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 Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due will not not not six may 1: Troubled debt restructurings 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’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 Company averages loss rates for the most recent 8 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 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, 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 the risk from changes in lending policies, loan officers’ average years of experience, unemployment levels, bankruptcy rates, interest rate environment, and competition/legal/regulatory environments. Factors analyzed for each class, with resultant allocations based upon the level of risk assessed for each class, include the risk from changes in loan review, 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 Note 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 Three Months Ended March 31, 2018 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, 2017 $ 337 $ 2,027 $ 3,044 $ 1,072 $ 419 $ 707 $ 319 $ 7,925 Charge-offs --- --- --- --- --- (139 ) --- (139 ) Recoveries --- --- 12 7 --- 58 --- 77 Provision for (recovery of) loan losses (42 ) (98 ) (266 ) (163 ) 13 54 30 (472 ) Balance, March 31 , 201 8 $ 295 $ 1,929 $ 2,790 $ 916 $ 432 $ 680 $ 349 $ 7,391 A ctivity in the Allowance for Loan Losses for the Three Months Ended March 31, 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 --- --- (30 ) --- --- (113 ) --- (143 ) Recoveries --- --- 12 4 --- 29 --- 45 Provision for (recovery of) loan losses (61 ) (84 ) (103 ) 75 87 56 89 59 Balance, March 31, 2017 $ 377 $ 1,746 $ 3,617 $ 1,142 $ 417 $ 616 $ 346 $ 8,261 A ctivity in the Allowance for Loan Losses for the Year Ended December 31, 201 7 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 ) (139 ) (82 ) --- (452 ) --- (819 ) Recoveries --- 1 131 23 --- 132 --- 287 Provision for (recovery of) loan losses (101 ) 342 (686 ) 68 89 383 62 157 Balance, December 31 , 201 7 $ 337 $ 2,027 $ 3,044 $ 1,072 $ 419 $ 707 $ 319 $ 7,925 Allowance for Loan Losses as of March 31, 2018 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 $ --- $ 15 $ --- $ 153 $ --- $ 1 $ --- $ 169 Collectively evaluated for impairment 295 1,914 2,790 763 432 679 349 7,222 Total $ 295 $ 1,929 $ 2,790 $ 916 $ 432 $ 680 $ 349 $ 7,391 Allowance for Loan Losses as of December 31, 201 7 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 $ --- $ 16 $ --- $ 160 $ --- $ 1 $ --- $ 177 Collectively evaluated for impairment 337 2,011 3,044 912 419 706 319 7,748 Total $ 337 $ 2,027 $ 3,044 $ 1,072 $ 419 $ 707 $ 319 $ 7,925 Loans as of March 31, 2018 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 $ 2,817 $ 1,155 $ 6,479 $ 1,203 $ --- $ 27 $ --- $ 11,681 Collectively evaluated for impairment 29,264 166,273 326,886 40,873 51,091 33,184 --- 647,571 Total $ 32,081 $ 167,428 $ 333,365 $ 42,076 $ 51,091 $ 33,211 $ --- $ 659,252 Loans as of December 31, 201 7 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 $ 2,882 $ 1,267 $ 6,516 $ 1,229 $ --- $ 30 $ --- $ 11,924 Collectively evaluated for impairment 31,812 165,698 333,898 39,289 51,443 34,618 --- 656,758 Total $ 34,694 $ 166,965 $ 340,414 $ 40,518 $ 51,443 $ 34,648 $ --- $ 668,682 A summary of ratios for the allowance for loan losses follows. As of and for the Three Months Ended March 31, Year E nded December 31, 2018 2017 2017 Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees and costs 1.12 % 1.27 % 1.19 % Ratio of net charge-offs to average loans, net of unearned income and deferred fees and costs (1) 0.04 % 0.06 % 0.08 % ( 1 Net charge-offs are on an annualized basis. A summary of nonperforming assets follows. March 31, December 31, 2018 2017 2017 Nonperforming assets: Nonaccrual loans $ 6 $ 1,040 $ 6 Restructured loans in nonaccrual 2,758 4,640 2,763 Total nonperforming loans 2,764 5,680 2,769 Other real estate owned, net 2,741 2,952 2,817 Total nonperforming assets $ 5,505 $ 8,632 $ 5,586 Ratio of nonperforming assets to loans, net of unearned income and deferred fees and costs, plus other real estate owned 0.83 % 1.32 % 0.83 % Ratio of allowance for loan losses to nonperforming loans ( 1 ) 267.40 % 145.44 % 286.20 % ( 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 March 31, December 31, 2018 2017 2017 Loans past due 90 days or more and still accruing $ 52 $ 63 $ 51 Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees and costs 0.01 % 0.01 % 0.01 % Accruing restructured loans $ 7,890 $ 3,747 $ 5,134 Impaired loans: Impaired loans with no valuation allowance $ 10,233 $ 8,172 $ 10,444 Impaired loans with a valuation allowance 1,448 894 1,480 Total impaired loans $ 11,681 $ 9,066 $ 11,924 Valuation allowance (169 ) (25 ) (177 ) Impaired loans, net of allowance $ 11,512 $ 9,041 $ 11,747 Average recorded investment in impaired loans (1) $ 11,754 $ 9,123 $ 13,344 Interest income recognized on impaired loans, after designation as impaired $ 120 $ 67 $ 528 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 three March 31, 2018 March 31, 2017 December 31, 2017. A detailed analysis of investment in impaired loans, associated reserves and interest income recognized, segregated by loan class follows. Impaired Loans as of March 31, 2018 Principal Balance Total Recorded Investment (1) Recorded Investment (1 ) Recorded Investment (1) Related Allowance Real Estate Construction (2) Construction, other $ 2,817 $ 2,817 $ 2,817 $ --- $ --- Co nsumer Real Estate (2) Residential closed-end first liens 706 664 487 177 10 Residential closed-end junior liens 168 168 --- 168 5 Investor-owned residential real estate 344 323 323 --- --- Commercial Real Estate (2) Multifamily 300 300 300 --- --- Commercial real estate, owner-occupied 3,586 3,577 3,577 --- --- Commercial real estate, other 2,921 2,602 2,602 --- --- Commercial Non Real Estate (2) Commercial and industrial 1,211 1,203 123 1,080 153 Consumer Non Real Estate (2) Automobile 27 27 4 23 1 Total $ 12,080 $ 11,681 $ 10,233 $ 1,448 $ 169 ( 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, 2017 Principal Balance Total Recorded Investment (1) Recorded Investment (1) Related Allowance Recorded Investment (1) Related Allowance Real Estate Construction (2) Construction 1-4 family residential $ 2,882 $ 2,882 $ 2,882 $ --- $ --- Co nsumer Real Estate (2) Residential closed-end first liens 807 768 590 178 10 Residential closed-end junior liens 174 174 --- 174 6 Investor-owned residential real estate 347 325 325 --- --- Commercial Real Estate (2) Multifamily real estate 303 303 303 --- --- Commercial real estate, owner occupied 3,619 3,611 3,611 --- --- Commercial real estate, other 2,921 2,602 2,602 --- --- Commercial Non Real Estate (2) Commercial and industrial 1,236 1,229 126 1,103 160 Consumer Non Real Estate (2) Automobile 30 30 5 25 1 Total $ 12,319 $ 11,924 $ 10,444 $ 1,480 $ 177 ( 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 Three Months Ended March 31, 2018 Average Recorded Investment (1) Interest Income Recognized Real Estate Construction (2) Construction 1-4 family residential $ 839 $ 38 Co nsumer Real Estate (2) Residential closed-end first liens 3,387 10 Residential closed-end junior liens 253 3 Investor-owned residential real estate 323 4 Commercial Real Estate (2) Multifamily real estate 372 4 Commercial real estate, owner occupied 2,648 50 Commercial real estate, other 2,384 --- Commercial Non Real Estate (2) Commercial and industrial 939 11 Consumer Non Real Estate (2) Automobile 609 --- Total $ 11,754 $ 120 ( 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 Three Months Ended March 31, 2017 Average Recorded Investment (1) Interest Income Recognized Real Estate Construction (2) Construction 1-4 family residential $ 267 $ 3 Co nsumer Real Estate (2) Residential closed-end first liens 606 9 Residential closed-end junior liens 193 3 Investor-owned residential real estate 73 1 Commercial Real Estate (2) Multifamily real estate 1,091 --- Commercial real estate, owner occupied 3,945 32 Commercial real estate, other 2,708 17 Commercial Non Real Estate (2) Commercial and industrial 237 2 Consumer Non Real Estate Automobile 3 --- Total $ 9,123 $ 67 ( 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, 2017 Average Recorded Investment (1) Interest Income Recognized Real Estate Construction (2) Construction 1-4 family residential $ 3,298 $ 177 Consumer Real Estate (2) Residential closed-end first liens 781 57 Residential closed-end junior liens 185 11 Investor-owned residential real estate 329 1 Commercial Real Estate (2) Multifamily real estate 748 16 Commercial real estate, owner occupied 4,047 200 Commercial real estate, other 2,638 --- Commercial Non Real Estate (2) Commercial and industrial 1,282 64 Co nsumer Non Real Estate (2) Automobile 36 2 Total $ 13,344 $ 528 ( 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 An analysis of past due and nonaccrual loans March 31, 2018 30 – 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 780 --- --- 142 Residential closed-end junior liens 168 --- --- --- Investor-owned residential real estate --- 5 --- 6 Commercial Real Estate (1) Multifamily real estate 498 --- --- --- Commercial real estate, owner-occupied 394 --- --- --- Commercial real estate, other --- 2,602 --- 2,602 Commercial Non Real Estate (1) Commercial and industrial 260 20 20 13 Consumer Non Real Estate (1) Credit cards 7 11 11 --- Automobile 322 1 1 1 Other consumer loans 73 20 20 --- Total $ 2,502 $ 2,659 $ 52 $ 2,764 ( 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, 2017 30 – 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 637 16 11 145 Residential closed-end junior liens 188 --- --- --- Investor-owned residential real estate 66 --- --- 6 Commercial Real Estate (1) Multifamily real estate 303 --- --- --- Commercial real estate, owner occupied 402 --- --- --- Commercial real estate, other --- 2,602 --- 2,602 Commercial Non Real Estate (1) Commercial and industrial 131 --- --- 15 Consumer Non Real Estate (1) Credit cards 7 12 12 --- Automobile 375 22 22 1 Other consumer loans 154 6 6 --- Total $ 2,263 $ 2,658 $ 51 $ 2,769 ( 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 March 31, 2018 December 31, 2017. The following displays collectively-evaluated loans by credit quality indicator. March 31, 2018 Pass Special Mention (1) Classified (1) Real Estate Construction Construction, 1-4 family residential $ 9,367 $ --- $ --- Construction, other 19,897 --- --- Consumer Real Estate Equity lines 16,560 39 --- Closed-end first liens 84,519 2,379 866 Closed-end junior liens 4,455 27 10 Investor-owned residential real estate 56,957 275 186 Commercial Real Estate Multifamily residential real estate 87,412 126 198 Commercial real estate owner-occupied 131,800 245 752 Commercial real estate, other 106,353 --- --- Commercial Non Real Estate Commercial and industrial 40,447 257 169 Public Sector and IDA States and political subdivisions 51,091 --- --- Consumer Non Real Estate Credit cards 5,328 --- --- Automobile 15,590 242 175 Other consumer 11,772 50 27 Total $ 641,548 $ 3,640 $ 2,383 ( 1 Excludes impaired, if any. The following displays collectively-evaluated loans by credit quality indicator. December 31, 201 7 Pass Special Mention (1) Classified (1) Real Estate Construction Construction, 1-4 family residential $ 10,396 $ --- $ --- Construction, other 21,416 --- --- Consumer Real Estate Equity lines 16,673 39 --- Closed-end first liens 85,975 2,400 355 Closed-end junior liens 4,483 29 12 Investor-owned residential real estate 55,410 66 256 Commercial Real Estate Multifamily residential real estate 95,894 127 --- Commercial real estate owner-occupied 130,256 246 763 Commercial real estate, other 106,612 --- --- Commercial Non Real Estate Commercial and industrial 38,904 220 165 Public Sector and IDA States and political subdivisions 51,443 --- --- Consumer Non Real Estate Credit cards 5,493 --- --- Automobile 16,059 218 116 Other consumer 12,692 16 24 Total $ 651,706 $ 3,361 $ 1,691 ( 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 Troubled Debt Restructurings From time to time the Company modifies loans in troubled debt restructurings. Total troubled debt restructurings amounted to $10,648 March 31, 2018, $7,897 December 31, 2017, $8,387 March 31, 2017. The following table present restructurings by class that occurred during the three March 31, 2018. Restructurings That Occurred During the Three Months Ended March 31, 2018 Number of Contracts Pre-Modification Outstanding Principal Balance Post-Modification Outstanding Principal Balance Real Estate Construction Construction, other 2 $ 2,882 $ 2,882 Total 2 $ 2,882 $ 2,882 Each of the restructurings completed during the three March 31, 2018 two not The Company did not three March 31, 2017. The Company analyzed its TDR portfolio for loans that defaulted during the three March 31, 2018 March 31, 2017, 12 one 90 three March 31, 2018 March 31, 2017, none 12 |