LOANS AND ALLOWANCE FOR PROBABLE LOAN LOSSES |
LOANS AND ALLOWANCE FOR PROBABLE LOAN LOSSES
Loans in the accompanying consolidated balance sheets are classified as follows (in thousands):
| | | | | | | | | | | | December 31, 2013 | | December 31, 2012 | Real Estate Loans: | | | | | Construction | | $ | 125,219 |
| | $ | 113,744 |
| 1-4 Family residential | | 390,499 |
| | 368,845 |
| Other | | 262,536 |
| | 236,760 |
| Commercial loans | | 157,655 |
| | 160,058 |
| Municipal loans | | 245,550 |
| | 220,947 |
| Loans to individuals | | 169,814 |
| | 162,623 |
| Total loans | | 1,351,273 |
| | 1,262,977 |
| Less: Allowance for loan losses | | 18,877 |
| | 20,585 |
| Net loans | | $ | 1,332,396 |
| | $ | 1,242,392 |
|
Loans to Affiliated Parties
In the normal course of business, we make loans to certain of our own executive officers and directors and their related interests. As of December 31, 2013 and 2012, these loans totaled $5.5 million and $4.3 million, respectively. These loans represented 2.1% and 1.7% of shareholders' equity as of December 31, 2013 and 2012, respectively. Such loans are made in the normal course of business at normal credit terms, including interest rate and collateral requirements and do not represent more than normal credit risks contained in the rest of the loan portfolio for loans of similar types.
Allowance for Loan Losses
The allowance for loan losses is based on the most current review of the loan portfolio and is validated by multiple processes. First, the bank utilizes historical data to establish general reserve amounts for each class of loans. The historical charge off figure is further adjusted through qualitative factors that include general trends in past dues, nonaccruals and classified loans to more effectively and promptly react to both positive and negative movements. Second, our lenders have the primary responsibility for identifying problem loans and estimating necessary reserves based on customer financial stress and underlying collateral. These recommendations are reviewed by senior loan administration, the Special Assets department, and the Loan Review department. Third, the Loan Review department does independent reviews of the portfolio on an annual basis. The Loan Review department follows a board-approved annual loan review scope. The loan review scope encompasses a number of metrics that takes into consideration the size of the loan, the type of credit extended, the seasoning of the loan along with the performance of the loan. The loan review scope, as it relates to size, focuses more on larger dollar loan relationships, typically, for example, aggregate debt of $500,000 or greater. The loan review officer also tracks specific reserves for loans by type compared to general reserves to determine trends in comparative reserves as well as losses not reserved for prior to charge-off to determine the effectiveness of the specific reserve process.
At each review, a subjective analysis methodology is used to grade the respective loan. Categories of grading vary in severity from loans that do not appear to have a significant probability of loss at the time of review to loans that indicate a probability that the entire balance of the loan will be uncollectible. If full collection of the loan balance appears unlikely at the time of review, estimates of future expected cash flows or appraisals of the collateral securing the debt are used to determine the necessary allowances. The internal loan review department maintains a list of all loans or loan relationships that are graded as having more than the normal degree of risk associated with them. In addition, a list of specifically reserved loans or loan relationships of $50,000 or more is updated on a quarterly basis in order to properly determine necessary allowances and keep management informed on the status of attempts to correct the deficiencies noted with respect to the loan.
For loans to individuals, the methodology associated with determining the appropriate allowance for losses on loans primarily consists of an evaluation of individual payment histories, remaining term to maturity and underlying collateral support.
SFG loans, included in loans to individuals, experiencing past due status or extension of maturity characteristics are reserved for at significantly higher levels based on the circumstances associated with each specific loan. In general the reserves for SFG are calculated based on the past due status of the loan. For reserve purposes, the portfolio has been segregated by past due status and by the remaining term variance from the original contract. During repayment, loans that pay late will take longer to pay out than the original contract. Additionally, some loans may be granted extensions for extenuating payment circumstances and evaluated for troubled debt classification. The remaining term extensions increase the risk of collateral deterioration and, accordingly, reserves are increased to recognize this risk.
Industry and our own experience indicates that a portion of our loans will become delinquent and a portion of the loans will require partial or full charge-off. Regardless of the underwriting criteria utilized, losses may be experienced as a result of various factors beyond our control, including, among other things, changes in market conditions affecting the value of properties used as collateral for loans and problems affecting the credit of the borrower and the ability of the borrower to make payments on the loan. Our determination of the appropriateness of the allowance for loan losses is based on various considerations, including an analysis of the risk characteristics of various classifications of loans, previous loan loss experience, specific loans which would have loan loss potential, delinquency trends, estimated fair value of the underlying collateral, current economic conditions, and geographic and industry loan concentration.
Credit Quality Indicators
We categorize loans into risk categories on an ongoing basis based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. We use the following definitions for risk ratings:
| | • | Satisfactory (Rating 1 – 4) – This rating is assigned to all satisfactory loans. This category, by definition, should consist of acceptable credit. Credit and collateral exceptions should not be present, although their presence would not necessarily prohibit a loan from being rated Satisfactory, if deficiencies are in process of correction. These loans will not be included in the Watch List. |
| | • | Satisfactory (Rating 5) – Special Treatment Required – (Pass Watch) – These loans require some degree of special treatment, but not due to credit quality. This category does not include loans specially mentioned or adversely classified by the loan review officer or regulatory authorities; however, particular attention must be accorded such credits due to characteristics such as: |
| | • | A lack of, or abnormally extended payment program; |
| | • | A heavy degree of concentration of collateral without sufficient margin; |
| | • | A vulnerability to competition through lesser or extensive financial leverage; and |
| | • | A dependence on a single, or few customers, or sources of supply and materials without suitable substitutes or alternatives. |
| | • | Special Mention (Rating 6) – A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. |
| | • | Substandard (Rating 7) – Substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. |
| | • | Doubtful (Rating 8) – Loans classified as Doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation, in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. |
| | • | Loss (Rating 9) – Loans classified as Loss are currently in the process of being charged off and are fully reserved. They are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. |
Loans that are accruing and not considered troubled debt restructurings ("TDR") are reserved for as a group of similar type credits and included in the general portion of the allowance for loan losses.
The general portion of the loan loss allowance is reflective of historical charge-off levels for similar loans adjusted for changes in current conditions and other relevant factors. These factors are likely to cause estimated losses to differ from historical loss experience and include:
| | • | Changes in lending policies or procedures, including underwriting, collection, charge-off, and recovery procedures; |
| | • | Changes in local, regional and national economic and business conditions including entry into new markets; |
| | • | Changes in the volume or type of credit extended; |
| | • | Changes in the experience, ability, and depth of lending management; |
| | • | Changes in the volume and severity of past due, nonaccrual, restructured, or classified loans; |
| | • | Changes in charge-off trends; |
| | • | Changes in loan review or Board oversight; |
| | • | Changes in the level of concentrations of credit; and |
| | • | Changes in external factors, such as competition and legal and regulatory requirements. |
The following table details activity in the allowance for loan losses by portfolio segment for the periods presented (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2013 | | | Real Estate | | | | | | | | | | | | | Construction | | 1-4 Family Residential | | Other | | Commercial Loans | | Municipal Loans | | Loans to Individuals | | Unallocated | | Total | Balance at beginning of period | | $ | 2,355 |
| | $ | 3,545 |
| | $ | 2,290 |
| | $ | 3,158 |
| | $ | 633 |
| | $ | 7,373 |
| | $ | 1,231 |
| | $ | 20,585 |
| Provision (reversal) for loan losses | | (290 | ) | | (40 | ) | | 10 |
| | (909 | ) | | 35 |
| | 10,073 |
| | — |
| | 8,879 |
| Distribution of unallocated allowance | | — |
| | — |
| | — |
| | — |
| | — |
| | 1,231 |
| | (1,231 | ) | | — |
| Loans charged off | | — |
| | (319 | ) | | (67 | ) | | (512 | ) | | — |
| | (12,676 | ) | | — |
| | (13,574 | ) | Recoveries of loans charged off | | 77 |
| | 91 |
| | 339 |
| | 233 |
| | — |
| | 2,247 |
| | — |
| | 2,987 |
| Balance at end of period | | $ | 2,142 |
| | $ | 3,277 |
| | $ | 2,572 |
| | $ | 1,970 |
| | $ | 668 |
| | $ | 8,248 |
| | $ | — |
| | $ | 18,877 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2012 | | | Real Estate | | | | | | | | | | | | | Construction | | 1-4 Family Residential | | Other | | Commercial Loans | | Municipal Loans | | Loans to Individuals | | Unallocated | | Total | Balance at beginning of period | | $ | 2,620 |
| | $ | 1,957 |
| | $ | 3,051 |
| | $ | 2,877 |
| | $ | 619 |
| | $ | 6,244 |
| | $ | 1,172 |
| | $ | 18,540 |
| Provision (reversal) for loan losses | | (345 | ) | | 1,655 |
| | (608 | ) | | 371 |
| | 14 |
| | 9,590 |
| | 59 |
| | 10,736 |
| Loans charged off | | (41 | ) | | (239 | ) | | (159 | ) | | (402 | ) | | — |
| | (10,188 | ) | | — |
| | (11,029 | ) | Recoveries of loans charged off | | 121 |
| | 172 |
| | 6 |
| | 312 |
| | — |
| | 1,727 |
| | — |
| | 2,338 |
| Balance at end of period | | $ | 2,355 |
| | $ | 3,545 |
| | $ | 2,290 |
| | $ | 3,158 |
| | $ | 633 |
| | $ | 7,373 |
| | $ | 1,231 |
| | $ | 20,585 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2011 | | | Real Estate | | | | | | | | | | | | | Construction | | 1-4 Family Residential | | Other | | Commercial Loans | | Municipal Loans | | Loans to Individuals | | Unallocated | | Total | Balance at beginning of period | | $ | 2,585 |
| | $ | 1,988 |
| | $ | 3,354 |
| | $ | 3,746 |
| | $ | 607 |
| | $ | 7,978 |
| | $ | 453 |
| | $ | 20,711 |
| Provision (reversal) for loan losses | | 20 |
| | 546 |
| | (307 | ) | | (64 | ) | | 12 |
| | 6,570 |
| | 719 |
| | 7,496 |
| Loans charged off | | (46 | ) | | (675 | ) | | (271 | ) | | (1,254 | ) | | — |
| | (10,231 | ) | | — |
| | (12,477 | ) | Recoveries of loans charged off | | 61 |
| | 98 |
| | 275 |
| | 449 |
| | — |
| | 1,927 |
| | — |
| | 2,810 |
| Balance at end of period | | $ | 2,620 |
| | $ | 1,957 |
| | $ | 3,051 |
| | $ | 2,877 |
| | $ | 619 |
| | $ | 6,244 |
| | $ | 1,172 |
| | $ | 18,540 |
|
The following tables present the balance in the allowance for loan losses by portfolio segment based on impairment method as described in the allowance for loan losses methodology discussion (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2013 | | | Real Estate | | | | | | | | | | | | | Construction | | 1-4 Family Residential | | Other | | Commercial Loans | | Municipal Loans | | Loans to Individuals | | Unallocated | | Total | Ending balance – individually evaluated for impairment | | $ | 103 |
| | $ | 161 |
| | $ | 73 |
| | $ | 240 |
| | $ | 15 |
| | $ | 173 |
| | $ | — |
| | $ | 765 |
| Ending balance – collectively evaluated for impairment | | 2,039 |
| | 3,116 |
| | 2,499 |
| | 1,730 |
| | 653 |
| | 8,075 |
| | — |
| | 18,112 |
| Balance at end of period | | $ | 2,142 |
| | $ | 3,277 |
| | $ | 2,572 |
| | $ | 1,970 |
| | $ | 668 |
| | $ | 8,248 |
| | $ | — |
| | $ | 18,877 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2012 | | | Real Estate | | | | | | | | | | | | | Construction | | 1-4 Family Residential | | Other | | Commercial Loans | | Municipal Loans | | Loans to Individuals | | Unallocated | | Total | Ending balance – individually evaluated for impairment | | $ | 592 |
| | $ | 500 |
| | $ | 387 |
| | $ | 1,015 |
| | $ | 89 |
| | $ | 308 |
| | $ | — |
| | $ | 2,891 |
| Ending balance – collectively evaluated for impairment | | 1,763 |
| | 3,045 |
| | 1,903 |
| | 2,143 |
| | 544 |
| | 7,065 |
| | 1,231 |
| | 17,694 |
| Balance at end of period | | $ | 2,355 |
| | $ | 3,545 |
| | $ | 2,290 |
| | $ | 3,158 |
| | $ | 633 |
| | $ | 7,373 |
| | $ | 1,231 |
| | $ | 20,585 |
|
The following tables present the recorded investment in loans by portfolio segment based on impairment method as described in the allowance for loan losses methodology discussion (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2013 | | | Real Estate | | | | | | | | | | | Construction |
| | 1-4 Family Residential | | Other |
| | Commercial Loans | | Municipal Loans | | Individuals | | Total |
| Loans individually evaluated for impairment | | $ | 1,472 |
| | $ | 2,624 |
| | $ | 1,778 |
| | $ | 1,369 |
| | $ | 759 |
| | $ | 559 |
| | $ | 8,561 |
| Loans collectively evaluated for impairment | | 123,747 |
| | 387,875 |
| | 260,758 |
| | 156,286 |
| | 244,791 |
| | 169,255 |
| | 1,342,712 |
| Total ending loans balance | | $ | 125,219 |
| | $ | 390,499 |
| | $ | 262,536 |
| | $ | 157,655 |
| | $ | 245,550 |
| | $ | 169,814 |
| | $ | 1,351,273 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2012 | | | Real Estate | | | | | | | | | | | Construction | | 1-4 Family Residential | | Other | | Commercial Loans | | Municipal Loans | | Loans to Individuals | | Total | Loans individually evaluated for impairment | | $ | 7,653 |
| | $ | 8,563 |
| | $ | 10,366 |
| | $ | 6,284 |
| | $ | 559 |
| | $ | 1,165 |
| | $ | 34,590 |
| Loans collectively evaluated for impairment | | 106,091 |
| | 360,282 |
| | 226,394 |
| | 153,774 |
| | 220,388 |
| | 161,458 |
| | 1,228,387 |
| Total ending loans balance | | $ | 113,744 |
| | $ | 368,845 |
| | $ | 236,760 |
| | $ | 160,058 |
| | $ | 220,947 |
| | $ | 162,623 |
| | $ | 1,262,977 |
|
The following table details activity of the reserve for unfunded loan commitments for the periods presented (in thousands):
| | | | | | | | | | | | | | | | Years Ended December 31, | | | 2013 | | 2012 | | 2011 | Reserve For Unfunded Loan Commitments: | | | | | | | Balance at beginning of period | | $ | 5 |
| | $ | 26 |
| | $ | 30 |
| Provision (reversal) for losses on unfunded loan commitments | | 308 |
| | (21 | ) | | (4 | ) | Balance at end of period | | $ | 313 |
| | $ | 5 |
| | $ | 26 |
|
The following table sets forth loans by credit quality indicator for the periods presented (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2013 | | | Pass | | Pass Watch | | Special Mention | | Substandard | | Doubtful | | Loss | | Total | Real Estate Loans: | | | | | | | | | | | | | | | Construction | | $ | 121,280 |
| | $ | — |
| | $ | 1,419 |
| | $ | 2,454 |
| | $ | 66 |
| | $ | — |
| | $ | 125,219 |
| 1-4 Family residential | | 380,741 |
| | 1,626 |
| | 3,025 |
| | 4,901 |
| | 206 |
| | — |
| | 390,499 |
| Other | | 249,381 |
| | 2,553 |
| | 4,698 |
| | 5,887 |
| | 17 |
| | — |
| | 262,536 |
| Commercial loans | | 150,683 |
| | 836 |
| | 9 |
| | 5,826 |
| | 301 |
| | — |
| | 157,655 |
| Municipal loans | | 244,505 |
| | — |
| | — |
| | 1,045 |
| | — |
| | — |
| | 245,550 |
| Loans to individuals | | 168,764 |
| | 27 |
| | 2 |
| | 719 |
| | 302 |
| | — |
| | 169,814 |
| Total | | $ | 1,315,354 |
| | $ | 5,042 |
| | $ | 9,153 |
| | $ | 20,832 |
| | $ | 892 |
| | $ | — |
| | $ | 1,351,273 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2012 | | | Pass | | Pass Watch | | Special Mention | | Substandard | | Doubtful | | Loss | | Total | Real Estate Loans: | | | | | | | | | | | | | | | Construction | | $ | 106,091 |
| | $ | — |
| | $ | 3,637 |
| | $ | 3,941 |
| | $ | 75 |
| | $ | — |
| | $ | 113,744 |
| 1-4 Family residential | | 360,282 |
| | 1,805 |
| | 170 |
| | 5,711 |
| | 877 |
| | — |
| | 368,845 |
| Other | | 226,394 |
| | 2,721 |
| | 4,073 |
| | 3,319 |
| | 253 |
| | — |
| | 236,760 |
| Commercial loans | | 153,774 |
| | 731 |
| | — |
| | 4,690 |
| | 863 |
| | — |
| | 160,058 |
| Municipal loans | | 220,388 |
| | 204 |
| | — |
| | 355 |
| | — |
| | — |
| | 220,947 |
| Loans to individuals | | 161,458 |
| | 27 |
| | 4 |
| | 723 |
| | 393 |
| | 18 |
| | 162,623 |
| Total | | $ | 1,228,387 |
| | $ | 5,488 |
| | $ | 7,884 |
| | $ | 18,739 |
| | $ | 2,461 |
| | $ | 18 |
| | $ | 1,262,977 |
|
The following table sets forth nonperforming assets for the periods presented (in thousands):
| | | | | | | | | | | | At December 31, 2013 | | At December 31, 2012 | Nonaccrual loans | | $ | 8,088 |
| | $ | 10,314 |
| Accruing loans past due more than 90 days | | 3 |
| | 15 |
| Restructured loans | | 3,888 |
| | 2,998 |
| Other real estate owned | | 726 |
| | 686 |
| Repossessed assets | | 901 |
| | 704 |
| Total Nonperforming Assets | | $ | 13,606 |
| | $ | 14,717 |
|
Nonaccrual and Past Due Loans
Nonaccrual loans are those loans which are 90 days or more delinquent and collection in full of both the principal and interest is not expected. Additionally, some loans that are not delinquent may be placed on nonaccrual status due to doubts about full collection of principal or interest. When a loan is categorized as nonaccrual, the accrual of interest is discontinued and any accrued balance is reversed for financial statement purposes. Payments of contractual interest are recognized as income only to the extent that full recovery of the principal balance of the loan is reasonably certain. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Other factors, such as the value of collateral securing the loan and the financial condition of the borrower must be considered in judgments as to potential loan loss.
Loans are considered impaired if, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. The measurement of impaired loans is generally based on the present value of the expected future cash flows discounted at the historical effective interest rate stipulated in the loan agreement, except that all collateral-dependent loans are measured for impairment based on the fair value of the collateral. In measuring the fair value of the collateral, in addition to relying on third party appraisals, we use assumptions such as discount rates, and methodologies, such as comparison to the recent selling price of similar assets, consistent with those that would be utilized by unrelated third parties performing a valuation. Loans that are evaluated and determined not to meet the definition of an impaired loan are reserved for at the general reserve rate for its appropriate class.
Nonaccrual loans and accruing loans past due more than 90 days include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.
The following table sets forth the recorded investment in nonaccrual and accruing loans past due more than 90 days by class of loans for the periods presented (in thousands):
| | | | | | | | | | | | | | | | | | | | December 31, 2013 | | December 31, 2012 | | | Nonaccrual | | Accruing Loans Past Due More Than 90 Days | | Nonaccrual | | Accruing Loans Past Due More Than 90 Days | Real Estate Loans: | | | | | | | | | Construction | | $ | 1,472 |
| | $ | — |
| | $ | 2,416 |
| | $ | — |
| 1-4 Family residential | | 1,435 |
| | — |
| | 2,001 |
| | — |
| Other | | 599 |
| | — |
| | 1,357 |
| | — |
| Commercial loans | | 1,062 |
| | — |
| | 1,812 |
| | — |
| Loans to individuals | | 3,520 |
| | 3 |
| | 2,728 |
| | 15 |
| Total | | $ | 8,088 |
| | $ | 3 |
| | $ | 10,314 |
| | $ | 15 |
|
The following tables present the aging of the recorded investment in past due loans by class of loans (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2013 | | | 30-59 Days Past Due | | 60-89 Days Past Due | | Greater than 90 Days Past Due | | Total Past Due | | Loans Not Past Due | | Total | Real Estate Loans: | | | | | | | | | | | | | Construction | | $ | 311 |
| | $ | — |
| | $ | 1,472 |
| | $ | 1,783 |
| | $ | 123,436 |
| | $ | 125,219 |
| 1-4 Family residential | | 4,340 |
| | 781 |
| | 1,435 |
| | 6,556 |
| | 383,943 |
| | 390,499 |
| Other | | 2,652 |
| | — |
| | 599 |
| | 3,251 |
| | 259,285 |
| | 262,536 |
| Commercial loans | | 411 |
| | 22 |
| | 1,062 |
| | 1,495 |
| | 156,160 |
| | 157,655 |
| Municipal loans | | — |
| | — |
| | — |
| | — |
| | 245,550 |
| | 245,550 |
| Loans to individuals | | 7,241 |
| | 2,590 |
| | 3,523 |
| | 13,354 |
| | 156,460 |
| | 169,814 |
| Total | | $ | 14,955 |
| | $ | 3,393 |
| | $ | 8,091 |
| | $ | 26,439 |
| | $ | 1,324,834 |
| | $ | 1,351,273 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2012 | | | 30-59 Days Past Due | | 60-89 Days Past Due | | Greater than 90 Days Past Due | | Total Past Due | | Loans Not Past Due | | Total | Real Estate Loans: | | | | | | | | | | | | | Construction | | $ | 1,589 |
| | $ | — |
| | $ | 2,416 |
| | $ | 4,005 |
| | $ | 109,739 |
| | $ | 113,744 |
| 1-4 Family residential | | 4,450 |
| | 977 |
| | 2,001 |
| | 7,428 |
| | 361,417 |
| | 368,845 |
| Other | | 1,639 |
| | 273 |
| | 1,357 |
| | 3,269 |
| | 233,491 |
| | 236,760 |
| Commercial loans | | 769 |
| | 175 |
| | 1,812 |
| | 2,756 |
| | 157,302 |
| | 160,058 |
| Municipal loans | | 709 |
| | — |
| | — |
| | 709 |
| | 220,238 |
| | 220,947 |
| Loans to individuals | | 5,908 |
| | 1,191 |
| | 2,743 |
| | 9,842 |
| | 152,781 |
| | 162,623 |
| Total | | $ | 15,064 |
| | $ | 2,616 |
| | $ | 10,329 |
| | $ | 28,009 |
| | $ | 1,234,968 |
| | $ | 1,262,977 |
|
The following table sets forth interest income recognized on nonaccrual and restructured loans by class of loans for the periods presented. Average recorded investment is reported on a year-to-date basis (in thousands):
| | | | | | | | | | | | | | December 31, 2013 | | Average Recorded Investment | | Interest Income Recognized | | Accruing Interest at Original Contracted Rate | Real Estate Loans: | | | | | | Construction | $ | 1,707 |
| | $ | 9 |
| | $ | 166 |
| 1-4 Family residential | 2,915 |
| | 57 |
| | 137 |
| Other | 1,972 |
| | 71 |
| | 109 |
| Commercial loans | 1,935 |
| | 15 |
| | 93 |
| Municipal loans | 292 |
| | 26 |
| | 42 |
| Loans to individuals | 3,149 |
| | 464 |
| | 783 |
| Total | $ | 11,970 |
| | $ | 642 |
| | $ | 1,330 |
|
| | | | | | | | | | | | | | December 31, 2012 | | Average Recorded Investment | | Interest Income Recognized | | Accruing Interest at Original Contracted Rate | Real Estate Loans: | | | | | | Construction | $ | 3,222 |
| | $ | 2 |
| | $ | 241 |
| 1-4 Family residential | 2,873 |
| | 38 |
| | 128 |
| Other | 1,734 |
| | 69 |
| | 178 |
| Commercial loans | 2,234 |
| | 32 |
| | 128 |
| Loans to individuals | 3,170 |
| | 431 |
| | 673 |
| Total | $ | 13,233 |
| | $ | 572 |
| | $ | 1,348 |
|
| | | | | | | | | | | | | | December 31, 2011 | | Average Recorded Investment | | Interest Income Recognized | | Accruing Interest at Original Contracted Rate | Real Estate Loans: | | | | | | Construction | $ | 4,054 |
| | $ | 18 |
| | $ | 292 |
| 1-4 Family residential | 2,362 |
| | 112 |
| | 153 |
| Other | 1,744 |
| | 50 |
| | 130 |
| Commercial loans | 1,748 |
| | 2 |
| | 65 |
| Loans to individuals | 4,508 |
| | 761 |
| | 1,191 |
| Total | $ | 14,416 |
| | $ | 943 |
| | $ | 1,831 |
|
The following table sets forth impaired loans by class of loans for the periods presented (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2013 | | | Unpaid Contractual Principal Balance | | Recorded Investment With No Allowance | | Recorded Investment With Allowance | | Total Recorded Investment | | Related Allowance for Loan Losses | Real Estate Loans: | | | | | | | | | | | Construction | | $ | 2,629 |
| | $ | — |
| | $ | 1,472 |
| | $ | 1,472 |
| | $ | 103 |
| 1-4 Family residential | | 2,748 |
| | — |
| | 2,624 |
| | 2,624 |
| | 161 |
| Other | | 1,800 |
| | — |
| | 1,778 |
| | 1,778 |
| | 73 |
| Commercial loans | | 1,606 |
| | — |
| | 1,369 |
| | 1,369 |
| | 240 |
| Municipal loans | | 759 |
| | — |
| | 759 |
| | 759 |
| | 15 |
| Loans to individuals | | 4,280 |
| | — |
| | 3,943 |
| | 3,943 |
| | 1,950 |
| Total | | $ | 13,822 |
| | $ | — |
| | $ | 11,945 |
| | $ | 11,945 |
| | $ | 2,542 |
|
| | | | | | | | | | | | | | | | | | | | | | | | December 31, 2012 | | | Unpaid Contractual Principal Balance | | Recorded Investment With No Allowance | | Recorded Investment With Allowance | | Total Recorded Investment | | Related Allowance for Loan Losses | Real Estate Loans: | | | | | | | | | | | Construction | | $ | 3,716 |
| | $ | — |
| | $ | 2,465 |
| | $ | 2,465 |
| | $ | 200 |
| 1-4 Family residential | | 2,907 |
| | — |
| | 2,799 |
| | 2,799 |
| | 222 |
| Other | | 3,133 |
| | — |
| | 2,613 |
| | 2,613 |
| | 243 |
| Commercial loans | | 2,215 |
| | — |
| | 2,043 |
| | 2,043 |
| | 630 |
| Municipal loans | | — |
| | — |
| | — |
| | — |
| | — |
| Loans to individuals | | 3,626 |
| | 1 |
| | 3,359 |
| | 3,360 |
| | 1,428 |
| Total | | $ | 15,597 |
| | $ | 1 |
| | $ | 13,279 |
| | $ | 13,280 |
| | $ | 2,723 |
|
At any time a potential loss is recognized in the collection of principal, proper reserves should be allocated. Loans are charged off when deemed uncollectible. Loans are written down as soon as collection by liquidation is evident to the liquidation value of the collateral net of liquidation costs, if any, and placed in nonaccrual status.
Troubled Debt Restructurings
The restructuring of a loan is considered a TDR if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.
The following tables set forth the recorded investment in loans modified for the periods presented (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2013 | | | Extend Amortization Period | | Interest Rate Reductions | | Combination (1) | | Total Modifications | | Number of Contracts | Real Estate Loans: | | | | | | | | | | | 1-4 Family residential | | $ | 279 |
| | $ | — |
| | $ | 117 |
| | $ | 396 |
| | 5 |
| Other | | 153 |
| | — |
| | 14 |
| | 167 |
| | 2 |
| Commercial loans | | 256 |
| | — |
| | 84 |
| | 340 |
| | 5 |
| Municipal Loans | | 759 |
| | — |
| | — |
| | 759 |
| | 1 |
| Loans to individuals | | — |
| | 308 |
| | 97 |
| | 405 |
| | 47 |
| Total | | $ | 1,447 |
| | $ | 308 |
| | $ | 312 |
| | $ | 2,067 |
| | 60 |
|
| | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2012 | | | Extend Amortization Period | | Interest Rate Reductions | | Combination (1) | | Total Modifications | | Number of Contracts | Real Estate Loans: | | | | | | | | | | | 1-4 Family residential | | $ | 644 |
| | $ | 32 |
| | $ | 428 |
| | $ | 1,104 |
| | 13 |
| Other | | 510 |
| | 204 |
| | 349 |
| | 1,063 |
| | 9 |
| Commercial loans | | 372 |
| | — |
| | 516 |
| | 888 |
| | 12 |
| Municipal Loans | | — |
| | — |
| | — |
| | — |
| | — |
| Loans to individuals | | 27 |
| | 7 |
| | 98 |
| | 132 |
| | 26 |
| Total | | $ | 1,553 |
| | $ | 243 |
| | $ | 1,391 |
| | $ | 3,187 |
| | 60 |
|
| | (1) | These modifications include an extension of the amortization period and interest rate reduction. |
The majority of loans restructured as TDRs during the year ended December 31, 2013 were modified to extend the maturity. Interest continues to be charged on principal balances outstanding during the term extended. Therefore, the financial effects of the recorded investment of loans restructured as TDRs during the years ended December 31, 2013 and December 31, 2012 were insignificant. Generally, the loans identified as TDRs were previously reported as impaired loans prior to restructuring and therefore the modification did not impact our determination of the allowance for loan losses. On an ongoing basis, the performance of the restructured loans is monitored for subsequent payment default. Payment default for TDRs is recognized when the borrower is 90 days or more past due. For the years ended December 31, 2013 and 2012, there were no significant defaults. These defaults did not significantly impact the determination of the allowance for loan loss. At December 31, 2013 and December 31, 2012, there were no commitments to lend additional funds to borrowers whose terms have been modified in TDRs. |