| Allowance for Loan Losses |
NOTE 6: ALLOWANCE FOR LOAN LOSSES
The following is a roll forward of the Bank’s allowance for loan losses for the following periods:
|
(dollars in thousands) |
|
Beginning
Balance |
|
|
Provision for
Loan Losses |
|
|
Charge-offs |
|
|
Recoveries |
|
|
Ending
Balance |
|
|
Quarter Ended September 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
8,702 |
|
|
$ |
(575 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
8,127 |
|
|
Commercial properties |
|
|
4,560 |
|
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
4,565 |
|
|
Land |
|
|
471 |
|
|
|
102 |
|
|
|
— |
|
|
|
— |
|
|
|
573 |
|
|
Commercial and industrial loans |
|
|
6,261 |
|
|
|
648 |
|
|
|
(1,279 |
) |
|
|
1,407 |
|
|
|
7,037 |
|
|
Consumer loans |
|
|
206 |
|
|
|
(8 |
) |
|
|
— |
|
|
|
— |
|
|
|
198 |
|
|
Total |
|
$ |
20,200 |
|
|
$ |
172 |
|
|
$ |
(1,279 |
) |
|
$ |
1,407 |
|
|
$ |
20,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
9,216 |
|
|
$ |
(1,089 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
8,127 |
|
|
Commercial properties |
|
|
4,547 |
|
|
|
18 |
|
|
|
— |
|
|
|
— |
|
|
|
4,565 |
|
|
Land |
|
|
391 |
|
|
|
182 |
|
|
|
— |
|
|
|
— |
|
|
|
573 |
|
|
Commercial and industrial loans |
|
|
4,628 |
|
|
|
2,848 |
|
|
|
(2,208 |
) |
|
|
1,769 |
|
|
|
7,037 |
|
|
Consumer loans |
|
|
218 |
|
|
|
(16 |
) |
|
|
(5 |
) |
|
|
1 |
|
|
|
198 |
|
|
Total |
|
$ |
19,000 |
|
|
$ |
1,943 |
|
|
$ |
(2,213 |
) |
|
$ |
1,770 |
|
|
$ |
20,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
9,715 |
|
|
$ |
(499 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9,216 |
|
|
Commercial properties |
|
|
4,399 |
|
|
|
359 |
|
|
|
(211 |
) |
|
|
— |
|
|
|
4,547 |
|
|
Land |
|
|
395 |
|
|
|
(4 |
) |
|
|
— |
|
|
|
— |
|
|
|
391 |
|
|
Commercial and industrial loans |
|
|
3,624 |
|
|
|
4,413 |
|
|
|
(3,978 |
) |
|
|
569 |
|
|
|
4,628 |
|
|
Consumer loans |
|
|
267 |
|
|
|
(49 |
) |
|
|
— |
|
|
|
— |
|
|
|
218 |
|
|
Total |
|
$ |
18,400 |
|
|
$ |
4,220 |
|
|
$ |
(4,189 |
) |
|
$ |
569 |
|
|
$ |
19,000 |
|
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by impairment method as of:
|
|
|
Allowance for Loan Losses |
|
Unaccreted
Credit |
|
|
|
|
Evaluated for Impairment |
|
|
Purchased |
|
|
|
|
|
Component |
|
|
(dollars in thousands) |
|
Individually |
|
Collectively |
|
|
Impaired |
|
|
Total |
|
|
Other Loans |
|
|
September 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
— |
|
|
$ |
8,127 |
|
|
$ |
— |
|
|
$ |
8,127 |
|
|
$ |
1,167 |
|
|
Commercial properties |
|
|
111 |
|
|
|
4,454 |
|
|
|
— |
|
|
|
4,565 |
|
|
|
1,277 |
|
|
Land |
|
|
— |
|
|
|
573 |
|
|
|
— |
|
|
|
573 |
|
|
|
25 |
|
|
Commercial and industrial loans |
|
|
282 |
|
|
|
6,755 |
|
|
|
— |
|
|
|
7,037 |
|
|
|
326 |
|
|
Consumer loans |
|
|
— |
|
|
|
198 |
|
|
|
— |
|
|
|
198 |
|
|
|
1 |
|
|
Total |
|
$ |
393 |
|
|
$ |
20,107 |
|
|
$ |
— |
|
|
$ |
20,500 |
|
|
$ |
2,796 |
|
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
1,426 |
|
|
$ |
2,836,805 |
|
|
$ |
— |
|
|
$ |
2,838,231 |
|
|
$ |
200,542 |
|
|
Commercial properties |
|
|
12,688 |
|
|
|
855,157 |
|
|
|
3,380 |
|
|
|
871,225 |
|
|
|
235,633 |
|
|
Land |
|
|
697 |
|
|
|
69,625 |
|
|
|
788 |
|
|
|
71,110 |
|
|
|
34,562 |
|
|
Commercial and industrial loans |
|
|
10,722 |
|
|
|
555,045 |
|
|
|
623 |
|
|
|
566,390 |
|
|
|
29,060 |
|
|
Consumer loans |
|
|
— |
|
|
|
16,505 |
|
|
|
— |
|
|
|
16,505 |
|
|
|
285 |
|
|
Total |
|
$ |
25,533 |
|
|
$ |
4,333,137 |
|
|
$ |
4,791 |
|
|
$ |
4,363,461 |
|
|
$ |
500,082 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
— |
|
|
$ |
9,216 |
|
|
$ |
— |
|
|
$ |
9,216 |
|
|
$ |
1,724 |
|
|
Commercial properties |
|
|
126 |
|
|
|
4,421 |
|
|
|
— |
|
|
|
4,547 |
|
|
|
1,779 |
|
|
Land |
|
|
— |
|
|
|
391 |
|
|
|
— |
|
|
|
391 |
|
|
|
84 |
|
|
Commercial and industrial loans |
|
|
290 |
|
|
|
4,338 |
|
|
|
— |
|
|
|
4,628 |
|
|
|
633 |
|
|
Consumer loans |
|
|
— |
|
|
|
218 |
|
|
|
— |
|
|
|
218 |
|
|
|
3 |
|
|
Total |
|
$ |
416 |
|
|
$ |
18,584 |
|
|
$ |
— |
|
|
$ |
19,000 |
|
|
$ |
4,223 |
|
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
651 |
|
|
$ |
2,861,112 |
|
|
$ |
— |
|
|
$ |
2,861,763 |
|
|
$ |
241,698 |
|
|
Commercial properties |
|
|
2,871 |
|
|
|
860,835 |
|
|
|
5,463 |
|
|
|
869,169 |
|
|
|
275,516 |
|
|
Land |
|
|
697 |
|
|
|
78,681 |
|
|
|
809 |
|
|
|
80,187 |
|
|
|
41,132 |
|
|
Commercial and industrial loans |
|
|
8,559 |
|
|
|
440,437 |
|
|
|
809 |
|
|
|
449,805 |
|
|
|
61,183 |
|
|
Consumer loans |
|
|
— |
|
|
|
22,699 |
|
|
|
— |
|
|
|
22,699 |
|
|
|
366 |
|
|
Total |
|
$ |
12,778 |
|
|
$ |
4,263,764 |
|
|
$ |
7,081 |
|
|
$ |
4,283,623 |
|
|
$ |
619,895 |
|
The column labeled “Unaccreted Credit Component Other Loans” represents the amount of unaccreted credit component discount for the other loans acquired in a business combination, and the stated principal balance of the related loans. The discount is equal to 0.56% and 0.68% of the stated principal balance of these loans as of September 30, 2019 and December 31, 2018, respectively. In addition to this unaccreted credit component discount, an additional $0.4 million of ALLL has been provided for these loans as of September 30, 2019 and December 31, 2018.
The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. The Bank analyzes loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as loans secured by multifamily or commercial real estate and commercial and industrial loans. This analysis is performed on an ongoing basis as new information is obtained. The Bank uses the following definitions for risk ratings:
Pass: Loans classified as pass are strong credits with no existing or known potential weaknesses deserving of management’s close attention.
Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Impaired: A loan is considered impaired, when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement.
Additionally, all loans classified as TDRs are considered impaired at the time they are restructured. Purchased credit impaired loans are not considered impaired loans for these purposes.
Loans listed as pass include larger non-homogeneous loans not meeting the risk rating definitions above and smaller, homogeneous loans not assessed on an individual basis.
Based on the most recent analysis performed, the risk category of loans by class of loans is as follows as of:
|
(dollars in thousands) |
|
Pass |
|
|
Special
Mention |
|
|
Substandard |
|
|
Impaired |
|
|
Total |
|
|
September 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
2,835,650 |
|
|
$ |
1,155 |
|
|
$ |
— |
|
|
$ |
1,426 |
|
|
$ |
2,838,231 |
|
|
Commercial properties |
|
|
851,578 |
|
|
|
688 |
|
|
|
7,066 |
|
|
|
11,893 |
|
|
|
871,225 |
|
|
Land |
|
|
69,625 |
|
|
|
— |
|
|
|
788 |
|
|
|
697 |
|
|
|
71,110 |
|
|
Commercial and industrial loans |
|
|
547,235 |
|
|
|
689 |
|
|
|
6,949 |
|
|
|
11,517 |
|
|
|
566,390 |
|
|
Consumer loans |
|
|
16,505 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16,505 |
|
|
Total |
|
$ |
4,320,593 |
|
|
$ |
2,532 |
|
|
$ |
14,803 |
|
|
$ |
25,533 |
|
|
$ |
4,363,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
2,857,666 |
|
|
$ |
3,446 |
|
|
$ |
— |
|
|
$ |
651 |
|
|
$ |
2,861,763 |
|
|
Commercial properties |
|
|
845,672 |
|
|
|
13,024 |
|
|
|
7,602 |
|
|
|
2,871 |
|
|
|
869,169 |
|
|
Land |
|
|
78,681 |
|
|
|
— |
|
|
|
809 |
|
|
|
697 |
|
|
|
80,187 |
|
|
Commercial and industrial loans |
|
|
431,751 |
|
|
|
7,723 |
|
|
|
1,772 |
|
|
|
8,559 |
|
|
|
449,805 |
|
|
Consumer loans |
|
|
22,699 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
22,699 |
|
|
Total |
|
$ |
4,236,469 |
|
|
$ |
24,193 |
|
|
$ |
10,183 |
|
|
$ |
12,778 |
|
|
$ |
4,283,623 |
|
Impaired loans evaluated individually and any related allowance are as follows as of:
|
|
|
With No Allowance Recorded |
|
|
With an Allowance Recorded |
|
|
(dollars in thousands) |
|
Unpaid Principal Balance |
|
|
Recorded Investment |
|
|
Unpaid Principal Balance |
|
|
Recorded Investment |
|
|
Related Allowance |
|
|
September 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
1,479 |
|
|
$ |
1,426 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Commercial properties |
|
|
11,675 |
|
|
|
11,481 |
|
|
|
1,207 |
|
|
|
1,207 |
|
|
|
111 |
|
|
Land |
|
|
697 |
|
|
|
697 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Commercial and industrial loans |
|
|
9,429 |
|
|
|
8,717 |
|
|
|
2,084 |
|
|
|
2,005 |
|
|
|
282 |
|
|
Total |
|
$ |
23,280 |
|
|
$ |
22,321 |
|
|
$ |
3,291 |
|
|
$ |
3,212 |
|
|
$ |
393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
651 |
|
|
$ |
651 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Commercial properties |
|
|
1,607 |
|
|
|
1,607 |
|
|
|
1,264 |
|
|
|
1,264 |
|
|
|
126 |
|
|
Land |
|
|
697 |
|
|
|
697 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Commercial and industrial loans |
|
|
6,543 |
|
|
|
6,543 |
|
|
|
2,016 |
|
|
|
2,016 |
|
|
|
290 |
|
|
Total |
|
$ |
9,498 |
|
|
$ |
9,498 |
|
|
$ |
3,280 |
|
|
$ |
3,280 |
|
|
$ |
416 |
|
The weighted average annualized average balance of the recorded investment for impaired loans, beginning from when the loan became impaired, and any interest income recorded on impaired loans after they became impaired is as follows for the:
|
|
|
Nine Months Ended
September 30, 2019 |
|
|
Year Ended
December 31, 2018 |
|
|
(dollars in thousands) |
|
Average Recorded Investment |
|
|
Interest Income after Impairment |
|
|
Average Recorded Investment |
|
Interest Income after Impairment |
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
1,453 |
|
|
$ |
— |
|
|
$ |
276 |
|
|
$ |
— |
|
|
Commercial properties |
|
|
9,512 |
|
|
|
222 |
|
|
|
3,459 |
|
|
|
90 |
|
|
Land |
|
|
697 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Commercial and industrial loans |
|
|
10,080 |
|
|
|
— |
|
|
|
9,117 |
|
|
|
— |
|
|
Total |
|
$ |
21,742 |
|
|
$ |
222 |
|
|
$ |
12,852 |
|
|
$ |
90 |
|
There was no interest income recognized on a cash basis in either 2019 or 2018 on impaired loans.
|