TRADE, OTHER AND LOANS RECEIVABLE

Trade and Other Receivables, Net



	June 30, 2015		December 31, 2014
Trade accounts receivable net of allowance for doubtful accounts of $2,009 in 2015 and $2,149 in 2014	$	130,812	$	85,553
Other receivables	4,634		1,887
Total	$	135,446	$	87,440

Loans Receivable

Major classification of WebBank’s loans receivable at June 30, 2015 and December 31, 2014 are as follows:



	Total										Current						Non-current
	June 30, 2015			%		December 31, 2014			%		June 30, 2015			December 31, 2014			June 30, 2015		December 31, 2014
Loans held for sale	$	84,168		52	%	$	40,886		35	%	$	84,168		$	40,886		$	—	$	—
Real estate loans:
Commercial – owner occupied	$	1,596		1	%	$	1,650		1	%	99			96			$	1,497	1,554
Commercial – other	282			—	%	264			—	%	—			—			282		264
Total real estate loans	1,878			1	%	1,914			1	%	99			96			1,779		1,818
Commercial and industrial	74,775			47	%	75,706			64	%	1,226			1,142			73,549		74,564
Total loans	76,653			48	%	77,620			65	%	1,325			1,238			75,328		76,382
Less:
Deferred fees and discounts	(17		)			(20		)			(17		)	(20		)	—		—
Allowance for loan losses	(624		)			(557		)			(624		)	(557		)	—		—
Total loans receivable, net	$	76,012				$	77,043				684			661			75,328		76,382
Loans receivable, including loans held for sale (a)											$	84,852		$	41,547		$	75,328	$	76,382

(a) The carrying value is considered to be representative of fair value because the rates of interest are not significantly different from market interest rates for instruments with similar maturities. The fair value of loans receivable, including loans held for sale, net was $160,355 and $117,346 at June 30, 2015 and December 31, 2014, respectively.

Allowance for Loan Losses

The Allowance for Loan Losses (“ALLL”) represents an estimate of probable and estimable losses inherent in the loan portfolio as of the balance sheet date. Losses are charged to the ALLL when incurred. Generally, commercial loans are charged off or charged down at the point at which they are determined to be uncollectible in whole or in part, or when 180 days past due unless the loan is well secured and in the process of collection. The amount of the ALLL is established by analyzing the portfolio at least quarterly and a provision for or reduction of loan losses is recorded so that the ALLL is at an appropriate level at the balance sheet date.

The methodologies used to estimate the ALLL depend upon the impairment status and portfolio segment of the loan. Loan groupings are created for each loan class, and are then graded against historical and industry loss rates.

After applying historic loss experience, the quantitatively derived level of ALLL is reviewed for each segment using qualitative criteria is performed. Various risk factors are tracked that influence judgment regarding the level of the ALLL across the portfolio segments. Primary qualitative factors that may be reflected in the quantitative models include:

• Asset quality trends

• Risk management and loan administration practices

• Risk identification practices

• Effect of changes in the nature and volume of the portfolio

• Existence and effect of any portfolio concentrations

• National economic and business conditions

• Regional and local economic and business conditions

• Data availability and applicability

Changes in these factors are reviewed to ensure that changes in the level of the ALLL are consistent with changes in these factors. The magnitude of the impact of each of these factors on the qualitative assessment of the ALLL changes from quarter to quarter according to the extent these factors are already reflected in historic loss rates and according to the extent these factors diverge from one another. Also considered is the uncertainty inherent in the estimation process when evaluating the ALLL.

Changes in the allowance for loan losses are summarized as follows:



	Real Estate
	Commercial - Owner Occupied			Commercial - Other			Commercial & Industrial			Total
March 31, 2014	$	35		$	28		$	346		$	409
Charge-offs	—			—			—			—
Recoveries	1			11			6			18
Provision	(2		)	(9		)	(54		)	(65		)
June 30, 2014	34			30			298			362

March 31, 2015	60			11			567			638
Charge-offs	—			—			—			—
Recoveries	2			11			5			18
Provision	(15		)	(12		)	(5		)	(32		)
June 30, 2015	$	47		$	10		$	567		$	624



	Real Estate
	Commercial - Owner Occupied			Commercial - Other			Commercial & Industrial			Total
December 31, 2013	$	77		$	28		$	319		$	424
Charge-offs	—			—			(3		)	(3		)
Recoveries	63			18			14			95
Provision	(106		)	(16		)	(32		)	(154		)
June 30, 2014	$	34		$	30		298			$	362
December 31, 2014	$	64		$	12		$	481		$	557
Charge-offs	—			—			—			—
Recoveries	3			22			12			37
Provision	(20		)	(24		)	74			30
June 30, 2015	$	47		$	10		$	567		$	624

The ALLL and outstanding loan balances according to the Company’s impairment method are summarized as follows:



	Real Estate
June 30, 2015	Commercial - Owner Occupied		Commercial - Other		Commercial & Industrial		Total
Allowance for loan losses:
Individually evaluated for impairment	$	—	$	—	$	57	$	57
Collectively evaluated for impairment	47		10		510		567
Total	$	47	$	10	$	567	$	624
Outstanding Loan balances:
Individually evaluated for impairment	$	378	$	—	$	85	$	463
Collectively evaluated for impairment	1,218		282		74,690		76,190
Total	$	1,596	$	282	$	74,775	$	76,653



	Real Estate
December 31, 2014	Commercial - Owner Occupied		Commercial - Other		Commercial & Industrial		Total
Allowance for loan losses:
Individually evaluated for impairment	$	—	$	—	$	52	$	52
Collectively evaluated for impairment	64		12		429		505
Total	$	64	$	12	$	481	$	557
Outstanding Loan balances:
Individually evaluated for impairment (1)	$	374	$	—	$	84	$	458
Collectively evaluated for impairment	1,276		264		75,622		77,162
Total	$	1,650	$	264	$	75,706	$	77,620

(1) $4 is guaranteed by the USDA or SBA.

Nonaccrual and Past Due Loans

Loans are generally placed on nonaccrual status when payment in full of principal and interest is not expected, or the loan is 90 days or more past due as to principal or interest, unless the loan is both well secured and in the process of collection.

A nonaccrual loan may be returned to accrual status when all delinquent interest and principal become current in accordance with the terms of the loan agreement; and the loan, if secured, is well secured; the borrower has paid according to the contractual terms for a minimum of six months; and analysis of the borrower indicates a reasonable assurance of the ability to maintain payments. Payments received on nonaccrual loans are applied as a reduction to the principal outstanding.

Loans are reported as past due when either principal or interest is due and unpaid for a period of 30 days or more. Loans past due 90 days or more and still accruing interest were $50 and $52 at June 30, 2015 and December 31, 2014, respectively.

Nonaccrual loans are summarized as follows:



	June 30, 2015		December 31, 2014
Real Estate Loans:
Commercial - Owner Occupied	$	360	$	374
Total Real Estate Loans	360		374
Commercial and Industrial	16		16
Total Loans	$	376	$	390

Past due loans (accruing and nonaccruing) are summarized as follows:



June 30, 2015	Current		30-89 days past due		90+ days past due		Total past due		Total loans		Recorded investment in accruing loans 90+ days past due		Nonaccrual loans that are current (1)
Real Estate Loans:
Commercial - Owner Occupied	$	1,218	$	375	$	3	$	378	$	1,596	$	—	$	—
Commercial - Other	282		—		—		—		282		—		—
Total Real Estate Loans	1,500		375		3		378		1,878		—		—
Commercial and Industrial	74,709		—		66		66		74,775		50		—
Total Loans	$	76,209	$	375	$	69	$	444	$	76,653	$	50	$	—

(1) Represents nonaccrual loans that are not past due more than 30 days; however, full payment of principal and interest is still not expected.



December 31, 2014	Current		30-89 days past due		90+ days past due		Total past due (2)		Total loans		Recorded investment in accruing loans 90+ days past due		Nonaccrual loans that are current (1)
Real Estate Loans:
Commercial - Owner Occupied	$	1,228	$	49	$	373	$	422	$	1,650	$	—	$	—
Commercial - Other	264		—		—		—		264		—		—
Total Real Estate Loans	1,492		49		373		422		1,914		—		—
Commercial and Industrial	75,635		3		68		71		75,706		52		—
Total Loans	$	77,127	$	52	$	441	$	493	$	77,620	$	52	$	—

(1) Represents nonaccrual loans that are not past due more than 30 days; however, full payment of principal and interest is still not expected.

(2) $4 is guaranteed by the USDA or SBA.

Credit Quality Indicators

In addition to the past due and nonaccrual criteria, loans are analyzed using a loan grading system. Generally, internal grades are assigned to loans based on financial/statistical models and loan officer judgment. The Company reviews and grades all loans with unpaid principal balances of $100 or more once per year. Grades follow definitions of Pass, Special Mention, Substandard, and Doubtful. The definitions of Pass, Special Mention, Substandard, and Doubtful are summarized as follows:


•	Pass: A pass asset is a higher quality asset and does not fit any of the other categories described below. The likelihood of loss is considered remote.


•	Special Mention: A receivable in this category has a specific weakness or problem but does not currently present a significant risk of loss or default as to any material term of the loan or financing agreement.


•	Substandard: A substandard receivable has a developing or currently minor weakness or weaknesses that could result in loss or default if deficiencies are not corrected or adverse conditions arise.


•	Doubtful: A doubtful receivable has an existing weakness or weaknesses that have developed into a serious risk of significant loss or default with regard to a material term of the financing agreement.

Outstanding loan balances (accruing and nonaccruing) categorized by these credit quality indicators are summarized as follows:



June 30, 2015	Pass		Special Mention		Sub- standard		Doubtful		Total loans
Real Estate Loans:
Commercial - Owner Occupied	$	1,218	$	—	$	378	$	—	$	1,596
Commercial - Other	282		—		—		—		282
Total Real Estate Loans	1,500		—		378		—		1,878
Commercial and Industrial	73,511		1,179		85		—		74,775
Total Loans	$	75,011	$	1,179	$	463	$	—	$	76,653



December 31, 2014	Pass		Special Mention		Sub- standard (1)		Doubtful		Total loans
Real Estate Loans:
Commercial - Owner Occupied	$	1,258	$	19	$	373	$	—	$	1,650
Commercial - Other	264		—		—		—		264
Total Real Estate Loans	1,522		19		373		—		1,914
Commercial and Industrial	74,439		1,183		84		—		75,706
Total Loans	$	75,961	$	1,202	$	457	$	—	$	77,620

(1) $4 is guaranteed by the USDA or SBA.

Impaired Loans

Loans are considered impaired when, based on current information and events, it is probable that WebBank will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments. When loans are impaired, an estimate of the amount of the balance that is impaired is made and a specific reserve is assigned to the loan based on the estimated present value of the loan’s future cash flows discounted at the loan’s effective interest rate, the observable market price of the loan, or the fair value of the loan’s underlying collateral less the cost to sell. When the impairment is based on amount on the fair value of the loan’s underlying collateral, the portion of the balance that is impaired is charged off, such that these loans do not have a specific reserve in the ALLL. Payments received on impaired loans that are accruing are recognized in interest income, according to the contractual loan agreement. WebBank recognized $3 and $2 on impaired loans for the three months ended June 30, 2015 and 2014, respectively, and $4 and $28 for the six months ended June 30, 2015 and 2014, respectively.

Payments received on impaired loans that are on nonaccrual are not recognized in interest income, but are applied as a reduction to the principal outstanding. Payments are recognized when cash is received. No impaired loans were considered a troubled debt restructuring.

Information on impaired loans is summarized as follows:



			Recorded investment
June 30, 2015	Unpaid principle balance		with no allowance		with allowance		Total recorded investment		Related Allowance		Average recorded investment
Real Estate Loans:
Commercial - Owner Occupied	$	435	$	360	$	18	$	378	$	1	$	274
Total Real Estate Loans	435		360		18		378		1		274
Commercial and Industrial	194		27		56		83		57		63
Total Loans	$	629	$	387	$	74	$	461	$	58	$	337



			Recorded investment
December 31, 2014	Unpaid principle balance		with no allowance		with allowance		Total recorded investment (1)		Related Allowance		Average recorded investment
Real Estate Loans:
Commercial - Owner Occupied	$	430	$	374	$	—	$	374	$	—	$	750
Total Real Estate Loans	430		374		—		374		—		750
Commercial and Industrial	193		28		56		84		52		131
Total Loans	$	623	$	402	$	56	$	458	$	52	$	881

(1)$4 is guaranteed by the USDA or SBA.