Allowance for Loan Losses | NOTE 6: ALLOWANCE FOR LOAN LOSSES The following is a roll forward of the Bank’s allowance for loan losses for the following periods: (dollars in thousands) Beginning Provision for Charge-offs Recoveries Ending Quarter Ended June Real estate loans: Residential properties $ 9,908 $ (357 ) $ — $ — $ 9,551 Commercial properties 4,390 725 (211 ) — 4,904 Land 335 166 — — 501 Commercial and industrial loans 5,093 1,971 (3,239 ) — 3,825 Consumer loans 274 (55 ) — — 219 Total $ 20,000 $ 2,450 $ (3,450 ) $ — $ 19,000 Six Months Ended June 30, 2018: Real estate loans: Residential properties $ 9,715 $ (164 ) $ — $ — $ 9,551 Commercial properties 4,399 716 (211 ) — 4,904 Land 395 106 — — 501 Commercial and industrial loans 3,624 3,528 (3,327 ) — 3,825 Consumer loans 267 (48 ) — — 219 Total $ 18,400 $ 4,138 $ (3,538 ) $ — $ 19,000 Year Ended December 31, 2017: Real estate loans: Residential properties $ 6,669 $ 3,046 $ — $ — $ 9,715 Commercial properties 2,983 1,416 — — 4,399 Land 233 162 — — 395 Commercial and industrial loans 5,227 (1,841 ) — 238 3,624 Consumer loans 288 (21 ) — — 267 Total $ 15,400 $ 2,762 $ — $ 238 $ 18,400 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 June 30, 2018: Allowance for loan losses: Real estate loans: Residential properties $ — $ 9,551 $ — $ 9,551 $ 2,624 Commercial properties 128 4,776 — 4,904 2,964 Land — 501 — 501 432 Commercial and industrial loans 786 3,039 — 3,825 1,211 Consumer loans — 219 — 219 13 Total $ 914 $ 18,086 $ — $ 19,000 $ 7,244 Loans: Real estate loans: Residential properties $ — $ 2,893,308 $ — $ 2,893,308 $ 286,135 Commercial properties 2,975 873,313 11,778 888,066 338,718 Land — 84,833 822 85,655 44,728 Commercial and industrial loans 8,151 373,342 3,909 385,402 86,432 Consumer loans — 26,164 — 26,164 3,399 Total $ 11,126 $ 4,250,960 $ 16,509 $ 4,278,595 $ 759,412 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 June 30, 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 June 30, 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 June 30, 2018: Real estate loans: Residential properties $ 2,890,024 $ 3,223 $ 61 $ — $ 2,893,308 Commercial properties 857,475 11,103 16,513 2,975 888,066 Land 84,833 — 822 — 85,655 Commercial and industrial loans 371,970 — 5,281 8,151 385,402 Consumer loans 26,164 — — — 26,164 Total $ 4,230,466 $ 14,326 $ 22,677 $ 11,126 $ 4,278,595 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 June 30, 2018 : Real estate loans: Commercial properties $ 1,675 $ 1,675 $ 1,300 $ 1,300 $ 128 Commercial and industrial loans 2,401 2,401 5,750 5,750 786 Total $ 4,076 $ 4,076 $ 7,050 $ 7,050 $ 914 December 31, 2017 : Real estate loans: 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 for the: Six 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 4,001 47 2,403 50 Commercial and industrial loans 9,338 — 5,503 5 Total $ 13,339 $ 47 $ 9,229 $ 75 There was no interest income recognized on a cash basis in either 2018 or 2017 on impaired loans. |