Note 5 - Loans and Allowance for Loan Losses | 3 Months Ended |
Mar. 31, 2014 |
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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| | 31-Mar-14 | | | 31-Dec-13 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | PCI loans | | | All other | | | Total | | | PCI loans | | | All other | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
loans | loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 5,160 | | | $ | 119,858 | | | $ | 125,018 | | | $ | 5,737 | | | $ | 116,663 | | | $ | 122,400 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate (CRE) - owner-occupied | | | 31,959 | | | | 233,169 | | | | 265,128 | | | | 35,760 | | | | 231,821 | | | | 267,581 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 52,045 | | | | 357,853 | | | | 409,898 | | | | 56,996 | | | | 325,191 | | | | 382,187 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - 1-4 family construction | | | - | | | | 19,267 | | | | 19,267 | | | | - | | | | 19,959 | | | | 19,959 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - lots, land & development | | | 20,292 | | | | 40,185 | | | | 60,477 | | | | 22,699 | | | | 42,890 | | | | 65,589 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - CRE | | | 118 | | | | 42,341 | | | | 42,459 | | | | 121 | | | | 56,638 | | | | 56,759 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other commercial | | | 648 | | | | 3,926 | | | | 4,574 | | | | 137 | | | | 3,712 | | | | 3,849 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 110,222 | | | | 816,599 | | | | 926,821 | | | | 121,450 | | | | 796,874 | | | | 918,324 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 30,444 | | | | 141,934 | | | | 172,378 | | | | 32,826 | | | | 140,550 | | | | 173,376 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity lines of credit (HELOC) | | | 1,375 | | | | 141,748 | | | | 143,123 | | | | 1,402 | | | | 142,352 | | | | 143,754 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential construction | | | 6,366 | | | | 33,432 | | | | 39,798 | | | | 6,920 | | | | 33,901 | | | | 40,821 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 1,096 | | | | 18,569 | | | | 19,665 | | | | 1,189 | | | | 17,606 | | | | 18,795 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 39,281 | | | | 335,683 | | | | 374,964 | | | | 42,337 | | | | 334,409 | | | | 376,746 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | | 149,503 | | | | 1,152,282 | | | | 1,301,785 | | | | 163,787 | | | | 1,131,283 | | | | 1,295,070 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred costs | | | - | | | | 1,041 | | | | 1,041 | | | | - | | | | 738 | | | | 738 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans, net of deferred costs | | $ | 149,503 | | | $ | 1,153,323 | | | $ | 1,302,826 | | | $ | 163,787 | | | $ | 1,132,021 | | | $ | 1,295,808 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Included in the March 31, 2014 and December 31, 2013 loan totals are $65.2 million and $71.1 million, respectively, of covered loans pursuant to FDIC loss share agreements. Of these amounts, at March 31, 2014, approximately $62.2 million is included in PCI loans and $3.0 million is included in all other loans. At December 31, 2013, $68.0 million is included in PCI loans and $3.2 million is included in all other loans. |
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At both March 31, 2014 and December 31, 2013, the Company had sold participations in loans aggregating $3.2 million and $3.3 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. From time to time, the Company may choose to hold certain mortgage loans on balance sheet. 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, ranging 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 has 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 three months ended March 31, 2014 were $8.3 million. Total loans sold with limited recourse in the three months ended March 31, 2013 were $30.6 million. |
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At March 31, 2014, the carrying value of loans pledged as collateral to the FHLB on borrowings and to the Federal Reserve totaled $466.1 million. At December 31, 2013, the carrying value of loans pledged as collateral to the FHLB and the Federal Reserve totaled $472.4 million. |
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Concentrations of Credit - Loans are primarily made within the Company’s operating footprint of North Carolina, South Carolina, Virginia 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 and real estate development loans. Primary concentrations in the consumer loan portfolio include home equity lines of credit and residential mortgages. At March 31, 2014 and December 31, 2013, the Company had no loans outstanding with foreign entities. |
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Allowance for Loan Losses -The following table presents, by portfolio segment, the activity in the allowance for loan losses for the three months ended March 31, 2014. |
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| | Commercial and industrial | | | CRE - owner-occupied | | | CRE - investor income producing | | | AC&D | | | AC&D - 1-4 family construction | | | AC&D - lots, land & development | | | AC&D - CRE | | | Other commercial | | | Residential mortgage | | | HELOC | | | Residential construction | | | Other loans to individuals | | | Total | |
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For the three months ended March 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 1,491 | | | $ | 399 | | | $ | 1,797 | | | $ | - | | | $ | 839 | | | $ | 1,751 | | | $ | 299 | | | $ | 25 | | | $ | 358 | | | $ | 1,050 | | | $ | 390 | | | $ | 72 | | | $ | 8,471 | |
Provision for loan losses | | | (87 | ) | | | 30 | | | | (50 | ) | | | - | | | | (85 | ) | | | (979 | ) | | | (77 | ) | | | 1 | | | | 216 | | | | 413 | | | | (12 | ) | | | 14 | | | | (616 | ) |
Charge-offs | | | - | | | | - | | | | (273 | ) | | | - | | | | - | | | | (4 | ) | | | - | | | | - | | | | (11 | ) | | | (66 | ) | | | (7 | ) | | | (10 | ) | | | (371 | ) |
Recoveries | | | 143 | | | | 2 | | | | 76 | | | | - | | | | - | | | | 812 | | | | - | | | | - | | | | 10 | | | | 11 | | | | 11 | | | | 4 | | | | 1,069 | |
Net charge-offs | | | 143 | | | | 2 | | | | (197 | ) | | | - | | | | - | | | | 808 | | | | - | | | | - | | | | (1 | ) | | | (55 | ) | | | 4 | | | | (6 | ) | | | 698 | |
Balance, end of period | | $ | 1,547 | | | $ | 431 | | | $ | 1,550 | | | | - | | | $ | 754 | | | $ | 1,580 | | | $ | 222 | | | $ | 26 | | | $ | 573 | | | $ | 1,408 | | | $ | 382 | | | $ | 80 | | | $ | 8,553 | |
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PCI Impairment Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | - | | | $ | - | | | $ | 360 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 360 | |
PCI Impairment charge-offs | | | - | | | | - | | | | (5 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (144 | ) | | | - | | | | - | | | | (149 | ) |
PCI impairment recoveries | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Net PCI impairment charge-offs | | | - | | | | - | | | | (5 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (144 | ) | | | - | | | | - | | | | (149 | ) |
PCI provision for loan losses | | | - | | | | - | | | | 163 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 145 | | | | 1 | | | | 3 | | | | 312 | |
Benefit attributable to FDIC loss share agreements | | | - | | | | - | | | | 287 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 287 | |
Total provision for loan losses charged to operations | | | - | | | | - | | | | 450 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 145 | | | | 1 | | | | 3 | | | | 599 | |
Provision for loan losses recorded through FDIC loss share receivable | | | - | | | | - | | | | (287 | ) | | | - | | | | | | | | | | | | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (287 | ) |
Balance, end of period | | $ | - | | | $ | - | | | $ | 518 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 1 | | | $ | 1 | | | $ | 3 | | | $ | 523 | |
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Total Allowance for Loan Losses | | $ | 1,547 | | | $ | 431 | | | $ | 2,068 | | | $ | - | | | $ | 754 | | | $ | 1,580 | | | $ | 222 | | | $ | 26 | | | $ | 573 | | | $ | 1,409 | | | $ | 383 | | | $ | 83 | | | $ | 9,076 | |
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| | Commercial and industrial | | | CRE - owner-occupied | | | CRE - investor income producing | | | AC&D | | | AC&D - 1-4 family construction | | | AC&D - lots, land & development | | | AC&D - CRE | | | Other commercial | | | Residential mortgage | | | HELOC | | | Residential construction | | | Other loans to individuals | | | Total | |
For the three months ended March 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 849 | | | $ | 496 | | | $ | 1,102 | | | $ | 4,157 | | | $ | - | | | $ | - | | | $ | - | | | $ | 8 | | | $ | 454 | | | $ | 1,463 | | | $ | 1,046 | | | $ | 49 | | | $ | 9,624 | |
Provision for loan losses | | | 795 | | | | (219 | ) | | | 255 | | | | (238 | ) | | | - | | | | - | | | | - | | | | (9 | ) | | | (122 | ) | | | 35 | | | | (649 | ) | | | 25 | | | | (127 | ) |
Charge-offs | | | (13 | ) | | | - | | | | (253 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (2 | ) | | | (82 | ) | | | - | | | | (16 | ) | | | (366 | ) |
Recoveries | | | 45 | | | | 45 | | | | 131 | | | | 299 | | | | - | | | | - | | | | - | | | | 7 | | | | 19 | | | | 24 | | | | 53 | | | | 8 | | | | 631 | |
Net charge-offs | | | 32 | | | | 45 | | | | (122 | ) | | | 299 | | | | - | | | | - | | | | - | | | | 7 | | | | 17 | | | | (58 | ) | | | 53 | | | | (8 | ) | | | 265 | |
Balance, end of period | | $ | 1,676 | | | $ | 322 | | | $ | 1,235 | | | $ | 4,218 | | | $ | - | | | $ | - | | | $ | - | | | $ | 6 | | | $ | 349 | | | $ | 1,440 | | | $ | 450 | | | $ | 66 | | | $ | 9,762 | |
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PCI Impairment Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 225 | | | $ | - | | | $ | - | | | $ | 542 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 200 | | | $ | - | | | $ | - | | | $ | - | | | $ | 967 | |
PCI provision for loan losses | | | (225 | ) | | | - | | | | 16 | | | | (143 | ) | | | - | | | | - | | | | - | | | | 386 | | | | 118 | | | | 3 | | | | 245 | | | | 36 | | | | 436 | |
PCI impairment charge-off | | | - | | | | - | | | | (16 | ) | | | (14 | ) | | | - | | | | - | | | | - | | | | (386 | ) | | | - | | | | - | | | | - | | | | - | | | | (416 | ) |
Balance, end of period | | $ | - | | | $ | - | | | $ | - | | | $ | 385 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 318 | | | $ | 3 | | | $ | 245 | | | $ | 36 | | | $ | 987 | |
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Total Allowance for Loan Losses | | $ | 1,676 | | | $ | 322 | | | $ | 1,235 | | | $ | 4,603 | | | $ | - | | | $ | - | | | $ | - | | | $ | 6 | | | $ | 667 | | | $ | 1,443 | | | $ | 695 | | | $ | 102 | | | $ | 10,749 | |
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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 March 31, 2014 and December 31, 2013. |
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| | Commercial and industrial | | | CRE - owner-occupied | | | CRE - investor income producing | | | AC&D | | | AC&D - 1-4 family construction | | | AC&D - lots, land & development | | | AC&D - CRE | | | Other commercial | | | Residential mortgage | | | HELOC | | | Residential construction | | | Other loans to individuals | | | Total | |
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At March 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 24 | | | $ | 24 | | | $ | 12 | | | $ | - | | | $ | 16 | | | $ | 8 | | | $ | - | | | $ | 19 | | | $ | 208 | | | $ | 397 | | | $ | 5 | | | $ | - | | | $ | 713 | |
Collectively evaluated for impairment | | | 1,523 | | | | 407 | | | | 1,538 | | | | - | | | | 738 | | | | 1,572 | | | | 222 | | | | 7 | | | | 365 | | | | 1,011 | | | | 377 | | | | 80 | | | | 7,840 | |
| | | 1,547 | | | | 431 | | | | 1,550 | | | | - | | | | 754 | | | | 1,580 | | | | 222 | | | | 26 | | | | 573 | | | | 1,408 | | | | 382 | | | | 80 | | | | 8,553 | |
Purchased credit-impaired | | | - | | | | - | | | | 518 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1 | | | | 1 | | | | 3 | | | | 523 | |
Total | | $ | 1,547 | | | $ | 431 | | | $ | 2,068 | | | $ | - | | | $ | 754 | | | $ | 1,580 | | | $ | 222 | | | $ | 26 | | | $ | 573 | | | $ | 1,409 | | | $ | 383 | | | $ | 83 | | | $ | 9,076 | |
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Recorded Investment in Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 815 | | | $ | 3,028 | | | $ | 1,019 | | | $ | - | | | $ | 95 | | | $ | 1,157 | | | $ | - | | | $ | 261 | | | $ | 4,262 | | | $ | 3,011 | | | $ | 51 | | | $ | 56 | | | $ | 13,755 | |
Collectively evaluated for impairment | | | 119,043 | | | | 230,141 | | | | 356,834 | | | | - | | | | 19,172 | | | | 39,028 | | | | 42,341 | | | | 3,665 | | | | 137,672 | | | | 138,737 | | | | 33,381 | | | | 18,513 | | | | 1,138,527 | |
| | | 119,858 | | | | 233,169 | | | | 357,853 | | | | - | | | | 19,267 | | | | 40,185 | | | | 42,341 | | | | 3,926 | | | | 141,934 | | | | 141,748 | | | | 33,432 | | | | 18,569 | | | | 1,152,282 | |
Purchased credit-impaired | | | 5,160 | | | | 31,959 | | | | 52,045 | | | | - | | | | - | | | | 20,292 | | | | 118 | | | | 648 | | | | 30,444 | | | | 1,375 | | | | 6,366 | | | | 1,096 | | | | 149,503 | |
Total | | $ | 125,018 | | | $ | 265,128 | | | $ | 409,898 | | | $ | - | | | $ | 19,267 | | | $ | 60,477 | | | $ | 42,459 | | | $ | 4,574 | | | $ | 172,378 | | | $ | 143,123 | | | $ | 39,798 | | | $ | 19,665 | | | $ | 1,301,785 | |
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At December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 14 | | | $ | 14 | | | $ | 527 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 18 | | | $ | 167 | | | $ | 137 | | | $ | 7 | | | $ | - | | | $ | 884 | |
Collectively evaluated for impairment | | | 1,477 | | | | 385 | | | | 1,270 | | | | - | | | | 839 | | | | 1,751 | | | | 299 | | | | 7 | | | | 191 | | | | 913 | | | | 383 | | | | 72 | | | | 7,587 | |
| | | 1,491 | | | | 399 | | | | 1,797 | | | | - | | | | 839 | | | | 1,751 | | | | 299 | | | | 25 | | | | 358 | | | | 1,050 | | | | 390 | | | | 72 | | | | 8,471 | |
Purchased credit-impaired | | | - | | | | - | | | | 360 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 360 | |
Total | | $ | 1,491 | | | $ | 399 | | | $ | 2,157 | | | $ | - | | | $ | 839 | | | $ | 1,751 | | | $ | 299 | | | $ | 25 | | | $ | 358 | | | $ | 1,050 | | | $ | 390 | | | $ | 72 | | | $ | 8,831 | |
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Recorded Investment in Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 265 | | | $ | 1,902 | | | $ | 3,216 | | | $ | - | | | $ | - | | | $ | 1,888 | | | $ | - | | | $ | 262 | | | $ | 4,513 | | | $ | 3,014 | | | $ | 66 | | | $ | 60 | | | $ | 15,186 | |
Collectively evaluated for impairment | | | 116,398 | | | | 229,919 | | | | 321,975 | | | | - | | | | 19,959 | | | | 41,002 | | | | 56,638 | | | | 3,450 | | | | 136,037 | | | | 139,338 | | | | 33,835 | | | | 17,546 | | | | 1,116,097 | |
| | | 116,663 | | | | 231,821 | | | | 325,191 | | | | - | | | | 19,959 | | | | 42,890 | | | | 56,638 | | | | 3,712 | | | | 140,550 | | | | 142,352 | | | | 33,901 | | | | 17,606 | | | | 1,131,283 | |
Purchased credit-impaired | | | 5,737 | | | | 35,760 | | | | 56,996 | | | | - | | | | - | | | | 22,699 | | | | 121 | | | | 137 | | | | 32,826 | | | | 1,402 | | | | 6,920 | | | | 1,189 | | | | 163,787 | |
Total | | $ | 122,400 | | | $ | 267,581 | | | $ | 382,187 | | | $ | - | | | $ | 19,959 | | | $ | 65,589 | | | $ | 56,759 | | | $ | 3,849 | | | $ | 173,376 | | | $ | 143,754 | | | $ | 40,821 | | | $ | 18,795 | | | $ | 1,295,070 | |
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The Company’s loan loss allowance 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 reserved for 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. |
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The historical loss experience of the Company 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 a particular 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 applicable portfolio considering prevailing market conditions. A minimum reserve is utilized when the Company has insufficient internal loss history or when internal loss history falls below the minimum reserve percentage. 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) 1-4 family construction, (ii) lots, land and development and (iii) CRE construction. These enhancements strengthen the granularity of the allowance methodology and are reflective of the distinctions in credit quality indicators for the three collateral types as well as the Company’s present origination activities. |
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The following look back periods were utilized by management in determining the quantitative reserve component at March 31, 2014 and December 31, 2013: |
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| | March 31, | | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Look back periods (in calendar quarters) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 15 | | | | 15 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | Minimum | | | Minimum | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 15 | | | | 15 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - 1-4 family construction | | | 15 | | | | 15 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - lots, land, & development | | | 15 | | | | 15 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - CRE | | Minimum | | | Minimum | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other commercial | | Minimum | | | Minimum | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 15 | | | | 12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
HELOC | | | 15 | | | | 12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential construction | | | 13 | | | | 12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other loans to individuals | | Minimum | | | Minimum | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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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. The Company also performs a quantitative calculation on the acquired purchased performing loan portfolio. There is no allowance for loan losses established at the acquisition date for purchased performing loans. The historical loss experience discussed above is applied to the acquired purchased performing loan portfolio and the result is compared to the remaining fair value mark on this portfolio. A provision for loan losses is recorded for any further deterioration in these loans subsequent to the acquisition. At March 31, 2014 and December 31, 2013, this analysis did not indicate a need for a provision for loan losses for the acquired purchased performing portfolio. The remaining mark on the acquired purchased performing loan portfolio was $4.1 million and $4.5 million at March 31, 2014 and December 31, 2013, respectively. |
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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. The Company 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, loan types and/or other factors; | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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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, competitor activities and/or other factors; | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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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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| 4) | Reserve on Purchased-Credit Impaired 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 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 impairment for the three months ended March 31, 2014 of $312 thousand. The net impairment of $360 thousand as of December 31, 2013, which impacted a pool comprised of CRE-investor income producing loans was reversed during 2014 as estimated cash flows in those impacted pools improved or projected losses were fully recognized. During the three months ended March 31, 2014, new impairment of $672 thousand was recorded; approximately $523 thousand of this impairment is attributable to covered loans under the 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. A full breakdown of the net impairment or recovery is detailed in the allowance by segment table above for the three months ended March 31, 2014 and 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 March 31, 2014 and December 31, 2013, $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 Mention: | | 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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| Classified: | | Loans in the classes that comprise the commercial portfolio segment 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 March 31, 2014 and December 31, 2013, by loan class and by credit quality indicator. |
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| | As of March 31, 2014 | | | | | | | | | | | | | | | | | | | | | |
| | Commercial and industrial | | | CRE - owner-occupied | | | CRE - investor income producing | | | AC&D - 1-4 family construction | | | AC&D - lots, land & development | | | AC&D - CRE | | | Other commercial | | | Total Commercial | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 122,427 | | | $ | 256,902 | | | $ | 403,839 | | | $ | 19,172 | | | $ | 56,390 | | | $ | 42,459 | | | $ | 4,313 | | | $ | 905,502 | | | | | | | | | | | | | | | | | | | | | |
Special mention | | | 1,419 | | | | 6,115 | | | | 3,954 | | | | - | | | | 1,949 | | | | - | | | | 149 | | | | 13,586 | | | | | | | | | | | | | | | | | | | | | |
Classified | | | 1,172 | | | | 2,111 | | | | 2,105 | | | | 95 | | | | 2,138 | | | | - | | | | 112 | | | | 7,733 | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 125,018 | | | $ | 265,128 | | | $ | 409,898 | | | $ | 19,267 | | | $ | 60,477 | | | $ | 42,459 | | | $ | 4,574 | | | $ | 926,821 | | | | | | | | | | | | | | | | | | | | | |
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| | Residential mortgage | | | HELOC | | | Residential construction | | | Other loans to individuals | | | | | | | | | | | | | | | Total Consumer | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 168,513 | | | $ | 136,558 | | | $ | 38,875 | | | $ | 19,203 | | | | | | | | | | | | | | | $ | 363,149 | | | | | | | | | | | | | | | | | | | | | |
Special mention | | | 2,053 | | | | 3,327 | | | | 708 | | | | 458 | | | | | | | | | | | | | | | | 6,546 | | | | | | | | | | | | | | | | | | | | | |
Classified | | | 1,812 | | | | 3,238 | | | | 215 | | | | 4 | | | | | | | | | | | | | | | | 5,269 | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 172,378 | | | $ | 143,123 | | | $ | 39,798 | | | $ | 19,665 | | | | | | | | | | | | | | | $ | 374,964 | | | | | | | | | | | | | | | | | | | | | |
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Total Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 1,301,785 | | | | | | | | | | | | | | | | | | | | | |
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| | As of December 31, 2013 | | | | | | | | | | | | | | | | | | | | | |
| | Commercial and industrial | | | CRE - owner-occupied | | | CRE - investor income producing | | | AC&D - 1-4 family construction | | | AC&D - lots, land & development | | | AC&D - CRE | | | Other commercial | | | Total Commercial | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 120,037 | | | $ | 260,472 | | | $ | 373,464 | | | $ | 19,959 | | | $ | 60,332 | | | $ | 56,759 | | | $ | 3,587 | | | $ | 894,610 | | | | | | | | | | | | | | | | | | | | | |
Special mention | | | 1,692 | | | | 6,126 | | | | 3,628 | | | | - | | | | 2,802 | | | | - | | | | 150 | | | | 14,398 | | | | | | | | | | | | | | | | | | | | | |
Classified | | | 671 | | | | 983 | | | | 5,095 | | | | - | | | | 2,455 | | | | - | | | | 112 | | | | 9,316 | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 122,400 | | | $ | 267,581 | | | $ | 382,187 | | | $ | 19,959 | | | $ | 65,589 | | | $ | 56,759 | | | $ | 3,849 | | | $ | 918,324 | | | | | | | | | | | | | | | | | | | | | |
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| | Residential mortgage | | | HELOC | | | Residential construction | | | Other loans to individuals | | | | | | | | | | | | | | | Total Consumer | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 169,519 | | | $ | 137,626 | | | $ | 39,824 | | | $ | 18,301 | | | | | | | | | | | | | | | $ | 365,270 | | | | | | | | | | | | | | | | | | | | | |
Special mention | | | 1,864 | | | | 2,893 | | | | 766 | | | | 488 | | | | | | | | | | | | | | | | 6,011 | | | | | | | | | | | | | | | | | | | | | |
Classified | | | 1,993 | | | | 3,235 | | | | 231 | | | | 6 | | | | | | | | | | | | | | | | 5,465 | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 173,376 | | | $ | 143,754 | | | $ | 40,821 | | | $ | 18,795 | | | | | | | | | | | | | | | $ | 376,746 | | | | | | | | | | | | | | | | | | | | | |
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Total Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 1,295,070 | | | | | | | | | | | | | | | | | | | | | |
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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 presents, by class, an aging analysis of the Company’s accruing and non-accruing loans as of March 31, 2014 and December 31, 2013. |
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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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of March 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 65 | | | $ | 138 | | | $ | 118 | | | $ | 5,160 | | | $ | 119,537 | | | $ | 125,018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | | - | | | | 38 | | | | 176 | | | | 31,959 | | | | 232,955 | | | | 265,128 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 19 | | | | 12 | | | | 977 | | | | 52,045 | | | | 356,845 | | | | 409,898 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - 1-4 family construction | | | - | | | | - | | | | - | | | | - | | | | 19,267 | | | | 19,267 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - lots, land & development | | | - | | | | - | | | | 48 | | | | 20,292 | | | | 40,137 | | | | 60,477 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - CRE | | | - | | | | - | | | | - | | | | 118 | | | | 42,341 | | | | 42,459 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other commercial | | | - | | | | - | | | | 112 | | | | 648 | | | | 3,814 | | | | 4,574 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 84 | | | | 188 | | | | 1,431 | | | | 110,222 | | | | 814,896 | | | | 926,821 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 31 | | | | - | | | | 3 | | | | 30,444 | | | | 141,900 | | | | 172,378 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
HELOC | | | 268 | | | | 76 | | | | 1,148 | | | | 1,375 | | | | 140,256 | | | | 143,123 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential construction | | | - | | | | 454 | | | | 94 | | | | 6,366 | | | | 32,884 | | | | 39,798 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 10 | | | | 40 | | | | 19 | | | | 1,096 | | | | 18,500 | | | | 19,665 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 309 | | | | 570 | | | | 1,264 | | | | 39,281 | | | | 333,540 | | | | 374,964 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 393 | | | $ | 758 | | | $ | 2,695 | | | $ | 149,503 | | | $ | 1,148,436 | | | $ | 1,301,785 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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As of December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 96 | | | $ | 52 | | | $ | 149 | | | $ | 5,737 | | | $ | 116,366 | | | $ | 122,400 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | | 418 | | | | - | | | | 209 | | | | 35,760 | | | | 231,194 | | | | 267,581 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 655 | | | | - | | | | 3,161 | | | | 56,996 | | | | 321,375 | | | | 382,187 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - 1-4 family construction | | | - | | | | - | | | | - | | | | - | | | | 19,959 | | | | 19,959 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - lots, land & development | | | 48 | | | | - | | | | 292 | | | | 22,699 | | | | 42,550 | | | | 65,589 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - CRE | | | - | | | | - | | | | - | | | | 121 | | | | 56,638 | | | | 56,759 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other commercial | | | - | | | | 112 | | | | - | | | | 137 | | | | 3,600 | | | | 3,849 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 1,217 | | | | 164 | | | | 3,811 | | | | 121,450 | | | | 791,682 | | | | 918,324 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | - | | | | 32 | | | | 1,340 | | | | 32,826 | | | | 139,178 | | | | 173,376 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
HELOC | | | 248 | | | | 160 | | | | 698 | | | | 1,402 | | | | 141,246 | | | | 143,754 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential construction | | | 25 | | | | - | | | | 66 | | | | 6,920 | | | | 33,810 | | | | 40,821 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 14 | | | | 11 | | | | - | | | | 1,189 | | | | 17,581 | | | | 18,795 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 287 | | | | 203 | | | | 2,104 | | | | 42,337 | | | | 331,815 | | | | 376,746 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 1,504 | | | $ | 367 | | | $ | 5,915 | | | $ | 163,787 | | | $ | 1,123,497 | | | $ | 1,295,070 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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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. |
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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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The Company’s quarterly cash flow analyses of PCI loan pools indicated net impairment of $312 thousand during the quarter ended March 31, 2014. The net impairment of $360 thousand as of December 31, 2013, which impacted a single covered pool comprised of CRE-investor income producing loans, was reversed during 2014. The impairment of $672 thousand recognized during the first quarter of 2014 was in a single consumer real estate loan pool. During the first quarter of 2013, the Company’s quarterly cash flow analysis indicated that two of the Company’s PCI loan pools, both real estate pools, had net impairment of $436 thousand. These amounts are not included in the tables below. |
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The table below presents impaired loans, by class, and the corresponding allowance for loan losses at March 31, 2014 and December 31, 2013: |
|
| | 31-Mar-14 | | | 31-Dec-13 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Unpaid | | | Related | | | | | | | Unpaid | | | Related | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Recorded | | | Principal | | | Allowance For | | | Recorded | | | Principal | | | Allowance For | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Investment | | | Balance | | | Loan Losses | | | Investment | | | Balance | | | Loan Losses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired Loans with No Related Allowance Recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 668 | | | $ | 958 | | | $ | - | | | $ | 183 | | | $ | 473 | | | $ | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | | 2,881 | | | | 3,008 | | | | - | | | | 1,815 | | | | 1,955 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 950 | | | | 1,710 | | | | - | | | | 30 | | | | 47 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - 1-4 family construction | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - lots, land & development | | | 1,109 | | | | 2,752 | | | | | | | | 1,888 | | | | 4,475 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - CRE | | | - | | | | - | | | | | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other commercial | | | 149 | | | | 165 | | | | - | | | | 150 | | | | 167 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 5,757 | | | | 8,593 | | | | - | | | | 4,066 | | | | 7,117 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 2,700 | | | | 3,775 | | | | - | | | | 3,080 | | | | 3,926 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
HELOC | | | 1,352 | | | | 1,841 | | | | - | | | | 2,478 | | | | 2,855 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential construction | | | 18 | | | | 39 | | | | - | | | | 26 | | | | 39 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 55 | | | | 55 | | | | - | | | | 58 | | | | 62 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 4,125 | | | | 5,710 | | | | - | | | | 5,642 | | | | 6,882 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total impaired loans with no related allowance recorded | | $ | 9,882 | | | $ | 14,303 | | | $ | - | | | $ | 9,708 | | | $ | 13,999 | | | $ | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired Loans with an Allowance Recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 147 | | | $ | 156 | | | $ | 24 | | | $ | 82 | | | $ | 90 | | | $ | 14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | | 147 | | | | 151 | | | | 24 | | | | 87 | | | | 88 | | | | 14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 69 | | | | 75 | | | | 12 | | | | 3,186 | | | | 3,673 | | | | 527 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - 1-4 family construction | | | 95 | | | | 94 | | | | 16 | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - lots, land & development | | | 48 | | | | 49 | | | | 8 | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - CRE | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other commercial | | | 112 | | | | 112 | | | | 19 | | | | 112 | | | | 112 | | | | 18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 618 | | | | 637 | | | | 103 | | | | 3,467 | | | | 3,963 | | | | 573 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 1,562 | | | | 1,613 | | | | 208 | | | | 1,433 | | | | 1,485 | | | | 167 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
HELOC | | | 1,659 | | | | 1,713 | | | | 397 | | | | 536 | | | | 587 | | | | 137 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential construction | | | 33 | | | | 36 | | | | 5 | | | | 40 | | | | 42 | | | | 7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 1 | | | | 8 | | | | - | | | | 2 | | | | 4 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 3,255 | | | | 3,370 | | | | 610 | | | | 2,011 | | | | 2,118 | | | | 311 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total impaired loans with an allowance recorded | | $ | 3,873 | | | $ | 4,007 | | | $ | 713 | | | $ | 5,478 | | | $ | 6,081 | | | $ | 884 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Impaired Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 815 | | | $ | 1,114 | | | $ | 24 | | | $ | 265 | | | $ | 563 | | | $ | 14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | | 3,028 | | | | 3,159 | | | | 24 | | | | 1,902 | | | | 2,043 | | | | 14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 1,019 | | | | 1,785 | | | | 12 | | | | 3,216 | | | | 3,720 | | | | 527 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - 1-4 family construction | | | 95 | | | | 94 | | | | 16 | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - lots, land & development | | | 1,157 | | | | 2,801 | | | | 8 | | | | 1,888 | | | | 4,475 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - CRE | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other commercial | | | 261 | | | | 277 | | | | 19 | | | | 262 | | | | 279 | | | | 18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 6,375 | | | | 9,230 | | | | 103 | | | | 7,533 | | | | 11,080 | | | | 573 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 4,262 | | | | 5,388 | | | | 208 | | | | 4,513 | | | | 5,411 | | | | 167 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
HELOC | | | 3,011 | | | | 3,554 | | | | 397 | | | | 3,014 | | | | 3,442 | | | | 137 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential construction | | | 51 | | | | 75 | | | | 5 | | | | 66 | | | | 81 | | | | 7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 56 | | | | 63 | | | | - | | | | 60 | | | | 66 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 7,380 | | | | 9,080 | | | | 610 | | | | 7,653 | | | | 9,000 | | | | 311 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total impaired loans | | $ | 13,755 | | | $ | 18,310 | | | $ | 713 | | | $ | 15,186 | | | $ | 20,080 | | | $ | 884 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The average recorded investment and interest income recognized on impaired loans, by class, for the three months ended March 31, 2014 and March 31, 2013 are shown in the table below. |
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| | Three Months Ended March 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Average | | | Interest | | | Average | | | Interest | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Recorded | | | Income | | | Recorded | | | Income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Investment | | | Recognized | | | Investment | | | Recognized | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired Loans with No Related Allowance Recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 334 | | | $ | 8 | | | $ | 536 | | | $ | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | | 2,217 | | | | 31 | | | | 1,361 | | | | 4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 322 | | | | 10 | | | | 2,673 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D | | | - | | | | - | | | | 6,726 | | | | 18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - 1-4 family construction | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - lots, land & development | | | 2,229 | | | | 44 | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - CRE | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other commercial | | | 154 | | | | 4 | | | | 131 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 5,256 | | | | 97 | | | | 11,427 | | | | 22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 2,778 | | | | 15 | | | | 1,341 | | | | 18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity lines of credit | | | 1,499 | | | | 6 | | | | 1,034 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential construction | | | 9 | | | | - | | | | 78 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 61 | | | | 1 | | | | 59 | | | | 1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 4,347 | | | | 22 | | | | 2,512 | | | | 19 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total impaired loans with no related allowance recorded | | $ | 9,603 | | | $ | 119 | | | $ | 13,939 | | | $ | 41 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired Loans with an Allowance Recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 470 | | | $ | - | | | $ | 436 | | | $ | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | | 77 | | | | 2 | | | | 12 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 2,843 | | | | - | | | | 1,411 | | | | 36 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D | | | - | | | | - | | | | 609 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - 1-4 family construction | | | 19 | | | | 2 | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - lots, land & development | | | 60 | | | | | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - CRE | | | - | | | | | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other commercial | | | 45 | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 3,514 | | | | 4 | | | | 2,468 | | | | 36 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 1,352 | | | | 9 | | | | 1,134 | | | | 9 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity lines of credit | | | 1,151 | | | | 2 | | | | 431 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential construction | | | 30 | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 2 | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 2,535 | | | | 11 | | | | 1,565 | | | | 9 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total impaired loans with an allowance recorded | | $ | 6,049 | | | $ | 15 | | | $ | 4,033 | | | $ | 45 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Impaired Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 804 | | | $ | 8 | | | $ | 972 | | | $ | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | | 2,294 | | | | 33 | | | | 1,373 | | | | 4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 3,165 | | | | 10 | | | | 4,084 | | | | 36 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D | | | - | | | | - | | | | 7,335 | | | | 18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - 1-4 family construction | | | 19 | | | | 2 | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - lots, land & development | | | 2,289 | | | | 44 | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - CRE | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other commercial | | | 199 | | | | 4 | | | | 131 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 8,770 | | | | 101 | | | | 13,895 | | | | 58 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 4,130 | | | | 24 | | | | 2,475 | | | | 27 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity lines of credit | | | 2,650 | | | | 8 | | | | 1,465 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential construction | | | 39 | | | | - | | | | 78 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 63 | | | | 1 | | | | 59 | | | | 1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 6,882 | | | | 33 | | | | 4,077 | | | | 28 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total impaired loans | | $ | 15,652 | | | $ | 134 | | | $ | 17,972 | | | $ | 86 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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During the three months ended March 31, 2014 and 2013, the Company recognized $134 thousand and $86 thousand, respectively, of interest income with respect to impaired loans, specifically accruing TDRs, within the period the loans were impaired. |
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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 March 31, 2014, there was $493 thousand in loans past due 90 days or more and accruing interest. At December 31, 2013, there was $17 thousand in loans past due 90 days or more and accruing interest. These loans were considered fully collectible at March 31, 2014 and December 31, 2013. The recorded investment in nonaccrual loans at March 31, 2014 and December 31, 2013 follows: |
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| | March 31, | | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 250 | | | $ | 200 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - owner-occupied | | | 176 | | | | 209 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE - investor income producing | | | 528 | | | | 3,192 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - 1-4 family construction | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - lots, land & development | | | 48 | | | | 292 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AC&D - CRE | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other commercial | | | 112 | | | | 112 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total commercial loans | | | 1,114 | | | | 4,005 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 1,645 | | | | 2,007 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
HELOC | | | 2,281 | | | | 2,348 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential construction | | | 51 | | | | 66 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other loans to individuals | | | 1 | | | | 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 3,978 | | | | 4,423 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total nonaccrual loans | | $ | 5,092 | | | $ | 8,428 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Purchased Credit-Impaired Loans – PCI loans had an unpaid principal balance of $180.1 million and $197.0 million and a carrying value of $149.5 million and $163.8 million at March 31, 2014 and December 31, 2013, respectively. PCI loans represented 7.5% and 8.4% of total assets at March 31, 2014 and December 31, 2013, respectively. Determining the fair value of the PCI loans at the time of 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 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 carryover of previously established allowance for loan losses from acquired companies. |
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A summary of changes in the accretable yield for PCI loans for the three months ended March 31, 2014 and 2013 follows: |
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| | Three Months Ended March 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accretable yield, beginning of period | | $ | 39,249 | | | $ | 42,734 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest income | | | (3,692 | ) | | | (3,575 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reclassification of nonaccretable difference due to improvement in expected cash flows | | | 4,504 | | | | 4,693 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other changes, net | | | 1,023 | | | | 1,716 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accretable yield, end of period | | $ | 41,084 | | | $ | 45,568 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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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. |
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The Company had allocated $333 thousand and $565 thousand, respectively, of specific reserves to customers whose loan terms have been modified in a TDR as of March 31, 2014 and December 31, 2013. As of March 31, 2014, the Company had 11 TDR loans totaling $5.0 million, of which $1.8 million are nonaccrual loans. As of December 31, 2013, the Company had 11 TDR loans totaling $8.2 million, of which $4.4 million are nonaccrual loans. |
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For the three months ended March 31, 2014 and 2013, the following tables represent a breakdown of the types of concessions made by loan class. |
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| | Three months ended | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
31-Mar-14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of loans | | | Pre-Modification Outstanding Recorded Investment | | | Post-Modification Outstanding Recorded Investment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Below market interest rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other Commercial | | | 1 | | | $ | 165 | | | $ | 165 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
HELOC | | | 2 | | | | 1,549 | | | | 1,549 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 3 | | | $ | 1,714 | | | $ | 1,714 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | Three months ended | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
31-Mar-13 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of loans | | | Pre-Modification Outstanding Recorded Investment | | | Post-Modification Outstanding Recorded Investment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Below market interest rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRE-investor income producing | | | 1 | | | $ | 3,610 | | | $ | 3,610 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 1 | | | | 43 | | | | 43 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 2 | | | $ | 3,653 | | | $ | 3,653 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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There were no loans that were modified as TDRs within the 12 months ended March 31, 2014 or 2013 and for which there was a payment default during the three months ended March 31, 2014 or 2013. |
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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 March 31, 2014 and 2013: |
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| | Twelve Months Ended March 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Paid in full | | | Paying as restructured | | | Foreclosure/Default | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of loans | | | Recorded Investment | | | Number of loans | | | Recorded Investment | | | Number of loans | | | Recorded Investment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Below market interest rate | | | - | | | $ | - | | | | 3 | | | $ | 2,037 | | | | - | | | $ | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Extended payment terms | | | - | | | | - | | | | 8 | | | | 2,954 | | | | - | | | $ | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | - | | | $ | - | | | | 11 | | | $ | 4,991 | | | | - | | | $ | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | Twelve Months Ended March 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Paid in full | | | Paying as restructured | | | Foreclosure/Default | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of loans | | | Recorded Investment | | | Number of loans | | | Recorded Investment | | | Number of loans | | | Recorded Investment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Below market interest rate | | | - | | | $ | - | | | | 2 | | | $ | 3,653 | | | | - | | | $ | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | - | | | $ | - | | | | 2 | | | $ | 3,653 | | | | - | | | $ | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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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 arms length 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: |
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| | Three Months Ended | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
March 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 17,247 | | | $ | 4,184 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Disbursements | | | 62 | | | | 40 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Repayments | | | (2,408 | ) | | | (1,565 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 14,901 | | | $ | 2,659 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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At March 31, 2014 and December 31, 2013, the Company had pre-approved but unused lines of credit totaling $2.7 million and $3.0 million, respectively, to related parties. |