XML 100 R14.htm IDEA: XBRL DOCUMENT

NOTE 6: LOANS AND ALLOWANCE FOR LOAN LOSSES

3 Months Ended

Sep. 30, 2019

NOTE 6: LOANS AND ALLOWANCE FOR LOAN LOSSES

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

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

One- to four-family residential construction	$35,153	$26,177
Subdivision construction	16,326	13,844
Land development	38,899	44,492
Commercial construction	1,335,827	1,417,166
Owner occupied one- to four-family residential	345,098	276,866
Non-owner occupied one- to four-family residential	122,289	122,438
Commercial real estate	1,494,621	1,371,435
Other residential	841,087	784,894
Commercial business	305,233	322,118
Industrial revenue bonds	13,350	13,940
Consumer auto	174,710	253,528
Consumer other	48,623	57,350
Home equity lines of credit	119,705	121,352
Loans acquired and accounted for under ASC 310-30, net of discounts	142,099	167,651
	5,033,020	4,993,251
Undisbursed portion of loans in process	(829,135)	(958,441)
Allowance for loan losses	(40,406)	(38,409)
Deferred loan fees and gains, net	(6,776)	(7,400)
	$4,156,703	$3,989,001

Weighted average interest rate	5.11%	5.16%

Classes of loans by aging were as follows:

	September 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	$ 250	$—	$—	$ 250	$ 34,903	$ 35,153	$ —
Subdivision construction	—	—	—	—	16,326	16,326	—
Land development	—	28	83	111	38,788	38,899	—
Commercial construction	—	—	—	—	1,335,827	1,335,827	—
Owner occupied one- to
four-family residential	556	55	913	1,524	343,574	345,098	—
Non-owner occupied one-
to four-family residential	—	56	566	622	121,667	122,289	—
Commercial real estate	498	91	637	1,226	1,493,395	1,494,621	—
Other residential	9,319	—	—	9,319	831,768	841,087	—
Commercial business	23	11	1,245	1,279	303,954	305,233	—
Industrial revenue bonds	—	—	—	—	13,350	13,350	—
Consumer auto	1,408	366	513	2,287	172,423	174,710	—
Consumer other	341	93	178	612	48,011	48,623	—
Home equity lines of credit	303	—	531	834	118,871	119,705	—
Loans acquired and
accounted for under
ASC 310-30, net of discounts	642	291	6,413	7,346	134,753	142,099	—
	13,340	991	11,079	25,410	5,007,610	5,033,020	—
Less loans acquired and accounted for under
ASC 310-30, net	642	291	6,413	7,346	134,753	142,099	—

Total	$ 12,698	$ 700	$ 4,666	$ 18,064	$ 4,872,857	$ 4,890,921	$ —

	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:

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

One- to four-family residential construction	$ —	$ —
Subdivision construction	—	—
Land development	83	49
Commercial construction	—	—
Owner occupied one- to four-family residential	913	1,206
Non-owner occupied one- to four-family residential	566	1,458
Commercial real estate	637	334
Other residential	—	—
Commercial business	1,245	1,437
Industrial revenue bonds	—	—
Consumer auto	513	1,490
Consumer other	178	240
Home equity lines of credit	531	86

Total	$ 4,666	$ 6,300

The following table presents the activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 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 September 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, July 1, 2019	$ 3,803	$ 3,753	$ 22,367	$ 3,479	$ 1,678	$ 4,174	$ 39,254
Provision (benefit) charged to expense	(232)	566	2,246	(571)	(341)	282	1,950
Losses charged off	(1)	—	—	(46)	(211)	(1,419)	(1,677)
Recoveries	61	—	13	20	100	685	879
Balance, September 30, 2019	$ 3,631	$ 4,319	$ 24,626	$ 2,882	$ 1,226	$ 3,722	$ 40,406

Balance, January 1, 2019	$ 3,122	$ 4,713	$ 19,803	$ 3,105	$ 1,568	$ 6,098	$ 38,409
Provision (benefit) charged to expense	931	(394)	4,791	3	(431)	600	5,500
Losses charged off	(518)	—	(7)	(266)	(310)	(5,324)	(6,425)
Recoveries	96	—	39	40	399	2,348	2,922
Balance, September 30, 2019	$ 3,631	$ 4,319	$ 24,626	$ 2,882	$ 1,226	$ 3,722	$ 40,406

Ending balance:
Individually evaluated for
impairment	$ 224	$ —	$ 569	$ —	$ 14	$ 127	$ 934
Collectively evaluated for
impairment	$ 3,315	$ 4,236	$ 23,735	$ 2,747	$ 1,174	$ 3,572	$ 38,779
Loans acquired and
accounted for under
ASC 310-30	$ 92	$ 83	$ 322	$ 135	$ 38	$ 23	$ 693

Loans
Individually evaluated for
impairment	$ 3,106	$ —	$ 4,285	$ 83	$ 1,299	$ 1,722	$ 10,495
Collectively evaluated for
impairment	$ 515,760	$ 841,087	$ 1,490,336	$ 1,374,643	$ 317,284	$ 341,316	$ 4,880,426
Loans acquired and
accounted for under
ASC 310-30	$ 79,892	$ 11,349	$ 30,772	$ 4,069	$ 3,777	$ 12,240	$ 142,099

The following table presents the activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 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 July 1, 2018	$ 2,727	$ 3,845	$ 19,474	$ 2,395	$ 2,991	$ 6,124	$ 37,556
Provision (benefit) charged to expense	7	341	708	538	(1,019)	725	1,300
Losses charged off	(18)	(194)	—	(4)	(274)	(2,128)	(2,618)
Recoveries	79	41	1	97	80	961	1,259
Balance September 30, 2018	$ 2,795	$ 4,033	$ 20,183	$ 3,026	$ 1,778	$ 5,682	$ 37,497

Balance January 1, 2018	$ 2,108	$ 2,839	$ 18,639	$ 1,767	$ 3,581	$ 7,558	$ 36,492
Provision (benefit) charged to expense	494	1,310	1,519	1,009	(991)	1,859	5,200
Losses charged off	(59)	(525)	(102)	(87)	(1,155)	(7,062)	(8,990)
Recoveries	252	409	127	337	343	3,327	4,795
Balance September 30, 2018	$ 2,795	$ 4,033	$ 20,183	$ 3,026	$ 1,778	$ 5,682	$ 37,497

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:

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

One- to four-family residential construction	$ —	$ —	$ —
Subdivision construction	256	256	98
Land development	83	83	—
Commercial construction	—	—	—
Owner occupied one- to four-family residential	2,055	2,312	105
Non-owner occupied one- to four-family residential	795	980	21
Commercial real estate	4,286	4,312	569
Other residential	—	—	—
Commercial business	1,299	1,766	14
Industrial revenue bonds	—	—	—
Consumer auto	840	1,083	107
Consumer other	340	517	16
Home equity lines of credit	541	563	4

Total	$ 10,495	$ 11,872	$ 934

	Three Months Ended		Nine Months Ended
	September 30, 2019		September 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	269	2	285	7
Land development	83	2	428	101
Commercial construction	—	—	—	—
Owner occupied one- to four-family residential	2,042	23	2,745	80
Non-owner occupied one- to four-family residential	687	14	1,093	32
Commercial real estate	4,427	62	5,217	198
Other residential	—	—	—	—
Commercial business	1,370	7	1,590	65
Industrial revenue bonds	—	—	—	—
Consumer auto	883	21	1,121	64
Consumer other	331	12	399	34
Home equity lines of credit	447	13	318	30

Total	$ 10,539	$ 156	$ 13,196	$ 611

	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

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

One- to four-family residential construction	$ —	$ —	$ —
Subdivision construction	241	241	107
Land development	14	18	—
Commercial construction	—	—	—
Owner occupied one- to four-family residential	3,663	3,995	343
Non-owner occupied one- to four-family residential	2,398	2,677	321
Commercial real estate	3,556	3,714	635
Other residential	—	—	—
Commercial business	2,008	2,383	324
Industrial revenue bonds	—	—	—
Consumer auto	1,843	2,046	331
Consumer other	566	751	85
Home equity lines of credit	115	133	17

Total	$ 14,404	$ 15,958	$ 2,163

	Three Months Ended		Nine Months Ended
	September 30, 2018		September 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	299	3	336	11
Land development	15	1	15	1
Commercial construction	—	—	—	—
Owner occupied one- to four-family residential	3,401	53	3,322	142
Non-owner occupied one- to four-family residential	2,583	38	3,082	130
Commercial real estate	6,689	55	7,115	278
Other residential	675	—	1,368	20
Commercial business	2,581	40	3,277	329
Industrial revenue bonds	—	—	—	—
Consumer auto	1,865	37	2,120	118
Consumer other	671	11	806	48
Home equity lines of credit	405	—	500	28

Total	$ 19,184	$ 238	$ 21,941	$ 1,105

At September 30, 2019, $4.7 million of impaired loans had specific valuation allowances totaling $934,000. 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 nine months ended September 30, 2019 and 2018, respectively, by type of modification:

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

Consumer	$ —	$ —	$ —	$ —

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

Consumer	$ —	$ 67	$ —	$ 67

	Nine Months Ended September 30, 2019
				Total
	Interest Only	Term	Combination	Modification
	(In Thousands)

Consumer	$ —	$ 73	$ —	$ 73

	Nine Months Ended September 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	—	506	—	506

	$ 1,348	$ 506	$ —	$ 1,854

At September 30, 2019, the Company had $2.0 million of loans that were modified in troubled debt restructurings and impaired, as follows: $256,000 of construction and land development loans, $777,000 of one- to four-family and other residential mortgage loans, $418,000 of commercial real estate loans, $168,000 of commercial business loans and $355,000 of consumer loans. Of the total troubled debt restructurings at September 30, 2019, $1.4 million were accruing interest and $585,000 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 nine months ended September 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 nine months ended September 30, 2019, $0 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 nine months ended September 30, 2018, $46,000 and $85,000 of loans, respectively, all of which consisted of one- to four-family residential loans, designated as troubled debt restructurings 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 September 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, 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:

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

One- to four-family residential
construction	$ 35,153	$ —	$ —	$ —	$ —	$ 35,153
Subdivision construction	16,326	—	—	—	—	16,326
Land development	38,788	28	—	83	—	38,899
Commercial construction	1,335,827	—	—	—	—	1,335,827
Owner occupied one- to four-
family residential	343,359	—	—	1,739	—	345,098
Non-owner occupied one- to
four- family residential	121,298	425	—	566	—	122,289
Commercial real estate	1,458,339	32,312	—	3,970	—	1,494,621
Other residential	841,087	—	—	—	—	841,087
Commercial business	299,286	4,702	—	1,245	—	305,233
Industrial revenue bonds	13,350	—	—	—	—	13,350
Consumer auto	173,996	60	—	654	—	174,710
Consumer other	48,211	94	—	318	—	48,623
Home equity lines of credit	119,130	44	—	531	—	119,705
Loans acquired and accounted
for under ASC 310-30,
net of discounts	142,084	—	—	15	—	142,099

Total	$ 4,986,234	$ 37,665	$ —	$ 9,121	$ —	$ 5,033,020

	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