Allowance for Credit Losses [Text Block] | Note 5: 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 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. If a TDR loan payment exceeds 90 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: 10 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: Activity in the Allowance for Loan Losses by Segment for the year ended December 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 --- (38 ) --- (107 ) --- (544 ) --- (689 ) Recoveries --- 3 49 22 --- 161 --- 235 Provision for (recovery of) loan losses 61 57 (295 ) (385 ) 164 426 (109 ) (81 ) Balance, December 31, 2018 $ 398 $ 2,049 $ 2,798 $ 602 $ 583 $ 750 $ 210 $ 7,390 Activity in the Allowance for Loan Losses by Segment 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 Activity in the Allowance for Loan Losses by Segment 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 (recovery of) 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 by Segment and Evaluation Method as of December 31, 201 8 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 $ --- $ 4 $ --- $ 135 $ --- $ --- $ --- $ 139 Collectively evaluated for impairment 398 2,045 2,798 467 583 750 210 7,251 Total $ 398 $ 2,049 $ 2,798 $ 602 $ 583 $ 750 $ 210 $ 7,390 Loans by Segment and Evaluation Method as of December 31, 201 8 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 $ --- $ 1,452 $ 4,340 $ 1,015 $ --- $ 13 $ --- $ 6,820 Collectively evaluated for impairment 37,845 174,004 349,206 45,520 60,777 36,225 --- 703,577 Total $ 37,845 $ 175,456 $ 353,546 $ 46,535 $ 60,777 $ 36,238 $ --- $ 710,397 Allowance for Loan Losses by Segment and Evaluation Method 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 by Segment and Evaluation Method 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: December 31, 2018 2017 Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees and costs 1.04 % 1.19 % Ratio of net charge-offs to average loans, net of unearned income and deferred fees and costs 0.07 % 0.08 % A summary of nonperforming assets follows: December 31, 2018 2017 Nonperforming assets: Nonaccrual loans $ 311 $ 6 Restructured loans in nonaccrual 3,109 2,763 Total nonperforming loans 3,420 2,769 Other real estate owned, net 2,052 2,817 Total nonperforming assets $ 5,472 $ 5,586 Ratio of nonperforming assets to loans, net of unearned income and deferred fees and costs, plus other real estate owned 0.77 % 0.83 % Ratio of allowance for loan losses to nonperforming loans (1) 216.08 % 286.20 % ( 1 The Company defines nonperforming loans as total nonaccrual and restructured loans that are nonaccrual. Loans 90 A summary of loans past due 90 December 31, 2018 2017 Loans past due 90 days or more and still accruing $ 35 $ 51 Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees and costs 0.00 % 0.01 % Accruing restructured loans $ 2,552 $ 5,134 Impaired loans: Impaired loans with no valuation allowance $ 5,667 $ 10,444 Impaired loans with a valuation allowance 1,153 1,480 Total impaired loans $ 6,820 $ 11,924 Valuation allowance $ (139 ) $ (177 ) Impaired loans, net of allowance $ 6,681 $ 11,747 Average recorded investment in impaired loans (1) $ 9,788 $ 13,344 Income recognized on impaired loans, after designation as impaired $ 250 $ 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. No December 31, 2018, 2017 2016. A detailed analysis of investment in impaired loans, associated reserves and interest income recognized, by loan class follows: Impaired Loans as of December 31, 2018 Principal Balance (A) Total Recorded Investment (1) Recorded Investment (1) for Which There is No Related Allowance Recorded Investment (1) (A) for Which There is a Related Allowance Related Allowance Consumer Real Estate (2) Residential closed-end first liens $ 728 $ 719 $ 719 $ --- $ --- Residential closed-end junior liens 144 143 --- 143 4 Investor-owned residential real estate 593 590 590 --- --- Commercial Real Estate (2) Multifamily real estate 485 483 483 --- --- Commercial real estate, owner occupied 1,363 1,363 1,363 --- --- Commercial real estate, other 2,867 2,494 2,494 --- --- Commercial Non Real Estate (2) Commercial and Industrial 1,018 1,015 5 1,010 135 Consumer Non Real Estate (2) Automobile 13 13 13 --- --- Total $ 7,211 $ 6,820 $ 5,667 $ 1,153 $ 139 Impaired Loans as of December 31, 2017 Principal Balance (A) Total Recorded Investment (1) Recorded Investment (1) for Which There is No Related Allowance Recorded Investment (1) (A) for Which There is a Related Allowance Related Allowance Real Estate Construction (2) Construction other $ 2,882 $ 2,882 $ 2,882 $ --- $ --- Consumer 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. Average Investment and Interest Income for Impaired Loans For the Year Ended December 31, 2018 Average Recorded Investment (1) Interest Income Recognized Consumer Real Estate (2) Residential closed-end first liens 1,202 41 Residential closed-end junior liens 159 9 Investor-owned residential real estate 808 23 Commercial Real Estate (2) Multifamily real estate 491 20 Commercial real estate, owner occupied 3,038 75 Commercial real estate, other 2,744 54 Commercial Non Real Estate (2) Commercial and Industrial 1,326 27 Consumer Non Real Estate (2) Automobile 20 1 Total $ 9,788 $ 250 ( 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. Average Investment and Interest Income for Impaired Loans For the Year Ended December 31, 2017 Average Recorded Investment (1) Interest Income Recognized Real Estate Construction (2) Construction other $ 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 Consumer 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. Average Investment and Interest Income for Impaired Loans For the Year Ended December 31, 2016 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 Consumer 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. An analysis of past due and nonaccrual loans follows: December 31, 2018 30 – 89 Days Past Due 90 or More Days Past Due 90 or More Days Past Due and Still Accruing Nonaccruals (Including Impaired Nonaccruals) Consumer Real Estate (1) Residential closed-end first liens 647 119 --- 278 Residential closed-end junior liens 11 --- --- --- Investor-owned residential real estate --- --- --- 451 Commercial Real Estate (1) Multifamily real estate 291 192 --- 192 Commercial real estate, owner occupied 325 --- --- --- Commercial real estate, other --- --- --- 2,494 Commercial Non Real Estate (1) Commercial and Industrial 10 2 2 5 Consumer Non Real Estate (1) Credit cards 5 --- --- --- Automobile 296 29 29 --- Other consumer loans 50 4 4 --- Total $ 1,635 $ 346 $ 35 $ 3,420 December 31, 2017 30 – 89 Days Past Due 90 or More Days Past Due 90 or More Days Past Due and Still Accruing Nonaccruals (Including Impaired Nonaccruals) 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 presented 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 December 31, 2018 2017. The following displays non-impaired gross loans by credit quality indicator: December 31, 2018 Pass Special Mention (Excluding Impaired) Classified (Excluding Impaired) Real Estate Construction Construction, 1-4 family residential $ 9,264 $ --- $ --- Construction, other 28,560 21 --- Consumer Real Estate Equity lines 16,026 38 --- Closed-end first liens 92,253 994 582 Closed-end junior liens 3,954 --- --- Investor-owned residential real estate 60,157 --- --- Commercial Real Estate Multifamily residential real estate 98,582 --- --- Commercial real estate owner-occupied 123,225 211 32 Commercial real estate, other 127,156 --- --- Commercial Non Real Estate Commercial and Industrial 45,420 54 46 Public Sector and IDA States and political subdivisions 60,777 --- --- Consumer Non Real Estate Credit cards 5,724 --- --- Automobile 18,598 133 71 Other consumer 11,691 4 4 Total $ 701,387 $ 1,455 $ 735 December 31, 201 7 Pass Special Mention (Excluding Impaired) Classified (Excluding Impaired) 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 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 (“TDRs”). The following tables present restructurings by class that occurred during the years ended December 31, 2018, 2017 2016. Note: Only classes with restructured loans are presented. Restructurings that occurred during the year ended December 31, 2018 Number of Contracts Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment (1) Construction Real Estate Construction, other 2 $ 2,882 $ 2,882 Commercial Real Estate Commercial real estate, owner occupied 2 715 715 Consumer Real Estate Closed-end first liens 1 22 22 Investor-owned residential real estate 8 594 594 Total 13 $ 4,213 $ 4,213 ( 1 Post-modification outstanding recorded investment considers amounts immediately following the modification. Amounts do not The Company restructured 13 twelve December 31, 2018. Each of the construction loans were restructured to extend the maturity and interest only period for each loan. As of December 31, 2018, no Two commercial real estate loans were restructured to provide a 12 not The investor owned residential real estate loans were restructured to provide payment relief. Seven loans were restructured from amortizing to interest-only for a period of 12 not not One residential closed-end first 12 not None twelve December 31, 2018 Restructurings that occurred during the year ended December 31, 201 7 Number of Contracts Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment (1) Consumer Real Estate Closed-end first lien 1 $ 8 $ 8 Commercial Real Estate Commercial real estate, other 1 132 132 Commercial Non Real Estate Commercial and industrial 4 1,221 1,221 Co nsumer Non Real Estate Automobile 4 26 26 Total 10 $ 1,387 $ 1,387 ( 1 Post-modification outstanding recorded investment considers amounts immediately following the modification. Amounts do not Each of the restructurings completed during the twelve December 31, 2017 not The commercial real estate loan restructuring reduced debt service by lowering the interest rate slightly and changing the interest method from variable to fixed. Interest was capitalized and the loan was re-amortized over a longer term. Impairment measurement, based on the present value of cash flows, did not The four Three one two The four 13 $1. Restructurings that occurred during the year ended December 31, 201 6 Number of Contracts Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment (1) Commercial Real Estate Commercial real estate, other 2 $ 3,008 $ 3,008 Commercial Non Real Estate Commercial and industrial 1 29 30 Consumer Non Real Estate Automobile 1 5 5 Total 4 $ 3,042 $ 3,043 ( 1 Post-modification outstanding recorded investment considers amounts immediately following the modification. Amounts do not During the twelve December 31, 2016, four Two 2014 2016 2014 2016 December 31, 2016 one one four not Of the Company’s TDR’s that defaulted in 2018, 2017 2016, none 12 one 90 |