Loans | 12 Months Ended |
Dec. 31, 2014 |
Loans | |
Loans | (5) Loans |
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The composition of loans by primary loan portfolio segment follows: |
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| | December 31, | | | | | | | | | | | | | | | | | |
(In thousands) | | 2014 | | 2013 | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 577,911 | | $ | 510,739 | | | | | | | | | | | | | | | | | |
Construction and development, excluding undeveloped land | | 95,733 | | 99,719 | | | | | | | | | | | | | | | | | |
Undeveloped land | | 22,268 | | 29,871 | | | | | | | | | | | | | | | | | |
Real estate mortgage | | 1,133,953 | | 1,046,823 | | | | | | | | | | | | | | | | | |
Consumer | | 38,685 | | 34,198 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | $ | 1,868,550 | | $ | 1,721,350 | | | | | | | | | | | | | | | | | |
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Loan balances include deferred loan origination fees, net of deferred loan costs. At December 31, 2014 and 2013, net deferred loan costs exceeded deferred loan fees, resulting in net balances of ($331) thousand, compared to ($139) thousand at December 31, 2013. During 2013 and 2014, deferred loan origination costs exceeded deferred fees for new loans, resulting in the net balance decrease. |
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Bancorp’s credit exposure is diversified with secured and unsecured loans to individuals and businesses. No specific industry concentration exceeds ten percent of loans. While Bancorp has a diversified loan portfolio, a customer’s ability to honor contracts is somewhat dependent upon the economic stability and/or industry in which that customer does business. Loans outstanding and related unfunded commitments are primarily concentrated within Bancorp’s current market areas, which encompass the Louisville, Indianapolis and Cincinnati metropolitan markets. |
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Bancorp occasionally enters into loan participation agreements with other banks in the ordinary course of business to diversify credit risk. For certain sold participation loans, Bancorp has retained effective control of the loans, typically by restricting the participating institutions from pledging or selling their share of the loan without permission from Bancorp. US GAAP requires the participated portion of these loans to be recorded as secured borrowings. The participated portions of these loans are included in the commercial and industrial loan totals above, and a corresponding liability is reflected in other liabilities. At December 31, 2014 and 2013, the total participated portions of loans of this nature were $8.1 million and $9.4 million respectively. |
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Loans to directors and their associates, including loans to companies for which directors are principal owners, and executive officers are presented in the following table. |
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(in thousands) | | Year ended December 31, | | | | | | | | | | | | | | | | | |
Loans to directors and executive officers | 2014 | | 2013 | | | | | | | | | | | | | | | | | |
Balance as of January 1 | | $ | 8,667 | | $ | 6,099 | | | | | | | | | | | | | | | | | |
New loans | | — | | 2,210 | | | | | | | | | | | | | | | | | |
Repayment of term loans | | 1,222 | | 892 | | | | | | | | | | | | | | | | | |
Changes in balances of revolving lines of credit | | 4,345 | | 1,250 | | | | | | | | | | | | | | | | | |
Balance as of December 31 | | $ | 11,790 | | $ | 8,667 | | | | | | | | | | | | | | | | | |
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None of the loans to directors and executive officers were past due or considered potential problem loans during 2014 or 2013. |
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The following tables present the balance in the recorded investment in loans and roll-forward of allowance for loan losses by portfolio segment and based on impairment evaluation method as of December 31, 2014, 2013 and 2012. |
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| | Type of loan | | | | | | | |
| | | | Construction | | | | | | | | | | | | | |
| | | | and development | | | | | | | | | | | | | |
| | Commercial | | excluding | | | | | | | | | | | | | |
(in thousands) | | and | | undeveloped | | Undeveloped | | Real estate | | | | | | | | | |
December 31, 2014 | | industrial | | land | | land | | mortgage | | Consumer | | Total | | | | | |
| | | | | | | | | | | | | | | | | |
Loans | | $ | 577,911 | | $ | 95,733 | | $ | 22,268 | | $ | 1,133,953 | | $ | 38,685 | | $ | 1,868,550 | | | | | |
| | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | | $ | 6,239 | | $ | 516 | | $ | 1,000 | | $ | 3,720 | | $ | 76 | | $ | 11,551 | | | | | |
| | | | | | | | | | | | | | | | | |
Loans collectively evaluated for impairment | | $ | 571,600 | | $ | 94,603 | | $ | 21,268 | | $ | 1,129,766 | | $ | 38,600 | | $ | 1,855,837 | | | | | |
| | | | | | | | | | | | | | | | | |
Loans acquired with deteriorated credit quality | | $ | 72 | | $ | 614 | | $ | — | | $ | 467 | | $ | 9 | | $ | 1,162 | | | | | |
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| | | | Construction | | | | | | | | | | | | |
| | | | and development | | | | | | | | | | | | |
| | Commercial | | excluding | | | | | | | | | | | | |
| | and | | undeveloped | | Undeveloped | | Real estate | | | | | | | | |
| | industrial | | land | | land | | mortgage | | Consumer | | Unallocated | | Total | | |
Allowance for loan losses | | | | | | | | | | | | | | | | |
At December 31, 2013 | | $ | 7,644 | | $ | 2,555 | | $ | 5,376 | | $ | 12,604 | | $ | 343 | | $ | — | | $ | 28,522 | | |
Provision (credit) | | 4,593 | | (1,584 | ) | (2,244 | ) | (1,190 | ) | 25 | | — | | (400 | ) | |
Charge-offs | | (661 | ) | (250 | ) | (1,753 | ) | (993 | ) | (587 | ) | — | | (4,244 | ) | |
Recoveries | | 243 | | — | | 166 | | 120 | | 513 | | — | | 1,042 | | |
At December 31, 2014 | | $ | 11,819 | | $ | 721 | | $ | 1,545 | | $ | 10,541 | | $ | 294 | | $ | — | | $ | 24,920 | | |
| | | | | | | | | | | | | | | | |
Allowance for loans individually evaluated for impairment | | $ | 529 | | $ | 15 | | $ | 500 | | $ | 256 | | $ | 76 | | $ | — | | $ | 1,376 | | |
| | | | | | | | | | | | | | | | |
Allowance for loans collectively evaluated for impairment | | $ | 11,290 | | $ | 706 | | $ | 1,045 | | $ | 10,285 | | $ | 218 | | $ | — | | $ | 23,544 | | |
| | | | | | | | | | | | | | | | |
Allowance for loans acquired with deteriorated credit quality | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | |
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| | Type of loan | | | | | | | |
| | | | Construction | | | | | | | | | | | | | |
| | | | and development | | | | | | | | | | | | | |
| | Commercial | | excluding | | | | | | | | | | | | | |
(in thousands) | | and | | undeveloped | | Undeveloped | | Real estate | | | | | | | | | |
December 31, 2013 | | industrial | | land | | land | | mortgage | | Consumer | | Total | | | | | |
| | | | | | | | | | | | | | | | | |
Loans | | $ | 510,739 | | $ | 99,719 | | $ | 29,871 | | $ | 1,046,823 | | $ | 34,198 | | $ | 1,721,350 | | | | | |
| | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | | $ | 7,579 | | $ | 26 | | $ | 7,340 | | $ | 7,478 | | $ | 84 | | $ | 22,507 | | | | | |
| | | | | | | | | | | | | | | | | |
Loans collectively evaluated for impairment | | $ | 502,535 | | $ | 98,428 | | $ | 22,531 | | $ | 1,038,824 | | $ | 34,095 | | $ | 1,696,413 | | | | | |
| | | | | | | | | | | | | | | | | |
Loans acquired with deteriorated credit quality | | $ | 625 | | $ | 1,265 | | $ | — | | $ | 521 | | $ | 19 | | $ | 2,430 | | | | | |
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| | | | Construction | | | | | | | | | | | | |
| | | | and development | | | | | | | | | | | | |
| | Commercial | | excluding | | | | | | | | | | | | |
| | and | | undeveloped | | Undeveloped | | Real estate | | | | | | | | |
| | industrial | | land | | land | | mortgage | | Consumer | | Unallocated | | Total | | |
Allowance for loan losses | | | | | | | | | | | | | | | | |
At December 31, 2012 | | $ | 5,949 | | $ | 1,638 | | $ | 2,898 | | $ | 14,288 | | $ | 362 | | $ | 6,746 | | $ | 31,881 | | |
Provision | | 1,583 | | 779 | | 10,358 | | 490 | | 86 | | (6,746 | ) | 6,550 | | |
Charge-offs | | (457 | ) | (25 | ) | (7,961 | ) | (2,758 | ) | (763 | ) | — | | (11,964 | ) | |
Recoveries | | 569 | | 163 | | 81 | | 584 | | 658 | | — | | 2,055 | | |
At December 31, 2013 | | $ | 7,644 | | $ | 2,555 | | $ | 5,376 | | $ | 12,604 | | $ | 343 | | $ | — | | $ | 28,522 | | |
| | | | | | | | | | | | | | | | |
Allowance for loans individually evaluated for impairment | | $ | 762 | | $ | — | | $ | — | | $ | 606 | | $ | 84 | | $ | — | | $ | 1,452 | | |
| | | | | | | | | | | | | | | | |
Allowance for loans collectively evaluated for impairment | | $ | 6,882 | | $ | 2,555 | | $ | 5,376 | | $ | 11,998 | | $ | 259 | | $ | — | | $ | 27,070 | | |
| | | | | | | | | | | | | | | | |
Allowance for loans acquired with deteriorated credit quality | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | |
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| | Type of loan | | | | | | | | | | |
(in thousands) | | Commercial | | Construction | | Real estate | | | | | | | | | | | | |
December 31, 2012 | | and industrial | | and development | | mortgage | | Consumer | | Total | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Loans | | $ | 426,930 | | $ | 131,253 | | $ | 989,631 | | $ | 36,780 | | $ | 1,584,594 | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | | $ | 8,667 | | $ | 10,863 | | $ | 9,795 | | $ | 4 | | $ | 29,329 | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Loans collectively evaluated for impairment | | $ | 418,263 | | $ | 120,390 | | $ | 979,836 | | $ | 36,776 | | $ | 1,555,265 | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Loans acquired with deteriorated credit quality | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | | | | | | | |
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| | Commercial | | Construction | | Real estate | | | | | | | | | | | |
| | and industrial | | and development | | mortgage | | Consumer | | Unallocated | | Total | | | | | |
Allowance for loan losses | | | | | | | | | | | | | | | | | |
At December 31, 2011 | | $ | 7,364 | | $ | 3,546 | | $ | 11,182 | | $ | 540 | | $ | 7,113 | | $ | 29,745 | | | | | |
Provision | | 3,024 | | 2,716 | | 6,308 | | (181 | ) | (367 | ) | 11,500 | | | | | |
Charge-offs | | (4,523 | ) | (1,726 | ) | (3,451 | ) | (798 | ) | — | | (10,498 | ) | | | | |
Recoveries | | 84 | | — | | 249 | | 801 | | — | | 1,134 | | | | | |
At December 31, 2012 | | $ | 5,949 | | $ | 4,536 | | $ | 14,288 | | $ | 362 | | $ | 6,746 | | $ | 31,881 | | | | | |
| | | | | | | | | | | | | | | | | |
Allowance for loans individually evaluated for impairment | | $ | 156 | | $ | 2,898 | | $ | 563 | | $ | — | | $ | — | | $ | 3,617 | | | | | |
| | | | | | | | | | | | | | | | | |
Allowance for loans collectively evaluated for impairment | | $ | 5,793 | | $ | 1,638 | | $ | 13,725 | | $ | 362 | | $ | 6,746 | | $ | 28,264 | | | | | |
| | | | | | | | | | | | | | | | | |
Allowance for loans acquired with deteriorated credit quality | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | | | | |
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The considerations by Bancorp in computing its allowance for loan losses are determined based on the various risk characteristics of each loan segment. Relevant risk characteristics are as follows: |
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| · | | Commercial and industrial loans: Loans in this category are made to businesses. Generally these loans are secured by assets of the business and repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer and/or business spending will have an effect on the credit quality in this loan category. | | | | | | | | | | | | | | | | | | | | |
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| · | | Construction and development, excluding undeveloped land: Loans in this category primarily include land loans to local individuals, contractors and developers for developing the land for sale or for the purpose of making improvements thereon. Repayment is derived from sale of the lots/ units including any pre-sold units. Credit risk is affected by market conditions, time to sell at an adequate price and cost overruns. This category also includes commercial development projects Bancorp finances, which in most cases require only interest to be paid during construction, and then convert to permanent financing requiring principal amortization. Credit risk is affected by construction delays, cost overruns, market conditions and the availability of permanent financing, to the extent such permanent financing is not being provided by us. | | | | | | | | | | | | | | | | | | | | |
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| · | | Undeveloped land: Loans in this category are secured by land initially acquired for development by the borrower, but for which no development has yet taken place. Credit risk is affected by market conditions, time to sell at an adequate price and cost overruns. Credit risk is also affected by market conditions and the availability of permanent financing, to the extent such permanent financing is not being provided by us. Prior to 2013 loans in this category were recorded within construction and development loans. | | | | | | | | | | | | | | | | | | | | |
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| · | | Real estate mortgage: Loans in this category are made to and secured by owner-occupied residential real estate, income-producing investment properties and owner-occupied real estate used for business purposes. Repayment is dependent on the credit quality of the individual borrower. The underlying properties are generally located largely in Bancorp’s primary market area. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this loan category. The cash flows of the income producing investment properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on credit quality. In the case of owner-occupied real estate used for business purposes, a weakened economy and resultant decreased consumer and/or business spending will have an adverse effect on credit quality. | | | | | | | | | | | | | | | | | | | | |
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| · | | Consumer: Loans in this category may be either secured or unsecured and repayment is dependent on the credit quality of the individual borrower and, if applicable, sale of the collateral securing the loan (such as automobiles). Therefore, the overall health of the economy, including unemployment rates and housing prices, will have a significant effect on the credit quality in this loan category. | | | | | | | | | | | | | | | | | | | | |
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During 2013, Bancorp refined its allowance calculation to allocate the portion of the allowance that was previously deemed to be unallocated to instead be included in management’s determination of the appropriate qualitative factors. This refined allowance calculation included specific allowance allocations to loan portfolio segments for qualitative factors including, among other factors, (i) national and local economic and business conditions, (ii) the quality and experience of lending staff and management, (iii) changes in lending policies and procedures, (iv) changes in volume and severity of past due loans, classified loans and non-performing loans, (v) potential impact of any concentrations of credit, (vi) changes in the nature and terms of loans such as growth rates and utilization rates, (vii) changes in the value of underlying collateral for collateral-dependent loans, considering Bancorp’s disposition bias, and (viii) the effect of other external factors such as the legal and regulatory environment. Bancorp may also consider other qualitative factors in future periods for additional allowance allocations, including, among other factors, changes in Bancorp’s loan review process. Because Bancorp refined its allowance calculation during 2013 such that it no longer maintains unallocated allowance, Bancorp’s allocation of its allowance by loan segment at December 31, 2014 and 2013 are not comparable with prior periods. |
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Also in 2013, as a result of analyses of non-performing loan metrics, Bancorp expanded the classifications for loans to include undeveloped land, which was previously recorded within construction and development loans. |
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Bancorp has loans that were acquired in the Oldham acquisition, for which there was, at acquisition, evidence of deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans is included in the balance sheet amounts of loans at December 31, 2014 and 2013. Changes in the interest component of the fair value adjustment for acquired impaired loans for the years ended December 31, 2013 and 2014 are shown in the following table: |
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(in thousands) | | Accretable | | Non-accretable | | | | | | | | | | | | | | | | | |
discount | discount | | | | | | | | | | | | | | | | |
Balance at December 31, 2012 | | $ | — | | $ | — | | | | | | | | | | | | | | | | | |
Additions due to Oldham acquisition | | 174 | | 372 | | | | | | | | | | | | | | | | | |
Accretion | | (37 | ) | (3 | ) | | | | | | | | | | | | | | | | |
Reclassifications from (to) non-accretable difference | | — | | — | | | | | | | | | | | | | | | | | |
Disposals | | — | | — | | | | | | | | | | | | | | | | | |
Balance at December 31, 2013 | | 137 | | 369 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Accretion | | (75 | ) | (103 | ) | | | | | | | | | | | | | | | | |
Reclassifications from (to) non-accretable difference | | — | | — | | | | | | | | | | | | | | | | | |
Disposals | | — | | — | | | | | | | | | | | | | | | | | |
Balance at December 31, 2014 | | $ | 62 | | $ | 266 | | | | | | | | | | | | | | | | | |
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Accretion in the non-accretable discount column represents accretion recorded upon payoff of loans. |
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The following tables present loans individually evaluated for impairment as of December 31, 2014 and 2013. |
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| | | | Unpaid | | | | Average | | | | | | | | | | | |
(in thousands) | | Recorded | | principal | | Related | | recorded | | | | | | | | | | | |
December 31, 2014 | | investment | | balance | | allowance | | investment | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Loans with no related allowance recorded | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 396 | | $ | 408 | | $ | — | | $ | 896 | | | | | | | | | | | |
Construction and development, excluding undeveloped land | | 26 | | 151 | | — | | 26 | | | | | | | | | | | |
Undeveloped land | | 500 | | 3,188 | | — | | 5,708 | | | | | | | | | | | |
Real estate mortgage | | 2,803 | | 3,240 | | — | | 2,999 | | | | | | | | | | | |
Consumer | | — | | — | | — | | — | | | | | | | | | | | |
Subtotal | | 3,725 | | 6,987 | | — | | 9,629 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Loans with an allowance recorded | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 5,843 | | $ | 6,318 | | $ | 529 | | $ | 6,697 | | | | | | | | | | | |
Construction and development, excluding undeveloped land | | 490 | | 490 | | 15 | | 196 | | | | | | | | | | | |
Undeveloped land | | 500 | | 1,596 | | 500 | | 100 | | | | | | | | | | | |
Real estate mortgage | | 917 | | 917 | | 256 | | 1,995 | | | | | | | | | | | |
Consumer | | 76 | | 76 | | 76 | | 80 | | | | | | | | | | | |
Subtotal | | 7,826 | | 9,397 | | 1,376 | | 9,068 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 6,239 | | $ | 6,726 | | $ | 529 | | $ | 7,593 | | | | | | | | | | | |
Construction and development, excluding undeveloped land | | 516 | | 641 | | 15 | | 222 | | | | | | | | | | | |
Undeveloped land | | 1,000 | | 4,784 | | 500 | | 5,808 | | | | | | | | | | | |
Real estate mortgage | | 3,720 | | 4,157 | | 256 | | 4,994 | | | | | | | | | | | |
Consumer | | 76 | | 76 | | 76 | | 80 | | | | | | | | | | | |
Total | | $ | 11,551 | | $ | 16,384 | | $ | 1,376 | | $ | 18,697 | | | | | | | | | | | |
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| | | | Unpaid | | | | Average | | | | | | | | | | | |
(in thousands) | | Recorded | | principal | | Related | | recorded | | | | | | | | | | | |
December 31, 2013 | | investment | | balance | | allowance | | investment | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Loans with no related allowance recorded | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 830 | | $ | 974 | | $ | — | | $ | 4,499 | | | | | | | | | | | |
Construction and development, excluding undeveloped land | | 26 | | 151 | | — | | 54 | | | | | | | | | | | |
Undeveloped land | | 7,340 | | 9,932 | | — | | 3,272 | | | | | | | | | | | |
Real estate mortgage | | 3,731 | | 5,069 | | — | | 5,559 | | | | | | | | | | | |
Consumer | | — | | — | | — | | 3 | | | | | | | | | | | |
Subtotal | | 11,927 | | 16,126 | | — | | 13,387 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Loans with an allowance recorded | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 6,749 | | $ | 6,749 | | $ | 762 | | $ | 3,806 | | | | | | | | | | | |
Construction and development, excluding undeveloped land | | — | | — | | — | | 259 | | | | | | | | | | | |
Undeveloped land | | — | | — | | — | | 7,152 | | | | | | | | | | | |
Real estate mortgage | | 3,747 | | 4,065 | | 606 | | 3,705 | | | | | | | | | | | |
Consumer | | 84 | | 84 | | 84 | | 34 | | | | | | | | | | | |
Subtotal | | 10,580 | | 10,898 | | 1,452 | | 14,956 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 7,579 | | $ | 7,723 | | $ | 762 | | $ | 8,305 | | | | | | | | | | | |
Construction and development, excluding undeveloped land | | 26 | | 151 | | — | | 313 | | | | | | | | | | | |
Undeveloped land | | 7,340 | | 9,932 | | — | | 10,424 | | | | | | | | | | | |
Real estate mortgage | | 7,478 | | 9,134 | | 606 | | 9,264 | | | | | | | | | | | |
Consumer | | 84 | | 84 | | 84 | | 37 | | | | | | | | | | | |
Total | | $ | 22,507 | | $ | 27,024 | | $ | 1,452 | | $ | 28,343 | | | | | | | | | | | |
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Differences between recorded investment amounts and unpaid principal balance amounts less related allowance are due to partial charge-offs which have occurred over the life of loans and fair value adjustments recorded for loans acquired. |
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Interest income on impaired or non-accrual loans (cash basis) was $284 thousand, $185 thousand and $157 thousand in 2014, 2013, and 2012, respectively. Interest income that would have been recorded if non-accrual loans were on a current basis in accordance with their original terms was $376 thousand, $1.2 million and $1.2 million in 2014, 2013 and 2012, respectively. |
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Impaired loans include non-accrual loans and loans accounted for as troubled debt restructurings (TDR), which continue to accrue interest. Non-performing loans include the balance of impaired loans plus any loans over 90 days past due and still accruing interest. Loans past due more than 90 days or more and still accruing interest amounted to $329 thousand and $437 thousand at December 31, 2014 and 2013, respectively. |
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The following table presents the recorded investment in non-accrual loans as of December 31, 2014 and 2013. |
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(In thousands) | | 2014 | | 2013 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 381 | | $ | 846 | | | | | | | | | | | | | | | | | |
Construction and development, excluding undeveloped land | | 516 | | 26 | | | | | | | | | | | | | | | | | |
Undeveloped land | | 1,000 | | 7,340 | | | | | | | | | | | | | | | | | |
Real estate mortgage | | 3,302 | | 7,046 | | | | | | | | | | | | | | | | | |
Consumer | | — | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 5,199 | | $ | 15,258 | | | | | | | | | | | | | | | | | |
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On December 31, 2014 and 2013, Bancorp had $6.4 million and $7.2 million of accruing loans classified as TDR, respectively. |
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Bancorp did not modify and classify any additional loans as TDR during the year ended December 31, 2014. The following table presents the recorded investment in loans modified and classified as TDR during the year ended December 31, 2013. |
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(dollars in thousands) | | Number of | | Recorded | | | | | | | | | | | | | | | | | | |
December 31, 2013 | | contracts | | investment | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Commercial & industrial | | 1 | | $ | 796 | | | | | | | | | | | | | | | | | | |
Real estate mortgage | | 1 | | 85 | | | | | | | | | | | | | | | | | | |
Total | | 2 | | $ | 881 | | | | | | | | | | | | | | | | | | |
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Bancorp did not have any loans accounted for as TDR that were restructured and experienced a payment default within the previous year as of December 31, 2014. The following table presents the recorded investment in loans accounted for as TDR that were restructured and experienced a payment default during the year ending December 31, 2013. |
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(dollars in thousands) | | Number of | | Recorded | | | | | | | | | | | | | | | | | | |
December 31, 2013 | | Contracts | | investment | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Commercial & industrial | | 1 | | $ | 790 | | | | | | | | | | | | | | | | | | |
Real estate mortgage | | 2 | | 2,425 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Total | | 3 | | $ | 3,215 | | | | | | | | | | | | | | | | | | |
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Loans accounted for as TDR include modifications from original terms such as those due to bankruptcy proceedings, certain modifications of amortization periods or extended suspension of principal payments due to customer financial difficulties. Loans accounted for as TDR, which have not defaulted, are individually evaluated for impairment and, at December 31, 2014, had a total allowance allocation of $703 thousand, compared to $942 thousand at December 31, 2013. |
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At December 31, 2014 and 2013, Bancorp had outstanding commitments to lend additional funds totaling $458 thousand and $262 thousand, respectively, to borrowers whose loans have been modified as TDR. |
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The following table presents the aging of the recorded investment in loans as of December 31, 2014 and 2013. |
|
| | | | | | Greater | | | | | | | | | |
| | | | | | than | | | | | | | | Recorded | |
| | | | | | 90 days | | | | | | | | investment | |
| | | | | | past due | | | | | | | | > 90 days | |
| | 30-59 days | | 60-89 days | | (includes | | Total | | | | Total | | and | |
(in thousands) | | past due | | past due | | non-accrual) | | past due | | Current | | loans | | accruing | |
| | | | | | | | | | | | | | | |
December 31, 2014 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial and industrial | | $ | | 3,860 | | $ | 3 | | $ | 382 | | $ | 4,245 | | $ | 573,666 | | $ | 577,911 | | $ | 1 | |
Construction and development, excluding undeveloped land | | 69 | | — | | 757 | | 826 | | 94,907 | | 95,733 | | 241 | |
Undeveloped land | | — | | — | | 1,000 | | 1,000 | | 21,268 | | 22,268 | | — | |
Real estate mortgage | | 4,536 | | 1,532 | | 3,389 | | 9,457 | | 1,124,496 | | 1,133,953 | | 87 | |
Consumer | | 43 | | 18 | | — | | 61 | | 38,624 | | 38,685 | | — | |
| | | | | | | | | | | | | | | |
Total | | $ | | 8,508 | | $ | 1,553 | | $ | 5,528 | | $ | 15,589 | | $ | 1,852,961 | | $ | 1,868,550 | | $ | 329 | |
| | | | | | | | | | | | | | | |
December 31, 2013 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial and industrial | | $ | | 808 | | $ | 201 | | $ | 1,268 | | $ | 2,277 | | $ | 508,462 | | $ | 510,739 | | $ | 421 | |
Construction and development, excluding undeveloped land | | 429 | | — | | 26 | | 455 | | 99,264 | | 99,719 | | — | |
Undeveloped land | | — | | — | | 7,340 | | 7,340 | | 22,531 | | 29,871 | | — | |
Real estate mortgage | | 4,529 | | 1,180 | | 7,062 | | 12,771 | | 1,034,052 | | 1,046,823 | | 16 | |
Consumer | | 110 | | — | | — | | 110 | | 34,088 | | 34,198 | | — | |
| | | | | | | | | | | | | | | |
Total | | $ | | 5,876 | | $ | 1,381 | | $ | 15,696 | | $ | 22,953 | | $ | 1,698,397 | | $ | 1,721,350 | | $ | 437 | |
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Consistent with regulatory guidance, Bancorp categorizes loans into credit risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends. Pass-rated loans included all risk-rated loans other than those classified as special mention, substandard, and doubtful, which are defined below: |
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| · | | Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. These potential weaknesses may result in deterioration of repayment prospects for the loan or of Bancorp’s credit position at some future date. | | | | | | | | | | | | | | | | | | | | |
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| · | | Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize repayment of the debt. They are characterized by the distinct possibility that Bancorp will sustain some loss if the deficiencies are not corrected. | | | | | | | | | | | | | | | | | | | | |
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| · | | Substandard non-performing: Loans classified as substandard non-performing have all the characteristics of substandard loans and have been placed on non-accrual status or have been accounted for as troubled debt restructurings. | | | | | | | | | | | | | | | | | | | | |
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| · | | Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. | | | | | | | | | | | | | | | | | | | | |
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As of December 31, 2014 and 2013, the internally assigned risk grades of loans by category were as follows: |
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| | | | Construction | | | | | | | | | | | | | |
| | | | and | | | | | | | | | | | | | |
| | | | development, | | | | | | | | | | | | | |
| | | | excluding | | | | | | | | | | | | | |
| | Commercial | | undeveloped | | Undeveloped | | Real estate | | | | | | | | | |
(in thousands) | | and industrial | | land | | land | | mortgage | | Consumer | | Total | | | | | |
December 31, 2014 | | | | | | | | | | | | | | | | | |
Grade | | | | | | | | | | | | | | | | | |
Pass | | $ | 553,739 | | $ | 88,389 | | $ | 20,578 | | $ | 1,114,116 | | $ | 38,533 | | $ | 1,815,355 | | | | | |
Special mention | | 6,215 | | 4,867 | | 530 | | 13,112 | | 76 | | 24,800 | | | | | |
Substandard | | 11,717 | | 1,720 | | 160 | | 2,918 | | — | | 16,515 | | | | | |
Substandard non-performing | | 6,240 | | 757 | | 1,000 | | 3,807 | | 76 | | 11,880 | | | | | |
Doubtful | | — | | — | | — | | — | | — | | — | | | | | |
Total | | $ | 577,911 | | $ | 95,733 | | $ | 22,268 | | $ | 1,133,953 | | $ | 38,685 | | $ | 1,868,550 | | | | | |
| | | | | | | | | | | | | | | | | |
December 31, 2013 | | | | | | | | | | | | | | | | | |
Grade | | | | | | | | | | | | | | | | | |
Pass | | $ | 486,140 | | $ | 87,896 | | $ | 22,366 | | $ | 1,014,216 | | $ | 34,028 | | $ | 1,644,646 | | | | | |
Special mention | | 12,983 | | 7,091 | | — | | 17,916 | | 86 | | 38,076 | | | | | |
Substandard | | 3,616 | | 4,706 | | 165 | | 7,197 | | — | | 15,684 | | | | | |
Substandard non-performing | | 8,000 | | 26 | | 7,340 | | 7,494 | | 84 | | 22,944 | | | | | |
Doubtful | | — | | — | | — | | — | | — | | — | | | | | |
Total | | $ | 510,739 | | $ | 99,719 | | $ | 29,871 | | $ | 1,046,823 | | $ | 34,198 | | $ | 1,721,350 | | | | | |
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