|
| | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
Operating Activities | | |
| | |
|
Net income | | $ | 64,398 |
| | $ | 53,923 |
|
Adjustments reconciling net income to net cash provided by operating activities: | | |
| | |
|
Depreciation | | 6,918 |
| | 7,041 |
|
Net losses on sale or disposal of premises and equipment | | 956 |
| | 112 |
|
Provision for loan losses | | 5,828 |
| | 2,381 |
|
Net losses on sale of other real estate owned including write-downs | | 501 |
| | 1,844 |
|
Share-based compensation expense | | 2,419 |
| | 1,586 |
|
Amortization of intangible assets | | 2,990 |
| | 3,332 |
|
Provision for deferred taxes | | (962 | ) | | (6,369 | ) |
Net amortization of investment securities available for sale | | 4,815 |
| | 5,086 |
|
Net gains on securities available for sale | | (37 | ) | | (94 | ) |
Accretion of discount on purchased loans | | (9,023 | ) | | (12,926 | ) |
Amortization of premium on purchased loan pools | | 2,943 |
| | 4,149 |
|
Net accretion (amortization) on other borrowings | | 62 |
| | (57 | ) |
Amortization of subordinated deferrable interest debentures | | 992 |
| | 1,123 |
|
Originations of mortgage loans held for sale | | (1,113,188 | ) | | (1,051,812 | ) |
Payments received on mortgage loans held for sale | | 799 |
| | 1,167 |
|
Proceeds from sales of mortgage loans held for sale | | 961,831 |
| | 982,898 |
|
Net gains on sale of mortgage loans held for sale | | (36,451 | ) | | (41,935 | ) |
Originations of SBA loans | | (25,720 | ) | | (57,462 | ) |
Proceeds from sales of SBA loans | | 23,952 |
| | 21,656 |
|
Net gains on sale of SBA loans | | (3,423 | ) | | (3,054 | ) |
Increase in cash surrender value of BOLI | | (1,188 | ) | | (1,318 | ) |
Changes in FDIC loss-share receivable/payable, net of cash payments received | | 1,974 |
| | 10,277 |
|
Change attributable to other operating activities | | 12,931 |
| | 16,202 |
|
Net cash used in operating activities | | (95,683 | ) | | (62,250 | ) |
| | | | |
Investing Activities, net of effects of business combinations | | |
| | |
|
Purchase of securities available for sale | | (83,090 | ) | | (134,786 | ) |
Proceeds from prepayments and maturities of securities available for sale | | 85,036 |
| | 93,513 |
|
Proceeds from sales of securities available for sale | | 3,090 |
| | 53,026 |
|
Net increase in other investments | | (12,669 | ) | | (13,050 | ) |
Net increase in loans, excluding purchased loans | | (786,548 | ) | | (556,182 | ) |
Payments received on purchased loans | | 155,033 |
| | 186,319 |
|
Purchases of loan pools | | — |
| | (151,481 | ) |
Payments received on purchased loan pools | | 95,533 |
| | 115,409 |
|
Purchases of premises and equipment | | (3,016 | ) | | (8,250 | ) |
Proceeds from sales of premises and equipment | | 16 |
| | 207 |
|
Proceeds from sales of other real estate owned | | 11,989 |
| | 18,329 |
|
Payments received from (payments to) FDIC under loss-share agreements | | (97 | ) | | 4,770 |
|
Net cash proceeds paid in acquisitions | | — |
| | (7,205 | ) |
Net cash used in investing activities | | (534,723 | ) | | (399,381 | ) |
| | | | |
| | |
| | (Continued) |
|
AMERIS BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
(dollars in thousands) | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 |
Financing Activities | | | | |
Net increase in deposits | | $ | 288,881 | | | $ | 434,717 | |
| | | | |
Proceeds from other borrowings | | 983,000 | | | 6,655,000 | |
Repayment of other borrowings | | (861,105) | | | (6,130,036) | |
| | | | |
| | | | |
Proceeds from exercise of stock options | | — | | | 476 | |
Dividends paid - common stock | | (10,477) | | | (10,584) | |
Purchase of treasury shares | | (4,894) | | | (9,058) | |
Net cash provided by financing activities | | 395,405 | | | 940,515 | |
| | | | |
Net increase in cash and cash equivalents | | 43,948 | | | 902,721 | |
Cash and cash equivalents at beginning of period | | 1,167,304 | | | 1,118,132 | |
Cash and cash equivalents at end of period | | $ | 1,211,252 | | | $ | 2,020,853 | |
| | | | |
Supplemental Disclosures of Cash Flow Information | | | | |
Cash paid (received) during the period for: | | | | |
Interest | | $ | 130,031 | | | $ | 76,589 | |
Income taxes | | 398 | | | (1) | |
Loans transferred to other real estate owned | | 2,443 | | | 1,652 | |
Loans transferred from loans held for sale to loans held for investment | | 6,088 | | | 5,734 | |
| | | | |
| | | | |
| | | | |
| | | | |
Right-of-use assets obtained in exchange for new operating lease liabilities | | 982 | | | 1,942 | |
| | | | |
| | | | |
| | | | |
| | | | |
Change in unrealized loss on securities available-for-sale, net of tax | | (4,020) | | | 10,926 | |
| | | | |
| | | | |
| | | | |
| | | | (Concluded) |
|
| | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
Financing Activities, net of effects of business combinations | | |
| | |
|
Net increase in deposits | | $ | 320,341 |
| | $ | 25,448 |
|
Net decrease in securities sold under agreements to repurchase | | (39,349 | ) | | (20,938 | ) |
Proceeds from other borrowings | | 1,687,692 |
| | 339,500 |
|
Repayment of other borrowings | | (1,371,503 | ) | | (53,513 | ) |
Issuance of common stock | | 88,656 |
| | — |
|
Proceeds from exercise of stock options | | 1,912 |
| | 963 |
|
Dividends paid - common stock | | (10,927 | ) | | (5,096 | ) |
Purchase of treasury shares | | (886 | ) | | (1,225 | ) |
Net cash provided by financing activities | | 675,936 |
| | 285,139 |
|
| | | | |
Net increase (decrease) in cash and cash equivalents | | 45,530 |
| | (176,492 | ) |
Cash and cash equivalents at beginning of period | | 198,385 |
| | 390,563 |
|
Cash and cash equivalents at end of period | | $ | 243,915 |
| | $ | 214,071 |
|
| | | | |
Supplemental Disclosures of Cash Flow Information | | |
| | |
|
Cash paid during the period for: | | |
| | |
|
Interest | | $ | 23,369 |
| | $ | 13,791 |
|
Income taxes | | 28,212 |
| | 30,969 |
|
Loans (excluding purchased loans) transferred to other real estate owned | | 4,043 |
| | 2,101 |
|
Purchased loans transferred to other real estate owned | | 4,294 |
| | 6,262 |
|
Loans transferred from loans held for sale to loans held for investment | | 165,352 |
| | 94,601 |
|
Loans provided for the sales of other real estate owned | | 1,334 |
| | 1,471 |
|
Assets acquired in business acquisitions | | — |
| | 561,440 |
|
Liabilities assumed in business acquisitions | | — |
| | 465,048 |
|
Issuance of common stock in acquisitions | | — |
| | 72,455 |
|
Issuance of common stock in exchange for equity investment in US Premium Finance Holding Company | | 5,844 |
| | — |
|
Change in unrealized gain (loss) on securities available for sale, net of tax | | 4,337 |
| | 7,724 |
|
Change in unrealized gain (loss) on cash flow hedge, net of tax | | (38 | ) | | (567 | ) |
| | | | |
| | |
| | (Concluded) |
|
See notes to unaudited consolidated financial statements.
AMERIS BANCORP AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
September 30, 2017March 31, 2024
NOTE 1 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Nature of Business
Ameris Bancorp (the “Company” or “Ameris”) is a financial holding company headquartered in Moultrie,Atlanta, Georgia. Ameris conducts substantially all of its operations through its wholly owned banking subsidiary, Ameris Bank (the “Bank”). At September 30, 2017,March 31, 2024, the Bank operated 97164 branches in select markets in Georgia, Alabama, Florida, North Carolina and South Carolina. Our business model capitalizes on the efficiencies of a large financial services company, while still providing the community with the personalized banking service expected by our customers. We manage our Bank through a balance of decentralized management responsibilities and efficient centralized operating systems, products and loan underwriting standards. The Company’s Board of Directors and senior managers establish corporate policy, strategy and administrative policies. Within our established guidelines and policies, the banker closest to the customer responds to the differing needs and demands of his or her unique market.
Basis of Presentation
The accompanying unaudited consolidated financial statements for Ameris have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statement presentation. The interim consolidated financial statements included herein are unaudited but reflect all adjustments, (consistingconsisting of normal recurring accruals)adjustments, which, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the periodthree months ended September 30, 2017March 31, 2024 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto and the report of our registered independent public accounting firm included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2023.
Accounting Policy UpdateIn preparing the consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Other Investments – Other investments include Federal Home Loan Bank (“FHLB”) stock, Federal Reserve Bank stockCash and a minority equity investment in US Premium Finance Holding Company, a Florida corporation (“USPF”). These investments do not have readily determinable fair values and are carried at cost. They are periodically reviewed for impairment based on ultimate recoveryCash Equivalents
For purposes of par value or cost basis. Both stockreporting cash flows, cash and cash dividends are reported as income. For additional information regarding the Company’s minority equity investmentequivalents include cash on hand, cash items in USPF, see Note 2.process of collection, amounts due from banks, interest-bearing deposits in banks and federal funds sold.
Reclassifications
Certain reclassifications of prior year amounts have been made to conform with the current year presentations. The reclassifications had no effect on net income or shareholders' equity as previously reported.
Accounting Standards Adopted in 20172024
ASU 2016-09 – Improvements to Employee Share-Based Payment2023-02 - Investments - Equity Method and Joint Ventures (Topic 323): Accounting (“ for Investments in Tax Credit Structures Using the Proportional Amortization Method ("ASU 2016-09”2023-02"). ASU 2016-09 simplifies various aspects2023-02 allows entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of how share-based payments are accounted for and presented in the financial statements. Under ASU 2016-09, companies will record all excess tax benefits and tax deficiencies asprogram giving rise to the related income tax expense or benefitcredit. Previously, this method was only available for qualifying tax equity investments in the income statement and will no longer record excesslow-income housing tax benefits and certain tax deficiencies in additional paid-in capital. The standard eliminates the requirement that excess tax benefits be realized before companies can recognize them. The excess tax benefits will be reported as an operating activity on the statement of cash flows, and the cash paid to a tax authority when shares are withheld to satisfy a company’s statutory income tax withholding obligation will be reported as a financing activity on its statement of cash. In addition, the standard increases the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s statutory income tax withholding obligation. ASU 2016-09 permits companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as required today, or recognized when they occur.credit structures. The Company has elected to recognize forfeitures as they occur.adopted ASU 2016-09 became effective2023-02 on January 1, 20172024 and adoption did not have a materialsignificant impact on the consolidatedCompany's financial statements.position or results of operations.
ASU No. 2023-07 – Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 enhances segment disclosures by requiring inclusion of significant segment expenses, disclosure of the amount and composition of other segment items, previous annual disclosures in interim periods and identification of the position and title of the chief operating decision maker. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted this standard effective January 1, 2024 and adoption did not have a significant impact on the Company's financial position or results of operations. The adoption will enhance disclosures of reporting segments beginning with the Company's Annual Report on Form 10-K and will be applied on a retrospective basis.
Accounting Standards Pending Adoption
ASU 2017-12 – "Derivatives and HedgingNo. 2023-09 - Income Taxes (Topic 815)740): Targeted Improvements to AccountingIncome Tax Disclosures ("ASU 2023-09"). ASU No. 2023-09 provides for Hedging Activities ("enhanced income tax disclosures by, among other things, requiring specific breakout of certain categories in the reconciliation of statutory income tax rate to effective rate, establishing a quantitative threshold for further breakout of reconciling items exceeding the threshold and not already required to be separately disclosed, requiring a qualitative description of the state and local jurisdictions making up the majority (greater than 50%) of the effect of state and local income taxes category, and provide further disaggregation of income taxes paid (net of refunds received) by jurisdiction. ASU 2017-12"). The purposes of ASU 2017-12 are to (1) improve the transparency and understandability of information conveyed in financial statements about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with the economic objectives of those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. ASU 2017-122023-09 is effective for interim and annual reporting periods beginning after December 15, 2018 with early2024. Early adoption in an interim periodis permitted. ASU 2017-12 requires a modified retrospective transition method in which the Company will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the beginning of the fiscal year of adoption. The Company is currently evaluating the provisions of ASU 2017-12 to determine the potential impact the new standard will have on the Company’s results of operations, financial positionguidance and disclosures, but it is not expected to have a material impact.
ASU 2017-09 – “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 clarifies when changes to the terms of a share-based award must be accounted for as a modification. Companies must apply the modification accounting guidance if any of the following change: the shard-based award’s fair value, vesting provisions or classification as an equity instrument or a liability instrument. The new guidance should reduce diversity in practice and result in fewer changes to the terms of share-based awards being accounted for as modifications, as the guidance will allow companies to make certain non-substantive changes to share-based awards without accounting for them as modifications. ASU 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017 with early adoption permitted. ASU 2017-09 is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.
ASU 2017-08 – “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities (“ASU 2017-08”). ASU 2017-08 shortens the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. Under the current guidance, entities generally amortize the premium on a callable debt security as an adjustment of yield over the contractual life (to maturity date) of the instrument. This ASU does not require any accounting change in the accounting for debt securities held at a discount; the discount continues to be amortized as an adjustment of yield over the contractual life (to maturity) of the instrument. ASU 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption, ASU 2017-08 provides for a modified retrospective transition by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. The Company is currently evaluating the provisions of ASU 2017-08 to determine the potential impact the new standard will have on the Company’s results of operations, financial position and disclosures, but it is not expected to have a material impact.
ASU 2017-04 – Intangibles: Goodwill and Other: Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 from the goodwill impairment test to simplify the subsequent measurement of goodwill. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, the income tax effects of tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. ASU 2017-04 also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the qualitative impairment test is necessary. The standard must be adopted using a prospective basis and the nature and reason for the change in accounting principle should be disclosed upon transition. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in reporting periods beginning after December 15, 2019. Early adoption is permitted on testing dates after January 1, 2017. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position and disclosures, but it is not expected to have a material impact.
ASU 2017-01 – Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 provides a framework to use in determining when a set of assets and activities is a business. The standard provides more consistency in applying the business combination guidance, reduces the costs of application, and makes the definition of a business more operable. ASU 2017-01 is effective for interim and annual periods within those annual periods beginning after December 15, 2017. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position and disclosures, but it is not expected to have a material impact.
ASU 2016-13 - Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace the current incurred loss approach with an expected loss model, referred to as the current expected credit loss (“CECL”) model. The new standard will apply to
financial assets subject to credit losses and measured at amortized cost and certain off-balance-sheet credit exposures, which include, but are not limited to, loans, leases, held-to-maturity securities, loan commitments and financial guarantees. ASU 2016-13 simplifies the accounting for purchased credit-impaired debt securities and loans and expands the disclosure requirements regarding an entity’s assumptions, models and methods for estimating the allowance for loan and lease losses. In addition, entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Upon adoption, ASU 2016-13 provides for a modified retrospective transition by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is effective. While the Company is currently evaluating the impact this standard will have on the results of operations, financial position and disclosures, the Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective. The Company has established a steering committee which includes the appropriate members of management to evaluate the impact this ASU will have on Company’s financial position, results of operations and financial statement disclosures and determine the most appropriate method of implementing the amendments in this ASU as well as any resources needed to implement the amendments. This committee has identified the software vendor of choice for implementation, established an implementation timeline and continues to stay current on implementation issues and concerns.
ASU 2016-02 – Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 amends the existing standards for lease accounting effectively requiring most leases be carried on the balance sheets of the related lessees by requiring them to recognize a right-of-use asset and a corresponding lease liability. ASU 2016-02 includes qualitative and quantitative disclosure requirements intended to provide greater insight into the nature of an entity’s leasing activities. The standard must be adopted using a modified retrospective transition with a cumulative-effect adjustment to equity as of the beginning of the period in which it is adopted. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods with early adoption permitted. The Company has several leased facilities, which are currently treated as operating leases, and are not currently shown on the Company’s consolidated balance sheet. After ASU 2016-02 is implemented, the Company expects to begin reporting these lease agreements on the balance sheet as a right-of-use asset and a corresponding liability. The Company is currently evaluating the impact this standard will have on the Company’s consolidated statement of income and comprehensive income, consolidated statement of stockholders’ equity and consolidated statement of cash flows, but it is not expected to have a material impact.
ASU 2014-09 – Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective prospectively, for annual and interim periods, beginning after December 15, 2017. Management has substantially completed its evaluation of the impact ASU 2014-09 will have on the Company’s consolidated financial statements. Based on this evaluation to date, management has determined that for the revenue streams of the Company within the scope of ASU 2014-09, the new accounting guidance will not change the timing or amount of revenue recognized. The adoption of ASU 2014-09 is not expected to have a materialsignificant impact on the Company's consolidated financial statements.position or results of operations but will increase disclosures of income taxes.
NOTE 2 – INVESTMENT IN US PREMIUM FINANCE HOLDING COMPANY
On December 15, 2016, the Bank entered into a Management and License Agreement with William J. Villari and USPF pursuant to which Mr. Villari will manage a division of the Bank to be operated under the name “US Premium Finance” and which is to be engaged in the business of soliciting, originating, servicing, administering and collecting loans made for purposes of funding insurance premiums and other loans made to persons engaged in the insurance business.
Also on December 15, 2016, the Company entered into a Stock Purchase Agreement with Mr. Villari pursuant to which the Company agreed to purchase from Mr. Villari 4.99% of the outstanding shares of common stock of USPF. As consideration for such shares, the Company agreed to issue to Mr. Villari 128,572 unregistered shares of its common stock in a private placement transaction pursuant to the exemptions from registration provided in Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder. Those transactions closed on January 18, 2017, and a registration statement was filed with the Securities and Exchange Commission on February 13, 2017 to register the resale or other disposition of the shares of common stock that were issued to Mr. Villari.
The Company’s 4.99% investment in USPF was valued at $5.8 million, based upon the closing price of the Company’s common stock immediately prior to the parties’ execution of the Stock Purchase Agreement, as follows:
|
| | | |
(dollars in thousands, except per share amount) | |
|
Ameris common shares issued | 128,572 |
|
Price per share of the Company's common stock | $ | 45.45 |
|
Fair value of consideration transferred | $ | 5,844 |
|
Because USPF does not have a readily determinable fair value and Ameris does not exercise significant influence over USPF, the investment is carried at cost and is included in other investments in the Company’s consolidated balance sheet. The net carrying value of the Company’s investment in USPF was $5.8 million as of September 30, 2017.
NOTE 32 – INVESTMENT SECURITIES
The Company’s investment policy blends the Company’s liquidity needs and interest rate risk management with its desire to increase income and provide funds for expected growth in loans. The investment securities portfolio consists primarily of U.S. government-sponsored mortgage-backed securities and state, county and municipal securities. The Company’s portfolio and investing philosophy concentrate activities in obligations where the credit risk is limited. For the small portion of the Company’s portfolio found to present credit risk, the Company has reviewed the investments and financial performance of the obligors and believes the credit risk to be acceptable.
The amortized cost and estimated fair value of investment securities available for sale,available-for-sale along with gross unrealized gains and losses are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) Securities available-for-sale | | Amortized Cost | | Allowance for Credit Losses | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
March 31, 2024 | | | | | | | | | | |
U.S. Treasuries | | $ | 712,985 | | | $ | — | | | $ | 8 | | | $ | (11,697) | | | $ | 701,296 | |
U.S. government-sponsored agencies | | 1,020 | | | — | | | — | | | (40) | | | 980 | |
State, county and municipal securities | | 28,136 | | | — | | | 5 | | | (1,137) | | | 27,004 | |
Corporate debt securities | | 10,946 | | | (73) | | | — | | | (859) | | | 10,014 | |
SBA pool securities | | 80,164 | | | — | | | 2 | | | (1,737) | | | 78,429 | |
Mortgage-backed securities | | 631,284 | | | — | | | 24 | | | (34,612) | | | 596,696 | |
Total debt securities available-for-sale | | $ | 1,464,535 | | | $ | (73) | | | $ | 39 | | | $ | (50,082) | | | $ | 1,414,419 | |
| | | | | | | | | | |
December 31, 2023 | | | | | | | | | | |
U.S. Treasuries | | $ | 732,636 | | | $ | — | | | $ | 34 | | | $ | (11,793) | | | $ | 720,877 | |
U.S. government-sponsored agencies | | 1,023 | | | — | | | — | | | (38) | | | 985 | |
State, county and municipal securities | | 28,986 | | | — | | | 9 | | | (944) | | | 28,051 | |
Corporate debt securities | | 10,946 | | | (69) | | | — | | | (850) | | | 10,027 | |
SBA pool securities | | 53,033 | | | — | | | 2 | | | (1,519) | | | 51,516 | |
Mortgage-backed securities | | 621,013 | | | — | | | 67 | | | (29,592) | | | 591,488 | |
Total debt securities available-for-sale | | $ | 1,447,637 | | | $ | (69) | | | $ | 112 | | | $ | (44,736) | | | $ | 1,402,944 | |
|
| | | | | | | | | | | | | | | | |
(dollars in thousands) | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
September 30, 2017 | | | | | | | | |
U.S. government sponsored agencies | | $ | 1,000 |
| | $ | 4 |
| | $ | — |
| | $ | 1,004 |
|
State, county and municipal securities | | 140,190 |
| | 3,271 |
| | (74 | ) | | 143,387 |
|
Corporate debt securities | | 46,704 |
| | 661 |
| | (116 | ) | | 47,249 |
|
Mortgage-backed securities | | 626,927 |
| | 3,774 |
| | (2,748 | ) | | 627,953 |
|
Total debt securities | | $ | 814,821 |
| | $ | 7,710 |
| | $ | (2,938 | ) | | $ | 819,593 |
|
| | | | | | | | |
December 31, 2016 | | | | | | | | |
U.S. government sponsored agencies | | $ | 999 |
| | $ | 21 |
| | $ | — |
| | $ | 1,020 |
|
State, county and municipal securities | | 149,899 |
| | 2,605 |
| | (469 | ) | | 152,035 |
|
Corporate debt securities | | 32,375 |
| | 167 |
| | (370 | ) | | 32,172 |
|
Mortgage-backed securities | | 641,362 |
| | 2,700 |
| | (6,554 | ) | | 637,508 |
|
Total debt securities | | $ | 824,635 |
| | $ | 5,493 |
| | $ | (7,393 | ) | | $ | 822,735 |
|
The amortized cost and estimated fair value of securities held-to-maturity along with gross unrealized gains and losses are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) Securities held-to-maturity | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
March 31, 2024 | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
State, county and municipal securities | | $ | 33,668 | | | $ | 2 | | | $ | (5,693) | | | $ | 27,977 | |
| | | | | | | | |
| | | | | | | | |
Mortgage-backed securities | | 113,354 | | | 29 | | | (14,779) | | | 98,604 | |
Total debt securities held-to-maturity | | $ | 147,022 | | | $ | 31 | | | $ | (20,472) | | | $ | 126,581 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
December 31, 2023 | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
State, county and municipal securities | | $ | 31,905 | | | $ | — | | | $ | (5,051) | | | $ | 26,854 | |
| | | | | | | | |
| | | | | | | | |
Mortgage-backed securities | | 109,607 | | | — | | | (13,730) | | | 95,877 | |
Total debt securities held-to-maturity | | $ | 141,512 | | | $ | — | | | $ | (18,781) | | | $ | 122,731 | |
| | | | | | | | |
| | | | | | | | |
The amortized cost and estimated fair value of debt securities available-for-sale securities at September 30, 2017and held-to-maturity as of March 31, 2024, by contractual maturity are summarized in the tableshown below. Expected maturities for mortgage-backed securitiesMaturities may differ from contractual maturities in mortgage-backed securities because in certain cases borrowers can prepay obligationsthe mortgages underlying these securities may be called or repaid without prepayment penalties.penalty. Therefore, these securities are not included in the maturity categories in the following maturity summary.summary:
| | | Available-for-Sale | | | Available-for-Sale | | Held-to-Maturity |
(dollars in thousands) | | Amortized Cost | | Estimated Fair Value | (dollars in thousands) | Amortized Cost | | Estimated Fair Value | | Amortized Cost | | Estimated Fair Value |
Due in one year or less | | $ | 14,094 |
| | $ | 14,205 |
|
Due from one year to five years | | 57,385 |
| | 58,204 |
|
Due from five to ten years | | 77,194 |
| | 79,093 |
|
Due after ten years | | 39,221 |
| | 40,138 |
|
Mortgage-backed securities | | 626,927 |
| | 627,953 |
|
| | $ | 814,821 |
| | $ | 819,593 |
|
Securities with a carrying value of approximately $238.6$459.4 million and $532.6 million at March 31, 2024 and December 31, 2023, respectively, serve as collateral to secure public deposits securities sold under agreements to repurchase and for other purposes required or permitted by law at September 30, 2017, compared with $618.2 million at December 31, 2016.law.
The following table detailsshows the gross unrealized losses and estimated fair value of available-for-sale securities aggregated by category and durationlength of time that securities have been in a continuous unrealized loss position at September 30, 2017March 31, 2024 and December 31, 2016.2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Less Than 12 Months | | 12 Months or More | | Total |
(dollars in thousands) Securities available-for-sale | | Estimated Fair Value | | Unrealized Losses | | Estimated Fair Value | | Unrealized Losses | | Estimated Fair Value | | Unrealized Losses |
March 31, 2024 | | | | | | | | | | | | |
U.S. Treasuries | | $ | 133,526 | | | $ | (1,129) | | | $ | 562,763 | | | $ | (10,568) | | | $ | 696,289 | | | $ | (11,697) | |
U.S. government-sponsored agencies | | — | | | — | | | 980 | | | (40) | | | 980 | | | (40) | |
State, county and municipal securities | | 5,362 | | | (10) | | | 19,502 | | | (1,127) | | | 24,864 | | | (1,137) | |
Corporate debt securities | | 499 | | | (1) | | | 8,515 | | | (858) | | | 9,014 | | | (859) | |
SBA pool securities | | 58,947 | | | (147) | | | 19,333 | | | (1,590) | | | 78,280 | | | (1,737) | |
Mortgage-backed securities | | 47,179 | | | (289) | | | 548,200 | | | (34,323) | | | 595,379 | | | (34,612) | |
Total debt securities available-for-sale | | $ | 245,513 | | | $ | (1,576) | | | $ | 1,159,293 | | | $ | (48,506) | | | $ | 1,404,806 | | | $ | (50,082) | |
| | | | | | | | | | | | |
December 31, 2023 | | | | | | | | | | | | |
U.S. Treasuries | | $ | 159,667 | | | $ | (827) | | | $ | 537,313 | | | $ | (10,966) | | | $ | 696,980 | | | $ | (11,793) | |
U.S. government sponsored agencies | | — | | | — | | | 985 | | | (38) | | | 985 | | | (38) | |
State, county and municipal securities | | 1,923 | | | — | | | 19,754 | | | (944) | | | 21,677 | | | (944) | |
Corporate debt securities | | 500 | | | — | | | 8,527 | | | (850) | | | 9,027 | | | (850) | |
SBA pool securities | | 42 | | | — | | | 21,267 | | | (1,519) | | | 21,309 | | | (1,519) | |
Mortgage-backed securities | | 126 | | | — | | | 566,707 | | | (29,592) | | | 566,833 | | | (29,592) | |
Total debt securities available-for-sale | | $ | 162,258 | | | $ | (827) | | | $ | 1,154,553 | | | $ | (43,909) | | | $ | 1,316,811 | | | $ | (44,736) | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Less Than 12 Months | | 12 Months or More | | Total |
(dollars in thousands) | | Estimated Fair Value | | Unrealized Losses | | Estimated Fair Value | | Unrealized Losses | | Estimated Fair Value | | Unrealized Losses |
September 30, 2017 | | |
| | |
| | |
| | |
| | |
| | |
|
U.S. government sponsored agencies | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
State, county and municipal securities | | 11,333 |
| | (18 | ) | | 4,240 |
| | (56 | ) | | 15,573 |
| | (74 | ) |
Corporate debt securities | | 8,131 |
| | (35 | ) | | 10,854 |
| | (81 | ) | | 18,985 |
| | (116 | ) |
Mortgage-backed securities | | 225,258 |
| | (1,685 | ) | | 54,465 |
| | (1,063 | ) | | 279,723 |
| | (2,748 | ) |
Total debt securities | | $ | 244,722 |
| | $ | (1,738 | ) | | $ | 69,559 |
| | $ | (1,200 | ) | | $ | 314,281 |
| | $ | (2,938 | ) |
| | | | | | | | | | | | |
December 31, 2016 | | |
| | |
| | |
| | |
| | |
| | |
|
U.S. government sponsored agencies | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
State, county and municipal securities | | 47,647 |
| | (469 | ) | | — |
| | — |
| | 47,647 |
| | (469 | ) |
Corporate debt securities | | 18,377 |
| | (363 | ) | | 493 |
| | (7 | ) | | 18,870 |
| | (370 | ) |
Mortgage-backed securities | | 414,300 |
| | (6,177 | ) | | 11,791 |
| | (377 | ) | | 426,091 |
| | (6,554 | ) |
Total debt securities | | $ | 480,324 |
| | $ | (7,009 | ) | | $ | 12,284 |
| | $ | (384 | ) | | $ | 492,608 |
| | $ | (7,393 | ) |
As of September 30, 2017,March 31, 2024, the Company’s securitiesavailable-for-sale security portfolio consisted of 421409 securities, 119400 of which were in an unrealized loss position. The majority of unrealized losses are related to the Company’s mortgage-backed securities, as discussed below.
At September 30, 2017,March 31, 2024, the Company held 101309 mortgage-backed securities that were in an unrealized loss position, all of which were issued by U.S. government-sponsored entities and agencies. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2017.
At September 30, 2017,March 31, 2024, the Company held nine33 U.S. Small Business Administration (“SBA”) pool securities, 24 state, county and municipal securities, seven corporate securities, one U.S. government-sponsored agency security, and nine corporate debt26 U.S. Treasury securities that were in an unrealized loss position. Because
The following table shows the decline ingross unrealized losses and estimated fair value is attributable to changesof held-to-maturity securities aggregated by category and length of time that securities have been in interest ratesa continuous unrealized loss position at March 31, 2024 and illiquidity, and not credit quality, and becauseDecember 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Less Than 12 Months | | 12 Months or More | | Total |
(dollars in thousands) Securities held-to-maturity | | Estimated Fair Value | | Unrealized Losses | | Estimated Fair Value | | Unrealized Losses | | Estimated Fair Value | | Unrealized Losses |
March 31, 2024 | | | | | | | | | | | | |
| | | | | | | | | | | | |
State, county and municipal securities | | $ | 453 | | | $ | (6) | | | $ | 26,217 | | | $ | (5,687) | | | $ | 26,670 | | | $ | (5,693) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Mortgage-backed securities | | 8,282 | | | (266) | | | 85,738 | | | (14,513) | | | 94,020 | | | (14,779) | |
Total debt securities held-to-maturity | | $ | 8,735 | | | $ | (272) | | | $ | 111,955 | | | $ | (20,200) | | | $ | 120,690 | | | $ | (20,472) | |
| | | | | | | | | | | | |
December 31, 2023 | | | | | | | | | | | | |
| | | | | | | | | | | | |
State, county and municipal securities | | $ | — | | | $ | — | | | $ | 26,854 | | | $ | (5,051) | | | $ | 26,854 | | | $ | (5,051) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Mortgage-backed securities | | 13,612 | | | (227) | | | 82,265 | | | (13,503) | | | 95,877 | | | (13,730) | |
Total debt securities held-to-maturity | | $ | 13,612 | | | $ | (227) | | | $ | 109,119 | | | $ | (18,554) | | | $ | 122,731 | | | $ | (18,781) | |
As of March 31, 2024, the Company’s held-to-maturity security portfolio consisted of 30 securities, 28 of which were in an unrealized loss position. At March 31, 2024, the Company does not have the intent to sell theseheld 21 mortgage-backed securities and it is likelyseven state, county and municipal securities that it will not be required to sellwere in an unrealized loss position.
At March 31, 2024 and December 31, 2023, all of the Company’s mortgage-backed securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2017.
The Company’s investments in corporate debt include investments in regional and super-regional banks on which the Company prepares regular analysis through review of financial information and credit ratings. Investments in preferred securities are also concentrated in the preferredwere obligations of regional and super-regional banks through non-pooled investment structures. The Company did not have investments in “pooled” trust preferred securities at September 30, 2017 or December 31, 2016.government-sponsored agencies.
Management and the Company’s Asset and Liability Committee (the “ALCO Committee”) evaluate available-for-sale securities for other-than-temporary impairmentin an unrealized loss position on at least on a quarterly basis, and more frequently when economic or market conditionsconcerns warrant such evaluation. Whileevaluation, to determine if credit-related impairment exists. Management first evaluates whether they intend to sell or more likely than not will be required to sell an impaired security before recovering its amortized cost basis. If either criteria is met, the majorityentire amount of unrealized loss is recognized in earnings with a corresponding adjustment to the security's amortized cost basis. If either of the unrealized losses on debt securities relateabove criteria is not met, management evaluates whether the decline in fair value is attributable to changes in interest rates, corporate debt securities have also been affected by reduced levels of liquidity and higher risk premiums. Occasionally, management engages independent third parties to evaluate the Company’s position in certain corporate debt securities to aid management and the ALCO Committee in its determination regarding the status of impairment.credit or resulted from other factors. The Company believes that each investment poses minimal credit risk and further, that the Company does not intend to sell these available-for-sale investment securities at an unrealized loss position at September 30, 2017,March 31, 2024, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore,Based on the results of management's review, at September 30, 2017, these investments are not considered impairedMarch 31, 2024, management determined that $73,000 was attributable to credit impairment and an allowance for credit losses was recorded. The remaining $50.1 million in unrealized loss was determined to be from factors other than credit.
| | | | | | | | | | | | | | | |
(dollars in thousands) | Three Months Ended March 31, | | |
Allowance for credit losses | 2024 | | 2023 | | | | |
Beginning balance | $ | 69 | | | $ | 75 | | | | | |
Provision for other credit losses | 4 | | | 7 | | | | | |
Ending balance | $ | 73 | | | $ | 82 | | | | | |
The Company's held-to-maturity securities have no expected credit losses, and no related allowance for credit losses has been established.
Total net gain (loss) on an other-than-temporary basis.
At September 30, 2017securities reported on the consolidated statements of income and December 31, 2016, allcomprehensive income is comprised of the Company’s mortgage-backed securities were obligations of government-sponsored agencies.
The following table is a summary of sales activities in the Company’s investment securities available for sale for the ninethree months ended September 30, 2017March 31, 2024 and 2016:2023:
|
| | | | | | | | |
(dollars in thousands) | | September 30, 2017 | | September 30, 2016 |
Gross gains on sales of securities | | $ | 38 |
| | $ | 312 |
|
Gross losses on sales of securities | | (1 | ) | | (218 | ) |
Net realized gains on sales of securities available for sale | | $ | 37 |
| | $ | 94 |
|
| | | | |
Sales proceeds | | $ | 3,090 |
| | $ | 53,026 |
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(dollars in thousands) | 2024 | | 2023 | | | | |
| | | | | | | |
Unrealized holding gains (losses) on equity securities | $ | (7) | | | $ | 6 | | | | | |
| | | | | | | |
Net gain (loss) on securities | $ | (7) | | | $ | 6 | | | | | |
NOTE 43 – LOANS AND ALLOWANCE FOR CREDIT LOSSES
The Bank engages in a full complement of lending activities, including real estate-related loans, agriculture-related loans, commercial and financial loans and consumer installment loans within select markets in Georgia, Alabama, Florida and South Carolina. The Bank purchased residential mortgage loan pools during 2015 and 2016 collateralized by properties located outside our Southeast markets, specifically in California, Washington and Illinois. During the third quarter of 2016, the Bank began purchasing from an unrelated third party consumer installment home improvement loans made to borrowers throughout the United States. As of September 30, 2017 and December 31, 2016, the net carrying value of these consumer installment home improvement loans was approximately $148.0 million and $60.8 million, respectively. During the fourth quarter of 2016, the Bank purchased a pool of commercial insurance premium finance loans made to borrowers throughout the United States and began to originate, administer and service these types of loans. As of September 30, 2017 and December 31, 2016, the net carrying value of commercial insurance premium loans was approximately $487.9 million and $353.9 million, respectively, and such loans are reported in the commercial, financial and agricultural loan category.
The Bank concentrates the majority of its lending activities in real estate loans. While risk of loss in the Company’s portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond the Company’s control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the real estate portfolio. A substantial portion of the Bank’s loans are secured by real estate in the Bank’s primary market area. In addition, a substantial portion of the OREO is located in those same markets. Accordingly, the ultimate collectability of a substantial portion of the Bank’s loan portfolio and the recovery of a substantial portion of the carrying amount of OREO are susceptible to changes in real estate conditions in the Bank’s primary market area.
Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production, commercial insurance premium finance, and other business purposes. Commercial, financial and agricultural loans also include SBA loans and municipal loans. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Bank evaluates the financial strength, cash flow, management, credit history of the borrower and the quality of the collateral securing the loan. The Bank often requires personal guarantees and secondary sources of repayment on commercial, financial and agricultural loans.
Real estate loans include construction and development loans, commercial and farmland loans and residential loans. Construction and development loans include loans for the development of residential neighborhoods, one-to-four family home residential construction loans to builders and consumers, and commercial real estate construction loans, primarily for owner-occupied properties. The Company limits its construction lending risk through adherence to established underwriting procedures. Commercial real estate loans include loans secured by owner-occupied commercial buildings for office, storage, retail, farmland and warehouse space. They also include non-owner occupied commercial buildings such as leased retail and office space. Commercial real estate loans may be larger in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. The Company’s residential loans represent permanent mortgage financing and are secured by residential properties located within the Bank's market areas, along with warehouse lines of credit secured by residential mortgages.
Consumer installment loans and other loans include home improvement loans, automobile loans, boat and recreational vehicle financing, and secured and unsecured personal loans. Consumer loans carry greater risks than other loans, as the collateral can consist of rapidly depreciating assets such as automobiles and equipment that may not provide an adequate source of repayment of the loan in the case of default.
Loans are stated at unpaid balances, net of unearned income and deferred loan fees.amortized cost. Balances within the major loans receivable categories are presented in the following table, excluding purchased loans:table:
| | (dollars in thousands) | September 30, 2017 | | December 31, 2016 | (dollars in thousands) | March 31, 2024 | | December 31, 2023 |
Commercial, financial and agricultural | $ | 1,307,209 |
| | $ | 967,138 |
|
Consumer | |
Indirect automobile | |
Mortgage warehouse | |
Municipal | |
Premium finance | |
Real estate – construction and development | 550,189 |
| | 363,045 |
|
Real estate – commercial and farmland | 1,558,882 |
| | 1,406,219 |
|
Real estate – residential | 969,289 |
| | 781,018 |
|
Consumer installment | 183,314 |
| | 96,915 |
|
Other | 5,795 |
| | 12,486 |
|
| $ | 4,574,678 |
| | $ | 3,626,821 |
|
PurchasedAccrued interest receivable on loans are defined as loans that were acquiredis reported in bank acquisitions including those that are covered by a loss-sharing agreement withother assets on the Federal Deposit Insurance Corporation (the “FDIC”). Purchased loansconsolidated balance sheets totaling $917.1$77.4 million and $1.07 billion$79.2 million and at September 30, 2017March 31, 2024 and December 31, 2016, respectively, are not included in the above schedule.
Purchased2023, respectively. The Company had no recorded allowance for credit losses related to accrued interest on loans are shown below according to major loan type as of the end of the periods shown:
|
| | | | | | | |
(dollars in thousands) | September 30, 2017 | | December 31, 2016 |
Commercial, financial and agricultural | $ | 80,895 |
| | $ | 96,537 |
|
Real estate – construction and development | 68,583 |
| | 81,368 |
|
Real estate – commercial and farmland | 500,169 |
| | 576,355 |
|
Real estate – residential | 264,312 |
| | 310,277 |
|
Consumer installment | 3,167 |
| | 4,654 |
|
| $ | 917,126 |
| | $ | 1,069,191 |
|
A rollforward of purchased loans for the nine months ended September 30, 2017 and 2016 is shown below:
|
| | | | | | | |
(dollars in thousands) | September 30, 2017 | | September 30, 2016 |
Balance, January 1 | $ | 1,069,191 |
| | $ | 909,083 |
|
Charge-offs, net of recoveries | (1,761 | ) | | (3,122 | ) |
Additions due to acquisitions | — |
| | 402,942 |
|
Accretion | 9,023 |
| | 12,926 |
|
Transfers to purchased other real estate owned | (4,294 | ) | | (6,262 | ) |
Payments received | (155,033 | ) | | (186,276 | ) |
Other | — |
| | 90 |
|
Ending balance | $ | 917,126 |
| | $ | 1,129,381 |
|
The following is a summary of changes in the accretable discounts of purchased loans during the nine months ended September 30, 2017 and 2016:
|
| | | | | | | |
(dollars in thousands) | September 30, 2017 | | September 30, 2016 |
Balance, January 1 | $ | 30,624 |
| | $ | 33,848 |
|
Additions due to acquisitions | — |
| | 9,991 |
|
Accretion | (9,023 | ) | | (12,926 | ) |
Accretable discounts removed due to charge-offs | (15 | ) | | (161 | ) |
Transfers between non-accretable and accretable discounts, net | 923 |
| | 2,544 |
|
Ending balance | $ | 22,509 |
| | $ | 33,296 |
|
Purchased loan pools are defined as groups of residential mortgage loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of September 30, 2017, purchased loan pools totaled $465.2 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $459.1 million and $6.1 million of remaining purchase premium paid at acquisition. As of Decemberboth March 31, 2016, purchased loan pools totaled $568.3 million with principal balances totaling $559.4 million and $8.9 million of remaining purchase premium paid at acquisition. At September 30, 20172024 and December 31, 2016, one loan in the purchased loan pools with a principal balance of $915,000 and $925,000, respectively, was classified as a troubled debt restructuring and risk-rated grade 40, while all other loans included in the purchased loan pools were performing current loans risk-rated grade 20. During the second quarter of 2017, this troubled debt restructuring defaulted on its restructured terms and was placed on nonaccrual status. At September 30, 2017 and December 31, 2016, the Company had allocated $1.5 million and $1.8 million, respectively, of allowance for loan losses for the purchased loan pools. As part of the due diligence process prior to purchasing an individual mortgage pool, a complete re-underwrite of the individual loan files was conducted. The underwriting process included a review of all income, asset, credit and property related documentation that was used to originate the loan. Underwriters utilized the originating lender’s program guidelines, as well as general prudent mortgage lending standards, to assess each individual loan file. Additional research was conducted to assess the real estate market conditions and market expectations in the geographic areas where a collateral concentration existed. As part of this review, an automated valuation model was employed to provide current collateral valuations and to support individual loan-to-value ratios. Additionally, a sample of site inspections was completed to provide further assurance. The results of the due diligence review were evaluated by officers of the Company in order to determine overall conformance to the Bank’s credit and lending policies.2023.
Nonaccrual and Past-Due Loans
A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged againstto interest income. Interest on loans that are classified as nonaccrual is subsequently applied to principal until the loans are returned to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Past-due loans are loans whose principal or interest is past due 30 days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms.
The following table presents an analysis of loans accounted for on a nonaccrual basis, excluding purchased loans:
|
| | | | | | | |
(dollars in thousands) | September 30, 2017 | | December 31, 2016 |
Commercial, financial and agricultural | $ | 2,409 |
| | $ | 1,814 |
|
Real estate – construction and development | 735 |
| | 547 |
|
Real estate – commercial and farmland | 5,705 |
| | 8,757 |
|
Real estate – residential | 5,984 |
| | 6,401 |
|
Consumer installment | 492 |
| | 595 |
|
| $ | 15,325 |
| | $ | 18,114 |
|
The following table presents an analysis of purchased loans accounted for on a nonaccrual basis:
|
| | | | | | | |
(dollars in thousands) | September 30, 2017 | | December 31, 2016 |
Commercial, financial and agricultural | $ | 2,086 |
| | $ | 692 |
|
Real estate – construction and development | 3,255 |
| | 2,611 |
|
Real estate – commercial and farmland | 6,974 |
| | 10,174 |
|
Real estate – residential | 6,646 |
| | 9,476 |
|
Consumer installment | 88 |
| | 13 |
|
| $ | 19,049 |
| | $ | 22,966 |
|
The following table presents an analysis of past-due loans, excluding purchased past-due loans as of September 30, 2017 and December 31, 2016:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | Loans 30-59 Days Past Due | | Loans 60-89 Days Past Due | | Loans 90 or More Days Past Due | | Total Loans Past Due | | Current Loans | | Total Loans | | Loans 90 Days or More Past Due and Still Accruing |
September 30, 2017 | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Commercial, financial and agricultural | $ | 5,388 |
| | $ | 2,488 |
| | $ | 5,025 |
| | $ | 12,901 |
| | $ | 1,294,308 |
| | $ | 1,307,209 |
| | $ | 2,941 |
|
Real estate – construction and development | 341 |
| | 52 |
| | 517 |
| | 910 |
| | 549,279 |
| | 550,189 |
| | — |
|
Real estate – commercial and farmland | 2,369 |
| | 1,097 |
| | 5,203 |
| | 8,669 |
| | 1,550,213 |
| | 1,558,882 |
| | — |
|
Real estate – residential | 3,293 |
| | 1,938 |
| | 4,165 |
| | 9,396 |
| | 959,893 |
| | 969,289 |
| | — |
|
Consumer installment loans | 1,034 |
| | 408 |
| | 338 |
| | 1,780 |
| | 181,534 |
| | 183,314 |
| | — |
|
Other | — |
| | — |
| | — |
| | — |
| | 5,795 |
| | 5,795 |
| | — |
|
Total | $ | 12,425 |
| | $ | 5,983 |
| | $ | 15,248 |
| | $ | 33,656 |
| | $ | 4,541,022 |
| | $ | 4,574,678 |
| | $ | 2,941 |
|
| | | | | | | | | | | | | |
December 31, 2016 | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Commercial, financial and agricultural | $ | 565 |
| | $ | 82 |
| | $ | 1,293 |
| | $ | 1,940 |
| | $ | 965,198 |
| | $ | 967,138 |
| | $ | — |
|
Real estate – construction and development | 908 |
| | 446 |
| | 439 |
| | 1,793 |
| | 361,252 |
| | 363,045 |
| | — |
|
Real estate – commercial and farmland | 6,329 |
| | 1,711 |
| | 6,945 |
| | 14,985 |
| | 1,391,234 |
| | 1,406,219 |
| | — |
|
Real estate – residential | 6,354 |
| | 1,282 |
| | 5,302 |
| | 12,938 |
| | 768,080 |
| | 781,018 |
| | — |
|
Consumer installment loans | 624 |
| | 263 |
| | 350 |
| | 1,237 |
| | 95,678 |
| | 96,915 |
| | — |
|
Other | — |
| | — |
| | — |
| | — |
| | 12,486 |
| | 12,486 |
| | — |
|
Total | $ | 14,780 |
| | $ | 3,784 |
| | $ | 14,329 |
| | $ | 32,893 |
| | $ | 3,593,928 |
| | $ | 3,626,821 |
| | $ | — |
|
The following table presents an analysis of purchased past-due loans as of September 30, 2017 and December 31, 2016:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | Loans 30-59 Days Past Due | | Loans 60-89 Days Past Due | | Loans 90 or More Days Past Due | | Total Loans Past Due | | Current Loans | | Total Loans | | Loans 90 Days or More Past Due and Still Accruing |
September 30, 2017 | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Commercial, financial and agricultural | $ | 2,674 |
| | $ | 2 |
| | $ | 288 |
| | $ | 2,964 |
| | $ | 77,931 |
| | $ | 80,895 |
| | $ | — |
|
Real estate – construction and development | 1,221 |
| | 935 |
| | 1,713 |
| | 3,869 |
| | 64,714 |
| | 68,583 |
| | — |
|
Real estate – commercial and farmland | 2,842 |
| | 1,318 |
| | 1,823 |
| | 5,983 |
| | 494,186 |
| | 500,169 |
| | — |
|
Real estate – residential | 3,308 |
| | 440 |
| | 3,435 |
| | 7,183 |
| | 257,129 |
| | 264,312 |
| | — |
|
Consumer installment loans | 1 |
| | 4 |
| | 43 |
| | 48 |
| | 3,119 |
| | 3,167 |
| | — |
|
Total | $ | 10,046 |
| | $ | 2,699 |
| | $ | 7,302 |
| | $ | 20,047 |
| | $ | 897,079 |
| | $ | 917,126 |
| | $ | — |
|
| | | | | | | | | | | | | |
December 31, 2016 | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Commercial, financial and agricultural | $ | 113 |
| | $ | 18 |
| | $ | 593 |
| | $ | 724 |
| | $ | 95,813 |
| | $ | 96,537 |
| | $ | — |
|
Real estate – construction and development | 161 |
| | 11 |
| | 2,518 |
| | 2,690 |
| | 78,678 |
| | 81,368 |
| | — |
|
Real estate – commercial and farmland | 2,034 |
| | 326 |
| | 7,152 |
| | 9,512 |
| | 566,843 |
| | 576,355 |
| | — |
|
Real estate – residential | 4,566 |
| | 698 |
| | 6,835 |
| | 12,099 |
| | 298,178 |
| | 310,277 |
| | — |
|
Consumer installment loans | 22 |
| | — |
| | 13 |
| | 35 |
| | 4,619 |
| | 4,654 |
| | — |
|
Total | $ | 6,896 |
| | $ | 1,053 |
| | $ | 17,111 |
| | $ | 25,060 |
| | $ | 1,044,131 |
| | $ | 1,069,191 |
| | $ | — |
|
Impaired Loans
Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements. Impaired loans include loans on nonaccrual status and accruing troubled debt restructurings. When determining if the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement, the Company considers the borrower’s capacity to pay, which includes such factors as the borrower’s current financial statements, an analysis of global cash flow sufficient to pay all debt obligations and an evaluation of secondary sources of repayment, such as guarantor support and collateral value. The Company individually assesses for impairment all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000 (including all troubled debt restructurings, whether or not currently classified as such). The tables below include all loans deemed impaired, whether or not individually assessed for impairment. If a loan is deemed impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis.
The following is a summary of information pertaining to impaired loans, excluding purchased loans:
|
| | | | | | | | | | | |
| As of and for the Period Ended |
(dollars in thousands) | September 30, 2017 | | December 31, 2016 | | September 30, 2016 |
Nonaccrual loans | $ | 15,325 |
| | $ | 18,114 |
| | $ | 16,570 |
|
Troubled debt restructurings not included above | 12,452 |
| | 14,209 |
| | 14,013 |
|
Total impaired loans | $ | 27,777 |
| | $ | 32,323 |
| | $ | 30,583 |
|
| | | | | |
Quarter-to-date interest income recognized on impaired loans | $ | 297 |
| | $ | 225 |
| | $ | 252 |
|
Year-to-date interest income recognized on impaired loans | $ | 857 |
| | $ | 1,033 |
| | $ | 808 |
|
Quarter-to-date foregone interest income on impaired loans | $ | 233 |
| | $ | 267 |
| | $ | 239 |
|
Year-to-date foregone interest income on impaired loans | $ | 753 |
| | $ | 977 |
| | $ | 710 |
|
The following table presents an analysis of information pertaining to impaired loans, excluding purchased loans as of September 30, 2017, December 31, 2016 and September 30, 2016:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | Unpaid Contractual Principal Balance | | Recorded Investment With No Allowance | | Recorded Investment With Allowance | | Total Recorded Investment | | Related Allowance | | Three Month Average Recorded Investment | | Nine Month Average Recorded Investment |
September 30, 2017 | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Commercial, financial and agricultural | $ | 2,924 |
| | $ | 1,121 |
| | $ | 1,331 |
| | $ | 2,452 |
| | $ | 379 |
| | $ | 2,478 |
| | $ | 2,380 |
|
Real estate – construction and development | 1,655 |
| | 532 |
| | 627 |
| | 1,159 |
| | 81 |
| | 1,179 |
| | 1,160 |
|
Real estate – commercial and farmland | 11,451 |
| | 536 |
| | 9,938 |
| | 10,474 |
| | 806 |
| | 10,669 |
| | 11,416 |
|
Real estate – residential | 15,211 |
| | 4,558 |
| | 8,636 |
| | 13,194 |
| | 1,058 |
| | 13,683 |
| | 14,814 |
|
Consumer installment loans | 538 |
| | 498 |
| | — |
| | 498 |
| | — |
| | 507 |
| | 554 |
|
Total | $ | 31,779 |
| | $ | 7,245 |
| | $ | 20,532 |
| | $ | 27,777 |
| | $ | 2,324 |
| | $ | 28,516 |
| | $ | 30,324 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | Unpaid Contractual Principal Balance | | Recorded Investment With No Allowance | | Recorded Investment With Allowance | | Total Recorded Investment | | Related Allowance | | Three Month Average Recorded Investment | | Twelve Month Average Recorded Investment |
December 31, 2016 | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Commercial, financial and agricultural | $ | 3,068 |
| | $ | 204 |
| | $ | 1,656 |
| | $ | 1,860 |
| | $ | 134 |
| | $ | 1,613 |
| | $ | 1,684 |
|
Real estate – construction and development | 2,047 |
| | — |
| | 1,233 |
| | 1,233 |
| | 273 |
| | 1,590 |
| | 2,018 |
|
Real estate – commercial and farmland | 13,906 |
| | 6,811 |
| | 6,065 |
| | 12,876 |
| | 1,503 |
| | 12,948 |
| | 12,845 |
|
Real estate – residential | 15,482 |
| | 2,238 |
| | 13,503 |
| | 15,741 |
| | 3,080 |
| | 15,525 |
| | 14,453 |
|
Consumer installment loans | 671 |
| | — |
| | 613 |
| | 613 |
| | 5 |
| | 576 |
| | 506 |
|
Total | $ | 35,174 |
| | $ | 9,253 |
| | $ | 23,070 |
| | $ | 32,323 |
| | $ | 4,995 |
| | $ | 32,252 |
| | $ | 31,506 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | Unpaid Contractual Principal Balance | | Recorded Investment With No Allowance | | Recorded Investment With Allowance | | Total Recorded Investment | | Related Allowance | | Three Month Average Recorded Investment | | Nine Month Average Recorded Investment |
September 30, 2016 | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Commercial, financial and agricultural | $ | 2,568 |
| | $ | 252 |
| | $ | 1,114 |
| | $ | 1,366 |
| | $ | 118 |
| | $ | 1,736 |
| | $ | 1,640 |
|
Real estate – construction and development | 2,972 |
| | — |
| | 1,946 |
| | 1,946 |
| | 537 |
| | 2,001 |
| | 2,214 |
|
Real estate – commercial and farmland | 14,015 |
| | 5,499 |
| | 7,520 |
| | 13,019 |
| | 873 |
| | 12,776 |
| | 12,837 |
|
Real estate – residential | 14,350 |
| | 2,046 |
| | 11,667 |
| | 13,713 |
| | 2,648 |
| | 13,686 |
| | 13,516 |
|
Consumer installment loans | 586 |
| | — |
| | 539 |
| | 539 |
| | 6 |
| | 492 |
| | 479 |
|
Total | $ | 34,491 |
| | $ | 7,797 |
| | $ | 22,786 |
| | $ | 30,583 |
| | $ | 4,182 |
| | $ | 30,691 |
| | $ | 30,686 |
|
The following is a summary of information pertaining to purchased impaired loans:
|
| | | | | | | | | | | |
| As of and for the Period Ended |
(dollars in thousands) | September 30, 2017 | | December 31, 2016 | | September 30, 2016 |
Nonaccrual loans | $ | 19,049 |
| | $ | 22,966 |
| | $ | 23,827 |
|
Troubled debt restructurings not included above | 20,205 |
| | 23,543 |
| | 21,117 |
|
Total impaired loans | $ | 39,254 |
| | $ | 46,509 |
| | $ | 44,944 |
|
| | | | | |
Quarter-to-date interest income recognized on impaired loans | $ | 493 |
| | $ | 377 |
| | $ | 1,493 |
|
Year-to-date interest income recognized on impaired loans | $ | 1,246 |
| | $ | 2,755 |
| | $ | 2,378 |
|
Quarter-to-date foregone interest income on impaired loans | $ | 356 |
| | $ | 354 |
| | $ | 346 |
|
Year-to-date foregone interest income on impaired loans | $ | 958 |
| | $ | 1,637 |
| | $ | 1,283 |
|
The following table presents an analysis of information pertaining to purchased impaired loans as of September 30, 2017, December 31, 2016 and September 30, 2016:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | Unpaid Contractual Principal Balance | | Recorded Investment With No Allowance | | Recorded Investment With Allowance | | Total Recorded Investment | | Related Allowance | | Three Month Average Recorded Investment | | Nine Month Average Recorded Investment |
September 30, 2017 | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Commercial, financial and agricultural | $ | 5,333 |
| | $ | 345 |
| | $ | 1,741 |
| | $ | 2,086 |
| | $ | 800 |
| | $ | 1,128 |
| | $ | 831 |
|
Real estate – construction and development | 9,268 |
| | 1,189 |
| | 3,088 |
| | 4,277 |
| | 537 |
| | 3,885 |
| | 3,807 |
|
Real estate – commercial and farmland | 16,492 |
| | 1,516 |
| | 11,766 |
| | 13,282 |
| | 1,140 |
| | 13,658 |
| | 16,063 |
|
Real estate – residential | 22,462 |
| | 7,224 |
| | 12,297 |
| | 19,521 |
| | 762 |
| | 20,088 |
| | 21,308 |
|
Consumer installment loans | 97 |
| | 88 |
| | — |
| | 88 |
| | — |
| | 58 |
| | 40 |
|
Total | $ | 53,652 |
| | $ | 10,362 |
| | $ | 28,892 |
| | $ | 39,254 |
| | $ | 3,239 |
| | $ | 38,817 |
| | $ | 42,049 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | Unpaid Contractual Principal Balance | | Recorded Investment With No Allowance | | Recorded Investment With Allowance | | Total Recorded Investment | | Related Allowance | | Three Month Average Recorded Investment | | Twelve Month Average Recorded Investment |
December 31, 2016 | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Commercial, financial and agricultural | $ | 5,031 |
| | $ | 370 |
| | $ | 322 |
| | $ | 692 |
| | $ | — |
| | $ | 783 |
| | $ | 2,206 |
|
Real estate – construction and development | 24,566 |
| | 493 |
| | 3,477 |
| | 3,970 |
| | 153 |
| | 3,888 |
| | 4,279 |
|
Real estate – commercial and farmland | 36,174 |
| | 3,598 |
| | 15,036 |
| | 18,634 |
| | 385 |
| | 17,806 |
| | 19,872 |
|
Real estate – residential | 27,022 |
| | 7,883 |
| | 15,306 |
| | 23,189 |
| | 1,088 |
| | 23,201 |
| | 23,163 |
|
Consumer installment loans | 37 |
| | 24 |
| | — |
| | 24 |
| | — |
| | 51 |
| | 96 |
|
Total | $ | 92,830 |
| | $ | 12,368 |
| | $ | 34,141 |
| | $ | 46,509 |
| | $ | 1,626 |
| | $ | 45,729 |
| | $ | 49,616 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | Unpaid Contractual Principal Balance | | Recorded Investment With No Allowance | | Recorded Investment With Allowance | | Total Recorded Investment | | Related Allowance | | Three Month Average Recorded Investment | | Nine Month Average Recorded Investment |
September 30, 2016 | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Commercial, financial and agricultural | $ | 5,097 |
| | $ | 648 |
| | $ | 225 |
| | $ | 873 |
| | $ | — |
| | $ | 838 |
| | $ | 2,251 |
|
Real estate – construction and development | 24,253 |
| | 296 |
| | 3,509 |
| | 3,805 |
| | 184 |
| | 3,946 |
| | 4,075 |
|
Real estate – commercial and farmland | 41,098 |
| | 1,861 |
| | 15,116 |
| | 16,977 |
| | 402 |
| | 18,196 |
| | 19,569 |
|
Real estate – residential | 26,908 |
| | 7,473 |
| | 15,740 |
| | 23,213 |
| | 935 |
| | 23,103 |
| | 22,893 |
|
Consumer installment loans | 98 |
| | 76 |
| | — |
| | 76 |
| | — |
| | 80 |
| | 105 |
|
Total | $ | 97,454 |
| | $ | 10,354 |
| | $ | 34,590 |
| | $ | 44,944 |
| | $ | 1,521 |
| | $ | 46,163 |
| | $ | 48,893 |
|
Credit Quality Indicators
The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. The following is a description of the general characteristics of the grades:
Grade 10 – Prime Credit – This grade represents loans to the Company’s most creditworthy borrowers or loans that are secured by cash or cash equivalents.
Grade 15 – Good Credit – This grade includes loans that exhibit one or more characteristics better than that of a Satisfactory Credit. Generally, the debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.
Grade 20 – Satisfactory Credit – This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.
Grade 23 – Performing, Under-Collateralized Credit – This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity but exhibits a loan-to-value ratio greater than 110%, based on a documented collateral valuation.
Grade 25 – Minimum Acceptable Credit – This grade includes loans which exhibit all the characteristics of a Satisfactory Credit, but warrant more than normal level of banker supervision due to (i) circumstances which elevate the risks of performance (such as start-up operations, untested management, heavy leverage and interim losses); (ii) adverse, extraordinary events that have affected, or could affect, the borrower’s cash flow, financial condition, ability to continue operating profitability or refinancing (such as death of principal, fire and divorce); (iii) loans that require more than the normal servicing requirements (such as any type of construction financing, acquisition and development loans, accounts receivable or inventory loans and floor plan loans); (iv) existing technical exceptions which raise some doubts about the Bank’s perfection in its collateral position or the continued financial capacity of the borrower; or (v) improvements in formerly criticized borrowers, which may warrant banker supervision.
Grade 30 – Other Asset Especially Mentioned – This grade includes loans that exhibit potential weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.
Grade 40 – Substandard – This grade represents loans which are inadequately protected by the current credit worthiness and paying capacity of the borrower or of the collateral pledged, if any. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses or questionable collateral values.
Grade 50 – Doubtful – This grade includes loans which exhibit all of the characteristics of a substandard loan with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.
Grade 60 – Loss – This grade is assigned to loans which are considered uncollectible and of such little value that their continuance as active assets of the Bank is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.
The following table presents the loan portfolio, excluding purchased loans, by risk grade as of September 30, 2017 and December 31, 2016 (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk Grade | | Commercial, Financial and Agricultural | | Real Estate - Construction and Development | | Real Estate - Commercial and Farmland | | Real Estate - Residential | | Consumer Installment Loans | | Other | | Total |
September 30, 2017 |
10 | | $ | 495,116 |
| | $ | — |
| | $ | 6,029 |
| | $ | 49 |
| | $ | 9,068 |
| | $ | — |
| | $ | 510,262 |
|
15 | | 559,781 |
| | 959 |
| | 75,462 |
| | 55,759 |
| | 256 |
| | — |
| | 692,217 |
|
20 | | 117,904 |
| | 48,640 |
| | 1,005,945 |
| | 800,557 |
| | 24,332 |
| | 5,795 |
| | 2,003,173 |
|
23 | | 343 |
| | 4,403 |
| | 4,242 |
| | 5,986 |
| | 3 |
| | — |
| | 14,977 |
|
25 | | 121,558 |
| | 488,956 |
| | 431,862 |
| | 86,702 |
| | 148,891 |
| | — |
| | 1,277,969 |
|
30 | | 8,350 |
| | 4,458 |
| | 17,568 |
| | 5,674 |
| | 93 |
| | — |
| | 36,143 |
|
40 | | 4,150 |
| | 2,773 |
| | 17,774 |
| | 14,562 |
| | 671 |
| | — |
| | 39,930 |
|
50 | | 7 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 7 |
|
60 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Total | | $ | 1,307,209 |
| | $ | 550,189 |
| | $ | 1,558,882 |
| | $ | 969,289 |
| | $ | 183,314 |
| | $ | 5,795 |
| | $ | 4,574,678 |
|
| | | | | | | | | | | | | | |
December 31, 2016 |
10 | | $ | 397,093 |
| | $ | — |
| | $ | 8,814 |
| | $ | 125 |
| | $ | 8,532 |
| | $ | — |
| | $ | 414,564 |
|
15 | | 376,323 |
| | 5,390 |
| | 102,893 |
| | 54,136 |
| | 405 |
| | — |
| | 539,147 |
|
20 | | 97,057 |
| | 36,307 |
| | 889,539 |
| | 609,583 |
| | 25,026 |
| | 12,486 |
| | 1,669,998 |
|
23 | | 366 |
| | 6,803 |
| | 8,533 |
| | 7,470 |
| | 14 |
| | — |
| | 23,186 |
|
25 | | 92,066 |
| | 307,903 |
| | 357,151 |
| | 88,370 |
| | 62,098 |
| | — |
| | 907,588 |
|
30 | | 144 |
| | 719 |
| | 22,986 |
| | 5,197 |
| | 126 |
| | — |
| | 29,172 |
|
40 | | 4,089 |
| | 5,923 |
| | 16,303 |
| | 16,038 |
| | 714 |
| | — |
| | 43,067 |
|
50 | | — |
| | — |
| | — |
| | 99 |
| | — |
| | — |
| | 99 |
|
60 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Total | | $ | 967,138 |
| | $ | 363,045 |
| | $ | 1,406,219 |
| | $ | 781,018 |
| | $ | 96,915 |
| | $ | 12,486 |
| | $ | 3,626,821 |
|
The following table presents the purchased loan portfolio by risk grade as of September 30, 2017 and December 31, 2016 (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk Grade | | Commercial, Financial and Agricultural | | Real Estate - Construction and Development | | Real Estate - Commercial and Farmland | | Real Estate - Residential | | Consumer Installment Loans | | Other | | Total |
September 30, 2017 |
10 | | $ | 3,377 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 662 |
| | $ | — |
| | $ | 4,039 |
|
15 | | 4,969 |
| | — |
| | 5,327 |
| | 96,570 |
| | 231 |
| | — |
| | 107,097 |
|
20 | | 9,497 |
| | 13,548 |
| | 198,960 |
| | 52,646 |
| | 1,204 |
| | — |
| | 275,855 |
|
23 | | — |
| | 2,302 |
| | 6,936 |
| | 10,621 |
| | — |
| | — |
| | 19,859 |
|
25 | | 47,822 |
| | 40,500 |
| | 243,216 |
| | 79,374 |
| | 864 |
| | — |
| | 411,776 |
|
30 | | 12,817 |
| | 7,617 |
| | 22,829 |
| | 7,378 |
| | 55 |
| | — |
| | 50,696 |
|
40 | | 2,413 |
| | 4,616 |
| | 22,901 |
| | 17,723 |
| | 151 |
| | — |
| | 47,804 |
|
50 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
60 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Total | | $ | 80,895 |
| | $ | 68,583 |
| | $ | 500,169 |
| | $ | 264,312 |
| | $ | 3,167 |
| | $ | — |
| | $ | 917,126 |
|
| | | | | | | | | | | | | | |
December 31, 2016 |
10 | | $ | 5,722 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 814 |
| | $ | — |
| | $ | 6,536 |
|
15 | | 1,266 |
| | — |
| | 7,619 |
| | 31,331 |
| | 570 |
| | — |
| | 40,786 |
|
20 | | 16,204 |
| | 10,686 |
| | 194,168 |
| | 111,712 |
| | 1,583 |
| | — |
| | 334,353 |
|
23 | | 22 |
| | 3,643 |
| | 9,019 |
| | 14,791 |
| | — |
| | — |
| | 27,475 |
|
25 | | 67,123 |
| | 56,006 |
| | 323,242 |
| | 121,379 |
| | 1,276 |
| | — |
| | 569,026 |
|
30 | | 5,072 |
| | 7,271 |
| | 15,039 |
| | 7,605 |
| | 45 |
| | — |
| | 35,032 |
|
40 | | 1,128 |
| | 3,762 |
| | 27,268 |
| | 23,459 |
| | 366 |
| | — |
| | 55,983 |
|
50 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
60 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Total | | $ | 96,537 |
| | $ | 81,368 |
| | $ | 576,355 |
| | $ | 310,277 |
| | $ | 4,654 |
| | $ | — |
| | $ | 1,069,191 |
|
Troubled Debt Restructurings
The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The Company has exhibited the greatest success for rehabilitation of the loan by a reduction in the rate alone (maintaining the amortization of the debt) or a combination of a rate reduction and the forbearance of previously past due interest or principal. This has most typically been evidenced in certain commercial real estate loans whereby a disruption in the borrower’s cash flow resulted in an extended past due status, of which the borrower was unable to catch up completely as the cash flow of the property ultimately stabilized at a level lower than its original level. A reduction in rate, coupled with a forbearance of unpaid principal and/or interest, allowed the net cash flows to service the debt under the modified terms.
The Company’s policy requires a restructure request to be supported by a current, well-documented credit evaluation of the borrower’s financial condition and a collateral evaluation that is no older than six months from the date of the restructure. Key factors of that evaluation include the documentation of current, recurring cash flows, support provided by the guarantor(s) and the current valuation of the collateral. If the appraisal in the file is older than six months, an evaluation must be made as to the continued reasonableness of the valuation. For certain income-producing properties, current rent rolls and/or other income information can be utilized to support the appraisal valuation, when coupled with documented cap rates within our markets and a physical inspection of the collateral to validate the current condition.
The Company’s policy states that in the event a loan has been identified as a troubled debt restructuring, it should be assigned a grade of substandard and placed on nonaccrual status until such time the borrower has demonstrated the ability to service the loan payments based on the restructured terms – generally defined as six months of satisfactory payment history. Missed payments under the original loan terms are not considered under the new structure; however, subsequent missed payments are considered non-performance and are not considered toward the six month required term of satisfactory payment history. The Company’s loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest, or (ii) it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower’s financial condition and the prospects for full repayment, and approved by the Company’s Chief Credit Officer.
Past-due loans are loans whose principal or interest is past due 30 days or more. In the normal course of business, the Company renews loans with a modification of the interest rate or terms thatsome cases, where borrowers are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modifieddifficulties, loans inmay be restructured to provide terms significantly different from the first nine months of 2017 and 2016 totaling $36.6 million and $58.2 million, respectively, under such parameters.original contractual terms.
As of September 30, 2017 and December 31, 2016, the Company had a balance of $14.2 million and $18.2 million, respectively, in troubled debt restructurings, excluding purchased loans. The Company has recorded $2.8 million and $1.2 million in previous charge-offs on such loans at September 30, 2017 and December 31, 2016, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was $1.2 million and $3.1 million at September 30, 2017 and December 31, 2016, respectively. At September 30, 2017, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.
During the nine months ended September 30, 2017 and 2016, the Company modified loans as troubled debt restructurings, excluding purchased loans, with principal balances of $783,000 and $2.9 million, respectively, and these modifications did not have a material impact on the Company’s allowance for loan loss. The following table presents the loans by class modified as troubled debt restructurings, excluding purchased loans, which occurred during the nine months ended September 30, 2017 and 2016:
|
| | | | | | | | | | | |
| September 30, 2017 | | September 30, 2016 |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | 1 | | $ | 4 |
| | 5 | | $ | 59 |
|
Real estate – construction and development | — | | — |
| | 2 | | 251 |
|
Real estate – commercial and farmland | 2 | | 226 |
| | 4 | | 1,658 |
|
Real estate – residential | 10 | | 526 |
| | 7 | | 887 |
|
Consumer installment | 6 | | 27 |
| | 9 | | 44 |
|
Total | 19 | | $ | 783 |
| | 27 | | $ | 2,899 |
|
Troubled debt restructurings, excluding purchased loans, with an outstanding balance of $1.2 million and $793,000 defaulted during the nine months ended September 30, 2017 and 2016, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss. The following table presents for loans, excluding purchased loans, the troubled debt restructurings by class that defaulted (defined as 30 days past due) during the nine months ended September 30, 2017 and 2016:
|
| | | | | | | | | | | |
| September 30, 2017 | | September 30, 2016 |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | 4 | | $ | 58 |
| | 5 | | $ | 51 |
|
Real estate – construction and development | 1 | | 25 |
| | — | | — |
|
Real estate – commercial and farmland | 4 | | 200 |
| | 5 | | 517 |
|
Real estate – residential | 12 | | 878 |
| | 3 | | 219 |
|
Consumer installment | 7 | | 25 |
| | 2 | | 6 |
|
Total | 28 | | $ | 1,186 |
| | 15 | | $ | 793 |
|
The following table presents the amountan analysis of troubled debt restructurings by loan class, excluding purchased loans classified separately as accrualaccounted for on a nonaccrual basis:
| | | | | | | | | | | |
(dollars in thousands) | March 31, 2024 | | December 31, 2023 |
Commercial, financial and agricultural | $ | 16,760 | | | $ | 8,059 | |
Consumer | 1,306 | | | 1,153 | |
Indirect automobile | 309 | | | 299 | |
| | | |
| | | |
| | | |
Real estate – construction and development | 282 | | | 282 | |
Real estate – commercial and farmland | 10,777 | | | 11,295 | |
Real estate – residential(1) | 135,252 | | | 130,029 | |
| $ | 164,686 | | | $ | 151,117 | |
(1) Included in real estate - residential were $84.2 million and $90.2 million of serviced GNMA-guaranteed nonaccrual loans at September 30, 2017March 31, 2024 and December 31, 2016: 2023, respectively.
|
| | | | | | | | | | | |
September 30, 2017 | Accruing Loans | | Non-Accruing Loans |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | 4 | | $ | 44 |
| | 13 | | $ | 129 |
|
Real estate – construction and development | 7 | | 424 |
| | 2 | | 34 |
|
Real estate – commercial and farmland | 16 | | 4,769 |
| | 5 | | 210 |
|
Real estate – residential | 78 | | 7,209 |
| | 16 | | 1,212 |
|
Consumer installment | 4 | | 6 |
| | 36 | | 130 |
|
Total | 109 | | $ | 12,452 |
| | 72 | | $ | 1,715 |
|
|
| | | | | | | | | | | |
December 31, 2016 | Accruing Loans | | Non-Accruing Loans |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | 4 | | $ | 47 |
| | 15 | | $ | 114 |
|
Real estate – construction and development | 8 | | 686 |
| | 2 | | 34 |
|
Real estate – commercial and farmland | 16 | | 4,119 |
| | 5 | | 2,970 |
|
Real estate – residential | 82 | | 9,340 |
| | 15 | | 739 |
|
Consumer installment | 7 | | 17 |
| | 32 | | 130 |
|
Total | 117 | | $ | 14,209 |
| | 69 | | $ | 3,987 |
|
As of September 30, 2017 and December 31, 2016,Interest income recognized on nonaccrual loans during the Company had a balance of $26.0 million and $28.1 million, respectively, in troubled debt restructurings included in purchased loans. The Company has recorded $1.5 million in previous charge-offs on such loans at both September 30, 2017 and December 31, 2016. At September 30, 2017, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.
During the ninethree months ended September 30, 2017March 31, 2024 and 2016, the Company modified purchased loans as troubled debt restructurings, with principal balances of $1.0 million and $1.9 million, respectively, and these modifications did2023 was not have a material impact on the Company’s allowance for loan loss. The following table presents the purchased loans by class modified as troubled debt restructurings, which occurred during the nine months ended September 30, 2017 and 2016: material.
|
| | | | | | | | | | | |
| September 30, 2017 | | September 30, 2016 |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | — | | $ | — |
| | 1 | | $ | 76 |
|
Real estate – construction and development | — | | — |
| | — | | — |
|
Real estate – commercial and farmland | — | | — |
| | 3 | | 708 |
|
Real estate – residential | 8 | | 1,005 |
| | 8 | | 1,130 |
|
Consumer installment | — | | — |
| | — | | — |
|
Total | 8 | | $ | 1,005 |
| | 12 | | $ | 1,914 |
|
Troubled debt restructurings included in purchased loans with an outstanding balance of $2.3 million and $733,000 defaulted during the nine months ended September 30, 2017 and 2016, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss.
The following table presents purchased loan troubled debt restructurings by class that defaulted (defined as 30 days past due) during the nine months ended September 30, 2017 and 2016:an analysis of nonaccrual loans with no related allowance for credit losses:
|
| | | | | | | | | | | |
| September 30, 2017 | | September 30, 2016 |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | 1 | | $ | 5 |
| | 2 | | $ | 76 |
|
Real estate – construction and development | — | | — |
| | 1 | | 10 |
|
Real estate – commercial and farmland | 5 | | 1,945 |
| | 1 | | 207 |
|
Real estate – residential | 7 | | 333 |
| | 11 | | 440 |
|
Consumer installment | 1 | | 3 |
| | — | | — |
|
Total | 14 | | $ | 2,286 |
| | 15 | | $ | 733 |
|
| | | | | | | | | | | |
(dollars in thousands) | March 31, 2024 | | December 31, 2023 |
Commercial, financial and agricultural | $ | 4,874 | | | $ | 2,049 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Real estate – commercial and farmland | 5,412 | | | 9,109 | |
Real estate – residential | 79,326 | | | 75,419 | |
| $ | 89,612 | | | $ | 86,577 | |
The following table presents the amountan analysis of troubled debt restructurings by loan classpast-due loans as of purchased loans, classified separately as accrual and nonaccrual at September 30, 2017March 31, 2024 and December 31, 2016. 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | Loans 30-59 Days Past Due | | Loans 60-89 Days Past Due | | Loans 90 or More Days Past Due | | Total Loans Past Due | | Current Loans | | Total Loans | | Loans 90 Days or More Past Due and Still Accruing |
March 31, 2024 | | | | | | | | | | | | | |
Commercial, financial and agricultural | $ | 15,809 | | | $ | 8,410 | | | $ | 6,437 | | | $ | 30,656 | | | $ | 2,728,060 | | | $ | 2,758,716 | | | $ | 3,925 | |
Consumer | 2,341 | | | 1,548 | | | 362 | | | 4,251 | | | 228,742 | | | 232,993 | | | — | |
Indirect automobile | 82 | | | 60 | | | 118 | | | 260 | | | 23,762 | | | 24,022 | | | — | |
Mortgage warehouse | — | | | — | | | — | | | — | | | 891,336 | | | 891,336 | | | — | |
Municipal | — | | | — | | | — | | | — | | | 477,567 | | | 477,567 | | | — | |
Premium finance | 14,166 | | | 6,139 | | | 11,886 | | | 32,191 | | | 966,535 | | | 998,726 | | | 11,886 | |
Real estate – construction and development | 732 | | | — | | | 282 | | | 1,014 | | | 2,263,332 | | | 2,264,346 | | | — | |
Real estate – commercial and farmland | 1,858 | | | 429 | | | 7,138 | | | 9,425 | | | 8,121,823 | | | 8,131,248 | | | — | |
Real estate – residential | 45,648 | | | 14,427 | | | 132,284 | | | 192,359 | | | 4,628,947 | | | 4,821,306 | | | — | |
Total | $ | 80,636 | | | $ | 31,013 | | | $ | 158,507 | | | $ | 270,156 | | | $ | 20,330,104 | | | $ | 20,600,260 | | | $ | 15,811 | |
| | | | | | | | | | | | | |
December 31, 2023 | | | | | | | | | | | | | |
Commercial, financial and agricultural | $ | 11,023 | | | $ | 5,439 | | | $ | 9,733 | | | $ | 26,195 | | | $ | 2,662,734 | | | $ | 2,688,929 | | | $ | 5,310 | |
Consumer | 2,155 | | | 1,037 | | | 498 | | | 3,690 | | | 237,862 | | | 241,552 | | | — | |
Indirect automobile | 153 | | | 17 | | | 78 | | | 248 | | | 34,009 | | | 34,257 | | | — | |
Mortgage warehouse | — | | | — | | | — | | | — | | | 818,728 | | | 818,728 | | | — | |
Municipal | — | | | — | | | — | | | — | | | 492,668 | | | 492,668 | | | — | |
Premium finance | 12,379 | | | 6,832 | | | 11,678 | | | 30,889 | | | 915,673 | | | 946,562 | | | 11,678 | |
Real estate – construction and development | 2,094 | | | — | | | 282 | | | 2,376 | | | 2,126,811 | | | 2,129,187 | | | — | |
Real estate – commercial and farmland | 5,070 | | | 1,656 | | | 6,352 | | | 13,078 | | | 8,046,676 | | | 8,059,754 | | | — | |
Real estate – residential | 49,976 | | | 19,300 | | | 127,087 | | | 196,363 | | | 4,661,303 | | | 4,857,666 | | | — | |
Total | $ | 82,850 | | | $ | 34,281 | | | $ | 155,708 | | | $ | 272,839 | | | $ | 19,996,464 | | | $ | 20,269,303 | | | $ | 16,988 | |
Collateral-Dependent Loans
Collateral-dependent loans are loans where repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty. If the Company determines that foreclosure is probable, these loans are written down to the lower of cost or fair value of the collateral less estimated costs to sell. When repayment is expected to be from the operation of the collateral, the allowance for credit losses is calculated as the amount by which the amortized cost basis of the financial asset exceeds the present value of expected cash flows from the operation of the collateral.
|
| | | | | | | | | | | |
September 30, 2017 | Accruing Loans | | Non-Accruing Loans |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | — | | $ | — |
| | 3 | | $ | 18 |
|
Real estate – construction and development | 3 | | 1,022 |
| | 6 | | 349 |
|
Real estate – commercial and farmland | 15 | | 6,308 |
| | 11 | | 3,834 |
|
Real estate – residential | 119 | | 12,875 |
| | 25 | | 1,627 |
|
Consumer installment | — | | — |
| | 2 | | 6 |
|
Total | 137 | | $ | 20,205 |
| | 47 | | $ | 5,834 |
|
The Company may, in the alternative, measure the allowance for credit loss as the amount by which the amortized cost basis of the financial asset exceeds the estimated fair value of the collateral.
The following table presents an analysis of individually evaluated collateral-dependent financial assets and related allowance for credit losses:
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
(dollars in thousands) | Balance | | Allowance for Credit Losses | | Balance | | Allowance for Credit Losses |
Commercial, financial and agricultural | $ | 13,864 | | | $ | 3,061 | | | $ | 5,889 | | | $ | 567 | |
Consumer | 380 | | | 343 | | | — | | | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Premium finance | 2,140 | | | 77 | | | 1,990 | | | 45 | |
Real estate – construction and development | 280 | | | 23 | | | 280 | | | 23 | |
Real estate – commercial and farmland | 9,867 | | | 67 | | | 11,114 | | | 108 | |
Real estate – residential | 26,936 | | | 2,749 | | | 21,102 | | | 2,654 | |
| $ | 53,467 | | | $ | 6,320 | | | $ | 40,375 | | | $ | 3,397 | |
Credit Quality Indicators
The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. The following is a description of the general characteristics of the grades:
Pass (Grades 1 - 5) – These grades represent acceptable credit risk to the Company based on factors including creditworthiness of the borrower, current performance and nature of the collateral.
Other Assets Especially Mentioned (Grade 6) – This grade includes loans that exhibit potential weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.
Substandard(Grade 7) – This grade represents loans which are inadequately protected by the current credit worthiness and paying capacity of the borrower or of the collateral pledged, if any. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses or questionable collateral values.
Doubtful (Grade 8) – This grade includes loans which exhibit all of the characteristics of a substandard loan with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.
Loss (Grade 9) – This grade is assigned to loans which are considered uncollectible and of such little value that their continuance as active assets of the Bank is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.
The following tables present the loan portfolio's amortized cost by class of financing receivable, risk grade and year of origination (in thousands) as of March 31, 2024 and December 31, 2023. Generally, current period renewals of credit are underwritten again at the point of renewal and considered current period originations for purposes of the tables below. The Company had an immaterial amount of revolving loans which converted to term loans and the amortized cost basis of those loans is included in the applicable origination year. There were no loans risk graded 8 or 9 at March 31, 2024 or December 31, 2023.
|
| | | | | | | | | | | |
December 31, 2016 | Accruing Loans | | Non-Accruing Loans |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | 1 | | $ | 1 |
| | 4 | | $ | 91 |
|
Real estate – construction and development | 6 | | 1,358 |
| | 3 | | 30 |
|
Real estate – commercial and farmland | 20 | | 8,460 |
| | 5 | | 2,402 |
|
Real estate – residential | 123 | | 13,713 |
| | 33 | | 2,077 |
|
Consumer installment | 3 | | 11 |
| | 1 | | — |
|
Total | 153 | | $ | 23,543 |
| | 46 | | $ | 4,600 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of March 31, 2024 | | Term Loans by Origination Year | | Revolving Loans Amortized Cost Basis | | | | |
| 2024 | | 2023 | | 2022 | | 2021 | | 2020 | | Prior | | | | Total |
| | | | | | | | | | | | | | | | | | |
Commercial, Financial and Agricultural |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 297,252 | | | $ | 779,128 | | | $ | 705,529 | | | $ | 344,701 | | | $ | 80,504 | | | $ | 78,229 | | | $ | 433,576 | | | | | $ | 2,718,919 | |
6 | | — | | | 216 | | | 1,274 | | | 1,656 | | | 986 | | | 982 | | | 10,266 | | | | | 15,380 | |
7 | | — | | | 1,087 | | | 3,976 | | | 8,470 | | | 726 | | | 8,649 | | | 1,509 | | | | | 24,417 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total commercial, financial and agricultural | | $ | 297,252 | | | $ | 780,431 | | | $ | 710,779 | | | $ | 354,827 | | | $ | 82,216 | | | $ | 87,860 | | | $ | 445,351 | | | | | $ | 2,758,716 | |
| | | | | | | | | | | | | | | | | | |
Current-period gross charge offs | | — | | | 6,172 | | | 5,557 | | | 2,662 | | | 428 | | | 476 | | | — | | | | | 15,295 | |
Consumer |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 19,721 | | | $ | 28,572 | | | $ | 15,117 | | | $ | 4,738 | | | $ | 23,350 | | | $ | 33,590 | | | $ | 106,128 | | | | | $ | 231,216 | |
6 | | — | | | — | | | 5 | | | — | | | — | | | 23 | | | — | | | | | 28 | |
7 | | — | | | 230 | | | 185 | | | 40 | | | 252 | | | 557 | | | 485 | | | | | 1,749 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total consumer | | $ | 19,721 | | | $ | 28,802 | | | $ | 15,307 | | | $ | 4,778 | | | $ | 23,602 | | | $ | 34,170 | | | $ | 106,613 | | | | | $ | 232,993 | |
| | | | | | | | | | | | | | | | | | |
Current-period gross charge offs | | 1 | | | 146 | | | 71 | | | 2 | | | 290 | | | 383 | | | 198 | | | | | 1,091 | |
Indirect Automobile |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 23,584 | | | $ | — | | | | | $ | 23,584 | |
| | | | | | | | | | | | | | | | | | |
7 | | — | | | — | | | — | | | — | | | — | | | 438 | | | — | | | | | 438 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total indirect automobile | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 24,022 | | | $ | — | | | | | $ | 24,022 | |
| | | | | | | | | | | | | | | | | | |
Current-period gross charge offs | | — | | | — | | | — | | | — | | | — | | | 65 | | | — | | | | | 65 | |
Mortgage Warehouse |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 863,383 | | | | | $ | 863,383 | |
6 | | — | | | — | | | — | | | — | | | — | | | — | | | 27,953 | | | | | 27,953 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total mortgage warehouse | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 891,336 | | | | | $ | 891,336 | |
| | | | | | | | | | | | | | | | | | |
Current-period gross charge offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | |
Municipal |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 12,903 | | | $ | 9,407 | | | $ | 29,637 | | | $ | 37,933 | | | $ | 170,942 | | | $ | 214,285 | | | $ | 2,460 | | | | | $ | 477,567 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total municipal | | $ | 12,903 | | | $ | 9,407 | | | $ | 29,637 | | | $ | 37,933 | | | $ | 170,942 | | | $ | 214,285 | | | $ | 2,460 | | | | | $ | 477,567 | |
| | | | | | | | | | | | | | | | | | |
Current-period gross charge offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | |
Premium Finance |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 511,184 | | | $ | 473,140 | | | $ | 1,358 | | | $ | 1,158 | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 986,840 | |
| | | | | | | | | | | | | | | | | | |
7 | | 30 | | | 11,712 | | | 144 | | | — | | | — | | | — | | | — | | | | | 11,886 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total premium finance | | $ | 511,214 | | | $ | 484,852 | | | $ | 1,502 | | | $ | 1,158 | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 998,726 | |
| | | | | | | | | | | | | | | | | | |
Current-period gross charge offs | | 7 | | | 1,831 | | | 168 | | | — | | | — | | | — | | | — | | | | | 2,006 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of March 31, 2024 | | Term Loans by Origination Year | | Revolving Loans Amortized Cost Basis | | | | |
| 2024 | | 2023 | | 2022 | | 2021 | | 2020 | | Prior | | | | Total |
| | | | | | | | | | | | | | | | | | |
Real Estate – Construction and Development |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 108,222 | | | $ | 408,184 | | | $ | 1,089,607 | | | $ | 467,028 | | | $ | 36,444 | | | $ | 77,819 | | | $ | 75,518 | | | | | $ | 2,262,822 | |
6 | | — | | | — | | | 281 | | | 68 | | | — | | | 301 | | | — | | | | | 650 | |
7 | | — | | | 80 | | | — | | | 301 | | | — | | | 493 | | | — | | | | | 874 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total real estate – construction and development | | $ | 108,222 | | | $ | 408,264 | | | $ | 1,089,888 | | | $ | 467,397 | | | $ | 36,444 | | | $ | 78,613 | | | $ | 75,518 | | | | | $ | 2,264,346 | |
| | | | | | | | | | | | | | | | | | |
Current-period gross charge offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | |
Real Estate – Commercial and Farmland |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 75,366 | | | $ | 460,496 | | | $ | 1,930,487 | | | $ | 2,191,428 | | | $ | 1,085,100 | | | $ | 2,143,332 | | | $ | 96,186 | | | | | $ | 7,982,395 | |
6 | | — | | | 1,359 | | | — | | | 3,527 | | | 16,579 | | | 69,058 | | | — | | | | | 90,523 | |
7 | | — | | | 426 | | | 17,369 | | | 15,895 | | | 2,620 | | | 22,020 | | | — | | | | | 58,330 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total real estate – commercial and farmland | | $ | 75,366 | | | $ | 462,281 | | | $ | 1,947,856 | | | $ | 2,210,850 | | | $ | 1,104,299 | | | $ | 2,234,410 | | | $ | 96,186 | | | | | $ | 8,131,248 | |
| | | | | | | | | | | | | | | | | | |
Current-period gross charge offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | |
Real Estate - Residential |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 60,319 | | | $ | 694,668 | | | $ | 1,388,718 | | | $ | 1,125,575 | | | $ | 497,316 | | | $ | 628,555 | | | $ | 279,425 | | | | | $ | 4,674,576 | |
6 | | — | | | 12 | | | 37 | | | 71 | | | 231 | | | 1,355 | | | 985 | | | | | 2,691 | |
7 | | — | | | 9,665 | | | 27,429 | | | 32,144 | | | 26,626 | | | 44,994 | | | 3,181 | | | | | 144,039 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total real estate - residential | | $ | 60,319 | | | $ | 704,345 | | | $ | 1,416,184 | | | $ | 1,157,790 | | | $ | 524,173 | | | $ | 674,904 | | | $ | 283,591 | | | | | $ | 4,821,306 | |
| | | | | | | | | | | | | | | | | | |
Current-period gross charge offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | |
Total Loans |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 1,084,967 | | | $ | 2,853,595 | | | $ | 5,160,453 | | | $ | 4,172,561 | | | $ | 1,893,656 | | | $ | 3,199,394 | | | $ | 1,856,676 | | | | | $ | 20,221,302 | |
6 | | — | | | 1,587 | | | 1,597 | | | 5,322 | | | 17,796 | | | 71,719 | | | 39,204 | | | | | 137,225 | |
7 | | 30 | | | 23,200 | | | 49,103 | | | 56,850 | | | 30,224 | | | 77,151 | | | 5,175 | | | | | 241,733 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total loans | | $ | 1,084,997 | | | $ | 2,878,382 | | | $ | 5,211,153 | | | $ | 4,234,733 | | | $ | 1,941,676 | | | $ | 3,348,264 | | | $ | 1,901,055 | | | | | $ | 20,600,260 | |
Total current-period gross charge offs | | 8 | | | 8,149 | | | 5,796 | | | 2,664 | | | 718 | | | 924 | | | 198 | | | | | 18,457 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2023 | | Term Loans by Origination Year | | Revolving Loans Amortized Cost Basis | | | | |
| 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | | | Total |
| | | | | | | | | | | | | | | | | | |
Commercial, Financial and Agricultural |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 892,951 | | | $ | 758,471 | | | $ | 384,830 | | | $ | 95,055 | | | $ | 56,447 | | | $ | 41,095 | | | $ | 432,472 | | | | | $ | 2,661,321 | |
6 | | — | | | 335 | | | 5,722 | | | 92 | | | 109 | | | 451 | | | 803 | | | | | 7,512 | |
7 | | 1,512 | | | 3,595 | | | 3,222 | | | 1,140 | | | 3,533 | | | 5,748 | | | 1,346 | | | | | 20,096 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total commercial, financial and agricultural | | $ | 894,463 | | | $ | 762,401 | | | $ | 393,774 | | | $ | 96,287 | | | $ | 60,089 | | | $ | 47,294 | | | $ | 434,621 | | | | | $ | 2,688,929 | |
| | | | | | | | | | | | | | | | | | |
Consumer |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 44,736 | | | $ | 17,661 | | | $ | 5,878 | | | $ | 25,654 | | | $ | 15,838 | | | $ | 20,937 | | | $ | 109,214 | | | | | $ | 239,918 | |
6 | | — | | | 5 | | | — | | | — | | | — | | | 26 | | | — | | | | | 31 | |
7 | | 154 | | | 181 | | | 41 | | | 334 | | | 197 | | | 531 | | | 165 | | | | | 1,603 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total consumer | | $ | 44,890 | | | $ | 17,847 | | | $ | 5,919 | | | $ | 25,988 | | | $ | 16,035 | | | $ | 21,494 | | | $ | 109,379 | | | | | $ | 241,552 | |
| | | | | | | | | | | | | | | | | | |
Indirect Automobile |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 6,086 | | | $ | 27,646 | | | $ | — | | | | | $ | 33,732 | |
| | | | | | | | | | | | | | | | | | |
7 | | — | | | — | | | — | | | — | | | 55 | | | 470 | | | — | | | | | 525 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total indirect automobile | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 6,141 | | | $ | 28,116 | | | $ | — | | | | | $ | 34,257 | |
| | | | | | | | | | | | | | | | | | |
Mortgage Warehouse |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 772,366 | | | | | $ | 772,366 | |
6 | | — | | | — | | | — | | | — | | | — | | | — | | | 46,362 | | | | | 46,362 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total mortgage warehouse | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 818,728 | | | | | $ | 818,728 | |
| | | | | | | | | | | | | | | | | | |
Municipal |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 14,216 | | | $ | 27,346 | | | $ | 48,941 | | | $ | 177,156 | | | $ | 14,655 | | | $ | 208,236 | | | $ | 2,118 | | | | | $ | 492,668 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total municipal | | $ | 14,216 | | | $ | 27,346 | | | $ | 48,941 | | | $ | 177,156 | | | $ | 14,655 | | | $ | 208,236 | | | $ | 2,118 | | | | | $ | 492,668 | |
| | | | | | | | | | | | | | | | | | |
Premium Finance |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 928,930 | | | $ | 4,038 | | | $ | 1,916 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 934,884 | |
| | | | | | | | | | | | | | | | | | |
7 | | 10,777 | | | 901 | | | — | | | — | | | — | | | — | | | — | | | | | 11,678 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total premium finance | | $ | 939,707 | | | $ | 4,939 | | | $ | 1,916 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 946,562 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2023 | | Term Loans by Origination Year | | Revolving Loans Amortized Cost Basis | | | | |
| 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | | | Total |
| | | | | | | | | | | | | | | | | | |
Real Estate – Construction and Development |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 457,077 | | | $ | 938,909 | | | $ | 505,254 | | | $ | 58,840 | | | $ | 54,646 | | | $ | 30,042 | | | $ | 81,662 | | | | | $ | 2,126,430 | |
6 | | — | | | — | | | — | | | — | | | — | | | 479 | | | — | | | | | 479 | |
7 | | — | | | 266 | | | 1,512 | | | — | | | — | | | 500 | | | — | | | | | 2,278 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total real estate – construction and development | | $ | 457,077 | | | $ | 939,175 | | | $ | 506,766 | | | $ | 58,840 | | | $ | 54,646 | | | $ | 31,021 | | | $ | 81,662 | | | | | $ | 2,129,187 | |
| | | | | | | | | | | | | | | | | | |
Real Estate – Commercial and Farmland |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 450,315 | | | $ | 1,890,498 | | | $ | 2,133,833 | | | $ | 1,090,735 | | | $ | 765,640 | | | $ | 1,437,323 | | | $ | 100,206 | | | | | $ | 7,868,550 | |
6 | | — | | | 17,131 | | | 53,329 | | | — | | | 30,200 | | | 46,370 | | | — | | | | | 147,030 | |
7 | | 428 | | | 418 | | | 15,578 | | | 2,660 | | | 6,106 | | | 18,984 | | | — | | | | | 44,174 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total real estate – commercial and farmland | | $ | 450,743 | | | $ | 1,908,047 | | | $ | 2,202,740 | | | $ | 1,093,395 | | | $ | 801,946 | | | $ | 1,502,677 | | | $ | 100,206 | | | | | $ | 8,059,754 | |
| | | | | | | | | | | | | | | | | | |
Real Estate - Residential |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 714,684 | | | $ | 1,425,186 | | | $ | 1,148,092 | | | $ | 506,137 | | | $ | 236,147 | | | $ | 423,648 | | | $ | 262,968 | | | | | $ | 4,716,862 | |
6 | | 13 | | | — | | | 72 | | | 201 | | | 234 | | | 1,411 | | | 380 | | | | | 2,311 | |
7 | | 5,057 | | | 26,171 | | | 28,459 | | | 30,566 | | | 19,357 | | | 25,263 | | | 3,620 | | | | | 138,493 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total real estate - residential | | $ | 719,754 | | | $ | 1,451,357 | | | $ | 1,176,623 | | | $ | 536,904 | | | $ | 255,738 | | | $ | 450,322 | | | $ | 266,968 | | | | | $ | 4,857,666 | |
| | | | | | | | | | | | | | | | | | |
Total Loans |
Risk Grade: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 3,502,909 | | | $ | 5,062,109 | | | $ | 4,228,744 | | | $ | 1,953,577 | | | $ | 1,149,459 | | | $ | 2,188,927 | | | $ | 1,761,006 | | | | | $ | 19,846,731 | |
6 | | 13 | | | 17,471 | | | 59,123 | | | 293 | | | 30,543 | | | 48,737 | | | 47,545 | | | | | 203,725 | |
7 | | 17,928 | | | 31,532 | | | 48,812 | | | 34,700 | | | 29,248 | | | 51,496 | | | 5,131 | | | | | 218,847 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total loans | | $ | 3,520,850 | | | $ | 5,111,112 | | | $ | 4,336,679 | | | $ | 1,988,570 | | | $ | 1,209,250 | | | $ | 2,289,160 | | | $ | 1,813,682 | | | | | $ | 20,269,303 | |
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Allowance for LoanCredit Losses on Loans
The allowance for loancredit losses represents an allowance for probable incurredexpected losses inover the loan portfolio. The adequacyremaining contractual life of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on non-accruing, past-due and other loans that management believes might be potentially impairedassets. The contractual term does not consider extensions, renewals or warrant additional attention.modifications. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio. In addition, based on internal reviews and external reviews performed by regulatory authorities, the Company further segregates the loan portfolio by loan grades based on an assessment of risk for a particular loan or group of loans. Certain reviewed loans are assigned specific allowances when a review of relevant data determines that a general allocation is not sufficient or when the review affords management the opportunity to adjust the amount of exposure in a given credit. In establishing allowances, management considers historical loan loss experience but adjusts this data with a significant emphasis on current loan quality trends, current economic conditions and other factors in the markets where the Company operates. Factors considered include, among others, current valuations of real estate in the Company’s markets, unemployment rates, the effect of weather conditions on agricultural related entities and other significant local economic events, such as major plant closings.
The Company has developed a methodology for determining the adequacy of the allowance for loan losses which is monitored by the Company’s Chief Credit Officer. Procedures provide for the assignment of a risk rating for every loan included in the total loan portfolio. Mortgage warehouse lines of credit, overdraft protection loans, commercial insurance premium finance loans, and certain consumer and mortgage loans serviced by outside processors are treated as pools for risk rating purposes. The risk rating schedule provides nine ratings of which five ratings are classified as pass ratings and four ratings are classified as criticized ratings. Each risk rating is assigned a percentage factor to be applied to the loan balance to determine the adequate amount of reserve. The Bank’s independent internal loan review department reviews on an annual basis a sample of relationships in excess of $500,000. Sampling is based on a number of factors unique to the Bank’s portfolio risks, including, but not limited to, lending divisions, industry, risk grades, and new originations. As a result of these loan reviews, certain loans may be identified as having deteriorating
credit quality. Other loans that surface as problem loans may also be assigned specific reserves. Past-due loans are assigned risk ratings based on the number of days past due. The calculation of the allowance for loan losses, including underlying data and assumptions, is reviewed regularly by the Company’s Chief Financial Officer and the independent internal loan review department.
Loan losses are charged against the allowance when management believes the collection of a loan’s principal is unlikely. Subsequent recoveries are credited to the allowance. Consumer loans are charged-offcharged off in accordance with the Federal Financial Institutions Examination Council’s (“FFIEC”(the “FFIEC”) Uniform Retail Credit Classification and Account Management Policy. Commercial loans are charged-offcharged off when they are deemed uncollectible, which usually involves a triggering event within the collection effort. If the loan is collateral dependent, the loss is more easily identified and is charged-offcharged off when it is identified, usually based upon receipt of an appraisal. However, when a loan has guarantor support, the Company may carry the estimated loss as a reserve against the loan while collection efforts with the guarantor are pursued. If, after collection efforts with the guarantor are complete, the deficiency is still considered uncollectible, the loss is charged-offcharged off and any further collections are treated as recoveries. In all situations, when a loan is downgraded to an Asset Quality Rating of 609 (Loss per the regulatory guidance), the uncollectible portion is charged-off.charged off.
The Company’s methodologies for estimating the allowance for credit losses consider available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The methodologies apply historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions expected to exist through the contractual lives of the financial assets that are reasonable and supportable, to the identified pools of loans with similar risk characteristics for which
the historical loss experience was observed. The Company utilizes a one year reasonable and supportable forecast period. The Company’s methodologies revert back to historical loss information on a straight-line basis over four quarters after the reasonable and supportable forecast period.
During the three months ended March 31, 2024, the allowance for credit losses increased due to the current economic forecast and organic loan growth during the period. The allowance for credit losses was determined at both March 31, 2024 and December 31, 2023 using the Moody's baseline scenario economic forecast. The current forecast reflects, among other things, an increase in forecast levels of rental vacancies compared with the forecast at December 31, 2023.
The following tables detail activity and end of period balances in the allowance for loancredit losses by portfolio segment for the three and nine-month periods ended September 30, 2017, the year ended December 31, 2016 and the three and nine-month periods ended September 30, 2016.indicated. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
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Three Months Ended March 31, 2024 |
| | | | | | | | | | | |
(dollars in thousands) | Commercial, Financial and Agricultural | | Consumer | | Indirect Automobile | | Mortgage Warehouse | | Municipal | | Premium Finance |
Balance, December 31, 2023 | $ | 64,053 | | | $ | 3,902 | | | $ | 50 | | | $ | 1,678 | | | $ | 345 | | | $ | 602 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Provision for loan losses | 12,147 | | | 900 | | | (134) | | | 145 | | | (282) | | | (431) | |
Loans charged off | (15,295) | | | (1,091) | | | (65) | | | — | | | — | | | (2,006) | |
Recoveries of loans previously charged off | 2,899 | | | 192 | | | 185 | | | — | | | — | | | 2,451 | |
Balance, March 31, 2024 | $ | 63,804 | | | $ | 3,903 | | | $ | 36 | | | $ | 1,823 | | | $ | 63 | | | $ | 616 | |
| | | | | | | | | | | |
| Real Estate – Construction and Development | | Real Estate – Commercial and Farmland | | Real Estate – Residential | | Total | | | | |
Balance, December 31, 2023 | $ | 61,017 | | | $ | 110,097 | | | $ | 65,356 | | | $ | 307,100 | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Provision for loan losses | 11,148 | | | 474 | | | 1,556 | | | 25,523 | | | | | |
Loans charged off | — | | | — | | | — | | | (18,457) | | | | | |
Recoveries of loans previously charged off | 3 | | | 85 | | | 42 | | | 5,857 | | | | | |
Balance, March 31, 2024 | $ | 72,168 | | | $ | 110,656 | | | $ | 66,954 | | | $ | 320,023 | | | | | |
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Three Months Ended March 31, 2023 |
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(dollars in thousands) | Commercial, Financial and Agricultural | | Consumer | | Indirect Automobile | | Mortgage Warehouse | | Municipal | | Premium Finance |
Balance, December 31, 2022 | $ | 39,455 | | | $ | 5,413 | | | $ | 174 | | | $ | 2,118 | | | $ | 357 | | | $ | 1,025 | |
Adjustment to allowance for adoption of ASU 2022-02 | (105) | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | |
Provision for loan losses | 16,078 | | | 323 | | | (219) | | | (194) | | | (3) | | | (93) | |
Loans charged off | (12,233) | | | (1,140) | | | (34) | | | — | | | — | | | (1,421) | |
Recoveries of loans previously charged off | 2,043 | | | 297 | | | 216 | | | — | | | — | | | 1,382 | |
Balance, March 31, 2023 | $ | 45,238 | | | $ | 4,893 | | | $ | 137 | | | $ | 1,924 | | | $ | 354 | | | $ | 893 | |
| | | | | | | | | | | |
| Real Estate – Construction and Development | | Real Estate – Commercial and Farmland | | Real Estate – Residential | | Total | | | | |
Balance, December 31, 2022 | $ | 32,659 | | | $ | 67,433 | | | $ | 57,043 | | | $ | 205,677 | | | | | |
Adjustment to allowance for adoption of ASU 2022-02 | (37) | | | (722) | | | (847) | | | (1,711) | | | | | |
| | | | | | | | | | | |
Provision for loan losses | 10,119 | | | 20,369 | | | 2,996 | | | 49,376 | | | | | |
Loans charged off | — | | | — | | | (128) | | | (14,956) | | | | | |
Recoveries of loans previously charged off | 100 | | | 44 | | | 190 | | | 4,272 | | | | | |
Balance, March 31, 2023 | $ | 42,841 | | | $ | 87,124 | | | $ | 59,254 | | | $ | 242,658 | | | | | |
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(dollars in thousands) | Commercial, Financial and Agricultural | | Real Estate – Construction and Development | | Real Estate – Commercial and Farmland | | Real Estate – Residential | | Consumer Installment Loans and Other | | Purchased Loans | | Purchased Loan Pools | | Total |
Three Months Ended September 30, 2017 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
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Balance, June 30, 2017 | $ | 3,302 |
| | $ | 3,756 |
| | $ | 7,869 |
| | $ | 5,605 |
| | $ | 1,155 |
| | $ | 1,791 |
| | $ | 1,623 |
| | $ | 25,101 |
|
Provision for loan losses | 910 |
| | (587 | ) | | 68 |
| | 127 |
| | 670 |
| | 745 |
| | (146 | ) | | 1,787 |
|
Loans charged off | (1,091 | ) | | (1 | ) | | (18 | ) | | (852 | ) | | (320 | ) | | (161 | ) | | — |
| | (2,443 | ) |
Recoveries of loans previously charged off | 409 |
| | 126 |
| | 26 |
| | 56 |
| | 17 |
| | 887 |
| | — |
| | 1,521 |
|
Balance, September 30, 2017 | $ | 3,530 |
| | $ | 3,294 |
| | $ | 7,945 |
| | $ | 4,936 |
| | $ | 1,522 |
| | $ | 3,262 |
| | $ | 1,477 |
| | $ | 25,966 |
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Nine Months Ended September 30, 2017: | |
| | |
| | |
| | |
| | |
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| | |
| | |
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Balance, December 31, 2016 | $ | 2,192 |
| | $ | 2,990 |
| | $ | 7,662 |
| | $ | 6,786 |
| | $ | 827 |
| | $ | 1,626 |
| | $ | 1,837 |
| | $ | 23,920 |
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Provision for loan losses | 2,535 |
| | 155 |
| | 540 |
| | (9 | ) | | 1,539 |
| | 1,428 |
| | (360 | ) | | 5,828 |
|
Loans charged off | (1,896 | ) | | (95 | ) | | (413 | ) | | (2,031 | ) | | (922 | ) | | (1,472 | ) | | — |
| | (6,829 | ) |
Recoveries of loans previously charged off | 699 |
| | 244 |
| | 156 |
| | 190 |
| | 78 |
| | 1,680 |
| | — |
| | 3,047 |
|
Balance, September 30, 2017 | $ | 3,530 |
| | $ | 3,294 |
| | $ | 7,945 |
| | $ | 4,936 |
| | $ | 1,522 |
| | $ | 3,262 |
| | $ | 1,477 |
| | $ | 25,966 |
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Period-end allocation: | |
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| | |
| | |
| | |
| | |
| | |
| | |
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Loans individually evaluated for impairment (1) | $ | 509 |
| | $ | 81 |
| | $ | 1,380 |
| | $ | 1,058 |
| | $ | — |
| | $ | 3,262 |
| | $ | 105 |
| | $ | 6,395 |
|
Loans collectively evaluated for impairment | 3,021 |
| | 3,213 |
| | 6,565 |
| | 3,878 |
| | 1,522 |
| | — |
| | 1,372 |
| | 19,571 |
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Ending balance | $ | 3,530 |
| | $ | 3,294 |
| | $ | 7,945 |
| | $ | 4,936 |
| | $ | 1,522 |
| | $ | 3,262 |
| | $ | 1,477 |
| | $ | 25,966 |
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Loans: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
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Individually evaluated for impairment (1) | $ | 3,204 |
| | $ | 627 |
| | $ | 10,512 |
| | $ | 8,636 |
| | $ | — |
| | $ | 32,032 |
| | $ | 915 |
| | $ | 55,926 |
|
Collectively evaluated for impairment | 1,304,005 |
| | 549,562 |
| | 1,548,370 |
| | 960,653 |
| | 189,109 |
| | 763,271 |
| | 464,303 |
| | 5,779,273 |
|
Acquired with deteriorated credit quality | — |
| | — |
| | — |
| | — |
| | — |
| | 121,823 |
| | — |
| | 121,823 |
|
Ending balance | $ | 1,307,209 |
| | $ | 550,189 |
| | $ | 1,558,882 |
| | $ | 969,289 |
| | $ | 189,109 |
| | $ | 917,126 |
| | $ | 465,218 |
| | $ | 5,957,022 |
|
Modifications to Borrowers Experiencing Financial Difficulty
(1) At September 30, 2017, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | Commercial, Financial and Agricultural | | Real Estate – Construction and Development | | Real Estate – Commercial and Farmland | | Real Estate – Residential | | Consumer Installment Loans and Other | | Purchased Loans | | Purchased Loan Pools | | Total |
Twelve Months Ended December 31, 2016 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
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Balance, January 1, 2016 | $ | 1,144 |
| | $ | 5,009 |
| | $ | 7,994 |
| | $ | 4,760 |
| | $ | 1,574 |
| | $ | — |
| | $ | 581 |
| | $ | 21,062 |
|
Provision for loan losses | 2,647 |
| | (1,921 | ) | | 107 |
| | 2,757 |
| | (523 | ) | | (232 | ) | | 1,256 |
| | 4,091 |
|
Loans charged off | (1,999 | ) | | (588 | ) | | (708 | ) | | (1,122 | ) | | (351 | ) | | (1,559 | ) | | — |
| | (6,327 | ) |
Recoveries of loans previously charged off | 400 |
| | 490 |
| | 269 |
| | 391 |
| | 127 |
| | 3,417 |
| | — |
| | 5,094 |
|
Balance, December 31, 2016 | $ | 2,192 |
| | $ | 2,990 |
| | $ | 7,662 |
| | $ | 6,786 |
| | $ | 827 |
| | $ | 1,626 |
| | $ | 1,837 |
| | $ | 23,920 |
|
| | | | | | | | | | | | | | | |
Period-end allocation: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
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Loans individually evaluated for impairment (1) | $ | 120 |
| | $ | 266 |
| | $ | 1,502 |
| | $ | 2,893 |
| | $ | — |
| | $ | 1,626 |
| | $ | — |
| | $ | 6,407 |
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Loans collectively evaluated for impairment | 2,072 |
| | 2,724 |
| | 6,160 |
| | 3,893 |
| | 827 |
| | — |
| | 1,837 |
| | 17,513 |
|
Ending balance | $ | 2,192 |
| | $ | 2,990 |
| | $ | 7,662 |
| | $ | 6,786 |
| | $ | 827 |
| | $ | 1,626 |
| | $ | 1,837 |
| | $ | 23,920 |
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Loans: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
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Individually evaluated for impairment (1) | $ | 501 |
| | $ | 659 |
| | $ | 12,423 |
| | $ | 12,697 |
| | $ | — |
| | $ | 34,141 |
| | $ | — |
| | $ | 60,421 |
|
Collectively evaluated for impairment | 966,637 |
| | 362,386 |
| | 1,393,796 |
| | 768,321 |
| | 109,401 |
| | 886,516 |
| | 568,314 |
| | 5,055,371 |
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Acquired with deteriorated credit quality | — |
| | — |
| �� | — |
| | — |
| | — |
| | 148,534 |
| | — |
| | 148,534 |
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Ending balance | $ | 967,138 |
| | $ | 363,045 |
| | $ | 1,406,219 |
| | $ | 781,018 |
| | $ | 109,401 |
| | $ | 1,069,191 |
| | $ | 568,314 |
| | $ | 5,264,326 |
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(1) At December 31, 2016, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | Commercial, Financial and Agricultural | | Real Estate – Construction and Development | | Real Estate – Commercial and Farmland | | Real Estate – Residential | | Consumer Installment Loans and Other | | Purchased Loans | | Purchased Loan Pools | | Total |
Three Months Ended September 30, 2016 | |
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| | |
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Balance, June 30, 2016 | $ | 1,667 |
| | $ | 3,599 |
| | $ | 7,459 |
| | $ | 4,263 |
| | $ | 2,160 |
| | $ | 1,387 |
| | $ | 1,199 |
| | $ | 21,734 |
|
Provision for loan losses | 677 |
| | (521 | ) | | (554 | ) | | 2,649 |
| | (1,595 | ) | | (654 | ) | | 809 |
| | 811 |
|
Loans charged off | (326 | ) | | (60 | ) | | — |
| | (292 | ) | | (74 | ) | | (699 | ) | | — |
| | (1,451 | ) |
Recoveries of loans previously charged off | 119 |
| | 131 |
| | 13 |
| | 40 |
| | 78 |
| | 1,488 |
| | — |
| | 1,869 |
|
Balance, September 30, 2016 | $ | 2,137 |
| | $ | 3,149 |
| | $ | 6,918 |
| | $ | 6,660 |
| | $ | 569 |
| | $ | 1,522 |
| | $ | 2,008 |
| | $ | 22,963 |
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Nine Months Ended September 30, 2016: | |
| | |
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Balance, December 31, 2015 | $ | 1,144 |
| | $ | 5,009 |
| | $ | 7,994 |
| | $ | 4,760 |
| | $ | 1,574 |
| | $ | — |
| | $ | 581 |
| | $ | 21,062 |
|
Provision for loan losses | 1,987 |
| | (2,010 | ) | | (559 | ) | | 2,415 |
| | (932 | ) | | 53 |
| | 1,427 |
| | 2,381 |
|
Loans charged off | (1,273 | ) | | (324 | ) | | (708 | ) | | (883 | ) | | (192 | ) | | (1,261 | ) | | — |
| | (4,641 | ) |
Recoveries of loans previously charged off | 279 |
| | 474 |
| | 191 |
| | 368 |
| | 119 |
| | 2,730 |
| | — |
| | 4,161 |
|
Balance, September 30, 2016 | $ | 2,137 |
| | $ | 3,149 |
| | $ | 6,918 |
| | $ | 6,660 |
| | $ | 569 |
| | $ | 1,522 |
| | $ | 2,008 |
| | $ | 22,963 |
|
| | | | | | | | | | | | | | | |
Period-end allocation: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Loans individually evaluated for impairment (1) | $ | 107 |
| | $ | 529 |
| | $ | 883 |
| | $ | 2,629 |
| | $ | — |
| | $ | 1,522 |
| | $ | — |
| | $ | 5,670 |
|
Loans collectively evaluated for impairment | 2,030 |
| | 2,620 |
| | 6,035 |
| | 4,031 |
| | 569 |
| | — |
| | 2,008 |
| | 17,293 |
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Ending balance | $ | 2,137 |
| | $ | 3,149 |
| | $ | 6,918 |
| | $ | 6,660 |
| | $ | 569 |
| | $ | 1,522 |
| | $ | 2,008 |
| | $ | 22,963 |
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Loans: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Individually evaluated for impairment (1) | $ | 424 |
| | $ | 1,154 |
| | $ | 11,699 |
| | $ | 11,571 |
| | $ | — |
| | $ | 34,991 |
| | $ | — |
| | $ | 59,839 |
|
Collectively evaluated for impairment | 625,523 |
| | 327,154 |
| | 1,285,883 |
| | 755,362 |
| | 72,269 |
| | 939,243 |
| | 624,886 |
| | 4,630,320 |
|
Acquired with deteriorated credit quality | — |
| | — |
| | — |
| | — |
| | — |
| | 155,147 |
| | — |
| | 155,147 |
|
Ending balance | $ | 625,947 |
| | $ | 328,308 |
| | $ | 1,297,582 |
| | $ | 766,933 |
| | $ | 72,269 |
| | $ | 1,129,381 |
| | $ | 624,886 |
| | $ | 4,845,306 |
|
(1) At September 30, 2016, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.
NOTE 5 – ASSETS ACQUIRED IN FDIC-ASSISTED ACQUISITIONS
From October 2009 through July 2012, theThe Company participated in ten FDIC-assisted acquisitions whereby the Company purchased certain failed institutions outperiodically provides modifications to borrowers experiencing financial difficulty. These modifications include either payment deferrals, term extensions, interest rate reductions, principal forgiveness or combinations of the FDIC’s receivership. These institutions include the following:
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| | | | | | |
Bank Acquired | | Location | | Branches | | Date Acquired |
American United Bank (“AUB”) | | Lawrenceville, Ga. | | 1 | | October 23, 2009 |
United Security Bank (“USB”) | | Sparta, Ga. | | 2 | | November 6, 2009 |
Satilla Community Bank (“SCB”) | | St. Marys, Ga. | | 1 | | May 14, 2010 |
First Bank of Jacksonville (“FBJ”) | | Jacksonville, Fl. | | 2 | | October 22, 2010 |
Tifton Banking Company (“TBC”) | | Tifton, Ga. | | 1 | | November 12, 2010 |
Darby Bank & Trust (“DBT”) | | Vidalia, Ga. | | 7 | | November 12, 2010 |
High Trust Bank (“HTB”) | | Stockbridge, Ga. | | 2 | | July 15, 2011 |
One Georgia Bank (“OGB”) | | Midtown Atlanta, Ga. | | 1 | | July 15, 2011 |
Central Bank of Georgia (“CBG”) | | Ellaville, Ga. | | 5 | | February 24, 2012 |
Montgomery Bank & Trust (“MBT”) | | Ailey, Ga. | | 2 | | July 6, 2012 |
modification types. The determination of whether the initial fair values of loans at the acquisition date and the initial fair values of the related FDIC indemnification assets involves a high degree of judgment and complexity. The carrying values of the acquired loans and the FDIC indemnification assets reflect management’s best estimate of the fair value of each of these assets as ofborrower is experiencing financial difficulty is made on the date of acquisition.
However,the modification. When principal forgiveness is provided, the amount thatof principal forgiveness is charged off against the Company realizes on these assets could differ materially from the carrying values reflected in the financial statements included in this report, based upon the timing and amount of collections on the acquired loans in future periods. Because of the loss-sharing agreements with the FDIC on these assets, the Company does not expect to incur any significant losses. To the extent the actual values realized for the acquired loans are different from the estimates, the indemnification assets will generally be affected in an offsetting manner due to the loss-sharing support from the FDIC.
FASB ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”), applies to a loan with evidence of deterioration of credit quality since origination, acquired by completion of a transfer for which it is probable, at acquisition, that the investor will be unable to collect all contractually required payments receivable. ASC 310-30 prohibits carrying over or creating an allowance for loan losses upon initial recognition for loans which fall under the scope of this statement. At the acquisition dates, a majority of these loans were valued based on the liquidation value of the underlying collateral because the future cash flows are primarily based on the liquidation of underlying collateral. There was no allowance for credit losses established related to these ASC 310-30 loans atwith a corresponding reduction in the acquisition dates, based on the provisions of this statement. Over the lifeamortized cost basis of the acquired loans, the Company continues to estimate cash flows expected to be collected. If the expected cash flows expected to be collected increases, then the Company adjusts the amount of accretable discount recognized on a prospective basis over the loan’s remaining life. If the expected cash flows expected to be collected decreases, then the Company records a provision for loan loss in its consolidated statements of income and comprehensive income.loan.
Each acquisition with loss-sharing agreements has separate agreements for the single family residential assets (“SFR”) and the non-single family assets (“NSF”). The SFR agreements cover losses and recoveries for ten years. The NSF agreements are for eight years. During the first five years, losses and recoveries are covered. During the final three years, only recoveries, net of expenses, are covered. The AUB SFR agreement was terminated during 2012 and Ameris received a payment of $87,000. The AUB and USB NSF agreements passed their five-year anniversaries during the fourth quarter of 2014, the SCB NSF agreement passed its five-year anniversary during the second quarter of 2015, the FBJ, TBC and DBT NSF agreements passed their five-year anniversaries during the fourth quarter of 2015, the HTB and OGB NSF agreements passed their five-year anniversaries during the third quarter of 2016, and the CBG NSF passed its five-year anniversary during the first quarter of 2017. Losses will no longer be reimbursed on these agreements. MBT did not have a loss-sharing agreement.
At September 30, 2017, the Company’s FDIC loss-sharing payable totaled $8.2 million, which is comprised of an accrued clawback liability of $9.6 million, less $419,000 in current activity incurred but not yet received from the FDIC (net charge-offs offset by reimbursable expenses) and remaining indemnification of $1.0 million (for reimbursements associated with anticipated losses in future quarters).
The following table summarizes componentsshows the amortized cost basis of all covered assetsthe loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted during the three months ended of March 31, 2024, and 2023:
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Three Months Ended March 31, 2024 |
(dollars in thousands) | | | | Term Extension | | | | | | Combination of Term Extension and Rate Reduction | | Total | | Percentage of Total Class of Financial Receivable |
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Real estate – residential | | | | $ | 3,519 | | | | | | | $ | 534 | | | $ | 4,053 | | | 0.1 | % |
Total | | | | $ | 3,519 | | | | | | | $ | 534 | | | $ | 4,053 | | | — | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended March 31, 2023 |
(dollars in thousands) | | Payment Deferral | | | | | | | | | | Total | | Percentage of Total Class of Financial Receivable |
Commercial, financial and agricultural | | $ | 843 | | | | | | | | | | | $ | 843 | | | — | % |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Total | | $ | 843 | | | | | | | | | | | $ | 843 | | | — | % |
The Company had unfunded commitments to borrowers experiencing financial difficulty for which the Company has modified their loans of $446,000 and $1.5 million at September 30, 2017March 31, 2024 and December 31, 2016 and their origin:2023, respectively.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | Covered Loans | | Less: Fair Value Adjustments | | Total Covered Loans | | OREO | | Less: Fair Value Adjustments | | Total Covered OREO | | Total Covered Assets | | FDIC Loss- Share Receivable (Payable) |
September 30, 2017 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
AUB | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
USB | 2,763 |
| | 12 |
| | 2,751 |
| | — |
| | — |
| | — |
| | 2,751 |
| | (1,752 | ) |
SCB | 2,541 |
| | 27 |
| | 2,514 |
| | — |
| | — |
| | — |
| | 2,514 |
| | (169 | ) |
FBJ | 3,647 |
| | 394 |
| | 3,253 |
| | — |
| | — |
| | — |
| | 3,253 |
| | (312 | ) |
DBT | 9,663 |
| | 356 |
| | 9,307 |
| | 81 |
| | — |
| | 81 |
| | 9,388 |
| | (4,442 | ) |
TBC | 1,667 |
| | — |
| | 1,667 |
| | — |
| | — |
| | — |
| | 1,667 |
| | (8 | ) |
HTB | 1,856 |
| | 28 |
| | 1,828 |
| | — |
| | — |
| | — |
| | 1,828 |
| | 27 |
|
OGB | 930 |
| | 31 |
| | 899 |
| | — |
| | — |
| | — |
| | 899 |
| | (1,032 | ) |
CBG | 10,329 |
| | 678 |
| | 9,651 |
| | 161 |
| | — |
| | 161 |
| | 9,812 |
| | (502 | ) |
Total | $ | 33,396 |
| | $ | 1,526 |
| | $ | 31,870 |
| | $ | 242 |
| | $ | — |
| | $ | 242 |
| | $ | 32,112 |
| | $ | (8,190 | ) |
| | | | | | | | | | | | | | | |
December 31, 2016 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
AUB | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | (27 | ) |
USB | 3,199 |
| | 13 |
| | 3,186 |
| | 51 |
| | — |
| | 51 |
| | 3,237 |
| | (1,642 | ) |
SCB | 4,019 |
| | 51 |
| | 3,968 |
| | — |
| | — |
| | — |
| | 3,968 |
| | (32 | ) |
FBJ | 3,767 |
| | 452 |
| | 3,315 |
| | — |
| | — |
| | — |
| | 3,315 |
| | (234 | ) |
DBT | 12,166 |
| | 565 |
| | 11,601 |
| | — |
| | — |
| | — |
| | 11,601 |
| | (4,591 | ) |
TBC | 1,679 |
| | — |
| | 1,679 |
| | — |
| | — |
| | — |
| | 1,679 |
| | (33 | ) |
HTB | 1,913 |
| | 33 |
| | 1,880 |
| | — |
| | — |
| | — |
| | 1,880 |
| | 734 |
|
OGB | 1,077 |
| | 32 |
| | 1,045 |
| | — |
| | — |
| | — |
| | 1,045 |
| | (993 | ) |
CBG | 33,449 |
| | 1,963 |
| | 31,486 |
| | 1,161 |
| | 4 |
| | 1,157 |
| | 32,643 |
| | 505 |
|
Total | $ | 61,269 |
| | $ | 3,109 |
| | $ | 58,160 |
| | $ | 1,212 |
| | $ | 4 |
| | $ | 1,208 |
| | $ | 59,368 |
| | $ | (6,313 | ) |
The shared-loss agreements are subject to the servicing procedures as specified in the agreement with the FDIC. The expected reimbursements under the shared-loss agreements were recorded as an indemnification asset at their estimated fair values on the acquisition dates. As of September 30, 2017 and December 31, 2016, the Company has recorded a clawback liability of $9.6 million and $9.3 million, respectively, which represents the obligation of the Company to reimburse the FDIC should actual losses be less than certain thresholds established in each loss-share agreement.
Changes in the FDIC shared-loss payable for the nine months ended September 30, 2017 and 2016 are as follows:
|
| | | | | | | | |
(dollars in thousands) | | September 30, 2017 | | September 30, 2016 |
Beginning balance, January 1 | | $ | (6,313 | ) | | $ | 6,301 |
|
Payments to (received from) FDIC | | 97 |
| | (4,770 | ) |
Amortization | | (747 | ) | | (3,351 | ) |
Changes in clawback liability | | (326 | ) | | (682 | ) |
Increase in receivable due to: | | |
| | |
|
Net recoveries on covered loans | | (1,097 | ) | | (4,118 | ) |
Loss (gain) on covered other real estate owned | | (76 | ) | | 203 |
|
Reimbursable expenses on covered assets | | 401 |
| | 604 |
|
Other activity, net | | (129 | ) | | (1,962 | ) |
Ending balance | | $ | (8,190 | ) | | $ | (7,775 | ) |
The FDIC loss-sharing payable is included in other liabilities in the consolidated balance sheets. The FDIC loss-sharing receivable is included in other assets in the consolidated balance sheets.
NOTE 6 – OTHER REAL ESTATE OWNED
The following is a summarytable describes the financial effect of the activity in other real estate ownedmodifications made to borrowers experiencing financial difficulty during the ninethree months ended September 30, 2017March 31, 2024, and 2016:2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended March 31, 2024 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | |
Term Extension |
Loan Type | | Financial Effect |
| | |
| | |
| | |
Real estate - residential | | Maturity dates were extended for a weighted average of 76 months |
| | | | | | | | |
Combination of Term Extension and Rate Reduction |
Loan Type | | Financial Effect |
Real estate - residential | | Maturity date was extended 134 months and rate was reduced by 1.50% |
| | | | | | | | |
Three Months Ended March 31, 2023 | | |
Payment Deferral | | |
Loan Type | | Financial Effect |
Commercial, financial and agricultural | | Payments were reduced approximately 32% for three months before returning to a fully amortizing payment structure thereafter. |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| | | | | | | |
(dollars in thousands) | September 30, 2017 | | September 30, 2016 |
Beginning balance, January 1 | $ | 10,874 |
| | $ | 16,147 |
|
Loans transferred to other real estate owned | 4,043 |
| | 2,101 |
|
Net gains (losses) on sale and write-downs recorded in statement of income | (766 | ) | | (1,276 | ) |
Sales proceeds | (4,760 | ) | | (6,580 | ) |
Ending balance | $ | 9,391 |
| | $ | 10,392 |
|
The following is a summary of the activity in purchased other real estate owned during the nine months ended September 30, 2017 and 2016:
|
| | | | | | | |
(dollars in thousands) | September 30, 2017 | | September 30, 2016 |
Beginning balance, January 1 | $ | 12,540 |
| | $ | 19,344 |
|
Loans transferred to other real estate owned | 4,294 |
| | 6,262 |
|
Acquired in acquisitions | — |
| | 1,838 |
|
Portion of gains (losses) on sale and write-downs payable to (receivable from) the FDIC under loss-sharing agreements | 76 |
| | — |
|
Net gains (losses) on sale and write-downs recorded in statement of income | 265 |
| | (568 | ) |
Sales proceeds | (7,229 | ) | | (11,750 | ) |
Ending balance | $ | 9,946 |
| | $ | 15,126 |
|
NOTE 7 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The Company classifies the sales of securities under agreements to repurchase as short-term borrowings. The amounts received under these agreements are reflected as a liability in the Company’s consolidated balance sheets and the securities underlying these agreements are included in investment securities in the Company’s consolidated balance sheets. At September 30, 2017 and December 31, 2016, all securities sold under agreements to repurchase mature on a daily basis. The market value of the securities fluctuate on a daily basis due to market conditions. The Company monitors the market valueperformance of the securities underlying these agreements on a daily basis and is requiredloans that are modified to transfer additional securities ifborrowers experiencing financial difficulty to understand the market valueeffectiveness of its modification efforts. The following table depicts the securities fall below the repurchase agreement price. The Company maintains an unpledged securities portfolioperformance of loans that it believes is sufficient to protect against a declinehave been modified in the market value of the securities sold under agreements to repurchase.last 12 months:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of March 31, 2024 |
(dollars in thousands) | | Current | | 30-59 Days Past Due | | 60-89 Days Past Due | | 90 or More Days Past Due | | Total |
Commercial, financial and agricultural | | $ | 5,029 | | | $ | — | | | $ | — | | | $ | — | | | $ | 5,029 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Real estate – commercial and farmland | | 5,875 | | | — | | | — | | | 1,115 | | | 6,990 | |
Real estate – residential | | $ | 8,547 | | | $ | 648 | | | $ | 235 | | | $ | 1,980 | | | $ | 11,410 | |
Total | | $ | 19,451 | | | $ | 648 | | | $ | 235 | | | $ | 3,095 | | | $ | 23,429 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2023 |
(dollars in thousands) | | Current | | 30-59 Days Past Due | | 60-89 Days Past Due | | 90 or More Days Past Due | | Total |
Commercial, financial and agricultural | | $ | 4,018 | | | $ | 355 | | | $ | — | | | $ | 799 | | | $ | 5,172 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Real estate – commercial and farmland | | 6,692 | | | 1,129 | | | — | | | — | | | 7,821 | |
Real estate – residential | | $ | 5,113 | | | $ | 711 | | | $ | 442 | | | $ | 1,106 | | | $ | 7,372 | |
Total | | $ | 15,823 | | | $ | 2,195 | | | $ | 442 | | | $ | 1,905 | | | $ | 20,365 | |
The following istable provides the amortized cost basis of financing receivables that had a summary ofpayment default during the Company’s securities sold under agreementsthree months ended March 31, 2024 and were modified in the 12 months before default to repurchase at September 30, 2017 and Decemberborrowers experiencing financial difficulty. There were no payment defaults during the three months ended March 31, 2016. 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | | | | Term Extension | | Payment Deferral | | Combination of Term Extension and Rate Reduction | | Total |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Real estate – commercial and farmland | | | | $ | — | | | $ | 1,115 | | | $ | — | | | $ | 1,115 | |
Real estate – residential | | | | 2,215 | | | 191 | | | 456 | | | 2,862 | |
Total | | | | $ | 2,215 | | | $ | 1,306 | | | $ | 456 | | | $ | 3,977 | |
|
| | | | | | | |
(dollars in thousands) | September 30, 2017 | | December 31, 2016 |
Securities sold under agreements to repurchase | $ | 14,156 |
| | $ | 53,505 |
|
At September 30, 2017 and December 31, 2016, the investment securities underlying these agreements were comprised of state, county and municipal securities and mortgage-backed securities.
NOTE 84 – OTHER BORROWINGS
The Company has, from time to time, utilized certain borrowing arrangements to fund growth in earning assets or provide additional liquidity when appropriate spreads can be realized. At September 30, 2017 and December 31, 2016, there were $808.6 million and $492.3 million, respectively, in outstanding other borrowings.
Other borrowings consist of the following:
| | | | | | | | | | | |
(dollars in thousands) | March 31, 2024 | | December 31, 2023 |
FHLB borrowings: | | | |
Fixed Rate Advance due January 10, 2024; fixed interest rate of 5.450% | $ | — | | | $ | 50,000 | |
Fixed Rate Advance due January 17, 2024; fixed interest rate of 5.460% | — | | | 100,000 | |
Fixed Rate Advance due April 15, 2024; fixed interest rate of 5.440% | 50,000 | | | — | |
Fixed Rate Advance due April 19, 2024; fixed interest rate of 5.470% | 25,000 | | | — | |
Daily Rate Credit due December 11, 2024, variable interest rate of 5.580% | 200,000 | | | — | |
Fixed Rate Advance due March 3, 2025; fixed interest rate of 1.208% | 15,000 | | | 15,000 | |
Fixed Rate Advance due March 2, 2027; fixed interest rate of 1.445% | 15,000 | | | 15,000 | |
Fixed Rate Advance due March 4, 2030; fixed interest rate of 1.606% | 15,000 | | | 15,000 | |
Fixed Rate Advance due December 9, 2030; fixed interest rate of 4.550% | 1,375 | | | 1,378 | |
Fixed Rate Advance due December 9, 2030; fixed interest rate of 4.550% | 952 | | | 954 | |
Principal Reducing Advance due September 29, 2031; fixed interest rate of 3.095% | 1,092 | | | 1,128 | |
| | | |
Subordinated notes payable: | | | |
| | | |
| | | |
Subordinated notes payable due December 15, 2029 net of unamortized debt issuance cost of $1,220 and $1,296, respectively; fixed interest rate of 4.25% through December 14, 2024; variable interest rate thereafter at three-month SOFR plus 2.94% | 104,530 | | | 106,704 | |
Subordinated notes payable due May 31, 2030 net of unaccreted purchase accounting fair value adjustment of $743 and $784, respectively; fixed interest rate of 5.875% through May 31, 2025; variable interest rate thereafter at three-month LIBOR plus 3.63% | 74,743 | | | 75,784 | |
Subordinated notes payable due October 1, 2030 net of unamortized debt issuance cost of $1,312 and $1,362, respectively; fixed interest rate of 3.875% through September 30, 2025; variable interest rate thereafter at three-month SOFR plus 3.753% | 108,688 | | | 108,638 | |
| | | |
| | | |
| | | |
| | | |
| | | |
Other Debt: | | | |
Advance from correspondent bank due November 28, 2024; secured by a loan receivable; variable interest rate at one-month SOFR plus 2.50% | 10,000 | | | 10,000 | |
Advance from correspondent bank due December 1, 2025; secured by a loan receivable; variable interest rate at one-month SOFR plus 2.65% | 10,000 | | | 10,000 | |
| $ | 631,380 | | | $ | 509,586 | |
|
| | | | | | | |
(dollars in thousands) | September 30, 2017 | | December 31, 2016 |
FHLB borrowings: | |
| | |
|
Daily Rate Credit from FHLB with a variable interest rate (1.32% at September 30, 2017 and 0.80% at December 31, 2016) | $ | 168,000 |
| | $ | 150,000 |
|
Advance from FHLB due October 6, 2017; fixed interest rate of 1.16% | 565,000 |
| | — |
|
Advance from FHLB due January 6, 2017; fixed interest rate of 0.56% | — |
| | 292,500 |
|
Advance from FHLB due January 9, 2017; fixed interest rate of 1.40% | — |
| | 4,002 |
|
Advance from FHLB due May 30, 2017; fixed interest rate of 1.23% | — |
| | 5,006 |
|
Subordinated notes payable: | |
| | |
|
Subordinated notes payable due March 15, 2027 net of unamortized debt issuance cost of $1,238; fixed interest rate of 5.75% through March 14, 2022; variable interest rate thereafter at three-month LIBOR plus 3.616% | 73,762 |
| | — |
|
Other debt: | |
| | |
|
Advance from correspondent bank due October 5, 2019; secured by a loan receivable; fixed interest rate of 4.25% | 56 |
| | 77 |
|
Advance from correspondent bank due September 5, 2026; secured by a loan receivable; fixed interest rate of 2.09% | 1,754 |
| | 1,886 |
|
Advances under revolving credit agreement with a regional bank due September 26, 2020; secured by subsidiary bank stock; variable interest rate at 90-day LIBOR plus 3.50% (4.43% at December 31, 2016) | — |
| | 38,000 |
|
Advances under revolving credit agreement with a regional bank due January 7, 2017; fixed interest rate of 8.00% | — |
| | 850 |
|
Total | $ | 808,572 |
| | $ | 492,321 |
|
The advances from the FHLB are collateralized by a blanket lien on all eligible first mortgage loans and other specific loans in addition to FHLB stock. At September 30, 2017, $347.4 millionMarch 31, 2024, $4.15 billion was available for borrowing on lines with the FHLB.
At September 30, 2017, $30.0 million was available for borrowing under the revolving credit agreement with a regional bank, secured by subsidiary bank stock.
As of September 30, 2017,March 31, 2024, the CompanyBank maintained credit arrangements with various financial institutions to purchase federal funds up to $82.0$127.0 million.
The CompanyBank also participates in the Federal Reserve discount window borrowings program. At September 30, 2017,March 31, 2024, the CompanyBank had $1.04$3.45 billion of loans pledged at the Federal Reserve discount window and had $678.1 million$2.63 billion available for borrowing.
Subordinated Notes Payable
NOTE 5 – ACCUMULATED OTHER COMPREHENSIVE INCOME
On March 13, 2017,
Accumulated other comprehensive income (loss) for the Company completedconsists of changes in net unrealized gains and losses on debt securities available-for-sale. The reclassification for gains included in net income is recorded in net gain (loss) on securities in the public offeringconsolidated statement of income and sale of $75.0 million in aggregate principal amount of its 5.75% Fixed-To-Floating Rate Subordinated Notes due 2027 (the “subordinated notes”). The subordinated notes were sold to the public at par pursuant to an underwriting agreement and were issued pursuant to an indenture and a supplemental indenture. The subordinated notes will mature on March 15, 2027 and through March 14, 2022 will bear a fixed rate of interest of 5.75% per annum, payable semi-annually in arrears on September 15 and March 15 of each year. Beginning March 15, 2022, the interest rate on the subordinated notes resets quarterly to a floating rate per annum equal to the then-current three-month LIBOR plus 3.616%, payable quarterly in arrears on June 15, September 15, December 15, and March 15 of each year to the maturity date or earlier redemption.comprehensive income.
On any scheduled interest payment date beginning March 15, 2022, the Company may, at its option, redeem the subordinated notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest.
The subordinated notes are unsecured and rank equally with all other unsecured subordinated indebtedness of the Company, including any subordinated indebtedness issued in the future under the indenture governing the subordinated notes. The subordinated notes are subordinated in right of payment to all senior indebtedness of the Company. The subordinated notes are obligations of the Company only and are not guaranteed by any subsidiaries, including the Bank. Additionally, the subordinated notes are structurally subordinated to all existing and future indebtedness and other liabilities of the Company’s subsidiaries, meaning that creditors of the Company’s subsidiaries (including, in the case of the Bank, its depositors) generally will be paid from those subsidiaries’ assets before holders of the subordinated notes have any claim to those assets.
For regulatory capital adequacy purposes, the subordinated notes qualify as Tier 2 capital for the Company. If in the future the subordinated notes no longer qualify as Tier 2 capital, the subordinated notes may be redeemed by the Company atfollowing table presents a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, subject to prior approval by the Board of Governors of the Federal Reserve System.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Loan Commitments
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. They involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized in the Company’s balance sheets.
The Company’s exposure to credit loss is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
A summary of the Company’s commitments is as follows:accumulated other comprehensive income (loss) balances, net of tax, for the periods indicated:
| | | | | | | | | | | | | |
(dollars in thousands) | | | Unrealized Gain (Loss) on Securities | | Accumulated Other Comprehensive Income (Loss) |
Three Months Ended March 31, 2024 | | | | | |
Balance, December 31, 2023 | | | $ | (35,939) | | | $ | (35,939) | |
| | | | | |
Unrealized loss on debt securities available-for-sale, net of tax | | | (4,020) | | | (4,020) | |
Balance, March 31, 2024 | | | $ | (39,959) | | | $ | (39,959) | |
| | | | | |
Three Months Ended March 31, 2023 | | | | | |
Balance, December 31, 2022 | | | $ | (46,507) | | | $ | (46,507) | |
| | | | | |
Unrealized gain on debt securities available-for-sale, net of tax | | | 10,926 | | | 10,926 | |
Balance, March 31, 2023 | | | $ | (35,581) | | | $ | (35,581) | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
|
| | | | | | | |
(dollars in thousands) | September 30, 2017 | | December 31, 2016 |
Commitments to extend credit | $ | 1,096,702 |
| | $ | 1,101,257 |
|
Unused home equity lines of credit | 63,951 |
| | 62,586 |
|
Financial standby letters of credit | 13,192 |
| | 14,257 |
|
Mortgage interest rate lock commitments | 113,056 |
| | 91,426 |
|
Mortgage forward contracts with positive fair value | — |
| | 150,000 |
|
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. These commitments, predominantly at variable interest rates, generally have fixed expiration dates of one year or less or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the customer.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Collateral is required in instances which the Company deems necessary.
Other Commitments
As of September 30, 2017, a $75.0 million letter of credit issued by the FHLB was used to guarantee the Bank’s performance related to public fund deposit balances.
Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
A former borrower of the Company has filed a claim related to a loan previously made by the Company asserting lender liability. The case was tried without a jury and a judgment was issued by the court against the Company awarding the borrower approximately $2.9 million on August 8, 2013. The judgment was appealed to the South Carolina Court of Appeals. On May 24, 2017, the Court of Appeals filed its decision and unanimously found in favor of the Company and reversed the trial court judgment. The plaintiff has a filed a petition for rehearing with the Court of Appeals, which has been denied. The plaintiff has filed a writ of certiorari asking the Supreme Court of South Carolina to hear the case. The Company believes the likelihood the Supreme Court will hear the case is not probable, and, accordingly the Company does not expect to incur any loss as a result of this case. Accordingly, the Company has not established any reserves related to this legal matter. In the event that the Company's assumptions used to evaluate this matter as neither probable nor estimable change in future periods, it may be required to record a liability for an adverse outcome.
NOTE 10 – SHAREHOLDERS’ EQUITY
On January 18, 2017, the Company issued 128,572 unregistered shares of its common stock to William J. Villari in exchange for 4.99% of the outstanding shares of common stock of USPF. A registration statement was filed with the Securities and Exchange Commission on February 13, 2017 to register the resale or other disposition of these shares. The issuance of the 128,572 common shares was valued at $45.45 per share, resulting in an increase in shareholders’ equity of $5.8 million. For additional information regarding the investment in USPF, see Note 2.
On March 6, 2017, the Company completed an underwritten public offering of 2,012,500 shares of the Company’s common stock at a price to the public of $46.50 per share. The Company received net proceeds from the issuance of approximately $88.7 million, after deducting $4.9 million in underwriting discounts and commissions and other issuance costs.
In March 2017, the Company made a capital contribution to the Bank in the amount of $110.0 million, using the net proceeds of the March 6, 2017 issuance of common stock as well as a portion of the net proceeds of the March 13, 2017 issuance of the Company’s 5.75% Fixed-To-Floating Rate Subordinated Notes due 2027 discussed in Note 8.
NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income for the Company consists of changes in net unrealized gains and losses on investment securities available for sale and an interest rate swap derivative designated as a cash flow hedge. The following tables present a summary of the accumulated other comprehensive income balances, net of tax, as of September 30, 2017 and 2016:
|
| | | | | | | | | | | | |
(dollars in thousands) | | Unrealized Gain (Loss) on Derivatives | | Unrealized Gain (Loss) on Securities | | Accumulated Other Comprehensive Income (Loss) |
Balance, January 1, 2017 | | $ | 176 |
| | $ | (1,234 | ) | | $ | (1,058 | ) |
Reclassification for gains included in net income, net of tax | | — |
| | (24 | ) | | (24 | ) |
Current year changes, net of tax | | (38 | ) | | 4,361 |
| | 4,323 |
|
Balance, September 30, 2017 | | $ | 138 |
| | $ | 3,103 |
| | $ | 3,241 |
|
|
| | | | | | | | | | | | |
(dollars in thousands) | | Unrealized Gain (Loss) on Derivatives | | Unrealized Gain (Loss) on Securities | | Accumulated Other Comprehensive Income (Loss) |
Balance, January 1, 2016 | | $ | 152 |
| | $ | 3,201 |
| | $ | 3,353 |
|
Reclassification for gains included in net income, net of tax | | — |
| | (61 | ) | | (61 | ) |
Current year changes, net of tax | | (567 | ) | | 7,724 |
| | 7,157 |
|
Balance, September 30, 2016 | | $ | (415 | ) | | $ | 10,864 |
| | $ | 10,449 |
|
NOTE 126 – WEIGHTED AVERAGE SHARES OUTSTANDING
Earnings per share have been computed based on the following weighted average number of common shares outstanding:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
Average common shares outstanding | 68,808,393 | | | 69,171,562 | | | | | |
Common share equivalents: | | | | | | | |
Stock options | — | | | 242 | | | | | |
Nonvested restricted share grants | 126,032 | | | 98,033 | | | | | |
Performance stock units | 79,691 | | | 52,827 | | | | | |
Average common shares outstanding, assuming dilution | 69,014,116 | | | 69,322,664 | | | | | |
There were no anti-dilutive securities excluded from the computation of earnings per share for the three months ended March 31, 2024. There were 84,487 anti-dilutive securities excluded from the computation of earnings per share for the three months ended March 31, 2023.
NOTE 7 – FAIR VALUE MEASURES
The fair value of an asset or liability is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair value is based on discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the asset or liability. The accounting standard for disclosures about the fair value measures excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
The Company's loans held for sale under the fair value option are comprised of the following:
| | | | | | | | | | | |
(dollars in thousands) | March 31, 2024 | | December 31, 2023 |
Mortgage loans held for sale | $ | 363,002 | | | $ | 281,332 | |
SBA loans held for sale | 1,330 | | | — | |
Total loans held for sale | $ | 364,332 | | | $ | 281,332 | |
The Company has elected to record mortgage loans held for sale at fair value in order to eliminate the complexities and inherent difficulties of achieving hedge accounting and to better align reported results with the underlying economic changes in value of
|
| | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(share data in thousands) | 2017 | | 2016 | | 2017 | | 2016 |
Average common shares outstanding | 37,225 |
| | 34,870 |
| | 36,690 |
| | 34,156 |
|
Common share equivalents: | |
| | |
| | |
| | |
|
Stock options | 70 |
| | 108 |
| | 70 |
| | 100 |
|
Nonvested restricted share grants | 258 |
| | 217 |
| | 257 |
| | 214 |
|
Average common shares outstanding, assuming dilution | 37,553 |
| | 35,195 |
| | 37,017 |
| | 34,470 |
|
the loans and related hedge instruments. This election impacts the timing and recognition of origination fees and costs, as well as servicing value, which are now recognized in earnings at the time of origination. Interest income on mortgage loans held for sale is recorded on an accrual basis in the consolidated statements of income and comprehensive income under the heading interest income – interest and fees on loans. The servicing value is included in the fair value of the interest rate lock commitments (“IRLCs”) with borrowers. The mark to market adjustments related to mortgage loans held for sale and the associated economic hedges are captured in mortgage banking activities.
A net loss of $413,000 resulting from changes in fair value of these mortgage loans was recorded in income during the three months ended March 31, 2024. For the three months ended March 31, 2023, a net gain of $5.6 million resulting from changes in fair value of these mortgage loans was recorded in income. A net gain of $6.9 million resulting from changes in the fair value of the related derivative financial instruments used to hedge exposure to the market-related risks associated with these mortgage loans was recorded in income during the three months ended March 31, 2024. For the three months ended March 31, 2023, a net loss of $2.9 million resulting from changes in the fair value of the related derivative financial instruments was recorded in income. The Company’s valuation of mortgage loans held for sale incorporates an assumption for credit risk; however, given the short-term period that the Company holds these loans, valuation adjustments attributable to instrument-specific credit risk is nominal.
The following table summarizes the difference between the fair value and the principal balance for mortgage loans held for sale measured at fair value as of March 31, 2024 and December 31, 2023:
| | | | | | | | | | | |
(dollars in thousands) | March 31, 2024 | | December 31, 2023 |
Aggregate fair value of mortgage loans held for sale | $ | 363,002 | | | $ | 281,332 | |
Aggregate unpaid principal balance of mortgage loans held for sale | 355,998 | | | 273,915 | |
Past-due loans of 90 days or more | 463 | | | 781 | |
Nonaccrual loans | 463 | | | 781 | |
Unpaid principal balance of nonaccrual loans | 453 | | | 774 | |
The following table summarizes the difference between the fair value and the principal balance for SBA loans held for sale measured at fair value as of March 31, 2024 and December 31, 2023:
| | | | | | | | | | | |
(dollars in thousands) | March 31, 2024 | | December 31, 2023 |
Aggregate fair value of SBA loans held for sale | $ | 1,330 | | | $ | — | |
Aggregate unpaid principal balance of SBA loans held for sale | 1,203 | | | — | |
| | | |
| | | |
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale, loans held for sale under the fair value option and derivative financial instruments are recorded at fair value on a recurring basis. From time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as collateral-dependent loans, loan servicing rights and OREO. Additionally, the Company is required to disclose, but not record, the fair value of other financial instruments.
The following table presents the fair value measurements of assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of March 31, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| Recurring Basis Fair Value Measurements |
| March 31, 2024 |
(dollars in thousands) | Fair Value | | Level 1 | | Level 2 | | Level 3 |
Financial assets: | | | | | | | |
Debt securities available-for-sale: | | | | | | | |
U.S. Treasuries | $ | 701,296 | | | $ | 701,296 | | | $ | — | | | $ | — | |
U.S. government sponsored agencies | 980 | | | — | | | 980 | | | — | |
State, county and municipal securities | 27,004 | | | — | | | 27,004 | | | — | |
Corporate debt securities | 10,014 | | | — | | | 9,054 | | | 960 | |
SBA pool securities | 78,429 | | | — | | | 78,429 | | | — | |
Mortgage-backed securities | 596,696 | | | — | | | 596,696 | | | — | |
Loans held for sale | 364,332 | | | — | | | 364,332 | | | — | |
Derivative financial instruments | 10,019 | | | — | | | 10,019 | | | — | |
Mortgage banking derivative instruments | 5,752 | | | — | | | 5,752 | | | — | |
Total recurring assets at fair value | $ | 1,794,522 | | | $ | 701,296 | | | $ | 1,092,266 | | | $ | 960 | |
Financial liabilities: | | | | | | | |
Derivative financial instruments | $ | 10,142 | | | $ | — | | | $ | 10,142 | | | $ | — | |
Risk participation agreement | 32 | | | | | 32 | | | |
Mortgage banking derivative instruments | 1,030 | | | — | | | 1,030 | | | — | |
Total recurring liabilities at fair value | $ | 11,204 | | | $ | — | | | $ | 11,204 | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Recurring Basis Fair Value Measurements |
| December 31, 2023 |
(dollars in thousands) | Fair Value | | Level 1 | | Level 2 | | Level 3 |
Financial assets: | | | | | | | |
Debt securities available-for-sale: | | | | | | | |
U.S. Treasuries | $ | 720,877 | | | $ | 720,877 | | | $ | — | | | $ | — | |
U.S. government sponsored agencies | 985 | | | — | | | 985 | | | — | |
State, county and municipal securities | 28,051 | | | — | | | 28,051 | | | — | |
Corporate debt securities | 10,027 | | | — | | | 9,037 | | | 990 | |
SBA pool securities | 51,516 | | | — | | | 51,516 | | | — | |
Mortgage-backed securities | 591,488 | | | — | | | 591,488 | | | — | |
Loans held for sale | 281,332 | | | — | | | 281,332 | | | — | |
Derivative financial instruments | 5,937 | | | — | | | 5,937 | | | — | |
Mortgage banking derivative instruments | 3,636 | | | — | | | 3,636 | | | — | |
Total recurring assets at fair value | $ | 1,693,849 | | | $ | 720,877 | | | $ | 971,982 | | | $ | 990 | |
Financial liabilities: | | | | | | | |
Derivative financial instruments | $ | 6,203 | | | $ | — | | | $ | 6,203 | | | $ | — | |
Mortgage banking derivative instruments | 5,790 | | | — | | | 5,790 | | | — | |
Total recurring liabilities at fair value | $ | 11,993 | | | $ | — | | | $ | 11,993 | | | $ | — | |
The following table presents the fair value measurements of assets measured at fair value on a non-recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy as of March 31, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| Nonrecurring Basis Fair Value Measurements |
(dollars in thousands) | Fair Value | | Level 1 | | Level 2 | | Level 3 |
March 31, 2024 | | | | | | | |
Collateral-dependent loans | $ | 47,147 | | | $ | — | | | $ | — | | | $ | 47,147 | |
Other real estate owned | 560 | | | — | | | — | | | 560 | |
| | | | | | | |
| | | | | | | |
Total nonrecurring assets at fair value | $ | 47,707 | | | $ | — | | | $ | — | | | $ | 47,707 | |
| | | | | | | |
December 31, 2023 | | | | | | | |
Collateral-dependent loans | $ | 36,978 | | | $ | — | | | $ | — | | | $ | 36,978 | |
Other real estate owned | 5,324 | | | — | | | — | | | 5,324 | |
| | | | | | | |
| | | | | | | |
Total nonrecurring assets at fair value | $ | 42,302 | | | $ | — | | | $ | — | | | $ | 42,302 | |
The inputs used to determine estimated fair value of collateral-dependent loans include market conditions, loan term, underlying collateral characteristics and discount rates. The inputs used to determine fair value of OREO include market conditions, estimated marketing period or holding period, underlying collateral characteristics and discount rates.
For the three months ended March 31, 2024 and nine-month periodsthe year ended September 30, 2017December 31, 2023, there was not a change in the methods and 2016, theresignificant assumptions used to estimate fair value.
The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | | Fair Value | | Valuation Technique | | Unobservable Inputs | | Range of Discounts | | Weighted Average Discount |
March 31, 2024 | | | | | | | | | | |
Recurring: | | | | | | | | | | |
Debt securities available-for-sale | | $ | 960 | | | Discounted cash flows | | Probability of Default | | 11% | | 11% |
Loss Given Default | | 44% | | 44% |
Nonrecurring: | | | | | | | | | | |
Collateral-dependent loans | | $ | 47,147 | | | Third-party appraisals and discounted cash flows | | Collateral discounts and discount rates | | 3% - 60% | | 28% |
Other real estate owned | | $ | 560 | | | Third-party appraisals and sales contracts | | Collateral discounts and estimated costs to sell | | 15% - 27% | | 23% |
| | | | | | | | | | |
| | |
| | | | | | | | | | |
December 31, 2023 | | | | | | | | | | |
Recurring: | | | | | | | | | | |
Debt securities available-for-sale | | $ | 990 | | | Discounted cash flows | | Probability of Default | | 11% | | 11% |
| | | Loss Given Default | | 42% | | 42% |
Nonrecurring: | | | | | | | | | | |
Collateral-dependent loans | | $ | 36,978 | | | Third-party appraisals and discounted cash flows | | Collateral discounts and discount rates | | 11% - 60% | | 28% |
Other real estate owned | | $ | 5,324 | | | Third-party appraisals and sales contracts | | Collateral discounts and estimated costs to sell | | 15% - 33% | | 22% |
| | | | | | | | | | |
| | |
The carrying amount and estimated fair value of the Company’s financial instruments, not shown elsewhere in these financial statements, were no potential common shares with strike prices that would cause them to be anti-dilutive.as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Fair Value Measurements |
| | | March 31, 2024 |
(dollars in thousands) | Carrying Amount | | Level 1 | | Level 2 | | Level 3 | | Total |
Financial assets: | | | | | | | | | |
Cash and due from banks | $ | 235,931 | | | $ | 235,931 | | | $ | — | | | $ | — | | | $ | 235,931 | |
Federal funds sold and interest-bearing accounts | 975,321 | | | 975,321 | | | — | | | — | | | 975,321 | |
| | | | | | | | | |
Debt securities held-to-maturity | 147,022 | | | — | | | 126,581 | | | — | | | 126,581 | |
| | | | | | | | | |
Loans, net | 20,233,090 | | | — | | | — | | | 19,662,474 | | | 19,662,474 | |
| | | | | | | | | |
Financial liabilities: | | | | | | | | | |
Deposits | 20,997,390 | | | — | | | 20,945,083 | | | — | | | 20,945,083 | |
| | | | | | | | | |
Other borrowings | 631,380 | | | — | | | 617,432 | | | — | | | 617,432 | |
Subordinated deferrable interest debentures | 130,814 | | | — | | | 141,659 | | | — | | | 141,659 | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Fair Value Measurements |
| | | December 31, 2023 |
(dollars in thousands) | Carrying Amount | | Level 1 | | Level 2 | | Level 3 | | Total |
Financial assets: | | | | | | | | | |
Cash and due from banks | $ | 230,470 | | | $ | 230,470 | | | $ | — | | | $ | — | | | $ | 230,470 | |
Federal funds sold and interest-bearing accounts | 936,834 | | | 936,834 | | | — | | | — | | | 936,834 | |
| | | | | | | | | |
Debt securities held-to-maturity | 141,512 | | | — | | | 122,731 | | | — | | | 122,731 | |
Loans, net | 19,925,225 | | | — | | | — | | | 19,332,899 | | | 19,332,899 | |
| | | | | | | | | |
Financial liabilities: | | | | | | | | | |
Deposits | 20,708,509 | | | — | | | 20,707,463 | | | — | | | 20,707,463 | |
| | | | | | | | | |
Other borrowings | 509,586 | | | — | | | 501,723 | | | — | | | 501,723 | |
Subordinated deferrable interest debentures | 130,315 | | | — | | | 141,407 | | | — | | | 141,407 | |
| | | | | | | | | |
NOTE 138 – FAIR VALUE MEASURESCOMMITMENTS AND CONTINGENCIES
The fair value of an asset or liability is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair value is based on discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the asset or liability. The accounting standard for disclosures about the fair value measures excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.Loan Commitments
The Company’s loans held for sale are carried at fair value and are comprised of the following:
|
| | | | | | | |
(dollars in thousands) | September 30, 2017 | | December 31, 2016 |
Mortgage loans held for sale | $ | 132,201 |
| | $ | 105,924 |
|
SBA loans held for sale | 5,191 |
| | — |
|
Total loans held for sale | $ | 137,392 |
| | $ | 105,924 |
|
The Company has electedis a party to record mortgage loans held for sale at fair value in order to eliminate the complexities and inherent difficulties of achieving hedge accounting and to better align reported resultsfinancial instruments with the underlying economic changes in value of the loans and related hedge instruments. This election impacts the timing and recognition of origination fees and costs, as well as servicing value, which are now recognized in earnings at the time of origination. Interest income on mortgage loans held for sale is recorded on an accrual basisoff-balance-sheet risk in the consolidated statementsnormal course of income and comprehensive income underbusiness to meet the heading interest income – interest and fees on loans. The servicing value is included in the fair value of the interest rate lock commitments (“IRLCs”) with borrowers. The mark to market adjustments related to mortgage loans held for sale and the associated economic hedges are captured in mortgage banking activities. Net gains of $5.7 million and $4.9 million resulting from fair value changes of these mortgage loans were recorded in income during the nine months ended September 30, 2017 and 2016, respectively. The amount does not reflect changes in fair values of related derivative instruments used to hedge exposure to market-related risks associated with these mortgage loans. The change in fair value of both mortgage loans held for sale and the related derivative instruments are recorded in mortgage banking activity in the consolidated statements of income and comprehensive income. The Company’s valuation of mortgage loans held for sale incorporates an assumption for credit risk; however, given the short-term period that the Company holds these loans, valuation adjustments attributable to instrument-specific credit risk is nominal.
The following table summarizes the difference between the fair value and the principal balance for mortgage loans held for sale measured at fair value as of September 30, 2017 and December 31, 2016:
|
| | | | | | | |
(dollars in thousands) | September 30, 2017 | | December 31, 2016 |
Aggregate fair value of mortgage loans held for sale | $ | 132,201 |
| | $ | 105,924 |
|
Aggregate unpaid principal balance | 126,503 |
| | 103,691 |
|
Past-due loans of 90 days or more | — |
| | — |
|
Nonaccrual loans | — |
| | — |
|
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale, mortgage loans held for sale and derivatives are recorded at fair value on a recurring basis. From time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans and OREO. Additionally, the Company is required to disclose, but not record, the fair value of other financial instruments.
Fair Value Hierarchy
The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
Level 1– Quoted prices in active markets for identical assets or liabilities.
Level 2– Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3– Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The following methods and assumptions were used by the Company in estimating the fair valuefinancing needs of its assets and liabilities recorded at fair value and for estimating the fair value of itscustomers. These financial instruments:
Cash, Due From Banks, Federal Funds Sold and Interest-Bearing Accounts: The carrying amount of cash, due from banks, federal funds sold and interest-bearing deposits in banks approximates fair value.
Investment Securities Available for Sale: The fair value of securities available for sale is determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Level 2 securitiesinstruments include certain U.S. agency bonds, mortgage-backed securities, collateralized mortgage and debt obligations, and municipal securities. The Level 2 fair value pricing is provided by an independent third party and is based upon similar securities in an active market. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and include certain residual municipal securities and other less liquid securities.
Other Investments: FHLB stock, Federal Reserve Bank stock and the Company’s minority equity investment in USPF are included in other investment securities at original cost basis. These investments do not have readily determinable fair values and are carried at original cost basis. It is not practical to determine the fair value of these investments due to restrictions placed on transferability. These investments are periodically evaluated for impairment based on ultimate recovery of par value or cost basis. Cost basis approximates fair value for these investments.
Loans Held for Sale: The Company records loans held for sale at fair value. The fair value of loans held for sale is determined on outstanding commitments from third party investors in the secondary markets and is classified within Level 2 of the valuation hierarchy.
Loans: The carrying amount of variable-rate loans that reprice frequently and have no significant change in credit risk approximates fair value. The fair value of fixed-rate loans is estimated based on discounted contractual cash flows, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. The fair value of impaired loans is estimated based on discounted contractual cash flows or underlying collateral values, where applicable. A loan is determined to be impaired if the Company believes it is probable that all principal and interest amounts due according to the terms of the note will not be collected as scheduled. The fair value of impaired loans is determined in accordance with ASC 310-10, Accounting by Creditors for Impairment of a Loan, and generally results in a specific reserve established through a charge to the provision for loan losses. Losses on impaired loans are charged to the allowance when management believes the uncollectability of a loan is confirmed. Management has determined that the majority of impaired loans are Level 3 assets due to the extensive use of market appraisals.
Other Real Estate Owned: The fair value of other real estate owned (“OREO”) is determined using certified appraisals and internal evaluations that value the property at its highest and best uses by applying traditional valuation methods common to the industry. The Company does not hold any OREO for profit purposes and all other real estate is actively marketed for sale. In most
cases, management has determined that additional write-downs are required beyond what is calculable from the appraisal to carry the property at levels that would attract buyers. Because this additional write-down is not based on observable inputs, management has determined that other real estate owned should be classified as Level 3.
Intangible Assets: Intangible assets consist of core deposit premiums acquired in connection with business combinations and are based on the established value of acquired customer deposits. The core deposit premium is initially recognized based on a valuation performed as of the consummation date and is amortized over an estimated useful life of seven to ten years.
FDIC Loss-Share Receivable/Payable: Because the FDIC will reimburse the Company for certain acquired loans should the Company experience a loss, an indemnification asset is recorded at fair value at the acquisition date. The indemnification asset is recognized at the same time as the indemnified loans, and measured on the same basis, subject to collectability or contractual limitations. The shared loss agreements on the acquisition date reflect the reimbursements expected to be received from the FDIC, using an appropriate discount rate, which reflects counterparty credit risk and other uncertainties. The shared loss agreements continue to be measured on the same basis as the related indemnified loans, and the loss-share receivable/payable is impacted by changes in estimated cash flows associated with these loans.
Accrued Interest Receivable/Payable: The carrying amount of accrued interest receivable and accrued interest payable approximates fair value.
Cash Value of Bank Owned Life Insurance: The carrying value of cash value of bank owned life insurance approximates fair value.
Deposits: The carrying amount of demand deposits, savings deposits and variable-rate certificates of deposit approximates fair value. The fair value of fixed-rate certificates of deposit is estimated based on discounted contractual cash flows using interest rates currently being offered for certificates of similar maturities.
Securities Sold under Agreements to Repurchase and Other Borrowings: The carrying amount of variable rate borrowings and securities sold under repurchase agreements approximates fair value and are classified as Level 1. The fair value of fixed rate other borrowings is estimated based on discounted contractual cash flows using the current incremental borrowing rates for similar borrowing arrangements and are classified as Level 2.
Subordinated Deferrable Interest Debentures: The fair value of the Company’s trust preferred securities is based primarily upon discounted cash flows using rates for securities with similar terms and remaining maturities and are classified as Level 2.
Off-Balance-Sheet Instruments: Because commitments to extend credit and standby letters of credit. They involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized in the Company’s balance sheets.
The Company’s exposure to credit loss is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. A summary of the Company’s commitments is as follows:
| | | | | | | | | | | |
(dollars in thousands) | March 31, 2024 | | December 31, 2023 |
Commitments to extend credit | $ | 3,816,556 | | | $ | 4,412,818 | |
Unused home equity lines of credit | 414,894 | | | 386,574 | |
Financial standby letters of credit | 39,194 | | | 37,546 | |
Mortgage interest rate lock commitments | 321,262 | | | 171,750 | |
| | | |
| | | |
Commitments to extend credit are typically made usingagreements to lend to a customer as long as there is no violation of any condition established in the contract. These commitments, predominantly at variable interest rates, generally have fixed expiration dates or other termination clauses and have short maturities,may require payment of a fee. Since many of the carrying valuecommitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the customer.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and fair value are immaterial for disclosure.private borrowing arrangements. The credit risk
Derivatives:involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Collateral is required in instances which the Company deems necessary. The Company has entered into derivativenot been required to perform on any material financial instruments to manage interest rate risk. The valuationstandby letters of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivative, including the period to maturity,credit and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair value of the derivatives is determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves derived from observable market interest rate curves).
The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considerednot incurred any losses on financial standby letters of credit for the impact of netting any applicable credit enhancements such as collateral postings, thresholds, mutual puts and guarantees.
Although the Company has determined that the majority of the inputs used to value its derivative fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself or the counterparty. However, as of September 30, 2017 and December 31, 2016, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustment is not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.
The following table presents the fair value measurements of assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of September 30, 2017 and December 31, 2016:
|
| | | | | | | | | | | | | | | |
| Recurring Basis Fair Value Measurements |
| September 30, 2017 |
(dollars in thousands) | Fair Value | | Level 1 | | Level 2 | | Level 3 |
Financial assets: | |
| | |
| | |
| | |
|
U.S. government sponsored agencies | $ | 1,004 |
| | $ | — |
| | $ | 1,004 |
| | $ | — |
|
State, county and municipal securities | 143,387 |
| | — |
| | 143,387 |
| | — |
|
Corporate debt securities | 47,249 |
| | — |
| | 45,749 |
| | 1,500 |
|
Mortgage-backed securities | 627,953 |
| | — |
| | 627,953 |
| | — |
|
Loans held for sale | 137,392 |
| | — |
| | 137,392 |
| | — |
|
Mortgage banking derivative instruments | 3,836 |
| | — |
| | 3,836 |
| | — |
|
Total recurring assets at fair value | $ | 960,821 |
| | $ | — |
| | $ | 959,321 |
| | $ | 1,500 |
|
Financial liabilities: | |
| | |
| | |
| | |
|
Derivative financial instruments | $ | 723 |
| | $ | — |
| | $ | 723 |
| | $ | — |
|
Mortgage banking derivative instruments | 237 |
| | — |
| | 237 |
| | — |
|
Total recurring liabilities at fair value | $ | 960 |
| | $ | — |
| | $ | 960 |
| | $ | — |
|
|
| | | | | | | | | | | | | | | |
| Recurring Basis Fair Value Measurements |
| December 31, 2016 |
(dollars in thousands) | Fair Value | | Level 1 | | Level 2 | | Level 3 |
Financial assets: | |
| | |
| | |
| | |
|
U.S. government sponsored agencies | $ | 1,020 |
| | $ | — |
| | $ | 1,020 |
| | $ | — |
|
State, county and municipal securities | 152,035 |
| | — |
| | 152,035 |
| | — |
|
Corporate debt securities | 32,172 |
| | — |
| | 30,672 |
| | 1,500 |
|
Mortgage-backed securities | 637,508 |
| | — |
| | 637,508 |
| | — |
|
Loans held for sale | 105,924 |
| | — |
| | 105,924 |
| | — |
|
Mortgage banking derivative instruments | 4,314 |
| | — |
| | 4,314 |
| | — |
|
Total recurring assets at fair value | $ | 932,973 |
| | $ | — |
| | $ | 931,473 |
| | $ | 1,500 |
|
Financial liabilities: | |
| | |
| | |
| | |
|
Derivative financial instruments | $ | 978 |
| | $ | — |
| | $ | 978 |
| | $ | — |
|
Total recurring liabilities at fair value | $ | 978 |
| | $ | — |
| | $ | 978 |
| | $ | — |
|
The following table presents the fair value measurements of assets measured at fair value on a non-recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy as of September 30, 2017 and December 31, 2016:
|
| | | | | | | | | | | | | | | |
| Nonrecurring Basis Fair Value Measurements |
(dollars in thousands) | Fair Value | | Level 1 | | Level 2 | | Level 3 |
September 30, 2017 | |
| | |
| | |
| | |
|
Impaired loans carried at fair value | $ | 28,790 |
| | $ | — |
| | $ | — |
| | $ | 28,790 |
|
Other real estate owned | 435 |
| | — |
| | — |
| | 435 |
|
Purchased other real estate owned | 9,946 |
| | — |
| | — |
| | 9,946 |
|
Total nonrecurring assets at fair value | $ | 39,171 |
| | $ | — |
| | $ | — |
| | $ | 39,171 |
|
| | | | | | | |
December 31, 2016 | |
| | |
| | |
| | |
|
Impaired loans carried at fair value | $ | 28,253 |
| | $ | — |
| | $ | — |
| | $ | 28,253 |
|
Other real estate owned | 1,172 |
| | — |
| | — |
| | 1,172 |
|
Purchased other real estate owned | 12,540 |
| | — |
| | — |
| | 12,540 |
|
Total nonrecurring assets at fair value | $ | 41,965 |
| | $ | — |
| | $ | — |
| | $ | 41,965 |
|
The inputs used to determine estimated fair value of impaired loans include market conditions, loan terms, underlying collateral characteristics and discount rates. The inputs used to determine fair value of other real estate owned include market conditions, estimated marketing period or holding period, underlying collateral characteristics and discount rates.
For the ninethree months ended September 30, 2017March 31, 2024 and the year ended December 31, 2016, there was not a change2023.
The Company maintains an allowance for credit losses on unfunded commitments which is recorded in other liabilities on the methods and significant assumptions used to estimate fair value.
consolidated balance sheets. The following table shows significant unobservable inputs usedpresents activity in the fair value measurementallowance for unfunded commitments for the periods presented:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(dollars in thousands) | 2024 | | 2023 | | | | |
Balance at beginning of period | $ | 41,558 | | | $ | 52,411 | | | | | |
| | | | | | | |
| | | | | | | |
Provision for unfunded commitments | (4,422) | | | 346 | | | | | |
Balance at end of period | $ | 37,136 | | | $ | 52,757 | | | | | |
Other Commitments
As of Level 3 assetsMarch 31, 2024, letters of credit issued by the FHLB totaling $1.0 billion were used to guarantee the Bank’s performance related to a portion of its public fund deposit balances.
Litigation and liabilities:Regulatory Contingencies
|
| | | | | | | | | | | | |
(dollars in thousands) | | Fair Value | | Valuation Technique | | Unobservable Inputs | | Range of Discounts | | Weighted Average Discount |
September 30, 2017 | | |
| | | | | | | | |
Recurring: | | |
| | | | | | | | |
Investment securities available for sale | | $ | 1,500 |
| | Discounted par values | | Credit quality of underlying issuer | | 0% | | 0% |
Nonrecurring: | | |
| | | | | | | | |
Impaired loans | | $ | 28,790 |
| | Third-party appraisals and discounted cash flows | | Collateral discounts and discount rates | | 10% - 100% | | 25% |
Other real estate owned | | $ | 435 |
| | Third-party appraisals and sales contracts | | Collateral discounts and estimated costs to sell | | 15% - 20% | | 13% |
Purchased other real estate owned | | $ | 9,946 |
| | Third-party appraisals | | Collateral discounts and estimated costs to sell | | 10% - 74% | | 16% |
| | | | | | | | | | |
December 31, 2016 | | |
| | | | | | | | |
Recurring: | | |
| | | | | | | | |
Investment securities available for sale | | $ | 1,500 |
| | Discounted par values | | Credit quality of underlying issuer | | 0% | | 0% |
Nonrecurring: | | |
| | | | | | | | |
Impaired loans | | $ | 28,253 |
| | Third-party appraisals and discounted cash flows | | Collateral discounts and discount rates | | 15% - 100% | | 28% |
Other real estate owned | | $ | 1,172 |
| | Third-party appraisals and sales contracts | | Collateral discounts and estimated costs to sell | | 15% - 74% | | 22% |
Purchased other real estate owned | | $ | 12,540 |
| | Third-party appraisals | | Collateral discounts and estimated costs to sell | | 10% - 74% | | 15% |
From time to time, the Company and the Bank are subject to various legal proceedings, claims and disputes that arise in the ordinary course of business. The Company and the Bank are also subject to regulatory examinations, information gathering requests, inquiries and investigations in the ordinary course of business. Based on the Company’s current knowledge and advice of counsel, management presently does not believe that the liabilities arising from these legal and regulatory matters will have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows. However, it is possible that the ultimate resolution of these legal and regulatory matters could have a material adverse effect on the Company’s results of operations and financial condition for any particular period.
The carryingCompany’s management and its legal counsel periodically assess contingent liabilities, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, fair value ofthen the estimated liability would be accrued in the Company’s financial instruments,statements. If the assessment indicates that a potentially material loss contingency is not shown elsewhereprobable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in these financial statements, were as follows:which case the nature of the guarantee would be disclosed.
|
| | | | | | | | | | | | | | | | | | | |
| | | Fair Value Measurements |
| | | September 30, 2017 |
(dollars in thousands) | Carrying Amount | | Level 1 | | Level 2 | | Level 3 | | Total |
Financial assets: | |
| | |
| | |
| | |
| | |
|
Cash and due from banks | $ | 131,071 |
| | $ | 131,071 |
| | $ | — |
| | $ | — |
| | $ | 131,071 |
|
Federal funds sold and interest-bearing accounts | 112,844 |
| | 112,844 |
| | — |
| | — |
| | 112,844 |
|
Loans, net | 5,902,267 |
| | — |
| | — |
| | 5,871,518 |
| | 5,871,518 |
|
Accrued interest receivable | 25,068 |
| | 25,068 |
| | — |
| | — |
| | 25,068 |
|
Financial liabilities: | |
| | |
| | |
| | |
| | |
|
Deposits | $ | 5,895,504 |
| | $ | — |
| | $ | 5,896,989 |
| | $ | — |
| | $ | 5,896,989 |
|
Securities sold under agreements to repurchase | 14,156 |
| | 14,156 |
| | — |
| | — |
| | 14,156 |
|
Other borrowings | 808,572 |
| | — |
| | 809,810 |
| | — |
| | 809,810 |
|
Subordinated deferrable interest debentures | 85,220 |
| | — |
| | 70,984 |
| | — |
| | 70,984 |
|
FDIC loss-share payable | 8,190 |
| | — |
| | — |
| | 9,077 |
| | 9,077 |
|
Accrued interest payable | 2,313 |
| | 2,313 |
| | — |
| | — |
| | 2,313 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | | Fair Value Measurements |
| | | December 31, 2016 |
(dollars in thousands) | Carrying Amount | | Level 1 | | Level 2 | | Level 3 | | Total |
Financial assets: | |
| | |
| | |
| | |
| | |
|
Cash and due from banks | $ | 127,164 |
| | $ | 127,164 |
| | $ | — |
| | $ | — |
| | $ | 127,164 |
|
Federal funds sold and interest-bearing accounts | 71,221 |
| | 71,221 |
| | — |
| | — |
| | 71,221 |
|
Loans, net | 5,212,153 |
| | — |
| | — |
| | 5,236,034 |
| | 5,236,034 |
|
Accrued interest receivable | 22,278 |
| | 22,278 |
| | — |
| | — |
| | 22,278 |
|
Financial liabilities: | |
| | |
| | |
| | |
| | |
|
Deposits | $ | 5,575,163 |
| | $ | — |
| | $ | 5,575,288 |
| | $ | — |
| | $ | 5,575,288 |
|
Securities sold under agreements to repurchase | 53,505 |
| | 53,505 |
| | — |
| | — |
| | 53,505 |
|
Other borrowings | 492,321 |
| | — |
| | 492,321 |
| | — |
| | 492,321 |
|
Subordinated deferrable interest debentures | 84,228 |
| | — |
| | 67,321 |
| | — |
| | 67,321 |
|
FDIC loss-share payable | 6,313 |
| | — |
| | — |
| | 8,243 |
| | 8,243 |
|
Accrued interest payable | 1,501 |
| | 1,501 |
| | — |
| | — |
| | 1,501 |
|
NOTE 149 – SEGMENT REPORTING
The Company has the following fivefour reportable segments: Banking Division, Retail Mortgage Division, Warehouse Lending Division, SBA Division and Premium Finance Division. The Banking Division derives its revenues from the delivery of full-service financial services, including commercial loans, consumer loans and deposit accounts. The Retail Mortgage Division derives its revenues from the origination, sales and servicing of one-to-four family residential mortgage loans. The Warehouse Lending Division derives its revenues from the origination and servicing of warehouse lines to other businesses that are secured by underlying one-to-four family residential mortgage loans. The SBA Division derives its revenues from the origination, sales and servicing of SBA loans. The Premium Finance Division derives its revenues from the origination and servicing of commercial insurance premium finance loans.
The Banking, Retail Mortgage, Warehouse Lending SBA and Premium Finance Divisions are managed as separate business units because of the different products and services they provide. The Company evaluates performance and allocates resources based on profit or loss from operations. There are no material intersegment sales or transfers. During the first quarter of 2024, the Company consolidated its former SBA Division into the Banking Division based on the similarity of products and services
offered, customers served and materiality of its operating profit. Prior period segment information for the Banking Division was restated to reflect this consolidation.
The following tables present selected financial information with respect to the Company’s reportable business segments for the three months ended September 30, 2017March 31, 2024 and 2016:2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2024 |
(dollars in thousands) | Banking Division | | Retail Mortgage Division | | Warehouse Lending Division | | | | Premium Finance Division | | Total |
Interest income | $ | 235,122 | | | $ | 55,099 | | | $ | 16,483 | | | | | $ | 22,748 | | | $ | 329,452 | |
Interest expense | 70,654 | | | 31,812 | | | 10,455 | | | | | 15,143 | | | 128,064 | |
Net interest income | 164,468 | | | 23,287 | | | 6,028 | | | | | 7,605 | | | 201,388 | |
Provision for credit losses | 19,127 | | | 2,332 | | | 145 | | | | | (499) | | | 21,105 | |
Noninterest income | 26,363 | | | 38,765 | | | 740 | | | | | 10 | | | 65,878 | |
Noninterest expense | | | | | | | | | | | |
Salaries and employee benefits | 58,916 | | | 21,073 | | | 888 | | | | | 2,053 | | | 82,930 | |
Occupancy and equipment | 11,753 | | | 1,049 | | | 7 | | | | | 76 | | | 12,885 | |
Data processing and communications expenses | 13,184 | | | 1,366 | | | 25 | | | | | 79 | | | 14,654 | |
Other expenses | 24,447 | | | 12,530 | | | 237 | | | | | 1,028 | | | 38,242 | |
Total noninterest expense | 108,300 | | | 36,018 | | | 1,157 | | | | | 3,236 | | | 148,711 | |
Income before income tax expense | 63,404 | | | 23,702 | | | 5,466 | | | | | 4,878 | | | 97,450 | |
Income tax expense | 16,028 | | | 4,978 | | | 1,148 | | | | | 984 | | | 23,138 | |
Net income | $ | 47,376 | | | $ | 18,724 | | | $ | 4,318 | | | | | $ | 3,894 | | | $ | 74,312 | |
| | | | | | | | | | | |
Total assets | $ | 18,553,964 | | | $ | 4,971,058 | | | $ | 897,460 | | | | | $ | 1,232,963 | | | $ | 25,655,445 | |
Goodwill | 951,148 | | | — | | | — | | | | | 64,498 | | | 1,015,646 | |
Other intangible assets, net | 78,275 | | | — | | | — | | | | | 5,252 | | | 83,527 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 |
(dollars in thousands) | Banking Division | | Retail Mortgage Division | | Warehouse Lending Division | | | | Premium Finance Division | | Total |
Interest income | $ | 212,590 | | | $ | 48,589 | | | $ | 16,614 | | | | | $ | 17,923 | | | $ | 295,716 | |
Interest expense | 35,305 | | | 28,562 | | | 10,914 | | | | | 9,283 | | | 84,064 | |
Net interest income | 177,285 | | | 20,027 | | | 5,700 | | | | | 8,640 | | | 211,652 | |
Provision for credit losses | 47,036 | | | 2,853 | | | (194) | | | | | 34 | | | 49,729 | |
Noninterest income | 24,503 | | | 31,058 | | | 480 | | | | | 9 | | | 56,050 | |
Noninterest expense | | | | | | | | | | | |
Salaries and employee benefits | 57,751 | | | 20,160 | | | 802 | | | | | 2,197 | | | 80,910 | |
Occupancy and equipment | 11,643 | | | 1,283 | | | 1 | | | | | 59 | | | 12,986 | |
Data processing and communications expenses | 11,834 | | | 1,069 | | | 46 | | | | | 85 | | | 13,034 | |
Other expenses | 19,445 | | | 11,747 | | | 202 | | | | | 1,097 | | | 32,491 | |
Total noninterest expense | 100,673 | | | 34,259 | | | 1,051 | | | | | 3,438 | | | 139,421 | |
Income before income tax expense | 54,079 | | | 13,973 | | | 5,323 | | | | | 5,177 | | | 78,552 | |
Income tax expense | 13,029 | | | 2,934 | | | 1,118 | | | | | 1,050 | | | 18,131 | |
Net income | $ | 41,050 | | | $ | 11,039 | | | $ | 4,205 | | | | | $ | 4,127 | | | $ | 60,421 | |
| | | | | | | | | | | |
Total assets | $ | 19,142,989 | | | $ | 4,879,135 | | | $ | 936,169 | | | | | $ | 1,130,091 | | | $ | 26,088,384 | |
Goodwill | 951,148 | | | — | | | — | | | | | 64,498 | | | 1,015,646 | |
Other intangible assets, net | 93,285 | | | — | | | — | | | | | 8,203 | | | 101,488 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net income | $ | 47,376 | | | $ | 18,724 | | | $ | 4,318 | | | $ | — | | | $ | 3,894 | | | $ | 74,312 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net income | $ | 41,050 | | | $ | 11,039 | | | $ | 4,205 | | | $ | — | | | $ | 4,127 | | | $ | 60,421 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2017 |
(dollars in thousands) | Banking Division | | Retail Mortgage Division | | Warehouse Lending Division | | SBA Division | | Premium Finance Division | | Total |
Interest income | $ | 59,130 |
| | $ | 5,862 |
| | $ | 2,022 |
| | $ | 1,413 |
| | $ | 7,895 |
| | $ | 76,322 |
|
Interest expense | 5,530 |
| | 1,597 |
| | 487 |
| | 432 |
| | 1,421 |
| | 9,467 |
|
Net interest income | 53,600 |
| | 4,265 |
| | 1,535 |
| | 981 |
| | 6,474 |
| | 66,855 |
|
Provision for loan losses | 1,037 |
| | 262 |
| | 215 |
| | (1 | ) | | 274 |
| | 1,787 |
|
Noninterest income | 13,007 |
| | 12,257 |
| | 583 |
| | 1,130 |
| | 22 |
| | 26,999 |
|
Noninterest expense | |
| | |
| | |
| | |
| | |
| | |
|
Salaries and employee benefits | 20,554 |
| | 9,792 |
| | 129 |
| | 858 |
| | 1,250 |
| | 32,583 |
|
Equipment and occupancy expenses | 5,384 |
| | 555 |
| | 1 |
| | 54 |
| | 42 |
| | 6,036 |
|
Data processing and telecommunications expenses | 6,357 |
| | 425 |
| | 28 |
| | 9 |
| | 231 |
| | 7,050 |
|
Other expenses | 14,905 |
| | 1,001 |
| | 51 |
| | 63 |
| | 2,078 |
| | 18,098 |
|
Total noninterest expense | 47,200 |
| | 11,773 |
| | 209 |
| | 984 |
| | 3,601 |
| | 63,767 |
|
Income before income tax expense | 18,370 |
| | 4,487 |
| | 1,694 |
| | 1,128 |
| | 2,621 |
| | 28,300 |
|
Income tax expense | 4,850 |
| | 1,475 |
| | 580 |
| | 394 |
| | 843 |
| | 8,142 |
|
Net income | $ | 13,520 |
| | $ | 3,012 |
| | $ | 1,114 |
| | $ | 734 |
| | $ | 1,778 |
| | $ | 20,158 |
|
| | | | | | | | | | | |
Total assets | $ | 6,296,159 |
| | $ | 531,897 |
| | $ | 236,024 |
| | $ | 94,531 |
| | $ | 491,209 |
| | $ | 7,649,820 |
|
Goodwill | 125,532 |
| | — |
| | — |
| | — |
| | — |
| | 125,532 |
|
Other intangible assets, net | 14,437 |
| | — |
| | — |
| | — |
| | — |
| | 14,437 |
|
27
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2016 |
(dollars in thousands) | Banking Division | | Retail Mortgage Division | | Warehouse Lending Division | | SBA Division | | Premium Finance Division | | Total |
Interest income | $ | 55,369 |
| | $ | 3,679 |
| | $ | 2,073 |
| | $ | 1,089 |
| | $ | — |
| | $ | 62,210 |
|
Interest expense | 3,716 |
| | 1,054 |
| | 225 |
| | 148 |
| | — |
| | 5,143 |
|
Net interest income | 51,653 |
| | 2,625 |
| | 1,848 |
| | 941 |
| | — |
| | 57,067 |
|
Provision for loan losses | 57 |
| | 447 |
| | 94 |
| | 213 |
| | — |
| | 811 |
|
Noninterest income | 13,949 |
| | 13,198 |
| | 555 |
| | 1,162 |
| | — |
| | 28,864 |
|
Noninterest expense | |
| | |
| | |
| | |
| | |
| | |
|
Salaries and employee benefits | 18,323 |
| | 8,940 |
| | 103 |
| | 616 |
| | — |
| | 27,982 |
|
Equipment and occupancy expenses | 5,490 |
| | 433 |
| | 1 |
| | 65 |
| | — |
| | 5,989 |
|
Data processing and telecommunications expenses | 5,794 |
| | 364 |
| | 26 |
| | 1 |
| | — |
| | 6,185 |
|
Other expenses | 11,533 |
| | 1,303 |
| | 26 |
| | 181 |
| | — |
| | 13,043 |
|
Total noninterest expense | 41,140 |
| | 11,040 |
| | 156 |
| | 863 |
| | — |
| | 53,199 |
|
Income before income tax expense | 24,405 |
| | 4,336 |
| | 2,153 |
| | 1,027 |
| | — |
| | 31,921 |
|
Income tax expense | 7,733 |
| | 1,518 |
| | 754 |
| | 359 |
| | — |
| | 10,364 |
|
Net income | $ | 16,672 |
| | $ | 2,818 |
| | $ | 1,399 |
| | $ | 668 |
| | $ | — |
| | $ | 21,557 |
|
| | | | | | | | | | | |
Total assets | $ | 5,841,207 |
| | $ | 356,755 |
| | $ | 203,334 |
| | $ | 92,199 |
| | $ | — |
| | $ | 6,493,495 |
|
Goodwill | 122,545 |
| | — |
| | — |
| | — |
| | — |
| | 122,545 |
|
Other intangible assets, net | 18,472 |
| | — |
| | — |
| | — |
| | — |
| | 18,472 |
|
NOTE 10 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Mortgage Banking Derivatives
The Company maintains a risk management program to manage interest rate risk and pricing risk associated with its mortgage lending activities. This program includes the use of forward contracts and other derivatives that are used to offset changes in value of the mortgage inventory due to changes in market interest rates. Forward contracts to sell primarily fixed-rate mortgage loans are entered into to reduce the exposure to market risk arising from potential changes in interest rates, which could affect the fair value of mortgage loans held for sale and outstanding interest rate lock commitments, which guarantee a certain interest rate if the loan is ultimately funded or granted by the Company as a mortgage loan held for sale. The commitments to sell mortgage loans are at fixed prices and are scheduled to settle at specified dates.
The Company enters into interest rate lock commitments for residential mortgage loans which commits it to lend funds to a potential borrower at a specific interest rate and within a specified period of time. Interest rate lock commitments that relate to the origination of mortgage loans that, if originated, will be held for sale, are considered derivative financial instruments under applicable accounting guidance. Outstanding interest rate lock commitments expose the Company to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan and the eventual commitment for sale into the secondary market.
These mortgage banking derivatives are carried at fair value and are not designated in hedge relationships. Fair values are estimated based on changes in mortgage interest rates from the date of the commitments. Changes in the fair values of these mortgage banking derivatives are included as a component of mortgage banking activity in the consolidated statements of income.
Customer Related Derivative Positions
The Company enters into interest rate derivative contracts to facilitate the risk management strategies of certain clients. The Company mitigates this risk largely by entering into equal and offsetting interest rate derivative agreements with highly rated counterparties. The interest rate contracts are free-standing derivatives and are recorded at fair value on the Company's consolidated balance sheets. The credit risk to these clients is evaluated and included in the calculation of fair value. Fair value changes including credit-related adjustments are recorded as a component of other noninterest income.
Risk Participation Agreement
The Company has entered into a risk participation agreement swap, that is associated with a loan participation, where the Company is not the counterparty to the interest rate swap that is associated with the risk participation sold. The interest rate swap mark to market only impacts the Company if the swap is in a liability position to the counterparty and the customer defaults on payments to the counterparty.
The following tables present selected financial informationtable reflects the notional amount and fair value of derivative instruments not designated as hedging instruments included in the consolidated balance sheets as of March 31, 2024 and December 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| | | Fair Value | | | | Fair Value |
(dollars in thousands) | Notional Amount | | Derivative Assets(1) | | Derivative Liabilities(2) | | Notional Amount | | Derivative Assets(1) | | Derivative Liabilities(2) |
Interest rate contracts(3) | $ | 850,965 | | | $ | 10,019 | | | $ | 10,142 | | | $ | 736,188 | | | $ | 5,937 | | | $ | 6,203 | |
Risk participation agreement | 26,163 | | | — | | | 32 | | | 26,163 | | | — | | | 65 | |
Mortgage derivatives - interest rate lock commitments | 321,262 | | | 5,752 | | | — | | | 171,750 | | | 3,636 | | | — | |
Mortgage derivatives - forward contracts related to mortgage loans held for sale | 856,672 | | | — | | | 1,030 | | | 663,015 | | | — | | | 5,790 | |
(1)Derivative assets are included in other assets on the consolidated balance sheets.
(2)Derivative liabilities are included in other liabilities on the consolidated balance sheets.
(3)Includes interest rate contracts for client swaps and offsetting positions.
The net gains (losses) relating to changes in fair value from derivative instruments not designated as hedging instruments are summarized below for the three months ended March 31, 2024 and 2023.
| | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, | | |
(dollars in thousands) | Location | | 2024 | | 2023 | | | | |
Interest rate contracts(1) | Other noninterest income | | $ | 143 | | | $ | (326) | | | | | |
Risk participation agreement | Other noninterest income | | 33 | | | — | | | | | |
Interest rate lock commitments | Mortgage banking activity | | 2,116 | | | 5,013 | | | | | |
Forward contracts related to mortgage loans held for sale | Mortgage banking activity | | 4,760 | | | (7,876) | | | | | |
(1)Gain (loss) represents net fair value adjustments (including credit related adjustments) for client swaps and offsetting positions.
NOTE 11 – LOAN SERVICING RIGHTS
The Company sells certain residential mortgage loans and SBA loans to third parties. All such transfers are accounted for as sales and the continuing involvement in the loans sold is limited to certain servicing responsibilities. The Company has also acquired servicing portfolios of residential mortgage and SBA loans. Loan servicing rights are initially recorded at fair value and subsequently recorded at the lower of cost or fair value and are amortized over the remaining service life of the loans, with respectconsideration given to prepayment assumptions. Loan servicing rights are recorded in other assets on the consolidated balance sheets.
The carrying value of the loan servicing rights assets is shown in the table below:
| | | | | | | | | | | |
(dollars in thousands) | March 31, 2024 | | December 31, 2023 |
Loan Servicing Rights | | | |
Residential mortgage | $ | 171,968 | | | $ | 171,915 | |
SBA | 2,301 | | | 2,737 | |
| | | |
Total loan servicing rights | $ | 174,269 | | | $ | 174,652 | |
Residential Mortgage Loans
The Company sells certain first-lien residential mortgage loans to third party investors, primarily the Federal National Mortgage Association (“FNMA”), the Government National Mortgage Association (“GNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”). The Company retains the related mortgage servicing rights (“MSRs”) and receives servicing fees on certain of these loans. The net gain on loan sales, MSRs amortization and recoveries/impairment, and ongoing servicing fees on the portfolio of loans serviced for others are recorded in the consolidated statements of income and comprehensive income as part of mortgage banking activity.
During the three-month period ended March 31, 2024, the Company recorded servicing fee income of $17.2 million. During the three-month period ended March 31, 2023, the Company recorded servicing fee income of $14.2 million. Servicing fee income includes servicing fees, late fees and ancillary fees earned for each period.
The table below is an analysis of the activity in the Company’s MSRs and valuation allowance:
| | | | | | | | | | | | | | | |
(dollars in thousands) | Three Months Ended March 31, | | |
Residential mortgage servicing rights | 2024 | | 2023 | | | | |
Beginning carrying value, net | $ | 171,915 | | | $ | 147,014 | | | | | |
Additions | 5,456 | | | 7,730 | | | | | |
| | | | | | | |
Amortization | (5,403) | | | (4,758) | | | | | |
| | | | | | | |
| | | | | | | |
Ending carrying value, net | $ | 171,968 | | | $ | 149,986 | | | | | |
The key metrics and the sensitivity of the fair value to adverse changes in model inputs and/or assumptions are summarized below:
| | | | | | | | | | | |
(dollars in thousands) | March 31, 2024 | | December 31, 2023 |
Residential mortgage servicing rights | | | |
Unpaid principal balance of loans serviced for others | $ | 12,640,061 | | | $ | 12,454,454 | |
Composition of residential loans serviced for others: | | | |
FHLMC | 17.50 | % | | 17.54 | % |
FNMA | 50.48 | % | | 50.51 | % |
GNMA | 32.02 | % | | 31.95 | % |
Total | 100.00 | % | | 100.00 | % |
Weighted average term (months) | 355 | | 355 |
Weighted average age (months) | 29 | | 27 |
Modeled prepayment speed | 8.41 | % | | 8.56 | % |
Decline in fair value due to a 10% adverse change | (5,424) | | | (4,492) | |
Decline in fair value due to a 20% adverse change | (11,079) | | | (9,444) | |
Weighted average discount rate | 10.73 | % | | 10.98 | % |
Decline in fair value due to a 10% adverse change | (6,742) | | | (5,110) | |
Decline in fair value due to a 20% adverse change | (13,926) | | | (11,181) | |
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in model inputs and/or assumptions generally cannot be extrapolated because the relationship of a change in input or assumption to the change in fair value may not be linear. In addition, the effect of an adverse variation in a particular input or assumption on the value of the residential mortgage servicing rights is calculated without changing any other input or assumption. In reality, a change in another factor may magnify or counteract the effect of the change in the first.
SBA Loans
All sales of SBA loans, consisting of the guaranteed portion, are executed on a servicing retained basis. These loans, which are partially guaranteed by the SBA, are generally secured by business property such as real estate, inventory, equipment and accounts receivable. The net gain on SBA loan sales, amortization and impairment/recoveries of servicing rights, and ongoing servicing fees are recorded in the consolidated statements of income and comprehensive income as part of other noninterest income.
During the three-month period ended March 31, 2024, the Company recorded servicing fee income of $592,000. During the three-month period ended March 31, 2023, the Company recorded servicing fee income of $752,000. Servicing fee income includes servicing fees, late fees and ancillary fees earned for each period.
The table below is an analysis of the activity in the Company’s reportable business segments for the nine months ended September 30, 2017SBA loan servicing rights and 2016:valuation allowance:
| | | | | | | | | | | | | | | |
(dollars in thousands) | Three Months Ended March 31, | | |
SBA servicing rights | 2024 | | 2023 | | | | |
Beginning carrying value, net | $ | 2,737 | | | $ | 3,443 | | | | | |
Additions | 19 | | | 44 | | | | | |
| | | | | | | |
| | | | | | | |
Amortization | (455) | | | (321) | | | | | |
| | | | | | | |
Ending carrying value, net | $ | 2,301 | | | $ | 3,166 | | | | | |
| | | | | | | |
| | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2017 |
(dollars in thousands) | Banking Division | | Retail Mortgage Division | | Warehouse Lending Division | | SBA Division | | Premium Finance Division | | Total |
Interest income | $ | 170,036 |
| | $ | 14,890 |
| | $ | 4,968 |
| | $ | 3,884 |
| | $ | 21,005 |
| | $ | 214,783 |
|
Interest expense | 14,510 |
| | 4,179 |
| | 1,074 |
| | 1,111 |
| | 3,307 |
| | 24,181 |
|
Net interest income | 155,526 |
| | 10,711 |
| | 3,894 |
| | 2,773 |
| | 17,698 |
| | 190,602 |
|
Provision for loan losses | 4,510 |
| | 617 |
| | 159 |
| | 98 |
| | 444 |
| | 5,828 |
|
Noninterest income | 38,974 |
| | 35,823 |
| | 1,340 |
| | 4,663 |
| | 94 |
| | 80,894 |
|
Noninterest expense | |
| | |
| | |
| | |
| | |
| | |
|
Salaries and employee benefits | 58,757 |
| | 24,771 |
| | 403 |
| | 2,339 |
| | 3,239 |
| | 89,509 |
|
Equipment and occupancy expenses | 16,068 |
| | 1,684 |
| | 3 |
| | 159 |
| | 145 |
| | 18,059 |
|
Data processing and telecommunications expenses | 18,778 |
| | 1,182 |
| | 80 |
| | 12 |
| | 598 |
| | 20,650 |
|
Other expenses | 34,355 |
| | 3,030 |
| | 137 |
| | 533 |
| | 6,326 |
| | 44,381 |
|
Total noninterest expense | 127,958 |
| | 30,667 |
| | 623 |
| | 3,043 |
| | 10,308 |
| | 172,599 |
|
Income before income tax expense | 62,032 |
| | 15,250 |
| | 4,452 |
| | 4,295 |
| | 7,040 |
| | 93,069 |
|
Income tax expense | 17,801 |
| | 5,337 |
| | 1,559 |
| | 1,503 |
| | 2,471 |
| | 28,671 |
|
Net income | $ | 44,231 |
| | $ | 9,913 |
| | $ | 2,893 |
| | $ | 2,792 |
| | $ | 4,569 |
| | $ | 64,398 |
|
30
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2016 |
(dollars in thousands) | Banking Division | | Retail Mortgage Division | | Warehouse Lending Division | | SBA Division | | Premium Finance Division | | Total |
Interest income | $ | 158,682 |
| | $ | 9,992 |
| | $ | 4,714 |
| | $ | 2,721 |
| | $ | — |
| | $ | 176,109 |
|
Interest expense | 10,726 |
| | 2,383 |
| | 458 |
| | 450 |
| | — |
| | 14,017 |
|
Net interest income | 147,956 |
| | 7,609 |
| | 4,256 |
| | 2,271 |
| | — |
| | 162,092 |
|
Provision for loan losses | 1,471 |
| | 540 |
| | 94 |
| | 276 |
| | — |
| | 2,381 |
|
Noninterest income | 39,702 |
| | 36,126 |
| | 1,328 |
| | 4,373 |
| | — |
| | 81,529 |
|
Noninterest expense | |
| | |
| | |
| | |
| | |
| | |
|
Salaries and employee benefits | 55,740 |
| | 23,591 |
| | 399 |
| | 1,970 |
| | — |
| | 81,700 |
|
Equipment and occupancy expenses | 16,541 |
| | 1,326 |
| | 3 |
| | 190 |
| | — |
| | 18,060 |
|
Data processing and telecommunications expenses | 17,299 |
| | 974 |
| | 71 |
| | 3 |
| | — |
| | 18,347 |
|
Other expenses | 39,040 |
| | 3,392 |
| | 77 |
| | 542 |
| | — |
| | 43,051 |
|
Total noninterest expense | 128,620 |
| | 29,283 |
| | 550 |
| | 2,705 |
| | — |
| | 161,158 |
|
Income before income tax expense | 57,567 |
| | 13,912 |
| | 4,940 |
| | 3,663 |
| | — |
| | 80,082 |
|
Income tax expense | 18,278 |
| | 4,870 |
| | 1,729 |
| | 1,282 |
| | — |
| | 26,159 |
|
Net income | $ | 39,289 |
| | $ | 9,042 |
| | $ | 3,211 |
| | $ | 2,381 |
| | $ | — |
| | $ | 53,923 |
|
| | | | | | | | | | | |
(dollars in thousands) | March 31, 2024 | | December 31, 2023 |
SBA servicing rights | | | |
Unpaid principal balance of loans serviced for others | $ | 252,465 | | | $ | 271,164 | |
Weighted average life (in years) | 3.18 | | 3.31 |
Modeled prepayment speed | 21.62 | % | | 20.83 | % |
Decline in fair value due to a 10% adverse change | (170) | | | (171) | |
Decline in fair value due to a 20% adverse change | (324) | | | (327) | |
Weighted average discount rate | 13.00 | % | | 14.70 | % |
Decline in fair value due to a 100 basis point adverse change | (66) | | | (69) | |
Decline in fair value due to a 200 basis point adverse change | (128) | | | (135) | |
NOTE 15 – REGULATORY MATTERS
On December 16, 2016,The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in model inputs and/or assumptions generally cannot be extrapolated because the Bank entered intorelationship of a Stipulationchange in input or assumption to the Issuancechange in fair value may not be linear. In addition, the effect of an adverse variation in a Consent Order with its bank regulatory agencies,particular input or assumption on the FDIC and the Georgia Department of Banking and Finance (the “GDBF”), consenting to the issuance of a consent order (the “Order”) relating to the Bank’s Bank Secrecy Act (together with its implementing regulations, the “BSA”) compliance program. In consenting to the issuancevalue of the Order,SBA servicing rights is calculated without changing any other input or assumption. In reality, a change in another factor may magnify or counteract the Bank did not admit or deny any charges of unsafe or unsound banking practices related to its BSA compliance program.
Under the termseffect of the Order, the Bank or its board of directors is required to take certain affirmative actions to comply with the Bank’s obligations under the BSA. These include, but are not limited to, the following: strengthening the board of directors’ oversight of BSA activities; enhancing and adopting a revised BSA compliance program; completing a BSA risk assessment; developing a revised system of internal controls designed to ensure full compliance with the BSA; reviewing and revising customer due diligence and risk assessment processes, policies and procedures; developing, adopting and implementing effective BSA training programs; assessing BSA staffing needs and resources and appointing a qualified BSA officer; establishing an independent BSA testing program; ensuring that all reports required by the BSA are accurately and properly filed; and engaging an independent firm to review past account activity to determine whether suspicious activity was properly identified and reported.
Prior to implementation, certain of the actions required by the Order were subject to review by, and approval or non-objection from, the FDIC and the GDBF. The Order will remain in effect and be enforceable until it is modified, terminated, suspended or
set aside by the FDIC and the GDBF. The Bank expects that it will continue to meet the required actions within the time periods specifiedchange in the Order based upon ongoing communications with its regulators.first.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements
Certain of the statements made in this report are “forward-looking statements” within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance and involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control and which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.
All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation, the following: general competitive, economic, unemployment, political and market conditions and fluctuations, including real estate market conditions, and the effects of such conditions and fluctuations on the creditworthiness of borrowers, collateral values, asset recovery values and the value of investment securities; movements in interest rates and their impacts on net interest margin; expectations on credit quality and performance; competitive pressures on product pricing and services; legislative and regulatory initiatives;changes; changes in U.S. government monetary and fiscal policy; investment security valuation and other performance measures; additional competition in our markets; potential business strategies, including acquisitions or dispositions of assets or internal restructuring, that may be pursued by us;changes in state and federal banking regulations; changes in or application of environmental and other laws and regulations to which we are subject; political, legal and economic conditions and developments; financial market conditions and the results of financing efforts; changes in commodity pricesthe success and interest rates;timing of other business strategies; our outlook and long-term goals for future growth; weather events, natural disasters, geopolitical events, acts of war or terrorism or other hostilities, public health crises and other catastrophic events;events beyond our control; and other factors discussed in our filings with the Securities and Exchange Commission (the “SEC”) under the Exchange Act.
All written or oral forward-looking statements that are made by or are attributable to us are expressly qualified in their entirety by this cautionary notice. Our forward-looking statements apply only as of the date of this report or the respective date of the document from which they are incorporated herein by reference. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date of this report, or after the respective dates on which such statements otherwise are made, whether as a result of new information, future events or otherwise.
Overview
The following is management’s discussion and analysis of certain significant factors which have affected the financial condition and results of operations of the Company as reflected in the unaudited consolidated balance sheet as of September 30, 2017,March 31, 2024, as compared with December 31, 2016,2023, and operating results for the three- and nine-monththree-month periods ended September 30, 2017March 31, 2024 and 2016.2023. These comments should be read in conjunction with the Company’s unaudited consolidated financial statements and accompanying notes appearing elsewhere herein.
This discussion contains certain performance measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”).GAAP. Management of the Company uses these non-GAAP measures in its analysis of the Company’s performance. These measures are useful when evaluating the underlying performance and efficiency of the Company’s operations and balance sheet. The Company’s management believes that these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results with prior periods and demonstrate the effects of significant gains and charges in the current period. The Company’s management believes that investors may use these non-GAAP financial measures to evaluate the Company’s financial performance without the impact of unusual items that may obscure trends in the Company’s underlying performance. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Non-GAAP measures include tangible common equity, tangible book value per common share, adjusted operating net income and adjusted operating net income per diluted share. The Company calculates the regulatory capital ratios using current regulatory report instructions. The Company’s management uses these measures to assess the quality of capital and believes that investors may find them useful in their evaluation of the Company. These capital measures may or may not be necessarily comparable to similar capital measures that may be presented by other companies.
Critical Accounting Policies
There have been no significant changes to our critical accounting policies from those disclosed in our 2023 Annual Report on Form 10-K. The following table sets forth unaudited selected financial data forreader should refer to the previous five quarters. This data should be read in conjunction with the unauditednotes to our consolidated financial statements and the notes thereto and the information contained in this Item 2.our 2023 Annual Report on Form 10-K for a full disclosure of all critical accounting policies.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Nine Months Ended |
(in thousands, except share and per share data) | Third Quarter 2017 | | Second Quarter 2017 | | First Quarter 2017 | | Fourth Quarter 2016 | | Third Quarter 2016 | | September 30, 2017 | | September 30, 2016 |
Results of Operations: | | | | | | | | | | | | | |
Net interest income | $ | 66,855 |
| | $ | 63,157 |
| | $ | 60,590 |
| | $ | 57,279 |
| | $ | 57,067 |
| | $ | 190,602 |
| | $ | 162,092 |
|
Net interest income (tax equivalent) | 68,668 |
| | 64,773 |
| | 62,108 |
| | 58,897 |
| | 58,024 |
| | 195,549 |
| | 164,726 |
|
Provision for loan losses | 1,787 |
| | 2,205 |
| | 1,836 |
| | 1,710 |
| | 811 |
| | 5,828 |
| | 2,381 |
|
Non-interest income | 26,999 |
| | 28,189 |
| | 25,706 |
| | 24,272 |
| | 28,864 |
| | 80,894 |
| | 81,529 |
|
Non-interest expense | 63,767 |
| | 55,739 |
| | 53,093 |
| | 54,677 |
| | 53,199 |
| | 172,599 |
| | 161,158 |
|
Income tax expense | 8,142 |
| | 10,315 |
| | 10,214 |
| | 6,987 |
| | 10,364 |
| | 28,671 |
| | 26,159 |
|
Net income available to common shareholders | 20,158 |
| | 23,087 |
| | 21,153 |
| | 18,177 |
| | 21,557 |
| | 64,398 |
| | 53,923 |
|
Selected Average Balances: | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Investment securities | $ | 864,456 |
| | $ | 866,960 |
| | $ | 862,616 |
| | $ | 856,671 |
| | $ | 857,433 |
| | $ | 864,684 |
| | $ | 840,688 |
|
Loans held for sale | 126,798 |
| | 110,933 |
| | 77,617 |
| | 102,926 |
| | 105,859 |
| | 105,296 |
| | 96,340 |
|
Loans | 4,379,082 |
| | 3,994,213 |
| | 3,678,149 |
| | 3,145,714 |
| | 2,897,771 |
| | 4,018,597 |
| | 2,642,498 |
|
Purchased loans | 937,595 |
| | 973,521 |
| | 1,034,983 |
| | 1,101,907 |
| | 1,199,175 |
| | 982,033 |
| | 1,147,821 |
|
Purchased loan pools | 475,742 |
| | 516,949 |
| | 547,057 |
| | 590,617 |
| | 629,666 |
| | 513,750 |
| | 629,118 |
|
Earning assets | 6,892,939 |
| | 6,584,386 |
| | 6,347,807 |
| | 5,925,634 |
| | 5,780,455 |
| | 6,610,374 |
| | 5,490,525 |
|
Assets | 7,461,367 |
| | 7,152,024 |
| | 6,915,965 |
| | 6,573,344 |
| | 6,330,350 |
| | 7,180,330 |
| | 6,030,181 |
|
Deposits | 5,837,154 |
| | 5,671,394 |
| | 5,491,324 |
| | 5,490,657 |
| | 5,221,219 |
| | 5,667,891 |
| | 5,102,729 |
|
Shareholders’ equity | 796,856 |
| | 774,664 |
| | 695,830 |
| | 653,991 |
| | 640,382 |
| | 756,153 |
| | 599,817 |
|
Period-End Balances: | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Investment securities | $ | 867,570 |
| | $ | 861,188 |
| | $ | 866,715 |
| | $ | 852,199 |
| | $ | 862,702 |
| | $ | 867,570 |
| | $ | 862,702 |
|
Loans held for sale | 137,392 |
| | 146,766 |
| | 105,637 |
| | 105,924 |
| | 126,263 |
| | 137,392 |
| | 126,263 |
|
Loans | 4,574,678 |
| | 4,230,228 |
| | 3,785,480 |
| | 3,626,821 |
| | 3,091,039 |
| | 4,574,678 |
| | 3,091,039 |
|
Purchased loans | 917,126 |
| | 950,499 |
| | 1,006,935 |
| | 1,069,191 |
| | 1,129,381 |
| | 917,126 |
| | 1,129,381 |
|
Purchased loan pools | 465,218 |
| | 490,114 |
| | 529,099 |
| | 568,314 |
| | 624,886 |
| | 465,218 |
| | 624,886 |
|
Earning assets | 7,074,828 |
| | 6,816,606 |
| | 6,525,911 |
| | 6,293,670 |
| | 5,925,072 |
| | 7,074,828 |
| | 5,925,072 |
|
Total assets | 7,649,820 |
| | 7,397,858 |
| | 7,094,856 |
| | 6,892,031 |
| | 6,493,495 |
| | 7,649,820 |
| | 6,493,495 |
|
Deposits | 5,895,504 |
| | 5,793,397 |
| | 5,642,369 |
| | 5,575,163 |
| | 5,306,098 |
| | 5,895,504 |
| | 5,306,098 |
|
Shareholders’ equity | 801,921 |
| | 782,682 |
| | 758,216 |
| | 646,437 |
| | 642,583 |
| | 801,921 |
| | 642,583 |
|
Per Common Share Data: | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Earnings per share - basic | $ | 0.54 |
| | 0.62 |
| | 0.59 |
| | 0.52 |
| | 0.62 |
| | 1.76 |
| | 1.58 |
|
Earnings per share - diluted | $ | 0.54 |
| | 0.62 |
| | 0.59 |
| | 0.52 |
| | 0.61 |
| | 1.74 |
| | 1.56 |
|
Book value per common share | $ | 21.54 |
| | $ | 21.03 |
| | $ | 20.42 |
| | $ | 18.51 |
| | $ | 18.42 |
| | $ | 21.54 |
| | $ | 18.42 |
|
Tangible book value per common share | $ | 17.78 |
| | $ | 17.24 |
| | $ | 16.60 |
| | $ | 14.42 |
| | $ | 14.38 |
| | $ | 17.78 |
| | $ | 14.38 |
|
End of period shares outstanding | 37,231,049 |
| | 37,222,904 |
| | 37,128,714 |
| | 34,921,474 |
| | 34,891,304 |
| | 37,231,049 |
| | 34,891,304 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Nine Months Ended |
(in thousands, except share and per share data) | Third Quarter 2017 | | Second Quarter 2017 | | First Quarter 2017 | | Fourth Quarter 2016 | | Third Quarter 2016 | | September 30, 2017 | | September 30, 2016 |
Weighted Average Shares Outstanding: | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Basic | 37,225,418 |
| | 37,162,810 |
| | 35,664,420 |
| | 34,915,459 |
| | 34,869,747 |
| | 36,689,934 |
| | 34,155,556 |
|
Diluted | 37,552,667 |
| | 37,489,348 |
| | 36,040,240 |
| | 35,293,035 |
| | 35,194,739 |
| | 37,017,486 |
| | 34,470,101 |
|
Market Price: | |
| | |
| | |
| | |
| | |
| | |
| | |
|
High intraday price | $ | 51.28 |
| | $ | 49.80 |
| | $ | 49.50 |
| | $ | 47.70 |
| | $ | 36.20 |
| | $ | 51.28 |
| | $ | 36.20 |
|
Low intraday price | $ | 41.05 |
| | $ | 42.60 |
| | $ | 41.60 |
| | $ | 34.61 |
| | $ | 28.90 |
| | $ | 41.05 |
| | $ | 24.96 |
|
Closing price for quarter | $ | 48.00 |
| | $ | 48.20 |
| | $ | 46.10 |
| | $ | 43.60 |
| | $ | 34.95 |
| | $ | 48.00 |
| | $ | 34.95 |
|
Average daily trading volume | 168,911 |
| | 169,617 |
| | 242,982 |
| | 191,894 |
| | 166,841 |
| | 193,555 |
| | 211,351 |
|
Cash dividends declared per share | $ | 0.10 |
| | $ | 0.10 |
| | $ | 0.10 |
| | $ | 0.10 |
| | $ | 0.10 |
| | $ | 0.30 |
| | $ | 0.20 |
|
Closing price to book value | 2.23 |
| | 2.29 |
| | 2.26 |
| | 2.36 |
| | 1.90 |
| | 2.23 |
| | 1.90 |
|
Performance Ratios: | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Return on average assets | 1.07 | % | | 1.29 | % | | 1.24 | % | | 1.10 | % | | 1.35 | % | | 1.20 | % | | 1.19 | % |
Return on average common equity | 10.04 | % | | 11.95 | % | | 12.33 | % | | 11.06 | % | | 13.39 | % | | 11.39 | % | | 12.01 | % |
Average loans to average deposits | 101.41 | % | | 98.66 | % | | 97.20 | % | | 89.99 | % | | 92.55 | % | | 99.15 | % | | 88.50 | % |
Average equity to average assets | 10.68 | % | | 10.83 | % | | 10.06 | % | | 9.95 | % | | 10.12 | % | | 10.53 | % | | 9.95 | % |
Net interest margin (tax equivalent) | 3.95 | % | | 3.95 | % | | 3.97 | % | | 3.95 | % | | 3.99 | % | | 3.96 | % | | 4.01 | % |
Efficiency ratio | 67.94 | % | | 61.02 | % | | 61.52 | % | | 67.05 | % | | 61.91 | % | | 63.57 | % | | 66.15 | % |
| | | | | | | | | | | | | |
Non-GAAP Measures Reconciliation - | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Tangible book value per common share: | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Total shareholders’ equity | $ | 801,921 |
| | $ | 782,682 |
| | $ | 758,216 |
| | $ | 646,437 |
| | $ | 642,583 |
| | $ | 801,921 |
| | $ | 642,583 |
|
Less: | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Goodwill | 125,532 |
| | 125,532 |
| | 125,532 |
| | 125,532 |
| | 122,545 |
| | 125,532 |
| | 122,545 |
|
Other intangible assets, net | 14,437 |
| | 15,378 |
| | 16,391 |
| | 17,428 |
| | 18,472 |
| | 14,437 |
| | 18,472 |
|
Tangible common equity | $ | 661,952 |
| | $ | 641,772 |
| | $ | 616,293 |
| | $ | 503,477 |
| | $ | 501,566 |
| | $ | 661,952 |
| | $ | 501,566 |
|
End of period shares outstanding | 37,231,049 |
| | 37,222,904 |
| | 37,128,714 |
| | 34,921,474 |
| | 34,891,304 |
| | 37,231,049 |
| | 34,891,304 |
|
Book value per common share | $ | 21.54 |
| | $ | 21.03 |
| | $ | 20.42 |
| | $ | 18.51 |
| | $ | 18.42 |
| | $ | 21.54 |
| | $ | 18.42 |
|
Tangible book value per common share | 17.78 |
| | 17.24 |
| | 16.60 |
| | 14.42 |
| | 14.38 |
| | 17.78 |
| | 14.38 |
|
Results of Operations for the Three Months Ended September 30, 2017March 31, 2024 and 20162023
Consolidated Earnings and Profitability
Ameris reported net income available to common shareholders of $20.2$74.3 million, or $0.54$1.08 per diluted share, for the quarter ended September 30, 2017,March 31, 2024, compared with $21.6$60.4 million, or $0.61$0.87 per diluted share, for the same period in 2016.2023. The Company’s return on average assets and average shareholders’ equity were 1.07%1.18% and 10.04%8.63%, respectively, in the thirdfirst quarter of 2017,2024, compared with 1.35%0.98% and 13.39%7.54%, respectively, in the thirdfirst quarter of 2016.2023. During the thirdfirst quarter of 20172024, the Company incurredrecorded pre-tax merger and conversion chargesgain on bank owned life insurance (BOLI) proceeds of $92,000, pre-tax BSA compliance resolution expenses of $4.7 million, pre-tax Hurricane Irma expenses of $410,000,$998,000 and pre-tax losses on the saleFDIC special assessment of premises of $91,000.$2.9 million. During the thirdfirst quarter of 2016,2023, the Company incurredrecorded a pre-tax lossesgain on the saleBOLI proceeds of premises of $238,000.$486,000. Excluding these merger and conversion charges, compliance resolution expenses, Hurricane Irma expenses, and losses on the sale of premises,adjustment items, the Company’s net income would have been $23.6$75.6 million, or $0.63$1.10 per diluted share, for the thirdfirst quarter of 20172024 and $21.7$59.9 million, or $0.62$0.86 per diluted share, for the thirdfirst quarter of 2016.2023.
Below is a reconciliation of adjusted operating net income to net income, as discussed above. | | | | | | | | | | | |
| Three Months Ended March 31, |
(in thousands, except share and per share data) | 2024 | | 2023 |
Net income | $ | 74,312 | | | $ | 60,421 | |
Adjustment items: | | | |
| | | |
| | | |
| | | |
| | | |
Gain on BOLI proceeds | (998) | | | (486) | |
FDIC special assessment | 2,909 | | | — | |
| | | |
| | | |
Tax effect of adjustment items (Note 1) | (611) | | | — | |
After tax adjustment items | 1,300 | | | (486) | |
Adjusted net income | $ | 75,612 | | | $ | 59,935 | |
| | | |
Weighted average common shares outstanding - diluted | 69,014,116 | | | 69,322,664 | |
Net income per diluted share | $ | 1.08 | | | $ | 0.87 | |
Adjusted net income per diluted share | $ | 1.10 | | | $ | 0.86 | |
| | | |
Note 1: Tax effect is calculated utilizing a 21% rate for taxable adjustments. Gain on BOLI proceeds is non-taxable and no tax effect is included. |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in thousands, except share and per share data) | 2017 | | 2016 | | 2017 | | 2016 |
Net income available to common shareholders | $ | 20,158 |
| | $ | 21,557 |
| | $ | 64,398 |
| | $ | 53,923 |
|
Adjustment items: | |
| | |
| | |
| | |
|
Merger and conversion charges | 92 |
| | — |
| | 494 |
| | 6,359 |
|
Certain compliance resolution expenses | 4,729 |
| | — |
| | 4,729 |
| | — |
|
Financial impact of Hurricane Irma | 410 |
| | — |
| | 410 |
| | — |
|
Losses on the sale of premises | 91 |
| | 238 |
| | 956 |
| | 562 |
|
Tax effect of management adjusted charges | (1,863 | ) | | (83 | ) | | (2,306 | ) | | (2,422 | ) |
After tax management-adjusted charges | 3,459 |
| | 155 |
| | 4,283 |
| | 4,499 |
|
Adjusted operating net income | $ | 23,617 |
| | $ | 21,712 |
| | $ | 68,681 |
| | $ | 58,422 |
|
| | | | | | | |
Weighted average common shares outstanding - diluted | 37,552,667 |
| | 35,194,739 |
| | 37,017,486 |
| | 34,470,101 |
|
Earnings per diluted share | $ | 0.54 |
| | $ | 0.61 |
| | $ | 1.74 |
| | $ | 1.56 |
|
Adjusted operating net income per diluted share | $ | 0.63 |
| | $ | 0.62 |
| | $ | 1.86 |
| | $ | 1.69 |
|
Below is additional information regarding the retail banking activities, mortgage banking activities, warehouse lending activities SBA activities and premium finance activities of the Company during the thirdfirst quarter of 20172024 and 2016,2023, respectively:
| | | | Three Months Ended September 30, 2017 | Three Months Ended March 31, 2024 |
(dollars in thousands) | Banking Division | | Retail Mortgage Division | | Warehouse Lending Division | | SBA Division | | Premium Finance Division | | Total | (dollars in thousands) | Banking Division | | Retail Mortgage Division | | Warehouse Lending Division | | | | Premium Finance Division | | Total |
Interest income | $ | 59,130 |
| | $ | 5,862 |
| | $ | 2,022 |
| | $ | 1,413 |
| | $ | 7,895 |
| | $ | 76,322 |
|
Interest expense | 5,530 |
| | 1,597 |
| | 487 |
| | 432 |
| | 1,421 |
| | 9,467 |
|
Net interest income | 53,600 |
| | 4,265 |
| | 1,535 |
| | 981 |
| | 6,474 |
| | 66,855 |
|
Provision for loan losses | 1,037 |
| | 262 |
| | 215 |
| | (1 | ) | | 274 |
| | 1,787 |
|
Provision for credit losses | |
Noninterest income | 13,007 |
| | 12,257 |
| | 583 |
| | 1,130 |
| | 22 |
| | 26,999 |
|
Noninterest expense | |
| | |
| | |
| | |
| | |
| | |
| Noninterest expense | | | | | | | | | |
Salaries and employee benefits | 20,554 |
| | 9,792 |
| | 129 |
| | 858 |
| | 1,250 |
| | 32,583 |
|
Equipment and occupancy expenses | 5,384 |
| | 555 |
| | 1 |
| | 54 |
| | 42 |
| | 6,036 |
|
Data processing and telecommunications expenses | 6,357 |
| | 425 |
| | 28 |
| | 9 |
| | 231 |
| | 7,050 |
|
Occupancy and equipment | |
Data processing and communications expenses | |
Other expenses | 14,905 |
| | 1,001 |
| | 51 |
| | 63 |
| | 2,078 |
| | 18,098 |
|
Total noninterest expense | 47,200 |
| | 11,773 |
| | 209 |
| | 984 |
| | 3,601 |
| | 63,767 |
|
Income before income tax expense | 18,370 |
| | 4,487 |
| | 1,694 |
| | 1,128 |
| | 2,621 |
| | 28,300 |
|
Income tax expense | 4,850 |
| | 1,475 |
| | 580 |
| | 394 |
| | 843 |
| | 8,142 |
|
Net income | $ | 13,520 |
| | $ | 3,012 |
| | $ | 1,114 |
| | $ | 734 |
| | $ | 1,778 |
| | $ | 20,158 |
|
| | | | Three Months Ended September 30, 2016 | Three Months Ended March 31, 2023 |
(dollars in thousands) | Banking Division | | Retail Mortgage Division | | Warehouse Lending Division | | SBA Division | | Premium Finance Division | | Total | (dollars in thousands) | Banking Division | | Retail Mortgage Division | | Warehouse Lending Division | | | | Premium Finance Division | | Total |
Interest income | $ | 55,369 |
| | $ | 3,679 |
| | $ | 2,073 |
| | $ | 1,089 |
| | $ | — |
| | $ | 62,210 |
|
Interest expense | 3,716 |
| | 1,054 |
| | 225 |
| | 148 |
| | — |
| | 5,143 |
|
Net interest income | 51,653 |
| | 2,625 |
| | 1,848 |
| | 941 |
| | — |
| | 57,067 |
|
Provision for loan losses | 57 |
| | 447 |
| | 94 |
| | 213 |
| | — |
| | 811 |
|
Provision for credit losses | |
Noninterest income | 13,949 |
| | 13,198 |
| | 555 |
| | 1,162 |
| | — |
| | 28,864 |
|
Noninterest expense | |
| | |
| | |
| | |
| | |
| | |
| Noninterest expense | | | | | | | | | |
Salaries and employee benefits | 18,323 |
| | 8,940 |
| | 103 |
| | 616 |
| | — |
| | 27,982 |
|
Equipment and occupancy expenses | 5,490 |
| | 433 |
| | 1 |
| | 65 |
| | — |
| | 5,989 |
|
Data processing and telecommunications expenses | 5,794 |
| | 364 |
| | 26 |
| | 1 |
| | — |
| | 6,185 |
|
Occupancy and equipment | |
Data processing and communications expenses | |
Other expenses | 11,533 |
| | 1,303 |
| | 26 |
| | 181 |
| | — |
| | 13,043 |
|
Total noninterest expense | 41,140 |
| | 11,040 |
| | 156 |
| | 863 |
| | — |
| | 53,199 |
|
Income before income tax expense | 24,405 |
| | 4,336 |
| | 2,153 |
| | 1,027 |
| | — |
| | 31,921 |
|
Income tax expense | 7,733 |
| | 1,518 |
| | 754 |
| | 359 |
| | — |
| | 10,364 |
|
Net income | $ | 16,672 |
| | $ | 2,818 |
| | $ | 1,399 |
| | $ | 668 |
| | $ | — |
| | $ | 21,557 |
|
Net Interest Income and Margins
The following table sets forth the average balance, interest income or interest expense, and average yield/interest rate paid for each category of interest-earning assets and interest-bearing liabilities, net interest spread, and net interest margin on average interest-earning assets for the three months ended September 30, 2017March 31, 2024 and 2016.2023. Federally tax-exempt income is presented on a taxable-equivalent basis assuming a 35%21% federal tax rate.
| | | Quarter Ended September 30, | | Quarter Ended March 31, |
| 2017 | | 2016 | | 2024 | | 2023 |
(dollars in thousands) | Average Balance | | Interest Income/ Expense | | Average Yield/ Rate Paid | | Average Balance | | Interest Income/ Expense | | Average Yield/ Rate Paid | (dollars in thousands) | Average Balance | | Interest Income/ Expense | | Average Yield/ Rate Paid | | Average Balance | | Interest Income/ Expense | | Average Yield/ Rate Paid |
Assets | |
| | |
| | | | |
| | |
| | |
Interest-earning assets: | |
| | |
| | | | |
| | |
| | |
Federal funds sold and interest-bearing deposits in banks | $ | 109,266 |
| | $ | 406 |
| | 1.47% | | $ | 90,551 |
| | $ | 155 |
| | 0.68% |
Investment securities | 864,456 |
| | 5,665 |
| | 2.60% | | 857,433 |
| | 4,872 |
| | 2.26% |
Interest-earning assets: | |
Interest-earning assets: | |
Interest-bearing deposits in banks | |
Interest-bearing deposits in banks | |
Interest-bearing deposits in banks | | $ | 923,845 | | | $ | 12,637 | | | 5.50% | | $ | 859,614 | | | $ | 9,113 | | | 4.30% |
| Investment securities - taxable | |
| Investment securities - taxable | |
| Investment securities - taxable | | 1,599,705 | | | 13,092 | | | 3.29% | | 1,717,448 | | | 14,300 | | | 3.38% |
Investment securities - nontaxable | | Investment securities - nontaxable | 41,287 | | | 418 | | | 4.07% | | 43,052 | | | 429 | | | 4.04% |
Loans held for sale | 126,798 |
| | 1,131 |
| | 3.54% | | 105,859 |
| | 826 |
| | 3.10% | Loans held for sale | 323,351 | | | 5,348 | | 5,348 | | | 6.65% | | 6.65% | | 490,295 | | | 7,007 | | 7,007 | | | 5.80% | | 5.80% |
Loans | 4,379,082 |
| | 53,394 |
| | 4.84% | | 2,897,771 |
| | 33,672 |
| | 4.62% | Loans | 20,320,678 | | | 298,907 | | 298,907 | | | 5.92% | | 5.92% | | 19,820,749 | | | 265,802 | | 265,802 | | | 5.44% | | 5.44% |
Purchased loans | 937,595 |
| | 14,048 |
| | 5.94% | | 1,199,175 |
| | 19,296 |
| | 6.40% |
Purchased loan pools | 475,742 |
| | 3,491 |
| | 2.91% | | 629,666 |
| | 4,346 |
| | 2.75% |
Total interest-earning assets | 6,892,939 |
| | 78,135 |
| | 4.50% | | 5,780,455 |
| | 63,167 |
| | 4.35% | Total interest-earning assets | 23,208,866 | | | 330,402 | | 330,402 | | | 5.73% | | 5.73% | | 22,931,158 | | | 296,651 | | 296,651 | | | 5.25% | | 5.25% |
Noninterest-earning assets | 568,428 |
| | |
| | | | 549,895 |
| | |
| | |
Total assets | $ | 7,461,367 |
| | |
| | | | $ | 6,330,350 |
| | |
| | |
Total assets | |
Total assets | |
| Liabilities and Shareholders’ Equity | |
| Liabilities and Shareholders’ Equity | |
| | | | | | | | |
Liabilities and Shareholders’ Equity | |
| | |
| | | | |
| | |
| | |
Interest-bearing liabilities: | |
| | |
| | | | |
| | |
| | |
Savings and interest-bearing demand deposits | $ | 3,162,448 |
| | $ | 2,963 |
| | 0.37% | | $ | 2,787,323 |
| | $ | 1,719 |
| | 0.25% |
Time deposits | 1,020,239 |
| | 2,173 |
| | 0.85% | | 887,685 |
| | 1,355 |
| | 0.61% |
Federal funds purchased and securities sold under agreements to repurchase | 19,414 |
| | 11 |
| | 0.22% | | 37,305 |
| | 18 |
| | 0.19% |
Interest-bearing liabilities: | |
Interest-bearing liabilities: | |
Interest-bearing deposits | |
Interest-bearing deposits | |
Interest-bearing deposits | |
NOW accounts | |
NOW accounts | |
NOW accounts | | $ | 3,829,977 | | | $ | 20,574 | | | 2.16% | | $ | 4,145,991 | | | $ | 15,033 | | | 1.47% |
MMDA | | MMDA | 5,952,389 | | | 53,953 | | | 3.65% | | 4,994,195 | | | 27,809 | | | 2.26% |
Savings accounts | | Savings accounts | 795,887 | | | 986 | | | 0.50% | | 1,005,614 | | | 1,288 | | | 0.52% |
Retail CDs | | Retail CDs | 2,378,678 | | | 24,576 | | | 4.16% | | 1,612,325 | | | 7,629 | | | 1.92% |
Brokered CDs | | Brokered CDs | 1,381,382 | | | 18,085 | | | 5.27% | | 125,133 | | | 1,423 | | | 4.61% |
Total interest-bearing deposits | | Total interest-bearing deposits | 14,338,313 | | | 118,174 | | | 3.31% | | 11,883,258 | | | 53,182 | | | 1.82% |
Non-deposit funding | |
| FHLB advances | |
| FHLB advances | |
| FHLB advances | 608,413 |
| | 1,849 |
| | 1.21% | | 265,202 |
| | 393 |
| | 0.59% | 219,589 | | | 2,578 | | 2,578 | | | 4.72% | | 4.72% | | 1,968,811 | | | 22,448 | | 22,448 | | | 4.62% | | 4.62% |
Other borrowings | 75,590 |
| | 1,183 |
| | 6.21% | | 49,345 |
| | 479 |
| | 3.86% | Other borrowings | 308,210 | | | 3,879 | | 3,879 | | | 5.06% | | 5.06% | | 361,445 | | | 5,349 | | 5,349 | | | 6.00% | | 6.00% |
Subordinated deferrable interest debentures | 85,040 |
| | 1,288 |
| | 6.01% | | 83,719 |
| | 1,179 |
| | 5.60% | Subordinated deferrable interest debentures | 130,551 | | | 3,433 | | 3,433 | | | 10.58% | | 10.58% | | 128,557 | | | 3,085 | | 3,085 | | | 9.73% | | 9.73% |
Total non-deposit funding | | Total non-deposit funding | 658,350 | | | 9,890 | | | 6.04% | | 2,458,813 | | | 30,882 | | | 5.09% |
Total interest-bearing liabilities | 4,971,144 |
| | 9,467 |
| | 0.76% | | 4,110,579 |
| | 5,143 |
| | 0.50% | Total interest-bearing liabilities | 14,996,663 | | | 128,064 | | 128,064 | | | 3.43% | | 3.43% | | 14,342,071 | | | 84,064 | | 84,064 | | | 2.38% | | 2.38% |
Demand deposits | 1,654,467 |
| | |
| | | | 1,546,211 |
| | |
| | |
Other liabilities | 38,900 |
| | |
| | | | 33,178 |
| | |
| | |
Other liabilities | |
Other liabilities | |
Shareholders’ equity | |
Shareholders’ equity | |
Shareholders’ equity | 796,856 |
| | |
| | | | 640,382 |
| | |
| | |
Total liabilities and shareholders’ equity | $ | 7,461,367 |
| | |
| | | | $ | 6,330,350 |
| | |
| | |
Total liabilities and shareholders’ equity | |
Total liabilities and shareholders’ equity | |
Interest rate spread | |
Interest rate spread | |
Interest rate spread | |
| | |
| | 3.74% | | |
| | |
| | 3.85% | | | | | 2.30% | | | | | | 2.87% |
Net interest income | |
| | $ | 68,668 |
| | | | |
| | $ | 58,024 |
| | |
Net interest margin | |
| | |
| | 3.95% | | |
| | |
| | 3.99% |
Net interest margin | |
Net interest margin | | | | | | 3.51% | | | | | | 3.76% |
On a tax-equivalent basis, net interest income for the thirdfirst quarter of 20172024 was $68.7$202.3 million, an increasea decrease of $10.6$10.2 million, or 18.3%4.8%, compared with $58.0$212.6 million reported in the same quarter in 2016.2023. The higherdecrease in net interest income is primarily a result of increased cost of funds as market interest rates have risen, partially offset by growth in average interest earning assets whichand related rates. Average interest-earning assets increased $1.11 billion,$277.7 million, or 19.2%1.2%, from $5.78$22.93 billion in the thirdfirst quarter of 20162023 to $6.89$23.21 billion for the thirdfirst quarter of 2017.2024. This growth in interest-earning assets resulted primarily from organic loan growth, partially offset by paydowns on the securities portfolio. The Company’s net interest margin decreased during the thirdfirst quarter of 20172024 was 3.51%, down 25 basis points from 3.76% reported in the first quarter of 2023. Loan production amounted to 3.95%$3.9 billion during the first quarter of 2024, with weighted average yields of 7.70%, compared with 3.99% reported in$3.9 billion and 6.88%, respectively, during the thirdfirst quarter of 2016 but remained stable compared with 3.95% reported in the second quarter of 2017.2023.
Total interest income, on a tax-equivalent basis, increased to $78.1$330.4 million during the thirdfirst quarter of 2017,2024, compared with $63.2$296.7 million in the same quarter of 2016.2023. Yields on earning assets increased to 4.50%5.73% during the thirdfirst quarter of 2017,2024, compared with 4.35%5.25% reported in the thirdfirst quarter of 2016.2023. During the thirdfirst quarter of 2017,2024, loans comprised 85.9%88.9% of average
earning assets, compared with 83.6%88.6% in the same quarter of 2016. This increase is a result of growth in average legacy2023. Yields on loans which increased $1.48 billion, or 51.1%, to $4.38 billion5.92% in the thirdfirst quarter 2017 from $2.90 billionof 2024, compared with 5.44% in the same period of 2016. Yields on legacy loans increased to 4.84% in the third quarter of 2017, compared with 4.62% in the same period of 2016. 2023.
The yield on purchased loans decreasedinterest-bearing deposits increased from 6.40%1.82% in the thirdfirst quarter of 20162023 to 5.94% during3.31% in the thirdfirst quarter of 2017. Accretion income for the third quarter of 2017 was $2.7 million, compared with $3.6 million in the third quarter of 2016. Excluding the effect of accretion on purchased loans, the yield on purchased loans was 5.21% for the third quarter of 2016, compared with 4.79% in the same period of 2017. Yields on purchased loan pools increased from 2.75% in the third quarter of 2016 to 2.91% in the same period in 2017. Management anticipates improving economic conditions and increased loan demand will provide consistent interest income.
2024. The yield on total interest-bearing liabilities increased from 0.50%2.38% in the thirdfirst quarter of 20162023 to 0.76%3.43% in the thirdfirst quarter of 2017.2024. Total funding costs, inclusive of noninterest bearingnoninterest-bearing demand deposits, increased to 0.57%2.41% in the thirdfirst quarter of 2017,2024, compared with 0.36%1.59% during the thirdfirst quarter of 2016.2023. Deposit costs increased from 0.23%1.13% in the thirdfirst quarter of 20162023 to 0.35%2.29% in the thirdfirst quarter of 2017.2024. Non-deposit funding costs increased from 1.89%5.09% in the thirdfirst quarter of 20162023 to 2.18%6.04% in the thirdfirst quarter of 2017. The increase in non-deposit funding costs was driven primarily by an increased utilization of short-term FHLB advances coupled with an increase in the average rate paid on other borrowings related to the March 2017 issuance of $75.0 million of 5.75% Fixed-To-Floating Rate Subordinated Notes due 2027. Ongoing efforts to maintain the percentage of funding from transaction deposits have succeeded such that non-CD deposits averaged 82.5% of total deposits in the third quarter of 2017, compared with 83.0% during the third quarter of 2016. Average balances of interest bearing deposits and their respective costs for the third quarter of 2017 and 2016 are shown below:2024.
|
| | | | | | | | | | | |
| Three Months Ended September 30, 2017 | | Three Months Ended September 30, 2016 |
(dollars in thousands) | Average Balance | | Average Cost | | Average Balance | | Average Cost |
NOW | $ | 1,201,151 |
| | 0.20% | | $ | 1,085,828 |
| | 0.16% |
MMDA | 1,682,306 |
| | 0.55% | | 1,435,151 |
| | 0.34% |
Savings | 278,991 |
| | 0.07% | | 266,344 |
| | 0.07% |
Retail CDs < $100,000 | 437,641 |
| | 0.62% | | 431,570 |
| | 0.45% |
Retail CDs > $100,000 | 582,598 |
| | 1.01% | | 451,115 |
| | 0.75% |
Brokered CDs | — |
| | —% | | 5,000 |
| | 0.64% |
Interest-bearing deposits | $ | 4,182,687 |
| | 0.49% | | $ | 3,675,008 |
| | 0.33% |
Provision for LoanCredit Losses
The Company’s provision for loancredit losses during the thirdfirst quarter of 20172024 amounted to $1.8$21.1 million, compared with $2.2$49.7 million in the secondfirst quarter of 20172023. This increase was attributable to the updated economic forecast and $811,000 inorganic loan growth. The provision for credit losses for the thirdfirst quarter of 2016. At September 30, 2017, classified2024 was comprised of $25.5 million related to loans, still accruing totaled $45.8negative $4.4 million related to unfunded commitments and $4,000 related to other credit losses, compared with $43.3$49.4 million at December 31, 2016.related to loans, $346,000 related to unfunded commitments and $7,000 related to other credit losses for the first quarter of 2023. Non-performing assets as a percentage of total assets decreased from 0.94%increased two basis points to 0.71% at March 31, 2024, compared with 0.69% at December 31, 20162023. The increase in non-performing assets is primarily attributable to 0.75% at September 30, 2017. Netan increase in nonaccrual loans of $13.6 million, partially offset by decreases in other real estate owned and accruing loans delinquent 90 days or more of $4.0 million and $1.2 million, respectively. The Company recognized net charge-offs on legacy loans during the thirdfirst quarter of 2017 were2024 of approximately $1.6$12.6 million, or 0.15%0.25% of average legacy loans on an annualized basis, compared with net charge-offs of approximately $371,000,$10.7 million, or 0.05%0.22%, in the thirdfirst quarter of 2016. The Company’s allowance for loan losses allocated to legacy loans at September 30, 2017 was $21.2 million, or 0.46% of legacy loans, compared with $20.5 million, or 0.56% of legacy loans, at December 31, 2016.2023. The Company’s total allowance for loancredit losses on loans at September 30, 2017March 31, 2024 was $26.0$320.0 million, or 0.44%1.55% of total loans, increasing from $23.9compared with $307.1 million, or 0.45%1.52% of total loans, at December 31, 2016.2023. This increase is primarily attributable to updated forecast economic conditions.
Noninterest Income
Total non-interestnoninterest income for the thirdfirst quarter of 20172024 was $27.0$65.9 million, a decreasean increase of $1.9$9.8 million, or 6.5%17.5%, from the $28.9$56.1 million reported in the thirdfirst quarter of 2016. Service charges on deposit accounts in the third quarter of 2017 decreased $823,000, or 7.2%, to $10.5 million, compared with $11.42023. Income from mortgage banking activities was $39.4 million in the thirdfirst quarter of 2016. This decrease in service charge revenue was primarily attributable to lower overdraft fee income. Income from mortgage-related activities decreased $727,000,2024, an increase of $8.0 million, or 5.2%25.6%, from $14.1$31.4 million in the thirdfirst quarter of 2016 to $13.3 million in the third quarter of 2017.2023. Total production in the thirdfirst quarter of 20172024 amounted to $401.7$910.2 million, compared with $410.8$946.4 million in the same quarter of 2016,2023, while spread (gain on sale) decreasedincreased to 3.30%2.49% in the current quarter, compared with 3.69%1.96% in the same quarter of 2016.2023. The retail mortgage open pipeline finished the thirdfirst quarter of 20172024 at $158.4$606.7 million, compared with $174.3$400.1 million at the beginning of the third quarter of 2017December 31, 2023 and $145.4$725.9 million at the end of the thirdfirst quarter of 2016. Other service2023.
Service charges commissions and fees decreased $92,000,on deposit accounts increased $823,000, or 11.6%7.5%, to $699,000 during$11.8 million in the thirdfirst quarter of 2017,2024, compared with $791,000 during$10.9 million in the thirdfirst quarter of 2016. The decrease in other service charges, commissions and fees was primarily attributable to lower ATM fees, reflecting the Company's decision to waive ATM fees for customers during Hurricane Irma.2023. Other non-interestnoninterest income decreased $223,000,increased $749,000, or 8.4%5.9%, to $2.4$13.5 million for the thirdfirst quarter of 2017,2024, compared with $2.6$12.7 million during the thirdfirst quarter of 2016.2023. The decreaseincrease in other non-interestnoninterest income was primarily attributable to lower bank owned life insuranceincreased BOLI income, gain on BOLI proceeds, merchant fee income and lower check orderequipment finance fee income.income of $367,000, $512,000, $235,000 and $171,000, respectively, partially offset by a decline in customer swap related income of $867,000.
Noninterest Expense
Total non-interest expensesnoninterest expense for the thirdfirst quarter of 20172024 increased $10.6$9.3 million, or 19.9%6.7%, to $63.8$148.7 million, compared with $53.2$139.4 million in the same quarter 2016.2023. Salaries and employee benefits increased $4.6$2.0 million, or 16.4%2.5%, from $28.0$80.9 million in the thirdfirst quarter of 20162023 to $32.6$82.9 million in the thirdfirst quarter of 20172024, due primarily to staff additionsa decrease in deferred origination costs of $974,000 and an increase in share-based compensation of $937,000. Occupancy and equipment expenses decreased $101,000, or 0.8%, to $12.9 million for the premium finance division, increased staffing related to the Company’s ongoing BSA compliance efforts, higher incentive accruals for production staff, increased commissionsfirst quarter of 2024, compared with $13.0 million in the mortgage and SBA divisions, and staff additions for the equipment finance line of business. Occupancy and
equipment expenses remained stable at $6.0 million for both the thirdfirst quarter of 2017 and the third quarter of 2016. Tighter controls on expenses held increases in these costs to a minimum.2023. Data processing and telecommunications expensecommunications expenses increased $865,000,$1.6 million, or 14.0%12.4%, to $7.1$14.7 million in the thirdfirst quarter of 2017,2024, compared with $6.2$13.0 million in the thirdfirst quarter of 2016, due to an increase in the number of accounts being processed by our core banking system2023. Advertising and additional software fees incurred related to the buildout of our BSA compliance program which we expect to stabilize. Credit resolution-related expenses decreased from $1.5marketing expense was $2.5 million in the thirdfirst quarter of 2016 to $1.32024, compared with $3.5 million in the thirdfirst quarter of 2017.2023. This decrease was primarily related to a marketing campaign begun in the second quarter of 2022 which was narrowed in 2024. Amortization of intangible assets decreased $284,000, or 6.0%, from $4.7 million in the first quarter of 2023 to $4.4 million in the first quarter of 2024. This decrease was primarily related to a reduction in core deposit intangible amortization. Loan servicing expenses increased $1.1 million, or 13.3%, from $8.3 million in the first quarter of 2023 to $9.4 million in the first quarter of 2024, primarily attributable to additional mortgage loans serviced added from mortgage production over the previous year. Other noninterest expenses increased $5.2$5.9 million, or 37.9%,
from $9.3$15.5 million in the thirdfirst quarter of 20162023 to $14.5$21.4 million in the thirdfirst quarter of 20172024, due primarily to consulting fees$2.9 million related to BSA compliance resolution, managementthe FDIC special assessment and licensing fees associated with the premium finance divisionan increase of $3.0 million in tax and loan servicing fees associated with consumer installment home improvement loans serviced by an unrelated third party.license expense.
Income Taxes
Income tax expense is influenced by the statutory rate, the amount of taxable income, the amount of tax-exempt income and the amount of non-deductiblenondeductible expenses. For the thirdfirst quarter of 2017,2024, the Company reported income tax expense of $8.1$23.1 million, compared with $10.4$18.1 million in the same period of 2016. This decrease in income tax expense is directly correlated to the decrease in pre-tax income for the periods.2023. The Company’s effective tax rate for the three months ending September 30, 2017ended March 31, 2024 and 20162023 was 28.8%23.7% and 32.5%23.1%, respectively.
Results of Operations for the Nine Months Ended September 30, 2017 and 2016
Consolidated Earnings and Profitability
Ameris reported net income available to common shareholders of $64.4 million, or $1.74 per diluted share, for the nine months ended September 30, 2017, compared with $53.9 million, or $1.56 per diluted share, for the same period in 2016. The Company’s return on average assets and average shareholders’ equity were 1.20% and 11.39%, respectively, for the nine months ended September 30, 2017, compared with 1.19% and 12.01%, respectively, for the nine months ended September 30, 2016. During the nine months ended September 30, 2017, the Company incurred pre-tax merger and conversion charges of $494,000, pre-tax BSA compliance resolution expenses of $4.7 million, pre-tax Hurricane Irma expenses of $410,000, and pre-tax losses on the sale of premises of $956,000. During the nine months ended September 30, 2016, the Company incurred pre-tax merger and conversion charges of $6.4 million and pre-tax losses on the sale of premises of $562,000. Excluding these merger and conversion charges, compliance resolution expenses, Hurricane Irma expenses, and losses on the sale of premises, the Company’s net income would have been $68.7 million, or $1.86 per diluted share, and $58.4 million, or $1.69 per diluted share, for the first nine months of 2017 and 2016, respectively.
Below is a reconciliation of adjusted operating net income to net income, as discussed above.
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in thousands, except share and per share data) | 2017 | | 2016 | | 2017 | | 2016 |
Net income available to common shareholders | $ | 20,158 |
| | $ | 21,557 |
| | $ | 64,398 |
| | $ | 53,923 |
|
Adjustment items: | |
| | |
| | |
| | |
|
Merger and conversion charges | 92 |
| | — |
| | 494 |
| | 6,359 |
|
Certain compliance resolution expenses | 4,729 |
| | — |
| | 4,729 |
| | — |
|
Financial impact of Hurricane Irma | 410 |
| | — |
| | 410 |
| | — |
|
Losses on the sale of premises | 91 |
| | 238 |
| | 956 |
| | 562 |
|
Tax effect of management adjusted charges | (1,863 | ) | | (83 | ) | | (2,306 | ) | | (2,422 | ) |
After tax management-adjusted charges | 3,459 |
| | 155 |
| | 4,283 |
| | 4,499 |
|
Adjusted operating net income | $ | 23,617 |
| | $ | 21,712 |
| | $ | 68,681 |
| | $ | 58,422 |
|
| | | | | | | |
Weighted average common shares outstanding - diluted | 37,552,667 |
| | 35,194,739 |
| | 37,017,486 |
| | 34,470,101 |
|
Earnings per diluted share | $ | 0.54 |
| | $ | 0.61 |
| | $ | 1.74 |
| | $ | 1.56 |
|
Adjusted operating net income per diluted share | $ | 0.63 |
| | $ | 0.62 |
| | $ | 1.86 |
| | $ | 1.69 |
|
Below is additional information regarding the retail banking activities, mortgage banking activities, warehouse lending activities, SBA activities and premium finance activities of the Company during the first nine months of 2017 and 2016, respectively:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2017 |
(dollars in thousands) | Banking Division | | Retail Mortgage Division | | Warehouse Lending Division | | SBA Division | | Premium Finance Division | | Total |
Interest income | $ | 170,036 |
| | $ | 14,890 |
| | $ | 4,968 |
| | $ | 3,884 |
| | $ | 21,005 |
| | $ | 214,783 |
|
Interest expense | 14,510 |
| | 4,179 |
| | 1,074 |
| | 1,111 |
| | 3,307 |
| | 24,181 |
|
Net interest income | 155,526 |
| | 10,711 |
| | 3,894 |
| | 2,773 |
| | 17,698 |
| | 190,602 |
|
Provision for loan losses | 4,510 |
| | 617 |
| | 159 |
| | 98 |
| | 444 |
| | 5,828 |
|
Noninterest income | 38,974 |
| | 35,823 |
| | 1,340 |
| | 4,663 |
| | 94 |
| | 80,894 |
|
Noninterest expense | |
| | |
| | |
| | |
| | |
| | |
|
Salaries and employee benefits | 58,757 |
| | 24,771 |
| | 403 |
| | 2,339 |
| | 3,239 |
| | 89,509 |
|
Equipment and occupancy expenses | 16,068 |
| | 1,684 |
| | 3 |
| | 159 |
| | 145 |
| | 18,059 |
|
Data processing and telecommunications expenses | 18,778 |
| | 1,182 |
| | 80 |
| | 12 |
| | 598 |
| | 20,650 |
|
Other expenses | 34,355 |
| | 3,030 |
| | 137 |
| | 533 |
| | 6,326 |
| | 44,381 |
|
Total noninterest expense | 127,958 |
| | 30,667 |
| | 623 |
| | 3,043 |
| | 10,308 |
| | 172,599 |
|
Income before income tax expense | 62,032 |
| | 15,250 |
| | 4,452 |
| | 4,295 |
| | 7,040 |
| | 93,069 |
|
Income tax expense | 17,801 |
| | 5,337 |
| | 1,559 |
| | 1,503 |
| | 2,471 |
| | 28,671 |
|
Net income | $ | 44,231 |
| | $ | 9,913 |
| | $ | 2,893 |
| | $ | 2,792 |
| | $ | 4,569 |
| | $ | 64,398 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2016 |
(dollars in thousands) | Banking Division | | Retail Mortgage Division | | Warehouse Lending Division | | SBA Division | | Premium Finance Division | | Total |
Interest income | $ | 158,682 |
| | $ | 9,992 |
| | $ | 4,714 |
| | $ | 2,721 |
| | $ | — |
| | $ | 176,109 |
|
Interest expense | 10,726 |
| | 2,383 |
| | 458 |
| | 450 |
| | — |
| | 14,017 |
|
Net interest income | 147,956 |
| | 7,609 |
| | 4,256 |
| | 2,271 |
| | — |
| | 162,092 |
|
Provision for loan losses | 1,471 |
| | 540 |
| | 94 |
| | 276 |
| | — |
| | 2,381 |
|
Noninterest income | 39,702 |
| | 36,126 |
| | 1,328 |
| | 4,373 |
| | — |
| | 81,529 |
|
Noninterest expense | |
| | |
| | |
| | |
| | |
| | |
|
Salaries and employee benefits | 55,740 |
| | 23,591 |
| | 399 |
| | 1,970 |
| | — |
| | 81,700 |
|
Equipment and occupancy expenses | 16,541 |
| | 1,326 |
| | 3 |
| | 190 |
| | — |
| | 18,060 |
|
Data processing and telecommunications expenses | 17,299 |
| | 974 |
| | 71 |
| | 3 |
| | — |
| | 18,347 |
|
Other expenses | 39,040 |
| | 3,392 |
| | 77 |
| | 542 |
| | — |
| | 43,051 |
|
Total noninterest expense | 128,620 |
| | 29,283 |
| | 550 |
| | 2,705 |
| | — |
| | 161,158 |
|
Income before income tax expense | 57,567 |
| | 13,912 |
| | 4,940 |
| | 3,663 |
| | — |
| | 80,082 |
|
Income tax expense | 18,278 |
| | 4,870 |
| | 1,729 |
| | 1,282 |
| | — |
| | 26,159 |
|
Net income | $ | 39,289 |
| | $ | 9,042 |
| | $ | 3,211 |
| | $ | 2,381 |
| | $ | — |
| | $ | 53,923 |
|
Interest Income
Interest income, on a tax-equivalent basis, for the nine months ended September 30, 2017 was $219.7 million, an increase of $41.0 million, or 22.9%, as compared with $178.7 million for the same period in 2016. Average earning assets for the nine-month period increased $1.12 billion, or 20.4%, to $6.61 billion as of September 30, 2017, compared with $5.49 billion as of September 30, 2016. The increase in average earning assets is due to organic growth in the loan portfolio coupled with acquisition activity during the first quarter of 2016. Yield on average earning assets increased to 4.44% for the nine months ended September 30, 2017, compared with 4.35% in the first nine months of 2016. The increase in the yield on average earning assets was primarily attributable to the growth in legacy loans.
Interest Expense
Total interest expense for the nine months ended September 30, 2017 amounted to $24.2 million, reflecting a $10.2 million increase from the $14.0 million expense recorded in the same period of 2016. During the nine-month period ended September 30, 2017, the Company’s funding costs increased to 0.51% from 0.35% reported in 2016. Deposit costs increased to 0.32% during the nine-month period ended September 30, 2017, compared with 0.23% during the same period in 2016. Total non-deposit funding costs decreased to 1.99% during the nine-month period ended September 30, 2017, compared with 2.36% during the first nine months of 2016. The decrease in non-deposit funding costs was driven primarily by an increased utilization of lower rate short-term FHLB advances.
Net Interest Income
The following table sets forth the average balance, interest income or interest expense, and average yield/rate paid for each category of interest-earning assets and interest-bearing liabilities, net interest spread, and net interest margin on average interest-earning assets for the nine months ended September 30, 2017 and 2016. Federally tax-exempt income is presented on a taxable-equivalent basis assuming a 35% federal tax rate.
|
| | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
(dollars in thousands) | Average Balance | | Interest Income/ Expense | | Average Yield/ Rate Paid | | Average Balance | | Interest Income/ Expense | | Average Yield/ Rate Paid |
Assets | |
| | |
| | | | |
| | |
| | |
Interest-earning assets: | |
| | |
| | | | |
| | |
| | |
Federal funds sold and interest-bearing deposits in banks | $ | 126,014 |
| | $ | 1,070 |
| | 1.14% | | $ | 134,060 |
| | $ | 659 |
| | 0.66% |
Investment securities | 864,684 |
| | 16,917 |
| | 2.62% | | 840,688 |
| | 15,227 |
| | 2.42% |
Loans held for sale | 105,296 |
| | 2,842 |
| | 3.61% | | 96,340 |
| | 2,402 |
| | 3.33% |
Loans | 4,018,597 |
| | 143,806 |
| | 4.78% | | 2,642,498 |
| | 93,887 |
| | 4.75% |
Purchased loans | 982,033 |
| | 43,986 |
| | 5.99% | | 1,147,821 |
| | 53,348 |
| | 6.21% |
Purchased loan pools | 513,750 |
| | 11,109 |
| | 2.89% | | 629,118 |
| | 13,220 |
| | 2.81% |
Total interest-earning assets | 6,610,374 |
| | 219,730 |
| | 4.44% | | 5,490,525 |
| | 178,743 |
| | 4.35% |
Noninterest-earning assets | 569,956 |
| | |
| | | | 539,656 |
| | |
| | |
Total assets | $ | 7,180,330 |
| | |
| | | | $ | 6,030,181 |
| | |
| | |
| | | | | | | | | | | |
Liabilities and Shareholders’ Equity | |
| | |
| | | | |
| | |
| | |
Interest-bearing liabilities: | |
| | |
| | | | |
| | |
| | |
Savings and interest-bearing demand deposits | $ | 3,048,284 |
| | $ | 7,614 |
| | 0.33% | | $ | 2,740,368 |
| | $ | 4,922 |
| | 0.24% |
Time deposits | 994,770 |
| | 5,865 |
| | 0.79% | | 872,209 |
| | 3,808 |
| | 0.58% |
Federal funds purchased and securities sold under agreements to repurchase | 29,612 |
| | 44 |
| | 0.20% | | 44,433 |
| | 77 |
| | 0.23% |
FHLB advances | 539,496 |
| | 3,994 |
| | 0.99% | | 126,855 |
| | 571 |
| | 0.60% |
Other borrowings | 66,420 |
| | 2,900 |
| | 5.84% | | 47,809 |
| | 1,333 |
| | 3.72% |
Subordinated deferrable interest debentures | 84,712 |
| | 3,764 |
| | 5.94% | | 79,912 |
| | 3,306 |
| | 5.53% |
Total interest-bearing liabilities | 4,763,294 |
| | 24,181 |
| | 0.68% | | 3,911,586 |
| | 14,017 |
| | 0.48% |
Demand deposits | 1,624,837 |
| | |
| | | | 1,490,152 |
| | |
| | |
Other liabilities | 36,046 |
| | |
| | | | 28,626 |
| | |
| | |
Shareholders’ equity | 756,153 |
| | |
| | | | 599,817 |
| | |
| | |
Total liabilities and shareholders’ equity | $ | 7,180,330 |
| | |
| | | | $ | 6,030,181 |
| | |
| | |
Interest rate spread | |
| | |
| | 3.76% | | |
| | |
| | 3.87% |
Net interest income | |
| | $ | 195,549 |
| | | | |
| | $ | 164,726 |
| | |
Net interest margin | |
| | |
| | 3.96% | | |
| | |
| | 4.01% |
For the year-to-date period ending September 30, 2017, the Company reported $195.5 million of net interest income on a tax-equivalent basis, an increase of $30.8 million, or 18.7%, compared with $164.7 million of net interest income for the same period in 2016. The average balance of earning assets increased $1.12 billion, or 20.4%, from $5.49 billion during the first nine months of 2016 to $6.61 billion during the first nine months of 2017. The increase in average earning assets is due to organic growth in the loan portfolio coupled with acquisition activity during the first quarter of 2016. The Company’s net interest margin decreased to 3.96% in the nine-month period ending September 30, 2017, compared with 4.01% in the same period in 2016. The decrease in the net interest margin was primarily attributable to the increase in yield on interest-bearing liabilities.
Provision for Loan Losses
The provision for loan losses increased to $5.8 million for the nine months ended September 30, 2017, compared with $2.4 million in the same period in 2016. For the nine-month period ended September 30, 2016, the Company had legacy net charge-offs totaling $3.9 million, compared with $1.9 million for the same period in 2016. Annualized legacy net charge-offs as a percentage of average legacy loans increased to 0.13% during the first nine months of 2017, compared with 0.10% during the first nine months of 2016. For the nine-month period ended September 30, 2017, the Company had total loan net charge-offs totaling $3.8 million, compared with $480,000 for the same period in 2016. Annualized total loan net charge-offs as a percentage of average total loans increased to 0.09% during the first nine months of 2017, compared with 0.01% during the first nine months of 2016. Non-performing assets declined to $57.6 million at September 30, 2017, compared with $66.6 million at September 30, 2016.
Noninterest Income
Non-interest income for the first nine months of 2017 decreased $635,000, or 0.8%, to $80.9 million, compared with $81.5 million in the same period in 2016. Service charges on deposit accounts remained stable at $31.7 million for both the first nine months of 2017 and the first nine months of 2016. However, service charge revenues on both commercial and consumer accounts increased, while overdraft fee income declined. Income from mortgage banking activity increased slightly from $38.4 million in the first nine months of 2016 to $38.5 million in the first nine months of 2017, due to higher levels of production. Other service charges, commissions and fees decreased $732,000, or 25.5%, to $2.1 million in the first nine months of 2017, compared with $2.9 million in the first nine months of 2016. The decrease in other service charges, commissions and fees was primarily attributable to lower ATM fees and lower brokerage income. Other non-interest income increased slightly from $8.4 million during the first nine months of 2016 to $8.5 million during the first nine months of 2017.
Noninterest Expense
Total operating expenses for the first nine months of 2017 increased $11.4 million, or 7.1%, to $172.6 million, compared with $161.2 million in the same period in 2016. Salaries and benefits for the first nine months of 2017 increased $7.8 million as compared with the first nine months of 2016 due to staff additions for the premium finance division, increased staffing related to the Company’s ongoing BSA compliance efforts, staff additions for the equipment finance line of business, and the acquisition of Jacksonville Bancorp, Inc. (“JAXB”) during the first quarter of 2016. Occupancy and equipment expenses remained stable at $18.1 million for both the first nine months of 2017 and the first nine months of 2016. Data processing and telecommunications expenses increased from $18.3 million in the first nine months of 2016 to $20.7 million in the first nine months of 2017. Credit resolution-related expenses, including problem loan and OREO expense and OREO write-downs and losses, decreased to $2.9 million for the first nine months of 2017, compared with $5.1 million in the first nine months of 2016. Advertising and marketing expenses increased from $2.9 million for the first nine months of 2016 to $3.6 million for the first nine months of 2017. Amortization of intangible assets for the first nine months of 2017 decreased $342,000 as compared with the first nine months of 2016. Merger and conversion charges were $494,000 and $6.4 million for the nine months ended September 30, 2017 and 2016, respectively, reflecting the first quarter 2016 acquisition of JAXB. Other noninterest expense increased $9.0 million for the first nine months of 2017 as compared with the first nine months of 2016 due primarily to consulting fees related to BSA compliance resolution, management and licensing fees associated with the premium finance division, and loan servicing fees associated with consumer installment home improvement loans serviced by an unrelated third party.
Income Taxes
In the first nine months of 2017, the Company recorded income tax expense of $28.7 million, compared with $26.2 million in the same period of 2016. This increase in income tax expense is directly correlated to the increase in pre-tax income for the periods. The Company’s effective tax rate for the nine months ended September 30, 2017 and 2016 was 30.8% and 32.7%, respectively.
Financial Condition as of September 30, 2017March 31, 2024
Securities
Debt securities with readily determinable fair values are classified as available for sale andavailable-for-sale are recorded at fair value with unrealized holding gains and losses excluded from earnings and reported in accumulated other comprehensive income, net of the related deferred tax effect. EquitySecurities available-for-sale may be bought and sold in response to changes in market conditions, including, but not limited to, fluctuations in interest rates, changes in securities' prepayment risk, increases in loan demand, general liquidity needs and positioning the portfolio to take advantage of market conditions that create more economically attractive returns. Debt securities including restrictedare classified as held-to-maturity based on management's positive intent and ability to hold such securities to maturity and are carried at amortized cost. Restricted equity securities are classified as other investment securities and are recordedcarried at cost and are periodically evaluated for impairment based on the lowerultimate recovery of par value or cost or market value.basis.
The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the expected life of the securities. Realized gains and losses, determined on the basis of the cost of specific securities sold, are included in earnings on the trade date. Declines in the fair value of securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses.
In determining whether other-than-temporary impairment losses exist, management considers (1) the length of timeManagement and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investmentCompany’s ALCO Committee evaluate available-for-sale securities in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
Management evaluates securities for other-than-temporary impairmentan unrealized loss position on at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Substantially allevaluation, to determine if credit-related impairment exists. Management first evaluates whether they intend to sell or more likely than not will be required to sell an impaired security before recovering its amortized cost basis. If either criteria is met, the entire amount of unrealized loss is recognized in earnings with a corresponding adjustment to the security's amortized cost basis. If either of the unrealizedabove criteria is not met, management evaluates whether the decline in fair value is attributable to credit or resulted from other factors. If credit-related impairment exists, the Company recognizes an allowance for credit losses, on debt securities are relatedlimited to
changes the amount by which the fair value is less than the amortized cost basis. Any impairment not recognized through an allowance for credit losses is recognized in interest rates and do not affect the expected cash flowsother comprehensive income, net of the issuer or underlying collateral. All unrealized losses are considered temporary because each security carries an acceptable investment grade and thetax, as a non credit-related impairment. The Company does not intend to sell these available-for-sale investment securities at an unrealized loss position at September 30, 2017,March 31, 2024, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore,Based on the results of management's review, at September 30, 2017, these investments are not considered impaired onMarch 31, 2024, management determined that $73,000 was attributable to credit impairment and, accordingly, an other-than temporary basis.allowance for credit losses was established. The remaining $50.1 million in unrealized loss was determined to be from factors other than credit.
The Company's held-to-maturity securities have no expected credit losses, and no related allowance for credit losses has been established.
The following table illustrates certain information regarding the Company’sis a summary of our investment portfolio with respectat the dates indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
(dollars in thousands) | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
Securities available-for-sale | | | | | | | |
U.S. Treasuries | $ | 712,985 | | | $ | 701,296 | | | $ | 732,636 | | | $ | 720,877 | |
U.S. government-sponsored agencies | 1,020 | | | 980 | | | 1,023 | | | 985 | |
State, county and municipal securities | 28,136 | | | 27,004 | | | 28,986 | | | 28,051 | |
Corporate debt securities | 10,946 | | | 10,014 | | | 10,946 | | | 10,027 | |
SBA pool securities | 80,164 | | | 78,429 | | | 53,033 | | | 51,516 | |
Mortgage-backed securities | 631,284 | | | 596,696 | | | 621,013 | | | 591,488 | |
Total debt securities available-for-sale | $ | 1,464,535 | | | $ | 1,414,419 | | | $ | 1,447,637 | | | $ | 1,402,944 | |
| | | | | | | |
Securities held-to-maturity | | | | | | | |
| | | | | | | |
State, county and municipal securities | $ | 33,668 | | | $ | 27,977 | | | $ | 31,905 | | | $ | 26,854 | |
| | | | | | | |
| | | | | | | |
Mortgage-backed securities | 113,354 | | | 98,604 | | | 109,607 | | | 95,877 | |
Total debt securities held-to-maturity | $ | 147,022 | | | $ | 126,581 | | | $ | 141,512 | | | $ | 122,731 | |
The amounts of securities available-for-sale and held-to-maturity in each category as of March 31, 2024 are shown in the following table according to yields, sensitivitiescontractual maturity classifications: (i) one year or less; (ii) after one year through five years; (iii) after five years through ten years; and expected(iv) after ten years:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | U.S. Treasuries | | U.S. Government-Sponsored Agencies | | State, County and Municipal Securities |
(dollars in thousands) Securities available-for-sale (1) | | Amount | | Yield (2) | | Amount | | Yield (2) | | Amount | | Yield (2)(3) |
One year or less | | $ | 302,878 | | | 3.91 | % | | $ | — | | | — | % | | $ | 1,489 | | | 3.46 | % |
After one year through five years | | 398,418 | | | 2.59 | | | 980 | | | 2.16 | | | 18,121 | | | 4.00 | |
After five years through ten years | | — | | | — | | | — | | | — | | | 7,394 | | | 3.94 | |
After ten years | | — | | | — | | | — | | | — | | | — | | | — | |
| | $ | 701,296 | | | 3.15 | % | | $ | 980 | | | 2.16 | % | | $ | 27,004 | | | 3.95 | % |
| | | | | | | | | | | | |
| | Corporate Debt Securities | | SBA Pool Securities | | Mortgage-Backed Securities |
(dollars in thousands) Securities available-for-sale (1) | | Amount | | Yield (2) | | Amount | | Yield (2) | | Amount | | Yield (2) |
One year or less | | $ | — | | | — | % | | $ | 963 | | | 2.33 | % | | $ | 3,101 | | | 2.30 | % |
After one year through five years | | 8,666 | | | 6.77 | | | 3,107 | | | 2.18 | | | 288,516 | | | 3.19 | |
After five years through ten years | | — | | | — | | | 64,956 | | | 5.64 | | | 81,739 | | | 2.89 | |
After ten years | | 1,348 | | | 8.61 | | | 9,403 | | | 3.24 | | | 223,340 | | | 3.59 | |
| | $ | 10,014 | | | 7.09 | % | | $ | 78,429 | | | 5.15 | % | | $ | 596,696 | | | 3.29 | % |
| | | | | | | | | | | | |
| | State, County and Municipal Securities | | Mortgage-Backed Securities | | | | |
(dollars in thousands) Securities held-to-maturity (1) | | Amount | | Yield (2)(3) | | Amount | | Yield (2) | | | | |
One year or less | | $ | — | | | — | % | | $ | — | | | — | % | | | | |
After one year through five years | | — | | | — | | | 11,095 | | | 1.36 | | | | | |
After five years through ten years | | — | | | — | | | 70,386 | | | 2.73 | | | | | |
After ten years | | 33,668 | | | 3.95 | | | 31,873 | | | 2.66 | | | | | |
| | $ | 33,668 | | | 3.95 | % | | $ | 113,354 | | | 2.57 | % | | | | |
(1)The amortized cost of securities held-to-maturity and fair value of securities available-for-sale are presented based on contractual maturities. Actual cash flows may differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties.
(2)Yields were computed using coupon interest, adding discount accretion or subtracting premium amortization, as appropriate, on a ratable basis over the next twelve months assuming constant prepaymentslife of each security. The weighted average yield for each maturity range was computed using the amortized cost of each security in that range.
(3)Yields on securities of state and maturities:political subdivisions are stated on a taxable-equivalent basis, using a tax rate of 21%.
|
| | | | | | | | | | | | | | | |
(dollars in thousands) | Amortized Cost | | Fair Value | | Book Yield | | Modified Duration | | Estimated Cash Flows 12 Months |
September 30, 2017 | | | | | | | | | |
U.S. government sponsored agencies | $ | 1,000 |
| | $ | 1,004 |
| | 3.20% | | 0.19 | | $ | 1,000 |
|
State, county and municipal securities | 140,190 |
| | 143,387 |
| | 4.06% | | 4.82 | | 14,048 |
|
Corporate debt securities | 46,704 |
| | 47,249 |
| | 4.00% | | 5.34 | | 3,000 |
|
Mortgage-backed securities | 626,927 |
| | 627,953 |
| | 2.34% | | 3.91 | | 102,846 |
|
Total debt securities | $ | 814,821 |
| | $ | 819,593 |
| | 2.73% | | 4.14 | | $ | 120,894 |
|
| | | | | | | | | |
December 31, 2016 | |
| | |
| | | | | | |
|
U.S. government sponsored agencies | $ | 999 |
| | $ | 1,020 |
| | 3.20% | | 0.92 | | $ | 1,000 |
|
State, county and municipal securities | 149,899 |
| | 152,035 |
| | 3.73% | | 5.34 | | 7,884 |
|
Corporate debt securities | 32,375 |
| | 32,172 |
| | 2.94% | | 4.87 | | 2,000 |
|
Mortgage-backed securities | 641,362 |
| | 637,508 |
| | 2.38% | | 4.33 | | 94,081 |
|
Total debt securities | $ | 824,635 |
| | $ | 822,735 |
| | 2.65% | | 4.53 | | $ | 104,965 |
|
Loans and Allowance for LoanCredit Losses
At September 30, 2017,March 31, 2024, gross loans outstanding (including purchased loans purchased loan pools, and loans held for sale) were $6.09$20.96 billion, an increaseup $414.0 million from $5.37$20.55 billion reported at December 31, 2016.2023. Loans increased $331.0 million, or 1.6%, from $20.27 billion at December 31, 2023 to $20.60 billion at March 31, 2024, driven by organic growth. Loans held for sale increased from $105.9$281.3 million at December 31, 20162023 to $137.4$364.3 million at September 30, 2017. Legacy loans (excluding purchased loans and purchased loan pools) increased $947.9 million, from $3.63 billion at DecemberMarch 31, 2016 to $4.57 billion at September 30, 2017, driven2024 primarily by increased growth in commercial, financial and agricultural, construction and development, residential real estate, and commercial real estate loan categories. Purchased loans decreased $152.1 million, from $1.07 billion at December 31, 2016 to $917.1 million at September 30, 2017, due to paydowns of $155.0 million, transfers to other real estate owned of $4.3 million and charge-offs of $1.8 million, partially offset by accretion of $9.0 million. Purchased loan pools decreased $103.1 million, from $568.3 million at December 31, 2016 to $465.2 million at September 30, 2017 due to payments on the portfolio of $95.5 million and premium amortization of $2.9 million during the first nine months of 2017.our mortgage division.
The Company regularly monitors the composition of the loan portfolio to evaluate the adequacy of the allowance for loancredit losses ("ACL") on loans in light of the impact that changes in the economic environment may have on the loan portfolio. The Company focuses on the following loan categories: (1) commercial, financial and agricultural; (2) consumer; (3) indirect automobile; (4) mortgage warehouse; (5) municipal; (6) premium finance; (7) construction and development related real estate; (3)(8) commercial and farmland real estate; (4)and (9) residential real estate; and (5) consumer.estate. The Company’s management has strategically located its branches in select markets in SouthGeorgia, Alabama, Florida, North Carolina and Southeast Georgia, North Florida, Southeast Alabama and throughout South Carolina to take advantage of the growth in these areas.
The Company’s risk management processes include a loan review program designed to evaluate the credit risk in the loan portfolio and ensure credit grade accuracy. Through the loan review process, the Company conducts (1) a loan portfolio summary analysis, (2) charge-off and recovery analysis, (3) trends in accruing problem loan analysis, and (4) problem and past-due loan analysis. This analysis process serves as a tool to assist management in assessing the overall quality of the loan portfolio and the adequacy of the allowance for loan losses.ACL. Loans classified as “substandard” are loans which are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses and/or questionable collateral values. Loans classified as “doubtful” are those loans that have characteristics similar to substandard loans but have an increased risk of loss. Loans classified as “loss” are those loans which are considered uncollectible and are in the process of being charged-off.charged off.
The allowanceCompany estimates the ACL on loans based on the underlying assets’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for loanapplicable accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, and charge-offs. In the event that collection of principal becomes uncertain, the Company has policies in place to reverse accrued interest in a timely manner. Therefore, the Company has made a policy election to exclude accrued interest from the measurement of ACL.
Expected credit losses is a reserve established through charges to earningsare reflected in the form ofACL through a provision for loan losses. The provision for loan losses is based on management’s evaluation ofcharge to credit loss expense. When the size and composition of the loan portfolio, the level of non-performing and past-due loans, historical trends of charged-off loans and recoveries, prevailing economic conditions and other
factors managementCompany deems appropriate. The Company’s management has established an allowance for loan losses which it believes is adequate for the probable incurred losses in the loan portfolio. Based on a credit evaluation of the loan portfolio, management presents a monthly review of the allowance for loan losses to the Company’s Board of Directors, which primarily focuses on risk by evaluating individual loans in certain risk categories. These categories have also been established by management and take the form of loan grades. By grading the loan portfolio in this manner the Company’s management is able to effectively evaluate the portfolio by risk, which management believes is the most effective way to analyze the loan portfolio and thus analyze the adequacy of the allowance for loan losses.
The allowance for loan losses is established by examining (1) the large classified loans, nonaccrual loans and loans considered impaired and evaluating them individually to determine the specific reserve allocation and (2) the remainder of the loan portfolio to allocateall or a portion of a financial asset to be uncollectible the allowance basedappropriate amount is written off and the ACL is reduced by the same amount. The Company applies judgment to determine when a financial asset is deemed uncollectible; however, generally speaking, an asset will be considered uncollectible no later than when all efforts at collection have been exhausted. Subsequent recoveries, if any, are credited to the ACL when received.
The Company measures expected credit losses of financial assets on a collective (pool) basis, when the financial assets share similar risk characteristics. Depending on the nature of the pool of financial assets with similar risk characteristics, the Company currently uses the DCF method or the PD×LGD method which may be adjusted for qualitative factors.
The Company’s methodologies for estimating the ACL consider available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The methodologies apply historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions expected to exist through the contractual lives of the financial assets that are reasonable and supportable, to the identified pools of financial assets with similar risk characteristics for which the historical loss experience was observed. The Company’s methodologies revert back to historical loss information on a straight-line basis over four quarters when the Company can no longer develop reasonable and the economic conditions for the particular loan category. The Company also considers other factors such as changes in lending policies and procedures; changes in national, regional and/or local economic and business conditions; changes in the nature and volume of the loan portfolio; changes in the experience, ability and depth of either the market president or lending staff; changes in the volume and severity of past-due and classified loans; changes in the quality of the Company’s corporate loan review system; and other factors management deems appropriate.supportable forecasts.
At the end of the thirdfirst quarter of 2017,2024, the allowance for loan losses allocated to legacyACL on loans totaled $21.2$320.0 million, or 0.46%1.55% of legacy loans, compared with $20.5$307.1 million, or 0.56%1.52% of legacy loans, at December 31, 2016. The decrease in the allowance for loan losses as a percentage of legacy loans reflects improvement in the credit risk of our portfolio, both from the mix of loan and collateral types and the credit quality of the loan portfolio.2023. Our legacy nonaccrual loans decreasedincreased from $18.1$151.1 million at December 31, 20162023 to $15.3$164.7 million at September 30, 2017.March 31, 2024. For the first ninethree months of 2017,2024, our legacy net charge off ratio as a percentage of average legacy loans increased to 0.13%0.25%, compared with 0.10%0.22% for the first ninethree months of 2016.2023. The total provision for loancredit losses for the first ninethree months of 2017 increased to $5.82024 was $21.1 million, compared with $2.4decreasing from a provision of $49.7 million recorded for the first ninethree months of 2016.2023. Our ratio of total nonperforming assets to total assets decreasedwas up two basis points from 0.94%0.69% at December 31, 20162023 to 0.75%0.71% at September 30, 2017.March 31, 2024.
The balance of the allowance for loan losses allocated to loans collectively evaluated for impairment increased 11.8%, or $2.1 million, during the first nine months of 2017, while the balance of loans collectively evaluated for impairment increased 14.3%, or $723.9 million, during the same period. A significant portion of the loan growth was concentrated in lower risk categories such as commercial premium finance loans and municipal loans which did not require as large of an allowance for loan losses as other categories of loans. In addition to the change of type of loan growth, we also experienced a decline in our historical loss rates across nearly all loan portfolios. We consider a four year loss rate on all loan categories and our charge off ratios have been declining over that period. We have adjusted the qualitative factors to account for the inherent risks in the portfolio that are not captured in the historical loss rates, such as weak commodity prices for agriculture products, growth rates of certain loan types and other factors management deems appropriate. As a percentage of all loans collectively evaluated for impairment, the allowance allocated to those loans declined 1 basis point from 0.35% at December 31, 2016 to 0.34% at September 30, 2017. The largest decrease was in the legacy construction and development real estate category, which decreased from 0.75% at December 31, 2016 to 0.58% at September 30, 2017. The reason for this decline is the positive trend in net losses within that category.
The balance of the allowance for loan losses allocated to loans individually evaluated for impairment decreased slightly by 0.2%, or $12,000, during the first nine months of 2017, while the balance of loans individually evaluated for impairment decreased 7.4%, or $4.5 million, during the same period. Although the total allowance for loan losses allocated to loans individually evaluated for impairment changed by only $12,000 from December 31, 2016 to September 30, 2017, the amount allocated for the legacy residential real estate category declined by $1.8 million, while the amount allocated for purchased loans increased by $1.6 million.
The following tables presenttable presents an analysis of the allowance for loancredit losses on loans, provision for credit losses on loans and net charge-offs as of and for the ninethree months ended September 30, 2017March 31, 2024 and 2016:2023:
| | | Nine Months Ended September 30, |
| Three Months Ended March 31, | | | Three Months Ended March 31, |
(dollars in thousands) | 2017 | | 2016 | (dollars in thousands) | 2024 | | 2023 |
Balance of allowance for loan losses at beginning of period | $ | 23,920 |
| | $ | 21,062 |
|
Balance of allowance for credit losses on loans at beginning of period | |
Adjustment to allowance for adoption of ASU 2022-02 | |
Provision charged to operating expense | 5,828 |
| | 2,381 |
|
Charge-offs: | |
| | |
| Charge-offs: | | | |
Commercial, financial and agricultural | 1,896 |
| | 1,273 |
|
Consumer | |
Indirect automobile | |
| Premium finance | |
| Premium finance | |
| Premium finance | |
| Real estate – residential | |
| Real estate – residential | |
| Real estate – residential | |
Total charge-offs | |
| Recoveries: | |
Recoveries: | |
Recoveries: | |
Commercial, financial and agricultural | |
Commercial, financial and agricultural | |
Commercial, financial and agricultural | |
Consumer | |
Indirect automobile | |
| Premium finance | |
| Premium finance | |
| Premium finance | |
Real estate – construction and development | 95 |
| | 324 |
|
Real estate – commercial and farmland | 413 |
| | 708 |
|
Real estate – residential | 2,031 |
| | 883 |
|
Consumer installment and Other | 922 |
| | 192 |
|
Purchased loans | 1,472 |
| | 1,261 |
|
Purchased loan pools | — |
| | — |
|
Total charge-offs | 6,829 |
| | 4,641 |
|
Recoveries: | |
| | |
|
Commercial, financial and agricultural | 699 |
| | 279 |
|
Real estate – construction and development | 244 |
| | 474 |
|
Real estate – commercial and farmland | 156 |
| | 191 |
|
Real estate – residential | 190 |
| | 368 |
|
Consumer installment and Other | 78 |
| | 119 |
|
Purchased loans | 1,680 |
| | 2,730 |
|
Purchased loan pools | — |
| | — |
|
Total recoveries | 3,047 |
| | 4,161 |
|
Net charge-offs | 3,782 |
| | 480 |
|
Balance of allowance for loan losses at end of period | $ | 25,966 |
| | $ | 22,963 |
|
Balance of allowance for credit losses on loans at end of period | |
|
| | | | | | | | | | | | | | | |
| As of and for the Nine Months Ended September 30, 2017 |
(dollars in thousands) | Legacy Loans | | Purchased Loans | | Purchased Loan Pools | | Total |
Allowance for loan losses at end of period | $ | 21,227 |
| | $ | 3,262 |
| | $ | 1,477 |
| | $ | 25,966 |
|
Net charge-offs (recoveries) for the period | 3,990 |
| | (208 | ) | | — |
| | 3,782 |
|
Loan balances: | |
| | |
| | |
| | |
|
End of period | 4,574,678 |
| | 917,126 |
| | 465,218 |
| | 5,957,022 |
|
Average for the period | 4,018,597 |
| | 982,033 |
| | 513,750 |
| | 5,514,380 |
|
Net charge-offs as a percentage of average loans | 0.13 | % | | (0.03 | )% | | 0.00 | % | | 0.09 | % |
Allowance for loan losses as a percentage of end of period loans | 0.46 | % | | 0.36 | % | | 0.32 | % | | 0.44 | % |
|
| | | | | | | | | | | | | | | |
| As of and for the Nine Months Ended September 30, 2016 |
(dollars in thousands) | Legacy Loans | | Purchased Loans | | Purchased Loan Pools | | Total |
Allowance for loan losses at end of period | $ | 19,433 |
| | $ | 1,522 |
| | $ | 2,008 |
| | $ | 22,963 |
|
Net charge-offs (recoveries) for the period | 1,949 |
| | (1,469 | ) | | — |
| | 480 |
|
Loan balances: | |
| | |
| | |
| | |
|
End of period | 3,091,039 |
| | 1,129,381 |
| | 624,886 |
| | 4,845,306 |
|
Average for the period | 2,642,498 |
| | 1,147,821 |
| | 629,118 |
| | 4,419,437 |
|
Net charge-offs as a percentage of average loans | 0.10 | % | | (0.17 | )% | | 0.00 | % | | 0.01 | % |
Allowance for loan losses as a percentage of end of period loans | 0.63 | % | | 0.13 | % | | 0.32 | % | | 0.47 | % |
Purchased Assets
Loans that were acquired in transactions, including those that are covered by the loss-sharing agreements with the FDIC (“purchased loans”), totaled $917.1 million and $1.07 billion at September 30, 2017 and December 31, 2016, respectively. OREO that was acquired in transactions, including OREO that is covered by the loss-sharing agreements with the FDIC, totaled $9.9 million and $12.5 million, at September 30, 2017 and December 31, 2016, respectively.
The Bank initially recorded purchased loans at their fair values, taking into consideration certain credit quality, risk and liquidity marks. The Company believes its estimation of credit risk and its adjustments to the carrying balances of the acquired loans are adequate. If the Company determines that a loan or group of loans has deteriorated from its initial assessment of fair value, a reserve for loan losses will be established to account for that difference. If the Company determines that a loan or group of loans has improved from its initial assessment of fair value, then the increase in cash flows over those expected at the acquisition date is recognized as interest income prospectively. During the nine months ended September 30, 2017, the Company recorded for purchased loans a provision for loan loss of $745,000. During the nine months ended September 30, 2016, the Company recorded for purchased loans a reduction in provision for loan loss of $654,000 due to recoveries exceeding charge-offs for purchased loans.
Purchased loans are shown below according to loan type as of the end of the periods shown:
|
| | | | | | | |
(dollars in thousands) | September 30, 2017 | | December 31, 2016 |
Commercial, financial and agricultural | $ | 80,895 |
| | $ | 96,537 |
|
Real estate – construction and development | 68,583 |
| | 81,368 |
|
Real estate – commercial and farmland | 500,169 |
| | 576,355 |
|
Real estate – residential | 264,312 |
| | 310,277 |
|
Consumer installment | 3,167 |
| | 4,654 |
|
| $ | 917,126 |
| | $ | 1,069,191 |
|
Purchased Loan Pools
Purchased loan pools are defined as groups of residential mortgage loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of September 30, 2017, purchased loan pools totaled $465.2 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $459.1 million and $6.1 million of remaining purchase premium paid at acquisition. As of December 31, 2016, purchased loan pools totaled $568.3 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $559.4 million and $8.9 million of remaining purchase premium paid at acquisition. The Company has allocated approximately $1.5 million and $1.8 millionfollowing table presents an analysis of the allowance for loancredit losses toon loans and net charge-offs for loans held for investment:
| | | | | | | | | | | |
| As of and for the Three Months Ended |
(dollars in thousands) | March 31, 2024 | | March 31, 2023 |
Allowance for credit losses on loans at end of period | $ | 320,023 | | | $ | 242,658 | |
Net charge-offs for the period | 12,600 | | | 10,684 | |
Loan balances: | | | |
End of period | 20,600,260 | | | 19,997,871 | |
Average for the period | 20,320,678 | | | 19,820,749 | |
Net charge-offs as a percentage of average loans (annualized) | 0.25 | % | | 0.22 | % |
Allowance for credit losses on loans as a percentage of end of period loans | 1.55 | % | | 1.21 | % |
Loans
Loans are stated at amortized cost. Balances within the purchased loan pools at September 30, 2017 and December 31, 2016, respectively.major loans receivable categories are presented in the following table:
| | | | | | | | | | | |
(dollars in thousands) | March 31, 2024 | | December 31, 2023 |
Commercial, financial and agricultural | $ | 2,758,716 | | | $ | 2,688,929 | |
Consumer | 232,993 | | | 241,552 | |
Indirect automobile | 24,022 | | | 34,257 | |
Mortgage warehouse | 891,336 | | | 818,728 | |
Municipal | 477,567 | | | 492,668 | |
Premium finance | 998,726 | | | 946,562 | |
Real estate – construction and development | 2,264,346 | | | 2,129,187 | |
Real estate – commercial and farmland | 8,131,248 | | | 8,059,754 | |
Real estate – residential | 4,821,306 | | | 4,857,666 | |
| $ | 20,600,260 | | | $ | 20,269,303 | |
Non-Performing Assets
Non-performing assets include nonaccrual loans, accruing loans contractually past due 90 days or more, repossessed personal property, and other real estate owned.OREO. Loans are placed on nonaccrual status when management has concerns relating to the ability to collect the principal and interest and generally when such loans are 90 days or more past due. Management performs a detailed review and valuation assessment of impairednon-performing loans over $250,000 on a quarterly basis and recognizes losses when impairment is identified. A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the loan contract.basis. When a loan is placed on nonaccrual status, any interest previously accrued but not collected is reversed against current income.
Nonaccrual loans excluding purchased loans, totaled $15.3$164.7 million at September 30, 2017, a decreaseMarch 31, 2024, an increase of 15.4%$13.6 million, or 9.0%, from $18.1 million reported at December 31, 2016. Nonaccrual purchased loans totaled $19.0 million at September 30, 2017, a decrease of 17.1%, compared with $23.0$151.1 million at December 31, 2016. At September 30, 2017, OREO, excluding purchased OREO,2023. Accruing loans delinquent 90 days or more totaled $9.4$15.8 million at March 31, 2024, a decrease of $1.2 million, or 6.9%, compared with $10.9$17.0 million at December 31, 2016. Purchased2023. At March 31, 2024, OREO totaled $9.9$2.2 million, at September 30, 2017,a decrease of $4.0 million, or 65.2%, compared with $12.5$6.2 million at December 31, 2016.2023. Management regularly assesses the valuation of OREO through periodic reappraisal and through inquiries received in the marketing process. At the end of the thirdfirst quarter of 2017,2024, total non-performing assets decreased to 0.75%as a percent of total assets compared with 0.94%was up two basis points from 0.69% at December 31, 2016.2023 to 0.71% at March 31, 2024.
Non-performing assets at September 30, 2017March 31, 2024 and December 31, 20162023 were as follows: |
| | | | | | | |
(dollars in thousands) | September 30, 2017 | | December 31, 2016 |
Nonaccrual loans, excluding purchased loans | $ | 15,325 |
| | $ | 18,114 |
|
Nonaccrual purchased loans | 19,049 |
| | 22,966 |
|
Nonaccrual purchased loan pools | 915 |
| | — |
|
Accruing loans delinquent 90 days or more, excluding purchased loans | 2,941 |
| | — |
|
Accruing purchased loans delinquent 90 days or more | — |
| | — |
|
Foreclosed assets, excluding purchased assets | 9,391 |
| | 10,874 |
|
Purchased other real estate owned | 9,946 |
| | 12,540 |
|
Total non-performing assets | $ | 57,567 |
| | $ | 64,494 |
|
| | | | | | | | | | | |
(dollars in thousands) | March 31, 2024 | | December 31, 2023 |
Nonaccrual loans(1) | $ | 164,686 | | | $ | 151,117 | |
Accruing loans delinquent 90 days or more | 15,811 | | | 16,988 | |
Repossessed assets | 29 | | | 17 | |
Other real estate owned | 2,158 | | | 6,199 | |
Total non-performing assets | $ | 182,684 | | | $ | 174,321 | |
Troubled Debt Restructurings
The restructuring(1) Included in nonaccrual loans were $84.2 million and $90.2 million of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession.
As of September 30, 2017serviced GNMA-guaranteed nonaccrual loans at March 31, 2024 and December 31, 2016, the Company had a balance of $14.2 million and $18.2 million, respectively, in troubled debt restructurings, excluding purchased loans. The following table presents the amount of troubled debt restructurings by loan class, excluding purchased loans, classified separately as accrual and nonaccrual at September 30, 2017 and December 31, 2016: 2023, respectively.
|
| | | | | | | | | | | |
September 30, 2017 | Accruing Loans | | Non-Accruing Loans |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | 4 | | $ | 44 |
| | 13 | | $ | 129 |
|
Real estate – construction and development | 7 | | 424 |
| | 2 | | 34 |
|
Real estate – commercial and farmland | 16 | | 4,769 |
| | 5 | | 210 |
|
Real estate – residential | 78 | | 7,209 |
| | 16 | | 1,212 |
|
Consumer installment | 4 | | 6 |
| | 36 | | 130 |
|
Total | 109 | | $ | 12,452 |
| | 72 | | $ | 1,715 |
|
|
| | | | | | | | | | | |
December 31, 2016 | Accruing Loans | | Non-Accruing Loans |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | 4 | | $ | 47 |
| | 15 | | $ | 114 |
|
Real estate – construction and development | 8 | | 686 |
| | 2 | | 34 |
|
Real estate – commercial and farmland | 16 | | 4,119 |
| | 5 | | 2,970 |
|
Real estate – residential | 82 | | 9,340 |
| | 15 | | 739 |
|
Consumer installment | 7 | | 17 |
| | 32 | | 130 |
|
Total | 117 | | $ | 14,209 |
| | 69 | | $ | 3,987 |
|
The following table presents the amount of troubled debt restructurings by loan class, excluding purchased loans, classified separately as those currently paying under restructured terms and those that have defaulted (defined as 30 days past due) under restructured terms at September 30, 2017 and December 31, 2016:
|
| | | | | | | | | | | |
September 30, 2017 | Loans Currently Paying Under Restructured Terms | | Loans that have Defaulted Under Restructured Terms |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | 8 | | $ | 56 |
| | 9 | | $ | 117 |
|
Real estate – construction and development | 6 | | 399 |
| | 3 | | 59 |
|
Real estate – commercial and farmland | 17 | | 4,778 |
| | 4 | | 201 |
|
Real estate – residential | 80 | | 7,425 |
| | 14 | | 996 |
|
Consumer installment | 25 | | 74 |
| | 15 | | 62 |
|
Total | 136 | | $ | 12,732 |
| | 45 | | $ | 1,435 |
|
|
| | | | | | | | | | | |
December 31, 2016 | Loans Currently Paying Under Restructured Terms | | Loans that have Defaulted Under Restructured Terms |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | 12 | | $ | 82 |
| | 7 | | $ | 79 |
|
Real estate – construction and development | 8 | | 686 |
| | 2 | | 34 |
|
Real estate – commercial and farmland | 16 | | 4,119 |
| | 5 | | 2,970 |
|
Real estate – residential | 84 | | 9,248 |
| | 13 | | 831 |
|
Consumer installment | 25 | | 76 |
| | 14 | | 71 |
|
Total | 145 | | $ | 14,211 |
| | 41 | | $ | 3,985 |
|
The following table presents the amount of troubled debt restructurings, excluding purchased loans, by types of concessions made, classified separately as accrual and nonaccrual at September 30, 2017 and December 31, 2016:
|
| | | | | | | | | | | |
September 30, 2017 | Accruing Loans | | Non-Accruing Loans |
Type of Concession | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Forbearance of interest | 12 | | $ | 2,622 |
| | 4 | | $ | 172 |
|
Forgiveness of principal | 3 | | 1,256 |
| | — | | — |
|
Forbearance of principal | 5 | | 75 |
| | 5 | | 644 |
|
Rate reduction only | 13 | | 1,580 |
| | 1 | | 29 |
|
Rate reduction, forbearance of interest | 33 | | 2,431 |
| | 20 | | 491 |
|
Rate reduction, forbearance of principal | 7 | | 1,465 |
| | 35 | | 249 |
|
Rate reduction, forgiveness of interest | 36 | | 3,023 |
| | 3 | | 119 |
|
Rate reduction, forgiveness of principal | — | | — |
| | 4 | | 11 |
|
Total | 109 | | $ | 12,452 |
| | 72 | | $ | 1,715 |
|
|
| | | | | | | | | | | |
December 31, 2016 | Accruing Loans | | Non-Accruing Loans |
Type of Concession | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Forbearance of interest | 11 | | $ | 1,685 |
| | 5 | | $ | 146 |
|
Forgiveness of principal | 3 | | 1,303 |
| | — | | — |
|
Forbearance of principal | 8 | | 2,210 |
| | 9 | | 315 |
|
Rate reduction only | 12 | | 1,573 |
| | 1 | | 29 |
|
Rate reduction, forbearance of interest | 38 | | 2,618 |
| | 21 | | 1,647 |
|
Rate reduction, forbearance of principal | 8 | | 1,734 |
| | 29 | | 1,506 |
|
Rate reduction, forgiveness of interest | 37 | | 3,086 |
| | 3 | | 341 |
|
Rate reduction, forgiveness of principal | — | | — |
| | 1 | | 3 |
|
Total | 117 | | $ | 14,209 |
| | 69 | | $ | 3,987 |
|
The following table presents the amount of troubled debt restructurings, excluding purchased loans, by collateral types, classified separately as accrual and nonaccrual at September 30, 2017 and December 31, 2016:
|
| | | | | | | | | | | |
September 30, 2017 | Accruing Loans | | Non-Accruing Loans |
Collateral Type | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Warehouse | 3 | | $ | 445 |
| | 1 | | $ | 80 |
|
Raw land | 9 | | 723 |
| | 2 | | 34 |
|
Hotel and motel | 3 | | 1,411 |
| | — | | — |
|
Office | 4 | | 667 |
| | — | | — |
|
Retail, including strip centers | 5 | | 2,189 |
| | 3 | | 85 |
|
1-4 family residential | 78 | | 7,002 |
| | 18 | | 1,259 |
|
Automobile/equipment/CD | 6 | | 13 |
| | 47 | | 255 |
|
Unsecured | 1 | | 2 |
| | 1 | | 2 |
|
Total | 109 | | $ | 12,452 |
| | 72 | | $ | 1,715 |
|
|
| | | | | | | | | | | |
December 31, 2016 | Accruing Loans | | Non-Accruing Loans |
Collateral Type | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Warehouse | 5 | | $ | 763 |
| | — | | $ | — |
|
Raw land | 9 | | 742 |
| | 2 | | 34 |
|
Apartments | — | | — |
| | 3 | | 1,505 |
|
Hotel and motel | 3 | | 1,525 |
| | — | | — |
|
Office | 3 | | 477 |
| | — | | — |
|
Retail, including strip centers | 4 | | 1,298 |
| | — | | — |
|
1-4 family residential | 82 | | 9,340 |
| | 17 | | 746 |
|
Church | — | | — |
| | 2 | | 1,465 |
|
Automobile/equipment/CD | 10 | | 61 |
| | 44 | | 233 |
|
Unsecured | 1 | | 3 |
| | 1 | | 4 |
|
Total | 117 | | $ | 14,209 |
| | 69 | | $ | 3,987 |
|
As of September 30, 2017 and December 31, 2016, the Company had a balance of $26.0 million and $28.1 million, respectively, in troubled debt restructurings included in purchased loans. The following table presents the amount of troubled debt restructurings by loan class of purchased loans, classified separately as accrual and nonaccrual at September 30, 2017 and December 31, 2016:
|
| | | | | | | | | | | |
September 30, 2017 | Accruing Loans | | Non-Accruing Loans |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | — | | $ | — |
| | 3 | | $ | 18 |
|
Real estate – construction and development | 3 | | 1,022 |
| | 6 | | 349 |
|
Real estate – commercial and farmland | 15 | | 6,308 |
| | 11 | | 3,834 |
|
Real estate – residential | 119 | | 12,875 |
| | 25 | | 1,627 |
|
Consumer installment | — | | — |
| | 2 | | 6 |
|
Total | 137 | | $ | 20,205 |
| | 47 | | $ | 5,834 |
|
|
| | | | | | | | | | | |
December 31, 2016 | Accruing Loans | | Non-Accruing Loans |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | 1 | | $ | 1 |
| | 4 | | $ | 91 |
|
Real estate – construction and development | 6 | | 1,358 |
| | 3 | | 30 |
|
Real estate – commercial and farmland | 20 | | 8,460 |
| | 5 | | 2,402 |
|
Real estate – residential | 123 | | 13,713 |
| | 33 | | 2,077 |
|
Consumer installment | 3 | | 11 |
| | 1 | | — |
|
Total | 153 | | $ | 23,543 |
| | 46 | | $ | 4,600 |
|
The following table presents the amount of troubled debt restructurings by loan class of purchased loans, classified separately as those currently paying under restructured terms and those that have defaulted (defined as 30 days past due) under restructured terms at September 30, 2017 and December 31, 2016:
|
| | | | | | | | | | | |
September 30, 2017 | Loans Currently Paying Under Restructured Terms | | Loans that have Defaulted Under Restructured Terms |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | 1 | | $ | 12 |
| | 2 | | $ | 6 |
|
Real estate – construction and development | 8 | | 1,365 |
| | 1 | | 6 |
|
Real estate – commercial and farmland | 21 | | 8,197 |
| | 5 | | 1,945 |
|
Real estate – residential | 127 | | 13,340 |
| | 17 | | 1,162 |
|
Consumer installment | 1 | | 3 |
| | 1 | | 3 |
|
Total | 158 | | $ | 22,917 |
| | 26 | | $ | 3,122 |
|
|
| | | | | | | | | | | |
December 31, 2016 | Loans Currently Paying Under Restructured Terms | | Loans that have Defaulted Under Restructured Terms |
Loan Class | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Commercial, financial and agricultural | 3 | | $ | 16 |
| | 2 | | $ | 76 |
|
Real estate – construction and development | 8 | | 1,378 |
| | 1 | | 9 |
|
Real estate – commercial and farmland | 25 | | 10,862 |
| | — | | — |
|
Real estate – residential | 126 | | 13,484 |
| | 30 | | 2,306 |
|
Consumer installment | 4 | | 11 |
| | — | | — |
|
Total | 166 | | $ | 25,751 |
| | 33 | | $ | 2,391 |
|
The following table presents the amount of troubled debt restructurings included in purchased loans, by types of concessions made, classified separately as accrual and nonaccrual at September 30, 2017 and December 31, 2016:
|
| | | | | | | | | | | |
September 30, 2017 | Accruing Loans | | Non-Accruing Loans |
Type of Concession | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Forbearance of interest | 4 | | $ | 189 |
| | 9 | | $ | 1,772 |
|
Forgiveness of principal | — | | — |
| | 1 | | 63 |
|
Forbearance of principal | 6 | | 1,934 |
| | 5 | | 1,588 |
|
Forbearance of principal, extended amortization | 2 | | 375 |
| | 1 | | 298 |
|
Rate reduction only | 72 | | 11,607 |
| | 16 | | 1,465 |
|
Rate reduction, forbearance of interest | 19 | | 1,913 |
| | 10 | | 454 |
|
Rate reduction, forbearance of principal | 10 | | 2,211 |
| | 5 | | 194 |
|
Rate reduction, forgiveness of interest | 24 | | 1,976 |
| | — | | — |
|
Total | 137 | | $ | 20,205 |
| | 47 | | $ | 5,834 |
|
|
| | | | | | | | | | | |
December 31, 2016 | Accruing Loans | | Non-Accruing Loans |
Type of Concession | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Forbearance of interest | 12 | | $ | 3,553 |
| | 4 | | $ | 207 |
|
Forbearance of principal | 7 | | 2,003 |
| | 5 | | 1,528 |
|
Forbearance of principal, extended amortization | 1 | | 78 |
| | 1 | | 323 |
|
Rate reduction only | 78 | | 12,710 |
| | 13 | | 1,385 |
|
Rate reduction, forbearance of interest | 20 | | 1,387 |
| | 19 | | 632 |
|
Rate reduction, forbearance of principal | 11 | | 1,617 |
| | 3 | | 231 |
|
Rate reduction, forgiveness of interest | 24 | | 2,195 |
| | 1 | | 294 |
|
Total | 153 | | $ | 23,543 |
| | 46 | | $ | 4,600 |
|
The following table presents the amount of troubled debt restructurings included in purchased loans, by collateral types, classified separately as accrual and nonaccrual at September 30, 2017 and December 31, 2016:
|
| | | | | | | | | | | |
September 30, 2017 | Accruing Loans | | Non-Accruing Loans |
Collateral Type | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Warehouse | 2 | | $ | 369 |
| | — | | $ | — |
|
Raw land | 3 | | 1,045 |
| | 7 | | 846 |
|
Hotel and motel | 1 | | 151 |
| | 1 | | 497 |
|
Office | 2 | | 470 |
| | 2 | | 505 |
|
Retail, including strip centers | 8 | | 5,074 |
| | 1 | | 169 |
|
1-4 family residential | 121 | | 13,096 |
| | 28 | | 2,356 |
|
Church | — | | — |
| | 2 | | 1,390 |
|
Automobile/equipment/CD | — | | — |
| | 6 | | 71 |
|
Total | 137 | | $ | 20,205 |
| | 47 | | $ | 5,834 |
|
|
| | | | | | | | | | | |
December 31, 2016 | Accruing Loans | | Non-Accruing Loans |
Collateral Type | # | | Balance (in thousands) | | # | | Balance (in thousands) |
Warehouse | 4 | | $ | 1,532 |
| | — | | $ | — |
|
Raw land | 7 | | 1,919 |
| | 4 | | 86 |
|
Hotel and motel | 1 | | 154 |
| | 1 | | 558 |
|
Office | 3 | | 967 |
| | — | | — |
|
Retail, including strip centers | 7 | | 4,489 |
| | 1 | | 197 |
|
1-4 family residential | 127 | | 14,470 |
| | 33 | | 2,318 |
|
Church | — | | — |
| | 1 | | 1,298 |
|
Automobile/equipment/CD | 4 | | 12 |
| | 6 | | 143 |
|
Total | 153 | | $ | 23,543 |
| | 46 | | $ | 4,600 |
|
Commercial Lending Practices
The federal bank regulatory agencies previously issued interagency guidance on commercial real estate lending and prudent risk management practices. This guidance defines commercial real estate (“CRE”) loans as loans secured by raw land, land development and construction (including 1-4one-to-four family residential construction), multi-family property and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with the property, excluding owner occupiedowner-occupied properties (loans for which 50% or more of the source of repayment is derived from the ongoing operations and activities conducted by the party, or affiliate of the party, who owns the property) or the proceeds of the sale, refinancing or permanent financing of the property. Loans for owner occupiedowner-occupied CRE are generally excluded from the CRE guidance.
The CRE guidance is applicable when either:
| |
(1) | total loans for construction, land development, and other land, net of owner occupied loans, represent 100% or more of a bank’s total risk-based capital; or |
| |
(2) | total loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land, net of owner occupied loans, represent 300% or more of a bank’s total risk-based capital. |
(1)total loans for construction, land development, and other land, net of owner-occupied loans, represent 100% or more of a tier I capital plus allowance for credit losses on loans and leases; or
(2)total loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land, net of owner-occupied loans, represent 300% or more of a bank’s tier I capital plus allowance for credit losses on loans and leases.
Banks that are subject to the CRE guidance criteria are required to implement enhanced strategic planning, CRE underwriting policies, risk management and internal controls, portfolio stress testing, risk exposure limits, and other policies, including management compensation and incentives, to address the CRE risks. Higher allowances for loan losses and capital levels may also be appropriate.
As of September 30, 2017,March 31, 2024, the Company exhibited a concentration in the CRE loan category based on Federal Reserve Call codes. The primary risks of CRE lending are:
| |
(1) | within CRE loans, construction and development loans are somewhat dependent upon continued strength in demand for residential real estate, which is reliant on favorable real estate mortgage rates and changing population demographics; |
| |
(2) | on average, CRE loan sizes are generally larger than non-CRE loan types; and |
| |
(3) | certain construction and development loans may be less predictable and more difficult to evaluate and monitor. |
(1)within CRE loans, construction and development loans are somewhat dependent upon continued strength in demand for residential real estate, which is reliant on favorable real estate mortgage rates and changing population demographics;
(2)on average, CRE loan sizes are generally larger than non-CRE loan types; and
(3)certain construction and development loans may be less predictable and more difficult to evaluate and monitor.
The following table outlines CRE loan categories and CRE loans as a percentage of total loans as of September 30, 2017March 31, 2024 and December 31, 2016.2023. The loan categories and concentrations below are based on Federal Reserve Call codes and include purchased loans: codes:
| | | September 30, 2017 | | December 31, 2016 |
| March 31, 2024 | | | March 31, 2024 | | December 31, 2023 |
(dollars in thousands) | Balance | | % of Total Loans | | Balance | | % of Total Loans | (dollars in thousands) | Balance | | % of Total Loans | | Balance | | % of Total Loans |
Construction and development loans | $ | 618,772 |
| | 10% | | $ | 444,412 |
| | 8% | Construction and development loans | $ | 2,264,346 | | | 11% | | 11% | | $ | 2,129,187 | | | 11% | | 11% |
Multi-family loans | 160,577 |
| | 3% | | 130,723 |
| | 3% | Multi-family loans | 1,037,067 | | | 5% | | 5% | | 927,970 | | | 5% | | 5% |
Nonfarm non-residential loans (excluding owner occupied) | 1,012,661 |
| | 17% | | 985,496 |
| | 19% |
Total CRE Loans (excluding owner occupied) | 1,792,010 |
| | 30% | | 1,560,631 |
| | 30% |
Nonfarm non-residential loans (excluding owner-occupied) | | Nonfarm non-residential loans (excluding owner-occupied) | 5,039,439 | | | 24% | | 5,057,253 | | | 25% |
Total CRE Loans (excluding owner-occupied) | | Total CRE Loans (excluding owner-occupied) | 8,340,852 | | | 40% | | 8,114,410 | | | 40% |
All other loan types | 4,165,012 |
| | 70% | | 3,703,695 |
| | 70% | All other loan types | 12,259,408 | | | 60% | | 60% | | 12,154,893 | | | 60% | | 60% |
Total Loans | $ | 5,957,022 |
| | 100% | | $ | 5,264,326 |
| | 100% | Total Loans | $ | 20,600,260 | | | 100% | | 100% | | $ | 20,269,303 | | | 100% | | 100% |
The following table outlines the percentage of construction and development loans and total CRE loans, net of owner occupiedowner-occupied loans, to the Bank’s total risk-basedtier I capital plus allowance for credit losses on loans and leases, and the Company’s internal concentration limits as of September 30, 2017March 31, 2024 and December 31, 2016: 2023:
| | | | | | | | | | | | | | | | | |
| Internal Limit | | Actual |
| | March 31, 2024 | | December 31, 2023 |
Construction and development loans | 100% | | 76% | | 74% |
Total CRE loans (excluding owner-occupied) | 300% | | 281% | | 282% |
|
| | | | | |
| Internal Limit | | Actual |
| | September 30, 2017 | | December 31, 2016 |
Construction and development | 100% | | 76% | | 72% |
Commercial real estate | 300% | | 220% | | 253% |
Short-Term Investments
The Company’s short-term investments are comprised of federal funds sold and interest-bearing deposits in banks. At September 30, 2017, the Company’s short-term investments were $112.8 million, compared with $71.2 million at December 31, 2016. At September 30, 2017, the Company did not have any federal funds sold and all $112.8 million was in interest-bearing deposit balances at correspondent banks and the Federal Reserve Bank of Atlanta.
Derivative Instruments and Hedging Activities
The Company has a cash flow hedge that matures September 15, 2020 with a notional amount of $37.1 million at September 30, 2017 and December 31, 2016 for the purpose of converting the variable rate on certain junior subordinated debentures to a fixed rate of 4.11%. The fair value of this instrument was a liability of approximately $723,000 and $978,000 at September 30, 2017 and December 31, 2016, respectively.
The Company has fair value hedges with a combined notional amount of $22.7 million at September 30, 2017 for the purpose of hedging the change in fair value of certain fixed rate loans. These instruments have maturity dates that range from January 2023 to October 2031 and are indexed to the one-month LIBOR rate. The fair value of these instruments amounted to an asset of approximately $204,000 and a liability of approximately $96,000 at September 30, 2017. At December 31, 2016, the Company had fair value hedges with a combined notional amount of $20.2 million. These instruments have maturity dates that range from January 2023 to October 2031 and are indexed to the one-month LIBOR rate. The fair value of these instruments amounted to an asset of approximately $229,000 and a liability of approximately $96,000 at December 31, 2016.
The Company also has forward contracts and IRLCs to economically hedge changes in the value of the mortgage inventory due to changes in market interest rates. The fair value of these instruments amounted to an asset of approximately $3.8$5.8 million and $4.3$3.6 million at September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively, and a liability of approximately $237,000$1.0 million and $0$5.8 million at September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively. The Company also enters into interest rate derivative agreements to facilitate the risk management strategies of certain clients. The Company mitigates this risk by entering into equal and offsetting interest rate derivative agreements with highly rated third-party financial institutions. The fair value of these instruments amounted to an asset of $10.0 million and $5.9 million at March 31, 2024 and December 31, 2023, respectively, and a liability of $10.1 million and $6.2 million at March 31, 2024 and December 31, 2023, respectively.
No material hedge ineffectiveness from cash flowDeposits
Total deposits at the Company increased $288.9 million, or fair value hedges was recognized1.4%, to $21.00 billion at March 31, 2024, compared with $20.71 billion at December 31, 2023. Noninterest-bearing deposits increased $46.7 million, or 0.7%, and interest-bearing deposits increased $242.2 million, or 1.7%, during the first three months of 2024. At March 31, 2024, the Company had approximately $1.24 billion in short-term brokered CDs, compared with $1.14 billion at December 31, 2023. As of March 31, 2024 and December 31, 2023, the statementCompany had estimated uninsured deposits of operations. All components$9.08 billion and $9.13 billion, respectively. These estimates were derived using the same methodologies and assumptions used for the Bank's regulatory reporting. Approximately $2.93 billion, or 32.2%, of each derivative’s gainthe uninsured deposits at March 31, 2024 were for municipalities which are collateralized with investment securities or loss are included in the assessmentletters of hedge effectiveness.credit.
Capital
Common Stock Repurchase Program
On January 18, 2017,September 19, 2019, the Company issued 128,572 unregistered sharesannounced that its Board of Directors authorized the Company to repurchase up to $100.0 million of its outstanding common stock to William J. Villari in exchange for 4.99%through October 31, 2020. The Board has subsequently extended the share repurchase program each year since that original authorization, with the most recent extension, which also included the replenishment of the outstanding shares of common stock of USPF. A registration statement was filed with the Securities and Exchange Commissionprogram to $100.0 million, being announced on February 13, 2017 to register the resale or other disposition of these shares. The issuance of the 128,572 common shares was valued at $45.45 per share, resulting in an increase in shareholders’ equity of $5.8 million.
On March 6, 2017,October 26, 2023. As a result, the Company completedis currently authorized to engage in additional share repurchases up to $100.0 million through October 31, 2024. Repurchases of shares must be made in accordance with applicable securities laws and may be made from time to time in the open market or by negotiated transactions. The amount and timing of repurchases will be based on a variety of factors, including share acquisition price, regulatory limitations and other market and economic factors. The program does not require the Company to repurchase any specific number of shares. As of March 31, 2024, an underwritten public offeringaggregate of 2,012,500$5.3 million, or 131,574 shares of the Company’sCompany's common stock, at a price tohad been repurchased under the public of $46.50 per share. The Company received net proceeds fromprogram's October 26, 2023 renewal, which also included the issuance of approximately $88.7 million, after deducting $4.9 million in underwriting discounts and commissions and other issuance costs.
In March 2017, the Company made a capital contribution to the Bank in the amount of $110.0 million, using the net proceedsreplenishment of the March 6, 2017 issuance of common stock as well as a portion of the net proceeds of the March 13, 2017 issuance of the Company’s 5.75% Fixed-To-Floating Rate Subordinated Notes due 2027.program to $100.0 million.
Capital Management
Capital management consists of providing equity to support both current and anticipated future operations. The capital resources of the Company is subject toare monitored on a periodic basis by state and federal regulatory authorities.
Under the regulatory capital adequacy requirements imposedframeworks adopted by the Federal Reserve Board (the “FRB”"FRB") and the GDBF,Federal Deposit Insurance Corporation (the "FDIC"), the Company and the Bank is subject to capital adequacy requirements imposed by the FDIC and the GDBF.
The FRB, the FDIC and the GDBF have adopted risk-based capital requirements for assessing bank holding company and bank capital adequacy. These standards define and establish minimum capital requirements in relation to assets and off-balance sheet exposure, adjusted for credit risk. The risk-based capital standards currently in effect are designed to make regulatory capital requirements more sensitive to differences in risk profiles among bank holding companies and banks and to account for off-balance sheet exposure.
In July 2013, the Federal Reserve published final rules for the adoption of the Basel III regulatory capital framework (the "Basel III Capital Rules"). The Basel III Capital Rules definedmust each maintain a new capital measure called "Common Equity Tier 1" ("CET1"), established thatcommon equity Tier 1 capital consistto total risk-weighted assets ratio of Common Equityat least 4.5%, a Tier 1 capital to total risk-weighted assets ratio of at least 6%, a total capital to total risk-weighted assets ratio of at least 8% and "Additional Tier 1 Capital" instruments meeting specified requirements, defined Common Equity Tier 1, established a capital conservation buffer and expanded the scopeleverage ratio of the adjustments as compared with existing regulations. The capital conservation buffer is being increased by 0.625% per year until reaching 2.50% by 2019. The capital conservation buffer is being phased in from 0.0% for 2015 to, 0.625% for 2016, 1.25% for 2017, 1.875% for 2018, and 2.50% for 2019. The Basel III Capital Rules became effective for us on January 1, 2015 with certain transition provisions fully phased in on January 1, 2019.
The regulatory capital standards are defined by the following key measurements:
a) The “Tier 1 Leverage Ratio” is defined as Tier 1 capital to average assets. To be considered “adequately capitalized” under this measurement, a bank musttotal consolidated assets of at least 4%. The Company and the Bank are also required to maintain a Tier 1 leverage ratio greater than or equal to 4.00%. For a bank to be considered “well capitalized,” it must maintain a Tier 1 leverage ratio greater than or equal to 5.00%.
b) The “CET1 Ratio” is defined as Common equity tier 1 capital to total risk weighted assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a CET1 ratio greater than or equal to 4.50% (5.75% including the 1.25% capital conservation buffer for 2017; 5.125% including the 0.625% capital conservation buffer for 2016). For a bank to be considered “well capitalized,” it must maintain a CET1 ratio greater than or equal to 6.50%.
c) The “Tier 1 Capital Ratio” is defined asof common equity Tier 1 capital of at least 2.5% of risk-weighted assets in addition to total risk weighted assets. To be considered “adequately capitalized”the minimum risk-based capital ratios in order to avoid certain restrictions on capital distributions and discretionary bonus payments.
In March 2020, the Office of the Comptroller of the Currency, the FRB and the FDIC issued an interim final rule that delays the estimated impact on regulatory capital stemming from the implementation of CECL. The interim final rule provides banking organizations that implement CECL in 2020 the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period. As a result, the Company and Bank elected the five-year transition relief allowed under this measurement, a bank must maintain a Tier 1 capital ratio greater than or equal to 6.00% (7.25% including the 1.25% capital conservation buffer for 2017; 6.625% including the 0.625% capital conservation buffer for 2016). For a bank to be considered “well capitalized,” it must maintain a Tier 1 capital ratio greater than or equal to 8.00%.interim final rule effective March 31, 2020.
d) The “Total Capital Ratio” is defined as total capital to total risk weighted assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a total capital ratio greater than or equal to 8.00% (9.25% including the 1.25% capital conservation buffer for 2017; 8.625% including the 0.625% capital conservation buffer for 2016). For a bank to be considered “well capitalized,” it must maintain a total capital ratio greater than or equal to 10.00%.
As of September 30, 2017,March 31, 2024, under the regulatory capital standards, the Bank was considered “well capitalized” under all capital measurements. The following table sets forth the regulatory capital ratios of for the Company and the Bank at September 30, 2017March 31, 2024 and December 31, 2016. 2023:
| | | September 30, 2017 | | December 31, 2016 |
| March 31, 2024 | | | March 31, 2024 | | December 31, 2023 |
Tier 1 Leverage Ratio (tier 1 capital to average assets) | | | | Tier 1 Leverage Ratio (tier 1 capital to average assets) | | | |
Consolidated | 9.94% | | 8.68% | Consolidated | 10.15% | | 9.93% |
Ameris Bank | 10.83% | | 9.27% | Ameris Bank | 11.00% | | 10.69% |
CET1 Ratio (common equity tier 1 capital to risk weighted assets) | | | | CET1 Ratio (common equity tier 1 capital to risk weighted assets) | | | |
Consolidated | 10.35% | | 8.32% | Consolidated | 11.36% | | 11.23% |
Ameris Bank | 12.69% | | 10.35% | Ameris Bank | 12.30% | | 12.09% |
Tier 1 Capital Ratio (tier 1 capital to risk weighted assets) | | | | Tier 1 Capital Ratio (tier 1 capital to risk weighted assets) | | | |
Consolidated | 11.65% | | 9.69% | Consolidated | 11.36% | | 11.23% |
Ameris Bank | 12.69% | | 10.35% | Ameris Bank | 12.30% | | 12.09% |
Total Capital Ratio (total capital to risk weighted assets) | | | | Total Capital Ratio (total capital to risk weighted assets) | | | |
Consolidated | 13.25% | | 10.11% | Consolidated | 14.55% | | 14.45% |
Ameris Bank | 13.10% | | 10.77% | Ameris Bank | 13.90% | | 13.69% |
Interest Rate Sensitivity and Liquidity
The Company’s primary market risk exposures are credit risk, interest rate risk, and to a lesser degree, liquidity risk. The Bank operates under an Asset Liability Management Policy approved by the Company’s Board of Directors and the Asset and Liability Committee (the “ALCO Committee”).ALCO Committee. The policy outlines limits on interest rate risk in terms of changes in net interest income and changes in the net market values of assets and liabilities over certain changes in interest rate environments. These measurements are made through a simulation model which projects the impact of changes in interest rates on the Bank’s assets and liabilities. The policy also outlines responsibility for monitoring interest rate risk, and the process for the approval, implementation and monitoring of interest rate risk strategies to achieve the Bank’s interest rate risk objectives.
The ALCO Committee is comprised of senior officers of Ameris and two outside members of the Company’s Board of Directors.Ameris. The ALCO Committee makes all strategic decisions with respect to the sources and uses of funds that may affect net interest income, including net interest spread and net interest margin. The objective of the ALCO Committee is to identify the interest rate, liquidity and market value risks of the Company’s balance sheet and use reasonable methods approved by the Company’s Board of Directors and executive management to minimize those identified risks.
The normal course of business activity exposes the Company to interest rate risk. Interest rate risk is managed within an overall asset and liability framework for the Company. The principal objectives of asset and liability management are to predict the sensitivity of net interest spreads to potential changes in interest rates, control risk and enhance profitability. Funding positions are kept within predetermined limits designed to properly manage risk and liquidity. The Company employs sensitivity analysisin the form of a net interest income simulation to help characterize the market risk arising from changes in interest rates. In addition, fluctuations in interest rates usually result in changes in the fair market value of the Company’s financial instruments, cash flows and net interest income. The Company’s interest rate risk position is managed by the ALCO Committee.
The Company uses a simulation modeling process to measure interest rate risk and evaluate potential strategies. Interest rate scenario models are prepared using software created and licensed from an outside vendor. The Company’s simulation includes all financial assets and liabilities. Simulation results quantify interest rate risk under various interest rate scenarios. Management then develops and implements appropriate strategies. The ALCO Committee has determined that an acceptable level of interest rate risk would be for net interest income to increase/decrease no more than 20% given a change in selected interest rates of 200 basis points over any 24-month period.
Liquidity management involves the matching of the cash flow requirements of customers, who may be either depositors desiring to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs, and the ability of Ameris to manage those requirements. The Company strives to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance it has in short-term assets at any given time will adequately cover any reasonably anticipated immediate need for funds. Additionally, the Bank maintains relationships with correspondent banks, which could provide funds on short notice, if needed. The Company has invested in FHLB stock for the purpose of establishing credit lines with the FHLB. The credit availability to the Bank is equal to 30% of the Bank’s total assets as reported on the most recent quarterly financial information submitted to the regulators subject to the pledging of sufficient collateral. At September 30, 2017March 31, 2024 and December 31, 2016,2023, the net carrying value of the
Company’s other borrowings was $808.6$631.4 million and $492.3$509.6 million, respectively. OnAt March 13, 2017,31, 2024, the Company completedhad availability with the public offeringFHLB and saleFRB Discount Window of $75.0 million$4.15 billion and $2.63 billion, respectively.
in aggregate principal amount of its 5.75% Fixed-To-Floating Rate Subordinated Notes due 2027. These subordinated notes are included in other borrowings at September 30, 2017 at a net carrying value of $73.8 million. See Note 8 for additional details on the subordinated notes.
The following liquidity ratios compare certain assets and liabilities to total deposits or total assets:
| | | September 30, 2017 | | June 30, 2017 | | March 31, 2017 | | December 31, 2016 | | September 30, 2016 |
Investment securities available for sale to total deposits | 13.90% | | 14.13% | | 14.72% | | 14.76% | | 15.80% |
| March 31, 2024 | | | March 31, 2024 | | December 31, 2023 | | September 30, 2023 | | June 30, 2023 | | March 31, 2023 |
Investment securities available-for-sale to total deposits | | Investment securities available-for-sale to total deposits | 6.74% | | 6.77% | | 6.92% | | 7.14% | | 7.52% |
Loans (net of unearned income) to total deposits | 101.04% | | 97.88% | | 94.31% | | 94.42% | | 91.32% | Loans (net of unearned income) to total deposits | 98.11% | | 97.88% | | 98.11% | | 100.14% | | 100.50% |
Interest-earning assets to total assets | 92.48% | | 92.14% | | 91.98% | | 91.32% | | 91.25% | Interest-earning assets to total assets | 91.91% | | 91.67% | | 91.51% | | 91.71% |
Interest-bearing deposits to total deposits | 70.86% | | 71.12% | | 70.67% | | 71.78% | | 70.54% | Interest-bearing deposits to total deposits | 68.86% | | 68.65% | | 68.00% | | 67.19% | | 61.60% |
The liquidity resources of the Company are monitored continuouslycontinually by the ALCO Committee and on a periodic basis by state and federal regulatory authorities. As determined under guidelines established by these regulatory authorities, the Company’s and the Bank’s liquidity ratios at September 30, 2017March 31, 2024 were considered satisfactory. The Company is aware of no events or trends likely to result in a material change in liquidity.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed only to U.S. dollar interest rate changes, and, accordingly, the Company manages exposure by considering the possible changes in the net interest margin. The Company does not have any trading instruments nor does it classify any portion of the investment portfolio as held for trading. The Company’s hedging activities are limited to cash flow hedges and fair value hedges and are part of the Company’s program to manage interest rate sensitivity.
At September 30, 2017, the Company had one cash flow hedge with a notional amount of $37.1 million for the purpose of converting the variable rate on certain junior subordinated debentures to a fixed rate. The LIBOR rate swap exchanges fixed rate payments of 4.11% for floating rate payments based on the three-month LIBOR rate and matures September 2020. The fair value of this instrument was a liability of approximately $723,000 and $978,000 at September 30, 2017 and December 31, 2016, respectively.
At September 30, 2017, the Company had fair value hedges with a combined notional amount of $22.7 million for the purpose of hedging the change in fair value of certain fixed rate loans. These instruments have maturity dates that range from January 2023 to October 2031 and are indexed to the one-month LIBOR rate. The fair value of these instruments amounted to an asset of approximately $204,000 and a liability of approximately $96,000 at September 30, 2017. At December 31, 2016, the Company had fair value hedges with a combined notional amount of $20.2 million. These instruments have maturity dates that range from January 2023 to October 2031 and are indexed to the one-month LIBOR rate. The fair value of these instruments amounted to an asset of approximately $229,000 and a liability of approximately $96,000 at December 31, 2016.
The Company also had forward contracts and IRLCs to economically hedge changes in the value of the mortgage inventory due to changes in market interest rates. The fair value of these instruments amounted to an asset of approximately $3.8$5.8 million and $4.3$3.6 million at September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively, and a liability of $237,000$1.0 million and $0$5.8 million at September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively. The Company also enters into interest rate derivative agreements to facilitate the risk management strategies of certain clients. The Company mitigates this risk by entering into equal and offsetting interest rate derivative agreements with highly rated third-party financial institutions. The fair value of these instruments amounted to an asset of $10.0 million and $5.9 million at March 31, 2024 and December 31, 2023, respectively, and a liability of $10.1 million and $6.2 million at March 31, 2024 and December 31, 2023, respectively.
The Company has no exposure to foreign currency exchange rate risk, commodity price risk and other market risks.
Interest rates play a major part in the net interest income of a financial institution. The sensitivity to rate changes is known as “interest rate risk.” The repricing of interest-earning assets and interest-bearing liabilities can influence the changes in net interest income. As part of the Company’s asset/liability management program, the timing of repriced assets and liabilities is referred to as “gap management.”
The Company uses simulation analysis to monitor changes in net interest income due to changes in market interest rates. The simulation of rising, declining and flat interest rate scenarios allows management to monitor and adjust interest rate sensitivity to minimize the impact of market interest rate swings. The analysis of the impact on net interest income over a 12-month and 24-month period is subjected to gradual and parallel shocks of 100, 200, 300 and 400 basis point increases and decreases in market rates and is monitored on a quarterly basisbasis.
The following table presents the earnings simulation model’s projected impact of a change in interest rates on the projected baseline net interest income for the 12- and 24-month periods commencing April 1, 2024. This change in interest rates assumes parallel shifts in the yield curve and does not take into account changes in the slope of the yield curve.
| | | | | | | | | | | | | | |
Earnings Simulation Model Results |
Change in | | % Change in Projected Baseline |
Interest Rates | | Net Interest Income |
(in bps) | | 12 Months | | 24 Months |
400 | | (4.6)% | | 6.6% |
300 | | (1.2)% | | 6.9% |
200 | | 1.1% | | 6.1% |
100 | | 0.9% | | 3.3% |
(100) | | (1.0)% | | (3.8)% |
(200) | | (2.3)% | | (8.0)% |
(300) | | (3.7)% | | (12.5)% |
(400) | | (5.0)% | | (16.9)% |
Additional information required by Item 305 of Regulation S-K is set forth under Part I, Item 2 of this report.
Item 4. Controls and Procedures.
The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act), as of the end of the period covered by this report, as required by paragraph (b) of Rules 13a-15 or 15d-15 of the Exchange Act. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures arewere effective.
During the quarter ended September 30, 2017,March 31, 2024, there was no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, as a normal incident of the nature and kind of business in which the Company is engaged, various claims or charges are asserted against the Company or the Bank. In the ordinary course of business, the Company and the Bank are also subject to regulatory examinations, information gathering requests, inquiries and investigations. Other than ordinary routine litigation incidental to the Company’s business, management believes based on its current knowledge and after consultation with legal counsel that there are no pending or threatenedDisclosure concerning legal proceedings that will, individually orcan be found in Part I - "Financial Information, Item 1. Financial Statements, Notes to Unaudited Consolidated Financial Statements, Note 8 – Commitments and Contingencies" under the aggregate, have a material adverse effect on the consolidated results of operations or financial condition of the Company.caption, "Litigation and Regulatory Contingencies," which is incorporated herein by reference.
Item 1A. Risk Factors.
There have not been noany material changes to the risk factors disclosed in Item 1A. of Part I of ourthe Company's Annual Report on Form 10-K for the year ended December 31, 2016.2023, previously filed with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.c) Issuer Purchases of Equity Securities.
The table below sets forth information regarding the Company’s repurchase of shares of its outstanding common stock during the three-month period ended March 31, 2024. | | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased(1) | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs(2) |
January 1, 2024 through January 31, 2024 | | — | | | $ | — | | | — | | | $ | 96,763,673 | |
February 1, 2024 through February 29, 2024 | | 83,198 | | | $ | 46.84 | | | 23,174 | | | $ | 95,656,070 | |
March 1, 2024 through March 31, 2024 | | 22,000 | | | $ | 45.30 | | | 22,000 | | | $ | 94,659,440 | |
Total | | 105,198 | | | $ | 46.51 | | | 45,174 | | | $ | 94,659,440 | |
(1)The shares purchased in February 1, 2024 to February 29, 2024 include 60,024 shares of common stock surrendered to the Company in payment of the income tax withholding obligations relating to the vesting of shares of restricted stock and performance stock units.
(2)On September 19, 2019, the Company announced that its board of directors authorized the Company to repurchase up to $100.0 million of its outstanding common stock through October 31, 2020. The Board has subsequently extended the share repurchase program each year since the original authorization, with the most recent extension, which also included the replenishment of the program to $100.0 million, being announced on October 26, 2023. As a result, the Company is currently authorized to engage in additional share repurchases totaling up to $100.0 million through October 31, 2024. Repurchases of shares must be made in accordance with applicable securities laws and may be made from time to time in the open market or by negotiated transactions. The amount and timing of repurchases will be based on a variety of factors, including share acquisition price, regulatory limitations and other market and economic factors. The program does not require the Company to repurchase any specific number of shares. As of March 31, 2024, an aggregate of $5.3 million, or 131,574 shares of the Company's common stock, had been repurchased under the program's October 26, 2023 renewal, which also included the replenishment of the program to $100.0 million.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.During the quarter ended March 31, 2024, no director or Section 16 officer of the Company adopted or terminated any Rule 10b5-1 trading arrangement or any non-Rule 10b5-1 trading arrangement (in each case, as defined in Item 408(a) of Regulation S-K).
Item 6. Exhibits.
| | | | | | | | |
Exhibit Number | | Description |
| | | |
Exhibit
| | Description |
| | |
3.1 | | Articles of Incorporation of Ameris Bancorp, as amended (incorporated by reference to Exhibit 2.1 to Ameris Bancorp’s Regulation A Offering Statement on Form 1-A filed with the SEC on August 14, 1987). |
| | |
| | Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.7 to Ameris Bancorp’s Annual Report on Form 10-K filed with the SEC on March 26, 1999). |
| | |
| | Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.9 to Ameris Bancorp’s Annual Report on Form 10-K filed with the SEC on March 31, 2003). |
| | |
| | Articles of Amendment to theRestated Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s CurrentAnnual Report on Form 8-K10-K filed with the SEC on December 1, 2005)February 28, 2023). |
| | |
| | Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on November 21, 2008). |
| | |
| | Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on June 1, 2011). |
| | |
| | Bylaws of Ameris Bancorp, as amended and restated effective July 18, 2017through February 23, 2023 (incorporated by reference to Exhibit 3.13.2 to Ameris Bancorp’s CurrentBancorp's Quarterly Report on Form 8-K10-Q filed with the SEC on July 21, 2017)May 8, 2023). |
| | |
| | Severance Protection and Restrictive Covenants Agreement by and among Ameris Bancorp, Ameris Bank and William D. McKendry dated as of October 3, 2017 (incorporated by reference to Exhibit 10.1 to Ameris Bancorp's Current Report on Form 8-K filed with the SEC on October 6, 2017). |
| | |
| | Third Amendment to Loan Agreement dated October 20, 2017 by and between Ameris Bancorp and NexBank SSB (incorporated by reference to Exhibit 10.1 to Ameris Bancorp's Current Report on Form 8-K filed with the SEC on October 23, 2017). |
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| | Third Amended and Restated Revolving Promissory Note dated as of September 26, 2017 issued by Ameris Bancorp to NexBank SSB (incorporated by reference to Exhibit 10.2 to Ameris Bancorp's Current Report on Form 8-K filed with the SEC on October 23, 2017).
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| | Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Executive Officer. |
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| | Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Financial Officer. |
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| | Section 1350 Certification by the Company’s Chief Executive Officer. |
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| | Section 1350 Certification by the Company’s Chief Financial Officer. |
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101.INS | | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101 | |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL | | The following financial statements from Ameris Bancorp’s Form 10-Q forInline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 | | Cover Page Interactive Data File - the quarter ended September 30, 2017, formatted ascover page interactive data filesfile does not appear in the Interactive Data File because its XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income and Comprehensive Income; (iii) Consolidated Statements of Shareholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements.
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* Management contract or a compensatory plan or arrangement.tags are embedded within the Inline XBRL document. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Dated: May 9, 2024 | AMERIS BANCORP |
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Dated: November 9, 2017 | AMERIS BANCORP/s/ Nicole S. Stokes |
| Nicole S. Stokes |
| /s/ Dennis J. Zember Jr. |
| Dennis J. Zember Jr., |
| Executive Vice President, Chief Financial Officer and Chief Operating Officer
(duly authorized signatory and principal accounting and financial officer)
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