BRKL » Topics » Provision for Loan Losses

This excerpt taken from the BRKL 10-Q filed Nov 7, 2007.

Provision for Loan Losses

 

The provision for loan losses, which is comprised of amounts relating to the auto loan portfolio, the Eastern loan portfolio and the remainder of the Company’s loan portfolio, was $1,503,000 in the 2007 third quarter compared to $813,000 in the 2006 third quarter and $3,860,000 in the 2007 nine month period compared to $2,420,000 in the 2006 nine month period.

 

The amounts provided for auto loans in the 2007 and 2006 third quarters were $1,389,000 and $850,000, respectively, and $3,012,000 and $2,355,000, respectively, in the 2007 and 2006 nine month periods. The increases resulted in part from higher loan balances but more from a rise in net charge-offs. Net charge-offs were $1,232,000 in the 2007 third quarter (an annualized rate of net charge-offs of 0.80%) and $2,527,000 in the 2007 nine month period (0.57%). Net charge-offs in the 2006 nine month period were $1,381,000 (0.36%). See the prior section, “Auto Loans”, for a discussion about the reasons for the higher charge-offs and trends in this segment of the Company’s lending activities.

 

The provisions for loan losses related to the Eastern portfolio in the 2007 and 2006 third quarters were $114,000 and $238,000, respectively, $823,000 in the 2007 nine month period and $415,000 in the six month period ended September 30, 2006. Net charge-offs declined from $391,000 in the 2007 first quarter to $288,000 in the 2007 second quarter and $63,000 in the 2007 third quarter, which was aided by recoveries of $179,000 in that quarter. The resulting annualized rate of net charge-offs for the 2007 nine month period was 0.75% of average loans outstanding. Loans delinquent 30 days or more increased from $1,436,000 (1.13% of total loans) at December 31, 2006 to $2,002,000 (1.45%) at June 30, 2007 and $3,414,000 (2.44%) at September 30, 2007. Loans on non-accrual at those respective dates were $657,000 (0.52% of total loans), $2,254,000 (1.63%) and $2,169,000 (1.55%). The total allowance for loan losses related to Eastern’s loans was $2,377,000, or 1.80% of loans outstanding at September 30, 2007 (excluding seasoned loans purchased at the end of the 2007 second quarter). Despite a much lower rate of net charge-off experience, the allowance is maintained at 1.80% in recognition of the higher risk exposure associated with Eastern’s loans. The higher risk exposure is the reason why the rates charged on the loans are significantly above those on other segments of the Company’s loan portfolio.

 

Regarding the remainder of the Company’s loan portfolio, which is comprised primarily of mortgage loans and commercial loans, the provision for loan losses in the 2007 third quarter and nine month period were none and $25,000, respectively. In the 2006 third quarter and nine month period, credits to the provision for loan losses of $275,000 and $350,000, respectively, were taken to income as a result of reductions in loans outstanding caused by payoffs. No mortgage loans or commercial loans were charged off in 2007 or 2006. Loans delinquent 90 days or more at September 30, 2007 were $1,026,000.

 

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This excerpt taken from the BRKL 10-Q filed Aug 7, 2007.

Provision for Loan Losses

The provision for loan losses was $1,107,000 in the 2007 second quarter compared to $859,000 in the 2006 second quarter and $2,357,000 in the first half of 2007 compared to $1,607,000 in the first half of 2006.  The provision for loan losses is comprised of amounts relating to the auto loan portfolio, the Eastern loan portfolio and the remainder of the Company’s loan portfolio.

The provision for loan losses related to the auto loan portfolio was $779,000 in the 2007 second quarter and $757,000 in the 2006 second quarter. These amounts exceeded net charge-offs of $528,000 and $420,000 in those respective periods, resulting in annualized rates of net charge-offs of 0.36% and 0.32%, respectively. The provision for loan losses related to the auto loan portfolio was $1,623,000 in the first half of 2007 and $1,505,000 in the first half of 2006. Net charge-offs were $1,295,000 and $899,000 in those respective periods resulting in annualized rates of net charge-offs of 0.45% and 0.36%, respectively. Loans delinquent 30 days and over were $5,851,000, or 0.99% of auto loans outstanding at June 30, 2007, compared to $5,594,000 (1.00%) at March 31, 2007 and $7,092,000 (1.31%) at December 31, 2006.

The provision for loan losses related to the Eastern portfolio was $328,000 in the 2007 second quarter, $380,000 in the 2007 first quarter and $177,000 in the 2006 second quarter. Net charge-offs in the 2007 second and first quarters were $288,000 and $391,000, respectively, resulting in a six month annualized rate of net charge-offs of 1.06% of average loans outstanding. Loans delinquent 30 days or more increased from $1,436,000 (1.13% of total loans) at December 31, 2006 to $2,221,000 (1.75%) at March 31, 2007, but declined to $2,034,000 (1.47%) at June 30, 2007. Loans on non-accrual at those respective dates increased from $657,000 (0.52%  of total loans) to $2,199,000 (1.74%) and $2,254,000 (1.75% of total loans excluding $9.5 million of seasoned loans purchased at the end of the quarter). The total allowance for loan losses for Eastern’s loans at June 30, 2007 was $2,326,000, or 1.80% of loans outstanding (excluding the quarter end purchase). Despite a much lower rate of charge-off experience, the allowance is maintained at 1.80% in recognition of the higher risk exposure associated with Eastern’s loans. The higher risk exposure is the reason why the rates charged on the loans are significantly higher than on other segments of the Company’s loan portfolio.

Regarding the remainder of the Company’s loan portfolio, which is comprised primarily of mortgage loans, $25,000 was provided in the first half of 2007 and $75,000 was credited to income in the first half of 2006. The credit was due primarily to the reduction of mortgage loans outstanding and payments made on loans acquired in connection with the acquisition of Mystic Financial, Inc. in January 2005. No mortgage loans were charged off in the first half of 2007 and 2006. Mortgage loans delinquent 30 days or more at June 30, 2007 were insignificant at $516,000.

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This excerpt taken from the BRKL 10-Q filed May 3, 2007.

Provision for Loan Losses

The provision for loan losses was $1,249,000 in the 2007 first quarter compared to $748,000 in the 2006 first quarter. The provision for loan losses is comprised of amounts relating to the indirect automobile loan portfolio, the Eastern loan portfolio and the remainder of the Company’s loan portfolio.

The provision for loan losses related to the indirect automobile loan portfolio was $844,000 in the 2007 first quarter and $748,000 in the 2006 first quarter. These amounts exceeded net charge-offs of $767,000 and $479,000 in those respective periods, resulting in annualized rates of net charge-offs of 0.55% and 0.40%, respectively. The rise in net charge-offs is believed to be due in part to added liquidity pressures on consumers in general and the decision in 2006 to moderately expand loan originations to borrowers with lower credit scores. Loans delinquent 30 days and over declined from $7,092,000, or 1.31% of loans outstanding at December 31, 2006, to $5,594,000, or 1.00% of loans outstanding at March 31, 2007.

The provision for loan losses related to the Eastern portfolio was $380,000 in the 2007 first quarter. Net charge-offs were $391,000, an annualized rate of 1.22% based on the average balance of loans outstanding during that period. Total loans delinquent more that 30 days increased from $1,436,000 (1.13% of total loans) at December 31, 2006 to $2,221,000 (1.75% of total loans) at March 31, 2007. Loans on non-accrual at those respective dates increased from $657,000 (0.52% of total loans) to $2,154,000 (1.70% of total loans). Of the increase in non-accrual loans, $885,000 related to loans made to one borrower. That amount is net of a $100,000 charge-off taken on one of the loans in the 2007 first quarter. The total amount of the loans as of their varying dates of origination was $1,200,000. The total allowance for loan losses for Eastern loans was $2,285,000 at March 31, 2007, an amount equal to 1.80% of the portfolio. Historically, due to the higher risk nature of its portfolio, Eastern has maintained its allowance for loan losses around that percent, despite a rate of net charge-offs considerably below that percent. Customarily, there is a lag in time before the symptoms that may cause a possible loss become evident.

Regarding the remainder of the Company’s loan portfolio, which is comprised primarily of mortgage loans, $25,000 was provided in the 2007 first quarter compared to none in the 2006 first quarter. No mortgage loans were charged off in either of those periods. Only one mortgage loan with a balance of $72,000 was delinquent 30 days or more at March 31, 2007.

This excerpt taken from the BRKL 10-K filed Feb 28, 2007.

Provision for Loan Losses

The provision for loan losses was $2,549,000 in 2006, $2,483,000 in 2005 and $2,603,000 in 2004. The provision for loan losses is comprised of amounts relating to the indirect automobile loan portfolio, the Eastern loan portfolio and the remainder of the Company’s loan portfolio.

The provision for loan losses related to the indirect automobile loan portfolio was $3,098,000 in 2006, $2,859,000 in 2005 and $2,199,000 in 2004. The increases were attributable to the growth of the portfolio which was discussed in a prior subsection herein. Net charge-offs were $1,838,000 in 2006, $1,358,000 in 2005 and $1,246,000 in 2004, or 0.35%, 0.32% and 0.40% of the average balance of indirect automobile loans outstanding in those respective years.

The provision for loan losses related to the Eastern loan portfolio was $851,000 since the acquisition in April 2006. Net charge-offs in that period were $515,000, an amount equal to 0.57% of average loans outstanding on an annualized basis.

Regarding the remainder of the Company’s loan portfolio, credits of $1,400,000 and $376,000 were taken into income in 2006 and 2005, respectively, and $404,000 was charged to earnings in 2004. Of the total credit taken to income in 2006, $1,050,000 was credited in the fourth quarter of 2006. Much of that amount ($828,000) resulted from a reduction in the reserve factor applied to the multi-family mortgage loan portfolio. The remainder of the credit in 2006 and the credit in 2005 resulted from reductions in outstanding loans through pay downs, including loans classified as higher risk loans. The provision in 2004 was attributable primarily to growth of the loan portfolio in that year.

See the subsection “Allowance for Loan Losses” appearing elsewhere herein for more information about amounts set aside to absorb loan losses.

This excerpt taken from the BRKL 10-Q filed Nov 2, 2006.

Provision for Loan Losses

The provision for loan losses was $813,000 in the 2006 third quarter compared to $32,000 in the 2005 third quarter. The provision for loans losses for the nine months ended September 30, 2006 and 2005 was $2,420,000 and $1,643,000, respectively.

The provision for loan losses is comprised of amounts related to indirect automobile lending, the Eastern portfolio and the remainder of the Company’s loan portfolio. The provisions related to the indirect automobile loan portfolio in the 2006 and 2005 quarters were $850,000 and $692,000, respectively, and in the 2006 and 2005 nine month periods $2,355,000 and $2,019,000, respectively. The higher amounts resulted primarily from the increases in loans outstanding. Net charge-offs in the 2006 and 2005 nine month periods were $1,380,000 and $863,000, respectively, or annualized rates of 0.36% and 0.28%, respectively, based on average indirect automobile loans outstanding during those periods. Indirect automobile loans delinquent more than 30 days were $4.8 million, or 0.91% of the portfolio, at September 30, 2006 compared to $5.3 million, or 1.01% of the portfolio, at June 30, 2006 and $5.5 million, or 1.21% of the portfolio, at December 31, 2005.

The provision for loan losses related to the Eastern portfolio was $238,000 in the 2006 third quarter and $415,000 since the acquisition of a controlling interest by the Company in April 2006. Net charge-offs were $104,000 in the 2006 quarter and $87,000 since the acquisition. Loans delinquent over 30 days amounted to $2.1 million, or 1.66%, of total loans at September 30, 2006. Of that amount, $796,000 is on non-accrual; additionally, $400,000 is included in non-performing assets as equipment in possession.

Regarding the remainder of the loan portfolio, credits to the provision for loan losses of $275,000 and $660,000 were taken to income in the 2006 and 2005 third quarters, respectively, and $350,000 and $376,000 were taken to income in the 2006 and 2005 nine month periods, respectively. Such credits resulted from reductions in loans outstanding caused by payoffs. Of the credit taken to income in the 2005 third quarter, $650,000 related to payoff of some of the loans, including certain higher risk loans, acquired in the January 2005 Mystic transaction (see note 2 to the consolidated financial statements on page 11 herein).

This excerpt taken from the BRKL 10-Q filed Aug 2, 2006.
Provision for Loan Losses. The provision for loan losses declined from $957,000 in the 2005 second quarter to $859,000 in the 2006 second quarter and remained at $1.6 million in the first half of 2006 and 2005. Of these amounts, $623,000, $757,000, $1.3 million and $1.5 million, respectively, related to the indirect automobile loan portfolio. Net charge-offs in that portfolio in the six month periods ended June 30, 2006 and 2005 were $899,000 and $556,000, respectively, or 0.36% and 0.28% of average indirect automobile loans outstanding during those respective periods. Indirect automobile loans delinquent more than 30 days were $5.6 million, or 1.07% of the portfolio, at June 30, 2006 compared to $5.5 million, or 1.21% of the portfolio, at December 31, 2005.

The provision for loan losses for the 2006 second quarter included $177,000 related to the Eastern loan portfolio. In the first half of 2006, $75,000 was credited to income due primarily to the reduction of mortgage loans outstanding and payments made on loans acquired in connection with the acquisition of Mystic in January 2005. The provision in the first half of 2005 included $284,000 due primarily to the assignment of higher risk ratings to certain loans acquired in the Mystic transaction.

This excerpt taken from the BRKL 10-Q filed May 3, 2006.

Provision for Loan Losses

 

The provision for loan losses charged to earnings was $748,000 in the 2006 first quarter compared to $654,000 in the 2005 first quarter. These amounts were attributable primarily to the growth of the indirect automobile loan portfolio described above. Net charge-offs of indirect automobile loans were $479,000 in the 2006 first quarter and $319,000 in the 2005 first quarter, resulting in respective annualized net charge-off rates of 0.40% and 0.33%. Indirect automobile loans delinquent more than 30 days declined from $5.5 million, or 1.21% of the portfolio, at December 31, 2005 to $4.2 million, or 0.86% of the portfolio, at March 31, 2006.

 

In the 2005 first quarter, the provision for loan losses was reduced by a $50,000 credit to income due to payments made on loans acquired in the Mystic transaction which was completed on January 7, 2005.

 

This excerpt taken from the BRKL 10-K filed Mar 10, 2006.

Provision for Loan Losses

 

The provision for loan losses charged to earnings was $2,483,000 in 2005, $2,603,000 in 2004 and $1,288,000 in 2003. Of these amounts, $2,859,000, $2,199,000 and $619,000, respectively, were attributable to the indirect automobile loan portfolio. Net charge-offs of indirect automobile loans were $1,358,000 in 2005, $1,246,000 in 2004 and $157,000 in 2003, or 0.32%, 0.40% and 0.17% of the average balance of indirect automobile loans outstanding in those respective years. While charge-off experience to date has been favorable, indirect automobile loans delinquent over 30 days increased from $4.5 million, or 1.00% of the portfolio, at the end of 2004 to $5.5 million, or 1.21% of the portfolio, at the end of 2005.The increase is considered to be due in part to the change in the bankruptcy law which occurred in October 2005. The substantial excess provisions over net charge-offs related to the indirect automobile loan portfolio reflect the rapid growth of that portfolio and our assumption that the rate of charge-offs may increase in the future.

 

Excluding the additions to the allowance for loan losses relating to indirect automobile loans, there was a $376,000 reduction in the allowance for loan losses in 2005 credited to earnings. This credit compares to charges to earnings of $404,000 in 2004 and $669,000 in 2003. The credit in 2005 resulted primarily from the payoff of Mystic loans, including several loans which were deemed to have higher than normal risk characteristics. The provisions in 2004 and 2003 were attributable primarily to growth in the non-indirect automobile loan portfolio of $46 million in 2004 and $59 million in 2003. Excluding Mystic loans and indirect automobile loans, the Company experienced net recoveries of prior charge-offs of $2,000 in 2005 and $12,000 in 2003 and net charge-offs of $12,000 in 2004.

 

This excerpt taken from the BRKL 10-Q filed Nov 7, 2005.

Provision for Loan Losses

 

The provision for loan losses decreased from $635,000 in the 2004 third quarter to $32,000 in the 2005 third quarter and from $1,676,000 in the 2004 nine month period to $1,643,000 in the 2005 nine month period. The considerably lower provision in the 2005 third quarter was due to a $650,000 credit resulting from payoffs of loans acquired in the Mystic transaction, including certain higher risk loans. The Company is utilizing its more conservative underwriting criteria in the origination of new loans to the Mystic customer base and is striving to strengthen the collectibility of certain commercial real estate and commercial and industrial loans acquired in the Mystic transaction by obtaining additional collateral and better repayment terms. Success in these endeavors could improve the collectibility of such loans and, accordingly, allow for future recapture of amounts provided that resulted from assignment of higher risk ratings. Conversely, if endeavors are not successful, the ultimate collectibility of such acquired loans could be impeded and result in additional provisions for loan losses. At this time, it is not expected that any required additional provisions due to unsuccessful efforts to strengthen such acquired loans will be material to the Company’s financial statements. Actual amounts provided in the future related to acquired loans, if any, will depend on each loan’s facts and circumstances as of the dates financial statements are presented. Except for two loans with an aggregate balance of $710,000 delinquent over 30 days, all acquired commercial real estate and commercial and industrial loans were current in their payments at September 30, 2005.

 

Of the totals provided for loan losses, the following amounts were attributable to the indirect automobile loan portfolio: $692,000 and $575,000 in the respective 2005 and 2004 quarters and $2,019,000 and $1,457,000 in the respective 2005 and 2004 nine month periods. Net charge-offs of indirect automobile loans in those periods were $307,000, $434,000, $863,000 and $705,000, respectively. The substantial excess of provisions over charge-offs is in light of the growth of the portfolio and the short amount of time that has elapsed since February 2003 when the Company commenced originating such loans. The economy has been relatively strong since the beginning of 2003 and, accordingly, the Company has no experience on how collection of the portfolio could be affected in a weakened economy. Until such experience is garnered and the rate of portfolio growth starts to subside, the Company expects that amounts provided for loan losses related to the indirect automobile loan portfolio will continue to exceed net charge-offs.

 

This excerpt taken from the BRKL 10-Q filed Aug 5, 2005.

Provision for Loan Losses

 

The provision for loan losses increased from $711,000 in the 2004 quarter to $957,000 in the 2005 quarter and from $1,041,000 in the 2004 six month period to $1,611,000 in the 2005 six month period. Of these amounts, $501,000, $623,000, $883,000 and $1,327,000, respectively, related to the indirect automobile loan portfolio. The amounts provided exceeded the net amounts charged off of $137,000, $237,000, $271,000 and $556,000 in those respective periods. The substantial excess of provisions over charge-offs is in light of the growth of the portfolio and the short amount of time that has elapsed since February 2003 when the Company commenced originating such loans. The economy has been relatively strong since the beginning of 2003 and, accordingly, the Company has no experience on how collection of the portfolio

 

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could be affected in a weakened economy. Until such experience is garnered and the rate of portfolio growth starts to subside, the Company expects that amounts provided for loan losses related to the indirect automobile loan portfolio will continue to exceed net charge-offs.

 

The provision for loan losses not attributable to indirect automobile loans related to growth of the remainder of the loan portfolio and assignment of higher risk ratings to certain loans acquired in the Mystic transaction. The Company is utilizing its more conservative underwriting criteria in the origination of new loans to the Mystic customer base and is striving to strengthen the collectibility of certain commercial real estate and commercial and industrial loans acquired in the Mystic transaction by obtaining additional collateral and better repayment terms. Success in these endeavors could improve the collectibility of such loans and, accordingly, allow for future recapture of amounts provided that resulted from assignment of higher risk ratings. Conversely, if endeavors are not successful, the ultimate collectibility of such acquired loans could be impeded and result in additional provisions for loan losses. At this time, it is not expected that any required additional provisions due to unsuccessful efforts to strengthen such acquired loans will be material to the Company’s financial statements. Actual amounts provided in the future related to acquired loans will depend on each loan’s facts and circumstances as of the dates financial statements are presented. Except for two loans with an aggregate balance of $719,000 delinquent over 30 days, all acquired commercial real estate and commercial and industrial loans were current in their payments at June 30, 2005.

 

This excerpt taken from the BRKL 10-Q filed May 6, 2005.
Provision for Loan Losses. The provision for loan losses charged to earnings was $654,000 in the 2005 quarter compared to $330,000 in the 2004 quarter. Such charges were due entirely to growth of the indirect automobile loan portfolio and the net charge-offs in that portfolio previously commented on in the Indirect Automobile Lending sub-section on page 21 herein. Excluding indirect automobile loans and the addition to the loan portfolio resulting from the Mystic acquisition, the remainder of the loan portfolio declined slightly in each of the 2005 and 2004 quarters resulting in credits to the provision for loan losses in each of those quarters of approximately $50,000.

 

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