| LOANS | 5. LOANS
The composition of loans is as follows (dollars in thousands):
September 30,
December 31,
September 30,
2015
2014
2014
Commercial real estate
$
$
$
Commercial, financial, and agricultural
One to four family residential real estate
Construction :
Consumer
Commerical
Consumer
Total loans
$
$
$
The Corporation completed the acquisition of Peninsula Financial Corporation (“PFC”) on December 5, 2014. The acquired loans were divided into loans with evidence of credit quality deterioration, which are accounted for under ASC 310-30 (“acquired impaired”) and loans that do not meet that criteria, which are accounted for under ASC 310-20 (“acquired nonimpaired”). The acquired impaired loans totaled $10.312 million. The Corporation recorded all acquired loans at fair value taking into account a number of factors, including remaining life, estimated loss, estimated value of the underlying collateral and net present values of cash flows. In the first nine months of 2015, the Corporation had positive resolution of one acquired nonperforming loan which resulted in the recognition of approximately $.429 million of the accretable interest.
The table below details the acquired portfolio at September 30, 2015 (dollars in thousands):
Acquired
Acquired
Acquired
Impaired
Non-impaired
Total
Loans acquired - contractual payments
$
$
$
Nonaccretable difference
)
—
)
Expected cash flows
Accretable yield
)
)
)
Carrying balance at September 30, 2015
$
$
$
The table below presents a rollforward of the accretable yield on acquired loans for the nine months ended September 30, 2015 (dollars in thousands):
Acquired
Acquired
Acquired
Impaired
Non-impaired
Total
Balance, December 31, 2014
$
$
$
Accretion
)
)
)
Reclassification from nonaccretable difference
—
Balance at September 30, 2015
$
$
$
An analysis of the allowance for loan losses for nine months ended September 30, 2015, the year ended December 31, 2014 and the nine months ended September 30, 2014 is as follows (dollars in thousands):
September 30,
December 31,
September 30,
2015
2014
2014
Balance at beginning of period
$
$
$
Loans charged off
)
)
)
Recoveries on loans previously charged off
Provision
Balance at end of period
$
$
$
In the first nine months of 2015, net charge-offs were $.216 million, or .05% of average loans, compared to net recoveries of $.057 million, in the same period in 2014. In the first nine months of 2015, the Corporation recorded a provision for loan loss of $.855 million compared to $.561 million in the first nine months of 2014. The Corporation’s allowance for loan loss reserve policy calls for a measurement of the adequacy of the reserve at each quarter end. This process includes an analysis of the loan portfolio to take into account increases in loans outstanding and portfolio composition, historical loss rates, and specific reserve requirements of nonperforming loans.
A breakdown of the allowance for loan losses and recorded balances in loans at September 30, 2015 is as follows (dollars in thousands):
Commercial,
One to four
Commercial
financial and
Commercial
family residential
Consumer
real estate
agricultural
construction
real estate
construction
Consumer
Unallocated
Total
Three Months Ended September 30, 2015
Allowance for loan loss reserve:
Beginning balance ALLR
$
$
$
$
$
$
$
$
Charge-offs
)
)
—
)
—
)
—
)
Recoveries
—
—
—
—
Provision
)
)
Ending balance ALLR
$
$
$
$
$
$
$
$
Nine Months Ended September 30, 2015
Allowance for loan loss reserve:
Beginning balance ALLR
$
$
$
$
$
$
$
$
Charge-offs
)
)
—
)
—
)
—
)
Recoveries
—
—
Provision
)
)
—
)
Ending balance ALLR
$
$
$
$
$
$
$
$
At September 30,2015
Loans:
Ending balance
$
$
$
$
$
$
$
—
$
Ending balance ALLR
)
)
)
)
)
)
)
)
Net loans
$
$
$
$
$
$
$
)
$
Ending balance ALLR:
Individually evaluated
$
$
$
—
$
$
—
$
$
—
$
Collectively evaluated
Acquired with deteriorated
credit quality
—
—
—
—
—
—
—
—
Total
$
$
$
$
$
$
$
$
Ending balance Loans:
Individually evaluated
$
$
$
—
$
$
—
$
$
—
$
Collectively evaluated
—
Acquired with deteriorated
credit quality
—
—
Total
$
$
$
$
$
$
$
—
$
Impaired loans, by definition, are individually evaluated.
A breakdown of the allowance for loan losses and recorded balances in loans as of and for the twelve months ended December 31, 2014 is as follows (dollars in thousands):
Commercial,
One to four
Commercial
financial and
Commercial
family residential
Consumer
real estate
agricultural
construction
real estate
construction
Consumer
Unallocated
Total
Allowance for loan loss reserve:
Beginning balance ALLR
$
$
$
$
$
$
$
$
Charge-offs
)
)
—
)
—
)
—
)
Recoveries
—
—
Provision
)
)
)
Ending balance ALLR
$
$
$
$
$
$
$
$
Loans:
Ending balance
$
$
$
$
$
$
$
—
$
Ending balance ALLR
)
)
)
)
)
)
)
)
Net loans
$
$
$
$
$
$
$
)
$
Ending balance ALLR:
Individually evaluated
$
$
$
—
$
$
—
$
$
—
$
Collectively evaluated
Acquired with deteriorated credit quality
—
—
—
—
—
—
—
—
Total
$
$
$
$
$
$
$
$
Ending balance Loans:
Individually evaluated
$
$
$
—
$
$
—
$
$
—
$
Collectively evaluated
—
Acquired with deteriorated credit quality
—
Total
$
$
$
$
$
$
$
—
$
Impaired loans, by definition, are individually evaluated.
A breakdown of the allowance for loan losses and recorded balances in loans at September 30, 2014 is as follows (dollars in thousands):
Commercial,
One to four
Commercial
financial and
Commercial
family residential
Consumer
real estate
agricultural
construction
real estate
construction
Consumer
Unallocated
Total
Three Months Ended September 30, 2014
Allowance for loan loss reserve:
Beginning balance ALLR
$
$
$
$
$
$
$
$
Charge-offs
)
)
—
)
—
)
—
)
Recoveries
—
—
Provision
)
)
Ending balance ALLR
$
$
$
$
$
$
$
$
Nine Months Ended September 30, 2014
Allowance for loan loss reserve:
Beginning balance ALLR
$
$
$
$
$
$
$
$
Charge-offs
)
)
—
)
—
)
—
)
Recoveries
—
—
Provision
)
)
)
)
)
Ending balance ALLR
$
$
$
$
$
$
$
$
At September 30,2014
Loans:
Ending balance
$
$
$
$
$
$
$
—
$
Ending balance ALLR
)
)
)
)
)
)
)
)
Net loans
$
$
$
$
$
$
$
)
$
Ending balance ALLR:
Individually evaluated
$
$
$
—
$
$
—
$
$
—
$
Collectively evaluated
Total
$
$
$
$
$
$
$
$
Ending balance Loans:
Individually evaluated
$
$
$
—
$
$
—
$
$
—
$
Collectively evaluated
—
Total
$
$
$
$
$
$
$
—
$
Impaired loans, by definition, are individually evaluated.
As part of the management of the loan portfolio, risk ratings are assigned to all commercial loans. Through the loan review process, ratings are modified as believed to be appropriate to reflect changes in the credit. Our ability to manage credit risk depends in large part on our ability to properly identify and manage problem loans.
To do so, we operate a credit risk rating system under which our credit management personnel assign a credit risk rating to each loan at the time of origination and review loans on a regular basis to determine each loan’s credit risk rating on a scale of 1 through 8, with higher scores indicating higher risk. The credit risk rating structure used is shown below.
In the context of the credit risk rating structure, the term Classified is defined as a problem loan which may or may not be in a nonaccrual status, dependent upon current payment status and collectability.
Strong (1)
Borrower is not vulnerable to sudden economic or technological changes. They have “strong” balance sheets and are within an industry that is very typical for our markets or type of lending culture. Borrowers also have “strong” financial and cash flow performance and excellent collateral (low loan to value or readily available to liquidate collateral) in conjunction with an impeccable repayment history.
Good (2)
Borrower shows limited vulnerability to sudden economic change. These borrowers have “above average” financial and cash flow performance and a very good repayment history. The balance sheet of the company is also very good as compared to peer and the company is in an industry that is familiar to our markets or our type of lending. The collateral securing the deal is also very good in terms of its type, loan to value, etc.
Average (3)
Borrower is typically a well-seasoned business, however may be susceptible to unfavorable changes in the economy, and could be somewhat affected by seasonal factors. The borrowers within this category exhibit financial and cash flow performance that appear “average” to “slightly above average” when compared to peer standards and they show an adequate payment history. Collateral securing this type of credit is good, exhibiting above average loan to values, etc.
Acceptable/Acceptable Watch (4)
A borrower within this category exhibits financial and cash flow performance that appear adequate and satisfactory when compared to peer standards and they show a satisfactory payment history. The collateral securing the request is within supervisory limits and overall is acceptable. Borrowers rated acceptable could also be newer businesses that are typically susceptible to unfavorable changes in the economy, and more than likely could be affected by seasonal factors.
Special Mention (5)
The borrower may have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Examples of this type of credit include a start-up company fully based on projections, a documentation issue that needs to be corrected or a general market condition that the borrower is working through to get corrected.
Substandard (6)
Substandard loans are classified assets exhibiting a number of well-defined weaknesses that jeopardize normal repayment. The assets are no longer adequately protected due to declining net worth, lack of earning capacity, or insufficient collateral offering the distinct possibility of the loss of a portion of the loan principal. Loans classified as substandard clearly represent troubled and deteriorating credit situations requiring constant supervision.
Doubtful (7)
Loans in this category exhibit the same, if not more pronounced weaknesses used to describe the substandard credit. Loans are frozen with collection improbable. Such loans are not yet rated as Charge-off because certain actions may yet occur which would salvage the loan.
Charge-off/Loss (8)
Loans in this category are largely uncollectible and should be charged against the loan loss reserve immediately.
General Reserves:
For loans with a credit risk rating of 5 or better and any loans with a risk rating of 6 or 7 with no specific reserve, reserves are established based on the type of loan collateral, if any, and the assigned credit risk rating. Determination of the allowance is inherently subjective as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on pools of homogenous loans based on historical loss experience, and consideration of current environmental factors and economic trends, all of which may be susceptible to significant change.
Using a historical average loss by loan type as a base, each loan graded as higher risk is assigned a specific percentage. The residential real estate and consumer loan portfolios are assigned a loss percentage as a homogenous group. If, however, on an individual loan the projected loss based on collateral value and payment histories are in excess of the computed allowance, the allocation is increased for the higher anticipated loss. These computations provide the basis for the allowance for loan losses as recorded by the Corporation.
Commercial construction loans in the amount of $2.447 million, $3.251 million and $2.883 million for the periods ended September 30, 2015, December 31, 2014 and September 30, 2014, respectively did not receive a specific risk rating. These amounts represent loans made for land development and unimproved land purchases.
Below is a breakdown of loans by risk category as of September 30, 2015 (dollars in thousands):
(1) Excellent
(2) Good
(3) Average
(4) Acceptable/ Acceptable Watch
(5) Sp. Mention
(6) Substandard
(7) Doubtful
Rating Unassigned
Total
Commercial real estate
$
$
$
$
$
—
$
$
—
$
—
$
Commercial, financial and agricultural
—
—
—
Commercial construction
—
—
—
One to four family residential real estate
—
—
Consumer construction
—
—
—
—
—
—
—
Consumer
—
—
—
—
Total loans
$
$
$
$
$
—
$
$
—
$
$
Below is a breakdown of loans by risk category as of December 31, 2014 (dollars in thousands):
(1) Strong
(2) Good
(3) Average
(4) Acceptable/ Acceptable Watch
(5) Sp. Mention
(6) Substandard
(7) Doubtful
Rating Unassigned
Total
Commercial real estate
$
$
$
$
$
—
$
$
—
$
—
$
Commercial, financial and agricultural
—
—
—
Commercial construction
—
—
One-to-four family residential real estate
—
—
Consumer construction
—
—
—
—
—
—
—
Consumer
—
—
—
Total loans
$
$
$
$
$
—
$
$
—
$
$
Below is a breakdown of loans by risk category as of September 30, 2014 (dollars in thousands):
(1) Excellent
(2) Good
(3) Average
(4) Acceptable/ Acceptable Watch
(5) Sp. Mention
(6) Substandard
(7) Doubtful
Rating Unassigned
Total
Commercial real estate
$
$
$
$
$
—
$
$
—
$
—
$
Commercial, financial and agricultural
—
—
—
Commercial construction
—
—
—
One to four family residential real estate
—
—
—
Consumer construction
—
—
—
—
—
—
—
Consumer
—
—
—
—
—
Total loans
$
$
$
$
$
$
$
—
$
$
Impaired Loans
Nonperforming loans are those which are contractually past due 90 days or more as to interest or principal payments, on nonaccrual status, or loans, the terms of which have been renegotiated to provide a reduction or deferral on interest or principal. Interest income recorded during impairment for the three and nine months ended September 30, 2015 was $.076 million and $.704 million, respectively. Additional interest income that would have been recognized during these periods was $.140 million and $.971 million, respectively. For the three and nine months ended September 30, 2014, the amounts that would have been recognized were $.040 million and $.093 million, respectively.
The accrual of interest on loans is discontinued when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Loans are considered impaired when, based on current information and events, it is probable the Corporation will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loans basis for other loans. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible.
Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan losses. In determining the estimated fair value of purchased loans, management considers a number of factors including the remaining life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, net present value of cash flows expected to be received, among others. Purchased loans are accounted for in accordance with guidance for certain loans acquired in a transfer (ASC 310-30), when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the acquirer will not collect all contractually required principal and interest payments. The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in expected cash flows will result in a reversal of the provision for loan losses to the extent of prior charges and then an adjustment to accretable yield, which would have a positive impact on interest income. The ASC 310-30 mark on impaired loans totaled $2.978 million as of the acquisition date. The accretable yield related to these impaired loans was estimated at $.744 million. The Corporation recorded $.429 million due to the positive resolution of one large acquired nonperforming commercial loan relationship in the first quarter of 2015 and no accretable yield of the loan mark in 2014.
The following is a summary of impaired loans and their effect on interest income (dollars in thousands):
Three Months Ended
Nine Months Ended
QTD
YTD
Interest Income
Interest Income
Interest Income
Interest Income
Nonaccrual
Accrual
Average
Average
Related
Recognized
on
Recognized
on
Basis
Basis
Investment
Investment
Valuation Reserve
During Impairment
Accrual Basis
During Impairment
Accrual Basis
September 30, 2015
With no valuation reserve:
Commercial real estate
$
$
$
$
$
—
$
$
$
$
Commercial, financial and agricultural
—
—
Commercial construction
—
—
—
—
—
—
One to four family residential real estate
Consumer construction
—
—
—
—
Consumer
—
—
—
With a valuation reserve:
Commercial real estate
$
$
—
$
$
$
$
—
$
—
$
Commercial, financial and agricultural
—
—
—
Commercial construction
—
—
—
—
—
—
—
—
—
One to four family residential real estate
—
—
—
—
Consumer construction
—
—
—
—
—
—
—
—
—
Consumer
—
—
—
—
—
—
Total:
Commercial real estate
$
$
$
$
$
$
$
$
$
Commercial, financial and agricultural
Commercial construction
—
—
—
—
—
—
One to four family residential real estate
Consumer construction
—
—
—
—
Consumer
—
—
—
Total
$
$
$
$
$
$
$
$
$
Interest Income
Interest Income
Nonaccrual
Accrual
Average
Related
Recognized
on
Basis
Basis
Investment
Valuation Reserve
During Impairment
Accrual Basis
As of and for the year ended December 31, 2014
With no valuation reserve:
Commercial real estate
$
$
$
$
—
$
—
$
Commercial, financial and agricultural
—
—
Commercial construction
—
—
—
—
One to four family residential real estate
—
—
Consumer construction
—
—
—
Consumer
—
—
—
With a valuation reserve:
Commercial real estate
$
$
—
$
$
$
—
$
Commercial, financial and agricultural
—
—
Commercial construction
—
—
—
—
—
—
One to four family residential real estate
—
—
Consumer construction
—
—
—
—
—
—
Consumer
—
—
—
—
—
—
Total:
Commercial real estate
$
$
$
$
$
—
$
Commercial, financial and agricultural
—
Commercial construction
—
—
—
—
One to four family residential real estate
—
Consumer construction
—
—
—
Consumer
—
—
—
Total
$
$
$
$
$
—
$
Three Months Ended
Nine Months Ended
QTD
YTD
Interest Income
Interest Income
Interest Income
Interest Income
Nonaccrual
Accrual
Average
Average
Related
Recognized
on
Recognized
on
Basis
Basis
Investment
Investment
Valuation Reserve
During Impairment
Accrual Basis
During Impairment
Accrual Basis
September 30, 2014
With no valuation reserve:
Commercial real estate
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Commercial, financial and agricultural
—
—
—
—
—
—
—
—
—
Commercial construction
—
—
—
—
—
—
—
—
—
One to four family residential real estate
—
—
—
—
—
—
—
—
—
Consumer construction
—
—
—
—
—
—
—
—
—
Consumer
—
—
—
—
—
—
—
—
—
With a valuation reserve:
$
—
Commercial real estate
$
$
—
$
$
$
$
—
$
—
$
Commercial, financial and agricultural
—
—
—
Commercial construction
—
—
—
—
—
—
—
—
—
One to four family residential real estate
—
—
—
Consumer construction
—
—
—
—
—
—
—
—
—
Consumer
—
—
—
—
Total:
Commercial real estate
$
$
—
$
$
$
$
—
$
$
—
$
Commercial, financial and agricultural
—
—
—
Commercial construction
—
—
—
—
—
—
—
—
—
One to four family residential real estate
—
—
—
Consumer construction
—
—
—
—
—
—
—
—
—
Consumer
—
—
—
—
—
Total
$
$
—
$
$
$
$
—
$
$
—
$
A summary of past due loans at September 30, 2015, December 31, 2014 and September 30, 2014 is as follows (dollars in thousands):
September 30,
December 31,
September 30,
2015
2014
2014
30-89 days
90+ days
30-89 days
90+ days
30-89 days
90+ days
Past Due
Past Due/
Past Due
Past Due/
Past Due
Past Due/
(accruing)
Nonaccrual
Total
(accruing)
Nonaccrual
Total
(accruing)
Nonaccrual
Total
Commercial real estate
$
$
$
$
$
$
$
$
$
Commercial, financial and agricultural
Commercial construction
—
—
—
—
One to four family residential real estate
Consumer construction
—
—
—
—
—
—
Consumer
—
—
Total past due loans
$
$
$
$
$
$
$
$
$
A roll-forward of nonaccrual activity for the three months ended September 30, 2015 (dollars in thousands):
For the Three Months Ended September 30, 2015
Commercial,
One to four
Commercial
Financial and
Commercial
family residential
Consumer
Real Estate
Agricultural
Construction
real estate
Construction
Consumer
Total
NONACCRUAL
Beginning balance
$
$
$
—
$
$
$
$
Principal payments
)
)
)
)
)
)
)
Charge-offs
)
—
—
)
—
)
)
Advances
—
—
—
—
—
—
—
Class transfers
—
—
—
—
—
—
—
Transfers to OREO
—
—
—
)
—
—
)
Transfers to accruing
)
)
—
)
—
—
)
Transfers from accruing
—
—
Other
—
)
)
—
)
Ending balance
$
$
$
—
$
$
$
$
A roll-forward of nonaccrual activity for the three months ended September 30, 2014 (dollars in thousands):
For the Three Months Ended September 30, 2014
Commercial,
One to four
Commercial
Financial and
Commercial
family residential
Consumer
Real Estate
Agricultural
Construction
real estate
Construction
Consumer
Total
NONACCRUAL
Beginning balance
$
$
$
—
$
$
—
$
$
Principal payments
)
)
—
)
—
—
)
Charge-offs
)
)
—
)
—
)
)
Advances
—
—
—
—
—
—
—
Class transfers
—
—
—
—
—
—
—
Transfers to OREO
)
—
—
—
—
—
)
Transfers to accruing
—
—
—
—
—
—
—
Transfers from accruing
—
—
—
—
Other
—
—
)
—
—
Ending balance
$
$
$
—
$
$
—
$
—
$
A roll-forward of nonaccrual activity for the nine months ended September 30, 2015 (dollars in thousands):
For the Nine Months Ended September 30, 2015
Commercial,
One to four
Commercial
Financial and
Commercial
family residential
Consumer
Real Estate
Agricultural
Construction
real estate
Construction
Consumer
Total
NONACCRUAL
Beginning balance
$
$
$
—
$
$
$
—
$
Principal payments
)
)
)
)
)
)
)
Charge-offs
)
)
—
)
—
)
)
Advances
—
—
—
—
—
—
—
Class transfers
—
—
—
)
—
—
Transfers to OREO
—
—
—
)
—
—
)
Transfers to accruing
)
)
—
)
—
—
)
Transfers from accruing
—
Other
—
)
)
)
)
Ending balance
$
$
$
—
$
$
$
$
A roll-forward of nonaccrual activity for the nine months ended September 30, 2014 (dollars in thousands):
For the Nine Months Ended September 30, 2014
Commercial,
One to four
Commercial
Financial and
Commercial
family residential
Consumer
Real Estate
Agricultural
Construction
real estate
Construction
Consumer
Total
NONACCRUAL
Beginning balance
$
$
$
—
$
$
—
$
$
Principal payments
)
)
—
)
—
)
)
Charge-offs
)
)
—
)
—
)
)
Advances
—
—
—
—
—
—
—
Class transfers
—
—
—
—
—
—
—
Transfers to OREO
)
—
—
)
—
—
)
Transfers to accruing
—
)
—
)
—
—
)
Transfers from accruing
—
—
—
Other
—
—
—
Ending balance
$
$
$
—
$
$
—
$
—
$
A roll-forward of nonperforming loan activity during the year ended December 31, 2014 (dollars in thousands):
Commercial,
One to four
Commercial
Financial and
Commercial
family residential
Consumer
Real Estate
Agricultural
Construction
real estate
Construction
Consumer
Total
NONACCRUAL
Beginning balance
$
$
$
—
$
$
—
$
$
Principal payments
)
)
—
)
—
)
)
Charge-offs
)
)
—
)
—
)
)
Advances
—
—
—
—
—
—
—
Transfers to OREO
)
—
—
)
—
—
)
Transfers to accruing
—
)
—
)
—
—
)
Transfers from accruing
—
—
—
Acquired impaired loans
—
—
—
Other
—
—
—
Ending balance
$
$
$
—
$
$
$
—
$
Troubled Debt Restructuring
Troubled debt restructurings (“TDR”) are determined on a loan-by-loan basis. Generally restructurings are related to interest rate reductions, loan term extensions and short term payment forbearance as means to maximize collectability of troubled credits. If a portion of the TDR loan is uncollectible (including forgiveness of principal), the uncollectible amount will be charged off against the allowance at the time of the restructuring. In general, a borrower must make at least six consecutive timely payments before the Corporation would consider a return of a restructured loan to accruing status in accordance with FDIC guidelines regarding restoration of credits to accrual status.
The Corporation has, in accordance with generally accepted accounting principles and per recently enacted accounting standard updates, evaluated all loan modifications to determine the fair value impact of the underlying asset. The carrying amount of the loan is compared to the expected payments to be received, discounted at the loan’s original rate, or for collateral dependent loans, to the fair value of the collateral.
A summary of troubled debt restructurings occurring during the periods indicated is as follows (dollars in thousands):
Nine months ended
Twelve months ended
Nine months ended
September 30,
December 31,
September 30,
2015
2014
2014
Number of
Recorded
Number of
Recorded
Number of
Recorded
Modifications
Investment
Modifications
Investment
Modifications
Investment
Commercial real estate
$
—
$
—
—
$
—
Commercial, financial and agricultural
—
—
—
—
Commercial construction
—
—
—
—
One to four family residential real estate
—
—
Consumer construction
—
—
—
—
—
—
Consumer
—
—
—
—
—
—
Total troubled debt restructurings
$
$
—
$
—
A roll-forward of troubled debt restructuring during the three months ended September 30, 2015 (dollars in thousands):
Commercial,
One to four
Consumer and
Commercial
Financial and
Commercial
family residential
Consumer
Real Estate
Agricultural
Construction
real estate
Construction
Total
ACCRUING
Beginning balance
$
$
$
$
$
—
$
Principal payments
)
)
)
)
—
)
Charge-offs
—
Advances
—
New restructured
—
Transferred out of TDR
—
Transfers to nonaccrual
—
Ending Balance
$
$
$
$
$
—
$
NONACCRUAL
Beginning balance
$
$
—
$
—
$
$
—
$
Principal payments
)
—
—
)
)
Charge-offs
—
Advances
—
New restructured
—
Transfers to foreclosed properties
—
Transfers from accruing
—
Ending Balance
$
$
—
$
—
$
$
—
$
TOTALS
Beginning balance
$
$
$
$
$
—
$
Principal payments
)
)
)
)
—
)
Charge-offs
—
—
—
—
—
—
Advances
—
—
—
—
—
—
New restructured
—
—
—
—
—
—
Transfers out of TDRs
—
—
—
—
—
—
Tansfers to nonaccrual
—
—
—
—
—
—
Transfers to foreclosed properties
—
—
—
—
—
—
Transfers from accruing
—
—
—
—
—
—
Ending Balance
$
$
$
$
$
—
$
A roll-forward of troubled debt restructuring during the three months ended September 30, 2014 (dollars in thousands):
Commercial,
One to four
Consumer and
Commercial
Financial and
Commercial
family residential
Consumer
Real Estate
Agricultural
Construction
real estate
Construction
Total
ACCRUING
Beginning balance
$
$
$
$
$
—
$
Principal payments
—
—
)
)
—
)
Charge-offs
—
—
—
—
—
—
Advances
—
—
—
—
—
—
New restructured
—
—
—
—
—
—
Transferred out of TDR
—
—
—
—
—
—
Transfers to nonaccrual
—
—
—
—
—
—
Ending Balance
$
$
$
$
$
—
$
NONACCRUAL
Beginning balance
$
—
$
$
—
$
$
—
$
Principal payments
—
—
—
—
—
—
Charge-offs
—
—
—
—
—
—
Advances
—
—
—
—
—
—
New restructured
—
—
—
—
—
—
Transfers to foreclosed properties
—
—
—
—
—
—
Transfers from accruing
—
—
—
—
—
—
Ending Balance
$
—
$
$
—
$
$
—
$
TOTALS
Beginning balance
$
$
$
$
$
—
$
Principal payments
—
—
)
)
—
)
Charge-offs
—
—
—
—
—
—
Advances
—
—
—
—
—
—
New restructured
—
—
—
—
—
—
Transfers out of TDRs
—
—
—
—
—
—
Tansfers to nonaccrual
—
—
—
—
—
—
Transfers to foreclosed properties
—
—
—
—
—
—
Transfers from accruing
—
—
—
—
—
—
Ending Balance
$
$
$
$
$
—
$
A roll-forward of troubled debt restructuring during the nine months ended September 30, 2015 (dollars in thousands):
Commercial,
One to four
Consumer and
Commercial
Financial and
Commercial
family residential
Consumer
Real Estate
Agricultural
Construction
real estate
Construction
Total
ACCRUING
Beginning balance
$
$
$
$
$
—
$
Principal payments
)
)
)
)
—
)
Charge-offs
—
—
—
—
—
—
Advances
—
—
—
—
—
—
New restructured
—
—
Transferred out of TDRs
—
—
—
—
—
—
Transfers to nonaccrual
—
—
—
)
—
)
Ending Balance
$
$
$
$
$
—
$
NONACCRUAL
Beginning balance
$
—
$
—
$
—
$
—
$
—
$
—
Principal payments
)
—
)
)
—
)
Charge-offs
—
—
—
—
—
—
Advances
—
—
—
—
—
—
New restructured
—
—
Transfers to foreclosed properties
—
—
—
—
—
—
Transfers from accruing
—
—
—
—
Ending Balance
$
$
—
$
—
$
$
—
$
TOTALS
Beginning balance
$
$
$
$
$
—
$
Principal payments
)
)
)
)
—
)
Charge-offs
—
—
—
—
—
—
Advances
—
—
—
—
—
—
New restructured
—
Transfers out of TDR
—
—
—
—
—
—
Transfers to nonaccrual
—
—
—
)
—
)
Transfers to foreclosed properties
—
—
—
—
Transfer from accruing
—
—
—
—
—
—
Ending Balance
$
$
$
$
$
—
$
A roll-forward of troubled debt restructuring during the nine months ended September 30, 2014 (dollars in thousands):
Commercial,
One to four
Consumer and
Commercial
Financial and
Commercial
family residential
Consumer
Real Estate
Agricultural
Construction
real estate
Construction
Total
ACCRUING
Beginning balance
$
$
$
$
$
—
$
Principal payments
)
—
)
)
—
)
Charge-offs
—
—
—
—
—
—
Advances
—
—
—
—
—
—
New restructured
—
—
—
—
—
—
Transferred out of TDRs
—
—
—
—
Transfers to nonaccrual
—
—
—
)
—
)
Ending Balance
$
$
$
$
$
—
$
NONACCRUAL
Beginning balance
$
—
$
$
—
$
$
—
$
Principal payments
—
)
—
—
—
)
Charge-offs
—
—
—
—
—
—
Advances
—
—
—
—
—
—
New restructured
—
—
—
—
—
—
Transfers to foreclosed properties
—
—
—
)
—
)
Transfers from accruing
—
—
—
—
Ending Balance
$
—
$
$
—
$
$
—
$
TOTALS
Beginning balance
$
$
$
$
$
—
$
Principal payments
)
)
)
)
—
)
Charge-offs
—
—
—
—
—
—
Advances
—
—
—
—
—
—
New restructured
—
—
—
—
—
—
Transfers out of TDR
—
—
—
—
Transfers to nonaccrual
—
—
—
)
—
)
Transfers to foreclosed properties
—
—
—
—
Transfer from accruing
—
—
—
)
—
)
Ending Balance
$
$
$
$
$
—
$
A roll-forward of troubled debt restructuring during the year ended December 31, 2014 (dollars in thousands):
Commercial,
One to four
Consumer and
Commercial
Financial and
Commercial
family residential
Consumer
Real Estate
Agricultural
Construction
real estate
Construction
Total
ACCRUING
Beginning balance
$
$
$
$
$
—
$
Principal payments
)
—
)
)
—
)
Charge-offs
—
—
—
)
—
)
Advances
—
—
—
—
—
—
New restructured
—
—
—
—
—
—
Transferred out of TDR
—
—
—
—
Transfers to nonaccrual
—
—
—
)
—
)
Ending Balance
$
$
$
$
$
—
$
NONACCRUAL
Beginning balance
$
—
$
$
—
$
$
—
$
Principal payments
—
)
—
—
—
)
Charge-offs
—
)
—
)
—
)
Advances
—
—
—
—
—
—
New restructured
—
—
—
—
—
—
Transfers to foreclosed properties
—
—
—
)
—
)
Transfers from accruing
—
—
—
—
Ending Balance
$
—
$
—
$
—
$
—
$
—
$
—
TOTALS
Beginning balance
$
$
$
$
$
—
$
Principal payments
)
)
)
)
—
)
Charge-offs
—
)
—
)
—
)
Advances
—
—
—
—
—
—
New restructured
—
—
—
—
—
—
Transfers out of TDRs
—
—
—
—
Tansfers to nonaccrual
—
—
—
)
—
)
Transfers to foreclosed properties
—
—
—
)
—
)
Transfers from accruing
—
—
—
—
Ending Balance
$
$
$
$
$
—
$
The above includes loans with revolving privileges which are scoped out of ASC 310-30 and certain loans which the Corporation elected to treat under the cost recovery method of accounting.
Insider Loans
The Bank, in the ordinary course of business, grants loans to the Corporation’s executive officers and directors, including their families and firms in which they are principal owners. Activity in such loans is summarized below (dollars in thousands):
Nine months ended
Year ended
Nine months ended
September 30,
December 31,
September 30,
2015
2014
2014
Loans outstanding, beginning of period
$
$
$
New loans
—
Net activity on revolving lines of credit
Principal payments
)
)
)
Loans outstanding, end of period
$
$
$
There were no loans to related parties classified substandard as of September 30, 2015, December 31, 2014 or September 30, 2014. In addition to the outstanding balances above, there were unfunded commitments of $3.255 million to related parties at September 30, 2015. |
