Loans | 3 Months Ended |
Mar. 31, 2014 |
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): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, | | | December 31, | | | | | | | | | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial Loans: | | $ | 290,000 | | | $ | 299,473 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Loans Secured by Real Estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Owner-Occupied Nonresidential Properties | | | 195,151 | | | | 197,605 | | | | | | | | | | | | | | | | | | | | | |
Other Nonresidential Properties | | | 286,198 | | | | 271,818 | | | | | | | | | | | | | | | | | | | | | |
Construction, Land Development and Other Land | | | 56,706 | | | | 47,074 | | | | | | | | | | | | | | | | | | | | | |
1-4 Family Residential Properties | | | 62,128 | | | | 65,711 | | | | | | | | | | | | | | | | | | | | | |
Multifamily Residential Properties | | | 39,869 | | | | 33,780 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Loans Secured by Real Estate | | | 640,052 | | | | 615,988 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Other Loans: | | | 15,455 | | | | 17,733 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Total Loans | | $ | 945,507 | | | $ | 933,194 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, | | | December 31, | | | | | | | | | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | | | | | | | | | |
Real Estate | | $ | 398,543 | | | $ | 381,830 | | | | | | | | | | | | | | | | | | | | | |
Manufacturing | | | 77,969 | | | | 83,319 | | | | | | | | | | | | | | | | | | | | | |
Hotel/Lodging | | | 84,211 | | | | 76,143 | | | | | | | | | | | | | | | | | | | | | |
Construction | | | 63,555 | | | | 62,835 | | | | | | | | | | | | | | | | | | | | | |
Wholesale | | | 61,576 | | | | 60,291 | | | | | | | | | | | | | | | | | | | | | |
Professional Services | | | 47,749 | | | | 49,739 | | | | | | | | | | | | | | | | | | | | | |
Finance | | | 42,803 | | | | 46,393 | | | | | | | | | | | | | | | | | | | | | |
Healthcare | | | 38,351 | | | | 38,662 | | | | | | | | | | | | | | | | | | | | | |
Restaurant/Food Service | | | 36,158 | | | | 35,244 | | | | | | | | | | | | | | | | | | | | | |
Other Services | | | 22,588 | | | | 21,448 | | | | | | | | | | | | | | | | | | | | | |
Retail | | | 18,799 | | | | 23,157 | | | | | | | | | | | | | | | | | | | | | |
Administrative Management | | | 16,907 | | | | 15,218 | | | | | | | | | | | | | | | | | | | | | |
Information | | | 10,893 | | | | 11,709 | | | | | | | | | | | | | | | | | | | | | |
Education | | | 10,224 | | | | 10,270 | | | | | | | | | | | | | | | | | | | | | |
Transportation | | | 9,268 | | | | 9,531 | | | | | | | | | | | | | | | | | | | | | |
Entertainment | | | 4,810 | | | | 6,207 | | | | | | | | | | | | | | | | | | | | | |
Other | | | 1,103 | | | | 1,198 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 945,507 | | | $ | 933,194 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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. The total portfolio of the SBA contractual loan balances being serviced by the Company at March 31, 2014 was $109.2 million, of which $75.5 million has been sold. Of the $33.6 million remaining on the Company’s books, $24.2 million is un-guaranteed and $9.4 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, 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. |
|
At March 31, 2014, there were no loans classified as held for sale. At March 31, 2014, the balance of SBA 7a loans originated during the quarter is $1.6 million, of which $1.2 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. |
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): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | | | | | | | | | | | | | | | | | | |
March 31, | | | | | | | | | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan loss at beginning of period | | $ | 10,603 | | | $ | 8,803 | | | | | | | | | | | | | | | | | | | | | |
Provision for loan losses | | | 75 | | | | 134 | | | | | | | | | | | | | | | | | | | | | |
Net (charge-offs) recoveries: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | | (0 | ) | | | (121 | ) | | | | | | | | | | | | | | | | | | | | |
Recoveries | | | 145 | | | | 25 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net (charge-offs) recoveries | | | 145 | | | | (96 | ) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan loss at end of period | | $ | 10,823 | | | $ | 8,841 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Net (charge-offs) recoveries to average loans | | | 0.02 | % | | | (0.01 | )% | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, | | | December 31, | | | | | | | | | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan loss to total loans | | | 1.14 | % | | | 1.14 | % | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
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 | | | 1.48 | % | | | 1.5 | % | | | | | | | | | | | | | | | | | | | | |
The allowance for losses on unfunded loan commitments to extend credit is primarily related to commercial lines of credit and construction loans. The amount of unfunded loan commitments at March 31, 2014 and December 31, 2013 was $385.8 million and $345.9 million, respectively. The inherent risk associated with a loan is evaluated at the same time the credit is extended. However, the allowance held for the commitments is reported in other liabilities within the accompanying balance sheets and not as part of the allowance for loan loss in the above table. The allowance for the loss on unfunded loan commitments to extend credit was $370,000 and $329,000 at March 31, 2014 and December 31, 2013, respectively. |
|
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): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial | | | Construction, | | | Commercial | | | Other | | | Total | | | | | | | | | |
and | Land | and | | | | | | | | |
Industrial | Development | Other | | | | | | | | |
| and | Real Estate | | | | | | | | |
| Other Land | | | | | | | | | |
Three Months Ended | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
March 31, 2014 | | | | | | | | |
Allowance for loan loss – Beginning balance | | $ | 5,534 | | | $ | 1,120 | | | $ | 3,886 | | | $ | 63 | | | $ | 10,603 | | | | | | | | | |
Provision for loan losses | | | (399 | ) | | | 214 | | | | 273 | | | | (13 | ) | | | 75 | | | | | | | | | |
Net (charge-offs) recoveries: | | | | | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | | (0 | ) | | | (0 | ) | | | (0 | ) | | | (0 | ) | | | (0 | ) | | | | | | | | |
Recoveries | | | 143 | | | | 0 | | | | 2 | | | | 0 | | | | 145 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net recoveries | | | 143 | | | | 0 | | | | 2 | | | | 0 | | | | 145 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 5,278 | | | $ | 1,334 | | | $ | 4,161 | | | $ | 50 | | | $ | 10,823 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Three Months Ended | | | | | | | | | | | | | | | | | | | | |
March 31, 2013 | | | | | | | | |
Allowance for loan loss – Beginning balance | | $ | 4,572 | | | $ | 2,035 | | | $ | 2,084 | | | $ | 112 | | | $ | 8,803 | | | | | | | | | |
Provision for loan losses | | | (362 | ) | | | 112 | | | | 383 | | | | 1 | | | | 134 | | | | | | | | | |
Net (charge-offs) recoveries: | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | | (44 | ) | | | 0 | | | | (69 | ) | | | (8 | ) | | | (121 | ) | | | | | | | | |
Recoveries | | | 21 | | | | 0 | | | | 2 | | | | 2 | | | | 25 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net (charge-offs) | | | (23 | ) | | | 0 | | | | (67 | ) | | | (6 | ) | | | (96 | ) | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 4,187 | | | $ | 2,147 | | | $ | 2,400 | | | $ | 107 | | | $ | 8,841 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following tables present both the allowance for loan loss and the associated loan balance classified by loan portfolio segment and by credit evaluation methodology (dollars in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial | | | Construction, | | | Commercial | | | Other | | | Total | | | | | | | | | |
and | Land | and | | | | | | | | |
Industrial | Development | Other | | | | | | | | |
| and | Real Estate | | | | | | | | |
| Other Land | | | | | | | | | |
March 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan loss: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 3 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 3 | | | | | | | | | |
Collectively evaluated for impairment | | | 5,263 | | | | 1,334 | | | | 4,161 | | | | 50 | | | | 10,808 | | | | | | | | | |
Purchased credit impaired | | | 12 | | | | 0 | | | | 0 | | | | 0 | | | | 12 | | | | | | | | | |
(loans acquired with deteriorated credit quality) | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Allowance for Loan Loss | | $ | 5,278 | | | $ | 1,334 | | | $ | 4,161 | | | $ | 50 | | | $ | 10,823 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Loans receivable: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 2,568 | | | $ | 0 | | | $ | 3,649 | | | $ | 0 | | | $ | 6,217 | | | | | | | | | |
Collectively evaluated for impairment | | | 286,415 | | | | 56,706 | | | | 577,604 | | | | 15,455 | | | | 936,180 | | | | | | | | | |
Purchased credit impaired | | | 1,017 | | | | 0 | | | | 2,093 | | | | 0 | | | | 3,110 | | | | | | | | | |
(loans acquired with deteriorated credit quality) | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Loans Receivable | | $ | 290,000 | | | $ | 56,706 | | | $ | 583,346 | | | $ | 15,455 | | | $ | 945,507 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial | | | Construction, | | | Commercial | | | Other | | | Total | | | | | | | | | |
and | Land | and | | | | | | | | |
Industrial | Development | Other | | | | | | | | |
| and | Real Estate | | | | | | | | |
| Other Land | | | | | | | | | |
December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan loss: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 4 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 4 | | | | | | | | | |
Collectively evaluated for impairment | | | 5,520 | | | | 1,120 | | | | 3,886 | | | | 63 | | | | 10,589 | | | | | | | | | |
Purchased credit impaired | | | 10 | | | | 0 | | | | 0 | | | | 0 | | | | 10 | | | | | | | | | |
(loans acquired with deteriorated credit quality) | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Allowance for Loan Loss | | $ | 5,534 | | | $ | 1,120 | | | $ | 3,886 | | | $ | 63 | | | $ | 10,603 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Loans receivable: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 2,640 | | | $ | 0 | | | $ | 3,680 | | | $ | 0 | | | $ | 6,320 | | | | | | | | | |
Collectively evaluated for impairment | | | 295,787 | | | | 47,074 | | | | 561,952 | | | | 17,733 | | | | 922,546 | | | | | | | | | |
Purchased credit impaired | | | 1,046 | | | | 0 | | | | 3,282 | | | | 0 | | | | 4,328 | | | | | | | | | |
(loans acquired with deteriorated credit quality) | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Loans Receivable | | $ | 299,473 | | | $ | 47,074 | | | $ | 568,914 | | | $ | 17,733 | | | $ | 933,194 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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. There are several different levels of Pass rated credits, including “Watch” which is considered a transitory grade for pass rated loans that require greater monitoring. 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): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial | | | Construction, | | | Commercial | | | Other | | | Total | | | | | | | | | |
and | Land | and | | | | | | | | |
Industrial | Development | Other | | | | | | | | |
| and | Real Estate | | | | | | | | |
| Other Land | | | | | | | | | |
31-Mar-14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 278,461 | | | $ | 56,706 | | | $ | 562,235 | | | $ | 15,453 | | | $ | 912,855 | | | | | | | | | |
Special Mention | | | 2,725 | | | | 0 | | | | 3,882 | | | | 0 | | | | 6,607 | | | | | | | | | |
Substandard | | | 8,814 | | | | 0 | | | | 17,229 | | | | 2 | | | | 26,045 | | | | | | | | | |
Doubtful | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 290,000 | | | $ | 56,706 | | | $ | 583,346 | | | $ | 15,455 | | | $ | 945,507 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 289,594 | | | $ | 47,074 | | | $ | 547,600 | | | $ | 17,731 | | | $ | 901,999 | | | | | | | | | |
Special Mention | | | 1,540 | | | | 0 | | | | 2,613 | | | | 0 | | | | 4,153 | | | | | | | | | |
Substandard | | | 8,339 | | | | 0 | | | | 18,701 | | | | 2 | | | | 27,042 | | | | | | | | | |
Doubtful | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 299,473 | | | $ | 47,074 | | | $ | 568,914 | | | $ | 17,733 | | | $ | 933,194 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | | |
March 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | $ | 1,020 | | | $ | 0 | | | $ | 0 | | | $ | 1,020 | | | $ | 3,581 | | | $ | 285,399 | | | $ | 290,000 | |
Construction, Land Development and Other Land | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 56,706 | | | | 56,706 | |
Commercial and Other Real Estate | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 4,646 | | | | 578,700 | | | | 583,346 | |
Other | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 15,455 | | | | 15,455 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 1,020 | | | $ | 0 | | | $ | 0 | | | $ | 1,020 | | | $ | 8,227 | | | $ | 936,260 | | | $ | 945,507 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | $ | 0 | | | $ | 241 | | | $ | 0 | | | $ | 241 | | | $ | 3,682 | | | $ | 295,550 | | | $ | 299,473 | |
Construction, Land Development and Other Land | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 47,074 | | | | 47,074 | |
Commercial and Other Real Estate | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 5,874 | | | | 563,040 | | | | 568,914 | |
Other | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 17,733 | | | | 17,733 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 0 | | | $ | 241 | | | $ | 0 | | | $ | 241 | | | $ | 9,556 | | | $ | 923,397 | | | $ | 933,194 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
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. |
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 below as impaired loans “with no specific allowance recorded.” The valuation allowance disclosed below is included in the allowance for loan loss reported in the consolidated balance sheets as of March 31, 2014 and December 31, 2013. |
The following tables present, by loan category, the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable, for the dates and periods indicated (dollars in thousands). This table excludes purchased credit impaired loans (loans acquired in acquisitions with deteriorated credit quality) of $3.1 million and $4.3 million at March 31, 2014 and December 31, 2013, respectively. |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2014 | | | December 31, 2013 | | | | | |
| | Recorded | | | Unpaid | | | Related | | | Recorded | | | Unpaid | | | Related | | | | | |
Investment | Principal | Allowance | Investment | Principal | Allowance | | | | |
| Balance | | | Balance | | | | | |
With no specific allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | $ | 2,468 | | | $ | 5,315 | | | $ | 0 | | | $ | 2,540 | | | $ | 5,347 | | | $ | 0 | | | | | |
Commercial and Other Real Estate | | | 3,649 | | | | 6,001 | | | | 0 | | | | 3,680 | | | | 6,112 | | | | 0 | | | | | |
| | | | | | | | | | |
With a specific allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | | 100 | | | | 354 | | | | 3 | | | | 100 | | | | 355 | | | | 4 | | | | | |
| | | | | | | | | | |
Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | | 2,568 | | | | 5,669 | | | | 3 | | | | 2,640 | | | | 5,702 | | | | 4 | | | | | |
Commercial and Other Real Estate | | | 3,649 | | | | 6,001 | | | | 0 | | | | 3,680 | | | | 6,112 | | | | 0 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 6,217 | | | $ | 11,670 | | | $ | 3 | | | $ | 6,320 | | | $ | 11,814 | | | $ | 4 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | | | | | | | | | | |
March 31, | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | | | | | |
| | Average | | | Interest | | | Average | | | Interest | | | | | | | | | | | | | |
Recorded | Income | Recorded | Income | | | | | | | | | | | | |
Investment | Recognized | Investment | Recognized | | | | | | | | | | | | |
With no specific allowance recorded: | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | $ | 2,516 | | | $ | 0 | | | $ | 848 | | | $ | 0 | | | | | | | | | | | | | |
Construction, Land Development and Other Land | | | 0 | | | | 0 | | | | 1,200 | | | | 0 | | | | | | | | | | | | | |
Commercial and Other Real Estate | | | 3,670 | | | | 0 | | | | 3,455 | | | | 0 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
With a specific allowance recorded: | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | | 100 | | | | 0 | | | | 150 | | | | 0 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Total: | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | | 2,616 | | | | 0 | | | | 998 | | | | 0 | | | | | | | | | | | | | |
Construction, Land Development and Other Land | | | 0 | | | | 0 | | | | 1,200 | | | | 0 | | | | | | | | | | | | | |
Commercial and Other Real Estate | | | 3,670 | | | | 0 | | | | 3,455 | | | | 0 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 6,286 | | | $ | 0 | | | | 5,653 | | | $ | 0 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The following is a summary of additional information pertaining to impaired loans for the periods indicated (dollars in thousands): |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | | | | | | | | | | | | | | | | | | |
March 31, | | | | | | | | | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | |
Interest foregone on impaired loans | | $ | 171 | | | $ | 90 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Cash collections applied to reduce principal balance | | $ | 108 | | | $ | 42 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Interest income recognized on cash collections | | $ | 0 | | | $ | 0 | | | | | | | | | | | | | | | | | | | | | |
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. |
The following tables include the recorded investment and unpaid principal balances for troubled debt restructured loans for the periods ending March 31, 2014 and December 31, 2013 (dollars in thousands). These tables include two TDR loans that were purchased credit impaired. As of March 31, 2014, these loans had a recorded investment of $84,000 and unpaid principal balances of $147,000. |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Period ended March 31, 2014 | | Recorded | | | Unpaid | | | Interest Income | | | | | | | | | | | | | | | | | |
Investment | Principal | Recognized | | | | | | | | | | | | | | | | |
| Balance | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | $ | 537 | | | $ | 840 | | | $ | 0 | | | | | | | | | | | | | | | | | |
Commercial and Other Real Estate | | | 2,141 | | | | 2,785 | | | | 0 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 2,678 | | | $ | 3,625 | | | $ | 0 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year ended December 31, 2013 | | Recorded | | | Unpaid | | | Interest Income | | | | | | | | | | | | | | | | | |
Investment | Principal | Recognized | | | | | | | | | | | | | | | | |
| Balance | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | $ | 541 | | | $ | 843 | | | $ | 0 | | | | | | | | | | | | | | | | | |
Commercial and Other Real Estate | | | 2,173 | | | | 2,785 | | | | 0 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 2,714 | | | $ | 3,628 | | | $ | 0 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The following table shows the pre- and post-modification recorded investment in TDR loans by loan segment that have occurred during the periods indicated (dollars in thousands): |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | | |
March 31, | | | | |
| | 2014 | | | 2013 | | | | | |
| | Number | | | Pre- | | | Post- | | | Number | | | Pre- | | | Post- | | | | | |
of | Modification | Modification | of | Modification | Modification | | | | |
Loans | Recorded | Recorded | Loans | Recorded | Recorded | | | | |
| Investment | Investment | | Investment | Investment | | | | |
Troubled Debt Restructured Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and Industrial | | | 0 | | | | 0 | | | | 0 | | | | 1 | | | | 310 | | | | 310 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 0 | | | $ | 0 | | | $ | 0 | | | | 1 | | | | 310 | | | | 310 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans are restructured in an effort to maximize collections. There was no financial impact for specific reserves or from charge-offs for the modified loans included in the table above. 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. |
There have been no payment defaults in the three months ended March 31, 2014 or March 31, 2013 subsequent to modification on troubled debt restructured loans that have been modified within the last twelve months. |
Loans Acquired Through Acquisition |
The following table reflects the accretable net discount for loans acquired through acquisition, for the periods indicated (dollars in thousands): |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | | | | | | | | | | | | | | | | | | |
March 31, | | | | | | | | | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 7,912 | | | $ | 12,189 | | | | | | | | | | | | | | | | | | | | | |
Accretion, included in interest income | | | (562 | ) | | | (944 | ) | | | | | | | | | | | | | | | | | | | | |
Reclassifications (to) from non-accretable yield | | | 0 | | | | 24 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, end of period | | $ | 7,350 | | | $ | 11,269 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 Loans |
Purchased Credit Impaired Loans (“PCI”) loans are acquired loans with evidence of deterioration of credit quality since origination and it is probable at the acquisition date, that the Company will not be able 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 PCI 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): |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2014 | | | December 31, 2013 | | | | | | | | | | | | | |
| | Unpaid Principal | | | Carrying | | | Unpaid Principal | | | Carrying | | | | | | | | | | | | | |
Balance | Value | Balance | Value | | | | | | | | | | | | |
Commercial and Industrial | | $ | 1,580 | | | $ | 1,017 | | | $ | 1,599 | | | $ | 1,046 | | | | | | | | | | | | | |
Commercial and Other Real Estate | | | 3,520 | | | | 2,093 | | | | 5,611 | | | | 3,282 | | | | | | | | | | | | | |
Other | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 5,100 | | | $ | 3,110 | | | $ | 7,210 | | | $ | 4,328 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following table reflects the activities in the accretable net discount for PCI loans for the period indicated (dollars in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | | | | | | | | | | | | | | | | | | |
March 31, | | | | | | | | | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 395 | | | $ | 9 | | | | | | | | | | | | | | | | | | | | | |
Accretion, included in interest income | | | (17 | ) | | | (0 | ) | | | | | | | | | | | | | | | | | | | | |
Reclassifications from non-accretable yield | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, end of period | | $ | 378 | | | $ | 9 | | | | | | | | | | | | | | | | | | | | | |