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Allowance for Loan Losses
 12 Months Ended
Dec. 31, 2014
Receivables [Abstract]  
Allowance for Loan Losses

6.    Allowance for Loan Losses

The Company maintains an allowance for loan losses in an amount determined by management on the basis of the character of the loans, loan performance, financial condition of borrowers, the value of collateral securing loans and other relevant factors. The following table summarizes the changes in the Company’s allowance for loan losses for the years indicated.

 

An analysis of the allowance for loan losses for each of the three years ending December 31, 2014, 2013 and 2012 is as follows:

 

     2014      2013      2012  
(dollars in thousands)                     

Allowance for loan losses, beginning of year

    $ 20,941       $ 19,197       $ 16,574   

Loans charged-off

      (1,382 )       (1,813 )       (2,301 ) 

Recoveries on loans previously charged-off

      709         847         774   
  

 

 

     

 

 

     

 

 

  

Net charge-offs

      (673 )       (966 )       (1,527 ) 

Provision charged to expense

      2,050         2,710         4,150   
  

 

 

     

 

 

     

 

 

  

Allowance for loan losses, end of year

    $ 22,318       $ 20,941       $ 19,197   
  

 

 

     

 

 

     

 

 

  

ALLOWANCE FOR LOAN LOSSES AND AMOUNT OF INVESTMENTS IN LOANS

Further information pertaining to the allowance for loan losses at December 31, 2014 follows:

 

    Construction
and Land
Development		     Commercial
and
Industrial		     Municipal     Commercial
Real Estate		     Residential
Real
Estate		     Consumer     Home
Equity		     Unallocated     Total  
(dollars in thousands)                  

Allowance for Loan Losses:

                  

Balance at December 31, 2013

   $ 2,174      $ 2,617      $ 655      $ 10,935      $ 2,006      $ 432      $ 959      $ 1,163      $ 20,941   

Charge-offs

     (500 )      (333 )      —        —        (24 )      (525 )      —        —        (1,382 ) 

Recoveries

     —        201        —        7        27        391        83        —        709   

Provision

     (82 )      2,272        833        257        (1,233 )      512        (443 )      (66 )      2,050   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance at December 31, 2014

   $ 1,592      $ 4,757      $ 1,488      $ 11,199      $ 776      $ 810      $ 599      $ 1,097      $ 22,318   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Amount of allowance for loan losses for loans deemed to be impaired

   $ 21      $ 57      $ —      $ 639      $ 95      $ —      $ 92      $ —      $ 904   

Amount of allowance for loan losses for loans not deemed to be impaired

   $ 1,571      $ 4,700      $ 1,488      $ 10,560      $ 681      $ 810      $ 507      $ 1,097      $ 21,414   

Loans:

                  

Ending balance

   $ 22,744      $ 149,732      $ 41,850      $ 696,272      $ 257,305      $ 12,188      $ 151,275      $ —      $ 1,331,366   

Loans deemed to be impaired

   $ 103      $ 853      $ —      $ 4,317      $ 962      $ —      $ 92      $ —      $ 6,327   

Loans not deemed to be impaired

   $ 22,641      $ 148,879      $ 41,850      $ 691,955      $ 256,343      $ 12,188      $ 151,183      $ —      $ 1,325,039   

 

Further information pertaining to the allowance for loan losses at December 31, 2013 follows:

 

    Construction
and Land
Development		     Commercial
and
Industrial		     Municipal     Commercial
Real Estate		     Residential
Real
Estate		     Consumer     Home
Equity		     Unallocated     Total  
(dollars in thousands)                  

Allowance for Loan Losses:

                  

Balance at December 31, 2012

   $ 3,041      $ 3,118      $ 24      $ 9,041      $ 1,994      $ 333      $ 886      $ 760      $ 19,197   

Charge-offs

     (1,000 )      (234 )      —        —        —        (579 )      —        —        (1,813 ) 

Recoveries

     —        389        —        19        11        427        1        —        847   

Provision

     133        (656 )      631        1,875        1        251        72        403        2,710   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance at December 31, 2013

   $ 2,174      $ 2,617      $ 655      $ 10,935      $ 2,006      $ 432      $ 959      $ 1,163      $ 20,941   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Amount of allowance for loan losses for loans deemed to be impaired

   $ 12      $ 367      $ —      $ 417      $ 129      $ —      $ 94      $ —      $ 1,019   

Amount of allowance for loan losses for loans not deemed to be impaired

   $ 2,162      $ 2,250      $ 655      $ 10,518      $ 1,877      $ 432      $ 865      $ 1,163      $ 19,922   

Loans:

                  

Ending balance

   $ 33,058      $ 76,675      $ 32,737      $ 696,317      $ 286,041      $ 9,658      $ 130,277      $ —      $ 1,264,763   

Loans deemed to be impaired

   $ 608      $ 1,367      $ —      $ 4,520      $ 1,199      $ —      $ 94      $ —      $ 7,788   

Loans not deemed to be impaired

   $ 32,450      $ 75,308      $ 32,737      $ 691,797      $ 284,842      $ 9,658      $ 130,183      $ —      $ 1,256,975   

CREDIT QUALITY INFORMATION

The Company utilizes a six-grade internal loan rating system for commercial real estate, construction and commercial loans as follows:

Loans rated 1-3 (Pass) — Loans in this category are considered “pass” rated loans with low to average risk.

Loans rated 4 (Monitor) — These loans represent classified loans that management is closely monitoring for credit quality. These loans have had or may have minor credit quality deterioration as of December 31, 2014.

Loans rated 5 (Substandard) — Substandard loans represent classified loans that management is closely monitoring for credit quality. These loans have had more significant credit quality deterioration as of December 31, 2014.

Loans rated 6 (Doubtful) — Doubtful loans represent classified loans that management is closely monitoring for credit quality. These loans had more significant credit quality deterioration as of December 31, 2014, and are doubtful for full collection.

Impaired — Impaired loans represent classified loans that management is closely monitoring for credit quality. A loan is classified as impaired when it is probable that the Company will be unable to collect all amounts due.

 

The following table presents the Company’s loans by risk rating at December 31, 2014.

 

     Construction
and Land
Development		      Commercial
and
Industrial		      Municipal      Commercial
Real Estate		  
(dollars in thousands)                            

Grade:

            

1-3 (Pass)

    $ 15,515       $ 148,407       $ 41,850       $ 691,322   

4 (Monitor)

      7,126         472         —         633   

5 (Substandard)

      —         —         —         —   

6 (Doubtful)

      —         —         —         —   

Impaired

      103         853         —         4,317   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 22,744       $ 149,732       $ 41,850       $ 696,272   
  

 

 

     

 

 

     

 

 

     

 

 

  

The following table presents the Company’s loans by risk rating at December 31, 2013.

 

     Construction
and Land
Development		      Commercial
and
Industrial		      Municipal      Commercial
Real Estate		  
(dollars in thousands)                            

Grade:

            

1-3 (Pass)

    $ 25,138       $ 74,836       $ 32,737       $ 690,451   

4 (Monitor)

      7,312         472         —         1,346   

5 (Substandard)

      —         —         —         —   

6 (Doubtful)

      —         —         —         —   

Impaired

      608         1,367         —         4,520   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 33,058       $ 76,675       $ 32,737       $ 696,317   
  

 

 

     

 

 

     

 

 

     

 

 

  

The Company utilized payment performance as credit quality indicators for residential real state, consumer and overdrafts, and the home equity portfolio. The indicators are depicted in the table “aging of past-due loans,” below.

AGING OF PAST-DUE LOANS

Further information pertaining to the allowance for loan losses at December 31, 2014 follows:

 

     Accruing
30-89 Days
Past Due		      Non
Accrual		      Accruing
Greater
Than
90 Days		      Total
Past Due		      Current
Loans		      Total  
(dollars in thousands)                                          

Construction and land development

    $ —       $ 103       $ —       $ 103       $ 22,641       $ 22,744   

Commercial and industrial

      905         157         —         1,062         148,670         149,732   

Municipal

      —         —         —         —         41,850         41,850   

Commercial real estate

      1,046         2,781         —         3,827         692,445         696,272   

Residential real estate

      632         846         —         1,478         255,827         257,305   

Consumer and overdrafts

      6         5         —         11         12,177         12,188   

Home equity

      576         254         —         830         150,445         151,275   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
    Total    $ 3,165       $ 4,146       $ —       $ 7,311       $ 1,324,055       $ 1,331,366   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

Further information pertaining to the allowance for loan losses at December 31, 2013 follows:

 

     Accruing
30-89 Days
Past Due		      Non
Accrual		      Accruing
Greater
Than
90 Days		      Total
Past Due		      Current
Loans		      Total  
(dollars in thousands)                                          

Construction and land development

    $ —       $ 500       $ —       $ 500       $ 32,558       $ 33,058   

Commercial and industrial

      112         706         —         818         75,857         76,675   

Municipal

      —         —         —         —         32,737         32,737   

Commercial real estate

      1,496         306         —         1,802         694,515         696,317   

Residential real estate

      2,232         1,034         —         3,266         282,775         286,041   

Consumer and overdrafts

      11         3         —         14         9,644         9,658   

Home equity

      1,710         —         —         1,710         128,567         130,277   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

    Total

    $ 5,561       $ 2,549       $ —       $ 8,110       $ 1,256,653       $ 1,264,763   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

IMPAIRED LOANS

A loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. When a loan is impaired, the Company measures impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except that as a practical expedient, the Company measures impairment based on a loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. Loans are charged-off when management believes that the collectibility of the loan’s principal is not probable. The specific factors that management considers in making the determination that the collectibility of the loan’s principal is not probable include; the delinquency status of the loan, the fair value of the collateral, if secured, and the financial strength of the borrower and/or guarantors. For collateral dependent loans, the amount of the recorded investment in a loan that exceeds the fair value of the collateral is charged-off against the allowance for loan losses in lieu of an allocation of a specific allowance amount when such an amount has been identified definitively as uncollectible. The Company’s policy for recognizing interest income on impaired loans is contained within Note 1 of the “Notes to Consolidated Financial Statements.”

 

The following is information pertaining to impaired loans at December 31, 2014:

 

     Carrying
Value		      Unpaid
Balance
Principal		      Required
Reserve		      Average
Carrying
Value
Recognized		      Interest
Income		  
(dollars in thousands)                                   

With no required reserve recorded:

               

Construction and land development

    $ —       $ —       $ —       $ 173       $ —   

Commercial and industrial

      31         32         —         46         —   

Municipal

      —         —         —         —         —   

Commercial real estate

      393         396         —         225         —   

Residential real estate

      136         219         —         77         9   

Consumer

      —         —         —         —         —   

Home equity

      —         —         —         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 560       $ 647       $ —       $ 521       $ 9   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

With required reserve recorded:

               

Construction and land development

    $ 103       $ 108       $ 21       $ 222       $ —   

Commercial and industrial

      822         1,063         57         1,065         31   

Municipal

      —         —         —         —         —   

Commercial real estate

      3,924         4,018         639         4,325         103   

Residential real estate

      826         826         95         1,208         1   

Consumer

      —         —         —         —         —   

Home equity

      92         92         92         93         —   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 5,767       $ 6,107       $ 904       $ 6,913       $ 135   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

               

Construction and land development

    $ 103       $ 108       $ 21       $ 395       $ —   

Commercial and industrial

      853         1,095         57         1,111         31   

Municipal

      —         —         —         —         —   

Commercial real estate

      4,317         4,414         639         4,550         103   

Residential real estate

      962         1,045         95         1,285         10   

Consumer

      —         —         —         —         —   

Home equity

      92         92         92         93         —   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 6,327       $ 6,754       $ 904       $ 7,434       $ 144   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

The following is information pertaining to impaired loans at December 31, 2013:

 

     Carrying
Value		      Unpaid
Balance
Principal		      Required
Reserve		      Average
Carrying Value
Recognized		      Interest
Income		  
(dollars in thousands)                                   

With no required reserve recorded:

               

Construction and land development

    $ 500       $ 3,292       $ —       $ —       $ —   

Commercial and industrial

      238         268         —         361         1   

Municipal

      —         —         —         —         —   

Commercial real estate

      82         82         —         132         —   

Residential real estate

      246         259         —         169         —   

Consumer

      —         —         —         —         —   

Home equity

      —         —         —         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 1,066       $ 3,901       $ —       $ 662       $ 1   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

With required reserve recorded:

               

Construction and land development

    $ 108       $ 108       $ 12       $ 1,371       $ 1   

Commercial and industrial

      1,129         1,371         367         902         37   

Municipal

      —         —         —         —         —   

Commercial real estate

      4,438         4,527         417         2,868         120   

Residential real estate

      953         1,035         129         878         2   

Consumer

      —         —         —         —         —   

Home equity

      94         94         94         95         —   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 6,722       $ 7,135       $ 1,019       $ 6,114       $ 160   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

               

Construction and land development

    $ 608       $ 3,400       $ 12       $ 1,371       $ 1   

Commercial and industrial

      1,367         1,639         367         1,263         38   

Municipal

      —         —         —         —         —   

Commercial real estate

      4,520         4,609         417         3,000         120   

Residential real estate

      1,199         1,294         129         1,047         2   

Consumer

      —         —         —         —         —   

Home equity

      94         94         94         95         —   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 7,788       $ 11,036       $ 1,019       $ 6,776       $ 161   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Troubled Debt Restructurings are identified as a modification in which a concession was granted to a customer who was having financial difficulties. This concession may be below market rate, longer amortization/term, or a lower payment amount. The present value calculation of the modification did not result in an increase in the allowance for these loans beyond any previously established allocations.

 

The following is information pertaining to troubled debt restructurings occurring during the year ended December 31, 2014:

 

     Number
of
Contracts		      Pre-modification
Outstanding
Recorded
Investment		      Post-modification
Outstanding
Recorded
Investment		  
(dollars in thousands)                     

Commercial and industrial

      2       $ 98       $ 98   
  

 

 

     

 

 

     

 

 

  

Total

      2       $ 98       $ 98   
  

 

 

     

 

 

     

 

 

  

The loans were modified for 2014, by extending terms on the commercial and industrial loans. There was one commercial real estate troubled debt restructuring, totaling $2,191,000, which subsequently defaulted during 2014. The financial impact of the modification for the performing commercial and industrial loans was a $100 increase in principal payments for the year ended 2014.

The following is information pertaining to troubled debt restructurings occurring during the year ended December 31, 2013:

 

     Number of
Contracts		      Pre-modification
Outstanding
Recorded Investment		      Post-modification
Outstanding
Recorded  Investment		  
(dollars in thousands)                     

Construction and land development

              1       $ 108       $ 108   

Commercial and industrial

      2         67         64   

Commercial real estate

      3         2,376         2,356   

Residential real estate

      1         285         162   
  

 

 

     

 

 

     

 

 

  

    Total

      7       $ 2,836       $ 2,690   
  

 

 

     

 

 

     

 

 

  

There was one commercial and industrial troubled debt restructuring, that subsequently defaulted amounting to $6,000 during 2013. The loans were modified for 2013, by reducing interest rates as well as extending term on the commercial and industrial loan. The financial impact of the modifications for performing commercial and industrial loans were $808 reduction in principal and $606 reduction in interest payments for the year ended December 31, 2013. The financial impact of the modifications for performing commercial real estate loans were $5,246 increase in principal and $23,227 reduction in interest payments for the year ended December 31, 2013. The financial impact of the modifications for performing construction and land development loans were $1,515 reduction in principal and $1,098 reduction in interest payments for the year ended December 31, 2013. The financial impact of the modifications for performing residential real estate loans were $4,704 reduction in principal and $4,104 reduction in interest payments for the year ended December 31, 2013.