XML 24 R14.htm IDEA: XBRL DOCUMENT

NOTE 6: LOANS AND ALLOWANCE FOR LOAN LOSSES

6 Months Ended

Jun. 30, 2019

NOTE 6: LOANS AND ALLOWANCE FOR LOAN LOSSES

Classes of loans at June 30, 2019 and December 31, 2018 were as follows:

	June 30,	December 31,
	2019	2018
	(In Thousands)

One- to four-family residential construction	$ 30,255	$ 26,177
Subdivision construction	12,973	13,844
Land development	46,032	44,492
Commercial construction	1,391,158	1,417,166
Owner occupied one- to four-family residential	322,207	276,866
Non-owner occupied one- to four-family residential	122,858	122,438
Commercial real estate	1,446,166	1,371,435
Other residential	796,341	784,894
Commercial business	312,965	322,118
Industrial revenue bonds	13,643	13,940
Consumer auto	201,061	253,528
Consumer other	52,077	57,350
Home equity lines of credit	120,102	121,352
Loans acquired and accounted for under ASC 310-30, net of discounts	151,694	167,651
	5,019,532	4,993,251
Undisbursed portion of loans in process	(861,054)	(958,441)
Allowance for loan losses	(39,254)	(38,409)
Deferred loan fees and gains, net	(6,769)	(7,400)
	$ 4,112,455	$ 3,989,001

Weighted average interest rate	5.25%	5.16%

Classes of loans by aging were as follows:

	June 30, 2019
							Total Loans
						Total	> 90 Days
	30-59 Days	60-89 Days	Over	Total		Loans	Past Due and
	Past Due	Past Due	90 Days	Past Due	Current	Receivable	Still Accruing
	(In Thousands)

One- to four-family
residential construction	$ —	$ —	$ —	$ —	$ 30,255	$ 30,255	$ —
Subdivision construction	44	—	—	44	12,929	12,973	—
Land development	—	72	3,556	3,628	42,404	46,032	—
Commercial construction	—	—	—	—	1,391,158	1,391,158	—
Owner occupied one- to
four-family residential	726	189	999	1,914	320,293	322,207	—
Non-owner occupied one-
o to four-family residential	170	293	533	996	121,862	122,858	—
Commercial real estate	1,121	954	3,675	5,750	1,440,416	1,446,166	—
Other residential	422	—	—	422	795,919	796,341	—
Commercial business	194	36	1,359	1,589	311,376	312,965	—
Industrial revenue bonds	—	—	—	—	13,643	13,643	—
Consumer auto	1,601	436	661	2,698	198,363	201,061	—
Consumer other	288	38	252	578	51,499	52,077	—
Home equity lines of credit	284	59	353	696	119,406	120,102	—
Loans acquired and
accounted for under
ASC 310-30, net of
discounts	983	340	6,612	7,935	143,759	151,694	—
	5,833	2,417	18,000	26,250	4,993,282	5,019,532	—
Less loans acquired and accounted for under
ASC 310-30, net	983	340	6,612	7,935	143,759	151,694	—

Total	$ 4,850	$ 2,077	$ 11,388	$ 18,315	$ 4,849,523	$ 4,867,838	$ —

	December 31, 2018
							Total Loans
						Total	> 90 Days Past
	30-59 Days	60-89 Days	Over 90	Total Past		Loans	Due and
	Past Due	Past Due	Days	Due	Current	Receivable	Still Accruing
	(In Thousands)

One- to four-family
residential construction	$ —	$ —	$ —	$ —	$ 26,177	$ 26,177	$ —
Subdivision construction	—	—	—	—	13,844	13,844	—
Land development	13	—	49	62	44,430	44,492	—
Commercial construction	—	—	—	—	1,417,166	1,417,166	—
Owner occupied one- to
four-family residential	1,431	806	1,206	3,443	273,423	276,866	—
Non-owner occupied one-
to four-family residential	1,142	144	1,458	2,744	119,694	122,438	—
Commercial real estate	3,940	53	334	4,327	1,367,108	1,371,435	—
Other residential	—	—	—	—	784,894	784,894	—
Commercial business	72	54	1,437	1,563	320,555	322,118	—
Industrial revenue bonds	3	—	—	3	13,937	13,940	—
Consumer auto	2,596	722	1,490	4,808	248,720	253,528	—
Consumer other	691	181	240	1,112	56,238	57,350	—
Home equity lines of credit	229	—	86	315	121,037	121,352	—
Loans acquired and
accounted for under ASC 310-30, net of
discounts	2,195	1,416	6,827	10,438	157,213	167,651	—
	12,312	3,376	13,127	28,815	4,964,436	4,993,251	—
Less loans acquired and accounted for under ASC 310-30, net	2,195	1,416	6,827	10,438	157,213	167,651	—

Total	$ 10,117	$ 1,960	$ 6,300	$ 18,377	$ 4,807,223	$ 4,825,600	$ —

Nonaccruing loans (excluding FDIC-assisted acquired loans, net of discount) are summarized as follows:

	June 30,	December 31,
	2019	2018
	(In Thousands)

One- to four-family residential construction	$ —	$ —
Subdivision construction	—	—
Land development	3,556	49
Commercial construction	—	—
Owner occupied one- to four-family residential	999	1,206
Non-owner occupied one- to four-family residential	533	1,458
Commercial real estate	3,675	334
Other residential	—	—
Commercial business	1,359	1,437
Industrial revenue bonds	—	—
Consumer auto	661	1,490
Consumer other	252	240
Home equity lines of credit	353	86

Total	$ 11,388	$ 6,300

The following table presents the activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2019. Also presented are the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of June 30, 2019:

	One- to Four-
	Family
	Residential and	Other	Commercial	Commercial	Commercial
	Construction	Residential	Real Estate	Construction	Business	Consumer	Total
	(In Thousands)

Allowance for loan losses
Balance, April 1, 2019	$ 3,036	$ 5,436	$ 20,981	$ 2,515	$ 1,484	$ 5,199	$ 38,651
Provision (benefit) charged to expense	805	(1,683)	1,382	1,145	62	(111)	1,600
Losses charged off	(62)	—	(7)	(189)	(25)	(1,699)	(1,982)
Recoveries	24	—	11	8	157	785	985
Balance, June 30, 2019	$ 3,803	$ 3,753	$ 22,367	$ 3,479	$ 1,678	$ 4,174	$ 39,254

Balance, January 1, 2019	$ 3,122	$ 4,713	$ 19,803	$ 3,105	$ 1,568	$ 6,098	$ 38,409
Provision (benefit) charged to expense	1,163	(960)	2,545	574	(90)	318	3,550
Losses charged off	(517)	—	(7)	(220)	(99)	(3,905)	(4,748)
Recoveries	35	—	26	20	299	1,663	2,043
Balance, June 30, 2019	$ 3,803	$ 3,753	$ 22,367	$ 3,479	$ 1,678	$ 4,174	$ 39,254

Ending balance:
Individually evaluated for
impairment	$ 237	$ —	$ 555	$ —	$ 470	$ 155	$ 1,417
Collectively evaluated for
impairment	$ 3,490	$ 3,720	$ 21,645	$ 3,290	$ 1,195	$ 3,992	$ 37,332
Loans acquired and
accounted for under
ASC 310-30	$ 76	$ 33	$ 167	$ 189	$ 13	$ 27	$ 505
Loans acquired and
accounted for under
ASC 310-30	$ 76	$ 33	$ 167	$ 189	$ 13	$ 27	$ 505

Loans
Individually evaluated for
impairment	$ 3,182	$ —	$ 7,809	$ 3,556	$ 1,451	$ 1,821	$ 17,819
Collectively evaluated for
impairment	$ 485,111	$ 796,341	$ 1,438,357	$ 1,433,634	$ 325,157	$ 371,419	$ 4,850,019
Loans acquired and
accounted for under
ASC 310-30	$ 84,909	$ 12,448	$ 31,083	$ 4,739	$ 3,674	$ 14,841	$ 151,694

The following table presents the activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2018:

	One- to Four-
	Family
	Residential and	Other	Commercial	Commercial	Commercial
	Construction	Residential	Real Estate	Construction	Business	Consumer	Total
	(In Thousands)

Allowance for loan losses
Balance April 1, 2018	$ 2,602	$ 3,212	$ 18,062	$ 2,188	$ 3,695	$ 6,551	$ 36,310
Provision (benefit) charged to expense	63	364	1,297	109	(454)	571	1,950
Losses charged off	(27)	(75)	—	(46)	(472)	(2,112)	(2,732)
Recoveries	89	344	115	144	222	1,114	2,028
Balance June 30, 2018	$ 2,727	$ 3,845	$ 19,474	$ 2,395	$ 2,991	$ 6,124	$ 37,556

Balance January 1, 2018	$ 2,108	$ 2,839	$ 18,639	$ 1,767	$ 3,581	$ 7,558	$ 36,492
Provision (benefit) charged to expense	487	969	811	471	28	1,134	3,900
Losses charged off	(41)	(331)	(102)	(83)	(881)	(4,934)	(6,372)
Recoveries	173	368	126	240	263	2,366	3,536
Balance June 30, 2018	$ 2,727	$ 3,845	$ 19,474	$ 2,395	$ 2,991	$ 6,124	$ 37,556

The following table presents the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2018:

	One- to Four-
	Family
	Residential and	Other	Commercial	Commercial	Commercial
	Construction	Residential	Real Estate	Construction	Business	Consumer	Total
	(In Thousands)

Allowance for loan losses
Individually evaluated for
impairment	$ 694	$ —	$ 613	$ —	$ 309	$ 425	$ 2,041
Collectively evaluated for
impairment	$ 2,392	$ 4,681	$ 18,958	$ 3,029	$ 1,247	$ 5,640	$ 35,947
Loans acquired and
accounted for under
ASC 310-30	$ 36	$ 32	$ 232	$ 76	$ 12	$ 33	$ 421

Loans
Individually evaluated for
impairment	$ 6,116	$ —	$ 3,501	$ 14	$ 1,844	$ 2,464	$ 13,939
Collectively evaluated for
impairment	$ 433,209	$ 784,894	$ 1,367,934	$ 1,461,644	$ 334,214	$ 429,766	$ 4,811,661
Loans acquired and
accounted for under
ASC 310-30	$ 93,841	$ 12,790	$ 33,620	$ 4,093	$ 4,347	$ 18,960	$ 167,651

The portfolio segments used in the preceding three tables correspond to the loan classes used in all other tables in Note 6 as follows:

· The one- to four-family residential and construction segment includes the one- to four-family residential construction, subdivision construction, owner occupied one- to four-family residential and non-owner occupied one- to four-family residential classes

· The other residential segment corresponds to the other residential class

· The commercial real estate segment includes the commercial real estate and industrial revenue bonds classes

· The commercial construction segment includes the land development and commercial construction classes

· The commercial business segment corresponds to the commercial business class

· The consumer segment includes the consumer auto, consumer other and home equity lines of credit classes

A loan is considered impaired, in accordance with the impairment accounting guidance (FASB ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include not only nonperforming loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties.

Impaired loans (excluding FDIC-assisted loans, net of discount), are summarized as follows:

	June 30, 2019
		Unpaid
	Recorded	Principal	Specific
	Balance	Balance	Allowance
	(In Thousands)

One- to four-family residential construction	$ —	$ —	$ —
Subdivision construction	261	261	100
Land development	3,556	3,588	—
Commercial construction	—	—	—
Owner occupied one- to four- family residential	2,157	2,434	114
Non-owner occupied one- to four- family residential	764	944	22
Commercial real estate	7,809	7,834	555
Other residential	—	—	—
Commercial business	1,451	1,918	470
Industrial revenue bonds	—	—	—
Consumer auto	1,040	1,230	133
Consumer other	417	651	20
Home equity lines of credit	364	380	3

Total	$ 17,819	$ 19,240	$ 1,417

	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
	Average		Average
	Investment	Interest	Investment	Interest
	in Impaired	Income	in Impaired	Income
	Loans	Recognized	Loans	Recognized
	(In Thousands)

One- to four-family residential construction	$ —	$ —	$ —	$ —
Subdivision construction	280	3	293	5
Land development	1,189	99	601	99
Commercial construction	—	—	—	—
Owner occupied one- to four-family residential	2,839	20	3,097	57
Non-owner occupied one- to four-family residential	815	6	1,296	18
Commercial real estate	6,349	86	5,612	136
Other residential	—	—	—	—
Commercial business	1,626	26	1,700	58
Industrial revenue bonds	—	—	—	—
Consumer auto	1,088	18	1,240	43
Consumer other	401	11	432	22
Home equity lines of credit	290	10	254	17

Total	$ 14,877	$ 279	$ 14,525	$ 455

	At or for the Year Ended December 31, 2018
				Average
		Unpaid		Investment	Interest
	Recorded	Principal	Specific	in Impaired	Income
	Balance	Balance	Allowance	Loans	Recognized
	(In Thousands)

One- to four-family residential construction	$ —	$ —	$ —	$ —	$ —
Subdivision construction	318	318	105	321	17
Land development	14	18	—	14	1
Commercial construction	—	—	—	—	—
Owner occupied one- to four-
family residential	3,576	3,926	285	3,406	197
Non-owner occupied one- to four-
family residential	2,222	2,519	304	2,870	158
Commercial real estate	3,501	3,665	613	6,216	337
Other residential	—	—	—	1,026	20
Commercial business	1,844	2,207	309	2,932	362
Industrial revenue bonds	—	—	—	—	—
Consumer auto	1,874	2,114	336	2,069	167
Consumer other	479	684	72	738	59
Home equity lines of credit	111	128	17	412	28

Total	$ 13,939	$ 15,579	$ 2,041	$ 20,004	$ 1,346

	June 30, 2018
		Unpaid
	Recorded	Principal	Specific
	Balance	Balance	Allowance
	(In Thousands)

One- to four-family residential construction	$ —	$ —	$ —
Subdivision construction	335	357	110
Land development	15	18	—
Commercial construction	—	—	—
Owner occupied one- to four- family residential	3,261	3,579	284
Non-owner occupied one- to four- family residential	3,144	3,465	343
Commercial real estate	8,313	8,468	220
Other residential	1,015	1,015	—
Commercial business	3,350	4,754	1,422
Industrial revenue bonds	—	—	—
Consumer auto	2,033	2,228	369
Consumer other	784	1,007	118
Home equity lines of credit	513	553	154

Total	$ 22,763	$ 25,444	$ 3,020

	Three Months Ended		Six Months Ended
	June 30, 2018		June 30, 2018
	Average		Average
	Investment	Interest	Investment	Interest
	in Impaired	Income	in Impaired	Income
	Loans	Recognized	Loans	Recognized
	(In Thousands)

One- to four-family residential construction	$ —	$ —	$ —	$ —
Subdivision construction	338	2	354	8
Land development	15	—	15	—
Commercial construction	—	—	—	—
Owner occupied one- to four-family residential	3,272	44	3,283	89
Non-owner occupied one- to four-family residential	3,225	38	3,331	92
Commercial real estate	7,391	145	7,328	223
Other residential	1,017	10	1,714	20
Commercial business	3,559	258	3,625	289
Industrial revenue bonds	—	—	—	—
Consumer auto	2,034	40	2,247	81
Consumer other	879	18	874	37
Home equity lines of credit	528	9	548	28

Total	$ 22,258	$ 564	$ 23,319	$ 867

At June 30, 2019, $6.2 million of impaired loans had specific valuation allowances totaling $1.4 million. At December 31, 2018, $8.4 million of impaired loans had specific valuation allowances totaling $2.0 million.

Included in certain loan categories in the impaired loans are troubled debt restructurings that were classified as impaired. Troubled debt restructurings are loans that are modified by granting concessions to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. The types of concessions made are factored into the estimation of the allowance for loan losses for troubled debt restructurings primarily using a discounted cash flow or collateral adequacy approach.

The following tables present newly restructured loans during the three and six months ended June 30, 2019 and 2018, respectively, by type of modification:

	Three Months Ended June 30, 2019
				Total
	Interest Only	Term	Combination	Modification
	(In Thousands)

Consumer	$ —	$ 52	$ —	$ 52

	Three Months Ended June 30, 2018
				Total
	Interest Only	Term	Combination	Modification
	(In Thousands)

Consumer	$ —	$ 287	$ —	$ 287

	Six Months Ended June 30, 2019
				Total
	Interest Only	Term	Combination	Modification
	(In Thousands)

Consumer	$ —	$ 79	$ —	$ 79

	Six Months Ended June 30, 2018
				Total
	Interest Only	Term	Combination	Modification
	(In Thousands)

Mortgage loans on real estate:
One- to four-family residential	$ 1,348	$ —	$ —	$ 1,348
Consumer	—	439	—	439

	$ 1,348	$ 439	$ —	$ 1,787

At June 30, 2019, the Company had $2.0 million of loans that were modified in troubled debt restructurings and impaired, as follows: $261,000 of construction and land development loans, $787,000 of one- to four-family and other residential mortgage loans, $428,000 of commercial real estate loans, $178,000 of commercial business loans and $391,000 of consumer loans. Of the total troubled debt restructurings at June 30, 2019, $1.5 million were accruing interest and $619,000 were classified as substandard using the Company’s internal grading system, which is described below. The Company had no troubled debt restructurings which were modified in the previous 12 months and subsequently defaulted during the six months ended June 30, 2019. When loans modified as troubled debt restructurings have subsequent payment defaults, the defaults are factored into the determination of the allowance for loan losses to ensure specific valuation allowances reflect amounts considered uncollectible. At December 31, 2018, the Company had $6.9 million of loans that were modified in troubled debt restructurings and impaired, as follows: $283,000 of construction and land development loans, $3.9 million of one- to four-family and other residential mortgage loans, $1.3 million of commercial real estate loans, $548,000 of commercial business loans and $803,000 of consumer loans. Of the total troubled debt restructurings at December 31, 2018, $4.7 million were accruing interest and $2.5 million were classified as substandard using the Company’s internal grading system. The Company had no troubled debt restructurings which were modified in the previous 12 months and subsequently defaulted during the year ended December 31, 2018.

During the three and six months ended June 30, 2019, $14,000 and $63,000 of loans, respectively, all of which consisted of consumer loans, designated as troubled debt restructurings met the criteria for placement back on accrual status. The criteria is generally a minimum of six months of consistent and timely payment performance under original or modified terms. During the three and six months ended June 30, 2018, loans designated as troubled debt restructurings totaling $16,000 and $39,000, respectively, all of which consisted of one- to four-family loans, met the criteria for placement back on accrual status.

The Company reviews the credit quality of its loan portfolio using an internal grading system that classifies loans as “Satisfactory,” “Watch,” “Special Mention,” “Substandard” and “Doubtful.” Loans classified as watch are being monitored because of indications of potential weaknesses or deficiencies that may require future classification as special mention or substandard. Special mention loans possess potential weaknesses that deserve management’s close attention but do not expose the Bank to a degree of risk that warrants substandard classification. Substandard loans are characterized by the distinct possibility that the Bank will sustain some loss if certain deficiencies are not corrected. Doubtful loans are those having all the weaknesses inherent to those classified Substandard with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Loans not meeting any of the criteria previously described are considered satisfactory. The FDIC-assisted acquired loans are evaluated using this internal grading system. These loans are accounted for in pools. Minimal adverse classification in these acquired loan pools was identified as of June 30, 2019 and December 31, 2018, respectively. See Note 7 for further discussion of the acquired loan pools and the termination of the loss sharing agreements.

The Company evaluates the loan risk internal grading system definitions and allowance for loan loss methodology on an ongoing basis. The general component of the allowance for loan losses is affected by several factors, including, but not limited to, average historical losses, average life of the loans, the current composition of the loan portfolio, current and expected economic conditions, collateral values and internal risk ratings. Management considers all these factors in determining the adequacy of the Company’s allowance for loan losses. In early 2018, we expanded our loan risk rating system to allow for further segregation of satisfactory credits. No significant changes were made to the allowance for loan loss methodology during the past year.

The loan grading system is presented by loan class below:

	June 30, 2019
			Special
	Satisfactory	Watch	Mention	Substandard	Doubtful	Total
	(In Thousands)

One- to four-family residential
construction	$ 30,255	$ —	$ —	$ —	$ —	$ 30,255
Subdivision construction	12,973	—	—	—	—	12,973
Land development	42,446	30	—	3,556	—	46,032
Commercial construction	1,391,158	—	—	—	—	1,391,158
Owner occupied one- to four-
family residential	320,368	—	—	1,839	—	322,207
Non-owner occupied one- to
four- family residential	121,952	373	—	533	—	122,858
Commercial real estate	1,407,401	31,280	—	7,485	—	1,446,166
Other residential	796,341	—	—	—	—	796,341
Commercial business	306,808	4,762	—	1,395	—	312,965
Industrial revenue bonds	13,643	—	—	—	—	13,643
Consumer auto	200,146	77	—	838	—	201,061
Consumer other	51,580	103	—	394	—	52,077
Home equity lines of credit	119,650	99	—	353	—	120,102
Loans acquired and accounted
for under ASC 310-30,
net of discounts	151,173	—	—	521	—	151,694

Total	$ 4,965,894	$ 36,724	$ —	$ 16,914	$ —	$ 5,019,532

	December 31, 2018
			Special
	Satisfactory	Watch	Mention	Substandard	Doubtful	Total
	(In Thousands)

One- to four-family residential
construction	$ 25,803	$ 374	$ —	$ —	$ —	$ 26,177
Subdivision construction	12,077	1,718	—	49	—	13,844
Land development	39,892	4,600	—	—	—	44,492
Commercial construction	1,417,166	—	—	—	—	1,417,166
Owner occupied one- to-four-
family residential	274,661	43	—	2,162	—	276,866
Non-owner occupied one- to-
four-family residential	119,951	941	—	1,546	—	122,438
Commercial real estate	1,357,987	11,061	—	2,387	—	1,371,435
Other residential	784,393	501	—	—	—	784,894
Commercial business	315,518	5,163	—	1,437	—	322,118
Industrial revenue bonds	13,940	—	—	—	—	13,940
Consumer auto	251,824	116	—	1,588	—	253,528
Consumer other	56,859	157	—	334	—	57,350
Home equity lines of credit	121,134	118	—	100	—	121,352
Loans acquired and accounted
for under ASC 310-30,
net of discounts	167,632	—	—	19	—	167,651

Total	$ 4,958,837	$ 24,792	$ —	$ 9,622	$ —	$ 4,993,251