These enhancements strengthen the granularity of the allowance methodology and better align with the Company’s present origination activities, which are focused on construction rather than development activities. |
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In determining the quantitative reserve component at September 30, 2013, management utilized the following look back periods: |
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i. | | 15 quarter – Commercial & industrial, CRE-investor income producing, AC&D-1-4 family construction, and AC&D-development (lots and land) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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ii. | | 12 quarter – residential mortgage and HELOCs | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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iii. | | 11 quarter – residential construction | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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iv. | | Minimum – CRE-owner-occupied, AC&D-CRE construction, other commercial and other consumer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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At December 31, 2012, management utilized the following look back periods: |
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i. | | 12 quarter – AC&D, residential mortgage and residential construction | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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ii. | | 8 quarter – Commercial & industrial, CRE-owner-occupied, CRE-investor income producing, and HELOCs | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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iii. | | Minimum –Other commercial and other consumer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The changes in the look back periods noted above were made to provide a better estimate of the loss inherent in the portfolio for each loan category and to reflect the availability of loss history. |
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3) Qualitative Reserve Component. Qualitative reserves represent an estimate of the amount for which it is probable that environmental or other relevant factors will cause the aforementioned loss contingency estimate to differ from the Company’s historical loss experience or other assumptions. During the second quarter of 2012, the Company refined its allowance methodology to eliminate the use of traditional risk grade factors as a single forward-looking qualitative indicator, which had been introduced during the fourth quarter of 2011, and instead focuses directly on five specific environmental factors. These five factors include portfolio trends, portfolio concentrations, economic and market conditions, changes in lending practices and other factors. Management believes these refinements simplify application of the qualitative component of the allowance methodology. Each of the factors, except other factors, can range from 0.00% (not applicable) to 0.15% (very high). Other factors are reviewed on a situational basis and are adjusted in 5 basis point increments, up or down, with a maximum of 0.50%. Details of the five environmental factors for inclusion in the allowance methodology are as follows: |
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i. | | Portfolio trends, which may relate to such factors as type or level of loan origination activity, changes in asset quality (i.e., past due, special mention, non-performing) and/or changes in collateral values; | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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ii. | | Portfolio concentrations, which may relate to individual borrowers and/or guarantors, geographic regions, industry sectors, and/or loan types; | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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iii. | | Economic and market trends, which may relate to trends and/or levels of gross domestic production, unemployment, bankruptcies, foreclosures, housing starts, housing prices, equity prices, and/or competitor activities; | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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iv. | | Changes in lending practices, which may relate to changes in credit policies, procedures, systems or staff; and | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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v. | | Other factors, which is intended to capture environmental factors not specifically identified above. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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In addition, qualitative reserves on purchased performing loans are based on the Company’s judgment around the timing difference expected to occur between accretion of the fair market value credit adjustment and realization of actual loan losses. |
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During the third quarter of 2013, the Company applied the qualitative other factors against CRE-investor income producing loans and residential mortgage loans to adjust for inherent risks that, in management’s judgment, are not adequately reflected in historical loss rates. |
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4) Reserve on PCI Loans. In determining the acquisition date fair value of PCI loans, and in subsequent accounting, the Company generally aggregates purchased loans into pools of loans with common risk characteristics. Expected cash flows at the acquisition date in excess of the fair value of loans are recorded as interest income over the life of the loans using a level yield method if the timing and amount of the future cash flows of the pool is reasonably estimable. Subsequent to the acquisition date, significant increases in cash flows over those expected at the acquisition date are recognized as interest income prospectively. Decreases in expected cash flows after the acquisition date are recognized by recording an allowance for loan losses. In pools where impairment has already been recognized, an increase in cash flows will result in a reversal of prior impairment. Management analyzes these acquired loan pools using various assessments of risk to determine and calculate an expected loss. The expected loss is derived using an estimate of a loss given default based upon the collateral type and/or specific review by loan officers of loans generally greater than $1.0 million, and the probability of default that was determined based upon management’s review of the loan portfolio. Trends are reviewed in terms of traditional credit metrics such as accrual status, past due status, and weighted-average risk grade of the loans within each of the accounting pools. In addition, the relationship between the change in the unpaid principal balance and change in the fair value mark is assessed to correlate the directional consistency of the expected loss for each pool. |
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This analysis resulted in net (recovery) impairment for the three- and nine-months ended September 30, 2013 of ($419) thousand and $389 thousand, respectively. Additionally, in the nine-month period, approximately $297 thousand is attributable to covered loans under FDIC loss share agreements. These covered loan impairments were a function of an increase in expected losses and as a result, the FDIC indemnification asset was increased. See Note 6 – FDIC Loss Share Agreements for further discussion. These impairments are spread among several pools and reporting segments. A full breakdown of the net impairment or recovery is detailed in the allowance by segment table above for the three- and nine-months ended September 30, 2013. |
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The changes to the quantitative and qualitative reserve components of the non-PCI allowance for loan losses, in aggregate, did not have a material impact on the estimated allowance at September 30. 2013. The further segregation of the AC&D portfolio described above resulted in a decrease in the AC&D quantitative reserve of approximately $1.2 million from June 30, 2013 and $1.8 million from December 31, 2012. Offsetting this decrease were quantitative increases in the other loan portfolios as a result of extending look back periods which now contain sufficient build up in loss history. These increases were approximately $800 thousand from June 30, 2013 and $1.6 million from December 31, 2012. The growth in the loan portfolio coupled with the other qualitative factors referenced above resulted in a net $530 thousand increase in the qualitative factor from June 30, 2013 and $313 thousand from December 31, 2012. These changes, in management's judgment, produce a non-PCI allowance for loan losses that reflects the estimate of inherent losses in the loan portfolio at September 30, 2013. |
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The Company evaluates and estimates off-balance sheet credit exposure at the same time it estimates credit losses for loans by a similar process. These estimated credit losses are not recorded as part of the allowance for loan losses, but are recorded to a separate liability account by a charge to income, if material. Loan commitments, unused lines of credit and standby letters of credit make up the off-balance sheet items reviewed for potential credit losses. At September 30, 2013 and December 31, 2012, $125 thousand was recorded as an other liability for off-balance sheet credit exposure. |
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Credit Quality Indicators - The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company's primary credit quality indicator is an internal credit risk rating system that categorizes loans into pass, special mention, or classified categories. Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics that benefit from a case-by-case evaluation. These are typically loans to businesses or individuals in the classes that comprise the commercial portfolio segment. Groups of loans that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk rated and monitored collectively. These are typically loans to individuals in the classes that comprise the consumer portfolio segment. |
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The following are the definitions of the Company's credit quality indicators: |
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Pass: | | Loans in classes that comprise the commercial and consumer portfolio segments that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan agreement. PCI loans that were recorded at estimated fair value on the acquisition date are generally assigned a “pass” loan grade because their net financial statement value is based on the present value of expected cash flows. Management believes there is a low likelihood of loss related to those loans that are considered pass. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Special | | Loans in classes that comprise the commercial and consumer portfolio segments that have potential weaknesses that deserve management's close attention. If not addressed, these potential weaknesses may result in deterioration of the repayment prospects for the loan. Management believes there is a moderate likelihood of some loss related to those loans that are considered special mention. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mention: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Classified: | | Loans in the classes that comprise the commercial and consumer portfolio segments that are inadequately protected by the sound worth and paying capacity of the borrower or of the collateral pledged, if any. Management believes that there is a distinct possibility that the Company will sustain some loss if the deficiencies related to classified loans are not corrected in a timely manner. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The Company's credit quality indicators are periodically updated on a case-by-case basis. The following tables present the recorded investment in the Company's loans as of September 30, 2013 and December 31, 2012, by loan class and by credit quality indicator. |
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| | As of September 30, 2013 | | | | | | | | | | | | | | | | | |
(dollars in thousands) | | Commercial | | | CRE-Owner | | | CRE-Investor | | | AC&D | | | Other | | | Total | | | | | | | | | | | | | | | | | |
and | Occupied | Income | Commercial | Commercial | | | | | | | | | | | | | | | | |
Industrial | | Producing | | | | | | | | | | | | | | | | | | |
Pass | | $ | 130,891 | | | $ | 266,152 | | | $ | 363,597 | | | $ | 134,773 | | | $ | 3,677 | | | $ | 899,090 | | | | | | | | | | | | | | | | | |
Special mention | | | 351 | | | | 4,092 | | | | 3,584 | | | | 5,855 | | | | 111 | | | | 13,993 | | | | | | | | | | | | | | | | | |
Classified | | | 281 | | | | 3,095 | | | | 4,722 | | | | 2,156 | | | | 154 | | | | 10,408 | | | | | | | | | | | | | | | | | |
Total | | $ | 131,523 | | | $ | 273,339 | | | $ | 371,903 | | | $ | 142,784 | | | $ | 3,942 | | | $ | 923,491 | | | | | | | | | | | | | | | | | |
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| | Residential | | | Home Equity | | | Residential | | | Other Loans to | | | | | | | Total | | | | | | | | | | | | | | | | | |
Mortgage | Lines of Credit | Construction | Individuals | Consumer | | | | | | | | | | | | | | | | |
Pass | | $ | 170,624 | | | $ | 140,263 | | | $ | 45,717 | | | $ | 24,244 | | | | | | | $ | 380,848 | | | | | | | | | | | | | | | | | |
Special mention | | | 1,433 | | | | 2,710 | | | | 539 | | | | 369 | | | | | | | | 5,051 | | | | | | | | | | | | | | | | | |
Classified | | | 2,723 | | | | 3,511 | | | | 243 | | | | 112 | | | | | | | | 6,589 | | | | | | | | | | | | | | | | | |
Total | | $ | 174,780 | | | $ | 146,484 | | | $ | 46,499 | | | $ | 24,725 | | | | | | | $ | 392,488 | | | | | | | | | | | | | | | | | |
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Total Loans | | | | | | | | | | | | | | | | | | | | | | $ | 1,315,979 | | | | | | | | | | | | | | | | | |
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| | As of December 31, 2012 | | | | | | | | | | | | | | | | | |
(dollars in thousands) | | Commercial | | | CRE-Owner | | | CRE-Investor | | | AC&D | | | Other | | | Total | | | | | | | | | | | | | | | | | |
and | Occupied | Income | Commercial | Commercial | | | | | | | | | | | | | | | | |
Industrial | | Producing | | | | | | | | | | | | | | | | | | |
Pass | | $ | 115,907 | | | $ | 292,418 | | | $ | 361,212 | | | $ | 126,167 | | | $ | 5,460 | | | $ | 901,164 | | | | | | | | | | | | | | | | | |
Special mention | | | 173 | | | | 3,804 | | | | 5,564 | | | | 9,252 | | | | - | | | | 18,793 | | | | | | | | | | | | | | | | | |
Classified | | | 3,052 | | | | 3,194 | | | | 5,181 | | | | 5,242 | | | | 168 | | | | 16,837 | | | | | | | | | | | | | | | | | |
Total | | $ | 119,132 | | | $ | 299,416 | | | $ | 371,957 | | | $ | 140,661 | | | $ | 5,628 | | | $ | 936,794 | | | | | | | | | | | | | | | | | |
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| | Residential | | | Home Equity | | | Residential | | | Other Loans to | | | | | | | Total | | | | | | | | | | | | | | | | | |
Mortgage | Lines of Credit | Construction | Individuals | Consumer | | | | | | | | | | | | | | | | |
Pass | | $ | 185,686 | | | $ | 158,335 | | | $ | 52,612 | | | $ | 15,444 | | | | | | | $ | 412,077 | | | | | | | | | | | | | | | | | |
Special mention | | | 1,115 | | | | 2,599 | | | | - | | | | 78 | | | | | | | | 3,792 | | | | | | | | | | | | | | | | | |
Classified | | | 1,731 | | | | 2,691 | | | | 200 | | | | 31 | | | | | | | | 4,653 | | | | | | | | | | | | | | | | | |
Total | | $ | 188,532 | | | $ | 163,625 | | | $ | 52,812 | | | $ | 15,553 | | | | | | | $ | 420,522 | | | | | | | | | | | | | | | | | |
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Total Loans | | | | | | | | | | | | | | | | | | | | | | $ | 1,357,316 | | | | | | | | | | | | | | | | | |
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Aging Analysis of Accruing and Non-Accruing Loans - The Company considers a loan to be past due or delinquent when the terms of the contractual obligation are not met by the borrower. PCI loans are included as a single category in the table below as management believes, regardless of their age, there is a lower likelihood of aggregate loss related to these loan pools. Additionally, PCI loans are discounted to allow for the accretion of income on a level yield basis over the life of the loan based on expected cash flows. Regardless of accruing status, the associated discount on these loan pools results in income recognition. The following table presents, by class, an aging analysis of the Company’s accruing and non-accruing loans as of September 30, 2013 and December 31, 2012. |
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| | 30-59 | | | 60-89 | | | Past Due | | | PCI | | | Current | | | Total Loans | | | | | | | | | | | | | | | | | |
Days | Days | 90 Days | Loans | | | | | | | | | | | | | | | | |
Past Due | Past Due | or More | | | | | | | | | | | | | | | | | |
| | (dollars in thousands) | | | | | | | | | | | | | | | | | |
As of September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 340 | | | $ | 221 | | | $ | 37 | | | $ | 6,488 | | | $ | 124,437 | | | $ | 131,523 | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | | - | | | | - | | | | 674 | | | | 39,545 | | | | 233,121 | | | | 273,340 | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 15 | | | | 41 | | | | 180 | | | | 64,087 | | | | 307,580 | | | | 371,903 | | | | | | | | | | | | | | | | | |
AC&D | | | - | | | | - | | | | 542 | | | | 29,165 | | | | 113,077 | | | | 142,784 | | | | | | | | | | | | | | | | | |
Other commercial | | | - | | | | - | | | | - | | | | 142 | | | | 3,799 | | | | 3,941 | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 355 | | | | 262 | | | | 1,433 | | | | 139,427 | | | | 782,014 | | | | 923,491 | | | | | | | | | | | | | | | | | |
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Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | - | | | | 33 | | | | 1,926 | | | | 34,784 | | | | 138,037 | | | | 174,780 | | | | | | | | | | | | | | | | | |
Home equity lines of credit | | | 311 | | | | 263 | | | | 2,143 | | | | 1,736 | | | | 142,031 | | | | 146,484 | | | | | | | | | | | | | | | | | |
Residential construction | | | - | | | | 38 | | | | 40 | | | | 7,459 | | | | 38,962 | | | | 46,499 | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 20 | | | | 2 | | | | 2 | | | | 1,356 | | | | 23,345 | | | | 24,725 | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 331 | | | | 336 | | | | 4,111 | | | | 45,335 | | | | 342,375 | | | | 392,488 | | | | | | | | | | | | | | | | | |
Total loans | | $ | 686 | | | $ | 598 | | | $ | 5,544 | | | $ | 184,762 | | | $ | 1,124,389 | | | $ | 1,315,979 | | | | | | | | | | | | | | | | | |
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As of December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 1,316 | | | $ | 83 | | | $ | 230 | | | $ | 7,323 | | | $ | 110,180 | | | $ | 119,132 | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | | 48 | | | | 1,903 | | | | 113 | | | | 44,925 | | | | 252,427 | | | | 299,416 | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 224 | | | | 27 | | | | 366 | | | | 85,959 | | | | 285,381 | | | | 371,957 | | | | | | | | | | | | | | | | | |
AC&D | | | - | | | | 699 | | | | 1,428 | | | | 39,541 | | | | 98,993 | | | | 140,661 | | | | | | | | | | | | | | | | | |
Other commercial | | | - | | | | - | | | | 168 | | | | 742 | | | | 4,718 | | | | 5,628 | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 1,588 | | | | 2,712 | | | | 2,305 | | | | 178,490 | | | | 751,699 | | | | 936,794 | | | | | | | | | | | | | | | | | |
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Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 18 | | | | 196 | | | | 499 | | | | 40,483 | | | | 147,336 | | | | 188,532 | | | | | | | | | | | | | | | | | |
Home equity lines of credit | | | 590 | | | | - | | | | 1,094 | | | | 1,949 | | | | 159,992 | | | | 163,625 | | | | | | | | | | | | | | | | | |
Residential construction | | | - | | | | - | | | | 71 | | | | 11,265 | | | | 41,476 | | | | 52,812 | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 36 | | | | 4 | | | | - | | | | 2,095 | | | | 13,418 | | | | 15,553 | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 644 | | | | 200 | | | | 1,664 | | | | 55,792 | | | | 362,222 | | | | 420,522 | | | | | | | | | | | | | | | | | |
Total loans | | $ | 2,232 | | | $ | 2,912 | | | $ | 3,969 | | | $ | 234,282 | | | $ | 1,113,921 | | | $ | 1,357,316 | | | | | | | | | | | | | | | | | |
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Impaired Loans - All classes of loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impaired loans may include all classes of nonaccrual loans and loans modified in a troubled debt restructuring (“TDR”). If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the rate implicit in the original loan agreement or at the fair value of collateral if repayment is expected solely from the collateral. Additionally, a portion of the Company’s qualitative factors accounts for potential impairment on loans generally less than $150 thousand. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible. |
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During the three- and nine-months ended September 30, 2013, the Company’s quarterly cash flow analyses indicated that net (release) impairment of $(419) thousand and $389 thousand was present in several of the Company’s PCI loan pools. This net (release) impairment is spread among almost all the loan segments presented in the table above and is the result of changes in cash flows, increases and decreases. |
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The following tables do not include information regarding impairment of the Company’s PCI loans. At December 31, 2012, the Company’s quarterly cash flow analyses indicated that three of fourteen PCI loan pools were impaired. This analysis resulted in $225 thousand net impairment in a commercial pool, $542 thousand net impairment in an AC&D pool and $200 thousand net impairment of a residential mortgage pool at December 31, 2012. |
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The table below presents impaired loans, by class, and the corresponding allowance for loan losses at September 30, 2013 and December 31, 2012: |
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| | 30-Sep-13 | | | 31-Dec-12 | | | | | | | | | | | | | | | | | |
| | Recorded | | | Unpaid | | | Related | | | Recorded | | | Unpaid | | | Related | | | | | | | | | | | | | | | | | |
Investment | Principal | Allowance For | Investment | Principal | Allowance For | | | | | | | | | | | | | | | | |
| Balance | Loan Losses | | Balance | Loan Losses | | | | | | | | | | | | | | | | |
| | (dollars in thousands) | | | | | | | | | | | | | | | | | |
Impaired Loans with No Related Allowance Recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 226 | | | $ | 2,125 | | | $ | - | | | $ | 377 | | | $ | 1,170 | | | $ | - | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | | 2,117 | | | | 3,426 | | | | - | | | | 2,337 | | | | 2,675 | | | | - | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 180 | | | | 5,245 | | | | - | | | | 4,243 | | | | 4,424 | | | | - | | | | | | | | | | | | | | | | | |
AC&D | | | 2,275 | | | | 9,775 | | | | - | | | | 4,855 | | | | 9,306 | | | | - | | | | | | | | | | | | | | | | | |
Other commercial | | | 153 | | | | 196 | | | | - | | | | 168 | | | | 172 | | | | - | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 4,951 | | | | 20,767 | | | | - | | | | 11,980 | | | | 17,747 | | | | - | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 3,616 | | | | 4,384 | | | | - | | | | 2,252 | | | | 2,363 | | | | - | | | | | | | | | | | | | | | | | |
Home equity lines of credit | | | 1,035 | | | | 3,481 | | | | - | | | | 1,419 | | | | 2,439 | | | | - | | | | | | | | | | | | | | | | | |
Residential construction | | | - | | | | 1,441 | | | | - | | | | 71 | | | | 551 | | | | - | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 60 | | | | 104 | | | | - | | | | 73 | | | | 75 | | | | - | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 4,711 | | | | 9,410 | | | | - | | | | 3,815 | | | | 5,428 | | | | - | | | | | | | | | | | | | | | | | |
Total impaired loans with no related allowance recorded | | $ | 9,662 | | | $ | 30,177 | | | $ | - | | | $ | 15,795 | | | $ | 23,175 | | | $ | - | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired Loans with an Allowance Recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 100 | | | $ | 110 | | | $ | 16 | | | $ | 230 | | | $ | 230 | | | $ | 115 | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | | 149 | | | | 164 | | | | 24 | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 3,670 | | | | 3,674 | | | | 202 | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | |
AC&D | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | |
Other commercial | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 3,919 | | | | 3,948 | | | | 242 | | | | 230 | | | | 230 | | | | 115 | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 1,335 | | | | 1,398 | | | | 182 | | | | 1,211 | | | | 1,250 | | | | 249 | | | | | | | | | | | | | | | | | |
Home equity lines of credit | | | 2,252 | | | | 2,309 | | | | 509 | | | | 506 | | | | 707 | | | | 351 | | | | | | | | | | | | | | | | | |
Residential construction | | | 79 | | | | 81 | | | | 13 | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 2 | | | | 4 | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 3,668 | | | | 3,792 | | | | 704 | | | | 1,717 | | | | 1,957 | | | | 600 | | | | | | | | | | | | | | | | | |
Total impaired loans with an allowance recorded | | $ | 7,587 | | | $ | 7,740 | | | $ | 946 | | | $ | 1,947 | | | $ | 2,187 | | | $ | 715 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Impaired Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 326 | | | $ | 2,235 | | | $ | 16 | | | $ | 607 | | | $ | 1,400 | | | $ | 115 | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | | 2,266 | | | | 3,590 | | | | 24 | | | | 2,337 | | | | 2,675 | | | | - | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 3,850 | | | | 8,919 | | | | 202 | | | | 4,243 | | | | 4,424 | | | | - | | | | | | | | | | | | | | | | | |
AC&D | | | 2,275 | | | | 9,775 | | | | - | | | | 4,855 | | | | 9,306 | | | | - | | | | | | | | | | | | | | | | | |
Other commercial | | | 153 | | | | 196 | | | | - | | | | 168 | | | | 172 | | | | - | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 8,870 | | | | 24,715 | | | | 242 | | | | 12,210 | | | | 17,977 | | | | 115 | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 4,951 | | | | 5,782 | | | | 182 | | | | 3,463 | | | | 3,613 | | | | 249 | | | | | | | | | | | | | | | | | |
Home equity lines of credit | | | 3,287 | | | | 5,790 | | | | 509 | | | | 1,925 | | | | 3,146 | | | | 351 | | | | | | | | | | | | | | | | | |
Residential construction | | | 79 | | | | 1,522 | | | | 13 | | | | 71 | | | | 551 | | | | - | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 62 | | | | 108 | | | | - | | | | 73 | | | | 75 | | | | - | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 8,379 | | | | 13,202 | | | | 704 | | | | 5,532 | | | | 7,385 | | | | 600 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total impaired loans | | $ | 17,249 | | | $ | 37,917 | | | $ | 946 | | | $ | 17,742 | | | $ | 25,362 | | | $ | 715 | | | | | | | | | | | | | | | | | |
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The average recorded investment and interest income recognized on impaired loans, by class, for the three and nine months ended September 30, 2013 and September 30, 2012 are shown in the table below. |
|
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | | | | | | | |
| | 2013 | | | 2012 | | | 2013 | | | 2012 | | | | | | | | | |
| | Average | | | Interest | | | Average | | | Interest | | | Average | | | Interest | | | Average | | | Interest | | | | | | | | | |
Recorded | Income | Recorded | Income | Recorded | Income | Recorded | Income | | | | | | | | |
Investment | Recognized | Investment | Recognized | Investment | Recognized | Investment | Recognized | | | | | | | | |
| | (dollars in thousands) | | | | | | | | | |
Impaired Loans with No Related Allowance Recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 219 | | | $ | 4 | | | $ | 708 | | | $ | - | | | $ | 345 | | | $ | 4 | | | $ | 772 | | | $ | - | | | | | | | | | |
CRE - owner-occupied | | | 2,033 | | | | 93 | | | | 366 | | | | 5 | | | | 1,903 | | | | 93 | | | | 368 | | | | 17 | | | | | | | | | |
CRE - investor income producing | | | 180 | | | | - | | | | 2,851 | | | | - | | | | 1,816 | | | | - | | | | 2,536 | | | | - | | | | | | | | | |
AC&D | | | 2,300 | | | | 58 | | | | 6,775 | | | | 14 | | | | 3,982 | | | | 181 | | | | 8,884 | | | | 44 | | | | | | | | | |
Other commercial | | | 154 | | | | - | | | | 160 | | | | - | | | | 160 | | | | - | | | | 102 | | | | - | | | | | | | | | |
Total commercial loans | | | 4,886 | | | | 155 | | | | 10,860 | | | | 19 | | | | 8,206 | | | | 278 | | | | 12,662 | | | | 61 | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 2,876 | | | | 14 | | | | 621 | | | | - | | | | 2,207 | | | | 46 | | | | 715 | | | | - | | | | | | | | | |
Home equity lines of credit | | | 1,139 | | | | 16 | | | | 770 | | | | - | | | | 1,183 | | | | 16 | | | | 928 | | | | - | | | | | | | | | |
Residential construction | | | - | | | | - | | | | 76 | | | | - | | | | 24 | | | | - | | | | 128 | | | | - | | | | | | | | | |
Other loans to individuals | | | 62 | | | | 1 | | | | 6 | | | | 1 | | | | 68 | | | | 3 | | | | 7 | | | | 3 | | | | | | | | | |
Total consumer loans | | | 4,077 | | | | 31 | | | | 1,473 | | | | 1 | | | | 3,482 | | | | 65 | | | | 1,778 | | | | 3 | | | | | | | | | |
Total impaired loans with no related allowance recorded | | $ | 8,963 | | | $ | 186 | | | $ | 12,333 | | | $ | 20 | | | $ | 11,688 | | | $ | 343 | | | $ | 14,440 | | | $ | 64 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired Loans with an Allowance Recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 437 | | | $ | - | | | $ | 230 | | | $ | - | | | $ | 516 | | | $ | 1 | | | $ | 88 | | | $ | - | | | | | | | | | |
CRE - owner-occupied | | | 74 | | | | - | | | | - | | | | - | | | | 30 | | | | - | | | | - | | | | - | | | | | | | | | |
CRE - investor income producing | | | 3,675 | | | | 37 | | | | - | | | | - | | | | 2,192 | | | | 112 | | | | - | | | | - | | | | | | | | | |
AC&D | | | 125 | | | | - | | | | - | | | | - | | | | 50 | | | | - | | | | - | | | | - | | | | | | | | | |
Other commercial | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | |
Total commercial loans | | | 4,311 | | | | 37 | | | | 230 | | | | - | | | | 2,788 | | | | 113 | | | | 88 | | | | - | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 1,283 | | | | 10 | | | | 424 | | | | 7 | | | | 1,241 | | | | 26 | | | | 221 | | | | 22 | | | | | | | | | |
Home equity lines of credit | | | 1,431 | | | | 1 | | | | 315 | | | | - | | | | 876 | | | | 2 | | | | 317 | | | | - | | | | | | | | | |
Residential construction | | | 40 | | | | 1 | | | | - | | | | - | | | | 16 | | | | 1 | | | | - | | | | - | | | | | | | | | |
Other loans to individuals | | | 3 | | | | - | | | | - | | | | - | | | | 1 | | | | - | | | | - | | | | - | | | | | | | | | |
Total consumer loans | | | 2,757 | | | | 12 | | | | 739 | | | | 7 | | | | 2,134 | | | | 29 | | | | 538 | | | | 22 | | | | | | | | | |
Total impaired loans with an allowance recorded | | $ | 7,068 | | | $ | 49 | | | $ | 969 | | | $ | 7 | | | $ | 4,922 | | | $ | 142 | | | $ | 626 | | | $ | 22 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Impaired Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 656 | | | $ | 4 | | | $ | 938 | | | $ | - | | | $ | 861 | | | $ | 5 | | | $ | 860 | | | $ | - | | | | | | | | | |
CRE - owner-occupied | | | 2,107 | | | | 93 | | | | 366 | | | | 5 | | | | 1,933 | | | | 93 | | | | 368 | | | | 17 | | | | | | | | | |
CRE - investor income producing | | | 3,855 | | | | 37 | | | | 2,851 | | | | - | | | | 4,008 | | | | 112 | | | | 2,536 | | | | - | | | | | | | | | |
AC&D | | | 2,425 | | | | 58 | | | | 6,775 | | | | 14 | | | | 4,032 | | | | 181 | | | | 8,884 | | | | 44 | | | | | | | | | |
Other commercial | | | 154 | | | | - | | | | 160 | | | | - | | | | 160 | | | | - | | | | 102 | | | | - | | | | | | | | | |
Total commercial loans | | | 9,197 | | | | 192 | | | | 11,090 | | | | 19 | | | | 10,994 | | | | 391 | | | | 12,750 | | | | 61 | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 4,159 | | | | 24 | | | | 1,045 | | | | 7 | | | | 3,448 | | | | 72 | | | | 936 | | | | 22 | | | | | | | | | |
Home equity lines of credit | | | 2,570 | | | | 17 | | | | 1,085 | | | | - | | | | 2,059 | | | | 18 | | | | 1,245 | | | | - | | | | | | | | | |
Residential construction | | | 40 | | | | 1 | | | | 76 | | | | - | | | | 40 | | | | 1 | | | | 128 | | | | - | | | | | | | | | |
Other loans to individuals | | | 65 | | | | 1 | | | | 6 | | | | 1 | | | | 69 | | | | 3 | | | | 7 | | | | 3 | | | | | | | | | |
Total consumer loans | | | 6,834 | | | | 43 | | | | 2,212 | | | | 8 | | | | 5,616 | | | | 94 | | | | 2,316 | | | | 25 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total impaired loans | | $ | 16,031 | | | $ | 235 | | | $ | 13,302 | | | $ | 27 | | | $ | 16,610 | | | $ | 485 | | | $ | 15,066 | | | $ | 86 | | | | | | | | | |
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During the three and nine months ended September 30, 2013, the Company recognized $235 thousand and $485 thousand, respectively, in interest income with respect to impaired loans, primarily accruing TDRs, within the period the loans were impaired. During the three and nine months ended September 30, 2012, the Company recognized $27 thousand and $86 thousand, respectively, with respect to impaired loans. |
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Nonaccrual and Past Due Loans - It is the general policy of the Company to place a loan on nonaccrual status when there is probable loss or when there is reasonable doubt that all principal will be collected, or when it is over 90 days past due. At September 30, 2013, there was $357 thousand in loans past due 90 days or more and accruing interest. These loans are being evaluated for collectability at September 30, 2013. At December 31, 2012, there was a $77 thousand loan past due 90 days or more and accruing interest. The recorded investment in nonaccrual loans at September 30, 2013 and December 31, 2012 follows: |
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| | September 30, | | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2013 | 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (dollars in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 256 | | | $ | 607 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | | 539 | | | | 1,996 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 213 | | | | 633 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D | | | 542 | | | | 3,872 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other commercial | | | 153 | | | | 168 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 1,703 | | | | 7,276 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 2,456 | | | | 1,096 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity lines of credit | | | 2,576 | | | | 1,925 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential construction | | | 40 | | | | 71 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 3 | | | | 6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 5,075 | | | | 3,098 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total nonaccrual loans | | $ | 6,778 | | | $ | 10,374 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
PCI Loans – PCI loans had an unpaid principal balance of $220.7 million and $278.2 million and a carrying value of $184.8 million and $234.3 million at September 30, 2013 and December 31, 2012, respectively. PCI loans represented 9.5% and 11.5% of total assets at September 30, 2013 and December 31, 2012, respectively. Determining the fair value of the PCI loans at acquisition required the Company to estimate cash flows expected to result from those loans and to discount those cash flows at appropriate rates of interest. For such loans, the excess of cash flows expected to be collected at acquisition over the estimated fair value is recognized as interest income over the remaining lives of the loans and is called the accretable yield. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition reflects the impact of estimated credit losses and is called the nonaccretable difference. In accordance with GAAP, there was no carry-over of previously established allowance for loan losses from acquired companies. |
|
In conjunction with the Citizens South acquisition, the PCI loan portfolio was accounted for at fair value as follows (dollars in thousands): |
|
| | 1-Oct-12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contractual principal and interest at acquisition | | $ | 294,283 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nonaccretable difference | | | (47,941 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expected cash flows at acquisition | | | 246,342 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accretable yield | | | (37,724 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basis in PCI loans at acquisition - estimated fair value | | $ | 208,618 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
In conjunction with the acquisition of Community Capital Corporation (“Community Capital”) in 2011, the PCI loan portfolio was accounted for at fair value as follows (dollars in thousands): |
|
| | 1-Nov-11 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contractual principal and interest at acquisition | | $ | 146,843 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nonaccretable difference | | | (61,145 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expected cash flows at acquisition | | | 85,698 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accretable yield | | | (14,424 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basis in PCI loans at acquisition - estimated fair value | | $ | 71,274 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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A summary of changes in the accretable yield for PCI loans for the nine months ended September 30, 2013 and 2012 follows: |
|
| | Nine Months Ended September 30, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (dollars in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accretable yield, beginning of period | | $ | 42,734 | | | $ | 14,264 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Addition from the Community Capital acquisition | | | - | | | | 218 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest income | | | (11,201 | ) | | | (3,540 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reclassification of nonaccretable difference due to improvement in expected cash flows | | | 7,445 | | | | 9,374 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other changes, net | | | 725 | | | | (1,893 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accretable yield, end of period | | $ | 39,703 | | | $ | 18,423 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Troubled Debt Restructuring - In situations where, for economic or legal reasons related to a borrower's financial difficulties, management may grant a concession for other than an insignificant period of time to the borrower that would not otherwise be considered, the related loan is classified as a TDR. Management strives to identify borrowers in financial difficulty early and work with them to modify to more affordable terms. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. All loan modifications are made on a case-by-case basis. |
|
The Company had allocated $248 thousand and $54 thousand, respectively, of specific reserves to customers whose loan terms have been modified in a TDR as of September 30, 2013 and December 31, 2012. As of September 30, 2013, the Company had 13 TDR loans totaling $7.6 million, of which $70 thousand are nonaccrual loans. As of December 31, 2012, the Company had 18 TDR loans totaling $10.2 million, of which $2.8 million were nonaccrual loans. |
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The following tables represent a breakdown of the types of concessions made by loan class for the three- and nine-month periods ended September 30, 2013 and 2012. |
|
| | Three months ended | | | Nine months ended | | | | | | | | | | | | | | | | | |
30-Sep-13 | 30-Sep-13 | | | | | | | | | | | | | | | | |
(dollars in thousands) | | Number of | | | Pre-Modification Outstanding Recorded | | | Post-Modification Outstanding Recorded | | | Number of | | | Pre-Modification Outstanding Recorded | | | Post-Modification Outstanding Recorded | | | | | | | | | | | | | | | | | |
loans | Investment | Investment | loans | Investment | Investment | | | | | | | | | | | | | | | | |
Below market interest rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | - | | | $ | - | | | $ | - | | | | 1 | | | $ | 43 | | | $ | 43 | | | | | | | | | | | | | | | | | |
Total | | | - | | | | - | | | | - | | | | 1 | | | | 43 | | | | 43 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Extended payment terms | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D | | | - | | | | - | | | | - | | | | 1 | | | | 962 | | | | 962 | | | | | | | | | | | | | | | | | |
Total | | | - | | | | - | | | | - | | | | 1 | | | | 962 | | | | 962 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | - | | | $ | - | | | $ | - | | | | 2 | | | $ | 1,005 | | | $ | 1,005 | | | | | | | | | | | | | | | | | |
|
| | Three months ended | | | Nine months ended | | | | | | | | | | | | | | | | | |
30-Sep-12 | 30-Sep-12 | | | | | | | | | | | | | | | | |
(dollars in thousands) | | Number of | | | Pre-Modification Outstanding Recorded | | | Post-Modification Outstanding Recorded | | | Number of | | | Pre-Modification Outstanding Recorded | | | Post-Modification Outstanding Recorded | | | | | | | | | | | | | | | | | |
loans | Investment | Investment | loans | Investment | Investment | | | | | | | | | | | | | | | | |
Below market interest rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 1 | | | $ | 3,610 | | | $ | 3,610 | | | | 1 | | | $ | 3,610 | | | $ | 3,610 | | | | | | | | | | | | | | | | | |
Total | | | 1 | | | $ | 3,610 | | | $ | 3,610 | | | | 1 | | | $ | 3,610 | | | $ | 3,610 | | | | | | | | | | | | | | | | | |
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There were no loans that were modified as TDRs within the 12 months ended September 30, 2013 and for which there was a payment default during the three months or nine months ended June 30, 2013. The following table presents loans that were modified as TDRs within the 12 months ended September 30, 2012 and for which there was a payment default during the three or nine months ended September 30, 2012 (dollars in thousands): |
|
| | Three months ended | | | Nine months ended | | | | | | | | | | | | | | | | | | | | | | | | | |
30-Sep-12 | 30-Sep-12 | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of loans | | | Recorded Investment | | | Number of loans | | | Recorded Investment | | | | | | | | | | | | | | | | | | | | | | | | | |
Below market interest rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | - | | | $ | - | | | | 1 | | | $ | 323 | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | - | | | $ | - | | | | 1 | | | $ | 323 | | | | | | | | | | | | | | | | | | | | | | | | | |
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The Company does not deem a TDR to be successful until it has been re-established as an accruing loan. The following table presents the successes and failures of the types of modifications indicated within the 12 months ended September 30, 2013 and 2012 (dollars in thousands): |
|
Twelve Months Ended September 30, 2013 | | | | | | | | |
| | Paid in full | | | Paying as restructured | | | Nonaccrual | | | Foreclosure/Default | | | | | | | | | |
| | Number of | | | Recorded Investment | | | Number of | | | Recorded Investment | | | Number of | | | Recorded Investment | | | Number of | | | Recorded Investment | | | | | | | | | |
loans | loans | loans | loans | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Below market interest rate | | | 2 | | | $ | 164 | | | | 1 | | | $ | 42 | | | | - | | | $ | - | | | | - | | | $ | - | | | | | | | | | |
Extended payment terms | | | 1 | | | | 329 | | | | 1 | | | | 109 | | | | - | | | | - | | | | - | | | | - | | | | | | | | | |
Total | | | 3 | | | $ | 493 | | | | 2 | | | $ | 151 | | | | - | | | $ | - | | | | - | | | $ | - | | | | | | | | | |
|
Twelve Months Ended September 30, 2012 | | | | | | | | |
| | Paid in full | | | Paying as restructured | | | Nonaccrual | | | Foreclosure/Default | | | | | | | | | |
| | Number of | | | Recorded Investment | | | Number of | | | Recorded Investment | | | Number of | | | Recorded Investment | | | Number of | | | Recorded Investment | | | | | | | | | |
loans | loans | loans | loans | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Below market interest rate | | | - | | | $ | - | | | | 1 | | | $ | 3,592 | | | | 1 | | | $ | 322 | | | | - | | | $ | - | | | | | | | | | |
Extended payment terms | | | - | | | | - | | | | 2 | | | | 415 | | | | 2 | | | | 426 | | | | - | | | | - | | | | | | | | | |
Total | | | - | | | $ | - | | | | 3 | | | $ | 4,007 | | | | 3 | | | $ | 748 | | | | - | | | $ | - | | | | | | | | | |
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Related Party Loans – From time to time, the Company engages in loan transactions with its directors, executive officers and their related interests (collectively referred to as “related parties”). Such loans are made in the ordinary course of business and on substantially the same terms and collateral as those for comparable transactions prevailing at the time and do not involve more than the normal risk of collectability or present other unfavorable features. A summary of activity in loans to related parties is as follows: |
|
Loans to Directors, Executive Officers and Their Related Interests |
|
| | Nine Months Ended | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
September 30, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (dollars in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 4,184 | | | $ | 3,998 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Disbursements | | | 12,830 | | | | 710 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Repayments | | | (1,928 | ) | | | (429 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 15,086 | | | $ | 4,279 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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At September 30, 2013 and December 31, 2012, the Company had pre-approved but unused lines of credit totaling $2.8 million and $1.8 million, respectively, to related parties. |