1.
|
We note your response to prior comment 1 related to your equity securities that have been in an unrealized loss position for greater than twelve months. Please revise your impairment analyses to address the following:
|
a.
|
We call your attention to the respective time periods that your underwater equity securities presented in response to bullet point (a) have been in a continuous unrealized loss position. Please note that the length of time that an equity security’s fair value has been below cost should be a significant factor considered in your impairment analysis (ASC 320-10-S99-1). In general, your individual narrative discussions of positive and negative evidence for each equity security presented appears to be inappropriately weighted to discount the significant negative objective evidence of the length of time the security has been in an unrealized loss position. Similarly, the analysis does not appear to recognize the fact that a security which is impaired solely due to general negative economic trends and conditions such as those in recent years can be considered other than temporarily impaired based on the duration and severity of the impairment, among other factors, after taking into consideration an entity’s specific cost basis.
|
b.
|
You also appear to be basing your other-than-temporarily analysis on the weighted-average cost of your equity securities. Please revise your analysis and disclosure to focus on the cost basis/unrealized loss of each purchase separately or provide us accounting guidance to support your position.
|
c.
|
In general, as the length of time that an equity security has been in a continuous unrealized loss position increases, the level of objective evidence required to support that the security is not other-than-temporarily impaired also increases. Once again, we call your attention to the length of time many of your securities have been in a continuous unrealized loss position.
|
d.
|
Your response appears to indicate that you only consider equity securities that have been in an unrealized loss position as a percentage of amortized cost of 30% or more for an other-than-temporary impairment charge. Please note that ASC 320-10-S99-1 specifically states that “unless evidence exists to support a realizable value equal to or greater than the carrying value of the investment in equity securities…a write-down to fair value accounted for as a realized loss should be recorded.” Please tell us how you considered this guidance in your analysis, including the specific objective evidence you used to overcome the fact that sixteen of your securities were underwater as of December 31, 2010.
|
e.
|
Your response indicates that you consider whether you have the intent and ability to hold underwater equity securities for a “reasonable period” of time sufficient for recovery of the fair value up to or beyond the cost of the investment. Please tell us how you define “reasonable period” of time as used in your analysis. Further, your analysis appears to omit objective evidence that would be required to project a recovery in a reasonable period of twelve months. Instead it appears to rely primarily on subjective evidence such as projected stock price and assumptions of earnings projections. This approach seems overly simplistic and does not appear to reflect the fact that a security’s sensitivity to current economic conditions does not preclude a security from being other-than-temporarily impaired as noted in the guidance. Further, your response is silent on the basis of your ability at December 31, 2010 to provide objective evidence that the fair value of these securities will recover to its cost basis within twelve months. To the extent that you possess such objective evidence, please provide us with your revised impairment analyses. Otherwise, please revise your conclusions accordingly.
|
1.
|
Recently purchased common stocks with minimal change in value and, therefore, excluded from further consideration of OTTI.
|
2.
|
Common stocks that, although in a loss position at December 31, 2010, had demonstrated significant improvement in price over the previous 12- and 24- month periods. Based on this improvement and our understanding of the fundamental strengths of the investee companies, we concluded that the impairment of these securities was temporary as of December 31, 2010.
|
3.
|
Remaining common stocks that have been in a continuous loss position for more than twelve months at December 31, 2010.
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
Date
|
Book Value Equities
|
Market Value Equities
|
Gross Unrealized Gain (Loss)
|
Total Assets
|
Book Value of Equities to Total Assets
|
Total Capital to Risk Weighted Assets
|
||||
(Dollars in Thousands)
|
||||||||||
6/30/2010
|
561
|
379
|
(182)
|
584,039
|
0.10%
|
23.40%
|
||||
12/31/2010
|
1,066
|
935
|
(132)
|
565,290
|
0.19%
|
24.30%
|
2.
|
We note that the effective date section of the summary of ASU 2010-20 encourages, but does not require, comparative financial disclosure for earlier periods. We note you did not provide comparative information for many of your credit quality disclosures. To the extent the information required for comparative disclosure is readily available, please consider providing comparative disclosure in all future filings considering the significant benefit this information provides investors and the objective of the ASU.
|
3.
|
Please revise future filings to disclose all of the information required by ASU 2010-20 in the notes to your financial statements as opposed to your MD&A.
|
4.
|
Please revise future filings to describe your policy for charging off uncollectible financing receivables by loan portfolio segment. Refer to ASC 310-10-50-11B(b) for guidance.
|
5.
|
Please revise your Summary of Past Due and Non-Accrual Loans tabular disclosure in future filings to further breakout the amounts included in the 30-89 days past due bucket into loans past due 30-59 days and loans past due 60-89 days. Refer to ASC 310-10-55-9 for guidance.
|
March 31, 2011
|
|||||||
30-59 Days
Past Due
|
60-89 Days
Past Due
|
90 Days
or Greater
|
Total
Past Due
|
Past Due 90
Days or More
and Still Accruing
|
Loans on
Non-accrual
|
||
(In Thousands)
|
|||||||
Mortgage loans on real estate:
1-4 family residential
Commercial real estate
|
$ [***]
[***]
|
$ [***]
[***]
|
$ [***]
[***]
|
$ [***]
[***]
|
$ [***]
[***]
|
$ [***]
[***]
|
|
Home equity:
First lien
Second lien
|
[***]
[***]
|
[***]
[***]
|
[***]
[***]
|
[***]
[***]
|
[***]
[***]
|
[***]
[***]
|
|
Construction:
Residential construction
Commercial construction
|
[***]
[***]
|
[***]
[***]
|
[***]
[***]
|
[***]
[***]
|
[***]
[***]
|
[***]
[***]
|
|
Commercial
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
|
Consumer:
Manufactured homes
Other
|
[***]
[***]
|
[***]
[***]
|
[***]
[***]
|
[***]
[***]
|
[***]
[***]
|
[***]
[***]
|
|
Total
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
6.
|
Please tell us and revise future filings to disclose your policy for determining past due or delinquency loan status as required by paragraph (e) of ASC 310-10-50-6.
|
7.
|
You disclose that you keep loans on non-accrual status until the borrower can demonstrate their ability to make payments according to their loan terms. Please tell us in detail and revise future filings to describe what you mean by “demonstrate their ability.” To this extent, please clarify whether the borrower must make payments in accordance with the loan terms for a specific period of time (e.g. three months, six months) or whether you use another metric to conclude that the loan should be reclassified to current.
|
8.
|
Please revise future filings to disclose the information required by ASC 310-10-50-15(c)(1), (2) and (3) for each period for which results of operations are presented. Please note that this information was required prior to ASU 2010-20.
|
For the Three Months Ended March 31, 2011
|
|||||||||||
1-4 Family
Residential
|
Commercial Real Estate
|
Home Equity First Lien
|
Home Equity Second Lien
|
Residential Construction
|
Commercial Construction
|
Commercial
|
Manufactured
Homes
|
Other
Consumer
|
|||
(In Thousands)
|
|||||||||||
Average investment in impaired loans
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
||
Interest income recognized on impaired loans
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
||
Interest income recognized on a cash basis on impaired loans
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
SEC Staff Comment Number 9
|
9.
|
Please revise future filings to disclose the amount of interest income that represents the change in present value attributable to the passage of time or disclose that you recognize this amount as bad-debt expense. Refer to ASC 310-10-50-19.
|
10.
|
We note your response and proposed disclosure to prior comment 2. Please address the following:
|
a.
|
On page 17, you disclose that you had impaired 1-4 family residential mortgage loans of $2,166,000 at December 31, 2010. Please tell us in detail and revise future filings to discuss whether you obtain appraisals for these loans individually evaluated for impairment. If you do not obtain appraisals, please discuss how you measure impairment. If you do obtain appraisals, given the significant decline in the residential real estate market in the last few years, please discuss the average age of your appraisals.
|
b.
|
You state that there are situations where you may make adjustments to the appraised value of commercial real estate loans if facts and circumstances warrant. Please further revise your proposed disclosure to clarify whether any of these adjustments increase the value of the appraised property. If so, please also describe the specific facts and circumstances in which you would increase the appraised value.
|
a.
|
When 1-4 family residential mortgage loans become impaired, the collateral value is generally determined by obtaining the current tax assessed value, discounted by 10%. As a practical expedient the Company believes this is a reliable source of valuation as assessments are periodically updated by the cities and towns. If the impaired loan is being actively marketed, the Company uses the realtor’s market analysis or listing price discounted by 10% and less 5% for realtor commission, instead of the tax assessment. We apply a discount based on management’s historical knowledge, expertise and or to account for changes in market conditions from the time of valuation. In the event the Company has an appraisal on hand that is less than twelve months old, then the Company will use that appraisal to determine the collateral value.
|
b.
|
For commercial real estate loans, the Company obtains an appraisal when the loan is originated. An updated appraisal is obtained by the Company if the loan becomes impaired and if the Company will use the collateral dependency method to measure the impairment, as well as when a loan goes into foreclosure. On a quarterly basis, management’s Loan Review Committee reviews non-accrual and classified loans and ensures that all collateral dependent impaired loans have current appraisals within the preceding eighteen months. Because the appraisals are current, adjustments are limited in nature. There are situations where the Company may make adjustments to the appraisal in which the Company may decrease the appraised value if facts and circumstances warrant. The Company does not make any adjustments that would increase the appraised value.
|
11.
|
Please revise future filings to disclose your policy for recording payments received on non-accrual loans as required by paragraph (b) of ASC 310-10-50-6.
|
12.
|
Please revise future filings to disclose both the balance of your allowance for loan losses and your recorded investment in financing receivables by impairment method (e.g. collectively evaluated, individually evaluated, acquired with deteriorated credit quality) for each loan portfolio segment as required by paragraphs (g) and (h) of ASC 310-10-50-11B. Refer to the example disclosure in ASC 310-10-55-7 for guidance.
|
Allowance for Loan Losses and Recorded Investment in Financing Receivables For the Three Months Ended March 31, 2011
|
||||||||||
1-4 Family
Residential
|
Commercial
Real Estate
|
Home
Equity
First Lien
|
Home
Equity
Second Lien
|
Residential
Construction
|
Commercial
Construction
|
Commercial
|
Manufactured
Homes
|
Other
Consumer
|
||
Allowance for loan losses:
|
||||||||||
Beginning balance
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
$[***]
|
|
Charge-offs
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
|
Recoveries
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
|
Provision
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
|
Ending balance
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
|
Ending balance: individually evaluated for impairment
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
|
Ending balance: collectively evaluated for impairment
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
|
Financing receivables:
|
||||||||||
Ending balance:
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
|
Ending balance: individually evaluated for impairment
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
|
Ending balance: collectively evaluated for impairment
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
$ [***]
|
13.
|
Please revise future filings to disclose your policy for recognizing interest income and how cash receipts are recorded on impaired loans as required by paragraph (b) of ASC 310-10-50-15.
|
Hampden Bancorp, Inc.
|
Exhibit 1
|
||||||||||
Equity Securities Held
|
|||||||||||
December 31, 2010
|
|||||||||||
Issuer
|
Cost
|
Market Value
|
Gross Unrealized Gain/(Loss)
|
% Unrealized Loss
|
Months of Continuous Loss
|
Average Cost Per Share *(1)
|
Market Price Per Share
|
% Change In Market Value Last 12 Months
|
% Change in Market Value Last 24 Months
|
Projected 12 Month
Market Price
|
Projected 24 Month
Market Price
|
Unrealized Gains and Continuous Lossess less than 12 months
|
|||||||||||
General Mills Inc
|
51,100
|
49,826
|
(1,274)
|
-2%
|
<1
|
36.5
|
35.59
|
N/A
|
N/A
|
||
Johnson & Johnson
|
50,448
|
49,480
|
(968)
|
-2%
|
<1
|
63.06
|
61.85
|
N/A
|
N/A
|
||
McDonald's Corp
|
50,297
|
49,894
|
(403)
|
-1%
|
<1
|
77.38
|
76.76
|
N/A
|
N/A
|
||
At&T Inc
|
50,303
|
49,946
|
(357)
|
-1%
|
<1
|
29.59
|
29.38
|
N/A
|
N/A
|
||
Kraft Foods Inc
|
50,480
|
50,416
|
(64)
|
0%
|
<1
|
31.55
|
31.51
|
N/A
|
N/A
|
||
Abbott Labortories
|
50,358
|
50,306
|
(53)
|
0%
|
<1
|
47.96
|
47.91
|
N/A
|
N/A
|
||
Lockheed Martin Corp
|
48,972
|
48,937
|
(35)
|
0%
|
<1
|
69.96
|
69.91
|
N/A
|
N/A
|
||
Waste Management Inc
|
51,198
|
51,618
|
420
|
1%
|
<1
|
36.57
|
36.87
|
N/A
|
N/A
|
||
Procter & Gamble Co
|
50,960
|
51,464
|
504
|
1%
|
N/A
|
63.7
|
64.33
|
N/A
|
N/A
|
||
Clorox Co
|
50,080
|
50,624
|
544
|
1%
|
N/A
|
62.6
|
63.28
|
N/A
|
N/A
|
||
Metlife, Inc
|
27,020
|
31,108
|
4,088
|
15%
|
N/A
|
38.61
|
44.44
|
26%
|
27%
|
||
Bank of America Corp
|
24,516
|
36,018
|
11,502
|
47%
|
N/A
|
9.08
|
13.34
|
-11%
|
1%
|
||
Continuous Loss Greater than 12 months - share price rising
|
|||||||||||
Lowe's Companies Inc
|
50,485
|
40,128
|
(10,357)
|
-21%
|
47
|
31.55
|
25.08
|
7%
|
17%
|
||
Metlife, Inc
|
49,392
|
31,108
|
(18,284)
|
-37%
|
39
|
70.56
|
44.44
|
26%
|
27%
|
||
Walgreen Co
|
50,693
|
42,856
|
(7,837)
|
-15%
|
45
|
46.08
|
38.96
|
6%
|
58%
|
||
Comcast Corp
|
50,363
|
46,137
|
(4,226)
|
-8%
|
39
|
23.98
|
21.97
|
30%
|
30%
|
||
The Home Depot, Inc
|
49,445
|
45,578
|
(3,867)
|
-8%
|
64
|
38.03
|
35.06
|
21%
|
52%
|
||
Thermo Fisher
|
51,566
|
49,824
|
(1,742)
|
-3%
|
28
|
57.3
|
55.36
|
16%
|
62%
|
||
Continuous Loss Greater than 12 months - remainder
|
|||||||||||
Bank of America Corp
|
75,531
|
22,678
|
(52,853)
|
-70%
|
38
|
44.43
|
13.34
|
-11%
|
1%
|
31.09
|
42.53
|
Medtronic, Inc
|
76,853
|
48,217
|
(28,636)
|
-37%
|
60
|
59.12
|
37.09
|
-16%
|
18%
|
58.70
|
63.29
|
Amgen Inc
|
55,445
|
38,430
|
(17,015)
|
-31%
|
61
|
79.21
|
54.90
|
-3%
|
-5%
|
74.71
|
81.50
|
Total
|
1,065,505
|
934,593
|
(130,913)
|
||||||||