Loans and reserve for credit losses | 9 Months Ended |
Sep. 30, 2014 |
Receivables [Abstract] | ' |
Loans and reserve for credit losses | ' |
Loans and reserve for credit losses |
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The composition of the loan portfolio at September 30, 2014 and December 31, 2013 was as follows (dollars in thousands): |
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| 30-Sep-14 | | 31-Dec-13 | | | | | | | | | | | | | | |
| Amount | | Percent | | Amount | | Percent | | | | | | | | | | | | | | |
Originated loans (a): | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Owner occupied | $ | 202,015 | | | 17.9 | % | | $ | 204,998 | | | 20.6 | % | | | | | | | | | | | | | | |
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Non-owner occupied | 362,102 | | | 32.1 | % | | 347,014 | | | 34.8 | % | | | | | | | | | | | | | | |
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Total commercial real estate loans | 564,117 | | | 50 | % | | 552,012 | | | 55.4 | % | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Construction | 82,825 | | | 7.4 | % | | 52,503 | | | 5.3 | % | | | | | | | | | | | | | | |
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Residential real estate | 102,004 | | | 9.1 | % | | 101,557 | | | 10.2 | % | | | | | | | | | | | | | | |
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Commercial and industrial | 342,994 | | | 30.4 | % | | 254,170 | | | 25.5 | % | | | | | | | | | | | | | | |
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Consumer | 34,661 | | | 3.1 | % | | 35,990 | | | 3.6 | % | | | | | | | | | | | | | | |
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Total loans | 1,126,601 | | | 100 | % | | 996,232 | | | 100 | % | | | | | | | | | | | | | | |
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Less: | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Deferred loan fees | (1,907 | ) | | | | | (1,757 | ) | | | | | | | | | | | | | | | | | |
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Reserve for loan losses | (21,351 | ) | | | | | (20,857 | ) | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Loans, net | $ | 1,103,343 | | | | | | $ | 973,618 | | | | | | | | | | | | | | | | | | |
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Acquired loans (b): | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Owner occupied | $ | 49,284 | | | 17 | % | | | | | | | | | | | | | | | | | | |
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Non-owner occupied | 106,344 | | | 36.7 | % | | | | | | | | | | | | | | | | | | |
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Total commercial real estate loans | 155,628 | | | 53.7 | % | | | | | | | | | | | | | | | | | | |
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Construction | 29,775 | | | 10.3 | % | | | | | | | | | | | | | | | | | | |
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Residential real estate | 76,453 | | | 26.3 | % | | | | | | | | | | | | | | | | | | |
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Commercial and industrial | 25,775 | | | 8.9 | % | | | | | | | | | | | | | | | | | | |
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Consumer | 2,416 | | | 0.8 | % | | | | | | | | | | | | | | | | | | |
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Total loans | 290,047 | | | 100 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
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Less: | | | | | | | | | | | | | | | | | | | | | | | |
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Reserve for loan losses | — | | | | | | | | | | | | | | | | | | | | | |
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Loans, net | $ | 290,047 | | | | | | | | | | | | | | | | | | | | | | |
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Acquired covered loans (c): | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | |
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Owner occupied | $ | 12,864 | | | 25.7 | % | | | | | | | | | | | | | | | | | | |
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Non-owner occupied | 18,698 | | | 37.4 | % | | | | | | | | | | | | | | | | | | |
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Total commercial real estate loans | 31,562 | | | 63.1 | % | | | | | | | | | | | | | | | | | | |
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Construction | 2,520 | | | 5 | % | | | | | | | | | | | | | | | | | | |
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Residential real estate | 11,766 | | | 23.5 | % | | | | | | | | | | | | | | | | | | |
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Commercial and industrial | 3,745 | | | 7.5 | % | | | | | | | | | | | | | | | | | | |
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Consumer | 469 | | | 0.9 | % | | | | | | | | | | | | | | | | | | |
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Total loans | 50,062 | | | 100 | % | | | | | | | | | | | | | | | | | | |
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Less: | | | | | | | | | | | | | | | | | | | | | | | |
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Reserve for loan losses | — | | | | | | | | | | | | | | | | | | | | | |
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Loans, net | $ | 50,062 | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | |
Total loans: | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Owner occupied | $ | 264,163 | | | 18 | % | | | | | | | | | | | | | | | | | | |
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Non-owner occupied | 487,144 | | | 33.2 | % | | | | | | | | | | | | | | | | | | |
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Total commercial real estate loans | 751,307 | | | 51.2 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Construction | 115,120 | | | 7.8 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Residential real estate | 190,223 | | | 13 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Commercial and industrial | 372,514 | | | 25.4 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Consumer | 37,546 | | | 2.6 | % | | | | | | | | | | | | | | | | | | |
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Total loans | 1,466,710 | | | 100 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Less: | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Deferred loan fees | (1,907 | ) | | | | | | | | | | | | | | | | | | | | |
Reserve for loan losses | (21,351 | ) | | | | | | | | | | | | | | | | | | | | |
Loans, net | $ | 1,443,452 | | | | | | | | | | | | | | | | | | | | | | |
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(a) Originated loans are loans organically made through the Company's normal and customary origination process | | | | | | | | | | | | | | |
(b) Acquired loans are loans acquired in the acquisition of Home, discussed elsewhere in this report, less acquired covered loans | | | | | | | | | | | | | | |
(c) Acquired covered loans acquired in the acquisition of Home that are covered under FDIC loss share agreements | | | | | | | | | | | | | | |
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The following describes the distinction between originated, acquired and covered loan portfolios and certain significant accounting policies relevant to each of these portfolios. |
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Originated loans |
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Loans originated for investment are stated at their principal amount outstanding adjusted for partial charge-offs, the reserve for loan losses and net deferred loan fees and costs. Interest income on loans is accrued over the term of the loans. Interest is not accrued on loans where collectability is uncertain. Accrued interest on loans is presented in "Other assets" on the condensed consolidated balance sheet. Loan origination fees and certain direct costs incurred to extend credit are deferred and amortized over the term of the loan as an adjustment to the related loan yield. |
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Approximately 66.5% of the Bank’s originated loan portfolio at September 30, 2014 consisted of real estate-related loans including construction and development loans, residential mortgage loans, and commercial loans were secured by commercial real estate. At September 30, 2014, approximately 72.0% of the Bank's total portfolio (inclusive of acquired and acquired covered loans) consisted of real estate-related loans as described above. The Bank's results of operations and financial condition are affected by general economic trends and in particular, the strength of the local residential and commercial real estate markets in Central, Southern and Northwest Oregon and the greater Boise/Treasure Valley, Idaho area. Real estate values could be affected by, among other things, a worsening of national and local economic conditions, an increase in foreclosures, a decline in home sale volumes, and an increase in interest rates. Furthermore, the Bank may experience an increase in the number of borrowers who become delinquent, file for protection under bankruptcy laws, or default on their loans or other obligations to the Bank in the event of a sustained downturn in business and economic conditions generally or specifically in the principal markets in which the Bank does business. An increase in the number of delinquencies, bankruptcies, or defaults could result in a higher level of non-performing assets, net charge-offs, and loan loss provision. Management is targeting to diversify its commercial real estate ("CRE") concentration over time, but real estate-related loans will remain a significant portfolio component due to the nature of the economies, businesses, and markets we serve. |
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In the normal course of business, the Bank may participate portions of loans to third parties in order to extend the Bank’s lending capability or to mitigate risk. At September 30, 2014 and December 31, 2013, the portion of loans participated to third-parties (which are not included in the accompanying condensed consolidated financial statements) totaled $31.4 million and $11.3 million, respectively. |
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Acquired and acquired covered loans |
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Acquired loans and acquired covered loans are those purchased in the Home acquisition (See Note 2 - "Business Combinations" for further information). These loans were recorded at estimated fair value at the Acquisition Date. The fair value estimates for acquired and acquired covered loans is based on expected prepayments, charge offs and the amount and timing of undiscounted expected principal, interest and other cash flows. The net fair value adjustment to the acquired and acquired covered loans at acquisition was a reduction of $6.0 million, representing a valuation adjustment for interest rate and credit which will be accreted over the life of the loans (approximately 10 years). |
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Of the loans acquired on May 16, 2014 and still held at September 30, 2014, $15.3 million or 4.5% were graded substandard. Of that amount $7.9 million or 51.8% of the substandard loans were covered under a loss share agreement with the FDIC. With the amount of classified loans acquired being nominal, all loans acquired are treated in a manner consistent with originated loans for credit risk management and accounting purposes. |
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As of September 30, 2014, $50.1 million or 14.7% of the $340.1 million in acquired and acquired covered loans were covered under loss sharing agreements with the FDIC. The agreements were entered into in September 2009 and September 2010 between the FDIC and Home. The loss sharing agreements expire five years after the date of the FDIC agreements for non-single family covered assets and ten years after the acquisitions date for single-family covered assets. After the expiration of the loss sharing agreements, the Company will not be indemnified for losses and related expenses on covered assets. When the loss sharing agreements expire, the Company's and the Bank's risk-based capital ratios will be reduced. While the agreements are in place, the covered assets receive a 20% risk-weighting. When the agreements expire, the risk-weighting for previously covered assets will most likely increase to 100%, based on current regulatory capital definitions. Nearly all of the assets remaining in the covered asset portfolios are non-single family covered assets. Therefore, most of the covered assets will no longer be indemnified after September 2014 or September 2015. Only $7.9 million of the acquired covered loans were graded substandard. With the amount of classified loans covered under these agreements being nominal, amounts that may be due to or due from the FDIC under loss sharing agreements will be accounted for on a cash basis. |
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A net loss share payable was recorded at the Acquisition Date which represents the estimated value of reimbursement the Company expects to pay to the FDIC for recoveries net of incurred losses on covered loans. These expected reimbursements are recorded as part of covered loans in the accompanying consolidated balance sheets. |
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Upon the determination of an incurred loss or recovery the loss share receivable/payable will be changed by the amount due to or due from the FDIC. |
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Changes in the loss share payable (receivable) associated with covered loans for the three months ended September 30, 2014 was as follows (dollars in thousands): |
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| | Three months ended | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2014 | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period | | $ | 1,283 | | | | | | | | | | | | | | | | | | | | | | | | |
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Paid to FDIC | | (1,283 | ) | | | | | | | | | | | | | | | | | | | | | | | |
Increase due to impairment | | (14 | ) | | | | | | | | | | | | | | | | | | | | | | | |
FDIC reimbursement | | 722 | | | | | | | | | | | | | | | | | | | | | | | | |
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Shared loss expenses | | (985 | ) | | | | | | | | | | | | | | | | | | | | | | | |
Shared income | | 21 | | | | | | | | | | | | | | | | | | | | | | | | |
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Adjustments from prior periods | | (63 | ) | | | | | | | | | | | | | | | | | | | | | | | |
Balance at end of period | | $ | (319 | ) | | | | | | | | | | | | | | | | | | | | | | | |
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Reserve for loan losses |
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The reserve for loan losses represents management’s estimate of known and inherent losses in the loan portfolio as of the condensed consolidated balance sheet date and is recorded as a reduction to loans. The reserve for loan losses is increased by charges to operating expense through the loan loss provision, and decreased by loans charged-off, net of recoveries. The reserve for loan losses requires complex subjective judgments as a result of the need to make estimates about matters that are uncertain. The reserve for loan losses is maintained at a level currently considered adequate to provide for potential loan losses based on management’s assessment of various factors affecting the loan portfolio. |
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However the reserve for loan losses is based on estimates and actual losses may vary from the current estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the periods in which they become known. Therefore, management cannot provide assurance that, in any particular period, the Company will not have significant losses in relation to the amount reserved. The level of the reserve for loan losses is also determined after consideration of bank regulatory guidance and recommendations and is subject to review by such regulatory authorities who may require increases or decreases to the reserve based on their evaluation of the information available to them at the time of their examinations of the Bank. |
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For purposes of assessing the appropriate level of the reserve for loan losses, the Company analyzes loans and commitments to loan, and the amount of reserves allocated to loans and commitments to loan in each of the following reserve categories: pooled reserves, specifically identified reserves for impaired loans, and the unallocated reserve. Also, for purposes of analyzing loan portfolio credit quality and determining the appropriate level of reserve for loan losses, the Company identifies loan portfolio segments and classes based on the nature of the underlying loan collateral. |
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The increase in the reserve for loan losses from December 31, 2013 to September 30, 2014 was related to net recoveries during the period. The unallocated reserve for loan losses at September 30, 2014 has increased $2.3 million from the balance at December 31, 2013. Management believes that the amount of unallocated reserve for loan losses is appropriate and will continue to evaluate the amount going forward. |
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Acquired reserve for loan losses |
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The fair value estimates for acquired and acquired covered loans is based on expected prepayments, charge offs, and the amount and timing of undiscounted expected principal, interest and other cash flows. The net fair value adjustment to the acquired and acquired covered loans was $6.0 million, representing a valuation adjustment for interest rate and credit quality. The credit portion of the fair value adjustment not accreted at any point in time represents the estimated reserve for loan losses for acquired loans. If the Company determines that this amount is insufficient a provision to the reserve for loan losses will be made. |
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Covered reserve for loan losses |
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The reserve for loan losses on covered loans is estimated similarly to acquired loans as described above except any increase to the reserve from a recovery or a decrease in the reserve from a charge-off is partially offset by an increase in the loss share payable (or receivable) for the portion of the losses recoverable and recoveries payable to the FDIC under the loss sharing agreements. No allowance was recorded at quarter-end given management's judgment that purchase discounts adequately address the estimated losses in the acquired loans. |
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Transactions and allocations in the reserve for loan losses and unfunded loan commitments, by portfolio segment, for the three and nine months ended September 30, 2014 and 2013 were as follows (dollars in thousands): |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial | | Construction | | Residential | | Commercial | | Consumer | | Unallocated | | Total |
real estate | real estate | and |
| | industrial |
Three months ended September 30, 2014 | | | | | | | | | | | | | | | | | | | | |
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Reserve for loan losses | | | | | | | | | | | | | | | | | | | | |
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Balance at June 30, 2014 | $ | 7,960 | | | $ | 728 | | | $ | 2,068 | | | $ | 6,615 | | | $ | 1,181 | | | $ | 1,919 | | | $ | 20,471 | |
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Loan loss provision (credit) | (1,203 | ) | | (597 | ) | | 6 | | | 469 | | | 211 | | | 1,114 | | | — | |
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Recoveries | 317 | | | 869 | | | 349 | | | 512 | | | 76 | | | — | | | 2,123 | |
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Loans charged off | (91 | ) | | — | | | (539 | ) | | (244 | ) | | (369 | ) | | — | | | (1,243 | ) |
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Balance at end of period | $ | 6,983 | | | $ | 1,000 | | | $ | 1,884 | | | $ | 7,352 | | | $ | 1,099 | | | $ | 3,033 | | | $ | 21,351 | |
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Reserve for unfunded lending commitments | | | | | | | | | | | | | | | | | | | | |
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Balance at June 30, 2014 | $ | 48 | | | $ | 268 | | | $ | 25 | | | $ | 75 | | | $ | 24 | | | $ | — | | | $ | 440 | |
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Provision for unfunded loan commitments | — | | | — | | | — | | | — | | | — | | | — | | | — | |
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Balance at end of period | $ | 48 | | | $ | 268 | | | $ | 25 | | | $ | 75 | | | $ | 24 | | | $ | — | | | $ | 440 | |
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Reserve for credit losses | | | | | | | | | | | | | | | | | | | | |
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Reserve for loan losses | $ | 6,983 | | | $ | 1,000 | | | $ | 1,884 | | | $ | 7,352 | | | $ | 1,099 | | | $ | 3,033 | | | $ | 21,351 | |
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Reserve for unfunded lending commitments | 48 | | | 268 | | | 25 | | | 75 | | | 24 | | | — | | | 440 | |
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Total reserve for credit losses | $ | 7,031 | | | $ | 1,268 | | | $ | 1,909 | | | $ | 7,427 | | | $ | 1,123 | | | $ | 3,033 | | | $ | 21,791 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial | | Construction | | Residential | | Commercial | | Consumer | | Unallocated | | Total |
real estate | real estate | and |
| | industrial |
For the nine months ended September 30, 2014 | | | | | | | | | | | | | | | | | | | | |
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Reserve for loan losses | | | | | | | | | | | | | | | | | | | | |
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Balance at December 31, 2013 | $ | 9,565 | | | $ | 535 | | | $ | 2,381 | | | $ | 6,261 | | | $ | 1,401 | | | $ | 714 | | | $ | 20,857 | |
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Loan loss provision (credit) | (2,681 | ) | | (482 | ) | | (264 | ) | | 706 | | | 402 | | | 2,319 | | | — | |
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Recoveries | 1,318 | | | 1,243 | | | 630 | | | 1,969 | | | 230 | | | — | | | 5,390 | |
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Loans charged off | (1,219 | ) | | (296 | ) | | (863 | ) | | (1,584 | ) | | (934 | ) | | — | | | (4,896 | ) |
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Balance at end of period | $ | 6,983 | | | $ | 1,000 | | | $ | 1,884 | | | $ | 7,352 | | | $ | 1,099 | | | $ | 3,033 | | | $ | 21,351 | |
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| | | | | | | | | | | | | |
Reserve for unfunded lending commitments | | | | | | | | | | | | | | | | | | | | |
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Balance at December 31, 2013 | $ | 48 | | | $ | 268 | | | $ | 25 | | | $ | 75 | | | $ | 24 | | | $ | — | | | $ | 440 | |
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Provision for unfunded loan commitments | — | | | — | | | — | | | — | | | — | | | — | | | — | |
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Balance at end of period | $ | 48 | | | $ | 268 | | | $ | 25 | | | $ | 75 | | | $ | 24 | | | $ | — | | | $ | 440 | |
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| | | | | | | | | | | | | |
Reserve for credit losses | | | | | | | | | | | | | | | | | | | | |
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Reserve for loan losses | $ | 6,983 | | | $ | 1,000 | | | $ | 1,884 | | | $ | 7,352 | | | $ | 1,099 | | | $ | 3,033 | | | $ | 21,351 | |
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Reserve for unfunded lending commitments | 48 | | | 268 | | | 25 | | | 75 | | | 24 | | | — | | | 440 | |
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Total reserve for credit losses | $ | 7,031 | | | $ | 1,268 | | | $ | 1,909 | | | $ | 7,427 | | | $ | 1,123 | | | $ | 3,033 | | | $ | 21,791 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial | | Construction | | Residential | | Commercial | | Consumer | | Unallocated | | Total |
real estate | real estate | and |
| | industrial |
Three months ended September 30, 2013 | | | | | | | | | | | | | | | | | | | | |
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Reserve for loan losses | | | | | | | | | | | | | | | | | | | | |
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Balance at June 30, 2013 | $ | 10,712 | | | $ | 842 | | | $ | 2,972 | | | $ | 5,348 | | | $ | 1,690 | | | $ | 1,130 | | | $ | 22,694 | |
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Loan loss provision (credit) | 1,049 | | | (201 | ) | | (202 | ) | | (23 | ) | | 185 | | | (808 | ) | | — | |
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Recoveries | 79 | | | 249 | | | 28 | | | 554 | | | 72 | | | — | | | 982 | |
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Loans charged off | (656 | ) | | (292 | ) | | (129 | ) | | (534 | ) | | (412 | ) | | — | | | (2,023 | ) |
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Balance at end of period | $ | 11,184 | | | $ | 598 | | | $ | 2,669 | | | $ | 5,345 | | | $ | 1,535 | | | $ | 322 | | | $ | 21,653 | |
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| | | | | | | | | | | | | |
Reserve for unfunded lending commitments | | | | | | | | | | | | | | | | | | | | |
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Balance at June 30, 2013 | $ | 48 | | | $ | 268 | | | $ | 25 | | | $ | 75 | | | $ | 24 | | | $ | — | | | $ | 440 | |
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Provision for unfunded loan commitments | — | | | — | | | — | | | — | | | — | | | — | | | — | |
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Balance at end of period | $ | 48 | | | $ | 268 | | | $ | 25 | | | $ | 75 | | | $ | 24 | | | $ | — | | | $ | 440 | |
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Reserve for credit losses | | | | | | | | | | | | | | | | | | | | |
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Reserve for loan losses | $ | 11,184 | | | $ | 598 | | | $ | 2,669 | | | $ | 5,345 | | | $ | 1,535 | | | $ | 322 | | | $ | 21,653 | |
|
Reserve for unfunded lending commitments | 48 | | | 268 | | | 25 | | | 75 | | | 24 | | | — | | | 440 | |
|
Total reserve for credit losses | $ | 11,232 | | | $ | 866 | | | $ | 2,694 | | | $ | 5,420 | | | $ | 1,559 | | | $ | 322 | | | $ | 22,093 | |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial | | Construction | | Residential | | Commercial | | Consumer | | Unallocated | | Total |
real estate | real estate | and |
| | industrial |
For the nine months ended September 30, 2013 | | | | | | | | | | | | | | | | | | | | |
|
Reserve for loan losses | | | | | | | | | | | | | | | | | | | | |
|
Balance at December 31, 2012 | $ | 11,596 | | | $ | 1,583 | | | $ | 3,551 | | | $ | 7,267 | | | $ | 2,177 | | | $ | 1,087 | | | $ | 27,261 | |
|
Loan loss provision (credit) | 1,030 | | | 341 | | | (590 | ) | | 989 | | | (5 | ) | | (765 | ) | | 1,000 | |
|
Recoveries | 294 | | | 412 | | | 216 | | | 1,900 | | | 190 | | | — | | | 3,012 | |
|
Loans charged off | (1,736 | ) | | (1,738 | ) | | (508 | ) | | (4,811 | ) | | (827 | ) | | — | | | (9,620 | ) |
|
Balance at end of period | $ | 11,184 | | | $ | 598 | | | $ | 2,669 | | | $ | 5,345 | | | $ | 1,535 | | | $ | 322 | | | $ | 21,653 | |
|
| | | | | | | | | | | | | |
Reserve for unfunded lending commitments | | | | | | | | | | | | | | | | | | | | |
|
Balance at December 31, 2012 | $ | 48 | | | $ | 268 | | | $ | 25 | | | $ | 75 | | | $ | 24 | | | $ | — | | | $ | 440 | |
|
Provision for unfunded loan commitments | — | | | — | | | — | | | — | | | — | | | — | | | — | |
|
Balance at end of period | $ | 48 | | | $ | 268 | | | $ | 25 | | | $ | 75 | | | $ | 24 | | | $ | — | | | $ | 440 | |
|
| | | | | | | | | | | | | |
Reserve for credit losses | | | | | | | | | | | | | | | | | | | | |
|
Reserve for loan losses | $ | 11,184 | | | $ | 598 | | | $ | 2,669 | | | $ | 5,345 | | | $ | 1,535 | | | $ | 322 | | | $ | 21,653 | |
|
Reserve for unfunded lending commitments | 48 | | | 268 | | | 25 | | | 75 | | | 24 | | | — | | | 440 | |
|
Total reserve for credit losses | $ | 11,232 | | | $ | 866 | | | $ | 2,694 | | | $ | 5,420 | | | $ | 1,559 | | | $ | 322 | | | $ | 22,093 | |
|
|
An individual loan is impaired when, based on current information and events, management believes that it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. The following table presents the reserve for loan losses and the recorded investment in loans by portfolio segment and impairment evaluation method at September 30, 2014 and December 31, 2013 (dollars in thousands): |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Reserve for loan losses | | Recorded investment in loans | | | | |
| | | |
| Individually | | Collectively | | Total | | Individually | | Collectively | | Total | | | | |
evaluated for | evaluated for | evaluated for | evaluated for | | | | |
impairment | impairment | impairment | impairment | | | | |
September 30, 2014 | | | | | | | | | | | | | | | | | | | | | |
| | | |
Commercial real estate | $ | 172 | | | $ | 6,811 | | | $ | 6,983 | | | $ | 28,547 | | | $ | 722,760 | | | $ | 751,307 | | | | | |
| | | |
Construction | — | | | 1,000 | | | 1,000 | | | 963 | | | 114,157 | | | 115,120 | | | | | |
| | | |
Residential real estate | — | | | 1,884 | | | 1,884 | | | 322 | | | 189,901 | | | 190,223 | | | | | |
| | | |
Commercial and industrial | 25 | | | 7,327 | | | 7,352 | | | 3,656 | | | 368,858 | | | 372,514 | | | | | |
| | | |
Consumer | — | | | 1,099 | | | 1,099 | | | — | | | 37,546 | | | 37,546 | | | | | |
| | | |
| $ | 197 | | | $ | 18,121 | | | 18,318 | | | $ | 33,488 | | | $ | 1,433,222 | | | $ | 1,466,710 | | | | | |
| | | |
Unallocated | | | | | | | 3,033 | | | | | | | | | | | | | | |
| | | |
| | | | | | | $ | 21,351 | | | | | | | | | | | | | | |
| | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | |
December 31, 2013 | | | | | | | | | | | | | | | | | | | | | |
| | | |
Commercial real estate | $ | 665 | | | $ | 8,900 | | | $ | 9,565 | | | $ | 32,227 | | | $ | 519,785 | | | $ | 552,012 | | | | | |
| | | |
Construction | — | | | 535 | | | 535 | | | 1,987 | | | 50,516 | | | 52,503 | | | | | |
| | | |
Residential real estate | 62 | | | 2,319 | | | 2,381 | | | 430 | | | 101,127 | | | 101,557 | | | | | |
| | | |
Commercial and industrial | 56 | | | 6,205 | | | 6,261 | | | 5,823 | | | 248,347 | | | 254,170 | | | | | |
| | | |
Consumer | — | | | 1,401 | | | 1,401 | | | — | | | 35,990 | | | 35,990 | | | | | |
| | | |
| $ | 783 | | | $ | 19,360 | | | 20,143 | | | $ | 40,467 | | | $ | 955,765 | | | $ | 996,232 | | | | | |
| | | |
Unallocated | | | | | | | 714 | | | | | | | | | | | | | | |
| | | |
| | | | | | | $ | 20,857 | | | | | | | | | | | | | | |
| | | |
|
The above reserve for loan losses includes an unallocated allowance of $3.0 million at September 30, 2014 and $0.7 million at December 31, 2013. The increased unallocated allowance at September 30, 2014 is considered by management to be reasonable and appropriate due to lack of seasoning in the retail/small business “pools” of loans, and market uncertainty associated with loss expectations for both historical and recently acquired loan portfolios. |
|
The Company uses credit risk ratings, which reflect the Bank’s assessment of a loan’s risk or loss potential, for purposes of assessing the appropriate level of reserve for loan losses. The Bank’s credit risk rating definitions along with applicable borrower characteristics for each credit risk rating are as follows: |
|
Acceptable |
|
The borrower is a reasonable credit risk and demonstrates the ability to repay the loan from normal business operations. Loans are generally made to companies operating in an economy and/or industry that is generally sound. The borrower tends to operate in regional or local markets and has achieved sufficient revenues for the business to be financially viable. The borrowers financial performance has been consistent in normal economic times and has been average or better than average for its industry. |
|
A loan can also be considered Acceptable even though the borrower may have some vulnerability to downturns in the economy due to marginally satisfactory working capital and debt service cushion. Availability of alternate financing sources may be limited or nonexistent. In some cases, the borrower’s management, may have limited depth or continuity but is still considered capable. An adequate primary source of repayment is identified while secondary sources may be illiquid, more speculative, less readily identified, or reliant upon collateral liquidation. Loan agreements will be well defined, including several financial performance covenants and detailed operating covenants. This category also includes commercial loans to individuals with average or better than average capacity to repay. |
|
Pass-Watch |
|
Loans are graded Pass-Watch when temporary situations increase the level of the Bank’s risk associated with the loan, and remain graded Pass-Watch until the situation has been corrected. These situations may involve one or more weaknesses in cash flow, collateral value or indebtedness that could, if not corrected within a reasonable period of time, jeopardize the full repayment of the debt. In general, loans in this category remain adequately protected by the borrower’s net worth and paying capacity, or pledged collateral. |
|
Special Mention |
|
A Special Mention credit has potential weaknesses that may, if not checked or corrected, weaken the loan or leave the Bank inadequately protected at some future date. Loans in this category are deemed by management of the Bank to be currently protected but reflect potential problems that warrant more than the usual management attention but do not justify a Substandard classification. |
|
Substandard |
|
Substandard loans are those inadequately protected by the net worth and paying capacity of the obligor and/or by the value of the pledged collateral, if any. Substandard loans have a high probability of payment default or they have other well-defined weaknesses. They require more intensive supervision and borrowers are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. |
|
CRE and construction loans are classified Substandard when well-defined weaknesses are present which jeopardize the orderly liquidation of the loan. Well-defined weaknesses include a project’s lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time, and/or the project’s failure to fulfill economic expectations. These loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. |
|
In addition, Substandard loans also include impaired loans. Impaired loans bear the characteristics of Substandard loans as described above, and the Company has determined it does not expect timely payment of all contractually due interest and principal. Impaired loans may be adequately secured by collateral. |
|
During the nine months ended September 30, 2014, the Bank reduced loans classified as special mention and substandard in the originated loan portfolio by $16.4 million, while total loans classified as special mention and substandard increased $17.1 million as a result of the loans acquired in the merger. Remediation on the originated portfolio was accomplished through credit upgrades mainly owing to improved obligor cash flows as well as payoffs/paydowns, and/or sales. Work began on the acquired and acquired covered portfolio at Acquisition Date. |
|
The following table presents, by portfolio class, the recorded investment in loans by internally assigned grades at September 30, 2014 and December 31, 2013 (dollars in thousands): |
|
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loan grades | | | | | | | | | | |
| Acceptable | | Pass-Watch | | Special | | Substandard | | Total | | | | | | | | |
Mention | | | | | | | | |
September 30, 2014 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Originated loans (a): | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Owner occupied | $ | 165,642 | | | $ | 8,700 | | | $ | 6,093 | | | $ | 21,580 | | | $ | 202,015 | | | | | | | | | |
| | | | | | | |
Non-owner occupied | 328,866 | | | 11,662 | | | 15,004 | | | 6,570 | | | 362,102 | | | | | | | | | |
| | | | | | | |
Total commercial real estate loans | 494,508 | | | 20,362 | | | 21,097 | | | 28,150 | | | 564,117 | | | | | | | | | |
| | | | | | | |
Construction | 76,716 | | | 3,467 | | | 2,254 | | | 388 | | | 82,825 | | | | | | | | | |
| | | | | | | |
Residential real estate | 99,687 | | | 1,480 | | | 22 | | | 815 | | | 102,004 | | | | | | | | | |
| | | | | | | |
Commercial and industrial | 317,201 | | | 9,929 | | | 12,032 | | | 3,832 | | | 342,994 | | | | | | | | | |
| | | | | | | |
Consumer | 34,616 | | | — | | | — | | | 45 | | | 34,661 | | | | | | | | | |
| | | | | | | |
| $ | 1,022,728 | | | $ | 35,238 | | | $ | 35,405 | | | $ | 33,230 | | | $ | 1,126,601 | | | | | | | | | |
| | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Acquired loans (b): | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | |
Owner occupied | $ | 43,483 | | | $ | 1,135 | | | $ | 4,386 | | | $ | 280 | | | $ | 49,284 | | | | | | | | | |
| | | | | | | |
Non-owner occupied | 79,193 | | | 10,945 | | | 11,067 | | | 5,139 | | | 106,344 | | | | | | | | | |
| | | | | | | |
Total commercial real estate loans | 122,676 | | | 12,080 | | | 15,453 | | | 5,419 | | | 155,628 | | | | | | | | | |
| | | | | | | |
Construction | 29,369 | | | — | | | — | | | 406 | | | 29,775 | | | | | | | | | |
| | | | | | | |
Residential real estate | 75,082 | | | — | | | — | | | 1,371 | | | 76,453 | | | | | | | | | |
| | | | | | | |
Commercial and industrial | 24,499 | | | — | | | 1,195 | | | 81 | | | 25,775 | | | | | | | | | |
| | | | | | | |
Consumer | 2,346 | | | — | | | — | | | 70 | | | 2,416 | | | | | | | | | |
| | | | | | | |
| $ | 253,972 | | | $ | 12,080 | | | $ | 16,648 | | | $ | 7,347 | | | $ | 290,047 | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | |
Acquired covered loans (c): | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | |
Owner occupied | $ | 11,078 | | | $ | — | | | $ | 1,059 | | | $ | 727 | | | $ | 12,864 | | | | | | | | | |
| | | | | | | |
Non-owner occupied | 5,736 | | | 7,580 | | | 560 | | | 4,822 | | | 18,698 | | | | | | | | | |
| | | | | | | |
Total commercial real estate loans | 16,814 | | | 7,580 | | | 1,619 | | | 5,549 | | | 31,562 | | | | | | | | | |
| | | | | | | |
Construction | 49 | | | 2,422 | | | — | | | 49 | | | 2,520 | | | | | | | | | |
| | | | | | | |
Residential real estate | 10,006 | | | — | | | — | | | 1,760 | | | 11,766 | | | | | | | | | |
| | | | | | | |
Commercial and industrial | 3,196 | | | — | | | — | | | 549 | | | 3,745 | | | | | | | | | |
| | | | | | | |
Consumer | 469 | | | — | | | — | | | — | | | 469 | | | | | | | | | |
| | | | | | | |
| $ | 30,534 | | | $ | 10,002 | | | $ | 1,619 | | | $ | 7,907 | | | $ | 50,062 | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | |
Total loans: | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | |
Owner occupied | $ | 220,203 | | | $ | 9,835 | | | $ | 11,538 | | | $ | 22,587 | | | $ | 264,163 | | | | | | | | | |
| | | | | | | |
Non-owner occupied | 413,795 | | | 30,187 | | | 26,631 | | | 16,531 | | | 487,144 | | | | | | | | | |
| | | | | | | |
Total commercial real estate loans | 633,998 | | | 40,022 | | | 38,169 | | | 39,118 | | | 751,307 | | | | | | | | | |
| | | | | | | |
Construction | 106,134 | | | 5,889 | | | 2,254 | | | 843 | | | 115,120 | | | | | | | | | |
| | | | | | | |
Residential real estate | 184,775 | | | 1,480 | | | 22 | | | 3,946 | | | 190,223 | | | | | | | | | |
| | | | | | | |
Commercial and industrial | 344,896 | | | 9,929 | | | 13,227 | | | 4,462 | | | 372,514 | | | | | | | | | |
| | | | | | | |
Consumer | 37,431 | | | — | | | — | | | 115 | | | 37,546 | | | | | | | | | |
| | | | | | | |
| $ | 1,307,234 | | | $ | 57,320 | | | $ | 53,672 | | | $ | 48,484 | | | $ | 1,466,710 | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | |
(a) Originated loans are loans organically made through the Company's normal and customary origination process | | | | | | | | |
(b) Acquired loans are loans acquired in the acquisition of Home, discussed elsewhere in this report, less acquired covered loans | | | | | | | | |
(c) Acquired covered loans acquired in the acquisition of Home that are covered under FDIC loss share agreements | | | | | | | | |
| | | | | | | | | | | | | | | | | |
December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Owner occupied | $ | 147,865 | | | $ | 19,798 | | | $ | 14,730 | | | $ | 22,605 | | | $ | 204,998 | | | | | | | | | |
| | | | | | | |
Non-owner occupied | 278,854 | | | 33,827 | | | 24,188 | | | 10,145 | | | 347,014 | | | | | | | | | |
| | | | | | | |
Total commercial real estate loans | 426,719 | | | 53,625 | | | 38,918 | | | 32,750 | | | 552,012 | | | | | | | | | |
| | | | | | | |
Construction | 46,274 | | | 2,772 | | | 2,131 | | | 1,326 | | | 52,503 | | | | | | | | | |
| | | | | | | |
Residential real estate | 98,633 | | | 1,570 | | | 147 | | | 1,207 | | | 101,557 | | | | | | | | | |
| | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | 242,053 | | | 3,518 | | | 2,694 | | | 5,905 | | | 254,170 | | | | | | | | | |
| | | | | | | |
Consumer | 35,984 | | | — | | | — | | | 6 | | | 35,990 | | | | | | | | | |
| | | | | | | |
| $ | 849,663 | | | $ | 61,485 | | | $ | 43,890 | | | $ | 41,194 | | | $ | 996,232 | | | | | | | | | |
| | | | | | | |
|
The following table presents, by portfolio class, an age analysis of past due loans, including loans placed on non-accrual at September 30, 2014 and December 31, 2013 (dollars in thousands): |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 30-89 days | | 90 days | | Total | | Current | | Total | | | | | | | | |
past due | or more | past due | loans | | | | | | | | |
| past due | | | | | | | | | | |
September 30, 2014 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Originated loans (a): | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Owner occupied | $ | 1,255 | | | $ | 2,969 | | | $ | 4,224 | | | $ | 197,791 | | | $ | 202,015 | | | | | | | | | |
| | | | | | | |
Non-owner occupied | 860 | | | 332 | | | 1,192 | | | 360,910 | | | 362,102 | | | | | | | | | |
| | | | | | | |
Total commercial real estate loans | 2,115 | | | 3,301 | | | 5,416 | | | 558,701 | | | 564,117 | | | | | | | | | |
| | | | | | | |
Construction | 419 | | | 39 | | | 458 | | | 82,367 | | | 82,825 | | | | | | | | | |
| | | | | | | |
Residential real estate | 1,270 | | | — | | | 1,270 | | | 100,734 | | | 102,004 | | | | | | | | | |
| | | | | | | |
Commercial and industrial | 419 | | | 473 | | | 892 | | | 342,102 | | | 342,994 | | | | | | | | | |
| | | | | | | |
Consumer | 162 | | | 45 | | | 207 | | | 34,454 | | | 34,661 | | | | | | | | | |
| | | | | | | |
| $ | 4,385 | | | $ | 3,858 | | | $ | 8,243 | | | $ | 1,118,358 | | | $ | 1,126,601 | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | |
Acquired loans (b): | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Owner occupied | $ | — | | | $ | — | | | $ | — | | | $ | 49,284 | | | $ | 49,284 | | | | | | | | | |
| | | | | | | |
Non-owner occupied | — | | | — | | | — | | | 106,344 | | | 106,344 | | | | | | | | | |
| | | | | | | |
Total commercial real estate loans | — | | | — | | | — | | | 155,628 | | | 155,628 | | | | | | | | | |
| | | | | | | |
Construction | — | | | 167 | | | 167 | | | 29,608 | | | 29,775 | | | | | | | | | |
| | | | | | | |
Residential real estate | 1,774 | | | 752 | | | 2,526 | | | 73,927 | | | 76,453 | | | | | | | | | |
| | | | | | | |
Commercial and industrial | — | | | — | | | — | | | 25,775 | | | 25,775 | | | | | | | | | |
| | | | | | | |
Consumer | 46 | | | — | | | 46 | | | 2,370 | | | 2,416 | | | | | | | | | |
| | | | | | | |
| $ | 1,820 | | | $ | 919 | | | $ | 2,739 | | | $ | 287,308 | | | $ | 290,047 | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | |
Acquired covered loans (c): | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Owner occupied | $ | — | | | $ | 84 | | | $ | 84 | | | $ | 12,780 | | | $ | 12,864 | | | | | | | | | |
| | | | | | | |
Non-owner occupied | 74 | | | 27 | | | 101 | | | 18,597 | | | 18,698 | | | | | | | | | |
| | | | | | | |
Total commercial real estate loans | 74 | | | 111 | | | 185 | | | 31,377 | | | 31,562 | | | | | | | | | |
| | | | | | | |
Construction | — | | | — | | | — | | | 2,520 | | | 2,520 | | | | | | | | | |
| | | | | | | |
Residential real estate | 387 | | | — | | | 387 | | | 11,379 | | | 11,766 | | | | | | | | | |
| | | | | | | |
Commercial and industrial | 6 | | | 43 | | | 49 | | | 3,696 | | | 3,745 | | | | | | | | | |
| | | | | | | |
Consumer | — | | | — | | | — | | | 469 | | | 469 | | | | | | | | | |
| | | | | | | |
| $ | 467 | | | $ | 154 | | | $ | 621 | | | $ | 49,441 | | | $ | 50,062 | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | |
Total loans: | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Owner occupied | $ | 1,255 | | | $ | 3,053 | | | $ | 4,308 | | | $ | 259,855 | | | $ | 264,163 | | | | | | | | | |
| | | | | | | |
Non-owner occupied | 934 | | | 359 | | | 1,293 | | | 485,851 | | | 487,144 | | | | | | | | | |
| | | | | | | |
Total commercial real estate loans | 2,189 | | | 3,412 | | | 5,601 | | | 745,706 | | | 751,307 | | | | | | | | | |
| | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | 419 | | | 206 | | | 625 | | | 114,495 | | | 115,120 | | | | | | | | | |
| | | | | | | |
Residential real estate | 3,431 | | | 752 | | | 4,183 | | | 186,040 | | | 190,223 | | | | | | | | | |
| | | | | | | |
Commercial and industrial | 425 | | | 516 | | | 941 | | | 371,573 | | | 372,514 | | | | | | | | | |
| | | | | | | |
Consumer | 208 | | | 45 | | | 253 | | | 37,293 | | | 37,546 | | | | | | | | | |
| | | | | | | |
| $ | 6,672 | | | $ | 4,931 | | | $ | 11,603 | | | $ | 1,455,107 | | | $ | 1,466,710 | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | |
(a) Originated loans are loans organically made through the Company's normal and customary origination process | | | | | | | | |
(b) Acquired loans are loans acquired in the acquisition of Home, discussed elsewhere in this report, less acquired covered loans | | | | | | | | |
(c) Acquired covered loans acquired in the acquisition of Home that are covered under FDIC loss share agreements | | | | | | | | |
| | | | | | | | | | | | | | | | | |
December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Owner occupied | $ | 959 | | | $ | 2,905 | | | $ | 3,864 | | | $ | 201,134 | | | $ | 204,998 | | | | | | | | | |
| | | | | | | |
Non-owner occupied | — | | | — | | | — | | | 347,014 | | | 347,014 | | | | | | | | | |
| | | | | | | |
Total commercial real estate loans | 959 | | | 2,905 | | | 3,864 | | | 548,148 | | | 552,012 | | | | | | | | | |
| | | | | | | |
Construction | 215 | | | 119 | | | 334 | | | 52,169 | | | 52,503 | | | | | | | | | |
| | | | | | | |
Residential real estate | 436 | | | 163 | | | 599 | | | 100,958 | | | 101,557 | | | | | | | | | |
| | | | | | | |
Commercial and industrial | 597 | | | 2,077 | | | 2,674 | | | 251,496 | | | 254,170 | | | | | | | | | |
| | | | | | | |
Consumer | 53 | | | 6 | | | 59 | | | 35,931 | | | 35,990 | | | | | | | | | |
| | | | | | | |
| $ | 2,260 | | | $ | 5,270 | | | $ | 7,530 | | | $ | 988,702 | | | $ | 996,232 | | | | | | | | | |
| | | | | | | |
|
Loans contractually past due 90 days or more on which the Company continued to accrue interest were $0.1 million and $1.1 million at September 30, 2014 and December 31, 2013, respectively. |
|
The following table presents information related to impaired loans, by portfolio class, at September 30, 2014 and December 31, 2013 (dollars in thousands): |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Impaired loans | | | | | | | | | | |
| With a | | Without a | | Total | | Unpaid | | Related | | | | | | | | |
related | related | recorded | principal | allowance | | | | | | | | |
allowance | allowance | balance | balance | | | | | | | | | |
September 30, 2014 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Owner occupied | $ | 1,614 | | | $ | 4,547 | | | $ | 6,161 | | | $ | 8,742 | | | $ | 153 | | | | | | | | | |
| | | | | | | |
Non-owner occupied | 1,096 | | | 21,290 | | | 22,386 | | | 22,439 | | | 19 | | | | | | | | | |
| | | | | | | |
Total commercial real estate loans | 2,710 | | | 25,837 | | | 28,547 | | | 31,181 | | | 172 | | | | | | | | | |
| | | | | | | |
Construction | — | | | 963 | | | 963 | | | 963 | | | — | | | | | | | | | |
| | | | | | | |
Residential real estate | — | | | 322 | | | 322 | | | 357 | | | — | | | | | | | | | |
| | | | | | | |
Commercial and industrial | 2,732 | | | 924 | | | 3,656 | | | 4,133 | | | 25 | | | | | | | | | |
| | | | | | | |
Consumer | — | | | — | | | — | | | — | | | — | | | | | | | | | |
| | | | | | | |
| $ | 5,442 | | | $ | 28,046 | | | $ | 33,488 | | | $ | 36,634 | | | $ | 197 | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | |
December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Owner occupied | $ | 2,772 | | | $ | 6,582 | | | $ | 9,354 | | | $ | 12,707 | | | $ | 652 | | | | | | | | | |
| | | | | | | |
Non-owner occupied | 1,116 | | | 21,757 | | | 22,873 | | | 22,904 | | | 13 | | | | | | | | | |
| | | | | | | |
Total commercial real estate loans | 3,888 | | | 28,339 | | | 32,227 | | | 35,611 | | | 665 | | | | | | | | | |
| | | | | | | |
Construction | 751 | | | 1,236 | | | 1,987 | | | 2,029 | | | — | | | | | | | | | |
| | | | | | | |
Residential real estate | 174 | | | 256 | | | 430 | | | 515 | | | 62 | | | | | | | | | |
| | | | | | | |
Commercial and industrial | 4,074 | | | 1,749 | | | 5,823 | | | 6,701 | | | 56 | | | | | | | | | |
| | | | | | | |
Consumer | — | | | — | | | — | | | — | | | — | | | | | | | | | |
| | | | | | | |
| $ | 8,887 | | | $ | 31,580 | | | $ | 40,467 | | | $ | 44,856 | | | $ | 783 | | | | | | | | | |
| | | | | | | |
|
At September 30, 2014 and December 31, 2013, the total recorded balance of impaired loans in the above table included $26.9 million and $33.2 million, respectively, of Troubled Debt Restructuring (“TDR”) loans which were not on non-accrual status. |
|
The following table presents, by portfolio class, the average recorded investment in impaired loans for the three and nine months ended September 30, 2014 and 2013 (dollars in thousands): |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | | | | | | | | | | | |
| 2014 | | 2013 | | 2014 | | 2013 | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Owner occupied | $ | 6,010 | | | $ | 13,948 | | | $ | 6,134 | | | $ | 14,579 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Non-owner occupied | 22,586 | | | 25,062 | | | 22,637 | | | 26,656 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total commercial real estate loans | 28,596 | | | 39,010 | | | 28,771 | | | 41,235 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Construction | 963 | | | 1,927 | | | 1,221 | | | 4,220 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Residential real estate | 391 | | | 560 | | | 403 | | | 2,698 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial and industrial | 3,663 | | | 6,585 | | | 4,188 | | | 7,984 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Consumer | — | | | — | | | — | | | 894 | | | | | | | | | | | | | |
| | | | | | | | | | | |
| $ | 33,613 | | | $ | 48,082 | | | $ | 34,583 | | | $ | 57,031 | | | | | | | | | | | | | |
| | | | | | | | | | | |
|
Interest income recognized for cash payments received on impaired loans for the nine months ended September 30, 2014 was insignificant. |
|
Information with respect to the Company’s non-accrual loans, by portfolio class, at September 30, 2014 and December 31, 2013 is as follows (dollars in thousands): |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2014 | | December 31, 2013 | | | | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Owner occupied | $ | 5,708 | | | $ | 4,443 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Non-owner occupied | 1,995 | | | 280 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Total commercial real estate loans | 7,703 | | | 4,723 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Construction | 473 | | | 236 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Residential real estate | 3,946 | | | 399 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Commercial and industrial | 995 | | | 1,868 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Consumer | 70 | | | — | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Total non-accrual loans | $ | 13,187 | | | $ | 7,226 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Accruing loans which are contractually past due 90 days or more: | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Owner occupied | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Non-owner occupied | — | | | — | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Total commercial real estate loans | — | | | — | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Construction | 39 | | | — | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Residential real estate | — | | | — | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Commercial and industrial | 6 | | | 1,077 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Consumer | 45 | | | 6 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Total accruing loans which are contractually past due 90 days or more | $ | 90 | | | $ | 1,083 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
|
TDRs |
|
The Company allocated $0.2 million and $0.8 million of specific reserves to customers whose loan terms have been modified in TDRs as of September 30, 2014 and December 31, 2013, respectively. TDRs involve the restructuring of terms to allow customers to mitigate the risk of foreclosure by meeting a lower loan payment requirement based upon their current cash flow. As indicated above, TDRs may also include loans to borrowers experiencing financial distress that renewed at existing contractual rates, but below market rates for comparable credit quality. The Company has been actively utilizing these programs and working with its customers to improve obligor cash flow and related prospect for repayment. Concessions may include, but are not limited to, interest rate reductions, principal forgiveness, deferral of interest payments, extension of the maturity date, and other actions intended to minimize potential losses to the Company. For each commercial loan restructuring, a comprehensive credit underwriting analysis of the borrower’s financial condition and prospects of repayment under the revised terms is performed to assess whether the new structure can be successful and whether cash flows will be sufficient to support the restructured debt. Generally, if the loan is on accrual at the time of restructuring, it will remain on accrual after the restructuring. After six consecutive payments under the restructured terms, a nonaccrual restructured loan is reviewed for possible upgrade to accruing status. |
|
Typically, once a loan is identified as a TDR it will retain that designation until it is paid off, because restructured loans generally are not at market rates following restructuring. Under certain circumstances a TDR may be removed from TDR status if it is determined to no longer be impaired and the loan is at a competitive interest rate. Under such circumstances, allowance allocations for loans removed from TDR status would be based on the historical allocation for the applicable loan grade and loan class. |
|
The following table presents, by portfolio segment, information with respect to the Company’s loans that were modified and recorded as TDRs during the three and nine months ended September 30, 2014 and 2013 (dollars in thousands): |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | | | |
| Number of | | TDR outstanding | | Number of | | TDR outstanding | | | | | | | | | | | | | | |
loans | recorded investment | loans | recorded investment | | | | | | | | | | | | | | |
Commercial real estate | — | | | $ | — | | | — | | | $ | — | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Construction | — | | | — | | | 1 | | | 1,243 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Residential real estate | — | | | — | | | — | | | — | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Commercial and industrial | — | | | — | | | 1 | | | 963 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Consumer | — | | | — | | | — | | | — | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| — | | | $ | — | | | 2 | | | $ | 2,206 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30, | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | | | |
| Number of | | TDR outstanding | | Number of | | TDR outstanding | | | | | | | | | | | | | | |
loans | recorded investment | loans | recorded investment | | | | | | | | | | | | | | |
Commercial real estate | — | | | $ | — | | | 5 | | | $ | 27,677 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Construction | — | | | — | | | 1 | | | 1,243 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Residential real estate | — | | | — | | | — | | | — | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Commercial and industrial | — | | | — | | | 4 | | | 1,237 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Consumer | — | | | — | | | — | | | — | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| — | | | $ | — | | | 10 | | | $ | 30,157 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
|
There were no loans modified and recorded as TDRs during the three and nine months ended September 30, 2014. During the same period in 2013, TDR activity was primarily the result of remediation to bolster cash flow of stressed loans, and included the restructuring of a large CRE credit in the Bank’s loan portfolio. |
|
At both September 30, 2014 and 2013, the Company had no remaining commitments to lend on loans accounted for as TDRs. |
|
The following table presents, by portfolio segment, the post modification recorded investment for TDRs restructured during the three and nine months ended September 30, 2013 by the primary type of concession granted (dollars in thousands). There were no TDRs restructured during the three and nine months ended September 30, 2014. |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended | Rate | | Term | | Rate reduction | | Total | | | | | | | | | | | | |
September 30, 2013 | reduction | extension | and term | | | | | | | | | | | | |
| | | extension | | | | | | | | | | | | |
Commercial real estate | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
Construction | — | | | 1,243 | | | — | | | 1,243 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Residential real estate | — | | | — | | | — | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial and industrial | — | | | 963 | | | — | | | 963 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Consumer | — | | | — | | | — | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
| $ | — | | | $ | 2,206 | | | $ | — | | | $ | 2,206 | | | | | | | | | | | | | |
| | | | | | | | | | | |
|
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended | Rate | | Term | | Rate reduction | | Total | | | | | | | | | | | | |
September 30, 2013 | reduction | extension | and term | | | | | | | | | | | | |
| | | extension | | | | | | | | | | | | |
Commercial real estate | $ | 3,809 | | | $ | 2,368 | | | $ | 21,500 | | | $ | 27,677 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Construction | — | | | 1,243 | | | — | | | 1,243 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Residential real estate | — | | | — | | | — | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial and industrial | 174 | | | 1,063 | | | — | | | 1,237 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Consumer | — | | | — | | | — | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
| $ | 3,983 | | | $ | 4,674 | | | $ | 21,500 | | | $ | 30,157 | | | | | | | | | | | | | |
| | | | | | | | | | | |
|
The following table presents, by portfolio segment, the TDRs which had payment defaults during the nine months ended September 30, 2013 that had been previously restructured within the last twelve months prior to September 30, 2013 (dollars in thousands). There were no TDRs which had payment defaults during the nine months ended September 30, 2014 that had been previously restructured within the last twelve months prior to September 30, 2104. |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | | | | | | | | | | | | | | | | | | | |
| | Number | | TDRs restructured in the | | | | | | | | | | | | | | | | | | | | |
of loans | period with a payment | | | | | | | | | | | | | | | | | | | | |
| default | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | 2 | | | $ | 3,500 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Construction | | — | | | — | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Residential real estate | | — | | | — | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Commercial and industrial loans | | — | | | — | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Consumer loans | | — | | | — | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | 2 | | | $ | 3,500 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |