Loans | 9 Months Ended |
Sep. 30, 2013 |
Receivables [Abstract] | ' |
Loans | ' |
Note 6—Loans |
The following table presents the composition of the Company’s loan portfolio as of the dates indicated (dollars in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, | | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial Loans: | | $ | 296,229 | | | $ | 262,637 | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans Secured by Real Estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction, Land Development and Other Land | | | 52,720 | | | | 48,528 | | | | | | | | | | | | | | | | | | | | | | | | | |
Owner-Occupied Nonresidential Properties | | | 192,631 | | | | 181,844 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other Nonresidential Properties | | | 262,395 | | | | 246,450 | | | | | | | | | | | | | | | | | | | | | | | | | |
1-4 Family Residential Properties | | | 63,852 | | | | 62,037 | | | | | | | | | | | | | | | | | | | | | | | | | |
Multifamily Residential Properties | | | 27,438 | | | | 31,610 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Commercial and Other Real Estate | | | 546,316 | | | | 521,941 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other Loans: | | | 14,377 | | | | 21,779 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Loans | | $ | 909,642 | | | $ | 854,885 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following table is a breakout of the Company’s loan portfolio stratified by the industry concentration of the borrower by their respective NAICS code as of the dates indicated (dollars in thousands): |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, | | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate | | $ | 354,041 | | | $ | 312,625 | | | | | | | | | | | | | | | | | | | | | | | | | |
Hotel/Lodging | | | 74,442 | | | | 82,483 | | | | | | | | | | | | | | | | | | | | | | | | | |
Manufacturing | | | 84,423 | | | | 77,203 | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | 67,428 | | | | 55,385 | | | | | | | | | | | | | | | | | | | | | | | | | |
Wholesale | | | 57,045 | | | | 54,218 | | | | | | | | | | | | | | | | | | | | | | | | | |
Finance | | | 45,290 | | | | 59,791 | | | | | | | | | | | | | | | | | | | | | | | | | |
Healthcare | | | 39,904 | | | | 41,857 | | | | | | | | | | | | | | | | | | | | | | | | | |
Professional Services | | | 45,349 | | | | 44,714 | | | | | | | | | | | | | | | | | | | | | | | | | |
Restaurant/Food Service | | | 35,996 | | | | 24,105 | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail | | | 24,516 | | | | 30,302 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other Services | | | 21,376 | | | | 23,239 | | | | | | | | | | | | | | | | | | | | | | | | | |
Administrative Management | | | 20,541 | | | | 19,078 | | | | | | | | | | | | | | | | | | | | | | | | | |
Information | | | 12,167 | | | | 4,492 | | | | | | | | | | | | | | | | | | | | | | | | | |
Transportation | | | 9,471 | | | | 11,431 | | | | | | | | | | | | | | | | | | | | | | | | | |
Entertainment | | | 6,018 | | | | 8,132 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other | | | 11,535 | | | | 5,830 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 909,642 | | | $ | 854,885 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA Loans |
As part of the acquisition of PC Bancorp, the Company acquired loans that were originated under the guidelines of the Small Business Administration (“SBA”) program. Furthermore, the Company continues to originate SBA loans. The total portfolio of the SBA contractual loan balances being serviced by the Company at September 30, 2013 was $112 million, of which $73 million has been sold. Of the $39 million remaining on the Company’s books, $24 million is un-guaranteed and $15 million is guaranteed by the SBA. |
For SBA guaranteed loans, a secondary market exists to purchase the guaranteed portion of these loans with the Company continuing to “service” the entire loan. The secondary market for guaranteed loans is comprised of investors seeking long term assets with yields that adapt to the prevailing interest rates. These investors are typically financial institutions, insurance companies, pension funds, unions and other types of investors specializing in the acquisition of this product. When a decision to sell the guaranteed portion of an SBA loan is made by the Company, bids are solicited from secondary market investors and the loan is normally sold to the highest bidder. |
While there were no loans classified as held for sale at September 30, 2013, the Company has originated approximately $5.8 million in commercial and industrial SBA loans, of which $4.3 million is guaranteed by the SBA. The Company does not currently plan on selling these loans, but it may choose to do so in the future. The Company sold approximately $5.1 million of the guaranteed portion of its SBA loans during the nine months ended September 30, 2013 and recorded a net gain on sale of $673,000. |
|
Allowance for Loan Loss |
The following table is a summary of the activity for the allowance for loan loss for the periods indicated (dollars in thousands): |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Nine Months Ended | | | | | | | | | | | | | | | | | |
September 30, | September 30, | | | | | | | | | | | | | | | | |
| | 2013 | | | 2012 | | | 2013 | | | 2012 | | | | | | | | | | | | | | | | | |
Allowance for loan loss at beginning of period | | $ | 9,412 | | | $ | 7,329 | | | $ | 8,803 | | | $ | 7,495 | | | | | | | | | | | | | | | | | |
Provision for loan losses | | | 631 | | | | 521 | | | | 1,918 | | | | 901 | | | | | | | | | | | | | | | | | |
Net (charge-offs) recoveries: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | | (786 | ) | | | (97 | ) | | | (1,523 | ) | | | (686 | ) | | | | | | | | | | | | | | | | |
Recoveries | | | 781 | | | | 53 | | | | 840 | | | | 96 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net (charge-offs) | | | (5 | ) | | | (44 | ) | | | (683 | ) | | | (590 | ) | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan loss at end of period | | $ | 10,038 | | | $ | 7,806 | | | $ | 10,038 | | | $ | 7,806 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net (charge-offs) to average loans | | | 0 | % | | | (0.01 | )% | | | (0.08 | )% | | | (0.11 | )% | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, | | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | |
2013 | 2012 | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan loss to total loans | | | 1.1 | % | | | 1.03 | % | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan loss to total loans accounted for at historical cost, which excludes loan balances and the related allowance for loans acquired through acquisition | | | 1.5 | % | | | 1.54 | % | | | | | | | | | | | | | | | | | | | | | | | | |
The following tables present, by portfolio segment, the changes in the allowance for loan loss and the recorded investment in loans as of the dates and for the periods indicated (dollars in thousands): |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial | | | Construction, | | | Commercial | | | Other | | | Total | | | | | | | | | | | | | |
and Industrial | Land | and Other | | | | | | | | | | | | |
| Development | Real Estate | | | | | | | | | | | | |
| and Other | | | | | | | | | | | | | |
| Land | | | | | | | | | | | | | |
Three Months Ended September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 4,659 | | | $ | 2,360 | | | $ | 2,351 | | | $ | 42 | | | $ | 9,412 | | | | | | | | | | | | | |
Provision for loan losses | | | 1,103 | | | | (1,095 | ) | | | 596 | | | | 27 | | | | 631 | | | | | | | | | | | | | |
Net (charge-offs) recoveries: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | | (786 | ) | | | 0 | | | | (0 | ) | | | (0 | ) | | | (786 | ) | | | | | | | | | | | | |
Recoveries | | | 11 | | | | 763 | | | | 6 | | | | 1 | | | | 781 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net (charge-offs) recoveries | | | (775 | ) | | | 763 | | | | 6 | | | | 1 | | | | (5 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 4,987 | | | $ | 2,028 | | | $ | 2,953 | | | $ | 70 | | | $ | 10,038 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 4,161 | | | $ | 663 | | | $ | 2,265 | | | $ | 240 | | | $ | 7,329 | | | | | | | | | | | | | |
Provision for loan losses | | | (11 | ) | | | 101 | | | | 444 | | | | (13 | ) | | | 521 | | | | | | | | | | | | | |
Net (charge-offs) recoveries: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | | (0 | ) | | | (0 | ) | | | (97 | ) | | | (0 | ) | | | (97 | ) | | | | | | | | | | | | |
Recoveries | | | 14 | | | | 0 | | | | 37 | | | | 2 | | | | 53 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net (charge-offs) recoveries | | | 14 | | | | 0 | | | | (60 | ) | | | 2 | | | | (44 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 4,164 | | | $ | 764 | | | $ | 2,649 | | | $ | 229 | | | $ | 7,806 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial | | | Construction, | | | Commercial | | | Other | | | Total | | | | | | | | | | | | | |
and Industrial | Land | and Other | | | | | | | | | | | | |
| Development | Real Estate | | | | | | | | | | | | |
| and Other | | | | | | | | | | | | | |
| Land | | | | | | | | | | | | | |
Nine Months Ended September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 4,572 | | | $ | 2,035 | | | $ | 2,084 | | | $ | 112 | | | $ | 8,803 | | | | | | | | | | | | | |
Provision for loan losses | | | 1,754 | | | | (770 | ) | | | 974 | | | | (40 | ) | | | 1,918 | | | | | | | | | | | | | |
Net (charge-offs) recoveries: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | | (1,398 | ) | | | (0 | ) | | | (116 | ) | | | (8 | ) | | | (1,523 | ) | | | | | | | | | | | | |
Recoveries | | | 59 | | | | 763 | | | | 11 | | | | 6 | | | | 840 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net (charge-offs) recoveries | | | (1,339 | ) | | | 763 | | | | (105 | ) | | | (2 | ) | | | (683 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 4,987 | | | $ | 2,028 | | | $ | 2,953 | | | $ | 70 | | | $ | 10,038 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 3,541 | | | $ | 752 | | | $ | 2,911 | | | $ | 291 | | | $ | 7,495 | | | | | | | | | | | | | |
Provision for loan losses | | | 1,015 | | | | 12 | | | | (66 | ) | | | (60 | ) | | | 901 | | | | | | | | | | | | | |
Net (charge-offs) recoveries: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | | (443 | ) | | | 0 | | | | (233 | ) | | | (10 | ) | | | (686 | ) | | | | | | | | | | | | |
Recoveries | | | 51 | | | | 0 | | | | 37 | | | | 8 | | | | 96 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net (charge-offs) recoveries | | | (392 | ) | | | 0 | | | | (197 | ) | | | (2 | ) | | | (590 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 4,164 | | | $ | 764 | | | $ | 2,649 | | | $ | 229 | | | $ | 7,806 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial | | | Construction, | | | Commercial | | | Other | | | Total | | | | | | | | | | | | | |
and Industrial | Land | and Other | | | | | | | | | | | | |
| Development | Real Estate | | | | | | | | | | | | |
| and Other | | | | | | | | | | | | | |
| Land | | | | | | | | | | | | | |
September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for Loan Loss – Ending balance: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 6 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 6 | | | | | | | | | | | | | |
Collectively evaluated for impairment | | | 4,971 | | | | 2,028 | | | | 2,953 | | | | 70 | | | | 10,022 | | | | | | | | | | | | | |
Purchased credit impaired (loans acquired with deteriorated credit quality) | | | 10 | | | | 0 | | | | 0 | | | | 0 | | | | 10 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Allowance for Loan Loss | | $ | 4,987 | | | $ | 2,028 | | | $ | 2,953 | | | $ | 70 | | | $ | 10,038 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans receivable – Ending balance: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 3,094 | | | $ | 0 | | | $ | 6,022 | | | $ | 0 | | | $ | 9,116 | | | | | | | | | | | | | |
Collectively evaluated for impairment | | | 292,059 | | | | 52,720 | | | | 536,958 | | | | 14,377 | | | | 896,114 | | | | | | | | | | | | | |
Purchased credit impaired (loans acquired with deteriorated credit quality) | | | 1,076 | | | | 0 | | | | 3,336 | | | | 0 | | | | 4,412 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Loans Receivable | | $ | 296,229 | | | $ | 52,720 | | | $ | 546,316 | | | $ | 14,377 | | | $ | 909,642 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for Loan Loss – Ending balance: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 11 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 11 | | | | | | | | | | | | | |
Collectively evaluated for impairment | | | 4,552 | | | | 2,035 | | | | 2,084 | | | | 112 | | | | 8,783 | | | | | | | | | | | | | |
Purchased credit impaired (loans acquired with deteriorated credit quality) | | | 9 | | | | 0 | | | | 0 | | | | 0 | | | | 9 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Allowance for Loan Loss | | $ | 4,572 | | | $ | 2,035 | | | $ | 2,084 | | | $ | 112 | | | $ | 8,803 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans receivable – Ending balance: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 885 | | | $ | 1,200 | | | $ | 3,499 | | | $ | 0 | | | $ | 5,584 | | | | | | | | | | | | | |
Collectively evaluated for impairment | | | 260,982 | | | | 47,328 | | | | 512,312 | | | $ | 21,775 | | | | 842,397 | | | | | | | | | | | | | |
Purchased credit impaired (loans acquired with deteriorated credit quality) | | | 770 | | | | 0 | | | | 6,130 | | | $ | 4 | | | | 6,904 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Loans Receivable | | $ | 262,637 | | | $ | 48,528 | | | $ | 521,941 | | | $ | 21,779 | | | $ | 854,885 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Credit Quality of Loans |
The Company utilizes an internal loan classification system as a means of reporting problem and potential problem loans. Under the Company’s loan risk rating system, loans are classified as “Pass,” with problem and potential problem loans as “Special Mention,” “Substandard” “Doubtful” and “Loss”. Individual loan risk ratings are updated continuously or at any time the situation warrants. In addition, management regularly reviews problem loans to determine whether any loan requires a classification change, in accordance with the Company’s policy and applicable regulations. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The internal loan classification risk grading system is based on experiences with similarly graded loans. |
The Company’s internally assigned grades are as follows: |
|
| • | | Pass – loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral. Loans not meeting the criteria of special mention, substandard, doubtful or loss that have been analyzed individually as part of the above described process are considered to be pass-rated loans. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| • | | Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected. Special Mention loans do not currently expose the Company to sufficient risk to warrant classification as a Substandard, Doubtful or Loss classification, but possess weaknesses that deserve management’s close attention. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| • | | Substandard – loans that have a well-defined weakness based on objective evidence and can be characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| • | | Doubtful – loans classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| • | | Loss – loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The following tables present the risk category of loans by class of loans based on the most recent internal loan classification as of the dates indicated (dollars in thousands): |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial | | | Construction, | | | Commercial | | | Other | | | Total | | | | | | | | | | | | | |
and Industrial | Land | and | | | | | | | | | | | | |
| Development | Other Real | | | | | | | | | | | | |
| and Other | Estate | | | | | | | | | | | | |
| Land | | | | | | | | | | | | | |
30-Sep-13 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 285,687 | | | $ | 52,720 | | | $ | 521,526 | | | $ | 14,374 | | | $ | 874,307 | | | | | | | | | | | | | |
Special Mention | | | 1,683 | | | | 0 | | | | 2,999 | | | | 0 | | | | 4,682 | | | | | | | | | | | | | |
Substandard | | | 8,859 | | | | 0 | | | | 21,791 | | | | 3 | | | | 30,652 | | | | | | | | | | | | | |
Doubtful | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 296,229 | | | $ | 52,720 | | | $ | 546,316 | | | $ | 14,377 | | | $ | 909,642 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 250,624 | | | $ | 47,328 | | | $ | 493,768 | | | $ | 21,655 | | | $ | 813,375 | | | | | | | | | | | | | |
Special Mention | | | 4,602 | | | | 0 | | | | 5,300 | | | | 0 | | | | 9,902 | | | | | | | | | | | | | |
Substandard | | | 7,411 | | | | 1,200 | | | | 22,873 | | | | 119 | | | | 31,603 | | | | | | | | | | | | | |
Doubtful | | | 0 | | | | 0 | | | | 0 | | | | 5 | | | | 5 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 262,637 | | | $ | 48,528 | | | $ | 521,941 | | | $ | 21,779 | | | $ | 854,885 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Age Analysis of Past Due and Non-Accrual Loans |
The following tables present an aging analysis of the recorded investment of past due loans and non-accrual loans as of the dates indicated (dollars in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 31-60 | | | 61-90 | | | Greater | | | Total | | | Total | | | Current | | | Total Loans | | | | | |
Days | Days | than | Past Due | Non | | | | |
Past Due | Past Due | 90 Days | and | Accrual | | | | |
| | Past Due | Accruing | | | | | |
| | and | | | | | | |
| | Accruing | | | | | | |
September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | $ | 244 | | | $ | 0 | | | $ | 0 | | | $ | 244 | | | $ | 4,166 | | | $ | 291,819 | | | $ | 296,229 | | | | | |
Construction, Land Development and Other Land | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 52,720 | | | | 52,720 | | | | | |
Commercial and Other Real Estate | | | 249 | | | | 0 | | | | 0 | | | | 249 | | | | 8,278 | | | | 537,789 | | | | 546,316 | | | | | |
Other | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 14,377 | | | | 14,377 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 493 | | | $ | 0 | | | $ | 0 | | | $ | 493 | | | $ | 12,444 | | | $ | 896,705 | | | $ | 909,642 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| | 31-60 | | | 61-90 | | | Greater | | | Total | | | Total | | | Current | | | Total Loans | | | | | |
Days | Days | than | Past Due | Non | | | | |
Past Due | Past Due | 90 Days | and | Accrual | | | | |
| | Past Due | Accruing | | | | | |
| | and | | | | | | |
| | Accruing | | | | | | |
December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | $ | 1,025 | | | $ | 0 | | | $ | 0 | | | $ | 1,025 | | | $ | 1,583 | | | $ | 260,029 | | | $ | 262,637 | | | | | |
Construction, Land Development and Other Land | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 1,200 | | | | 47,328 | | | | 48,528 | | | | | |
Commercial and Other Real Estate | | | 2,884 | | | | 0 | | | | 0 | | | | 2,884 | | | | 7,742 | | | | 511,315 | | | | 521,941 | | | | | |
Other | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 5 | | | | 21,774 | | | | 21,779 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 3,909 | | | $ | 0 | | | $ | 0 | | | $ | 3,909 | | | $ | 10,530 | | | $ | 840,446 | | | $ | 854,885 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Troubled Debt Restructuring |
The Company’s loan portfolio contains certain loans that have been modified in a Troubled Debt Restructuring (“TDR”), where economic concessions have been granted to borrowers experiencing financial difficulties. Loans are restructured in an effort to maximize collections. Economic concessions can include: reductions to the interest rate, payment extensions, forgiveness of principal or other actions. |
The modification process includes evaluation of impairment based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the loan collateral. In these cases, management uses the current fair value of the collateral, less selling costs, to evaluate the loan for impairment. If management determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs and unamortized premium or discount), impairment is recognized through a specific allowance or a charge-off. |
Impairment analyses are performed on troubled debt restructured loans in conjunction with the normal allowance for loan loss process. |
The following tables include the recorded investment and unpaid principal balances for TDR loans for the dates and periods indicated (dollars in thousands). This table includes one commercial and industrial TDR loan that was returned to accrual status during the second quarter of 2013. This accruing TDR loan has a recorded investment of $54,911 and unpaid principal of $54,734 as of September 30, 2013. Also included in this table are two commercial and industrial TDR loans that were purchased credit impaired (“PCI”). These two TDR PCI loans had a recorded investment of $94,251 and unpaid principal balances of $155,034 as of September 30, 2013. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Recorded | | | Unpaid | | | Interest Income | | | | | | | | | | | | | | | | | | | | | |
Investment | Principal | Recognized | | | | | | | | | | | | | | | | | | | | |
| Balance | | | | | | | | | | | | | | | | | | | | | |
Period ended September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | $ | 602 | | | $ | 900 | | | $ | 1 | | | | | | | | | | | | | | | | | | | | | |
Construction, Land Development and Other Land | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | | | | |
Commercial and Other Real Estate | | | 2,204 | | | | 2,785 | | | | 0 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 2,806 | | | $ | 3,685 | | | $ | 1 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Recorded | | | Unpaid | | | Interest Income | | | | | | | | | | | | | | | | | | | | | |
Investment | Principal | Recognized | | | | | | | | | | | | | | | | | | | | |
| Balance | | | | | | | | | | | | | | | | | | | | | |
Year ended December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | $ | 314 | | | $ | 626 | | | $ | 5 | | | | | | | | | | | | | | | | | | | | | |
Construction, Land Development and Other Land | | | 1,200 | | | | 2,791 | | | | 0 | | | | | | | | | | | | | | | | | | | | | |
Commercial and Other Real Estate | | | 4,193 | | | | 4,874 | | | | 32 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 5,707 | | | $ | 8,291 | | | $ | 37 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following table shows the pre- and post-modification recorded investment in TDR loans by type of modification and loan segment that have occurred during the periods indicated (dollars in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Three Months Ended September 30, | | | | | | | | | |
2013 | 2012 | | | | | | | | |
| | Number | | | Pre- | | | Post- | | | Number | | | Pre- | | | Post- | | | | | | | | | |
of Loans | Modification | Modification | of Loans | Modification | Modification | | | | | | | | |
| Recorded | Recorded | | Recorded | Recorded | | | | | | | | |
| Investment | Investment | | Investment | Investment | | | | | | | | |
Reduced Interest Rate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction, Land Development and Other Land | | | 0 | | | $ | 0 | | | $ | 0 | | | | 0 | | | $ | 0 | | | $ | 0 | | | | | | | | | |
Lengthened Amortization: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | | 0 | | | | 0 | | | | 0 | | | | 1 | | | | 60 | | | | 60 | | | | | | | | | |
Commercial and Other Real Estate | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal – Lengthened Amortization | | | 0 | | | | 0 | | | | 0 | | | | 1 | | | | 60 | | | | 60 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 0 | | | $ | 0 | | | $ | 0 | | | | 1 | | | $ | 60 | | | $ | 60 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2013 | | | Nine Months Ended September 30, 2012 | | | | | | | | | |
| | Number | | | Pre- | | | Post- | | | Number | | | Pre- | | | Post- | | | | | | | | | |
of Loans | Modification | Modification | of Loans | Modification | Modification | | | | | | | | |
| Recorded | Recorded | | Recorded | Recorded | | | | | | | | |
| Investment | Investment | | Investment | Investment | | | | | | | | |
Reduced Interest Rate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction, Land Development and Other Land | | | 0 | | | $ | 0 | | | $ | 0 | | | | 0 | | | $ | 0 | | | $ | 0 | | | | | | | | | |
Lengthened Amortization: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | | 1 | | | | 310 | | | | 310 | | | | 1 | | | | 60 | | | | 60 | | | | | | | | | |
Commercial and Other Real Estate | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal – Lengthened Amortization | | | 0 | | | | 310 | | | | 310 | | | | 1 | | | | 60 | | | | 60 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 1 | | | $ | 310 | | | $ | 310 | | | | 1 | | | $ | 60 | | | $ | 60 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
There was no financial impact for specific reserves or from charge-offs for the modified loans included in the table above. |
The Company has restructured one new TDR loan during the nine months ended September 30, 2013. In January 2013, the Company extended interest only payments on a commercial and industrial SBA 7a loan with a pre and post modification recorded investment of $310,000. This borrower also received a second modification in May 2013, after having difficulty making payments according to the terms of the January modification. |
In May 2013, an accruing TDR loan with a recorded investment of approximately $66,000 was placed on non-accrual status after the borrower filed Chapter 7 bankruptcy. |
Aside from the two loans described above, there have been no other payment defaults in 2013, subsequent to modification on troubled debt restructured loans modified within the last twelve months. |
Loans are restructured in an effort to maximize collections. Impairment analyses are performed on the Company’s troubled debt restructured loans in conjunction with the normal allowance for loan loss process. The Company’s troubled debt restructured loans are analyzed to ensure adequate cash flow or collateral supports the outstanding loan balance. |
|
Impaired Loans |
Impaired loans are evaluated by comparing the fair value of the collateral, if the loan is collateral dependent, and the present value of the expected future cash flows discounted at the loan’s effective interest rate, if the loan is not collateral dependent. The Company recognizes interest income from impaired loans on an accrual basis, unless the loan is on non-accrual status. There were no loans greater than 90 days past due and still accruing interest at September 30, 2013 or December 31, 2012. |
A valuation allowance is established for an impaired loan when the fair value of the loan is less than the recorded investment. In certain cases, portions of impaired loans are charged-off to realizable value instead of establishing a valuation allowance and are included, when applicable in the table above as “Impaired loans without specific valuation allowance.” The valuation allowance disclosed below is included in the allowance for loan loss reported in the consolidated balance sheets as of September 30, 2013 and December 31, 2012. |
The following tables present, by loan category, the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable, as of the dates and for the periods indicated (dollars in thousands). This table excludes purchased credit impaired loans (loans acquired with deteriorated credit quality) of $4.4 million and $6.9 million at September 30, 2013 and December 31, 2012, respectively. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2013 | | | December 31, 2012 | | | | | | | | | |
| | Recorded | | | Unpaid | | | Related | | | Recorded | | | Unpaid | | | Related | | | | | | | | | |
Investment | Principal | Allowance | Investment | Principal | Allowance | | | | | | | | |
| Balance | | | Balance | | | | | | | | | |
With no specific allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | $ | 2,944 | | | $ | 5,402 | | | $ | 0 | | | $ | 677 | | | $ | 1,490 | | | $ | 0 | | | | | | | | | |
Construction, Land Development and Other Land | | | 0 | | | | 0 | | | | 0 | | | | 1,201 | | | | 2,791 | | | | 0 | | | | | | | | | |
Commercial and Other Real Estate | | | 6,022 | | | | 8,933 | | | | 0 | | | | 3,498 | | | | 4,331 | | | | 0 | | | | | | | | | |
With a specific allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | | 150 | | | | 405 | | | | 6 | | | | 208 | | | | 463 | | | | 11 | | | | | | | | | |
Construction, Land Development and Other Land | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | |
Commercial and Other Real Estate | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | |
Total | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | | 3,094 | | | | 5,807 | | | | 6 | | | | 885 | | | | 1,953 | | | | 11 | | | | | | | | | |
Construction, Land Development and Other Land | | | 0 | | | | 0 | | | | 0 | | | | 1,201 | | | | 2,791 | | | | 0 | | | | | | | | | |
Commercial and Other Real Estate | | | 6,022 | | | | 8,933 | | | | 0 | | | | 3,498 | | | | 4,331 | | | | 0 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 9,116 | | | $ | 14,740 | | | $ | 6 | | | $ | 5,584 | | | $ | 9,075 | | | $ | 11 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Nine Months Ended | |
September 30, | September 30, |
| | 2013 | | | 2012 | | | 2013 | | | 2012 | |
| | Average | | | Interest | | | Average | | | Interest | | | Average | | | Interest | | | Average | | | Interest | |
Recorded | Income | Recorded | Income | Recorded | Income | Recorded | Income |
Investment | Recognized | Investment | Recognized | Investment | Recognized | Investment | Recognized |
With no specific allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | $ | 2,235 | | | $ | 0 | | | $ | 1,200 | | | $ | 0 | | | $ | 1,528 | | | $ | 0 | | | $ | 833 | | | $ | 0 | |
Construction, Land Development and Other Land | | | 1,159 | | | | 0 | | | | 1,228 | | | | 0 | | | | 1,172 | | | | 0 | | | | 1,249 | | | | 0 | |
Commercial and Other Real Estate | | | 4,044 | | | | 0 | | | | 317 | | | | 0 | | | | 3,613 | | | | 0 | | | | 859 | | | | 0 | |
With a specific allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | | 150 | | | | 0 | | | | 200 | | | | 0 | | | | 150 | | | | 0 | | | | 200 | | | | 0 | |
Construction, Land Development and Other Land | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
Commercial and Other Real Estate | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 710 | | | | 0 | |
Total: | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | | 2,385 | | | | 0 | | | | 1,400 | | | | 0 | | | | 1,678 | | | | 0 | | | | 1,033 | | | | 0 | |
Construction, Land Development and Other Land | | | 1,159 | | | | 0 | | | | 1,228 | | | | 0 | | | | 1,172 | | | | 0 | | | | 1,249 | | | | 0 | |
Commercial and Other Real Estate | | | 4,044 | | | | 0 | | | | 317 | | | | 0 | | | | 3,613 | | | | 0 | | | | 859 | | | | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 7,588 | | | $ | 0 | | | $ | 2,945 | | | $ | 0 | | | $ | 6,462 | | | $ | 0 | | | $ | 3,141 | | | $ | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following is a summary of additional information pertaining to impaired loans for the periods indicated (dollars in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Nine Months Ended | | | | | | | | | | | | | | | | | |
September 30, | September 30, | | | | | | | | | | | | | | | | |
| | 2013 | | | 2012 | | | 2013 | | | 2012 | | | | | | | | | | | | | | | | | |
Interest foregone on impaired loans | | $ | 264 | | | $ | 73 | | | $ | 495 | | | $ | 233 | | | | | | | | | | | | | | | | | |
Cash collections applied to reduce principal balance | | $ | 1,885 | | | $ | 21 | | | $ | 2,037 | | | $ | 64 | | | | | | | | | | | | | | | | | |
Interest income recognized on cash collections | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | | | | | | | | | | | | | |
|
Loans Acquired Through Acquisition |
The following table reflects the accretable net discount for loans acquired through acquisition accounted for under ASC 310 “Receivables” for the periods indicated (dollars in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Nine Months Ended | | | | | | | | | | | | | | | | | |
September 30, | September 30, | | | | | | | | | | | | | | | | |
| | 2013 | | | 2012 | | | 2013 | | | 2012 | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 10.13 | | | $ | 1,832 | | | $ | 12,189 | | | $ | 2,585 | | | | | | | | | | | | | | | | | |
Accretion, included in interest income | | | (967 | ) | | | (801 | ) | | | (3,050 | ) | | | (1,554 | ) | | | | | | | | | | | | | | | | |
Additions due to acquisition | | | 0 | | | | 12,315 | | | | 0 | | | | 12,315 | | | | | | | | | | | | | | | | | |
Sold acquired loans | | | 0 | | | | 284 | | | | 0 | | | | 284 | | | | | | | | | | | | | | | | | |
Reclassifications (to) from non-accretable yield | | | (547 | ) | | | 201 | | | | (523 | ) | | | 201 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, end of period | | $ | 8,616 | | | $ | 13,831 | | | $ | 8,616 | | | $ | 13,831 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The above table reflects the fair value adjustment on the loans acquired from mergers that will be amortized to loan interest income based on the effective yield method over the remaining life of the loans. These amounts do not include the fair value adjustments on the purchased credit impaired loans acquired from mergers. |
Purchased Credit Impaired (“PCI”) Loans |
We evaluated loans acquired through acquisition in accordance with guidance in ASC 310-30 related to loans acquired with deteriorated credit quality. Acquired loans are considered credit-impaired if there is evidence of deterioration of credit quality since origination and it is probable, at the acquisition date, that we will be unable to collect all contractually required amounts. |
When the timing and/or amounts of expected cash flows on such loans are not reasonably estimable, no interest is accreted and the loan is reported as a non-accrual loan; otherwise, if the timing and amounts of expected cash flows for purchased credit-impaired loans are reasonably estimable, then interest is accreted and the loans are reported as accruing loans. |
The non-accretable difference represents the difference between the undiscounted contractual cash flows and the undiscounted expected cash flows, and also reflects the estimated credit losses in the acquired loan portfolio at the acquisition date and can fluctuate due to changes in expected cash flows during the life of the PCI loans. |
The following table reflects the outstanding balance and related carrying value of PCI loans as of the dates indicated (dollars in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2013 | | | December 31, 2012 | | | | | | | | | | | | | | | | | |
| | Unpaid Principal | | | Carrying | | | Unpaid Principal | | | Carrying | | | | | | | | | | | | | | | | | |
Balance | Value | Balance | Value | | | | | | | | | | | | | | | | |
Commercial and Industrial | | $ | 1,390 | | | $ | 1,076 | | | $ | 1,221 | | | $ | 770 | | | | | | | | | | | | | | | | | |
Commercial and Other Real Estate | | | 4,982 | | | | 3,336 | | | | 9,424 | | | | 6,130 | | | | | | | | | | | | | | | | | |
Other | | | 0 | | | | 0 | | | | 73 | | | | 4 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 6,372 | | | $ | 4,412 | | | $ | 10,718 | | | $ | 6,904 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following table reflects the activities in the accretable net discount for PCI loans for the period indicated (dollars in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Nine Months Ended | | | | | | | | | | | | | | | | | |
September 30, | September 30, | | | | | | | | | | | | | | | | |
| | 2013 | | | 2012 | | | 2013 | | | 2012 | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 428 | | | $ | 0 | | | $ | 9 | | | $ | 0 | | | | | | | | | | | | | | | | | |
Accretion, included in interest income | | | (17 | ) | | | (0 | ) | | | (17 | ) | | | (0 | ) | | | | | | | | | | | | | | | | |
Reclassifications (to) from non-accretable yield | | | 0 | | | | 0 | | | | 419 | | | | 0 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, end of period | | $ | 411 | | | $ | 0 | | | $ | 411 | | | $ | 0 | | | | | | | | | | | | | | | | | |
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