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Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2015

Receivables [Abstract]

Loans And Allowance For Loan Losses

NOTE 3 – LOANS AND ALLOWANCE FOR LOAN LOSSES

Activity in the allowance for loan losses and balances in the loan portfolio were as follows:

(Dollars in thousands)		Agricultural				Commercial and Industrial				Consumer				Commercial Real Estate				Construction Real Estate				Residential Real Estate				Unallocated				Total
Allowance for Loan Losses Three Months Ended June 30, 2015
Beginning balance		$	201			$	613			$	193			$	1,498			$	39			$	1,482			$	295			$	4,321
Charge-offs			—				—				(55	)			—				—				(20	)			—				(75	)
Recoveries			1				20				42				14				—				30				—				107
Provision			77				(136	)			13				(228	)			(11	)			(116	)			401				—
Ending balance		$	279			$	497			$	193			$	1,284			$	28			$	1,376			$	696			$	4,353
Six Months Ended
June 30, 2015
Beginning balance		$	187			$	527			$	183			$	1,641			$	9			$	1,193			$	433			$	4,173
Charge-offs			—				—				(106	)			—				—				(21	)			—				(127	)
Recoveries			1				48				79				21				—				58				—				207
Provision			91				(78	)			37				(378	)			19				146				263				100
Ending balance		$	279			$	497			$	193			$	1,284			$	28			$	1,376			$	696			$	4,353
Individually evaluated for impairment		$	—			$	—			$	1			$	333			$	—			$	332			$	—			$	666
Collectively evaluated for impairment		$	279			$	497			$	192			$	951			$	28			$	1,044			$	696			$	3,687
Three Months Ended
June 30, 2014
Beginning balance		$	187			$	586			$	187			$	1,664			$	7			$	1,563			$	402			$	4,596
Charge-offs			—				—				(64	)			—				—				(20	)			—				(84	)
Recoveries			4				18				57				38				—				27				—				144
Provision			(11	)			44				15				70				(2	)			(301	)			185				—
Ending balance		$	180			$	648			$	195			$	1,772			$	5			$	1,269			$	587			$	4,656
Six Months Ended
June 30, 2014
Beginning balance		$	179			$	562			$	192			$	1,842			$	12			$	1,625			$	323			$	4,735
Charge-offs			—				—				(117	)			(185	)			—				(110	)			—				(412	)
Recoveries			5				38				107				52				—				31				—				233
Provision			(4	)			48				13				63				(7	)			(277	)			264				100
Ending balance		$	180			$	648			$	195			$	1,772			$	5			$	1,269			$	587			$	4,656
Individually evaluated for impairment		$	20			$	38			$	4			$	836			$	—			$	254			$	—			$	1,152
Collectively evaluated for impairment		$	160			$	610			$	191			$	936			$	5			$	1,015			$	587			$	3,504
Loans
June 30, 2015
Individually evaluated for impairment		$	—			$	4			$	25			$	2,286			$	—			$	2,434							$	4,749
Collectively evaluated for impairment			36,518				84,849				20,213				97,110				2,893				89,607								331,190
Ending balance		$	36,518			$	84,853			$	20,238			$	99,396			$	2,893			$	92,041							$	335,939
December 31, 2014
Individually evaluated for impairment		$	—			$	38			$	36			$	3,853			$	—			$	2,958							$	6,885
Collectively evaluated for impairment			41,098				88,024				20,716				95,954				2,691				90,745								339,228
Ending balance		$	41,098			$	88,062			$	20,752			$	99,807			$	2,691			$	93,703							$	346,113

The process to monitor the credit quality of ChoiceOne’s loan portfolio includes tracking (1) the risk ratings of business loans, (2) the level of classified business loans, and (3) delinquent and nonperforming consumer loans. Business loans are risk rated on a scale of 1 to 8. A description of the characteristics of the ratings follows:

Risk ratings 1 and 2: These loans are considered pass credits. They exhibit good to exceptional credit risk and demonstrate the ability to repay the loan from normal business operations.

Risk rating 3: These loans are considered pass credits. They exhibit acceptable credit risk and demonstrate the ability to repay the loan from normal business operations.

Risk rating 4: These loans are considered pass credits. However, they have potential developing weaknesses that, if not corrected, may cause deterioration in the ability of the borrower to repay the loan. While a loss is possible for a loan with this rating, it is not anticipated.

Risk rating 5: These loans are considered special mention credits. Loans in this risk rating are considered to be inadequately protected by the net worth and debt service coverage of the borrower or of any pledged collateral. These loans have well defined weaknesses that may jeopardize the borrower’s ability to repay the loan. If the weaknesses are not corrected, loss of principal and interest could be probable.

Risk rating 6: These loans are considered substandard credits. These loans have well defined weaknesses, the severity of which makes collection of principal and interest in full questionable. Loans in this category may be placed on nonaccrual status.

Risk rating 7: These loans are considered doubtful credits. Some loss of principal and interest has been determined to be probable. The estimate of the amount of loss could be affected by factors such as the borrower’s ability to provide additional capital or collateral. Loans in this category are on nonaccrual status.

Risk rating 8: These loans are considered loss credits. They are considered uncollectible and will be charged off against the allowance for loan losses.

Information regarding the Bank’s credit exposure is as follows:

Corporate Credit Exposure - Credit Risk Profile By Creditworthiness Category

		Agricultural								Commercial and Industrial								Commercial Real Estate
(Dollars in thousands)		June 30,				December 31,				June 30,				December 31,				June 30,				December 31,
		2015				2014				2015				2014				2015				2014
Risk ratings 1 and 2		$	7,402			$	9,596			$	10,339			$	11,590			$	3,332			$	3,576
Risk rating 3			22,512				24,294				58,206				59,470				58,745				58,600
Risk rating 4			4,669				6,462				15,321				15,764				29,445				28,557
Risk rating 5			1,883				683				969				976				5,427				4,490
Risk rating 6			52				63				18				262				2,447				4,584
Risk rating 7			—				—				—				—				—				—
		$	36,518			$	41,098			$	84,853			$	88,062			$	99,396			$	99,807

Corporate Credit Exposure - Credit Risk Profile Based On Payment Activity

			Consumer								Construction Real Estate							Residential Real Estate
(Dollars in thousands)		June 30,				December 31,				June 30,				December 31,				June 30,				December 31,
			2015				2014				2015				2014				2015				2014
Performing		$	20,213			$	20,752			$	2,893			$	2,691			$	89,691			$	92,974
Nonperforming			25				—				—				—				2,350				58
Nonaccrual			—				—				—				—				—				671
		$	20,238			$	20,752			$	2,893			$	2,691			$	92,041			$	93,703

The following schedule provides information on loans that were considered TDRs that were modified during the three- and six-months periods ended June 30, 2015:

		Three Months Ended June 30, 2015												Six Months Ended June 30, 2015
(Dollars in thousands)		Number of Loans				Pre- Modification Outstanding  Recorded Investment				Post- Modification Outstanding  Recorded Investment				Number of Loans				Pre- Modification Outstanding  Recorded Investment				Post- Modification Outstanding  Recorded Investment
Commercial real estate			1			$	41			$	41				4			$	468			$	468

The pre-modification and post-modification outstanding recorded investment represents amounts as of the date of loan modification. If a difference exists between the pre-modification and post-modification outstanding recorded investment, it represents impairment recognized through the provision for loan losses computed based on a loan’s post-modification present value of expected future cash flows discounted at the loan’s original effective interest rate. If no difference exists, a loss is not expected to be incurred based on an assessment of the borrower’s expected cash flows.

Loans are classified as performing when they are current as to principal and interest payments or are past due on payments less than 90 days. Loans are classified as nonperforming when they are past due 90 days or more as to principal and interest payments or are considered a troubled debt restructuring.

Impaired loans by loan category follow:

(Dollars in thousands)		Recorded Investment				Unpaid Principal Balance				Related Allowance
June 30, 2015
With no related allowance recorded
Agricultural		$	—			$	—			$	—
Commercial and industrial			4				7				—
Consumer			—				—				—
Commercial real estate			713				743				—
Residential real estate			175				179				—
Subtotal			892				929				—
With an related allowance recorded
Agricultural			—				—				—
Commercial and industrial			—				—				—
Consumer			25				25				1
Commercial real estate			1,573				2,105				333
Residential real estate			2,259				2,281				332
Subtotal			3,857				4,411				666
Total
Agricultural			—				—				—
Commercial and industrial			4				7				—
Consumer			25				25				1
Commercial real estate			2,286				2,848				333
Residential real estate			2,434				2,460				332
Total		$	4,749			$	5,340			$	666
December 31, 2014
With no related allowance recorded
Agricultural		$	—			$	—			$	—
Commercial and industrial			38				43				—
Consumer			8				8				—
Commercial real estate			413				419				—
Residential real estate			502				502				—
Subtotal			961				972				—
With an allowance recorded
Agricultural			—				—				—
Commercial and industrial			—				—				—
Consumer			28				28				4
Commercial real estate			3,440				4,498				745
Residential real estate			2,456				2,474				365
Subtotal			5,924				7,000				1,114
Total
Agricultural			—				—				—
Commercial and industrial			38				43				—
Consumer			36				36				4
Commercial real estate			3,853				4,917				745
Residential real estate			2,958				2,976				365
Total		$	6,885			$	7,972			$	1,114

The following schedule provides information regarding average balances of impaired loans and interest recognized on impaired loans for the six months ended June 30, 2015 and 2014:

(Dollars in thousands)		Average Recorded Investment				Interest Income Recognized
June 30, 2015
With no related allowance recorded
Agricultural		$	—			$	—
Commercial and industrial			16				—
Consumer			3				—
Commercial real estate			658				5
Residential real estate			300				—
Subtotal			977				5
With an allowance recorded
Agricultural			70				(6	)
Commercial and industrial			—				—
Consumer			26				1
Commercial real estate			2,408				39
Residential real estate			2,393				41
Subtotal			4,897				75
Total
Agricultural			70				(6	)
Commercial and industrial			16				—
Consumer			29				1
Commercial real estate			3,066				44
Residential real estate			2,693				41
Total		$	5,874			$	80
June 30, 2014
With no related allowance recorded
Agricultural		$	150			$	—
Commercial and industrial			119				—
Consumer			1				—
Commercial real estate			445				5
Residential real estate			576				6
Subtotal			1,291				11
With an allowance recorded
Agricultural			196				—
Commercial and industrial			437				4
Consumer			33				1
Commercial real estate			3,801				53
Residential real estate			2,206				45
Subtotal			6,673				103
Total
Agricultural			346				—
Commercial and industrial			556				4
Consumer			34				1
Commercial real estate			4,246				58
Residential real estate			2,782				51
Total		$	7,964			$	114

An aging analysis of loans by loan category follows:

(Dollars in thousands)		30 to 59 Days				60 to 89 Days				Greater Than 90  Days (1)				Total				Loans Not Past Due				Total Loans				90 Days Past Due and Accruing
June 30, 2015
Agricultural		$	137			$	—			$	—			$	137			$	36,381			$	36,518			$	—
Commercial and industrial			120				238				—				358				84,495				84,853				—
Consumer			67				33				—				100				20,138				20,238				—
Commercial real estate			1,407				—				476				1,883				97,513				99,396				—
Construction real estate			—				—				—				—				2,893				2,893				—
Residential real estate			1,289				197				143				1,629				90,412				92,041				157
		$	3,020			$	468			$	619			$	4,107			$	331,832			$	335,939			$	157
December 31, 2014
Agricultural		$	—			$	—			$	—			$	—			$	41,098			$	41,098			$	—
Commercial and industrial			33				260				—				293				87,769				88,062				—
Consumer			66				10				—				76				20,676				20,752				—
Commercial real estate			172				51				699				922				98,885				99,807				—
Construction real estate			—				—				—				—				2,691				2,691				—
Residential real estate			1,376				404				363				2,143				91,560				93,703				58
		$	1,647			$	725			$	1,062			$	3,434			$	342,679			$	346,113			$	58

(1) Includes nonaccrual loans.

Nonaccrual loans by loan category follow:

		June 30,				December 31,
(Dollars in thousands)		2015				2014
Agricultural		$	—			$	—
Commercial and industrial			4				38
Consumer			—				—
Commercial real estate			931				2,652
Construction real estate			—				—
Residential real estate			612				671
		$	1,547			$	3,361

X

- Definition

The entire disclosure for financing receivables. Examples of financing receivables include, but are not limited to, loans, trade accounts receivables, notes receivable, credit cards, and receivables relating to a lessor's right(s) to payment(s) from a lease other than an operating lease that is recognized as assets.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef



-Publisher FASB



-Name Accounting Standards Codification



-Topic 310



-SubTopic 10



-Section 55



-Paragraph 14



-URI http://asc.fasb.org/extlink&oid=32702940&loc=SL6953791-111525



Reference 2: http://www.xbrl.org/2003/role/presentationRef



-Publisher FASB



-Name Accounting Standards Codification



-Topic 310



-SubTopic 10



-Section 50



-Paragraph 1



-URI http://asc.fasb.org/extlink&oid=49124121&loc=d3e4975-111524

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X

- References

No definition available.

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