Loans Receivable | 12 Months Ended |
Dec. 31, 2013 |
Loans and Leases Receivable Disclosure [Abstract] | ' |
Loans Receivable | ' |
Loans Receivable |
The Company originates loans in the ordinary course of business. These loans are identified as “originated” loans. Disclosures related to the Company’s recorded investment in originated loans receivable generally exclude accrued interest receivable and net deferred loan origination fees and costs because they are insignificant. The Company has also acquired loans through FDIC-assisted and open bank transactions. Loans acquired in a business acquisition are designated as “purchased” loans. The Company refers to the purchased loans subject to the FDIC shared-loss agreements as “covered” loans, and those loans without shared-loss agreements are referred to as “non-covered” loans. Loans purchased with evidence of credit deterioration since origination for which it is probable that not all contractually required payments will be collected are accounted for under FASB ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. These loans are identified as “purchased impaired” loans. Loans purchased that are not accounted for under FASB ASC 310-30 are accounted for under FASB ASC 310-20, Receivables—Nonrefundable Fees and Other Costs. These loans are identified as “purchased other” loans. |
(a) Loan Origination/Risk Management |
The Company originates loans in one of the four segments of the total loan portfolio: commercial business, real estate construction and land development, one-to-four family residential and consumer. Within these segments are classes of loans to which management monitors and assesses credit risk in the loan portfolios. The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies, and nonperforming and potential problem loans. The Company also conducts internal loan reviews and validates the credit risk assessment on a periodic basis and presents the results of these reviews to management. The loan review process complements and reinforces the risk identification and assessment decisions made by loan officers and credit personnel, as well as the Company’s policies and procedures. |
A discussion of the risk characteristics of each loan portfolio segment is as follows: |
Commercial Business: |
There are three significant classes of loans in the commercial portfolio segment, including commercial and industrial loans, owner-occupied commercial real estate and non-owner occupied commercial real estate. The owner and non-owner occupied commercial real estate are both considered commercial real estate loans. As the commercial and industrial loans carry different risk characteristics than the commercial real estate loans, they are discussed separately below. |
Commercial and industrial. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may include a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. |
Commercial real estate. The Company originates commercial real estate loans within its primary market areas. These loans are subject to underwriting standards and processes similar to commercial and industrial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate involves more risk than other classes of loans in that the lending typically involves higher loan principal amounts, and payments on loans secured by real estate properties are dependent on successful operation and management of the properties. Repayment of these loans may be more adversely affected by conditions in the real estate market or the economy. |
One-to-Four Family Residential: |
The majority of the Company’s one-to-four family residential loans are secured by single-family residences located in its primary market areas. The Company’s underwriting standards require that single-family portfolio loans generally are owner-occupied and do not exceed 80% of the lower of appraised value at origination or cost of the underlying collateral. Terms of maturity typically range from 15 to 30 years. Until second quarter 2013, the Company sold most single-family loans in the secondary market and retained a smaller portion in its loan portfolio. After the second quarter of 2013, the Company only originated single-family loans for its loan portfolio. |
Real Estate Construction and Land Development: |
The Company originates construction loans for one-to-four family residential and for five or more family residential and commercial properties. The one-to-four family residential construction loans generally include construction of custom homes whereby the home buyer is the borrower. The Company also provides financing to builders for the construction of pre-sold homes and, in selected cases, to builders for the construction of speculative residential property. Substantially all construction loans are short-term in nature and priced with variable rates of interest. Construction lending can involve a higher level of risk than other types of lending because funds are advanced partially based upon the value of the project, which is uncertain prior to the project’s completion. Because of the uncertainties inherent in estimating construction costs as well as the market value of a completed project and the effects of governmental regulation of real property, the Company’s estimates with regards to the total funds required to complete a project and the related loan-to-value ratio may vary from actual results. As a result, construction loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell or lease the property or refinance the indebtedness. If the Company’s estimate of the value of a project at completion proves to be overstated, it may have inadequate security for repayment of the loan and may incur a loss if the borrower does not repay the loan. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to successful completion of the construction project, interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing. |
Consumer: |
The Company originates consumer loans and lines of credit that are both secured and unsecured. The underwriting process for these loans ensures a qualifying primary and secondary source of repayment. Underwriting standards for home equity loans are significantly influenced by statutory requirements, which include, but are not limited to, a maximum loan-to-value percentage of 80%, collection remedies, the number of such loans a borrower can have at one time and documentation requirements. To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed. The majority of consumer loans are for relatively small amounts disbursed among many individual borrowers which reduces the credit risk for this type of loan. To further reduce the risk, trend reports are reviewed by management on a regular basis. |
Originated loans receivable at December 31, 2013 and December 31, 2012 consisted of the following portfolio segments and classes: |
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| December 31, 2013 | | December 31, 2012 | | | | | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | | | | | |
Commercial business: | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 283,075 | | | $ | 277,240 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Owner-occupied commercial real estate | 211,287 | | | 188,494 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-owner occupied commercial real estate | 354,451 | | | 265,835 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total commercial business | 848,813 | | | 731,569 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
One-to-four family residential | 39,235 | | | 38,848 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate construction and land development: | | | | | | | | | | | | | | | | | | | |
One-to-four family residential | 18,593 | | | 25,175 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Five or more family residential and commercial properties | 45,184 | | | 52,075 | | | | | | | | | | | | | | | | | |
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Total real estate construction and land development | 63,777 | | | 77,250 | | | | | | | | | | | | | | | | | |
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Consumer | 28,130 | | | 28,914 | | | | | | | | | | | | | | | | | |
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Gross originated loans receivable | 979,955 | | | 876,581 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Net deferred loan fees | (2,670 | ) | | (2,096 | ) | | | | | | | | | | | | | | | | |
Originated loans receivable, net | 977,285 | | | 874,485 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Allowance for loan losses | (17,153 | ) | | (19,125 | ) | | | | | | | | | | | | | | | | |
Originated loans receivable, net of allowance for loan losses | $ | 960,132 | | | $ | 855,360 | | | | | | | | | | | | | | | | | |
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The recorded investment of purchased covered loans receivable at December 31, 2013 and December 31, 2012 consisted of the following portfolio segments and classes: |
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| December 31, 2013 | | December 31, 2012 | | | | | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | | | | | |
Commercial business: | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 14,690 | | | $ | 25,781 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Owner-occupied commercial real estate | 24,366 | | | 34,796 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-owner occupied commercial real estate | 14,625 | | | 13,028 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total commercial business | 53,681 | | | 73,605 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
One-to-four family residential | 4,777 | | | 5,027 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate construction and land development: | | | | | | | | | | | | | | | | | | | |
One-to-four family residential | 1,556 | | | 4,433 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Five or more family residential and commercial properties | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total real estate construction and land development | 1,556 | | | 4,433 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | 3,740 | | | 5,265 | | | | | | | | | | | | | | | | | |
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Gross purchased covered loans receivable | 63,754 | | | 88,330 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Allowance for loan losses | (6,167 | ) | | (4,352 | ) | | | | | | | | | | | | | | | | |
Purchased covered loans receivable, net | $ | 57,587 | | | $ | 83,978 | | | | | | | | | | | | | | | | | |
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The December 31, 2013 and December 31, 2012 gross recorded investment balance of purchased impaired covered loans accounted for under FASB ASC 310-30 was $38.9 million and $59.0 million, respectively. The gross recorded investment balance of purchased other covered loans was $24.9 million and $29.3 million at December 31, 2013 and December 31, 2012, respectively. At December 31, 2013 and December 31, 2012, the recorded investment balance of purchased covered loans which are no longer covered under the FDIC shared-loss agreements was $2.6 million and $3.5 million, respectively. |
Funds advanced on the purchased covered loans subsequent to acquisition, referred to as “subsequent advances,” are included in the purchased covered loan balances as these subsequent advances are covered under the shared-loss agreements. These subsequent advances are not accounted for under FASB ASC 310-30. The total balance of subsequent advances on the purchased covered loans was $4.7 million and $6.9 million as of December 31, 2013 and December 31, 2012, respectively. |
The recorded investment of purchased non-covered loans receivable at December 31, 2013 and December 31, 2012 consisted of the following portfolio segments and classes: |
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| December 31, 2013 | | December 31, 2012 | | | | | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | | | | | |
Commercial business: | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 53,465 | | | $ | 24,763 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Owner-occupied commercial real estate | 70,022 | | | 13,211 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-owner occupied commercial real estate | 45,528 | | | 11,019 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total commercial business | 169,015 | | | 48,993 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
One-to-four family residential | 3,847 | | | 3,040 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate construction and land development: | | | | | | | | | | | | | | | | | | | |
One-to-four family residential | 1,131 | | | 513 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Five or more family residential and commercial properties | 3,471 | | | 864 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total real estate construction and land development | 4,602 | | | 1,377 | | | | | | | | | | | | | | | | | |
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Consumer | 13,417 | | | 10,713 | | | | | | | | | | | | | | | | | |
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Gross purchased non-covered loans receivable | 190,881 | | | 64,123 | | | | | | | | | | | | | | | | | |
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Allowance for loan losses | (5,504 | ) | | (5,117 | ) | | | | | | | | | | | | | | | | |
Purchased non-covered loans receivable, net | $ | 185,377 | | | $ | 59,006 | | | | | | | | | | | | | | | | | |
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The December 31, 2013 and December 31, 2012 gross recorded investment balance of purchased impaired non-covered loans accounted for under FASB ASC 310-30 was $36.0 million and $42.0 million, respectively. The recorded investment balance of purchased other non-covered loans was $154.9 million and $22.1 million at December 31, 2013 and December 31, 2012, respectively. |
The loans purchased in the NCB and Valley Acquisitions on January 9, 2013 and July 15, 2013, respectively, are included in the purchased non-covered loans receivable balances shown above as of December 31, 2013. The estimated fair value of the purchased non-covered loans at the acquisition dates totaled $51.5 million and $117.1 million for NCB and Valley, respectively. The gross recorded investment balance of the NCB purchased impaired loans and the NCB purchased other loans was $2.9 million and $34.3 million at December 31, 2013, respectively. The gross recorded investment balance of the Valley purchased impaired loans and the Valley purchased other loans was $2.7 million and $103.7 million at December 31, 2013, respectively. |
(b) Concentrations of Credit |
Most of the Company’s lending activity occurs within Washington State, and to a lesser extent Oregon State. The Company’s primary market areas include Thurston, Pierce, King, Mason, Cowlitz, Yakima, Kittitas and Clark counties in Washington and Multnomah County in Oregon, as well as other contiguous markets. The majority of the Company’s loan portfolio consists of (in order of balances at December 31, 2013) non-owner occupied commercial real estate, commercial and industrial and owner-occupied commercial real estate. As of December 31, 2013 and December 31, 2012, there were no concentrations of loans related to any single industry in excess of 10% of the Company’s total loans. |
(c) Credit Quality Indicators |
As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk grade of the loans, (ii) the level of classified loans, (iii) net charge-offs, (iv) nonperforming loans, and (v) the general economic conditions of the United States of America, and specifically the states of Washington and Oregon. The Company utilizes a risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 0 to 9, and a “W.” A description of the general characteristics of the risk grades is as follows: |
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• | Grades 0 to 5: These grades are considered “pass grade” and includes loans with negligible to above average but acceptable risk. These borrowers generally have strong to acceptable capital levels and consistent earnings and debt service capacity. Loans with the higher grades within the “pass” category may include borrowers who are experiencing unusual operating difficulties, but have acceptable payment performance to date. Increased monitoring of financials and/or collateral may be appropriate. Loans with this grade show no immediate loss exposure. | | | | | | | | | | | | | | | | | | | | | | |
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• | Grade “W”: This grade is considered “pass grade” and includes loans on management’s “watch list” and is intended to be utilized on a temporary basis for pass grade borrowers where a potentially significant risk-modifying action is anticipated in the near term. | | | | | | | | | | | | | | | | | | | | | | |
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• | Grade 6: This grade includes “Other Assets Especially Mentioned” (“OAEM”) loans in accordance with regulatory guidelines, and is intended to highlight loans with elevated risks. Loans with this grade show signs of deteriorating profits and capital, and the borrower might not be strong enough to sustain a major setback. The borrower is typically higher than normally leveraged, and outside support might be modest and likely illiquid. The loan is at risk of further decline unless active measures are taken to correct the situation. | | | | | | | | | | | | | | | | | | | | | | |
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• | Grade 7: This grade includes “Substandard” loans in accordance with regulatory guidelines, for which the Company has determined have a high credit risk. These loans also have well-defined weaknesses which make payment default or principal exposure likely, but not yet certain. The borrower may have shown serious negative trends in financial ratios and performance. Such loans may be dependent upon collateral liquidation, a secondary source of repayment or an event outside of the normal course of business. Loans with this grade can be placed on accrual or nonaccrual status based on the Company’s accrual policy. | | | | | | | | | | | | | | | | | | | | | | |
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• | Grade 8: This grade includes “Doubtful” loans in accordance with regulatory guidelines, and the Company has determined these loans to have excessive credit risk. Such loans are placed on nonaccrual status and may be dependent upon collateral having a value that is difficult to determine or upon some near-term event which lacks certainty. Additionally, these loans generally have a specific valuation allowance. | | | | | | | | | | | | | | | | | | | | | | |
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• | Grade 9: This grade includes “Loss” loans in accordance with regulatory guidelines, and the Company has determined these loans have the highest risk of loss. Such loans are charged-off or charged-down when payment is acknowledged to be uncertain or when the timing or value of payments cannot be determined. “Loss” is not intended to imply that the loan or some portion of it will never be paid, nor does it in any way imply that there has been a forgiveness of debt. | | | | | | | | | | | | | | | | | | | | | | |
Loan grades for all commercial business loans and real estate construction and land development loans are established at the origination of the loan. One-to-four family residential loans and consumer loans (“non-commercial loans”) are not graded with a 0 to 9 at origination date as these loans are determined to be “pass graded” loans. These non-commercial loans may subsequently require a 0-9 risk grade if the credit department has evaluated the credit and determined it necessary to classify the loan. Loan grades are reviewed on a quarterly basis, or more frequently if necessary, by the credit department. Typically, an individual loan grade will not be changed from the prior period unless there is a specific indication of credit deterioration or improvement. Credit deterioration is evidenced by delinquency, direct communications with the borrower, or other borrower information that becomes known to management. Credit improvements are evidenced by known facts regarding the borrower or the collateral property. |
The loan grades relate to the likelihood of losses in that the higher the grade, the greater the loss potential. Loans with a pass grade may have some inherent losses in the portfolios, but to a lesser extent than the other loan grades. These pass graded loans may also have a zero percent loss based on historical experience and current market trends. The OAEM loan grade is transitory in that the Company is waiting on additional information to determine the likelihood and extent of the potential loss. The likelihood of loss for OAEM graded loans, however, is greater than Watch graded loans because there has been measurable credit deterioration. Loans with a Substandard grade are generally loans for which the Company has individually analyzed for potential impairment. For Doubtful and Loss graded loans, the Company is almost certain of the losses, and the unpaid principal balances are generally charged-off to the realizable value. |
The following tables present the balance of the originated loans receivable by credit quality indicator as of December 31, 2013 and December 31, 2012. |
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| December 31, 2013 | | | | |
| Pass | | OAEM | | Substandard | | Doubtful | | Total | | | | |
| (In thousands) | | | | |
Commercial business: | | | | | | | | | | | | | |
Commercial and industrial | $ | 259,071 | | | $ | 8,367 | | | $ | 14,368 | | | $ | 1,269 | | | $ | 283,075 | | | | | |
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Owner-occupied commercial real estate | 202,440 | | | 3,393 | | | 5,454 | | | — | | | 211,287 | | | | | |
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Non-owner occupied commercial real estate | 340,732 | | | 7,927 | | | 5,792 | | | — | | | 354,451 | | | | | |
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Total commercial business | 802,243 | | | 19,687 | | | 25,614 | | | 1,269 | | | 848,813 | | | | | |
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One-to-four family residential | 38,330 | | | 269 | | | 636 | | | — | | | 39,235 | | | | | |
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Real estate construction and land development: | | | | | | | | | | | | | |
One-to-four family residential | 10,608 | | | 4,159 | | | 3,826 | | | — | | | 18,593 | | | | | |
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Five or more family residential and commercial properties | 42,780 | | | — | | | 2,404 | | | — | | | 45,184 | | | | | |
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Total real estate construction and land development | 53,388 | | | 4,159 | | | 6,230 | | | — | | | 63,777 | | | | | |
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Consumer | 27,986 | | | — | | | 144 | | | — | | | 28,130 | | | | | |
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Gross originated loans | $ | 921,947 | | | $ | 24,115 | | | $ | 32,624 | | | $ | 1,269 | | | $ | 979,955 | | | | | |
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| December 31, 2012 | | | | |
| Pass | | OAEM | | Substandard | | Doubtful | | Total | | | | |
| (In thousands) | | | | |
Commercial business: | | | | | | | | | | | | | |
Commercial and industrial | $ | 254,593 | | | $ | 3,908 | | | $ | 18,157 | | | $ | 582 | | | $ | 277,240 | | | | | |
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Owner-occupied commercial real estate | 181,630 | | | 2,658 | | | 4,206 | | | — | | | 188,494 | | | | | |
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Non-owner occupied commercial real estate | 256,077 | | | 4,132 | | | 5,257 | | | 369 | | | 265,835 | | | | | |
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Total commercial business | 692,300 | | | 10,698 | | | 27,620 | | | 951 | | | 731,569 | | | | | |
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One-to-four family residential | 37,239 | | | 920 | | | 689 | | | — | | | 38,848 | | | | | |
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Real estate construction and land development: | | | | | | | | | | | | | |
One-to-four family residential | 16,446 | | | 1,795 | | | 6,934 | | | — | | | 25,175 | | | | | |
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Five or more family residential and commercial properties | 48,718 | | | — | | | 3,357 | | | — | | | 52,075 | | | | | |
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Total real estate construction and land development | 65,164 | | | 1,795 | | | 10,291 | | | — | | | 77,250 | | | | | |
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Consumer | 28,748 | | | — | | | 156 | | | 10 | | | 28,914 | | | | | |
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Gross originated loans | $ | 823,451 | | | $ | 13,413 | | | $ | 38,756 | | | $ | 961 | | | $ | 876,581 | | | | | |
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The tables above include $27.4 million and $27.5 million of originated impaired loans as of December 31, 2013 and December 31, 2012, respectively, as detailed in the impaired loans section below. These impaired loans have been individually reviewed for probable incurred losses and have a specific valuation allowance, as necessary. The tables above also include potential problem loans. Potential problem loans are those loans that are currently accruing interest and are not considered impaired, but which management is monitoring because the financial information of the borrower causes concern as to their ability to meet their loan repayment terms. Potential problem originated loans as of December 31, 2013 and December 31, 2012 were $34.5 million and $28.3 million, respectively. The balance of potential problem originated loans guaranteed by a governmental agency, which reduces the Company's credit exposure, was $1.8 million and $3.2 million as of December 31, 2013 and December 31, 2012, respectively. |
The following tables present the recorded invested balance of the purchased covered and purchased noncovered loans receivable by credit quality indicator as of December 31, 2013 and December 31, 2012. |
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| December 31, 2013 | | | | |
| Pass | | OAEM | | Substandard | | Doubtful | | Total | | | | |
| (In thousands) | | | | |
Commercial business: | | | | | | | | | | | | | |
Commercial and industrial | $ | 55,404 | | | $ | 4,703 | | | $ | 7,183 | | | $ | 865 | | | $ | 68,155 | | | | | |
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Owner-occupied commercial real estate | 87,774 | | | 2,739 | | | 3,619 | | | 256 | | | 94,388 | | | | | |
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Non-owner occupied commercial real estate | 47,157 | | | 1,165 | | | 7,562 | | | 4,269 | | | 60,153 | | | | | |
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Total commercial business | 190,335 | | | 8,607 | | | 18,364 | | | 5,390 | | | 222,696 | | | | | |
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One-to-four family residential | 5,654 | | | 882 | | | 2,088 | | | — | | | 8,624 | | | | | |
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Real estate construction and land development: | | | | | | | | | | | | | |
One-to-four family residential | 1,672 | | | — | | | 1,015 | | | — | | | 2,687 | | | | | |
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Five or more family residential and commercial properties | 2,552 | | | — | | | 919 | | | — | | | 3,471 | | | | | |
| | | |
Total real estate construction and land development | 4,224 | | | — | | | 1,934 | | | — | | | 6,158 | | | | | |
| | | |
Consumer | 14,562 | | | 354 | | | 2,241 | | | — | | | 17,157 | | | | | |
| | | |
Gross purchased covered and noncovered loans | $ | 214,775 | | | $ | 9,843 | | | $ | 24,627 | | | $ | 5,390 | | | $ | 254,635 | | | | | |
| | | |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2012 | | | | |
| Pass | | OAEM | | Substandard | | Doubtful | | Total | | | | |
| (In thousands) | | | | |
Commercial business: | | | | | | | | | | | | | |
Commercial and industrial | $ | 40,577 | | | $ | 1,753 | | | $ | 6,809 | | | $ | 1,405 | | | $ | 50,544 | | | | | |
| | | |
Owner-occupied commercial real estate | 40,676 | | | 2,390 | | | 4,676 | | | 265 | | | 48,007 | | | | | |
| | | |
Non-owner occupied commercial real estate | 11,419 | | | 2,404 | | | 4,806 | | | 5,418 | | | 24,047 | | | | | |
| | | |
Total commercial business | 92,672 | | | 6,547 | | | 16,291 | | | 7,088 | | | 122,598 | | | | | |
| | | |
One-to-four family residential | 6,059 | | | 903 | | | 1,105 | | | — | | | 8,067 | | | | | |
| | | |
Real estate construction and land development: | | | | | | | | | | | | | |
One-to-four family residential | 136 | | | — | | | 1,051 | | | 3,759 | | | 4,946 | | | | | |
| | | |
Five or more family residential and commercial properties | 420 | | | — | | | 444 | | | — | | | 864 | | | | | |
| | | |
Total real estate construction and land development | 556 | | | — | | | 1,495 | | | 3,759 | | | 5,810 | | | | | |
| | | |
Consumer | 11,785 | | | 157 | | | 4,004 | | | 32 | | | 15,978 | | | | | |
| | | |
Gross purchased covered and noncovered loans | $ | 111,072 | | | $ | 7,607 | | | $ | 22,895 | | | $ | 10,879 | | | $ | 152,453 | | | | | |
| | | |
The tables above include $6.7 million and $2.2 million of purchased other impaired loans as of December 31, 2013 and December 31, 2012, respectively, as detailed in the impaired loans section below. These purchased other impaired loans have been individually reviewed for potential losses and have a specific valuation allowance, as necessary. |
(d) Nonaccrual loans |
Originated nonaccrual loans, segregated by segments and classes of loans, were as follows as of December 31, 2013 and December 31, 2012: |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, | | December 31, | | | | | | | | | | | | | | | | |
2013 (1) | 2012 (1) | | | | | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | | | | | |
Commercial business: | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 4,497 | | | $ | 4,560 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Owner-occupied commercial real estate | 1,024 | | | 563 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-owner occupied commercial real estate | 3 | | | 369 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total commercial business | 5,524 | | | 5,492 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
One-to-four family residential | 340 | | | 389 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate construction and land development: | | | | | | | | | | | | | | | | | | | |
One-to-four family residential | 1,045 | | | 3,063 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Five or more family residential and commercial properties | — | | | 3,357 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total real estate construction and land development | 1,045 | | | 6,420 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | 38 | | | 157 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Gross originated nonaccrual loans | $ | 6,947 | | | $ | 12,458 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
-1 | $1.7 million and $1.2 million of nonaccrual originated loans were guaranteed by governmental agencies at December 31, 2013 and December 31, 2012, respectively. | | | | | | | | | | | | | | | | | | | | | | |
The recorded investment balance of purchased other nonaccrual loans, segregated by segments and classes of loans, were as follows as of December 31, 2013 and December 31, 2012: |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, | | December 31, | | | | | | | | | | | | | | | | |
2013 (1) | 2012 (1) | | | | | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | | | | | |
Commercial business: | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 151 | | | $ | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Owner-occupied commercial real estate | — | | | 139 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-owner occupied commercial real estate | — | | | 437 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total commercial business | 151 | | | 576 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
One-to-four family residential | — | | | 61 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | 647 | | | 163 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Gross purchased other nonaccrual loans | $ | 798 | | | $ | 800 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
-1 | $7,000 and $39,000 of purchased other nonaccrual loans were covered by the FDIC shared-loss agreements at December 31, 2013 and December 31, 2012, respectively. | | | | | | | | | | | | | | | | | | | | | | |
(e) Past due loans |
The Company performs an aging analysis of past due loans using the categories of 30-89 days past due and 90 or more days past due. This policy is consistent with regulatory reporting requirements. |
The balances of originated past due loans, segregated by segments and classes of loans, as of December 31, 2013 and December 31, 2012 were as follows: |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2013 |
| 30-89 Days | | 90 Days or | | Total Past | | Current | | Total | | 90 Days or More |
Greater | Due | and Still |
| | Accruing |
| (In thousands) |
Commercial business: | | | | | | | | | | | |
Commercial and industrial | $ | 2,253 | | | $ | 3,446 | | | $ | 5,699 | | | $ | 277,376 | | | $ | 283,075 | | | $ | — | |
|
Owner-occupied commercial real estate | 325 | | | 849 | | | 1,174 | | | 210,113 | | | 211,287 | | | — | |
|
Non-owner occupied commercial real estate | 951 | | | 9 | | | 960 | | | 353,491 | | | 354,451 | | | 6 | |
|
Total commercial business | 3,529 | | | 4,304 | | | 7,833 | | | 840,980 | | | 848,813 | | | 6 | |
|
One-to-four family residential | 89 | | | — | | | 89 | | | 39,146 | | | 39,235 | | | — | |
|
Real estate construction and land development: | | | | | | | | | | | |
One-to-four family residential | 821 | | | 1,045 | | | 1,866 | | | 16,727 | | | 18,593 | | | — | |
|
Five or more family residential and commercial properties | — | | | — | | | — | | | 45,184 | | | 45,184 | | | — | |
|
Total real estate construction and land development | 821 | | | 1,045 | | | 1,866 | | | 61,911 | | | 63,777 | | | — | |
|
Consumer | 211 | | | — | | | 211 | | | 27,919 | | | 28,130 | | | — | |
|
Gross originated loans | $ | 4,650 | | | $ | 5,349 | | | $ | 9,999 | | | $ | 969,956 | | | $ | 979,955 | | | $ | 6 | |
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2012 |
| 30-89 Days | | 90 Days or | | Total Past | | Current | | Total | | 90 Days or More |
Greater | Due | and Still |
| | Accruing |
| (In thousands) |
Commercial business: | | | | | | | | | | | |
Commercial and industrial | $ | 2,768 | | | $ | 2,014 | | | $ | 4,782 | | | $ | 272,458 | | | $ | 277,240 | | | $ | 25 | |
|
Owner-occupied commercial real estate | 920 | | | 112 | | | 1,032 | | | 187,462 | | | 188,494 | | | — | |
|
Non-owner occupied commercial real estate | 92 | | | 369 | | | 461 | | | 265,374 | | | 265,835 | | | — | |
|
Total commercial business | 3,780 | | | 2,495 | | | 6,275 | | | 725,294 | | | 731,569 | | | 25 | |
|
One-to-four family residential | 239 | | | 375 | | | 614 | | | 38,234 | | | 38,848 | | | — | |
|
Real estate construction and land development: | | | | | | | | | | | |
One-to-four family residential | 847 | | | 3,242 | | | 4,089 | | | 21,086 | | | 25,175 | | | 179 | |
|
Five or more family residential and commercial properties | — | | | 3,018 | | | 3,018 | | | 49,057 | | | 52,075 | | | — | |
|
Total real estate construction and land development | 847 | | | 6,260 | | | 7,107 | | | 70,143 | | | 77,250 | | | 179 | |
|
Consumer | 68 | | | 146 | | | 214 | | | 28,700 | | | 28,914 | | | 10 | |
|
Gross originated loans | $ | 4,934 | | | $ | 9,276 | | | $ | 14,210 | | | $ | 862,371 | | | $ | 876,581 | | | $ | 214 | |
|
|
The balances of purchased past due loans, segregated by segments and classes of loans, as of December 31, 2013 and December 31, 2012 are as follows: |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2013 |
| 30-89 Days | | 90 Days or | | Total Past | | Current | | Total | | 90 Days or More |
Greater | Due | and Still |
| | Accruing |
| (In thousands) |
Commercial business: | | | | | | | | | | | |
Commercial and industrial | $ | 966 | | | $ | 2,089 | | | $ | 3,055 | | | $ | 65,100 | | | $ | 68,155 | | | $ | — | |
|
Owner-occupied commercial real estate | 511 | | | 147 | | | 658 | | | 93,730 | | | 94,388 | | | — | |
|
Non-owner occupied commercial real estate | 210 | | | 3,710 | | | 3,920 | | | 56,233 | | | 60,153 | | | — | |
|
Total commercial business | 1,687 | | | 5,946 | | | 7,633 | | | 215,063 | | | 222,696 | | | — | |
|
One-to-four family residential | 595 | | | 509 | | | 1,104 | | | 7,520 | | | 8,624 | | | — | |
|
Real estate construction and land development: | | | | | | | | | | | |
One-to-four family residential | 213 | | | 644 | | | 857 | | | 1,830 | | | 2,687 | | | — | |
|
Five or more family residential and commercial properties | 384 | | | 453 | | | 837 | | | 2,634 | | | 3,471 | | | — | |
|
Total real estate construction and land development | 597 | | | 1,097 | | | 1,694 | | | 4,464 | | | 6,158 | | | — | |
|
Consumer | 66 | | | 91 | | | 157 | | | 17,000 | | | 17,157 | | | — | |
|
Gross purchased loans | $ | 2,945 | | | $ | 7,643 | | | $ | 10,588 | | | $ | 244,047 | | | $ | 254,635 | | | $ | — | |
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2012 |
| 30-89 Days | | 90 Days or | | Total Past | | Current | | Total | | 90 Days or More |
Greater | Due | and Still |
| | Accruing |
| (In thousands) |
Commercial business: | | | | | | | | | | | |
Commercial and industrial | $ | 406 | | | $ | 3,187 | | | $ | 3,593 | | | $ | 46,951 | | | $ | 50,544 | | | $ | — | |
|
Owner-occupied commercial real estate | 700 | | | 761 | | | 1,461 | | | 46,546 | | | 48,007 | | | — | |
|
Non-owner occupied commercial real estate | 289 | | | 4,034 | | | 4,323 | | | 19,724 | | | 24,047 | | | — | |
|
Total commercial business | 1,395 | | | 7,982 | | | 9,377 | | | 113,221 | | | 122,598 | | | — | |
|
One-to-four family residential | 912 | | | 141 | | | 1,053 | | | 7,014 | | | 8,067 | | | — | |
|
Real estate construction and land development: | | | | | | | | | | | |
One-to-four family residential | 509 | | | 3,415 | | | 3,924 | | | 1,022 | | | 4,946 | | | — | |
|
Five or more family residential and commercial properties | — | | | 444 | | | 444 | | | 420 | | | 864 | | | — | |
|
Total real estate construction and land development | 509 | | | 3,859 | | | 4,368 | | | 1,442 | | | 5,810 | | | — | |
|
Consumer | 118 | | | 883 | | | 1,001 | | | 14,977 | | | 15,978 | | | 135 | |
|
Gross purchased loans | $ | 2,934 | | | $ | 12,865 | | | $ | 15,799 | | | $ | 136,654 | | | $ | 152,453 | | | $ | 135 | |
|
(f) Impaired loans |
Originated impaired loans (including troubled debt restructured loans) as of December 31, 2013 and December 31, 2012 are set forth in the following tables. |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2013 | | | | |
| Recorded | | Recorded | | Total | | Unpaid | | Related | | | | |
Investment With | Investment With | Recorded | Contractual | Specific | | | | |
No Specific | Specific | Investment | Principal | Valuation | | | | |
Valuation | Valuation | | Balance | Allowance | | | | |
Allowance | Allowance | | | | | | | |
| (In thousands) | | | | |
Commercial business: | | | | | | | | | | | | | |
Commercial and industrial | $ | 5,713 | | | $ | 3,980 | | | $ | 9,693 | | | $ | 13,889 | | | $ | 1,891 | | | | | |
| | | |
Owner-occupied commercial real estate | 1,092 | | | 1,880 | | | 2,972 | | | 3,686 | | | 595 | | | | | |
| | | |
Non-owner occupied commercial real estate | 2,780 | | | 4,123 | | | 6,903 | | | 6,757 | | | 364 | | | | | |
| | | |
Total commercial business | 9,585 | | | 9,983 | | | 19,568 | | | 24,332 | | | 2,850 | | | | | |
| | | |
One-to-four family residential | 592 | | | — | | | 592 | | | 849 | | | — | | | | | |
| | | |
Real estate construction and land development: | | | | | | | | | | | | | |
One-to-four family residential | 3,773 | | | 911 | | | 4,684 | | | 6,402 | | | 211 | | | | | |
| | | |
Five or more family residential and commercial properties | 2,404 | | | — | | | 2,404 | | | 2,385 | | | — | | | | | |
| | | |
Total real estate construction and land development | 6,177 | | | 911 | | | 7,088 | | | 8,787 | | | 211 | | | | | |
| | | |
Consumer | 100 | | | 38 | | | 138 | | | 140 | | | 38 | | | | | |
| | | |
Gross originated loans | $ | 16,454 | | | $ | 10,932 | | | $ | 27,386 | | | $ | 34,108 | | | $ | 3,099 | | | | | |
| | | |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2012 | | | | |
| Recorded | | Recorded | | Total | | Unpaid | | Related | | | | |
Investment With | Investment With | Recorded | Contractual | Specific | | | | |
No Specific | Specific | Investment | Principal | Valuation | | | | |
Valuation | Valuation | | Balance | Allowance | | | | |
Allowance | Allowance | | | | | | | |
| (In thousands) | | | | |
Commercial business: | | | | | | | | | | | | | |
Commercial and industrial | $ | 7,797 | | | $ | 2,643 | | | $ | 10,440 | | | $ | 10,741 | | | $ | 858 | | | | | |
| | | |
Owner-occupied commercial real estate | 633 | | | 1,418 | | | 2,051 | | | 2,134 | | | 509 | | | | | |
| | | |
Non-owner occupied commercial real estate | 3,031 | | | 4,226 | | | 7,257 | | | 7,257 | | | 1,386 | | | | | |
| | | |
Total commercial business | 11,461 | | | 8,287 | | | 19,748 | | | 20,132 | | | 2,753 | | | | | |
| | | |
One-to-four family residential | 422 | | | 389 | | | 811 | | | 811 | | | 46 | | | | | |
| | | |
Real estate construction and land development: | | | | | | | | | | | | | |
One-to-four family residential | 700 | | | 2,724 | | | 3,424 | | | 4,597 | | | 792 | | | | | |
| | | |
Five or more family residential and commercial properties | — | | | 3,357 | | | 3,357 | | | 3,397 | | | 658 | | | | | |
| | | |
Total real estate construction and land development | 700 | | | 6,081 | | | 6,781 | | | 7,994 | | | 1,450 | | | | | |
| | | |
Consumer | 47 | | | 110 | | | 157 | | | 157 | | | 110 | | | | | |
| | | |
Gross originated loans | $ | 12,630 | | | $ | 14,867 | | | $ | 27,497 | | | $ | 29,094 | | | $ | 4,359 | | | | | |
| | | |
The Company had governmental guarantees of $3.0 million and $1.9 million related to the originated impaired loan balances at December 31, 2013 and December 31, 2012, respectively. |
The average recorded investment of originated impaired loans (including TDRs) for the years ended December 31, 2013, 2012 and 2011 are set forth in the following table. |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | | | | | | | | |
| | 2013 | | 2012 | | 2011 | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | |
Commercial business: | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 13,083 | | | $ | 11,390 | | | $ | 9,918 | | | | | | | | | | | | |
| | | | | | | | | | |
Owner-occupied commercial real estate | | 2,633 | | | 2,056 | | | 1,350 | | | | | | | | | | | | |
| | | | | | | | | | |
Non-owner occupied commercial real estate | | 7,793 | | | 7,500 | | | 3,120 | | | | | | | | | | | | |
| | | | | | | | | | |
Total commercial business | | 23,509 | | | 20,946 | | | 14,388 | | | | | | | | | | | | |
| | | | | | | | | | |
One-to-four family residential | | 1,249 | | | 965 | | | 335 | | | | | | | | | | | | |
| | | | | | | | | | |
Real estate construction and land development: | | | | | | | | | | | | | | | | | |
One-to-four family residential | | 4,237 | | | 4,381 | | | 6,972 | | | | | | | | | | | | |
| | | | | | | | | | |
Five or more family residential and commercial properties | | 2,839 | | | 5,415 | | | 9,258 | | | | | | | | | | | | |
| | | | | | | | | | |
Total real estate construction and land development | | 7,076 | | | 9,796 | | | 16,230 | | | | | | | | | | | | |
| | | | | | | | | | |
Consumer | | 144 | | | 150 | | | 88 | | | | | | | | | | | | |
| | | | | | | | | | |
Gross originated impaired loans | | $ | 31,978 | | | $ | 31,857 | | | $ | 31,041 | | | | | | | | | | | | |
| | | | | | | | | | |
Purchased other loans generally become impaired when classified as nonaccrual or when its modification results in a TDR. Purchased other impaired loans (including TDRs) as of December 31, 2013 and December 31, 2012 are set forth in the following tables. |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2013 | | | | |
| Recorded | | Recorded | | Total | | Unpaid | | Related | | | | |
Investment With | Investment With | Recorded | Contractual | Specific | | | | |
No Specific | Specific | Investment | Principal | Valuation | | | | |
Valuation | Valuation | | Balance | Allowance | | | | |
Allowance | Allowance | | | | | | | |
| (In thousands) | | | | |
Commercial business: | | | | | | | | | | | | | |
Commercial and industrial | $ | 437 | | | $ | 4,621 | | | $ | 5,058 | | | $ | 5,564 | | | $ | 1,454 | | | | | |
| | | |
Owner-occupied commercial real estate | 26 | | | — | | | 26 | | | 153 | | | — | | | | | |
| | | |
Non-owner occupied commercial real estate | 520 | | | — | | | 520 | | | 1,401 | | | — | | | | | |
| | | |
Total commercial business | 983 | | | 4,621 | | | 5,604 | | | 7,118 | | | 1,454 | | | | | |
| | | |
One-to-four family residential | — | | | 450 | | | 450 | | | 428 | | | 31 | | | | | |
| | | |
Consumer | 7 | | | 640 | | | 647 | | | 648 | | | 115 | | | | | |
| | | |
Gross purchased other impaired loans | $ | 990 | | | $ | 5,711 | | | $ | 6,701 | | | $ | 8,194 | | | $ | 1,600 | | | | | |
| | | |
|
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2012 | | | | |
| Recorded | | Recorded | | Total | | Unpaid | | Related | | | | |
Investment With | Investment With | Recorded | Contractual | Specific | | | | |
No Specific | Specific | Investment | Principal | Valuation | | | | |
Valuation | Valuation | | Balance | Allowance | | | | |
Allowance | Allowance | | | | | | | |
| (In thousands) | | | | |
Commercial business: | | | | | | | | | | | | | |
Commercial and industrial | $ | 330 | | | $ | 106 | | | $ | 436 | | | $ | 434 | | | $ | 14 | | | | | |
| | | |
Owner-occupied commercial real estate | — | | | 139 | | | 139 | | | 135 | | | 7 | | | | | |
| | | |
Non-owner occupied commercial real estate | 437 | | | 536 | | | 973 | | | 926 | | | 18 | | | | | |
| | | |
Total commercial business | 767 | | | 781 | | | 1,548 | | | 1,495 | | | 39 | | | | | |
| | | |
One-to-four family residential | — | | | 527 | | | 527 | | | 489 | | | 105 | | | | | |
| | | |
Consumer | — | | | 163 | | | 163 | | | 173 | | | 157 | | | | | |
| | | |
Gross purchased other impaired loans | $ | 767 | | | $ | 1,471 | | | $ | 2,238 | | | $ | 2,157 | | | $ | 301 | | | | | |
| | | |
|
The average recorded investment of purchased other impaired loans (including TDRs) for years ended December 31, 2013, 2012 and 2011 are set forth in the following table. |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | | | | | | | | | | | |
| 2013 | | 2012 | | 2011 | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | |
Commercial business: | | | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 1,815 | | | $ | 98 | | | $ | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
Owner-occupied commercial real estate | 149 | | | 85 | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
Non-owner occupied commercial real estate | 1,079 | | | 673 | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total commercial business | 3,043 | | | 856 | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
One-to-four family residential | 476 | | | 199 | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
Consumer | 55 | | | 303 | | | 124 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Gross impaired purchased other loans | $ | 3,574 | | | $ | 1,358 | | | $ | 124 | | | | | | | | | | | | | |
| | | | | | | | | | | |
For the years ended December 31, 2013, 2012 and 2011 no interest income was recognized subsequent to a loan’s classification as impaired. |
(g) Troubled Debt Restructured Loans |
A troubled debt restructured loan is a restructuring in which the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. TDRs are considered impaired and are separately measured for impairment under FASB ASC 310-10-35, whether on accrual or nonaccrual status. |
The recorded investment balance and related allowance for loan losses of accruing and non-accruing TDRs as of December 31, 2013 and December 31, 2012 were as follows: |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2013 | | December 31, 2012 | | | | | | | | |
| Accruing | | Non-Accruing | | Accruing | | Non-Accruing | | | | | | | | |
TDRs | TDRs | TDRs | TDRs | | | | | | | | |
| (In thousands) | | | | | | | | |
Originated TDRs | $ | 20,439 | | | $ | 2,532 | | | $ | 15,039 | | | $ | 9,311 | | | | | | | | | |
| | | | | | | |
Allowance for loan losses on originated TDRs | 2,187 | | | 133 | | | 2,131 | | | 1,994 | | | | | | | | | |
| | | | | | | |
Purchased other TDRs | 5,903 | | | 110 | | | 1,437 | | | 7 | | | | | | | | | |
| | | | | | | |
Allowance for loan losses on purchased other TDRs | 1,430 | | | 57 | | | 76 | | | 2 | | | | | | | | | |
| | | | | | | |
|
The unfunded commitment to borrowers related to originated TDRs was $1.5 million at both December 31, 2013 and December 31, 2012. There were $17,000 and $0 unfunded commitments to borrowers related to the purchased other TDRs as of December 31, 2013 and December 31, 2012, respectively. |
Originated loans that were modified as TDRs during the years ended December 31, 2013 and 2012 are set forth in the following table: |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | | |
| Number of | | Outstanding | | Number of | | Outstanding | | | | | | | | | | |
Contracts | Principal Balance | Contracts | Principal Balance | | | | | | | | | | |
-1 | (1)(2) | -1 | (1)(2) | | | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | |
Commercial business: | | | | | | | | | | | | | | | | | |
Commercial and industrial | 25 | | | $ | 5,324 | | | 26 | | | $ | 4,632 | | | | | | | | | | | |
| | | | | | | | | |
Owner-occupied commercial real estate | 4 | | | 511 | | | 5 | | | 1,641 | | | | | | | | | | | |
| | | | | | | | | |
Non-owner occupied commercial real estate | 2 | | | 192 | | | 1 | | | 94 | | | | | | | | | | | |
| | | | | | | | | |
Total commercial business | 31 | | | 6,027 | | | 32 | | | 6,367 | | | | | | | | | | | |
| | | | | | | | | |
One-to-four family residential | 1 | | | 252 | | | — | | | — | | | | | | | | | | | |
| | | | | | | | | |
Real estate construction and land development: | | | | | | | | | | | | | | | | | |
One-to-four family residential | 24 | | | 3,639 | | | 1 | | | 180 | | | | | | | | | | | |
| | | | | | | | | |
Five or more family residential and commercial properties | 1 | | | 2,404 | | | 1 | | | 339 | | | | | | | | | | | |
| | | | | | | | | |
Total real estate construction and land development | 25 | | | 6,043 | | | 2 | | | 519 | | | | | | | | | | | |
| | | | | | | | | |
Consumer | 2 | | | 139 | | | — | | | — | | | | | | | | | | | |
| | | | | | | | | |
Total originated TDRs | 59 | | | $ | 12,461 | | | 34 | | | $ | 6,886 | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
-1 | Number of contracts and outstanding principal balance represent loans which have balances as of year end as certain loans may have been paid-down or charged-off during the years ended December 31, 2013 and 2012. | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
-2 | Includes subsequent payments after modifications and reflects the balance as of the end of the year. As the Bank did not forgive any principal or interest balance as part of the loan modification, the Bank’s recorded investment in each loan at the date of modification (pre-modification) did not change as a result of the modification (post-modification), except when the modification was the initial advance on a one-to-four family residential real estate construction and land development loan under a master guidance line. During the year ended December 31, 2013, the Company's initial advance at the time of modification on these construction loans totaled $1.1 million and the total commitment amount was $4.3 million. There were no construction loans under a master guidance line that were modified as TDRS during the year ended December 31, 2012. | | | | | | | | | | | | | | | | | | | | | | |
A significant portion of the loans modified during the year ended December 31, 2013 (24 loans totaling $3.4 million at December 31, 2013) relate to a speculative construction home builder. As the builder completes and sells the units, the Bank will advance funds for the construction of another unit. The builder's loans for each separate unit were considered troubled debt restructured loans during the second quarter of 2013. Two of this borrower's 24 loans outstanding as of December 31, 2013 totaling $865,000 were nonaccrual. The related specific valuation allowance on this relationship is approximately $211,000 at December 31, 2013. The Bank closely monitors the activity of this borrower for potential losses. |
Of the 59 loans modified during the year ended December 31, 2013, twelve loans with a total outstanding principal balance of $5.1 million were previously reported as TDRs as of December 31, 2012. Of the 34 loans modified during the year ended December 31, 2012, nine loans with a total outstanding principal balance of $2.4 million were previously reported as TDRs as of December 31, 2011. The Bank typically grants shorter extension periods to continually monitor the troubled credits despite the fact that the extended date might not be the date the Bank expects the cash flow. The Company does not consider these modifications a subsequent default of a TDR as new loan terms, specifically maturity dates, were granted. The potential losses related to these loans would have been considered in the period the loan was first reported as a TDR and adjusted, as necessary, in the current periods based on more recent information. The related specific valuation allowance for TDRs that were modified during the year ended December 31, 2013 was $1.4 million at December 31, 2013. The related specific valuation allowance for those TDRs that were previously reported as TDRs as of December 31, 2012 was $111,000 and the general allowance for loan losses for TDRs that were modified during the year ended December 31, 2013 that were not previously reported as TDRs was $274,000 as of December 31, 2012. |
Purchased other loans that were modified as TDRs during the years ended December 31, 2013 and 2012 are set forth in the following table: |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | | |
| Number of | | Outstanding | | Number of | | Outstanding | | | | | | | | | | |
Contracts (1) | Principal Balance | Contracts (1) | Principal Balance | | | | | | | | | | |
| (1)(2) | | (1)(2) | | | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | |
Commercial business: | | | | | | | | | | | | | | | | | |
Commercial and industrial | 11 | | | $ | 5,007 | | | 7 | | | $ | 435 | | | | | | | | | | | |
| | | | | | | | | |
Owner occupied commercial real estate | 1 | | | 26 | | | — | | | — | | | | | | | | | | | |
| | | | | | | | | |
Non-owner occupied commercial real estate | — | | | — | | | 1 | | | 536 | | | | | | | | | | | |
| | | | | | | | | |
Total commercial business | 12 | | | 5,033 | | | 8 | | | 971 | | | | | | | | | | | |
| | | | | | | | | |
One-to-four family residential | — | | | — | | | 1 | | | 466 | | | | | | | | | | | |
| | | | | | | | | |
Consumer | 1 | | | 3 | | | — | | | — | | | | | | | | | | | |
| | | | | | | | | |
Total purchased other TDRs | 13 | | | $ | 5,036 | | | 9 | | | $ | 1,437 | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
-1 | Number of contracts and outstanding principal balance represent loans which have balances as of year end as certain loans may have been paid-down or charged-off during the years ended December 31, 2013 and 2012. | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
-2 | Includes subsequent payments after modifications and reflects the balance as of the end of the year. The Bank’s initial recorded investment in each loan at the date of modification (pre-modification) did not change as a result of the modification (post-modification) as the Bank did not forgive any principal or interest balance as part of the loan modification. | | | | | | | | | | | | | | | | | | | | | | |
The majority of the Bank’s TDRs are a result of granting extensions to troubled credits which have already been adversely classified. We grant such extensions to reassess the borrower’s financial status and to develop a plan for repayment. Certain modifications with extensions also include interest rate reductions, which is the second most prevalent concession. Certain TDRs were additionally re-amortized over a longer period of time. The Bank additionally advanced funds to a troubled speculative home builder to complete established projects as mentioned above. These modifications would all be considered a concession for a borrower that could not obtain similar financing terms from another source other than from the Bank. |
The financial effects of each modification will vary based on the specific restructure. For the majority of the Bank’s TDRs, the loans were interest-only with a balloon payment at maturity. If the interest rate is not adjusted and the modified terms are consistent with other similar credits being offered, the Bank may not experience any loss associated with the restructure. If, however, the restructure involves forbearance agreements or interest rate modifications, the Bank may not collect all the principal and interest based on the original contractual terms. The Bank estimates the necessary allowance for loan losses on TDRs using the same guidance as used for other impaired loans. |
There were three originated commercial and industrial TDRs with a principal balance totaling $918,000 that had been modified during the previous twelve months ended that subsequently defaulted during the year ended December 31, 2013. Two of these loans defaulted because they were past their modified maturity date while one defaulted due to a payment being past due 90 days or more. The Bank recorded a $63,000 related specific valuation allowance for these defaulted TDRs as of December 31, 2013. |
There were no originated TDRs that had been modified during the previous twelve months ended that subsequently defaulted during the year ended December 31, 2012. There were no purchased other TDRs that had been modified during the previous twelve months ended that subsequently defaulted during the years ended December 31, 2013 and 2012. |
(h) Purchased Impaired Loans |
As indicated above, the Company purchased impaired loans from the Cowlitz, Pierce, NCB and Valley Acquisitions which are accounted for under FASB ASC 310-30. |
The following tables reflect the outstanding balance at December 31, 2013 and December 31, 2012 of the purchased impaired loans by acquisition: |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Cowlitz Bank | | | | | | | | | | | | | | | | |
| December 31, 2013 | | December 31, 2012 | | | | | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | | | | | |
Commercial business: | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 10,608 | | | $ | 21,624 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Owner-occupied commercial real estate | 11,538 | | | 17,157 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-owner occupied commercial real estate | 10,611 | | | 12,908 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total commercial business | 32,757 | | | 51,689 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
One-to-four family residential | 3,966 | | | 4,262 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate construction and land development: | | | | | | | | | | | | | | | | | | | |
One-to-four family residential | 1,298 | | | 6,122 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Five or more family residential and commercial properties | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total real estate construction and land development | 1,298 | | | 6,122 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | 2,022 | | | 3,533 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Gross purchased impaired covered loans | $ | 40,043 | | | $ | 65,606 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
The total balance of subsequent advances on the purchased impaired covered loans was $2.6 million and $3.8 million as of December 31, 2013 and December 31, 2012, respectively. The Bank has the option to modify certain purchased covered loans which may terminate the FDIC shared-loss coverage on those modified loans. At both December 31, 2013 and December 31, 2012, the recorded investment balance of purchased impaired covered loans which are no longer covered under the FDIC shared-loss agreements was $1.7 million. The Bank continues to report these loans in the covered portfolio as they are in a pool and they continue to be accounted for under FASB ASC 310-30. The FDIC indemnification asset has been adjusted to reflect the change in the loan status. |
|
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Pierce Commercial Bank | | | | | | | | | | | | | | | | |
| December 31, 2013 | | December 31, 2012 | | | | | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | | | | | |
Commercial business: | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 15,684 | | | $ | 21,953 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Owner-occupied commercial real estate | 5,067 | | | 5,748 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-owner occupied commercial real estate | 4,893 | | | 7,802 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total commercial business | 25,644 | | | 35,503 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
One-to-four family residential | 4,055 | | | 3,303 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate construction and land development: | | | | | | | | | | | | | | | | | | | |
One-to-four family residential | 1,967 | | | 3,375 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Five or more family residential and commercial properties | 469 | | | 820 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total real estate construction and land development | 2,436 | | | 4,195 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | 1,013 | | | 4,393 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Gross purchased impaired non-covered loans | $ | 33,148 | | | $ | 47,394 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| NCB | | Valley | | | | | | | | | | | | | | | | |
| December 31, 2013 (1) | | | | | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | | | | | |
Commercial business: | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 1,014 | | | $ | 1,495 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Owner-occupied commercial real estate | — | | | 443 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-owner occupied commercial real estate | 2,028 | | | 1,355 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total commercial business | 3,042 | | | 3,293 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
One-to-four family residential | — | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate construction and land development: | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Five or more family residential and commercial properties | 608 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total real estate construction and land development | 608 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | 79 | | | 58 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Gross purchased impaired non-covered loans | $ | 3,729 | | | $ | 3,351 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
-1 | The NCB Acquisition was completed on January 9, 2013 and the Valley Acquisition was completed on July 15, 2013. | | | | | | | | | | | | | | | | | | | | | | |
On the acquisition dates, the amount by which the undiscounted expected cash flows of the purchased impaired loans exceeded the estimate fair value of the loan is the “accretable yield”. The accretable yield is then measured at each financial reporting date and represents the difference between the remaining undiscounted expected cash flows and the current carrying value of the purchased impaired loan. |
The following tables summarize the accretable yield on the purchased impaired loans resulting from the Cowlitz, Pierce, NCB and Valley Acquisitions for the years ended December 31, 2013 and 2012. As the NCB and Valley Acquisitions were completed in 2013, there are no balances for the years ended December 31, 2012 or 2011. |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2013 | | | | |
| Cowlitz | | Pierce | | NCB (1) | | Valley (2) | | Total | | | | |
Bank | Commercial | | | | |
| Bank | | | | |
| (In thousands) | | | | |
Balance at the beginning of the year | $ | 14,286 | | | $ | 7,352 | | | $ | — | | | $ | — | | | $ | 21,638 | | | | | |
| | | |
Accretion | (4,210 | ) | | (4,115 | ) | | (273 | ) | | (14 | ) | | (8,612 | ) | | | | |
Disposal and other | (4,902 | ) | | 45 | | | (258 | ) | | (105 | ) | | (5,220 | ) | | | | |
| | | |
Change in accretable yield | 4,361 | | | 3,847 | | | 964 | | | 271 | | | 9,443 | | | | | |
| | | |
Balance at the end of the year | $ | 9,535 | | | $ | 7,129 | | | $ | 433 | | | $ | 152 | | | $ | 17,249 | | | | | |
| | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended | | Year Ended | | | | | | | | |
December 31, 2012 | December 31, 2011 | | | | | | | | |
| Cowlitz | | Pierce | | Cowlitz | | Pierce | | | | | | | | |
Bank | Commercial | Bank | Commercial | | | | | | | | |
| Bank | | Bank | | | | | | | | |
| (In thousands) | | | | | | | | |
Balance at the beginning of the year | $ | 19,912 | | | $ | 14,638 | | | $ | 20,082 | | | $ | 10,943 | | | | | | | | | |
| | | | | | | |
Accretion | (6,679 | ) | | (6,238 | ) | | (9,206 | ) | | (6,288 | ) | | | | | | | | |
Disposals and other | (1,140 | ) | | (2,798 | ) | | (80 | ) | | 20 | | | | | | | | | |
| | | | | | | |
Change in accretable yield | 2,193 | | | 1,750 | | | 9,116 | | | 9,963 | | | | | | | | | |
| | | | | | | |
Balance at the end of the year | $ | 14,286 | | | $ | 7,352 | | | $ | 19,912 | | | $ | 14,638 | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
-1 | For the NCB Acquisition, the contractual cash flows were $8.5 million and the expected cash flows were $5.6 million, resulting in a non-accretable difference of $2.9 million. As the fair value of these purchased impaired loans at the January 9, 2013 NCB Acquisition date was $4.9 million, this provides an accretable yield of $745,000, which the Company included in the change in accretable yield in the quarter of acquisition. | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
-2 | For the Valley Acquisition, the contractual cash flows were $5.1 million and the expected cash flows were $4.4 million, resulting in a non-accretable difference of $692,000. As the fair value of these purchased impaired loans at the July 15, 2013 Valley Acquisition date was $4.1 million, this provides an accretable yield of $271,000, which the Company included in the change in accretable yield in the quarter of acquisition. | | | | | | | | | | | | | | | | | | | | | | |
(i) Related Party Loans |
In the ordinary course of business, the Company has granted loans to certain directors, executive officers and their affiliates (collectively referred to as “related parties”). |
Activity in related party loans for the years ended December 31, 2013, 2012 and 2011 was as follows (in thousands): |
|
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Balance outstanding at December 31, 2010 | $ | 10,547 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Principal additions | 6,427 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Principal reductions | (6,583 | ) | | | | | | | | | | | | | | | | | | | | |
Balance outstanding at December 31, 2011 | 10,391 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Principal additions | 8,906 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Principal reductions | (7,855 | ) | | | | | | | | | | | | | | | | | | | | |
Balance outstanding at December 31, 2012 | 11,442 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Principal additions | — | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Elimination of outstanding loan balance due to change in related party status | (3,045 | ) | | | | | | | | | | | | | | | | | | | | |
Principal reductions | (923 | ) | | | | | | | | | | | | | | | | | | | | |
Balance outstanding at December 31, 2013 | $ | 7,474 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
The Company had $184,000 and $2.0 million of unfunded commitments to related parties as of December 31, 2013 and 2012, respectively. The Company did not have any borrowings from related parties at December 31, 2013 or 2012. |
|
(j) Mortgage Banking Activities |
The Bank historically originated certain single family residential loans to be sold on the secondary market. These loans were presented as held for sale. The Bank ceased these mortgage banking activities in the second quarter of 2013. Details of certain mortgage banking activities are as follows: |
|
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended or As of December 31, | | | | | | | | | | | | | | | |
| | 2013 | | 2012 | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | |
Loans held for sale at lower of cost or market | | $ | — | | | $ | 1,676 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Loans serviced for others | | — | | | 49 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Total loans sold during the year | | 8,460 | | | 21,187 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Commitments to sell mortgage loans | | — | | | 2,971 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Commitments to fund mortgage loans (at interest rates approximating market rates): | | | | | | | | | | | | | | | | | | | |
Fixed rate | | $ | — | | | $ | 5,714 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Variable or adjustable rate | | — | | | — | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
There was no servicing fee income from mortgage loans serviced for others for the years ended December 31, 2013, 2012 and 2011. |