Allowance for Credit Losses [Text Block] | Note 4: Allowance for Loan Losses, Nonperforming Assets and Impaired Loans Impaired loans are those loans that have been modified in a troubled debt restructure (“TDR” or “restructure”) and larger, non-homogeneous loans that are in nonaccrual or exhibit payment history or financial status that indicate the probability that collection will not occur when due according to the loan’s original terms. Generally, impaired loans are given risk ratings that indicate higher risk, such as “classified” or “other assets especially mentioned.” Impaired loans are individually evaluated to determine appropriate reserves and are measured at the lower of the invested amount or the fair market value. Impaired loans that are not troubled debt restructures and for which fair value measurement indicates an impairment loss are designated nonaccrual. A restructured loan that maintains current status for at least six months may be in accrual status. Please refer to Note 1 of the Company’s 2014 Form 10-K, “Summary of Significant Accounting Policies” for additional information on evaluation of impaired loans and associated specific reserves, and policies regarding nonaccruals, past due status and charge-offs. Troubled debt restructures impact the estimation of the appropriate level of the allowance for loan losses. If the restructuring included forgiveness of a portion of principal, the charge-off is included in the historical charge-off rates applied to the collective evaluation methodology. Further, restructured loans are individually evaluated for impairment and any amount of book value that exceeds fair value is accrued in the allowance for loan losses. TDRs that experience a payment default are examined to determine whether the default indicates collateral dependency or a decline in estimates of cash flow used in the fair value measurement. TDRs that are determined to be collateral-dependent, as well as all impaired loans that are determined to be collateral dependent, are charged down to fair value net of estimated costs to dispose. Deficiencies indicated by impairment measurements for TDRs that are not collateral dependent may be accrued in the allowance for loan losses or charged off if deemed uncollectible. The Company evaluated characteristics in the loan portfolio and determined major segments and smaller classes within each segment. These characteristics include collateral type, repayment sources, and (if applicable) the borrower’s business model. The methodology for calculating reserves for collectively-evaluated loans is applied at the class level. Portfolio Segments and Classes The segments and classes used in determining the allowance for loan losses are as follows. Real Estate Construction Construction, residential Construction, other Consumer Real Estate Equity lines Residential closed-end first liens Residential closed-end junior liens Investor-owned residential real estate Commercial Real Estate Multifamily real estate Commercial real estate, owner-occupied Commercial real estate, other Commercial Non Real Estate Commercial and Industrial Public Sector and IDA Public sector and IDA Consumer Non Real Estate Credit cards Automobile Other consumer loans Historical Loss Rates The Company’s allowance methodology for collectively-evaluated loans applies historical loss rates by class to current class balances as part of the process of determining required reserves. Class loss rates are calculated as the net charge-offs for the class as a percentage of average class balance. The loss rate for the current quarter is averaged with that of prior periods to obtain the historical loss rate. Two loss rates for each class are calculated: total net charge-offs for the class as a percentage of average class loan balance (“class loss rate”), and total net charge-offs for the class as a percentage of average classified loans in the class (“classified loss rate”). Classified loans are those with risk ratings of “substandard” or higher. Net charge-offs in both calculations include charge-offs and recoveries of classified and non-classified loans as well as those associated with impaired loans. Class historical loss rates are applied to non-classified loan balances at the reporting date, and classified historical loss rates are applied to classified balances at the reporting date. Risk Factors In addition to historical loss rates, risk factors pertinent to credit risk for each class are analyzed to estimate reserves for collectively-evaluated loans. Factors include changes in national and local economic and business conditions, the nature and volume of classes within the portfolio, loan quality , loan officers’ experience , lending policies and the Company’s loan review system . The analysis of certain factors results in standard allocations to all segments and classes. These factors include loan officers’ average years of experience, the risk from changes in lending policies, and the risk from changes in loan review. Factors analyzed for each class, with resultant allocations based upon the level of risk assessed for each class, include levels of past due loans, nonaccrual loans, current class balance as a percentage of total loans, and the percentage of high risk loans (defined to be junior lien mortgages, high loan-to-value loans, and interest only loans) within the class. Additionally, factors specific to each segment are analyzed and result in allocations to the segment. Real estate construction loans are subject to general risks from changing commercial building and housing market trends and economic conditions that may impact demand for completed properties and the costs of completion. These risks are measured by market-area unemployment rates, bankruptcy rates, housing and commercial building market trends, and interest rates. The credit quality of consumer real estate is subject to risks associated with the borrower’s repayment ability and collateral value, measured generally by analyzing local unemployment and bankruptcy trends, local housing market trends, and interest rates. The commercial real estate segment includes loans secured by multifamily residential real estate, commercial real estate occupied by the owner/borrower, and commercial real estate leased to non-owners. Loans in the commercial real estate segment are impacted by economic risks from changing commercial real estate markets, rental markets for multi-family housing and commercial buildings, business bankruptcy rates, local unemployment and interest rate trends that would impact the businesses housed by the commercial real estate. Commercial non real estate loans are secured by collateral other than real estate, or are unsecured. Credit risk for commercial non real estate loans is subject to economic conditions, generally monitored by local business bankruptcy trends, and interest rates. Public sector and IDA loans are extended to municipalities and related entities. Credit risk is based upon the entity’s ability to repay and interest rate trends. Consumer non real estate includes credit cards, automobile and other consumer loans. Credit cards and certain other consumer loans are unsecured, while collateral is obtained for automobile loans and other consumer loans. Credit risk stems primarily from the borrower’s ability to repay, measured by average unemployment, average personal bankruptcy rates and interest rates. Factor allocations applied to each class are increased for loans rated special mention and classified. The Company allocates additional reserves for “high risk” loans. High risk loans include junior liens, interest only and high loan to value loans. A detailed analysis showing the allowance roll-forward by portfolio segment and related loan balance by segment follows. A ctivity in the Allowance for Loan Losses for the Six Months Ended June 30, 2015 Real Estate Construction Consumer Real Estate Commercial Real Estate Commercial Non Real Estate Public Sector and IDA Consumer Non Real Estate Unallocated Total Balance, December 31, 2014 $ 612 $ 1,662 $ 3,537 $ 1,475 $ 327 $ 602 $ 48 $ 8,263 Charge-offs --- (201 ) (116 ) (330 ) --- (129 ) --- (776 ) Recoveries --- 1 24 --- --- 63 --- 88 Provision for loan losses (136 ) 375 373 (204 ) 159 (22 ) 11 556 Balance, June 30, 2015 $ 476 $ 1,837 $ 3,818 $ 941 $ 486 $ 514 $ 59 $ 8,131 A ctivity in the Allowance for Loan Losses for the Six Months Ended June 30, 2014 Real Estate Construction Consumer Real Estate Commercial Real Estate Commercial Non Real Estate Public Sector and IDA Consumer Non Real Estate Unallocated Total Balance, December 31, 2013 $ 863 $ 1,697 $ 3,685 $ 989 $ 132 $ 576 $ 285 $ 8,227 Charge-offs (2 ) (70 ) (943 ) (79 ) --- (150 ) --- (1,244 ) Recoveries --- --- 25 131 --- 28 --- 184 Provision for loan losses (198 ) (73 ) 1,023 15 146 98 (207 ) 804 Balance, June 30, 2014 $ 663 $ 1,554 $ 3,790 $ 1,056 $ 278 $ 552 $ 78 $ 7,971 A ctivity in the Allowance for Loan Losses for the Year Ended December 31, 2014 Real Estate Construction Consumer Real Estate Commercial Real Estate Commercial Non Real Estate Public Sector and IDA Consumer Non Real Estate Unallocated Total Balance, December 31, 2013 $ 863 $ 1,697 $ 3,685 $ 989 $ 132 $ 576 $ 285 $ 8,227 Charge-offs (2 ) (222 ) (1,201 ) (89 ) --- (346 ) --- (1,860 ) Recoveries --- --- 50 132 --- 73 --- 255 Provision for loan losses (249 ) 187 1,003 443 195 299 (237 ) 1,641 Balance, December 31, 2014 $ 612 $ 1,662 $ 3,537 $ 1,475 $ 327 $ 602 $ 48 $ 8,263 Allowance for Loan Losses as of June 30, 2015 Real Estate Construction Consumer Real Estate Commercial Real Estate Commercial Non Real Estate Public Sector and IDA Consumer Non Real Estate Unallocated Total Individually evaluated for impairment $ --- $ 13 $ 138 $ --- $ --- $ --- $ --- $ 151 Collectively evaluated for impairment 476 1,824 3,680 941 486 514 59 7,980 Total $ 476 $ 1,837 $ 3,818 $ 941 $ 486 $ 514 $ 59 $ 8,131 Allowance for Loan Losses as of December 31, 2014 Real Estate Construction Consumer Real Estate Commercial Real Estate Commercial Non Real Estate Public Sector and IDA Consumer Non Real Estate Unallocated Total Individually evaluated for impairment $ --- $ 14 $ 258 $ 10 $ --- $ --- $ --- $ 282 Collectively evaluated for impairment 612 1,648 3,279 1,465 327 602 48 7,981 Total $ 612 $ 1,662 $ 3,537 $ 1,475 $ 327 $ 602 $ 48 $ 8,263 Loans as of June 30, 2015 Real Estate Construction Consumer Real Estate Commercial Real Estate Commercial Non Real Estate Public Sector and IDA Consumer Non Real Estate Unallocated Total Individually evaluated for impairment $ --- $ 798 $ 13,375 $ 512 $ --- $ --- $ --- $ 14,685 Collectively evaluated for impairment 42,246 145,412 309,959 32,461 53,383 29,639 --- 613,100 Total loans $ 42,246 $ 146,210 $ 323,334 $ 32,973 $ 53,383 $ 29,639 $ --- $ 627,785 Loans as of December 31, 2014 Real Estate Construction Consumer Real Estate Commercial Real Estate Commercial Non Real Estate Public Sector and IDA Consumer Non Real Estate Unallocated Total Individually evaluated for impairment $ --- $ 819 $ 13,624 $ 678 $ --- $ --- $ --- $ 15,121 Collectively evaluated for impairment 45,562 146,220 297,138 32,735 41,361 28,182 --- 591,198 Total $ 45,562 $ 147,039 $ 310,762 $ 33,413 $ 41,361 $ 28,182 $ --- $ 606,319 A summary of ratios for the allowances for loan losses follows. As of the Six Months Ended June 30, For the Year E nded December 31, 2015 2014 2014 Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees 1.30 % 1.34 % 1.36 % Ratio of net charge-offs to average loans, net of unearned income and deferred fees (1) 0.22 % 0.36 % 0.27 % (1) A summary of nonperforming assets follows. June 30, December 31, 2015 2014 2014 Nonperforming assets: Nonaccrual loans $ 2,870 $ 2,335 $ 3,999 Restructured loans in nonaccrual 6,035 2,674 5,288 Total nonperforming loans 8,905 5,009 9,287 Other real estate owned, net 4,441 5,293 4,744 Total nonperforming assets $ 13,346 $ 10,302 $ 14,031 Ratio of nonperforming assets to loans, net of unearned income and deferred fees, plus other real estate owned 2.11 % 1.72 % 2.30 % Ratio of allowance for loan losses to nonperforming loans ( 1 ) 91.31 % 159.13 % 88.97 % (1) A summary of loans past due 90 days or more and impaired loans follows. June 30, December 31, 2015 2014 2014 Loans past due 90 days or more and still accruing $ 80 $ 266 $ 207 Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees 0.01 % 0.04 % 0.03 % Accruing restructured loans $ 5,943 $ 6,240 $ 6,040 Impaired loans: Impaired loans with no valuation allowance $ 12,182 $ 8,155 $ 7,615 Impaired loans with a valuation allowance 2,503 2,989 7,506 Total impaired loans $ 14,685 $ 11,144 $ 15,121 Valuation allowance (151 ) (291 ) (282 ) Impaired loans, net of allowance $ 14,534 $ 10,853 $ 14,839 Average recorded investment in impaired loans (1) $ 15,543 $ 11,898 $ 16,311 Interest income recognized on impaired loans, after designation as impaired $ 172 $ 191 $ 473 Amount of income recognized on a cash basis $ --- $ --- $ --- (1) Nonaccrual loans that meet the Company’s balance threshold of $250 and all TDRs are designated as impaired. No interest income was recognized on nonaccrual loans for the six months ended June 30, 2015 or June 30, 2014 or for the year ended December 31, 2014. A detailed analysis of investment in impaired loans, associated reserves and interest income recognized, segregated by loan class follows. Impaired Loans as of June 30, 2015 Principal Balance (A) Total Recorded Investment (1) Recorded Investment (1) Recorded Investment (1) Related Allowance Co nsumer Real Estate (2) Residential closed-end first liens $ 520 $ 493 $ 308 $ 185 $ 2 Residential closed-end junior liens 229 229 --- 229 7 Investor-owned residential real estate 76 76 --- 76 4 Commercial Real Estate (2) Multifamily real estate 2,902 2,672 868 1,804 123 Commercial real estate, owner-occupied 4,815 4,755 4,564 191 15 Commercial real estate, other 6,035 5,948 5,948 --- --- Commercial Non Real Estate (2) Commercial and Industrial 512 512 494 18 --- Total $ 15,089 $ 14,685 $ 12,182 $ 2,503 $ 151 (1) (2) Impaired Loans as of December 31, 2014 Principal Balance (A) Total Recorded Investment (1) Recorded Investment (1) Recorded Investment (1) Related Allowance Co nsumer Real Estate (2) Residential closed-end first liens $ 530 $ 503 $ 311 $ 192 $ 2 Residential closed-end junior liens 239 239 --- 239 8 Investor-owned residential real estate 77 77 --- 77 4 Commercial Real Estate (2) Multifamily real estate 2,911 2,735 868 1,866 170 Commercial real estate, owner occupied 4,919 4,821 3,314 1,508 74 Commercial real estate, other 6,080 6,068 3,072 2,996 14 Commercial Non Real Estate (2) Commercial and Industrial 678 678 50 628 10 Total $ 15,434 $ 15,121 $ 7,615 $ 7,506 $ 282 (1) (2) Only classes with impaired loans are shown. The following tables show the average recorded investment and interest income recognized for impaired loans. For the Six Months Ended June 30, 2015 Average Recorded Investment (1) Interest Income Recognized Co nsumer Real Estate (2) Residential closed-end first liens $ 499 $ 15 Residential closed-end junior liens 233 8 Investor-owned residential real estate 76 2 Commercial Real Estate (2) Multifamily real estate 2,678 --- Commercial real estate, owner occupied 5,565 57 Commercial real estate, other 5,974 86 Commercial Non Real Estate (2) Commercial and Industrial 518 4 Total $ 15,543 $ 172 (1) (2) For the Six Months Ended June 30, 2014 Average Recorded Investment (1) Interest Income Recognized Co nsumer Real Estate (2) Residential closed-end first liens 452 13 Residential closed-end junior liens 254 8 Investor-owned residential real estate 81 2 Commercial Real Estate (2) Multifamily real estate 2,821 --- Commercial real estate, owner occupied 5,032 77 Commercial real estate, other 3,140 89 Commercial Non Real Estate (2) Commercial and Industrial 95 2 Consumer Non Real Estate (2) Automobile 23 --- Total $ 11,898 $ 191 (1) (2) Average Investment and Interest Income for Impaired Loans For the Year Ended December 31, 2014 Average Recorded Investment (1) Interest Income Recognized Consumer Real Estate (2) Residential closed-end first liens 555 31 Residential closed-end junior liens 249 16 Investor-owned residential real estate 77 5 Commercial Real Estate (2) Multifamily real estate 2,773 --- Commercial real estate, owner occupied 5,836 203 Commercial real estate, other 6,114 175 Commercial Non Real Estate (2) Commercial and Industrial 707 43 Total $ 16,311 $ 473 (1) Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status. (2) Only classes with impaired loans are shown. The Company reviews nonaccrual loans on an individual loan basis to determine whether future payments are reasonably assured. To satisfy this criteria, the Company’s evaluation must determine that the underlying cause of the original delinquency or weakness that indicated nonaccrual status has been resolved, such as receipt of new guarantees, increased cash flows that cover the debt service or other resolution. Nonaccrual loans that demonstrate reasonable assurance of future payments and that have made at least six consecutive payments in accordance with repayment terms and timeframes may be returned to accrual status. A restructured loan for which impairment measurement does not indicate a loss and that maintains current status for at least six months may be returned to accrual status. An analysis of past due and nonaccrual loans June 30, 2015 30 – 89 Days Past Due 90 or M ore Days Past Due 90 or More Days Past Due and Still Accruing Nonaccruals (Including Impaired Nonaccruals) Real Estate Construction (1) Construction, other $ --- $ --- $ --- $ --- Consumer Real Estate (1) Equity lines 67 --- --- --- Residential closed-end first liens 972 67 67 4 Residential closed-end junior liens 66 --- --- --- Investor-owned residential real estate 71 --- --- 13 Commercial Real Estate (1) Multifamily real estate 837 868 --- 2,672 Commercial real estate, owner-occupied 637 1,569 --- 2,805 Commercial real estate, other 807 --- --- 2,921 Commercial Non Real Estate (1) Commercial and Industrial --- 442 --- 490 Consumer Non Real Estate (1) Credit cards 4 8 8 --- Automobile 147 3 3 --- Other consumer loans 52 2 2 --- Total $ 3,660 $ 2,959 $ 80 $ 8,905 (1) An analysis of past due and nonaccrual loans December 31, 2014 30 – 89 Days Past Due 90 or M ore Days Past Due 90 or More Days Past Due and Still Accruing Nonaccruals (Including Impaired Nonaccruals) Real Estate Construction (1) Construction, other 28 --- --- --- Consumer Real Estate (1) Equity Lines 25 --- --- --- Residential closed-end first liens 719 185 80 105 Residential closed-end junior liens 74 1 1 --- Investor-owned residential real estate 336 45 --- 59 Commercial Real Estate (1) Multifamily real estate 850 868 --- 2,735 Commercial real estate, owner occupied --- 1,066 102 2,573 Commercial real estate, other --- 70 --- 3,066 Commercial Non Real Estate (1) Commercial and Industrial 153 43 --- 749 Consumer Non Real Estate (1) Credit cards 3 4 4 --- Automobile 205 20 20 --- Other consumer loans 54 --- --- --- Total $ 2,447 $ 2,302 $ 207 $ 9,287 (1) The estimate of credit risk for non-impaired loans is obtained by applying allocations for internal and external factors. The allocations are increased for loans that exhibit greater credit quality risk. Credit quality indicators, which the Company terms risk grades, are assigned through the Company’s credit review function for larger loans and selective review of loans that fall below credit review thresholds. Loans that do not indicate heightened risk are graded as “pass.” Loans that appear to have elevated credit risk because of frequent or persistent past due status, which is less than 75 days, or that show weakness in the borrower’s financial condition are risk graded “special mention.” Loans with frequent or persistent delinquency exceeding 75 days or that have a higher level of weakness in the borrower’s financial condition are graded “classified.” Classified loans have regulatory risk ratings of “substandard” and “doubtful.” Allocations are increased by 50% and by 100% for loans with grades of “special mention” and “classified,” respectively. Determination of risk grades was completed for the portfolio as of June 30, 2015 and December 31, 2014. The following displays collectively-evaluated loans by credit quality indicator. Pass Special Mention Classified (Excluding Impaired) Real Estate Construction Construction, 1-4 family residential $ 11,564 $ 3,860 $ 1,196 Construction, other 25,626 --- --- Consumer Real Estate Equity lines 16,287 --- 116 Closed-end first liens 78,556 1,173 970 Closed-end junior liens 4,431 55 66 Investor-owned residential real estate 41,986 887 885 Commercial Real Estate Multifamily residential real estate 77,752 1,363 1,830 Commercial real estate owner-occupied 127,913 1,707 1,894 Commercial real estate, other 95,540 1,960 --- Commercial Non Real Estate Commercial and Industrial 30,393 479 1,589 Public Sector and IDA States and political subdivisions 53,383 --- --- Consumer Non Real Estate Credit cards 5,675 --- --- Automobile 11,666 114 48 Other consumer 12,109 23 4 Total $ 592,881 $ 11,621 $ 8,598 The following displays collectively-evaluated loans by credit quality indicator. Pass Special Mention (Excluding Impaired) Classified (Excluding Impaired) Real Estate Construction Construction, 1-4 family residential $ 14,222 $ --- $ 2,265 Construction, other 29,047 --- 28 Consumer Real Estate Equity lines 15,861 59 60 Closed-end first liens 78,806 1,566 1,412 Closed-end junior liens 4,258 21 95 Investor-owned residential real estate 42,781 688 614 Commercial Real Estate Multifamily residential real estate 73,611 1,397 850 Commercial real estate owner-occupied 125,643 202 2,855 Commercial real estate, other 90,821 1,177 582 Commercial Non Real Estate Commercial and Industrial 31,247 97 1,390 Public Sector and IDA States and political subdivisions 41,361 --- --- Consumer Non Real Estate Credit cards 5,705 --- --- Automobile 11,505 93 128 Other consumer 10,745 --- 6 Total $ 575,613 $ 5,300 $ 10,285 Sales , Purchases and Reclassification of Loans The Company finances mortgages under “best efforts” contracts with mortgage purchasers. The mortgages are designated as held for sale upon initiation. There have been no reclassifications from portfolio loans to held for sale. There have been no loans held for sale transferred to portfolio loans. Occasionally, the Company purchases or sells participations in loans. All participation loans purchased met the Company’s normal underwriting standards at the time the participation was entered. Participation loans are included in the appropriate portfolio balances to which the allowance methodology is applied. Troubled Debt Restructurings The Company modifies loans in troubled debt restructurings. Total troubled debt restructurings amounted to $11,978 at June 30, 2015, $11,328 at December 31, 2014, and $8,914 at June 30, 2014. The following tables present restructurings by class that occurred during the six month period ended June 30, 2015, and the three and six month periods ended June 30, 2014. The Company did not modify any loans in troubled debt restructures during the three-month period ended June 30, 2015. Note: Only classes with restructured loans are presented. Restructurings That Occurred During the Six Months Ended June 30, 2015 Number of Contracts Pre-Modification Outstanding Principal Balance Post-Modification Outstanding Principal Balance Commercial Real Estate Commercial real estate, owner occupied 1 1,007 907 Total 1 $ 1,007 $ 907 During the six-month period ended June 30, 2015, the Company restructured one loan to provide payment relief . The restructuring provided payment relief by capitalizing interest and re-amortizing payments. The fair value measurements of the restructured loans as of June 30, 2015 resulted in no specific allocations to the allowance for loan losses. Restructurings That Occurred During the Three Months Ended June 30, 2014 Number of Contracts Pre-Modification Outstanding Principal Balance Post-Modification Outstanding Principal Balance Commercial R eal E state Multifamily real estate 1 2,484 2,484 Total 1 $ 2,484 $ 2,484 Restructurings That Occurred During the Six Months Ended June 30, 2014 Number of Contracts Pre-Modification Outstanding Principal Balance Post-Modification Outstanding Principal Balance Commercial Real Estate Commercial real estate, owner occupied 1 $ 184 $ 209 Multifamily real estate 1 2,484 2,484 Total 2 $ 2,668 $ 2,693 During the six-month period ended June 30, 2014, the Company restructured two loans. One commercial real estate, owner occupied loan was restructured pursuant to bankruptcy court orders. The restructuring provided payment relief by capitalizing interest, reducing the interest rate and re-amortizing payments. The fair value measurement of the restructured loan as of June 30, 2014 resulted in a specific allocation to the allowance for loan losses of $27. One multifamily real estate loan was restructured to provide payment relief. The Company reduced the loan’s interest rate and re-amortized payments. The fair value measurement of the restructured loan as of June 30, 2014 resulted in a specific allocation to the allowance for loan losses of $248. The Company analyzed its TDR portfolio for loans that defaulted during the three and six month periods ended June 30, 2015 and June 30, 2014, and that were modified within 12 months prior to default. The Company defines default as one or more payments that occur more than 90 days past the due date, charge-offs, or foreclosure after the date of restructuring. There were no restructured loans that defaulted and were modified within 12 months prior to default for the three or six month periods ended June 30, 2015 and 2014. |