Table of Contents

 

 

 

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

(Registrant’s 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 issuer’s 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.

 

 

 



Table of Contents

 

TERRITORIAL BANCORP INC.

 

Form 10-Q Quarterly Report

 

Table of Contents

 

PART I

 

 

 

ITEM 1.

FINANCIAL STATEMENTS

1

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

31

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

47

ITEM 4.

CONTROLS AND PROCEDURES

48

PART II

 

ITEM 1.

LEGAL PROCEEDINGS

50

ITEM 1A.

RISK FACTORS

50

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

50

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

50

ITEM 4.

MINE SAFETY DISCLOSURES

51

ITEM 5.

OTHER INFORMATION

51

ITEM 6.

EXHIBITS

51

 

 

 

SIGNATURES

52

 



Table of Contents

 

PART I

 

ITEM 1.         FINANCIAL STATEMENTS

 

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.

 

1



Table of Contents

 

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)

(Dollars in thousands, except per share data)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

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.

 

2



Table of Contents

 

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in thousands)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

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.

 

3



Table of Contents

 

TERRITORIAL BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (Unaudited)

(Dollars in thousands, except per share data)

 

 

 

Common
Stock

 

Additional
Paid-in
Capital

 

Unearned
ESOP
Shares

 

Retained
Earnings

 

Accumulated
Other
Comprehensive
(Loss)/Income

 

Total
Stockholders’
Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

4



Table of Contents

 

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)

 

5



Table of Contents

 

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.

 

6



Table of Contents

 

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 Company’s 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.

 

7



Table of Contents

 

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.

 

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Table of Contents

 

(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
September 30,

 

Nine Months Ended
September 30,

 

(Dollars in thousands)

 

2015

 

2014

 

2015

 

2014

 

Proceeds from sales

 

$

 

$

4,307

 

$

5,083

 

$

16,577

 

Gross gains

 

 

392

 

476

 

1,047

 

Gross losses

 

 

 

 

 

 

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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 management’s 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 management’s 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 Company’s 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

 

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Table of Contents

 

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 Company’s 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 Company’s review, the Company’s 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 Company’s 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 Company’s 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

 

 

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Table of Contents

 

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

 

 

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Table of Contents

 

The table below presents the activity in the allowance for loan losses by portfolio segment:

 

(Dollars in thousands)

 

Residential
Mortgage

 

Construction,
Commercial
and Other
Mortgage
Loans

 

Home
Equity
Loans and
Lines of
 Credit

 

Consumer
and Other

 

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
Mortgage

 

Construction,
Commercial
and Other
Mortgage
Loans

 

Home
Equity
Loans and
Lines of
Credit

 

Consumer
and Other

 

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

 

 

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Table of Contents

 

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
Mortgage

 

Construction,
Commercial
and Other
Mortgage
Loans

 

Home
Equity
Loans and
Lines of
Credit

 

Consumer
and Other

 

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

 

 

14



Table of Contents

 

The table below presents the balance of impaired loans individually evaluated for impairment by class of loans:

 

(Dollars in thousands)

 

Recorded
Investment

 

Unpaid
Principal
Balance

 

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
September 30,

 

For the Nine Months Ended
September 30,

 

(Dollars in thousands)

 

Average
Recorded
Investment

 

Interest
Income
Recognized

 

Average
Recorded
Investment

 

Interest
Income
Recognized

 

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.

 

15



Table of Contents

 

The table below presents the aging of loans and accrual status by class of loans:

 

(Dollars in thousands)

 

30 – 59
Days Past
Due

 

60 – 89
Days Past
Due

 

90 Days or
Greater
Past Due

 

Total Past
Due

 

Loans Not
Past Due

 

Total
Loans

 

Nonaccrual
Loans

 

Loans
More
Than 90
Days Past
Due and
Still
Accruing

 

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

 

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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.

 

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(7)                     Federal Home Loan Bank Stock

 

On June 1, 2015, the Federal Home Loan Bank of Seattle (FHLB Seattle) completed its merger