Loans | 6 Months Ended |
Jun. 30, 2014 |
Loans | ' |
Loans | ' |
Note 6. Loans |
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The following footnote disclosure breaks out the Company’s loan portfolio in segments and classes. Segments are groupings of similar loans at a level which the Company has adopted systematic methods of documentation for determining its allowance for loan and credit losses. Classes are a disaggregation of the portfolio segments. The Company’s loan portfolio segments are: |
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Construction loans — The Company originates loans to finance construction projects including one to four family residences, multifamily residences, senior housing, and industrial projects. Residential construction loans are due upon the sale of the completed project and are generally collateralized by first liens on the real estate and have floating interest rates. Construction loans are considered to have higher risks than other loans due to the ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, and the availability of long-term financing. Economic conditions may also impact the Company’s ability to recover its investment in construction loans. Adverse economic conditions may negatively impact the real estate market which could affect the borrowers’ ability to complete and sell the project. Additionally, the fair value of the underlying collateral may fluctuate as market conditions change. As construction loans make up only a small percentage of the total loan portfolio, these loans are not further broken down into classes. |
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Real estate secured loans — We offer real estate secured loans to finance the acquisition of, or to refinance the existing mortgages on commercial properties. Real estate secured loans are further broken out into classes based on the type of loans and underlying collateral. These classes include SBA loans secured by real estate, residential real estate loans, gas station loans, carwash loans, hotel/motel loans, land loans, and loans secured by other types of properties. |
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Our commercial real estate loans are typically collateralized by first or junior deeds of trust on specific commercial properties, and, when possible, subject to corporate or individual guarantees from financially capable parties. The properties collateralizing real estate loans are principally located in the markets where our retail branches are located. Real estate loans typically bear an interest rate that floats with our base rate, the prime rate, or another established index. However, an increasing amount of new real estate secured loan originations bear fixed rather than floating interest rates due to the current competitive market environment and trends. Commercial real estate loans typically have 7-year maturities with up to 25-year amortization of principal and interest and loan-to-value ratios of 60-70% of the appraised value or purchase price, whichever is lower at origination. We usually impose a prepayment penalty on real estate secured loans, usually a period within three to five years of the date of the loan. |
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Commercial and industrial loans — We offer commercial and industrial loans to various business enterprises. These loans include business lines of credit and business term loans to finance operations, to provide working capital, or for specific purposes, such as to finance the purchase of assets, equipment, or inventory. Since a borrower’s cash flow from operations is generally the primary source of repayment, our policies provide specific guidelines regarding required debt coverage and other important financial ratios. |
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Lines of credit are extended to businesses or individuals based on the financial strength and integrity of the borrower. These lines of credit are secured primarily by business assets such as accounts receivable or inventory, and have a maturity of one year or less. Such lines of credit bear an interest rate that floats with our base rate, the prime rate, or another established index. |
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Business term loans are typically made to finance the acquisition of fixed assets, refinance short-term debts, or to finance the purchase of businesses. Business term loans generally have terms from one to seven years. They may be collateralized by the assets being acquired or other available assets and bear interest rates which either floats with our base rate, prime rate, another established index, or is fixed for the term of the loan. |
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Commercial and industrial loans are broken down further into two different classes, SBA loans and other commercial and industrial loans. |
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Consumer loans — The Company provides a broad range of consumer loans to customers, including personal lines of credit, cash secured loans, and automobile loans. Repayment of these loans is dependent on the borrowers’ ability to pay and the fair value of any underlying collateral. |
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The loans in the portfolio that we acquired from Mirae Bank were covered by FDIC loss-share agreements and are referred to herein as “covered loans.” The loss-sharing agreements in regards to losses on covered loans expired on June 30, 2014. Subsequent to June 30, 2014, the FDIC will no longer share in any losses on loans acquired from Mirae Bank. The FDIC will still continue to share in loan recoveries on covered loans until June 30, 2017. The remaining FDIC loss-share indemnification balance is expected to be collected from the FDIC in the quarter ended September 30, 2014. |
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On October 1, 2013, the Company acquired BankAsiana and its loan portfolio at fair value and on November 20, 2013 acquired Saehan Bancorp and its loan portfolio also at fair value. The following table shows the carrying amount of loans acquired through acquisitions and legacy Wilshire loans: |
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| | At June 30, 2014 | | | | | | | | | | |
| | Loans Acquired From Former: | | Legacy Wilshire | | | | | | | | | | | | |
(Dollars in Thousands) | | Mirae Bank* | | BankAsiana | | Saehan Bancorp | | Loans | | Total | | | | | | | | | | |
Construction loans | | $ | — | | $ | 3,755 | | $ | — | | $ | 40,843 | | $ | 44,598 | | | | | | | | | | |
Real estate secured loans | | 57,243 | | 109,780 | | 330,117 | | 1,993,588 | | 2,490,728 | | | | | | | | | | |
Commercial and industrial | | 3,174 | | 28,650 | | 27,239 | | 377,984 | | 437,047 | | | | | | | | | | |
Consumer loans | | 2 | | 3 | | 929 | | 12,141 | | 13,075 | | | | | | | | | | |
Gross Loans | | 60,419 | | 142,188 | | 358,285 | | 2,424,556 | | 2,985,448 | | | | | | | | | | |
Unearned Income | | — | | — | | — | | (9,346 | ) | (9,346 | ) | | | | | | | | | |
Total Loans | | 60,419 | | 142,188 | | 358,285 | | 2,415,210 | | 2,976,102 | | | | | | | | | | |
Allowance For Loan Losses | | (1,558 | ) | (377 | ) | (121 | ) | (50,613 | ) | (52,669 | ) | | | | | | | | | |
Net Loans | | $ | 58,861 | | $ | 141,811 | | $ | 358,164 | | $ | 2,364,597 | | $ | 2,923,433 | | | | | | | | | | |
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Held-for-sale loans included above | | $ | 384 | | $ | — | | $ | — | | $ | 5,823 | | $ | 6,207 | | | | | | | | | | |
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| | At December 31, 2013 | | | | | | | | | | |
| | Loans Acquired From Former: | | Legacy Wilshire | | | | | | | | | | | | |
(Dollars in Thousands) | | Mirae Bank* | | BankAsiana | | Saehan Bancorp | | Loans | | Total | | | | | | | | | | |
Construction loans | | $ | — | | $ | 5,030 | | $ | — | | $ | 35,337 | | $ | 40,367 | | | | | | | | | | |
Real estate secured loans | | 71,493 | | 117,050 | | 341,002 | | 1,837,985 | | 2,367,530 | | | | | | | | | | |
Commercial and industrial | | 6,316 | | 39,550 | | 36,356 | | 367,450 | | 449,672 | | | | | | | | | | |
Consumer loans | | 3 | | 10 | | 2,376 | | 12,305 | | 14,694 | | | | | | | | | | |
Gross Loans | | 77,812 | | 161,640 | | 379,734 | | 2,253,077 | | 2,872,263 | | | | | | | | | | |
Unearned Income | | — | | — | | — | | (7,864 | ) | (7,864 | ) | | | | | | | | | |
Total Loans | | 77,812 | | 161,640 | | 379,734 | | 2,245,213 | | 2,864,399 | | | | | | | | | | |
Allowance For Loan Losses | | (3,943 | ) | — | | — | | (49,620 | ) | (53,563 | ) | | | | | | | | | |
Net Loans | | $ | 73,869 | | $ | 161,640 | | $ | 379,734 | | $ | 2,195,593 | | $ | 2,810,836 | | | | | | | | | | |
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Held-for-sale loans included above | | $ | — | | $ | 2,052 | | $ | — | | $ | 45,505 | | $ | 47,557 | | | | | | | | | | |
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* Loans that were covered by loss-sharing agreement with the FDIC. The loss-sharing agreement in regards to sharing of losses expired on June 30, 2014. |
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In accordance with ASC 310-30 (formerly AICPA Statement of Position “SOP 03-3”, Accounting for Certain Loans or Debt Securities Acquired in a Transfer), acquired loans were divided into “ASC 310-30 loans” and “Non-ASC 310-30 loans”, at the time of acquisition. ASC 310-30 loans are acquired loans that had evidence of deterioration in credit quality and it was probable, at the time of acquisition, that the Bank would be unable to collect all contractually required payments receivable. In contrast, Non-ASC 310-30 loans are all other acquired loans that do not qualify as ASC 310-30 loans. Acquired loans are categorized into four different loan segments by loan type: construction, real estate secured, commercial and industrial, and consumer. |
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The difference between contractually required payments at the time of acquisition and the cash flows expected to be collected at the time of acquisition is referred to as the non-accretable difference which is included in the carrying amount of the loans. Subsequent declines to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or a reversal of the non-accretable difference with a positive impact to interest income. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized as interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows. |
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The following table represents the carrying balance, net of discount, of ASC 310-30 and Non-ASC 310-30 loans at June 30, 2014, December 31, 2013, and June 30, 2013. The unpaid principal balance, before discount, of ASC 310-30 loans was $12.8 million at June 30, 2014, $14.9 million at December 31, 2013, and $1.7 million at June 30, 2013. |
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(Dollars in Thousands) | | June 30, 2014 | | December 31, 2013 | | June 30, 2013 | | | | | | | | | | | | | | | | |
Non-ASC 310-30 loans | | $ | 559,021 | | $ | 616,500 | | $ | 99,235 | | | | | | | | | | | | | | | | |
ASC 310-30 loans | | 1,871 | | 2,686 | | 756 | | | | | | | | | | | | | | | | |
Total outstanding acquired loan balance | | 560,892 | | 619,186 | | 99,991 | | | | | | | | | | | | | | | | |
Allowance related to acquired loans | | (2,056 | ) | (3,943 | ) | (4,227 | ) | | | | | | | | | | | | | | | |
Carrying amount, net of allowance | | $ | 558,836 | | $ | 615,243 | | $ | 95,764 | | | | | | | | | | | | | | | | |
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The following table represents by loan segment the current balance of ASC 310-30 loans acquired for which it was probable at the time of acquisition that all of the contractually required payments would not be collected for the periods indicated: |
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(Dollars in Thousands) | | June 30, 2014 | | December 31, 2013 | | June 30, 2013 | | | | | | | | | | | | | | | | |
Breakdown of ASC 310-30 loans | | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | 1,787 | | $ | 2,254 | | $ | 644 | | | | | | | | | | | | | | | | |
Commercial & Industrial | | 84 | | 432 | | 112 | | | | | | | | | | | | | | | | |
Total ASC 310-30 loans | | $ | 1,871 | | $ | 2,686 | | $ | 756 | | | | | | | | | | | | | | | | |
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Loans acquired in connection with the acquisitions of Mirae Bank, BankAsiana, and Saehan Bancorp were discounted based on their estimated cash flows to be received on the acquisition dates. For the three and six months ended June 30, 2014 and June 30, 2013, changes to the total discount on acquired loans is shown in the following table: |
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| | Three Months Ended | | Six Months Ended | | | | | | | | | | | | | |
(Dollars in Thousands) | | June 30, 2014 | | June 30, 2013 | | June 30, 2014 | | June 30, 2013 | | | | | | | | | | | | | |
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Balance at beginning of period | | $ | 30,865 | | $ | 3,146 | | $ | 34,201 | | $ | 3,448 | | | | | | | | | | | | | |
Discount accretion income recognized | | (2,677 | ) | (178 | ) | (5,493 | ) | (406 | ) | | | | | | | | | | | | |
Disposals related to charge-offs | | (306 | ) | (149 | ) | (826 | ) | (223 | ) | | | | | | | | | | | | |
Balance at end of period | | $ | 27,882 | | $ | 2,819 | | $ | 27,882 | | $ | 2,819 | | | | | | | | | | | | | |
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The following table is a breakdown of changes to the accretable portion of the discount related to acquired loans for the three and six months ended June 30, 2014 and June 30, 2013: |
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| | Three Months Ended | | Six Months Ended | | | | | | | | | | | | | |
(Dollars in Thousands) | | June 30, 2014 | | June 30, 2013 | | June 30, 2014 | | June 30, 2013 | | | | | | | | | | | | | |
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Balance at beginning of period | | $ | 28,374 | | $ | 2,973 | | $ | 31,450 | | $ | 3,275 | | | | | | | | | | | | | |
Discount accretion income recognized | | (2,619 | ) | (178 | ) | (5,410 | ) | (406 | ) | | | | | | | | | | | | |
Disposals related to charge-offs | | (145 | ) | (149 | ) | (430 | ) | (223 | ) | | | | | | | | | | | | |
Balance at end of period | | $ | 25,610 | | $ | 2,646 | | $ | 25,610 | | $ | 2,646 | | | | | | | | | | | | | |
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The table below summarizes for the periods indicated, changes to the allowance for loan losses and allowance for loan commitments arising from loans charged-off, recoveries on loans previously charged-off, provision for losses on loans and loan commitments, and certain ratios related to the allowance for loan losses: |
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Allowance for Losses on Loans and Loan Commitments |
(Dollars in Thousands) |
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| | Three Months Ended, | | Six Months Ended, | | | | | | | | | | | | | |
| | June 30, 2014 | | June 30, 2013 | | June 30, 2014 | | June 30, 2013 | | | | | | | | | | | | | |
Balances: | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | |
Balances at beginning of period | | $ | 53,464 | | $ | 58,577 | | $ | 53,563 | | $ | 63,285 | | | | | | | | | | | | | |
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Charge-offs: * | | | | | | | | | | | | | | | | | | | | | |
Real estate secured | | 782 | | 3,668 | | 1,454 | | 8,073 | | | | | | | | | | | | | |
Commercial and industrial | | 1,021 | | 746 | | 1,985 | | 1,929 | | | | | | | | | | | | | |
Consumer | | — | | — | | 1 | | 1 | | | | | | | | | | | | | |
Total charge-offs | | 1,803 | | 4,414 | | 3,440 | | 10,003 | | | | | | | | | | | | | |
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Recoveries on loans previously charged off: | | | | | | | | | | | | | | | | | | | | | |
Construction | | — | | — | | — | | — | | | | | | | | | | | | | |
Real estate secured | | 586 | | 340 | | 1,614 | | 555 | | | | | | | | | | | | | |
Commercial and industrial | | 408 | | 433 | | 918 | | 1,091 | | | | | | | | | | | | | |
Consumer | | 14 | | 1 | | 14 | | 9 | | | | | | | | | | | | | |
Total recoveries | | 1,008 | | 774 | | 2,546 | | 1,655 | | | | | | | | | | | | | |
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Net loan charge-offs | | 795 | | 3,640 | | 894 | | 8,348 | | | | | | | | | | | | | |
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Provision for losses on loans | | — | | — | | — | | — | | | | | | | | | | | | | |
Balances at end of period | | $ | 52,669 | | $ | 54,937 | | $ | 52,669 | | $ | 54,937 | | | | | | | | | | | | | |
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Allowance for loan commitments: | | | | | | | | | | | | | | | | | | | | | |
Balances at beginning of period | | $ | 1,061 | | $ | 1,023 | | $ | 1,061 | | $ | 1,023 | | | | | | | | | | | | | |
Provision for losses on loan commitments | | — | | — | | — | | — | | | | | | | | | | | | | |
Balance at end of period | | $ | 1,061 | | $ | 1,023 | | $ | 1,061 | | $ | 1,023 | | | | | | | | | | | | | |
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Ratios: | | | | | | | | | | | | | | | | | | | | | |
Net loan charge-offs to average total loans (annualized) | | 0.11 | % | 0.67 | % | 0.06 | % | 0.78 | % | | | | | | | | | | | | |
Allowance for loan losses to gross loans at end of period (excluding loans held-for-sale) | | 1.77 | % | 2.62 | % | 1.77 | % | 2.62 | % | | | | | | | | | | | | |
Net loan charge-offs to allowance for loan losses at end of period | | 1.51 | % | 6.63 | % | 1.7 | % | 15.2 | % | | | | | | | | | | | | |
Net loan charge-offs to provision for loan losses and loan commitments | | 0 | % | 0 | % | 0 | % | 0 | % | | | | | | | | | | | | |
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* Charge-off amount for the three months ended June 30, 2014 includes net charge-offs of covered loans amounting to $1.8 million which represents gross covered loan charge-offs of $1.3 million plus $530,000 in the reversal of FDIC receivable portions. |
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* Charge-off amount for the six months ended June 30, 2014 includes net charge-offs of covered loans amounting to $3.4 million, which represents gross covered loan charge-offs of $3.6 million less net FDIC receivable portions totaling $238,000. |
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The table below summarizes for the end of the periods indicated, the balance of our allowance for loan losses by loan type and the percentage of allowance for loan losses to gross loans receivable balance by loan segment: |
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Distribution and Percentage Composition of Allowance for Loan Losses |
(Dollars in Thousands) |
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| | June 30, 2014 | | December 31, 2013 | | | | | | | | | |
| | Reserve | | Loans | | (%) | | Reserve | | Loans | | (%) | | | | | | | | | |
Receivable | Receivable | | | | | | | | |
Construction | | $ | 707 | | $ | 44,598 | | 1.59 | % | $ | 814 | | $ | 40,367 | | 2.02 | % | | | | | | | | |
Real estate secured | | 38,795 | | 2,485,875 | | 1.56 | % | 41,401 | | 2,332,121 | | 1.78 | % | | | | | | | | |
Commercial and industrial | | 13,038 | | 435,693 | | 2.99 | % | 11,238 | | 437,524 | | 2.57 | % | | | | | | | | |
Consumer | | 129 | | 13,075 | | 0.99 | % | 110 | | 14,694 | | 0.75 | % | | | | | | | | |
Total Gross Loans Receivable * | | $ | 52,669 | | $ | 2,979,241 | | 1.77 | % | $ | 53,563 | | $ | 2,824,706 | | 1.9 | % | | | | | | | | |
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* Held-for-sale loans of $6.2 million and $47.6 million at June 30, 2014 and December 31, 2013, respectively, were excluded from the total. |
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The following tables show the allowance for loan losses roll-forward and breakdown by loan segment for the three months ended June 30, 2014, and June 30, 2013: |
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| | June 30, 2014 | | | | | | | | | | |
(Dollars in Thousands) | | Construction | | Real Estate | | Commercial & | | Consumer | | Total | | | | | | | | | | |
Secured | Industrial | | | | | | | | | |
Balance at beginning of quarter | | $ | 791 | | $ | 39,164 | | $ | 13,353 | | $ | 156 | | $ | 53,464 | | | | | | | | | | |
Total charge-offs | | — | | (782 | ) | (1,021 | ) | — | | (1,803 | ) | | | | | | | | | |
Total recoveries | | — | | 586 | | 408 | | 14 | | 1,008 | | | | | | | | | | |
(Credit) provision for losses on loans | | (84 | ) | (173 | ) | 298 | | (41 | ) | — | | | | | | | | | | |
Balance at end of quarter | | $ | 707 | | $ | 38,795 | | $ | 13,038 | | $ | 129 | | $ | 52,669 | | | | | | | | | | |
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| | June 30, 2013 | | | | | | | | | | |
(Dollars in Thousands) | | Construction | | Real Estate | | Commercial & | | Consumer | | Total | | | | | | | | | | |
Secured | Industrial | | | | | | | | | |
Balance at beginning of quarter | | $ | 694 | | $ | 44,298 | | $ | 13,464 | | $ | 121 | | $ | 58,577 | | | | | | | | | | |
Total charge-offs | | — | | (3,668 | ) | (746 | ) | — | | (4,414 | ) | | | | | | | | | |
Total recoveries | | — | | 340 | | 433 | | 1 | | 774 | | | | | | | | | | |
(Credit) provision for losses on loans | | (88 | ) | 688 | | (614 | ) | 14 | | — | | | | | | | | | | |
Balance at end of quarter | | $ | 606 | | $ | 41,658 | | $ | 12,537 | | $ | 136 | | $ | 54,937 | | | | | | | | | | |
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The following tables show the allowance for loan losses roll-forward and breakdown by loan segment for the six months ended June 30, 2014, and June 30, 2013: |
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| | June 30, 2014 | | | | | | | | | | |
(Dollars in Thousands) | | Construction | | Real Estate | | Commercial & | | Consumer | | Total | | | | | | | | | | |
Secured | Industrial | | | | | | | | | |
Balance at beginning of period | | $ | 814 | | $ | 41,401 | | $ | 11,238 | | $ | 110 | | $ | 53,563 | | | | | | | | | | |
Total charge-offs | | — | | (1,454 | ) | (1,985 | ) | (1 | ) | (3,440 | ) | | | | | | | | | |
Total recoveries | | — | | 1,614 | | 918 | | 14 | | 2,546 | | | | | | | | | | |
(Credit) provision for losses on loans | | (107 | ) | (2,766 | ) | 2,867 | | 6 | | — | | | | | | | | | | |
Balance at end of period | | $ | 707 | | $ | 38,795 | | $ | 13,038 | | $ | 129 | | $ | 52,669 | | | | | | | | | | |
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| | June 30, 2013 | | | | | | | | | | |
(Dollars in Thousands) | | Construction | | Real Estate | | Commercial & | | Consumer | | Total | | | | | | | | | | |
Secured | Industrial | | | | | | | | | |
Balance at beginning of period | | $ | 453 | | $ | 49,956 | | $ | 12,737 | | $ | 139 | | $ | 63,285 | | | | | | | | | | |
Total charge-offs | | — | | (8,073 | ) | (1,929 | ) | (1 | ) | (10,003 | ) | | | | | | | | | |
Total recoveries | | — | | 555 | | 1,091 | | 9 | | 1,655 | | | | | | | | | | |
Provision (credit) for losses on loans | | 153 | | (780 | ) | 638 | | (11 | ) | — | | | | | | | | | | |
Balance at end of period | | $ | 606 | | $ | 41,658 | | $ | 12,537 | | $ | 136 | | $ | 54,937 | | | | | | | | | | |
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The allowance for loan losses is comprised of general valuation allowance (“GVA”) based on quantitative and qualitative analyses and specific valuation allowances (“SVA”) for impaired loans. |
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A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement or if a concession was granted to the borrower current undergoing financial difficulties. At June 30, 2014, the outstanding balance of impaired loans totaled $75.0 million, of which $18.1 million had specific reserves of $9.2 million. At December 31, 2013, the outstanding balance of impaired loans totaled $72.8 million, of which $17.3 million had specific reserves of $3.8 million. |
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On a quarterly basis, we utilize a classification migration model combined with individual loan impairment as starting points for determining the adequacy of our allowance for losses on loans. Our loss migration analysis tracks a certain number of quarters of individual loan loss history to determine historical losses by classification category for different loan types, except for certain loans which are analyzed as homogeneous loan pools (i.e., home mortgage loans, home equity lines of credit, overdraft loans, express business loans, and automobile loans). These calculated loss factors are then applied to outstanding non-impaired loan balances. The Company also records a reserve for loan commitments based on historical loss rates and an internally defined utilization rate of exposure for unused off-balance sheet loan commitments. |
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To establish an adequate allowance, we must be able to recognize when loans initially become a problem. A risk grade of either pass, watch, special mention, substandard, or doubtful, is assigned to every loan in the portfolio, with the exception of homogeneous loans, or loans that are evaluated together in pools of similar loans. The following is a brief description of the loan classifications or risk grades used in our allowance calculation: |
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Pass Loans — Loans that are past due less than 30 days that do not exhibit signs of credit deterioration. The financial condition of the borrower is sound as well as the status of any collateral. Loans secured by cash (principal and interest) also fall within this classification. |
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Watch Loans — Performing loans with borrowers that have experienced adverse financial trends, higher debt/equity ratio, or weak liquidity positions, but not to the degree that the loan is considered a problem. |
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Special Mention — Loans that are currently protected but exhibit an increasing degree of risk based on weakening credit strength and/or repayment sources. Contingent or remedial plans to improve the Bank’s risk exposure should be documented. |
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Substandard — Loans inadequately protected by the current worth and paying capacity of the borrower or pledged collateral, if any. This grade is assigned when inherent credit weakness is apparent. |
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Doubtful — Loans having all the weakness inherent in a “substandard” classification but collection or liquidation is highly questionable with the possibility of loss at some future date. |
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The total allowance for loan losses at June 30, 2014 was $52.7 million, compared to $53.6 million at December 31, 2013. Allowance coverage of gross loans receivable (gross loans excluding loans held-for-sale) at the end of the second quarter of 2014 was 1.77%, compared to 1.90% at the end of the fourth quarter of 2013. Total GVA at June 30, 2014 totaled $43.5 million, or 82.6% of total allowance for loan losses, and SVA on impaired loans totaled $9.2 million, or 17.4% of the total allowance for loan losses. At December 31, 2013, the GVA portion of the allowance for loan losses totaled $49.8 million, or 92.9% of total allowance, while specific reserve on impaired loan totaled $3.8 million, or 7.1% of the total allowance for loan losses. |
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Allowance coverage ratio of construction and real estate secured loans receivable declined in the second quarter of 2014 from the fourth quarter of 2013, while commercial and industrial and consumer loan coverage ratios increased during the same period. The allowance coverage ratio for construction and real estate secured loans declined due to an increase in loan balance and a decline in allowance due to a reduction in historical loss rates. The increase in commercial and industrial loan allowance coverage ratios was largely due to one impaired loan that had an impairment of $2.2 million during the first half of 2014. Consumer loan coverage ratio increased due to an increase in historical loss rates. |
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The tables below represent the breakdown of the allowance for loan losses and gross loans receivable (gross loans excluding loans held-for-sale) balances at June 30, 2014 and December 31, 2013: |
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| | June 30, 2014 | | | | | | | | | | |
(Dollars in Thousands) | | Construction | | Real Estate | | Commercial & | | Consumer | | Gross Loans | | | | | | | | | | |
Secured | Industrial | Receivable | | | | | | | | | |
Impaired loans | | $ | — | | $ | 65,304 | | $ | 9,691 | | $ | 4 | | $ | 74,999 | | | | | | | | | | |
Specific valuation allowance | | $ | — | | $ | 3,879 | | $ | 5,288 | | $ | 4 | | $ | 9,171 | | | | | | | | | | |
Coverage ratio | | 0 | % | 5.94 | % | 54.57 | % | 100 | % | 12.23 | % | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Non-impaired loans | | $ | 44,598 | | $ | 2,420,571 | | $ | 426,002 | | $ | 13,071 | | $ | 2,904,242 | | | | | | | | | | |
General valuation allowance | | $ | 707 | | $ | 34,916 | | $ | 7,750 | | $ | 125 | | $ | 43,498 | | | | | | | | | | |
Coverage ratio | | 1.59 | % | 1.44 | % | 1.82 | % | 0.96 | % | 1.5 | % | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Gross loans receivable | | $ | 44,598 | | $ | 2,485,875 | | $ | 435,693 | | $ | 13,075 | | $ | 2,979,241 | | | | | | | | | | |
Allowance for loan losses | | $ | 707 | | $ | 38,795 | | $ | 13,038 | | $ | 129 | | $ | 52,669 | | | | | | | | | | |
Allowance coverage ratio | | 1.59 | % | 1.56 | % | 2.99 | % | 0.99 | % | 1.77 | % | | | | | | | | | |
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| | December 31, 2013 | | | | | | | | | | |
(Dollars in Thousands) | | Construction | | Real Estate | | Commercial & | | Consumer | | Gross Loans | | | | | | | | | | |
Secured | Industrial | Receivable | | | | | | | | | |
Impaired loans | | $ | 2,471 | | $ | 63,363 | | $ | 6,980 | | $ | — | | $ | 72,814 | | | | | | | | | | |
Specific valuation allowance | | $ | — | | $ | 1,857 | | $ | 1,958 | | $ | — | | $ | 3,815 | | | | | | | | | | |
Coverage ratio | | 0 | % | 2.93 | % | 28.05 | % | 0 | % | 5.24 | % | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Non-impaired loans | | $ | 37,896 | | $ | 2,268,758 | | $ | 430,544 | | $ | 14,694 | | $ | 2,751,892 | | | | | | | | | | |
General valuation allowance | | $ | 814 | | $ | 39,544 | | $ | 9,280 | | $ | 110 | | $ | 49,748 | | | | | | | | | | |
Coverage ratio | | 2.15 | % | 1.74 | % | 2.16 | % | 0.75 | % | 1.81 | % | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Gross loans receivable | | $ | 40,367 | | $ | 2,332,121 | | $ | 437,524 | | $ | 14,694 | | $ | 2,824,706 | | | | | | | | | | |
Allowance for loan losses | | $ | 814 | | $ | 41,401 | | $ | 11,238 | | $ | 110 | | $ | 53,563 | | | | | | | | | | |
Allowance coverage ratio | | 2.02 | % | 1.78 | % | 2.57 | % | 0.75 | % | 1.9 | % | | | | | | | | | |
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At June 30, 2014 and December 31, 2013, loans acquired with deteriorated credit quality (ASC 310-30 formerly SOP 03-3 loans) totaled $1.9 and $2.7 million, respectively. At June 30, 2014 loans acquired with deteriorated credit quality had an allowance of $275,000 and at December 31, 2013, there was no allowance recorded for these loans. The following is a breakdown of loan balances for loans acquired with deteriorated credit quality at June 30, 2014 and December 31, 2013: |
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| | June 30, 2014 | | | | | | | | | | |
(Dollars in Thousands) | | Construction | | Real Estate | | Commercial & | | Consumer | | Total | | | | | | | | | | |
Secured | Industrial | | | | | | | | | |
Balance of Loans Acquired With Deteriorated Credit Quality | | $ | — | | $ | 1,787 | | $ | 84 | | $ | — | | $ | 1,871 | | | | | | | | | | |
Total Allowance for Loans Acquired With Deteriorated Credit Quality | | $ | — | | $ | 225 | | $ | 50 | | $ | — | | $ | 275 | | | | | | | | | | |
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| | December 31, 2013 | | | | | | | | | | |
(Dollars in Thousands) | | Construction | | Real Estate | | Commercial & | | Consumer | | Total | | | | | | | | | | |
Secured | Industrial | | | | | | | | | |
Balance of Loans Acquired With Deteriorated Credit Quality | | $ | — | | $ | 2,254 | | $ | 432 | | $ | — | | $ | 2,686 | | | | | | | | | | |
Total Allowance for Loans Acquired With Deteriorated Credit Quality | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | | | | | | | | | |
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Impaired loan net principal balances are broken down by those with and without specific reserves as shown in the following table for June 30, 2014 and December 31, 2013: |
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| | For Three Months Ended | | | | | | | | | | | | | | | | | | | |
(Dollars in Thousands) | | June 30, 2014 | | December 31, 2013 | | | | | | | | | | | | | | | | | | | |
With Specific Reserves | | | | | | | | | | | | | | | | | | | | | | | |
Without Charge-Offs | | $ | 15,616 | | $ | 17,265 | | | | | | | | | | | | | | | | | | | |
With Charge-Offs | | 2,449 | | 8 | | | | | | | | | | | | | | | | | | | |
Without Specific Reserves | | | | | | | | | | | | | | | | | | | | | | | |
Without Charge-Off | | 41,992 | | 36,781 | | | | | | | | | | | | | | | | | | | |
With Charge-Offs | | 14,942 | | 18,760 | | | | | | | | | | | | | | | | | | | |
Total Impaired Loans* | | 74,999 | | 72,814 | | | | | | | | | | | | | | | | | | | |
Allowance on Impaired Loans | | (9,171 | ) | (3,815 | ) | | | | | | | | | | | | | | | | | | |
Impaired Loans Net of Allowance | | $ | 65,828 | | $ | 68,999 | | | | | | | | | | | | | | | | | | | |
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* Balances net of SBA guaranteed portions and discount on acquired loans totaled $71.9 million and $65.9 million at June 30, 2014 and December 31, 2013, respectively. |
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Net principal balance and average quarterly balances for impaired loans with specific reserves, and those without specific reserves, at June 30, 2014 and December 31, 2013 are presented in the following tables by loan class: |
|
| | June 30, 2014 | | June 30, 2013 | |
| | | | | | 3 Months | | 6 Months | | | | | | 3 Months | | 6 Months | |
| | | | | | Ended | | Ended | | | | | | Ended | | Ended | |
| | | | Related | | Average | | Average | | | | Related | | Average | | Average | |
(Dollars In Thousands) | | Balance | | Allowance | | Balance | | Balance | | Balance | | Allowance | | Balance | | Balance | |
With Specific Reserves: | | | | | | | | | | | | | | | | | |
Construction | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
Real Estate Secured: | | | | | | | | | | | | | | | | | |
Residential Real Estate | | 451 | | 6 | | 475 | | 475 | | 484 | | 168 | | 486 | | 487 | |
SBA Real Estate | | 1,557 | | 500 | | 1,666 | | 1,691 | | 3,475 | | 269 | | 1,681 | | 1,760 | |
Gas Station | | 243 | | 7 | | 245 | | 247 | | 2,099 | | 354 | | 2,502 | | 2,502 | |
Carwash | | — | | — | | — | | — | | — | | — | | — | | — | |
Hotel/Motel | | — | | — | | — | | — | | 1,250 | | 385 | | 1,461 | | 1,461 | |
Land | | — | | — | | — | | — | | 600 | | 257 | | 612 | | 619 | |
Other | | 9,950 | | 3,366 | | 10,060 | | 10,075 | | 2,656 | | 758 | | 2,792 | | 2,797 | |
Commercial & Industrial: | | | | | | | | | | | | | | | | | |
SBA Commercial | | 992 | | 840 | | 1,107 | | 1,171 | | 1,054 | | 777 | | 1,207 | | 1,277 | |
Commercial | | 4,868 | | 4,448 | | 5,117 | | 5,284 | | 5,767 | | 2,829 | | 6,291 | | 6,387 | |
Consumer | | 4 | | 4 | | 5 | | 7 | | — | | — | | — | | — | |
Total With Related Allowance | | 18,065 | | 9,171 | | 18,675 | | 18,950 | | 17,385 | | 5,797 | | 17,032 | | 17,290 | |
| | | | | | | | | | | | | | | | | |
Without Specific Reserves: | | | | | | | | | | | | | | | | | |
Construction | | — | | — | | — | | — | | 6,388 | | — | | 6,388 | | 6,388 | |
Real Estate Secured: | | | | | | | | | | | | | | | | | |
Residential Real Estate | | 805 | | — | | 888 | | 930 | | 1,441 | | — | | 1,805 | | 1,805 | |
SBA Real Estate | | 6,171 | | — | | 7,843 | | 7,984 | | 9,447 | | — | | 4,259 | | 4,559 | |
Gas Station | | 6,383 | | — | | 6,868 | | 6,885 | | 3,527 | | — | | 5,945 | | 5,956 | |
Carwash | | 4,990 | | — | | 5,117 | | 5,127 | | 3,055 | | — | | 3,698 | | 3,704 | |
Hotel/Motel | | 5,004 | | — | | 4,890 | | 5,112 | | 3,410 | | — | | 5,550 | | 5,561 | |
Land | | 262 | | — | | 263 | | 264 | | 1,119 | | — | | 1,121 | | 1,122 | |
Other | | 29,488 | | — | | 30,938 | | 31,260 | | 16,484 | | — | | 19,484 | | 19,002 | |
Commercial & Industrial: | | | | | | | | | | | | | | | | | |
SBA Commercial | | 438 | | — | | 505 | | 598 | | 162 | | — | | 58 | | 59 | |
Commercial | | 3,393 | | — | | 3,490 | | 3,648 | | 624 | | — | | 630 | | 654 | |
Consumer | | — | | — | | — | | — | | — | | — | | — | | — | |
Total Without Related Allowance | | 56,934 | | — | | 60,802 | | 61,808 | | 45,657 | | — | | 48,938 | | 48,810 | |
Total Impaired Loans | | $ | 74,999 | | $ | 9,171 | | $ | 79,477 | | $ | 80,758 | | $ | 63,042 | | $ | 5,797 | | $ | 65,970 | | 66,100 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
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Income recognized from payments received for impaired loans is recorded on a cash basis and not accrued. The cash basis income recognized from impaired loans for the quarters ended June 30, 2014, December 31, 2013, and June 30, 2013 totaled $623,000, $411,000, and $451,000, respectively. For the six months ended June 30, 2014 and June 30, 2013, the total cash basis income recognized from impaired loans was $1.1 million and $784,000, respectively. |
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Delinquent loans, including non-accrual loans 30 days or more past due, at June 30, 2014 and December 31, 2013 are presented in the following table by loan class: |
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| | June 30, 2014 | | December 31, 2013 | |
(Dollars In Thousands) | | 30-59 | | 60-89 | | 90 Days | | Total | | 30-59 | | 60-89 | | 90 Days | | Total | |
(Balances are net of SBA guaranteed portions) | Days | Days | or More | Past Due* | Days | Days | or More | Past Due* |
| Past Due | Past Due | Past Due | | Past Due | Past Due | Past Due | |
Legacy Wilshire: | | | | | | | | | | | | | | | | | |
Construction | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 2,471 | | $ | 2,471 | |
Real Estate Secured: | | | | | | | | | | | | | | | | | |
Residential Real Estate | | 133 | | 231 | | 628 | | 992 | | — | | 179 | | 617 | | 796 | |
SBA Real Estate | | 416 | | 622 | | 233 | | 1,271 | | 394 | | 437 | | 597 | | 1,428 | |
Gas Station | | — | | — | | — | | — | | 176 | | — | | 849 | | 1,025 | |
Carwash | | — | | — | | 770 | | 770 | | — | | — | | 769 | | 769 | |
Hotel/Motel | | 1,038 | | 1,658 | | 1,262 | | 3,958 | | — | | 810 | | 1,962 | | 2,772 | |
Other | | 402 | | 959 | | 12,619 | | 13,980 | | 945 | | 4,221 | | 9,536 | | 14,702 | |
Commercial & Industrial: | | | | | | | | | | | | | | | | | |
SBA Commercial | | 73 | | 62 | | 184 | | 319 | | 458 | | 16 | | — | | 474 | |
Commercial | | 1,572 | | 265 | | 230 | | 2,067 | | 41 | | — | | 39 | | 80 | |
Consumer | | — | | — | | — | | — | | — | | 41 | | — | | 41 | |
Total Legacy Loans | | 3,634 | | 3,797 | | 15,926 | | 23,357 | | 2,014 | | 5,704 | | 16,840 | | 24,558 | |
Acquired Loans: | | | | | | | | | | | | | | | | | |
Construction | | — | | — | | — | | — | | — | | — | | — | | — | |
Real Estate Secured: | | | | | | | | | | | | | | | | | |
Residential Real Estate | | — | | — | | — | | — | | 147 | | — | | — | | 147 | |
SBA Real Estate | | 260 | | 591 | | 271 | | 1,122 | | 225 | | — | | 528 | | 753 | |
Gas Station | | — | | — | | 716 | | 716 | | — | | — | | — | | — | |
Carwash | | — | | — | | — | | — | | — | | — | | 168 | | 168 | |
Hotel/Motel | | — | | — | | — | | — | | — | | — | | — | | — | |
Other | | 1,410 | | 874 | | 2,364 | | 4,648 | | 1,656 | | 388 | | 853 | | 2,897 | |
Commercial & Industrial: | | | | | | | | | | | | | | | | | |
SBA Commercial | | 108 | | — | | — | | 108 | | 287 | | 267 | | 17 | | 571 | |
Commercial | | 406 | | 179 | | 1,103 | | 1,688 | | 344 | | 143 | | 178 | | 665 | |
Consumer | | — | | — | | — | | — | | 10 | | — | | — | | 10 | |
Total Acquired Loans | | 2,184 | | 1,644 | | 4,454 | | 8,282 | | 2,669 | | 798 | | 1,744 | | 5,211 | |
Total Delinquencies | | $ | 5,818 | | $ | 5,441 | | $ | 20,380 | | $ | 31,639 | | $ | 4,683 | | $ | 6,502 | | $ | 18,584 | | $ | 29,769 | |
| | | | | | | | | | | | | | | | | |
Non-Accrual and 30 Days or More Past Due: | | | | | | | | | | | | | | | | | |
Legacy Loans | | $ | 626 | | $ | 818 | | $ | 15,924 | | $ | 17,368 | | $ | 615 | | $ | 3,572 | | $ | 16,841 | | $ | 21,028 | |
Acquired Loans | | 636 | | 1,633 | | 4,454 | | 6,723 | | 1,222 | | 403 | | 1,576 | | 3,201 | |
Non-Accrual Loans Listed Above | | $ | 1,262 | | $ | 2,451 | | $ | 20,378 | | $ | 24,091 | | $ | 1,837 | | $ | 3,975 | | $ | 18,417 | | $ | 24,229 | |
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* Total past due balances are net of SBA guaranteed portions totaling $9.4 million and $12.6 million at June 30, 2014 and December 31, 2013, respectively. |
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Non-performing loans consisting of non-accrual loans and loans past due 90 days or more and still accruing at June 30, 2014 and December 31, 2013 are presented in the following table by loan class: |
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| | June 30, 2014 | | December 31, 2013 | | | | | | | |
| | | | 90 Days | | Total | | | | 90 Days | | Total | | | | | | | |
| | Total | | or More | | Non- | | Total | | or More | | Non- | | | | | | | |
(Dollars In Thousands) | | Non-Accrual | | Past Due and | | Performing | | Non-Accrual | | Past Due and | | Performing | | | | | | | |
(Balances are net of SBA guaranteed portions) | | Loans | | Still Accruing | | Loans* | | Loans | | Still Accruing | | Loans* | | | | | | | |
Legacy Wilshire: | | | | | | | | | | | | | | | | | | | |
Construction | | $ | — | | $ | — | | $ | — | | $ | 2,471 | | $ | — | | $ | 2,471 | | | | | | | |
Real Estate Secured: | | | | | | | | | | | | | | | | | | | |
Residential Real Estate | | 1,202 | | — | | 1,202 | | 1,050 | | — | | 1,050 | | | | | | | |
SBA Real Estate | | 964 | | — | | 964 | | 958 | | — | | 958 | | | | | | | |
Gas Station | | 139 | | — | | 139 | | 1,026 | | — | | 1,026 | | | | | | | |
Carwash | | 770 | | — | | 770 | | 770 | | — | | 770 | | | | | | | |
Hotel/Motel | | 1,410 | | — | | 1,410 | | 2,117 | | — | | 2,117 | | | | | | | |
Land | | — | | — | | — | | — | | — | | — | | | | | | | |
Other | | 18,885 | | — | | 18,885 | | 19,518 | | — | | 19,518 | | | | | | | |
Commercial & Industrial: | | | | | | | | | | | | | | | | | | | |
SBA Commercial | | 340 | | — | | 340 | | 137 | | — | | 137 | | | | | | | |
Other Commercial | | 4,958 | | — | | 4,958 | | 580 | | — | | 580 | | | | | | | |
Consumer | | — | | — | | — | | — | | — | | — | | | | | | | |
Total Legacy Loans | | 28,668 | | — | | 28,668 | | 28,627 | | — | | 28,627 | | | | | | | |
Acquired Loans: | | | | | | | | | | | | | | | | | | | |
Construction | | — | | — | | — | | — | | — | | — | | | | | | | |
Real Estate Secured: | | | | | | | | | | | | | | | | | | | |
Residential Real Estate | | 134 | | — | | 134 | | 215 | | — | | 215 | | | | | | | |
SBA Real Estate | | 1,408 | | — | | 1,408 | | 811 | | — | | 811 | | | | | | | |
Gas Station | | 2,941 | | — | | 2,941 | | 2,264 | | — | | 2,264 | | | | | | | |
Carwash | | — | | — | | — | | — | | 168 | | 168 | | | | | | | |
Hotel/Motel | | 741 | | — | | 741 | | 760 | | — | | 760 | | | | | | | |
Land | | — | | — | | — | | — | | — | | — | | | | | | | |
Other | | 6,991 | | — | | 6,991 | | 3,912 | | — | | 3,912 | | | | | | | |
Commercial & Industrial: | | | | | | | | | | | | | | | | | | | |
SBA Commercial | | 30 | | — | | 30 | | 69 | | — | | 69 | | | | | | | |
Other Commercial | | 1,441 | | — | | 1,441 | | 410 | | — | | 410 | | | | | | | |
Consumer | | 4 | | — | | 4 | | — | | — | | — | | | | | | | |
Total Acquired Loans | | 13,690 | | — | | 13,690 | | 8,441 | | 168 | | 8,609 | | | | | | | |
Total | | $ | 42,358 | | $ | — | | $ | 42,358 | | $ | 37,068 | | $ | 168 | | $ | 37,236 | | | | | | | |
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* Balances are net of SBA guaranteed portions totaling $9.1 million and $12.4 million at June 30, 2014 and December 31, 2013, respectively. |
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No interest income related to non-accrual loans was included in interest income for the three and six months ended June 30, 2014 and June 30, 2013. Additional income of approximately $264,000 and $683,000 would have been recorded during the three months and six months ended June 30, 2014, respectively, had these loans been paid in accordance with their original terms throughout the period indicated. Additional income of approximately $254,000 and $453,000 would have been recorded during the three months and six months ended June 30, 2013, respectively, had these loans been paid in accordance with their original terms throughout the period indicated. |
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Loans classified as special mention, substandard, and doubtful at June 30, 2014 and December 31, 2013 are presented in the following table by classes of loans: |
|
| | June 30, 2014 | | December 31, 2013 | |
(Dollars In Thousands) | | Special | | Sub- | | Doubtful | | Total* | | Special | | Sub- | | Doubtful | | Total* | |
(Balances are net of SBA guaranteed portions) | Mention | standard | Mention | standard |
Legacy Loans: | | | | | | | | | | | | | | | | | |
Construction | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 2,471 | | $ | — | | $ | 2,471 | |
Real Estate Secured: | | | | | | | | | | | | | | | | | |
Residential Real Estate | | — | | 2,633 | | 603 | | 3,236 | | — | | 2,342 | | 166 | | 2,508 | |
SBA Real Estate | | 2,694 | | 5,083 | | 217 | | 7,994 | | 4,314 | | 5,100 | | 510 | | 9,924 | |
Gas Station | | 1,142 | | 5,992 | | — | | 7,134 | | 1,158 | | 6,115 | | 849 | | 8,122 | |
Carwash | | 813 | | 10,305 | | 769 | | 11,887 | | — | | 10,437 | | 770 | | 11,207 | |
Hotel/Motel | | 794 | | 3,649 | | 1,410 | | 5,853 | | 2,508 | | 4,571 | | 155 | | 7,234 | |
Land | | 262 | | — | | — | | 262 | | 266 | | 662 | | — | | 928 | |
Other | | 17,613 | | 34,139 | | 13,449 | | 65,201 | | 33,886 | | 53,089 | | 4,179 | | 91,154 | |
Commercial & Industrial: | | | | | | | | | | | | | | | | | |
SBA Commercial | | 1,335 | | 1,744 | | — | | 3,079 | | 1,364 | | 1,774 | | — | | 3,138 | |
Other Commercial | | 23,590 | | 9,290 | | — | | 32,880 | | 16,128 | | 19,349 | | 39 | | 35,516 | |
Consumer | | — | | 2 | | — | | 2 | | — | | 2 | | — | | 2 | |
Total Legacy Loans | | 48,243 | | 72,837 | | 16,448 | | 137,528 | | 59,624 | | 105,912 | | 6,668 | | 172,204 | |
Acquired Loans: | | | | | | | | | | | | | | | | | |
Construction | | — | | — | | — | | — | | — | | — | | — | | — | |
Real Estate Secured: | | | | | | | | | | | | | | | | | |
Residential Real Estate | | — | | 134 | | — | | 134 | | — | | 1,228 | | — | | 1,228 | |
SBA Real Estate | | 2,767 | | 4,490 | | 206 | | 7,463 | | 3,587 | | 2,894 | | 274 | | 6,755 | |
Gas Station | | 2,405 | | 3,994 | | — | | 6,399 | | 2,434 | | 3,867 | | — | | 6,301 | |
Carwash | | 11,672 | | 1,421 | | — | | 13,093 | | 12,256 | | 1,435 | | — | | 13,691 | |
Hotel/Motel | | 1,673 | | 7,150 | | 741 | | 9,564 | | 2,432 | | 7,443 | | 760 | | 10,635 | |
Land | | — | | — | | — | | — | | — | | — | | — | | — | |
Other | | 18,906 | | 13,052 | | 645 | | 32,603 | | 15,912 | | 12,968 | | 297 | | 29,177 | |
Commercial & Industrial: | | | | | | | | | | | | | | | | | |
SBA Commercial | | 1,050 | | 828 | | — | | 1,878 | | 950 | | 1,609 | | 16 | | 2,575 | |
Other Commercial | | 1,528 | | 6,552 | | — | | 8,080 | | 3,448 | | 12,123 | | — | | 15,571 | |
Consumer | | 138 | | 4 | | — | | 142 | | 155 | | — | | — | | 155 | |
Total Acquired Loans | | 40,139 | | 37,625 | | 1,592 | | 79,356 | | 41,174 | | 43,567 | | 1,347 | | 86,088 | |
Total Loans | | $ | 88,382 | | $ | 110,462 | | $ | 18,040 | | $ | 216,884 | | $ | 100,798 | | $ | 149,479 | | $ | 8,015 | | $ | 258,292 | |
|
* Balances are net of SBA guaranteed portions totaling $11.1 million and $16.4 million at June 30, 2014 and December 31, 2013, respectively. |
|
A loan restructuring constitutes a troubled debt restructuring (“TDR”) if the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms of the loan. Loans that are reported as TDRs are accounted for in accordance with ASC 310-10-35 and are considered impaired and measured for specific impairment. |
|
Loans that are considered TDRs are classified as performing, unless they are on non-accrual status or greater than 90 days delinquent as of the end of the most recent quarter. All TDR loans are considered impaired by the Company regardless of whether it is performing or non-performing. At June 30, 2014, the balance of non-accrual TDR loans totaled $10.2 million, and TDR loans performing in accordance with their modified terms totaled $28.7 million. At December 31, 2013, the balance of non-accrual TDR loans totaled $8.2 million, and TDR loans performing in accordance with their modified terms totaled $28.0 million. New TDR loans did not have a material impact on the Company’s allowance for loan losses for the three and six months ended June 30, 2014 or December 31, 2013. |
|
The following tables present the total balance of TDR loans by loan type and types of concessions made at June 30, 2014 and December 31, 2013: |
|
| | June 30, 2014 | | | | | | | | | | | | | |
(Dollars In Thousands, Net of SBA Guarantee) | | Balance | | Term/Maturity | | Interest Rate | | Total* | | | | | | | | | | | | | |
Real Estate Secured | | $ | 14,520 | | $ | 8,939 | | $ | 9,890 | | $ | 33,349 | | | | | | | | | | | | | |
Commercial & Industrial | | 1,778 | | 1,563 | | 2,201 | | 5,542 | | | | | | | | | | | | | |
Total TDR Loans | | $ | 16,298 | | $ | 10,502 | | $ | 12,091 | | $ | 38,891 | | | | | | | | | | | | | |
|
| | December 31, 2013 | | | | | | | | | | | | | |
(Dollars In Thousands, Net of SBA Guarantee) | | Balance | | Term/Maturity | | Interest Rate | | Total* | | | | | | | | | | | | | |
Real Estate Secured | | $ | 15,640 | | $ | 8,708 | | $ | 5,660 | | $ | 30,008 | | | | | | | | | | | | | |
Commercial & Industrial | | 2,212 | | 1,645 | | 2,355 | | 6,212 | | | | | | | | | | | | | |
Total TDR Loans | | $ | 17,852 | | $ | 10,353 | | $ | 8,015 | | $ | 36,220 | | | | | | | | | | | | | |
|
* SBA guaranteed portions totaled $829,000 and $2.8 million at June 30, 2014 and December 31, 2013, respectively. |
|
The following table represents the roll-forward of TDR loans with addition and reductions for the quarters ended June 30, 2014, December 31, 2013, and June 30, 2013: |
|
(Dollars in Thousands, Net of SBA Guarantee) | | June 30, 2014 | | December 31, 2013 | | June 30, 2013 | | | | | | | | | | | | | | | | |
Balance at Beginning of Period | | $ | 40,128 | | $ | 29,472 | | $ | 30,867 | | | | | | | | | | | | | | | | |
New TDR Loans Added | | 836 | | 8,212 | | 2,434 | | | | | | | | | | | | | | | | |
TDR Loans Paid Off | | (1,550 | ) | (463 | ) | (1,864 | ) | | | | | | | | | | | | | | | |
Reductions Due to Charge-Offs | | (65 | ) | (412 | ) | (164 | ) | | | | | | | | | | | | | | | |
Other Changes (Payments, Amortization, and Other) | | (458 | ) | (589 | ) | (872 | ) | | | | | | | | | | | | | | | |
Balance at End of Period | | $ | 38,891 | | $ | 36,220 | | $ | 30,401 | | | | | | | | | | | | | | | | |
|
The following table represents the roll-forward of TDR loans with addition and reductions for the six months ended June 30, 2014 and June 30, 2013: |
|
(Dollars in Thousands, Net of SBA Guarantee) | | June 30, 2014 | | June 30, 2013 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Balance at Beginning of Period | | $ | 36,220 | | $ | 35,733 | | | | | | | | | | | | | | | | | | | |
New TDR Loans Added | | 5,810 | | 3,151 | | | | | | | | | | | | | | | | | | | |
TDR Loans Paid Off | | (1,550 | ) | (3,880 | ) | | | | | | | | | | | | | | | | | | |
Reductions Due to Charge-Offs | | (503 | ) | (3,366 | ) | | | | | | | | | | | | | | | | | | |
Other Changes (Payments, Amortization, and Other) | | (1,086 | ) | (1,237 | ) | | | | | | | | | | | | | | | | | | |
Balance at End of Period | | $ | 38,891 | | $ | 30,401 | | | | | | | | | | | | | | | | | | | |
|
The following tables summarize the pre-modification and post-modification balances and types of concessions provided for new TDR loans for the quarters ended June 30, 2014, December 31, 2013, and June 30, 2013: |
|
| | June 30, 2014 | | | | | | | | | | | | | |
(Dollars in Thousands, Net of SBA Guarantee) | | Principal | | Term/Maturity | | Interest Rate | | Total | | | | | | | | | | | | | |
Pre-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | — | | $ | 467 | | $ | — | | $ | 467 | | | | | | | | | | | | | |
Commercial & Industrial | | 350 | | 24 | | — | | 374 | | | | | | | | | | | | | |
Total TDR Loans | | $ | 350 | | $ | 491 | | $ | — | | $ | 841 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Post-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | — | | $ | 463 | | $ | — | | $ | 463 | | | | | | | | | | | | | |
Commercial & Industrial | | 349 | | 24 | | — | | 373 | | | | | | | | | | | | | |
Total TDR Loans | | $ | 349 | | $ | 487 | | $ | — | | $ | 836 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Number of Loans: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | — | | 2 | | — | | 2 | | | | | | | | | | | | | |
Commercial & Industrial | | 7 | | 1 | | — | | 8 | | | | | | | | | | | | | |
Total TDR Loans | | 7 | | 3 | | — | | 10 | | | | | | | | | | | | | |
|
| | December 31, 2013 | | | | | | | | | | | | | |
(Dollars in Thousands, Net of SBA Guarantee) | | Principal | | Term/Maturity | | Interest Rate | | Total | | | | | | | | | | | | | |
Pre-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | 9,090 | | $ | 691 | | $ | — | | $ | 9,781 | | | | | | | | | | | | | |
Commercial & Industrial | | 184 | | 615 | | — | | 799 | | | | | | | | | | | | | |
Total TDR Loans | | $ | 9,274 | | $ | 1,306 | | $ | — | | $ | 10,580 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Post-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | 6,868 | | $ | 680 | | $ | — | | $ | 7,548 | | | | | | | | | | | | | |
Commercial & Industrial | | 157 | | 507 | | — | | 664 | | | | | | | | | | | | | |
Total TDR Loans | | $ | 7,025 | | $ | 1,187 | | $ | — | | $ | 8,212 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Number of Loans: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | 13 | | 1 | | — | | 14 | | | | | | | | | | | | | |
Commercial & Industrial | | 3 | | 2 | | — | | 5 | | | | | | | | | | | | | |
Total TDR Loans | | 16 | | 3 | | — | | 19 | | | | | | | | | | | | | |
|
| | June 30, 2013 | | | | | | | | | | | | | |
(Dollars in Thousands, Net of SBA Guarantee) | | Principal | | Term/Maturity | | Interest Rate | | Total | | | | | | | | | | | | | |
Pre-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | — | | $ | 2,406 | | $ | — | | $ | 2,406 | | | | | | | | | | | | | |
Commercial & Industrial | | — | | 60 | | — | | 60 | | | | | | | | | | | | | |
Total TDR Loans | | $ | — | | $ | 2,466 | | $ | — | | $ | 2,466 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Post-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | — | | $ | 2,378 | | $ | — | | $ | 2,378 | | | | | | | | | | | | | |
Commercial & Industrial | | — | | 56 | | — | | 56 | | | | | | | | | | | | | |
Total TDR Loans | | $ | — | | $ | 2,434 | | $ | — | | $ | 2,434 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Number of Loans: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | — | | 6 | | — | | 6 | | | | | | | | | | | | | |
Commercial & Industrial | | — | | 2 | | — | | 2 | | | | | | | | | | | | | |
Total TDR Loans | | — | | 8 | | — | | 8 | | | | | | | | | | | | | |
|
The following tables summarize the pre-modification and post-modification balances, and types of concessions provided for new TDR loans during the six months ended June 30, 2014, and June 30, 2013: |
|
| | June 30, 2014 | | | | | | | | | | | | | |
(Dollars in Thousands, Net of SBA Guarantee) | | Principal | | Term/Maturity | | Interest Rate | | Total | | | | | | | | | | | | | |
Pre-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | — | | $ | 1,003 | | $ | 4,335 | | $ | 5,338 | | | | | | | | | | | | | |
Commercial & Industrial | | 391 | | 129 | | — | | 520 | | | | | | | | | | | | | |
Total TDR Loans | | $ | 391 | | $ | 1,132 | | $ | 4,335 | | $ | 5,858 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Post-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | — | | $ | 977 | | $ | 4,323 | | $ | 5,300 | | | | | | | | | | | | | |
Commercial & Industrial | | 391 | | 119 | | — | | 510 | | | | | | | | | | | | | |
Total TDR Loans | | $ | 391 | | $ | 1,096 | | $ | 4,323 | | $ | 5,810 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Number of Loans: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | — | | 4 | | 1 | | 5 | | | | | | | | | | | | | |
Commercial & Industrial | | 10 | | 4 | | — | | 14 | | | | | | | | | | | | | |
Total TDR Loans | | 10 | | 8 | | 1 | | 19 | | | | | | | | | | | | | |
|
| | June 30, 2013 | | | | | | | | | | | | | |
(Dollars in Thousands, Net of SBA Guarantee) | | Principal | | Term/Maturity | | Interest Rate | | Total | | | | | | | | | | | | | |
Pre-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | 267 | | $ | 2,760 | | $ | — | | $ | 3,027 | | | | | | | | | | | | | |
Commercial & Industrial | | 28 | | 160 | | — | | 188 | | | | | | | | | | | | | |
Total TDR Loans | | $ | 295 | | $ | 2,920 | | $ | — | | $ | 3,215 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Post-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | 265 | | $ | 2,730 | | $ | — | | $ | 2,995 | | | | | | | | | | | | | |
Commercial & Industrial | | — | | 156 | | — | | 156 | | | | | | | | | | | | | |
Total TDR Loans | | $ | 265 | | $ | 2,886 | | $ | — | | $ | 3,151 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Number of Loans: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | 1 | | 7 | | — | | 8 | | | | | | | | | | | | | |
Commercial & Industrial | | 2 | | 4 | | — | | 6 | | | | | | | | | | | | | |
Total TDR Loans | | 3 | | 11 | | — | | 14 | | | | | | | | | | | | | |
|
At June 30, 2014, December 31, 2013, and June 30, 2013, all TDR loans were modified with principal or payment, term or maturity, or interest rate concessions. Principal concessions usually consist of loans restructured to reduce the monthly payment through a reduction in principal, interest, or a combination of principal and interest payments for a certain period of time. Most of these types of concessions are usually interest only payments for three to six months. Term or maturity concessions are loans that are restructured to extend the maturity date beyond the original contractual term of loan. Interest rate concessions consist of TDR loans that are restructured with a lower interest rate than the original contractual rate and the reduced rate is lower than the current market interest rate for loans with similar risk characteristics. |
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The following tables summarize TDR loans that were modified during the twelve months ended June 30, 2014, December 31, 2013, and June 30, 2013 that had payment defaults during period indicated. We consider a TDR loan to be in payment default if the loan has been transferred to non-accrual status. This usually means the loan is past due 90 days or more, but in certain cases a loan that is less than 90 days past due can be deemed a non-accrual loan, if there exists evidence that the borrower will not be able to fulfill a portion or all of the obligated contractual payments. Defaulted TDR loans did not have material impact to the allowance for loan losses for the three months ended June 30, 2014, December 31, 2013, and June 30, 2013. |
|
| | TDRs With Payment Defaults During the | | | | | | | | | | | | | |
Three Months Ended June 30, 2014 | | | | | | | | | | | | |
(Dollars in Thousands, Net of SBA Guarantee) | | Principal | | Term/Maturity | | Interest Rate | | Total | | | | | | | | | | | | | |
Pre-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | — | | $ | 520 | | $ | — | | $ | 520 | | | | | | | | | | | | | |
Commercial & Industrial | | — | | — | | — | | — | | | | | | | | | | | | | |
Total TDRs Defaulted | | $ | — | | $ | 520 | | $ | — | | $ | 520 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Post-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | — | | $ | 498 | | $ | — | | $ | 498 | | | | | | | | | | | | | |
Commercial & Industrial | | — | | — | | — | | — | | | | | | | | | | | | | |
Total TDRs Defaulted | | $ | — | | $ | 498 | | $ | — | | $ | 498 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Number of Loans: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | — | | 1 | | — | | 1 | | | | | | | | | | | | | |
Commercial & Industrial | | — | | — | | — | | — | | | | | | | | | | | | | |
Total TDRs Defaulted Loans | | — | | 1 | | — | | 1 | | | | | | | | | | | | | |
|
| | TDRs With Payment Defaults During the | | | | | | | | | | | | | |
Three Months Ended December 31, 2013 | | | | | | | | | | | | |
(Dollars in Thousands, Net of SBA Guarantee) | | Principal | | Term/Maturity | | Interest Rate | | Total | | | | | | | | | | | | | |
Pre-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | 427 | | $ | 374 | | $ | — | | $ | 801 | | | | | | | | | | | | | |
Commercial & Industrial | | 77 | | — | | — | | 77 | | | | | | | | | | | | | |
Total TDRs Defaulted | | $ | 504 | | $ | 374 | | $ | — | | $ | 878 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Post-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | 241 | | $ | 334 | | $ | — | | $ | 575 | | | | | | | | | | | | | |
Commercial & Industrial | | 55 | | — | | — | | 55 | | | | | | | | | | | | | |
Total TDRs Defaulted | | $ | 296 | | $ | 334 | | $ | — | | $ | 630 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Number of Loans: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | 1 | | 1 | | — | | 2 | | | | | | | | | | | | | |
Commercial & Industrial | | 1 | | — | | — | | 1 | | | | | | | | | | | | | |
Total TDRs Defaulted | | 2 | | 1 | | — | | 3 | | | | | | | | | | | | | |
|
| | TDRs With Payment Defaults During the | | | | | | | | | | | | | |
Three Months Ended June 30, 2013 | | | | | | | | | | | | |
(Dollars in Thousands, Net of SBA Guarantee) | | Principal | | Term/Maturity | | Interest Rate | | Total | | | | | | | | | | | | | |
Pre-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | — | | $ | 1,455 | | $ | — | | $ | 1,455 | | | | | | | | | | | | | |
Commercial & Industrial | | 92 | | 160 | | — | | 252 | | | | | | | | | | | | | |
Total TDRs Defaulted | | $ | 92 | | $ | 1,615 | | $ | — | | $ | 1,707 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Post-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | — | | $ | 1,411 | | $ | — | | $ | 1,411 | | | | | | | | | | | | | |
Commercial & Industrial | | 85 | | 139 | | — | | 224 | | | | | | | | | | | | | |
Total TDRs Defaulted | | $ | 85 | | $ | 1,550 | | $ | — | | $ | 1,635 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Number of Loans: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | — | | 3 | | — | | 3 | | | | | | | | | | | | | |
Commercial & Industrial | | 1 | | 3 | | — | | 4 | | | | | | | | | | | | | |
Total TDRs Defaulted | | 1 | | 6 | | — | | 7 | | | | | | | | | | | | | |
|
The following tables summarize TDR loans that were modified during the past 12 months that had a payment default during the six months ended June 30, 2014 and June 30, 2013 by type of concessions made: |
|
| | TDRs With Payment Defaults During the | | | | | | | | | | | | | |
Six Months Ended June 30, 2014 | | | | | | | | | | | | |
(Dollars in Thousands, Net of SBA Guarantee) | | Principal | | Term/Maturity | | Interest Rate | | Total | | | | | | | | | | | | | |
Pre-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | 417 | | $ | 520 | | $ | — | | $ | 937 | | | | | | | | | | | | | |
Commercial & Industrial | | 3 | | — | | — | | 3 | | | | | | | | | | | | | |
Total TDRs Defaulted | | $ | 420 | | $ | 520 | | $ | — | | $ | 940 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Post-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | 384 | | $ | 498 | | $ | — | | $ | 882 | | | | | | | | | | | | | |
Commercial & Industrial | | — | | — | | — | | — | | | | | | | | | | | | | |
Total TDRs Defaulted | | $ | 384 | | $ | 498 | | $ | — | | $ | 882 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Number of Loans: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | 1 | | 1 | | — | | 2 | | | | | | | | | | | | | |
Commercial & Industrial | | 1 | | — | | — | | 1 | | | | | | | | | | | | | |
Total TDRs Defaulted | | 2 | | 1 | | — | | 3 | | | | | | | | | | | | | |
|
| | TDRs With Payment Defaults During the | | | | | | | | | | | | | |
Six Months Ended June 30, 2013 | | | | | | | | | | | | |
(Dollars in Thousands, Net of SBA Guarantee) | | Principal | | Term/Maturity | | Interest Rate | | Total | | | | | | | | | | | | | |
Pre-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | — | | $ | 1,455 | | $ | — | | $ | 1,455 | | | | | | | | | | | | | |
Commercial & Industrial | | 92 | | 160 | | — | | 252 | | | | | | | | | | | | | |
Total TDRs Defaulted | | $ | 92 | | $ | 1,615 | | $ | — | | $ | 1,707 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Post-Modification Balance: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | $ | — | | $ | 1,411 | | $ | — | | $ | 1,411 | | | | | | | | | | | | | |
Commercial & Industrial | | 85 | | 139 | | — | | 224 | | | | | | | | | | | | | |
Total TDRs Defaulted | | $ | 85 | | $ | 1,550 | | $ | — | | $ | 1,635 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Number of Loans: | | | | | | | | | | | | | | | | | | | | | |
Real Estate Secured | | — | | 3 | | — | | 3 | | | | | | | | | | | | | |
Commercial & Industrial | | 1 | | 3 | | — | | 4 | | | | | | | | | | | | | |
Total TDRs Defaulted | | 1 | | 6 | | — | | 7 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |