LOANS AND ALLOWANCE FOR LOAN LOSSES | 3 Months Ended |
Mar. 31, 2014 |
LOANS AND ALLOWANCE FOR LOAN LOSSES | ' |
NOTE 6 – LOANS AND ALLOWANCE FOR LOAN LOSSES |
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A summary of the balances of loans is as follows: |
|
| | March 31, | | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential – fixed | | $ | 21,949 | | | $ | 21,101 | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential – variable | | | 171,364 | | | | 160,618 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 86,544 | | | | 82,367 | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | 79,794 | | | | 80,103 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 359,651 | | | | 344,189 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Secured | | | 14,254 | | | | 14,977 | | | | | | | | | | | | | | | | | | | | | | | | | |
Unsecured | | | 1,398 | | | | 1,453 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 15,652 | | | | 16,430 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity lines of credit | | | 26,467 | | | | 27,092 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other | | | 385 | | | | 415 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 26,852 | | | | 27,507 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | | 402,155 | | | | 388,126 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Less: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses | | | (4,393 | ) | | | (4,213 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Net deferred loan origination fees | | | (136 | ) | | | (195 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans, net | | $ | 397,626 | | | $ | 383,718 | | | | | | | | | | | | | | | | | | | | | | | | | |
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The following table summarizes the changes in the allowance for loan losses by portfolio segment for the three months ended March 31, 2014 and 2013: |
|
| | Residential | | | Commercial | | | Construction | | | Commercial | | | Home | | | Other | | | Unallocated | | | Total | |
Real Estate | Real Estate | Equity | Consumer |
| | (In thousands) | |
Three Months Ended March 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Allowance at December 31, 2013 | | $ | 1,351 | | | $ | 887 | | | $ | 1,305 | | | $ | 426 | | | $ | 213 | | | $ | 7 | | | $ | 24 | | | $ | 4,213 | |
Provision (credit) for loan losses | | | 74 | | | | 134 | | | | 2 | | | | (36 | ) | | | (5 | ) | | | (1 | ) | | | 12 | | | | 180 | |
Loans charged off | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance at March 31, 2014 | | $ | 1,425 | | | $ | 1,021 | | | $ | 1,307 | | | $ | 390 | | | $ | 208 | | | $ | 6 | | | $ | 36 | | | $ | 4,393 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended March 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance at December 31, 2012 | | $ | 1,157 | | | $ | 1,041 | | | $ | 918 | | | $ | 456 | | | $ | 171 | | | $ | 11 | | | $ | 90 | | | $ | 3,844 | |
Provision (credit) for loan losses | | | 102 | | | | (122 | ) | | | 58 | | | | (16 | ) | | | 21 | | | | -- | | | | 57 | | | | 100 | |
Loans charged off | | | -- | | | | -- | | | | -- | | | | (36 | ) | | | -- | | | | -- | | | | -- | | | | (36 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance at March 31, 2013 | | $ | 1,259 | | | $ | 919 | | | $ | 976 | | | $ | 404 | | | $ | 192 | | | $ | 11 | | | $ | 147 | | | $ | 3,908 | |
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Additional information pertaining to the allowance for loan losses at March 31, 2014 and December 31, 2013 is as follows: |
|
| | Residential | | | Commercial | | | Construction | | | Commercial | | | Home | | | Other | | | Unallocated | | | Total | |
Real Estate | Real Estate | Equity | Consumer |
| | (In thousands) | |
31-Mar-14 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Allowance related to loans | | $ | -- | | | $ | 77 | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | 77 | |
individually evaluated and |
deemed to be impaired |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance related to loans | | | 1,425 | | | | 944 | | | | 1,307 | | | | 390 | | | | 208 | | | | 6 | | | | 36 | | | | 4,316 | |
individually evaluated and |
not deemed impaired, and |
those collectively evaluated |
for impairment |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total allowance | | $ | 1,425 | | | $ | 1,021 | | | $ | 1,307 | | | $ | 390 | | | $ | 208 | | | $ | 6 | | | $ | 36 | | | $ | 4,393 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loan balances individually | | $ | 423 | | | $ | 5,247 | | | $ | -- | | | $ | 29 | | | $ | 427 | | | $ | -- | | | $ | -- | | | $ | 6,126 | |
evaluated and deemed to be |
impaired |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loan balances individually | | | 192,890 | | | | 881,297 | | | | 779,794 | | | | 115,623 | | | | 226,040 | | | | 385 | | | | --- | | | | 396,029 | |
evaluated and not deemed |
impaired, and those collectively |
evaluated for impairment |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 193,313 | | | $ | 886,544 | | | $ | 779,794 | | | $ | 115,652 | | | $ | 226,467 | | | $ | 385 | | | $ | --- | | | $ | 402,155 | |
|
|
| | Residential | | | Commercial | | | Construction | | | Commercial | | | Home | | | Other | | | Unallocated | | | Total | |
Real Estate | Real Estate | Equity | Consumer |
| | (In thousands) | | |
31-Dec-13 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance related to loans | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | |
individually evaluated and |
deemed to be impaired |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance related to loans | | | 1,351 | | | | 887 | | | | 1,305 | | | | 426 | | | | 213 | | | | 7 | | | | 24 | | | | 4,213 | |
individually evaluated and |
not deemed impaired, and |
those collectively evaluated |
for impairment |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total allowance | | $ | 1,351 | | | $ | 887 | | | $ | 1,305 | | | $ | 426 | | | $ | 213 | | | $ | 7 | | | $ | 24 | | | $ | 4,213 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loan balances individually | | $ | 425 | | | $ | 5,269 | | | $ | -- | | | $ | 34 | | | $ | 427 | | | $ | -- | | | $ | -- | | | $ | 6,155 | |
evaluated and deemed to be |
impaired |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loan balances individually | | | 181,294 | | | | 77,098 | | | | 80,103 | | | | 16,396 | | | | 26,665 | | | | 415 | | | | -- | | | | 381,971 | |
evaluated and not deemed |
impaired, and those collectively |
evaluated for impairment |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 181,719 | | | $ | 82,367 | | | $ | 80,103 | | | $ | 16,430 | | | $ | 27,092 | | | $ | 415 | | | $ | -- | | | $ | 388,126 | |
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The following is a summary of past due and non-accrual loans at March 31, 2014 and December 31, 2013: |
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| | 30-59 Days | | | 60-89 Days | | | Past Due 90 | | | Total | | | Past Due 90 | | | Non-accrual | | | | | | | | | |
Past Due | Past Due | Days or More | Past Due | Days or More | Loans | | | | | | | | |
| | | | and Still | | | | | | | | | |
| | | | Accruing (1) | | | | | | | | | |
| | (In thousands) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
31-Mar-14 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential real estate | | $ | -- | | | $ | 226 | | | $ | 197 | | | $ | 423 | | | $ | -- | | | $ | 423 | | | | | | | | | |
Commercial real estate | | | -- | | | | -- | | | | 791 | | | | 791 | | | | -- | | | | 2,651 | | | | | | | | | |
Home equity lines of credit | | | -- | | | | -- | | | | 392 | | | | 392 | | | | -- | | | | 429 | | | | | | | | | |
Other consumer loans | | | 2 | | | | -- | | | | -- | | | | 2 | | | | -- | | | | -- | | | | | | | | | |
Total | | $ | 2 | | | $ | 226 | | | $ | 1,380 | | | $ | 1,608 | | | | -- | | | $ | 3,503 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
31-Dec-13 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential real estate | | $ | -- | | | $ | 335 | | | $ | 90 | | | $ | 425 | | | $ | -- | | | $ | 639 | | | | | | | | | |
Commercial real estate | | | 867 | | | | 791 | | | | -- | | | | 1,658 | | | | -- | | | | 2,645 | | | | | | | | | |
Commercial | | | -- | | | | -- | | | | 34 | | | | 34 | | | | -- | | | | 34 | | | | | | | | | |
Home equity lines of credit | | | 136 | | | | 308 | | | | 583 | | | | 1,027 | | | | 191 | | | | 427 4427 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | $1,003 | | | $ | $1,434 | | | $ | $707 | | | $ | $3,144 | | | $ | $191 | | | $ | $3,745 | | | | | | | | | |
|
| -1 | Represents loans past maturity for which monthly interest payments are being received. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
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The following is a summary of impaired loans at March 31, 2014 and December 31, 2013: |
|
| | 31-Mar-14 | | | 31-Dec-13 | | | | | | | | | |
| | Recorded | | | Unpaid | | | Related | | | Recorded | | | Unpaid | | | Related | | | | | | | | | |
Investment | Principal | Allowance | Investment | Principal | Allowance | | | | | | | | |
| Balance | | | Balance | | | | | | | | | |
| | (In thousands) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired loans without a valuation allowance: | | | | | | | | |
Residential real estate | | $ | 423 | | | $ | 423 | | | $ | -- | | | $ | 425 | | | $ | 425 | | | $ | -- | | | | | | | | | |
Commercial real estate | | | 4,456 | | | | 4,456 | | | | -- | | | | 5,269 | | | | 5,269 | | | | -- | | | | | | | | | |
Commercial | | | 29 | | | | 29 | | | | -- | | | | 34 | | | | 34 | | | | -- | | | | | | | | | |
Home equity lines of credit | | | 427 | | | | 427 | | | | -- | | | | 427 | | | | 427 | | | | -- | | | | | | | | | |
Total | | | 5,335 | | | | 5,335 | | | | -- | | | | 6,155 | | | | 6,155 | | | | -- | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired loans with a valuation allowance: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | 791 | | | | 791 | | | | 77 | | | | -- | | | | -- | | | | -- | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total impaired loans | | $ | 6,126 | | | $ | 6,126 | | | $ | 77 | | | $ | 6,155 | | | $ | 6,155 | | | $ | -- | | | | | | | | | |
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Additional information pertaining to impaired loans follows: |
|
| | Three Months Ended March 31, 2014 | | | Three Months Ended March 31, 2013 | | | | | | | | | |
| | | | | | | | Interest | | | | | | | | | Interest | | | | | | | | | |
| | Average | | | Interest | | | Income | | | Average | | | Interest | | | Income | | | | | | | | | |
| | Recorded | | | Income | | | Recognized | | | Recorded | | | Income | | | Recognized | | | | | | | | | |
| | Investment | | | Recognized | | | on Cash Basis | | | Investment | | | Recognized | | | on cash basis | | | | | | | | | |
| | (In thousands) | | | | | | | | | |
Residential real estate | | $ | 424 | | | $ | 4 | | | $ | 3 | | | $ | 605 | | | $ | 7 | | | $ | 7 | | | | | | | | | |
Commercial real estate | | | 5,258 | | | | 64 | | | | 53 | | | | 6,104 | | | | 117 | | | | 90 | | | | | | | | | |
Commercial | | | 31 | | | | 4 | | | | -- | | | | 372 | | | | 2 | | | | 2 | | | | | | | | | |
Home equity lines of credit | | | 427 | | | | -- | | | | 1 | | | | 103 | | | | 1 | | | | 1 | | | | | | | | | |
Total | | $ | 6,140 | | | $ | 72 | | | $ | 57 | | | $ | 7,184 | | | $ | 127 | | | $ | 100 | | | | | | | | | |
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No additional funds are committed to be advanced in connection with impaired loans. |
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There were no troubled debt restructurings recorded during the three months ended March 31, 2014 and 2013. |
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There were no troubled debt restructurings that defaulted during the three months ended March 31, 2014 and 2013, and for which default was within one year of the restructure date. |
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Credit Quality Information |
The Company utilizes an eleven-grade internal loan rating system for commercial real estate, construction and commercial loans as follows: |
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Loans rated 1-3 and 31: Loans in these categories are considered “pass” rated loans with low to average risk. |
|
Loans rated 4: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management. |
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Loans rated 5: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected. |
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Loans rated 6: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable. |
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Loans rated 7: Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted. |
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Category 8: Loans in this category only include commercial loans under $25 thousand with no other outstandings or relationships with the Company. In accordance with regulatory guidelines, these loans are not rated. |
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Category 9: Loans in this category include loans which otherwise require rating but which have not been rated, or loans for which the Company’s loan policy does not require rating. |
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Category 10: Loans in this category include credit commitments/relationships that cannot be rated due to a lack of financial information or inaccurate financial information. If, within 60 days of the assignment of a 10 rating, information is still not available to allow a standard rating, the credit will be rated 5. |
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On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate, construction and commercial loans. During each calendar year, the Company engages an independent third party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process. On a monthly basis, the Company reviews the residential real estate and consumer loan portfolio for credit quality primarily through the use of delinquency reports. |
|
The following table presents the Company’s loans by risk rating: |
|
| | 31-Mar-14 | | | 31-Dec-13 | |
| | Commercial | | | Construction | | | Commercial | | | Total | | | Commercial | | | Construction | | | Commercial | | | Total | |
Real Estate | Real Estate |
| | (In thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Loans rated 1 -3 and 31 | | $ | 75,242 | | | $ | 79,794 | | | $ | 15,025 | | | $ | 170,061 | | | $ | 71,547 | | | $ | 80,103 | | | $ | 15,019 | | | $ | 166,669 | |
Loans rated 4 | | | 8,914 | | | | -- | | | | 393 | | | | 9,307 | | | | 8,418 | | | | -- | | | | 1,168 | | | | 9,586 | |
Loans rated 5 | | | 1,597 | | | | -- | | | | 234 | | | | 1,831 | | | | 2,402 | | | | -- | | | | 243 | | | | 2,645 | |
Loans rated 6 | | | 791 | | | | -- | | | | -- | | | | 791 | | | | -- | | | | -- | | | | -- | | | | -- | |
Total | | $ | 86,544 | | | $ | 79,794 | | | $ | 15,652 | | | $ | 181,990 | | | $ | 82,367 | | | $ | 80,103 | | | $ | 16,430 | | | $ | 178,900 | |