Loans and Allowance for Loan Losses | 9 Months Ended |
Sep. 30, 2014 |
Receivables [Abstract] | ' |
Loans and Allowance for Loan Losses | ' |
Loans and Allowance for Loan Losses |
The composition of the loan portfolio was as follows at the dates indicated: |
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| September 30, | | December 31, | | | | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | | | | | |
Residential real estate loans: | | | | | | | | | | | | | | | | | | | |
One- to four-family | $ | 274,902 | | | $ | 262,723 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Home equity | 15,654 | | | 17,106 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total residential real estate loans | 290,556 | | | 279,829 | | | | | | | | | | | | | | | | | |
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Commercial loans: | | | | | | | | | | | | | | | | | | | |
Commercial real estate | 107,259 | | | 106,560 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real estate construction | 73,210 | | | 59,648 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial business | 76,083 | | | 69,320 | | | | | | | | | | | | | | | | | |
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Total commercial loans | 256,552 | | | 235,528 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer loans: | | | | | | | | | | | | | | | | | | | |
Automobile, indirect | 177,213 | | | 264,671 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Automobile, direct | 31,478 | | | 31,598 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other consumer | 16,074 | | | 15,330 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total consumer loans | 224,765 | | | 311,599 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total loans | 771,873 | | | 826,956 | | | | | | | | | | | | | | | | | |
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Plus (less): | | | | | | | | | | | | | | | | | | | |
Deferred fees and discounts | 2,142 | | | 4,370 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Allowance for loan losses | (6,248 | ) | | (6,445 | ) | | | | | | | | | | | | | | | | |
Total loans receivable, net | $ | 767,767 | | | $ | 824,881 | | | | | | | | | | | | | | | | | |
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The Company originates one- to four-family residential real estate loans which are sold in the secondary market. The Company retains the servicing for residential real estate loans that are sold to the Federal National Mortgage Association (“FNMA”). Residential real estate loans serviced for FNMA are not included as assets on the consolidated balance sheets. The following table presents loans sold and serviced as of September 30, 2014 and December 31, 2013: |
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| September 30, | | December 31, | | | | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | | | | | |
Principal balances of the loans sold and serviced for FNMA | $ | 203,045 | | | $ | 189,084 | | | | | | | | | | | | | | | | | |
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Mortgage servicing rights associated with the mortgage loans serviced for FNMA | 1,559 | | | 1,473 | | | | | | | | | | | | | | | | | |
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The following table presents loans identified as impaired by class of loans as of September 30, 2014 and December 31, 2013: |
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| Recorded | | Unpaid | | Related | | Average | | Interest | | | | |
Balance | Principal | Allowance | Recorded | Income | | | | |
| Balance | | Balance | Recognized | | | | |
| (In thousands) | | | | |
September 30, 2014: | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | |
One- to four-family | $ | 6,334 | | | $ | 6,334 | | | $ | — | | | $ | 7,189 | | | $ | 169 | | | | | |
| | | |
Home equity | — | | | — | | | — | | | 28 | | | — | | | | | |
| | | |
Commercial real estate | 837 | | | 837 | | | — | | | 1,838 | | | 90 | | | | | |
| | | |
Real estate construction | — | | | — | | | — | | | — | | | — | | | | | |
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Commercial business | — | | | — | | | — | | | 267 | | | 1 | | | | | |
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Automobile, indirect | 684 | | | 684 | | | — | | | 640 | | | 11 | | | | | |
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Automobile, direct | 29 | | | 29 | | | — | | | 208 | | | — | | | | | |
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Other consumer | 26 | | | 26 | | | — | | | 12 | | | — | | | | | |
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Impaired loans with no related allowance recorded | 7,910 | | | 7,910 | | | — | | | 10,182 | | | 271 | | | | | |
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With an allowance recorded: | | | | | | | | | | | | | |
One- to four-family | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | |
| | | |
Home equity | — | | | — | | | — | | | — | | | — | | | | | |
| | | |
Commercial real estate | 500 | | | 500 | | | 153 | | | 531 | | | — | | | | | |
| | | |
Real estate construction | — | | | — | | | — | | | — | | | — | | | | | |
| | | |
Commercial business | 640 | | | 640 | | | 172 | | | 793 | | | 4 | | | | | |
| | | |
Automobile, indirect | — | | | — | | | — | | | — | | | — | | | | | |
| | | |
Automobile, direct | — | | | — | | | — | | | — | | | — | | | | | |
| | | |
Other consumer | — | | | — | | | — | | | — | | | — | | | | | |
| | | |
Impaired loans with an allowance recorded | 1,140 | | | 1,140 | | | 325 | | | 1,324 | | | 4 | | | | | |
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Total | $ | 9,050 | | | $ | 9,050 | | | $ | 325 | | | $ | 11,506 | | | $ | 275 | | | | | |
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December 31, 2013: | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | |
One- to four-family | $ | 7,531 | | | $ | 7,531 | | | $ | — | | | $ | 7,468 | | | $ | 305 | | | | | |
| | | |
Home equity | 42 | | | 42 | | | — | | | 14 | | | 1 | | | | | |
| | | |
Commercial real estate | 2,347 | | | 2,347 | | | — | | | 4,237 | | | 31 | | | | | |
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Real estate construction | — | | | — | | | — | | | 3,171 | | | 66 | | | | | |
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Commercial business | 591 | | | 591 | | | — | | | 700 | | | 21 | | | | | |
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Automobile, indirect | 824 | | | 824 | | | — | | | 738 | | | 26 | | | | | |
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Automobile, direct | 32 | | | 32 | | | — | | | 34 | | | 2 | | | | | |
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Other consumer | 15 | | | 15 | | | — | | | 4 | | | — | | | | | |
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Impaired loans with no related allowance recorded | 11,382 | | | 11,382 | | | — | | | 16,366 | | | 452 | | | | | |
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With an allowance recorded: | | | | | | | | | | | | | |
One- to four-family | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | |
| | | |
Home equity | — | | | — | | | — | | | — | | | — | | | | | |
| | | |
Commercial real estate | 551 | | | 551 | | | 321 | | | 46 | | | — | | | | | |
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Real estate construction | — | | | — | | | — | | | — | | | — | | | | | |
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Commercial business | 1,040 | | | 1,040 | | | 200 | | | 1,064 | | | 8 | | | | | |
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Automobile, indirect | — | | | — | | | — | | | — | | | — | | | | | |
| | | |
Automobile, direct | — | | | — | | | — | | | — | | | — | | | | | |
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Other consumer | — | | | — | | | — | | | — | | | — | | | | | |
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Impaired loans with an allowance recorded | 1,591 | | | 1,591 | | | 521 | | | 1,110 | | | 8 | | | | | |
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Total | $ | 12,973 | | | $ | 12,973 | | | $ | 521 | | | $ | 17,476 | | | $ | 460 | | | | | |
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For the nine months ended September 30, 2013, the average recorded investment in impaired loans and the related amount of interest income recognized during the time within the period that the loans were impaired were $18.5 million and $324,000, respectively. |
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As of September 30, 2014 and December 31, 2013, no additional funds were committed to be advanced in connection with impaired loans. |
The following table presents the recorded investment in non-accrual loans by class of loans as of September 30, 2014 and December 31, 2013: |
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| September 30, | | December 31, | | | | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | | | | | |
Residential real estate loans: | | | | | | | | | | | | | | | | | | | |
One- to four-family | $ | 1,063 | | | $ | 2,050 | | | | | | | | | | | | | | | | | |
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Home equity | — | | | 42 | | | | | | | | | | | | | | | | | |
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Commercial loans: | | | | | | | | | | | | | | | | | | | |
Commercial real estate | 618 | | | 800 | | | | | | | | | | | | | | | | | |
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Real estate construction | — | | | — | | | | | | | | | | | | | | | | | |
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Commercial business | 403 | | | 864 | | | | | | | | | | | | | | | | | |
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Consumer loans: | | | | | | | | | | | | | | | | | | | |
Automobile, indirect | 427 | | | 558 | | | | | | | | | | | | | | | | | |
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Automobile, direct | 16 | | | 15 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other consumer | 26 | | | 15 | | | | | | | | | | | | | | | | | |
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Total | $ | 2,553 | | | $ | 4,344 | | | | | | | | | | | | | | | | | |
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There were no loans greater than 90 days past due that continued to accrue interest at September 30, 2014 or December 31, 2013. |
The following table presents the aging of the recorded investment in past due loans as of September 30, 2014 and December 31, 2013 by class of loans: |
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| 30-59 | | 60-89 | | 90 Days | | Total | | Loans Not | | Total |
Days | Days | and | Past Due | Past Due |
Past Due | Past Due | Greater | | |
| | Past Due | | |
| (In thousands) |
September 30, 2014: | | | | | | | | | | | |
Residential real estate loans: | | | | | | | | | | | |
One- to four-family | $ | — | | | $ | 625 | | | $ | 953 | | | $ | 1,578 | | | $ | 273,324 | | | $ | 274,902 | |
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Home equity | — | | | — | | | — | | | — | | | 15,654 | | | 15,654 | |
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Commercial loans: | | | | | | | | | | | | | | | |
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Commercial real estate | 65 | | | — | | | 118 | | | 183 | | | 107,076 | | | 107,259 | |
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Real estate construction | — | | | — | | | — | | | — | | | 73,210 | | | 73,210 | |
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Commercial business | 31 | | | — | | | 75 | | | 106 | | | 75,977 | | | 76,083 | |
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Consumer loans: | | | | | | | | | | | | | | |
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Automobile, indirect | 1,990 | | | 446 | | | 427 | | | 2,863 | | | 174,350 | | | 177,213 | |
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Automobile, direct | 76 | | | — | | | 17 | | | 93 | | | 31,385 | | | 31,478 | |
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Other consumer | 87 | | | 21 | | | 26 | | | 134 | | | 15,940 | | | 16,074 | |
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Total loans | $ | 2,249 | | | $ | 1,092 | | | $ | 1,616 | | | $ | 4,957 | | | $ | 766,916 | | | $ | 771,873 | |
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| 30-59 | | 60-89 | | 90 Days | | Total | | Loans Not | | Total |
Days | Days | and | Past Due | Past Due |
Past Due | Past Due | Greater | | |
| | Past Due | | |
| (In thousands) |
December 31, 2013: | | | | | | | | | | | |
Residential real estate loans: | | | | | | | | | | | |
One- to four-family | $ | 1,170 | | | $ | — | | | $ | 1,932 | | | $ | 3,102 | | | $ | 259,621 | | | $ | 262,723 | |
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Home equity | 1 | | | — | | | 42 | | | 43 | | | 17,063 | | | 17,106 | |
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Commercial loans: | | | | | | | | | | | |
Commercial real estate | — | | | — | | | 120 | | | 120 | | | 106,440 | | | 106,560 | |
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Real estate construction | 876 | | | — | | | — | | | 876 | | | 58,772 | | | 59,648 | |
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Commercial business | — | | | — | | | — | | | — | | | 69,320 | | | 69,320 | |
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Consumer loans: | | | | | | | | | | | |
Automobile, indirect | 2,217 | | | 615 | | | 558 | | | 3,390 | | | 261,281 | | | 264,671 | |
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Automobile, direct | 48 | | | 21 | | | 15 | | | 84 | | | 31,514 | | | 31,598 | |
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Other consumer | 72 | | | 33 | | | 15 | | | 120 | | | 15,210 | | | 15,330 | |
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Total loans | $ | 4,384 | | | $ | 669 | | | $ | 2,682 | | | $ | 7,735 | | | $ | 819,221 | | | $ | 826,956 | |
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Our methodology for evaluating the adequacy of the allowance for loan losses consists of: |
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• | a specific loss component which is the allowance for impaired loans; and | | | | | | | | | | | | | | | | | | | | | | |
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• | a general loss component for all other loans not individually evaluated for impairment but that, on a portfolio basis, are believed to have some inherent but unidentified loss. | | | | | | | | | | | | | | | | | | | | | | |
The specific component of the allowance for loan losses relates to loans that are considered impaired, which are generally classified as doubtful or substandard. For such loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan are lower than the carrying value of that loan. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for non-homogeneous loans, including one- to four-family residential real estate loans with balances in excess of $1 million, commercial real estate, real estate construction, and commercial business loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, consumer and one- to four-family residential real estate loans with balances less than $1 million are not separately identified for impairment disclosures, unless such loans are the subject of a restructuring agreement. |
The general component of the allowance for loan losses covers unimpaired loans and is based on the historical loss experience adjusted for other qualitative factors. The loan portfolio is stratified into homogeneous groups of loans that possess similar loss potential characteristics, and an appropriate loss ratio adjusted for other qualitative factors is applied to the homogeneous pools of loans to estimate the incurred losses in the loan portfolio. The other qualitative factors considered by management include, but are not limited to, the following: |
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• | changes in lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices; | | | | | | | | | | | | | | | | | | | | | | |
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• | changes in national and local economic and business conditions and developments, including the condition of various market segments; | | | | | | | | | | | | | | | | | | | | | | |
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• | changes in the nature and volume of the loan portfolio; | | | | | | | | | | | | | | | | | | | | | | |
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• | changes in the experience, ability, and depth of knowledge of the lending staff; | | | | | | | | | | | | | | | | | | | | | | |
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• | changes in the trend of the volume and severity of past due and classified loans; and trends in the volume of non-accrual loans, troubled debt restructurings, and other loan modifications; | | | | | | | | | | | | | | | | | | | | | | |
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• | changes in the quality of our loan review system and the degree of oversight by the board of directors; | | | | | | | | | | | | | | | | | | | | | | |
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• | the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
• | the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in our current portfolio. | | | | | | | | | | | | | | | | | | | | | | |
Consumer loans generally have greater risk of loss or default than one- to four-family residential real estate loans, particularly in the case of loans that are secured by rapidly depreciable assets, such as automobiles, or loans that are unsecured. In these cases, a risk exists that the collateral, if any, for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the ability to recover on consumer loans. |
Commercial real estate loans generally have greater credit risks compared to one- to four-family residential real estate loans, as they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment experience on loans secured by income-producing properties typically depends on the successful operation of the related real estate project and thus may be subject to a greater extent to adverse conditions in the real estate market and in the general economy. |
Commercial business loans involve a greater risk of default than residential real estate loans of like duration since their repayment generally depends on the successful operation of the borrower’s business and the sufficiency of collateral, if any. Loans secured by multi-family residential real estate generally involve a greater degree of credit risk than one- to four-family residential real estate loans and carry larger loan balances. This increased credit risk is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on income producing properties, and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by multi-family mortgages typically depends upon the successful operation of the related real estate property. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired. |
Real estate construction loans generally have greater credit risk than traditional one- to four-family residential real estate loans. The repayment of these loans depends upon the sale of the property to third parties or the availability of permanent financing upon completion of all improvements. In the event a loan is made on property that is not yet approved for the planned development, there is the risk that approvals will not be granted or will be delayed. These events may adversely affect the borrower and the collateral value of the property. Real estate construction loans also expose the Company to the risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, the ultimate sale or rental of the property may not occur as anticipated. |
When establishing the allowance for loan losses, management categorizes loans into risk categories based on the class of loans — residential real estate, commercial, or consumer — and relevant information about the ability of the borrowers to repay the loans, such as the current economic conditions, historical payment experience, the nature and volume of the loan portfolio, the financial strength of the borrower, and the estimated value of any underlying collateral, among other factors. Management classifies the loans individually analyzed for impairment as to credit risk. This analysis includes residential real estate loans with an outstanding balance in excess of $1 million and non-homogeneous loans, such as commercial real estate, real estate construction, and commercial business loans. The following definitions for the credit risk ratings are used for such loans: |
Special mention. Special mention loans have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose the institution to sufficient risk to warrant adverse classification. |
Substandard. Substandard loans have well defined weaknesses where a payment default and/or a loss is possible, but not yet probable. Loans so classified are inadequately protected by the current net worth and repayment capacity of the obligor or of the collateral pledged, if any. If deficiencies are not corrected quickly, there is a possibility of loss. |
Doubtful. Doubtful loans have the weaknesses and characteristics of substandard loans, but the available information suggests that collection or liquidation in its entirety, on the basis of currently existing facts, conditions and values, is highly improbable. The possibility of a loss is exceptionally high, but certain identifiable contingencies could possibly arise (proposed merger, acquisition, capital injection, refinancing plans, and pledging of additional collateral) that may strengthen the loan, such that it is reasonable to defer its classification as a loss until a more exact status is determined. |
Loans not meeting the criteria described above are considered to be pass-rated loans. The following table presents the risk category of loans by class for loans individually analyzed for impairment as of September 30, 2014 and December 31, 2013: |
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| Commercial Real Estate | | Real Estate | | Commercial | | One- to Four- | | Total | | | | |
Construction | Business | Family | | | | |
| (In thousands) | | | | |
September 30, 2014: | | | | | | | | | | | | | |
Pass | $ | 102,992 | | | $ | 73,210 | | | $ | 72,336 | | | $ | 17,051 | | | $ | 265,589 | | | | | |
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Special Mention | 319 | | | — | | | 1,215 | | | — | | | 1,534 | | | | | |
| | | |
Substandard | 3,948 | | | — | | | 2,532 | | | 4,551 | | | 11,031 | | | | | |
| | | |
Doubtful | — | | | — | | | — | | | — | | | — | | | | | |
| | | |
| $ | 107,259 | | | $ | 73,210 | | | $ | 76,083 | | | $ | 21,602 | | | $ | 278,154 | | | | | |
| | | |
December 31, 2013: | | | | | | | | | | | | | |
Pass | $ | 101,134 | | | $ | 59,536 | | | $ | 64,155 | | | $ | 15,514 | | | $ | 240,339 | | | | | |
| | | |
Special Mention | 735 | | | — | | | 2,164 | | | — | | | 2,899 | | | | | |
| | | |
Substandard | 4,691 | | | 112 | | | 3,001 | | | 3,175 | | | 10,979 | | | | | |
| | | |
Doubtful | — | | | — | | | — | | | — | | | — | | | | | |
| | | |
| $ | 106,560 | | | $ | 59,648 | | | $ | 69,320 | | | $ | 18,689 | | | $ | 254,217 | | | | | |
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The Company classifies residential real estate loans that are not analyzed individually for impairment (less than $1 million) as prime or subprime. The Company defines a subprime residential real estate loan as any loan to a borrower who has no credit score or a credit score of less than 661 along with at least one of the following at the time of funding: |
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• | Two or more 30 day delinquencies in the past 12 months; | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
• | One or more 60 day delinquencies in the past 24 months; | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
• | Bankruptcy filing within the past 60 months; | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
• | Judgment or unpaid charge-off of $500 or more in the last 24 months; and | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
• | Foreclosure or repossession in the past 24 months. | | | | | | | | | | | | | | | | | | | | | | |
All other residential real estate loans not individually analyzed for impairment are classified as prime. |
The following table presents the prime and subprime residential real estate loans collectively evaluated for impairment as of September 30, 2014 and December 31, 2013: |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| One- to | | Home | | Total | | | | | | | | | | | | |
Four- | Equity | | | | | | | | | | | | |
Family | | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | |
September 30, 2014: | | | | | | | | | | | | | | | | | |
Prime | $ | 192,145 | | | $ | 15,166 | | | $ | 207,311 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Subprime | 61,155 | | | 488 | | | 61,643 | | | | | | | | | | | | | |
| | | | | | | | | | | |
| $ | 253,300 | | | $ | 15,654 | | | $ | 268,954 | | | | | | | | | | | | | |
| | | | | | | | | | | |
December 31, 2013: | | | | | | | | | | | | | | | | | |
Prime | $ | 195,919 | | | $ | 16,521 | | | $ | 212,440 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Subprime | 48,115 | | | 585 | | | 48,700 | | | | | | | | | | | | | |
| | | | | | | | | | | |
| $ | 244,034 | | | $ | 17,106 | | | $ | 261,140 | | | | | | | | | | | | | |
| | | | | | | | | | | |
The Company evaluates consumer loans based on the credit score for each borrower when the loan is originated. The Company defines a subprime consumer loan as any loan to a borrower who has a credit score of less than 661 at the time of funding. The following table presents the credit score for each of the classes of consumer loans as of September 30, 2014 and December 31, 2013: |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Risk Tier | | Credit Score | | Automobile, indirect | | Automobile, direct | | Other consumer | | Total | | | | | |
| | (In thousands) | | | | | |
September 30, 2014: | | | | | | | | | | | | | | | |
A | | 720+ | | $ | 92,698 | | | $ | 22,752 | | | $ | 12,038 | | | $ | 127,488 | | | | | | |
| | | | |
B | | 690–719 | | 35,052 | | | 4,255 | | | 2,164 | | | 41,471 | | | | | | |
| | | | |
C | | 661–689 | | 29,608 | | | 2,486 | | | 1,475 | | | 33,569 | | | | | | |
| | | | |
D | | 660 and under | | 19,855 | | | 1,985 | | | 397 | | | 22,237 | | | | | | |
| | | | |
| | | | $ | 177,213 | | | $ | 31,478 | | | $ | 16,074 | | | $ | 224,765 | | | | | | |
| | | | |
December 31, 2013: | | | | | | | | | | | | | | | |
A | | 720+ | | $ | 135,583 | | | $ | 23,137 | | | $ | 11,453 | | | $ | 170,173 | | | | | | |
| | | | |
B | | 690–719 | | 53,678 | | | 4,311 | | | 2,228 | | | 60,217 | | | | | | |
| | | | |
C | | 661–689 | | 44,732 | | | 2,320 | | | 1,268 | | | 48,320 | | | | | | |
| | | | |
D | | 660 and under | | 30,678 | | | 1,830 | | | 381 | | | 32,889 | | | | | | |
| | | | |
| | | | $ | 264,671 | | | $ | 31,598 | | | $ | 15,330 | | | $ | 311,599 | | | | | | |
| | | | |
The following table presents the activity in the allowance for loan losses by portfolio segment based on impairment method for the three months ended September 30, 2014 and 2013: |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Residential | | Commercial | | Consumer | | Total | | | | | | | | |
Real Estate | | | | | | | | |
| (In thousands) | | | | | | | | |
September 30, 2014: | | | | | | | | | | | | | | | |
Allowance for loan losses for the three months ended: | | | | | | | | | | | | | | | |
Beginning balance | $ | 871 | | | $ | 2,853 | | | $ | 2,664 | | | $ | 6,388 | | | | | | | | | |
| | | | | | | |
Charge-offs | (122 | ) | | (37 | ) | | (672 | ) | | (831 | ) | | | | | | | | |
Recoveries of loans previously charged-off | 18 | | | 25 | | | 98 | | | 141 | | | | | | | | | |
| | | | | | | |
Provision for loan losses | 131 | | | 9 | | | 410 | | | 550 | | | | | | | | | |
| | | | | | | |
Ending balance | $ | 898 | | | $ | 2,850 | | | $ | 2,500 | | | $ | 6,248 | | | | | | | | | |
| | | | | | | |
Allowance for loan losses for the nine months ended: | | | | | | | | | | | | | | | |
Beginning balance | $ | 851 | | | $ | 2,517 | | | $ | 3,077 | | | $ | 6,445 | | | | | | | | | |
| | | | | | | |
Charge-offs | (224 | ) | | (116 | ) | | (2,166 | ) | | (2,506 | ) | | | | | | | | |
Recoveries of loans previously charged-off | 41 | | | 59 | | | 284 | | | 384 | | | | | | | | | |
| | | | | | | |
Provision for loan losses | 230 | | | 390 | | | 1,305 | | | 1,925 | | | | | | | | | |
| | | | | | | |
Ending balance | $ | 898 | | | $ | 2,850 | | | $ | 2,500 | | | $ | 6,248 | | | | | | | | | |
| | | | | | | |
Ending balance attributable to loans: | | | | | | | | | | | | | | | |
Individually evaluated for impairment | $ | — | | | $ | 325 | | | $ | — | | | $ | 325 | | | | | | | | | |
| | | | | | | |
Collectively evaluated for impairment | 898 | | | 2,525 | | | 2,500 | | | 5,923 | | | | | | | | | |
| | | | | | | |
Total ending balance | $ | 898 | | | $ | 2,850 | | | $ | 2,500 | | | $ | 6,248 | | | | | | | | | |
| | | | | | | |
September 30, 2013: | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Allowance for loan losses for the three months ended: | | | | | | | | | | | | | | | |
Beginning balance | $ | 794 | | | $ | 3,375 | | | $ | 2,913 | | | $ | 7,082 | | | | | | | | | |
| | | | | | | |
Charge-offs | (86 | ) | | — | | | (591 | ) | | (677 | ) | | | | | | | | |
| | | | | | | |
Recoveries of loans previously charged-off | 6 | | | 18 | | | 61 | | | 85 | | | | | | | | | |
| | | | | | | |
Provision for loan losses | 157 | | | (961 | ) | | 1,004 | | | 200 | | | | | | | | | |
| | | | | | | |
Ending balance | $ | 871 | | | $ | 2,432 | | | $ | 3,387 | | | $ | 6,690 | | | | | | | | | |
| | | | | | | |
Allowance for loan losses for the nine months ended: | | | | | | | | | | | | | | | |
Beginning balance | $ | 870 | | | $ | 3,133 | | | $ | 2,897 | | | $ | 6,900 | | | | | | | | | |
| | | | | | | |
Charge-offs | (239 | ) | | (202 | ) | | (1,890 | ) | | (2,331 | ) | | | | | | | | |
Recoveries of loans previously charged-off | 28 | | | 48 | | | 245 | | | 321 | | | | | | | | | |
| | | | | | | |
Provision for loan losses | 212 | | | (547 | ) | | 2,135 | | | 1,800 | | | | | | | | | |
| | | | | | | |
Ending balance | $ | 871 | | | $ | 2,432 | | | $ | 3,387 | | | $ | 6,690 | | | | | | | | | |
| | | | | | | |
Ending balance attributable to loans: | | | | | | | | | | | | | | | |
Individually evaluated for impairment | $ | — | | | $ | 209 | | | $ | — | | | $ | 209 | | | | | | | | | |
| | | | | | | |
Collectively evaluated for impairment | 871 | | | 2,223 | | | 3,387 | | | 6,481 | | | | | | | | | |
| | | | | | | |
Total ending balance | $ | 871 | | | $ | 2,432 | | | $ | 3,387 | | | $ | 6,690 | | | | | | | | | |
| | | | | | | |
The Company’s recorded investment in loans as of September 30, 2014, December 31, 2013, and September 30, 2013 related to each balance in the allowance for loan losses by portfolio segment and disaggregated on the basis of the Company’s impairment methodology is as follows: |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Residential | | Commercial | | Consumer | | Total | | | | | | | | |
Real Estate | | | | | | | | |
| (In thousands) | | | | | | | | |
September 30, 2014: | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | $ | 6,334 | | | $ | 1,977 | | | $ | 739 | | | $ | 9,050 | | | | | | | | | |
| | | | | | | |
Loans collectively evaluated for impairment | 284,222 | | | 254,575 | | | 224,026 | | | 762,823 | | | | | | | | | |
| | | | | | | |
Total ending balance | $ | 290,556 | | | $ | 256,552 | | | $ | 224,765 | | | $ | 771,873 | | | | | | | | | |
| | | | | | | |
December 31, 2013: | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | $ | 7,573 | | | $ | 4,529 | | | $ | 871 | | | $ | 12,973 | | | | | | | | | |
| | | | | | | |
Loans collectively evaluated for impairment | 272,256 | | | 230,999 | | | 310,728 | | | 813,983 | | | | | | | | | |
| | | | | | | |
Total ending balance | $ | 279,829 | | | $ | 235,528 | | | $ | 311,599 | | | $ | 826,956 | | | | | | | | | |
| | | | | | | |
September 30, 2013: | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | $ | 7,851 | | | $ | 6,698 | | | $ | 719 | | | $ | 15,268 | | | | | | | | | |
| | | | | | | |
Loans collectively evaluated for impairment | 270,280 | | | 243,672 | | | 334,766 | | | 848,718 | | | | | | | | | |
| | | | | | | |
Total ending balance | $ | 278,131 | | | $ | 250,370 | | | $ | 335,485 | | | $ | 863,986 | | | | | | | | | |
| | | | | | | |
A loan is considered a troubled debt restructuring (“TDR”) if the Company, for economic or legal reasons related to a debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. Concessions granted under a TDR typically involve a temporary or permanent reduction in the interest rate to less than a current market rate of interest or an extension of a loan’s stated maturity date. Loans classified as TDRs are designated as impaired. |
A summary of the Company’s loans classified as TDRs at September 30, 2014 and December 31, 2013 is presented below: |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, | | December 31, | | | | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | | | | | |
TDR | | | | | | | | | | | | | | | | | | | |
Residential Real Estate | $ | 5,380 | | | $ | 6,276 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial | 1,047 | | | 2,581 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | 308 | | | 382 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total TDR | 6,735 | | | 9,239 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Less: TDR in non-accrual status | | | | | | | | | | | | | | | | | | | |
Residential Real Estate | 109 | | | 795 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial | 328 | | | 483 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | 38 | | | 99 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total performing TDR | $ | 6,260 | | | $ | 7,862 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
The Company may grant concessions through a number of different restructuring methods. The following table presents the outstanding principal balance of loans by class and by method of concession that were the subject of a TDR during the nine months ended September 30, 2014 and 2013: |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Residential | | Commercial | | Consumer | | Total | | | | | | | | |
Real Estate | | | | | | | | |
| (In thousands) | | | | | | | | |
Nine Months Ended September 30, 2014: | | | | | | | | | | | | | | | |
Interest rate reduction | $ | 1,430 | | | $ | — | | | $ | 48 | | | $ | 1,478 | | | | | | | | | |
| | | | | | | |
Loan maturity extension | — | | | — | | | — | | | — | | | | | | | | | |
| | | | | | | |
Forbearance | — | | | — | | | — | | | — | | | | | | | | | |
| | | | | | | |
Principal reduction | — | | | — | | | 35 | | | 35 | | | | | | | | | |
| | | | | | | |
Total | $ | 1,430 | | | $ | — | | | $ | 83 | | | $ | 1,513 | | | | | | | | | |
| | | | | | | |
Nine Months Ended September 30, 2013: | | | | | | | | | | | | | | | |
Interest rate reduction | $ | — | | | $ | 365 | | | $ | 24 | | | $ | 389 | | | | | | | | | |
| | | | | | | |
Loan maturity extension | — | | | — | | | 28 | | | 28 | | | | | | | | | |
| | | | | | | |
Forbearance | — | | | — | | | — | | | — | | | | | | | | | |
| | | | | | | |
Principal reduction | — | | | — | | | — | | | — | | | | | | | | | |
| | | | | | | |
Total | $ | — | | | $ | 365 | | | $ | 52 | | | $ | 417 | | | | | | | | | |
| | | | | | | |
|
The following table presents the number of loans modified and the balances before and after modification for the nine months ended September 30, 2014 and 2013: |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of | | Pre-Modification | | Post-Modification | | | | | | | | | | | | | |
Loans | Outstanding | Outstanding | | | | | | | | | | | | | |
| Recorded Balance | Recorded Balance | | | | | | | | | | | | | |
| (Dollar amounts in thousands) | | | | | | | | | | | | | |
Nine Months Ended September 30, 2014: | | | | | | | | | | | | | | | | | | |
Residential Real Estate | 1 | | | $ | 1,430 | | | $ | 1,430 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Commercial | — | | | — | | | — | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Consumer | 7 | | | 98 | | | 84 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Total | 8 | | | $ | 1,528 | | | $ | 1,514 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Nine Months Ended September 30, 2013: | | | | | | | | | | | | | | | | | | |
Residential Real Estate | — | | | $ | — | | | $ | — | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Commercial | 1 | | | 371 | | | 371 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Consumer | 3 | | | 59 | | | 59 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Total | 4 | | | $ | 430 | | | $ | 430 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Included in the impaired loans as of September 30, 2014 and December 31, 2013 were TDRs of $6.7 million and $9.2 million, respectively. The Company has allocated $62,000 and $72,000 of specific reserves to customers whose loan terms have been modified as TDRs at September 30, 2014 and December 31, 2013, respectively. As of September 30, 2014 and December 31, 2013, no additional funds were committed to be advanced in connection with TDRs. |
The Company’s other real estate owned and foreclosed assets represent properties and personal collateral acquired through customer loan defaults. The property is recorded at fair value less the estimated costs to sell at the date acquired. Any difference between the book value and estimated market value is recognized as a charge-off through the allowance for loan losses. Subsequently, should the fair market value of an asset less the estimated cost to sell decline to less than the carrying amount of the asset, the deficiency is recognized in the period in which it becomes known and is included in noninterest expense. |
At September 30, 2014 and December 31, 2013, the Company had balances in non-performing assets consisting of the following: |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, | | December 31, | | | | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | | | | | |
| (Dollar amounts in thousands) | | | | | | | | | | | | | | | | |
Other real estate owned and foreclosed assets | | | | | | | | | | | | | | | | | | | |
Residential Real Estate | $ | 861 | | | $ | 107 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Commercial | 70 | | | 70 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | 447 | | | 850 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total other real estate owned and foreclosed assets | 1,378 | | | 1,027 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total non-accrual loans | 2,553 | | | 4,344 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total non-performing assets | $ | 3,931 | | | $ | 5,371 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-accrual loans/Total loans | 0.33 | % | | 0.53 | % | | | | | | | | | | | | | | | | |
Non-performing assets/Total assets | 0.29 | % | | 0.39 | % | | | | | | | | | | | | | | | | |