Allowance for Loan Losses | NOTE 5: ALLOWANCE FOR LOAN LOSSES The following is a roll forward of the Bank’s allowance for loan losses for the quarters ended March 31: (dollars in thousands) Beginning Provision for Charge-offs Recoveries Ending 2018: Real estate loans: Residential properties $ 9,715 $ 193 $ — $ — $ 9,908 Commercial properties 4,399 (9 ) — — 4,390 Land 395 (60 ) — — 335 Commercial and industrial loans 3,624 1,557 (88 ) — 5,093 Consumer loans 267 7 — — 274 Total $ 18,400 $ 1,688 $ (88 ) $ — $ 20,000 2017 Real estate loans: Residential properties $ 6,669 $ 1,748 $ — $ — $ 8,417 Commercial properties 2,983 339 — — 3,322 Land 233 30 — — 263 Commercial and industrial loans 5,227 (2,057 ) — 231 3,401 Consumer loans 288 9 — — 297 Total $ 15,400 $ 69 $ — $ 231 $ 15,700 The following table presents the balance in the allowance for loan losses and the recorded investment in loans by impairment method as of: (dollars in thousands) Allowance for Loan Losses Unaccreted Evaluated for Impairment Purchased Component Individually Collectively Impaired Total Other Loans March 31, 2018: Allowance for loan losses: Real estate loans: Residential properties $ — $ 9,908 $ — $ 9,908 $ 229 Commercial properties — 4,390 — 4,390 1,343 Land — 335 — 335 5 Commercial and industrial loans 1,931 3,162 — 5,093 789 Consumer loans — 274 — 274 25 Total $ 1,931 $ 18,069 $ — $ 20,000 $ 2,391 Loans: Real estate loans: Residential properties $ — $ 2,799,370 $ — $ 2,799,370 $ 26,407 Commercial properties 3,982 703,781 695 708,458 167,910 Land — 30,372 828 31,200 531 Commercial and industrial loans 9,342 326,121 1,832 337,295 54,025 Consumer loans — 29,361 — 29,361 2,686 Total $ 13,324 $ 3,889,005 $ 3,355 $ 3,905,684 $ 251,559 December 31, 2017: Allowance for loan losses: Real estate loans: Residential properties $ — $ 9,715 $ — $ 9,715 $ 248 Commercial properties — 4,399 — 4,399 1,449 Land — 395 — 395 4 Commercial and industrial loans 909 2,715 — 3,624 1,204 Consumer loans — 267 — 267 100 Total $ 909 $ 17,491 $ — $ 18,400 $ 3,005 Loans: Real estate loans: Residential properties $ — $ 2,581,245 $ — $ 2,581,245 $ 26,605 Commercial properties 4,037 691,632 1,079 696,748 168,057 Land — 36,323 837 37,160 167 Commercial and industrial loans 9,399 299,539 1,841 310,779 62,849 Consumer loans — 29,330 — 29,330 2,899 Total $ 13,436 $ 3,638,069 $ 3,757 $ 3,655,262 $ 260,577 The column labeled “Unaccreted Credit Component Other Loans” represents the amount of unaccreted credit component discount for the other loans acquired in a business combination, and the stated principal balance of the related loans. The discount is equal to 0.95% and 1.15% of the stated principal balance of these loans as of March 31, 2018 and December 31, 2017, respectively. In addition to this unaccreted credit component discount, an additional $0.4 million and $0.2 million of ALLL has been provided for these loans March 31, 2018 and December 31, 2017, respectively. The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. The Bank analyzes loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as loans secured by multifamily or commercial real estate and commercial and industrial loans. This analysis is performed on an ongoing basis as new information is obtained. The Bank uses the following definitions for risk ratings: Pass: Loans classified as pass are strong credits with no existing or known potential weaknesses deserving of management’s close attention. Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Impaired: A loan is considered impaired, when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Additionally, all loans classified as TDRs are considered impaired at the time they are restructured. Purchased credit impaired loans are not considered impaired loans for these purposes. Loans listed as pass include larger non-homogeneous loans not meeting the risk rating definitions above and smaller, homogeneous loans not assessed on an individual basis. Based on the most recent analysis performed, the risk category of loans by class of loans is as follows as of: (dollars in thousands) Pass Special Substandard Impaired Total March 31, 2018: Real estate loans: Residential properties $ 2,796,111 $ 3,259 $ — $ — $ 2,799,370 Commercial properties 693,082 5,885 5,509 3,982 708,458 Land 30,372 — 828 — 31,200 Commercial and industrial loans 325,731 160 2,062 9,342 337,295 Consumer loans 29,361 — — — 29,361 Total $ 3,874,657 $ 9,304 $ 8,399 $ 13,324 $ 3,905,684 December 31, 2017: Real estate loans: Residential properties $ 2,578,773 $ 192 $ 2,280 $ — $ 2,581,245 Commercial properties 680,449 6,326 5,936 4,037 696,748 Land 36,321 — 839 — 37,160 Commercial and industrial loans 298,408 865 2,107 9,399 310,779 Consumer loans 29,330 — — — 29,330 Total $ 3,623,281 $ 7,383 $ 11,162 $ 13,436 $ 3,655,262 Impaired loans evaluated individually and any related allowance are as follows as of: With No Allowance Recorded With an Allowance Recorded (dollars in thousands) Unpaid Principal Balance Recorded Investment Unpaid Principal Balance Recorded Investment Related Allowance March 31, 2018 : Real estate loans: Residential properties $ — $ — $ — $ — $ — Commercial properties 3,982 3,982 — — — Commercial and industrial loans 250 250 9,092 9,092 1,931 Total $ 4,232 $ 4,232 $ 9,092 $ 9,092 $ 1,931 December 31, 2017 : Real estate loans: Residential properties $ — $ — $ — $ — $ — Commercial properties 4,037 4,037 — — — Commercial and industrial loans 250 250 9,149 9,149 909 Total $ 4,287 $ 4,287 $ 9,149 $ 9,149 $ 909 The weighted average annualized average balance of the recorded investment for impaired loans, beginning from when the loan became impaired, and any interest income recorded on impaired loans after they became impaired is as follows: Three months Ended Year Ended (dollars in thousands) Average Recorded Investment Interest Income after Impairment Average Recorded Investment Interest Income after Impairment Real estate loans: Residential properties $ — $ — $ 1,323 $ 20 Commercial properties 4,021 34 2,403 50 Commercial and industrial loans 9,360 — 5,503 5 Total $ 13,381 $ 34 $ 9,229 $ 75 There was no interest income recognized on a cash basis in either 2018 or 2017 on impaired loans. |