XML 60 R14.htm IDEA: XBRL DOCUMENT v3.20.4
Allowance for Loan Losses
 12 Months Ended
Dec. 31, 2020
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, 2020, 2019 and 2018 is as follows:
 
    
2020
      2019      2018  
(dollars in thousands)                     
Allowance for loan losses, beginning of year
   
$
29,585
 
    $ 28,543      $ 26,255  
Loans
charged-off
   
 
(238
) 
      (454 )       (833 ) 
Recoveries on loans previously
charged-off
   
 
314
 
      246        1,771  
    
 
 
     
 
 
     
 
 
  
Net recoveries (charge-offs )
   
 
76
 
      (208 )       938  
Provision charged to expense
   
 
5,825
 
      1,250        1,350  
    
 
 
     
 
 
     
 
 
  
Allowance for loan losses, end of year
   
$
35,486
 
    $ 29,585      $ 28,543  
    
 
 
     
 
 
     
 
 
  
Further information pertaining to the allowance for loan losses at December 31, 2020 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:
                                                                        
Ending balance at December 31, 2019
  
$
331
 
  
$
11,596
 
  
$
2,566
 
  
$
11,464
 
  
$
2,194
 
  
$
312
 
  
$
1,065
 
  
$
57
 
  
$
29,585
 
Charge-offs
  
 
—  
 
  
 
(29
) 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
(209
) 
  
 
—  
 
  
 
—  
 
  
 
(238
) 
Recoveries
  
 
—  
 
  
 
197
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
112
 
  
 
5
 
  
 
—  
 
  
 
314
 
Provision
  
 
98
 
  
 
4,949
 
  
 
238
 
  
 
287
 
  
 
(83
) 
  
 
26
 
  
 
138
 
  
 
172
 
  
 
5,825
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Ending balance at December 31, 2020
  
$
429
 
  
$
16,713
 
  
$
2,804
 
  
$
11,751
 
  
$
2,111
 
  
$
241
 
  
$
1,208
 
  
$
229
 
  
$
35,486
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Amount of allowance for loan losses for loans deemed to be impaired
  
$
—  
 
  
$
140
 
  
$
—  
 
  
$
449
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
589
 
Amount of allowance for loan losses for loans not deemed to be impaired
  
$
429
 
  
$
16,573
 
  
$
2,804
 
  
$
11,302
 
  
$
2,111
 
  
$
241
 
  
$
1,208
 
  
$
229
 
  
$
34,897
 
Loans:
                                                                        
Ending balance
  
$
10,909
 
  
$
 1,314,245
 
  
$
 137,607
 
  
$
789,836
 
  
$
448,436
 
  
$
20,439
 
  
$
274,357
 
  
$
—  
 
  
$
 2,995,829
 
Loans deemed to be impaired
  
$
—  
 
  
$
439
 
  
$
—  
 
  
$
4,940
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
5,379
 
Loans not deemed to be impaired
  
$
10,909
 
  
$
1,313,806
 
  
$
137,607
 
  
$
784,896
 
  
$
448,436
 
  
$
20,439
 
  
$
274,357
 
  
$
—  
 
  
$
2,990,450
 
Further information pertaining to the allowance for loan losses at December 31, 2019 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:
                                                                        
Ending balance at December 31, 2018
   $ 1,092     $ 10,998     $ 1,838     $ 10,663     $ 2,190     $ 365     $ 1,111     $ 286     $ 28,543  
Charge-offs
     —         (137 )      —         —         —         (295 )      (22 )      —         (454 ) 
Recoveries
     —         60       —         —         —         186       —         —         246  
Provision
     (761 )      675       728       801       4       56       (24 )      (229 )      1,250  
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Ending balance at December 31, 2019
   $ 331     $ 11,596     $ 2,566     $ 11,464     $ 2,194     $ 312     $ 1,065     $ 57     $ 29,585  
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Amount of allowance for loan losses for loans deemed to be impaired
   $ —       $ 15     $ —       $ 87     $ —       $ —       $ —       $ —       $ 102  
Amount of allowance for loan losses for loans not deemed to be impaired
   $ 331     $ 11,581     $ 2,566     $ 11,377     $ 2,194     $ 312     $ 1,065     $ 57     $ 29,483  
Loans:
                                                                        
Ending balance
   $ 8,992     $ 812,417     $ 120,455     $ 786,102     $ 371,897     $ 21,893     $ 304,363     $ —       $  2,426,119  
Loans deemed to be impaired
   $ —       $ 906     $ —       $ 2,346     $ —       $ —       $ —       $ —       $ 3,252  
Loans not deemed to be impaired
   $ 8,992     $  811,511     $  120,455     $  783,756     $  371,897     $ 21,893     $ 304,363     $ —       $ 2,422,867  
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, 2020.
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, 2020.
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, 2020 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, 2020.
 
    
Construction
and Land
Development
   
Commercial
and
Industrial
     
Municipal
     
Commercial
Real Estate
(dollars in thousands)
                        
Grade:
                            
1-3
(Pass)
   
$10,909
   
$
1,309,861
 
   
$
137,607
 
   
$761,101
4 (Monitor)
   
—  
   
 
3,945
 
   
 
—  
 
   
23,795
5 (Substandard)
   
—  
   
 
—  
 
   
 
—  
 
   
—  
6 (Doubtful)
   
—  
   
 
—  
 
   
 
—  
 
   
—  
Impaired
   
—  
   
 
439
 
   
 
—  
 
   
4,940
    
 
   
 
 
     
 
 
     
 
Total
   
$10,909
   
$
1,314,245
 
   
$
137,607
 
   
$789,836
    
 
   
 
 
     
 
 
     
 
The Company has increased its exposure to larger loans to large institutions with publicly available credit ratings. These ratings are tracked as a credit quality indicator for these loans.
The following table presents the Company’s loans by credit rating at December 31, 2020.
 
    
Commercial
and
Industrial
     
Municipal
     
Commercial
Real Estate
     
Total
  
(dollars in thousands)
                            
Credit Rating:
                                    
Aaa-Aa3
   
$
710,955
 
   
$
74,291
 
   
$
38,035
 
   
$
823,281
 
A1-A3
   
 
183,123
 
   
 
7,103
 
   
 
145,583
 
   
 
335,809
 
Baa1-Baa3
   
 
50,000
 
   
 
51,133
 
   
 
140,905
 
   
 
242,038
 
Ba2
   
 
—  
 
   
 
5,080
 
   
 
—  
 
   
 
5,080
 
    
 
 
     
 
 
     
 
 
     
 
 
  
Total
   
$
944,078
 
   
$
137,607
 
   
$
324,523
 
   
$
1,406,208
 
    
 
 
     
 
 
     
 
 
     
 
 
  
The following table presents the Company’s loans by risk rating at December 31, 2019.
 
     Construction
and Land
Development		      Commercial
and
Industrial		      Municipal      Commercial
Real Estate		  
(dollars in thousands)                            
Grade:
                                    
1-3
(Pass)
    $ 8,992      $ 807,486      $ 120,455      $ 759,402  
4 (Monitor)
      —          4,025        —          24,354  
5 (Substandard)
      —          —          —          —    
6 (Doubtful)
      —          —          —          —    
Impaired
      —          906        —          2,346  
    
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ 8,992      $ 812,417      $ 120,455      $ 786,102  
    
 
 
     
 
 
     
 
 
     
 
 
  
The following table presents the Company’s loans by credit rating at December 31, 2019.
 
     Commercial
and
Industrial		      Municipal      Commercial
Real Estate		      Total  
(dollars in thousands)                            
Credit Rating:
                                    
Aaa-Aa3
    $ 523,644      $ 53,273      $ 40,437      $ 617,354  
A1-A3
      186,044        7,354        148,346        341,744  
Baa1-Baa3
      —          51,133        144,711        195,844  
Ba2
      —          5,895        —          5,895  
    
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ 709,688      $ 117,655      $ 333,494      $ 1,160,837  
    
 
 
     
 
 
     
 
 
     
 
 
  
The Company utilized payment performance as credit quality indicators for residential real estate, 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
At December 31, 2020, the aging of past due loans are as 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
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
10,909
 
   
$
10,909
 
Commercial and industrial
   
 
56
 
   
 
297
 
   
 
90
 
   
 
443
 
   
 
1,313,802
 
   
 
1,314,245
 
Municipal
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
137,607
 
   
 
137,607
 
Commercial real estate
   
 
—  
 
   
 
2,881
 
   
 
—  
 
   
 
2,881
 
   
 
786,955
 
   
 
789,836
 
Residential real estate
   
 
390
 
   
 
527
 
   
 
—  
 
   
 
917
 
   
 
447,519
 
   
 
448,436
 
Consumer and overdrafts
   
 
21
 
   
 
1
 
   
 
—  
 
   
 
22
 
   
 
20,417
 
   
 
20,439
 
Home equity
   
 
1,001
 
   
 
290
 
   
 
—  
 
   
 
1,291
 
   
 
273,066
 
   
 
274,357
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
   
$
1,468
 
   
$
3,996
 
   
$
90
 
   
$
5,554
 
   
$
2,990,275
 
   
$
2,995,829
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
At December 31, 2019 the aging of past due loans are as 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
    $ —        $ —        $ —        $ —        $ 8,992      $ 8,992  
Commercial and industrial
      227        400        —          627        811,790        812,417  
Municipal
      —          —          —          —          120,455        120,455  
Commercial real estate
      840        492        —          1,332        784,770        786,102  
Residential real estate
      1,563        683        —          2,246        369,651        371,897  
Consumer and overdrafts
      18        4        —          22        21,871        21,893  
Home equity
      603        435        —          1,038        303,325        304,363  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ 3,251      $ 2,014      $ —        $ 5,265      $ 2,420,854      $ 2,426,119  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
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, 2020:
 
    
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
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
Commercial and industrial
   
 
4
 
   
 
5
 
   
 
—  
 
   
 
633
 
   
 
—  
 
Municipal
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
Commercial real estate
   
 
272
 
   
 
306
 
   
 
—  
 
   
 
437
 
   
 
—  
 
Residential real estate
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
127
 
   
 
—  
 
Consumer
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
Home equity
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
   
$
276
 
   
$
311
 
   
$
—  
 
   
$
1,197
 
   
$
—  
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
With required reserve recorded:
                                             
Construction and land development
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
Commercial and industrial
   
 
435
 
   
 
454
 
   
 
140
 
   
 
121
 
   
 
8
 
Municipal
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
Commercial real estate
   
 
4,668
 
   
 
4,797
 
   
 
449
 
   
 
2,323
 
   
 
86
 
Residential real estate
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
Consumer
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
Home equity
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
   
$
5,103
 
   
$
5,251
 
   
$
589
 
   
$
2,444
 
   
$
94
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
                                             
Construction and land development
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
—  
 
Commercial and industrial
   
 
439
 
   
 
459
 
   
 
140
 
   
 
754
 
   
 
8
 
Municipal
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
Commercial real estate
   
 
4,940
 
   
 
5,103
 
   
 
449
 
   
 
2,760
 
   
 
86
 
Residential real estate
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
127
 
   
 
—  
 
Consumer
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
Home equity
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
   
$
5,379
 
   
$
5,562
 
   
$
589
 
   
$
3,641
 
   
$
94
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
The following is information pertaining to impaired loans at December 31, 2019:
 
     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
    $ —        $ —        $ —        $ —        $ —    
Commercial and industrial
      770        976        —          138        6  
Municipal
      —          —          —          —          —    
Commercial real estate
      160        189        —          445        —    
Residential real estate
      —          —          —          —          —    
Consumer
      —          —          —          —          —    
Home equity
      —          —          —          —          —    
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ 930      $ 1,165      $ —        $ 583      $ 6  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
With required reserve recorded:
                                             
Construction and land development
    $ —        $ —        $ —        $ —        $ —    
Commercial and industrial
      136        137        15        264        7  
Municipal
      —          —          —          —          —    
Commercial real estate
      2,186        2,306        87        2,314        90  
Residential real estate
      —          —          —          —          —    
Consumer
      —          —          —          —          —    
Home equity
      —          —          —          —          —    
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ 2,322      $ 2,443      $ 102      $ 2,578      $ 97  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
                                             
Construction and land development
    $ —        $ —        $ —        $ —        $ —    
Commercial and industrial
      906        1,113        15        402        13  
Municipal
      —          —          —          —          —    
Commercial real estate
      2,346        2,495        87        2,759        90  
Residential real estate
      —          —          —          —          —    
Consumer
      —          —          —          —          —    
Home equity
      —          —          —          —          —    
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ 3,252      $ 3,608      $ 102      $ 3,161      $ 103  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Troubled Debt Restructurings (TDRs) 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. 
There was one commercial and industrial loan that was modified during the first quarter of 2019. The loan was modified by reducing the interest rates as well as extending the term on the loan. The
pre-modification
and post-modification outstanding recorded investment was $39,000. The financial impact for the modification was not material. This loan was subsequently charged off during the third quarter of 2019. Also, there were no commitments to lend additional funds to troubled debt restructuring borrowers.
There were no TDRs that occurred during the year 2020. Also, there were no commitments to lend additional funds to troubled debt restructuring borrowers. There were no troubled debt restructurings that subsequently defaulted during 2020. 
Under Section 4013 of the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for
COVID-19
modifications. The Company can then suspend the requirements under GAAP for loan modifications related to
COVID-19
that would otherwise be categorized as a TDR, and suspend any determination of a loan modified as a result of
COVID-19
as being a TDR, including the requirement to determine impairment for accounting purposes.
As of December 31, 2020, and as a result of
COVID-19
loan modifications, the Company has 20 loans operating under modified terms aggregating $25,022,000, primarily consisting of short-term payment deferrals. Of these modifications, $25,022,000, or 100%, were performing in accordance with their modified terms.