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 will not not not six may 2018 10 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 for the Three Months Ended March 31 , 201 9 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, 2018 $ 398 $ 2,049 $ 2,798 $ 602 $ 583 $ 750 $ 210 $ 7,390 Charge-offs --- (16 ) (150 ) --- --- (162 ) --- (328 ) Recoveries --- --- 12 --- --- 86 --- 98 Provision for (recovery of) loan losses 70 58 327 (27 ) (58 ) --- (170 ) 200 Balance, March 3 1 , 201 9 $ 468 $ 2,091 $ 2,987 $ 575 $ 525 $ 674 $ 40 $ 7,360 A ctivity in the Allowance for Loan Losses for the Three Months Ended March 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 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 Year Ended 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 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 , 201 8 $ 398 $ 2,049 $ 2,798 $ 602 $ 583 $ 750 $ 210 $ 7,390 Allowance for Loan Losses as of March 31 , 201 9 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 $ --- $ 129 $ --- $ --- $ --- $ 132 Collectively evaluated for impairment 468 2,088 2,987 446 525 674 40 7,228 Total $ 468 $ 2,091 $ 2,987 $ 575 $ 525 $ 674 $ 40 $ 7,360 Allowance for Loan Losses 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 as of March 31 , 201 9 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 $ --- $ 1,187 $ 4,151 $ 989 $ --- $ 10 $ --- $ 6,337 Collectively evaluated for impairment 41,156 175,659 357,418 44,323 61,075 32,988 --- 712,619 Total $ 41,156 $ 176,846 $ 361,569 $ 45,312 $ 61,075 $ 32,998 $ --- $ 718,956 Loans 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 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, 2019 2018 2018 Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees and costs 1.02 % 1.12 % 1.04 % Ratio of net charge-offs to average loans, net of unearned income and deferred fees and costs (1) 0.13 % 0.04 % 0.07 % ( 1 Net charge-offs are on an annualized basis. A summary of nonperforming assets follows. March 31, December 31, 2019 2018 2018 Nonperforming assets: Nonaccrual loans $ 294 $ 6 $ 311 Restructured loans in nonaccrual 3,440 2,758 3,109 Total nonperforming loans 3,734 2,764 3,420 Other real estate owned, net 2,025 2,741 2,052 Total nonperforming assets $ 5,759 $ 5,505 $ 5,472 Ratio of nonperforming assets to loans, net of unearned income and deferred fees and costs, plus other real estate owned 0.80 % 0.83 % 0.77 % Ratio of allowance for loan losses to nonperforming loans (1) 197.11 % 267.40 % 216.08 % ( 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, 2019 2018 2018 Loans past due 90 days or more and still accruing $ 55 $ 52 $ 35 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 % 0.00 % Accruing restructured loans $ 1,995 $ 7,890 $ 2,552 Impaired loans: Impaired loans with no valuation allowance $ 5,212 $ 10,233 $ 5,667 Impaired loans with a valuation allowance 1,125 1,448 1,153 Total impaired loans $ 6,337 $ 11,681 $ 6,820 Valuation allowance (132 ) (169 ) (139 ) Impaired loans, net of allowance $ 6,205 $ 11,512 $ 6,681 Average recorded investment in impaired loans (1) $ 6,597 $ 11,754 $ 9,788 Interest income recognized on impaired loans, after designation as impaired $ 49 $ 120 $ 250 Amount of income recognized on a cash basis $ --- $ --- $ --- ( 1 Nonaccrual loan relationships that meet the Company’s balance threshold of $250 $250 not No three March 31, 2019 March 31, 2018 December 31, 2018. A detailed analysis of investment in impaired loans and associated reserves, segregated by loan class follows. Impaired Loans as of March 31, 2019 Principal Balance Total Recorded Investment (1) Recorded Investment (1 ) for Which There is No Related Allowance Recorded Investment (1) Which There is a Related Allowance Related Allowance Co nsumer Real Estate (2) Residential closed-end first liens $ 493 $ 478 $ 478 $ --- $ --- Residential closed-end junior liens 139 139 --- 139 3 Investor-owned residential real estate 580 570 570 --- --- Commercial Real Estate (2) Multifamily 476 469 469 --- --- Commercial real estate, owner-occupied 1,201 1,199 1,199 --- --- Commercial real estate, other 2,867 2,483 2,483 --- --- Commercial Non Real Estate (2) Commercial and industrial 993 989 3 986 129 Consumer Non Real Estate (2) Automobile 10 10 10 --- --- Total $ 6,759 $ 6,337 $ 5,212 $ 1,125 $ 132 ( 1 ( 2 Impaired Loans as of December 31, 2018 Principal Balance Total Recorded Investment (1) Recorded Investment (1) for Which There is No Related Allowance Recorded Investment (1) Which There is a Related Allowance Related Allowance Co nsumer 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 ( 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, 2019 Average Recorded Investment (1) Interest Income Recognized Co nsumer Real Estate (2) Residential closed-end first liens $ 710 $ 9 Residential closed-end junior liens 142 2 Investor-owned residential real estate 570 9 Commercial Real Estate (2) Multifamily real estate 471 7 Commercial real estate, owner occupied 1,207 5 Commercial real estate, other 2,484 11 Commercial Non Real Estate (2) Commercial and industrial 1,002 6 Consumer Non Real Estate (2) Automobile 11 --- Total $ 6,597 $ 49 ( 1 ( 2 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 Consumer 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 Automobile 609 --- Total $ 11,754 $ 120 ( 1 ( 2 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 Co nsumer Non Real Estate (2) Automobile 20 1 Total $ 9,788 $ 250 ( 1 ( 2 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, 2019 30 – 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, other $ 20 $ --- $ --- $ --- Consumer Real Estate (1) Residential closed-end first liens 1,225 41 19 270 Residential closed-end junior liens 176 --- --- --- Investor-owned residential real estate --- 240 --- 240 Commercial Real Estate (1) Multifamily real estate --- --- --- 181 Commercial real estate, owner-occupied --- 262 --- 560 Commercial real estate, other --- --- --- 2,483 Commercial Non Real Estate (1) Commercial and industrial 91 1 1 --- Consumer Non Real Estate (1) Credit cards 6 3 3 --- Automobile 261 31 31 --- Other consumer loans 43 1 1 --- Total $ 1,822 $ 579 $ 55 $ 3,734 ( 1 ( 2 ) December 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 $ 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 ( 1 ( 2 ) 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, 2019 December 31, 2018. The following displays collectively-evaluated loans by credit quality indicator. March 31, 2019 Pass (1) Special Mention (1) Classified (1) Real Estate Construction Construction, 1-4 family residential $ 8,436 $ --- $ --- Construction, other 32,700 20 --- Consumer Real Estate Equity lines 16,290 39 97 Closed-end first liens 91,442 1,085 1,116 Closed-end junior liens 4,075 --- --- Investor-owned residential real estate 61,508 7 --- Commercial Real Estate Multifamily residential real estate 98,155 --- --- Commercial real estate owner-occupied 125,961 72 32 Commercial real estate, other 133,198 --- --- Commercial Non Real Estate Commercial and industrial 44,193 86 44 Public Sector and IDA States and political subdivisions 61,075 --- --- Consumer Non Real Estate Credit cards 5,445 --- --- Automobile 15,615 71 53 Other consumer 11,785 11 8 Total $ 709,878 $ 1,391 $ 1,350 ( 1 The following displays collectively-evaluated loans by credit quality indicator. December 31, 201 8 Pass (1) Special Mention (1) Classified (1) 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 ( 1 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 $5,435 March 31, 2019, $5,661 December 31, 2018, $10,648 March 31, 2018. During the three March 31, 2019, no The following table presents 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 analyzed its TDR portfolio for loans that defaulted during the three March 31, 2019 March 31, 2018, 12 one 90 March 31, 2019, seven $263, one 12 no One 12 no three March 31, 2018, none 12 |