| Loans | Note 6. Loans
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 losses on loans and loan commitments. Classes are a disaggregation of the portfolio segments. The Company’s loan portfolio segments are:
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.
Real estate secured loans — We offer real estate secured loans to finance the acquisition of, or to refinance the existing mortgages on commercial and residential properties. Real estate secured loans are further broken out into classes based on the type of loan 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 all other types of properties.
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.
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.
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.
We also provide warehouse lines of credit to mortgage loan originators. The lines of credit are used by these originators to fund mortgages which are then pledged to the Bank as collateral until the mortgage loans are sold and the lines of credit are paid down. The typical duration of these lines of credit from the time of funding to pay-down ranges from 10-30 days. Although collateralized by mortgage loans, the structure of warehouse lending agreements results in the commercial and industrial loan treatment for these types of loans.
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.
Commercial and industrial loans are broken down further into two different classes, SBA loans and other commercial and industrial loans.
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.
The following table shows the carrying amount of loans acquired in connection with the acquisitions of Mirae Bank, BankAsiana, and Saehan Bancorp, as well as legacy Wilshire loans:
At June 30, 2015
Loans Acquired From Former:
Legacy Wilshire
(Dollars in Thousands)
Mirae Bank
BankAsiana
Saehan Bancorp
Loans
Total
Construction loans
$
—
$
$
—
$
$
Real estate secured loans
Commercial and industrial
Consumer loans
—
—
Gross Loans
Deferred loans fees and unearned income
—
—
—
)
)
Total Loans
Allowance For Loan Losses
)
)
)
)
)
Net Loans
$
$
$
$
$
Held-for-sale loans included above
$
—
$
—
$
—
$
$
At December 31, 2014
Loans Acquired From Former:
Legacy Wilshire
(Dollars in Thousands)
Mirae Bank
BankAsiana
Saehan Bancorp
Loans
Total
Construction loans
$
—
$
$
—
$
$
Real estate secured loans
Commercial and industrial
Consumer loans
—
—
Gross Loans
Deferred loans fees and unearned income
—
—
—
)
)
Total Loans
Allowance For Loan Losses
)
)
)
)
)
Net Loans
$
$
$
$
$
Held-for-sale loans included above
$
—
$
—
$
—
$
$
I n 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 we would be unable to collect all contractually required payments receivable. In contrast, N on-ASC 310-30 loans are all other acquired loans that do not qualify as ASC 310-30 loans.
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 results 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.
The following table represents the carrying balances, net of discount, of ASC 310-30 and Non-ASC 310-30 loans at June 30, 2015, December 31, 2014, and June 30, 2014. The unpaid principal balance, before discount, of ASC 310-30 loans was $10.1 million at June 30, 2015, $11.1 million at December 31, 2014, and $12.8 million at June 30, 2014.
(Dollars in Thousands)
June 30, 2015
December 31, 2014
June 30, 2014
Non-ASC 310-30 loans
$
$
$
ASC 310-30 loans
Total outstanding acquired loan balance
Allowance related to acquired loans
)
)
)
Carrying amount, net of allowance
$
$
$
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:
(Dollars in Thousands)
June 30, 2015
December 31, 2014
June 30, 2014
Breakdown of ASC 310-30 loans
Real Estate Secured
$
$
$
Commercial & Industrial
—
Total ASC 310-30 loans
$
$
$
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, 2015 and June 30, 2014, changes to the total discount on acquired loans is shown in the following table:
Three Months Ended
Six Months Ended
(Dollars in Thousands)
June 30, 2015
June 30, 2014
June 30, 2015
June 30, 2014
Balance at beginning of period
$
$
$
$
Discount accretion income recognized
)
)
)
)
Disposals related to charge-offs
)
)
)
)
Balance at end of period
$
$
$
$
The following table is a breakdown of changes to the accretable portion of the discount on acquired loans for the three and six months ended June 30, 2015 and June 30, 2014:
Three Months Ended
Six Months Ended
(Dollars in Thousands)
June 30, 2015
June 30, 2014
June 30, 2015
June 30, 2014
Balance at beginning of period
$
$
$
$
Discount accretion income recognized
)
)
)
)
Disposals related to charge-offs
)
)
)
)
Balance at end of period
$
$
$
$
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:
Allowance for Losses on Loans and Loan Commitments (Dollars in Thousands)
Three Months Ended,
Six Months Ended,
June 30, 2015
June 30, 2014
June 30, 2015
June 30, 2014
Balances:
Allowance for loan losses:
Balances at beginning of period
$
$
$
$
Charge-offs:
Real estate secured
Commercial and industrial
Consumer
—
—
—
Total charge-offs
Recoveries on loans previously charged off:
Construction
—
—
—
—
Real estate secured
Commercial and industrial
Consumer
—
Total recoveries
Net loan (recoveries) charge-offs
)
)
Provision for losses on loans
—
—
—
—
Balances at end of period
$
$
$
$
Allowance for loan commitments:
Balances at beginning of period
$
$
$
$
Provision for losses on loan commitments
—
—
—
—
Balance at end of period
$
$
$
$
Ratios :
Net loan (recoveries) charge-offs to average total loans (annualized)
-0.07
%
%
-0.01
%
%
Allowance for loan losses to gross loans at end of period (excluding loans held-for-sale)
%
%
%
%
Net loan (recoveries) charge-offs to allowance for loan losses at end of period
-1.33
%
%
-0.40
%
%
Net loan (recoveries) charge-offs to provision for loan losses and loan commitments
%
%
%
%
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:
Distribution and Percentage Composition of Allowance for Loan Losses
(Dollars in Thousands)
June 30, 2015
December 31, 2014
Reserve
Loans Receivable
(%)
Reserve
Loans Receivable
(%)
Construction
$
$
%
$
$
%
Real estate secured
%
%
Commercial and industrial
%
%
Consumer
%
%
Total gross loans receivable *
$
$
%
$
$
%
* Held-for-sale loans of $25.3 million and $11.8 million at June 30, 2015 and December 31, 2014, respectively, were excluded from the total.
The following tables show the allowance for loan losses roll-forward and breakdown by loan segment for the three months ended June 30, 2015, and June 30, 2014:
June 30, 2015
(Dollars in Thousands)
Construction
Real Estate Secured
Commercial & Industrial
Consumer
Total
Balance at beginning of quarter
$
$
$
$
$
Total charge-offs
—
)
)
—
)
Total recoveries
—
—
Provision (credit) for losses on loans
)
)
)
—
Balance at end of quarter
$
$
$
$
$
June 30, 2014
(Dollars in Thousands)
Construction
Real Estate Secured
Commercial & Industrial
Consumer
Total
Balance at beginning of quarter
$
$
$
$
$
Total charge-offs
—
)
)
—
)
Total recoveries
—
Provision (credit) for losses on loans
)
)
)
—
Balance at end of quarter
$
$
$
$
$
The following tables show the allowance for loan losses roll-forward and breakdown by loan segment for the six months ended June 30, 2015, and June 30, 2014:
June 30, 2015
(Dollars in Thousands)
Construction
Real Estate Secured
Commercial & Industrial
Consumer
Total
Balance at beginning of year
$
$
$
$
$
Total charge-offs
—
)
)
—
)
Total recoveries
—
Provision (credit) for losses on loans
)
)
)
—
Balance at end of quarter
$
$
$
$
$
June 30, 2014
(Dollars in Thousands)
Construction
Real Estate Secured
Commercial & Industrial
Consumer
Total
Balance at beginning of year
$
$
$
$
$
Total charge-offs
—
)
)
)
)
Total recoveries
—
Provision (credit) for losses on loans
)
)
—
Balance at end of quarter
$
$
$
$
$
The allowance for loan losses is comprised of a general valuation allowance (“GVA”) based on quantitative and qualitative analyses of the loan portfolio and specific valuation allowances (“SVA”) for impaired loans.
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 currently undergoing financial difficulties. At June 30, 2015, the outstanding balance of impaired loans totaled $72.7 million, of which $23.4 million had specific reserves of $7.4 million. At December 31, 2014, the outstanding balance of impaired loans totaled $69.9 million, of which $21.9 million had specific reserves of $9.0 million.
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., residential mortgage loans, home equity lines of credit, overdraft loans, express business loans, and automobile loans). These calculated loss factors are then applied to the balance of non-impaired loans. 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.
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:
Pass — 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.
Watch — 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.
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.
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.
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.
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, 2015 and December 31, 2014:
June 30, 2015
(Dollars in Thousands)
Construction
Real Estate Secured
Commercial & Industrial
Consumer
Gross Loans Receivable
Impaired loans
$
—
$
$
$
—
$
Specific valuation allowance
$
—
$
$
$
—
$
Coverage ratio
%
%
%
%
%
Non-impaired loans
$
$
$
$
$
General valuation allowance
$
$
$
$
$
Coverage ratio
%
%
%
%
%
Gross loans receivable
$
$
$
$
$
Allowance for loan losses
$
$
$
$
$
Allowance coverage ratio
%
%
%
%
%
December 31, 2014
(Dollars in Thousands)
Construction
Real Estate Secured
Commercial & Industrial
Consumer
Gross Loans Receivable
Impaired loans
$
—
$
$
$
—
$
Specific valuation allowance
$
—
$
$
$
—
$
Coverage ratio
%
%
%
%
%
Non-impaired loans
$
$
$
$
$
General valuation allowance
$
$
$
$
$
Coverage ratio
%
%
%
%
%
Gross loans receivable
$
$
$
$
$
Allowance for loan losses
$
$
$
$
$
Allowance coverage ratio
%
%
%
%
%
At June 30, 2015 and December 31, 2014, loans acquired with deteriorated credit quality (ASC 310-30 formerly SOP 03-3 loans) totaled $931,000 and $1.3 million, respectively. At June 30, 2015, loans acquired with deteriorated credit quality had no related allowance, and at December 31, 2014, total allowance recorded for these loans totaled $253,000. The following is a breakdown of loan balances for loans acquired with deteriorated credit quality at June 30, 2015 and December 31, 2014:
June 30, 2015
(Dollars in Thousands)
Construction
Real Estate Secured
Commercial & Industrial
Consumer
Total
Balance of Loans Acquired With Deteriorated Credit Quality
$
—
$
$
—
$
—
$
Total Allowance for Loans Acquired With Deteriorated Credit Quality
$
—
$
—
$
—
$
—
$
—
December 31, 2014
(Dollars in Thousands)
Construction
Real Estate Secured
Commercial & Industrial
Consumer
Total
Balance of Loans Acquired With Deteriorated Credit Quality
$
—
$
$
$
—
$
Total Allowance for Loans Acquired With Deteriorated Credit Quality
$
—
$
$
$
—
$
Impaired loan net principal balances are broken down by those with specific reserves and without specific reserves, as shown in the following table for June 30, 2015 and December 31, 2014:
For Quarter Ended
(Dollars in Thousands)
June 30, 2015
December 31, 2014
With Specific Reserves
Without Charge-Offs
$
$
With Charge-Offs
—
Without Specific Reserves
Without Charge-Off
With Charge-Offs
Total Impaired Loans*
Allowance on Impaired Loans
)
)
Impaired Loans Net of Allowance
$
$
*
Balances net of SBA guaranteed portions and discount on acquired loans totaled $67.5 million and $65.6 million at June 30, 2015 and December 31, 2014, respectively.
Net principal balance and average balances for impaired loans with specific reserves, and those without specific reserves, at June 30, 2015 and December 31, 2014 are presented in the following tables by loan class:
June 30, 2015
December 31, 2014
3 Months
6 Months
12 Months
Ended
Ended
Ended
Related
Average
Average
Related
Average
(Dollars In Thousands)
Balance
Allowance
Balance
Balance
Balance
Allowance
Balance
With Specific Reserves:
Construction
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Real Estate Secured:
Residential Real Estate
—
—
—
—
SBA Real Estate
Gas Station
Carwash
—
—
—
—
—
—
—
Hotel/Motel
—
—
—
—
Land
—
—
—
—
—
—
—
Other
Commercial & Industrial:
SBA Commercial
Commercial
Consumer
—
—
—
—
—
—
—
Total With Related Allowance
Without Specific Reserves:
Construction
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Real Estate Secured:
Residential Real Estate
—
—
SBA Real Estate
—
—
Gas Station
—
—
Carwash
—
—
Hotel/Motel
—
—
Land
—
—
—
—
—
Other
—
—
Commercial & Industrial:
SBA Commercial
—
—
Commercial
—
—
Consumer
—
—
—
—
—
—
—
Total Without Related Allowance
—
—
Total Impaired Loans
$
$
$
$
$
$
$
Income recognized on payments received from 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, 2015, December 31, 2014, and June 30, 2014 totaled $628,000, $1.4 million, and $1.1 million, respectively. The cash basis income recognized from impaired loans for the six months ended June 30, 2015 and June 30, 2014 totaled $1.0 million and $1.6 million, respectively.
Delinquent loans, including non-accrual loans 30 days or more past due, at June 30, 2015 and December 31, 2014, are presented in the following table by loan class:
June 30, 2015
December 31, 2014
(Dollars In Thousands) (Balances are net of SBA guaranteed portions)
30-59 Days Past Due
60-89 Days Past Due
90 Days or More Past Due
Total Past Due*
30-59 Days Past Due
60-89 Days Past Due
90 Days or More Past Due
Total Past Due*
Legacy Wilshire :
Construction
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Real Estate Secured:
Residential Real Estate
—
SBA Real Estate
Gas Station
—
—
—
—
—
—
—
—
Carwash
—
—
—
—
Hotel/Motel
—
—
—
Other
Commercial & Industrial:
SBA Commercial
—
Commercial
Consumer
—
—
—
—
—
—
—
—
Total Legacy Loans
Acquired Loans :
Construction
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Real Estate Secured:
Residential Real Estate
—
—
—
—
SBA Real Estate
—
Gas Station
—
—
—
—
—
—
Carwash
—
—
—
—
—
—
Hotel/Motel
—
—
—
—
—
—
Other
—
Commercial & Industrial:
SBA Commercial
—
—
Commercial
—
Consumer
—
—
—
—
—
—
—
—
Total Acquired Loans
Total Past Due Loans
$
$
$
$
$
$
$
$
Non-Accrual Loans 30 Days or More Past Due:
Legacy Loans
$
$
$
$
$
$
$
$
Acquired Loans
Non-Accrual Loans Listed Above
$
$
$
$
$
$
$
$
*
Total past due balances are net of SBA guaranteed portions totaling $5.9 million and $7.7 million at June 30, 2015 and December 31, 2014, respectively.
Non-performing loans consisting of non-accrual loans and loans past due 90 days or more and still accruing at June 30, 2015 and December 31, 2014 are presented in the following table by loan class:
June 30, 2015
December 31, 2014
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
$
—
$
—
$
—
$
—
$
—
$
—
Real Estate Secured:
—
Residential Real Estate
—
—
SBA Real Estate
—
—
Gas Station
—
—
—
—
Carwash
—
—
Hotel/Motel
—
—
Land
—
—
—
—
—
—
Other
—
—
Commercial & Industrial:
SBA Commercial
—
—
Other Commercial
—
—
Consumer
—
—
—
—
—
—
Total Legacy Loans
—
—
Acquired Loans:
Construction
$
—
$
—
$
—
$
—
$
—
$
—
Real Estate Secured:
Residential Real Estate
—
—
SBA Real Estate
—
—
Gas Station
—
—
—
—
Carwash
—
—
—
—
—
—
Hotel/Motel
—
—
Land
—
—
—
—
—
—
Other
—
—
Commercial & Industrial:
SBA Commercial
—
—
Other Commercial
—
—
Consumer
—
—
—
—
—
—
Total Acquired Loans
—
—
Total
$
$
—
$
$
$
—
$
*
Balances are net of SBA guaranteed portions totaling $7.6 million and $8.5 million at June 30, 2015 and December 31, 2014, respectively.
No interest income related to non-accrual loans was included in interest income for the three and six months ended June 30, 2015 and June 30, 2014. Additional income of approximately $97,000 and $264,000 would have been recorded during the three months ended June 30, 2015 and June 30, 2014, respectively, had these loans been paid in accordance with their original terms throughout the period indicated. Additional income of approximately $208,000 and $683,000 would have been recorded during the six months ended June 30, 2015 and June 30, 2014, respectively, had these loans been paid in accordance with their original terms throughout the period indicated.
Loans classified as special mention, substandard, and doubtful at June 30, 2015 and December 31, 2014 are presented in the following table by classes of loans:
June 30, 2015
December 31, 2014
(Dollars In Thousands) (Balances are net of SBA guaranteed portions)
Special Mention
Sub- standard
Doubtful
Total*
Special Mention
Sub- standard
Doubtful
Total*
Legacy Loans :
Construction
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Real Estate Secured:
Residential Real Estate
—
—
—
SBA Real Estate
Gas Station
—
—
Carwash
Hotel/Motel
Land
—
—
—
—
—
—
Other
Commercial & Industrial:
SBA Commercial
—
—
Other Commercial
—
—
Consumer
—
—
—
—
Total Legacy Loans
Acquired Loans :
Construction
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Real Estate Secured:
Residential Real Estate
—
—
—
—
SBA Real Estate
Gas Station
—
—
Carwash
—
—
—
—
Hotel/Motel
—
—
—
—
Land
—
—
—
—
—
—
—
—
Other
Commercial & Industrial:
SBA Commercial
—
—
Other Commercial
—
Consumer
—
—
—
—
Total Acquired Loans
Total Loans
$
$
$
$
$
$
$
$
*
Balances are net of SBA guaranteed portions totaling $7.3 million and $11.2 million at June 30, 2015 and December 31, 2014, 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 equal to or greater than 90 days delinquent as of the end of the most recent quarter. All TDR loans are considered impaired regardless of whether it is performing or non-performing. At June 30, 2015, the balance of non-accrual TDR loans totaled $6.9 million, and TDR loans performing in accordance with their modified terms totaled $36.0 million. At December 31, 2014, the balance of non-accrual TDR loans totaled $9.5 million, and TDR loans performing in accordance with their modified terms totaled $27.6 million. The increase in TDR loans experienced during the six months ended June 30, 2015 was largely due to the modification one loan totaling $4.7 million. This loan which was modified during the first quarter of 2015, was given a maturity extension due to difficulties experienced by the borrower. 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, 2015 and June 30, 2014.
The following tables present the total balance of TDR loans by loan type and types of concessions made at June 30, 2015 and December 31, 2014:
June 30, 2015
(Dollars In Thousands, Net of SBA Guarantee)
Balance
Term/Maturity
Interest Rate
Total*
Real Estate Secured
$
$
$
$
Commercial & Industrial
Total TDR Loans
$
$
$
$
December 31, 2014
(Dollars In Thousands, Net of SBA Guarantee)
Balance
Term/Maturity
Interest Rate
Total*
Real Estate Secured
$
$
$
$
Commercial & Industrial
Total TDR Loans
$
$
$
$
*
SBA guaranteed portions totaled $873,000 and $1.6 million at June 30, 2015 and December 31, 2014, respectively.
The following table represents the roll-forward of TDR loans with additions and reductions for the quarters ended June 30, 2015 and June 30, 2014:
Three Months Ended
(Dollars in Thousands, Net of SBA Guarantee)
June 30, 2015
June 30, 2014
Balance at Beginning of Period
$
$
New TDR Loans Added
TDR Loans Paid Off
)
)
Reductions Due to Charge-Offs
)
)
Other Changes (Payments, Amortization, and Other)
)
)
Balance at End of Period
$
$
The following table represents the roll-forward of TDR loans with addition and reductions for the six months ended June 30, 2015 and June 30, 2014:
Six Months Ended
(Dollars in Thousands, Net of SBA Guarantee)
June 30, 2015
June 30, 2014
Balance at Beginning of Period
$
$
New TDR Loans Added
TDR Loans Paid Off
)
)
Reductions Due to Charge-Offs
)
)
Other Changes (Payments, Amortization, and Other)
)
)
Balance at End of Period
$
$
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, 2015 and June 30, 2014:
June 30, 2015
(Dollars in Thousands, Net of SBA Guarantee)
Principal
Term/Maturity
Interest Rate
Total
Pre-Modification Balance:
Real Estate Secured
$
$
$
—
$
Commercial & Industrial
—
Total TDR Loans
$
$
$
—
$
Post-Modification Balance:
Real Estate Secured
$
$
$
—
$
Commercial & Industrial
—
Total TDR Loans
$
$
$
—
$
Number of Loans:
Real Estate Secured
—
Commercial & Industrial
—
Total TDR Loans
—
June 30, 2014
(Dollars in Thousands, Net of SBA Guarantee)
Principal
Term/Maturity
Interest Rate
Total
Pre-Modification Balance:
Real Estate Secured
$
—
$
$
—
$
Commercial & Industrial
—
Total TDR Loans
$
$
$
—
$
Post-Modification Balance:
Real Estate Secured
$
—
$
$
—
$
Commercial & Industrial
—
Total TDR Loans
$
$
$
—
$
Number of Loans:
Real Estate Secured
—
—
Commercial & Industrial
—
Total TDR Loans
—
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, 2015 and June 30, 2014:
June 30, 2015
(Dollars in Thousands, Net of SBA Guarantee)
Principal
Term/Maturity
Interest Rate
Total
Pre-Modification Balance:
Real Estate Secured
$
$
$
$
Commercial & Industrial
—
Total TDR Loans
$
$
$
$
Post-Modification Balance:
Real Estate Secured
$
$
$
$
Commercial & Industrial
—
Total TDR Loans
$
$
$
$
Number of Loans:
Real Estate Secured
Commercial & Industrial
—
Total TDR Loans
June 30, 2014
(Dollars in Thousands, Net of SBA Guarantee)
Principal
Term/Maturity
Interest Rate
Total
Pre-Modification Balance:
Real Estate Secured
$
—
$
$
$
Commercial & Industrial
—
Total TDR Loans
$
$
$
$
Post-Modification Balance:
Real Estate Secured
$
—
$
$
$
Commercial & Industrial
—
Total TDR Loans
$
$
$
$
Number of Loans:
Real Estate Secured
—
Commercial & Industrial
—
Total TDR Loans
At June 30, 2015 and June 30, 2014, 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.
The following tables summarize TDR loans that were modified during the twelve months ended June 30, 2015 and June 30, 2014, and 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 considered 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 and six months ended June 30, 2015 and June 30, 2014.
TDRs With Payment Defaults During the Three Months Ended June 30, 2015
(Dollars in Thousands, Net of SBA Guarantee)
Principal
Term/Maturity
Interest Rate
Total
Pre-Modification Balance:
Real Estate Secured
$
—
$
$
—
$
Commercial & Industrial
—
—
Total TDRs Defaulted
$
—
$
$
—
$
Post-Modification Balance:
Real Estate Secured
$
—
$
$
—
$
Commercial & Industrial
—
—
Total TDRs Defaulted
$
—
$
$
—
$
Number of Loans:
Real Estate Secured
—
—
Commercial & Industrial
—
—
Total TDRs Defaulted
—
—
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
$
—
$
$
—
$
Commercial & Industrial
—
—
—
—
Total TDRs Defaulted
$
—
$
$
—
$
Post-Modification Balance:
Real Estate Secured |
