XML 31 R11.htm IDEA: XBRL DOCUMENT v3.19.3
LOANS AND LEASES
 9 Months Ended
Sep. 30, 2019
Receivables [Abstract]  
LOANS AND LEASES

3.  LOANS AND LEASES

Loans outstanding, excluding those held for sale, by general ledger classification, as of September 30, 2019 and December 31, 2018, consisted of the following:

 

 

 

 

 

 

 

% of

 

 

 

 

 

 

% of

 

 

 

September 30,

 

 

Totals

 

 

December 31,

 

 

Total

 

(Dollars in thousands)

 

2019

 

 

Loans

 

 

2018

 

 

Loans

 

Residential mortgage

 

$

559,787

 

 

 

13.46

%

 

$

571,570

 

 

 

14.55

%

Multifamily mortgage

 

 

1,197,093

 

 

 

28.78

 

 

 

1,135,805

 

 

 

28.92

 

Commercial mortgage

 

 

721,261

 

 

 

17.34

 

 

 

702,165

 

 

 

17.88

 

Commercial loans (including equipment financing)

 

 

1,564,784

 

 

 

37.62

 

 

 

1,397,057

 

 

 

35.57

 

Commercial construction

 

 

4,355

 

 

 

0.10

 

 

 

—

 

 

 

—

 

Home equity lines of credit

 

 

58,423

 

 

 

1.40

 

 

 

62,191

 

 

 

1.58

 

Consumer loans, including fixed rate home equity loans

 

 

53,829

 

 

 

1.29

 

 

 

58,678

 

 

 

1.49

 

Other loans

 

 

380

 

 

 

0.01

 

 

 

465

 

 

 

0.01

 

Total loans

 

$

4,159,912

 

 

 

100.00

%

 

$

3,927,931

 

 

 

100.00

%

 

 

In determining an appropriate amount for the allowance, the Bank segments and evaluates the loan portfolio based on federal Call Report codes.  The following portfolio classes have been identified as of September 30, 2019 and December 31, 2018:

 

 

 

 

 

 

 

% of

 

 

 

 

 

 

% of

 

 

 

September 30,

 

 

Totals

 

 

December 31,

 

 

Total

 

(Dollars in thousands)

 

2019

 

 

Loans

 

 

2018

 

 

Loans

 

Primary residential mortgage

 

$

586,404

 

 

 

14.11

%

 

$

600,891

 

 

 

15.31

%

Home equity lines of credit

 

 

58,425

 

 

 

1.41

 

 

 

62,191

 

 

 

1.58

 

Junior lien loan on residence

 

 

7,063

 

 

 

0.17

 

 

 

7,418

 

 

 

0.19

 

Multifamily property

 

 

1,197,093

 

 

 

28.80

 

 

 

1,135,805

 

 

 

28.94

 

Owner-occupied commercial real estate

 

 

258,563

 

 

 

6.22

 

 

 

261,193

 

 

 

6.65

 

Investment commercial real estate

 

 

1,044,730

 

 

 

25.14

 

 

 

1,001,918

 

 

 

25.53

 

Commercial and industrial

 

 

704,726

 

 

 

16.96

 

 

 

616,838

 

 

 

15.72

 

Lease financing

 

 

233,918

 

 

 

5.63

 

 

 

172,643

 

 

 

4.40

 

Farmland/agricultural production

 

 

3,059

 

 

 

0.07

 

 

 

149

 

 

 

0.01

 

Commercial construction loans

 

 

4,579

 

 

 

0.11

 

 

 

86

 

 

 

0.01

 

Consumer and other loans

 

 

57,271

 

 

 

1.38

 

 

 

65,180

 

 

 

1.66

 

Total loans

 

$

4,155,831

 

 

 

100.00

%

 

$

3,924,312

 

 

 

100.00

%

Net deferred costs

 

 

4,081

 

 

 

 

 

 

 

3,619

 

 

 

 

 

Total loans including net deferred costs

 

$

4,159,912

 

 

 

 

 

 

$

3,927,931

 

 

 

 

 

 

The following tables present the loan balances by portfolio class, based on impairment method, and the corresponding balances in the allowance for loan and lease losses (ALLL) as of September 30, 2019 and December 31, 2018:

 

 

 

September 30, 2019

 

 

 

Total

 

 

Ending ALLL

 

 

Total

 

 

Ending ALLL

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

Attributable

 

 

Loans

 

 

Attributable

 

 

 

 

 

 

 

 

 

 

 

Individually

 

 

To Loans

 

 

Collectively

 

 

To Loans

 

 

 

 

 

 

 

 

 

 

 

Evaluated

 

 

Individually

 

 

Evaluated

 

 

Collectively

 

 

 

 

 

 

Total

 

 

 

For

 

 

Evaluated for

 

 

For

 

 

Evaluated for

 

 

Total

 

 

Ending

 

(In thousands)

 

Impairment

 

 

Impairment

 

 

Impairment

 

 

Impairment

 

 

Loans

 

 

ALLL

 

Primary residential mortgage

 

$

7,238

 

 

$

237

 

 

$

579,166

 

 

$

2,252

 

 

$

586,404

 

 

$

2,489

 

Home equity lines of credit

 

 

3

 

 

 

—

 

 

 

58,422

 

 

 

145

 

 

 

58,425

 

 

 

145

 

Junior lien loan on residence

 

 

24

 

 

 

—

 

 

 

7,039

 

 

 

15

 

 

 

7,063

 

 

 

15

 

Multifamily property

 

 

—

 

 

 

—

 

 

 

1,197,093

 

 

 

6,235

 

 

 

1,197,093

 

 

 

6,235

 

Owner-occupied commercial real estate

 

 

395

 

 

 

—

 

 

 

258,168

 

 

 

2,272

 

 

 

258,563

 

 

 

2,272

 

Investment commercial real estate

 

 

22,676

 

 

 

1,000

 

 

 

1,022,054

 

 

 

14,745

 

 

 

1,044,730

 

 

 

15,745

 

Commercial and industrial

 

 

6,291

 

 

 

1,500

 

 

 

698,435

 

 

 

10,405

 

 

 

704,726

 

 

 

11,905

 

Lease financing

 

 

—

 

 

 

—

 

 

 

233,918

 

 

 

2,396

 

 

 

233,918

 

 

 

2,396

 

Farmland/agricultural production

 

 

—

 

 

 

—

 

 

 

3,059

 

 

 

39

 

 

 

3,059

 

 

 

39

 

Commercial construction loans

 

 

—

 

 

 

—

 

 

 

4,579

 

 

 

24

 

 

 

4,579

 

 

 

24

 

Consumer and other loans

 

 

—

 

 

 

—

 

 

 

57,271

 

 

 

315

 

 

 

57,271

 

 

 

315

 

Total ALLL

 

$

36,627

 

 

$

2,737

 

 

$

4,119,204

 

 

$

38,843

 

 

$

4,155,831

 

 

$

41,580

 

 

 

 

 

December 31, 2018

 

 

 

Total

 

 

Ending ALLL

 

 

Total

 

 

Ending ALLL

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

Attributable

 

 

Loans

 

 

Attributable

 

 

 

 

 

 

 

 

 

 

 

Individually

 

 

To Loans

 

 

Collectively

 

 

To Loans

 

 

 

 

 

 

 

 

 

 

 

Evaluated

 

 

Individually

 

 

Evaluated

 

 

Collectively

 

 

 

 

 

 

Total

 

 

 

For

 

 

Evaluated for

 

 

For

 

 

Evaluated for

 

 

Total

 

 

Ending

 

(In thousands)

 

Impairment

 

 

Impairment

 

 

Impairment

 

 

Impairment

 

 

Loans

 

 

ALLL

 

Primary residential mortgage

 

$

9,518

 

 

$

262

 

 

$

591,373

 

 

$

3,244

 

 

$

600,891

 

 

$

3,506

 

Home equity lines of credit

 

 

255

 

 

 

—

 

 

 

61,936

 

 

 

164

 

 

 

62,191

 

 

 

164

 

Junior lien loan on residence

 

 

36

 

 

 

—

 

 

 

7,382

 

 

 

15

 

 

 

7,418

 

 

 

15

 

Multifamily property

 

 

1,262

 

 

 

—

 

 

 

1,134,543

 

 

 

5,959

 

 

 

1,135,805

 

 

 

5,959

 

Owner-occupied commercial real estate

 

 

1,574

 

 

 

—

 

 

 

259,619

 

 

 

2,614

 

 

 

261,193

 

 

 

2,614

 

Investment commercial real estate

 

 

18,655

 

 

 

—

 

 

 

983,263

 

 

 

14,248

 

 

 

1,001,918

 

 

 

14,248

 

Commercial and industrial

 

 

—

 

 

 

—

 

 

 

616,838

 

 

 

9,839

 

 

 

616,838

 

 

 

9,839

 

Lease financing

 

 

—

 

 

 

—

 

 

 

172,643

 

 

 

1,772

 

 

 

172,643

 

 

 

1,772

 

Farmland/agricultural production

 

 

—

 

 

 

—

 

 

 

149

 

 

 

2

 

 

 

149

 

 

 

2

 

Commercial construction loans

 

 

—

 

 

 

—

 

 

 

86

 

 

 

1

 

 

 

86

 

 

 

1

 

Consumer and other loans

 

 

—

 

 

 

—

 

 

 

65,180

 

 

 

384

 

 

 

65,180

 

 

 

384

 

Total ALLL

 

$

31,300

 

 

$

262

 

 

$

3,893,012

 

 

$

38,242

 

 

$

3,924,312

 

 

$

38,504

 

 

Impaired loans include nonaccrual loans of $29.4 million at September 30, 2019 and $25.7 million at December 31, 2018. Impaired loans also include performing TDR loans of $2.5 million at September 30, 2019 and $4.3 million at December 31, 2018.  At September 30, 2019, the allowance allocated to TDR loans totaled $1.2 million, all of which was allocated to nonaccrual loans.  At December 31, 2018, the allowance allocated to TDR loans totaled $262 thousand, of which $161 thousand was allocated to nonaccrual loans.  All accruing TDR loans were paying in accordance with restructured terms as of September 30, 2019.  The Company has not committed to lend additional amounts as of September 30, 2019 to customers with outstanding loans that are classified as TDR loans.

The following tables present loans individually evaluated for impairment by class of loans as of September 30, 2019 and December 31, 2018 (The average impaired loans on the following tables represent year to date impaired loans.):

 

 

September 30, 2019

 

 

 

Unpaid

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

Principal

 

 

Recorded

 

 

Specific

 

 

Impaired

 

(In thousands)

 

Balance

 

 

Investment

 

 

Reserves

 

 

Loans

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary residential mortgage

 

$

7,456

 

 

$

6,255

 

 

$

—

 

 

$

7,528

 

Owner-occupied commercial real estate

 

 

461

 

 

 

395

 

 

 

—

 

 

 

1,337

 

Investment commercial real estate

 

 

9,694

 

 

 

8,169

 

 

 

—

 

 

 

16,103

 

Home equity lines of credit

 

 

5

 

 

 

3

 

 

 

—

 

 

 

101

 

Junior lien loan on residence

 

 

95

 

 

 

24

 

 

 

—

 

 

 

32

 

Total loans with no related allowance

 

$

17,711

 

 

$

14,846

 

 

$

—

 

 

$

25,101

 

With related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary residential mortgage

 

$

983

 

 

$

983

 

 

$

237

 

 

$

1,074

 

Investment commercial real estate

 

 

15,064

 

 

 

14,507

 

 

 

1,000

 

 

 

1,612

 

Commercial and industrial

 

 

6,397

 

 

 

6,291

 

 

 

1,500

 

 

 

2,856

 

Total loans with related allowance

 

$

22,444

 

 

$

21,781

 

 

$

2,737

 

 

$

5,542

 

Total loans individually evaluated for Impairment

 

$

40,155

 

 

$

36,627

 

 

$

2,737

 

 

$

30,643

 

 

 

 

December 31, 2018

 

 

 

Unpaid

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

Principal

 

 

Recorded

 

 

Specific

 

 

Impaired

 

(In thousands)

 

Balance

 

 

Investment

 

 

Reserves

 

 

Loans

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary residential mortgage

 

$

9,789

 

 

$

8,502

 

 

$

—

 

 

$

8,042

 

Owner-occupied commercial real estate

 

 

2,741

 

 

 

1,574

 

 

 

—

 

 

 

2,025

 

Investment commercial real estate

 

 

20,179

 

 

 

18,655

 

 

 

—

 

 

 

13,999

 

Home equity lines of credit

 

 

257

 

 

 

255

 

 

 

—

 

 

 

123

 

Junior lien loan on residence

 

 

102

 

 

 

36

 

 

 

—

 

 

 

45

 

Multifamily property

 

 

1,262

 

 

 

1,262

 

 

 

—

 

 

 

105

 

Total loans with no related allowance

 

$

34,330

 

 

$

30,284

 

 

$

—

 

 

$

24,339

 

With related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary residential mortgage

 

$

1,016

 

 

$

1,016

 

 

$

262

 

 

$

1,144

 

Total loans with related allowance

 

$

1,016

 

 

$

1,016

 

 

$

262

 

 

$

1,144

 

Total loans individually evaluated for impairment

 

$

35,346

 

 

$

31,300

 

 

$

262

 

 

$

25,483

 

 

Interest income recognized on impaired loans for the quarters ended September 30, 2019 and 2018 was not material.  The Company did not recognize any income on nonaccruing impaired loans for the three and nine months ended September 30, 2019 and 2018.

The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of September 30, 2019 and December 31, 2018:

 

 

September 30, 2019

 

 

 

 

 

 

 

Loans Past Due

 

 

 

 

 

 

 

Over 90 Days

 

 

 

 

 

 

 

And Still

 

(In thousands)

 

Nonaccrual

 

 

Accruing Interest

 

Primary residential mortgage

 

$

4,710

 

 

$

—

 

Home equity lines of credit

 

 

3

 

 

 

—

 

Junior lien loan on residence

 

 

24

 

 

 

—

 

Owner-occupied commercial real estate

 

 

395

 

 

 

—

 

Investment commercial real estate

 

 

17,960

 

 

 

—

 

Commercial and industrial

 

 

6,291

 

 

 

—

 

Total

 

$

29,383

 

 

$

—

 

 

 

 

December 31, 2018

 

 

 

 

 

 

 

Loans Past Due

 

 

 

 

 

 

 

Over 90 Days

 

 

 

 

 

 

 

And Still

 

(In thousands)

 

Nonaccrual

 

 

Accruing Interest

 

Primary residential mortgage

 

$

5,215

 

 

$

—

 

Home equity lines of credit

 

 

235

 

 

 

—

 

Junior lien loan on residence

 

 

36

 

 

 

—

 

Owner-occupied commercial real estate

 

 

1,574

 

 

 

—

 

Investment commercial real estate

 

 

18,655

 

 

 

—

 

Total

 

$

25,715

 

 

$

—

 

 

The following tables present the aging of the recorded investment in past due loans as of September 30, 2019 and December 31, 2018 by class of loans, excluding nonaccrual loans:

 

 

September 30, 2019

 

 

 

30-59

 

 

60-89

 

 

Greater Than

 

 

 

 

 

 

 

Days

 

 

Days

 

 

90 Days

 

 

Total

 

(In thousands)

 

Past Due

 

 

Past Due

 

 

Past Due

 

 

Past Due

 

Primary residential mortgage

 

$

1,335

 

 

$

—

 

 

$

—

 

 

$

1,335

 

Home equity lines of credit

 

 

258

 

 

 

—

 

 

$

—

 

 

$

258

 

Owner-occupied commercial real estate

 

 

4,313

 

 

 

—

 

 

 

—

 

 

 

4,313

 

Commercial and industrial

 

 

342

 

 

 

85

 

 

 

—

 

 

 

427

 

Total

 

$

6,248

 

 

$

85

 

 

$

—

 

 

$

6,333

 

 

 

 

December 31, 2018

 

 

 

30-59

 

 

60-89

 

 

Greater Than

 

 

 

 

 

 

 

Days

 

 

Days

 

 

90 Days

 

 

Total

 

(In thousands)

 

Past Due

 

 

Past Due

 

 

Past Due

 

 

Past Due

 

Primary residential mortgage

 

$

606

 

 

$

491

 

 

$

—

 

 

$

1,097

 

Consumer and other loans

 

 

2

 

 

 

—

 

 

 

—

 

 

 

2

 

Total

 

$

608

 

 

$

491

 

 

$

—

 

 

$

1,099

 

Credit Quality Indicators:

The Company places all commercial loans into various credit risk rating categories based on an assessment of the expected ability of the borrowers to properly service their debt.  The assessment considers numerous factors including, but not limited to, current financial information on the borrower, historical payment experience, strength of any guarantor, nature of and value of any collateral, acceptability of the loan structure and documentation, relevant public information and current economic trends.  This credit risk rating analysis is performed when the loan is initially underwritten and then annually based on set criteria in the loan policy.  

In addition, the Bank has engaged an independent loan review firm to validate risk ratings and to ensure compliance with our policies and procedures.  This review of the following types of loans is performed quarterly:

 

•

A majority of relationships or new lending to existing relationships greater than $1,000,000;

 

•

All criticized and classified rated borrowers with relationship exposure of more than $500,000;  

 

•

A random sample of borrowers with relationships less than $1,000,000;

 

•

All leveraged loans of $1,000,000 or greater;

 

•

At least two borrowing relationships managed by each commercial banker;

 

•

Any new Regulation “O” loan commitments over $1,000,000;

 

•

No borrower with commitments of less than $250,000;

 

•

Any other credits requested by Bank senior management or a member of the Board of Directors and any borrower for which the reviewer determines a review is warranted based upon knowledge of the portfolio, local events, industry stresses, etc.

The Company uses the following regulatory definitions for criticized and classified risk ratings:

Special Mention:  These loans have a potential weakness that deserves Management’s close attention.  If left uncorrected, the potential weaknesses may result in deterioration of the repayment prospects for the loans or of the institution’s credit position at some future date.

Substandard:  These loans 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.

Doubtful: These loans have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently existing facts, conditions and values.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.  

Loans that are considered to be impaired are individually evaluated for potential loss and allowance adequacy.  Loans not deemed impaired are collectively evaluated for potential loss and allowance adequacy.  

As of September 30, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

 

 

 

 

 

 

Special

 

 

 

 

 

 

 

 

 

(In thousands)

 

Pass

 

 

Mention

 

 

Substandard

 

 

Doubtful

 

Primary residential mortgage

 

$

578,247

 

 

$

861

 

 

$

7,296

 

 

$

—

 

Home equity lines of credit

 

 

58,422

 

 

 

—

 

 

 

3

 

 

 

—

 

Junior lien loan on residence

 

 

7,039

 

 

 

—

 

 

 

24

 

 

 

—

 

Multifamily property

 

 

1,196,366

 

 

 

—

 

 

 

727

 

 

 

—

 

Owner-occupied commercial real estate

 

 

253,475

 

 

 

—

 

 

 

5,088

 

 

 

—

 

Investment commercial real estate

 

 

998,506

 

 

 

12,740

 

 

 

33,484

 

 

 

—

 

Commercial and industrial

 

 

689,281

 

 

 

8,185

 

 

 

7,260

 

 

 

—

 

Lease financing

 

 

233,918

 

 

 

—

 

 

 

—

 

 

 

—

 

Farmland/agricultural production

 

 

3,059

 

 

 

—

 

 

 

—

 

 

 

—

 

Commercial construction loans

 

 

4,495

 

 

 

84

 

 

 

—

 

 

 

—

 

Consumer and other loans

 

 

57,271

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

4,080,079

 

 

$

21,870

 

 

$

53,882

 

 

$

—

 

 

As of December 31, 2018, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

 

 

 

 

 

 

Special

 

 

 

 

 

 

 

 

 

(In thousands)

 

Pass

 

 

Mention

 

 

Substandard

 

 

Doubtful

 

Primary residential mortgage

 

$

590,372

 

 

$

943

 

 

$

9,576

 

 

$

—

 

Home equity lines of credit

 

 

61,936

 

 

 

—

 

 

 

255

 

 

 

—

 

Junior lien loan on residence

 

 

7,382

 

 

 

—

 

 

 

36

 

 

 

—

 

Multifamily property

 

 

1,130,926

 

 

 

3,263

 

 

 

1,616

 

 

 

—

 

Owner-occupied commercial real estate

 

 

255,417

 

 

 

249

 

 

 

5,527

 

 

 

—

 

Investment commercial real estate

 

 

948,300

 

 

 

20,756

 

 

 

32,862

 

 

 

—

 

Commercial and industrial

 

 

608,262

 

 

 

417

 

 

 

8,159

 

 

 

—

 

Lease financing

 

 

172,643

 

 

 

—

 

 

 

—

 

 

 

—

 

Farmland/agricultural production

 

 

149

 

 

 

—

 

 

 

—

 

 

 

—

 

Commercial construction loans

 

 

—

 

 

 

86

 

 

 

—

 

 

 

—

 

Consumer and other loans

 

 

64,946

 

 

 

—

 

 

 

234

 

 

 

—

 

Total

 

$

3,840,333

 

 

$

25,714

 

 

$

58,265

 

 

$

—

 

At September 30, 2019, $36.6 million of substandard loans were also considered impaired, compared to December 31, 2018, when $31.2 million of substandard loans were also impaired.

The activity in the allowance for loan and lease losses for the three months ended September 30, 2019 is summarized below:

 

 

 

July 1,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

 

 

Beginning

 

 

 

 

 

 

 

 

 

 

Provision

 

 

Ending

 

(In thousands)

 

ALLL

 

 

Charge-offs

 

 

Recoveries

 

 

(Credit)

 

 

ALLL

 

Primary residential mortgage

 

$

3,057

 

 

$

—

 

 

$

—

 

 

$

(568

)

 

$

2,489

 

Home equity lines of credit

 

 

155

 

 

 

—

 

 

 

3

 

 

 

(13

)

 

 

145

 

Junior lien loan on residence

 

 

15

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

15

 

Multifamily property

 

 

5,744

 

 

 

—

 

 

 

—

 

 

 

491

 

 

 

6,235

 

Owner-occupied commercial real estate

 

 

2,497

 

 

 

—

 

 

 

996

 

 

 

(1,221

)

 

 

2,272

 

Investment commercial real estate

 

 

14,650

 

 

 

—

 

 

 

—

 

 

 

1,095

 

 

 

15,745

 

Commercial and industrial

 

 

11,463

 

 

 

—

 

 

 

4

 

 

 

438

 

 

 

11,905

 

Lease financing

 

 

1,888

 

 

 

—

 

 

 

—

 

 

 

508

 

 

 

2,396

 

Farmland/agricultural production

 

 

2

 

 

 

—

 

 

 

—

 

 

 

37

 

 

 

39

 

Commercial construction loans

 

 

1

 

 

 

—

 

 

 

—

 

 

 

23

 

 

 

24

 

Consumer and other loans

 

 

319

 

 

 

(15

)

 

 

1

 

 

 

10

 

 

 

315

 

Total ALLL

 

$

39,791

 

 

$

(15

)

 

$

1,004

 

 

$

800

 

 

$

41,580

 

The activity in the allowance for loan and lease losses for the three months ended September 30, 2018 is summarized below:

 

 

 

July 1,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

 

 

Beginning

 

 

 

 

 

 

 

 

 

 

Provision

 

 

Ending

 

(In thousands)

 

ALLL

 

 

Charge-offs

 

 

Recoveries

 

 

(Credit)

 

 

ALLL

 

Primary residential mortgage

 

$

4,382

 

 

$

(10

)

 

$

—

 

 

$

(240

)

 

$

4,132

 

Home equity lines of credit

 

 

190

 

 

 

—

 

 

 

3

 

 

 

4

 

 

 

197

 

Junior lien loan on residence

 

 

17

 

 

 

—

 

 

 

6

 

 

 

(7

)

 

 

16

 

Multifamily property

 

 

8,259

 

 

 

—

 

 

 

—

 

 

 

(604

)

 

 

7,655

 

Owner-occupied commercial real estate

 

 

2,525

 

 

 

—

 

 

 

—

 

 

 

(138

)

 

 

2,387

 

Investment commercial real estate

 

 

13,659

 

 

 

(1,335

)

 

 

4

 

 

 

463

 

 

 

12,791

 

Commercial and industrial

 

 

7,356

 

 

 

—

 

 

 

85

 

 

 

744

 

 

 

8,185

 

Lease financing

 

 

1,311

 

 

 

—

 

 

 

—

 

 

 

238

 

 

 

1,549

 

Farmland/agricultural production

 

 

2

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

Commercial construction loans

 

 

1

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

Consumer and other loans

 

 

364

 

 

 

(27

)

 

 

1

 

 

 

40

 

 

 

378

 

Total ALLL

 

$

38,066

 

 

$

(1,372

)

 

$

99

 

 

$

500

 

 

$

37,293

 

 

The activity in the allowance for loan and lease losses for the nine months ended September 30, 2019 is summarized below:

 

 

 

January 1,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

 

 

Beginning

 

 

 

 

 

 

 

 

 

 

Provision

 

 

Ending

 

(In thousands)

 

ALLL

 

 

Charge-offs

 

 

Recoveries

 

 

(Credit)

 

 

ALLL

 

Primary residential mortgage

 

$

3,506

 

 

$

(80

)

 

$

51

 

 

$

(988

)

 

$

2,489

 

Home equity lines of credit

 

 

164

 

 

 

—

 

 

 

8

 

 

 

(27

)

 

 

145

 

Junior lien loan on residence

 

 

15

 

 

 

—

 

 

 

11

 

 

 

(11

)

 

 

15

 

Multifamily property

 

 

5,959

 

 

 

—

 

 

 

—

 

 

 

276

 

 

 

6,235

 

Owner-occupied commercial real estate

 

 

2,614

 

 

 

—

 

 

 

1,060

 

 

 

(1,402

)

 

 

2,272

 

Investment commercial real estate

 

 

14,248

 

 

 

—

 

 

 

—

 

 

 

1,497

 

 

 

15,745

 

Commercial and industrial

 

 

9,839

 

 

 

—

 

 

 

13

 

 

 

2,053

 

 

 

11,905

 

Lease financing

 

 

1,772

 

 

 

—

 

 

 

—

 

 

 

624

 

 

 

2,396

 

Farmland/agricultural production

 

 

2

 

 

 

—

 

 

 

—

 

 

 

37

 

 

 

39

 

Commercial construction loans

 

 

1

 

 

 

—

 

 

 

—

 

 

 

23

 

 

 

24

 

Consumer and other loans

 

 

384

 

 

 

(40

)

 

 

3

 

 

 

(32

)

 

 

315

 

Total ALLL

 

$

38,504

 

 

$

(120

)

 

$

1,146

 

 

$

2,050

 

 

$

41,580

 

The activity in the allowance for loan and lease losses for the nine months ended September 30, 2018 is summarized below:

 

 

 

January 1,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

 

 

Beginning

 

 

 

 

 

 

 

 

 

 

Provision

 

 

Ending

 

(In thousands)

 

ALLL

 

 

Charge-offs

 

 

Recoveries

 

 

(Credit)

 

 

ALLL

 

Primary residential mortgage

 

$

4,085

 

 

$

(87

)

 

$

139

 

 

$

(5

)

 

$

4,132

 

Home equity lines of credit

 

 

221

 

 

 

—

 

 

 

7

 

 

 

(31

)

 

 

197

 

Junior lien loan on residence

 

 

12

 

 

 

—

 

 

 

61

 

 

 

(57

)

 

 

16

 

Multifamily property

 

 

10,007

 

 

 

—

 

 

 

—

 

 

 

(2,352

)

 

 

7,655

 

Owner-occupied commercial real estate

 

 

2,385

 

 

 

(64

)

 

 

66

 

 

 

—

 

 

 

2,387

 

Investment commercial real estate

 

 

11,933

 

 

 

(1,335

)

 

 

4

 

 

 

2,189

 

 

 

12,791

 

Commercial and industrial

 

 

6,563

 

 

 

(46

)

 

 

107

 

 

 

1,561

 

 

 

8,185

 

Lease financing

 

 

884

 

 

 

—

 

 

 

—

 

 

 

665

 

 

 

1,549

 

Farmland/agricultural production

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

 

 

2

 

Commercial construction loans

 

 

1

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

Consumer and other loans

 

 

349

 

 

 

(52

)

 

 

3

 

 

 

78

 

 

 

378

 

Total ALLL

 

$

36,440

 

 

$

(1,584

)

 

$

387

 

 

$

2,050

 

 

$

37,293

 

 

Troubled Debt Restructurings:

The Company has allocated $1.2 million and $262 thousand of specific reserves on TDRs to customers whose loan terms have been modified in TDRs as of September 30, 2019 and December 31, 2018, respectively.  There were no unfunded commitments to lend additional amounts to customers with outstanding loans that are classified as TDRs.

The terms of certain loans were modified as TDRs when one or a combination of the following occurred:  a reduction of the stated interest rate of the loan; the maturity date was extended; or some other modification or extension occurred which would not be readily available in the market.

The following table presents loans by class modified as TDRs during both the three and nine-month periods ended September 30, 2019:

 

 

 

 

 

 

Pre-Modification

 

 

Post-Modification

 

 

 

 

 

 

 

Outstanding

 

 

Outstanding

 

 

 

Number of

 

 

Recorded

 

 

Recorded

 

(Dollars in thousands)

 

Contracts

 

 

Investment

 

 

Investment

 

Primary residential mortgage

 

 

1

 

 

$

341

 

 

$

341

 

Total

 

 

1

 

 

$

341

 

 

$

341

 

The following table presents loans by class modified as TDRs during the three-month period ended September 30, 2018:

 

 

 

 

 

 

 

Pre-Modification

 

 

Post-Modification

 

 

 

 

 

 

 

Outstanding

 

 

Outstanding

 

 

 

Number of

 

 

Recorded

 

 

Recorded

 

(Dollars in thousands)

 

Contracts

 

 

Investment

 

 

Investment

 

Primary residential mortgage

 

 

1

 

 

$

766

 

 

$

766

 

Total

 

 

1

 

 

$

766

 

 

$

766

 

The following table presents loans by class modified as TDRs during the nine-month period ended September 30, 2018:

 

 

 

 

 

 

Pre-Modification

 

 

Post-Modification

 

 

 

 

 

 

 

Outstanding

 

 

Outstanding

 

 

 

Number of

 

 

Recorded

 

 

Recorded

 

(Dollars in thousands)

 

Contracts

 

 

Investment

 

 

Investment

 

Primary residential mortgage

 

 

1

 

 

$

766

 

 

$

766

 

Investment commercial real estate

 

 

1

 

 

 

15,351

 

 

 

15,351

 

Total

 

 

2

 

 

$

16,117

 

 

$

16,117

 

The identification of the TDRs did not have a significant impact on the allowance for loan and lease losses.  

 

There were no loans that were modified as TDRs for which there was a payment default within twelve months of modification, during the three and nine months ended September 30, 2019 and September 30, 2018.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.  This evaluation is performed under the Company’s internal underwriting policy. The modification of the terms of such loans may include one or more of the following: (1) a reduction of the stated interest rate of the loan to a rate that is lower than the current market rate for new debt with similar risk; (2) an extension of an interest only period for a predetermined period of time; (3) an extension of the maturity date; or (4) an extension of the amortization period over which future payments will be computed.  At the time a loan is restructured, the Bank performs a full re-underwriting analysis, which includes, at a minimum, obtaining current financial statements and tax returns, copies of all leases, and an updated independent appraisal of the property. A loan will continue to accrue interest if it can be reasonably determined that the borrower should be able to perform under the modified terms, that the loan has not been chronically delinquent (both to debt service and real estate taxes) or in nonaccrual status since its inception, and that there have been no charge-offs on the loan.  Restructured loans with previous charge-offs would not accrue interest at the time of the TDR. At a minimum, six consecutive months of contractual payments would need to be made on a restructured loan before returning it to accrual status. Once a loan is classified as a TDR, the loan is reported as a TDR until the loan is paid in full, sold or charged-off.  In rare circumstances, a loan may be removed from TDR status if it meets the requirements of ASC 310-40-50-2.