UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended September 30, 2015
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For transition period from to
Commission File Number 1-34403
TERRITORIAL BANCORP INC.
(Exact Name of Registrant as Specified in Charter)
Maryland |
|
26-4674701 |
(State or Other Jurisdiction of Incorporation) |
|
(I.R.S. Employer Identification No.) |
1132 Bishop Street, Suite 2200, Honolulu, Hawaii |
|
96813 |
(Address of Principal Executive Offices) |
|
(Zip Code) |
(808) 946-1400
(Registrants telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o |
|
Accelerated filer x |
|
|
|
Non-accelerated filer o |
|
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x.
Indicate the number of shares outstanding of each of the issuers classes of common stock as of the latest practicable date: 9,680,322 shares of Common Stock, par value $0.01 per share, were issued and outstanding as of October 31, 2015.
TERRITORIAL BANCORP INC.
Form 10-Q Quarterly Report
|
|
|
1 | ||
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
31 | |
47 | ||
48 | ||
| ||
50 | ||
50 | ||
50 | ||
50 | ||
51 | ||
51 | ||
51 | ||
|
|
|
52 |
TERRITORIAL BANCORP INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands, except share data)
|
|
September 30, |
|
December 31, |
| ||
|
|
2015 |
|
2014 |
| ||
|
|
|
|
|
| ||
ASSETS |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
39,466 |
|
$ |
75,060 |
|
Investment securities held to maturity, at amortized cost (fair value of $520,534 and $586,710 at September 30, 2015 and December 31, 2014, respectively) |
|
508,747 |
|
572,922 |
| ||
Loans held for sale |
|
225 |
|
1,048 |
| ||
Loans receivable, net |
|
1,163,292 |
|
968,212 |
| ||
Federal Home Loan Bank stock, at cost |
|
4,590 |
|
11,234 |
| ||
Federal Reserve Bank stock, at cost |
|
2,989 |
|
2,925 |
| ||
Accrued interest receivable |
|
4,742 |
|
4,436 |
| ||
Premises and equipment, net |
|
5,026 |
|
5,629 |
| ||
Bank-owned life insurance |
|
42,072 |
|
41,303 |
| ||
Current income taxes receivable |
|
1,523 |
|
|
| ||
Deferred income taxes receivable |
|
8,366 |
|
7,254 |
| ||
Prepaid expenses and other assets |
|
2,477 |
|
1,874 |
| ||
|
|
|
|
|
| ||
Total assets |
|
$ |
1,783,515 |
|
$ |
1,691,897 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
| ||
Liabilities: |
|
|
|
|
| ||
Deposits |
|
$ |
1,412,997 |
|
$ |
1,359,679 |
|
Advances from the Federal Home Loan Bank |
|
64,000 |
|
15,000 |
| ||
Securities sold under agreements to repurchase |
|
55,000 |
|
72,000 |
| ||
Accounts payable and accrued expenses |
|
28,582 |
|
24,098 |
| ||
Current income taxes payable |
|
1,476 |
|
826 |
| ||
Advance payments by borrowers for taxes and insurance |
|
3,094 |
|
3,916 |
| ||
|
|
|
|
|
| ||
Total liabilities |
|
1,565,149 |
|
1,475,519 |
| ||
|
|
|
|
|
| ||
Stockholders Equity: |
|
|
|
|
| ||
Preferred stock, $.01 par value; authorized 50,000,000 shares, no shares issued or outstanding |
|
|
|
|
| ||
Common stock, $.01 par value; authorized 100,000,000 shares; issued and outstanding 9,698,420 and 9,919,064 shares at September 30, 2015 and December 31, 2014, respectively |
|
97 |
|
99 |
| ||
Additional paid-in capital |
|
70,295 |
|
75,229 |
| ||
Unearned ESOP shares |
|
(6,484 |
) |
(6,851 |
) | ||
Retained earnings |
|
159,785 |
|
153,289 |
| ||
Accumulated other comprehensive loss |
|
(5,327 |
) |
(5,388 |
) | ||
|
|
|
|
|
| ||
Total stockholders equity |
|
218,366 |
|
216,378 |
| ||
|
|
|
|
|
| ||
Total liabilities and stockholders equity |
|
$ |
1,783,515 |
|
$ |
1,691,897 |
|
See accompanying notes to consolidated financial statements.
TERRITORIAL BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
| ||||
Interest and dividend income: |
|
|
|
|
|
|
|
|
| ||||
Loans |
|
$ |
11,809 |
|
$ |
10,020 |
|
$ |
33,761 |
|
$ |
29,320 |
|
Investment securities |
|
4,098 |
|
4,895 |
|
12,895 |
|
15,055 |
| ||||
Other investments |
|
64 |
|
75 |
|
213 |
|
153 |
| ||||
Total interest and dividend income |
|
15,971 |
|
14,990 |
|
46,869 |
|
44,528 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Interest expense: |
|
|
|
|
|
|
|
|
| ||||
Deposits |
|
1,198 |
|
1,138 |
|
3,486 |
|
3,332 |
| ||||
Advances from the Federal Home Loan Bank |
|
211 |
|
67 |
|
438 |
|
199 |
| ||||
Securities sold under agreements to repurchase |
|
221 |
|
346 |
|
776 |
|
1,032 |
| ||||
Total interest expense |
|
1,630 |
|
1,551 |
|
4,700 |
|
4,563 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net interest income |
|
14,341 |
|
13,439 |
|
42,169 |
|
39,965 |
| ||||
Provision for loan losses |
|
71 |
|
23 |
|
366 |
|
188 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net interest income after provision for loan losses |
|
14,270 |
|
13,416 |
|
41,803 |
|
39,777 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Noninterest income: |
|
|
|
|
|
|
|
|
| ||||
Service fees on loan and deposit accounts |
|
590 |
|
555 |
|
1,577 |
|
1,578 |
| ||||
Income on bank-owned life insurance |
|
259 |
|
265 |
|
770 |
|
797 |
| ||||
Gain on sale of investment securities |
|
|
|
392 |
|
476 |
|
1,047 |
| ||||
Gain on sale of loans |
|
201 |
|
118 |
|
440 |
|
283 |
| ||||
Other |
|
138 |
|
68 |
|
419 |
|
330 |
| ||||
Total noninterest income |
|
1,188 |
|
1,398 |
|
3,682 |
|
4,035 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Noninterest expense: |
|
|
|
|
|
|
|
|
| ||||
Salaries and employee benefits |
|
5,596 |
|
5,402 |
|
15,759 |
|
16,062 |
| ||||
Occupancy |
|
1,483 |
|
1,474 |
|
4,348 |
|
4,305 |
| ||||
Equipment |
|
1,025 |
|
956 |
|
2,923 |
|
2,775 |
| ||||
Federal deposit insurance premiums |
|
214 |
|
202 |
|
634 |
|
602 |
| ||||
Other general and administrative expenses |
|
1,048 |
|
1,045 |
|
3,449 |
|
2,946 |
| ||||
Total noninterest expense |
|
9,366 |
|
9,079 |
|
27,113 |
|
26,690 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before income taxes |
|
6,092 |
|
5,735 |
|
18,372 |
|
17,122 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income taxes |
|
2,406 |
|
2,273 |
|
7,323 |
|
6,479 |
| ||||
Net income |
|
$ |
3,686 |
|
$ |
3,462 |
|
$ |
11,049 |
|
$ |
10,643 |
|
|
|
|
|
|
|
|
|
|
| ||||
Basic earnings per share |
|
$ |
0.41 |
|
$ |
0.38 |
|
$ |
1.22 |
|
$ |
1.16 |
|
Diluted earnings per share |
|
$ |
0.40 |
|
$ |
0.37 |
|
$ |
1.19 |
|
$ |
1.15 |
|
Cash dividends declared per common share |
|
$ |
0.17 |
|
$ |
0.15 |
|
$ |
0.49 |
|
$ |
0.44 |
|
Basic weighted-average shares outstanding |
|
9,085,725 |
|
9,218,745 |
|
9,086,481 |
|
9,190,476 |
| ||||
Diluted weighted-average shares outstanding |
|
9,301,500 |
|
9,323,306 |
|
9,250,835 |
|
9,283,425 |
|
See accompanying notes to consolidated financial statements.
TERRITORIAL BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Unaudited)
(Dollars in thousands)
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
|
$ |
3,686 |
|
$ |
3,462 |
|
$ |
11,049 |
|
$ |
10,643 |
|
|
|
|
|
|
|
|
|
|
| ||||
Change in unfunded pension liability |
|
|
|
|
|
(64 |
) |
|
| ||||
Change in unrealized loss on securities |
|
8 |
|
1 |
|
24 |
|
5 |
| ||||
Change in noncredit related loss on trust preferred securities |
|
(7 |
) |
3 |
|
101 |
|
75 |
| ||||
Other comprehensive income, net of tax |
|
1 |
|
4 |
|
61 |
|
80 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Comprehensive income |
|
$ |
3,687 |
|
$ |
3,466 |
|
$ |
11,110 |
|
$ |
10,723 |
|
See accompanying notes to consolidated financial statements.
TERRITORIAL BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders Equity (Unaudited)
(Dollars in thousands, except per share data)
|
|
Common |
|
Additional |
|
Unearned |
|
Retained |
|
Accumulated |
|
Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balances at December 31, 2013 |
|
$ |
101 |
|
$ |
77,340 |
|
$ |
(7,340 |
) |
$ |
145,826 |
|
$ |
(3,787 |
) |
$ |
212,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
|
|
|
|
|
|
|
10,643 |
|
|
|
10,643 |
| ||||||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
80 |
|
80 |
| ||||||
Cash dividends declared ($0.44 per share) |
|
|
|
|
|
|
|
(4,174 |
) |
|
|
(4,174 |
) | ||||||
Share-based compensation |
|
1 |
|
2,001 |
|
|
|
|
|
|
|
2,002 |
| ||||||
Allocation of 36,699 ESOP shares |
|
|
|
410 |
|
367 |
|
|
|
|
|
777 |
| ||||||
Repurchase of 195,109 shares of company common stock |
|
(2 |
) |
(4,380 |
) |
|
|
|
|
|
|
(4,382 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balances at September 30, 2014 |
|
$ |
100 |
|
$ |
75,371 |
|
$ |
(6,973 |
) |
$ |
152,295 |
|
$ |
(3,707 |
) |
$ |
217,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balances at December 31, 2014 |
|
$ |
99 |
|
$ |
75,229 |
|
$ |
(6,851 |
) |
$ |
153,289 |
|
$ |
(5,388 |
) |
$ |
216,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
|
|
|
|
|
|
|
11,049 |
|
|
|
11,049 |
| ||||||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
61 |
|
61 |
| ||||||
Cash dividends declared ($0.49 per share) |
|
|
|
|
|
|
|
(4,553 |
) |
|
|
(4,553 |
) | ||||||
Share-based compensation |
|
1 |
|
2,416 |
|
|
|
|
|
|
|
2,417 |
| ||||||
Allocation of 36,699 ESOP shares |
|
|
|
499 |
|
367 |
|
|
|
|
|
866 |
| ||||||
Repurchase of 334,976 shares of company common stock |
|
(3 |
) |
(7,866 |
) |
|
|
|
|
|
|
(7,869 |
) | ||||||
Exercise of 1,000 options of common stock |
|
|
|
17 |
|
|
|
|
|
|
|
17 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balances at September 30, 2015 |
|
$ |
97 |
|
$ |
70,295 |
|
$ |
(6,484 |
) |
$ |
159,785 |
|
$ |
(5,327 |
) |
$ |
218,366 |
|
See accompanying notes to consolidated financial statements.
TERRITORIAL BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
|
|
Nine Months Ended |
| ||||
|
|
September 30, |
| ||||
|
|
2015 |
|
2014 |
| ||
|
|
|
|
|
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net income |
|
$ |
11,049 |
|
$ |
10,643 |
|
Adjustments to reconcile net income to net cash from operating activities: |
|
|
|
|
| ||
Provision for loan losses |
|
366 |
|
188 |
| ||
Depreciation and amortization |
|
985 |
|
1,032 |
| ||
Deferred income taxes |
|
(1,152 |
) |
(1,445 |
) | ||
Amortization of fees, discounts, and premiums |
|
(374 |
) |
(310 |
) | ||
Origination of loans held for sale |
|
(45,452 |
) |
(27,195 |
) | ||
Proceeds from sales of loans held for sale |
|
46,459 |
|
27,086 |
| ||
Gain on sale of loans, net |
|
(440 |
) |
(283 |
) | ||
Net gain on sale of real estate owned |
|
(12 |
) |
|
| ||
Purchases of investment securities held for trading |
|
|
|
(5,041 |
) | ||
Proceeds from sale of investment securities held for trading |
|
|
|
5,071 |
| ||
Gain on sale of investment securities held for trading |
|
|
|
(30 |
) | ||
Gain on sale of investment securities held to maturity |
|
(476 |
) |
(1,017 |
) | ||
Net loss on disposal of premises and equipment |
|
4 |
|
|
| ||
ESOP expense |
|
866 |
|
777 |
| ||
Share-based compensation expense |
|
2,417 |
|
2,002 |
| ||
Increase in accrued interest receivable |
|
(306 |
) |
(140 |
) | ||
Net increase in bank-owned life insurance |
|
(769 |
) |
(796 |
) | ||
Net increase in prepaid expenses and other assets |
|
(573 |
) |
(454 |
) | ||
Net increase (decrease) in accounts payable and accrued expenses |
|
3,819 |
|
(2,038 |
) | ||
Net decrease in advance payments by borrowers for taxes and insurance |
|
(822 |
) |
(1,407 |
) | ||
Net increase in income taxes receivable |
|
(1,523 |
) |
|
| ||
Net increase (decrease) in income taxes payable |
|
650 |
|
(48 |
) | ||
Net cash from operating activities |
|
14,716 |
|
6,595 |
| ||
|
|
|
|
|
| ||
Cash flows from investing activities: |
|
|
|
|
| ||
Purchases of investment securities held to maturity |
|
(10,300 |
) |
(34,831 |
) | ||
Principal repayments on investment securities held to maturity |
|
69,966 |
|
48,705 |
| ||
Proceeds from sale of investment securities held to maturity |
|
5,083 |
|
11,506 |
| ||
Loan originations, net of principal repayments on loans receivable |
|
(194,900 |
) |
(68,694 |
) | ||
Purchases of Federal Home Loan Bank stock |
|
(2,920 |
) |
|
| ||
Proceeds from redemption of Federal Home Loan Bank stock |
|
9,564 |
|
337 |
| ||
Purchases of Federal Reserve Bank stock |
|
(64 |
) |
(2,904 |
) | ||
Proceeds from sale of real estate owned |
|
204 |
|
|
| ||
Purchases of premises and equipment |
|
(416 |
) |
(820 |
) | ||
Net cash from investing activities |
|
(123,783 |
) |
(46,701 |
) | ||
(Continued)
TERRITORIAL BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
|
|
Nine Months Ended |
| ||||
|
|
September 30, |
| ||||
|
|
2015 |
|
2014 |
| ||
|
|
|
|
|
| ||
Cash flows from financing activities: |
|
|
|
|
| ||
Net increase in deposits |
|
$ |
53,318 |
|
$ |
38,545 |
|
Proceeds from advances from the Federal Home Loan Bank |
|
115,000 |
|
|
| ||
Repayments of advances from the Federal Home Loan Bank |
|
(66,000 |
) |
|
| ||
Proceeds from securities sold under agreements to repurchase |
|
30,000 |
|
|
| ||
Repayments of securities sold under agreements to repurchase |
|
(47,000 |
) |
|
| ||
Purchases of Fed Funds |
|
10 |
|
10 |
| ||
Sales of Fed Funds |
|
(10 |
) |
(10 |
) | ||
Proceeds from issuance of common stock |
|
17 |
|
|
| ||
Repurchases of common stock |
|
(7,309 |
) |
(4,907 |
) | ||
Cash dividends paid |
|
(4,553 |
) |
(4,174 |
) | ||
Net cash from financing activities |
|
73,473 |
|
29,464 |
| ||
|
|
|
|
|
| ||
Net decrease in cash and cash equivalents |
|
(35,594 |
) |
(10,642 |
) | ||
|
|
|
|
|
| ||
Cash and cash equivalents at beginning of the period |
|
75,060 |
|
75,365 |
| ||
|
|
|
|
|
| ||
Cash and cash equivalents at end of the period |
|
$ |
39,466 |
|
$ |
64,723 |
|
|
|
|
|
|
| ||
Supplemental disclosure of cash flow information: |
|
|
|
|
| ||
Cash paid for: |
|
|
|
|
| ||
Interest on deposits and borrowings |
|
$ |
4,780 |
|
$ |
4,502 |
|
Income taxes |
|
8,932 |
|
7,972 |
| ||
|
|
|
|
|
| ||
Supplemental disclosure of noncash investing and financing activities: |
|
|
|
|
| ||
Loans transferred to real estate owned |
|
$ |
192 |
|
$ |
|
|
See accompanying notes to consolidated financial statements.
TERRITORIAL BANCORP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements of Territorial Bancorp Inc. (the Company) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These interim condensed consolidated financial statements and notes should be read in conjunction with the Companys consolidated financial statements and notes thereto filed as part of the Annual Report on Form 10-K for the year ended December 31, 2014. In the opinion of management, all adjustments necessary for a fair presentation have been made and consist only of normal recurring adjustments. Interim results of operations are not necessarily indicative of results to be expected for the year.
(2) Organization
On November 4, 2008, the Board of Directors of Territorial Mutual Holding Company (MHC) approved a plan of conversion and reorganization under which the MHC would convert from a mutual holding company to a stock holding company. The conversion to a stock holding company was approved by the depositors and borrowers of Territorial Savings Bank and the Office of Thrift Supervision (OTS) and included the filing of a registration statement with the U.S. Securities and Exchange Commission. Upon the completion of the conversion and reorganization on July 10, 2009, Territorial Mutual Holding Company and Territorial Savings Group, Inc. ceased to exist as separate legal entities and Territorial Bancorp Inc. became the holding company for Territorial Savings Bank.
Upon completion of the conversion and reorganization, a special liquidation account was established in an amount equal to the total equity of Territorial Mutual Holding Company as of December 31, 2008. The liquidation account is to provide eligible account holders and supplemental eligible account holders who maintain their deposit accounts with Territorial Savings Bank after the conversion with a liquidation interest in the unlikely event of the complete liquidation of Territorial Savings Bank after the conversion. The balance of the liquidation account at December 31, 2014 was $15.2 million.
On June 25, 2014, Territorial Savings Bank converted from a federal savings bank to a Hawaii state-chartered savings bank. On July 10, 2014, Territorial Savings Bank became a member of the Federal Reserve System.
(3) Recently Adopted Accounting Pronouncements
In January 2014, the Financial Accounting Standards Board (FASB) amended the Receivables topic of the FASB Accounting Standards Codification (ASC). The amendment clarifies when an in substance repossession or foreclosure occurs and when a mortgage loan should be derecognized and the related real property recognized. The amendment also requires disclosures about the amount of foreclosed residential real property held and the recorded investment in mortgage loans collateralized by residential real property in the process of foreclosure. The amendment was effective for interim and annual periods beginning after December 15, 2014. The Company adopted this amendment on January 1, 2015, and the adoption did not have a material effect on its consolidated financial statements.
In May 2014, the FASB amended the Revenue Recognition topic of the FASB ASC. The amendment seeks to clarify the principles for recognizing revenue as well as to develop common revenue standards for U.S. generally accepted accounting principles and International Financial Reporting Standards. The amendment is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. In August 2015, the FASB deferred the effective date of the amendment by one year. However, entities may still choose to adopt the amendment as of the original effective date. The Company does not expect the adoption of this amendment to have a material effect on its consolidated financial statements.
In June 2014, the FASB amended the Transfers and Servicing topic of the FASB ASC. The amendment modifies the accounting for certain types of repurchase transactions as well as adds new disclosure requirements for repurchase transactions. The amendment was effective for interim and annual periods beginning after December 15, 2014, with early adoption prohibited. The Company adopted this amendment on January 1, 2015, and the adoption did not have a material effect on its consolidated financial statements. See note 9, Securities Sold Under Agreements to Repurchase.
In August 2014, the FASB amended the Receivables topic of the FASB ASC. The amendment seeks to clarify the classification of foreclosed mortgage loans that are either fully or partially guaranteed under government programs, such as from the Federal Housing Administration (FHA) or the U.S. Department of Veterans Affairs (VA). The amendment was effective for interim and annual periods beginning after December 15, 2014. The Company adopted this amendment on January 1, 2015, and the adoption did not have any effect on its consolidated financial statements.
In April 2015, the FASB amended the Intangibles Goodwill and Other topic of the FASB ASC. The amendment adds guidance to help entities evaluate the accounting for fees paid in cloud computing arrangements. The amendment is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. The Company does not expect the adoption of this amendment to have a material effect on its consolidated financial statements.
(4) Cash and Cash Equivalents
The table below presents the balances of cash and cash equivalents:
|
|
September 30, |
|
December 31, |
| ||
(Dollars in thousands) |
|
2015 |
|
2014 |
| ||
|
|
|
|
|
| ||
Cash and due from banks |
|
$ |
9,841 |
|
$ |
10,803 |
|
Interest-earning deposits in other banks |
|
29,625 |
|
64,257 |
| ||
Cash and cash equivalents |
|
$ |
39,466 |
|
$ |
75,060 |
|
Interest-earning deposits in other banks consist primarily of deposits at the Federal Reserve Bank.
(5) Investment Securities
The amortized cost and fair values of investment securities are as follows:
|
|
Amortized |
|
Gross Unrealized |
|
Estimated |
| ||||||
(Dollars in thousands) |
|
Cost |
|
Gains |
|
Losses |
|
Fair Value |
| ||||
September 30, 2015: |
|
|
|
|
|
|
|
|
| ||||
Held to maturity: |
|
|
|
|
|
|
|
|
| ||||
U.S. government-sponsored mortgage-backed securities |
|
$ |
507,891 |
|
$ |
15,266 |
|
$ |
(3,479 |
) |
$ |
519,678 |
|
Trust preferred securities |
|
856 |
|
|
|
|
|
856 |
| ||||
Total |
|
$ |
508,747 |
|
$ |
15,266 |
|
$ |
(3,479 |
) |
$ |
520,534 |
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2014: |
|
|
|
|
|
|
|
|
| ||||
Held to maturity: |
|
|
|
|
|
|
|
|
| ||||
U.S. government-sponsored mortgage-backed securities |
|
$ |
572,232 |
|
$ |
18,078 |
|
$ |
(4,290 |
) |
$ |
586,020 |
|
Trust preferred securities |
|
690 |
|
|
|
|
|
690 |
| ||||
Total |
|
$ |
572,922 |
|
$ |
18,078 |
|
$ |
(4,290 |
) |
$ |
586,710 |
|
The amortized cost and estimated fair value of investment securities at September 30, 2015 are shown below. Incorporated in the maturity schedule are mortgage-backed and trust preferred securities, which are allocated using the contractual maturity as a basis. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
|
Amortized |
|
Estimated |
| ||
(Dollars in thousands) |
|
Cost |
|
Fair Value |
| ||
Held to maturity: |
|
|
|
|
| ||
Due within 5 years |
|
$ |
37 |
|
$ |
39 |
|
Due after 5 years through 10 years |
|
7 |
|
8 |
| ||
Due after 10 years |
|
508,703 |
|
520,487 |
| ||
Total |
|
$ |
508,747 |
|
$ |
520,534 |
|
Realized gains and losses and the proceeds from sales of securities held to maturity and trading are shown in the table below. All sales of securities were U.S. government-sponsored mortgage-backed securities.
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
(Dollars in thousands) |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
| ||||
Proceeds from sales |
|
$ |
|
|
$ |
4,307 |
|
$ |
5,083 |
|
$ |
16,577 |
|
Gross gains |
|
|
|
392 |
|
476 |
|
1,047 |
| ||||
Gross losses |
|
|
|
|
|
|
|
|
| ||||
The Company did not sell any held-to-maturity mortgage-backed securities during the three months ended September 30, 2015. During the three months ended September 30, 2014, the Company received proceeds of $4.3 million from the sale of $3.9 million of held-to-maturity mortgage-backed securities, resulting in gross realized gains of $392,000. During the nine months ended September 30, 2015 and 2014, the Company received proceeds of $5.0 million and $11.5 million, respectively, from the sale of $4.6 million and $10.5 million, respectively, of held-to-maturity mortgage-backed securities, resulting in gross realized gains of $415,000 and $1.0 million, respectively. The sale of these mortgage-backed securities, for which the Company had already collected a substantial portion of the original purchased principal (at least 85%), is in accordance with the Investments Debt and Equity Securities topic of the FASB ASC and does not taint managements assertion of intent to hold remaining securities in the held-to-maturity portfolio to maturity.
During the nine months ended September 30, 2015, the Company received proceeds of $61,000 from the sale of one of the trust preferred securities the Company owned, PreTSL XXIV. The Company previously wrote off the entire book value of this security when it incurred an other-than-temporary impairment charge in prior years. The trust preferred security sold was classified in the held-to-maturity portfolio. Since the credit rating of this security was downgraded, in accordance with the Investments Debt and Equity Securities topic of the FASB ASC, the sale of this security does not taint managements assertion of intent to hold remaining securities in the held-to-maturity portfolio to maturity.
During the nine months ended September 30, 2014, the Company received proceeds of $5.0 million from the sale of a held-for-trading security and recognized a gain of $30,000.
Investment securities with amortized costs of $246.5 million and $270.2 million at September 30, 2015 and December 31, 2014, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase and transaction clearing accounts.
Provided below is a summary of investment securities which were in an unrealized loss position at September 30, 2015 and December 31, 2014. The Company does not intend to sell these securities until such time as the value recovers or the securities mature and it is not more likely than not that the Company will be required to sell the securities prior to recovery of value or the securities mature.
|
|
Less Than 12 Months |
|
12 Months or Longer |
|
Total |
| ||||||||||||||
Description of Securities |
|
|
|
Unrealized |
|
|
|
Unrealized |
|
Number of |
|
|
|
Unrealized |
| ||||||
(Dollars in thousands) |
|
Fair Value |
|
Losses |
|
Fair Value |
|
Losses |
|
Securities |
|
Fair Value |
|
Losses |
| ||||||
September 30, 2015: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Mortgage-backed securities |
|
$ |
126,413 |
|
$ |
1,976 |
|
$ |
54,029 |
|
$ |
1,503 |
|
34 |
|
$ |
180,442 |
|
$ |
3,479 |
|
December 31, 2014: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Mortgage-backed securities |
|
$ |
12,717 |
|
$ |
65 |
|
$ |
183,349 |
|
$ |
4,225 |
|
37 |
|
$ |
196,066 |
|
$ |
4,290 |
|
Mortgage-Backed Securities. The unrealized losses on the Companys investment in mortgage-backed securities were caused by increases in market interest rates. All of the mortgage-backed securities are guaranteed by Freddie Mac or Fannie Mae, which are U.S. government-sponsored enterprises, or Ginnie Mae, which is a U.S. government agency. Since the decline in market value is attributable to changes in interest rates and not credit quality, and the Company does not intend to sell these investments until maturity and it is not more likely than not that the Company will be required to sell such investments prior to recovery of its cost basis, the Company does not consider these investments
to be other-than-temporarily impaired as of September 30, 2015 and December 31, 2014.
Trust Preferred Securities. At September 30, 2015, the Company owned one trust preferred security, PreTSL XXIII. The trust preferred security represents an investment in a pool of debt obligations issued primarily by holding companies for Federal Deposit Insurance Corporation-insured financial institutions. This security is classified in the Companys held-to-maturity investment portfolio.
The trust preferred securities market is considered to be inactive as only six transactions have occurred over the past 45 months in the same tranche of securities owned by the Company. The Company uses a discounted cash flow model to determine whether this security is other-than-temporarily impaired. The assumptions used in preparing the discounted cash flow model include the following: estimated discount rates, estimated deferral and default rates on collateral, and estimated cash flows.
Based on the Companys review, the Companys investment in PreTSL XXIII did not incur additional impairment during the quarter ended September 30, 2015.
PreTSL XXIII has an amortized cost of $856,000 at September 30, 2015. The difference between the amortized cost of $856,000 and the remaining cost basis of $1.1 million is reported as accumulated other comprehensive loss and is related to noncredit factors.
It is reasonably possible that the fair value of the trust preferred security could decline in the near term if the overall economy and the financial condition of some of the issuers continue to deteriorate and the liquidity of this security remains low. As a result, there is a risk that the Companys remaining cost basis of $1.1 million on its trust preferred security could be credit-related other-than-temporarily impaired in the near term. The impairment, if any, could be material to the Companys consolidated statements of income.
The table below provides a cumulative roll forward of credit losses recognized in earnings for debt securities held and not intended to be sold:
(Dollars in thousands) |
|
2015 |
|
2014 |
| ||
Balance at January 1, |
|
$ |
5,885 |
|
$ |
5,885 |
|
Credit losses on debt securities for which other-than-temporary impairment was not previously recognized |
|
|
|
|
| ||
Credit losses on debt securities which were sold |
|
(3,482 |
) |
|
| ||
Balance at September 30, |
|
$ |
2,403 |
|
$ |
5,885 |
|
The table below shows the components of accumulated other comprehensive loss, net of taxes, resulting from other-than-temporarily impaired securities:
|
|
September 30, |
| ||||
(Dollars in thousands) |
|
2015 |
|
2014 |
| ||
Noncredit losses on other-than-temporarily impaired securities, net of taxes |
|
$ |
183 |
|
$ |
301 |
|
(6) Loans Receivable and Allowance for Loan Losses
The components of loans receivable are as follows:
|
|
September 30, |
|
December 31, |
| ||
(Dollars in thousands) |
|
2015 |
|
2014 |
| ||
Real estate loans: |
|
|
|
|
| ||
First mortgages: |
|
|
|
|
| ||
One- to four-family residential |
|
$ |
1,123,353 |
|
$ |
926,074 |
|
Multi-family residential |
|
9,910 |
|
8,920 |
| ||
Construction, commercial, and other |
|
16,422 |
|
18,415 |
| ||
Home equity loans and lines of credit |
|
15,053 |
|
15,992 |
| ||
Total real estate loans |
|
1,164,738 |
|
969,401 |
| ||
Other loans: |
|
|
|
|
| ||
Loans on deposit accounts |
|
282 |
|
441 |
| ||
Consumer and other loans |
|
4,467 |
|
4,173 |
| ||
Total other loans |
|
4,749 |
|
4,614 |
| ||
Less: |
|
|
|
|
| ||
Net unearned fees and discounts |
|
(4,133 |
) |
(4,112 |
) | ||
Allowance for loan losses |
|
(2,062 |
) |
(1,691 |
) | ||
Total unearned fees, discounts and allowance for loan losses |
|
(6,195 |
) |
(5,803 |
) | ||
Loans receivable, net |
|
$ |
1,163,292 |
|
$ |
968,212 |
|
The table below presents the activity in the allowance for loan losses by portfolio segment:
(Dollars in thousands) |
|
Residential |
|
Construction, |
|
Home |
|
Consumer |
|
Unallocated |
|
Totals |
| ||||||
Three months ended September 30, 2015: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, beginning of period |
|
$ |
1,243 |
|
$ |
407 |
|
$ |
3 |
|
$ |
101 |
|
$ |
240 |
|
$ |
1,994 |
|
Provision (reversal of allowance) for loan losses |
|
109 |
|
|
|
|
|
(20 |
) |
(18 |
) |
71 |
| ||||||
|
|
1,352 |
|
407 |
|
3 |
|
81 |
|
222 |
|
2,065 |
| ||||||
Charge-offs |
|
|
|
|
|
|
|
(10 |
) |
|
|
(10 |
) | ||||||
Recoveries |
|
|
|
3 |
|
1 |
|
3 |
|
|
|
7 |
| ||||||
Net charge-offs |
|
|
|
3 |
|
1 |
|
(7 |
) |
|
|
(3 |
) | ||||||
Balance, end of period |
|
$ |
1,352 |
|
$ |
410 |
|
$ |
4 |
|
$ |
74 |
|
$ |
222 |
|
$ |
2,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Nine months ended September 30, 2015: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, beginning of period |
|
$ |
413 |
|
$ |
977 |
|
$ |
5 |
|
$ |
263 |
|
$ |
33 |
|
$ |
1,691 |
|
Provision (reversal of allowance) for loan losses |
|
936 |
|
(577 |
) |
(18 |
) |
(164 |
) |
189 |
|
366 |
| ||||||
|
|
1,349 |
|
400 |
|
(13 |
) |
99 |
|
222 |
|
2,057 |
| ||||||
Charge-offs |
|
|
|
|
|
|
|
(35 |
) |
|
|
(35 |
) | ||||||
Recoveries |
|
3 |
|
10 |
|
17 |
|
10 |
|
|
|
40 |
| ||||||
Net charge-offs |
|
3 |
|
10 |
|
17 |
|
(25 |
) |
|
|
5 |
| ||||||
Balance, end of period |
|
$ |
1,352 |
|
$ |
410 |
|
$ |
4 |
|
$ |
74 |
|
$ |
222 |
|
$ |
2,062 |
|
(Dollars in thousands) |
|
Residential |
|
Construction, |
|
Home |
|
Consumer |
|
Unallocated |
|
Totals |
| ||||||
Three months ended September 30, 2014: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, beginning of period |
|
$ |
344 |
|
$ |
932 |
|
$ |
7 |
|
$ |
159 |
|
$ |
68 |
|
$ |
1,510 |
|
Provision (reversal of allowance) for loan losses |
|
9 |
|
78 |
|
(1 |
) |
(5 |
) |
(58 |
) |
23 |
| ||||||
|
|
353 |
|
1,010 |
|
6 |
|
154 |
|
10 |
|
1,533 |
| ||||||
Charge-offs |
|
|
|
|
|
|
|
(10 |
) |
|
|
(10 |
) | ||||||
Recoveries |
|
|
|
1 |
|
1 |
|
3 |
|
|
|
5 |
| ||||||
Net charge-offs |
|
|
|
1 |
|
1 |
|
(7 |
) |
|
|
(5 |
) | ||||||
Balance, end of period |
|
$ |
353 |
|
$ |
1,011 |
|
$ |
7 |
|
$ |
147 |
|
$ |
10 |
|
$ |
1,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Nine months ended September 30, 2014: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, beginning of period |
|
$ |
376 |
|
$ |
799 |
|
$ |
10 |
|
$ |
229 |
|
$ |
72 |
|
$ |
1,486 |
|
Provision (reversal of allowance) for loan losses |
|
95 |
|
211 |
|
4 |
|
(60 |
) |
(62 |
) |
188 |
| ||||||
|
|
471 |
|
1,010 |
|
14 |
|
169 |
|
10 |
|
1,674 |
| ||||||
Charge-offs |
|
(118 |
) |
|
|
(10 |
) |
(35 |
) |
|
|
(163 |
) | ||||||
Recoveries |
|
|
|
1 |
|
3 |
|
13 |
|
|
|
17 |
| ||||||
Net charge-offs |
|
(118 |
) |
1 |
|
(7 |
) |
(22 |
) |
|
|
(146 |
) | ||||||
Balance, end of period |
|
$ |
353 |
|
$ |
1,011 |
|
$ |
7 |
|
$ |
147 |
|
$ |
10 |
|
$ |
1,528 |
|
During the nine months ended September 30, 2015, the Company increased the loan loss provisions for residential mortgage loans based on the growth of this segment of the loan portfolio and the concentration of loans in Hawaii. The Company also reduced the loan loss provisions on construction, commercial and other mortgage loans, home equity loans and lines of credit and consumer and other loans based on a continued limited loss experience. The allocation of a portion of the allowance from one category of loans does not preclude its availability to absorb losses in other loan categories.
Management considers the allowance for loan losses at September 30, 2015 to be at an appropriate level to provide for probable losses that can be reasonably estimated based on general and specific conditions at that date. While the Company uses the best information it has available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the information used in making the evaluations. To the extent actual outcomes differ from the estimates, additional provisions for credit losses may be required that would reduce future earnings. In addition, as an integral part of their examination process, the bank regulators periodically review the allowance for loan losses and may require the Company to increase the allowance based on their analysis of information available at the time of their examination.
The table below presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method:
(Dollars in thousands) |
|
Residential |
|
Construction, |
|
Home |
|
Consumer |
|
Unallocated |
|
Totals |
| ||||||
September 30, 2015: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Ending allowance balance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Individually evaluated for impairment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Collectively evaluated for impairment |
|
1,352 |
|
410 |
|
4 |
|
74 |
|
222 |
|
2,062 |
| ||||||
Total ending allowance balance |
|
$ |
1,352 |
|
$ |
410 |
|
$ |
4 |
|
$ |
74 |
|
$ |
222 |
|
$ |
2,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Ending loan balance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Individually evaluated for impairment |
|
$ |
6,473 |
|
$ |
|
|
$ |
124 |
|
$ |
|
|
$ |
|
|
$ |
6,597 |
|
Collectively evaluated for impairment |
|
1,122,709 |
|
16,349 |
|
14,937 |
|
4,762 |
|
|
|
1,158,757 |
| ||||||
Total ending loan balance |
|
$ |
1,129,182 |
|
$ |
16,349 |
|
$ |
15,061 |
|
$ |
4,762 |
|
$ |
|
|
$ |
1,165,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
December 31, 2014: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Ending allowance balance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Individually evaluated for impairment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Collectively evaluated for impairment |
|
413 |
|
977 |
|
5 |
|
263 |
|
33 |
|
1,691 |
| ||||||
Total ending allowance balance |
|
$ |
413 |
|
$ |
977 |
|
$ |
5 |
|
$ |
263 |
|
$ |
33 |
|
$ |
1,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Ending loan balance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Individually evaluated for impairment |
|
$ |
6,158 |
|
$ |
|
|
$ |
296 |
|
$ |
4 |
|
$ |
|
|
$ |
6,458 |
|
Collectively evaluated for impairment |
|
924,732 |
|
18,399 |
|
15,702 |
|
4,612 |
|
|
|
963,445 |
| ||||||
Total ending loan balance |
|
$ |
930,890 |
|
$ |
18,399 |
|
$ |
15,998 |
|
$ |
4,616 |
|
$ |
|
|
$ |
969,903 |
|
The table below presents the balance of impaired loans individually evaluated for impairment by class of loans:
(Dollars in thousands) |
|
Recorded |
|
Unpaid |
| ||
September 30, 2015: |
|
|
|
|
| ||
With no related allowance recorded: |
|
|
|
|
| ||
One- to four-family residential mortgages |
|
$ |
6,473 |
|
$ |
7,234 |
|
Home equity loans and lines of credit |
|
124 |
|
160 |
| ||
|
|
|
|
|
| ||
Total |
|
$ |
6,597 |
|
$ |
7,394 |
|
|
|
|
|
|
| ||
December 31, 2014: |
|
|
|
|
| ||
With no related allowance recorded: |
|
|
|
|
| ||
One- to four-family residential mortgages |
|
$ |
6,158 |
|
$ |
6,775 |
|
Home equity loans and lines of credit |
|
296 |
|
324 |
| ||
Consumer and other |
|
4 |
|
4 |
| ||
|
|
|
|
|
| ||
Total |
|
$ |
6,458 |
|
$ |
7,103 |
|
The table below presents the average recorded investment and interest income recognized on impaired loans by class of loans:
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
| ||||||||
(Dollars in thousands) |
|
Average |
|
Interest |
|
Average |
|
Interest |
| ||||
2015: |
|
|
|
|
|
|
|
|
| ||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
| ||||
One- to four-family residential mortgages |
|
$ |
6,515 |
|
$ |
16 |
|
$ |
6,586 |
|
$ |
52 |
|
Home equity loans and lines of credit |
|
126 |
|
|
|
129 |
|
|
| ||||
Total |
|
$ |
6,641 |
|
$ |
16 |
|
$ |
6,715 |
|
$ |
52 |
|
|
|
|
|
|
|
|
|
|
| ||||
2014: |
|
|
|
|
|
|
|
|
| ||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
| ||||
One- to four-family residential mortgages |
|
$ |
6,785 |
|
$ |
28 |
|
$ |
6,931 |
|
$ |
88 |
|
Home equity loans and lines of credit |
|
302 |
|
|
|
311 |
|
|
| ||||
Consumer and other |
|
1 |
|
|
|
1 |
|
|
| ||||
Total |
|
$ |
7,088 |
|
$ |
28 |
|
$ |
7,243 |
|
$ |
88 |
|
There were no loans individually evaluated for impairment with a related allowance for loan loss as of September 30, 2015 or December 31, 2014. Loans individually evaluated for impairment do not have an allocated allowance for loan loss because they are written down to fair value.
The table below presents the aging of loans and accrual status by class of loans:
(Dollars in thousands) |
|
30 59 |
|
60 89 |
|
90 Days or |
|
Total Past |
|
Loans Not |
|
Total |
|
Nonaccrual |
|
Loans |
| ||||||||
September 30, 2015: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
One- to four-family residential mortgages |
|
$ |
1,511 |
|
$ |
|
|
$ |
1,516 |
|
$ |
3,027 |
|
$ |
1,116,270 |
|
$ |
1,119,297 |
|
$ |
5,265 |
|
$ |
|
|
Multi-family residential mortgages |
|
|
|
|
|
|
|
|
|
9,885 |
|
9,885 |
|
|
|
|
| ||||||||
Construction, commercial and other mortgages |
|
|
|
|
|
|
|
|
|
16,349 |
|
16,349 |
|
|
|
|
| ||||||||
Home equity loans and lines of credit |
|
|
|
|
|
|
|
|
|
15,061 |
|
15,061 |
|
124 |
|
|
| ||||||||
Loans on deposit accounts |
|
|
|
|
|
|
|
|
|
282 |
|
282 |
|
|
|
|
| ||||||||
Consumer and other |
|
6 |
|
1 |
|
|
|
7 |
|
4,473 |
|
4,480 |
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total |
|
$ |
1,517 |
|
$ |
1 |
|
$ |
1,516 |
|
$ |
3,034 |
|
$ |
1,162,320 |
|
$ |
1,165,354 |
|
$ |
5,389 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
December 31, 2014: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
One- to four-family residential mortgages |
|
$ |
1,040 |
|
$ |
736 |
|
$ |
593 |
|
$ |
2,369 |
|
$ |
919,624 |
|
$ |
921,993 |
|
$ |
4,153 |
|
$ |
|
|
Multi-family residential mortgages |
|
|
|
|
|
|
|
|
|
8,897 |
|
8,897 |
|
|
|
|
| ||||||||
Construction, commercial and other mortgages |
|
|
|
|
|
|
|
|
|
18,399 |
|
18,399 |
|
|
|
|
| ||||||||
Home equity loans and lines of credit |
|
|
|
|
|
161 |
|
161 |
|
15,837 |
|
15,998 |
|
296 |
|
|
| ||||||||
Loans on deposit accounts |
|
|
|
|
|
|
|
|
|
440 |
|
440 |
|
|
|
|
| ||||||||
Consumer and other |
|
7 |
|
1 |
|
4 |
|
12 |
|
4,164 |
|
4,176 |
|
4 |
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total |
|
$ |
1,047 |
|
$ |
737 |
|
$ |
758 |
|
$ |
2,542 |
|
$ |
967,361 |
|
$ |
969,903 |
|
$ |
4,453 |
|
$ |
|
|
The Company primarily uses the aging of loans and accrual status to monitor the credit quality of its loan portfolio. When a mortgage loan becomes seriously delinquent (90 days or more contractually past due), it displays weaknesses that may result in a loss. As a loan becomes more delinquent, the likelihood of the borrower repaying the loan decreases and the loan becomes more collateral-dependent. A mortgage loan becomes collateral-dependent when the proceeds for repayment can be expected to come only from the sale or operation of the collateral and not from borrower repayments. Generally, appraisals are obtained after a loan becomes collateral-dependent or is five months delinquent. The carrying value of collateral-dependent loans is adjusted to the fair value of the collateral less selling costs. Any commercial real estate, commercial, construction or equity loan that has a loan balance in excess of a specified amount is also periodically reviewed to determine whether the loan exhibits any weaknesses and is performing in accordance with its contractual terms.
The Company had 20 nonaccrual loans with a book value of $5.4 million at September 30, 2015 and 18 nonaccrual loans with a book value of $4.5 million as of December 31, 2014. The Company collected interest on nonaccrual loans of $170,000 and $197,000 during the nine months ended September 30, 2015 and 2014, respectively, but due to regulatory requirements, the Company recorded
the interest as a reduction of principal. The Company would have recognized additional interest income of $231,000 and $164,000 during the nine months ended September 30, 2015 and 2014, respectively, had the loans been accruing interest. The Company did not have any loans more than 90 days past due and still accruing interest as of September 30, 2015 and December 31, 2014.
There were no loans modified in a troubled debt restructuring during the nine months ended September 30, 2015 or 2014. There were no new troubled debt restructurings within the past 12 months that subsequently defaulted.
The Company had 15 troubled debt restructurings totaling $3.4 million as of September 30, 2015 that were considered to be impaired. This total included 14 one- to four-family residential mortgage loans totaling $3.3 million and one home equity loan for $124,000. Four of the loans, totaling $889,000, are performing in accordance with their restructured terms and accruing interest at September 30, 2015. One of the loans, for $319,000, was 59 days delinquent and accruing interest at September 30, 2015. Nine of the loans, totaling $2.1 million, are performing in accordance with their restructured terms but not accruing interest at September 30, 2015. One of the loans, for $149,000, was more than 149 days delinquent and not accruing interest as of September 30, 2015. The Company had 17 troubled debt restructurings totaling $4.6 million as of December 31, 2014 that were considered to be impaired. This total included 16 one- to four-family residential mortgage loans totaling $4.4 million and one home equity loan for $135,000. Six of the loans, totaling $2.0 million, were performing in accordance with their restructured terms and accruing interest at December 31, 2014. Nine of the loans, totaling $2.2 million, were performing in accordance with their restructured terms but not accruing interest at December 31, 2014. Two of the loans, totaling $343,000, were delinquent and not accruing interest at December 31, 2014. Restructurings include deferrals of interest and/or principal payments and temporary or permanent reductions in interest rates due to the financial difficulties of the borrowers. At September 30, 2015, we had no commitments to lend any additional funds to these borrowers.
The Company had no real estate owned as of September 30, 2015 or December 31, 2014. There were three one-to four-family residential mortgage loans totaling $685,000 in the process of foreclosure as of September 30, 2015, and two one- to four-family residential mortgage loans totaling $352,000 in the process of foreclosure as of September 30, 2014.
Nearly all of our real estate loans are collateralized by real estate located in the State of Hawaii. Loan-to-value ratios on these real estate loans generally do not exceed 80% at the time of origination.
During the nine months ended September 30, 2015 and 2014, the Company sold $46.2 million and $26.9 million, respectively, of mortgage loans held for sale and recognized gains of $440,000 and $283,000, respectively. During the three months ended September 30, 2015 and 2014, the Company sold $17.7 million and $10.0 million, respectively, of mortgage loans held for sale and recognized gains of $201,000 and $118,000, respectively. The Company had one loan held for sale for $225,000 at September 30, 2015 and six loans held for sale totaling $1.0 million at December 31, 2014.
The Company serviced loans for others of $53.4 million at September 30, 2015 and $60.5 million at December 31, 2014. Of these amounts, $2.8 million and $3.0 million relate to securitizations for which the Company continues to hold the related mortgage-backed securities at September 30, 2015 and December 31, 2014, respectively. The amount of contractually specified servicing fees earned for the nine-month periods ended September 30, 2015 and 2014 was $117,000 and $137,000, respectively. The amount of contractually specified servicing fees earned for the three-month periods ended September 30, 2015 and 2014 was $37,000 and $44,000, respectively. The fees are reported in service fees on loan and deposit accounts in the consolidated statements of income.
(7) Federal Home Loan Bank Stock
On June 1, 2015, the Federal Home Loan Bank of Seattle (FHLB Seattle) completed it