Loans and Allowance For Credit Losses |
3. LOANS AND ALLOWANCE FOR CREDIT LOSSES Outstanding loans as of September 30, 2023 and December 31, 2022 are summarized below. Certain loans have been pledged to secure borrowing arrangements (see Note 4).
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
633,902 |
|
|
$ |
634,535 |
|
Real estate - other |
|
|
858,611 |
|
|
|
848,241 |
|
Real estate - construction and land |
|
|
40,003 |
|
|
|
63,730 |
|
SBA |
|
|
4,415 |
|
|
|
7,220 |
|
Other |
|
|
36,184 |
|
|
|
39,695 |
|
|
|
|
|
|
|
|
|
|
Total loans, gross |
|
|
1,573,115 |
|
|
|
1,593,421 |
|
Deferred loan origination costs, net |
|
|
1,312 |
|
|
|
2,040 |
|
Allowance for credit losses |
|
|
(15,921 |
) |
|
|
(17,005 |
) |
|
|
|
|
|
|
|
|
|
Total loans, net |
|
$ |
1,558,506 |
|
|
$ |
1,578,456 |
|
|
|
|
|
|
|
|
|
| The Company categorizes its loan portfolio into risk categories 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. The Company analyzes loans individually to classify the loans as to credit risk. The Company uses the following definitions for risk ratings: Special Mention: A Special Mention credit has potential weaknesses that require management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Special Mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Substandard: Substandard credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful: A Doubtful credit has all the weaknesses inherent in 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. Loans not meeting the criteria above that are analyzed individually, as part of the above described process, are considered to be pass-rated loans. The following table reflects the Company’s recorded investment in loans by credit quality indicators and by year of origination as of September 30, 2023.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loans by Year of Origination |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
Prior |
|
|
Revolving |
|
|
Total |
|
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
|
$ |
60,791 |
|
|
$ |
124,822 |
|
|
$ |
65,445 |
|
|
$ |
84,021 |
|
|
$ |
221,977 |
|
|
$ |
557,056 |
|
Special mention |
|
|
880 |
|
|
|
31,209 |
|
|
|
2,723 |
|
|
|
5,868 |
|
|
|
27,516 |
|
|
|
68,196 |
|
Substandard |
|
|
— |
|
|
|
1,883 |
|
|
|
780 |
|
|
|
567 |
|
|
|
5,420 |
|
|
|
8,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
61,671 |
|
|
$ |
157,914 |
|
|
$ |
68,948 |
|
|
$ |
90,456 |
|
|
$ |
254,913 |
|
|
$ |
633,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
136 |
|
|
$ |
— |
|
|
$ |
20 |
|
|
$ |
247 |
|
|
$ |
403 |
|
Real estate - other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
|
$ |
22,188 |
|
|
$ |
186,251 |
|
|
$ |
209,378 |
|
|
$ |
310,626 |
|
|
$ |
94,336 |
|
|
$ |
822,779 |
|
Special mention |
|
|
— |
|
|
|
14,924 |
|
|
|
10,210 |
|
|
|
6,948 |
|
|
|
— |
|
|
|
32,082 |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,750 |
|
|
|
— |
|
|
|
3,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
22,188 |
|
|
$ |
201,175 |
|
|
$ |
219,588 |
|
|
$ |
321,324 |
|
|
$ |
94,336 |
|
|
$ |
858,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Real estate - construction and land |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
|
$ |
2,949 |
|
|
$ |
10,949 |
|
|
$ |
24,439 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
38,337 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,666 |
|
|
|
— |
|
|
|
1,666 |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,949 |
|
|
$ |
10,949 |
|
|
$ |
24,439 |
|
|
$ |
1,666 |
|
|
$ |
— |
|
|
$ |
40,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
SBA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
|
$ |
— |
|
|
$ |
758 |
|
|
$ |
60 |
|
|
$ |
2,677 |
|
|
$ |
127 |
|
|
$ |
3,622 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
141 |
|
|
|
— |
|
|
|
141 |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
652 |
|
|
|
— |
|
|
|
652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
— |
|
|
$ |
758 |
|
|
$ |
60 |
|
|
$ |
3,470 |
|
|
$ |
127 |
|
|
$ |
4,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
|
$ |
10 |
|
|
$ |
1,612 |
|
|
$ |
— |
|
|
$ |
34,017 |
|
|
$ |
545 |
|
|
$ |
36,184 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
10 |
|
|
$ |
1,612 |
|
|
$ |
— |
|
|
$ |
34,017 |
|
|
$ |
545 |
|
|
$ |
36,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
|
$ |
85,938 |
|
|
$ |
324,392 |
|
|
$ |
299,322 |
|
|
$ |
431,341 |
|
|
$ |
316,985 |
|
|
$ |
1,457,978 |
|
Special mention |
|
|
880 |
|
|
|
46,133 |
|
|
|
12,933 |
|
|
|
14,623 |
|
|
|
27,516 |
|
|
|
102,085 |
|
Substandard |
|
|
— |
|
|
|
1,883 |
|
|
|
780 |
|
|
|
4,969 |
|
|
|
5,420 |
|
|
|
13,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
86,818 |
|
|
$ |
372,408 |
|
|
$ |
313,035 |
|
|
$ |
450,933 |
|
|
$ |
349,921 |
|
|
$ |
1,573,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
136 |
|
|
$ |
— |
|
|
$ |
20 |
|
|
$ |
247 |
|
|
$ |
403 |
| The following table reflects the loan portfolio allocated by the Company’s credit quality indicators as of December 31, 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Commercial and Industrial |
|
|
Real Estate Other |
|
|
Real Estate Construction and Land |
|
|
SBA |
|
|
Other |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
|
$ |
613,395 |
|
|
$ |
840,993 |
|
|
$ |
62,031 |
|
|
$ |
6,132 |
|
|
$ |
39,695 |
|
|
$ |
1,562,246 |
|
Special Mention |
|
|
18,157 |
|
|
|
2,602 |
|
|
|
— |
|
|
|
490 |
|
|
|
— |
|
|
|
21,249 |
|
Substandard |
|
|
2,983 |
|
|
|
4,646 |
|
|
|
1,699 |
|
|
|
598 |
|
|
|
— |
|
|
|
9,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
634,535 |
|
|
$ |
848,241 |
|
|
$ |
63,730 |
|
|
$ |
7,220 |
|
|
$ |
39,695 |
|
|
$ |
1,593,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| The increase in loans classified as special mention at September 30, 2023 compared to December 31, 2022 was primarily the result of the Company’s heightened monitoring in response to current economic and operating trends. The following table reflects an aging analysis of the loan portfolio by the time past due at September 30, 2023 and December 31, 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
30 Days |
|
|
60 Days |
|
|
90+ Days |
|
|
Nonaccrual |
|
|
Current |
|
|
Total |
|
As of September 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,183 |
|
|
$ |
632,719 |
|
|
$ |
633,902 |
|
Real estate - other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
858,611 |
|
|
|
858,611 |
|
Real estate - construction and land |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
40,003 |
|
|
|
40,003 |
|
SBA |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
53 |
|
|
|
4,362 |
|
|
|
4,415 |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
36,184 |
|
|
|
36,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, gross |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,236 |
|
|
$ |
1,571,879 |
|
|
$ |
1,573,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,028 |
|
|
$ |
633,507 |
|
|
$ |
634,535 |
|
Real estate - other |
|
|
3,160 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
845,081 |
|
|
|
848,241 |
|
Real estate - construction and land |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
63,730 |
|
|
|
63,730 |
|
SBA |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
222 |
|
|
|
6,998 |
|
|
|
7,220 |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
39,695 |
|
|
|
39,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, gross |
|
$ |
3,160 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,250 |
|
|
$ |
1,589,011 |
|
|
$ |
1,593,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| The Company measures expected credit losses on a pooled basis when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on an individual basis. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting dated and adjusted for selling costs as appropriate. At September 30, 2023 and December 31, 2022, the Company determined that certain loans did not share risk characteristics with other loans in the portfolio and therefore evaluated these loans for expected credit losses/impairment on an individual basis. The loans individually evaluated were classified as nonaccrual and were all collateral dependent. For collateral dependent loans, the Company has adopted the practical expedient under ASC 326 to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required. None of the individually evaluated loans required an allowance for credit losses as of the respective reporting dates. The following table reflects the recorded investment and unpaid principal balance for loans individually evaluated for expected credit losses/impairment as of September 30, 2023 and December 31, 2022 under ASC 326 and the previous accounting standard, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid |
|
|
Average |
|
|
|
Recorded |
|
|
Principal |
|
|
Recorded |
|
(Dollars in thousands) |
|
Investment |
|
|
Balance |
|
|
Investment |
|
As of September 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
1,183 |
|
|
$ |
1,319 |
|
|
$ |
1,183 |
|
SBA |
|
|
53 |
|
|
|
689 |
|
|
|
138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total individually evaluated loans |
|
$ |
1,236 |
|
|
$ |
2,008 |
|
|
$ |
1,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
1,028 |
|
|
$ |
1,678 |
|
|
$ |
1,028 |
|
SBA |
|
|
222 |
|
|
|
896 |
|
|
|
227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total individually evaluated loans |
|
$ |
1,250 |
|
|
$ |
2,574 |
|
|
$ |
1,255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| The recorded investment in loans individually evaluated for expected credit losses/impairment excludes interest receivable and net deferred origination costs due to their immateriality. The following table reflects the amortized cost of individually evaluated loans by type of collateral as of September 30, 2023 and December 31, 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
Residential |
|
|
Business |
|
|
Nonaccrual |
|
(Dollars in thousands) |
|
Property |
|
|
Assets |
|
|
Loans |
|
As of September 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
— |
|
|
$ |
1,183 |
|
|
$ |
1,183 |
|
SBA |
|
|
53 |
|
|
|
— |
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total individually evaluated loans |
|
$ |
53 |
|
|
$ |
1,183 |
|
|
$ |
1,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
— |
|
|
$ |
1,028 |
|
|
$ |
1,028 |
|
SBA |
|
|
222 |
|
|
|
— |
|
|
|
222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total individually evaluated loans |
|
$ |
222 |
|
|
$ |
1,028 |
|
|
$ |
1,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| The following table reflects nonaccrual loans and the related allowance for credit losses by portfolio segment as of September 30, 2023 under ASC 326 and nonaccrual loans as of December 31, 2022 under the previous accounting standard, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Loss |
|
|
|
CECL |
|
|
December 31, |
|
|
|
September 30, 2023 |
|
|
2022 |
|
|
|
Nonaccrual |
|
|
Nonaccrual |
|
|
Total |
|
|
|
|
|
|
Loans with No |
|
|
Loans with an |
|
|
Nonaccrual |
|
|
Nonaccrual |
|
(Dollars in thousands) |
|
Allowance |
|
|
Allowance |
|
|
Loans |
|
|
Loans |
|
Commercial and industrial |
|
$ |
1,183 |
|
|
$ |
— |
|
|
$ |
1,183 |
|
|
$ |
1,028 |
|
SBA |
|
|
53 |
|
|
|
— |
|
|
|
53 |
|
|
|
222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total individually evaluated loans |
|
$ |
1,236 |
|
|
$ |
— |
|
|
$ |
1,236 |
|
|
$ |
1,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Prior to the adoption of ASC 326 on January 1, 2023, the Company calculated the allowance for loan losses under the incurred loss methodology. The following table reflects information related to loans individually and collectively evaluated for impairment and related allowance for loan losses as of December 31, 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Commercial and Industrial |
|
|
Real Estate Other |
|
|
Real Estate Construction and Land |
|
|
SBA |
|
|
Other |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
1,028 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
222 |
|
|
$ |
— |
|
|
$ |
1,250 |
|
Loans collectively evaluated for impairment |
|
|
633,507 |
|
|
|
848,241 |
|
|
|
63,730 |
|
|
|
6,998 |
|
|
|
39,695 |
|
|
|
1,592,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross loans |
|
$ |
634,535 |
|
|
$ |
848,241 |
|
|
$ |
63,730 |
|
|
$ |
7,220 |
|
|
$ |
39,695 |
|
|
$ |
1,593,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Loans collectively evaluated for impairment |
|
|
10,620 |
|
|
|
5,322 |
|
|
|
884 |
|
|
|
132 |
|
|
|
47 |
|
|
|
17,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for loan losses |
|
$ |
10,620 |
|
|
$ |
5,322 |
|
|
$ |
884 |
|
|
$ |
132 |
|
|
$ |
47 |
|
|
$ |
17,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest forgone on nonaccrual loans totaled $62,000 and $25,000 for the three months ended September 30, 2023 and 2022, respectively. Interest forgone on nonaccrual loans totaled $150,000 and $60,000 for the nine months ended September 30, 2023 and 2022, respectively. There was no interest recognized on a cash-basis on loans individually evaluated for expected credit losses/impairment during the three and nine months ended September 30, 2023 and 2022 under ASC 326 and the previous accounting standard, respectively. The following tables reflect the changes in, and allocation of, the allowance for credit losses and allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2023 and 2022. The provision for credit losses of $121,000 for the third quarter of 2023 was primarily the result of changes in the forecast assumptions utilized in the CECL model along with a specific reserve pertaining to a previously charged-off SBA loan for which the SBA is unlikely to cover the portion participated to another lender, offset by net recoveries during the quarter of $78,000. In addition to changes in forecast assumptions and the above-mentioned specific reserve, the provision for credit losses of $925,000 for the nine months ended September 30, 2023 was impacted by the recognition of net charge-offs during the period of $169,000.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Commercial and Industrial |
|
|
Real Estate Other |
|
|
Real Estate Construction and Land |
|
|
SBA |
|
|
Other |
|
|
Total |
|
Three months ended September 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
10,803 |
|
|
$ |
2,970 |
|
|
$ |
737 |
|
|
$ |
40 |
|
|
$ |
1,172 |
|
|
$ |
15,722 |
|
Provision for credit losses |
|
|
272 |
|
|
|
(66 |
) |
|
|
(351 |
) |
|
|
452 |
|
|
|
(186 |
) |
|
|
121 |
|
Charge-offs |
|
|
(156 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(156 |
) |
Recoveries |
|
|
196 |
|
|
|
— |
|
|
|
— |
|
|
|
38 |
|
|
|
— |
|
|
|
234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
11,115 |
|
|
$ |
2,904 |
|
|
$ |
386 |
|
|
$ |
530 |
|
|
$ |
986 |
|
|
$ |
15,921 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alowance for credit losses / gross loans |
|
|
1.75 |
% |
|
|
0.34 |
% |
|
|
0.96 |
% |
|
|
12.00 |
% |
|
|
2.72 |
% |
|
|
1.01 |
% |
Net recoveries (charge-offs) / gross loans |
|
|
0.01 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.86 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
Three months ended September 30, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
9,526 |
|
|
$ |
5,243 |
|
|
$ |
907 |
|
|
$ |
273 |
|
|
$ |
8 |
|
|
$ |
15,957 |
|
Provision for loan losses |
|
|
699 |
|
|
|
(70 |
) |
|
|
90 |
|
|
|
57 |
|
|
|
24 |
|
|
|
800 |
|
Charge-offs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(202 |
) |
|
|
— |
|
|
|
(202 |
) |
Recoveries |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
10,225 |
|
|
$ |
5,173 |
|
|
$ |
997 |
|
|
$ |
128 |
|
|
$ |
32 |
|
|
$ |
16,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alowance for loan losses / gross loans |
|
|
1.59 |
% |
|
|
0.63 |
% |
|
|
1.39 |
% |
|
|
1.49 |
% |
|
|
0.08 |
% |
|
|
1.04 |
% |
Net recoveries (charge-offs) / gross loans |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
-2.36 |
% |
|
|
0.00 |
% |
|
|
-0.01 |
% |
Nine months ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
10,620 |
|
|
$ |
5,322 |
|
|
$ |
884 |
|
|
$ |
132 |
|
|
$ |
47 |
|
|
$ |
17,005 |
|
Adoption of new accounting standard |
|
|
(1,566 |
) |
|
|
(1,725 |
) |
|
|
1 |
|
|
|
(91 |
) |
|
|
1,541 |
|
|
|
(1,840 |
) |
Provision for credit losses |
|
|
2,268 |
|
|
|
(693 |
) |
|
|
(499 |
) |
|
|
451 |
|
|
|
(602 |
) |
|
|
925 |
|
Charge-offs |
|
|
(403 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(403 |
) |
Recoveries |
|
|
196 |
|
|
|
— |
|
|
|
— |
|
|
|
38 |
|
|
|
— |
|
|
|
234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
11,115 |
|
|
$ |
2,904 |
|
|
$ |
386 |
|
|
$ |
530 |
|
|
$ |
986 |
|
|
$ |
15,921 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alowance for credit losses / gross loans |
|
|
1.75 |
% |
|
|
0.34 |
% |
|
|
0.96 |
% |
|
|
12.00 |
% |
|
|
2.72 |
% |
|
|
1.01 |
% |
Net recoveries (charge-offs) / gross loans |
|
|
-0.03 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.86 |
% |
|
|
0.00 |
% |
|
|
-0.01 |
% |
Nine months ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
8,552 |
|
|
$ |
4,524 |
|
|
$ |
681 |
|
|
$ |
309 |
|
|
$ |
15 |
|
|
$ |
14,081 |
|
Provision for loan losses |
|
|
1,672 |
|
|
|
649 |
|
|
|
316 |
|
|
|
21 |
|
|
|
17 |
|
|
|
2,675 |
|
Charge-offs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(202 |
) |
|
|
— |
|
|
|
(202 |
) |
Recoveries |
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
10,225 |
|
|
$ |
5,173 |
|
|
$ |
997 |
|
|
$ |
128 |
|
|
$ |
32 |
|
|
$ |
16,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alowance for loan losses / gross loans |
|
|
1.59 |
% |
|
|
0.63 |
% |
|
|
1.39 |
% |
|
|
1.49 |
% |
|
|
0.08 |
% |
|
|
1.04 |
% |
Net recoveries (charge-offs) / gross loans |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
-2.36 |
% |
|
|
0.00 |
% |
|
|
-0.01 |
% | Modifications Made to Borrowers Experiencing Financial Difficulty The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. The effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, therefore a change to the allowance for credit losses is generally not recorded upon modification. In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as an interest rate reduction or principal forgiveness, may be granted. Upon the Company’s determination that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of that loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. At September 30, 2023, the Company had one loan with a recorded investment or commitment with terms that had been modified due to the borrower experiencing financial difficulties. This loan had no payments that were considered past due as of the reporting date. The following table reflects the type of concession granted and the financial effect of the modification.
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(Dollars in thousands) |
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Amortized Cost |
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% of Total Portfolio Segment |
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Financial Effect |
SBA |
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$ |
50 |
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1.13 |
% |
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Term Extension - extended forbearance expiration from March 31, 2023 to April 1, 2024 |
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Total modified loans |
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$ |
50 |
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| The Company had no loan modifications resulting from a borrower experiencing financial difficulties with a subsequent payment default within twelve months following the modification during the three and nine months ended September 30, 2023.
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