Loans Receivable and Allowance for Loan Losses | 9 Months Ended |
Sep. 30, 2014 |
Loans Receivable and Allowance for Loan Losses | ' |
Loans Receivable and Allowance for Loan Losses | ' |
Note 7 |
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Loans Receivable and Allowance for Loan Losses |
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The loan portfolio at September 30, 2014 and December 31, 2013 consist of the following: |
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| | 2014 | | 2013 | | | | | | | | | | | | | |
(In thousands) | | Originated | | Acquired | | Total | | Total | | | | | | | | | | | | | |
Commercial and industrial | | $ | 291,044 | | $ | 30,216 | | $ | 321,260 | | $ | 219,156 | | | | | | | | | | | | | |
Real estate - commercial | | 1,115,979 | | 108,992 | | 1,224,971 | | 1,048,579 | | | | | | | | | | | | | |
Real estate - construction | | 411,615 | | 17,003 | | 428,618 | | 363,063 | | | | | | | | | | | | | |
Real estate - residential | | 376,893 | | 10,390 | | 387,283 | | 299,484 | | | | | | | | | | | | | |
Home equity lines | | 121,866 | | 4,167 | | 126,033 | | 109,481 | | | | | | | | | | | | | |
Consumer | | 4,299 | | 847 | | 5,146 | | 4,159 | | | | | | | | | | | | | |
| | 2,321,696 | | 171,615 | | 2,493,311 | | 2,043,922 | | | | | | | | | | | | | |
Net deferred fees | | (4,018 | ) | — | | (4,018 | ) | (3,754 | ) | | | | | | | | | | | | |
Loans receivable, net of fees | | 2,317,678 | | 171,615 | | 2,489,293 | | 2,040,168 | | | | | | | | | | | | | |
Allowance for loan losses | | (29,392 | ) | (145 | ) | (29,537 | ) | (27,864 | ) | | | | | | | | | | | | |
Loans receivable, net | | $ | 2,288,286 | | $ | 171,470 | | $ | 2,459,756 | | $ | 2,012,304 | | | | | | | | | | | | | |
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During 2014, as a result of the Company’s acquisition of UFBC, the loan portfolio was segregated between loans initially accounted for under the amortized cost method (referred to as “originated” loans) and loans acquired (referred to as “acquired” loans). |
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The loans segregated to the acquired loan portfolio were initially measured at fair value and subsequently accounted for under either Accounting Standards Codification (“ASC”) Topic 310-30 or ASC 310-20. The outstanding principal balance and related carrying amount of acquired loans included in the consolidated statement of condition are as follows: |
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(in thousands) | | September 30, 2014 | | | | | | | | | | | | | | | | | | | | | | |
Credit impaired acquired loans evaluated individually for future credit losses | | | | | | | | | | | | | | | | | | | | | | | | |
Outstanding principal balance | | $ | 18,356 | | | | | | | | | | | | | | | | | | | | | | |
Carrying amount | | 14,167 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other acquired loans | | | | | | | | | | | | | | | | | | | | | | | | |
Outstanding principal balance | | 158,026 | | | | | | | | | | | | | | | | | | | | | | |
Carrying amount | | 157,448 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total acquired loans | | | | | | | | | | | | | | | | | | | | | | | | |
Outstanding principal balance | | 176,382 | | | | | | | | | | | | | | | | | | | | | | |
Carrying amount | | 171,615 | | | | | | | | | | | | | | | | | | | | | | |
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The following table presents changes in the accretable discount, which includes income recognized from contractual interest cash flows. |
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(in thousands) | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at January 1, 2014 | | $ | — | | | | | | | | | | | | | | | | | | | | | | |
Recorded discount at acquisition date | | (3,872 | ) | | | | | | | | | | | | | | | | | | | | | |
Accretion | | (896 | ) | | | | | | | | | | | | | | | | | | | | | |
Balance at September 30, 2014 | | $ | (4,768 | ) | | | | | | | | | | | | | | | | | | | | | |
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The Company’s allowance for loan losses is based first on a segmentation of its loan portfolio by general loan type, or portfolio segments, as presented in the preceding table. For originated loans, certain portfolio segments are further disaggregated and evaluated collectively for impairment based on class segments, which are largely based on the type of collateral underlying each loan. The Company also maintains an allowance for loan losses for acquired loans when: (i) for loans accounted for under ASC 310-30, there is deterioration in credit quality subsequent to acquisition, and (ii) for loans accounted for under ASC 310-20, the inherent losses in the loans exceed the remaining credit discount recorded at the time of acquisition. |
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Activity in the Company’s allowance for loan losses for the three and nine months ended September 30, 2014 and 2013 is shown below. |
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| | Three months ended September 30, | | Nine months ended September 30, | | | | | | | | | | | | | |
| | 2014 | | 2013 | | 2014 | | 2013 | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 29,566 | | $ | 26,934 | | $ | 27,864 | | $ | 27,400 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Provision for loan losses | | — | | 157 | | 2,541 | | (432 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Loans charged off: | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | — | | — | | (1,346 | ) | (42 | ) | | | | | | | | | | | | |
Residential | | (78 | ) | — | | (78 | ) | (185 | ) | | | | | | | | | | | | |
Consumer | | (5 | ) | — | | (7 | ) | (1 | ) | | | | | | | | | | | | |
Total loans charged off | | (83 | ) | — | | (1,431 | ) | (228 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Recoveries: | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | 10 | | 290 | | 339 | | 609 | | | | | | | | | | | | | |
Residential | | 44 | | 11 | | 136 | | 41 | | | | | | | | | | | | | |
Consumer | | — | | — | | 88 | | 2 | | | | | | | | | | | | | |
Total recoveries | | 54 | | 301 | | 563 | | 652 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Net recoveries (charge offs) | | (29 | ) | 301 | | (868 | ) | 424 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Ending balance, September 30, 2014 | | $ | 29,537 | | $ | 27,392 | | $ | 29,537 | | $ | 27,392 | | | | | | | | | | | | | |
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For the three and nine months ended September 30, 2014, the Company recorded an allowance for loan losses for the acquired loan portfolio of $0 and $145,000 respectively. This amount represents credit deterioration post acquisition related to acquired loans. There were no impairments recorded in the purchase credit impaired portfolio as of September 30, 2014. |
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An analysis of the allowance for loan losses based on loan type, or segment, and the Company’s loan portfolio, which identifies certain loans that are evaluated for individual or collective impairment, as of September 30, 2014 and December 31, 2013, are below: |
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Allowance for Loan Losses |
At and for the Three Months Ended September 30, 2014 |
(In thousands) |
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| | Commercial and | | Real Estate - | | Real Estate - | | Real Estate - | | Home Equity | | | | | | | | |
| | Industrial | | Commercial | | Construction | | Residential | | Lines | | Consumer | | Total | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | |
Beginning Balance, July 1 | | $ | 3,494 | | $ | 17,199 | | $ | 5,985 | | $ | 2,397 | | $ | 400 | | $ | 91 | | $ | 29,566 | | | | |
Charge-offs | | — | | — | | — | | (78 | ) | — | | (5 | ) | (83 | ) | | | |
Recoveries | | 3 | | — | | 7 | | 44 | | — | | — | | 54 | | | | |
Provision for loan losses | | 610 | | (422 | ) | (184 | ) | (52 | ) | 38 | | 10 | | — | | | | |
Ending balance, September 30, 2014 | | $ | 4,107 | | $ | 16,777 | | $ | 5,808 | | $ | 2,311 | | $ | 438 | | $ | 96 | | $ | 29,537 | | | | |
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Allowance for Loan Losses |
At and for the Nine Months Ended September 30, 2014 |
(In thousands) |
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| | Commercial and | | Real Estate - | | Real Estate - | | Real Estate - | | Home Equity | | | | | | | | |
| | Industrial | | Commercial | | Construction | | Residential | | Lines | | Consumer | | Total | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | |
Beginning Balance, January 1 | | $ | 3,329 | | $ | 16,076 | | $ | 5,336 | | $ | 2,421 | | $ | 609 | | $ | 93 | | $ | 27,864 | | | | |
Charge-offs | | (301 | ) | (1,045 | ) | — | | (78 | ) | — | | (7 | ) | (1,431 | ) | | | |
Recoveries | | 7 | | 316 | | 16 | | 136 | | — | | 88 | | 563 | | | | |
Provision for loan losses | | 1,072 | | 1,430 | | 456 | | (168 | ) | (171 | ) | (78 | ) | 2,541 | | | | |
Ending balance, September 30, 2014 | | $ | 4,107 | | $ | 16,777 | | $ | 5,808 | | $ | 2,311 | | $ | 438 | | $ | 96 | | $ | 29,537 | | | | |
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Ending balance, September 30, 2014 | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 574 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 574 | | | | |
Collectively evaluated for impairment | | 3,533 | | 16,777 | | 5,808 | | 2,311 | | 438 | | 96 | | 28,963 | | | | |
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Loans Receivable |
At September 30, 2014 |
(In thousands) |
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| | Commercial and | | Real Estate - | | Real Estate - | | Real Estate - | | Home Equity | | | | | | | | |
| | Industrial | | Commercial | | Construction | | Residential | | Lines | | Consumer | | Total | | | | |
Loans Receivable: | | | | | | | | | | | | | | | | | | |
Ending balance, September 30, 2014 | | $ | 321,260 | | $ | 1,224,971 | | $ | 428,618 | | $ | 387,283 | | $ | 126,033 | | $ | 5,146 | | $ | 2,493,311 | | | | |
| | | | | | | | | | | | | | | | | | |
Ending balance, September 30, 2014 | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 1,882 | | $ | 1,070 | | $ | 250 | | $ | 146 | | $ | 347 | | $ | 1 | | $ | 3,696 | | | | |
Purchased Credit Impaired Loans | | 2,965 | | 8,786 | | 1,617 | | 336 | | 458 | | 5 | | 14,167 | | | | |
Collectively evaluated for impairment | | 316,413 | | 1,215,115 | | 426,751 | | 386,801 | | 125,228 | | 5,140 | | 2,475,448 | | | | |
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Allowance for Loan Losses |
At and for the Three Months Ended September 30, 2013 |
(In thousands) |
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| | Commercial and | | Real Estate - | | Real Estate - | | Real Estate - | | Home Equity | | | | | | | | |
| | Industrial | | Commercial | | Construction | | Residential | | Lines | | Consumer | | Total | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | |
Beginning Balance, July 1 | | $ | 31 | | $ | 19,909 | | $ | 6,700 | | $ | 133 | | $ | 112 | | $ | 49 | | $ | 26,934 | | | | |
Charge-offs | | — | | — | | — | | | | — | | — | | — | | | | |
Recoveries | | — | | 289 | | 1 | | 11 | | — | | — | | 301 | | | | |
Provision for loan losses | | 669 | | (552 | ) | (234 | ) | 229 | | 29 | | 16 | | 157 | | | | |
Ending balance, September 30, 2013 | | $ | 700 | | $ | 19,646 | | $ | 6,467 | | $ | 373 | | $ | 141 | | $ | 65 | | $ | 27,392 | | | | |
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Allowance for Loan Losses |
At and for the Nine Months Ended September 30, 2013 |
(In thousands) |
|
| | Commercial and | | Real Estate - | | Real Estate - | | Real Estate - | | Home Equity | | | | | | | | |
| | Industrial | | Commercial | | Construction | | Residential | | Lines | | Consumer | | Total | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | |
Beginning Balance, January 1 | | $ | 525 | | $ | 17,990 | | $ | 7,675 | | $ | 857 | | $ | 266 | | $ | 87 | | $ | 27,400 | | | | |
Charge-offs | | (42 | ) | — | | — | | (185 | ) | — | | (1 | ) | (228 | ) | | | |
Recoveries | | 306 | | 293 | | 10 | | 41 | | — | | 2 | | 652 | | | | |
Provision for loan losses | | (89 | ) | 1,363 | | (1,218 | ) | (340 | ) | (125 | ) | (23 | ) | (432 | ) | | | |
Ending balance, September 30, 2013 | | $ | 700 | | $ | 19,646 | | $ | 6,467 | | $ | 373 | | $ | 141 | | $ | 65 | | $ | 27,392 | | | | |
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Ending balance, September 30, 2013 | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | | | |
Collectively evaluated for impairment | | 700 | | $ | 19,646 | | $ | 6,467 | | $ | 373 | | $ | 141 | | $ | 65 | | $ | 27,392 | | | | |
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Loans Receivable |
At September 30, 2013 |
(In thousands) |
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| | Commercial and | | Real Estate - | | Real Estate - | | Real Estate - | | Home Equity | | | | | | | | |
| | Industrial | | Commercial | | Construction | | Residential | | Lines | | Consumer | | Total | | | | |
Loans Receivable: | | | | | | | | | | | | | | | | | | |
Ending balance, September 30, 2013 | | $ | 207,729 | | $ | 999,128 | | $ | 353,241 | | $ | 294,105 | | $ | 109,125 | | $ | 3,818 | | $ | 1,967,146 | | | | |
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Ending balance, September 30, 2013 | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | — | | $ | 1,738 | | $ | 1,022 | | $ | — | | $ | — | | $ | — | | $ | 2,760 | | | | |
Collectively evaluated for impairment | | 207,729 | | 997,390 | | 352,219 | | 294,105 | | 109,125 | | 3,818 | | 1,964,386 | | | | |
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The accounting policy related to the allowance for loan losses is considered a critical accounting policy given the level of estimation, judgment and uncertainty in evaluating the levels of the allowance required for the inherent probable losses in the loan portfolio and the material effect such estimation, judgment and uncertainty can be on the consolidated financial results. |
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The Company’s ongoing credit quality management process relies on a system of activities to assess and evaluate various factors that impact the estimation of the allowance for loan losses. These factors include, but are not limited to; current economic conditions; loan concentrations, collateral adequacy and value; past loss experience for particular types of loans, size, composition and nature of loans; migration of loans through our loan rating methodology; trends in charge-offs and recoveries. This process also contemplates a disciplined approach to managing and monitoring credit exposures to ensure that the structure and pricing of credit is always consistent with the Company’s assessment of risk. The loan officer has frequent contact with the borrower and is a key player in the credit management process and must develop and diligently practice sound credit management skills and habits to ensure effectiveness. Under the direction of the Company’s loan committee and the chief credit officer, the credit risk management function works with the loan officers and other groups within the Company to monitor the loan portfolio, maintain the watch list, and compile the analysis necessary to determine the allowance for loan losses. |
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Loans are added to the watch list when circumstances appear to warrant the inclusion of the relationship. As a general rule, loans are added to the watch list when they are deemed to be problem assets. Problem assets are defined as those that have been risk rated special mention or lower. Successful problem asset management requires early recognition of deteriorating credits and timely corrective or risk management actions. Generally, risk ratings are either approved or amended by the loan committee accordingly. Problem loans are maintained on the watch list until the loan is either paid off or circumstances around the borrower’s situation improve to the point that the risk rating on the loan is adjusted upward. |
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In addition to internal activities, the Company also engages an external consultant on a quarterly basis to review the Company’s loan portfolio. This external loan review function helps to ensure the soundness of the loan portfolio through a third party review of existing exposures in the portfolio, supporting the commercial loan officers in the execution of its credit management responsibilities, and monitoring the adherence to the Company’s credit risk management standards. |
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The following tables report the Company’s nonaccrual and past due loans at September 30, 2014 and December 31, 2013. In addition, the credit quality of the loan portfolio is provided as of September 30, 2014 and December 31, 2013. |
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Nonaccrual and Past Due Loans - Originated Loan Portfolio |
At September 30, 2014 |
(In thousands) |
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| | | | | | 90 Days or | | | | | | | | | | | |
| | 30- | | 60- | | More Past Due | | | | | | | | 90 Days Past | | | |
| | 59 Days | | 89 Days | | (includes | | | | | | | | Due and Still | | Nonaccrual | |
| | Past Due | | Past Due | | nonaccrual) | | Total Past Due | | Current | | Total Loans | | Accruing | | Loans | |
Commercial and industrial | | $ | 69 | | $ | 380 | | $ | 1,495 | | $ | 1,944 | | $ | 289,100 | | 291,044 | | $ | — | | $ | 1,495 | |
| | | | | | | | | | | | | | | | | |
Real estate - commercial | | | | | | | | | | | | | | | | | |
Owner occupied | | — | | — | | — | | — | | 285,416 | | 285,416 | | — | | — | |
Non-owner occupied | | 76 | | — | | 1,070 | | 1,146 | | 829,417 | | 830,563 | | — | | 1,070 | |
| | | | | | | | | | | | | | | | | |
Real estate - construction | | | | | | | | | | | | | | | | | |
Residential | | — | | — | | — | | — | | 147,216 | | 147,216 | | — | | — | |
Commercial | | — | | — | | — | | — | | 264,399 | | 264,399 | | — | | — | |
| | | | | | | | | | | | | | | | | |
Real estate - residential | | | | | | | | | | | | | | | | | |
Single family | | — | | — | | 146 | | 146 | | 271,204 | | 271,350 | | — | | 146 | |
Multi-family | | — | | — | | — | | — | | 105,543 | | 105,543 | | — | | — | |
| | | | | | | | | | | | | | | | | |
Home equity lines | | 50 | | 119 | | 228 | | 397 | | 121,469 | | 121,866 | | — | | 228 | |
| | | | | | | | | | | | | | | | | |
Consumer | | | | | | | | | | | | | | | | | |
Installment | | — | | 1 | | — | | 1 | | 3,824 | | 3,825 | | — | | — | |
Credit cards | | — | | — | | — | | — | | 474 | | 474 | | — | | — | |
| | $ | 195 | | $ | 500 | | $ | 2,939 | | $ | 3,634 | | $ | 2,318,062 | | $ | 2,321,696 | | $ | — | | $ | 2,939 | |
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Nonaccrual and Past Due Loans - Acquired Loan Portfolio |
At September 30, 2014 |
(In thousands) |
|
| | | | | | 90 Days or | | | | | | | | | | | |
| | 30- | | 60- | | More Past Due | | | | | | | | 90 Days Past | | | |
| | 59 Days | | 89 Days | | (includes | | | | | | | | Due and Still | | Nonaccrual | |
| | Past Due | | Past Due | | nonaccrual) | | Total Past Due | | Current | | Total Loans | | Accruing | | Loans | |
Commercial and industrial | | $ | — | | $ | — | | $ | 724 | | $ | 724 | | $ | 29,492 | | 30,216 | | $ | — | | $ | 724 | |
| | | | | | | | | | | | | | | | | |
Real estate - commercial | | | | | | | | | | | | | | | | | |
Owner occupied | | — | | — | | — | | — | | 51,906 | | 51,906 | | — | | — | |
Non-owner occupied | | 146 | | — | | 969 | | 1,115 | | 55,971 | | 57,086 | | — | | 348 | |
| | | | | | | | | | | | | | | | | |
Real estate - construction | | | | | | | | | | | | | | | | | |
Residential | | — | | — | | — | | — | | 12,978 | | 12,978 | | — | | — | |
Commercial | | — | | — | | — | | — | | 4,025 | | 4,025 | | — | | — | |
| | | | | | | | | | | | | | | | | |
Real estate - residential | | | | | | | | | | | | | | | | | |
Single family | | — | | — | | 312 | | 312 | | 10,078 | | 10,390 | | — | | 312 | |
Multi-family | | — | | — | | — | | — | | — | | — | | — | | — | |
| | | | | | | | | | | | | | | | | |
Home equity lines | | — | | — | | — | | — | | 4,167 | | 4,167 | | — | | — | |
| | | | | | | | | | | | | | | | | |
Consumer | | | | | | | | | | | | | | | | | |
Installment | | — | | — | | — | | — | | 847 | | 847 | | — | | — | |
Credit cards | | — | | — | | — | | — | | — | | — | | — | | — | |
| | $ | 146 | | $ | — | | $ | 2,005 | | $ | 2,151 | | $ | 169,464 | | $ | 171,615 | | $ | — | | $ | 1,384 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
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Nonaccrual and Past Due Loans - Originated Loan Portfolio |
At December 31, 2013 |
(In thousands) |
|
| | | | | | 90 Days or | | | | | | | | | | | |
| | 30- | | 60- | | More Past Due | | | | | | | | 90 Days Past | | | |
| | 59 Days | | 89 Days | | (includes | | | | | | | | Due and Still | | Nonaccrual | |
| | Past Due | | Past Due | | nonaccrual) | | Total Past Due | | Current | | Total Loans | | Accruing | | Loans | |
Commercial and industrial | | $ | 101 | | $ | 316 | | $ | — | | $ | 417 | | $ | 218,739 | | 219,156 | | $ | — | | $ | — | |
| | | | | | | | | | | | | | | | | |
Real estate - commercial | | | | | | | | | | | | | | | | | |
Owner occupied | | — | | — | | — | | — | | 279,631 | | 279,631 | | — | | — | |
Non-owner occupied | | 82 | | — | | 1,738 | | 1,820 | | 767,128 | | 768,948 | | — | | 1,738 | |
| | | | | | | | | | | | | | | | | |
Real estate - construction | | | | | | | | | | | | | | | | | |
Residential | | — | | — | | — | | — | | 120,144 | | 120,144 | | — | | — | |
Commercial | | — | | — | | 525 | | 525 | | 242,394 | | 242,919 | | — | | 525 | |
| | | | | | | | | | | | | | | | | |
Real estate - residential | | | | | | | | | | | | | | | | | |
Single family | | 8 | | — | | — | | 8 | | 213,537 | | 213,545 | | — | | — | |
Multi-family | | — | | — | | — | | — | | 85,939 | | 85,939 | | — | | — | |
| | | | | | | | | | | | | | | | | |
Home equity lines | | — | | — | | 51 | | 51 | | 109,430 | | 109,481 | | — | | 51 | |
| | | | | | | | | | | | | | | | | |
Consumer | | | | | | | | | | | | | | | | | |
Installment | | — | | — | | — | | — | | 3,912 | | 3,912 | | — | | — | |
Credit cards | | — | | — | | — | | — | | 247 | | 247 | | — | | — | |
| | $ | 191 | | $ | 316 | | $ | 2,314 | | $ | 2,821 | | $ | 2,041,101 | | $ | 2,043,922 | | $ | — | | $ | 2,314 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
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The Company had no acquired loans as of December 31, 2013. |
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Additional information on the Company’s impaired loans that were evaluated for specific reserves as of September 30, 2014 and December 31, 2013, including the recorded investment on the statement of condition and the unpaid principal balance, is shown below: |
|
Impaired Loans - Originated Loan Portfolio |
At September 30, 2014 |
(In thousands) |
|
| | Recorded | | Unpaid Principal | | Related | | Interest Income | | | | | | | | | | | | | |
| | Investment | | Balance | | Allowance | | Recognized | | | | | | | | | | | | | |
With no related allowance: | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 239 | | $ | 239 | | $ | — | | $ | — | | | | | | | | | | | | | |
Real estate - commercial | | | | | | | | | | | | | | | | | | | | | |
Owner occupied | | — | | — | | — | | — | | | | | | | | | | | | | |
Non-owner occupied | | 1,070 | | 3,206 | | — | | — | | | | | | | | | | | | | |
Real estate - construction | | | | | | | | | | | | | | | | | | | | | |
Residential | | — | | — | | — | | — | | | | | | | | | | | | | |
Commercial | | 250 | | 250 | | — | | — | | | | | | | | | | | | | |
Real estate - residential | | | | | | | | | | | | | | | | | | | | | |
Single family | | 146 | | 146 | | — | | 3 | | | | | | | | | | | | | |
Multi-family | | — | | | | — | | — | | | | | | | | | | | | | |
Home equity lines | | 347 | | 347 | | — | | 5 | | | | | | | | | | | | | |
Consumer | | 1 | | 1 | | — | | — | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
With related allowance: | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 1,495 | | $ | 1,495 | | $ | 428 | | $ | — | | | | | | | | | | | | | |
Real estate - commercial | | | | | | | | — | | | | | | | | | | | | | |
Owner occupied | | — | | — | | — | | — | | | | | | | | | | | | | |
Non-owner occupied | | — | | — | | — | | — | | | | | | | | | | | | | |
Real estate - construction | | | | | | | | — | | | | | | | | | | | | | |
Residential | | — | | — | | — | | — | | | | | | | | | | | | | |
Commercial | | — | | — | | — | | — | | | | | | | | | | | | | |
Real estate - residential | | | | | | | | — | | | | | | | | | | | | | |
Single family | | — | | — | | — | | — | | | | | | | | | | | | | |
Multi-family | | — | | — | | — | | — | | | | | | | | | | | | | |
Home equity lines | | — | | — | | — | | — | | | | | | | | | | | | | |
Consumer | | — | | — | | — | | — | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
By segment total: | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 1,734 | | $ | 1,734 | | $ | 428 | | $ | — | | | | | | | | | | | | | |
Real estate - commercial | | 1,070 | | 3,206 | | — | | — | | | | | | | | | | | | | |
Real estate - construction | | 250 | | 250 | | — | | — | | | | | | | | | | | | | |
Real estate - residential | | 146 | | 146 | | — | | 3 | | | | | | | | | | | | | |
Home equity lines | | 347 | | 347 | | — | | 5 | | | | | | | | | | | | | |
Consumer | | 1 | | 1 | | — | | — | | | | | | | | | | | | | |
Total | | $ | 3,548 | | $ | 5,684 | | $ | 428 | | $ | 8 | | | | | | | | | | | | | |
|
Impaired Loans - Acquired Loan Portfolio |
At September 30, 2014 |
(In thousands) |
|
| | Recorded | | Unpaid Principal | | Related | | Interest Income | | | | | | | | | | | | | |
| | Investment | | Balance | | Allowance | | Recognized | | | | | | | | | | | | | |
With no related allowance: | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 574 | | $ | 1,227 | | $ | — | | $ | 6 | | | | | | | | | | | | | |
Real estate - commercial | | | | | | | | | | | | | | | | | | | | | |
Owner occupied | | — | | — | | — | | — | | | | | | | | | | | | | |
Non-owner occupied | | 543 | | 1,428 | | — | | 38 | | | | | | | | | | | | | |
Real estate - construction | | | | | | | | | | | | | | | | | | | | | |
Residential | | — | | — | | — | | — | | | | | | | | | | | | | |
Commercial | | 841 | | 943 | | — | | 5 | | | | | | | | | | | | | |
Real estate - residential | | | | | | | | | | | | | | | | | | | | | |
Single family | | 312 | | 455 | | — | | 2 | | | | | | | | | | | | | |
Multi-family | | — | | — | | — | | — | | | | | | | | | | | | | |
Home equity lines | | — | | — | | — | | — | | | | | | | | | | | | | |
Consumer | | — | | — | | — | | — | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
With related allowance: | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 147 | | $ | 147 | | $ | 145 | | $ | — | | | | | | | | | | | | | |
Real estate - commercial | | | | | | | | — | | | | | | | | | | | | | |
Owner occupied | | — | | — | | — | | — | | | | | | | | | | | | | |
Non-owner occupied | | — | | — | | — | | — | | | | | | | | | | | | | |
Real estate - construction | | | | | | | | | | | | | | | | | | | | | |
Residential | | — | | — | | — | | — | | | | | | | | | | | | | |
Commercial | | — | | — | | — | | — | | | | | | | | | | | | | |
Real estate - residential | | | | | | | | | | | | | | | | | | | | | |
Single family | | — | | — | | — | | — | | | | | | | | | | | | | |
Multi-family | | — | | — | | — | | — | | | | | | | | | | | | | |
Home equity lines | | — | | — | | — | | — | | | | | | | | | | | | | |
Consumer | | — | | — | | — | | — | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
By segment total: | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 721 | | $ | 1,374 | | $ | 145 | | $ | 6 | | | | | | | | | | | | | |
Real estate - commercial | | 543 | | 1,428 | | — | | 38 | | | | | | | | | | | | | |
Real estate - construction | | 841 | | 943 | | — | | 5 | | | | | | | | | | | | | |
Real estate - residential | | 312 | | 455 | | — | | 2 | | | | | | | | | | | | | |
Home equity lines | | — | | — | | — | | — | | | | | | | | | | | | | |
Consumer | | — | | — | | — | | — | | | | | | | | | | | | | |
Total | | $ | 2,417 | | $ | 4,200 | | $ | 145 | | $ | 51 | | | | | | | | | | | | | |
|
Impaired Loans |
At December 31, 2013 |
(In thousands) |
|
| | Recorded | | Unpaid Principal | | Related | | Interest Income | | | | | | | | | | | | | |
| | Investment | | Balance | | Allowance | | Recognized | | | | | | | | | | | | | |
With no related allowance: | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 814 | | $ | 814 | | $ | — | | $ | 23 | | | | | | | | | | | | | |
Real estate - commercial | | | | | | | | | | | | | | | | | | | | | |
Owner occupied | | — | | — | | — | | — | | | | | | | | | | | | | |
Non-owner occupied | | 1,738 | | 3,872 | | — | | — | | | | | | | | | | | | | |
Real estate - construction | | | | | | | | | | | | | | | | | | | | | |
Residential | | — | | — | | — | | — | | | | | | | | | | | | | |
Commercial | | 775 | | 2,928 | | — | | — | | | | | | | | | | | | | |
Real estate - residential | | | | | | | | | | | | | | | | | | | | | |
Single family | | — | | — | | — | | — | | | | | | | | | | | | | |
Multi-family | | — | | — | | — | | — | | | | | | | | | | | | | |
Home equity lines | | 51 | | 51 | | — | | — | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
With related allowance: | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | — | | $ | — | | $ | — | | $ | — | | | | | | | | | | | | | |
Real estate - commercial | | | | | | | | — | | | | | | | | | | | | | |
Owner occupied | | — | | — | | — | | — | | | | | | | | | | | | | |
Non-owner occupied | | — | | — | | — | | — | | | | | | | | | | | | | |
Real estate - construction | | | | | | | | — | | | | | | | | | | | | | |
Residential | | — | | — | | — | | — | | | | | | | | | | | | | |
Commercial | | — | | — | | — | | — | | | | | | | | | | | | | |
Real estate - residential | | | | | | | | — | | | | | | | | | | | | | |
Single family | | — | | — | | — | | — | | | | | | | | | | | | | |
Multi-family | | — | | — | | — | | — | | | | | | | | | | | | | |
Home equity lines | | — | | — | | — | | — | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
By segment total: | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 814 | | $ | 814 | | $ | — | | $ | 23 | | | | | | | | | | | | | |
Real estate - commercial | | 1,738 | | 3,872 | | — | | — | | | | | | | | | | | | | |
Real estate - construction | | 775 | | 2,928 | | — | | — | | | | | | | | | | | | | |
Real estate - residential | | — | | — | | — | | — | | | | | | | | | | | | | |
Home equity lines | | 51 | | 51 | | — | | — | | | | | | | | | | | | | |
Total | | $ | 3,378 | | $ | 7,665 | | $ | — | | $ | 23 | | | | | | | | | | | | | |
|
In order to maximize the collection of certain loans, the Company will attempt to work with borrowers when necessary to extend or modify loan terms to better align with the borrower’s ability to repay. Extensions and modifications to loans are made in accordance with the Company’s policy and conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately. The Company considers regulatory guidelines when restructuring a loan to ensure that prudent lending practices are followed. As such, qualification criteria and payment terms consider the borrower’s current and prospective ability to comply with the modified terms of the loan. |
|
A modification is classified as a troubled debt restructuring (“TDR”) if both of the following exist: (1) the borrower is experiencing financial difficulty and (2) the Company has granted a concession to the borrower. The Company determines that a borrower may be experiencing financial difficulty if the borrower is currently in default on any of its debt, or if the Company is concerned that the borrower may not be able to perform in accordance with the current terms of the loan agreement in the foreseeable future. Many aspects of the borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty, particularly as it relates to commercial borrowers due to the complex nature of the loan structure, business/industry risk, and borrower/guarantor structures. Concessions may include the reduction of an interest rate at a rate lower than current market rate for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, or principal forgiveness. When evaluating whether a concession has been granted, the Company also considers whether the borrower has provided additional collateral or guarantors and whether such additions adequately compensate the Company for the restructured terms, or if the revised terms are consistent with those currently being offered to new loan customers. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty and whether a concession has been granted is subjective in nature and management’s judgment is required when determining whether a modification is a TDR. |
|
Although each occurrence is unique to the borrower and is evaluated separately, for all portfolio segments, TDRs are typically modified through reductions in interest rates, reductions in payments, changing the payment terms from principal and interest to interest only, and/or extensions in term maturity. |
|
Nonaccruing loans that are modified can be placed back on accrual status when both the principal and interest are current and it is probable that the Company will be able to collect all amounts due (both principal and interest) according to the terms of the loan agreement. |
|
At September 30, 2014 and December 31, 2013, the Company had TDRs totaling $1.1 million and $2.3 million, respectively, all of which were on nonaccrual. Nonaccrual TDRs that are reasonably assured of repayment according to their modified terms may be returned to accrual status by the Company upon a detailed credit evaluation of the borrower’s financial condition and prospects for repayment under the revised terms. Consistent with regulatory guidance, upon sustained performance and classification as a TDR over the Company’s year-end, the loan will be removed from TDR status as long as the modified terms were market-based at the time of the modification. The following table reconciles the beginning and ending balances on TDRs as of September 30, 2014 and 2013, respectively: |
|
Troubled Debt Restructurings |
At and For the Nine Months Ended September 30, 2014 |
(In thousands) |
|
| | Commercial and | | Real Estate - | | Real Estate - | | Real Estate - | | | | | | | | | | |
| | Industrial | | Commercial | | Construction | | Residential | | Home Equity Lines | | Consumer | | Total | | | | |
| | | | | | | | | | | | | | | | | | |
Beginning Balance, January 1, 2014 | | $ | — | | $ | 1,738 | | $ | 525 | | $ | — | | $ | — | | $ | — | | $ | 2,263 | | | | |
New TDRs | | — | | — | | — | | — | | — | | — | | — | | | | |
Increases to existing TDRs | | — | | — | | — | | — | | — | | — | | — | | | | |
Charge-Offs Post Modification | | — | | — | | — | | — | | — | | — | | — | | | | |
Sales, paydowns, or other decreases | | — | | (668 | ) | (525 | ) | — | | — | | — | | (1,193 | ) | | | |
Ending balance, September 30, 2014 | | $ | — | | $ | 1,070 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 1,070 | | | | |
|
Troubled Debt Restructurings |
At and For the Nine Months Ended September 30, 2013 |
(In thousands) |
|
| | Commercial and | | Real Estate - | | Real Estate - | | Real Estate - | | Home Equity | | | | | | | | |
| | Industrial | | Commercial | | Construction | | Residential | | Lines | | Consumer | | Total | | | | |
| | | | | | | | | | | | | | | | | | |
Beginning Balance, January 1, 2013 | | $ | 1,776 | | $ | 3,800 | | $ | 1,762 | | $ | — | | $ | — | | $ | — | | $ | 7,338 | | | | |
New TDRs | | — | | 570 | | — | | — | | — | | — | | 570 | | | | |
Increases to existing TDRs | | — | | — | | — | | — | | — | | — | | — | | | | |
Charge-Offs Post Modification | | — | | — | | — | | — | | — | | — | | — | | | | |
Sales, paydowns, or other decreases | | (1,776 | ) | (2,632 | ) | (990 | ) | — | | — | | — | | (5,398 | ) | | | |
Ending balance, September 30, 2013 | | $ | — | | $ | 1,738 | | $ | 772 | | $ | — | | $ | — | | $ | — | | $ | 2,510 | | | | |
|
At September 30, 2014, TDRs make up one relationship with the Bank. These loans are performing as expected post-modification. There are no acquired loans classified as TDRs. For restructured loans in the portfolio, the Company had no loan loss reserves as of September 30, 2014 and December 31, 2013, respectively. |
|
Loans modified as TDRs within the previous 12 months and for which there was a payment default during the period are calculated by first identifying TDRs that defaulted during the period and then determining whether they were modified within the 12 months prior to the default. For the period ended September 30, 2014, one loan identified as a TDR had a payment default within the last twelve months. For the period ended December 31, 2013, one loan identified as a TDR had a payment default within the last twelve months. |
|
One of the most significant factors in assessing the credit quality of the Company’s loan portfolio is the risk rating. The Company uses the following risk ratings to manage the credit quality of its loan portfolio: pass, substandard, doubtful and loss. During 2011, the Company added an additional risk rating, other loans especially mentioned (“OLEM”), for the monitoring of credit quality. Other loans especially mentioned are those loans in which the borrower exhibits potential weakness that may, if not corrected or reversed, weaken the bank’s credit position at some future date. These loans may not show problems as yet due to the borrower’s apparent ability to service the debt, but special circumstances surround the loans of which the Bank’s management should be aware. Substandard risk rated loans are those loans whose full final collectability may not appear to be a matter for serious doubt, but which nevertheless have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt and require close supervision by management. Loans that have a risk rating of doubtful have all the weakness inherent in one graded substandard with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and value, highly questionable. A loss loan is one that is considered uncollectible and will be charged-off immediately. All other loans not rated other loans especially mentioned, substandard, doubtful or loss are considered to have a pass risk rating. Substandard and doubtful risk rated loans are evaluated for impairment. The following table presents a summary of the risk ratings by portfolio segment and class segment at September 30, 2014 and December 31, 2013. |
|
Internal Risk Rating Grades - Originated Loan Portfolio |
At September 30, 2014 |
(In thousands) |
|
| | Pass | | OLEM | | Substandard | | Doubtful | | Loss | | | | | | | | | | |
Commercial and industrial | | $ | 288,902 | | $ | 408 | | $ | 1,734 | | $ | — | | $ | — | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Real estate - commercial | | | | | | | | | | | | | | | | | | | | |
Owner occupied | | 285,416 | | — | | — | | — | | — | | | | | | | | | | |
Non-owner occupied | | 827,037 | | 2,456 | | 1,070 | | — | | — | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Real estate - construction | | | | | | | | | | | | | | | | | | | | |
Residential | | 147,216 | | — | | — | | — | | — | | | | | | | | | | |
Commercial | | 264,149 | | — | | 250 | | — | | — | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Real estate - residential | | | | | | | | | | | | | | | | | | | | |
Single family | | 271,204 | | — | | 146 | | — | | — | | | | | | | | | | |
Multi-family | | 105,543 | | — | | — | | — | | — | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Home equity lines | | 121,469 | | 50 | | 347 | | — | | — | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Consumer | | | | | | | | | | | | | | | | | | | | |
Installment | | 3,824 | | — | | 1 | | — | | — | | | | | | | | | | |
Credit cards | | 474 | | — | | — | | — | | — | | | | | | | | | | |
| | $ | 2,315,234 | | $ | 2,914 | | $ | 3,548 | | $ | — | | $ | — | | | | | | | | | | |
|
Internal Risk Rating Grades - Acquired Loan Portfolio |
At September 30, 2014 |
(In thousands) |
|
| | Pass | | OLEM | | Substandard | | Doubtful | | Loss | | | | | | | | | | |
Commercial and industrial | | $ | 29,490 | | $ | 5 | | $ | 721 | | $ | — | | $ | — | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Real estate - commercial | | | | | | | | | | | | | | | | | | | | |
Owner occupied | | 51,906 | | — | | — | | — | | — | | | | | | | | | | |
Non-owner occupied | | 53,213 | | 3,330 | | 543 | | — | | — | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Real estate - construction | | | | | | | | | | | | | | | | | | | | |
Residential | | 12,978 | | — | | — | | — | | — | | | | | | | | | | |
Commercial | | 3,184 | | — | | 841 | | — | | — | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Real estate - residential | | | | | | | | | | | | | | | | | | | | |
Single family | | 10,078 | | — | | 312 | | — | | — | | | | | | | | | | |
Multi-family | | — | | — | | — | | — | | — | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Home equity lines | | 4,167 | | — | | — | | — | | — | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Consumer | | | | | | | | | | | | | | | | | | | | |
Installment | | 847 | | — | | — | | — | | — | | | | | | | | | | |
Credit cards | | — | | — | | — | | — | | — | | | | | | | | | | |
| | $ | 165,863 | | $ | 3,335 | | $ | 2,417 | | $ | — | | $ | — | | | | | | | | | | |
|
Internal Risk Rating Grades |
At December 31, 2013 |
(In thousands) |
|
| | Pass | | OLEM | | Substandard | | Doubtful | | Loss | | | | | | | | | | |
Commercial and industrial | | $ | 217,755 | | $ | 587 | | $ | 814 | | $ | — | | $ | — | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Real estate - commercial | | | | | | | | | | | | | | | | | | | | |
Owner occupied | | 279,631 | | — | | — | | — | | — | | | | | | | | | | |
Non-owner occupied | | 753,872 | | 13,338 | | 1,738 | | — | | — | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Real estate - construction | | | | | | | | | | | | | | | | | | | | |
Residential | | 120,144 | | — | | — | | — | | — | | | | | | | | | | |
Commercial | | 242,144 | | — | | 775 | | — | | — | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Real estate - residential | | | | | | | | | | | | | | | | | | | | |
Single family | | 213,537 | | 8 | | — | | — | | — | | | | | | | | | | |
Multi-family | | 85,939 | | — | | — | | — | | — | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Home equity lines | | 109,430 | | — | | 51 | | — | | — | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Consumer | | | | | | | | | | | | | | | | | | | | |
Installment | | 3,912 | | — | | — | | — | | — | | | | | | | | | | |
Credit cards | | 247 | | — | | — | | — | | — | | | | | | | | | | |
| | $ | 2,026,611 | | $ | 13,933 | | $ | 3,378 | | $ | — | | $ | — | | | | | | | | | | |