LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES | 6 Months Ended |
Jun. 30, 2014 |
LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES | ' |
NOTE 5 – LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES |
The following table presents the balances in the Company’s loans and leases portfolio as of the dates indicated: |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Non-Traditional | | | Traditional | | | Total NTM and | | | Purchased Credit | | | Total Loans and | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgages (NTM) | Loans | Traditional Loans | Impaired | Leases Receivable | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | ($ in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
June 30, 2014: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | — | | | $ | 367,111 | | | $ | 367,111 | | | $ | 1,429 | | | $ | 368,540 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | — | | | | 521,168 | | | | 521,168 | | | | 14,576 | | | | 535,744 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Multi-family | | | — | | | | 234,179 | | | | 234,179 | | | | — | | | | 234,179 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | — | | | | 25,264 | | | | 25,264 | | | | 3,420 | | | | 28,684 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Constructions | | | — | | | | 30,761 | | | | 30,761 | | | | — | | | | 30,761 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Lease financing | | | — | | | | 57,754 | | | | 57,754 | | | | — | | | | 57,754 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 182,509 | | | | 612,235 | | | | 794,744 | | | | 284,083 | | | | 1,078,827 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - first liens | | | 133,986 | | | | — | | | | 133,986 | | | | — | | | | 133,986 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - second liens | | | 4,962 | | | | — | | | | 4,962 | | | | — | | | | 4,962 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | 113 | | | | 127,114 | | | | 127,227 | | | | 1,549 | | | | 128,776 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total gross loans | | $ | 321,570 | | | $ | 1,975,586 | | | $ | 2,297,156 | | | $ | 305,057 | | | $ | 2,602,213 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Percentage to total gross loans | | | 12.4 | % | | | 75.9 | % | | | 88.3 | % | | | 11.7 | % | | | 100 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan and lease losses | | | | | | | | | | | | | | | | | | | (22,627 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans and leases receivable, net | | | | | | | | | | | | | | | | | | $ | 2,579,586 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2013: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | — | | | $ | 283,743 | | | $ | 283,743 | | | $ | 4,028 | | | $ | 287,771 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | — | | | | 514,869 | | | | 514,869 | | | | 15,014 | | | | 529,883 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Multi-family | | | — | | | | 141,580 | | | | 141,580 | | | | — | | | | 141,580 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | — | | | | 23,740 | | | | 23,740 | | | | 3,688 | | | | 27,428 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Constructions | | | — | | | | 24,933 | | | | 24,933 | | | | — | | | | 24,933 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Lease financing | | | — | | | | 31,949 | | | | 31,949 | | | | — | | | | 31,949 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 156,490 | | | | 667,526 | | | | 824,016 | | | | 314,820 | | | | 1,138,836 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - first liens | | | 147,705 | | | | — | | | | 147,705 | | | | — | | | | 147,705 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - second liens | | | 5,289 | | | | — | | | | 5,289 | | | | — | | | | 5,289 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | 113 | | | | 108,888 | | | | 109,001 | | | | 1,736 | | | | 110,737 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total gross loans | | $ | 309,597 | | | $ | 1,797,228 | | | $ | 2,106,825 | | | $ | 339,286 | | | $ | 2,446,111 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Percentage to total gross loans | | | 12.7 | % | | | 73.4 | % | | | 86.1 | % | | | 13.9 | % | | | 100 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan and lease losses | | | | | | | | | | | | | | | | | | | (18,805 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans and leases receivable, net | | | | | | | | | | | | | | | | | | $ | 2,427,306 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non Traditional Mortgage Loans |
The Company’s non-traditional mortgage (NTM) portfolio is comprised of three interest only products: Green Account Loans (Green Loans), hybrid interest only fixed or adjustable rate mortgage (Interest Only) loans and a small number of additional loans with the potential for negative amortization. As of June 30, 2014 and December 31, 2013, the non-traditional mortgage loans totaled $321.6 million, or 12.4 percent of the total gross loan portfolio, and $309.6 million, or 12.7 percent of the total gross loan portfolio, respectively. The total NTM portfolio increased by $12.0 million, or 3.9 percent, during the six months ended June 30, 2014. |
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The following table presents the composition of the NTM portfolio as of the dates indicated: |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2014 | | | December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Count | | | Amount | | | Percent | | | Count | | | Amount | | | Percent | | | | | | | | | | | | | | | | | | | | | | | | | |
| | ($ in thousand) | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - first liens | | | 156 | | | $ | 133,986 | | | | 41.7 | % | | | 173 | | | $ | 147,705 | | | | 47.6 | % | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-only - first liens | | | 210 | | | | 168,141 | | | | 52.2 | % | | | 244 | | | | 139,867 | | | | 45.2 | % | | | | | | | | | | | | | | | | | | | | | | | | |
Negative amortization | | | 33 | | | | 14,368 | | | | 4.5 | % | | | 37 | | | | 16,623 | | | | 5.4 | % | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total NTM - first liens | | | 399 | | | | 316,495 | | | | 98.4 | % | | | 454 | | | | 304,195 | | | | 98.2 | % | | | | | | | | | | | | | | | | | | | | | | | | |
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Green Loans (HELOC) - second liens | | | 20 | | | | 4,962 | | | | 1.5 | % | | | 23 | | | | 5,289 | | | | 1.7 | % | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-only - second liens | | | 1 | | | | 113 | | | | 0.1 | % | | | 1 | | | | 113 | | | | 0.1 | % | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total NTM - second liens | | | 21 | | | | 5,075 | | | | 1.6 | % | | | 24 | | | | 5,402 | | | | 1.8 | % | | | | | | | | | | | | | | | | | | | | | | | | |
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Total NTM loans | | | 420 | | | $ | 321,570 | | | | 100 | % | | | 478 | | | $ | 309,597 | | | | 100 | % | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total gross loan portfolio | | | | | | $ | 2,602,213 | | | | | | | | | | | $ | 2,446,111 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
% of NTM to total gross loan portfolio | | | | | | | 12.4 | % | | | | | | | | | | | 12.7 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans |
Green Loans are single family residential first and second mortgage lines of credit with a linked checking account that allows all types of deposits and withdrawals to be performed. The loans are generally interest only with a 15 year balloon payment due at maturity. At June 30, 2014, Green Loans totaled $138.9 million, a decrease of $14.0 million, or 9.2 percent from $153.0 million at December 31, 2013, primarily due to reductions in principal balance and payoffs. As of June 30, 2014 and December 31, 2013, $15.1 million and $5.7 million, respectively, of the Company’s Green Loans were non-performing. As a result of their unique payment feature, Green Loans possess higher credit risk due to the potential of negative amortization; however, management believes the risk is mitigated through the Company’s loan terms and underwriting standards, including its policies on loan-to-value ratios and the Company’s contractual ability to curtail loans when the value of underlying collateral declines. The Company discontinued origination of the Green Loan products in 2011. |
Interest Only Loans |
Interest only loans are primarily single family residential first mortgage loans with payment features that allow interest only payment in initial periods before converting to a fully amortizing loan. As of June 30, 2014, our interest only loans increased by $28.3 million, or 20.2 percent, to $168.3 million from $140.0 million at December 31, 2013, primarily due to originations of $68.5 million and transfers from loans held for sale of $14.8 million, partially offset by transfers to loans held for sale of $25.3 million and net amortization of $29.8 million. As of June 30, 2014 and December 31, 2013, $1.1 million and $752 thousand of the interest only loans were non-performing, respectively. |
Loans with the Potential for Negative Amortization |
Negative amortization loans decreased by $2.3 million, or 13.6 percent, to $14.4 million as of June 30, 2014 from $16.6 million as of December 31, 2013. The Company discontinued origination of negative amortization loans in 2007. As of June 30, 2014 and December 31, 2013, $983 thousand and $1.2 million of the loans that had the potential for negative amortization were non-performing, respectively. These loans pose a potentially higher credit risk because of the lack of principal amortization and potential for negative amortization; however, management believes the risk is mitigated through the loan terms and underwriting standards, including the Company’s policies on loan-to-value ratios. |
Risk Management of Non-Traditional Mortgages |
The Company has determined that the most significant performance indicators for non-traditional mortgages are loan-to-value (LTV) and FICO scores. Accordingly, the Company manages credit risk in the NTM portfolio through semi-annual review of the loan portfolio that includes refreshing FICO scores on the Green Loans and home equity lines of credit, as needed in conjunction with portfolio management, and ordering third party automated valuation models. The loan review is designed to provide a method of identifying borrowers who may be experiencing financial difficulty before they actually fail to make a loan payment. Upon receipt of the updated FICO scores, an exception report is run to identify loans with a decrease in FICO of 10 percent or more and/or a resulting FICO of 620 or less. The loans are then further analyzed to determine if the risk rating should be downgraded which will increase the reserves the Company will establish for potential losses. A report of the semi-annual loan review is published and regularly monitored. |
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As these loans are revolving lines of credit, the Company, based on the loan agreement and loan covenants of the particular loan, as well as applicable rules and regulations, could suspend the borrowing privileges or reduce the credit limit at any time the Company reasonably believes that the borrower will be unable to fulfill their repayment obligations under the agreement or certain other conditions are met. In many cases, the decrease in FICO is the first indication that the borrower may have difficulty in making their future payment obligations. |
As a result, the Company proactively manages the portfolio by performing detailed analysis on its portfolio with emphasis on the NTM portfolio. The Company’s Internal Asset Review Committee (IARC) conducts meetings on at least quarterly basis to review the loans classified as special mention, substandard, or doubtful and determines whether suspension or reduction in credit limit is warranted. If the line has been suspended and the borrower would like to have their credit privileges reinstated, they would need to provide updated financials showing their ability to meet their payment obligations. |
On the interest only loans, the Company projects future payment changes to determine if there will a material increase in required payment and then monitors the loans for possible delinquency. The individual loans are monitored for possible downgrading of risk rating, and trends within the portfolio are identified that could affect other interest only loans scheduled for payment changes in the near future. |
Non Traditional Mortgage Performance Indicators |
The following table presents the Company’s non-traditional single family residential mortgage Green Loans first lien portfolio at June 30, 2014 by FICO scores that were obtained during the second quarter of 2014, comparing to the FICO scores for those same loans that were obtained during the fourth quarter of 2013: |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2014 | | | December 31, 2013 | | | Change | | | | | | | | | | | | | |
| | Count | | | Amount | | | Percent | | | Count | | | Amount | | | Percent | | | Count | | | Amount | | | Percent | | | | | | | | | | | | | |
| | ($ in thousand) | | | | | | | | | | | | | |
FICO Score | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
800+ | | | 21 | | | $ | 13,057 | | | | 9.7 | % | | | 13 | | | $ | 7,347 | | | | 5.5 | % | | | 8 | | | $ | 5,710 | | | | 4.2 | % | | | | | | | | | | | | |
700-799 | | | 77 | | | | 62,287 | | | | 46.5 | % | | | 90 | | | | 70,337 | | | | 52.5 | % | | | (13 | ) | | | (8,050 | ) | | | -6 | % | | | | | | | | | | | | |
600-699 | | | 34 | | | | 29,158 | | | | 21.8 | % | | | 34 | | | | 31,772 | | | | 23.7 | % | | | — | | | | (2,614 | ) | | | -1.9 | % | | | | | | | | | | | | |
<600 | | | 10 | | | | 12,953 | | | | 9.7 | % | | | 9 | | | | 9,394 | | | | 7 | % | | | 1 | | | | 3,559 | | | | 2.7 | % | | | | | | | | | | | | |
No FICO | | | 14 | | | | 16,531 | | | | 12.3 | % | | | 10 | | | | 15,136 | | | | 11.3 | % | | | 4 | | | | 1,395 | | | | 1 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Totals | | | 156 | | | $ | 133,986 | | | | 100 | % | | | 156 | | | $ | 133,986 | | | | 100 | % | | | — | | | $ | — | | | | 0 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The Company updates FICO scores on a semi-annual basis, typically in second and fourth quarter or as needed in conjunction with proactive portfolio management. |
Loan to Value |
The table below represents the Company’s single family residential NTM first lien portfolio by loan-to-value (LTV) as of the dates indicated: |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Green | | | Interest Only | | | Negative Amortization | | | Total | |
| | Count | | | Amount | | | Percent | | | Count | | | Amount | | | Percent | | | Count | | | Amount | | | Percent | | | Count | | | Amount | | | Percent | |
| | ($ in thousand) | |
June 30, 2014: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
LTV’s (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
< 61 | | | 83 | | | $ | 80,922 | | | | 60.4 | % | | | 67 | | | $ | 85,050 | | | | 50.5 | % | | | 15 | | | $ | 7,459 | | | | 51.9 | % | | | 165 | | | $ | 173,431 | | | | 54.7 | % |
61-80 | | | 46 | | | | 35,886 | | | | 26.8 | % | | | 41 | | | | 46,669 | | | | 27.8 | % | | | 10 | | | | 4,152 | | | | 28.9 | % | | | 97 | | | | 86,707 | | | | 27.4 | % |
81-100 | | | 22 | | | | 12,725 | | | | 9.5 | % | | | 38 | | | | 15,474 | | | | 9.2 | % | | | 7 | | | | 2,356 | | | | 16.4 | % | | | 67 | | | | 30,555 | | | | 9.7 | % |
> 100 | | | 5 | | | | 4,453 | | | | 3.3 | % | | | 64 | | | | 20,948 | | | | 12.5 | % | | | 1 | | | | 401 | | | | 2.8 | % | | | 70 | | | | 25,802 | | | | 8.2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 156 | | | $ | 133,986 | | | | 100 | % | | | 210 | | | $ | 168,141 | | | | 100 | % | | | 33 | | | $ | 14,368 | | | | 100 | % | | | 399 | | | $ | 316,495 | | | | 100 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2013: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
LTV’s (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
< 61 | | | 90 | | | $ | 78,807 | | | | 53.3 | % | | | 80 | | | $ | 65,181 | | | | 46.6 | % | | | 13 | | | $ | 4,930 | | | | 29.7 | % | | | 183 | | | $ | 148,918 | | | | 49 | % |
61-80 | | | 38 | | | | 33,604 | | | | 22.8 | % | | | 51 | | | | 28,999 | | | | 20.7 | % | | | 13 | | | | 7,643 | | | | 45.9 | % | | | 102 | | | | 70,246 | | | | 23.1 | % |
81-100 | | | 26 | | | | 14,917 | | | | 10.1 | % | | | 43 | | | | 21,474 | | | | 15.4 | % | | | 8 | | | | 3,277 | | | | 19.7 | % | | | 77 | | | | 39,668 | | | | 13 | % |
> 100 | | | 19 | | | | 20,377 | | | | 13.8 | % | | | 70 | | | | 24,213 | | | | 17.3 | % | | | 3 | | | | 773 | | | | 4.7 | % | | | 92 | | | | 45,363 | | | | 14.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 173 | | | $ | 147,705 | | | | 100 | % | | | 244 | | | $ | 139,867 | | | | 100 | % | | | 37 | | | $ | 16,623 | | | | 100 | % | | | 454 | | | $ | 304,195 | | | | 100 | % |
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-1 | LTV represents estimated current loan to value ratio, determined by dividing current unpaid principal balance by latest estimated property value received per the Company policy. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The decrease in Green Loans was due mainly to reductions in principal balance and payoffs and the increase in interest only was due to increased originations. During 2014, overall improvement on LTV of the Company’s single family residential NTM first lien portfolio was due to the improvement in the real estate market and the economy in Southern California. The Company updates LTV on a semi-annual basis, typically in second and fourth quarter or as needed in conjunction with proactive portfolio management. |
Allowance for Loan and Lease Losses |
The Company has an established credit risk management process that includes regular management review of the loan and lease portfolio to identify problem loans and leases. During the ordinary course of business, management becomes aware of borrowers and lessees that may not be able to meet the contractual requirements of the loan and lease agreements. Such loans and leases are subject to increased monitoring. Consideration is given to placing the loan or lease on non-accrual status, assessing the need for additional allowance for loan and lease losses, and partial or full charge-off. The Company maintains the allowance for loan and lease losses at a level that is considered adequate to cover the estimated and known inherent risks in the loan and lease portfolio. |
The Company also maintains a reserve for unfunded loan commitments at a level that is considered adequate to cover the estimated and known inherent risks. The probability of usage of the unfunded loan commitments and credit risk factors determined based on outstanding loan balance of the same customer or outstanding loans that shares similar credit risk exposure are used to determine the adequacy of the reserve. As of June 30, 2014 and December 31, 2013, the reserve for unfunded loan commitments was $1.4 million. |
The credit risk monitoring system is designed to identify impaired and potential problem loans, and to permit periodic evaluation of impairment and the adequacy of the allowance for credit losses in a timely manner. In addition, the Board of Directors of the Bank has adopted a credit policy that includes a credit review and control system which it believes should be effective in ensuring that the Company maintains an adequate allowance for credit losses. The Board of Directors provides oversight and guidance for management’s allowance evaluation process, including quarterly valuations, and consideration of management’s determination of whether the allowance is adequate to absorb losses in the loan and lease portfolio. The determination of the amount of the allowance for loan and lease losses and the provision for loan and lease losses is based on management’s current judgment about the credit quality of the loan and lease portfolio and takes into consideration known relevant internal and external factors that affect collectability when determining the appropriate level for the allowance for loan and lease losses. At June 30, 2014, the Company extended the historical loss look back period from 12 quarters to 15 quarters for determining the level of its allowance for loan and leases losses to better reflect the economic cycle. Due to this change, the Company realized additional $1.8 million allowance for loans and leases than what it would have been using the 12 quarter historical loss look back period. The nature of the process by which the Company determines the appropriate allowance for loan and lease losses requires the exercise of considerable judgment. Additions to the allowance for loan and lease losses are made by charges to the provision for loan and lease losses. Identified credit exposures that are determined to be uncollectible are charged against the allowance for loan and lease losses. Recoveries of previously charged off amounts, if any, are credited to the allowance for loan and lease losses. |
The following table presents a summary of activity in the allowance for loan and lease losses and ending balances of loans evaluated for impairment for the periods indicated: |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Six Months Ended | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
June 30, | June 30, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | | 2013 | | | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period | | $ | 20,003 | | | $ | 16,015 | | | $ | 18,805 | | | $ | 14,448 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans and leases charged off | | | (383 | ) | | | (1,027 | ) | | | (586 | ) | | | (1,932 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Recoveries of loans and leases previously charged off | | | 641 | | | | 73 | | | | 1,076 | | | | 377 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transfer of loans from (to) held-for-sale | | | 258 | | | | — | | | | (705 | ) | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Provision for loan and lease losses | | | 2,108 | | | | 1,918 | | | | 4,037 | | | | 4,086 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at end of period | | $ | 22,627 | | | $ | 16,979 | | | $ | 22,627 | | | $ | 16,979 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The following table presents the activity and balance in the allowance for loan and lease losses and the recorded investment, excluding accrued interest, in loans and leases by portfolio segment and is based on the impairment method as of or for the three and six months ended June 30, 2014: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial | | | Commercial | | | Multi- | | | SBA | | | Construction | | | Lease | | | Single | | | Other | | | Unallocated | | | Total | | | | | | | | | |
and | Real Estate | family | Financing | Family | Consumer | | | | | | | | |
Industrial | | | | Residential | | | | | | | | | |
| | | | Mortgage | | | | | | | | | |
| | (In thousands) | | | | | | | | | |
Allowance for loan and lease losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at March 31, 2014 | | $ | 2,367 | | | $ | 6,449 | | | $ | 2,720 | | | $ | 211 | | | $ | 352 | | | $ | 622 | | | $ | 6,147 | | | $ | 782 | | | $ | 353 | | | $ | 20,003 | | | | | | | | | |
Charge-offs | | | — | | | | — | | | | (3 | ) | | | — | | | | — | | | | — | | | | (206 | ) | | | (174 | ) | | | — | | | | (383 | ) | | | | | | | | |
Recoveries | | | 27 | | | | 438 | | | | — | | | | 175 | | | | — | | | | — | | | | — | | | | 1 | | | | — | | | | 641 | | | | | | | | | |
Transfer of loans from held-for-sale | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 258 | | | | — | | | | — | | | | 258 | | | | | | | | | |
Provision | | | 613 | | | | (1,272 | ) | | | 691 | | | | (125 | ) | | | 893 | | | | 108 | | | | 1,090 | | | | 463 | | | | (353 | ) | | | 2,108 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at June 30, 2014 | | $ | 3,007 | | | $ | 5,615 | | | $ | 3,408 | | | $ | 261 | | | $ | 1,245 | | | $ | 730 | | | $ | 7,289 | | | $ | 1,072 | | | $ | — | | | $ | 22,627 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2013 | | $ | 1,822 | | | $ | 5,484 | | | $ | 2,566 | | | $ | 235 | | | $ | 244 | | | $ | 428 | | | $ | 7,044 | | | $ | 532 | | | $ | 450 | | | $ | 18,805 | | | | | | | | | |
Charge-offs | | | — | | | | — | | | | (3 | ) | | | (17 | ) | | | — | | | | — | | | | (357 | ) | | | (209 | ) | | | — | | | | (586 | ) | | | | | | | | |
Recoveries | | | 53 | | | | 754 | | | | — | | | | 267 | | | | — | | | | — | | | | — | | | | 2 | | | | — | | | | 1,076 | | | | | | | | | |
Transfer of loans to held-for-sale | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (705 | ) | | | — | | | | — | | | | (705 | ) | | | | | | | | |
Provision | | | 1,132 | | | | (623 | ) | | | 845 | | | | (224 | ) | | | 1,001 | | | | 302 | | | | 1,307 | | | | 747 | | | | (450 | ) | | | 4,037 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at June 30, 2014 | | $ | 3,007 | | | $ | 5,615 | | | $ | 3,408 | | | $ | 261 | | | $ | 1,245 | | | $ | 730 | | | $ | 7,289 | | | $ | 1,072 | | | $ | — | | | $ | 22,627 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 309 | | | $ | — | | | $ | — | | | $ | 309 | | | | | | | | | |
Collectively evaluated for impairment | | | 3,007 | | | | 5,615 | | | | 3,408 | | | | 261 | | | | 1,245 | | | | 730 | | | | 6,659 | | | | 1,072 | | | | — | | | | 21,997 | | | | | | | | | |
Acquired with deteriorated credit quality | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 321 | | | | — | | | | — | | | | 321 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total ending allowance balance | | $ | 3,007 | | | $ | 5,615 | | | $ | 3,408 | | | $ | 261 | | | $ | 1,245 | | | $ | 730 | | | $ | 7,289 | | | $ | 1,072 | | | $ | — | | | $ | 22,627 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 4,507 | | | $ | 3,148 | | | $ | 1,651 | | | $ | 6 | | | $ | — | | | $ | — | | | $ | 26,413 | | | $ | 211 | | | $ | — | | | $ | 35,936 | | | | | | | | | |
Collectively evaluated for impairment | | | 362,604 | | | | 518,020 | | | | 232,528 | | | | 25,258 | | | | 30,761 | | | | 57,754 | | | | 902,317 | | | | 131,978 | | | | — | | | | 2,261,220 | | | | | | | | | |
Acquired with deteriorated credit quality | | | 1,429 | | | | 14,576 | | | | — | | | | 3,420 | | | | — | | | | — | | | | 284,083 | | | | 1,549 | | | | — | | | | 305,057 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total ending loan balances | | $ | 368,540 | | | $ | 535,744 | | | $ | 234,179 | | | $ | 28,684 | | | $ | 30,761 | | | $ | 57,754 | | | $ | 1,212,813 | | | $ | 133,738 | | | $ | — | | | $ | 2,602,213 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The following table presents the activity and balance in the allowance for loan and lease losses and the recorded investment, excluding accrued interest, in loans and leases by portfolio segment and is based on the impairment method as of or for the three and six months ended June 30, 2013: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial | | | Commercial | | | Multi- | | | SBA | | | Construction | | | Lease | | | Single | | | Other | | | Unallocated | | | Total | | | | | | | | | |
and | Real Estate | family | Financing | Family | Consumer | | | | | | | | |
Industrial | | | | Residential | | | | | | | | | |
| | | | Mortgage | | | | | | | | | |
| | (In thousands) | | | | | | | | | |
Allowance for loan and lease losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at March 31, 2013 | | $ | 481 | | | $ | 3,698 | | | $ | 1,544 | | | $ | 133 | | | $ | 294 | | | $ | 263 | | | $ | 9,212 | | | $ | 197 | | | $ | 193 | | | $ | 16,015 | | | | | | | | | |
Charge-offs | | | — | | | | (260 | ) | | | (169 | ) | | | (262 | ) | | | — | | | | — | | | | (329 | ) | | | (7 | ) | | | — | | | | (1,027 | ) | | | | | | | | |
Recoveries | | | — | | | | 19 | | | | — | | | | 42 | | | | — | | | | 4 | | | | 1 | | | | 7 | | | | — | | | | 73 | | | | | | | | | |
Provision | | | 335 | | | | 1,051 | | | | 74 | | | | 266 | | | | 209 | | | | (23 | ) | | | (133 | ) | | | 28 | | | | 111 | | | | 1,918 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at June 30, 2013 | | $ | 816 | | | $ | 4,508 | | | $ | 1,449 | | | $ | 179 | | | $ | 503 | | | $ | 244 | | | $ | 8,751 | | | $ | 225 | | | $ | 304 | | | $ | 16,979 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2012 | | $ | 263 | | | $ | 3,178 | | | $ | 1,478 | | | $ | 118 | | | $ | 21 | | | $ | 261 | | | $ | 8,855 | | | $ | 274 | | | $ | — | | | $ | 14,448 | | | | | | | | | |
Charge-offs | | | — | | | | (360 | ) | | | (553 | ) | | | (392 | ) | | | — | | | | (23 | ) | | | (590 | ) | | | (14 | ) | | | — | | | | (1,932 | ) | | | | | | | | |
Recoveries | | | — | | | | 19 | | | | 88 | | | | 166 | | | | — | | | | 6 | | | | 91 | | | | 7 | | | | — | | | | 377 | | | | | | | | | |
Provision | | | 553 | | | | 1,671 | | | | 436 | | | | 287 | | | | 482 | | | | — | | | | 395 | | | | (42 | ) | | | 304 | | | | 4,086 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at June 30, 2013 | | $ | 816 | | | $ | 4,508 | | | $ | 1,449 | | | $ | 179 | | | $ | 503 | | | $ | 244 | | | $ | 8,751 | | | $ | 225 | | | $ | 304 | | | $ | 16,979 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | — | | | $ | — | | | $ | 280 | | | $ | — | | | $ | — | | | $ | — | | | $ | 256 | | | $ | 35 | | | $ | — | | | $ | 571 | | | | | | | | | |
Collectively evaluated for impairment | | | 816 | | | | 4,508 | | | | 1,169 | | | | 179 | | | | 503 | | | | 244 | | | | 8,183 | | | | 190 | | | | 304 | | | | 16,096 | | | | | | | | | |
Acquired with deteriorated credit quality | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 312 | | | | — | | | | — | | | | 312 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total ending allowance balance | | $ | 816 | | | $ | 4,508 | | | $ | 1,449 | | | $ | 179 | | | $ | 503 | | | $ | 244 | | | $ | 8,751 | | | $ | 225 | | | $ | 304 | | | $ | 16,979 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | — | | | $ | 725 | | | $ | 2,048 | | | $ | 13 | | | $ | — | | | $ | — | | | $ | 11,248 | | | $ | 1,055 | | | $ | — | | | $ | 15,089 | | | | | | | | | |
Collectively evaluated for impairment | | | 90,716 | | | | 309,561 | | | | 119,281 | | | | 28,398 | | | | 5,957 | | | | 18,631 | | | | 869,709 | | | | 19,046 | | | | — | | | | 1,461,299 | | | | | | | | | |
Acquired with deteriorated credit quality | | | 1,938 | | | | 15,835 | | | | 838 | | | | 5,117 | | | | — | | | | — | | | | 114,175 | | | | 55 | | | | — | | | | 137,958 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total ending loan balances | | $ | 92,654 | | | $ | 326,121 | | | $ | 122,167 | | | $ | 33,528 | | | $ | 5,957 | | | $ | 18,631 | | | $ | 995,132 | | | $ | 20,156 | | | $ | — | | | $ | 1,614,346 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The following table presents loans and leases individually evaluated for impairment by class of loans and leases as of the dates indicated. The recorded investment, excluding accrued interest, presents customer balances net of any partial charge-offs recognized on the loans and leases and net of any deferred fees and costs. |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2014 | | | December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Unpaid | | | Recorded | | | Allowance | | | Unpaid | | | Recorded | | | Allowance | | | | | | | | | | | | | | | | | | | | | | | | | |
Principal | Investment | for Loan and | Principal | Investment | for Loan and | | | | | | | | | | | | | | | | | | | | | | | | |
Balance | | Lease Losses | Balance | | Lease Losses | | | | | | | | | | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 4,617 | | | $ | 4,507 | | | $ | — | | | $ | 50 | | | $ | 33 | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | 4,286 | | | | 3,148 | | | | — | | | | 4,951 | | | | 3,868 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Multi-family | | | 1,773 | | | | 1,651 | | | | — | | | | 487 | | | | 270 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | 24 | | | | 6 | | | | — | | | | 26 | | | | 10 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 22,605 | | | | 21,785 | | | | — | | | | 10,765 | | | | 9,487 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | 213 | | | | 211 | | | | — | | | | 248 | | | | 247 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Multi-family | | | — | | | | — | | | | — | | | | 1,797 | | | | 1,702 | | | | 60 | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 4,616 | | | | 4,628 | | | | 309 | | | | 3,378 | | | | 3,327 | | | | 34 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | — | | | | — | | | | — | | | | 2 | | | | 2 | | | | 2 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 38,134 | | | $ | 35,936 | | | $ | 309 | | | $ | 21,704 | | | $ | 18,946 | | | $ | 96 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following table presents information on impaired loans and leases, disaggregated by class, for the periods indicated |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Six Months Ended | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Average | | | Interest | | | Cash Basis | | | Average | | | Interest | | | Cash Basis | | | | | | | | | | | | | | | | | | | | | | | | | |
Recorded | Income | Interest | Recorded | Income | Interest | | | | | | | | | | | | | | | | | | | | | | | | |
Investment | Recognized | Recognized | Investment | Recognized | Recognized | | | | | | | | | | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | |
June 30, 2014: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 4,315 | | | $ | 60 | | | $ | 50 | | | $ | 2,158 | | | $ | 60 | | | $ | 50 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | 3,220 | | | | 63 | | | | 60 | | | | 3,319 | | | | 112 | | | | 117 | | | | | | | | | | | | | | | | | | | | | | | | | |
Multi-family | | | 1,662 | | | | 40 | | | | 19 | | | | 1,673 | | | | 53 | | | | 32 | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | 8 | | | | — | | | | — | | | | 4 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 26,630 | | | | 191 | | | | 226 | | | | 18,450 | | | | 256 | | | | 291 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | 212 | | | | 1 | | | | 1 | | | | 213 | | | | 2 | | | | 2 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 36,047 | | | $ | 355 | | | $ | 356 | | | $ | 25,817 | | | $ | 483 | | | $ | 492 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
June 30, 2013: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | $ | 761 | | | $ | 23 | | | $ | 23 | | | $ | 1,640 | | | $ | 26 | | | $ | 26 | | | | | | | | | | | | | | | | | | | | | | | | | |
Multi-family | | | 2,212 | | | | 16 | | | | 18 | | | | 2,277 | | | | 16 | | | | 18 | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | 13 | | | | — | | | | — | | | | 7 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 11,312 | | | | 92 | | | | 93 | | | | 14,168 | | | | 198 | | | | 189 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | 635 | | | | — | | | | — | | | | 318 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 14,933 | | | $ | 131 | | | $ | 134 | | | $ | 18,410 | | | $ | 240 | | | $ | 233 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Non-accrual Loans |
The following table presents nonaccrual loans and leases, and loans past due 90 days or more and still accruing as of the dates indicated: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2014 | | | December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | NTM Loans | | | Traditional Loans | | | Total | | | NTM Loans | | | Traditional Loans | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans past due 90 days or more and still accruing | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Nonaccrual loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The Company maintains specific allowances for these loans of $0 in 2014 and $95 in 2013 | | | 17,165 | | | | 24,446 | | | | 41,611 | | | | 7,698 | | | | 23,950 | | | | 31,648 | | | | | | | | | | | | | | | | | | | | | | | | | |
The following table presents the composition of nonaccrual loans and leases as of the dates indicated: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2014 | | | December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | NTM Loans | | | Traditional Loans | | | Total | | | NTM Loans | | | Traditional Loans | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | — | | | $ | 505 | | | $ | 505 | | | $ | — | | | $ | 33 | | | $ | 33 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | — | | | | 2,332 | | | | 2,332 | | | | — | | | | 3,868 | | | | 3,868 | | | | | | | | | | | | | | | | | | | | | | | | | |
Multi-family | | | — | | | | 1,905 | | | | 1,905 | | | | — | | | | 1,972 | | | | 1,972 | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | — | | | | 183 | | | | 183 | | | | — | | | | 10 | | | | 10 | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | 317 | | | | 317 | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Lease financing | | | — | | | | 120 | | | | 120 | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 2,042 | | | | 19,034 | | | | 21,076 | | | | 2,000 | | | | 18,032 | | | | 20,032 | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - first liens | | | 14,912 | | | | — | | | | 14,912 | | | | 5,482 | | | | — | | | | 5,482 | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - second liens | | | 211 | | | | — | | | | 211 | | | | 216 | | | | — | | | | 216 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | — | | | | 50 | | | | 50 | | | | — | | | | 35 | | | | 35 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total nonaccrual loans and leases | | $ | 17,165 | | | $ | 24,446 | | | $ | 41,611 | | | $ | 7,698 | | | $ | 23,950 | | | $ | 31,648 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Past Due Loans and Leases |
The following tables present the aging of the recorded investment in past due loans and leases as of June 30, 2014, excluding accrued interest receivable (which is not considered to be material), by class of loans and leases: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 30 - 59 Days | | | 60 - 89 Days | | | Greater than | | | Total | | | Current | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | |
Past Due | Past Due | 89 Days | Past Due | | | | | | | | | | | | | | | | | | | | | | | | |
| | Past due | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | |
NTM loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | $ | 2,223 | | | $ | — | | | $ | 2,042 | | | $ | 4,265 | | | $ | 178,244 | | | $ | 182,509 | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - first liens | | | 3,946 | | | | 2,058 | | | | 437 | | | | 6,441 | | | | 127,545 | | | | 133,986 | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - second liens | | | 505 | | | | — | | | | — | | | | 505 | | | | 4,457 | | | | 4,962 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | — | | | | — | | | | — | | | | — | | | | 113 | | | | 113 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total NTM loans | | | 6,674 | | | | 2,058 | | | | 2,479 | | | | 11,211 | | | | 310,359 | | | | 321,570 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Traditional loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 7,212 | | | | — | | | | 256 | | | | 7,468 | | | | 359,643 | | | | 367,111 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | 181 | | | | 70 | | | | — | | | | 251 | | | | 520,917 | | | | 521,168 | | | | | | | | | | | | | | | | | | | | | | | | | |
Multi-family | | | — | | | | 149 | | | | — | | | | 149 | | | | 234,030 | | | | 234,179 | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | 51 | | | | — | | | | 176 | | | | 227 | | | | 25,037 | | | | 25,264 | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | — | | | | 317 | | | | 317 | | | | 30,444 | | | | 30,761 | | | | | | | | | | | | | | | | | | | | | | | | | |
Lease financing | | | 125 | | | | — | | | | 120 | | | | 245 | | | | 57,509 | | | | 57,754 | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 20,762 | | | | 7,571 | | | | 13,574 | | | | 41,907 | | | | 570,328 | | | | 612,235 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | 36 | | | | 5 | | | | 3 | | | | 44 | | | | 127,070 | | | | 127,114 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total traditional loans | | | 28,367 | | | | 7,795 | | | | 14,446 | | | | 50,608 | | | | 1,924,978 | | | | 1,975,586 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased Credit Impaired (PCI) loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | — | | | | — | | | | — | | | | — | | | | 1,429 | | | | 1,429 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | — | | | | — | | | | 904 | | | | 904 | | | | 13,672 | | | | 14,576 | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | 662 | | | | — | | | | 42 | | | | 704 | | | | 2,716 | | | | 3,420 | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 20,024 | | | | 4,423 | | | | 11,452 | | | | 35,899 | | | | 248,184 | | | | 284,083 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | — | | | | — | | | | — | | | | — | | | | 1,549 | | | | 1,549 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total PCI loans | | | 20,686 | | | | 4,423 | | | | 12,398 | | | | 37,507 | | | | 267,550 | | | | 305,057 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 55,727 | | | $ | 14,276 | | | $ | 29,323 | | | $ | 99,326 | | | $ | 2,502,887 | | | $ | 2,602,213 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The following tables presents the aging of the recorded investment in past due loans and leases as of December 31, 2013, excluding accrued interest receivable (which is not considered to be material), by class of loans and leases: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 30 - 59 Days | | | 60 - 89 Days | | | Greater than | | | Total | | | Current | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | |
Past Due | Past Due | 89 Days | Past Due | | | | | | | | | | | | | | | | | | | | | | | | |
| | Past due | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | |
NTM loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | $ | 1,003 | | | $ | 1,854 | | | $ | 769 | | | $ | 3,626 | | | $ | 152,864 | | | $ | 156,490 | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - first liens | | | 653 | | | | — | | | | 437 | | | | 1,090 | | | | 146,615 | | | | 147,705 | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - second liens | | | — | | | | — | | | | — | | | | — | | | | 5,289 | | | | 5,289 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | — | | | | — | | | | — | | | | — | | | | 113 | | | | 113 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total NTM loans | | | 1,656 | | | | 1,854 | | | | 1,206 | | | | 4,716 | | | | 304,881 | | | | 309,597 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Traditional loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 52 | | | | 235 | | | | — | | | | 287 | | | | 283,456 | | | | 283,743 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | 5,554 | | | | 194 | | | | — | | | | 5,748 | | | | 509,121 | | | | 514,869 | | | | | | | | | | | | | | | | | | | | | | | | | |
Multi-family | | | 602 | | | | — | | | | — | | | | 602 | | | | 140,978 | | | | 141,580 | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | 14 | | | | 48 | | | | — | | | | 62 | | | | 23,678 | | | | 23,740 | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | — | | | | — | | | | — | | | | — | | | | 24,933 | | | | 24,933 | | | | | | | | | | | | | | | | | | | | | | | | | |
Lease financing | | | 271 | | | | 92 | | | | 19 | | | | 382 | | | | 31,567 | | | | 31,949 | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 20,684 | | | | 6,124 | | | | 12,181 | | | | 38,989 | | | | 628,537 | | | | 667,526 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | 209 | | | | 110 | | | | 35 | | | | 354 | | | | 108,534 | | | | 108,888 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total traditional loans | | | 27,386 | | | | 6,803 | | | | 12,235 | | | | 46,424 | | | | 1,750,804 | | | | 1,797,228 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
PCI loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | — | | | | — | | | | — | | | | — | | | | 4,028 | | | | 4,028 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | — | | | | — | | | | — | | | | — | | | | 15,014 | | | | 15,014 | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | 45 | | | | 1 | | | | 106 | | | | 152 | | | | 3,536 | | | | 3,688 | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 21,888 | | | | 8,580 | | | | 12,099 | | | | 42,567 | | | | 272,253 | | | | 314,820 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | — | | | | — | | | | — | | | | — | | | | 1,736 | | | | 1,736 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total PCI loans | | | 21,933 | | | | 8,581 | | | | 12,205 | | | | 42,719 | | | | 296,567 | | | | 339,286 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 50,975 | | | $ | 17,238 | | | $ | 25,646 | | | $ | 93,859 | | | $ | 2,352,252 | | | $ | 2,446,111 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Troubled Debt Restructurings |
Troubled Debt Restructurings (TDRs) of loans are defined by ASC 310-40, “Troubled Debt Restructurings by Creditors” and ASC 470-60, “Troubled Debt Restructurings by Debtors” and evaluated for impairment in accordance with ASC 310-10-35. The concessions may be granted in various forms, including reduction in the stated interest rate, reduction in the amount of principal amortization, forgiveness of a portion of a loan balance or accrued interest, or extension of the maturity date. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy. |
|
For the three and six months ended June 30, 2014, there were no modifications. The following table summarizes the pre-modification and post-modification balances of new TDRs for the three and six months ended June 30, 2013: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Six Months Ended | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of | | | Pre- | | | Post-Modification | | | Number of | | | Pre-Modification | | | Post-Modification | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans | Modification | Outstanding | Loans | Outstanding | Outstanding | | | | | | | | | | | | | | | | | | | | | | | | |
| Outstanding | Recorded | | Recorded | Recorded | | | | | | | | | | | | | | | | | | | | | | | | |
| Recorded | Investment | | Investment | Investment | | | | | | | | | | | | | | | | | | | | | | | | |
| Investment | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | ($ in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | |
June 30, 2013: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 0 | | | $ | — | | | $ | — | | | | 1 | | | $ | 367 | | | $ | 360 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 0 | | | $ | — | | | $ | — | | | | 1 | | | $ | 367 | | | $ | 360 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
During the six months ended June 30, 2013, there was one modification through extension of maturity. |
The following table presents loans and leases that were modified as TDRs during the past 12 months that had payment defaults during the period indicated: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Six Months Ended | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Number of | | | Recorded | | | Number of | | | Recorded | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans | Investment | Loans | Investment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
June 30, 2013: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 1 | | | $ | 360 | | | | 1 | | | $ | 360 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 1 | | | $ | 360 | | | | 1 | | | $ | 360 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Troubled debt restructured loans and leases consist of the following as of the dates indicated: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2014 | | | December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | NTM Loans | | | Traditional | | | Total | | | NTM Loans | | | Traditional | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans | Loans | | | | | | | | | | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | $ | — | | | $ | 168 | | | $ | 168 | | | $ | — | | | $ | 194 | | | $ | 194 | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | — | | | | 6 | | | | 6 | | | | — | | | | 10 | | | | 10 | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | — | | | | 3,101 | | | | 3,101 | | | | — | | | | 3,605 | | | | 3,605 | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - first liens | | | 3,457 | | | | — | | | | 3,457 | | | | 3,468 | | | | — | | | | 3,468 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 3,457 | | | $ | 3,275 | | | $ | 6,732 | | | $ | 3,468 | | | $ | 3,809 | | | $ | 7,277 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
TDRs were $6.7 million and $7.3 million at June 30, 2014 and December 31, 2013, respectively. The Company did not have any commitments to lend to customers with outstanding loans or leases that were classified as troubled debt restructurings as of June 30, 2014 and December 31, 2013. |
|
Credit Quality Indicators |
The Company categorizes loans and leases into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company performs historical loss analysis that is combined with a comprehensive loan or lease to value analysis to analyze the associated risks in the current loan and lease portfolio. The Company analyzes loans and leases individually by classifying the loans and leases as to credit risk. This analysis includes all loans and leases delinquent over 60 days and non-homogenous loans and leases such as commercial and commercial real estate loans and leases. Classification of problem single family residential loans is performed on a monthly basis while analysis of non-homogenous loans and leases is performed on a quarterly basis. The Company uses the following definitions for risk ratings: |
Pass: Loans and leases classified as pass are in compliance in all respects with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weakness as defined under “Special Mention”, “Substandard” or “Doubtful/Loss”. |
Special Mention: Loans and leases classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease or of the Company’s credit position at some future date. |
Substandard: Loans and leases classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans and leases so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. |
Doubtful/Loss: Loans and leases classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. |
Not-Rated: When accrual of income on a pool of purchased credit impaired (PCI) loans with common risk characteristics is appropriate in accordance with ASC 310-30, individual loans in those pools are not risk-rated. The credit criteria evaluated are FICO scores, loan-to-value, delinquency, and actual cash flows versus expected cash flows of the loan pools. |
Loans and leases not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans and leases. |
|
The following table presents the risk categories for loans and leases as of June 30, 2014: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Pass | | | Special | | | Substandard | | | Doubtful | | | Not-Rate | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | |
Mention | | | | | | | | | | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | |
NTM loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | $ | 178,449 | | | $ | 2,018 | | | $ | 2,042 | | | $ | — | | | $ | — | | | $ | 182,509 | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - first liens | | | 112,846 | | | | 5,183 | | | | 15,957 | | | | — | | | | — | | | | 133,986 | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - second liens | | | 4,751 | | | | — | | | | 211 | | | | — | | | | — | | | | 4,962 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | 113 | | | | — | | | | — | | | | — | | | | — | | | | 113 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total NTM loans | | | 296,159 | | | | 7,201 | | | | 18,210 | | | | — | | | | — | | | | 321,570 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Traditional loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 359,397 | | | | 2,951 | | | | 4,763 | | | | — | | | | — | | | | 367,111 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | 515,707 | | | | 2,243 | | | | 3,218 | | | | — | | | | — | | | | 521,168 | | | | | | | | | | | | | | | | | | | | | | | | | |
Multi-family | | | 231,031 | | | | 1,243 | | | | 1,905 | | | | — | | | | — | | | | 234,179 | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | 25,069 | | | | — | | | | 195 | | | | — | | | | — | | | | 25,264 | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | 30,444 | | | | — | | | | 317 | | | | — | | | | — | | | | 30,761 | | | | | | | | | | | | | | | | | | | | | | | | | |
Lease financing | | | 57,634 | | | | — | | | | 120 | | | | — | | | | — | | | | 57,754 | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 575,206 | | | | 9,045 | | | | 27,984 | | | | — | | | | — | | | | 612,235 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | 126,979 | | | | 103 | | | | 32 | | | | — | | | | — | | | | 127,114 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total traditional loans | | | 1,921,467 | | | | 15,585 | | | | 38,534 | | | | — | | | | — | | | | 1,975,586 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
PCI loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | — | | | | 127 | | | | 1,302 | | | | — | | | | — | | | | 1,429 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | 9,126 | | | | — | | | | 5,450 | | | | — | | | | — | | | | 14,576 | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | 714 | | | | 594 | | | | 2,112 | | | | — | | | | — | | | | 3,420 | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | — | | | | — | | | | 267 | | | | — | | | | 283,816 | | | | 284,083 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | — | | | | — | | | | 1,549 | | | | — | | | | — | | | | 1,549 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total PCI loans | | | 9,840 | | | | 721 | | | | 10,680 | | | | — | | | | 283,816 | | | | 305,057 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 2,227,466 | | | $ | 23,507 | | | $ | 67,424 | | | $ | — | | | $ | 283,816 | | | $ | 2,602,213 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
PCI loan pools are not risk rated. |
|
The following table presents the risk categories for loans and leases as of December 31, 2013: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Pass | | | Special | | | Substandard | | | Doubtful | | | Not-Rate | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | |
Mention | | | | | | | | | | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | |
NTM loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | $ | 151,728 | | | $ | 2,321 | | | $ | 2,441 | | | $ | — | | | $ | — | | | $ | 156,490 | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - first liens | | | 129,679 | | | | 11,470 | | | | 6,556 | | | | — | | | | — | | | | 147,705 | | | | | | | | | | | | | | | | | | | | | | | | | |
Green Loans (HELOC) - second liens | | | 5,073 | | | | — | | | | 216 | | | | — | | | | — | | | | 5,289 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | 113 | | | | — | | | | — | | | | — | | | | — | | | | 113 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total NTM loans | | | 286,593 | | | | 13,791 | | | | 9,213 | | | | — | | | | — | | | | 309,597 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Traditional loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 280,527 | | | | 1 | | | | 3,215 | | | | — | | | | — | | | | 283,743 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | 510,117 | | | | — | | | | 4,752 | | | | — | | | | — | | | | 514,869 | | | | | | | | | | | | | | | | | | | | | | | | | |
Multi-family | | | 139,608 | | | | — | | | | 1,972 | | | | — | | | | — | | | | 141,580 | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | 23,714 | | | | — | | | | 26 | | | | — | | | | — | | | | 23,740 | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | | 24,933 | | | | — | | | | — | | | | — | | | | — | | | | 24,933 | | | | | | | | | | | | | | | | | | | | | | | | | |
Lease financing | | | 31,949 | | | | — | | | | — | | | | — | | | | — | | | | 31,949 | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 640,701 | | | | 6,350 | | | | 20,475 | | | | — | | | | — | | | | 667,526 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | 108,745 | | | | 108 | | | | 33 | | | | 2 | | | | — | | | | 108,888 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total traditional loans | | | 1,760,294 | | | | 6,459 | | | | 30,473 | | | | 2 | | | | — | | | | 1,797,228 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
PCI loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | — | | | | 969 | | | | 3,059 | | | | — | | | | — | | | | 4,028 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | 10,148 | | | | — | | | | 4,866 | | | | — | | | | — | | | | 15,014 | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | 844 | | | | 605 | | | | 2,239 | | | | — | | | | — | | | | 3,688 | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | — | | | | — | | | | 287 | | | | — | | | | 314,533 | | | | 314,820 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | — | | | | — | | | | 1,736 | | | | — | | | | — | | | | 1,736 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total PCI loans | | | 10,992 | | | | 1,574 | | | | 12,187 | | | | — | | | | 314,533 | | | | 339,286 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 2,057,879 | | | $ | 21,824 | | | $ | 51,873 | | | $ | 2 | | | $ | 314,533 | | | $ | 2,446,111 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
PCI loan pools are not risk rated. |
|
Purchased Credit Impaired Loans and Leases |
During the years ended December 31, 2013 and 2012, the Company acquired loans and leases through business acquisitions and purchases of loan pools for which there was, at acquisition, evidence of deterioration of credit quality subsequent to origination and it was probable, at acquisition, that all contractually required payments would not be collected. The following table presents the outstanding balance and carrying amount of those loans and leases, which are sometimes collectively referred to as “PCI loans” as of the dates indicated: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2014 | | | December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Outstanding | | | Carrying | | | Outstanding | | | Carrying | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance | Amount | Balance | Amount | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 2,123 | | | $ | 1,429 | | | $ | 5,838 | | | $ | 4,028 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | 17,001 | | | | 14,576 | | | | 17,682 | | | | 15,014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SBA | | | 4,573 | | | | 3,420 | | | | 4,940 | | | | 3,688 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential mortgage | | | 364,305 | | | | 284,083 | | | | 414,341 | | | | 314,820 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | 1,931 | | | | 1,549 | | | | 2,134 | | | | 1,736 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total | | $ | 389,933 | | | $ | 305,057 | | | $ | 444,935 | | | $ | 339,286 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The following table presents a summary of accretable yield, or income expected to be collected for the periods indicated: |
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| | Three Months Ended | | | Six Months Ended | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
June 30, | June 30, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | | 2013 | | | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period | | $ | 108,348 | | | $ | 123,952 | | | $ | 126,336 | | | $ | 32,207 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
New loans or leases purchased | | | — | | | | 2,465 | | | | — | | | | 95,618 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accretion of income | | | (6,615 | ) | | | (4,842 | ) | | | (13,784 | ) | | | (7,511 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Changes in expected cash flows | | | 27,595 | | | | (6,618 | ) | | | 27,726 | | | | (5,188 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Disposals | | | (2,486 | ) | | | (16,718 | ) | | | (13,436 | ) | | | (16,887 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Balance at end of period | | $ | 126,842 | | | $ | 98,239 | | | $ | 126,842 | | | $ | 98,239 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The Company did not purchase any PCI loans during the six months ended June 30, 2014. The Company sold a portion of PCI loans with unpaid principal balances and carrying values of $2.5 million and $1.5 million, respectively, during the three months ended June 30, 2014 and $30.7 million and $17.8 million, respectively, during the six months ended June 30, 2014. |
The Company completed a bulk loan acquisition with unpaid principal balances and fair values of $49.5 million and $42.4 million, respectively, for the three months ended June 30, 2013, and four bulk loan acquisitions with unpaid principal balance and fair value of $501.1 million and $372.6 million, respectively, for the six months ended June 30, 2013, at the respective acquisition dates. The Company determined that certain of the loans in the bulk acquisitions reflected evidence of credit quality deterioration since origination and it was probable, at acquisition, that all contractually required payments would not be collected (PCI loans). During the three months ended June 30, 2013, the Company sold a portion of PCI loans with unpaid principal balances and carrying values of $125.0 million and $70.4 million, respectively. |