Loans and Allowance for Loan Losses | 3 Months Ended |
Mar. 31, 2015 |
Loans And Leases Receivable Disclosure [Abstract] | |
Loans And Allowance for Loan Losses | -3 | Loans and Allowance for Loan Losses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The Bank has six loan segments for financial reporting purposes, residential real estate, commercial and industrial, commercial real estate, construction and land development, consumer, and other. The Bank classifies its loan portfolio based on the underlying collateral utilized to secure each loan. These classifications are consistent with those utilized in the Quarterly Report of Condition and Income, filed by the Bank with the Federal Deposit Insurance Corporation (FDIC). |
· | Residential real estate loans are classified into two categories based on the underlying collateral securing the loans. They consist of primarily of mortgage loans secured by 1-4 family residential properties including home equity lines of credit and multi-family properties secured primarily by apartment buildings. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
· | Commercial and industrial loans include loans to business enterprises issued for commercial, industrial and/or other professional purposes. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
· | Commercial real estate mortgage loans are categorized as such based on investor exposures where repayment is largely dependent upon the operation, refinance, or sale of the underlying real estate. Commercial real estate mortgage loans also include owner occupied commercial real estate which shares a similar risk profile to our commercial and industrial loan products. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
· | Construction and land development loans include loans where the repayment is dependent on the successful operation of the related real estate project. Construction and land development loans include 1-4 family construction projects and commercial construction endeavors such as warehouses, apartments, office and retail space and land acquisition and development. Construction loans can include interest reserve to carry the project through to completion. At March 31, 2015, $600,000 was included in the loan balance for interest reserves. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
· | Consumer loans include all loans issued to individuals not included in the residential real estate mortgage classification. Examples of consumer loans are automobile loans and personal lines of credit. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
· | Other loans include all loans not included in the consumer classification, such as unsecured loans to religious organizations. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following table summarizes the balance of loans outstanding by segment and class as of March 31, 2015 and December 31, 2014 (in thousands): |
| | 31-Mar-15 | | | 31-Dec-14 | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage | | $ | 103,728 | | | | 110,929 | | | | | | | | | | | | | | | | | | | | | | | | | |
Multi-family | | | 13,480 | | | | 11,310 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 247,722 | | | | 235,911 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | 289,404 | | | | 271,001 | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction and land development | | | 54,515 | | | | 58,843 | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer | | | 7,319 | | | | 5,915 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other | | | 916 | | | | 875 | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | | 717,084 | | | | 694,784 | | | | | | | | | | | | | | | | | | | | | | | | | |
Net deferred loan origination costs and fees | | | (831 | ) | | | (876 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Less allowance for loan losses | | | (8,669 | ) | | | (8,518 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Net loans | | $ | 707,584 | | | | 685,390 | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | Asset Quality | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial loans are assigned risk ratings by the lender that are subject to validation by a third party loan reviewer or the Bank’s internal credit committee. Risk ratings are categorized as pass, special mention, substandard, impaired. As of March 31, 2015, approximately 75% of the loan portfolio assigned a risk rating. Pass rated loans include all loans other than those included in special mention, substandard and impaired, which are defined as follows: |
· | Special mention loans have potential weaknesses that deserve close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
· | Substandard loans are inadequately protected by the current worth and paying capacity of the borrower or the collateral pledged, if any. Assets so classified must have a well defined weakness or weaknesses that jeopardize collection of the debt. Substandard loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These loans may be considered impaired, if in management’s judgment, the loan is either collateral dependent or the credit is weakened by the borrower’s financial condition. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
· | Impaired loans have the traits of substandard loans; however, repayment of principal and interest is uncertain. The weaknesses of these loans make it more probable than not that repayment of principal and interest will not occur per contractual obligation. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following tables present the loan balances by segment as well as risk rating category as of March 31, 2015 and December 31, 2014 (in thousands): |
|
| | Performing Loans | | | | | | | | | | | |
| | Pass | | | Special Mention | | | Substandard | | | Total Performing | | | Total Impaired Loans(1) | | | Total Loans | | | | | | | | | |
31-Mar-15 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage | | $ | 103,039 | | | | - | | | | 221 | | | | 103,260 | | | | 468 | | | | 103,728 | | | | | | | | | |
Multi-family | | | 13,480 | | | | - | | | | - | | | | 13,480 | | | | - | | | | 13,480 | | | | | | | | | |
Commercial and industrial | | | 247,158 | | | | - | | | | 214 | | | | 247,372 | | | | 350 | | | | 247,722 | | | | | | | | | |
Commercial real estate | | | 285,999 | | | | - | | | | 3,405 | | | | 289,404 | | | | - | | | | 289,404 | | | | | | | | | |
Construction and land development | | | 53,832 | | | | - | | | | - | | | | 53,832 | | | | 683 | | | | 54,515 | | | | | | | | | |
Consumer | | | 7,283 | | | | - | | | | - | | | | 7,283 | | | | 36 | | | | 7,319 | | | | | | | | | |
Other | | | 916 | | | | - | | | | - | | | | 916 | | | | - | | | | 916 | | | | | | | | | |
| | $ | 711,707 | | | | - | | | | 3,840 | | | | 715,547 | | | | 1,537 | | | | 717,084 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Performing Loans | | | | | | | | | | | |
| | Pass | | | Special Mention | | | Substandard | | | Total Performing | | | Total Impaired Loans(2) | | | Total Loans | | | | | | | | | |
31-Dec-14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage | | $ | 108,325 | | | | - | | | | - | | | | 108,325 | | | | 2,604 | | | | 110,929 | | | | | | | | | |
Multi-family | | | 11,310 | | | | - | | | | - | | | | 11,310 | | | | - | | | | 11,310 | | | | | | | | | |
Commercial and industrial | | | 235,208 | | | | - | | | | 214 | | | | 235,422 | | | | 489 | | | | 235,911 | | | | | | | | | |
Commercial real estate | | | 267,567 | | | | - | | | | 3,434 | | | | 271,001 | | | | - | | | | 271,001 | | | | | | | | | |
Construction and land development | | | 58,158 | | | | - | | | | - | | | | 58,158 | | | | 685 | | | | 58,843 | | | | | | | | | |
Consumer | | | 5,886 | | | | - | | | | - | | | | 5,886 | | | | 29 | | | | 5,915 | | | | | | | | | |
Other | | | 875 | | | | - | | | | - | | | | 875 | | | | - | | | | 875 | | | | | | | | | |
| | $ | 687,329 | | | | - | | | | 3,648 | | | | 690,977 | | | | 3,807 | | | | 694,784 | | | | | | | | | |
-1 | Of the $1.5 million in impaired loans as of March 31, 2015, $854,000 were on non-accrual status. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-2 | Of the $3.8 million in impaired loans as of December 31, 2014, $695,000 were on non-accrual status. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(b) | Impaired Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of March 31, 2015 and December 31, 2014, all loans classified as non-accrual were considered to be impaired. In addition, certain substandard loans were evaluated for impairment due to management’s knowledge of certain facts surrounding the credit or due to the receipt of appraisals which caused the loan to be considered impaired. The principal balance of these impaired loans amounted to $1.5 million as of March 31, 2015 and $3.8 million as of December 31, 2014, respectively. The average balance of these loans for the quarter ended March 31, 2015 was $1.7 million as compared to $3.9 million for the year ended December 31, 2014. At the date that impaired loans were placed on non-accrual status, the Bank reversed all previously accrued interest income against the current year earnings. The payments received on these loans are applied to the principal balance until the loan qualifies for return to accrual status. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current with on time payments for six consecutive months and future payments are reasonably assured. |
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Additional information on the Bank’s impaired loans that were evaluated for specific loss allowance as of March 31, 2015 and December 31, 2014 including the recorded investment on the balance sheet and the unpaid principal balance is shown below (in thousands): |
| | | | | | | | | | | | | | Three Months Ended | | | | | | | | | | | | | |
| | At March 31, 2015 | | | 31-Mar-15 | | | | | | | | | | | | | |
| | Recorded investment | | | Unpaid principal balance | | | Related allowance | | | Average recorded investment | | | Interest income recognized(1) | | | | | | | | | | | | | |
Impaired loans with no recorded allowance: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage | | $ | 295 | | | | 296 | | | | - | | | | 294 | | | | - | | | | | | | | | | | | | |
Commercial and industrial | | | 131 | | | | 250 | | | | - | | | | 250 | | | | - | | | | | | | | | | | | | |
Total | | | 426 | | | | 546 | | | | - | | | | 544 | | | | - | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired loans with a recorded allowance: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage | | | 173 | | | | 189 | | | | 78 | | | | 193 | | | | - | | | | | | | | | | | | | |
Commercial and industrial | | | 219 | | | | 223 | | | | 219 | | | | 234 | | | | - | | | | | | | | | | | | | |
Construction and land development | | | 683 | | | | 683 | | | | 48 | | | | 706 | | | | 7 | | | | | | | | | | | | | |
Consumer | | | 36 | | | | 36 | | | | 36 | | | | 38 | | | | - | | | | | | | | | | | | | |
Total | | | 1,111 | | | | 1,131 | | | | 381 | | | | 1,171 | | | | 7 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total impaired loans | | $ | 1,537 | | | | 1,677 | | | | 381 | | | | 1,715 | | | | 7 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | For the year ended | | | | | | | | | | | | | |
| | At December 31, 2014 | | | 31-Dec-14 | | | | | | | | | | | | | |
| | Recorded investment | | | Unpaid principal balance | | | Related allowance | | | Average recorded investment | | | Interest income recognized(1) | | | | | | | | | | | | | |
Impaired loans with no recorded allowance: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 172 | | | | 292 | | | | - | | | | 235 | | | | - | | | | | | | | | | | | | |
Total | | | 172 | | | | 292 | | | | - | | | | 235 | | | | - | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired loans with a recorded allowance: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage | | | 2,604 | | | | 2,619 | | | | 130 | | | | 2,629 | | | | 100 | | | | | | | | | | | | | |
Commercial and industrial | | | 317 | | | | 320 | | | | 292 | | | | 320 | | | | - | | | | | | | | | | | | | |
Construction and land development | | | 685 | | | | 685 | | | | 79 | | | | 713 | | | | 29 | | | | | | | | | | | | | |
Consumer | | | 29 | | | | 29 | | | | 29 | | | | 30 | | | | - | | | | | | | | | | | | | |
Total | | | 3,635 | | | | 3,653 | | | | 530 | | | | 3,692 | | | | 129 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total impaired loans | | $ | 3,807 | | | | 3,945 | | | | 530 | | | | 3,927 | | | | 129 | | | | | | | | | | | | | |
|
-1 | Includes income recognized in earnings for impaired accruing loans only. All non-accrual loans did not have any interest recognized in the three months ended March 31, 2015 and year ended December 31, 2014. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
(c) | Non-accrual and Past Due Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As shown in the table below, the Bank had $0 and $8,000 of loans past due 30 days or more that were not on non-accrual status as of March 31, 2015 and December 31, 2014, respectively. The tables below present past due balances at March 31, 2015 and December 31, 2014 and by loan segment allocated between performing and impaired status (in thousands): |
|
| | 30-89 days past due and performing | | | 90 days or more past due and performing | | | Total past due and performing | | | Current and performing | | | Impaired (1) | | | Total Loans | | | | | | | | | |
31-Mar-15 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage | | $ | - | | | | - | | | | - | | | | 103,260 | | | | 468 | | | | 103,728 | | | | | | | | | |
Multi-family | | | - | | | | - | | | | - | | | | 13,480 | | | | - | | | | 13,480 | | | | | | | | | |
Commercial and industrial | | | - | | | | - | | | | - | | | | 247,372 | | | | 350 | | | | 247,722 | | | | | | | | | |
Commercial real estate | | | - | | | | - | | | | - | | | | 289,404 | | | | - | | | | 289,404 | | | | | | | | | |
Construction and land | | | - | | | | - | | | | - | | | | 53,832 | | | | 683 | | | | 54,515 | | | | | | | | | |
development | | | | | | | | |
Consumer | | | - | | | | - | | | | - | | | | 7,283 | | | | 36 | | | | 7,319 | | | | | | | | | |
Other | | | - | | | | - | | | | - | | | | 916 | | | | - | | | | 916 | | | | | | | | | |
| | $ | - | | | | - | | | | - | | | | 715,547 | | | | 1,537 | | | | 717,084 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 30-89 days past due and performing | | | 90 days or more past due and performing | | | Total past due and performing | | | Current and performing | | | Impaired (2) | | | Total Loans | | | | | | | | | |
31-Dec-14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage | | $ | - | | | | - | | | | - | | | | 108,325 | | | | 2,604 | | | | 110,929 | | | | | | | | | |
Multi-family | | | - | | | | - | | | | - | | | | 11,310 | | | | - | | | | 11,310 | | | | | | | | | |
Commercial and industrial | | | - | | | | - | | | | - | | | | 235,422 | | | | 489 | | | | 235,911 | | | | | | | | | |
Commercial real estate | | | - | | | | - | | | | - | | | | 271,001 | | | | - | | | | 271,001 | | | | | | | | | |
Construction and land | | | - | | | | - | | | | - | | | | 58,158 | | | | 685 | | | | 58,843 | | | | | | | | | |
development | | | | | | | | |
Consumer | | | 8 | | | | - | | | | 8 | | | | 5,878 | | | | 29 | | | | 5,915 | | | | | | | | | |
Other | | | - | | | | - | | | | - | | | | 875 | | | | - | | | | 875 | | | | | | | | | |
| | $ | 8 | | | | - | | | | 8 | | | | 690,969 | | | | 3,807 | | | | 694,784 | | | | | | | | | |
|
(1) | Of the $1.5 million in impaired loans as of March 31, 2015, $0.7 million were accruing and were not in past due status. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(2) | Of the $3.8 million in impaired loans as of December 31, 2014, $3.1 million were accruing and were not in past due status. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At March 31, 2015 and December 31, 2014, all loans classified as non-accrual were deemed to be impaired. The principal balance of these non-accrual loans amounted to $854,000 and $695,000 at March 31, 2015 and December 31, 2014, respectively. At the date such loans were placed on non-accrual status, the Bank reversed all previously accrued interest income against current year earnings. Had these non-accruing loans been on accruing status, interest income would have been higher by $3,000 and $72,000 for the periods ended March 31, 2015 and December 31, 2014, respectively. |
(d) | Troubled Debt Restructure (TDR) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The Bank attempts to work with borrowers when necessary to extend or modify terms to better align with their current ability to repay. These extensions and modifications are made in accordance with internal policies, which conform to regulatory guidance. Each modification is unique to the borrower and is evaluated separately, and as such, qualification criteria and payments terms consider the borrower’s current and prospective ability to comply with the modified terms of the loan. |
A modification is classified as a TDR if the borrower is experiencing financial difficulty and it is determined that the Bank has granted a concession to the borrower that would have otherwise not been granted and is not available to other borrowers. The Bank may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that a borrower may default in the foreseeable future without modification of its debt. Generally, a concession is considered to be granted when the Bank is no longer expected to collect all amounts due at the original contractual rate subsequent to modification. Concessions could include reduction in interest rates, extension of the maturity date at a rate lower than current market rate for a new loan with similar risk, principal forgiveness, reduction of accrued interest or a period of interest only payments. When evaluating a credit to determine if it is in the Bank’s interest to restructure, the Bank also considers whether the borrower has provided additional collateral or guarantors and whether such additions adequately compensate the Bank for the restructured terms. The determination of both of the above criteria is subjective in nature and management judgment is required when determining whether a modification should be classified as a TDR. As of March 31, 2015 and March 31, 2014 there were, $0.5 million and $2.9 million, respectively, of TDRs that were performing as of their restructure date and which are accruing interest. As of March 31, 2015, one mortgage loan was classified as a TDR. As of March 31, 2014 the TDRs were categorized as one mortgage loan, one construction and land development loan and one commercial and industrial loan. These TDRs are considered impaired loans pursuant to U.S. GAAP. No loans were restructured or modified due to declining credit quality during the three months ended March 31, 2015. |
Of the $2.9 million in loans reported as TDRs as of December 31, 2014, $2.4 million was paid off during the period ended March 31, 2015. No TDRs were foreclosed upon during the period ended March 31, 2015. As of March 31, 2015 and March 31, 2014, there were no commitments to lend additional funds to debtors owing receivables whose terms have been modified in a TDR. |
(e) | Allowance for Loan Losses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The adequacy of the allowance for loan losses is assessed at the end of each calendar quarter by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. |
Key components of the estimation process are as follows: (1) loans determined by management to be impaired are evaluated individually and specific allowances are determined based on the difference between the outstanding loan amount and the net realizable value of the present value of expected future cash flows or the collateral less estimated cost to sell (if collateral dependent); (2) loans not considered to be individually impaired are segmented based on similar credit risk characteristics and evaluated on a pool basis; (3) loss rates for the segments are calculated based on historical gross charge offs (or minimum loss rates if no historical gross charge offs), multiplied by the loss emergence period and are subject to adjustment by management to reflect the following qualitative factors: |
· | Changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
· | Changes in the experience, ability, and depth of lending management and other relevant staff. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
· | Changes in the nature and volume of the portfolio and in the terms of loans. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
· | Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
· | The existence and effect of any concentrations of credit, and changes in the level of such concentrations. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
· | Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on future evaluations, additional provisions for loan losses may be necessary to maintain the allowance for loan losses at an appropriate level. |
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The following table presents the balance in the recorded investment in loans by loan segment based on impairment method (in thousands): |
| | Real Estate Mortgage | | | Real Estate Multi-family | | | Commercial and industrial | | | Commercial real estate | | | Construction and land development | | | Consumer | | | Other | | | Total Loans | |
31-Mar-15 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans | | $ | 103,728 | | | | 13,480 | | | | 247,722 | | | | 289,404 | | | | 54,515 | | | | 7,319 | | | | 916 | | | | 717,084 | |
Loans individually evaluated for | | | 468 | | | | - | | | | 350 | | | | - | | | | 683 | | | | 36 | | | | - | | | | 1,537 | |
impairment |
Loans collectively evaluated for | | | 103,260 | | | | 13,480 | | | | 247,372 | | | | 289,404 | | | | 53,832 | | | | 7,283 | | | | 916 | | | | 715,547 | |
impairment |
Loans acquired with deteriorated | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
credit quality |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
31-Dec-14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans | | $ | 110,929 | | | | 11,310 | | | | 235,911 | | | | 271,001 | | | | 58,843 | | | | 5,915 | | | | 875 | | | | 694,784 | |
Loans individually evaluated for | | | 2,604 | | | | - | | | | 489 | | | | - | | | | 685 | | | | 29 | | | | - | | | | 3,807 | |
impairment |
Loans collectively evaluated for | | | 108,325 | | | | 11,310 | | | | 235,422 | | | | 271,001 | | | | 58,158 | | | | 5,886 | | | | 875 | | | | 690,977 | |
impairment |
Loans acquired with deteriorated | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
credit quality |
Consumer loans of $2,500 or less are typically charged off no later than when the loan becomes 120 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on non-accrual or charged off at an earlier date if collection of principal or interest is considered doubtful. The following table provides a roll forward of the allowance for loan losses from December 31, 2013 to March 31, 2015 by loan segment (in thousands): |
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| | Residential Real-Estate | | | Commercial and Industrial | | | Commercial Real Estate | | | Construction and Land Development | | | Consumer | | | Other | | | Total | | | | | |
Balances, December 31, 2013 | | $ | 1,368 | | | | 1,995 | | | | 2,754 | | | | 997 | | | | 61 | | | | 29 | | | | 7,204 | | | | | |
Charged-off loans | | | - | | | | (226 | ) | | | - | | | | (119 | ) | | | - | | | | - | | | | (345 | ) | | | | |
Recovery of previously charged- | | | 1 | | | | - | | | | - | | | | 15 | | | | - | | | | - | | | | 16 | | | | | |
off loans | | | | |
Provision for loan losses | | | (125 | ) | | | 633 | | | | 377 | | | | 782 | | | | 1 | | | | (25 | ) | | | 1,643 | | | | | |
Balances, December 31, 2014 | | | 1,244 | | | | 2,402 | | | | 3,131 | | | | 1,675 | | | | 62 | | | | 4 | | | | 8,518 | | | | | |
Charged-off loans | | | - | | | | (75 | ) | | | - | | | | - | | | | - | | | | - | | | | (75 | ) | | | | |
Recovery of previously charged- | | | - | | | | - | | | | - | | | | 73 | | | | - | | | | - | | | | 73 | | | | | |
off loans | | | | |
Provision for loan losses | | | 47 | | | | (38 | ) | | | 168 | | | | (40 | ) | | | 16 | | | | - | | | | 153 | | | | | |
Balances, March 31, 2015 | | $ | 1,291 | | | | 2,289 | | | | 3,299 | | | | 1,708 | | | | 78 | | | | 4 | | | | 8,669 | | | | | |
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Balances, March 31, 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loans individually | | $ | 78 | | | | 219 | | | | - | | | | 48 | | | | 36 | | | | - | | | | 381 | | | | | |
evaluated for impairment | | | | |
Allowance for loans collectively | | $ | 1,213 | | | | 2,070 | | | | 3,299 | | | | 1,660 | | | | 42 | | | | 4 | | | | 8,288 | | | | | |
evaluated for impairment | | | | |
Balances, December 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loans individually | | $ | 130 | | | | 292 | | | | - | | | | 79 | | | | 29 | | | | - | | | | 530 | | | | | |
evaluated for impairment | | | | |
Allowance for loans collectively | | $ | 1,114 | | | | 2,110 | | | | 3,131 | | | | 1,596 | | | | 33 | | | | 4 | | | | 7,988 | | | | | |
evaluated for impairment | | | | |
The following table shows the allowance allocation by loan classification for accruing and impaired loans at March 31, 2015 and December 31, 2014 (in thousands): |
| | Accruing Loans | | | Impaired Loans | | | Total Allowance for Loan Losses | | | | | | | | | |
| | March 31, | | | December 31, | | | March 31, | | | December 31, | | | March 31, | | | December 31, | | | | | | | | | |
| | 2015 | | | 2014 | | | 2015 | | | 2014 | | | 2015 | | | 2014 | | | | | | | | | |
Residential real estate | | $ | 1,213 | | | | 1,114 | | | | 78 | | | | 130 | | | | 1,291 | | | | 1,244 | | | | | | | | | |
Commercial and industrial | | | 2,070 | | | | 2,110 | | | | 219 | | | | 292 | | | | 2,289 | | | | 2,402 | | | | | | | | | |
Commercial real estate | | | 3,299 | | | | 3,131 | | | | - | | | | - | | | | 3,299 | | | | 3,131 | | | | | | | | | |
Construction and land development | | | 1,660 | | | | 1,596 | | | | 48 | | | | 79 | | | | 1,708 | | | | 1,675 | | | | | | | | | |
Consumer | | | 42 | | | | 33 | | | | 36 | | | | 29 | | | | 78 | | | | 62 | | | | | | | | | |
Other | | | 4 | | | | 4 | | | | - | | | | - | | | | 4 | | | | 4 | | | | | | | | | |
| | $ | 8,288 | | | | 7,988 | | | | 381 | | | | 530 | | | | 8,669 | | | | 8,518 | | | | | | | | | |
(f) | Residential Lending | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At March 31, 2015, the Bank had approximately $33.5 million of mortgage loans held-for-sale compared to approximately $27.2 million at December 31, 2014. Loans held-for-sale are carried at the lower of cost or market and consist of two distinct groups, secondary market and portfolio mortgage loans held-for-sale. Secondary market mortgage loans held-for-sale are typically sold at or before loan closing to an investor on a loan-by-loan basis and settle within two weeks of loan closing. At March 31, 2015 and December 31, 2014 the Bank had $6.7 million and $4.7 million, respectively of secondary market mortgage loans held-for-sale. Portfolio mortgage loans held-for-sale are maintained on the Bank’s core system and sold in pools or individually within 180 days of being identify as held-for-sale. All held-for-sale loans transfer servicing rights to the buyer. The Bank had $26.8 million and $22.6 million of portfolio mortgage loans held-for-sale as of March 31, 2015 and December 31, 2014, respectively. In the first quarter of 2015 the Bank sold $11.2 million of portfolio loans held-for-sale for a gain of $200,000. |
The secondary market mortgage sales are typically on a best efforts basis to investors that follow conventional government sponsored entities and the Department of Housing and Urban Development (HUD) guidelines. Generally, the investor has delegated underwriting authority to the Bank and they are underwritten by the Bank. |
Each investor has specific guidelines and criteria for sellers of loans, and the risk of credit loss with regard to the principal amount of the loans sold is generally transferred to the investors upon sale, however, the investors may have loan recourse rights for up to six months after the loan sale during which the Bank would be obligated to repurchase the loan if the borrower defaults during the recourse period. Also, the purchase agreements require the Bank to make certain representations and warranties regarding the existence and sufficiency of file documentation and the absence of fraud by borrowers or other third parties such as appraisers in connection with obtaining the loan. If it is determined that the loans sold were in breach of these representations or warranties, the Bank is obligated to either repurchase the loan for the unpaid principal balance and related investor fees or make the investor whole for the economic benefits of the loan. |
Based on information currently available, management believes that it does not have a material exposure to losses that may arise relating to borrower defaults or the representations and warranties that it has made in connection with its mortgage loan sales. |
At March 31, 2015, the Bank has $137.2 million of home equity and consumer mortgage loans which are secured by first or second liens on residential properties. Foreclosure activity in this portfolio has been minimal. Any foreclosures on these loans are handled by designated Bank personnel and external legal counsel, as appropriate, following established policies regarding legal and regulatory requirements. The Bank has not imposed any freezes on foreclosures. Based on information currently available, management believes that it does not have material exposure to faulty foreclosure practices. |
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