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Allowance for Loan Losses | 3 Months Ended
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Mar. 31, 2020
Allowance For Loan Losses [Abstract] |
Allowance for Loan Losses | Note 7: Allowance for Loan Losses Management extensively reviews recent trends in changes in the size and composition of the loan portfolio, historical loss experience, qualitative factors, and specific reserve needs on loans individually evaluated for impairment, in its determination of the adequacy of the allowance for loan losses. We recorded $1.1 million in provision for loan losses for the three-month period ended March 31, 2020, as compared to $144,000 for the three-month period ended March 31, 2019. The $923,000 increase in the provision for loan losses in the first quarter of 2020, as compared to the same quarter in 2019, resulted from year-over-year increases in: (1) the qualitative factors used in determining the adequacy of the allowance for loan losses, (2) the size of the loan portfolio, and (3) delinquent and nonaccrual loans. The increase in the quantitative factors used in determining the provision for loan losses reflects the substantial increase in economic uncertainty and the resultant potential for increased credit losses in future periods as a consequence of the COVID-19 pandemic. Outstanding loan balances increased $92.9 million, or 14.1%, in the quarter ended March 31, 2020, as compared to the same quarter in the previous year, and therefore required a corresponding increase in the estimable and probable loan losses inherent in the loan portfolio. Finally, the provision for loan losses in the quarter ended March 31, 2020 was further increased, as compared to the same quarter in 2019, by the effects of an increase in the ratio of delinquent loans to total loans, which increased to 3.05% at March 31, 2020 as compared to 2.75% at March 31, 2019, coupled with an increase in nonaccrual loans that increased $1.2 million to $4.7 million at March 31, 2020 as compared to $3.4 million at March 31, 2019. Summarized in the tables below are changes in the allowance for loan losses for the indicated periods and information pertaining to the allocation of the allowance for loan losses, balances of the allowance for loan losses, loans receivable based on individual, and collective impairment evaluation by loan portfolio class. An allocation of a portion of the allowance to a given portfolio class does not limit the Company’s ability to absorb losses in another portfolio class.
|  | March 31, 2020 |
|  | 1-4 family |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | first-lien |  |  | Residential |  |  |  |  |  |  |  |  |  |  | Other |
|  | residential |  |  | construction |  |  | Commercial |  |  | Commercial |  |  | commercial |
(In thousands) |  | mortgage |  |  | mortgage |  |  | real estate |  |  | lines of credit |  |  | and industrial |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning Balance |  | $ | 580 |  |  | $ | - |  |  | $ | 4,010 |  |  | $ | 1,195 |  |  | $ | 1,645 |
Charge-offs |  |  | (26 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Recoveries |  |  | 1 |  |  |  | - |  |  |  | - |  |  |  | 2 |  |  |  | - |
Provisions |  |  | 176 |  |  |  | - |  |  |  | 233 |  |  |  | 21 |  |  |  | 113 |
Ending balance |  | $ | 731 |  |  | $ | - |  |  | $ | 4,243 |  |  | $ | 1,218 |  |  | $ | 1,758 |
Ending balance: related to loans individually evaluated for impairment |  | $ | 95 |  |  | $ | - |  |  | $ | 76 |  |  | $ | 98 |  |  | $ | 379 |
Ending balance: related to loans collectively evaluated for impairment |  | $ | 636 |  |  | $ | - |  |  | $ | 4,167 |  |  | $ | 1,120 |  |  | $ | 1,379 |
Loans receivables: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 212,149 |  |  | $ | 2,338 |  |  | $ | 261,929 |  |  | $ | 59,354 |  |  | $ | 84,774 |
Ending balance: individually evaluated for impairment |  | $ | 1,604 |  |  | $ | - |  |  | $ | 4,427 |  |  | $ | 181 |  |  | $ | 881 |
Ending balance: collectively evaluated for impairment |  | $ | 210,545 |  |  | $ | 2,338 |  |  | $ | 257,502 |  |  | $ | 59,173 |  |  | $ | 83,893 |
|  |  |  |  |  | Home equity |  |  | Other |  |  |  |  |  |  |  |  |
|  | Tax exempt |  |  | and junior liens |  |  | Consumer |  |  | Unallocated |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning Balance |  | $ | 1 |  |  | $ | 553 |  |  | $ | 413 |  |  | $ | 272 |  |  | $ | 8,669 |
Charge-offs |  |  | - |  |  |  | (28 | ) |  |  | (133 | ) |  |  | - |  |  |  | (187 | )
Recoveries |  |  | - |  |  |  | 29 |  |  |  | 25 |  |  |  | - |  |  |  | 57 |
Provisions (credits) |  |  | - |  |  |  | 57 |  |  |  | 541 |  |  |  | (74 | ) |  |  | 1,067 |
Ending balance |  | $ | 1 |  |  | $ | 611 |  |  | $ | 846 |  |  | $ | 198 |  |  | $ | 9,606 |
Ending balance: related to loans individually evaluated for impairment |  | $ | - |  |  | $ | 128 |  |  | $ | 1 |  |  | $ | - |  |  | $ | 777 |
Ending balance: related to loans collectively evaluated for impairment |  | $ | 1 |  |  | $ | 483 |  |  | $ | 845 |  |  | $ | 198 |  |  | $ | 8,829 |
Loans receivables: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 7,937 |  |  | $ | 44,732 |  |  | $ | 76,839 |  |  | $ | 150 |  |  | $ | 750,202 |
Ending balance: individually evaluated for impairment |  | $ | - |  |  | $ | 219 |  |  | $ | 90 |  |  | $ | - |  |  | $ | 7,402 |
Ending balance: collectively evaluated for impairment |  | $ | 7,937 |  |  | $ | 44,513 |  |  | $ | 76,749 |  |  | $ | 150 |  |  | $ | 742,800 |
|  | March 31, 2019 |
|  | 1-4 family |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | first-lien |  |  | Residential |  |  |  |  |  |  |  |  |  |  | Other |
|  | residential |  |  | construction |  |  | Commercial |  |  | Commercial |  |  | commercial |
(In thousands) |  | mortgage |  |  | mortgage |  |  | real estate |  |  | lines of credit |  |  | and industrial |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning Balance |  | $ | 766 |  |  | $ | - |  |  | $ | 3,578 |  |  | $ | 730 |  |  | $ | 1,285 |
Charge-offs |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (107 | ) |  |  | (1 | )
Recoveries |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Provisions (credits) |  |  | (44 | ) |  |  | - |  |  |  | (208 | ) |  |  | 179 |  |  |  | 276 |
Ending balance |  | $ | 722 |  |  | $ | - |  |  | $ | 3,370 |  |  | $ | 802 |  |  | $ | 1,560 |
Ending balance: related to loans individually evaluated for impairment |  | $ | 104 |  |  | $ | - |  |  | $ | 98 |  |  | $ | 92 |  |  | $ | 464 |
Ending balance: related to loans collectively evaluated for impairment |  | $ | 618 |  |  | $ | - |  |  | $ | 3,272 |  |  | $ | 710 |  |  | $ | 1,096 |
Loans receivables: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 237,917 |  |  | $ | 3,855 |  |  | $ | 208,388 |  |  | $ | 55,238 |  |  | $ | 67,542 |
Ending balance: individually evaluated for impairment |  | $ | 1,422 |  |  | $ | - |  |  | $ | 2,863 |  |  | $ | 318 |  |  | $ | 1,052 |
Ending balance: collectively evaluated for impairment |  | $ | 236,495 |  |  | $ | 3,855 |  |  | $ | 205,525 |  |  | $ | 54,920 |  |  | $ | 66,490 |
|  |  |  |  |  | Home equity |  |  | Other |  |  |  |  |  |  |  |  |
|  | Tax exempt |  |  | and junior liens |  |  | Consumer |  |  | Unallocated |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning Balance |  | $ | 1 |  |  | $ | 409 |  |  | $ | 385 |  |  | $ | 152 |  |  | $ | 7,306 |
Charge-offs |  |  | - |  |  |  | - |  |  |  | (67 | ) |  |  | - |  |  |  | (175 | )
Recoveries |  |  | - |  |  |  | - |  |  |  | 9 |  |  |  | - |  |  |  | 9 |
Provisions (credits) |  |  | - |  |  |  | 21 |  |  |  | 72 |  |  |  | (152 | ) |  |  | 144 |
Ending balance |  | $ | 1 |  |  | $ | 430 |  |  | $ | 399 |  |  | $ | - |  |  | $ | 7,284 |
Ending balance: related to loans individually evaluated for impairment |  | $ | - |  |  | $ | 139 |  |  | $ | 9 |  |  | $ | - |  |  | $ | 906 |
Ending balance: related to loans collectively evaluated for impairment |  | $ | 1 |  |  | $ | 291 |  |  | $ | 390 |  |  | $ | - |  |  | $ | 6,378 |
Loans receivables: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 9,256 |  |  | $ | 26,212 |  |  | $ | 49,272 |  |  |  |  |  |  | $ | 657,680 |
Ending balance: individually evaluated for impairment |  | $ | - |  |  | $ | 207 |  |  | $ | 101 |  |  |  |  |  |  | $ | 5,963 |
Ending balance: collectively evaluated for impairment |  | $ | 9,256 |  |  | $ | 26,005 |  |  | $ | 49,171 |  |  |  |  |  |  | $ | 651,717 |
The Company’s methodology for determining its allowance for loan losses includes an analysis of qualitative factors that are added to the historical loss rates in arriving at the total allowance for loan losses needed for this general pool of loans. The qualitative factors include:
| • | Changes in national and local economic trends;
| • | The rate of growth in the portfolio;
| • | Trends of delinquencies and nonaccrual balances;
| • | Changes in loan policy; and
| • | Changes in lending management experience and related staffing.
Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. These qualitative factors, applied to each product class, make the evaluation inherently subjective, as it requires material estimates that may be susceptible to significant revision as more information becomes available. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan losses analysis and calculation. The allocation of the allowance for loan losses summarized on the basis of the Company’s calculation methodology was as follows:
|  | March 31, 2020 |
|  | 1-4 family |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | first-lien |  |  | Residential |  |  |  |  |  |  |  |  |  |  | Other |
|  | residential |  |  | construction |  |  | Commercial |  |  | Commercial |  |  | commercial |
(In thousands) |  | mortgage |  |  | mortgage |  |  | real estate |  |  | lines of credit |  |  | and industrial |
Specifically reserved |  | $ | 95 |  |  | $ | - |  |  | $ | 76 |  |  | $ | 98 |  |  | $ | 379 |
Historical loss rate |  |  | 66 |  |  |  | - |  |  |  | 101 |  |  |  | 100 |  |  |  | 57 |
Qualitative factors |  |  | 570 |  |  |  | - |  |  |  | 4,066 |  |  |  | 1,020 |  |  |  | 1,322 |
Total |  | $ | 731 |  |  | $ | - |  |  | $ | 4,243 |  |  | $ | 1,218 |  |  | $ | 1,758 |
|  |  |  |  |  | Home equity |  |  | Other |  |  |  |  |  |  |  |  |
|  | Tax exempt |  |  | and junior liens |  |  | consumer |  |  | Unallocated |  |  | Total |
Specifically reserved |  | $ | - |  |  | $ | 128 |  |  | $ | 1 |  |  | $ | - |  |  | $ | 777 |
Historical loss rate |  |  | - |  |  |  | 146 |  |  |  | 584 |  |  |  | - |  |  |  | 1,054 |
Qualitative factors |  |  | 1 |  |  |  | 337 |  |  |  | 261 |  |  |  | - |  |  |  | 7,577 |
Other |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 198 |  |  |  | 198 |
Total |  | $ | 1 |  |  | $ | 611 |  |  | $ | 846 |  |  | $ | 198 |  |  | $ | 9,606 |
|  | March 31, 2019 |
|  | 1-4 family |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | first-lien |  |  | Residential |  |  |  |  |  |  |  |  |  |  | Other |
|  | residential |  |  | construction |  |  | Commercial |  |  | Commercial |  |  | commercial |
(In thousands) |  | mortgage |  |  | mortgage |  |  | real estate |  |  | lines of credit |  |  | and industrial |
Specifically reserved |  | $ | 104 |  |  | $ | - |  |  | $ | 98 |  |  | $ | 92 |  |  | $ | 464 |
Historical loss rate |  |  | 65 |  |  |  | - |  |  |  | 151 |  |  |  | 18 |  |  |  | 26 |
Qualitative factors |  |  | 553 |  |  |  | - |  |  |  | 3,121 |  |  |  | 692 |  |  |  | 1,070 |
Total |  | $ | 722 |  |  | $ | - |  |  | $ | 3,370 |  |  | $ | 802 |  |  | $ | 1,560 |
|  |  |  |  |  | Home equity |  |  | Other |  |  |  |  |  |  |  |  |
|  | Tax exempt |  |  | and junior liens |  |  | consumer |  |  | Unallocated |  |  | Total |
Specifically reserved |  | $ | - |  |  | $ | 139 |  |  | $ | 9 |  |  | $ | - |  |  | $ | 906 |
Historical loss rate |  |  | - |  |  |  | 13 |  |  |  | 149 |  |  |  | - |  |  |  | 422 |
Qualitative factors |  |  | 1 |  |  |  | 278 |  |  |  | 241 |  |  |  | - |  |  |  | 5,956 |
Total |  | $ | 1 |  |  | $ | 430 |  |  | $ | 399 |  |  | $ | - |  |  | $ | 7,284 |

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- Definition Allowance for loan losses. + References No definition available. + Details
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- Definition The entire disclosure for allowance for credit losses. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -URI http://asc.fasb.org/topic&trid=2196771 + Details
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