Loan Participation Interests and Allowance For Credit Losses | 3 Months Ended |
Sep. 30, 2013 |
Loans Leases and Allowance for Credit Losses [Abstract] | ' |
Loans and Notes and Allowance For Credit Losses | ' |
Note 3 – Loan Participation Interests and Allowance for Credit Losses |
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Loan participation interests are categorized based on the collateral underlying the loan. At September 30, 2013 and December 31, 2012, loan participation interests were comprised of the following: |
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| | September 30, | | December 31, | | | | | | | | | | | | | | |
(dollar amounts in thousands) | | 2013 | | 2012 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Commercial real estate | $ | 2,832,018 | $ | 2,875,870 | | | | | | | | | | | | | | |
Consumer and residential real estate | | 371,044 | | 439,073 | | | | | | | | | | | | | | |
Total loan participation interests | | 3,203,062 | | 3,314,943 | | | | | | | | | | | | | | |
Allowance for loan participation losses | | -41,412 | | -59,451 | | | | | | | | | | | | | | |
Net loan participation interests | $ | 3,161,650 | $ | 3,255,492 | | | | | | | | | | | | | | |
Underlying loans are generally collateralized by real estate. As shown in the table above, the Company's primary loan participation interest portfolios are: CRE and consumer and residential real estate. Classes are generally disaggregations of a portfolio. The classes within the CRE portfolio are: retail properties, multi family, office, industrial and warehouse, and other CRE. The classes within the consumer and residential real estate portfolio are: first-lien loan participation interests and junior-lien loan participation interests. |
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Other than the credit risk concentration related to loan participation interests secured by real estate as described above, there were no underlying loans outstanding that would be considered a concentration of lending in any particular industry, group of industries, or business activity. Loans made to borrowers in the five states of Ohio, Michigan, Indiana, Pennsylvania, and Kentucky comprised approximately 95% of the portfolio at both September 30, 2013 and December 31, 2012. |
Loan Participation Interest Purchases and Sales |
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The following table summarizes significant portfolio purchase activity during the three-month and nine-month periods ended September 30, 2013 and 2012: |
| | | | | Consumer and | | | | | | | | | | | |
| | | Commercial | Residential | | | | | | | | | | | |
(dollar amounts in thousands) | Real Estate | Real Estate | Total | | | | | | | | | | |
Portfolio loan participation interests purchased during the: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Three-month period ended September 30, 2013 | $ | 517,182 | $ | --- | $ | 517,182 | | | | | | | | | | |
| Three-month period ended September 30, 2012 | | 396,204 | | --- | | 396,204 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Nine-month period ended September 30, 2013 | | 946,766 | | --- | | 946,766 | | | | | | | | | | |
| Nine-month period ended September 30, 2012 | | 1,351,609 | | --- | | 1,351,609 | | | | | | | | | | |
There were no significant portfolio loan participation interest sales during the three-month and nine-month periods ended September 30, 2013 and 2012. |
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NPAs and Past Due Loan Participation Interests |
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Loan participation interests are considered past due when the contractual amounts due with respect to principal and interest are not received within 30 days of the contractual due date. |
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Any loan participation interest in any portfolio may be placed on nonaccrual status prior to the policies described below when collection of principal or interest is in doubt. |
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Loan participation interests in all classes within the CRE portfolio are placed on nonaccrual status at 90-days past due. First-lien consumer and residential real estate loan participation interests are placed on nonaccrual status at 150-days past due. Junior-lien consumer and residential real estate loan participation interests are placed on nonaccrual status at the earlier of 120-days past due or when the related first-lien loan has been identified as nonaccrual. When a loan participation interest with discharged non-reaffirmed debt in a Chapter 7 bankruptcy filing is identified, and the loan participation interest is determined to be collateral dependent, the consumer and residential real estate loan participation interest is placed on nonaccrual status. |
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For all classes within all portfolios, when a loan participation interest is placed on nonaccrual status, any accrued interest income is reversed with current year accruals charged to interest income, and prior year amounts charged-off as a credit loss. |
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For all classes within all portfolios, cash receipts received on NPAs are applied against principal until the loan has been collected in full, after which time any additional cash receipts are recognized as interest income. However, for secured non-reaffirmed debt in a Chapter 7 bankruptcy, payments are applied to principal and interest when the borrower has demonstrated a capacity to continue payment of the debt and collection of the debt is reasonably assured. For unsecured non-reaffirmed debt in a Chapter 7 bankruptcy where the carrying value has been fully charged-off, payments are recorded as loan recoveries. |
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Regarding all classes within the CRE portfolio, the determination of a borrower's ability to make the required principal and interest payments is based on an examination of the borrower's current financial statements, industry, management capabilities, and other qualitative measures. For all classes within the consumer and residential real estate portfolio, the determination of a borrower's ability to make the required principal and interest payments is based on multiple factors, including number of days past due and, in some instances, an evaluation of the borrower's financial condition. When, in Management's judgment, the borrower's ability to make required principal and interest payments resumes and collectability is no longer in doubt, the loan participation interest is returned to accrual status. For these loan participation interests that have been returned to accrual status, cash receipts are applied according to the contractual terms of the loan. |
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The following table presents NPAs by loan class at September 30, 2013 and December 31, 2012: |
| | | 2013 | | 2012 | | | | | | | | | | | | |
(dollar amounts in thousands) | | September 30, | | | December 31, | | | | | | | | | | | | |
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Commercial real estate: | | | | | | | | | | | | | | | | | |
| Industrial and warehouse | $ | 1,382 | | $ | 1,652 | | | | | | | | | | | | |
| Retail properties | | 1,101 | | | 4,771 | | | | | | | | | | | | |
| Office | | 7,144 | | | 13,745 | | | | | | | | | | | | |
| Multi family | | 126 | | | 1,109 | | | | | | | | | | | | |
| Other commercial real estate | | 4,302 | | | 6,624 | | | | | | | | | | | | |
Total commercial real estate | | 14,055 | | | 27,901 | | | | | | | | | | | | |
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Consumer and residential real estate: | | | | | | | | | | | | | | | | | |
| Secured by first-lien | | 7,185 | | | 7,190 | | | | | | | | | | | | |
| Secured by junior-lien | | 541 | | | 780 | | | | | | | | | | | | |
Total consumer and residential real estate | | 7,726 | | | 7,970 | | | | | | | | | | | | |
Total nonperforming assets | $ | 21,781 | | $ | 35,871 | | | | | | | | | | | | |
The following table presents an aging analysis of loan participation interests, including past due loan participation interests, by loan class at September 30, 2013 and December 31, 2012: (1) |
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| | 30-Sep-13 | |
| Past Due | | | | Total Loan | | 90 or more | |
| | | | | | 90 or | | | | | | Participation | | days past due | |
(dollar amounts in thousands) | 30-59 days | 60-89 days | more days | Total | | Current | Interests | | and accruing | |
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Commercial real estate: | | | | | | | | | | | | | | | | | |
| Industrial and warehouse | $ | --- | $ | 136 | $ | 559 | $ | 695 | | $ | 626,739 | $ | 627,434 | | $ | --- | |
| Retail properties | | 372 | | 256 | | 934 | | 1,562 | | | 569,227 | | 570,789 | | | --- | |
| Office | | 999 | | --- | | 7,144 | | 8,143 | | | 497,495 | | 505,638 | | | --- | |
| Multi family | | 172 | | --- | | --- | | 172 | | | 287,297 | | 287,469 | | | --- | |
| Other commercial real estate | | 570 | | 465 | | 4,249 | | 5,284 | | | 835,404 | | 840,688 | | | --- | |
Total commercial real estate | $ | 2,113 | $ | 857 | $ | 12,886 | $ | 15,856 | | $ | 2,816,162 | $ | 2,832,018 | | $ | --- | |
| | | | | | | | | | | | | | | | | | |
Consumer and residential real estate: | | | | | | | | | | | | | | | | | |
| Secured by first-lien | $ | 1,923 | $ | 2,182 | $ | 6,342 | $ | 10,447 | | $ | 293,697 | $ | 304,144 | | $ | 1,426 | |
| Secured by junior-lien | | 1,086 | | 957 | | 1,224 | | 3,267 | | | 63,633 | | 66,900 | | | 590 | |
Total consumer and residential real estate | $ | 3,009 | $ | 3,139 | $ | 7,566 | $ | 13,714 | | $ | 357,330 | $ | 371,044 | | $ | 2,016 | |
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Total loan participation interests | $ | 5,122 | $ | 3,996 | $ | 20,452 | $ | 29,570 | | $ | 3,173,492 | $ | 3,203,062 | | $ | 2,016 | |
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| | 31-Dec-12 | |
| Past Due | | | | Total Loan | | 90 or more | |
| | | | | | 90 or | | | | | | Participation | | days past due | |
(dollar amounts in thousands) | 30-59 days | 60-89 days | more days | Total | | Current | Interests | | and accruing | |
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Commercial real estate: | | | | | | | | | | | | | | | | | |
| Industrial and warehouse | $ | 3,177 | $ | 83 | $ | 1,021 | $ | 4,281 | | $ | 672,218 | $ | 676,499 | | $ | --- | |
| Retail properties | | 24 | | --- | | 4,506 | | 4,530 | | | 571,118 | | 575,648 | | | --- | |
| Office | | 52 | | 367 | | 13,634 | | 14,053 | | | 457,323 | | 471,376 | | | --- | |
| Multi family | | 424 | | --- | | 975 | | 1,399 | | | 300,819 | | 302,218 | | | --- | |
| Other commercial real estate | | 1,226 | | 1,435 | | 5,078 | | 7,739 | | | 842,390 | | 850,129 | | | --- | |
Total commercial real estate | $ | 4,903 | $ | 1,885 | $ | 25,214 | $ | 32,002 | | $ | 2,843,868 | $ | 2,875,870 | | $ | --- | |
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Consumer and residential real estate: | | | | | | | | | | | | | | | | | |
| Secured by first-lien | $ | 4,418 | $ | 2,091 | $ | 9,123 | $ | 15,632 | | $ | 339,292 | $ | 354,924 | | $ | 2,713 | |
| Secured by junior-lien | | 2,037 | | 1,040 | | 1,314 | | 4,391 | | | 79,758 | | 84,149 | | | 509 | |
Total consumer and residential real estate | $ | 6,455 | $ | 3,131 | $ | 10,437 | $ | 20,023 | | $ | 419,050 | $ | 439,073 | | $ | 3,222 | |
| | | | | | | | | | | | | | | | | | |
Total loan participation interests | $ | 11,358 | $ | 5,016 | $ | 35,651 | $ | 52,025 | | $ | 3,262,918 | $ | 3,314,943 | | $ | 3,222 | |
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-1 | NPAs are included in this aging analysis based on the loan participation interest's past due status. | |
Allowance for Credit Losses |
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The ACL is comprised of the ALPL and the AULPC, and reflects Management's judgment regarding the appropriate level necessary to absorb credit losses inherent in the loan participation interests portfolio. It is HPCI's policy to utilize the Bank's analysis as of the end of each reporting date to estimate the required level of the ALPL and AULPC. The determination of the ACL requires significant estimates, including the timing and amounts of expected future cash flows on impaired loan participation interests, consideration of current economic conditions, and historical loss experience pertaining to pools of homogeneous loan participation interests, all of which may be susceptible to change. |
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The appropriateness of the ACL is based on Management's current judgments about the credit quality of the loan participation interests portfolio. These judgments consider on-going evaluations of the loan participation interests portfolio, including such factors as the differing economic risks associated with each loan participation interests category, the financial condition of specific borrowers, the level of delinquent loan participation interests, the value of any collateral and, where applicable, the existence of any guarantees or other documented support. Further, Management evaluates the impact of changes in interest rates and overall economic conditions on the ability of borrowers to meet their financial obligations when quantifying the exposure to credit losses and assessing the appropriateness of the ACL at each reporting date. In addition to general economic conditions and the other factors described above, additional factors also considered include the impact of declining residential real estate values and the diversification of commercial real estate loan participation interests. Also, the ACL assessment includes the on-going assessment of credit quality metrics, and a comparison of certain ACL benchmarks to current performance. |
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ALPL is transferred to HPCI either directly or through Holdings from the Bank on loan participation interests underlying the participation interests at the time the participation interests are acquired. This transfer of ALPL is reflected as ALPL acquired, rather than HPCI recording provision for credit losses. Based on Management's quarterly evaluation of the factors previously mentioned, the ALPL may either be increased through a provision for credit losses, net of recoveries, and charged to earnings or lowered through a reduction in allowance for credit losses, net of recoveries, and credited to earnings. Credit losses are charged against the ALPL when Management believes the loan participation interest balance, or a portion thereof, is uncollectible. |
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The ALPL consists of two components: (1) the transaction reserve, which includes an allocation per ASC 310-10, specific reserves related to loan participation interests considered to be impaired, and loan participation interests involved in TDRs allocated per ASC 310-40, and (2) the general reserve. The transaction reserve component includes both (1) an estimate of loss based on pools of commercial and consumer loan participation interests with similar characteristics and (2) an estimate of loss based on an impairment review of each impaired CRE loan participation interest greater than $1.0 million. For the CRE portfolio, the estimate of loss based on pools of loan participation interests with similar characteristics is made by applying a PD factor and a LGD factor to each individual loan based on a continuously updated loan grade, using a standardized loan grading system. The PD and LGD factors are determined for each loan grade using statistical models based on historical performance data. The PD factor considers on-going reviews of the financial performance of the specific borrower, including cash flow, debt-service coverage ratio, earnings power, debt level, and equity position, in conjunction with an assessment of the borrower's industry and future prospects. The LGD factor considers analysis of the type of collateral and the relative LTV ratio. These reserve factors are developed based on credit migration models that track historical movements of loan participation interests between loan ratings over time and a combination of long-term average loss experience of our own portfolio and external industry data using a 24-month emergence period. |
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In the case of more homogeneous portfolios, such as the consumer and residential real estate portfolio, the determination of the transaction reserve also incorporates PD and LGD factors, however, the estimate of loss is based on pools of loan participation interests with similar characteristics. The PD factor considers current credit scores unless the account is delinquent, in which case a higher PD factor is used. The credit score provides a basis of understanding the borrowers past and current payment performance, and this information is used to estimate expected losses over the subsequent 12-month period. The performance of first-lien loans ahead of junior-lien loans is available to use as part of the updated score process. The LGD factor considers analysis of the type of collateral and the relative LTV ratio. Credit scores, models, analyses, and other factors used to determine both the PD and LGD factors are updated frequently to capture the recent behavioral characteristics of the subject portfolios, as well as any changes in loss mitigation or credit origination strategies, and adjustments to the allowance factors are made as required. Models utilized in the ALPL estimation process are subject to the Bank's model validation policies. |
The general reserve consists of economic reserve and risk-profile reserve components. The economic reserve component considers the potential impact of changing market and economic conditions on portfolio performance. The risk-profile component considers items unique to our structure, policies, processes, and portfolio composition, as well as qualitative measurements and assessments of the portfolios including, but not limited to, management quality, concentrations, portfolio composition, industry comparisons, and internal review functions. |
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During the current quarter, the Bank made enhancements to the commercial risk rating system used for assessing credit risk when determining the ALPL. The enhancements provide greater granularity in overall corporate risk ratings and incorporate a broader set of financial metrics in the determination of the PD and LGD factors. The PD and LGD factors combine to represent the transaction reserve component for a given credit exposure. |
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In conjunction with the enhancements to the commercial risk rating system noted above, the Bank revised the process for incorporating risk inherent in the economic and risk profile components of the general reserve. These enhancements allow the Bank to better reflect the credit exposure inherent in our portfolio, as well as overall risks in the economic environment. These changes did not have a material impact on the overall ACL. |
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The estimate for the AULPC is determined using the same procedures and methodologies as used for the ALPL. The loss factors used in the AULPC are the same as the loss factors used in the ALPL while also considering a historical utilization of unused commitments. |
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The ACL is increased through a provision for credit losses that is charged to earnings, based on Management's quarterly evaluation of the factors previously mentioned, and is reduced by charge-offs, net of recoveries. There were no material changes in assumptions or estimation techniques compared with prior periods that impacted the determination of the current period's ALPL and AULPC. |
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The following table presents ALPL and AULPC activity by portfolio segment for the three-month and nine-month periods ended September 30, 2013 and 2012: |
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| | | | | Consumer and | | | | | | | | | | | | |
| | | Commercial | Residential | | | | | | | | | | | |
| Real Estate | Real Estate | Total | | | | | | | | | | |
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(dollar amounts in thousands) | | | | | | | | | | | | | | | | |
Three-month period ended September 30, 2013 | | | | | | | | | | | | | | | | |
| ALPL balance, beginning of period | $ | 45,328 | $ | 7,789 | $ | 53,117 | | | | | | | | | | |
| | ALPL for loan participation interests acquired | | 5,462 | | --- | | 5,462 | | | | | | | | | | |
| | Loan participation interest charge-offs | | -837 | | -1,396 | | -2,233 | | | | | | | | | | |
| | Recoveries of loan participation interests previously charged-off | | 521 | | 337 | | 858 | | | | | | | | | | |
| | (Reduction in) provision for loan participation interest losses | | -15,965 | | 173 | | -15,792 | | | | | | | | | | |
| ALPL balance, end of period | $ | 34,509 | $ | 6,903 | $ | 41,412 | | | | | | | | | | |
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| AULPC balance, beginning of period | $ | 654 | $ | --- | $ | 654 | | | | | | | | | | |
| | (Reduction in) provision for unfunded loan participation commitment losses | | 604 | | --- | | 604 | | | | | | | | | | |
| AULPC balance, end of period | $ | 1,258 | $ | --- | $ | 1,258 | | | | | | | | | | |
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| ACL balance, end of period | $ | 35,767 | $ | 6,903 | $ | 42,670 | | | | | | | | | | |
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Nine-month period ended September 30, 2013 | | | | | | | | | | | | | | | | |
| ALPL balance, beginning of period | $ | 50,415 | $ | 9,036 | $ | 59,451 | | | | | | | | | | |
| | ALPL for loan participation interests acquired | | 10,706 | | --- | | 10,706 | | | | | | | | | | |
| | Loan participation interest charge-offs | | -3,441 | | -4,444 | | -7,885 | | | | | | | | | | |
| | Recoveries of loan participation interests previously charged-off | | 2,500 | | 825 | | 3,325 | | | | | | | | | | |
| | (Reduction in) provision for loan participation interest losses | | -25,671 | | 1,486 | | -24,185 | | | | | | | | | | |
| ALPL balance, end of period | $ | 34,509 | $ | 6,903 | $ | 41,412 | | | | | | | | | | |
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| AULPC balance, beginning of period | $ | 1,057 | $ | --- | $ | 1,057 | | | | | | | | | | |
| | (Reduction in) provision for allowance for unfunded loan participation commitment losses | | 201 | | --- | | 201 | | | | | | | | | | |
| AULPC balance, end of period | $ | 1,258 | $ | --- | $ | 1,258 | | | | | | | | | | |
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| ACL balance, end of period | $ | 35,767 | $ | 6,903 | $ | 42,670 | | | | | | | | | | |
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| | | | | Consumer and | | | | | | | | | | | | |
| | | Commercial | Residential | | | | | | | | | | | |
| Real Estate | Real Estate | Total | | | | | | | | | | |
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(dollar amounts in thousands) | | | | | | | | | | | | | | | | |
Three-month period ended September 30, 2012 | | | | | | | | | | | | | | | | |
| ALPL balance, beginning of period | $ | 50,667 | $ | 10,842 | $ | 61,509 | | | | | | | | | | |
| | ALPL for loan participation interests acquired | | 5,787 | | --- | | 5,787 | | | | | | | | | | |
| | Loan participation interest charge-offs | | -4,857 | | -6,202 | | -11,059 | | | | | | | | | | |
| | Recoveries of loan participation interests previously charged-off | | 859 | | 275 | | 1,134 | | | | | | | | | | |
| | (Reduction in) provision for loan participation interest losses | | -318 | | 5,010 | | 4,692 | | | | | | | | | | |
| ALPL balance, end of period | $ | 52,138 | $ | 9,925 | $ | 62,063 | | | | | | | | | | |
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| AULPC balance, beginning of period | $ | 897 | $ | --- | $ | 897 | | | | | | | | | | |
| | (Reduction in) provision for allowance for unfunded loan participation commitment losses | | 425 | | --- | | 425 | | | | | | | | | | |
| AULPC balance, end of period | $ | 1,322 | $ | --- | $ | 1,322 | | | | | | | | | | |
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| ACL balance, end of period | $ | 53,460 | $ | 9,925 | $ | 63,385 | | | | | | | | | | |
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Nine-month period ended September 30, 2012 | | | | | | | | | | | | | | | | |
| ALPL balance, beginning of period | $ | 71,555 | $ | 12,217 | $ | 83,772 | | | | | | | | | | |
| | ALPL for loan participation interests acquired | | 17,404 | | --- | | 17,404 | | | | | | | | | | |
| | Loan participation interest charge-offs | | -12,605 | | -10,337 | | -22,942 | | | | | | | | | | |
| | Recoveries of loan participation interests previously charged-off | | 5,489 | | 893 | | 6,382 | | | | | | | | | | |
| | (Reduction in) provision for loan participation interest losses | | -29,705 | | 7,152 | | -22,553 | | | | | | | | | | |
| ALPL balance, end of period | $ | 52,138 | $ | 9,925 | $ | 62,063 | | | | | | | | | | |
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| AULPC balance, beginning of period | $ | 1,035 | $ | --- | $ | 1,035 | | | | | | | | | | |
| | (Reduction in) provision for allowance for unfunded loan participation commitment losses | | 287 | | --- | | 287 | | | | | | | | | | |
| AULPC balance, end of period | $ | 1,322 | $ | --- | $ | 1,322 | | | | | | | | | | |
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| ACL balance, end of period | $ | 53,460 | $ | 9,925 | $ | 63,385 | | | | | | | | | | |
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Any loan participation interest in any portfolio may be charged-off prior to the policies described below if a loss confirming event has occurred. Loss confirming events include, but are not limited to, bankruptcy (unsecured), continued delinquency, foreclosure, or receipt of an asset valuation indicating a collateral deficiency and that asset is the sole source of repayment. Additionally, discharged, collateral dependent non-reaffirmed debt in Chapter 7 bankruptcy filings are charged-off to estimated collateral value, less anticipated selling costs. |
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CRE loan participation interests are either charged-off or written down to net realizable value at 90-days past due. First-lien consumer and residential real estate loan participation interests are charged-off to the estimated fair value of the collateral, less anticipated selling costs at 150-days past due. Junior-lien consumer and residential real estate loan participation interests are charged-off to the estimated fair value of the collateral, less anticipated selling costs at 120-days past due. |
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Credit Quality Indicators |
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To facilitate the monitoring of credit quality for CRE loan participation interests, and for purposes of determining an appropriate ACL level for these loan participation interests, the following categories of credit grades are utilized: |
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Pass =igher quality loan participation interests that do not fit any of the other categories described below. |
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OLEM =he credit risk may be relatively minor yet represent a risk given certain specific circumstances. If the potential weaknesses are not monitored or mitigated, the asset may weaken or inadequately protect the Company's position in the future. For these reasons, the loan participation interests are considered to be potential problem loan participation interests. |
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Substandard =nadequately protected loan participation interests by the borrower's ability to repay, equity, and/or the collateral pledged to secure the loan participation interest. These loan participation interests have identified weaknesses that could hinder normal repayment or collection of the debt. It is likely that the Company will sustain some loss if any identified weaknesses are not mitigated. |
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Doubtful =oan participation interests that have all of the weaknesses inherent in those loan participation interests classified as Substandard, with the added elements of the full collection of the loan participation interest is improbable and that the possibility of loss is high. |
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The categories above, which are derived from standard regulatory rating definitions, are assigned upon initial approval of the loan and updated as appropriate. |
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Commercial loan participation interests categorized as OLEM, Substandard, or Doubtful are considered Criticized loan participation interests. Commercial loan participation interests categorized as Substandard or Doubtful are also considered Classified loan participation interests. |
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For all classes within the consumer and residential real estate portfolio, each loan participation interest is assigned a specific PD factor that is generally based on the borrower's most recent credit bureau score (FICO), which is updated quarterly. A HYPERLINK "http://www.investorglossary.com/fico-score.htm" FICO credit bureau score is a HYPERLINK "http://www.investorglossary.com/credit-score.htm" credit score developed by Fair Isaac Corporation based on data provided by the credit bureaus. The FICO credit bureau score is widely accepted as the standard measure of consumer credit risk used by lenders, regulators, rating agencies, and consumers. The higher the FICO credit bureau score, the higher likelihood of repayment and, therefore, an indicator of higher credit quality. |
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The risk in the loan portfolio is assessed by utilizing numerous risk characteristics. The classifications described above, and presented in the table below, represent one of those characteristics that are closely monitored in the overall credit risk management process. |
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The following table presents loan participation interest balances by credit quality indicator as of September 30, 2013 and December 31, 2012: |
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| | 30-Sep-13 | | | | | | | |
| Credit Risk Profile by UCS classification | | | | | | | |
(dollar amounts in thousands) | Pass | OLEM | Substandard | Doubtful | Total | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | |
| Industrial and warehouse | $ | 604,926 | $ | 7,112 | $ | 15,396 | $ | --- | $ | 627,434 | | | | | | | |
| Retail properties | | 557,163 | | 7,066 | | 6,560 | | --- | | 570,789 | | | | | | | |
| Office | | 478,678 | | 3,639 | | 23,321 | | --- | | 505,638 | | | | | | | |
| Multi family | | 286,658 | | 172 | | 639 | | --- | | 287,469 | | | | | | | |
| Other commercial real estate | | 821,915 | | 7,528 | | 11,245 | | --- | | 840,688 | | | | | | | |
Total commercial real estate | $ | 2,749,340 | $ | 25,517 | $ | 57,161 | $ | --- | $ | 2,832,018 | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Credit Risk Profile by FICO score (1) | | | | | | | |
| | 750+ | 650-749 | <650 | Total | | | | | | | | |
Consumer and residential real estate: | | | | | | | | | | | | | | | | | |
| Secured by first-lien | $ | 153,771 | $ | 100,761 | $ | 49,612 | $ | 304,144 | | | | | | | | | |
| Secured by junior-lien | | 21,644 | | 26,440 | | 18,816 | | 66,900 | | | | | | | | | |
Total consumer and residential real estate | $ | 175,415 | $ | 127,201 | $ | 68,428 | $ | 371,044 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | 31-Dec-12 | | | | | | | |
| Credit Risk Profile by UCS classification | | | | | | | |
(dollar amounts in thousands) | Pass | OLEM | Substandard | Doubtful | Total | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | |
| Industrial and warehouse | $ | 646,537 | $ | 13,660 | $ | 16,302 | $ | --- | $ | 676,499 | | | | | | | |
| Retail properties | | 558,396 | | 9,927 | | 7,325 | | --- | | 575,648 | | | | | | | |
| Office | | 450,862 | | 4,872 | | 15,642 | | --- | | 471,376 | | | | | | | |
| Multi family | | 298,039 | | 1,178 | | 3,001 | | --- | | 302,218 | | | | | | | |
| Other commercial real estate | | 826,403 | | 7,133 | | 16,593 | | --- | | 850,129 | | | | | | | |
Total commercial real estate | $ | 2,780,237 | $ | 36,770 | $ | 58,863 | $ | --- | $ | 2,875,870 | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Credit Risk Profile by FICO score (1) | | | | | | | |
| | 750+ | 650-749 | <650 | Total | | | | | | | | |
Consumer and residential real estate: | | | | | | | | | | | | | | | | | |
| Secured by first-lien | $ | 175,314 | $ | 120,661 | $ | 58,949 | $ | 354,924 | | | | | | | | | |
| Secured by junior-lien | | 28,488 | | 31,805 | | 23,856 | | 84,149 | | | | | | | | | |
Total consumer and residential real estate | $ | 203,802 | $ | 152,466 | $ | 82,805 | $ | 439,073 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
-1 | Reflects currently updated customer credit scores. | | | | | | | |
Impaired Loan Participation Interests |
|
For all classes within the CRE portfolio, all loan participation interests with an outstanding balance of greater than $1.0 million are considered for individual impairment evaluation on a quarterly basis. Generally, consumer loan participation interests within any class are not individually evaluated on a regular basis for impairment. Additionally, all TDRs, regardless of the outstanding balance amount, are also considered impaired. |
|
Once a loan participation interest has been identified for an assessment of impairment, the loan participation interest is considered impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. This determination requires significant judgment and use of estimates, and the eventual outcome may differ significantly from those estimates. |
|
When a loan participation interest in any class has been determined to be impaired, the amount of the impairment is measured using the present value of expected future cash flows discounted at the loan participation interest's effective interest rate or, as a practical expedient, the observable market price of the loan participation interest, or the fair value of the collateral if the loan participation interest is collateral-dependent. When the present value of expected future cash flows is used, the effective interest rate is the original contractual interest rate of the loan participation interest adjusted for any premium or discount. When the contractual interest rate is variable, the effective interest rate of the loan participation interest changes over time. A specific reserve is established as a component of the ALPL when a loan participation interest has been determined to be impaired. Subsequent to the initial measurement of impairment, if there is a significant change to the impaired loan participation interest's expected future cash flows, or if actual cash flows are significantly different from the cash flows previously estimated, the impairment is recalculated and the specific reserve is appropriately adjusted. Similarly, if impairment is measured based on the observable market price of an impaired loan participation interest or the fair value of the collateral, less costs to sell, of an impaired collateral-dependent loan participation interest, the specific reserve is adjusted. |
|
When a loan participation interest within any class is impaired, interest income is discontinued unless the receipt of principal and interest is no longer in doubt. Interest income on TDRs is accrued when all principal and interest is expected to be collected under the post-modification terms. Cash receipts received on nonaccrual impaired loan participation interests within any class are generally applied entirely against principal until the loan participation interest has been collected in full, after which time any additional cash receipts are recognized as interest income. Cash receipts received on accruing impaired loan participation interests within any class are applied in the same manner as accruing loan participation interests that are not considered impaired. |
|
The following tables present the balance of the ALPL attributable to loans by portfolio segment individually and collectively evaluated for impairment and the related loan participation interest balance at September 30, 2013 and December 31, 2012: (1) |
|
| | | | | Consumer and | | | | | | | | | | | | |
| | | Commercial | Residential | | | | | | | | | | | |
| Real Estate | Real Estate | Total | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
ALPL at September 30 2013 : | | | | | | | | | | | | | | | | |
(dollar amounts in thousands) | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Portion of ALPL balance: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Attributable to loan participation interests individually evaluated for impairment | $ | 1,209 | $ | 624 | $ | 1,833 | | | | | | | | | | |
| | Attributable to loan participation interests collectively evaluated for impairment | | 33,300 | | 6,279 | | 39,579 | | | | | | | | | | |
| Total ALPL balance | $ | 34,509 | $ | 6,903 | $ | 41,412 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Loan Participation Interests Ending Balance at September 30, 2013: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Portion of loan participation interest ending balance: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Individually evaluated for impairment | $ | 9,360 | $ | 30,226 | $ | 39,586 | | | | | | | | | | |
| | Collectively evaluated for impairment | | 2,822,658 | | 340,818 | | 3,163,476 | | | | | | | | | | |
| Total loan participation interests evaluated for impairment | $ | 2,832,018 | $ | 371,044 | $ | 3,203,062 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
ALPL at December 31, 2012: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Portion of ALPL balance: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Attributable to loan participation interests individually evaluated for impairment | $ | 1,195 | $ | 640 | $ | 1,835 | | | | | | | | | | |
| | Attributable to loan participation interests collectively evaluated for impairment | | 49,220 | | 8,396 | | 57,616 | | | | | | | | | | |
| Total ALPL balance | $ | 50,415 | $ | 9,036 | $ | 59,451 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Loan Participation Interests Ending Balance at December 31, 2012: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Portion of loan participation interest ending balance: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Individually evaluated for impairment | $ | 18,086 | $ | 30,275 | $ | 48,361 | | | | | | | | | | |
| | Collectively evaluated for impairment | | 2,857,784 | | 408,798 | | 3,266,582 | | | | | | | | | | |
| Total loan participation interests evaluated for impairment | $ | 2,875,870 | $ | 439,073 | $ | 3,314,943 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
-1 | No loans with deteriorated credit quality, as defined by ASC 310-30, have been acquired. | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
The following tables present, by class, the ending, unpaid principal balance, and the related ALPL, along with the average balance and interest income recognized only for loan participation interests individually evaluated for impairment at September 30, 2013 and December 31, 2012: (1), (2) |
|
(dollar amounts in thousands) | | | | | | | | Three Months Ended | | Nine Months Ended |
| 30-Sep-13 | | 30-Sep-13 | | 30-Sep-13 |
| | | | | Unpaid | | | | | | Interest | | | | Interest |
| | | Ending | Principal | Related | | Average | Income | | Average | Income |
| | | Balance | Balance (4) | Allowance | | Balance | Recognized | | Balance | Recognized |
| | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | |
| Commercial real estate: | | | | | | | | | | | | | | | | |
| | Industrial and warehouse | $ | --- | $ | --- | $ | --- | | $ | --- | $ | --- | | $ | --- | $ | --- |
| | Retail properties | | --- | | --- | | --- | | | --- | | --- | | | 741 | | --- |
| | Office | | --- | | --- | | --- | | | --- | | --- | | | --- | | --- |
| | Multi family | | --- | | --- | | --- | | | --- | | --- | | | --- | | --- |
| | Other commercial real estate | | --- | | --- | | --- | | | --- | | --- | | | --- | | --- |
| Total commercial real estate | $ | --- | $ | --- | $ | --- | | $ | --- | $ | --- | | $ | 741 | $ | --- |
| | | | | | | | | | | | | | | | | | |
| Consumer and residential real estate: | | | | | | | | | | | | | | | | |
| | Secured by first-lien | $ | --- | $ | --- | $ | --- | | $ | --- | $ | --- | | $ | --- | $ | --- |
| | Secured by junior-lien | | --- | | --- | | --- | | | --- | | --- | | | --- | | --- |
| Total consumer and residential real estate | $ | --- | $ | --- | $ | --- | | $ | --- | $ | --- | | $ | --- | $ | --- |
| | | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | |
| Commercial real estate: (3) | | | | | | | | | | | | | | | | |
| | Industrial and warehouse | $ | --- | $ | --- | $ | --- | | $ | --- | $ | --- | | $ | --- | $ | --- |
| | Retail properties | | --- | | --- | | --- | | | --- | | --- | | | --- | | --- |
| | Office | | 5,056 | | 8,222 | | 1,166 | | | 5,076 | | --- | | | 5,139 | | --- |
| | Multi family | | 34 | | 34 | | 4 | | | 34 | | --- | | | 636 | | 11 |
| | Other commercial real estate | | 4,270 | | 4,270 | | 39 | | | 2,220 | | 15 | | | 1,935 | | 15 |
| Total commercial real estate | $ | 9,360 | $ | 12,526 | $ | 1,209 | | $ | 7,330 | $ | 15 | | $ | 7,710 | $ | 26 |
| | | | | | | | | | | | | | | | | | |
| Consumer and residential real estate: | | | | | | | | | | | | | | | | |
| | Secured by first-lien | $ | 26,863 | $ | 28,140 | $ | 440 | | $ | 27,202 | $ | 264 | | $ | 27,216 | $ | 794 |
| | Secured by junior-lien | | 3,363 | | 3,363 | | 184 | | | 3,403 | | 41 | | | 3,448 | | 124 |
| Total consumer and residential real estate | $ | 30,226 | $ | 31,503 | $ | 624 | | $ | 30,605 | $ | 305 | | $ | 30,664 | $ | 918 |
(dollar amounts in thousands) | | | | | | | | Three Months Ended | | Nine Months Ended |
| 31-Dec-12 | | 30-Sep-12 | | 30-Sep-12 |
| | | | | | | | | | | | Interest | | | | Interest |
| | | Ending | Unpaid Principal | Related | | Average | Income | | Average | Income |
| | | Balance | Balance (4) | Allowance | | Balance | Recognized | | Balance | Recognized |
| | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | |
| Commercial real estate: | | | | | | | | | | | | | | | | |
| | Industrial and warehouse | $ | --- | $ | --- | $ | --- | | $ | 676 | $ | 5 | | $ | 225 | $ | 5 |
| | Retail properties | | 3,334 | | 4,139 | | --- | | | --- | | --- | | | --- | | --- |
| | Office | | 5,847 | | 5,848 | | --- | | | --- | | --- | | | --- | | --- |
| | Multi family | | --- | | --- | | --- | | | --- | | --- | | | --- | | --- |
| | Other commercial real estate | | --- | | --- | | --- | | | --- | | --- | | | --- | | --- |
| Total commercial real estate | $ | 9,181 | $ | 9,987 | $ | --- | | $ | 676 | $ | 5 | | $ | 225 | $ | 5 |
| | | | | | | | | | | | | | | | | | |
| Consumer and residential real estate: | | | | | | | | | | | | | | | | |
| | Secured by first-lien | $ | --- | $ | --- | $ | --- | | $ | --- | $ | --- | | $ | --- | $ | --- |
| | Secured by junior-lien | | --- | | --- | | --- | | | --- | | --- | | | --- | | --- |
| Total consumer and residential real estate | $ | --- | $ | --- | $ | --- | | $ | --- | $ | --- | | $ | --- | $ | --- |
| | | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | |
| Commercial real estate: | | | | | | | | | | | | | | | | |
| | Industrial and warehouse | $ | --- | $ | --- | $ | --- | | $ | 1,361 | $ | 10 | | $ | 3,456 | $ | 39 |
| | Retail properties | | --- | | --- | | --- | | | 6,176 | | --- | | | 5,300 | | --- |
| | Office | | 5,266 | | 8,332 | | 480 | | | 1,774 | | --- | | | 3,327 | | --- |
| | Multi family | | 944 | | 944 | | 114 | | | 1,019 | | 2 | | | 1,268 | | 6 |
| | Other commercial real estate | | 2,695 | | 5,108 | | 601 | | | 1,628 | | 9 | | | 1,391 | | 15 |
| Total commercial real estate | $ | 8,905 | $ | 14,384 | $ | 1,195 | | $ | 11,958 | $ | 21 | | $ | 14,742 | $ | 60 |
| | | | | | | | | | | | | | | | | | |
| Consumer and residential real estate: | | | | | | | | | | | | | | | | |
| | Secured by first-lien | $ | 26,719 | $ | 29,346 | $ | 350 | | $ | 23,218 | $ | 260 | | $ | 18,820 | $ | 653 |
| | Secured by junior-lien | | 3,556 | | 4,879 | | 290 | | | 3,158 | | 48 | | | 2,900 | | 133 |
| Total consumer and residential real estate | $ | 30,275 | $ | 34,225 | $ | 640 | | $ | 26,376 | $ | 308 | | $ | 21,720 | $ | 786 |
| | | | | | | | | | | | | | | | | | |
-1 | These tables do not include loan participation interests which are fully charged-off. | | | | | |
-2 | All consumer and residential real estate impaired loan participation interests are considered impaired due to their status as a TDR. | | | | | |
-3 | At September 30, 2013, $34 thousand of the $9,360 thousand of commercial real estate loan participation interests with an allowance recorded were considered impaired due to their status as a TDR. At December 31, 2012, $167 thousand of the $8,905 thousand of commercial real estate loan participation interests with an allowance recorded were considered impaired due to their status as a TDR. | | | | | |
-4 | The differences between the ending balance and unpaid principal balance amounts represent partial charge-offs. | | | | | |
TDR Loan Participation Interests |
|
TDRs are modified loan participation interests where a concession was provided to a borrower experiencing financial difficulties. Loan participation interest modifications are considered TDRs when the concessions provided are not available to the borrower through either the Bank's normal channels or other sources. However, not all loan participation interest modifications are TDRs. |
|
TDR Concession Types |
|
The Bank's standards relating to loan modifications consider, among other factors, minimum verified income requirements, cash flow analysis, and collateral valuations. Each potential loan modification is reviewed individually and the terms of the loan are modified to meet a borrower's specific circumstances at a point in time. Commercial TDRs are reviewed and approved by the Bank's Special Assets Division. The types of concessions provided to borrowers include: |
|
|
Interest rate reduction: A reduction of the stated interest rate to a nonmarket rate for the remaining original life of the debt. |
|
|
|
Amortization or maturity date change beyond what the collateral supports, including any of the following: |
|
|
|
Lengthens the amortization period of the amortized principal beyond market terms. This concession reduces the minimum monthly payment and increases the amount of the balloon payment at the end of the term of the loan. Principal is generally not forgiven. |
Reduces the amount of loan principal to be amortized. This concession also reduces the minimum monthly payment and increases the amount of the balloon payment at the end of the term of the loan. Principal is generally not forgiven. |
Extends the maturity date or dates of the debt beyond what the collateral supports. This concession generally applies to loans without a balloon payment at the end of the term of the loan. |
|
|
|
Chapter 7 bankruptcy: A bankruptcy court's discharge of a borrower's debt is considered a concession when the borrower does not reaffirm the discharged debt. |
|
|
|
Other: A concession that is not categorized as one of the concessions described above. These concessions include, but are not limited to: principal forgiveness, collateral concessions, covenant concessions, and reduction of accrued interest. |
|
|
Principal forgiveness may result from any TDR modification of any concession type. However, the aggregate amount of principal forgiven as a result of loans modified as TDRs during the three-month and nine-month periods ended September 30, 2013 and 2012, was not significant. |
|
TDRs by Loan Participation Interest Type |
|
The following is a description of TDRs by loan participation interest type: |
|
Commercial real estate loan participation interest TDRs – CRE accruing TDRs often result from loan participation interests receiving a concession with terms that are not considered a market transaction to the Bank. The TDR remains in accruing status as long as the customer is less than 90-days past due on payments per the restructured loan participation interest terms and no loss is expected. |
|
CRE nonaccrual TDRs result from either: (1) an accruing CRE TDR being placed on nonaccrual status, or (2) a workout where an existing CRE NAL is restructured and a concession was given. At times, these workouts restructure the NAL so that two or more new notes are created. The primary note is underwritten based upon the Bank's normal underwriting standards and is sized so projected cash flows are sufficient to repay contractual principal and interest. The terms on the secondary note(s) vary by situation, and may include notes that defer principal and interest payments until after the primary note is repaid. Creating two or more notes often allows the borrower to continue a project or weather a temporary economic downturn and allows the Bank to maximize repayment based upon the current expectations for a borrower's or project's performance. |
|
Our strategy involving TDR borrowers includes working with these borrowers to allow them to refinance elsewhere as well as allow them time to improve their financial position and remain our customer through refinancing their notes according to market terms and conditions in the future. A refinancing or modification of a loan occurs when either the loan matures according to the terms of the TDR-modified agreement or the borrower requests a change to the loan agreements. At that time, the loan is evaluated to determine if it is creditworthy. It is subjected to the Bank's normal underwriting standards and process for similar credit extensions, both new and existing. |
|
In accordance with ASC 310-20-35, the refinanced note is evaluated to determine if it is considered a new loan or a continuation of the prior loan participation. A new loan participation is considered for removal of the TDR designation, whereas a continuation of the prior note requires a continuation of the TDR designation. In order for the TDR designation to be removed, the borrower must no longer be experiencing financial difficulties and the terms of the refinanced loan participation must not represent a concession. |
|
Consumer and residential real estate loan participation interest TDRs – Consumer and residential real estate TDRs represent loan modifications associated with traditional first-lien mortgage loans, as well as first-lien and junior-lien home equity loans, in which a concession has been provided to the borrower. The primary concessions given to these borrowers are amortization or maturity date changes and interest rate reductions. Consumer and residential real estate loans identified as TDRs involve borrowers unable to refinance their mortgages through the Bank's normal mortgage origination channels or through other independent sources. Some, but not all, of the loans may be delinquent. |
|
TDR Impact on Credit Quality |
|
The ALPL is largely driven by updated risk ratings assigned to CRE loan participation interests, updated borrower credit scores on consumer and residential real estate, and borrower delinquency history in both portfolios. These updated risk ratings and credit scores consider the default history of the borrower, including payment redefaults. As such, the provision for credit losses is impacted primarily by changes in borrower payment performance rather than the TDR classification. TDRs can be classified as either accrual or nonaccrual loan participation interests. Nonaccrual TDRs are included in NPAs whereas accruing TDRs are excluded from NPAs as it is probable that all contractual principal and interest due under the restructured terms will be collected. |
|
TDRs may include multiple concessions and the disclosure classifications are presented based on the primary concession provided to the borrower. The majority of concessions for the CRE portfolio are the extension of the maturity date coupled with an increase in the interest rate. In these instances, the primary concession is the maturity date extension. |
|
TDR concessions may also result in the reduction of the ALPL within the CRE portfolio. This reduction is derived from payments and the resulting application of the reserve calculation within the ALPL. The transaction reserve for non-TDR loans is calculated based upon several estimated probability factors, such as PD and LGD, both of which were previously discussed. Upon the occurrence of a TDR in the CRE portfolio, the reserve is measured based on discounted expected cash flows or collateral value, less selling costs, of the modified loan in accordance with ASC 310-10. The resulting TDR ALPL calculation often results in a lower ALPL amount because: (1) the discounted expected cash flows or collateral value indicate a lower estimated loss, (2) if the modification includes a rate increase, the discounting of cash flows or the collateral value, less selling costs, on the modified loan, using the pre-modification interest rate, exceeds the carrying value of the loan, or (3) payments may occur as part of the modification. The ALPL for CRE loans may increase as a result of the modification, as the discounted cash flow analysis may indicate additional reserves are required. |
|
TDR concessions on consumer and residential real estate loans may increase the ALPL. The concessions made to these borrowers often include interest rate reductions and, therefore, the TDR ALPL calculation results in a greater ALPL compared with the non-TDR calculation as the reserve is measured based on the estimation of the discounted expected cash flows or collateral value, less selling costs, on the modified loan in accordance with ASC 310-10. The resulting TDR ALPL calculation often results in a higher ALPL amount because (1) the discounted expected cash flows or collateral value, less selling costs, indicate a higher estimated loss or, (2) due to the rate decrease, the discounting of the cash flows on the modified loan participation interest, using the pre-modification interest rate, indicates a reduction in the expected cash flows or collateral value, less selling costs. In certain instances, the ALPL may decrease as a result of payments made in connection with the modification. |
Commercial real estate loan participation interest TDRs – In instances where the Bank substantiates that it will collect the outstanding balance in full, the note is considered for return to accrual status upon the borrower sustaining sufficient cash flows for a six-month period of time. This nine-month period could extend before or after the restructure date. If a charge-off was taken as part of the restructuring, any interest or principal payments received on that note are applied to first reduce the outstanding book balance and then to recoveries of charged-off principal, unpaid interest, and/or fee expenses. |
|
Consumer and residential real estate loan participation interest TDRs – Modified loans identified as TDRs are aggregated into pools for analysis. Cash flows and weighted average interest rates are used to calculate impairment at the pooled-loan level. Once the loans are aggregated into the pool, they continue to be classified as TDRs until contractually repaid or charged-off. |
|
The following table presents, by class and the reason for the modification, the number of contracts, post-modification outstanding balance, and the financial effects of the modification for the three-month and nine-month periods ended September 30, 2013 and 2012: |
|
| | | New Troubled Debt Restructurings During The Three-Month Period Ended (1), (2) | |
| | | 30-Sep-13 | | 30-Sep-12 | |
| | | | Post-modification | | | | Post-modification | | | | | | |
(dollar amounts in thousands) | | Number of | Outstanding | Financial effects | | Number of | Outstanding | Financial effects | | | | | |
| | Contracts | Balance | of modification(3) | | Contracts | Balance | of modification(3) | | | | | |
| | | | | | | | | | | | | | | | | | |
CRE - Multi family: | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Interest rate reduction | | --- | $ | --- | $ | --- | | --- | $ | --- | $ | --- | | | | | |
| Amortization or maturity date change | | --- | | --- | | --- | | 1 | | 42 | | --- | | | | | |
Total CRE - Multi family | | --- | $ | --- | $ | --- | | 1 | $ | 42 | $ | --- | | | | | |
| | | | | | | | | | | | | | | | | | |
CRE - Other commercial real estate: | | | | | | | | | | | | | | | | | |
| Interest rate reduction | | --- | $ | --- | $ | --- | | --- | $ | --- | $ | --- | | | | | |
| Amortization or maturity date change | | --- | | --- | | --- | | 1 | | 303 | | 27 | | | | | |
| Other | | --- | | --- | | --- | | --- | | --- | | --- | | | | | |
Total CRE - Other commercial real estate | | --- | $ | --- | $ | --- | | 1 | $ | 303 | $ | 27 | | | | | |
| | | | | | | | | | | | | | | | | | |
Consumer and residential real estate secured by first-lien: | | | | | | | | | | | | | | | | | |
| Interest rate reduction | | 3 | $ | 118 | $ | 4 | | 33 | $ | 4,558 | $ | 836 | | | | | |
| Amortization or maturity date change | | 2 | | 84 | | 5 | | 1 | | 21 | | --- | | | | | |
| Chapter 7 bankruptcy | | 6 | | 295 | | -3 | | 54 | | 1,810 | | 2,094 | | | | | |
| Other | | --- | | --- | | --- | | --- | | --- | | --- | | | | | |
Total consumer and residential real estate secured by first-lien | | 11 | $ | 497 | $ | 6 | | 88 | $ | 6,389 | $ | 2,930 | | | | | |
| | | | | | | | | | | | | | | | | | |
Consumer and residential real estate secured by junior-lien: | | | | | | | | | | | | | | | | | |
| Interest rate reduction | | 1 | $ | 14 | $ | 3 | | 7 | $ | 648 | $ | 107 | | | | | |
| Amortization or maturity date change | | 1 | | 3 | | --- | | 1 | | 3 | | --- | | | | | |
| Chapter 7 bankruptcy | | 3 | | --- | | -1 | | 93 | | 509 | | 1,259 | | | | | |
| Other | | --- | | --- | | --- | | --- | | --- | | --- | | | | | |
Total consumer and residential real estate secured by junior-lien | | 5 | $ | 17 | $ | 2 | | 101 | $ | 1,160 | $ | 1,366 | | | | | |
| | | | | | | | | | | | | | | | | | |
Total new troubled debt restructurings | | 16 | $ | 514 | $ | 8 | | 189 | $ | 7,549 | $ | 4,296 | | | | | |
| | | New Troubled Debt Restructurings During The Nine-Month Period Ended (1), (2) | |
| | | 30-Sep-13 | | 30-Sep-12 | |
| | | | Post-modification | | | | Post-modification | | | | | | |
(dollar amounts in thousands) | | Number of | Outstanding | Financial effects | | Number of | Outstanding | Financial effects | | | | | |
| | Contracts | Balance | of modification(3) | | Contracts | Balance | of modification(3) | | | | | |
| | | | | | | | | | | | | | | | | | |
CRE - Retail properties: | | | | | | | | | | | | | | | | | |
| Interest rate reduction | | --- | $ | --- | $ | --- | | 1 | $ | 892 | $ | -2 | | | | | |
| Amortization or maturity date change | | --- | | --- | | --- | | --- | | --- | | --- | | | | | |
| Other | | --- | | --- | | --- | | --- | | --- | | --- | | | | | |
Total CRE - Retail properties | | --- | $ | --- | $ | --- | | 1 | $ | 892 | $ | -2 | | | | | |
| | | | | | | | | | | | | | | | | | |
CRE - Multi family: | | | | | | | | | | | | | | | | | |
| Interest rate reduction | | --- | $ | --- | $ | --- | | --- | $ | --- | $ | --- | | | | | |
| Amortization or maturity date change | | --- | | --- | | --- | | 1 | | 42 | | --- | | | | | |
| Other | | --- | | --- | | --- | | --- | | --- | | --- | | | | | |
Total CRE - Multi family | | --- | $ | --- | $ | --- | | 1 | $ | 42 | $ | --- | | | | | |
| | | | | | | | | | | | | | | | | | |
CRE - Other commercial real estate: | | | | | | | | | | | | | | | | | |
| Interest rate reduction | | --- | $ | --- | $ | --- | | --- | $ | --- | $ | --- | | | | | |
| Amortization or maturity date change | | --- | | --- | | --- | | 1 | | 303 | | 27 | | | | | |
| Other | | --- | | --- | | --- | | --- | | --- | | --- | | | | | |
Total CRE - Other commercial real estate | | --- | $ | --- | $ | --- | | 1 | $ | 303 | $ | 27 | | | | | |
| | | | | | | | | | | | | | | | | | |
Consumer and residential real estate secured by first-lien: | | | | | | | | | | | | | | | | | |
| Interest rate reduction | | 9 | $ | 847 | $ | 107 | | 102 | $ | 12,842 | | 2,116 | | | | | |
| Amortization or maturity date change | | 5 | | 443 | | 8 | | 6 | | 632 | | 1 | | | | | |
| Chapter 7 bankruptcy | | 26 | | 1,532 | | -30 | | 54 | | 1,810 | | 2,094 | | | | | |
| Other | | --- | | --- | | --- | | --- | | --- | | --- | | | | | |
Total consumer and residential real estate secured by first-lien | | 40 | $ | 2,822 | $ | 85 | | 162 | $ | 15,284 | $ | 4,211 | | | | | |
| | | | | | | | | | | | | | | | | | |
Consumer and residential real estate secured by junior-lien: | | | | | | | | | | | | | | | | | |
| Interest rate reduction | | 7 | $ | 173 | $ | 28 | | 15 | $ | 876 | $ | 143 | | | | | |
| Amortization or maturity date change | | 3 | | 16 | | --- | | 4 | | 51 | | -2 | | | | | |
| Chapter 7 bankruptcy | | 23 | | 105 | | -23 | | 93 | | 509 | | 1,259 | | | | | |
| Other | | --- | | --- | | --- | | --- | | --- | | --- | | | | | |
Total consumer and residential real estate secured by junior-lien | | 33 | $ | 294 | $ | 5 | | 112 | $ | 1,436 | $ | 1,400 | | | | | |
| | | | | | | | | | | | | | | | | | |
Total new troubled debt restructurings | | 73 | $ | 3,116 | $ | 90 | | 277 | $ | 17,957 | $ | 5,636 | | | | | |
| | | | | | | | | | | | | | | | | | |
-1 | TDRs may include multiple concessions and the disclosure classifications are based on the primary concession provided to the borrower. | |
-2 | For the three-month periods ended September 30, 2013 and 2012, there were no new troubled debt restructurings for the following classes: CRE - Industrial and warehouse, CRE - Retail properties, and CRE - Office. For the nine-month periods ended September 30, 2013 and 2012, there were no new troubled debt restructurings for the following classes: CRE - Industrial and warehouse, and CRE - Office. | |
-3 | Amounts represent the financial impact via provision for loan participation losses as a result of the modification. | |
Any loan participation interest within any portfolio or class is considered as payment redefaulted at 90-days past due. |
|
The following tables present TDRs modified within the previous twelve months that have subsequently redefaulted during the three-month and nine-month periods ended September 30, 2013 and 2012: |
|
| | | Troubled Debt Restructurings That Have Redefaulted | | | | | | | | | |
| | | Within One Year of Modification During The(1) | | | | | | | | | |
| | | Three Months Ended September 30, 2013 | | Three Months Ended September 30, 2012(2) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Number of | Ending | | Number of | Ending | | | | | | | | | |
(dollar amounts in thousands) | | Contracts | Balance | | Contracts | Balance | | | | | | | | | |
Consumer and residential real estate secured by first-lien: | | | | | | | | + | | | | | | | | | |
| Interest rate reduction | | --- | $ | --- | | --- | $ | ---+ | | | | | | | | | |
| Amortization or maturity date change | | --- | | --- | | 4 | | 489+ | | | | | | | | | |
| Chapter 7 bankruptcy | | --- | | --- | | 1 | | 34+ | | | | | | | | | |
| Other | | --- | | --- | | --- | | ---+ | | | | | | | | | |
Total consumer and residential real estate secured by first-lien | | --- | $ | --- | | 5 | $ | 523+ | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Consumer and residential real estate secured by junior-lien: | | | | | | | | | | | | | | | | | |
| Interest rate reduction | | --- | $ | --- | | --- | $ | ---+ | | | | | | | | | |
| Amortization or maturity date change | | --- | | --- | | 1 | | 20+ | | | | | | | | | |
| Chapter 7 bankruptcy | | --- | | --- | | --- | | ---+ | | | | | | | | | |
| Other | | --- | | --- | | --- | | ---+ | | | | | | | | | |
Total consumer and residential real estate secured by junior-lien | | --- | $ | --- | | 1 | $ | 20+ | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total troubled debt restructurings with subsequent redefault | | --- | $ | --- | | 6 | $ | 543+ | | | | | | | | | |
| | Troubled Debt Restructurings That Redefaulted | | | | | | | | | |
| | Within One Year Of Modification During The(1) | | | | | | | | | |
| | | Nine Months Ended September 30, 2013 | | Nine Months Ended September 30, 2012(2) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Number of | Ending | | Number of | Ending | | | | | | | | | |
(dollar amounts in thousands) | | Contracts | Balance | | Contracts | Balance | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Consumer and residential real estate secured by first-lien: | | | | | | | | | | | | | | | | | |
| Interest rate reduction | | --- | $ | --- | | --- | $ | --- | | | | | | | | | |
| Amortization or maturity date change | | --- | | --- | | 4 | | 489 | | | | | | | | | |
| Chapter 7 bankruptcy | | 1 | | 2 | | 1 | | 34 | | | | | | | | | |
| Other | | --- | | --- | | --- | | --- | | | | | | | | | |
Total consumer and residential real estate secured by first-lien | | 1 | $ | 2 | | 5 | $ | 523 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Consumer and residential real estate secured by junior-lien: | | | | | | | | | | | | | | | | | |
| Interest rate reduction | | --- | $ | --- | | --- | $ | --- | | | | | | | | | |
| Amortization or maturity date change | | --- | | --- | | 1 | | 20 | | | | | | | | | |
| Chapter 7 bankruptcy | | --- | | --- | | --- | | --- | | | | | | | | | |
| Other | | --- | | --- | | --- | | --- | | | | | | | | | |
Total consumer and residential real estate secured by junior-lien | | --- | $ | --- | | 1 | $ | 20 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total troubled debt restructurings with subsequent redefault | | 1 | $ | 2 | | 6 | $ | 543 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
-1 | Subsequent redefault is defined as a payment redefault within 12 months of the restructuring date. Payment redefault is defined as 90-days past due for any loan participation interest in any portfolio or class. Any loan participation interest in any portfolio or class may be considered in payment redefault prior to the guidelines noted above when collection of principal or interest is in doubt. | | | | | | | | | |
-2 | During the three-month and nine-month periods ended September 30, 2013 and 2012, there were no troubled debt restructurings that redefaulted within one year of modification for the following classes: CRE - Industrial and warehouse, CRE - Retail properties, CRE - Office, CRE - Multi family, and CRE - Other commercial real estate. | | | | | | | | | |