XML 28 R12.htm IDEA: XBRL DOCUMENT v3.19.3
LOANS AND ALLOWANCE FOR LOAN LOSSES
 9 Months Ended
Sep. 30, 2019
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:

 

       Commercial                         
(Dollars in thousands)      and       Commercial   Construction   Residential         
   Agricultural   Industrial   Consumer   Real Estate   Real Estate   Real Estate   Unallocated   Total 
Allowance for Loan Losses
Three Months Ended September 30, 2019		                                
Beginning balance  $362   $818   $335   $2,398   $43   $522   $323   $4,801 
Charge-offs   —    (81)   (71)   (589)   —    (11)   —    (752)
Recoveries   —    1    25    16    —    5    —    47 
Provision   111    (87)   (27)   (182)   5    (80)   260    — 
Ending balance  $473   $651   $262   $1,643   $48   $436   $583   $4,096 
                                         
Nine Months Ended September 30, 2019                                        
Beginning balance  $481   $892   $254   $1,926   $38   $537   $545   $4,673 
Charge-offs   —    (83)   (222)   (589)   —    (25)   —    (919)
Recoveries   65    21    113    22    —    121    —    342 
Provision   (73)   (179)   117    284    10    (197)   38    — 
Ending balance  $473   $651   $262   $1,643   $48   $436   $583   $4,096 
                                         
 Individually evaluated for impairment  $85   $2   $4   $14   $—   $186   $—   $291 
                                         
Collectively evaluated for impairment  $388   $649   $258   $1,629   $48   $250   $583   $3,805 
                                         
Three Months Ended September 30, 2018                                        
Beginning balance  $359   $970   $205   $1,911   $16   $620   $578   $4,659 
Charge-offs   —    —    (62)   —    —    (13)   —    (75)
Recoveries   —    4    22    2    —    10    —    38 
Provision   5    (25)   59    37    15    —    (91)   — 
Ending balance  $364   $949   $224   $1,950   $31   $617   $487   $4,622 
                                         
Nine Months Ended September 30, 2018                                        
Beginning balance  $506   $1,001   $262   $1,761   $35   $726   $286   $4,577 
Charge-offs   —    (58)   (180)   —    —    (25)   —    (263)
Recoveries   —    57    73    61    —    82    —    273 
Provision   (142)   (51)   69    128    (4)   (166)   201    35 
Ending balance  $364   $949   $224   $1,950   $31   $617   $487   $4,622 
                                         
Individually evaluated for impairment  $13   $18   $19   $27   $—   $180   $—   $257 
                                         
Collectively evaluated for impairment  $351   $931   $205   $1,923   $31   $437   $487   $4,365 
                                         
Loans
September 30, 2019		                                        
Individually evaluated for impairment  $389   $279   $20   $2,331   $—   $2,646        $5,665 
Collectively evaluated for impairment   49,668    81,252    24,388    141,975    11,188    92,670         401,141 
Ending balance  $50,057   $81,531   $24,408   $144,306   $11,188   $95,316        $406,806 
                                         
December 31, 2018                                        
Individually evaluated for impairment  $578   $21   $90   $623   $—   $2,712        $4,024 
Collectively evaluated for impairment   48,531    91,385    24,292    138,830    8,843    93,168         405,049 
Ending balance  $49,109   $91,406   $24,382   $139,453   $8,843   $95,880        $409,073 

  

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)  September 30,   December 31,   September 30,   December 31,   September 30,   December 31, 
   2019   2018   2019   2018   2019   2018 
Risk ratings 1 and 2  $14,214   $15,300   $7,138   $11,972   $9,137   $7,962 
Risk rating 3   16,376    23,938    39,317    50,266    89,117    89,173 
Risk rating 4   18,074    9,082    32,002    23,961    40,952    36,193 
Risk rating 5   1,004    211    2,795    5,204    2,156    4,850 
Risk rating 6   389    578    279    3    2,944    1,275 
   $50,057   $49,109   $81,531   $91,406   $144,306   $139,453 

 

Corporate Credit Exposure - Credit Risk Profile Based On Payment Activity

 

   Consumer   Construction Real Estate   Residential Real Estate 
(Dollars in thousands)  September 30,   December 31,   September 30,   December 31,   September 30,   December 31, 
   2019   2018   2019   2018   2019   2018 
Performing  $24,400   $24,320   $11,188   $8,843   $94,343   $94,925 
Nonperforming   —    —    —    —    —    — 
Nonaccrual   8    62    —    —    973    955 
   $24,408   $24,382   $11,188   $8,843   $95,316   $95,880 

 

The following schedule provides information on loans that were considered TDRs that were modified during the nine-month periods ended September 30, 2019 and September 30, 2018:

                         
   Three Months Ended September 30, 2019   Nine Months Ended September 30, 2019 
       Pre-   Post-       Pre-   Post- 
       Modification   Modification       Modification   Modification 
       Outstanding   Outstanding       Outstanding   Outstanding 
(Dollars in thousands)  Number of   Recorded   Recorded   Number of   Recorded   Recorded 
   Loans   Investment   Investment   Loans   Investment   Investment 
Commercial real estate   —   $—   $—    2   $1,882   $1,882 
Residential real estate   —    —    —    1    17    17 
    —   $—   $—    3   $1,899   $1,899 

 

   Three Months Ended September 30, 2018   Nine Months Ended September 30, 2018 
       Pre-   Post-       Pre-   Post- 
       Modification   Modification       Modification   Modification 
       Outstanding    Outstanding        Outstanding    Outstanding  
(Dollars in thousands)  Number of   Recorded   Recorded   Number of   Recorded   Recorded 
   Loans   Investment   Investment   Loans   Investment   Investment 
Commercial and industrial   —   $—   $—    —   $—   $— 

 

The pre-modification and post-modification outstanding recorded investments represent 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.

  

The following schedule provides information on TDRs as of September 30, 2019 and 2018 where the borrower was past due with respect to principal and/or interest for 30 days or more during the three- and nine-month periods ended September 30, 2019 and September 30, 2018 that had been modified during the year prior to the default:

 

   Three Months Ended   Nine Months Ended 
   September 30, 2019   September 30, 2019 
(Dollars in thousands)  Number   Recorded   Number   Recorded 
   of Loans   Investment   of Loans   Investment 
Commercial real estate   2   $1,882    2   $1,882 

 

   Three Months Ended   Nine Months Ended 
   September 30, 2018   September 30, 2018 
(Dollars in thousands)  Number    Recorded   Number   Recorded 
   of Loans   Investment   of Loans   Investment 
Commercial and industrial   —   $—    —   $— 

 

Impaired loans by loan category follow: 

             
       Unpaid     
(Dollars in thousands)  Recorded   Principal   Related 
   Investment   Balance   Allowance 
September 30, 2019               
With no related allowance recorded               
Agricultural  $—   $—   $— 
Commercial and industrial   259    259    — 
Consumer   —    —    — 
Commercial real estate   1,882    1,882    — 
Construction real estate   —    —    — 
Residential real estate   103    103    — 
Total   2,244    2,244    — 
With an allowance recorded               
Agricultural   389    474    85 
Commercial and industrial   20    22    2 
Consumer   20    24    4 
Commercial real estate   449    462    14 
Construction real estate   —    —    — 
Residential real estate   2,543    2,729    186 
Total   3,421    3,711    291 
Total               
Agricultural   389    474    85 
Commercial and industrial   279    281    2 
Consumer   20    24    4 
Commercial real estate   2,331    2,344    14 
Construction real estate   —    —    — 
Residential real estate   2,646    2,832    186 
Total  $5,665   $5,955   $291 
                
December 31, 2018               
With no related allowance recorded               
Agricultural  $185   $185   $— 
Commercial and industrial   —    —    — 
Consumer   1    1    — 
Construction real estate   —    —    — 
Commercial real estate   73    109    — 
Residential real estate   250    261    — 
Total   509    556    — 
With an allowance recorded               
Agricultural   393    440    94 
Commercial and industrial   21    21    3 
Consumer   89    89    13 
Construction real estate   —    —    — 
Commercial real estate   550    609    20 
Residential real estate   2,462    2,494    167 
Total   3,515    3,653    297 
Total               
Agricultural   578    625    94 
Commercial and industrial   21    21    3 
Consumer   90    90    13 
Construction real estate   —    —    — 
Commercial real estate   623    718    20 
Residential real estate   2,712    2,755    167 
Total  $4,024   $4,209   $297 

 

The following schedule provides information regarding average balances of impaired loans and interest recognized on impaired loans for three- and nine-month periods ended September 30, 2019 and 2018:

         
   Average   Interest 
(Dollars in thousands)  Recorded   Income 
   Investment   Recognized 
Three months ended September 30, 2019          
With no related allowance recorded          
Agricultural  $—   $— 
Commercial and industrial   129    — 
Consumer   —    — 
Commercial real estate   941    — 
Residential real estate   109    1 
Total   1,179    1 
With an allowance recorded          
Agricultural   389    — 
Commercial and industrial   191    — 
Consumer   37    1 
Commercial real estate   1,693    13 
Residential real estate   2,521    48 
Total   4,831    62 
Total          
Agricultural   389    — 
Commercial and industrial   320    — 
Consumer   37    1 
Commercial real estate   2,634    13 
Residential real estate   2,630    49 
Total  $6,010   $63 

 

   Average   Interest 
(Dollars in thousands)  Recorded   Income 
   Investment   Recognized 
Three months ended September 30, 2018          
With no related allowance recorded          
Agricultural  $211   $— 
Commercial and industrial   73    3 
Consumer   —    — 
Commercial real estate   134    — 
Construction real estate   65    — 
Residential real estate   168    — 
Total   651    3 
With an allowance recorded          
Agricultural   206    — 
Commercial and industrial   521    8 
Consumer   68    3 
Commercial real estate   739    20 
Construction real estate   —    — 
Residential real estate   2,418    52 
Total   3,952    83 
Total          
Agricultural   417    — 
Commercial and industrial   594    11 
Consumer   68    3 
Commercial real estate   873    20 
Construction real estate   65    — 
Residential real estate   2,586    52 
Total  $4,603   $86 

 

   Average   Interest 
(Dollars in thousands)  Recorded   Income 
   Investment   Recognized 
Nine months ended September 30, 2019          
With no related allowance recorded          
Agricultural  $46   $— 
Commercial and industrial   65    9 
Consumer   —    — 
Commercial real estate   507    61 
Residential real estate   156    4 
Total   774    74 
With an allowance recorded          
Agricultural   390    — 
Commercial and industrial   107    2 
Consumer   56    1 
Commercial real estate   1,117    27 
Residential real estate   2,510    112 
Total   4,180    142 
Total          
Agricultural   436    — 
Commercial and industrial   172    11 
Consumer   56    1 
Commercial real estate   1,624    88 
Residential real estate   2,666    116 
Total  $4,954   $216 

 

   Average   Interest 
(Dollars in thousands)  Recorded   Income 
   Investment   Recognized 
Nine months ended September 30, 2018          
With no related allowance recorded          
Agricultural  $317   $— 
Commercial and industrial   37    6 
Consumer   2    — 
Commercial real estate   67    — 
Construction real estate   79    — 
Residential real estate   159    2 
Total   661    8 
With an allowance recorded          
Agricultural   103    — 
Commercial and industrial   364    23 
Consumer   52    2 
Commercial real estate   728    42 
Construction real estate   —    — 
Residential real estate   2,539    112 
Total   3,786    179 
Total          
Agricultural   420    — 
Commercial and industrial   401    29 
Consumer   54    2 
Commercial real estate   795    42 
Construction real estate   79    — 
Residential real estate   2,698    114 
Total  $4,447   $187 

 

An aging analysis of loans by loan category follows:

 

           Greater               90 Days Past 
(Dollars in thousands)  30 to 59   60 to 89   Than 90       Loans Not       Due and 
   Days   Days   Days (1)   Total   Past Due   Total Loans   Accruing 
September 30, 2019                                   
Agricultural  $—   $—   $—   $—   $50,057   $50,057   $— 
Commercial and industrial   284    —    259    543    80,988    81,531    — 
Consumer   43    3    2    48    24,360    24,408    — 
Commercial real estate   —    —    1,882    1,882    142,424    144,306    — 
Construction real estate   —    —    —    —    11,188    11,188    — 
Residential real estate   102    644    201    947    94,369    95,316    — 
   $429   $647   $2,344   $3,420   $403,386   $406,806   $— 
                                    
December 31, 2018                                   
Agricultural  $—   $—   $—   $—   $49,109   $49,109   $— 
Commercial and industrial   5    —    —    5    91,401    91,406    — 
Consumer   149    40    11    200    24,182    24,382    — 
Commercial real estate   —    —    73    73    139,380    139,453    — 
Construction real estate   —    —    —    —    8,843    8,843    — 
Residential real estate   1,493    486    648    2,627    93,253    95,880    — 
   $1,647   $526   $732   $2,905   $406,168   $409,073   $— 

 

(1) Includes nonaccrual loans.

 

Nonaccrual loans by loan category follow:

 

(Dollars in thousands)  September 30,   December 31, 
   2019   2018 
Agricultural  $389   $393 
Commercial and industrial   279    — 
Consumer   7    62 
Commercial real estate   1,925    123 
Construction real estate   —    — 
Residential real estate   973    954 
   $3,573   $1,532