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 quarters ended March 31: (dollars in thousands) Beginning Provision for Charge-offs Recoveries Ending 2019: Real estate loans: Residential properties $ 9,216 $ 422 $ — $ — $ 9,638 Commercial properties 4,547 (232 ) — — 4,315 Land 391 (149 ) — — 242 Commercial and industrial loans 4,628 503 (543 ) 207 4,795 Consumer loans 218 (4 ) (5 ) 1 210 Total $ 19,000 $ 540 $ (548 ) $ 208 $ 19,200 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 The following table presents the balance in the allowance for loan losses and the recorded investment in loans by impairment method as of: Allowance for Loan Losses Unaccreted Evaluated for Impairment Purchased Component (dollars in thousands) Individually Collectively Impaired Total Other Loans March 31, 2019: Allowance for loan losses: Real estate loans: Residential properties $ — $ 9,638 $ — $ 9,638 $ 1,524 Commercial properties 117 4,198 — 4,315 1,589 Land — 242 — 242 47 Commercial and industrial loans 507 4,288 — 4,795 509 Consumer loans — 210 — 210 2 Total $ 624 $ 18,576 $ — $ 19,200 $ 3,671 Loans: Real estate loans: Residential properties $ 1,811 $ 2,889,871 $ — $ 2,891,682 $ 234,595 Commercial properties 8,944 889,412 3,704 902,060 280,393 Land 697 58,418 802 59,917 37,624 Commercial and industrial loans 10,496 443,348 1,005 454,849 55,921 Consumer loans — 17,693 — 17,693 314 Total $ 21,948 $ 4,298,742 $ 5,511 $ 4,326,201 $ 608,847 December 31, 2018: Allowance for loan losses: Real estate loans: Residential properties $ — $ 9,216 $ — $ 9,216 $ 1,724 Commercial properties 126 4,421 — 4,547 1,779 Land — 391 — 391 84 Commercial and industrial loans 290 4,338 — 4,628 633 Consumer loans — 218 — 218 3 Total $ 416 $ 18,584 $ — $ 19,000 $ 4,223 Loans: Real estate loans: Residential properties $ 651 $ 2,861,112 $ — $ 2,861,763 $ 241,698 Commercial properties 2,871 860,835 5,463 869,169 275,516 Land 697 78,681 809 80,187 41,132 Commercial and industrial loans 8,559 440,437 809 449,805 61,183 Consumer loans — 22,699 — 22,699 366 Total $ 12,778 $ 4,263,764 $ 7,081 $ 4,283,623 $ 619,895 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 0.60% and 0.68% of the stated principal balance of these loans as of March 31, 2019 and December 31, 2018, respectively. In addition to this unaccreted credit component discount, an additional $0.3 million and $0.4 million of ALLL has been provided for these loans as of March 31, 2019 and December 31, 2018, 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, 2019: Real estate loans: Residential properties $ 2,886,943 $ 2,928 $ — $ 1,811 $ 2,891,682 Commercial properties 880,599 6,696 5,821 8,944 902,060 Land 58,418 — 802 697 59,917 Commercial and industrial loans 440,126 918 3,309 10,496 454,849 Consumer loans 17,693 — — — 17,693 Total $ 4,283,779 $ 10,542 $ 9,932 $ 21,948 $ 4,326,201 December 31, 2018: Real estate loans: Residential properties $ 2,857,666 $ 3,446 $ — $ 651 $ 2,861,763 Commercial properties 845,672 13,024 7,602 2,871 869,169 Land 78,681 — 809 697 80,187 Commercial and industrial loans 431,751 7,723 1,772 8,559 449,805 Consumer loans 22,699 — — — 22,699 Total $ 4,236,469 $ 24,193 $ 10,183 $ 12,778 $ 4,283,623 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, 2019 : Real estate loans: Residential properties $ 1,835 $ 1,811 $ — $ — $ — Commercial properties 7,816 7,699 1,245 1,245 117 Land 697 697 — — — Commercial and industrial loans 6,974 6,766 3,750 3,730 507 Total $ 17,322 $ 16,973 $ 4,995 $ 4,975 $ 624 December 31, 2018 : Real estate loans: Residential properties $ 651 $ 651 $ — $ — $ — Commercial properties 1,607 1,607 1,264 1,264 126 Land 697 697 — — — Commercial and industrial loans 6,543 6,543 2,016 2,016 290 Total $ 9,498 $ 9,498 $ 3,280 $ 3,280 $ 416 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: 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 $ 1,151 $ — $ 276 $ — Commercial properties 6,927 74 3,459 90 Land 697 — — — Commercial and industrial loans 9,499 — 9,117 — Total $ 18,274 $ 74 $ 12,852 $ 90 There was no interest income recognized on a cash basis in either 2019 or 2018 on impaired loans. |