Quarterly report pursuant to Section 13 or 15(d)

Loans Receivable

v2.4.0.8
Loans Receivable
 6 Months Ended
Jun. 30, 2014
Receivables [Abstract]  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
Note 5 - Loans Receivable
 
 
 
(Dollars in thousands)
 
 
 
June 30, 2014
 
December 31, 2013
 
Loans secured by real estate:
 
 
 
 
 
 
 
Residential, including home equity
 
$
190,446
 
$
161,932
 
Commercial real estate, construction & land development, and other dwellings
 
 
205,639
 
 
195,423
 
Commercial participations purchased
 
 
2,335
 
 
1,273
 
Total loans secured by real estate
 
 
398,420
 
 
358,628
 
Consumer loans
 
 
436
 
 
237
 
Commercial business
 
 
63,530
 
 
57,716
 
Government and other
 
 
27,957
 
 
21,587
 
Subtotal
 
 
490,343
 
 
438,168
 
Less:
 
 
 
 
 
 
 
Net deferred loan origination fees
 
 
(210)
 
 
(252)
 
Undisbursed loan funds
 
 
(173)
 
 
(95)
 
Loan receivables
 
$
489,960
 
$
437,821
 
 
 
 
 
 
 
 
 
 
Commercial Real
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Estate,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Construction &
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential Real
 
 
 
 
Land
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Estate, Including
 
 
 
 
Development, and
 
Participations
 
Commercial
 
Government
 
 
 
 
(Dollars in thousands)
 
Home Equity
 
Consumer Loans
 
Other Dwellings
 
Purchased
 
Business Loans
 
Loans
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Bancorp's activity in the allowance for loan losses, by loan segment, is summarized below for the six months ended June 30, 2014:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
 
$
1,444
 
$
12
 
$
4,789
 
$
31
 
$
859
 
$
54
 
$
7,189
 
Charge-offs
 
 
(13)
 
 
(12)
 
 
(1,418)
 
 
-
 
 
-
 
 
-
 
 
(1,443)
 
Recoveries
 
 
2
 
 
1
 
 
12
 
 
2
 
 
3
 
 
-
 
 
20
 
Provisions
 
 
15
 
 
28
 
 
342
 
 
(8)
 
 
7
 
 
26
 
 
410
 
Ending Balance
 
$
1,448
 
$
29
 
$
3,725
 
$
25
 
$
869
 
$
80
 
$
6,176
 
 
The Bancorp's activity in the allowance for loan losses, by loan segment, is summarized below for the six months ended June 30, 2013:                
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
 
$
1,024
 
$
19
 
$
4,550
 
$
1,608
 
$
1,220
 
$
-
 
$
8,421
 
Charge-offs
 
 
(117)
 
 
(6)
 
 
(333)
 
 
-
 
 
(438)
 
 
-
 
 
(894)
 
Recoveries
 
 
1
 
 
3
 
 
-
 
 
-
 
 
3
 
 
-
 
 
7
 
Provisions
 
 
542
 
 
(1)
 
 
122
 
 
(757)
 
 
297
 
 
27
 
 
230
 
Ending Balance
 
$
1,450
 
$
15
 
$
4,339
 
$
851
 
$
1,082
 
$
27
 
$
7,764
 
 
The Bancorp's allowance for loan losses impairment evaluation and loan receivables are summarized below at June 30, 2014:
 
Ending balance: individually evaluated for impairment
 
$
-
 
$
-
 
$
367
 
$
-
 
$
39
 
$
-
 
$
406
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: collectively evaluated for impairment
 
$
1,448
 
$
29
 
$
3,358
 
$
25
 
$
830
 
$
80
 
$
5,770
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LOAN RECEIVABLES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
 
$
190,208
 
$
432
 
$
205,498
 
$
2,335
 
$
63,530
 
$
27,957
 
$
489,960
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
153
 
$
-
 
$
6,470
 
$
-
 
$
540
 
$
-
 
$
7,163
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: purchased credit impaired individually evaluated for impairment
 
$
647
 
$
-
 
$
-
 
$
-
 
$
-
 
$
-
 
$
647
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: collectively evaluated for impairment
 
$
189,408
 
$
432
 
$
199,028
 
$
2,335
 
$
62,990
 
$
27,957
 
$
482,150
 
 
The Bancorp's allowance for loan losses impairment evaluation and loan receivables are summarized below at December 31, 2013:
 
Ending balance: individually evaluated for impairment
 
$
16
 
$
-
 
$
1,657
 
$
-
 
$
30
 
$
-
 
$
1,703
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: collectively evaluated for impairment
 
$
1,428
 
$
12
 
$
3,132
 
$
31
 
$
829
 
$
54
 
$
5,486
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LOAN RECEIVABLES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
 
$
161,664
 
$
232
 
$
195,349
 
$
1,273
 
$
57,716
 
$
21,587
 
$
437,821
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
887
 
$
-
 
$
8,446
 
$
-
 
$
534
 
$
-
 
$
9,867
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: collectively evaluated for impairment
 
$
160,777
 
$
232
 
$
186,903
 
$
1,273
 
$
57,182
 
$
21,587
 
$
427,954
 
 
The Bancorp's credit quality indicators, are summarized below at June 30, 2014 and December 31, 2013:
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
 
Corporate Credit Exposure - Credit Risk Portfolio By Creditworthiness Category
 
 
 
 
 
Commercial Real Estate, Construction
 
 
 
 
 
 
 
 
 
 
 
 
 
Government
 
 
 
 
 
& Land Development, and Other Dwellings
 
Commercial Participations Purchased
 
Commercial Business Loans
 
Loans
 
 
 
Loan Grades
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
2
 
Moderate risk
 
$
-
 
$
-
 
$
-
 
$
-
 
$
4,285
 
$
4,279
 
$
-
 
$
-
 
3
 
Acceptable risk
 
 
164,266
 
 
150,303
 
 
2,109
 
 
1,013
 
 
46,127
 
 
41,474
 
 
27,957
 
 
21,587
 
4
 
Pass/monitor
 
 
31,201
 
 
33,153
 
 
122
 
 
260
 
 
11,305
 
 
11,173
 
 
-
 
 
-
 
5
 
Special mention (watch)
 
 
3,567
 
 
3,348
 
 
-
 
 
-
 
 
1,273
 
 
88
 
 
-
 
 
-
 
6
 
Substandard
 
 
6,464
 
 
8,545
 
 
104
 
 
-
 
 
540
 
 
702
 
 
-
 
 
-
 
7
 
Doubtful
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
 
Total
 
$
205,498
 
$
195,349
 
$
2,335
 
$
1,273
 
$
63,530
 
$
57,716
 
$
27,957
 
$
21,587
 
 
 
 
(Dollars in thousands)
 
 
 
Consumer Credit Exposure - Credit Risk Profile Based On Payment Activity
 
 
 
Residential Real Estate,
 
 
 
 
 
 
 
 
 
Including Home Equity
 
Consumer Loans
 
 
 
2014
 
2013
 
2014
 
2013
 
Performing
 
$
187,268
 
$
158,963
 
$
432
 
$
232
 
Non-performing
 
 
2,940
 
 
2,701
 
 
-
 
 
-
 
Total
 
$
190,208
 
$
161,664
 
$
432
 
$
232
 
  
The Bancorp has established a standard loan grading system to assist management, lenders and review personnel in their analysis and supervision of the loan portfolio. The use and application of theses grades by the Bancorp is uniform and conforms to regulatory definitions. The loan grading system is as follows:
 
2 – Moderate risk
Borrower consistently internally generates sufficient cash flow to fund debt service, working assets, and some capital expenditures. Risk of default considered low.
 
3 – Acceptable risk
Borrower generates sufficient cash flow to fund debt service, but most working asset and all capital expansion needs are provided from external sources. Profitability ratios and key balance sheet ratios are usually close to peers but one or more ratios (e.g. leverage) may be higher than peer. Earnings may be trending down over the last three years. Borrower may be able to obtain similar financing from other banks with comparable or less favorable terms. Risk of default is acceptable but requires collateral protection.
 
4 – Pass/monitor
The borrower has significant weaknesses resulting from performance trends or management concerns. The financial condition of the company has taken a negative turn and may be temporarily strained. Cash flow may be weak but cash reserves remain adequate to meet debt service. Management weaknesses are evident. Borrowers in this category will warrant more than the normal level of supervision and more frequent reporting.
 
5 – Special mention (watch)
Special mention credits are considered bankable assets with no apparent loss of principal or interest envisioned but requiring a high level of management attention. Assets in this category are currently protected but are potentially weak. These borrowers are subject to economic, industry, or management factors having an adverse impact upon their prospects for orderly service of debt. The perceived risk in continued lending is considered to have increased beyond the level where such loans would normally be granted. These assets constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of Substandard.
 
6 – Substandard
This classification consists of loans which are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. Financial statements normally reveal some or all of the following: poor trends, lack of earnings and cash flow, excessive debt, lack of liquidity, and the absence of creditor protection. Loans are still considered collectible, but due to increased risks and defined weaknesses of the credit, some loss could be incurred in collection if the deficiencies are not corrected.
 
7 – Doubtful
This classification consists of loans where the possibility of loss is high after collateral liquidation based upon existing facts, market conditions, and value. Loss is deferred until certain important and reasonably specific pending factors which may strengthen the credit can be exactly determined. These factors may include proposed acquisitions, liquidation procedures, capital injection and receipt of additional collateral, mergers or refinancing plans.
 
Performing loans are loans that are paying as agreed and are less than ninety days past due on payments of interest and principal.
 
No loans were modified in a troubled debt restructuring, nor have any previous troubled debt restructurings subsequently defaulted, during the six months ended June 30, 2014. Four residential real estate loans with a pre-modification outstanding recorded investment of $549 thousand and a post-modification outstanding recorded investment of $533 thousand qualified as troubled debt restructurings during the first six months of 2013.
 
 
 
 
 
 
 
 
 
 
 
 
For the six months ended
 
 
 
As of June 30, 2014
 
June 30, 2014
 
 
 
 
 
 
Unpaid
 
 
 
 
Average
 
Interest
 
(Dollars in thousands)
 
Recorded
 
Principal
 
Related
 
Recorded
 
Income
 
 
 
Investment
 
Balance
 
Allowance
 
Investment
 
Recognized
 
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate, including home equity
 
$
800
 
$
812
 
$
-
 
$
160
 
$
9
 
Commercial real estate, construction & land development, and other dwellings
 
 
1,683
 
 
2,919
 
 
-
 
 
956
 
 
38
 
Commercial participations purchased
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
Commercial business loans
 
 
228
 
 
228
 
 
-
 
 
256
 
 
1
 
With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate, including home equity
 
 
-
 
 
-
 
 
-
 
 
519
 
 
-
 
Commercial real estate, construction & land development, and other dwellings
 
 
4,787
 
 
4,787
 
 
367
 
 
6,795
 
 
46
 
Commercial participations purchased
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
Commercial business loans
 
 
312
 
 
580
 
 
39
 
 
278
 
 
1
 
Total:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate, including home equity
 
$
800
 
$
812
 
$
-
 
$
679
 
$
9
 
Commercial real estate, construction & land development, and other dwellings
 
$
6,470
 
$
7,706
 
$
367
 
$
7,751
 
$
84
 
Commercial participations purchased
 
$
-
 
$
-
 
$
-
 
$
-
 
$
-
 
Commercial business loans
 
$
540
 
$
808
 
$
39
 
$
534
 
$
2
 
 
 
 
 
 
 
 
 
 
 
 
 
For the six months ended
 
 
 
As of December 31, 2013
 
June 30, 2013
 
 
 
 
 
 
Unpaid
 
 
 
 
Average
 
Interest
 
(Dollars in thousands)
 
Recorded
 
Principal
 
Related
 
Recorded
 
Income
 
 
 
Investment
 
Balance
 
Allowance
 
Investment
 
Recognized
 
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate, including home equity
 
$
-
 
$
-
 
$
-
 
$
-
 
$
-
 
Commercial real estate, construction & land development, and other dwellings
 
 
617
 
 
617
 
 
-
 
 
791
 
 
15
 
Commercial participations purchased
 
 
-
 
 
-
 
 
-
 
 
5,507
 
 
29
 
Commercial business loans
 
 
228
 
 
228
 
 
-
 
 
1,037
 
 
4
 
With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate, including home equity
 
 
887
 
 
899
 
 
16
 
 
831
 
 
12
 
Commercial real estate, construction & land development, and other dwellings
 
 
7,829
 
 
7,829
 
 
1,657
 
 
10,004
 
 
142
 
Commercial participations purchased
 
 
-
 
 
-
 
 
-
 
 
189
 
 
-
 
Commercial business loans
 
 
306
 
 
574
 
 
30
 
 
652
 
 
4
 
Total:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate, including home equity
 
$
887
 
$
899
 
$
16
 
$
831
 
$
12
 
Commercial real estate, construction & land development, and other dwellings
 
$
8,446
 
$
8,446
 
$
1,657
 
$
10,795
 
$
157
 
Commercial participations purchased
 
$
-
 
$
-
 
$
-
 
$
5,696
 
$
29
 
Commercial business loans
 
$
534
 
$
802
 
$
30
 
$
1,689
 
$
8
 
 
       As part of the acquisition of First Federal, the Bancorp acquired loans for which there was evidence of credit quality deterioration since origination and it was determined that it was probable that the Bancorp would be unable to collect all contractually required principal and interest payments. At June 30, 2014, purchased credit impaired loans with unpaid principal balances totaled $1.8 million with a recorded investment of $647,000.
 
The Bancorp’s age analysis of past due loans is summarized below:
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recorded
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Greater than
 
 
 
30-59 Days Past
 
60-89 Days Past
 
Greater Than 90
 
 
 
 
 
 
 
 
 
 
90 Days and
 
 
 
Due
 
Due
 
Days Past Due
 
Total Past Due
 
Current
 
Total Loans
 
Accruing
 
June 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate, including home equity
 
$
4,046
 
$
1,326
 
$
2,422
 
$
7,794
 
$
182,414
 
$
190,208
 
$
64
 
Consumer loans
 
 
-
 
 
-
 
 
-
 
 
-
 
 
432
 
 
432
 
 
-
 
Commercial real estate, construction & land development, and other dwellings
 
 
1,428
 
 
147
 
 
1,218
 
 
2,793
 
 
202,705
 
 
205,498
 
 
529
 
Commercial participations purchased
 
 
-
 
 
-
 
 
-
 
 
-
 
 
2,335
 
 
2,335
 
 
-
 
Commercial business loans
 
 
268
 
 
30
 
 
443
 
 
741
 
 
62,789
 
 
63,530
 
 
-
 
Government loans
 
 
-
 
 
-
 
 
-
 
 
-
 
 
27,957
 
 
27,957
 
 
-
 
Total
 
$
5,742
 
$
1,503
 
$
4,083
 
$
11,328
 
$
478,632
 
$
489,960
 
$
592
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate, including home equity
 
$
3,721
 
$
1,090
 
$
1,502
 
$
6,313
 
$
155,351
 
$
161,664
 
$
174
 
Consumer loans
 
 
1
 
 
-
 
 
-
 
 
1
 
 
231
 
 
232
 
 
-
 
Commercial real estate, construction & land development, and other dwellings
 
 
1,083
 
 
2,626
 
 
768
 
 
4,477
 
 
190,872
 
 
195,349
 
 
-
 
Commercial participations purchased
 
 
-
 
 
-
 
 
-
 
 
-
 
 
1,273
 
 
1,273
 
 
-
 
Commercial business loans
 
 
1,032
 
 
25
 
 
447
 
 
1,504
 
 
56,212
 
 
57,716
 
 
-
 
Government loans
 
 
-
 
 
-
 
 
-
 
 
-
 
 
21,587
 
 
21,587
 
 
-
 
Total
 
$
5,837
 
$
3,741
 
$
2,717
 
$
12,295
 
$
425,526
 
$
437,821
 
$
174
 
 
The Bancorp's loans on nonaccrual status are summarized below:
 
 
 
(Dollars in thousands)
 
 
 
June 30,
 
December 31,
 
 
 
2014
 
2013
 
Residential real estate, including home equity
 
$
2,940
 
$
2,526
 
Consumer loans
 
 
-
 
 
-
 
Commercial real estate, construction & land development, and other dwellings
 
 
1,253
 
 
807
 
Commercial participations purchased
 
 
-
 
 
-
 
Commercial business loans
 
 
443
 
 
447
 
Government loans
 
 
-
 
 
-
 
Total
 
$
4,636
 
$
3,780