Loans Receivable and Allowance for Loan Losses | 3 Months Ended |
Mar. 31, 2015 |
Loans Receivable and Allowance for Loan Losses | |
Loans Receivable and Allowance for Loan Losses | |
(6)Loans Receivable and Allowance for Loan Losses |
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The components of loans receivable are as follows: |
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| | March 31, | | December 31, | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | 2015 | | 2014 | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | |
First mortgages: | | | | | | | | | | | | | | | | | | | | | | | |
One- to four-family residential | | $ | 995,241 | | $ | 926,074 | | | | | | | | | | | | | | | | | | | |
Multi-family residential | | 9,826 | | 8,920 | | | | | | | | | | | | | | | | | | | |
Construction, commercial, and other | | 19,092 | | 18,415 | | | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | 16,225 | | 15,992 | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | 1,040,384 | | 969,401 | | | | | | | | | | | | | | | | | | | |
Other loans: | | | | | | | | | | | | | | | | | | | | | | | |
Loans on deposit accounts | | 245 | | 441 | | | | | | | | | | | | | | | | | | | |
Consumer and other loans | | 4,166 | | 4,173 | | | | | | | | | | | | | | | | | | | |
Total other loans | | 4,411 | | 4,614 | | | | | | | | | | | | | | | | | | | |
Less: | | | | | | | | | | | | | | | | | | | | | | | |
Net unearned fees and discounts | | (4,001 | ) | (4,112 | ) | | | | | | | | | | | | | | | | | | |
Allowance for loan losses | | (1,872 | ) | (1,691 | ) | | | | | | | | | | | | | | | | | | |
Total unearned fees, discounts and allowance for loan losses | | (5,873 | ) | (5,803 | ) | | | | | | | | | | | | | | | | | | |
Loans receivable, net | | $ | 1,038,922 | | $ | 968,212 | | | | | | | | | | | | | | | | | | | |
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The table below presents the activity in the allowance for loan losses by portfolio segment: |
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(Dollars in thousands) | | Residential | | Construction, | | Home | | Consumer | | Unallocated | | Totals | | | | | | | |
Mortgage | Commercial | Equity | and Other | | | | | | |
| and Other | Loans and | | | | | | | |
| Mortgage | Lines of | | | | | | | |
| Loans | Credit | | | | | | | |
Three months ended March 31, 2015: | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 413 | | $ | 977 | | $ | 5 | | $ | 263 | | $ | 33 | | $ | 1,691 | | | | | | | |
Provision (reversal of allowance) for loan losses | | 698 | | (435 | ) | (2 | ) | (99 | ) | 32 | | 194 | | | | | | | |
| | 1,111 | | 542 | | 3 | | 164 | | 65 | | 1,885 | | | | | | | |
Charge-offs | | — | | — | | — | | (19 | ) | — | | (19 | ) | | | | | | |
Recoveries | | — | | 1 | | 1 | | 4 | | — | | 6 | | | | | | | |
Net charge-offs | | — | | 1 | | 1 | | (15 | ) | — | | (13 | ) | | | | | | |
Balance, end of period | | $ | 1,111 | | $ | 543 | | $ | 4 | | $ | 149 | | $ | 65 | | $ | 1,872 | | | | | | | |
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Three months ended March 31, 2014: | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 376 | | $ | 799 | | $ | 10 | | $ | 229 | | $ | 72 | | $ | 1,486 | | | | | | | |
Provision (reversal of allowance) for loan losses | | 58 | | 24 | | (4 | ) | (65 | ) | (4 | ) | 9 | | | | | | | |
| | 434 | | 823 | | 6 | | 164 | | 68 | | 1,495 | | | | | | | |
Charge-offs | | — | | — | | — | | (17 | ) | — | | (17 | ) | | | | | | |
Recoveries | | — | | — | | 1 | | 6 | | — | | 7 | | | | | | | |
Net charge-offs | | — | | — | | 1 | | (11 | ) | — | | (10 | ) | | | | | | |
Balance, end of period | | $ | 434 | | $ | 823 | | $ | 7 | | $ | 153 | | $ | 68 | | $ | 1,485 | | | | | | | |
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During the three months ended March 31, 2015, the Company increased the loan loss provisions for residential mortgage loans based on the growth of this segment of the loan portfolio and the concentration of loans in Hawaii. The Company also reduced the loan loss provisions on construction, commercial and other mortgage loans and consumer and other loans based on a continued limited loss experience. The allocation of a portion of the allowance from one category of loans does not preclude its availability to absorb losses in other loan categories. |
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Management considers the allowance for loan losses at March 31, 2015 to be at an appropriate level to provide for probable losses that can be reasonably estimated based on general and specific conditions at that date. While the Company uses the best information it has available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the information used in making the evaluations. To the extent actual outcomes differ from the estimates, additional provisions for credit losses may be required that would reduce future earnings. In addition, as an integral part of their examination process, the bank regulators and the Hawaii Department of Financial Institutions periodically review the allowance for loan losses and may require the Company to increase the allowance based on their analysis of information available at the time of their examination. |
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The table below presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method: |
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(Dollars in thousands) | | Residential | | Construction, | | Home | | Consumer | | Unallocated | | Totals | | | | | | | |
Mortgage | Commercial | Equity | and Other | | | | | | |
| and Other | Loans and | | | | | | | |
| Mortgage | Lines of | | | | | | | |
| Loans | Credit | | | | | | | |
March 31, 2015: | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | |
Ending allowance balance: | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | | | | | | |
Collectively evaluated for impairment | | 1,111 | | 543 | | 4 | | 149 | | 65 | | 1,872 | | | | | | | |
Total ending allowance balance | | $ | 1,111 | | $ | 543 | | $ | 4 | | $ | 149 | | $ | 65 | | $ | 1,872 | | | | | | | |
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Loans: | | | | | | | | | | | | | | | | | | | |
Ending loan balance: | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 6,179 | | $ | — | | $ | 132 | | $ | — | | $ | — | | $ | 6,311 | | | | | | | |
Collectively evaluated for impairment | | 994,906 | | 19,063 | | 16,099 | | 4,415 | | — | | 1,034,483 | | | | | | | |
Total ending loan balance | | $ | 1,001,085 | | $ | 19,063 | | $ | 16,231 | | $ | 4,415 | | $ | — | | $ | 1,040,794 | | | | | | | |
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December 31, 2014: | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | |
Ending allowance balance: | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | | | | | | |
Collectively evaluated for impairment | | 413 | | 977 | | 5 | | 263 | | 33 | | 1,691 | | | | | | | |
Total ending allowance balance | | $ | 413 | | $ | 977 | | $ | 5 | | $ | 263 | | $ | 33 | | $ | 1,691 | | | | | | | |
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Loans: | | | | | | | | | | | | | | | | | | | |
Ending loan balance: | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 6,158 | | $ | — | | $ | 296 | | $ | 4 | | $ | — | | $ | 6,458 | | | | | | | |
Collectively evaluated for impairment | | 924,732 | | 18,399 | | 15,702 | | 4,612 | | — | | 963,445 | | | | | | | |
Total ending loan balance | | $ | 930,890 | | $ | 18,399 | | $ | 15,998 | | $ | 4,616 | | $ | — | | $ | 969,903 | | | | | | | |
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The table below presents the balance of impaired loans individually evaluated for impairment by class of loans: |
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(Dollars in thousands) | | Recorded | | Unpaid | | | | | | | | | | | | | | | | | | | |
Investment | Principal | | | | | | | | | | | | | | | | | | |
| Balance | | | | | | | | | | | | | | | | | | |
March 31, 2015: | | | | | | | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | |
One- to four-family residential mortgages | | $ | 6,179 | | $ | 6,845 | | | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | 132 | | 162 | | | | | | | | | | | | | | | | | | | |
Total | | $ | 6,311 | | $ | 7,007 | | | | | | | | | | | | | | | | | | | |
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December 31, 2014: | | | | | | | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | |
One- to four-family residential mortgages | | $ | 6,158 | | $ | 6,775 | | | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | 296 | | 324 | | | | | | | | | | | | | | | | | | | |
Consumer and other | | 4 | | 4 | | | | | | | | | | | | | | | | | | | |
Total | | $ | 6,458 | | $ | 7,103 | | | | | | | | | | | | | | | | | | | |
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The table below presents the average recorded investment and interest income recognized on impaired loans by class of loans: |
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| | For the Three Months Ended | | | | | | | | | | | | | | | | | | | |
March 31, | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | | Average | | Interest | | | | | | | | | | | | | | | | | | | |
Recorded | Income | | | | | | | | | | | | | | | | | | |
Investment | Recognized | | | | | | | | | | | | | | | | | | |
2015:00:00 | | | | | | | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | |
One- to four-family residential mortgages | | $ | 6,216 | | $ | 30 | | | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | 134 | | — | | | | | | | | | | | | | | | | | | | |
Total | | $ | 6,350 | | $ | 30 | | | | | | | | | | | | | | | | | | | |
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2014:00:00 | | | | | | | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | |
One- to four-family residential mortgages | | $ | 7,248 | | $ | 32 | | | | | | | | | | | | | | | | | | | |
Home equity loans and lines of credit | | 158 | | — | | | | | | | | | | | | | | | | | | | |
Total | | $ | 7,406 | | $ | 32 | | | | | | | | | | | | | | | | | | | |
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There were no loans individually evaluated for impairment with a related allowance for loan loss as of March 31, 2015 or December 31, 2014. Loans individually evaluated for impairment do not have an allocated allowance for loan loss because they are written down to fair value. |
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The table below presents the aging of loans and accrual status by class of loans: |
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(Dollars in thousands) | | 30 — 59 | | 60 — 89 | | 90 Days or | | Total Past | | Loans Not | | Total | | Nonaccrual | | Loans | |
Days Past | Days Past | Greater | Due | Past Due | Loans | Loans | More |
Due | Due | Past Due | | | | | Than 90 |
| | | | | | | Days Past |
| | | | | | | Due and |
| | | | | | | Still |
| | | | | | | Accruing |
March 31, 2015: | | | | | | | | | | | | | | | | | |
One- to four-family residential mortgages | | $ | 894 | | $ | 580 | | $ | 842 | | $ | 2,316 | | $ | 988,974 | | $ | 991,290 | | $ | 4,183 | | $ | — | |
Multi-family residential mortgages | | — | | — | | — | | — | | 9,795 | | 9,795 | | — | | — | |
Construction, commercial and other mortgages | | — | | — | | — | | — | | 19,063 | | 19,063 | | — | | — | |
Home equity loans and lines of credit | | 83 | | — | | — | | 83 | | 16,148 | | 16,231 | | 132 | | — | |
Loans on deposit accounts | | — | | — | | — | | — | | 245 | | 245 | | — | | — | |
Consumer and other | | 2 | | — | | — | | 2 | | 4,168 | | 4,170 | | — | | — | |
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Total | | $ | 979 | | $ | 580 | | $ | 842 | | $ | 2,401 | | $ | 1,038,393 | | $ | 1,040,794 | | $ | 4,315 | | $ | — | |
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December 31, 2014: | | | | | | | | | | | | | | | | | |
One- to four-family residential mortgages | | $ | 1,040 | | $ | 736 | | $ | 593 | | $ | 2,369 | | $ | 919,624 | | $ | 921,993 | | $ | 4,153 | | $ | — | |
Multi-family residential mortgages | | — | | — | | — | | — | | 8,897 | | 8,897 | | — | | — | |
Construction, commercial and other mortgages | | — | | — | | — | | — | | 18,399 | | 18,399 | | — | | — | |
Home equity loans and lines of credit | | — | | — | | 161 | | 161 | | 15,837 | | 15,998 | | 296 | | — | |
Loans on deposit accounts | | — | | — | | — | | — | | 440 | | 440 | | — | | — | |
Consumer and other | | 7 | | 1 | | 4 | | 12 | | 4,164 | | 4,176 | | 4 | | — | |
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Total | | $ | 1,047 | | $ | 737 | | $ | 758 | | $ | 2,542 | | $ | 967,361 | | $ | 969,903 | | $ | 4,453 | | $ | — | |
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The Company primarily uses the aging of loans and accrual status to monitor the credit quality of its loan portfolio. When a mortgage loan becomes seriously delinquent (90 days or more contractually past due), it displays weaknesses that may result in a loss. As a loan becomes more delinquent, the likelihood of the borrower repaying the loan decreases and the loan becomes more collateral-dependent. A mortgage loan becomes collateral-dependent when the proceeds for repayment can be expected to come only from the sale or operation of the collateral and not from borrower repayments. Generally, appraisals are obtained after a loan becomes collateral-dependent or is five months delinquent. The carrying value of collateral-dependent loans is adjusted to the fair value of the collateral less selling costs. Any commercial real estate, commercial, construction or equity loan that has a loan balance in excess of a specified amount is also periodically reviewed to determine whether the loan exhibits any weaknesses and is performing in accordance with its contractual terms. |
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The Company had 17 nonaccrual loans with a book value of $4.3 million at March 31, 2015 and 18 nonaccrual loans with a book value of $4.5 million as of December 31, 2014. The Company collected interest on nonaccrual loans of $50,000 and $52,000 during the three months ended March 31, 2015 and 2014, respectively, but due to regulatory requirements, the Company recorded the interest as a reduction of principal. The Company would have recognized additional interest income of $66,000 and $70,000 during the three months ended March 31, 2015 and 2014, respectively, had the loans been accruing interest. The Company did not have any loans more than 90 days past due and still accruing interest as of March 31, 2015 or December 31, 2014. |
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There were no loans modified in a troubled debt restructuring during the three months ended March 31, 2015 or 2014. There were no new troubled debt restructurings within the past 12 months that subsequently defaulted. |
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The Company had 17 troubled debt restructurings totaling $4.5 million as of March 31, 2015 that were considered to be impaired. This total included 16 one- to four-family residential mortgage loans totaling $4.4 million and one home equity loan for $132,000. Six of the loans, totaling $2.0 million, were performing in accordance with their restructured terms and accruing interest at March 31, 2015. Nine of the loans, totaling $2.2 million, were performing in accordance with their restructured terms but not accruing interest at March 31, 2015. Two of the loans, totaling $342,000, are delinquent and not accruing interest at March 31, 2015. The Company had 17 troubled debt restructurings totaling $4.6 million as of December 31, 2014 that were considered to be impaired. This total included 16 one- to four-family residential mortgage loans totaling $4.4 million and one home equity loan for $135,000. Six of the loans, totaling $2.0 million, were performing in accordance with their restructured terms and accruing interest at December 31, 2014. Nine of the loans, totaling $2.2 million, were performing in accordance with their restructured terms but not accruing interest at December 31, 2014. Two of the loans, totaling $343,000, are delinquent and not accruing interest at December 31, 2014. Restructurings include deferrals of interest and/or principal payments and temporary or permanent reductions in interest rates due to the financial difficulties of the borrowers. We have no commitments to lend any additional funds to these borrowers. |
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The Company had no real estate owned as of March 31, 2015 and 2014. There were three one- to four-family residential mortgage loans totaling $691,000 in process of foreclosure as of March 31, 2015, and three one- to four-family residential mortgage loans totaling $1.0 million in process of foreclosure as of March 31, 2014. |
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Nearly all of our real estate loans are collateralized by real estate located in the State of Hawaii. Loan-to-value ratios on these real estate loans generally do not exceed 80% at the time of origination. |
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During the three months ended March 31, 2015 and 2014, the Company sold $13.3 million and $9.9 million, respectively, of mortgage loans held for sale and recognized gains of $129,000 and $79,000, respectively. The Company had nine loans held for sale totaling $2.9 million at March 31, 2015 and six loans held for sale totaling $1.0 million at December 31, 2014. |
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The Company serviced loans for others of $59.0 million at March 31, 2015 and $60.5 million at December 31, 2014. Of these amounts, $2.9 million and $3.0 million relate to securitizations for which the Company continues to hold the related mortgage-backed securities at March 31, 2015 and December 31, 2014, respectively. The amount of contractually specified servicing fees earned for the three-month periods ended March 31, 2015 and 2014 was $41,000 and $47,000, respectively. The fees are reported in service fees on loan and deposit accounts in the consolidated statements of income. |
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