NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 2014
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The accompanying unaudited consolidated financial statements include the accounts of Banc of
California, Inc. (the Company, we, us and our) and its wholly owned subsidiaries, Banc of California, National Association (the Bank), the Palisades Group, LLC (the Palisades Group), and PTB Property Holdings, LLC, as of March 31, 2014 and
December 31, 2013 and for the three months ended March 31, 2014 and 2013, except that the accounts of the Palisades Group were not included for amounts for the three months ended March 31, 2013. Significant intercompany accounts and
transactions have been eliminated in consolidation. Unless the context requires otherwise, all references to the Company include its wholly owned subsidiaries.
Nature of Operations: The principal business of the Company is the ownership of the Bank. The Bank operates under a national bank charter issued by the Office of the Comptroller of the Currency (the OCC),
its primary regulator. The Bank is a member of the Federal Home Loan Bank (FHLB) system, and maintains insurance on deposit accounts with the Federal Deposit Insurance Corporation (FDIC). PTB Property Holdings, LLC manages and disposes of other real
estate owned properties and the Palisades Group provides financial advisory and asset management services.
The Bank is engaged in the
business of retail banking, with operations conducted through 16 banking offices, serving San Diego, Los Angeles, and Orange counties, California and 53 producing loan production offices in California, Arizona, Oregon, Montana, Virginia, North
Carolina, Maryland and Washington as of March 31, 2014. As of March 31, 2014, single family residential (SFR) mortgage loans and Green loans (SFR mortgage lines of credit) accounted for approximately 42.4 percent and 6.0 percent,
respectively, of the Companys loan and lease portfolio, with a high percentage of such loans concentrated in Southern California. The customers ability to repay their loans or leases is dependent on the real estate market and general
economic conditions in the area.
The accounting and reporting polices of the Company are based upon U.S. generally accepted accounting
principles (GAAP) and conform to predominant practices within the banking industry. The Company has not made any significant changes in its critical accounting policies or in its estimates and assumptions from those disclosed in its 2013 Annual
Report on Form 10-K other than the adoption of new accounting pronouncements and other authoritative guidance that became effective for the Company on or after January 1, 2014. Refer to
Accounting Pronouncements
for discussion of
accounting pronouncements adopted in 2014.
Basis of Presentation:
The accompanying unaudited interim consolidated financial statements
have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain disclosures required by GAAP are not included herein. These interim statements should be read in conjunction with the consolidated financial
statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2013 filed by the Company with the Securities and Exchange Commission. The December 31, 2013 balance sheet presented herein has been derived
from the audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission, but does not include all of the disclosures required by GAAP.
In the opinion of management of the Company, the accompanying unaudited interim consolidated financial statements reflect all of the adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated financial position and consolidated results of operations for the periods presented. Certain reclassifications have been made in the prior period
financial statements to conform to the current period presentation.
The results of operations for the three months ended March 31, 2014
are not necessarily indicative of the results to be expected for the full year.
Use of Estimates in the Preparation of Financial
Statements:
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial
statements and disclosures provided, and actual results could differ. The allowance for loan and lease losses, reserve for loss on repurchased loans, servicing rights, other real estate owned, realization of deferred tax assets, goodwill, other
intangible assets, derivatives, fair value of assets and liabilities acquired in business combinations, and the fair value of financial instruments are particularly subject to change and such change could have a material effect on the consolidated
financial statements.
11
Income Taxes:
Income tax expense is the total of the current year income tax due or refundable and
the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax
rates. A valuation allowance is established when necessary to reduce deferred tax assets when it is more-likely-than-not that a portion or all of the net deferred tax assets will not be realized. The Company had $17.0 million and $17.3 million of
valuation allowance related to its deferred tax assets at March 31, 2014 and December 31, 2013, respectively (See further discussion in Note 11, Income Taxes).
Accounting Pronouncements:
During the three months ended March 31, 2014, the following pronouncements applicable to the Company were issued or became effective:
In January 2014, the FASB issued guidance within ASU 2014-01, Accounting for Investments in Qualified Affordable Housing Projects. The
amendments in ASU 2014-01 to Topic 323, Equity Investments and Joint Ventures, provide guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable
housing projects that qualify for the low-income housing tax credit. The amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional
amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received, and recognizes the net investment
performance in the income statement as a component of income tax expense (benefit). The amendments are effective for fiscal years, and interim periods within those years, beginning after December 31, 2014 and should be applied retrospectively
to all periods presented. Early adoption is permitted. All of the Company's affordable housing fund investments are within the scope of this guidance. The Company is in the process of evaluating the impact that adoption of this guidance may have on
its consolidated financial statements.
In January 2014, the FASB issued ASU No. 2014-04, Reclassification of Residential Real
Estate Collateralized Consumer Mortgage Loans upon Foreclosure. ASU 2014-04 clarifies that an in substance repossession or foreclosure has occurred, and a creditor is considered to have received physical possession of residential real estate
property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or the borrower conveying all interest in the residential real estate property
to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure. Interim and annual disclosure is required of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in
consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure. ASU 2014-04 is effective using either the modified retrospective transition method or a prospective transition method for fiscal years
and interim periods within those years, beginning after December 15, 2014, and early adoption is permitted. The Company is in the process of evaluating the impact that adoption of this guidance may have on its consolidated financial statements.
12
NOTE 2 BUSINESS COMBINATIONS AND BRANCH SALES
The Company completed the following acquisitions during the time period between January 1, 2013 and March 31, 2014 and used
the acquisition method of accounting. Accordingly, the operating results of the acquired entities have been included in the consolidated financial statements from their respective dates of acquisition. The following table presents a summary of
acquired assets and assumed liabilities along with a summary of the acquisition consideration as of the dates of acquisition:
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Acquisition and Date Acquired
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Renovation
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The Palisades
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Private Bank
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Ready
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CS Financial
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Group, LLC
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of California
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January 31,
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October 31,
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September 10,
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July 1,
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2014
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2013
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2013
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2013
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($ in thousands)
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Assets acquired:
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Cash and due from banks
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$
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$
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482
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$
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900
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$
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33,752
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Interest-bearing deposits
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5
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Federal funds sold
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Securities available for sale
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219,298
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Loans held for sale
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4,982
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Loans and leases receivable
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385,256
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Federal Home Loan Bank and other bank stock, at cost
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Servicing rights
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Premises, equipment, and capital leases
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1,050
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1,501
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Income tax receivable
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682
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Goodwill
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3,000
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8,057
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14,763
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Other intangible assets
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10,400
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Other assets
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621
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364
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6,578
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Total assets acquired
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$
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3,000
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$
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15,192
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$
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1,269
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$
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672,230
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Liabilities assumed:
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Deposits
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$
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$
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$
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$
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561,689
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Advances from Federal Home Loan Bank
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41,833
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Other liabilities
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1,000
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7,270
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1,219
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2,481
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Total liabilities assumed
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$
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1,000
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$
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7,270
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$
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1,219
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$
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606,003
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SBLF preferred stock assumed
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$
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$
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$
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$
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10,000
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Total consideration paid
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$
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2,000
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$
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7,922
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$
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50
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$
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56,227
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Summary of consideration
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Cash paid
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$
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1,000
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$
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1,500
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$
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50
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$
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27,915
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Common stock issued
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$
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1,000
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$
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1,964
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$
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$
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28,282
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Replacement awards
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$
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$
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$
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$
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30
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Stock warrants issued
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$
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$
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$
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$
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Noninterest-bearing note
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$
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$
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3,150
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$
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$
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Performance based equity
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$
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$
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1,308
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$
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$
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Earn-out liabilities
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$
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1,000
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$
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$
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$
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RenovationReady® Acquisition
Effective January 31, 2014, the Company acquired certain assets, including service contracts and intellectual property, of RenovationReady®, a provider of specialized loan services to financial
institutions and mortgage bankers that originate agency eligible residential renovation and construction loan products.
The
RenovationReady® acquisition was accounted for under GAAP guidance for business combinations. The purchased identifiable intangible assets and assumed liabilities were recorded at their estimated fair values as of January 31, 2014.
Because of the short time period between the acquisition date and March 31, 2014, the Company used significant estimates and assumptions to value the identifiable assets acquired and liabilities assumed. The closing date valuations related to
other intangible assets and assumed liabilities are preliminary and could differ significantly when finalized.
13
CS Financial Acquisition
Effective October 31, 2013, the Company acquired CS Financial, Inc. (CS Financial), a California corporation and Southern California-based mortgage banking firm controlled by former Company director
and current Company executive Jeffery T. Seabold. CS Financial became a wholly owned subsidiary of the Bank. For additional information regarding this transaction, see note 18-Related-Party Transactions.
The CS Financial acquisition was accounted for under GAAP guidance for business combinations. The purchased assets, including identifiable
intangible assets and assumed liabilities were recorded at their estimated fair values as of October 31, 2013. Because of the short time period between the acquisition date and March 31, 2014, the Company used significant estimates and
assumptions to value the identifiable assets acquired and liabilities assumed. The closing date valuations related to loans, premises, equipment, capital leases, other intangible assets, other assets, and assumed liabilities are preliminary and
could differ significantly when finalized.
The Palisades Group, LLC, Acquisition
Effective September 10, 2013, the Company acquired The Palisades Group, a Delaware limited liability company and a registered investment adviser
under the Investment Advisers Act of 1940, pursuant to the terms of the Amended and Restated Units Purchase Agreement dated as of November 30, 2012, amended and restated as of August 12, 2013, for $50 thousand. The Palisades Group provides
financial advisory and asset management services to third parties, including the Bank, with respect to the purchase, sale and management of portfolios of residential mortgage loans.
The Palisades Group acquisition was accounted for under GAAP guidance for business combinations. The assets and liabilities were recorded at their estimated fair values as of the September 10,
2013 acquisition date. No goodwill was recognized.
The Private Bank of California Acquisition
Effective July 1, 2013, the Company completed its acquisition of The Private Bank of California, (PBOC) pursuant to the terms of the Agreement and
Plan of Merger, dated as of August 21, 2012, as amended (the PBOC Merger Agreement), by and between the Company, Beach Business Bank (Beach) (then a separate subsidiary bank of the Company) and PBOC. PBOC merged with and into Beach, with Beach
continuing as the surviving entity in the merger and a wholly owned subsidiary of the Company, and changing its name to The Private Bank of California. On October 11, 2013, The Private Bank of California was merged with the
Companys other wholly owned banking subsidiary, Banc of California, National Association (formerly Pacific Trust Bank), to form the Bank.
Pursuant to the terms of the PBOC Merger Agreement, the Company paid aggregate merger consideration of (1) 2,082,654 shares of Company common stock
(valued at $28.3 million based on the $13.58 per share closing price of Company common stock on July 1, 2013), and (2) $25.3 million in cash. Additionally, the Company paid out $2.7 million for certain outstanding options to acquire PBOC
common stock in accordance with the PBOC Merger Agreement and converted the remaining outstanding PBOC stock options to the Company stock options with an assumed fair value of approximately $30 thousand. On the basis of the number of shares of PBOC
common stock issued and outstanding immediately prior to the completion of the merger, each outstanding share of PBOC common stock was converted into the right to receive $6.52 in cash and 0.5379 shares of Company common stock.
In addition, upon completion of the acquisition, each share of preferred stock issued by PBOC as part of the Small Business Lending Fund (SBLF) program
of the United States Department of Treasury (10,000 shares in the aggregate with a liquidation preference amount of $1,000 per share) was converted automatically into one substantially identical share of preferred stock of the Company. The terms of
the preferred stock issued by the Company in exchange for the PBOC preferred stock are substantially identical to the preferred stock previously issued by the Company as part of its own participation in the SBLF program (32,000 shares in aggregate
with a liquidation preference amount of $1,000 per share).
PBOC provided a range of financial services, including credit and deposit products
as well as cash management services, from its headquarters located in the Century City area of Los Angeles, California as well as full-service branches in Hollywood and Irvine, and a loan production office in downtown Los Angeles. PBOCs target
clients included high-net worth and high income individuals, business professionals and their professional service firms, business owners, entertainment service businesses and non-profit organizations.
In accordance with GAAP guidance for business combinations, the Company has expensed approximately $2.6 million of direct acquisition costs and recorded
$14.8 million of goodwill and $10.4 million of other intangible assets. The other intangible assets are primarily related to core deposits and are being amortized on an accelerated basis over 2-7 years. Loans that were acquired from PBOC that were
considered credit impaired were written down at the acquisition date in accordance with purchase accounting to fair value. In addition, the allowance for loan losses for all PBOC loans was not carried over to the Companys allowance for loan
and lease losses. A full valuation allowance for the deferred tax asset was recorded based on managements evaluation of the expectation of recovery of deferred tax assets for the Company. For tax purposes purchase accounting adjustments,
including goodwill are all nontaxable and/or non-deductible.
14
Pro Forma Information
The following table presents unaudited pro forma information as if the acquisitions of PBOC, Palisades and CS Financial had occurred on January 1, 2013 after giving effect to certain adjustments. The
unaudited pro forma information for the three months ended March 31, 2013 includes adjustments for interest income on loans and securities acquired, amortization of intangibles arising from the transaction, interest expense on deposits and
borrowings acquired, and the related income tax effects.
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Three months ended
|
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March 31,
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2014 (Actual)
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2013
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(In thousands, except per share data)
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Net interest income
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$
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35,185
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$
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20,527
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Provision for loan and lease losses
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1,929
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2,517
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Noninterest income
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25,278
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|
|
|
24,610
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Noninterest expense
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57,768
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|
|
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39,425
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Income (loss) before income taxes
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766
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|
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3,195
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Income tax expense (benefit)
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|
|
9
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|
|
|
1,318
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|
|
|
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|
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|
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Net income (loss)
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$
|
757
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|
|
$
|
1,877
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|
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|
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Basic earnings (loss) per common share
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|
$
|
(0.01
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)
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$
|
0.11
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Diluted earnings (loss) per common share
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|
$
|
(0.01
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)
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$
|
0.11
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|
The above unaudited pro forma financial information for 2013 includes the pre-acquisition periods for PBOC, Palisades,
and CS Financial. The above unaudited pro forma financial information includes pre-acquisition provisions for loan and lease losses recognized by PBOC and CS Financial of $349 thousand for the three months ended March 31, 2013. No pro forma
information for RenovationReady is presented for the three months ended March 31, 2014, as it is immaterial. The above pro forma financial information for the three months ended March 31, 2013 does not include cost saves or integration costs and may
not be reflective of what the actual results would have been for such period had the transactions occurred at the beginning of such period.
Branch Sales
On
October 4, 2013, the Bank completed a branch sale transaction to AmericanWest Bank, a Washington state chartered bank (AWB). In the transaction, the Bank sold eight branches and related assets and deposit liabilities to AWB. The transaction was
completed with a transfer of $464.3 million deposits to AWB in exchange for a deposit premium of 2.3 percent. Certain other assets related to the branches include the real estate for three of the branch locations and certain overdraft and other
credit facilities related to the deposit accounts. The Company recognized a gain of $12.1 million from this transaction.
NOTE 3 FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair Value Hierarchy.
ASC 820-10 establishes a fair value hierarchy which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. The topic describes three levels of inputs that may be used to measure fair value:
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Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
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Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable market data.
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Level 3: Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an
asset or liability.
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15
Securities Available for Sale.
The fair values of securities available for sale are generally
determined by quoted market prices, if available (Level 1), or by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but
rather by relying on the securities relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted
cash flows or other market indicators (Level 3). The fair values of the Companys Level 3 securities are determined by the Company or an independent third-party provider using a discounted cash flow methodology. The methodology uses discount
rates that are based upon observed market yields for similar securities. Prepayment speeds are estimated based upon the prepayment history of each bond and a detailed analysis of the underlying collateral. Gross weighted average coupon, geographic
concentrations, loan to value, FICO and seasoning are among the different loan attributes that are factored into our prepayment curve. Default rates and severity are estimated based upon geography of the collateral, delinquency, modifications, loan
to value ratios, FICO scores, and past performance.
Impaired Loans and Leases.
The fair value of impaired loans and leases with
specific allocations of the allowance for loan and lease losses based on collateral values is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including
comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and
result in a Level 3 classification of the inputs for determining fair value.
Loans Held for Sale.
The fair value of loans held for
sale is based on commitments outstanding from investors as well as what secondary markets are currently offering for portfolios with similar characteristics. Therefore, loans held for sale subjected to recurring fair value adjustments are classified
as Level 2. The Company had $169.2 million and $192.6 million of loans held for sale at such fair values at March 31, 2014 and December 31, 2013, respectively. The Company also had $831.2 million and $524.1 million of non-conforming jumbo
mortgage loans held for sale at the lower of cost or fair value at March 31, 2014 and December 31, 2013, respectively. The Company obtains quotes, bid or pricing indications on all or part of these loans directly from the buyers. Premiums
and discounts received or to be received on the quotes, bids or pricing indications are indicative of the fact that the cost is lower or higher than fair value.
Derivative Assets and Liabilities.
The Companys derivative assets and liabilities are carried at fair value as required by GAAP and are accounted for as freestanding derivatives. The Company
has entered into pay-fixed, receive-variable interest rate swap contracts with institutional counterparties to hedge against variability in cash flow attributable to interest rate risk caused by changes in the LIBOR benchmark interest rate on the
Companys ongoing LIBOR-based variable rate deposits. The Company is accounting for the swaps as cash flow hedges under ASC 815. The other derivative assets are interest rate lock commitments (IRLCs) with prospective residential mortgage
borrowers whereby the interest rate on the loan is locked by borrower prior to funding. These IRLCs are determined to be derivative instruments in accordance with GAAP. Additional derivative assets and liabilities, typically mortgage-backed
to-be-announced (TBA) securities, are used to hedge fair value changes, driven by changes in interest rates, on the Companys mortgage assets. The Company hedges the period from the interest rate lock (assuming a fall-out factor) to the date of
the loan sale. The estimated fair value is based on current market prices for similar instruments. Given the meaningful level of secondary market activity for derivative contracts, active pricing is available for similar assets and accordingly, the
Company classifies its derivative assets and liabilities as Level 2.
Servicing Rights Mortgage.
The Company retains servicing
on some of its mortgage loans sold and elected the fair value option for valuation of these mortgage servicing rights (MSRs). The value is based on a third party provider that calculates the present value of the expected net servicing income from
the portfolio based on key factors that include interest rates, prepayment assumptions, discount rate and estimated cash flows. Because of the significance of unobservable inputs, these servicing rights are classified as Level 3.
Other Real Estate Owned Assets.
Other real estate owned assets (OREO) are recorded at the fair value less estimated costs to sell at the time of
foreclosure. The fair value of other real estate owned assets is generally based on recent real estate appraisals adjusted for estimated selling costs. These appraisals may utilize a single valuation approach or a combination of approaches including
comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and result in a
Level 3 classification of the inputs for determining fair value. Only OREO with a valuation allowance are considered to be carried at fair value. For the three months ended March 31, 2014 and 2013, the Company experienced none and $79 thousand
in valuation allowance expense for those assets, respectively.
16
Assets and Liabilities Measured on a Recurring and Non-Recurring Basis
Available-for-sale securities, certain conforming mortgage loans held for sale, derivative assets and liabilities, and servicing rightsmortgage are
measured at fair value on a recurring basis, whereas impaired loans and leases, non-conforming jumbo mortgage loans held for sale and other real estate owned are measured at fair value on a non-recurring basis.
The following table presents the Companys financial assets and liabilities measured at fair value on a recurring basis as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Level
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Active Markets
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
for Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
Carrying
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
Value
|
|
|
(Level One)
|
|
|
(Level Two)
|
|
|
(Level Three)
|
|
|
|
(In thousands)
|
|
March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA loan pools securities
|
|
$
|
1,702
|
|
|
$
|
|
|
|
$
|
1,702
|
|
|
$
|
|
|
U.S. government-sponsored entities and agency securities
|
|
|
1,958
|
|
|
|
|
|
|
|
1,958
|
|
|
|
|
|
Private label residential mortgage-backed securities
|
|
|
5,067
|
|
|
|
|
|
|
|
5,067
|
|
|
|
|
|
Agency mortgage-backed securities
|
|
|
98,798
|
|
|
|
|
|
|
|
98,798
|
|
|
|
|
|
Loans held for sale
|
|
|
169,197
|
|
|
|
|
|
|
|
169,197
|
|
|
|
|
|
Derivative assets
(1)
|
|
|
4,469
|
|
|
|
|
|
|
|
4,469
|
|
|
|
|
|
Mortgage servicing rights
(2)
|
|
|
18,553
|
|
|
|
|
|
|
|
10,146
|
|
|
|
8,407
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
(3)
|
|
|
64
|
|
|
|
|
|
|
|
64
|
|
|
|
|
|
December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA loan pools securities
|
|
$
|
1,736
|
|
|
$
|
|
|
|
$
|
1,736
|
|
|
$
|
|
|
U.S. government-sponsored entities and agency securities
|
|
|
1,920
|
|
|
|
|
|
|
|
1,920
|
|
|
|
|
|
Private label residential mortgage-backed securities
|
|
|
14,752
|
|
|
|
|
|
|
|
14,752
|
|
|
|
|
|
Agency mortgage-backed securities
|
|
|
151,614
|
|
|
|
|
|
|
|
151,614
|
|
|
|
|
|
Loans held for sale
|
|
|
192,613
|
|
|
|
|
|
|
|
192,613
|
|
|
|
|
|
Derivative assets
(1)
|
|
|
5,493
|
|
|
|
|
|
|
|
5,493
|
|
|
|
|
|
Mortgage servicing rights
(2)
|
|
|
13,535
|
|
|
|
|
|
|
|
|
|
|
|
13,535
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Included in
other assets on the consolidated statements of financial condition
|
(2)
|
Included in
servicing rights, net and servicing rights held for sale on the consolidated statements of financial condition
|
(3)
|
Included in
accrued expenses and other liabilities on the consolidated statements of financial condition
|
During the
three months ended March 31, 2014, the Company entered into an agreement with a third party to sell servicing rights on mortgage loans with $941.1 million of outstanding unpaid principal balance at March 31, 2014 for a fair value of
$10.1 million. The sale closed on April 1, 2014. The fair values on the sold MSRs are carried at the closing price of the transaction at March 31, 2014, therefore, we transferred the amount to Level 2. The Company will continue
to be the interim servicer until later in the second quarter.
17
The following table presents the Companys financial assets and liabilities measured at
fair value on a non-recurring basis as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Level
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Active Markets
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
for Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
Carrying
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
Value
|
|
|
(Level One)
|
|
|
(Level Two)
|
|
|
(Level Three)
|
|
|
|
(In thousands)
|
|
March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
$
|
10,160
|
|
|
$
|
|
|
|
$
|
3,094
|
|
|
$
|
7,066
|
|
Real estate mortgage
|
|
|
3,218
|
|
|
|
|
|
|
|
|
|
|
|
3,218
|
|
Multifamily
|
|
|
1,674
|
|
|
|
|
|
|
|
|
|
|
|
1,674
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
212
|
|
|
|
|
|
|
|
212
|
|
|
|
|
|
Other real estate owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
150
|
|
|
|
|
|
|
|
150
|
|
|
|
|
|
December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
$
|
12,814
|
|
|
$
|
|
|
|
$
|
8,769
|
|
|
$
|
4,045
|
|
Real estate mortgage
|
|
|
3,868
|
|
|
|
|
|
|
|
105
|
|
|
|
3,763
|
|
Multifamily
|
|
|
1,972
|
|
|
|
|
|
|
|
|
|
|
|
1,972
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
249
|
|
|
|
|
|
|
|
216
|
|
|
|
33
|
|
Commercial and industrial
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
SBA
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
The Company did not have any other real estate owned at December 31, 2013.
The following table presents the gains and (losses) recognized on assets measured at fair value on a non-recurring basis for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(In thousands)
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
$
|
(151
|
)
|
|
$
|
(124
|
)
|
Multifamily
|
|
|
|
|
|
|
(296
|
)
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Other real estate owned assets
|
|
|
|
|
|
|
35
|
|
18
The following table presents a reconciliation of assets measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private label
|
|
|
|
|
|
|
|
|
|
residential
|
|
|
Mortgage
|
|
|
|
|
|
|
mortgage-backed
|
|
|
Servicing
|
|
|
|
|
|
|
securities
|
|
|
Rights
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Balance of recurring Level 3 assets at December 31, 2013
|
|
$
|
|
|
|
$
|
13,535
|
|
|
$
|
13,535
|
|
Transfers out of Level 3
(1)
|
|
|
|
|
|
|
(9,185
|
)
|
|
|
(9,185
|
)
|
Total gains or losses (realized/unrealized):
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earningsrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earningsfair value adjustment
|
|
|
|
|
|
|
315
|
|
|
|
315
|
|
Included in other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of premium (discount)
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
4,326
|
|
|
|
4,326
|
|
Sales and settlements
|
|
|
|
|
|
|
(584
|
)
|
|
|
(584
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance of recurring Level 3 assets at March 31, 2014
|
|
$
|
|
|
|
$
|
8,407
|
|
|
$
|
8,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance of recurring Level 3 assets at December 31, 2012
|
|
$
|
2,214
|
|
|
$
|
1,739
|
|
|
$
|
3,953
|
|
Transfers out of Level 3
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gains or losses (realized/unrealized):
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earningsrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earningsfair value adjustment
|
|
|
|
|
|
|
25
|
|
|
|
25
|
|
Included in other comprehensive income
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
Amortization of premium (discount)
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
910
|
|
|
|
910
|
|
Sales and settlements
|
|
|
(294
|
)
|
|
|
(95
|
)
|
|
|
(389
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance of recurring Level 3 assets at March 31, 2013
|
|
$
|
1,919
|
|
|
$
|
2,579
|
|
|
$
|
4,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Companys policy is to recognize transfers in and transfers out as of the actual date of the event or change in circumstances that cause the transfer.
|
The following table presents quantitative information about Level 3 fair value measurements on a recurring
basis as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Valuation Technique(s)
|
|
Unobservable Input(s)
|
|
Range (Weighted Average)
|
|
|
($ in thousands)
|
March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
$
|
8,407
|
|
|
Discounted cash flow
|
|
Discount rate
|
|
10.00% to 17.89% (10.81%)
|
|
|
|
|
|
|
|
|
Prepayment rate
|
|
3.92% to 34.54% (13.17%)
|
December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
$
|
13,535
|
|
|
Discounted cash flow
|
|
Discount rate
|
|
10.00% to 17.94% (10.26%)
|
|
|
|
|
|
|
|
|
Prepayment rate
|
|
4.19% to 34.54% (9.85%)
|
The significant unobservable inputs used in the fair value measurement of the Companys servicing
rights include the discount rate and estimated cash flows. There may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could
significantly affect the results.
The significant unobservable inputs used in the fair value measurement of the
Companys private label and agency residential mortgage backed securities are prepayment rates, collateral default rates, and loss severity in the event of default. Significant increases (decreases) in any of those inputs in isolation could
result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the collateral default rates is accompanied by a directionally similar change in the assumption used for the loss severity and a
directionally opposite change in the assumption used for prepayment rates.
19
The following table presents the carrying amounts and estimated fair values of financial
assets and liabilities as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Fair Value Measurements Level
|
|
|
|
Amount
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(In thousands)
|
|
March 31, 2014:
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
333,639
|
|
|
$
|
333,639
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
333,639
|
|
Time deposits in financial institutions
|
|
|
1,745
|
|
|
|
1,745
|
|
|
|
|
|
|
|
|
|
|
|
1,745
|
|
Securities available-for-sale
|
|
|
107,525
|
|
|
|
|
|
|
|
107,525
|
|
|
|
|
|
|
|
107,525
|
|
FHLB and other bank stock
|
|
|
26,801
|
|
|
|
|
|
|
|
26,801
|
|
|
|
|
|
|
|
26,801
|
|
Loans held for sale
|
|
|
1,000,394
|
|
|
|
|
|
|
|
1,000,394
|
|
|
|
|
|
|
|
1,000,394
|
|
Loans and leases receivable, net of allowance
|
|
|
2,376,992
|
|
|
|
|
|
|
|
|
|
|
|
2,414,917
|
|
|
|
2,414,917
|
|
Accrued interest receivable
|
|
|
10,962
|
|
|
|
10,962
|
|
|
|
|
|
|
|
|
|
|
|
10,962
|
|
Derivative assets
|
|
|
4,469
|
|
|
|
|
|
|
|
4,469
|
|
|
|
|
|
|
|
4,469
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
3,109,146
|
|
|
|
|
|
|
|
3,074,457
|
|
|
|
|
|
|
|
3,074,457
|
|
Advances from the FHLB
|
|
|
395,000
|
|
|
|
|
|
|
|
395,074
|
|
|
|
|
|
|
|
395,074
|
|
Federal funds purchased
|
|
|
70,000
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
70,000
|
|
Notes payable
|
|
|
82,416
|
|
|
|
86,615
|
|
|
|
|
|
|
|
|
|
|
|
86,615
|
|
Derivative liabilities
|
|
|
64
|
|
|
|
|
|
|
|
64
|
|
|
|
|
|
|
|
64
|
|
Accrued interest payable
|
|
|
1,628
|
|
|
|
1,628
|
|
|
|
|
|
|
|
|
|
|
|
1,628
|
|
December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
110,118
|
|
|
$
|
110,118
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
110,118
|
|
Time deposits in financial institutions
|
|
|
1,846
|
|
|
|
1,846
|
|
|
|
|
|
|
|
|
|
|
|
1,846
|
|
Securities available-for-sale
|
|
|
170,022
|
|
|
|
|
|
|
|
170,022
|
|
|
|
|
|
|
|
170,022
|
|
FHLB and other bank stock
|
|
|
22,600
|
|
|
|
|
|
|
|
22,600
|
|
|
|
|
|
|
|
22,600
|
|
Loans held for sale
|
|
|
716,733
|
|
|
|
|
|
|
|
719,496
|
|
|
|
|
|
|
|
719,496
|
|
Loans and leases receivable, net of allowance
|
|
|
2,427,306
|
|
|
|
|
|
|
|
|
|
|
|
2,460,953
|
|
|
|
2,460,953
|
|
Accrued interest receivable
|
|
|
10,866
|
|
|
|
10,866
|
|
|
|
|
|
|
|
|
|
|
|
10,866
|
|
Derivative assets
|
|
|
5,493
|
|
|
|
|
|
|
|
5,493
|
|
|
|
|
|
|
|
5,493
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
2,918,644
|
|
|
|
|
|
|
|
2,877,650
|
|
|
|
|
|
|
|
2,877,650
|
|
Advances from the FHLB
|
|
|
250,000
|
|
|
|
|
|
|
|
250,090
|
|
|
|
|
|
|
|
250,090
|
|
Notes payable
|
|
|
82,320
|
|
|
|
85,564
|
|
|
|
|
|
|
|
|
|
|
|
85,564
|
|
Derivative liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest payable
|
|
|
1,646
|
|
|
|
1,646
|
|
|
|
|
|
|
|
|
|
|
|
1,646
|
|
The methods and assumptions used to estimate fair value are described as follows:
Carrying amount is the estimated fair value for cash and cash equivalents, time deposits in financial institutions, and accrued interest receivable and
payable. The methods for determining the fair values for securities available for sale, and derivatives assets and liabilities are described above. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent re-pricing
or re-pricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. Fair value of FHLB advances and long-term debt is based on current rates for similar financing, and
therefore not indicative of an exit price. It was not practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability. Carrying amount of federal funds purchased is the estimated fair value due to the
short-term nature of this liability, as all outstanding federal funds purchased were over-night borrowings at March 31, 2014. The fair value of off-balance-sheet items is not considered material (or is based on the current fees or costs that
would be charged to enter into or terminate such arrangements) and is not presented.
20
NOTE 4 SECURITIES AVAILABLE FOR SALE
The following table presents the amortized cost and fair value of the available-for-sale investment securities portfolio and the
corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA loan pools securities
|
|
$
|
1,749
|
|
|
$
|
|
|
|
$
|
(47
|
)
|
|
$
|
1,702
|
|
U.S. government-sponsored entities and agency securities
|
|
|
1,930
|
|
|
|
28
|
|
|
|
|
|
|
|
1,958
|
|
Private label residential mortgage-backed securities
|
|
|
5,086
|
|
|
|
10
|
|
|
|
(29
|
)
|
|
|
5,067
|
|
Agency mortgage-backed securities
|
|
|
99,731
|
|
|
|
31
|
|
|
|
(964
|
)
|
|
|
98,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
108,496
|
|
|
$
|
69
|
|
|
$
|
(1,040
|
)
|
|
$
|
107,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA loan pools securities
|
|
$
|
1,794
|
|
|
$
|
|
|
|
$
|
(58
|
)
|
|
$
|
1,736
|
|
U.S. government-sponsored entities and agency securities
|
|
|
1,928
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
1,920
|
|
Private label residential mortgage-backed securities
|
|
|
14,653
|
|
|
|
135
|
|
|
|
(36
|
)
|
|
|
14,752
|
|
Agency mortgage-backed securities
|
|
|
153,134
|
|
|
|
299
|
|
|
|
(1,819
|
)
|
|
|
151,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
171,509
|
|
|
$
|
434
|
|
|
$
|
(1,921
|
)
|
|
$
|
170,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents amortized cost and fair value of the available-for-sale securities portfolio by expected
maturity. In the case of residential mortgage-backed securities and SBA loan pool securities, expected maturities may differ from contractual maturities because borrowers generally have the right to call or prepay obligations with or without call or
prepayment penalties. For that reason, mortgage-backed securities and SBA loan pool securities are not included in the maturity categories.
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
|
Amortized
|
|
|
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
Maturity:
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
Within one year
|
|
$
|
|
|
|
$
|
|
|
One to five years
|
|
|
|
|
|
|
|
|
Five to ten years
|
|
|
1,930
|
|
|
|
1,958
|
|
Greater than ten years
|
|
|
|
|
|
|
|
|
SBA loan pools, private label residential mortgage backed and agency mortgage-backed securities
|
|
|
106,566
|
|
|
|
105,567
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
108,496
|
|
|
$
|
107,525
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2014 and December 31, 2013, there were no holdings of any one issuer, other than the U.S.
Government and its agencies, in an amount greater than 10 percent of shareholders equity.
21
The following table summarizes the investment securities with unrealized losses at
March 31, 2014 and December 31, 2013, respectively, by security type and length of time in a continuous unrealized loss position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
|
(In thousands)
|
|
March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA loan pools securities
|
|
$
|
1,702
|
|
|
$
|
(47
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,702
|
|
|
$
|
(47
|
)
|
U.S. government-sponsored entities and agency securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private label residential mortgage-backed securities
|
|
|
1,219
|
|
|
|
(15
|
)
|
|
|
2,931
|
|
|
|
(14
|
)
|
|
|
4,150
|
|
|
|
(29
|
)
|
Agency mortgage-backed securities
|
|
|
86,795
|
|
|
|
(950
|
)
|
|
|
1,798
|
|
|
|
(14
|
)
|
|
|
88,593
|
|
|
|
(964
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale
|
|
$
|
89,716
|
|
|
$
|
(1,012
|
)
|
|
$
|
4,729
|
|
|
$
|
(28
|
)
|
|
$
|
94,445
|
|
|
$
|
(1,040
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA loan pools securities
|
|
$
|
1,736
|
|
|
$
|
(58
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,736
|
|
|
$
|
(58
|
)
|
U.S. government-sponsored entities and agency securities
|
|
|
1,920
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
1,920
|
|
|
|
(8
|
)
|
Private label residential mortgage-backed securities
|
|
|
2,064
|
|
|
|
(11
|
)
|
|
|
3,913
|
|
|
|
(25
|
)
|
|
|
5,977
|
|
|
|
(36
|
)
|
Agency mortgage-backed securities
|
|
|
114,104
|
|
|
|
(1,790
|
)
|
|
|
1,821
|
|
|
|
(29
|
)
|
|
|
115,925
|
|
|
|
(1,819
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale
|
|
$
|
119,824
|
|
|
$
|
(1,867
|
)
|
|
$
|
5,734
|
|
|
$
|
(54
|
)
|
|
$
|
125,558
|
|
|
$
|
(1,921
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recorded no other-than-temporary impairment (OTTI) for securities available for sale for the three months
ended March 31, 2014 and 2013.
At March 31, 2014, the Companys securities available for sale portfolio consisted of 80
securities, 67 of which were in an unrealized loss position. The unrealized losses are related to an overall increase in interest rates and a decrease in prepayment speeds of the agency mortgage-backed securities.
The Companys private label residential mortgage-backed securities in unrealized loss positions had fair values of $4.2 million with unrealized
losses of $29 thousand at March 31, 2014. The Companys agency residential mortgage-backed securities in unrealized loss positions had fair values of $88.6 million with unrealized losses of $964 thousand at March 31, 2014. The
Companys private label residential mortgage-backed securities in unrealized loss positions had fair values of $6.0 million with unrealized losses of $36 thousand at December 31, 2013. The Companys agency residential mortgage-backed
securities in unrealized loss positions had fair values of $115.9 million with unrealized losses of $1.8 million at December 31, 2013.
The Company monitors to ensure it has adequate credit support and as of March 31, 2014, the Company does not have the intent to sell these
securities and it is not likely that it will be required to sell the securities before their anticipated recoveries. Of the Companys $107.5 million securities portfolio, $107.3 million were rated AAA, AA or A, and $231 thousand were rated BBB
based on the most recent credit rating from the rating agencies as of March 31, 2014. The Company considers the lowest credit rating for identification of potential OTTI.
22
NOTE 5 LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES
The following table presents the balances in the Companys loans and leases portfolio as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Traditional
Mortgages (NTM)
|
|
|
Traditional
Loans
|
|
|
Total NTM and
Traditional Loans
|
|
|
Purchased Credit
Impaired
|
|
|
Total Loans and
Leases Receivable
|
|
|
|
(In thousands)
|
|
March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
|
|
|
$
|
297,646
|
|
|
$
|
297,646
|
|
|
$
|
1,538
|
|
|
$
|
299,184
|
|
Real estate mortgage
|
|
|
|
|
|
|
545,968
|
|
|
|
545,968
|
|
|
|
14,613
|
|
|
|
560,581
|
|
Multi-family
|
|
|
|
|
|
|
155,382
|
|
|
|
155,382
|
|
|
|
|
|
|
|
155,382
|
|
SBA
|
|
|
|
|
|
|
23,064
|
|
|
|
23,064
|
|
|
|
3,477
|
|
|
|
26,541
|
|
Construction
|
|
|
|
|
|
|
25,144
|
|
|
|
25,144
|
|
|
|
|
|
|
|
25,144
|
|
Lease financing
|
|
|
|
|
|
|
48,537
|
|
|
|
48,537
|
|
|
|
|
|
|
|
48,537
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
120,668
|
|
|
|
602,448
|
|
|
|
723,116
|
|
|
|
292,039
|
|
|
|
1,015,155
|
|
Green Loans (HELOC) - First Liens
|
|
|
143,708
|
|
|
|
|
|
|
|
143,708
|
|
|
|
|
|
|
|
143,708
|
|
Green Loans (HELOC) - Second Liens
|
|
|
4,921
|
|
|
|
|
|
|
|
4,921
|
|
|
|
|
|
|
|
4,921
|
|
Other HELOC's, home equity loans, and other consumer installment credit
|
|
|
113
|
|
|
|
115,973
|
|
|
|
116,086
|
|
|
|
1,756
|
|
|
|
117,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Loans
|
|
$
|
269,410
|
|
|
$
|
1,814,162
|
|
|
$
|
2,083,572
|
|
|
$
|
313,423
|
|
|
$
|
2,396,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage to total gross loans
|
|
|
11.2
|
%
|
|
|
75.7
|
%
|
|
|
86.9
|
%
|
|
|
13.1
|
%
|
|
|
100.0
|
%
|
Allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,003
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases receivable, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,376,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
|
|
|
$
|
283,743
|
|
|
$
|
283,743
|
|
|
$
|
4,028
|
|
|
$
|
287,771
|
|
Real estate mortgage
|
|
|
|
|
|
|
514,869
|
|
|
|
514,869
|
|
|
|
15,014
|
|
|
|
529,883
|
|
Multi-family
|
|
|
|
|
|
|
141,580
|
|
|
|
141,580
|
|
|
|
|
|
|
|
141,580
|
|
SBA
|
|
|
|
|
|
|
23,740
|
|
|
|
23,740
|
|
|
|
3,688
|
|
|
|
27,428
|
|
Construction
|
|
|
|
|
|
|
24,933
|
|
|
|
24,933
|
|
|
|
|
|
|
|
24,933
|
|
Lease financing
|
|
|
|
|
|
|
31,949
|
|
|
|
31,949
|
|
|
|
|
|
|
|
31,949
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
156,490
|
|
|
|
667,526
|
|
|
|
824,016
|
|
|
|
314,820
|
|
|
|
1,138,836
|
|
Green Loans (HELOC) - First Liens
|
|
|
147,705
|
|
|
|
|
|
|
|
147,705
|
|
|
|
|
|
|
|
147,705
|
|
Green Loans (HELOC) - Second Liens
|
|
|
5,289
|
|
|
|
|
|
|
|
5,289
|
|
|
|
|
|
|
|
5,289
|
|
Other HELOC's, home equity loans, and other consumer installment credit
|
|
|
113
|
|
|
|
108,888
|
|
|
|
109,001
|
|
|
|
1,736
|
|
|
|
110,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Loans
|
|
$
|
309,597
|
|
|
$
|
1,797,228
|
|
|
$
|
2,106,825
|
|
|
$
|
339,286
|
|
|
$
|
2,446,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage to total gross loans
|
|
|
12.7
|
%
|
|
|
73.4
|
%
|
|
|
86.1
|
%
|
|
|
13.9
|
%
|
|
|
100.0
|
%
|
Allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,805
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases receivable, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,427,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
Non Traditional Mortgage Loans
The Companys non-traditional mortgage (NTM) portfolio is comprised of three interest only products: Green Account Loans (Green Loans), hybrid interest only fixed or adjustable rate mortgage
(Interest Only) loans and a small number of additional loans with the potential for negative amortization. As of March 31, 2014 and December 31, 2013, the non-traditional mortgage loans totaled $269.4 million, or 11.2 percent of the total
gross loan portfolio, and $309.6 million, or 12.7 percent of the total gross loan portfolio, respectively. Total NTM portfolio decreased by $40.2 million, or 13.0 percent, during the three months ended March 31, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
|
Count
|
|
|
Amount
|
|
|
Percent
|
|
|
Count
|
|
|
Amount
|
|
|
Percent
|
|
|
|
($ in thousands)
|
|
Green Loans (HELOC) - first liens
|
|
|
167
|
|
|
$
|
143,708
|
|
|
|
53.3
|
%
|
|
|
173
|
|
|
$
|
147,705
|
|
|
|
47.6
|
%
|
Interest-only - first liens
|
|
|
221
|
|
|
|
105,446
|
|
|
|
39.1
|
%
|
|
|
244
|
|
|
|
139,867
|
|
|
|
45.2
|
%
|
Negative amortization
|
|
|
35
|
|
|
|
15,222
|
|
|
|
5.7
|
%
|
|
|
37
|
|
|
|
16,623
|
|
|
|
5.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total NTM - first liens
|
|
|
423
|
|
|
|
264,376
|
|
|
|
98.1
|
%
|
|
|
454
|
|
|
|
304,195
|
|
|
|
98.2
|
%
|
Green Loans (HELOC) - second liens
|
|
|
20
|
|
|
$
|
4,921
|
|
|
|
1.8
|
%
|
|
|
23
|
|
|
$
|
5,289
|
|
|
|
1.7
|
%
|
Interest-only - second liens
|
|
|
1
|
|
|
|
113
|
|
|
|
0.1
|
%
|
|
|
1
|
|
|
|
113
|
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total NTM - second liens
|
|
|
21
|
|
|
|
5,034
|
|
|
|
1.9
|
%
|
|
|
24
|
|
|
|
5,402
|
|
|
|
1.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total NTM loans
|
|
|
444
|
|
|
$
|
269,410
|
|
|
|
100.0
|
%
|
|
|
478
|
|
|
$
|
309,597
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross loan portfolio
|
|
|
|
|
|
$
|
2,396,995
|
|
|
|
|
|
|
|
|
|
|
$
|
2,446,111
|
|
|
|
|
|
% of NTM to total gross loan portfolio
|
|
|
|
|
|
|
11.2
|
%
|
|
|
|
|
|
|
|
|
|
|
12.7
|
%
|
|
|
|
|
Green Loans
Green Loans are single family residential first and second mortgage lines of credit with a linked checking account that allows all types of deposits and withdrawals to be performed. The loans are
generally interest only with a 15 year balloon payment due at maturity. At March 31, 2014, Green Loans totaled $148.6 million, a decrease of $4.4 million, or 2.9 percent from $153.0 million at December 31, 2013, primarily due to reductions
in principal balance and payoffs. As of March 31, 2014 and December 31, 2013, $5.6 million and $5.7 million, respectively, of the Companys Green Loans were non-performing. As a result of their unique payment feature, Green Loans
possess higher credit risk due to the potential of negative amortization; however, management believes the risk is mitigated through the Companys loan terms and underwriting standards, including its policies on loan-to-value ratios and the
Companys contractual ability to curtail loans when the value of underlying collateral declines. The Company discontinued origination of the Green Loan products in 2011.
Interest Only Loans
Interest only loans are primarily single family residential first
mortgage loans with payment features that allow interest only payment in initial periods before converting to a fully amortizing loan. As of March 31, 2014, our interest only loans decreased by $34.4 million, or 24.6 percent, to $105.6 million
from $140.0 million at December 31, 2013, primarily due to transfers to loans held for sale of $23.9 million and net amortization of $10.5 million. As of March 31, 2014 and December 31, 2013, $843 thousand and $752 thousand of the
interest only loans were non-performing, respectively.
Loans with the Potential for Negative Amortization
Negative amortization loans decreased by $1.4 million, or 8.4 percent, to $15.2 million as of March 31, 2014 from $16.6 million as of
December 31, 2013. The Company discontinued origination of negative amortization loans in 2007. As of March 31, 2014 and December 31, 2013, $983 thousand and $1.2 million of the loans that had the potential for negative amortization
were non-performing, respectively. These loans pose a potentially higher credit risk because of the lack of principal amortization and potential for negative amortization; however, management believes the risk is mitigated through the loan terms and
underwriting standards, including the Companys policies on loan-to-value ratios.
24
Risk Management of Non-Traditional Mortgages
The Company has assessed that the most significant performance indicators for non-traditional mortgages are loan-to-value (LTV) and FICO scores. Accordingly, the Company manages credit risk in the NTM
portfolio through semi-annual review of the loan portfolio that includes refreshing FICO scores on the Green Loans and home equity lines of credit, as needed in conjunction with portfolio management, and ordering third party automated valuation
models. The loan review is designed to provide a method of identifying borrowers who may be experiencing financial difficulty before they actually fail to make a loan payment. Upon receipt of the updated FICO scores, an exception report is run to
identify loans with a decrease in FICO of 10 percent or more and/or a resulting FICO of 620 or less. The loans are then further analyzed to determine if the risk rating should be downgraded which will increase the reserves the Company will establish
for potential losses. A report of the semi-annual loan review is published and regularly monitored.
As these loans are revolving lines of
credit, the Company, based on the loan agreement and loan covenants of the particular loan, as well as applicable rules and regulations, could suspend the borrowing privileges or reduce the credit limit at any time the Company reasonably believes
that the borrower will be unable to fulfill their repayment obligations under the agreement or certain other conditions are met. In many cases, the decrease in FICO is the first red flag that the borrower may have difficulty in making their future
payment obligations.
As a result, the Company proactively manages the portfolio by performing detailed analysis on its portfolio with
emphasis on the NTM portfolio. The Companys Internal Asset Review Committee (IARC) conducts meetings on at least a quarterly basis review the loans classified as special mention, substandard, or doubtful and determines whether suspension or
reduction in credit limit is warranted. If the line has been suspended and the borrower would like to have their credit privileges reinstated, they would need to provide updated financials showing their ability to meet their payment obligations.
On the Interest Only loans, the Company projects future payment changes to determine if there will a material increase in required payment
and then monitors the loans for possible delinquency. The individual loans are monitored for possible downgrading of risk rating, and trends within the portfolio are identified that could affect other interest only loans scheduled for payment
changes in the near future.
Non Traditional Mortgage Performance Indicators
The following table presents the Companys non-traditional one-to-four family residential mortgage Green Loans first lien portfolio at March 31, 2014 and December 31, 2013 by FICO scores:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
Changes
|
|
|
|
Count
|
|
|
Amount
|
|
|
Percent
|
|
|
Count
|
|
|
Amount
|
|
|
Percent
|
|
|
Count
|
|
|
Amount
|
|
|
Percent
|
|
|
|
($ in thousands)
|
|
FICO Score
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
800+
|
|
|
7
|
|
|
$
|
1,178
|
|
|
|
0.8
|
%
|
|
|
7
|
|
|
$
|
1,382
|
|
|
|
0.9
|
%
|
|
|
|
|
|
$
|
(204
|
)
|
|
|
-0.1
|
%
|
700-799
|
|
|
91
|
|
|
|
71,894
|
|
|
|
50.0
|
%
|
|
|
94
|
|
|
|
74,876
|
|
|
|
50.8
|
%
|
|
|
(3
|
)
|
|
|
(2,982
|
)
|
|
|
-0.8
|
%
|
600-699
|
|
|
43
|
|
|
|
41,985
|
|
|
|
29.2
|
%
|
|
|
44
|
|
|
|
42,739
|
|
|
|
28.9
|
%
|
|
|
(1
|
)
|
|
|
(754
|
)
|
|
|
0.3
|
%
|
<600
|
|
|
13
|
|
|
|
11,907
|
|
|
|
8.3
|
%
|
|
|
14
|
|
|
|
11,965
|
|
|
|
8.1
|
%
|
|
|
(1
|
)
|
|
|
(58
|
)
|
|
|
0.2
|
%
|
No FICO
|
|
|
13
|
|
|
|
16,744
|
|
|
|
11.7
|
%
|
|
|
14
|
|
|
|
16,743
|
|
|
|
11.3
|
%
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
167
|
|
|
$
|
143,708
|
|
|
|
100.0
|
%
|
|
|
173
|
|
|
$
|
147,705
|
|
|
|
100.0
|
%
|
|
|
(6
|
)
|
|
$
|
(3,997
|
)
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company updates FICO scores on a semi-annual basis, typically in second and fourth quarter or as needed in
conjunction with proactive portfolio management. As such, the FICO scores did not materially change from December 31, 2013 to March 31, 2014, but the change during the quarter reflects loans that were paid off during the quarter.
25
Loan to Value
The table below represents the Companys one-to-four SFR non-traditional mortgage first lien portfolio by LTV as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Green
|
|
|
Interest-Only
|
|
|
Negative Amortization
|
|
|
Total
|
|
|
|
Count
|
|
|
Amount
|
|
|
Percent
|
|
|
Count
|
|
|
Amount
|
|
|
Percent
|
|
|
Count
|
|
|
Amount
|
|
|
Percent
|
|
|
Count
|
|
|
Amount
|
|
|
Percent
|
|
|
|
($ in thousands)
|
|
March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTVs (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
< 61
|
|
|
81
|
|
|
$
|
82,430
|
|
|
|
57.4
|
%
|
|
|
75
|
|
|
$
|
43,389
|
|
|
|
41.2
|
%
|
|
|
14
|
|
|
$
|
5,670
|
|
|
|
37.2
|
%
|
|
|
170
|
|
|
$
|
131,489
|
|
|
|
49.8
|
%
|
61-80
|
|
|
49
|
|
|
|
37,055
|
|
|
|
25.8
|
%
|
|
|
39
|
|
|
|
18,777
|
|
|
|
17.8
|
%
|
|
|
14
|
|
|
|
7,181
|
|
|
|
47.2
|
%
|
|
|
102
|
|
|
|
63,013
|
|
|
|
23.8
|
%
|
81-100
|
|
|
25
|
|
|
|
14,108
|
|
|
|
9.8
|
%
|
|
|
41
|
|
|
|
20,911
|
|
|
|
19.8
|
%
|
|
|
6
|
|
|
|
1,967
|
|
|
|
12.9
|
%
|
|
|
72
|
|
|
|
36,986
|
|
|
|
14.0
|
%
|
> 100
|
|
|
12
|
|
|
|
10,115
|
|
|
|
7.0
|
%
|
|
|
66
|
|
|
|
22,369
|
|
|
|
21.2
|
%
|
|
|
1
|
|
|
|
404
|
|
|
|
2.7
|
%
|
|
|
79
|
|
|
|
32,888
|
|
|
|
12.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
167
|
|
|
$
|
143,708
|
|
|
|
100.0
|
%
|
|
|
221
|
|
|
$
|
105,446
|
|
|
|
100.0
|
%
|
|
|
35
|
|
|
$
|
15,222
|
|
|
|
100.0
|
%
|
|
|
423
|
|
|
$
|
264,376
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTVs (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
< 61
|
|
|
90
|
|
|
$
|
78,807
|
|
|
|
53.3
|
%
|
|
|
80
|
|
|
$
|
65,181
|
|
|
|
46.6
|
%
|
|
|
13
|
|
|
$
|
4,930
|
|
|
|
29.7
|
%
|
|
|
183
|
|
|
$
|
148,918
|
|
|
|
49.0
|
%
|
61-80
|
|
|
38
|
|
|
|
33,604
|
|
|
|
22.8
|
%
|
|
|
51
|
|
|
|
28,999
|
|
|
|
20.7
|
%
|
|
|
13
|
|
|
|
7,643
|
|
|
|
45.9
|
%
|
|
|
102
|
|
|
|
70,246
|
|
|
|
23.1
|
%
|
81-100
|
|
|
26
|
|
|
|
14,917
|
|
|
|
10.1
|
%
|
|
|
43
|
|
|
|
21,474
|
|
|
|
15.4
|
%
|
|
|
8
|
|
|
|
3,277
|
|
|
|
19.7
|
%
|
|
|
77
|
|
|
|
39,668
|
|
|
|
13.0
|
%
|
> 100
|
|
|
19
|
|
|
|
20,377
|
|
|
|
13.8
|
%
|
|
|
70
|
|
|
|
24,213
|
|
|
|
17.3
|
%
|
|
|
3
|
|
|
|
773
|
|
|
|
4.7
|
%
|
|
|
92
|
|
|
|
45,363
|
|
|
|
14.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
173
|
|
|
$
|
147,705
|
|
|
|
100.0
|
%
|
|
|
244
|
|
|
$
|
139,867
|
|
|
|
100.0
|
%
|
|
|
37
|
|
|
$
|
16,623
|
|
|
|
100.0
|
%
|
|
|
454
|
|
|
$
|
304,195
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
LTV represents estimated current loan to value ratio, determined by dividing current unpaid principal balance by latest estimated property value received per the
Companys policy
|
The decrease in interest only was primarily due to transfers to loans held for sales, and reductions in
principal balance and payoffs. The Company updates LTV on a semi-annual basis, typically in second and fourth quarter or as needed in conjunction with proactive portfolio management. As such, the LTV did not materially change from December 31,
2013 to March 31, 2014, but the change during the quarter reflects loans that were paid off during the quarter.
Allowance for Loan
and Lease Losses
The Company has an established credit risk management process that includes regular management review of the loan and
lease portfolio to identify problem loans and leases. During the ordinary course of business, management becomes aware of borrowers and lessees that may not be able to meet the contractual requirements of the loan and lease agreements. Such loans
and leases are subject to increased monitoring. Consideration is given to placing the loan or lease on non-accrual status, assessing the need for additional allowance for loan and lease losses, and partial or full charge-off. The Company maintains
the allowance for loan and lease losses at a level that is considered adequate to cover the estimated and known inherent risks in the loan portfolio.
The Company also maintains a reserve for unfunded loan commitments at a level that is considered adequate to cover the estimated and known inherent risks. The probability of usage of the unfunded loan
commitments and credit risk factors determined based on outstanding loan balance of same customer or outstanding loans that shares similar credit risk exposure are used to determine the adequacy of the reserve. As of March 31, 2014 and
December 31, 2013, the reserve for unfunded loan commitments was $1.6 million and $1.4 million, respectively.
The credit risk monitoring
system is designed to identify impaired and potential problem loans, and to permit periodic evaluation of impairment and the adequacy level of the allowance for credit losses in a timely manner. In addition, the Board of Directors of the Bank has
adopted a credit policy that includes a credit review and control system which it believes should be effective in ensuring that the Company maintains an adequate allowance for credit losses. The Board of Directors provides oversight and guidance for
managements allowance evaluation process, including quarterly valuations, and consideration of managements determination of whether the allowance is adequate to absorb losses in the loan and lease portfolio. The determination of the
amount of the allowance for loan and lease losses and the provision for loan and lease losses is based on managements current judgment about the credit quality of the loan and lease portfolio and takes into consideration known relevant
internal and external factors that affect collectability when determining the appropriate level for the allowance for loan and lease losses. The nature of the process by which the Company determines the appropriate allowance for loan and lease
losses requires the exercise of considerable judgment. Additions to the allowance for loan and lease losses are made by charges to the provision for loan and lease losses. Identified credit exposures that are determined to be uncollectible are
charged against the allowance for loan and lease losses. Recoveries of previously charged off amounts, if any, are credited to the allowance for loan and lease losses.
26
The following table presents a summary of activity in the allowance for loan and lease losses and ending
balances of loans evaluated for impairment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(In thousands)
|
|
Balance at beginning of year
|
|
$
|
18,805
|
|
|
$
|
14,448
|
|
Loans and leases charged off
|
|
|
(203
|
)
|
|
|
(906
|
)
|
Recoveries of loans and leases previously charged off
|
|
|
435
|
|
|
|
305
|
|
Transfer of loans to held-for-sale
|
|
|
(963
|
)
|
|
|
|
|
Provision for loan and lease losses
|
|
|
1,929
|
|
|
|
2,168
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
20,003
|
|
|
$
|
16,015
|
|
|
|
|
|
|
|
|
|
|
27
The following table presents the activity and balance in the allowance for loan and lease
losses and the recorded investment in loans and leases by portfolio segment and is based on the impairment method as of or for the periods ended dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HELOCs,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
|
Loans, and
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
and
|
|
|
Real Estate
|
|
|
Multi-
|
|
|
|
|
|
|
|
|
Lease
|
|
|
First
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
Industrial
|
|
|
Mortgage
|
|
|
Family
|
|
|
SBA
|
|
|
Construction
|
|
|
Financing
|
|
|
Mortgage
|
|
|
Credit
|
|
|
Unallocated
|
|
|
TOTAL
|
|
|
|
(In thousands)
|
|
March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2012
|
|
$
|
1,822
|
|
|
$
|
5,484
|
|
|
$
|
2,566
|
|
|
$
|
235
|
|
|
$
|
244
|
|
|
$
|
428
|
|
|
$
|
7,044
|
|
|
$
|
532
|
|
|
$
|
450
|
|
|
$
|
18,805
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
(151
|
)
|
|
|
(35
|
)
|
|
|
|
|
|
|
(203
|
)
|
Recoveries
|
|
|
26
|
|
|
|
316
|
|
|
|
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
435
|
|
Transfer of loans to held-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(963
|
)
|
|
|
|
|
|
|
|
|
|
|
(963
|
)
|
Provision
|
|
|
519
|
|
|
|
649
|
|
|
|
154
|
|
|
|
(99
|
)
|
|
|
108
|
|
|
|
194
|
|
|
|
217
|
|
|
|
284
|
|
|
|
(97
|
)
|
|
|
1,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2013
|
|
$
|
2,367
|
|
|
$
|
6,449
|
|
|
$
|
2,720
|
|
|
$
|
211
|
|
|
$
|
352
|
|
|
$
|
622
|
|
|
$
|
6,147
|
|
|
$
|
782
|
|
|
$
|
353
|
|
|
$
|
20,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
|
|
|
$
|
|
|
|
$
|
37
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
25
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
62
|
|
Collectively evaluated for impairment
|
|
|
2,367
|
|
|
|
6,449
|
|
|
|
2,683
|
|
|
|
211
|
|
|
|
352
|
|
|
|
622
|
|
|
|
5,926
|
|
|
|
782
|
|
|
|
353
|
|
|
|
19,745
|
|
Acquired with deteriorated credit quality
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196
|
|
|
|
|
|
|
|
|
|
|
|
196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance
|
|
$
|
2,367
|
|
|
$
|
6,449
|
|
|
$
|
2,720
|
|
|
$
|
211
|
|
|
$
|
352
|
|
|
$
|
622
|
|
|
$
|
6,147
|
|
|
$
|
782
|
|
|
$
|
353
|
|
|
$
|
20,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
|
|
|
$
|
3,218
|
|
|
$
|
1,674
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,160
|
|
|
$
|
212
|
|
|
$
|
|
|
|
$
|
15,264
|
|
Collectively evaluated for impairment
|
|
|
297,646
|
|
|
|
542,750
|
|
|
|
153,708
|
|
|
|
23,064
|
|
|
|
25,144
|
|
|
|
48,537
|
|
|
|
856,664
|
|
|
|
120,795
|
|
|
|
|
|
|
|
2,068,308
|
|
Acquired with deteriorated credit quality
|
|
|
1,538
|
|
|
|
14,613
|
|
|
|
|
|
|
|
3,477
|
|
|
|
|
|
|
|
|
|
|
|
292,039
|
|
|
|
1,756
|
|
|
|
|
|
|
|
313,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending loan balances
|
|
$
|
299,184
|
|
|
$
|
560,581
|
|
|
$
|
155,382
|
|
|
$
|
26,541
|
|
|
$
|
25,144
|
|
|
$
|
48,537
|
|
|
$
|
1,158,863
|
|
|
$
|
122,763
|
|
|
$
|
|
|
|
$
|
2,396,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2012
|
|
$
|
263
|
|
|
$
|
3,178
|
|
|
$
|
1,478
|
|
|
$
|
118
|
|
|
$
|
21
|
|
|
$
|
261
|
|
|
$
|
8,855
|
|
|
$
|
274
|
|
|
$
|
|
|
|
$
|
14,448
|
|
Charge-offs
|
|
|
|
|
|
|
(105
|
)
|
|
|
(384
|
)
|
|
|
(125
|
)
|
|
|
|
|
|
|
(23
|
)
|
|
|
(262
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
(906
|
)
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
88
|
|
|
|
125
|
|
|
|
|
|
|
|
2
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
305
|
|
Provision
|
|
|
218
|
|
|
|
625
|
|
|
|
362
|
|
|
|
15
|
|
|
|
273
|
|
|
|
23
|
|
|
|
529
|
|
|
|
(70
|
)
|
|
|
193
|
|
|
|
2,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2013
|
|
$
|
481
|
|
|
$
|
3,698
|
|
|
$
|
1,544
|
|
|
$
|
133
|
|
|
$
|
294
|
|
|
$
|
263
|
|
|
$
|
9,212
|
|
|
$
|
197
|
|
|
$
|
193
|
|
|
$
|
16,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
|
|
|
$
|
38
|
|
|
$
|
329
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,095
|
|
|
$
|
|
|
|
|
|
|
|
$
|
1,462
|
|
Collectively evaluated for impairment
|
|
|
481
|
|
|
|
3,636
|
|
|
|
1,215
|
|
|
|
133
|
|
|
|
294
|
|
|
|
263
|
|
|
|
7,902
|
|
|
|
197
|
|
|
|
193
|
|
|
|
14,314
|
|
Acquired with deteriorated credit quality
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
215
|
|
|
|
|
|
|
|
|
|
|
|
239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance
|
|
$
|
481
|
|
|
$
|
3,698
|
|
|
$
|
1,544
|
|
|
$
|
133
|
|
|
$
|
294
|
|
|
$
|
263
|
|
|
$
|
9,212
|
|
|
$
|
197
|
|
|
$
|
193
|
|
|
$
|
16,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
|
|
|
$
|
2,511
|
|
|
$
|
2,336
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
17,062
|
|
|
$
|
|
|
|
|
|
|
|
$
|
21,909
|
|
Collectively evaluated for impairment
|
|
|
74,564
|
|
|
|
307,338
|
|
|
|
123,329
|
|
|
|
30,329
|
|
|
|
6,831
|
|
|
|
16,418
|
|
|
|
806,197
|
|
|
|
21,901
|
|
|
|
|
|
|
|
1,386,907
|
|
Acquired with deteriorated credit quality
|
|
|
4,781
|
|
|
|
21,616
|
|
|
|
838
|
|
|
|
5,333
|
|
|
|
|
|
|
|
|
|
|
|
185,833
|
|
|
|
55
|
|
|
|
|
|
|
|
218,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending loan balances
|
|
$
|
79,345
|
|
|
$
|
331,465
|
|
|
$
|
126,503
|
|
|
$
|
35,662
|
|
|
$
|
6,831
|
|
|
$
|
16,418
|
|
|
$
|
1,009,092
|
|
|
$
|
21,956
|
|
|
$
|
|
|
|
$
|
1,627,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
The following table presents loans and leases individually evaluated for impairment by class of loans and
leases as of the dates indicated. The recorded investment presents customer balances net of any partial charge-offs recognized on the loans and leases and net of any deferred fees and costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
Allowance
|
|
|
|
|
|
|
|
|
Allowance
|
|
|
|
Unpaid
|
|
|
|
|
|
for Loan
|
|
|
Unpaid
|
|
|
|
|
|
for Loan
|
|
|
|
Principal
|
|
|
Recorded
|
|
|
Losses
|
|
|
Principal
|
|
|
Recorded
|
|
|
Losses
|
|
|
|
Balance
|
|
|
Investment
|
|
|
Allocated
|
|
|
Balance
|
|
|
Investment
|
|
|
Allocated
|
|
|
|
(In thousands)
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
50
|
|
|
$
|
33
|
|
|
$
|
|
|
Real estate mortgage
|
|
|
3,526
|
|
|
|
3,218
|
|
|
|
|
|
|
|
4,951
|
|
|
|
3,868
|
|
|
|
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
487
|
|
|
|
270
|
|
|
|
|
|
SBA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
10
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
8,612
|
|
|
|
8,267
|
|
|
|
|
|
|
|
10,765
|
|
|
|
9,487
|
|
|
|
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
213
|
|
|
|
212
|
|
|
|
|
|
|
|
248
|
|
|
|
247
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family
|
|
|
1,782
|
|
|
|
1,674
|
|
|
|
37
|
|
|
|
1,797
|
|
|
|
1,702
|
|
|
|
60
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
2,064
|
|
|
|
1,893
|
|
|
|
26
|
|
|
|
3,378
|
|
|
|
3,327
|
|
|
|
34
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
16,197
|
|
|
$
|
15,264
|
|
|
$
|
63
|
|
|
$
|
21,704
|
|
|
$
|
18,946
|
|
|
$
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
The following table presents information on impaired loans and leases, disaggregated by
class, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
Average
|
|
|
Interest
|
|
|
Cash Basis
|
|
|
Average
|
|
|
Interest
|
|
|
Cash Basis
|
|
|
|
Recorded
|
|
|
Income
|
|
|
Interest
|
|
|
Recorded
|
|
|
Income
|
|
|
Interest
|
|
|
|
Investment
|
|
|
Recognized
|
|
|
Recognized
|
|
|
Investment
|
|
|
Recognized
|
|
|
Recognized
|
|
|
|
(In thousands)
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Real estate mortgage
|
|
|
3,417
|
|
|
|
49
|
|
|
|
57
|
|
|
|
2,519
|
|
|
|
3
|
|
|
|
3
|
|
Multi-family
|
|
|
1,684
|
|
|
|
13
|
|
|
|
13
|
|
|
|
2,343
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
10,270
|
|
|
|
65
|
|
|
|
65
|
|
|
|
17,025
|
|
|
|
106
|
|
|
|
96
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
213
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15,584
|
|
|
$
|
128
|
|
|
$
|
136
|
|
|
$
|
21,887
|
|
|
$
|
109
|
|
|
$
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents nonaccrual loans and leases and loans past due 90 days still on accrual as
of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
|
Traditional Loans
|
|
|
NTM Loans
|
|
|
Total
|
|
|
Traditional Loans
|
|
|
NTM Loans
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Loans past due 90 days or more still on accrual
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Nonaccrual loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company maintains specific allowance allocations for these loans of $63 in 2014 and $95 in 2013
|
|
|
24,965
|
|
|
|
7,475
|
|
|
|
32,440
|
|
|
|
23,950
|
|
|
|
7,698
|
|
|
|
31,648
|
|
The following table presents the composition of nonaccrual loans and leases as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
|
Traditional Loans
|
|
|
NTM Loans
|
|
|
Total
|
|
|
Traditional Loans
|
|
|
NTM Loans
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
321
|
|
|
$
|
|
|
|
$
|
321
|
|
|
$
|
33
|
|
|
$
|
|
|
|
$
|
33
|
|
Real estate mortgage
|
|
|
3,764
|
|
|
|
|
|
|
|
3,764
|
|
|
|
3,868
|
|
|
|
|
|
|
|
3,868
|
|
Multi-family
|
|
|
1,938
|
|
|
|
|
|
|
|
1,938
|
|
|
|
1,972
|
|
|
|
|
|
|
|
1,972
|
|
SBA
|
|
|
57
|
|
|
|
|
|
|
|
57
|
|
|
|
10
|
|
|
|
|
|
|
|
10
|
|
Lease financing
|
|
|
119
|
|
|
|
|
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
18,721
|
|
|
|
1,826
|
|
|
|
20,547
|
|
|
|
18,032
|
|
|
|
2,000
|
|
|
|
20,032
|
|
Green Loans (HELOC) - First Liens
|
|
|
|
|
|
|
5,437
|
|
|
|
5,437
|
|
|
|
|
|
|
|
5,482
|
|
|
|
5,482
|
|
Green Loans (HELOC) - Second Liens
|
|
|
|
|
|
|
212
|
|
|
|
212
|
|
|
|
|
|
|
|
216
|
|
|
|
216
|
|
Other HELOCs, home equity loans, and other consumer installment credit
|
|
|
45
|
|
|
|
|
|
|
|
45
|
|
|
|
35
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
24,965
|
|
|
$
|
7,475
|
|
|
$
|
32,440
|
|
|
$
|
23,950
|
|
|
$
|
7,698
|
|
|
$
|
31,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
Past Due Loans and Leases
The following tables present the aging of the recorded investment in past due loans and leases as of March 31, 2014, excluding accrued interest receivable (which is not considered to be material), by
class of loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
|
|
|
|
|
|
|
Greater than
|
|
|
|
|
|
|
|
|
Gross Loans
|
|
|
|
30 - 59 Days
|
|
|
60 - 89 Days
|
|
|
89 Days
|
|
|
Total
|
|
|
|
|
|
and Leases
|
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Current
|
|
|
Receivables
|
|
|
|
(In thousands)
|
|
NTM loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
$
|
1,932
|
|
|
$
|
1,670
|
|
|
$
|
1,826
|
|
|
$
|
5,428
|
|
|
$
|
115,240
|
|
|
$
|
120,668
|
|
Green Loans (HELOC) - First Liens
|
|
|
2,143
|
|
|
|
|
|
|
|
437
|
|
|
|
2,580
|
|
|
|
141,128
|
|
|
|
143,708
|
|
Green Loans (HELOC) - Second Liens
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,921
|
|
|
|
4,921
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
|
|
|
|
113
|
|
|
|
|
|
|
|
113
|
|
|
|
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total NTM loans
|
|
$
|
4,075
|
|
|
$
|
1,783
|
|
|
$
|
2,263
|
|
|
$
|
8,121
|
|
|
$
|
261,289
|
|
|
$
|
269,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
697
|
|
|
$
|
|
|
|
$
|
274
|
|
|
$
|
971
|
|
|
$
|
296,675
|
|
|
$
|
297,646
|
|
Real estate mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
545,968
|
|
|
|
545,968
|
|
Multi-family
|
|
|
1,016
|
|
|
|
142
|
|
|
|
3
|
|
|
|
1,161
|
|
|
|
154,221
|
|
|
|
155,382
|
|
SBA
|
|
|
15
|
|
|
|
|
|
|
|
47
|
|
|
|
62
|
|
|
|
23,002
|
|
|
|
23,064
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,144
|
|
|
|
25,144
|
|
Lease financing
|
|
|
275
|
|
|
|
69
|
|
|
|
119
|
|
|
|
463
|
|
|
|
48,074
|
|
|
|
48,537
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
14,902
|
|
|
|
6,698
|
|
|
|
13,677
|
|
|
|
35,277
|
|
|
|
567,171
|
|
|
|
602,448
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
54
|
|
|
|
|
|
|
|
36
|
|
|
|
90
|
|
|
|
115,883
|
|
|
|
115,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total traditional loans
|
|
$
|
16,959
|
|
|
$
|
6,909
|
|
|
$
|
14,156
|
|
|
$
|
38,024
|
|
|
$
|
1,776,138
|
|
|
$
|
1,814,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,538
|
|
|
$
|
1,538
|
|
Real estate mortgage
|
|
|
|
|
|
|
|
|
|
|
880
|
|
|
|
880
|
|
|
|
13,733
|
|
|
|
14,613
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA
|
|
|
274
|
|
|
|
|
|
|
|
43
|
|
|
|
317
|
|
|
|
3,160
|
|
|
|
3,477
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
15,233
|
|
|
|
4,391
|
|
|
|
11,187
|
|
|
|
30,811
|
|
|
|
261,228
|
|
|
|
292,039
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,756
|
|
|
|
1,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PCI loans
|
|
$
|
15,507
|
|
|
$
|
4,391
|
|
|
$
|
12,110
|
|
|
$
|
32,008
|
|
|
$
|
281,415
|
|
|
$
|
313,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
36,541
|
|
|
$
|
13,083
|
|
|
$
|
28,529
|
|
|
$
|
78,153
|
|
|
$
|
2,318,842
|
|
|
$
|
2,396,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
The following tables presents the aging of the recorded investment in past due loans and leases as of
December 31, 2013, excluding accrued interest receivable (which is not considered to be material), by class of loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
Greater than
|
|
|
|
|
|
|
|
|
Gross Loans
|
|
|
|
30 - 59 Days
|
|
|
60 - 89 Days
|
|
|
89 Days
|
|
|
Total
|
|
|
|
|
|
and Leases
|
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Current
|
|
|
Receivables
|
|
|
|
(In thousands)
|
|
NTM loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
$
|
1,003
|
|
|
$
|
1,854
|
|
|
$
|
769
|
|
|
$
|
3,626
|
|
|
$
|
152,864
|
|
|
$
|
156,490
|
|
Green Loans (HELOC) - First Liens
|
|
|
653
|
|
|
|
|
|
|
|
437
|
|
|
|
1,090
|
|
|
|
146,615
|
|
|
|
147,705
|
|
Green Loans (HELOC) - Second Liens
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,289
|
|
|
|
5,289
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total NTM loans
|
|
$
|
1,656
|
|
|
$
|
1,854
|
|
|
$
|
1,206
|
|
|
$
|
4,716
|
|
|
$
|
304,881
|
|
|
$
|
309,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
52
|
|
|
$
|
235
|
|
|
$
|
|
|
|
$
|
287
|
|
|
$
|
283,456
|
|
|
$
|
283,743
|
|
Real estate mortgage
|
|
|
5,554
|
|
|
|
194
|
|
|
|
|
|
|
|
5,748
|
|
|
|
509,121
|
|
|
|
514,869
|
|
Multi-family
|
|
|
602
|
|
|
|
|
|
|
|
|
|
|
|
602
|
|
|
|
140,978
|
|
|
|
141,580
|
|
SBA
|
|
|
14
|
|
|
|
48
|
|
|
|
|
|
|
|
62
|
|
|
|
23,678
|
|
|
|
23,740
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,933
|
|
|
|
24,933
|
|
Lease financing
|
|
|
271
|
|
|
|
92
|
|
|
|
19
|
|
|
|
382
|
|
|
|
31,567
|
|
|
|
31,949
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
20,684
|
|
|
|
6,124
|
|
|
|
12,181
|
|
|
|
38,989
|
|
|
|
628,537
|
|
|
|
667,526
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
209
|
|
|
|
110
|
|
|
|
35
|
|
|
|
354
|
|
|
|
108,534
|
|
|
|
108,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total traditional loans
|
|
$
|
27,386
|
|
|
$
|
6,803
|
|
|
$
|
12,235
|
|
|
$
|
46,424
|
|
|
$
|
1,750,804
|
|
|
$
|
1,797,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,028
|
|
|
$
|
4,028
|
|
Real estate mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,014
|
|
|
|
15,014
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA
|
|
|
45
|
|
|
|
1
|
|
|
|
106
|
|
|
|
152
|
|
|
|
3,536
|
|
|
|
3,688
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
21,888
|
|
|
|
8,580
|
|
|
|
12,099
|
|
|
|
42,567
|
|
|
|
272,253
|
|
|
|
314,820
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,736
|
|
|
|
1,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PCI loans
|
|
$
|
21,933
|
|
|
$
|
8,581
|
|
|
$
|
12,205
|
|
|
$
|
42,719
|
|
|
$
|
296,567
|
|
|
$
|
339,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
50,975
|
|
|
$
|
17,238
|
|
|
$
|
25,646
|
|
|
$
|
93,859
|
|
|
$
|
2,352,252
|
|
|
$
|
2,446,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Troubled Debt Restructurings
Troubled Debt Restructurings (TDRs) of loans are defined by ASC 310-40, Troubled Debt Restructurings by Creditors and ASC 470-60, Troubled Debt Restructurings by Debtors and
evaluated for impairment in accordance with ASC 310-10-35. The concessions may be granted in various forms, including reduction in the stated interest rate, reduction in the amount of principal amortization, forgiveness of a portion of a loan
balance or accrued interest, or extension of the maturity date. 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 Companys internal underwriting policy.
32
For the three months ended March 31, 2014, there was no modification. For the three months ended
March 31, 2013, there was one modification through extension of maturity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
Number of
Loans
|
|
|
Pre-Modification
Outstanding
Recorded
Investment
|
|
|
Post-Modification
Outstanding
Recorded
Investment
|
|
|
Number of
Loans
|
|
|
Pre-Modification
Outstanding
Recorded
Investment
|
|
|
Post-Modification
Outstanding
Recorded
Investment
|
|
|
|
($ in thousands)
|
|
NTM and Traditional loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
0
|
|
|
$
|
|
|
|
$
|
|
|
|
|
1
|
|
|
$
|
367
|
|
|
$
|
367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
0
|
|
|
$
|
|
|
|
$
|
|
|
|
|
1
|
|
|
$
|
367
|
|
|
$
|
367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three months ended March 31, 2014 and 2013, there were no loans and leases modified as TDRs for which there
was a payment default within twelve months following the modification.
Troubled debt restructured loans and leases consist of the following
as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
|
|
|
|
Traditional
|
|
|
|
|
|
|
|
|
Traditional
|
|
|
|
|
|
|
NTM Loans
|
|
|
Loans
|
|
|
PCI Loans
|
|
|
NTM Loans
|
|
|
Loans
|
|
|
PCI Loans
|
|
|
|
(In thousands)
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
|
|
|
$
|
|
|
|
$
|
88
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
85
|
|
Real estate mortgage
|
|
|
|
|
|
|
181
|
|
|
|
2,847
|
|
|
|
|
|
|
|
194
|
|
|
|
2,868
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA
|
|
|
|
|
|
|
10
|
|
|
|
689
|
|
|
|
|
|
|
|
10
|
|
|
|
704
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
|
|
|
|
3,557
|
|
|
|
|
|
|
|
|
|
|
|
3,605
|
|
|
|
|
|
Green Loans (HELOC) - first liens
|
|
|
3,463
|
|
|
|
|
|
|
|
|
|
|
|
3,468
|
|
|
|
|
|
|
|
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
|
|
|
|
|
|
|
|
1,756
|
|
|
|
|
|
|
|
|
|
|
|
1,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,463
|
|
|
$
|
3,748
|
|
|
$
|
5,380
|
|
|
$
|
3,468
|
|
|
$
|
3,809
|
|
|
$
|
5,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDRs, excluding purchased credit impaired loans, were $7.2 million and $7.3 million at March 31, 2014 and
December 31, 2013, respectively. The Company did not have any commitments to lend to customers with outstanding loans or leases that were classified as troubled debt restructurings as of March 31, 2014 and December 31, 2013.
Credit Quality Indicators
The Company categorizes loans and leases into risk categories based on relevant information about the ability of borrowers to service their debt such as:
current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company performs historical loss analysis that is combined with a comprehensive loan or
lease to value analysis to analyze the associated risks in the current loan and lease portfolio. The Company analyzes loans and leases individually by classifying the loans and leases as to credit risk. This analysis includes all loans and leases
delinquent over 60 days and non-homogenous loans and leases such as commercial and commercial real estate loans and leases. Classification of problem single family residential loans is performed on a monthly basis while analysis of non-homogenous
loans and leases is performed on a quarterly basis. The Company uses the following definitions for risk ratings:
33
Pass:
Loans and leases classified as pass are in compliance in all respects with the Banks
credit policy and regulatory requirements, and do not exhibit any potential or defined weakness as defined under Special Mention, Substandard or Doubtful/Loss.
Special Mention
: Loans and leases classified as special mention have a potential weakness that deserves managements close attention. If left
uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease or of the Companys credit position at some future date.
Substandard
: Loans and leases 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 and leases
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/Loss:
Loans and leases classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added
characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
Not-Rated
: When accrual of income on a pool of purchased credit impaired (PCI) loans with common risk characteristics is appropriate in accordance with ASC 310-30, individual loans in those pools
are not risk-rated. The credit criteria evaluated are FICO scores, loan-to-value, delinquency, and actual cash flows versus expected cash flows of the loan pools.
Loans and leases not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans and leases.
34
The following table presents the risk categories for loans and leases as of March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Not-Rated
|
|
|
Gross Loans
and Leases
Receivables
|
|
|
|
(In thousands)
|
|
NTM loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
$
|
116,622
|
|
|
$
|
2,008
|
|
|
$
|
2,038
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
120,668
|
|
Green Loans (HELOC) - First Liens
|
|
|
126,407
|
|
|
|
10,818
|
|
|
|
6,483
|
|
|
|
|
|
|
|
|
|
|
|
143,708
|
|
Green Loans (HELOC) - Second Liens
|
|
|
4,709
|
|
|
|
|
|
|
|
212
|
|
|
|
|
|
|
|
|
|
|
|
4,921
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total NTM loans
|
|
$
|
247,851
|
|
|
$
|
12,826
|
|
|
$
|
8,733
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
269,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
295,194
|
|
|
$
|
|
|
|
$
|
2,452
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
297,646
|
|
Real estate mortgage
|
|
|
539,043
|
|
|
|
2,263
|
|
|
|
4,662
|
|
|
|
|
|
|
|
|
|
|
|
545,968
|
|
Multi-family
|
|
|
153,446
|
|
|
|
|
|
|
|
1,936
|
|
|
|
|
|
|
|
|
|
|
|
155,382
|
|
SBA
|
|
|
23,040
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
23,064
|
|
Construction
|
|
|
25,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,144
|
|
Lease financing
|
|
|
48,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,537
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
568,708
|
|
|
|
8,662
|
|
|
|
25,078
|
|
|
|
|
|
|
|
|
|
|
|
602,448
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
115,831
|
|
|
|
109
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
115,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total traditional loans
|
|
$
|
1,768,943
|
|
|
$
|
11,034
|
|
|
$
|
34,185
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,814,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
|
|
|
$
|
948
|
|
|
$
|
590
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,538
|
|
Real estate mortgage
|
|
|
9,156
|
|
|
|
|
|
|
|
5,457
|
|
|
|
|
|
|
|
|
|
|
|
14,613
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA
|
|
|
733
|
|
|
|
599
|
|
|
|
2,145
|
|
|
|
|
|
|
|
|
|
|
|
3,477
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
|
|
|
|
|
|
|
|
271
|
|
|
|
|
|
|
|
291,768
|
|
|
|
292,039
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
|
|
|
|
|
|
|
|
1,756
|
|
|
|
|
|
|
|
|
|
|
|
1,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PCI loans
|
|
$
|
9,889
|
|
|
$
|
1,547
|
|
|
$
|
10,219
|
|
|
$
|
|
|
|
$
|
291,768
|
|
|
$
|
313,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,026,683
|
|
|
$
|
25,407
|
|
|
$
|
53,137
|
|
|
$
|
|
|
|
$
|
291,768
|
|
|
$
|
2,396,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI loan pools are not risk rated.
35
The following table presents the risk categories for loans and leases as of December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Not-Rated
|
|
|
Gross Loans
and Leases
Receivables
|
|
|
|
(In thousands)
|
|
NTM loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
$
|
151,728
|
|
|
$
|
2,321
|
|
|
$
|
2,441
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
156,490
|
|
Green Loans (HELOC) - First Liens
|
|
|
129,679
|
|
|
|
11,470
|
|
|
|
6,556
|
|
|
|
|
|
|
|
|
|
|
|
147,705
|
|
Green Loans (HELOC) - Second Liens
|
|
|
5,073
|
|
|
|
|
|
|
|
216
|
|
|
|
|
|
|
|
|
|
|
|
5,289
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total NTM loans
|
|
$
|
286,593
|
|
|
$
|
13,791
|
|
|
$
|
9,213
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
309,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
280,527
|
|
|
$
|
1
|
|
|
$
|
3,215
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
283,743
|
|
Real estate mortgage
|
|
|
510,117
|
|
|
|
|
|
|
|
4,752
|
|
|
|
|
|
|
|
|
|
|
|
514,869
|
|
Multi-family
|
|
|
139,608
|
|
|
|
|
|
|
|
1,972
|
|
|
|
|
|
|
|
|
|
|
|
141,580
|
|
SBA
|
|
|
23,714
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
23,740
|
|
Construction
|
|
|
24,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,933
|
|
Lease financing
|
|
|
31,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,949
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
640,701
|
|
|
|
6,350
|
|
|
|
20,475
|
|
|
|
|
|
|
|
|
|
|
|
667,526
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
108,745
|
|
|
|
108
|
|
|
|
33
|
|
|
|
2
|
|
|
|
|
|
|
|
108,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total traditional loans
|
|
$
|
1,760,294
|
|
|
$
|
6,459
|
|
|
$
|
30,473
|
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
1,797,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
|
|
|
$
|
969
|
|
|
$
|
3,059
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,028
|
|
Real estate mortgage
|
|
|
10,148
|
|
|
|
|
|
|
|
4,866
|
|
|
|
|
|
|
|
|
|
|
|
15,014
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA
|
|
|
844
|
|
|
|
605
|
|
|
|
2,239
|
|
|
|
|
|
|
|
|
|
|
|
3,688
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
|
|
|
|
|
|
|
|
287
|
|
|
|
|
|
|
|
314,533
|
|
|
|
314,820
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
|
|
|
|
|
|
|
|
1,736
|
|
|
|
|
|
|
|
|
|
|
|
1,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PCI loans
|
|
$
|
10,992
|
|
|
$
|
1,574
|
|
|
$
|
12,187
|
|
|
$
|
|
|
|
$
|
314,533
|
|
|
$
|
339,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,057,879
|
|
|
$
|
21,824
|
|
|
$
|
51,873
|
|
|
$
|
2
|
|
|
$
|
314,533
|
|
|
$
|
2,446,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI loan pools are not risk rated.
36
Purchased Credit Impaired Loans and Leases
During the years ended December 31, 2013 and 2012, the Company purchased loans and leases for which there was, at acquisition, evidence of deterioration of credit quality subsequent to origination
and it was probable, at acquisition, that all contractually required payments would not be collected. The following table presents the outstanding balance and carrying amount of those loans and leases, which are sometimes collectively referred to as
PCI loans as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
|
Outstanding
|
|
|
Carrying
|
|
|
Outstanding
|
|
|
Carrying
|
|
|
|
Balance
|
|
|
Amount
|
|
|
Balance
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
2,322
|
|
|
$
|
1,538
|
|
|
$
|
5,838
|
|
|
$
|
4,028
|
|
Real estate mortgage
|
|
|
17,234
|
|
|
|
14,613
|
|
|
|
17,682
|
|
|
|
15,014
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA
|
|
|
4,657
|
|
|
|
3,477
|
|
|
|
4,940
|
|
|
|
3,688
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate 1-4 family first mortgage
|
|
|
376,380
|
|
|
|
292,039
|
|
|
|
414,341
|
|
|
|
314,820
|
|
HELOCs, home equity loans, and other consumer installment credit
|
|
|
2,133
|
|
|
|
1,756
|
|
|
|
2,134
|
|
|
|
1,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
402,726
|
|
|
$
|
313,423
|
|
|
$
|
444,935
|
|
|
$
|
339,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents a summary of accretable yield, or income expected to be collected for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(In thousands)
|
|
Balance at beginning of period
|
|
$
|
126,336
|
|
|
$
|
32,206
|
|
New loans or leases purchased
|
|
|
|
|
|
|
45,142
|
|
Accretion of income
|
|
|
(7,169
|
)
|
|
|
(2,668
|
)
|
Changes in expected cash flows
|
|
|
131
|
|
|
|
1,430
|
|
Disposals
|
|
|
(10,950
|
)
|
|
|
(169
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
108,348
|
|
|
$
|
75,941
|
|
|
|
|
|
|
|
|
|
|
The Company did not purchase any PCI loans during the three months ended March 31, 2014. During the three months
ended March 31, 2013, the Company completed three bulk loan acquisitions with unpaid principal balances and fair values of $451.5 million and $332.3 million, respectively, at the respective acquisition dates. The Company determined that certain
loans in these bulk acquisitions reflected evidence of credit quality deterioration since origination and it was probable, at acquisition, that all contractually required payments would not be collected.
37
NOTE 6 SERVICING RIGHTS
The Company retains mortgage servicing rights (MSRs) from certain of its sales of residential mortgage loans. MSRs on residential
mortgage loans are reported at fair value. Income earned by the Company on its MSRs is derived primarily from contractually specified mortgage servicing fees and late fees, net of curtailment costs and third party subservicing costs. The Company
retains servicing rights in connection with its SBA loan operations, which are measured using the amortization method.
Income earned from
servicing rights for the three months ended March 31, 2014 and 2013 were $1.3 million and $188 thousand, respectively. This amount is reported in loan servicing income in the consolidated statements of operations. The following table presents a
composition of servicing rights as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
|
(In thousands)
|
|
Mortgage servicing rights, at fair value
|
|
$
|
18,553
|
|
|
$
|
13,535
|
|
SBA servicing rights, at cost
|
|
|
327
|
|
|
|
348
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,880
|
|
|
$
|
13,883
|
|
|
|
|
|
|
|
|
|
|
Servicing retained sold mortgage loans are not reported as assets and are subserviced by a third party vendor. The unpaid
principal balance of these loans at March 31, 2014 and December 31, 2013 was $1.90 billion and $1.37 billion, respectively. Custodial escrow balances maintained in connection with serviced loans were $6.7 million and $5.9 million at
March 31, 2014 and December 31, 2013, respectively.
Mortgage Servicing Rights
During the three months ended March 31, 2014, the Company entered into an agreement with a third party to sell servicing rights on mortgage loans
with $941.1 million of outstanding unpaid principal balance at March 31, 2014 for a fair value of $10.1 million. The sale closed on April 1, 2014. The fair values on the sold MSRs are carried at the closing price of the
transaction at March 31, 2014. The Company will continue to be the interim servicer until later in the second quarter.
The
following table presents the key characteristics, inputs and economic assumptions used to estimate the fair value of the MSRs as of dates indicated:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
|
($ in thousands)
|
|
Fair value of retained MSRs
|
|
$
|
8,407
|
|
|
$
|
13,535
|
|
Decay (prepayment/default)
|
|
|
17.23
|
%
|
|
|
15.40
|
%
|
Discount rate
|
|
|
10.81
|
%
|
|
|
10.39
|
%
|
Constant prepayment rate
|
|
|
13.17
|
%
|
|
|
10.28
|
%
|
Weighted-average life (in years)
|
|
|
5.92
|
|
|
|
7.37
|
|
The following table presents activity in the MSRs for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(In thousands)
|
|
Balance at beginning of period
|
|
$
|
13,535
|
|
|
$
|
1,739
|
|
Additions
|
|
|
5,140
|
|
|
|
910
|
|
Prepayments
|
|
|
(209
|
)
|
|
|
(68
|
)
|
Changes in fair value resulting from valuation inputs or assumptions
|
|
|
462
|
|
|
|
25
|
|
Otherloans paid off
|
|
|
(375
|
)
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
18,553
|
|
|
$
|
2,579
|
|
|
|
|
|
|
|
|
|
|
38
SBA Servicing Rights
The Company used a discount rate of 7.25 percent to calculate the present value of cash flows and an estimated prepayment speed based on prepayment data available. Discount rates and prepayment speed are
reviewed quarterly and adjusted as appropriate. The following table presents activity in the SBA servicing rights for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(In thousands)
|
|
Balance at beginning of period
|
|
$
|
348
|
|
|
$
|
539
|
|
Additions
|
|
|
|
|
|
|
5
|
|
Amortization, including prepayments
|
|
|
(21
|
)
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
327
|
|
|
$
|
498
|
|
|
|
|
|
|
|
|
|
|
NOTE 7 OTHER REAL ESTATE OWNED
The following table presents the activity in other real estate owned for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(In thousands)
|
|
Balance at beginning of period
|
|
$
|
|
|
|
$
|
4,527
|
|
Additions
|
|
|
150
|
|
|
|
486
|
|
Sales and net direct write-downs
|
|
|
|
|
|
|
(5,249
|
)
|
Net change in valuation allowance
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
150
|
|
|
$
|
1,764
|
|
|
|
|
|
|
|
|
|
|
The following table presents the activity in the other real estate owned valuation allowance for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(In thousands)
|
|
Balance at beginning of period
|
|
$
|
|
|
|
$
|
2,069
|
|
Additions
|
|
|
|
|
|
|
79
|
|
Net direct write-downs and removals upon sale
|
|
|
|
|
|
|
(2,079
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
|
|
|
$
|
69
|
|
|
|
|
|
|
|
|
|
|
The following table presents expenses related to foreclosed assets included in loan servicing and foreclosure expenses on
the consolidated statements of operations for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(In thousands)
|
|
Net gain (loss) on sales
|
|
$
|
|
|
|
$
|
114
|
|
Operating expenses, net of rental income
|
|
|
|
|
|
|
(240
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
(126
|
)
|
|
|
|
|
|
|
|
|
|
39
The following table presents loans provided for sales of other real estate owned, included in other assets
on the consolidated statements of financial condition, and deferred gain on real estate sold on contract, included in accrued expenses and other liabilities on the consolidated statements of financial condition for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(In thousands)
|
|
Loans provided for sales of other real estate owned sold on contract
|
|
|
|
|
|
$
|
|
|
Deferred gain on other real estate sold on contract
|
|
|
|
|
|
|
|
|
NOTE 8 GOODWILL AND OTHER INTANGIBLE ASSETS, NET
At March 31, 2014, the Company had goodwill of $32.9 million related to the RenovationReady®, CS Financial, PBOC, and Beach
acquisitions.
Core deposit intangibles are amortized over their useful lives ranging from 4 to 7 years. As of March 31, 2014, the
weighted average remaining amortization period for core deposit intangibles was approximately 6 years. The following table presents a summary of other intangible assets as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Intangible
|
|
|
|
Value
|
|
|
Amortization
|
|
|
Assets, Net
|
|
|
|
(In thousands)
|
|
March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangibles
|
|
|
15,520
|
|
|
|
4,307
|
|
|
|
11,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
15,520
|
|
|
$
|
4,307
|
|
|
$
|
11,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangibles
|
|
|
15,433
|
|
|
|
3,281
|
|
|
|
12,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
15,433
|
|
|
$
|
3,281
|
|
|
$
|
12,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate amortization of intangible assets was $939 thousand and $367 thousand for the three months ended March 31,
2014 and 2013, respectively. The following table presents estimated future amortization expenses as of March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2019 and after
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Estimated future amortization expense
|
|
$
|
3,333
|
|
|
$
|
2,730
|
|
|
$
|
2,128
|
|
|
$
|
1,541
|
|
|
$
|
1,481
|
|
|
$
|
11,213
|
|
NOTE 9 FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
At March 31, 2014, the Bank had a fixed-rate advance of $15.0 million at an interest rate of 0.82 percent and a variable-rate
advance of $380.0 million at an interest rate of 0.11 percent from the FHLB. At December 31, 2013, $25.0 million of the Banks advances from the FHLB were fixed-rate and had interest rates ranging from 0.59 percent to 0.82 percent with a
weighted average rate of 0.73 percent, and $225.0 million of the Banks advances from the FHLB were variable-rate and had a weighted average interest rate of 0.06 percent as of that date. In addition, the Company had outstanding federal funds
purchased of $70.0 million at March 31, 2014.
Each advance is payable at its maturity date. Advances paid early are subject to a
prepayment penalty. At March 31, 2014 and December 31, 2013, the Banks advances from the FHLB were collateralized by certain real estate loans with an aggregate unpaid principal balance of $1.67 billion and $740.1 million,
respectively. The Banks investment in capital stock of the FHLB of San Francisco totaled $18.6 million and $14.4 million, respectively, at March 31, 2014 and December 31, 2013. Based on this collateral and the Banks holdings of
FHLB stock, the Bank was eligible to borrow an additional $509.0 million at March 31, 2014. In addition, the Bank had available lines of credit with the Federal Reserve Bank totaling $89.3 million at March 31, 2014.
40
NOTE 10 LONG TERM DEBT
On April 23, 2012, the Company completed the public offering of $33.0 million aggregate principal amount of its 7.50 percent
Senior Notes due April 15, 2020 (the Notes) at a price to the public of $25.00 per Note. Net proceeds after discounts were approximately $31.7 million. The Notes were issued under the Senior Debt Securities Indenture, dated as of
April 23, 2012 (the Base Indenture), as supplemented by the First Supplemental Indenture, dated as of April 23, 2012 (the Supplemental Indenture, and together with the Base Indenture, the Indenture),
between the Company and U.S. Bank National Association, as trustee.
On December 6, 2012, the Company completed the issuance and sale of
an additional $45.0 million aggregate principal amount of the Notes at a price to the public of $25.00 per Note, plus accrued interest from October 15, 2012. Net proceeds after discounts, including a full exercise of the $6.8 million
underwriters overallotment option on December 7, 2012, were approximately $50.1 million.
The Notes are the Companys senior
unsecured debt obligations and rank equally with all of the Companys other present and future unsecured unsubordinated obligations. The Notes bear interest at a per-annum rate of 7.50 percent. The Company makes interest payments on the Notes
quarterly in arrears.
The Notes will mature on April 15, 2020. However, the Company may, at the Companys option, on April 15,
2015, or on any scheduled interest payment date thereafter, redeem the Notes in whole or in part on not less than 30 nor more than 60 days prior notice. The Notes will be redeemable at a redemption price equal to 100 percent of the principal
amount of the Notes to be redeemed plus accrued and unpaid interest to the date of redemption.
The Indenture contains several covenants
which, among other things, restrict the Companys ability and the ability of the Companys subsidiaries to dispose of or incur liens on the voting stock of certain subsidiaries and also contains customary events of default.
NOTE 11 INCOME TAXES
For the three months ended March 31, 2014 and 2013, income tax expense was $9 thousand and $632 thousand,
respectively, and the effective tax rate was 1.1 percent and 40.5 percent, respectively. The Companys effective tax rate decreased due to the establishment of a full valuation allowance in 2013. Due to the inability to reliably estimate the
income for the year, the Company has used the year to date effective tax rate as the best estimate of the annual effective tax rate, under ASC 740-270-30.
The Company accounts for income taxes by recognizing deferred tax assets and liabilities based upon temporary differences between the amounts for financial reporting purposes and tax base of its assets
and liabilities. A valuation allowance is established when necessary to reduce deferred tax assets when it is more-likely-than-not that a portion or all of the net deferred tax assets will not be realized. In assessing the realization of deferred
tax assets, management evaluates both positive and negative evidence, including the existence of any cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, the forecasts of future
income, applicable tax planning strategies, and assessments of current and future economic and business conditions. This analysis is updated quarterly and adjusted as necessary. As of March 31, 2014, the Company had a net deferred tax asset of
$0, net of a $17.0 million valuation allowance and as of December 31, 2013, the Company had a net deferred tax asset of $0, net of a $17.3 million valuation allowance.
The Company adopted the provisions of ASC 740-10-25 (formally FIN 48), which relates to the accounting for uncertainty in income taxes recognized in an enterprises financial statements on
January 1, 2007. ASC 740-10-25 prescribes a threshold and a measurement process for recognizing in the financial statements a tax position taken or expected to be taken in a tax return and also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company had unrecognized tax benefits of $2.6 million and $2.2 million at March 31, 2014 and December 31, 2013, respectively. The Company
does not expect the total amount of unrecognized tax benefits to significantly change in the next twelve months. The total amount of tax benefit that, if recognized, would impact the effective tax rate was none as of March 31, 2014. In the
event we are assessed interest and/or penalties by federal or state tax authorities, such amounts will be classified in the consolidated financial statements as income tax expense. At March 31, 2014 and December 31, 2013, the Company had
no accrued interest or penalties.
Banc of California, Inc. and its subsidiaries are subject to U.S. federal income tax as well as income tax
of multiple state jurisdictions. The Company is no longer subject to examination by U.S. federal taxing authorities for tax years before 2010 and for all state tax years before 2009, except for Gateway Bancorp, Inc. and its subsidiaries (acquired by
the Company in 2012), which are currently under examination by the Internal Revenue Service (IRS) for 2008 and 2009 tax years. Banc of California, Inc. and its subsidiaries are currently under examination by IRS for the 2010 and 2011 tax years. The
consolidated returns for these years include Banc of California, Inc. and the Bank.
41
NOTE 12 MORTGAGE BANKING ACTIVITIES
The Bank originates conforming single family residential mortgage loans and sells these loans in the secondary market. This activity is
conducted in the name of the Bank with certain retail channels operating under different DBA or trade names such as Banc Home Loans and CS Financial. As of March 31, 2014, the mortgage operations maintained 53 producing loan production offices.
The amount of net gain on mortgage banking activities is a function of mortgage loans originated for sale and the fair values of these loans and derivatives. Net gain on mortgage banking activities includes mark to market pricing adjustments on loan
commitments and forward sales contracts, and initial capitalized value of mortgage servicing rights (MSRs).
During the three months ended
March 31, 2014, the Bank originated $511.5 million of conforming single family residential mortgage loans and sold $531.8 million of conforming single family residential mortgage loans in the secondary market. The net gain and margin were $15.2
million and 2.96 percent, respectively, and loan origination fees were $2.1 million for the three months ended March 31, 2014. Included in the net gain is the initial capitalized value of our MSRs, which totaled $4.8 million, on loans sold to
Fannie Mae, Freddie Mac and Ginnie Mae for the three months ended March 31, 2014.
During the three months ended March 31, 2013, the
Bank originated $332.8 million of conforming single family residential mortgage loans and sold $331.7 million of conforming single family residential mortgage loans in the secondary market. The net gain and margin were $15.4 million and 4.61
percent, respectively, and loan origination fees were $1.8 million for the three months ended March 31, 2013. Included in the net gain is the initial capitalized value of our MSRs, which totaled $783 thousand, on loans sold to Fannie Mae and
Freddie Mac for the three months ended March 31, 2013.
Mortgage Loan Repurchase Obligations
In addition to net gain on mortgage banking activities, the Company records provisions to the representation and warranty reserve representing our initial
estimate of losses on probable mortgage repurchases or loss reimbursements. Provision for loan repurchases totaled $571 thousand and $256 thousand for the three months ended March 31, 2014 and 2013, respectively.
The following table presents a summary of activity in the reserve for loss on repurchased loans for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(In thousands)
|
|
Balance at beginning of period
|
|
$
|
5,427
|
|
|
$
|
3,485
|
|
Provision for loan repurchases
|
|
|
571
|
|
|
|
256
|
|
Payments made for loss reimbursement on sold loans
|
|
|
(132
|
)
|
|
|
(243
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
5,866
|
|
|
$
|
3,498
|
|
|
|
|
|
|
|
|
|
|
NOTE 13 RISK MANAGEMENT AND DERIVATIVE INSTRUMENTS
The Company uses derivative instruments and other risk management techniques to reduce its exposure to adverse fluctuations in interest
rates in accordance with its risk management policies. The Company utilizes forward contracts and investor commitments to economically hedge mortgage banking products and may from time to time use interest rate swaps as hedges against certain
liabilities.
On September 30, 2013, the Company entered into pay-fixed, receive-variable interest-rate swap contracts with institutional
counterparties to hedge against variability in cash flows attributable to interest rate risk caused by changes in the LIBOR benchmark interest rate on the Companys ongoing LIBOR based variable rate deposits. The Company is accounting for the
swaps as cash flow hedges under ASC 815. The notional amount of the interest rate swaps were $50.0 million with a maturity date of September 27, 2018. The fair values of the interest rate swaps were $9 thousand and $226 thousand as of
March 31, 2014 and December 31, 2013, respectively.
42
The Company originates residential real estate mortgage loans and generates revenues from the origination
and sale of these loans. Although management closely monitors market conditions, such activities are sensitive to fluctuations in prevailing interest rates and real estate markets. As of March 31, 2014, approximately 81.7 percent of all
properties securing loans held for sale were located in California. A change in the underlying economic conditions of the California residential real estate market could have an adverse impact on the Companys results of operations.
In connection with mortgage banking activities, if interest rates increase, the value of the Companys loan commitments to borrowers and fixed rate
mortgage loans held-for-sale are adversely impacted. The Company attempts to economically hedge the risk of the overall change in the fair value of loan commitments to borrowers and mortgage loans held for sale by selling forward contracts on
securities with government-sponsored enterprises (GSEs) and investors in loans. Forward contracts on securities of GSEs and loan commitments to borrowers are non-designated derivative instruments and the gains and losses resulting from these
derivative instruments are included in net gain on mortgage banking activities in the accompanying consolidated statements of operations. At March 31, 2014, the resulting derivative asset of $4.5 million and liability of $64 thousand, are
included in other assets and accrued expenses and other liabilities, respectively, on the accompanying consolidated statements of financial condition. At March 31, 2014, the Company had outstanding forward sales commitments totaling $239.3
million. At March 31, 2014, the Company was committed to fund loans for borrowers of approximately $141.9 million.
The net losses
relating to free-standing derivative instruments used for risk management were $3.6 million and none for the three months ended March 31, 2014 and 2013, respectively, and are included in net gain on mortgage banking activities in the
consolidated statements of operations.
The following table presents the amount and market value of mortgage banking derivatives included in
the consolidated statements of financial condition as of the dates indicated. Note 3, Fair Value of Financial Instruments, contains further disclosures pertaining to the fair value of mortgage banking derivatives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
|
Notional Amount
|
|
|
Fair Value
|
|
|
Notional Amount
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
Included in assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments
|
|
$
|
135,421
|
|
|
$
|
4,140
|
|
|
$
|
129,010
|
|
|
$
|
3,962
|
|
Mandatory forward commitments
|
|
|
239,309
|
|
|
|
320
|
|
|
|
242,337
|
|
|
|
1,305
|
|
Interest rate swap
|
|
|
50,000
|
|
|
|
9
|
|
|
|
50,000
|
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total included in assets
|
|
$
|
424,730
|
|
|
$
|
4,469
|
|
|
$
|
421,347
|
|
|
$
|
5,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments
|
|
$
|
6,450
|
|
|
$
|
64
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total included in liabilities
|
|
$
|
6,450
|
|
|
$
|
64
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 14 STOCK COMPENSATION PLANS
Share-based Compensation Expense
For the three months ended March 31, 2014 and 2013, share-based compensation expense was $923 thousand and $331 thousand, respectively, and the related tax benefits were none and $2 thousand,
respectively.
On July 16, 2013, the Companys stockholders approved the Companys 2013 Omnibus Stock Incentive Plan (the 2013
Omnibus Plan). Upon the approval of the 2013 Omnibus Plan, no new awards may be granted under the Companys 2011 Omnibus Incentive Plan or any prior equity incentive plans. The 2013 Omnibus Plan provides that the aggregate number of shares of
Company common stock that may be subject to awards under the 2013 Omnibus Plan will be 20 percent of the then outstanding shares of Company common stock (the Share Limit), provided that in no event will the Share Limit be less than the greater of
2,384,711 shares of Company common stock and the aggregate number of shares of Company common stock with respect to which awards have been properly granted under the 2013 Omnibus Plan up to that point in time. As of March 31, 2014, the Share
Limit and available shares for future awards under the 2013 Omnibus Plan were 2,173,750 shares.
43
Unrecognized Share-based Compensation Expense
The following table presents unrecognized share-based compensation expense as of March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
Unrecognized
Expense
|
|
|
Average Expected
Recognition Period
|
|
|
|
($ in thousands)
|
|
Stock option awards
|
|
$
|
1,345
|
|
|
|
4.14 years
|
|
Restricted stock awards
|
|
|
10,395
|
|
|
|
3.65 years
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,740
|
|
|
|
3.71 years
|
|
|
|
|
|
|
|
|
|
|
Stock Options
The Company has issued stock options to certain employees, officers and directors. Stock options are issued at the current market price on the date of grant, and generally have provided for a three-year
to five-year vesting period and contractual terms of 7 to 10 years.
The following table represents stock option activity as of and for the
three months ended March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted-
Average
Exercise
Price per
Share
|
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
(In thousands)
|
|
Outstanding at beginning of period
|
|
|
734,721
|
|
|
$
|
12.73
|
|
|
|
7.5 years
|
|
|
$
|
741
|
|
Granted
|
|
|
|
|
|
$
|
|
|
|
|
0 years
|
|
|
$
|
|
|
Exercised
|
|
|
(66,667
|
)
|
|
$
|
11.36
|
|
|
|
0 years
|
|
|
$
|
|
|
Forfeited
|
|
|
|
|
|
$
|
|
|
|
|
0 years
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of period
|
|
|
668,054
|
|
|
$
|
12.86
|
|
|
|
7.3 years
|
|
|
$
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of period
|
|
|
335,000
|
|
|
$
|
11.71
|
|
|
|
7.6 years
|
|
|
$
|
188
|
|
The following table represents changes in unvested stock options and related information as of and for the three months
ended March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
|
Weighted-
Average
Exercise
Price per
Share
|
|
Non-vested outstanding at beginning of period
|
|
|
419,569
|
|
|
$
|
13.16
|
|
Granted
|
|
|
|
|
|
$
|
|
|
Vested
|
|
|
|
|
|
$
|
|
|
Forfeited
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested outstanding at end of period
|
|
|
419,569
|
|
|
$
|
13.16
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Awards
Additionally, the Company also has granted restricted stock awards to certain employees, officers and directors. The restricted stock awards are valued at the closing price of the Companys stock on
the date of award. The restricted stock awards fully vest after one to five years of continued employment from the date of grant. The Company recognizes an income tax deduction in an amount equal to the taxable income reported by the holders of the
restricted stock, generally when vested.
44
The following table represents restricted stock awards activity as of and for the three months ended
March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted-
Average
Exercise
Price per
Share
|
|
Non-vested shares outstanding at beginning of period
|
|
|
893,886
|
|
|
$
|
13.78
|
|
Granted
|
|
|
95,719
|
|
|
$
|
13.07
|
|
Vested
|
|
|
(22,879
|
)
|
|
$
|
11.19
|
|
Forfeited
|
|
|
(83,184
|
)
|
|
$
|
13.06
|
|
|
|
|
|
|
|
|
|
|
Non-vested shares outstanding at end of period
|
|
|
883,542
|
|
|
$
|
13.83
|
|
|
|
|
|
|
|
|
|
|
Stock Appreciation Right
On August 21, 2012, the Company granted to its chief executive officer a ten-year stock appreciation right (SAR) with respect to 500,000 shares (Initial SAR) of the Companys common stock with a
base price of $12.12 per share. One third of the Initial SAR vested on the grant date, one third vested on the first anniversary of the grant date and one-third will vest on the second anniversary of the grant date such that the SAR will be fully
vested on the second anniversary of the grant date. On June 21, 2013, a SAR with respect to an additional 150,933 shares (Additional SAR I) with a base price of $13.00 per share was granted to the Companys chief executive officer
pursuant to the anti-dilution provisions under his SAR agreement with the Company due to the Companys issuance on that date of shares of common stock in an underwritten public offering. On July 1, 2013, July 2, 2013 and
December 10, 2013, SARs with respect to an additional 88,366, 15,275 and 70,877 shares (Additional SARs II, III and IV, respectively, and together with Additional SAR I and the Initial SAR, the SARs) with base prices of $13.49, $13.49 and
$12.65 per share, respectively, were granted to the Companys chief executive officer pursuant to the anti-dilution provisions of his SAR agreement with the Company due to the Companys issuances on those dates of shares of common stock in
connection with the completion of the PBOC acquisition, the exercise of the over-allotment option granted to the underwriters of the Companys public common stock offering initially completed on June 21, 2013 and the private placement in
accordance with a Securities Purchase Agreement executed on December 3, 2013.
The Additional SARs have the same terms and conditions,
including vesting, as the Initial SAR. Compensation expense for the SAR is recognized over the vesting period based on the fair value as calculated using Black Scholes as of the grant date and adjusted each quarter. The SARs originally were to be
settled in cash. On December 13, 2013, the Company converted all outstanding SARs to stock options with the same terms absent an ability to settle in cash.
45
NOTE 15SHAREHOLDERS EQUITY
Warrants
On
November 1, 2010, the Company issued warrants to TCW Shared Opportunity Fund V, L.P. for up to 240,000 shares of non-voting common stock at an exercise price of $11.00 per share, subject to anti-dilutive adjustments. These warrants are
exercisable from the date of issuance through November 1, 2015. On November 1, 2010, the Company also issued warrants to COR Advisors LLC to purchase up to 1,395,000 shares of non-voting stock at an exercise price of $11.00 per share,
subject to anti-dilutive adjustments. These warrants are exercisable at the time of issuance based upon the additional shares issued and the anti-dilutive provisions set in the agreement and became fully exercisable at the time the anti-dilutive
event occurred. These warrants are exercisable for five years after the original vesting date. The warrants are exercisable for voting common stock in lieu of non-voting common stock following the transfer of the warrants in a widely disbursed
offering or in other limited circumstances.
Common Stock
On June 21, 2013, the Company issued 2,268,000 shares of its voting common stock in an underwritten public offering for gross proceeds of approximately $29.5 million and 1,153,846 shares of voting
common stock to two institutional investors in a registered direct offering for gross proceeds of approximately $15 million. On July 2, 2013, the Company issued an additional 360,000 shares of voting common stock upon the exercise in full by
the underwriters of the underwritten public offering of their 30-day over-allotment option, for additional gross proceeds of approximately $4.4 million. On December 10, 2013, the Company completed the issuance and sale of an aggregate of
1,509,450 shares of common stock to Patriot Financial Partners, L.P. and Patriot Financial Partners Parallel, L.P. at $13.25 per share, in exchange for aggregate cash consideration of approximately $20 million.
Perpetual Preferred Stock
On June 12, 2013, in an underwritten public offering, the Company sold 1,400,000 depositary shares, each representing a 1/40th
interest in a share of its 8.00 percent Non-Cumulative Perpetual Preferred Stock, Series C, par value $0.01 per share and liquidation preference of $1,000 per share, at an offering price of $25.00 per depositary share, for gross proceeds of $33.9
million. The Company also granted the underwriters a 30-day option to purchase up to an additional 210,000 depositary shares to cover over-allotments, if any, at the same price, for potential additional gross proceeds of $5.1 million, which the
underwriters exercised in full on July 8, 2013.
As discussed under Note 2, Business Combinations and Branch Sales, on
July 1, 2013, the Company completed its previously announced acquisition of PBOC. Upon completion of the acquisition, each share of preferred stock issued by PBOC as part of the Small Business Lending Fund (SBLF) program of the United States
Department of Treasury (10,000 shares in the aggregate with a liquidation preference amount of $1,000 per share) was converted automatically into one substantially identical share of preferred stock of the Company with a liquidation preference
amount of $1,000 per share, designated as the Companys Non-Cumulative Perpetual Preferred Stock, Series B. The terms of the preferred stock issued by the Company in exchange for the PBOC preferred stock are substantially identical to the
preferred stock previously issued by the Company as part of its own participation in the SBLF program (32,000 shares in aggregate with a liquidation preference amount of $1,000 per share), designated as the Companys Non-Cumulative Perpetual
Preferred Stock, Series A.
Change in Accumulated Other Comprehensive Income
The Companys accumulated other comprehensive income includes unrealized gain (losses) on available-for-sale investment securities
and unrealized gain on cash flow hedge. Changes to other accumulated other comprehensive income are presented net of tax effect as a component of equity. Reclassifications from accumulated comprehensive income are recorded on the statements of
operations either as a gain or loss.
46
The following table presents changes to accumulate other comprehensive income by components are presented in
the following tables for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
Gain (Losses)
on AFS
Securities
|
|
|
Cash Flow
Hedge
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Balance at December 31, 2013
|
|
$
|
(826
|
)
|
|
$
|
226
|
|
|
$
|
(600
|
)
|
Unrealized gain (loss) arising during the period
|
|
|
1,023
|
|
|
|
(217
|
)
|
|
|
806
|
|
Reclassification adjustment from other comprehensive income
|
|
|
(507
|
)
|
|
|
|
|
|
|
(507
|
)
|
Tax effect of current period changes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total changes, net of taxes
|
|
|
516
|
|
|
|
(217
|
)
|
|
|
299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2014
|
|
$
|
(310
|
)
|
|
$
|
9
|
|
|
$
|
(301
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2012
|
|
$
|
1,397
|
|
|
$
|
|
|
|
$
|
1,397
|
|
Unrealized gain (loss) arising during the period
|
|
|
100
|
|
|
|
|
|
|
|
100
|
|
Reclassification adjustment from other comprehensive income
|
|
|
(308
|
)
|
|
|
|
|
|
|
(308
|
)
|
Tax effect of current period changes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total changes, net of taxes
|
|
|
(208
|
)
|
|
|
|
|
|
|
(208
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2013
|
|
$
|
1,189
|
|
|
$
|
|
|
|
$
|
1,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 16 EARNINGS (LOSS) PER COMMON SHARE
Basic earnings (loss) per common share (EPS) is computed by dividing net income (loss) available to common shareholders by the weighted
average number of shares outstanding. Diluted EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares outstanding, adjusted for the dilutive effect of the outstanding stock options,
restricted stock awards, and warrants to purchase common stock. Computations for basic and diluted EPS are provided below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
Common
Stock
|
|
|
Class B
Common
Stock
|
|
|
Total
|
|
|
Common
Stock
|
|
|
Class B
Common
Stock
|
|
|
Total
|
|
|
|
($ in thousands, except per share data)
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
735
|
|
|
$
|
22
|
|
|
$
|
757
|
|
|
$
|
843
|
|
|
$
|
86
|
|
|
$
|
929
|
|
Less: preferred stock dividends
|
|
|
883
|
|
|
|
27
|
|
|
|
910
|
|
|
|
261
|
|
|
|
27
|
|
|
|
288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income available to common shareholders
|
|
$
|
(148
|
)
|
|
$
|
(5
|
)
|
|
$
|
(153
|
)
|
|
$
|
582
|
|
|
$
|
59
|
|
|
$
|
641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
19,609,017
|
|
|
|
590,008
|
|
|
|
20,199,025
|
|
|
|
10,809,008
|
|
|
|
1,112,188
|
|
|
|
11,921,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income available to common shareholders
|
|
$
|
(148
|
)
|
|
$
|
(5
|
)
|
|
$
|
(153
|
)
|
|
$
|
582
|
|
|
$
|
59
|
|
|
$
|
641
|
|
Weighted average common shares outstanding for basic (loss) earnings per common share
|
|
|
19,609,017
|
|
|
|
590,008
|
|
|
|
20,199,025
|
|
|
|
10,809,008
|
|
|
|
1,112,188
|
|
|
|
11,921,196
|
|
Add: Dilutive effects of stock awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,503
|
|
|
|
|
|
|
|
2,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares and dilutive common shares
|
|
|
19,609,017
|
|
|
|
590,008
|
|
|
|
20,199,025
|
|
|
|
10,811,511
|
|
|
|
1,112,188
|
|
|
|
11,923,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2014 and 2013, there were 1,493,505 and 492,465 stock options,
respectively, and 1,635,000 and 3,036,959 warrants, respectively, that were not considered in computing diluted earnings per common share, because they were anti-dilutive.
47
NOTE 17OFF-BALANCE SHEET COMMITMENTS
Some financial instruments such as loan commitments, credit lines, letters of credit, and overdraft protection are issued to meet customer financing needs. These are agreements to provide credit or to
support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Risk of credit loss exists up to the face amount of these instruments. The same
credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.
The
contractual amount of financial instruments with off-balance-sheet risk was as follows for the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
|
Fixed
Rate
|
|
|
Variable
Rate
|
|
|
Fixed
Rate
|
|
|
Variable
Rate
|
|
|
|
(In thousands)
|
|
Financial instruments whose contract amounts represent credit risk
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit
|
|
$
|
48,139
|
|
|
$
|
56,628
|
|
|
$
|
35,425
|
|
|
$
|
61,613
|
|
Unused lines of credit
|
|
|
958
|
|
|
|
327,599
|
|
|
|
3,403
|
|
|
|
268,669
|
|
Standby letters of credit
|
|
|
10
|
|
|
|
6,339
|
|
|
|
10
|
|
|
|
6,289
|
|
Commitments to make loans are generally made for periods of 30 days or less.
As of March 31, 2014, total forward commitments were $539.7 million. These commitments consisted of jumbo mortgage loan sale commitments of $287.6
million, TBAs of $238.0 million, best efforts of $13.3 million, and other commitments of $854 thousand. Additionally, the Company had IRLCs of $166.1 million at March 31, 2014.
NOTE 18RELATED-PARTY TRANSACTIONS
The Bank has granted loans to certain officers and directors and their related interests. Such loans amounted to none and $748 thousand
at March 31, 2014 and December 31, 2013, respectively.
Deposits from principal officers, directors, and their related interests
amounted to $9.3 million and $10.5 million at March 31, 2014 and December 31, 2013, respectively.
Transactions Involving Steven
A. Sugarman
. The following is a description of transactions involving the Company and certain entities affiliated with or relatives of Steven A. Sugarman, President and Chief Executive Officer of the Company and the Bank and a member of the
Board of Directors of the Company and the Bank.
Palisades Lease Payment Reimbursements
.
The Company acquired its subsidiary,
Palisades Group, LLC (Palisades) on September 16, 2013, at which time Palisades occupied (and continues to occupy) premises in Santa Monica, California leased by COR Securities Holding, Inc. (CORSHI), of which Mr. Sugarman is the Chief
Executive Officer as well as a shareholder (both directly and indirectly). In light of the benefit received by Palisades of its occupancy of the Santa Monica premises, the non-interested directors of the Companys Board ratified reimbursement
to CORSHI for rental payments made for the Santa Monica premises for the period commencing September 16, 2013 through the last date Palisades occupies the premises. Palisades is negotiating with an unaffiliated third party a lease for new
premises and plans to vacate the Santa Monica premises June 2014.
If Palisades continues to occupy the Santa Monica premises through
June 30, 2014 then the aggregate rent payments under the lease to be reimbursed to CORSHI from September 16, 2013 through June 30, 2014 will be $109,950. This aggregate amount is comprised of (i) $5,661, the pro-rated base rent
amount for the partial month of September 2013; (ii) $11,324 per month in base rent for the months of October and November 2013, and (iii) $11,663 per month in base rent for the month of December 2013 and the months of January through June
2014. The continued reimbursement costs are being monitored by the Boards Compensation, Nominating and Corporate Governance Committee.
In addition to the rental payments, the Company reimbursed CORSHI relating to a security deposit amount for the premises of $33,844. All or a portion of
the security deposit will be reimbursed to the Company subsequent to the Palisades relocation, with the actual amount to be determined based on the review and recommendation made by the Boards Compensation, Nominating and Corporate Governance
Committee.
48
Palisades Consulting Agreement
.
As discussed above, the Company
acquired its subsidiary, Palisades on September 16, 2013. Effective July 1, 2013, Palisades entered into a consulting agreement with Jason Sugarman, Mr. Sugarmans brother. Jason Sugarman provides advisory services to financial
institutions and other institutional clients related to investments in residential mortgages, real estate and real estate related assets and Palisades entered into the agreement with Jason Sugarman to provide these types of consulting services. The
consulting agreement is for a term of 5 years, with a minimum payment of $30,000 owed at the end of each quarter for consulting services Jason Sugarman has provided Palisades. There is also the potential for additional bonus payments based on the
nature of work performed and the financial results of Palisades. The aggregate amount of identified payments that will be paid by Palisades to Jason Sugarman under the five-year term of the consulting agreement will exceed $600,000. The $600,000 is
the minimum amount owed but does not include any bonuses that may be earned under the agreement. For the year ended December 31, 2013 and the quarter ended March 31, 2014, amounts earned by Jason Sugarman under the consulting agreement
totaled $120,662 and $30,000, respectively. The consulting agreement may be terminated at any time by ether Palisades or Jason Sugarman upon 30 days prior written notice. The consulting agreement with Jason Sugarman was reviewed as a related party
transaction and approved by the Compensation, Nominating and Corporate Governance Committee and approved by the disinterested directors of the Board.
CS Financial Acquisition
.
Certain relatives and entities affiliated with Mr. Sugarman received benefits as part of the CS Financial acquisition described in detail below under
Transactions Involving Jeffrey T. Seabold.
Transactions Involving Jeffrey T. Seabold
. The following
is a description of transactions involving the Company and certain entities affiliated with Jeffrey T. Seabold, who currently is employed as the Banks Managing Director, Chief Lending Officer and previously served as a director of the Company
and the Bank.
CS Financial Acquisition
. Effective October 31, 2013, the Company acquired CS Financial Inc. (CS
Financial), a California corporation and Southern California-based mortgage banking firm controlled by Jeffrey T. Seabold and in which certain relatives and entities affiliated with Mr. Sugarman also own certain minority, non-controlling
interests. The following is a description of the transaction.
CS Financial Service Agreement
. On December 27,
2012, the Company entered into a Management Services Agreement (the Services Agreement) with CS Financial. On December 27, 2012, Mr. Seabold was then a member of the Board of Directors of each of the Company and the Bank. Under
the Services Agreement, CS Financial agreed to provide the Bank such reasonably requested financial analysis, management consulting, knowledge sharing, training services and general advisory services as the Bank and CS Financial mutually agreed upon
with respect to the Banks residential mortgage lending business, including strategic plans and business objectives, compliance function, monitoring, reporting and related systems, and policies and procedures, at a monthly fee of $100,000. The
Services Agreement was recommended by disinterested members of management of the Bank and negotiated and approved by special committees of the Board of Directors of each of the Company and the Bank (the Special Committees), comprised exclusively of
independent, disinterested directors of the Boards. Each of the Boards of Directors of the Bank and the Company also considered and approved the Services Agreement, upon the recommendation of the Special Committees.
On May 13, 2013, the Bank hired Mr. Seabold as Managing Director and Chief Lending Officer by entering into a three-year
employment agreement with Mr. Seabold (the Employment Agreement). Simultaneously, the Bank terminated, with immediate effect, its Services Agreement with CS Financial. For the year ended December 31, 2013, the total compensation paid to CS
Financial under the Services Agreement was $439,000.
Option to Acquire CS Financial
. Under the Employment Agreement,
Mr. Seabold granted to the Company and the Bank an option (the CS Call Option), to acquire CS Financial for a purchase price of $10 million, payable pursuant to the terms provided under the Employment Agreement. Based upon the recommendation of
the Special Committees, with the assistance of outside financial and legal advisors and consultants, the Boards of Directors of the Company and the Bank, with Mr. Sugarman recusing himself from the discussions and vote due to previously
disclosed conflicts of interest, approved the recommendation of the Special Committees and, pursuant to a letter dated July 29, 2013, the Company indicated that the CS Call Option was being exercised by the Bank, subject to the negotiation and
execution of definitive transaction documentation consistent with the applicable provisions of the Employment Agreement and the satisfaction of the terms and conditions set forth therein.
Merger Agreement
. After exercise of the CS Call Option as described above, the Company and the Bank entered into an Agreement and
Plan of Merger (the Merger Agreement) with CS Financial, the stockholders of CS Financial (the Sellers) and Mr. Seabold, as the Sellers Representative and completed its acquisition of CS Financial on October 31, 2013.
Subject to the terms and conditions set forth in the Merger Agreement, which was approved by the Board of Directors of each of
the Company, the Bank and CS Financial, at the effective time of the Merger, the outstanding shares of common stock of CS Financial was converted into the right to receive in the aggregate: (1) upon the closing of the Merger, (a) 173,791
shares (the Closing Date Shares) of voting common stock, par value $0.01 per share, of the Company (the Company Common Stock), and (b) $1,500,000 in cash and $3,150,000 in the form of a noninterest-bearing note issued by the Company
to Mr. Seabold that was due and paid by the Company on January 2, 2014; and (2) upon the achievement of certain performance targets by the Banks Lending Division following the closing of the Merger that are set forth in the
Merger Agreement, up to 92,781 shares (the Performance Shares) of Company Common Stock ((1) and (2), together, the Merger Consideration).
49
Seller Stock Consideration
. The Sellers under the Merger Agreement included
Mr. Seabold, and the following relatives of Mr. Sugarman: Jason Sugarman (brother), Elizabeth Sugarman (sister-in-law), and Michael Sugarman (father), who each owned minority, non-controlling interests in CS Financial.
Upon the closing of the Merger and pursuant to the terms of the Merger Agreement, the aggregate shares of Company Common Stock issued as
the consideration to the Sellers was 173,791 shares, which was allocated by the Sellers and issued as follows: (i) 103,663 shares to Mr. Seabold, (ii) 16,140 shares to Jason Sugarman, (iii) 16,140 shares to Elizabeth Sugarman,
(iv) 3,228 shares to Michael Sugarman, and (v) 34,620 shares to certain employees of CS Financial. Of the 103,663 shares to be issued to Mr. Seabold, as allowed under the Merger Agreement and in consideration of repayment of a certain
debt incurred by CS Financial owed to an entity controlled by Elizabeth Sugarman, Mr. Seabold requested the Company to issue all 103,663 shares directly to Elizabeth Sugarman, and such shares were so issued by the Company to Elizabeth Sugarman.
Approval of the CS Call Option, Merger Agreement and Merger.
All decisions and actions with respect to the exercise of
the CS Agreement Option, the Merger Agreement and the Merger (including without limitation the determination of the Merger Consideration and the other material terms of the Merger Agreement) fall under the purview and authority of special committees
of the Board of Directors of each of the Company and the Bank, which are each composed exclusively of independent, disinterested directors of such Boards of Directors, with the assistance of outside financial and legal advisors. Mr. Sugarman
abstained from the vote of each of the Boards of Directors of the Company and the Bank to approve the Merger Agreement and the Merger.
Transaction With TCW Shared Opportunity Fund V, L.P., a Greater than 5 percent Shareholder.
TCW Shared Opportunity Fund V, L.P. (TCW) initially became a holder of the Companys voting common
stock (Voting Common Stock) and non-voting common stock (Non-Voting Common Stock) as a lead investor in the November 2010 recapitalization of the Company (the Recapitalization). In connection with its investment in the Recapitalization, TCW also was
issued by the Company an immediately exercisable five-year warrant (the TCW Warrant) to purchase 240,000 shares of Non-Voting Common Stock or, to the extent provided therein, shares of Voting Common Stock in lieu of Non-Voting Common Stock. TCW was
issued shares of Non-Voting Common Stock in the Recapitalization because at that time, a controlling interest in TCW Asset Management Company, the investment manager to TCW, was held by a foreign banking organization, and in order to prevent TCW
from being considered a bank holding company under the Bank Holding Company Act of 1956, as amended, the number of shares of Voting Common Stock it purchased in the Recapitalization had to be limited to 4.99 percent of the total number of shares of
Voting Common Stock outstanding immediately following the Recapitalization. For the same reason, the TCW Warrant could be exercised by TCW for Voting Common Stock in lieu of Non-Voting Common Stock only to the extent TCWs percentage ownership
of the Voting Common Stock at the time of exercise would be less than 4.99 percent as a result of dilution occurring from additional issuances of Voting Common Stock subsequent to the Recapitalization.
In 2013, the foreign banking organization sold its controlling interest in TCW Asset Management Company, eliminating the need to limit
TCWs percentage ownership of the Voting Common Stock to 4.99 percent. As a result, on May 29, 2013, the Company and TCW entered into a Common Stock Share Exchange Agreement, dated May 29, 2013 (the Exchange Agreement),
pursuant to which TCW may from time to time exchange its shares of Non-Voting Common Stock for shares of Voting Common Stock issued by the Company on a share-for-share basis, provided that immediately following any such exchange, TCWs
percentage ownership of Voting Common Stock does not exceed 9.99 percent. The shares of Non-Voting Common Stock that may be exchanged by TCW pursuant to the Exchange Agreement include the shares of Non-Voting Common Stock it purchased in the
Recapitalization, the additional shares of Non-Voting Common Stock TCW acquired subsequent to the Recapitalization (and may in the future acquire) pursuant to the Companys Dividend Reinvestment Plan and any additional shares of Non-Voting
Common Stock that TCW acquires pursuant to its exercise of the TCW Warrant.
On June 3, 2013, TCW exchanged 550,000
shares of Non-Voting Common Stock for the same number of shares of Voting Common Stock. As a result of that exchange and based on a Schedule 13-F and 13-G TCW filed with the SEC during the first quarter of 2014, the Company believes that as of
December 31, 2013 TCW held 1,078,250 shares of Voting Common Stock and 466,830 shares of Non-Voting Common Stock, plus the TCW Warrant under which up to 240,000 shares of Non-Voting Common Stock may be issued upon exercise and may thereafter be
exchanged for shares of Voting Common Stock pursuant to the Exchange Agreement.
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NOTE 19 SUBSEQUENT EVENTS
Pending Acquisition of Banco Populars California Branch Network
On April 22, 2014, the Bank entered into a Purchase and Assumption Agreement (the Purchase Agreement) with Banco Popular North
America (BPNA), pursuant to which the Bank agreed to acquire select assets and assume certain liabilities comprising BPNAs network of 20 California branches (the Branches). Subject to the terms of the Purchase Agreement, the Bank will pay
approximately $5.4 million for the deposits assumed and loans acquired based on March 31, 2014 balances, which equates to an effective deposit premium of 0.5%.
At the closing of the transaction (the Closing), and subject to the terms of the Purchase Agreement, the Bank will acquire approximately $1.1 billion in loans and assume approximately
$1.1 billion of deposit liabilities related to the Branches (based on March 31, 2014 balances). The Bank will also acquire certain other assets relating to the Branches, including, among others, owned and leased real property. In addition
to certain deposits, the Bank will assume other liabilities pertaining to the operation of the Branches at the Closing.
The
Bank will not acquire the assets or assume the liabilities related to certain business of the Branches to be retained by BPNA, including, among others, BPNAs credit card, health care and direct banking businesses and residential mortgages.
BPNA will also retain certain loans relating to the Branches, including nonperforming and nonaccrual loans, other real estate owned, home equity lines of credit with a combined loan-to-value ratio in excess of 80% or for which the ability to draw on
the line has been frozen and loans relating to BPNAs credit card business. Additionally, between the date of the Purchase Agreement and the Closing, the Bank may elect to exclude from the transaction certain loans or deposits in circumstances
described in the Purchase Agreement.
The Purchase Agreement contains customary representations, warranties and covenants of
the parties, including, among others, a covenant that requires BPNA to generally conduct the operations of the BPNA Branches in the ordinary course of business and to refrain from certain kinds of transactions. The Purchase Agreement also contains
customary indemnification provisions and indemnification by BPNA for up to 1.5% of credit losses on loans acquired by the Bank for a period of two years following the Closing. The Purchase Agreement also includes a customary covenant by BPNA not to
engage in certain banking businesses or operations conducted by the BPNA Branches in the Los Angeles metropolitan statistical area for a period of two years following the Closing, subject to certain customary exemptions.
The transaction is subject to customary conditions to closing, including the receipt of all required governmental approvals, the accuracy
of both parties representations, the performance in all material respects of all covenants and other agreements required by the Purchase Agreement and the execution and delivery of related transaction documents. In addition, the obligation of
the Bank to complete the transaction is subject to its receipt of financing necessary to complete the transaction on the terms set forth in the Purchase Agreement. The Bank is obligated to pay a fee of $2 million if the Purchase Agreement is
terminated in certain circumstances, including, among others, if BPNA terminates the Purchase Agreement because the Bank fails to obtain acceptable financing to enable the Bank to consummate the transaction by September 30, 2014.
Pending Oaktree and Patriot Investments
On April 22, 2014, the Company entered into two separate Securities Purchase Agreements (collectively, the SPAs) one with OCM BOCA Investor, LLC
(Oaktree), an entity owned by investment funds managed by Oaktree Capital Management, L.P., and one with Patriot Financial Partners, L.P. and Patriot Financial Partners Parallel, L.P. (collectively, Patriot, and together with Oaktree, the
Investors), pursuant to which the Company agreed to sell shares of its common stock at a price of $11.50 per share, subject to adjustment in the event the Company sells shares of its common stock in certain circumstances at a lower price prior to
the Closing. The Company agreed to sell a number of shares to Oaktree such that the percentage of the outstanding shares owned by Oaktree immediately following the closing of the investment contemplated by its SPA will equal 9.9%. The Company agreed
to sell a number of shares to Patriot that would result in an aggregate purchase price of $10 million; provided that Patriot may, at its option, purchase additional shares so that the percentage of the outstanding shares owned by Patriot
immediately following the closing of the investment contemplated by its SPA will equal up to 9.9%.
Each SPA contains customary
representations and warranties from the Company and the applicable Investor. The parties have agreed to customary closing conditions and covenants, and the Company has undertaken certain customary indemnification obligations.
Management has evaluated subsequent events through the date of issuance of the financial data included herein. There have been no
subsequent events other than the above mentioned that occurred during such period that would require disclosure in this report or would be required to be recognized in the Consolidated Financial Statements (Unaudited) as of March 31, 2014.
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