Allowance for Credit Losses [Text Block] | Note 3 : Allowance for Loan Losses, Nonperforming Assets and Impaired Loans The allowance for loan losses methodology incorporates individual evaluation of impaired loans and collective evaluation of groups of non-impaired loans. The Company performs ongoing analysis of the loan portfolio to determine credit quality and to identify impaired loans. Credit quality is rated based on the loan’s payment history, the borrower’s current financial situation and value of the underlying collateral. 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 suggests that collection will probably not not six may 1 2016 10 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 or accrued interest, the charge-off is included in the historical charge-off rates applied to the collective evaluation methodology. Restructured loans are individually evaluated for impairment and the amount of a restructured loan’s book value in excess of its fair value is accrued as a specific allocation in the allowance for loan losses. TDRs that experience a payment default are examined to determine whether the default indicates collateral dependency or cash flows below those that were used in the fair value measurement. TDRs, as well as all impaired loans, that are determined to be collateral dependent are charged down to fair value. Deficiencies indicated by impairment measurements for TDRs that are not may Collectively-Evaluated Loans 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 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 applies historical charge-off rates on the class level. Class loss rates are calculated as the net charge-offs for the class as a percentage of average class balance. The Company averages loss rates for the most recent 8 T wo 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 lower. 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, the Company analyzes factors pertinent to credit risk for each class 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 the risk from changes in lending policies, loan officers’ average years of experience, the risk from changes in loan review, unemployment levels, bankruptcy rates, the interest rate environment, and the competitive, legal and regulatory environments. Factors analyzed for each class, with resultant allocations based upon the level of risk assessed for each class, include levels of past due loans, levels of nonaccrual loans, current class balance as a percentage of total loans, and the percentage of high risk loans within the class. Additionally, factors specific to each segment are analyzed and result in allocations to the segment. Please refer to the Company’s 2016 10 1: Real estate construction loans are subject to general risks from changing commercial building and housing market trends and economic conditions that may 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 increased to a greater extent for loans rated 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 Nine Months Ended September 30 , 2017 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, 2016 $ 438 $ 1,830 $ 3,738 $ 1,063 $ 330 $ 644 $ 257 $ 8,300 Charge-offs --- (146 ) (122 ) (73 ) --- (348 ) --- (689 ) Recoveries --- 1 44 14 --- 79 --- 138 Provision for loan losses (140 ) 337 33 111 55 357 (29 ) 724 Balance, September 30, 2017 $ 298 $ 2,022 $ 3,693 $ 1,115 $ 385 $ 732 $ 228 $ 8,473 A ctivity in the Allowance for Loan Losses for the Nine Months Ended September 30 , 2016 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, 2015 $ 576 $ 1,866 $ 4,109 $ 655 $ 436 $ 627 $ 28 $ 8,297 Charge-offs (29 ) (131 ) (149 ) (767 ) --- (191 ) --- (1,267 ) Recoveries --- 2 71 6 --- 44 --- 123 Provision for loan losses (43 ) 111 (525 ) 1,493 (66 ) 152 26 1,148 Balance, September 30 , 2016 $ 504 $ 1,848 $ 3,506 $ 1,387 $ 370 $ 632 $ 54 $ 8,301 A ctivity in the Allowance for Loan Losses for the Year Ended December 31, 201 6 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, 2015 $ 576 $ 1,866 $ 4,109 $ 655 $ 436 $ 627 $ 28 $ 8,297 Charge-offs (29 ) (133 ) (488 ) (883 ) --- (273 ) --- (1,806 ) Recoveries --- 2 83 10 --- 64 --- 159 Provision for loan losses (109 ) 95 34 1,281 (106 ) 226 229 1,650 Balance, December 31 , 2016 $ 438 $ 1,830 $ 3,738 $ 1,063 $ 330 $ 644 $ 257 $ 8,300 Allowance for Loan Losses as of September 30 , 2017 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 $ --- $ 21 $ --- $ 163 $ --- $ 2 $ --- $ 186 Collectively evaluated for impairment 298 2,001 3,693 952 385 730 228 8,287 Total $ 298 $ 2,022 $ 3,693 $ 1,115 $ 385 $ 732 $ 228 $ 8,473 Allowance for Loan Losses as of December 31, 201 6 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 $ --- $ 25 $ 1 $ --- $ --- $ --- $ --- $ 26 Collectively evaluated for impairment 438 1,805 3,737 1,063 330 644 257 8,274 Total $ 438 $ 1,830 $ 3,738 $ 1,063 $ 330 $ 644 $ 257 $ 8,300 Loans as of September 30 , 2017 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 $ 3,300 $ 1,276 $ 6,319 $ 1,248 $ --- $ 16 $ --- $ 12,159 Collectively evaluated for impairment 28,926 165,115 330,910 41,807 48,391 33,683 --- 648,832 Total $ 32,226 $ 166,391 $ 337,229 $ 43,055 $ 48,391 $ 33,699 $ --- $ 660,991 Loans as of December 31, 201 6 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 $ 270 $ 877 $ 7,782 $ 241 $ --- $ 3 $ --- $ 9,173 Collectively evaluated for impairment 36,075 156,841 328,675 38,783 45,474 33,525 --- 639,373 Total $ 36,345 $ 157,718 $ 336,457 $ 39,024 $ 45,474 $ 33,528 $ --- $ 648,546 A summary of ratios for the allowance for loan losses follows. As of and for the Nine Months Ended September 30, Year E nded December 31, 201 7 20 16 20 16 Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees and costs 1.28 % 1.30 % 1.28 % Ratio of net charge-offs to average loans, net of unearned income and deferred fees and costs (1) 0.11 % 0.25 % 0.26 % ( 1 Net charge-offs are on an annualized basis. A summary of nonperforming assets follows. September 30, December 31, 201 7 20 16 20 16 Nonperforming assets: Nonaccrual loans $ 7 $ 1,592 $ 1,168 Restructured loans in nonaccrual 3,149 3,901 4,687 Total nonperforming loans 3,156 5,493 5,855 Other real estate owned, net 2,923 3,188 3,156 Total nonperforming assets $ 6,079 $ 8,681 $ 9,011 Ratio of nonperforming assets to loans, net of unearned income and deferred fees and costs, plus other real estate owned 0.92 % 1.36 % 1.38 % Ratio of allowance for loan losses to nonperforming loans ( 1 ) 268.47 % 151.12 % 141.76 % ( 1 The Company defines nonperforming loans as nonaccrual loans and restructured loans that are nonaccrual. Nonperforming loans do not 90 A summary of loans past due 90 . September 30, December 31, 201 7 20 16 20 16 Loans past due 90 days or more and still accruing $ 250 $ 195 $ 63 Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees and costs 0.04 % 0.03 % 0.01 % Accruing restructured loans $ 4,815 $ 4,662 $ 3,769 Impaired loans : Impaired loans with no valuation allowance $ 10,522 $ 9,290 $ 8,269 Impaired loans with a valuation allowance 1,637 620 904 Total impaired loans $ 12,159 $ 9,910 $ 9,173 Valuation allowance (186 ) (27 ) (26 ) Impaired loans, net of allowance $ 11,973 $ 9,883 $ 9,147 Average recorded investment in impaired loans (1) $ 12,541 $ 12,908 $ 11,585 Interest i ncome recognized on impaired loans, after designation as impaired $ 387 $ 476 $ 553 Amount of income recognized on a cash basis $ --- $ --- $ --- ( 1 Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status. Nonaccrual loan relationships that meet the Company’s balance threshold of $250 $250 not No nine September 30, 2017 September 30, 2016 December 31, 2016. A detailed analysis of investment in impaired loans, associated reserves and interest income recognized, segregated by loan class follows. Impaired Loans as of September 30, 2017 Principal Balance Total Recorded Investment (1) Recorded Investment (1 ) Which There is No Related Allowance Recorded Investment (1) Which There is a Related Allowance Related Allowance Real Estate Construction (2) Construction , other $ 3,300 $ 3,300 $ 3,300 $ --- $ --- Co nsumer Real Estate (2) Residential closed-end first liens 804 766 440 326 15 Residential closed-end junior liens 180 180 --- 180 6 Investor-owned residential real estate 349 330 330 --- --- Commercial Real Estate (2) Multifamily 307 307 307 --- --- Commercial real estate, owner-occupied 3,390 3,383 3,383 --- --- Commercial real estate, other 2,936 2,629 2,629 --- --- Commercial Non Real Estate (2) Commercial and industrial 1,268 1,248 131 1,117 163 Consumer Non Real Estate (2) Automobile 16 16 2 14 2 Total $ 12,550 $ 12,159 $ 10,522 $ 1,637 $ 186 ( 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. Impaired Loans as of December 31, 201 6 Principal Balance Total Recorded Investment (1) Recorded Investment (1) Which There is No Related Allowance Recorded Investment (1) Which There is a Related Allowance Related Allowance Real Estate Construction (2) Construction 1-4 family residential $ 280 $ 270 $ 270 $ --- $ --- Co nsumer Real Estate (2) Residential closed-end first liens 648 609 267 342 14 Residential closed-end junior liens 195 195 --- 195 7 Investor-owned residential real estate 73 73 --- 73 4 Commercial Real Estate (2) Multifamily real estate 1,364 1,091 1,091 --- --- Commercial real estate, owner occupied 4,005 3,957 3,663 294 1 Commercial real estate, other 2,997 2,734 2,734 --- --- Commercial Non Real Estate (2) Commercial and industrial 255 241 241 --- --- Consumer Non Real Estate (2) Automobile 3 3 3 --- --- Total $ 9,820 $ 9,173 $ 8,269 $ 904 $ 26 ( 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 following tables show the average recorded investment and interest income recognized for impaired loans. For the Nine Months Ended September 30, 2017 Average Recorded Investment (1) Interest Income Recognized Real Estate Construction (2) Construction 1-4 family residential $ 3,323 $ 133 Co nsumer Real Estate (2) Residential closed-end first liens 1,107 30 Residential closed-end junior liens 188 8 Investor-owned residential real estate 333 12 Commercial Real Estate (2) Multifamily real estate 310 12 Commercial real estate, owner occupied 3,420 140 Commercial real estate, other 2,658 45 Commercial Non Real Estate (2) Commercial and industrial 1,187 6 Consumer Non Real Estate (2) Automobile 15 1 Total $ 12,541 $ 387 ( 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. For the Nine Months Ended September 30, 2016 Average Recorded Investment (1) Interest Income Recognized Real Estate Construction (2) Construction 1-4 family residential $ 529 $ --- Co nsumer Real Estate (2) Residential closed-end first liens 652 28 Residential closed-end junior liens 210 10 Investor-owned residential real estate 74 3 Commercial Real Estate (2) Multifamily real estate 1,741 7 Commercial real estate, owner occupied 4,629 175 Commercial real estate, other 4,372 252 Commercial Non Real Estate (2) Commercial and industrial 697 1 Consumer Non Real Estate Automobile 4 --- Total $ 12,908 $ 476 ( 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. For the Year Ended December 31, 201 6 Average Recorded Investment (1) Interest Income Recognized Real Estate Construction (2) Construction 1-4 family residential $ 462 $ 10 Consumer Real Estate (2) Residential closed-end first liens 642 38 Residential closed-end junior liens 207 13 Investor-owned residential real estate 74 4 Commercial Real Estate (2) Multifamily real estate 1,366 12 Commercial real estate, owner occupied 4,342 206 Commercial real estate, other 3,947 263 Commercial Non Real Estate (2) Commercial and industrial 541 7 Co nsumer Non Real Estate (2) Automobile 4 --- Total $ 11,585 $ 553 ( 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 may A restructured loan that maintains current status for at least six may An analysis of past due and nonaccrual loans September 30, 2017 3 0 – 89 Days Past Due and Accruing 90 or M ore Days Past Due 90 or More Days Past Due and Accruing Nonaccruals (2) Consumer Real Estate (1) Residential closed-end first liens 901 88 88 266 Residential closed-end junior liens 197 --- --- --- Investor-owned residential real estate 1 7 --- --- Commercial Real Estate (1) Multifamily real estate 307 --- --- --- Commercial real estate, owner-occupied 676 --- --- 128 Commercial real estate, other --- --- --- 2,629 Commercial Non Real Estate (1) Commercial and industrial 65 --- --- 131 Consumer Non Real Estate (1) Credit cards 7 16 16 --- Automobile 295 22 22 2 Other consumer loans 94 124 124 --- Total $ 2,543 $ 257 $ 250 $ 3,156 ( 1 Only classes with past-due or nonaccrual loans are shown. ( 2 ) Includes current and past due loans in nonaccrual status. Includes impaired loans in nonaccrual status. December 31, 201 6 3 0 – 89 Days Past Due and Accruing 90 or M ore Days Past Due 90 or More Days Past Due and Accruing Nonaccruals (2) Real Estate Construction (1) Construction, residential $ --- $ --- $ --- $ 270 Construction, other 25 --- --- --- Consumer Real Estate (1) Equity lines 10 --- --- --- Residential closed-end first liens 1,498 6 6 --- Residential closed-end junior liens 114 36 36 --- Investor-owned residential real estate 56 234 --- 253 Commercial Real Estate (1) Multifamily real estate 132 1,091 --- 1,091 Commercial real estate, owner occupied 339 202 --- 1,183 Commercial real estate, other --- 80 --- 2,814 Commercial Non Real Estate (1) Commercial and industrial 6 218 --- 241 Consumer Non Real Estate (1) Credit cards 8 5 5 --- Automobile 234 12 12 3 Other consumer loans 131 4 4 --- Total $ 2,553 $ 1,888 $ 63 $ 5,855 ( 1 Only classes with past-due or nonaccrual loans are shown. ( 2 ) Includes current and past due loans in nonaccrual status. Includes impaired loans in nonaccrual status. 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 75 75 50% 100% Determination of risk grades was completed for the portfolio as of September 30, 2017 December 31, 2016. The following displays collectively-evaluated loans by credit quality indicator. September 30 , 2017 Pass Special Mention (1) Classified (1) Real Estate Construction Construction, 1-4 family residential $ 11,005 $ --- $ --- Construction, other 17,921 --- --- Consumer Real Estate Equity lines 17,128 42 --- Closed-end first liens 85,309 1,762 691 Closed-end junior liens 4,496 31 14 Investor-owned residential real estate 55,314 --- 328 Commercial Real Estate Multifamily residential real estate 99,932 --- 128 Commercial real estate owner-occupied 128,997 254 1,151 Commercial real estate, other 100,448 --- --- Commercial Non Real Estate Commercial and i ndustrial 41,593 149 65 Public Sector and IDA States and political subdivisions 48,391 --- --- Consumer Non Real Estate Credit cards 5,379 --- --- Automobile 16,110 69 135 Other consumer 11,928 42 20 Total $ 643,951 $ 2,349 $ 2,532 ( 1 Excludes impaired, if any. The following displays collectively-evaluated loans by credit quality indicator. December 31, 201 6 Pass Special Mention (1) Classified (1) Real Estate Construction Construction, 1-4 family residential $ 11,635 $ 3,468 $ --- Construction, other 20,972 --- --- Consumer Real Estate Equity lines 17,034 82 --- Closed-end first liens 83,658 1,267 580 Closed-end junior liens 4,861 15 151 Investor-owned residential real estate 48,277 333 583 Commercial Real Estate Multifamily residential real estate 99,002 1,733 --- Commercial real estate owner-occupied 120,170 1,188 1,425 Commercial real estate, other 103,534 1,543 80 Commercial Non Real Estate Commercial and i ndustrial 35,521 3,229 33 Public Sector and IDA States and political subdivisions 45,474 --- --- Consumer Non Real Estate Credit cards 5,978 --- --- Automobile 14,457 25 192 Other consumer 12,229 636 8 Total $ 622,802 $ 13,519 $ 3,052 ( 1 Excludes impaired, if any. 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 no Troubled Debt Restructurings From time to time the Company modifies loans in troubled debt restructurings. Total troubled debt restructurings amounted to $7,964 September 30, 2017, $8,456 December 31, 2016, $8,563 September 30, 2016. The following table present restructurings by class that occurred during the three September 30, 2017. Restructurings That Occurred During the Three Months Ended September 30, 2017 Number of Contracts Pre-Modification Outstanding Principal Balance Post-Modification Outstanding Principal Balance Commercial Non R eal E state Commercial and industrial 2 $ 1,116 $ 1,116 Consumer Non Real Estate Automobile 2 14 14 Total 4 $ 1,130 $ 1,130 Each of the restructurings completed during the three September 30, 2017 two and reducing the rate. Impairment measurement, based on the present value of cash flows, indicated a specific reserve for each of the commercial non-real estate loans. The two 13 The following table presents restructurings by class that occurred during the nine September 30, 2017. Restructurings That Occurred During the Nine Months Ended September 30, 2017 Number of Contracts Pre-Modification Outstanding Principal Balance Post-Modification Outstanding Principal Balance Commercial Real Estate Commercial real estate, owner occupied 1 $ 132 $ 132 Commercial Non R eal E state Commercial and industrial 4 1,234 1,234 Consumer Non Real Estate Automobile 2 14 14 Total 7 $ 1,380 $ 1,380 Each of the restructurings completed during the nine September 30, 2017 not four one two two 13 The following table presents restructurings by class that were identified during the three September 30, 2016. Restructurings That Occurred During the Three Months Ended September 30, 2016 Number of Contracts Pre-Modification Outstanding Principal Balance Post-Modification Outstanding Principal Balance Commercial Non R eal E state Commercial and industrial 1 $ 28 $ 30 Consumer Non Real Estate Automobile 1 5 5 Total 2 $ 33 $ 35 During the three September 30, 2016, one one The loans are collateral dependent and the fair value is measured using the collateral method. Impairment measurement did not four The following table presents restructurings by class that occurred during the nine September 30, 2016. Restructurings That Occurred During the Nine Months Ended September 30, 2016 Number of Contracts Pre-Modification Outstanding Principal Balance Post-Modification Outstanding Principal Balance Commercial R eal E state Commercial real estate, other 2 $ 3,008 $ 3,008 Commercial Non Real Estate Commercial and industrial 1 28 30 Consumer Non Real Estate Automobile 1 5 5 Total 4 $ 3,041 $ 3,043 In addition to the loans identified as troubled debt restructures during the three September, 30, 2016, two first nine 2016. second 2016 2014 2016 2014 2016 not The Company analyzed its TDR portfolio for loans that defaulted during the three nine September 30, 2017 September 30, 2016, 12 one 90 three nine September 30, 2017 September 30, 2016, none 12 |