| Loans and Allowance for Loan and Lease Losses | NOTE E — LOANS AND ALLOWANCE FOR LOAN AND LEASE
LOSSES (Dollars in Thousands)
At September 30, At December 31,
2015 2014
Real estate loans:
Commercial $ 117,196 $ 111,455
Residential 162,333 163,839
Construction 21,163 13,570
Commercial loans and leases 27,307 29,358
Municipal loans 1,870 785
Consumer loans 1,859 2,018
Total loans 331,728 321,025
Less:
Undisbursed loan proceeds 534 302
Deferred loan fees, net 696 707
Allowance for loan losses 3,627 3,903
4,857 4,912
Total loans - net $ 326,871 $ 316,113
The risk characteristics of each loan portfolio segment are as
follows:
Commercial Real Estate:
Construction Real Estate:
Commercial Loans and Leases:
Residential and Consumer:
Municipal:
Allowance for Loan and Lease Losses Methodology:
Bank policy is designed to ensure that an adequate allowance for
loan and lease losses (“ALLL”) will be maintained.
Primary responsibility for ensuring that the Bank has processes in
place to consistently assess the adequacy of the ALLL rests with
the Board. The Board has charged the Chief Credit Officer with
responsibility for establishing the methodology to be used and to
assess the adequacy of the ALLL quarterly. The methodology will be
reviewed and affirmed by the Loan Review Officer. Quarterly, the
Board will review recommendations from the Chief Credit Officer to
adjust the allowance as appropriate.
The methodology employed by the Bank for each portfolio segment
will at a minimum contain the following:
1) Loans will be segmented by type of
loan.
2) Loans will be further segmented by
risk grades.
3) The required ALLL for types of
performing homogeneous loans which do not have a specific reserve
will be determined by applying a factor based on historical losses
averaged over the twelve quarters prior to the most recent quarter.
In those instances where the Bank’s historical experience is
not available, management will develop factors based on industry
experience and best practices.
4) All criticized and classified loans
will be tested for impairment by applying one of three
methodologies:
a. Present value of future cash
flows;
b. Fair value of collateral less cost to
sell; or
c. The loan’s observable market
price.
5) All troubled debt restructurings
(“TDR”) are considered impaired loans.
6) Loans tested for impairment will be
removed from other pools to prevent layering
(double-counting).
7) The required ALLL for each group of
loans will be added together to determine the total required ALLL
for the Bank. The required ALLL will be compared to the current
ALLL to determine the required provision to increase the ALLL or
credit to decrease the ALLL.
The historical loss experience is determined by portfolio segment
and is based on the actual loss history experienced by the Bank
over the twelve quarters prior to the most recent quarter.
Management believes the historical loss experience methodology is
appropriate in the current economic environment, as it captures
loss rates that are comparable to the current period being
analyzed.
Management also factors in the following qualitative
considerations:
1) Changes in policies and
procedures;
2) Changes in national, regional and
local economic and business conditions;
3) Changes in the composition and size
of the portfolio and in the terms of loans;
4) Changes in the experience, ability
and depth of lending management and other relevant staff;
5) Changes in the volume and severity of
past due loans, the volume of non-accrual loans, and the volume and
severity of adversely classified or graded loans;
6) Changes in the quality of the
Bank’s loan review system;
7) Changes in the value of underlying
collateral for collateral-dependent loans;
8) The existence and effect of any
concentration of credit, and changes in the level of such
concentrations; and
9) The effect of other external factors
such as competition and legal and regulatory requirements on the
level of estimated credit losses in the existing portfolio.
The following table presents the balance and activity in allowance
for loan losses as of September 30, 2015 (dollars in
thousands): Allowance for Loan Losses For Three Months Ended September 30,
2015
Commercial Residential Construction Commercial Municipal Consumer Total
Balance at beginning of quarter $ 1,087 $ 2,021 $ 202 $ 469 $
— $ 125 $ 3,904
Provision (credit) for losses 183 (32 ) (52 ) (42 )
— 13 70
Charge-offs (1) (277 ) (70 )
—
—
— (18 ) (365 )
Recoveries
— 9 1 4
— 4 18
Balance at end of quarter $ 993 $ 1,928 $ 151 $ 431 $
— $ 124 $ 3,627
The following table presents the balance and activity in allowance
for loan losses and the recorded investment in loans and impairment
methods as of September 30, 2015 (dollars in thousands): Allowance for Loan Losses and Recorded Investment
in Loans For Nine Months Ended September 30,
2015
Commercial Residential Construction Commercial Municipal Consumer Total
Balance at beginning of year $ 1,059 $ 1,934 $ 156 $ 637 $
— $ 117 $ 3,903
Provision (credit) for losses 211 107 (7 ) (170 )
— 34 175
Charge-offs (1) (277 ) (153 )
— (48 )
— (47 ) (525 )
Recoveries
— 40 2 12
— 20 74
Balance at end of period $ 993 $ 1,928 $ 151 $ 431 $
— $ 124 $ 3,627
Ending allowance balance
Individually evaluated for impairment $
— $ 592 $
— $ 123 $
— $ 28 $ 743
Collectively evaluated for impairment 993 1,336 151 308
— 96 2,884
Total $ 993 $ 1,928 $ 151 $ 431 $
— $ 124 $ 3,627
Ending loan balance:
Individually evaluated for impairment $ 3,983 $ 7,214 $ 1,093 $ 409 $
— $ 82 $ 12,781
Collectively evaluated for impairment 113,213 155,119 20,070 26,898 1,870 1,777 318,947
Total $ 117,196 $ 162,333 $ 21,163 $ 27,307 $ 1,870 $ 1,859 $ 331,728
The following tables present the balance and activity in allowance
for loan losses as of September 30, 2014 (dollars in
thousands): Allowance for Loan Losses For Three Months Ended September 30,
2014
Commercial Residential Construction Commercial Municipal Consumer Total
Balance at beginning of quarter $ 1,248 $ 1,683 $ 392 $ 558 $
— $ 123 $ 4,004
Provision (credit) for losses 61 78 (139 )
—
— 22 22
Charge-offs (1) (5 ) (8 )
—
—
— (29 ) (42 )
Recoveries
— 3 1 15
— 11 30
Balance at end of quarter $ 1,304 $ 1,756 $ 254 $ 573 $
— $ 127 $ 4,014
Allowance for Loan Losses For Nine Months Ended September 30,
2014
Commercial Residential Construction Commercial Municipal Consumer Total
Balance at beginning of year $ 1,165 $ 1,743 $ 356 $ 623 $
— $ 106 $ 3,993
Provision (credit) for losses 242 92 (59 ) (17 )
— 64 322
Charge-offs (1) (106 ) (88 ) (46 ) (59 )
— (63 ) (362 )
Recoveries 3 9 3 26
— 20 61
Balance at end of period $ 1,304 $ 1,756 $ 254 $ 573 $
— $ 127 $ 4,014
The following table presents the balance in allowance for loan
losses and recorded investment in loans and impairment methods as
of December 31, 2014 (dollars in thousands): Allowance for Loan Losses and Recorded Investment
in Loans For Year Ended December 31, 2014
Commercial Residential Construction Commercial Municipal Consumer Total
Ending allowance balance
Individually evaluated for impairment $
— $ 319 $
— $ 166 $
— $ 12 $ 497
Collectively evaluated for impairment 1,059 1,615 156 471
— 105 3,406
Total $ 1,059 $ 1,934 $ 156 $ 637 $
— $ 117 $ 3,903
Ending loan balance:
Individually evaluated for impairment $ 4,263 $ 3,967 $ 2,004 $ 516 $
— $ 89 $ 10,839
Collectively evaluated for impairment 107,192 159,872 11,566 28,842 785 1,929 310,186
Total $ 111,455 $ 163,839 $ 13,570 $ 29,358 $ 785 $ 2,018 $ 321,025
(1) Policy for Charging Off
Loans:
A loan should be charged off at any point in time when it no longer
can be considered a bankable asset, meaning collectable within the
parameters of policy. The Bank shall not renew any loan, or put a
loan on a demand basis, only to defer a problem, nor is it
appropriate to attempt long-term recoveries while reporting loans
as assets.
An unsecured loan generally should be charged off no later than
when it is 120 days past due as to principal or interest. For loans
in the legal process of foreclosure against collateral of real
and/or liquid value, the 120-day rule does not apply. Such
charge-offs can be deferred until the foreclosure process
progresses to the point where the Bank can adequately determine
whether or not any ultimate loss will result. In similar instances
where other legal actions will cause extraordinary delays, such as
the settlement of an estate, if the loan is well collateralized,
the 120-day period may be extended. On loans where the Bank is
unsecured or not fully collateralized, the loan should be charged
off or written down to the documented collateral value rather than
merely being placed on non-accrual status.
All charge-offs and forgiveness of debt equal to or greater than
$100,000 must be approved by the Loan Committee upon recommendation
by the Chief Credit Officer. The Loan Committee consists of the
Bank’s Chief Executive Officer, Chief Credit Officer, Chief
Banking Officer and Loan Review Officer. Charge-offs less than
$100,000 and greater than $10,000 and decisions to defer the
charge-off of a loan must be approved by the Chief Credit
Officer.
Narrative Description of Borrower Rating
Grade 1 — Highest Quality (Pass)
This loan represents a credit extension of the highest quality. The
borrower’s historic (at least five years) cash flows manifest
extremely large and stable margins of coverage. Balance sheets are
conservative, well capitalized, and liquid. After considering debt
service for proposed and existing debt, projected cash flows
continue to be strong and provide ample coverage. The borrower
typically reflects broad geographic and product diversification and
has broad access to alternative financial markets. Also included in
this category may be loans secured by U.S. government securities,
U.S. government agencies, highly rated municipal bonds, insured
savings accounts, and insured certificates of deposit drawn on high
quality banks.
Grade 2 — Excellent Quality (Pass)
This loan has a sound primary and secondary source of repayment.
The borrower has proven access to alternative sources of financing.
This loan carries a low level of risk, with minimal loss exposure.
The borrower has the ability to perform according to the terms of
the credit facility. The margins of cash flow coverage are strong.
This category also includes loans secured by high quality traded
stocks and lower grade municipal bonds (must still be investment
grade).
Grade 3 — Good Quality (Pass)
This loan has a sound primary source of repayment. The borrower may
have access to alternative sources of financing, but sources are
not as widely available as they are to a higher graded borrower.
This loan carries a normal level of risk, with minimal loss
exposure. The borrower has the ability to perform according to the
terms of the credit facility. The margins of cash flow coverage are
satisfactory but vulnerable to more rapid deterioration than the
higher quality loans. Real estate loans in this category display
advance rates below the suggested maximum, debt coverage well in
excess of the suggested level, or are leased beyond the loan term
by a “credit” tenant.
Grade 4 — Acceptable Quality (Pass)
The borrower is a reasonable credit risk and demonstrates the
ability to repay the debt from normal business operations. Risk
factors may include reliability of margins and cash flows,
liquidity, dependence on a single product or industry, cyclical
trends, depth of management, or limited access to alternative
financing sources. Historic financial information may indicate
erratic performance, but current trends are positive. Quality of
financial information is adequate, but is not as detailed and
sophisticated as information found on higher graded loans. If
adverse circumstances arise, the impact on the borrower may be
significant. All small business loans extended based upon credit
scoring should be classified in this category unless deterioration
occurs, in which case they should bear one of the below mentioned
grades.
Grade 5 - Marginal Quality (Pass)
The borrower is an acceptable credit risk and while it can
demonstrate it has the ability to repay the debt from normal
business operations, the coverage is not as strong as an Acceptable
Quality loan. Weakness in one or more areas are defined. Risk
factors would typically include a higher leverage position than
desirable, low liquidity, weak or sporadic cash flow, the lack of
reasonably current and complete financial information, and/or
overall financial trends are erratic.
Grade 6 – Elevated Risk, Management Attention
(Watch)
While the borrower at origination was not considered a high risk
potential, there are characteristics related to the financial
condition, and/or a level of concern regarding either or both the
primary and secondary source of repayment, that may preclude this
from being a pass credit. These credit facilities are considered
“pass” credits but exhibit the potential of developing
a more serious weakness in their operation going forward. Usually,
a credit in this category will be upgraded or downgraded on further
analysis within a short period of time.
Grade 7 — Special Mention
These credit facilities have developing weaknesses that deserve
extra attention from the loan officer and other management
personnel. If the developing weakness is not corrected or
mitigated, there may be deterioration in the ability of the
borrower to repay the Bank’s debt in the future. This grade
should not be assigned to loans which bear certain peculiar risks
normally associated with the type of financing involved, unless
circumstances have caused the risk to increase to a level higher
than would have been acceptable when the credit was originally
approved. Loans where actual, not potential, weaknesses or problems
are clearly evident and significant should generally be graded in
one of the grade categories below.
Grade 8 — Substandard
Loans and other credit extensions bearing this grade are considered
to be inadequately protected by the current sound worth and debt
service capacity of the borrower or of any pledged collateral.
These obligations, even if apparently protected by collateral
value, have well-defined weaknesses related to adverse financial,
managerial, economic, market, or political conditions which have
clearly jeopardized repayment of principal and interest as
originally intended. Furthermore, there is the possibility that
some future loss will be sustained by the Bank if such weaknesses
are not corrected. Clear loss potential, however, does not have to
exist in any individual assets classified as substandard.
Grade 9 — Doubtful
Loans and other credit extensions graded “9” have all
the weaknesses inherent in those graded “8,” with the
added characteristic that the severity of the weaknesses make
collection or liquidation in full highly questionable or improbable
based upon currently existing facts, conditions, and values. The
probability of some loss is extremely high, but because of certain
important and reasonably specific factors, the amount of loss
cannot be determined. Such pending factors could include merger or
liquidation, additional capital injection, refinancing plans, or
perfection of liens on additional collateral. Loans in this
classification should be placed in nonaccrual status, with
collections applied to principal on the Bank’s books.
Grade 10 — Loss
Loans in this classification are considered uncollectible and
cannot be justified as a viable asset of the Bank. This
classification does not mean the loan has absolutely no recovery
value, but that it is neither practical nor desirable to defer
writing off this loan even though partial recovery may be obtained
in the future.
The following tables present the credit risk profile of the
Company’s loan portfolio based on rating category and payment
activity as of September 30, 2015 and December 31, 2014
(dollars in thousands): Loan Portfolio Quality Indicators At September 30, 2015
Commercial Residential Construction Commercial Municipal Consumer Total
Rating:
Pass (Grades 1-5) $ 109,224 $ 153,106 $ 20,941 $ 26,601 $ 1,870 $ 1,776 $ 313,518
Watch (Grade 6) 3,655 3,292
— 249
—
— 7,196
Special Mention (Grade 7) 335 74
— 48
—
— 457
Substandard (Grade 8) 3,439 419 222
—
—
— 4,080
Doubtful (Grade 9) 543 5,442
— 409
— 83 6,477
Loss (Grade 10)
—
—
—
—
—
—
—
Total $ 117,196 $ 162,333 $ 21,163 $ 27,307 $ 1,870 $ 1,859 $ 331,728
Loan Portfolio Quality Indicators At December 31, 2014
Commercial Residential Construction Commercial Municipal Consumer Total
Rating:
Pass (Grades 1-5) $ 100,095 $ 157,518 $ 10,786 $ 28,516 $ 785 $ 1,929 $ 299,629
Watch (Grade 6) 7,097 327 1,721 325
—
— 9,470
Special Mention (Grade 7)
— 3,355
—
—
—
— 3,355
Substandard (Grade 8) 3,451 427 228
—
—
— 4,106
Doubtful (Grade 9) 812 2,212 835 517
— 89 4,465
Loss (Grade 10)
—
—
—
—
—
—
—
Total $ 111,455 $ 163,839 $ 13,570 $ 29,358 $ 785 $ 2,018 $ 321,025
For all loan classes, the entire balance of a loan is considered
delinquent if the minimum payment contractually required to be made
is not received by the specified due date.
The following tables present the Company’s loan portfolio
aging analysis as of September 30, 2015 and December 31,
2014 (dollars in thousands): Loan Portfolio Aging Analysis At September 30, 2015
30-59 Days 60-89 Days 90 Days Total Past Current Total Loans Total Loans
Real estate loans:
Commercial $ 1,986 $
— $ 544 $ 2,530 $ 114,666 $ 117,196 $
—
Residential 1,820 129 1,835 3,784 158,549 162,333 138
Construction
—
—
—
— 21,163 21,163
—
Commercial loans and leases 348
— 60 408 26,899 27,307
—
Municipal loans
—
—
—
— 1,870 1,870
—
Consumer loans 3
—
— 3 1,856 1,859
—
Total $ 4,157 $ 129 $ 2,439 $ 6,725 $ 325,003 $ 331,728 $ 138
(A) Includes $511,000 in loans classified
as nonaccrual that are less than 30 days past due, of which
$163,000 are residential real estate loans and $348,000 are
commercial loans. Loan Portfolio Aging Analysis At December 31, 2014
30-59 Days 60-89 Days Greater than Total Past Current Total Loans Total Loans
Real estate loans:
Commercial $
— $
— $ 812 $ 812 $ 110,643 $ 111,455 $
—
Residential 1,346 212 1,598 3,156 160,683 163,839 14
Construction
—
— 836 836 12,734 13,570
—
Commercial loans and leases 80 320 117 517 28,841 29,358
—
Municipal loans
—
—
—
— 785 785
—
Consumer loans 10 4 1 15 2,003 2,018 1
Total $ 1,436 $ 536 $ 3,364 $ 5,336 $ 315,689 $ 321,025 $ 15
(A) Includes $667,000 in loans classified
as nonaccrual that are less than 30 days past due, of which
$587,000 are residential real estate loans and $80,000 are
commercial loans.
Impaired Loans:
For all loan classes, when interest accrual is discontinued all
unpaid accrued interest is reversed when considered uncollectible.
When a loan is in a non-accrual status, all cash payments of
interest are applied to loan principal. Should the loan be
reinstated to accrual status, all cash payments of interest
received while in non-accrual status will be taken into income over
the remaining life of the loan using the level yield accounting
method.
The following table presents impaired loans as of
September 30, 2015 (dollars in thousands): Impaired Loans At September 30, 2015
Three Months Ended Nine Months Ended
Recorded Unpaid Specific Average Interest Average Interest
Loans without a specific valuation allowance:
Real estate loans:
Commercial $ 3,983 $ 4,462 N/A $ 4,123 $ 44 $ 4,216 $ 129
Residential 2,833 3,148 N/A 2,847 14 2,795 43
Construction 1,093 1,093 N/A 1,520 16 1,824 50
Commercial loans and leases 61 99 N/A 64
— 90
—
Municipal loans
—
— N/A
—
—
—
—
Consumer loans
—
— N/A
—
—
—
—
Total $ 7,970 $ 8,802 N/A $ 8,554 $ 74 $ 8,925 $ 222
Loans with a specific valuation allowance:
Real estate loans:
Commercial $
— $
— $
— $
— $
— $
— $
—
Residential 4,381 4,381 592 4,372 39 2,714 47
Construction
—
—
—
—
—
—
—
Commercial loans and leases 348 418 123 358
— 374
—
Municipal loans
—
—
—
—
—
—
—
Consumer loans 82 82 28 85
— 76
—
Total $ 4,811 $ 4,881 $ 743 $ 4,815 $ 39 $ 3,164 $ 47
All Impaired Loans $ 12,781 $ 13,683 $ 743 $ 13,369 $ 113 $ 12,089 $ 269
(1) Includes all loans that were
classified as impaired at any time during the three-month and
nine-month periods (not just impaired loans at September 30,
2015), and their average balance for only the period during which
they were classified as impaired.
(2) Interest recorded in income during
only the period the loans were classified as impaired, for all
loans that were classified as impaired at any time during the three
months and nine months ended September 30, 2015.
For all loan classes, interest income on loans individually
classified as impaired is recognized on a cash basis after all past
due and current principal payments have been made.
The following table presents impaired loans as of
September 30, 2014 (dollars in thousands): Impaired Loans At September 30, 2014
Three Months Ended Nine Months Ended
Recorded Unpaid Specific Average Interest Average Interest
Loans without a specific valuation allowance:
Real estate loans:
Commercial $ 4,325 $ 4,804 N/A $ 4,332 $ 44 $ 4,576 $ 154
Residential 3,344 3,570 N/A 3,591 31 4,001 66
Construction 2,201 2,201 N/A 2,946 21 3,097 57
Commercial loans and leases 70 98 N/A 71
— 317
—
Municipal loans
—
— N/A
—
—
—
—
Consumer loans
—
— N/A
—
—
—
—
Total $ 9,940 $ 10,673 N/A $ 10,940 $ 96 $ 11,991 $ 277
Loans with a specific valuation allowance:
Real estate loans:
Commercial $
— $
— $
— $
— $
— $
— $
—
Residential 1,403 1,478 425 1,405 5 1,412 47
Construction 1,515 2,350 230 1,515
— 1,432 51
Commercial loans and leases 137 183 98 142
— 153
—
Municipal loans
—
—
—
—
—
—
—
Consumer loans 84 84 8 89
— 79
—
Total $ 3,139 $ 4,095 $ 761 $ 3,151 $ 5 $ 3,076 $ 98
All Impaired Loans $ 13,079 $ 14,768 $ 761 $ 14,091 $ 101 $ 15,067 $ 375
(1) Includes all loans that were
classified as impaired at any time during the three-month and
nine-month periods (not just impaired loans at September 30,
2014), and their average balance for only the period during which
they were classified as impaired.
(2) Interest recorded in income during
only the period the loans were classified as impaired, for all
loans that were classified as impaired at any time during the three
months and nine months ended September 30, 2014.
For all loan classes, interest income on loans individually
classified as impaired is recognized on a cash basis after all past
due and current principal payments have been made.
The following table presents impaired loans as of December 31,
2014 (dollars in thousands): Impaired Loans At December 31, 2014
Year Ended
Recorded Unpaid Specific Average Interest
Loans without a specific valuation allowance:
Real estate loans:
Commercial $ 4,263 $ 4,742 N/A $ 4,025 $ 176
Residential 2,686 2,923 N/A 2,342 58
Construction 2,004 2,004 N/A 1,744 72
Commercial loans and leases 70 99 N/A 221
—
Municipal loans
—
— N/A
—
—
Consumer loans
—
— N/A
—
—
Total $ 9,023 $ 9,768 N/A $ 8,332 $ 306
Loans with a specific valuation allowance:
Real estate loans:
Commercial $
— $
— $
— $ 481 $ 22
Residential 1,281 1,340 319 2,806 78
Construction
—
—
— 2,368 55
Commercial loans and leases 446 495 166 222
—
Municipal loans
—
—
—
—
—
Consumer loans 89 89 12 81
—
Total $ 1,816 $ 1,924 $ 497 $ 5,958 $ 155
All Impaired Loans $ 10,839 $ 11,692 $ 497 $ 14,290 $ 461
(1) Includes all loans that were
classified as impaired at any time during 2014 (not just impaired
loans at December 31, 2014), and their average balance for
only the period during which they were classified as impaired.
(2) Interest recorded in income during
only the period the loans were classified as impaired, for all
loans that were classified as impaired at any time during
2014.
For all loan classes, interest income on loans individually
classified as impaired is recognized on a cash basis after all past
due and current principal payments have been made.
Non-Accrual Loans
For all loan classes, when a loan is on non-accrual status all
payments are applied to loan principal.
A loan placed on non-accrual may be restored to accrual status when
all delinquent principal and interest has been brought current, and
the Bank expects full payment of the remaining contractual
principal and interest including any previous charge-offs. Should
the loan be reinstated to accrual status, all payments of interest
received while in non-accrual status will be taken into income over
the remaining life of the loan using the level yield accounting
method. Restoring a non-accrual loan to accrual status requires the
approval of the CCO. All loans placed on non-accrual status require
the approval of the CCO and must be documented on the loan system
and in the file.
The following table presents the Company’s non-accrual loans
at September 30, 2015 and December 31, 2014 (dollars in
thousands): Loans Accounted for on a Non-Accrual
Basis
At September 30, 2015 At December 31,
Real estate loans:
Commercial $
— $ 812
Residential 2,163 2,212
Construction 543 836
Commercial loans and leases 409 516
Municipal loans
—
—
Consumer loans
—
—
Total $ 3,115 $ 4,376
Total non-accrual loans at September 30, 2015 and
December 31, 2014 included $1,224,000 and $1,082,000 of TDRs,
respectively.
Troubled Debt Restructurings:
When we modify loans and leases as a TDR, we evaluate any possible
impairment similar to other impaired loans based on the present
value of expected future cash flows, discounted at the contractual
interest rate of the original loan or lease agreement, or use the
current fair value of the collateral, less selling costs for
collateral dependent loans. If we determine that the value of the
modified loan is less than the recorded balance of the loan (net of
previous charge-offs, deferred loan fees or costs and unamortized
premium or discount), impairment is recognized through a specific
allowance or charge-off to the allowance. In periods subsequent to
modification, we evaluate all TDRs, including those that have
payment defaults, for possible impairment and recognize impairment
through the allowance.
There were no loans classified as a TDR during the three-month
period and two loans classified as a TDR during the nine-month
month period ended September 30, 2015, and they are shown in
the table below identified by class (dollars in thousands). The
modifications were both payment concessions, one extending the
amortization period to reduce the monthly payment amount and the
other allowing the borrower to make interest only payments for a
period of time.
Three Months Ended September 30, 2015
Nine Months Ended September 30, 2015
Modifications Modifications
Number Recorded Recorded Number Recorded Recorded
Real estate loans:
Commercial
— $
— $
—
— $
— $
—
Residential
—
—
— 1 3,311 3,311
Construction
—
—
—
—
—
—
Commercial loans and leases
—
—
— 1 308 308
Municipal loans
—
—
—
—
—
—
Consumer loans
—
—
—
—
—
—
Total
— $
— $
— 2 $ 3,619 $ 3,619
There were no loans classified as a TDR during either the
three-month period or the nine-month period ended
September 30, 2014.
There were no TDRs that had payment defaults during the three-month
and nine-month periods ended September 30, 2015 and
September 30, 2014, respectively. Default occurs when a loan
or lease is 90 days or more past due or transferred to nonaccrual
and is within 12 months of restructuring. |
