Loans and Allowance for Loan Losses | 9 Months Ended |
Sep. 30, 2013 |
Loans Receivable, Net [Abstract] | ' |
Loans | ' |
Loans and Allowance for Loan Losses |
General |
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Loans held for investment are stated at the principal amounts outstanding adjusted for purchase premiums/discounts, deferred net loan fees and costs, and unearned income. We report our loan portfolio by segments and classes, which are disaggregations of portfolio segments. Our portfolio segments are: Commercial and agricultural, Real estate, and Consumer loans. The Commercial and agricultural loan and Consumer loan portfolios are not further segregated into classes. The classes within the Real estate portfolio segment include Real estate - construction and Real estate mortgage, which is further broken into 1-4 family residential mortgage and Commercial real estate mortgage loans. |
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Loan fees and the incremental direct costs associated with originating a loan are deferred and subsequently recognized over the life of the loan as an adjustment to interest income. |
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In addition to originating loans, we also purchase loans. At acquisition, purchased loans are designated as either purchased contractual loans ("PC loans") or purchased impaired loans ("PI loans"). PC loans are acquired loans where management believes it is probable that it will receive all principal as of the date of acquisition. These loans are accounted for under the contractual cash flow method, under ASC 310-20. Any discount or premium paid on PC loans is recorded in interest income using the effective yield method over the expected life of the loans. |
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PI loans are acquired loans where management believes, at acquisition date, it is probable that all principal on the acquired loans will not be received. PI loans are placed in homogeneous risk based pools where accounting for projected cash flows is performed, as allowed under ASC 310-30. Once a pool is established the individual loans within each pool do not change. As management obtains new information related to changes in expected principal loss and expected cash flows, by pool, we record either an increase in yield when new expected cash flows increase, an allowance for loan losses when new expected cash flows decline, or a decrease in yield when there is only a timing difference in expected cash flows. |
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Loans acquired in the Merger ("Granite Purchased Loans") included PI loans and PC loans. Loans designated as PC loans included performing revolving consumer and performing revolving commercial loans on acquisition date. |
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During the nine months ended September 30, 2013, we purchased $134.8 million of performing residential mortgage loans, including premiums of $1.0 million. During the nine months ended September 30, 2012, we purchased $173.2 million of performing residential mortgage loans, including premiums of $4.0 million. These loan purchases are accounted for as PC loans. |
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ALL Methodology |
COB's ALL, which is utilized to absorb actual losses in the loan portfolio, is maintained at a level consistent with management's best estimate of probable loan losses to be incurred as of the balance sheet date. Management assesses COB's ALL quarterly. This assessment includes a methodology that separates the total loan portfolio into homogeneous loan classifications for purposes of evaluating risk. The required allowance is calculated by applying a risk adjusted reserve requirement to the dollar volume of loans within a homogenous group. For purposes of the ALL, we have grouped our loans into pools according to the loan segmentation regime employed on schedule RC-C of the FFIEC's Consolidated Report of Condition and Income. Major loan portfolio subgroups include: risk graded commercial loans, mortgage loans, home equity loans, retail loans and retail credit lines. Management also analyzes the loan portfolio on an ongoing basis to evaluate current risk levels, and risk grades are adjusted accordingly. While management uses the best information available to make evaluations, future adjustments may be necessary, if economic or other conditions differ substantially from the assumptions used. |
Historical loss rates are calculated by associating losses to the risk-graded pool to which they relate for each of the previous eight quarters. Then, using a look back period consisting of the twenty most recent quarters, loss factors are calculated for each risk-graded pool using a simple average. This represents a change in methodology which began in the third quarter of 2013. Previously, we used a look back period beginning in the third quarter of 2006 and a weighted average of losses. The impact of this change was immaterial to the allowance calculation. |
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In addition to our ability to use our own historical loss data and migration between risk grades, we have a rigorous process for computing the qualitative factors that impact the ALL. A committee, independent of the historical loss migration team, reviews risk factors that may impact the ALL. Some factors are statistically quantifiable, such as concentration, growth, delinquency, and nonaccrual risk by loan type, while other factors are qualitative in nature, such as staff competency, competition within our markets and economic and regulatory changes impacting the loans held for investment. |
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We lend primarily in North Carolina. As of September 30, 2013, a majority of the principal amount of the loans held for investment in our portfolio was to businesses and individuals in North Carolina. This geographic concentration subjects the loan portfolio to the general economic conditions within this area. The risks created by this concentration have been considered by management in the determination of the adequacy of the ALL. Management believes the ALL is adequate to cover estimated losses on loans at each balance sheet date. |
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During the three month period ended September 30, 2013, we charged off $1.7 million in loans and realized $2.4 million in recoveries, for $0.7 million of net recoveries. During the nine month period ended September 30, 2013, we charged off $10.8 million in loans and realized $8.2 million in recoveries, for $2.6 million of net charge-offs. The majority of the loans charged off were loans that were previously impaired and had specific reserves assigned in prior periods. |
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The ALL, as a percentage of loans held for investment, was 2.12% at September 30, 2013, compared to 2.51% at September 30, 2012. At December 31, 2012, the ALL, as a percentage of loans held for investment, was 2.49%. |
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Risk Grades |
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The risk-grade categories presented in the following table, which are standard categories used by the bank regulators, are: |
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Pass - Loans categorized as Pass are higher quality loans that have adequate sources of repayment and little risk of collection. |
Special Mention - A Special Mention loan has 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 loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. |
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Substandard - A Substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of Substandard loans, does not have to exist in individual assets classified Substandard. |
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Doubtful - A loan classified as Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors, which may work to the advantage of strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans. |
Loans categorized as Special Mention or worse are considered Criticized. Loans categorized as Substandard or Doubtful are considered Classified. Purchased loans acquired in the Merger are recorded at estimated fair value on the date of acquisition without the carryover of related ALL. The table below includes $46.7 million and $60.6 million in Granite Purchased Loans categorized as Substandard or Doubtful at September 30, 2013 and December 31, 2012, respectively. |
The following table presents loans held for investment balances by risk grade as of September 30, 2013: |
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(dollars in thousands) | | Pass | | Special Mention | | Substandard | | Doubtful | | | | | | | | | | |
| | (Ratings 1-5) | | (Rating 6) | | (Rating 7) | | (Rating 8) | | Total | | | | | | | | |
Commercial and agricultural | | $ | 65,556 | | | $ | 640 | | | $ | 3,421 | | | $ | — | | | $ | 69,617 | | | | | | | | | |
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Real estate - construction | | 48,665 | | | 3,310 | | | 15,567 | | | — | | | 67,542 | | | | | | | | | |
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Real estate - mortgage: | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 578,197 | | | 12,638 | | | 27,427 | | | — | | | 618,262 | | | | | | | | | |
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Commercial | | 300,609 | | | 26,918 | | | 67,559 | | | — | | | 395,086 | | | | | | | | | |
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Consumer | | 43,997 | | | 48 | | | 241 | | | 349 | | | 44,635 | | | | | | | | | |
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Total | | $ | 1,037,024 | | | $ | 43,554 | | | $ | 114,215 | | | $ | 349 | | | $ | 1,195,142 | | | | | | | | | |
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The following table presents loans held for investment balances by risk grade as of December 31, 2012: |
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(dollars in thousands) | | Pass | | Special Mention | | Substandard | | Doubtful | | | | | | | | | | |
| | (Ratings 1-5) | | (Rating 6) | | (Rating 7) | | (Rating 8) | | Total | | | | | | | | |
Commercial and agricultural | | $ | 69,003 | | | $ | 3,447 | | | $ | 6,953 | | | $ | 301 | | | $ | 79,704 | | | | | | | | | |
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Real estate - construction | | 40,117 | | | 2,031 | | | 16,266 | | | — | | | 58,414 | | | | | | | | | |
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Real estate - mortgage: | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 504,819 | | | 15,855 | | | 32,625 | | | 239 | | | 553,538 | | | | | | | | | |
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Commercial | | 296,271 | | | 50,275 | | | 95,126 | | | 164 | | | 441,836 | | | | | | | | | |
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Consumer | | 42,495 | | | 178 | | | 426 | | | 444 | | | 43,543 | | | | | | | | | |
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Total | | $ | 952,705 | | | $ | 71,786 | | | $ | 151,396 | | | $ | 1,148 | | | $ | 1,177,035 | | | | | | | | | |
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Loans included in the preceding loan composition table are net of participations sold. Loans are increased by net loan premiums and deferred loan discounts or fees of $2.5 million at September 30, 2013. Loans are increased by net deferred loan discounts or fees of $3.6 million at December 31, 2012. |
At September 30, 2013, loans held for sale consisted of originated residential mortgage loans held for sale at the lower of cost or fair market value, as well as nonperforming commercial loans which are under contract to sell. At December 31, 2012, loans held for sale consisted only of originated residential mortgage loans. |
Loans serviced for others are not included in the consolidated balance sheet. The unpaid principal balance of loans serviced for others amounted to $172.7 million at September 30, 2013 and $65.1 million at December 31, 2012. |
Loans Pledged |
To borrow from the FHLB, members must pledge collateral to secure advances and letters of credit. Acceptable collateral includes, among other types of collateral, a variety of residential, multifamily, home equity lines and second mortgages, and commercial loans. Gross loans of $215.5 million and $25.1 million of investment securities, and gross loans of $270.2 million were pledged to collateralize FHLB advances and letters of credit at September 30, 2013 and December 31, 2012, respectively, of which there was $15.7 million and $19.1 million of credit availability for borrowing, respectively. At September 30, 2013, $10.0 million of loans and $51.7 million of securities were pledged to collateralize potential borrowings from the Federal Reserve Discount Window, of which $57.5 million was available as borrowing capacity. We could also access $314.2 million of additional borrowings from the FHLB under credit lines by pledging additional collateral. |
Nonaccruing and Impaired Loans |
Interest income on loans is calculated by using the interest method based on the daily outstanding balance. The recognition of interest income is discontinued when, in management's opinion, the collection of all or a portion of interest becomes doubtful. Loans are returned to accrual status when the factors indicating doubtful collectability cease to exist and the loan has performed in accordance with its terms for a demonstrated period of time. The past due status of loans is based on the contractual payment terms. Had nonaccruing loans been on accruing status, interest income would have been higher by $0.7 million and $1.5 million for the three months ended September 30, 2013 and September 30, 2012, respectively, and higher by $2.3 million and $2.9 million for the nine months ended September 30, 2013 and September 30, 2012, respectively. At September 30, 2013 and December 31, 2012, COB had certain impaired loans of $51.1 million and $79.2 million, respectively, which were on nonaccruing interest status. |
All loan classes are considered past due when the contractual amounts due with respect to principal and interest are not received within 30 days of the contractual due date. When we cannot reasonably expect full and timely repayment of its loan, the loan is placed on nonaccrual. |
All loan classes on which principal or interest is in default for 90 days or more are put on nonaccrual status, unless there is sufficient documentation to conclude that the loan is well secured and in the process of collection. A debt is "well-secured" if collateralized by liens on or pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt in full; or by the guarantee of a financially responsible party. A debt is "in process of collection" if collection is proceeding in due course either through legal action, including judgment enforcement procedures, or, in appropriate circumstances, through collection efforts not involving legal action that are reasonably expected to result in repayment of the debt or its restoration to a current status. |
Loans that are less than 90 days delinquent may also be placed on nonaccrual if deterioration in the financial condition of the borrower has increased the probability of less than full repayment. |
At the time a loan is placed on nonaccrual, all accrued, unpaid interest is charged off, unless it is documented that repayment of all principal and presently accrued but unpaid interest is probable. Charge-offs of accrued and unpaid interest are charged against the current year's interest income and not against the current ALL. |
For all loan classes, a nonaccrual loan may be returned to accrual status when we can reasonably expect continued timely payments until payment in full. All prior arrearage does not have to be eliminated, nor do all previously charged-off amounts need to have been recovered, but the loan can still be returned to accrual status if the following conditions are met: (1) all principal and interest amounts contractually due (including arrearage) are reasonably assured of repayment within a reasonable period; and (2) there is a sustained period of repayment performance (generally a minimum of six months) by the borrower, in accordance with the contractual terms involving payments of cash or cash equivalents. |
For all classes within all loan portfolios, cash receipts received on nonaccrual loans are applied entirely against principal until the loan or lease has been collected in full, after which time any additional cash receipts are recognized as interest income. |
For all loan classes, as soon as any loan becomes uncollectible, the loan will be charged down or charged off as follows: |
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• | If unsecured, the loan must be charged off in full. | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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• | If secured, the outstanding principal balance of the loan should be charged down to the net liquidation value of the collateral. | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans should be considered uncollectible when: |
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• | No regularly scheduled payment has been made within four months and the determination is made that any further payment is unlikely, or | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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• | The loan is unsecured, the borrower has filed for bankruptcy protection and there is no other (guarantor, etc.) support from an entity outside of the bankruptcy proceedings. | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Based on a variety of credit, collateral and documentation issues, loans with lesser degrees of delinquency or obvious loss may also be deemed uncollectible. |
The following table presents an aging analysis of accruing and nonaccruing loans as of September 30, 2013: |
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(dollars in thousands) | | Accruing | | | | | | | | |
| | 30-59 days past due | | 60-89 days past due | | More than 90 days past due | | Nonaccrual | | Total past due and nonaccrual | | Current and accruing | | Total Loans |
PC and Originated Loans | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 52 | | | $ | — | | | $ | — | | | $ | 590 | | | $ | 642 | | | $ | 57,558 | | | $ | 58,200 | |
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Real estate - construction | | 47 | | | — | | | 76 | | | 10,190 | | | 10,313 | | | 47,034 | | | 57,347 | |
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Real estate - mortgage: | | | | | | | | | | | | | | |
1-4 family residential | | 1,269 | | | 759 | | | — | | | 12,822 | | | 14,850 | | | 573,700 | | | 588,550 | |
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Commercial | | 220 | | | 153 | | | — | | | 27,425 | | | 27,798 | | | 243,108 | | | 270,906 | |
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Consumer | | 97 | | | 13 | | | — | | | 104 | | | 214 | | | 43,332 | | | 43,546 | |
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Total | | $ | 1,685 | | | $ | 925 | | | $ | 76 | | | $ | 51,131 | | | $ | 53,817 | | | $ | 964,732 | | | $ | 1,018,549 | |
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PI loans | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 77 | | | $ | — | | | $ | 2,235 | | | $ | — | | | $ | 2,312 | | | $ | 9,106 | | | $ | 11,418 | |
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Real estate - construction | | — | | | — | | | 2,884 | | | — | | | 2,884 | | | 7,312 | | | 10,196 | |
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Real estate - mortgage: | | | | | | | | | | | | | | |
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1-4 family residential | | 10 | | | — | | | 5,242 | | | — | | | 5,252 | | | 24,460 | | | 29,712 | |
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Commercial | | 174 | | | 594 | | | 19,228 | | | — | | | 19,996 | | | 104,182 | | | 124,178 | |
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Consumer | | 7 | | | — | | | 15 | | | — | | | 22 | | | 1,067 | | | 1,089 | |
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Total | | $ | 268 | | | $ | 594 | | | $ | 29,604 | | | $ | — | | | $ | 30,466 | | | $ | 146,127 | | | $ | 176,593 | |
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Total Loans | | $ | 1,953 | | | $ | 1,519 | | | $ | 29,680 | | | $ | 51,131 | | | $ | 84,283 | | | $ | 1,110,859 | | | $ | 1,195,142 | |
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The following table presents an aging analysis of accruing and nonaccruing loans as of December 31, 2012: |
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(dollars in thousands) | | Accruing | | | | | | | | |
| | 30-59 days past due | | 60-89 days past due | | More than 90 days past due | | Nonaccrual | | Total past due and nonaccrual | | Current and accruing | | Total Loans |
PC and Originated Loans | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 515 | | | $ | — | | | $ | 50 | | | $ | 2,746 | | | $ | 3,311 | | | $ | 61,727 | | | $ | 65,038 | |
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Real estate - construction | | 26 | | | 119 | | | — | | | 14,297 | | | 14,442 | | | 41,290 | | | 55,732 | |
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Real estate - mortgage: | | | | | | | | | | | | | | |
1-4 family residential | | 6,173 | | | 880 | | | — | | | 18,372 | | | 25,425 | | | 488,898 | | | 514,323 | |
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Commercial | | 617 | | | — | | | 177 | | | 43,621 | | | 44,415 | | | 226,948 | | | 271,363 | |
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Consumer | | 24 | | | — | | | — | | | 206 | | | 230 | | | 41,957 | | | 42,187 | |
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Total | | $ | 7,355 | | | $ | 999 | | | $ | 227 | | | $ | 79,242 | | | $ | 87,823 | | | $ | 860,820 | | | $ | 948,643 | |
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PI loans | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 100 | | | $ | 1 | | | $ | 1,103 | | | $ | — | | | $ | 1,204 | | | $ | 13,462 | | | $ | 14,666 | |
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Real estate - construction | | 117 | | | — | | | 655 | | | — | | | 772 | | | 1,910 | | | 2,682 | |
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Real estate - mortgage: | | | | | | | | | | | | | | |
1-4 family residential | | 1,308 | | | 495 | | | 4,678 | | | — | | | 6,481 | | | 32,734 | | | 39,215 | |
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Commercial | | 2,559 | | | 4,300 | | | 17,384 | | | — | | | 24,243 | | | 146,230 | | | 170,473 | |
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Consumer | | 4 | | | — | | | 13 | | | — | | | 17 | | | 1,339 | | | 1,356 | |
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Total | | $ | 4,088 | | | $ | 4,796 | | | $ | 23,833 | | | $ | — | | | $ | 32,717 | | | $ | 195,675 | | | $ | 228,392 | |
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Total Loans | | $ | 11,443 | | | $ | 5,795 | | | $ | 24,060 | | | $ | 79,242 | | | $ | 120,540 | | | $ | 1,056,495 | | | $ | 1,177,035 | |
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All PI loans are considered to be accruing for all periods presented, in accordance with ASC 310-30. |
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A loan is considered impaired, based on current information and events, if it is probable that we will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. If the loan has been modified to provide relief to the borrower, the loan is deemed to be impaired if all principal and interest will not be repaid according to the original contract. All loans meeting the definition of Doubtful should be considered impaired. |
When a loan has been determined to be impaired, the amount of the impairment is measured using the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, the observable market price of the loan, or the fair value of the collateral if the loan is collateral dependent. When the present value of expected future cash flows is used, the effective interest rate is the original contractual interest rate of the loan adjusted for any premium or discount. When the contractual interest rate is variable, the effective interest rate of the loan changes over time. A specific reserve is established as a component of the ALL when a loan has been determined to be impaired. Subsequent to the initial measurement of impairment, if there is a significant change to the impaired loan's expected future cash flows, or if actual cash flows are significantly different from the cash flows previously estimated, we recalculate the impairment and appropriately adjust the specific reserve. Similarly, if we measure impairment based on the observable market price of an impaired loan or the fair value of the collateral of an impaired collateral-dependent loan, we will adjust the specific reserve if there is a significant change in either of those bases. |
When a loan is impaired and principal and interest is in doubt when contractually due, interest income is not recognized. Cash receipts received on nonaccruing impaired loans within any class are generally applied entirely against principal until the loan has been collected in full, after which time any additional cash receipts are recognized as interest income. Cash receipts received on accruing impaired loans within any class are applied in the same manner as accruing loans that are not considered impaired. |
The following table summarizes information relative to impaired loans for the dates indicated: |
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| | September 30, 2013 | | December 31, 2012 | | | | | | | | | | | | |
(dollars in thousands) | | Balance | | Associated Reserves | | Balance | | Associated Reserves | | | | | | | | | | | | |
Impaired loans, not individually reviewed for impairment | | $ | 4,550 | | | $ | — | | | $ | 6,017 | | | $ | — | | | | | | | | | | | | | |
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Impaired loans, individually reviewed, with no impairment | | 49,356 | | | — | | | 62,282 | | | — | | | | | | | | | | | | | |
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Impaired loans, individually reviewed, with impairment | | 2,963 | | | 486 | | | 15,312 | | | 1,737 | | | | | | | | | | | | | |
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Total impaired loans, excluding purchased impaired * | | $ | 56,869 | | | $ | 486 | | | $ | 83,611 | | | $ | 1,737 | | | | | | | | | | | | | |
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Purchased impaired loans with subsequent deterioration | | $ | 147,852 | | | 4,066 | | | $ | 192,115 | | | 5,373 | | | | | | | | | | | | | |
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Purchased impaired loans with no subsequent deterioration | | $ | 28,741 | | | — | | | $ | 36,277 | | | — | | | | | | | | | | | | | |
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Total Reserves | | | | $ | 4,552 | | | | | $ | 7,110 | | | | | | | | | | | | | |
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Average impaired loans calculated using a simple average | | $ | 61,837 | | | | | $ | 94,754 | | | | | | | | | | | | | | | |
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* Included at September 30, 2013 and December 31, 2012 were $6.7 million and $4.5 million, respectively, in restructured and performing loans. | | | | | | | | | | | | | | | | | | | | |
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The following table presents loans held for investment on nonaccrual status by loan class for the dates indicated: |
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(dollars in thousands) | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2013 | | 31-Dec-12 | | | | | | | | | | | | | | | | | | | | |
Loans held for investment: | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 590 | | | $ | 2,746 | | | | | | | | | | | | | | | | | | | | | |
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Real estate - construction | | 10,190 | | | 14,297 | | | | | | | | | | | | | | | | | | | | | |
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Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 12,822 | | | 18,372 | | | | | | | | | | | | | | | | | | | | | |
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Commercial | | 27,425 | | | 43,621 | | | | | | | | | | | | | | | | | | | | | |
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Consumer | | 104 | | | 206 | | | | | | | | | | | | | | | | | | | | | |
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Total nonaccrual loans | | $ | 51,131 | | | $ | 79,242 | | | | | | | | | | | | | | | | | | | | | |
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Loans more than 90 days delinquent, still on accrual | | 76 | | | 227 | | | | | | | | | | | | | | | | | | | | | |
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Total nonperforming loans | | $ | 51,207 | | | $ | 79,469 | | | | | | | | | | | | | | | | | | | | | |
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There were no loans held for sale on nonaccrual status as of September 30, 2013 or December 31, 2012. |
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The following table presents individually reviewed impaired loans and purchased impaired loans with subsequent credit deterioration, segregated by portfolio segment, and the corresponding reserve for impaired loan losses as of September 30, 2013: |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Unpaid | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | | Recorded | | Principal | | Related | | | | | | | | | | | | | | | | |
| | Investment | | Balance | | Allowance | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 416 | | | $ | 776 | | | $ | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - construction | | 9,900 | | | 14,246 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 10,465 | | | 13,416 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial | | 28,576 | | | 34,748 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total | | $ | 49,357 | | | $ | 63,186 | | | $ | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - construction | | 97 | | | 112 | | | 1 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 2,595 | | | 2,994 | | | 446 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial | | 271 | | | 397 | | | 39 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total | | $ | 2,963 | | | $ | 3,503 | | | $ | 486 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total individually evaluated impaired loans | | | | | | | | | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 416 | | | $ | 776 | | | $ | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - construction | | 9,997 | | | 14,358 | | | 1 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 13,060 | | | 16,410 | | | 446 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial | | 28,847 | | | 35,145 | | | 39 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total | | $ | 52,320 | | | $ | 66,689 | | | $ | 486 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
PI loans with subsequent credit deterioration: | | | | | | | | | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 8,821 | | | $ | 9,042 | | | $ | 34 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - construction | | 8,258 | | | 8,897 | | | 747 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 26,661 | | | 27,130 | | | 527 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial | | 103,028 | | | 106,249 | | | 2,567 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | | 1,084 | | | 848 | | | 191 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total | | $ | 147,852 | | | $ | 152,166 | | | $ | 4,066 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
The following table presents individually reviewed impaired loans, and purchased impaired loans with subsequent credit deterioration, segregated by portfolio segment, and the corresponding reserve for impaired loan losses as of December 31, 2012: |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Unpaid | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | | Recorded | | Principal | | Related | | | | | | | | | | | | | | | | |
| | Investment | | Balance | | Allowance | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 1,755 | | | $ | 2,608 | | | $ | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - construction | | 11,875 | | | 18,553 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 16,437 | | | 20,764 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial | | 32,215 | | | 38,585 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total | | $ | 62,282 | | | $ | 80,510 | | | $ | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 579 | | | $ | 602 | | | $ | 282 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - construction | | 1,658 | | | 1,843 | | | 82 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 1,681 | | | 1,745 | | | 607 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial | | 11,394 | | | 14,714 | | | 766 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total | | $ | 15,312 | | | $ | 18,904 | | | $ | 1,737 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total individually evaluated impaired loans | | | | | | | | | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 2,334 | | | $ | 3,210 | | | $ | 282 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - construction | | 13,533 | | | 20,396 | | | 82 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 18,118 | | | 22,509 | | | 607 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial | | 43,609 | | | 53,299 | | | 766 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | | — | | | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total | | $ | 77,594 | | | $ | 99,414 | | | $ | 1,737 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
PI loans with subsequent credit deterioration: | | | | | | | | | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 11,533 | | | $ | 11,728 | | | $ | 524 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - construction | | 2,285 | | | 2,236 | | | 200 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 34,961 | | | 35,802 | | | 711 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial | | 141,974 | | | 145,704 | | | 3,388 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | | 1,362 | | | 1,147 | | | 550 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total | | $ | 192,115 | | | $ | 196,617 | | | $ | 5,373 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
|
|
The following summary includes impaired loans individually reviewed as well as impaired loans held for sale. Average recorded investment and interest income recognized on impaired loans, segregated by portfolio segment, is shown in the following tables as of September 30, 2013 and September 30, 2012: |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For Three Months Ended | | For Three Months Ended | | | | | | | | | | | | |
| | September 30, 2013 | | September 30, 2012 | | | | | | | | | | | | |
| | Average | | Interest | | Average | | Interest | | | | | | | | | | | | |
(dollars in thousands) | | Recorded | | Income | | Recorded | | Income | | | | | | | | | | | | |
| | Investment | | Recognized | | Investment | | Recognized | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 434 | | | $ | — | | | $ | 1,557 | | | $ | 56 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - construction | | 10,006 | | | 3 | | | 15,484 | | | 104 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 10,516 | | | — | | | 14,265 | | | 81 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial | | 27,844 | | | 4 | | | 44,480 | | | 567 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Consumer | | — | | | — | | | 162 | | | 4 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total | | $ | 48,800 | | | $ | 7 | | | $ | 75,948 | | | $ | 812 | | | | | | | | | | | | | |
| | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | — | | | $ | — | | | $ | 1,274 | | | $ | 6 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - construction | | 97 | | | — | | | 2,802 | | | 9 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 2,605 | | | — | | | 6,436 | | | 41 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial | | 273 | | | — | | | 4,689 | | | 27 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Consumer | | — | | | — | | | 100 | | | 1 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total | | $ | 2,975 | | | $ | — | | | $ | 15,301 | | | $ | 84 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total: | | | | | | | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 434 | | | $ | — | | | $ | 2,831 | | | $ | 62 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - construction | | 10,103 | | | 3 | | | 18,286 | | | 113 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 13,121 | | | — | | | 20,701 | | | 122 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial | | 28,117 | | | 4 | | | 49,169 | | | 594 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Consumer | | — | | | — | | | 262 | | | 5 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total | | $ | 51,775 | | | $ | 7 | | | $ | 91,249 | | | $ | 896 | | | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For Nine Months Ended | | For Nine Months Ended | | | | | | | | | | | | |
| | September 30, 2013 | | September 30, 2012 | | | | | | | | | | | | |
| | Average | | Interest | | Average | | Interest | | | | | | | | | | | | |
(dollars in thousands) | | Recorded | | Income | | Recorded | | Income | | | | | | | | | | | | |
| | Investment | | Recognized | | Investment | | Recognized | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 455 | | | $ | 7 | | | $ | 1,879 | | | $ | 152 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - construction | | 10,300 | | | 23 | | | 18,140 | | | 350 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 10,442 | | | 14 | | | 15,096 | | | 292 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial | | 29,288 | | | 58 | | | 46,051 | | | 1,388 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Consumer | | — | | | — | | | 279 | | | 6 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total | | $ | 50,485 | | | $ | 102 | | | $ | 81,445 | | | $ | 2,188 | | | | | | | | | | | | | |
| | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 107 | | | $ | — | | | $ | 1,266 | | | $ | 36 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - construction | | 220 | | | 6 | | | 2,873 | | | 32 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 1,682 | | | 4 | | | 6,869 | | | 163 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial | | 3,933 | | | — | | | 4,687 | | | 145 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Consumer | | 167 | | | 1 | | | 95 | | | 2 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total | | $ | 6,109 | | | $ | 11 | | | $ | 15,790 | | | $ | 378 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total: | | | | | | | | | | | | | | | | | | | | |
Commercial and agricultural | | $ | 562 | | | $ | 7 | | | $ | 3,145 | | | $ | 188 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - construction | | 10,520 | | | 29 | | | 21,013 | | | 382 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 12,124 | | | 18 | | | 21,965 | | | 455 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial | | 33,221 | | | 58 | | | 50,738 | | | 1,533 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Consumer | | 167 | | | 1 | | | 374 | | | 8 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total | | $ | 56,594 | | | $ | 113 | | | $ | 97,235 | | | $ | 2,566 | | | | | | | | | | | | | |
| | | | | | | | | | | |
|
Impaired loans also include loans for which we may elect to grant a concession, providing terms more favorable than those prevalent in the market (e.g., rate, amortization term), and formally restructure due to the weakening credit status of a borrower. Restructuring is designed to facilitate a repayment plan that minimizes the potential losses that we otherwise may have to incur. If these impaired loans are on nonaccruing status as of the date of restructuring, the loans are included in nonperforming loans. Nonperforming restructured loans will remain as nonperforming until the borrower can demonstrate adherence to the restructured terms for a period of no less than six months and when it is otherwise determined that continued adherence is reasonably assured. Some restructured loans continue as accruing loans after restructuring if the borrower is not past due at the time of restructuring, adequate collateral valuations support the restructured loans, and the cash flows of the underlying business appear adequate to support the restructured debt service. Not included in nonperforming loans are loans that have been restructured that were performing as of the restructure date. At September 30, 2013, there was $14.3 million in restructured loans, of which $6.7 million were accruing and in a performing status. At December 31, 2012, there was $20.8 million in restructured loans, of which $4.5 million were accruing and in a performing status. |
Sale of Problem Loans |
During 2012, we sold loans to third party buyers in order to reduce our problem loan exposure. These loans were transferred to loans held for sale at the time we received a signed contract for the purchase of the loans. Prior to transferring these loans to loans held for sale, the loans were marked down to the contract price less associated selling costs. All transactions were conducted at arm's length and loans were sold without recourse. |
|
The following table presents sold loans by portfolio segment for the periods indicated below: |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For Three Months Ended | | For Three Months Ended | | | | | | | |
| September 30, 2013 | | September 30, 2012 | | | | | | | |
(dollars in thousands) | Number | | Recorded | | Contract | | Number | | Recorded | | Contract | | | | | | | |
| of Loans | | Investment | | Pricing | | of Loans | | Investment | | Pricing | | | | | | | |
Commercial and agricultural | — | | | $ | — | | | $ | — | | | — | | | $ | — | | | $ | — | | | | | | | | |
| | | | | | |
Real estate - construction | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | |
| | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | |
1-4 family residential | — | | | — | | | — | | | 1 | | | 602 | | | 540 | | | | | | | | |
| | | | | | |
Commercial | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | |
| | | | | | |
Consumer | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | |
| | | | | | |
Total | — | | | $ | — | | | $ | — | | | 1 | | | $ | 602 | | | $ | 540 | | | | | | | | |
| | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For Nine Months Ended | | For Nine Months Ended | | | | | | | |
| September 30, 2013 | | September 30, 2012 | | | | | | | |
(dollars in thousands) | Number | | Recorded | | Contract | | Number | | Recorded | | Contract | | | | | | | |
| of Loans | | Investment | | Pricing | | of Loans | | Investment | | Pricing | | | | | | | |
Commercial and agricultural | — | | | $ | — | | | $ | — | | | — | | | $ | — | | | $ | — | | | | | | | | |
| | | | | | |
Real estate - construction | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | |
| | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | |
1-4 family residential | — | | | — | | | — | | | 7 | | | 1,865 | | | 1,896 | | | | | | | | |
| | | | | | |
Commercial | — | | | — | | | — | | | 2 | | | 4,402 | | | 4,590 | | | | | | | | |
| | | | | | |
Consumer | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | |
| | | | | | |
Total | — | | | $ | — | | | $ | — | | | 9 | | | $ | 6,267 | | | $ | 6,486 | | | | | | | | |
| | | | | | |
|
Granite Purchased Loans |
Granite Purchased Loans include PI loans and PC loans. PC loans include performing revolving consumer and commercial loans on October 21, 2011, the acquisition date. |
PI loans are segregated into pools and recorded at estimated fair value on the date of acquisition without the carryover of the related ALL. PI loans are accounted for under ASC 310-30 when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition we will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the date of acquisition may include statistics such as past due status, nonaccrual status and risk grade. PI loans generally meet our definition for nonaccrual status; however, even if the borrower is not currently making payments, we will classify loans as accruing if we can reasonably estimate the amount and timing of future cash flows. All Granite Purchased PI loans are presented on an accruing basis. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference. |
Periodically, we estimate the expected cash flows for each pool of the PI loans and evaluate whether the expected cash flows for each pool have changed from prior estimates. Decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or reclassification from nonaccretable difference to accretable yield with a positive impact on future interest income. Excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows. |
We have elected to account for the Granite Purchased PI loans under ASC 310-30 and the Granite Purchased PC loans under ASC 310-20. |
At September 30, 2013, and December 31, 2012, our financial statements reflected a PI loan ALL of $4.1 million and $5.4 million, respectively, and an ALL for PC loans of $0.7 million and $0.5 million, respectively. |
|
The following table presents the balance of all Granite Purchased Loans: |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At September 30, 2013 | | | | | | | | | | | | |
(dollars in thousands) | | Purchased Impaired | | Purchased Contractual | | Total Purchased Loans | | Unpaid | | | | | | | | | | | | |
Principal | | | | | | | | | | | | |
Balance | | | | | | | | | | | | |
Commercial and agricultural | | $ | 11,418 | | | $ | 4,874 | | | $ | 16,292 | | | $ | 15,597 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - construction | | 10,196 | | | — | | | 10,196 | | | 9,902 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 29,712 | | | 22,833 | | | 52,545 | | | 53,476 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial | | 124,178 | | | 381 | | | 124,559 | | | 125,395 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Consumer | | 1,089 | | | — | | | 1,089 | | | 860 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total | | $ | 176,593 | | | $ | 28,088 | | | $ | 204,681 | | | $ | 205,230 | | | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At December 31, 2012 | | | | | | | | | | | | |
(dollars in thousands) | | Purchased Impaired | | Purchased Contractual | | Total | | Unpaid | | | | | | | | | | | | |
Purchased Loans | Principal | | | | | | | | | | | | |
| Balance | | | | | | | | | | | | |
Commercial and agricultural | | $ | 14,666 | | | $ | 7,311 | | | $ | 21,977 | | | $ | 21,692 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - construction | | 2,682 | | | — | | | 2,682 | | | 2,677 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 39,215 | | | 27,484 | | | 66,699 | | | 69,200 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial | | 170,467 | | | 49 | | | 170,516 | | | 176,347 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Consumer | | 1,362 | | | — | | | 1,362 | | | 1,144 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total | | $ | 228,392 | | | $ | 34,844 | | | $ | 263,236 | | | $ | 271,060 | | | | | | | | | | | | | |
| | | | | | | | | | | |
The tables below include only those Granite Purchased Loans accounted for under the expected cash flow method (PI loans) for the periods indicated. These tables do not include PC loans, including Granite Purchased PC loans or purchased performing residential mortgage loans. |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For Three Months Ended | | For Three Months Ended | | | | | | | | | | | | |
| | 30-Sep-13 | | 30-Sep-12 | | | | | | | | | | | | |
| | Purchased Impaired | | Purchased Impaired | | | | | | | | | | | | |
(dollars in thousands) | | Carrying | | Future | | Carrying | | Future Accretion | | | | | | | | | | | | |
Amount | Accretion | Amount | | | | | | | | | | | | |
Balance, beginning of period | | $ | 189,159 | | | $ | 28,706 | | | $ | 287,092 | | | $ | 41,133 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Accretion | | 4,283 | | | (4,283 | ) | | 4,568 | | | (4,568 | ) | | | | | | | | | | | | |
| | | | | | | | | | | |
Increase in future accretion | | — | | | — | | | — | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
Payments received | | (16,225 | ) | | — | | | (34,043 | ) | | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
Foreclosed and transferred to OREO | | (624 | ) | | — | | | (5,412 | ) | | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
Subtotal before allowance | | 176,593 | | | 24,423 | | | 252,205 | | | 36,565 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Allowance for credit losses | | (4,066 | ) | | — | | | (3,296 | ) | | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
Net carrying amount, end of period | | $ | 172,527 | | | $ | 24,423 | | | $ | 248,909 | | | $ | 36,565 | | | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For Nine Months Ended | | For Nine Months Ended | | | | | | | | | | | | |
| | 30-Sep-13 | | 30-Sep-12 | | | | | | | | | | | | |
| | Purchased Impaired | | Purchased Impaired | | | | | | | | | | | | |
(dollars in thousands) | | Carrying | | Future | | Carrying | | Future Accretion | | | | | | | | | | | | |
Amount | Accretion | Amount | | | | | | | | | | | | |
Balance, beginning of period | | $ | 228,392 | | | $ | 30,299 | | | $ | 330,836 | | | $ | 47,804 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Accretion | | 12,677 | | | (12,677 | ) | | 15,831 | | | (15,831 | ) | | | | | | | | | | | | |
| | | | | | | | | | | |
Increase in future accretion | | — | | | 6,801 | | | — | | | 4,592 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Payments received | | (62,556 | ) | | — | | | (84,944 | ) | | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
Foreclosed and transferred to OREO | | (1,920 | ) | | — | | | (9,518 | ) | | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
Subtotal before allowance | | 176,593 | | | 24,423 | | | 252,205 | | | 36,565 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Allowance for credit losses | | (4,066 | ) | | — | | | (3,296 | ) | | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
Net carrying amount, end of period | | $ | 172,527 | | | $ | 24,423 | | | $ | 248,909 | | | $ | 36,565 | | | | | | | | | | | | | |
| | | | | | | | | | | |
|
Allowance for Loan Losses |
An analysis of the changes in the ALL is as follows: |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For Three Months Ended | | For Nine Months Ended | | | | | | | | | | | | |
(dollars in thousands) | | September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | | | | | | | | | | | | |
Balance, beginning of period | | $ | 25,085 | | | $ | 38,551 | | | $ | 29,314 | | | $ | 39,360 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Provision for (recoveries of) losses charged to continuing operations | | (350 | ) | | 32 | | | (1,297 | ) | | 10,877 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Net charge-offs: | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | (1,724 | ) | | (9,276 | ) | | (10,836 | ) | | (23,580 | ) | | | | | | | | | | | | |
Recoveries | | 2,376 | | | 1,552 | | | 8,206 | | | 4,202 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Net recoveries (charge-offs) | | 652 | | | (7,724 | ) | | (2,630 | ) | | (19,378 | ) | | | | | | | | | | | | |
| | | | | | | | | | | |
Balance, end of period | | $ | 25,387 | | | $ | 30,859 | | | $ | 25,387 | | | $ | 30,859 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Annualized net charge-offs (recoveries) during the period to average loans | | (0.22 | )% | | 2.46 | % | | 0.31 | % | | 2.06 | % | | | | | | | | | | | | |
Annualized net charge-offs (recoveries) during the period to ALL | | (10.19 | )% | | 100.12 | % | | 13.85 | % | | 83.73 | % | | | | | | | | | | | | |
Allowance for loan losses to loans held for investment (1) | | 2.12 | % | | 2.51 | % | | 2.12 | % | | 2.51 | % | | | | | | | | | | | | |
(1) Excludes discontinued operations. |
The following table presents ALL activity by portfolio segment for the three months ended September 30, 2013: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Real Estate - Mortgage | | | | | | | | |
(dollars in thousands) | | Commercial and Agricultural | | Real Estate - Construction | | 1-4 Family Residential | | Commercial | | Consumer | | Total | | | | |
| | | | | | | | | | | | | | | | |
| | | |
ALL: | | | | | | | | | | | | | | | | |
Beginning balance at July 1, 2013 | | $ | 2,192 | | | $ | 5,652 | | | $ | 7,400 | | | $ | 7,387 | | | $ | 2,454 | | | $ | 25,085 | | | | | |
| | | |
Charge-offs | | (2 | ) | | (36 | ) | | (394 | ) | | (592 | ) | | (700 | ) | | (1,724 | ) | | | | |
Recoveries | | 465 | | | 1,039 | | | 285 | | | 357 | | | 230 | | | 2,376 | | | | | |
| | | |
Provision | | (45 | ) | | (1,560 | ) | | 1,493 | | | (677 | ) | | 439 | | | (350 | ) | | | | |
| | | |
Ending balance at September 30, 2013 | | $ | 2,610 | | | $ | 5,095 | | | $ | 8,784 | | | $ | 6,475 | | | $ | 2,423 | | | $ | 25,387 | | | | | |
| | | |
|
The following table presents ALL activity by portfolio segment for the three months ended September 30, 2012: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Real Estate - Mortgage | | | | | | | | |
(dollars in thousands) | | Commercial and Agricultural | | Real Estate - Construction | | 1-4 Family Residential | | Commercial | | Consumer | | Total | | | | |
ALL: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | |
Beginning balance at July 1, 2012 | | $ | 7,151 | | | $ | 11,320 | | | $ | 8,784 | | | $ | 9,218 | | | $ | 2,078 | | | $ | 38,551 | | | | | |
| | | |
Charge-offs | | (1,156 | ) | | (2,465 | ) | | (1,646 | ) | | (2,602 | ) | | (1,407 | ) | | (9,276 | ) | | | | |
Recoveries | | 286 | | | 323 | | | 69 | | | 388 | | | 486 | | | 1,552 | | | | | |
| | | |
Provision | | (1,128 | ) | | (3,195 | ) | | 2,787 | | | 54 | | | 1,514 | | | 32 | | | | | |
| | | |
Ending balance at September 30, 2012 | | $ | 5,153 | | | $ | 5,983 | | | $ | 9,994 | | | $ | 7,058 | | | $ | 2,671 | | | $ | 30,859 | | | | | |
| | | |
|
The following table presents ALL activity by portfolio segment for the nine months ended September 30, 2013: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Real Estate - Mortgage | | | | | | | | |
(dollars in thousands) | | Commercial and Agricultural | | Real Estate - Construction | | 1-4 Family Residential | | Commercial | | Consumer | | Total | | | | |
| | | | | | | | | | | | | | | | |
ALL: | | | | | | | | | | | | | | | | |
Beginning balance at January 1, 2013 | | $ | 3,238 | | | $ | 4,987 | | | $ | 8,701 | | | $ | 9,627 | | | $ | 2,761 | | | $ | 29,314 | | | | | |
| | | |
Charge-offs | | (1,196 | ) | | (964 | ) | | (3,563 | ) | | (2,853 | ) | | (2,260 | ) | | (10,836 | ) | | | | |
Recoveries | | 1,376 | | | 2,106 | | | 962 | | | 2,363 | | | 1,399 | | | 8,206 | | | | | |
| | | |
Provision | | (808 | ) | | (1,034 | ) | | 2,684 | | | (2,662 | ) | | 523 | | | (1,297 | ) | | | | |
| | | |
Ending balance at September 30, 2013 | | $ | 2,610 | | | $ | 5,095 | | | $ | 8,784 | | | $ | 6,475 | | | $ | 2,423 | | | $ | 25,387 | | | | | |
| | | |
|
The following table presents ALL activity by portfolio segment for the nine months ended September 30, 2012: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Real Estate - Mortgage | | | | | | | | |
(dollars in thousands) | | Commercial and Agricultural | | Real Estate - Construction | | 1-4 Family Residential | | Commercial | | Consumer | | Total | | | | |
ALL: | | | | | | | | | | | | | | | | |
Beginning balance at January 1, 2012 | | $ | 5,776 | | | $ | 11,995 | | | $ | 8,885 | | | $ | 11,063 | | | $ | 1,641 | | | $ | 39,360 | | | | | |
| | | |
Charge-offs | | (2,774 | ) | | (8,761 | ) | | (4,805 | ) | | (3,594 | ) | | (3,646 | ) | | (23,580 | ) | | | | |
Recoveries | | 777 | | | 1,169 | | | 447 | | | 725 | | | 1,084 | | | 4,202 | | | | | |
| | | |
Provision | | 1,374 | | | 1,580 | | | 5,467 | | | (1,136 | ) | | 3,592 | | | 10,877 | | | | | |
| | | |
Ending balance at September 30, 2012 | | $ | 5,153 | | | $ | 5,983 | | | $ | 9,994 | | | $ | 7,058 | | | $ | 2,671 | | | $ | 30,859 | | | | | |
| | | |
The following table details the recorded investment in loans related to each segment in the allowance for loan losses by portfolio segment and disaggregated on the basis of impairment evaluation methodology at September 30, 2013: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Real Estate - Mortgage | | | | | | | | |
(dollars in thousands) | | Commercial and Agricultural | | Real Estate - Construction | | 1-4 Family Residential | | Commercial | | Consumer | | Total | | | | |
ALL: | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | — | | | $ | 1 | | | $ | 446 | | | $ | 39 | | | $ | — | | | $ | 486 | | | | | |
| | | |
Collectively evaluated for impairment | | 2,576 | | | 4,347 | | | 7,811 | | | 3,869 | | | 2,232 | | | 20,835 | | | | | |
| | | |
PI loans evaluated for credit impairment | | 34 | | | 747 | | | 527 | | | 2,567 | | | 191 | | | 4,066 | | | | | |
| | | |
PI loans with no credit deterioration | | — | | | — | | | — | | | — | | | — | | | — | | | | | |
| | | |
Total ALL | | $ | 2,610 | | | $ | 5,095 | | | $ | 8,784 | | | $ | 6,475 | | | $ | 2,423 | | | $ | 25,387 | | | | | |
| | | |
Loans held for investment | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 416 | | | $ | 9,998 | | | $ | 13,060 | | | $ | 28,846 | | | $ | — | | | $ | 52,320 | | | | | |
| | | |
Collectively evaluated for impairment | | 57,783 | | | 47,348 | | | 575,490 | | | 242,062 | | | 43,546 | | | 966,229 | | | | | |
| | | |
PI loans with subsequent credit deterioration | | 8,821 | | | 8,258 | | | 26,661 | | | 103,028 | | | 1,084 | | | 147,852 | | | | | |
| | | |
PI loans with no credit deterioration | | 2,597 | | | 1,938 | | | 3,051 | | | 21,150 | | | 5 | | | 28,741 | | | | | |
| | | |
Total loans | | $ | 69,617 | | | $ | 67,542 | | | $ | 618,262 | | | $ | 395,086 | | | $ | 44,635 | | | $ | 1,195,142 | | | | | |
| | | |
The following table details the recorded investment in loans related to each segment in the allowance for loan losses by portfolio segment and disaggregated on the basis of impairment evaluation methodology at December 31, 2012: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Real Estate - Mortgage | | | | | | | | |
(dollars in thousands) | | Commercial and Agricultural | | Real Estate - Construction | | 1-4 Family Residential | | Commercial | | Consumer | | Total | | | | |
ALL: | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 282 | | | $ | 82 | | | $ | 607 | | | $ | 766 | | | $ | — | | | $ | 1,737 | | | | | |
| | | |
Collectively evaluated for impairment | | 2,432 | | | 4,705 | | | 7,383 | | | 5,473 | | | 2,211 | | | 22,204 | | | | | |
| | | |
PI loans evaluated for credit impairment | | 524 | | | 200 | | | 711 | | | 3,388 | | | 550 | | | 5,373 | | | | | |
| | | |
PI loans with no credit deterioration | | — | | | — | | | — | | | — | | | — | | | — | | | | | |
| | | |
Total ALL | | $ | 3,238 | | | $ | 4,987 | | | $ | 8,701 | | | $ | 9,627 | | | $ | 2,761 | | | $ | 29,314 | | | | | |
| | | |
Loans held for investment | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 2,334 | | | $ | 13,533 | | | $ | 18,118 | | | $ | 43,609 | | | $ | — | | | $ | 77,594 | | | | | |
| | | |
Collectively evaluated for impairment | | 62,704 | | | 42,199 | | | 496,205 | | | 227,760 | | | 42,181 | | | 871,049 | | | | | |
| | | |
PI loans with subsequent credit deterioration | | 11,533 | | | 2,285 | | | 34,961 | | | 141,974 | | | 1,362 | | | 192,115 | | | | | |
| | | |
PI loans with no credit deterioration | | 3,133 | | | 397 | | | 4,254 | | | 28,493 | | | — | | | 36,277 | | | | | |
| | | |
Total loans | | $ | 79,704 | | | $ | 58,414 | | | $ | 553,538 | | | $ | 441,836 | | | $ | 43,543 | | | $ | 1,177,035 | | | | | |
| | | |
Troubled Debt Restructuring |
The following tables presents a breakdown of troubled debt restructurings that were restructured during the three months and nine months ended September 30, 2013 and September 30, 2012, segregated by portfolio segment: |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2013 | | For Three Months Ended September 30, 2012 | | | | | | |
| | | | Pre-Modification | | Post-Modification | | | | Pre-Modification | | Post-Modification | | | | | | |
| | | | Outstanding | | Outstanding | | | | Outstanding | | Outstanding | | | | | | |
(dollars in thousands) | | Number | | Recorded | | Recorded | | Number | | Recorded | | Recorded | | | | | | |
| | of Loans | | Investment | | Investment | | of Loans | | Investment | | Investment | | | | | | |
Commercial and agricultural | | — | | | $ | — | | | $ | — | | | — | | | $ | — | | | $ | — | | | | | | | |
| | | | | |
Real estate - construction | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | |
| | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | |
1-4 family residential | | — | | | — | | | — | | | 1 | | | 202 | | | 202 | | | | | | | |
| | | | | |
Commercial | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | |
| | | | | |
Consumer | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | |
| | | | | |
Total | | — | | | $ | — | | | $ | — | | | 1 | | | $ | 202 | | | $ | 202 | | | | | | | |
| | | | | |
|
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For Nine Months Ended September 30, 2013 | | For Nine Months Ended September 30, 2012 | | | | | | |
| | | | Pre-Modification | | Post-Modification | | | | Pre-Modification | | Post-Modification | | | | | | |
| | | | Outstanding | | Outstanding | | | | Outstanding | | Outstanding | | | | | | |
(dollars in thousands) | | Number | | Recorded | | Recorded | | Number | | Recorded | | Recorded | | | | | | |
| | of Loans | | Investment | | Investment | | of Loans | | Investment | | Investment | | | | | | |
Commercial and agricultural | | — | | | $ | — | | | $ | — | | | — | | | $ | — | | | $ | — | | | | | | | |
| | | | | |
Real estate - construction | | — | | | — | | | — | | | 9 | | | 2,526 | | | 1,603 | | | | | | | |
| | | | | |
Real estate - mortgage: | | | | | | | | | | | | | | | | | | |
1-4 family residential | | 9 | | | 2,733 | | | 2,630 | | | 3 | | | 260 | | | 260 | | | | | | | |
| | | | | |
Commercial | | 2 | | | 1,611 | | | 1,195 | | | 8 | | | 1,356 | | | 1,353 | | | | | | | |
| | | | | |
Consumer | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | |
| | | | | |
Total | | 11 | | | $ | 4,344 | | | $ | 3,825 | | | 20 | | | $ | 4,142 | | | $ | 3,216 | | | | | | | |
| | | | | |
|
During the three months ended September 30, 2013, we did not modify any loans. During the three months ended September 30, 2012, we modified one loan that was considered to be a troubled debt restructuring. We extended the term for this loan but did not modify the interest rate. |
During the nine months ended September 30, 2013, we modified eleven loans that were considered to be troubled debt restructurings. We extended the terms for two of these loans, modified the interest rate for one of these loans, and modified the remaining eight loans in both ways. During the nine months ended September 30, 2012, we modified 20 loans that were considered to be troubled debt restructurings. We extended the terms for 16 of these loans, the interest rate was lowered for two of these loans, and the remaining two loans were modified for multiple reasons. |
There were no loans restructured in the twelve months prior to September 30, 2013 that went into default during the three months or nine months ended September 30, 2013. There were also no loans restructured in the twelve months prior to September 30, 2012 that went into default during the three months or nine months ended September 30, 2012. |
In the determination of the ALL, management considers troubled debt restructurings and any subsequent defaults in these restructurings as impaired loans. The amount of the impairment is measured using the present value of expected future cash flows discounted at the loan's effective interest rate, the observable market price of the loan, or the fair value of the collateral if the loan is collateral dependent. |
Unfunded Commitments |
The reserve for unfunded commitments, which is included in other liabilities, is calculated by determining the type of commitment and the remaining unfunded commitment for each loan. Based on the type of commitment, an expected usage percentage to the remaining unfunded balance is applied. The expected usage percentage is multiplied by the historical losses and qualitative and environmental factors for each loans pool as defined in the regular ALL calculation to determine the appropriate level of reserve. The following describes our method for determining the unfunded commitment: |
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• | Straight Lines of Credit - Unfunded balance of line of credit | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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• | Revolving Lines of Credit - Average Utilization (for the last 12 months) less Current Utilization | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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• | Letters of Credit - a 10% utilization is applied | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The reserve for unfunded commitments was $0.5 million as of September 30, 2013 and $0.6 million at December 31, 2012. |