UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20182019
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-36827
001-36872
HANCOCK HOLDING COMPANYWHITNEY CORPORATION
(Exact name of registrant as specified in its charter)
Mississippi |
| |
| 64-0693170 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
|
| |
Gulfport, Mississippi | 39501 | |
(Address of principal executive offices) | (Zip Code) |
(228) 868-4000
(Registrant’s telephone number, including area code)
NOT APPLICABLE
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitionsdefinition s of “large accelerated filer”,filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):Act:
Large accelerated filer | ☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |
Emerging growth company | ☐ |
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Common stock, par value $3.33 per share | HWC | Nasdaq |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
85,287,03785,720,238 common shares were outstanding as of April 30, 2018.2019.
1
Hancock Holding CompanyHancock Whitney Corporation
Part I. Financial Information | Page Number | |
ITEM 1. | 4 | |
| Consolidated Balance Sheets (unaudited) – March 31, |
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| Consolidated Statements of Income (unaudited) – Three Months Ended March 31, |
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| |
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| |
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| Notes to Consolidated Financial Statements (unaudited) – March 31, 2019 and 2018 | 9 |
ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
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ITEM 3. |
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ITEM 4. |
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Part II. Other Information |
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ITEM 1. |
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ITEM 1A. |
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ITEM 2. |
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ITEM 3. | N/A | |
ITEM 4. | N/A | |
ITEM 5. | N/A | |
ITEM 6. |
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60 |
2
2
Hancock Holding CompanyWhitney Corporation
Glossary of Defined Terms
Entities:
Hancock Whitney Corporation – a financial holding company registered with the Securities and Exchange Commission
Hancock Whitney Bank – a wholly-owned subsidiary of Hancock Whitney Corporation through which Hancock Whitney Corporation conducts its banking operations
Company – Hancock Whitney Corporation and its wholly-owned subsidiaries
Parent – Hancock Whitney Corporation, exclusive of its subsidiaries
Bank – Hancock Whitney Bank
Other Terms:
AFS –available for sale securities
AOCI – accumulated other comprehensive income or loss
ALLL – allowance for loan and lease losses
ASC – Accounting Standards Codification
ASU – Accounting Standards Update
ATM - automaticautomated teller machine
Bank – Whitney Bank
Basel II - Basel Committee's 2004 Regulatory Capital Framework (Second Accord)
Basel III -Basel Committee's 2010 Regulatory Capital Framework (Third Accord)
Beta – Basel Committee - Basel Committee on Banking Supervisionamount by which deposit or loan costs change in response to movement in short-term interest rates
Beige Book - Federal Reserve’s Summary of Commentary on Current Economic Conditions
BOLI – Bank-owned life insurance
bp(s) – – basisBasis point(s)
C&I – commercial and industrial loans
Capital One – Capital One, National Association, from which the Company acquired a trust and asset management business in July 2018.
CECL – Current Expected Credit Losses, the Accounting Standards Update effective for the Company on January 1, 2020
CD –certificate of deposit
CDE – Community Development Entity
CMO – Collateralized Mortgage Obligation
Company – Hancock Holding Company and its wholly-owned subsidiaries
CRE – commercial real estate
Dodd-Frank Act – The Dodd-Frank Wall Street Reform and Consumer Protection Act
FASB – Financial Accounting Standards Board
FDIC – Federal Deposit Insurance Corporation
Federal Reserve Bank – The 12 banks that are the operating arms of the U.S. central bank. They implement the
policies of the Federal Reserve Board and also conduct economic research.
Federal Reserve Board – The 7-member Board of Governors that oversees the Federal Reserve System, establishes
monetary policy (interest rates, credit, etc.), and monitors the economic health of the country. Its members are appointed
by the President subject to Senate confirmation, and serve 14-year terms.
Federal Reserve System – The 12 Federal Reserve Banks, with each one serving member banks in its own district.
This system, supervised by the Federal Reserve Board, has broad regulatory powers over the money supply and the
credit structure.
FHLB – Federal Home Loan Bank
FNBC – The former New Orleans, Louisiana based First NBC Bank that failed on April 28, 2017
FNBC I – acquired selected assets and liabilities from FNBC under agreement dated March 10, 2017
FNBC II – acquired selected assets and liabilities from the FDIC as receiver for FNBC under agreement dated April 28, 2017
GAAP – Generally Accepted Accounting Principles in the United States of America
Hancock – Hancock Holding Company
Hancock Bank – Whitney Bank does business as Hancock Bank in Mississippi, Alabama, and Florida
HFC – Harrison Finance Company, a former consumer finance subsidiary
HTM – held to maturity securities
LIBOR – London Interbank Offered Rate
LIHTC – Low Income Housing Tax Credit
MD&A –management’s discussion and analysis of financial condition and results of operations
MidSouth – MidSouth Bancorp, Inc., an entity the Company has agreed to acquire under an Agreement and Plan of Merger dated April 30, 2019
NAICS – North American Industry Classification System
NII – Net interest income
n/m – not meaningful
OCIOCI – other comprehensive income
OFI – Louisiana Office of Financial Institutions
ORE – other real estate defined as foreclosed and surplus real estate
3
Parent Company – Hancock Holding Company
PCI – purchased credit impaired loans
Repos – securities sold under agreements to repurchase
SEC – U.S. Securities and Exchange Commission
Securities Act – Securities Act of 1933, as amended
Tax Act – Tax Cuts and Jobs Act of 2017
tete – taxable equivalent adjustment, or the term used to indicate that a financial measure is presented on a fully taxable equivalent basis
TDR – troubled debt restructuring (as defined in ASC 310-40)
TSR – total shareholder return
U.S. Treasury– The United States Department of the Treasury
Whitney Bank – wholly-owned subsidiary of Hancock Holding Company, through which Hancock conducts its banking operations3
4
Part I.FinanciFinancialal Information
Item 1.1. Financial Statements
Hancock Holding Company Whitney Corporation and Subsidiaries
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, |
| December 31, | ||
(in thousands, except per share data) |
| 2018 |
| 2017 | ||
ASSETS |
|
|
|
|
|
|
Cash and due from banks |
| $ | 253,860 |
| $ | 386,948 |
Interest-bearing bank deposits |
|
| 61,288 |
|
| 92,157 |
Federal funds sold |
|
| 253 |
|
| 227 |
Securities available for sale, at fair value (amortized cost of $3,008,951 and $2,949,057) |
|
| 2,915,648 |
|
| 2,910,869 |
Securities held to maturity (fair value of $2,952,295 and $2,962,010) |
|
| 3,014,428 |
|
| 2,977,511 |
Loans held for sale |
|
| 21,827 |
|
| 39,865 |
Loans |
|
| 19,092,504 |
|
| 19,004,163 |
Less: allowance for loan losses |
|
| (210,713) |
|
| (217,308) |
Loans, net |
|
| 18,881,791 |
|
| 18,786,855 |
Property and equipment, net of accumulated depreciation of $218,540 and $214,998 |
|
| 334,254 |
|
| 333,663 |
Prepaid expenses |
|
| 29,669 |
|
| 28,015 |
Other real estate, net |
|
| 13,963 |
|
| 14,862 |
Accrued interest receivable |
|
| 80,812 |
|
| 82,191 |
Goodwill |
|
| 745,523 |
|
| 745,523 |
Other intangible assets, net |
|
| 85,021 |
|
| 90,640 |
Life insurance contracts |
|
| 544,427 |
|
| 541,081 |
Deferred tax asset, net |
|
| 52,735 |
|
| 53,979 |
Other assets |
|
| 261,838 |
|
| 251,700 |
Total assets |
| $ | 27,297,337 |
| $ | 27,336,086 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
| �� |
Liabilities: |
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
Noninterest-bearing |
| $ | 8,230,060 |
| $ | 8,307,497 |
Interest-bearing |
|
| 14,255,662 |
|
| 13,945,705 |
Total deposits |
|
| 22,485,722 |
|
| 22,253,202 |
Short-term borrowings |
|
| 1,452,097 |
|
| 1,703,890 |
Long-term debt |
|
| 300,443 |
|
| 305,513 |
Accrued interest payable |
|
| 11,801 |
|
| 8,680 |
Other liabilities |
|
| 151,236 |
|
| 179,852 |
Total liabilities |
|
| 24,401,299 |
|
| 24,451,137 |
Stockholders' equity: |
|
|
|
|
|
|
Common stock |
|
| 292,716 |
|
| 292,716 |
Capital surplus |
|
| 1,723,689 |
|
| 1,718,117 |
Retained earnings |
|
| 1,060,182 |
|
| 1,008,518 |
Accumulated other comprehensive loss, net |
|
| (180,549) |
|
| (134,402) |
Total stockholders' equity |
|
| 2,896,038 |
|
| 2,884,949 |
Total liabilities and stockholders' equity |
| $ | 27,297,337 |
| $ | 27,336,086 |
Common shares authorized (par value of $3.33 per share) |
|
| 350,000 |
|
| 350,000 |
Common shares issued |
|
| 87,903 |
|
| 87,903 |
Common shares outstanding |
|
| 85,285 |
|
| 85,200 |
See notes to unaudited consolidated financial statements.
5
Hancock Holding Company and Subsidiaries
Consolidated Statements of Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended | ||||
|
| March 31, | ||||
(in thousands, except per share data) |
| 2018 |
| 2017 | ||
Interest income: |
|
|
|
|
|
|
Loans, including fees |
| $ | 205,847 |
| $ | 172,781 |
Loans held for sale |
|
| 221 |
|
| 217 |
Securities-taxable |
|
| 29,301 |
|
| 23,367 |
Securities-tax exempt |
|
| 5,537 |
|
| 5,407 |
Short-term investments |
|
| 489 |
|
| 743 |
Total interest income |
|
| 241,395 |
|
| 202,515 |
Interest expense: |
|
|
|
|
|
|
Deposits |
|
| 26,959 |
|
| 12,819 |
Short-term borrowings |
|
| 5,351 |
|
| 2,941 |
Long-term debt |
|
| 3,421 |
|
| 5,064 |
Total interest expense |
|
| 35,731 |
|
| 20,824 |
Net interest income |
|
| 205,664 |
|
| 181,691 |
Provision for loan losses |
|
| 12,253 |
|
| 15,991 |
Net interest income after provision for loan losses |
|
| 193,411 |
|
| 165,700 |
Noninterest income: |
|
|
|
|
|
|
Service charges on deposit accounts |
|
| 21,448 |
|
| 19,206 |
Trust fees |
|
| 11,335 |
|
| 11,211 |
Bank card and ATM fees |
|
| 14,458 |
|
| 12,468 |
Investment and annuity fees and insurance commissions |
|
| 6,125 |
|
| 5,264 |
Secondary mortgage market operations |
|
| 3,401 |
|
| 3,567 |
Other income |
|
| 9,485 |
|
| 11,775 |
Total noninterest income |
|
| 66,252 |
|
| 63,491 |
Noninterest expense: |
|
|
|
|
|
|
Compensation expense |
|
| 80,100 |
|
| 73,099 |
Employee benefits |
|
| 19,874 |
|
| 19,080 |
Personnel expense |
|
| 99,974 |
|
| 92,179 |
Net occupancy expense |
|
| 11,010 |
|
| 10,757 |
Equipment expense |
|
| 3,546 |
|
| 3,714 |
Data processing expense |
|
| 16,449 |
|
| 15,397 |
Professional services expense |
|
| 9,255 |
|
| 11,276 |
Amortization of intangibles |
|
| 5,618 |
|
| 4,705 |
Telecommunications and postage |
|
| 3,850 |
|
| 3,467 |
Deposit insurance and regulatory fees |
|
| 7,948 |
|
| 6,490 |
Other real estate (income) expense, net |
|
| 210 |
|
| (13) |
Other expense |
|
| 12,931 |
|
| 15,570 |
Total noninterest expense |
|
| 170,791 |
|
| 163,542 |
Income before income taxes |
|
| 88,872 |
|
| 65,649 |
Income taxes |
|
| 16,397 |
|
| 16,635 |
Net income |
| $ | 72,475 |
| $ | 49,014 |
Earnings per common share-basic |
| $ | 0.83 |
| $ | 0.57 |
Earnings per common share-diluted |
| $ | 0.83 |
| $ | 0.57 |
Dividends paid per share |
| $ | 0.24 |
| $ | 0.24 |
Weighted average shares outstanding-basic |
|
| 85,241 |
|
| 84,365 |
Weighted average shares outstanding-diluted |
|
| 85,423 |
|
| 84,624 |
See notes to unaudited consolidated financial statements.
6
Hancock Holding Company and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended | ||||
|
| March 31, | ||||
(in thousands) |
| 2018 |
| 2017 | ||
Net income |
| $ | 72,475 |
| $ | 49,014 |
Other comprehensive income before income taxes: |
|
|
|
|
|
|
Net change in unrealized gain/loss on securities available for sale and hedges |
|
| (62,244) |
|
| 1,184 |
Reclassification of net losses realized and included in earnings |
|
| 1,796 |
|
| 1,387 |
Amortization of unrealized net loss on securities transferred to held to maturity |
|
| 755 |
|
| 650 |
Other comprehensive income/loss before income taxes |
|
| (59,693) |
|
| 3,221 |
Income tax expense (benefit) |
|
| (13,546) |
|
| 1,201 |
Other comprehensive income/loss net of income taxes |
|
| (46,147) |
|
| 2,020 |
Comprehensive income |
| $ | 26,328 |
| $ | 51,034 |
|
| March 31, |
|
| December 31, |
| ||
(in thousands, except per share data) |
| 2019 |
|
| 2018 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Cash and due from banks |
| $ | 360,194 |
|
| $ | 383,372 |
|
Interest-bearing bank deposits |
|
| 163,232 |
|
|
| 110,579 |
|
Federal funds sold |
|
| 530 |
|
|
| 515 |
|
Securities available for sale, at fair value (amortized cost of $2,698,865 and $2,755,806) |
|
| 2,681,080 |
|
|
| 2,691,037 |
|
Securities held to maturity (fair value of $2,892,910 and $2,935,856) |
|
| 2,896,442 |
|
|
| 2,979,547 |
|
Loans held for sale |
|
| 27,437 |
|
|
| 28,150 |
|
Loans |
|
| 20,112,838 |
|
|
| 20,026,411 |
|
Less: allowance for loan losses |
|
| (194,688 | ) |
|
| (194,514 | ) |
Loans, net |
|
| 19,918,150 |
|
|
| 19,831,897 |
|
Property and equipment, net of accumulated depreciation of $233,078 and $225,969 |
|
| 358,205 |
|
|
| 353,668 |
|
Right of use assets, net of accumulated amortization of $3,064 |
|
| 113,447 |
|
|
| — |
|
Prepaid expenses |
|
| 39,153 |
|
|
| 35,047 |
|
Other real estate and foreclosed assets, net |
|
| 27,148 |
|
|
| 26,270 |
|
Accrued interest receivable |
|
| 94,404 |
|
|
| 86,681 |
|
Goodwill |
|
| 792,084 |
|
|
| 790,972 |
|
Other intangible assets, net |
|
| 91,013 |
|
|
| 96,151 |
|
Life insurance contracts |
|
| 553,893 |
|
|
| 549,300 |
|
Deferred tax asset, net |
|
| — |
|
|
| 22,967 |
|
Funded pension assets, net |
|
| 168,910 |
|
|
| 65,125 |
|
Other assets |
|
| 204,909 |
|
|
| 184,629 |
|
Total assets |
| $ | 28,490,231 |
|
| $ | 28,235,907 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
Noninterest-bearing |
| $ | 8,158,658 |
|
| $ | 8,499,027 |
|
Interest-bearing |
|
| 15,221,636 |
|
|
| 14,651,158 |
|
Total deposits |
|
| 23,380,294 |
|
|
| 23,150,185 |
|
Short-term borrowings |
|
| 1,388,735 |
|
|
| 1,589,128 |
|
Long-term debt |
|
| 224,962 |
|
|
| 224,993 |
|
Accrued interest payable |
|
| 18,031 |
|
|
| 12,267 |
|
Lease liabilities |
|
| 128,494 |
|
|
| — |
|
Deferred tax liability, net |
|
| 19,065 |
|
|
| — |
|
Other liabilities |
|
| 140,075 |
|
|
| 177,994 |
|
Total liabilities |
|
| 25,299,656 |
|
|
| 25,154,567 |
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Common stock |
|
| 292,716 |
|
|
| 292,716 |
|
Capital surplus |
|
| 1,731,148 |
|
|
| 1,725,741 |
|
Retained earnings |
|
| 1,299,220 |
|
|
| 1,243,592 |
|
Accumulated other comprehensive loss, net |
|
| (132,509 | ) |
|
| (180,709 | ) |
Total stockholders' equity |
|
| 3,190,575 |
|
|
| 3,081,340 |
|
Total liabilities and stockholders' equity |
| $ | 28,490,231 |
|
| $ | 28,235,907 |
|
Preferred shares authorized (par value of $20.00 per share) |
|
| 50,000 |
|
|
| 50,000 |
|
Preferred shares issued and outstanding |
|
| — |
|
|
| — |
|
Common shares authorized (par value of $3.33 per share) |
|
| 350,000 |
|
|
| 350,000 |
|
Common shares issued |
|
| 87,903 |
|
|
| 87,903 |
|
Common shares outstanding |
|
| 85,710 |
|
|
| 85,643 |
|
See notes to unaudited consolidated financial statements.
4
7
Hancock Whitney CorporationHolding Company and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive |
|
|
| |
|
| Common Stock |
| Capital |
| Retained |
| Income (Loss), |
|
|
| ||||||
(in thousands, except per share data) |
| Shares Issued |
| Amount |
| Surplus |
| Earnings |
| net |
|
| Total | ||||
Balance, December 31, 2016 |
| 87,495 |
| $ | 291,358 |
| $ | 1,698,253 |
| $ | 850,689 |
| $ | (120,532) |
| $ | 2,719,768 |
Net income |
| — |
|
| — |
|
| — |
|
| 49,014 |
|
| — |
|
| 49,014 |
Other comprehensive income |
| — |
|
| — |
|
| — |
|
| — |
|
| 2,020 |
|
| 2,020 |
Comprehensive income |
| — |
|
| — |
|
| — |
|
| 49,014 |
|
| 2,020 |
|
| 51,034 |
Cash dividends declared ($0.24 per common share) |
| — |
|
| — |
|
| — |
|
| (20,793) |
|
| — |
|
| (20,793) |
Common stock activity, long-term incentive plan |
| — |
|
| — |
|
| 12,815 |
|
| 43 |
|
| — |
|
| 12,858 |
Issuance of stock from dividend reinvestment |
| — |
|
| — |
|
| 755 |
|
| — |
|
| — |
|
| 755 |
Balance, March 31, 2017 |
| 87,495 |
| $ | 291,358 |
| $ | 1,711,823 |
| $ | 878,953 |
| $ | (118,512) |
| $ | 2,763,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017 |
| 87,903 |
| $ | 292,716 |
| $ | 1,718,117 |
| $ | 1,008,518 |
| $ | (134,402) |
| $ | 2,884,949 |
Net income |
| — |
|
| — |
|
| — |
|
| 72,475 |
|
| — |
|
| 72,475 |
Other comprehensive income |
| — |
|
| — |
|
| — |
|
| — |
|
| (46,147) |
|
| (46,147) |
Comprehensive income |
| — |
|
| — |
|
| — |
|
| 72,475 |
|
| (46,147) |
|
| 26,328 |
Cash dividends declared ($0.24 per common share) |
| — |
|
| — |
|
| — |
|
| (20,881) |
|
| — |
|
| (20,881) |
Common stock activity, long-term incentive plan |
| — |
|
| — |
|
| 4,735 |
|
| 70 |
|
| — |
|
| 4,805 |
Issuance of stock from dividend reinvestment and stock purchase plans |
| — |
|
| — |
|
| 837 |
|
| — |
|
| — |
|
| 837 |
Balance, March 31, 2018 |
| 87,903 |
| $ | 292,716 |
| $ | 1,723,689 |
| $ | 1,060,182 |
| $ | (180,549) |
| $ | 2,896,038 |
See notes to unaudited consolidated financial statements.
8
Hancock Holding Company and Subsidiaries
Consolidated Statements of Cash FlowsIncome
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended | ||||
|
| March 31, | ||||
(in thousands) |
| 2018 |
| 2017 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net income |
| $ | 72,475 |
| $ | 49,014 |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
| 6,551 |
|
| 6,915 |
Provision for loan losses |
|
| 12,253 |
|
| 15,991 |
(Gain) loss on other real estate owned |
|
| 210 |
|
| (54) |
Deferred tax expense |
|
| 14,790 |
|
| 7,156 |
Increase in cash surrender value of life insurance contracts |
|
| (3,346) |
|
| (3,636) |
Loss on disposal of other assets |
|
| 73 |
|
| 229 |
Loss on sale of business |
|
| 1,145 |
|
| — |
Net decrease in loans held for sale |
|
| 18,172 |
|
| 13,966 |
Net amortization of securities premium/discount |
|
| 8,453 |
|
| 7,323 |
Amortization of intangible assets |
|
| 5,618 |
|
| 4,705 |
Amortization of FDIC indemnification asset |
|
| — |
|
| 1,100 |
Stock-based compensation expense |
|
| 4,883 |
|
| 4,209 |
Decrease in interest payable and other liabilities |
|
| (32,568) |
|
| (33,323) |
Net payments to FDIC for loss share claims |
|
| — |
|
| (1,131) |
Decrease in FDIC loss share receivable |
|
| — |
|
| 902 |
Decrease in payable to FDIC for loan servicing |
|
| (11,107) |
|
| — |
Decrease in other assets |
|
| 6,821 |
|
| 21,362 |
Other, net |
|
| 71 |
|
| 1,600 |
Net cash provided by operating activities |
|
| 104,494 |
|
| 96,328 |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
Proceeds from maturities of securities available for sale |
|
| 80,155 |
|
| 81,116 |
Purchases of securities available for sale |
|
| (142,052) |
|
| (60,484) |
Proceeds from maturities of securities held to maturity |
|
| 93,408 |
|
| 92,684 |
Purchases of securities held to maturity |
|
| (134,020) |
|
| (87,847) |
Net decrease in short-term investments |
|
| 30,843 |
|
| 9,428 |
Proceeds from sales of loans |
|
| 12,211 |
|
| 33,279 |
Net increase in loans |
|
| (196,328) |
|
| (306,745) |
Purchases of property and equipment |
|
| (7,904) |
|
| (7,329) |
Proceeds from sales of property and equipment |
|
| 42 |
|
| 17 |
Proceeds from sales of other real estate |
|
| 1,641 |
|
| 3,099 |
Cash paid for acquisition, net of cash received |
|
| — |
|
| (322,708) |
Proceeds from the sale of business, net of cash sold |
|
| 77,081 |
|
| — |
Other, net |
|
| (8,915) |
|
| (39,588) |
Net cash used in investing activities |
|
| (193,838) |
|
| (605,078) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
Net increase in deposits |
|
| 232,638 |
|
| 99,583 |
Net increase (decrease) in short-term borrowings |
|
| (251,793) |
|
| 385,777 |
Repayments of long-term debt |
|
| (5,268) |
|
| (4,475) |
Net proceeds from issuance of long-term debt |
|
| 83 |
|
| 41 |
Dividends paid |
|
| (20,881) |
|
| (20,793) |
Payroll tax remitted on net share settlement of equity awards |
|
| (142) |
|
| (163) |
Proceeds from exercise of stock options |
|
| 782 |
|
| 8,650 |
Proceeds from dividend reinvestment and stock purchase plans |
|
| 837 |
|
| 755 |
Net cash provided by (used in) financing activities |
|
| (43,744) |
|
| 469,375 |
NET DECREASE IN CASH AND DUE FROM BANKS |
|
| (133,088) |
|
| (39,375) |
CASH AND DUE FROM BANKS, BEGINNING |
|
| 386,948 |
|
| 372,689 |
CASH AND DUE FROM BANKS, ENDING |
| $ | 253,860 |
| $ | 333,314 |
SUPPLEMENTAL INFORMATION FOR NON-CASH |
|
|
|
|
|
|
INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
Assets acquired in settlement of loans |
| $ | 1,305 |
| $ | 1,031 |
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
(in thousands, except per share data) |
| 2019 |
|
| 2018 |
| ||
Interest income: |
|
|
|
|
|
|
|
|
Loans, including fees |
| $ | 238,282 |
|
| $ | 205,847 |
|
Loans held for sale |
|
| 253 |
|
|
| 221 |
|
Securities-taxable |
|
| 31,139 |
|
|
| 29,301 |
|
Securities-tax exempt |
|
| 5,446 |
|
|
| 5,537 |
|
Short-term investments |
|
| 1,163 |
|
|
| 489 |
|
Total interest income |
|
| 276,283 |
|
|
| 241,395 |
|
Interest expense: |
|
|
|
|
|
|
|
|
Deposits |
|
| 46,138 |
|
|
| 26,959 |
|
Short-term borrowings |
|
| 8,082 |
|
|
| 5,351 |
|
Long-term debt |
|
| 2,809 |
|
|
| 3,421 |
|
Total interest expense |
|
| 57,029 |
|
|
| 35,731 |
|
Net interest income |
|
| 219,254 |
|
|
| 205,664 |
|
Provision for loan losses |
|
| 18,043 |
|
|
| 12,253 |
|
Net interest income after provision for loan losses |
|
| 201,211 |
|
|
| 193,411 |
|
Noninterest income: |
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
| 20,367 |
|
|
| 21,448 |
|
Trust fees |
|
| 15,124 |
|
|
| 11,335 |
|
Bank card and ATM fees |
|
| 15,290 |
|
|
| 14,458 |
|
Investment and annuity fees and insurance commissions |
|
| 6,528 |
|
|
| 6,125 |
|
Secondary mortgage market operations |
|
| 3,726 |
|
|
| 3,401 |
|
Other income |
|
| 9,468 |
|
|
| 9,485 |
|
Total noninterest income |
|
| 70,503 |
|
|
| 66,252 |
|
Noninterest expense: |
|
|
|
|
|
|
|
|
Compensation expense |
|
| 83,968 |
|
|
| 80,100 |
|
Employee benefits |
|
| 19,730 |
|
|
| 19,874 |
|
Personnel expense |
|
| 103,698 |
|
|
| 99,974 |
|
Net occupancy expense |
|
| 11,984 |
|
|
| 11,010 |
|
Equipment expense |
|
| 4,679 |
|
|
| 3,546 |
|
Data processing expense |
|
| 19,331 |
|
|
| 16,449 |
|
Professional services expense |
|
| 8,168 |
|
|
| 9,255 |
|
Amortization of intangible assets |
|
| 5,138 |
|
|
| 5,618 |
|
Deposit insurance and regulatory fees |
|
| 5,406 |
|
|
| 7,948 |
|
Other real estate (income) expense |
|
| (991 | ) |
|
| 210 |
|
Other expense |
|
| 18,287 |
|
|
| 16,781 |
|
Total noninterest expense |
|
| 175,700 |
|
|
| 170,791 |
|
Income before income taxes |
|
| 96,014 |
|
|
| 88,872 |
|
Income taxes |
|
| 16,850 |
|
|
| 16,397 |
|
Net income |
| $ | 79,164 |
|
| $ | 72,475 |
|
Earnings per common share-basic |
| $ | 0.91 |
|
| $ | 0.83 |
|
Earnings per common share-diluted |
| $ | 0.91 |
|
| $ | 0.83 |
|
Dividends paid per share |
| $ | 0.27 |
|
| $ | 0.24 |
|
Weighted average shares outstanding-basic |
|
| 85,688 |
|
|
| 85,241 |
|
Weighted average shares outstanding-diluted |
|
| 85,800 |
|
|
| 85,423 |
|
See notes to unaudited consolidated financial statements.
5
9
Hancock Whitney Corporationand Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
(in thousands) |
| 2019 |
|
| 2018 |
| ||
Net income |
| $ | 79,164 |
|
| $ | 72,475 |
|
Other comprehensive income/loss before income taxes: |
|
|
|
|
|
|
|
|
Net change in unrealized gain/loss on securities available for sale and cash flow hedges |
|
| 57,243 |
|
|
| (62,244 | ) |
Reclassification of net losses realized and included in earnings |
|
| 4,219 |
|
|
| 1,796 |
|
Amortization of unrealized net loss on securities transferred to held to maturity |
|
| 591 |
|
|
| 755 |
|
Other comprehensive income/loss before income taxes |
|
| 62,053 |
|
|
| (59,693 | ) |
Income tax expense (benefit) |
|
| 13,853 |
|
|
| (13,546 | ) |
Other comprehensive income/loss net of income taxes |
|
| 48,200 |
|
|
| (46,147 | ) |
Comprehensive income |
| $ | 127,364 |
|
| $ | 26,328 |
|
See notes to unaudited consolidated financial statements.
6
Hancock Whitney Corporationand Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |
|
| Common Stock |
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
| ||||||
(in thousands, except per share data) |
| Shares Issued |
|
| Amount |
|
| Capital Surplus |
|
| Retained Earnings |
|
| Comprehensive Loss, Net |
|
| Total |
| ||||||
Balance, December 31, 2017 |
|
| 87,903 |
|
| $ | 292,716 |
|
| $ | 1,718,117 |
|
| $ | 1,008,518 |
|
| $ | (134,402 | ) |
| $ | 2,884,949 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 72,475 |
|
|
| — |
|
|
| 72,475 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (46,147 | ) |
|
| (46,147 | ) |
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 72,475 |
|
|
| (46,147 | ) |
|
| 26,328 |
|
Cash dividends declared ($0.24 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (20,881 | ) |
|
| — |
|
|
| (20,881 | ) |
Common stock activity, long-term incentive plan |
|
| — |
|
|
| — |
|
|
| 4,735 |
|
|
| 70 |
|
|
| — |
|
|
| 4,805 |
|
Issuance of stock from dividend reinvestment and stock purchase plans |
|
| — |
|
|
| — |
|
|
| 837 |
|
|
| — |
|
|
| — |
|
|
| 837 |
|
Balance, March 31, 2018 |
|
| 87,903 |
|
| $ | 292,716 |
|
| $ | 1,723,689 |
|
| $ | 1,060,182 |
|
| $ | (180,549 | ) |
| $ | 2,896,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018 |
|
| 87,903 |
|
| $ | 292,716 |
|
| $ | 1,725,741 |
|
| $ | 1,243,592 |
|
| $ | (180,709 | ) |
| $ | 3,081,340 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 79,164 |
|
|
| — |
|
|
| 79,164 |
|
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 48,200 |
|
|
| 48,200 |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 79,164 |
|
|
| 48,200 |
|
|
| 127,364 |
|
Cash dividends declared ($0.27 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23,581 | ) |
|
| — |
|
|
| (23,581 | ) |
Common stock activity, long-term incentive plan |
|
| — |
|
|
| — |
|
|
| 4,528 |
|
|
| 45 |
|
|
| — |
|
|
| 4,573 |
|
Issuance of stock from dividend reinvestment and stock purchase plans |
|
| — |
|
|
| — |
|
|
| 879 |
|
|
| — |
|
|
| — |
|
|
| 879 |
|
Balance, March 31, 2019 |
|
| 87,903 |
|
| $ | 292,716 |
|
| $ | 1,731,148 |
|
| $ | 1,299,220 |
|
| $ | (132,509 | ) |
| $ | 3,190,575 |
|
See notes to unaudited consolidated financial statements.
7
Hancock Whitney Corporationand Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
(in thousands) |
| 2019 |
|
| 2018 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
| $ | 79,164 |
|
| $ | 72,475 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 7,516 |
|
|
| 6,551 |
|
Provision for loan losses |
|
| 18,043 |
|
|
| 12,253 |
|
(Gain) loss on other real estate owned |
|
| (991 | ) |
|
| 210 |
|
Deferred tax expense |
|
| 30,829 |
|
|
| 14,790 |
|
Increase in cash surrender value of life insurance contracts |
|
| (3,772 | ) |
|
| (3,346 | ) |
Loss on sale of business |
|
| — |
|
|
| 1,145 |
|
Net decrease in loans held for sale |
|
| 5,714 |
|
|
| 18,172 |
|
Net amortization of securities premium/discount |
|
| 7,009 |
|
|
| 8,453 |
|
Amortization of intangible assets |
|
| 5,138 |
|
|
| 5,618 |
|
Stock-based compensation expense |
|
| 5,181 |
|
|
| 4,883 |
|
Contribution to pension plan |
|
| (100,000 | ) |
|
| — |
|
Decrease in interest payable and other liabilities |
|
| (15,478 | ) |
|
| (32,568 | ) |
Decrease in payable to FDIC for loan servicing |
|
| — |
|
|
| (11,107 | ) |
(Increase) decrease in other assets |
|
| (23,335 | ) |
|
| 6,821 |
|
Other, net |
|
| (1,595 | ) |
|
| 144 |
|
Net cash provided by operating activities |
|
| 13,423 |
|
|
| 104,494 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from maturities of securities available for sale |
|
| 55,596 |
|
|
| 80,155 |
|
Purchases of securities available for sale |
|
| (1,502 | ) |
|
| (142,052 | ) |
Proceeds from maturities of securities held to maturity |
|
| 79,533 |
|
|
| 93,408 |
|
Purchases of securities held to maturity |
|
| — |
|
|
| (134,020 | ) |
Net (increase) decrease in short-term investments |
|
| (52,668 | ) |
|
| 30,843 |
|
Proceeds from sales of loans and leases |
|
| 42,059 |
|
|
| 12,211 |
|
Net increase in loans |
|
| (148,073 | ) |
|
| (196,328 | ) |
Purchases of property and equipment |
|
| (12,435 | ) |
|
| (7,904 | ) |
Proceeds from sales of property and equipment |
|
| 115 |
|
|
| 42 |
|
Proceeds from sales of other real estate |
|
| 4,613 |
|
|
| 1,641 |
|
Final cash settlement for acquisition of business |
|
| (1,112 | ) |
|
| — |
|
Proceeds from the sale of business, net of cash sold |
|
| — |
|
|
| 77,081 |
|
Other, net |
|
| (8,978 | ) |
|
| (8,915 | ) |
Net cash used in investing activities |
|
| (42,852 | ) |
|
| (193,838 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net increase in deposits |
|
| 230,109 |
|
|
| 232,638 |
|
Net decrease in short-term borrowings |
|
| (200,393 | ) |
|
| (251,793 | ) |
Repayments of long-term debt |
|
| (75 | ) |
|
| (5,268 | ) |
Net proceeds from issuance of long-term debt |
|
| — |
|
|
| 83 |
|
Dividends paid |
|
| (23,581 | ) |
|
| (20,881 | ) |
Payroll tax remitted on net share settlement of equity awards |
|
| (688 | ) |
|
| (142 | ) |
Proceeds from exercise of stock options |
|
| — |
|
|
| 782 |
|
Proceeds from dividend reinvestment and stock purchase plans |
|
| 879 |
|
|
| 837 |
|
Net cash provided by (used in) financing activities |
|
| 6,251 |
|
|
| (43,744 | ) |
NET DECREASE IN CASH AND DUE FROM BANKS |
|
| (23,178 | ) |
|
| (133,088 | ) |
CASH AND DUE FROM BANKS, BEGINNING |
|
| 383,372 |
|
|
| 386,948 |
|
CASH AND DUE FROM BANKS, ENDING |
| $ | 360,194 |
|
| $ | 253,860 |
|
SUPPLEMENTAL INFORMATION FOR NON-CASH |
|
|
|
|
|
|
|
|
INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Assets acquired in settlement of loans |
| $ | 4,273 |
|
| $ | 1,305 |
|
See notes to unaudited consolidated financial statements.
8
HANCOCK HOLDING COMPANYWHITNEY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of Hancock Holding CompanyWhitney Corporation and all other entities in which it has a controlling interest (the “Company”). The financial statements include all adjustments that are, in the opinion of management, necessary to fairly state the Company’s financial condition, results of operations, changes in stockholders’ equity and cash flows for the interim periods presented. The Company has also evaluated all subsequent events for potential recognition and disclosure through the date of the filing of this Quarterly Report on Form 10-Q. Some financial information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted in this Quarterly Report on Form 10-Q pursuant to Securities and Exchange Commission rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.2018. Financial information reported in these financial statements is not necessarily indicative of the Company’s financial condition, results of operations, or cash flows for any other interim or annual period.
Certain prior period amounts have been reclassified to conform to the current period presentation. These changes in presentation did not have a material impact on the Company’s financial condition or operating results.
Use of Estimates
The accounting principles the Company follows and the methods for applying these principles conform to GAAP and general practices followed by the banking industry. These accounting principles require management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.
Critical Accounting Policies and Estimates
There were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2017.2018. Refer to Note 1516 – Recent Accounting Pronouncements for a discussion of accounting standards adopted during the quarterthree months ended March 31, 2018.
2019.
2. Acquisitions and Divestiture
Acquisition
On March 10, 2017,July 13, 2018, the Company through its banking subsidiary, Whitney Bank (“Whitney”), acquired certain assets and assumed certain liabilities, including nine branches, from First NBC Bank (“FNBC”), referred to as the FNBC I transaction. Whitney paid approximately $323 million in cash consideration ($326 million cash paid net of $3 million in branch cash acquired), including a $41.6 million transaction premium for the earnings stream acquired.
On April 28, 2017, the Louisiana Office of Financial Institutions (“OFI”) closed FNBC and appointed the FDIC as receiver. Whitney entered into a purchase and assumption agreement with the FDIC, referred to as the FNBC II transaction. Pursuant to the agreement, Whitney acquired selected assets and assumed selected liabilities of the former FNBC, including substantially all of the transaction and savings deposits. Whitney paid a premium of $35 million to the FDIC for the earnings stream acquired and received approximately $800 million in cash ($642 million from the FDIC for the net liabilities assumed and $158 million in branch cash acquired). The terms of the agreement require the FDIC to indemnify Whitney against certain liabilities of FNBC and its affiliates not assumed or otherwise purchased by Whitney. Neither the Company nor Whitney Bank acquired any assets, common stock, preferred stock or debt, or assumed any other obligations, of First NBC Bank Holding Company.
Pending Business Combination
In December 2017, the Company announced entry into an agreement to acquire the bank-managed high net worth individual and institutional investment management and trust business fromof Capital One, National Association (“Capital One”). The transaction is expectedadded assets under management of $4 billion and assets under management and administration of $10.4 billion to close in early third quarter 2018, pending regulatory approvalthe Company’s existing trust and asset management business. In addition, the Company assumed approximately $217 million of customer deposit liabilities. The following table sets forth the acquisition date fair value of the assets acquired and the satisfaction of customaryliabilities assumed, the consideration received, and other closing conditions. the resulting goodwill.
Divestiture
(in thousands) |
|
|
|
|
ASSETS |
|
|
|
|
Accounts receivable |
| $ | 2,803 |
|
Identifiable intangible assets |
|
| 27,562 |
|
Total identifiable assets |
|
| 30,365 |
|
LIABILITIES |
|
|
|
|
Deposit liabilities |
|
| 217,432 |
|
Other liabilities |
|
| 151 |
|
Total liabilities |
|
| 217,583 |
|
Net liabilities assumed |
|
| (187,218 | ) |
Consideration received |
|
| 140,657 |
|
Goodwill |
| $ | 46,561 |
|
On March 9, 2018, the Company sold its consumer finance subsidiary, Harrison Finance Company (“HFC”). The Company recorded a loss on the sale of $1.1 millionIdentifiable intangible assets include customer relationships that are being amortized using an accelerated method based on forecasted cash flows over a useful life of approximately 17 years. Goodwill represents the preliminary cash settlementexcess of $78.3 million, with a final cash settlement expected to occurthe fair value of net liabilities assumed over the consideration received. It is comprised of estimated future economic benefits arising from the transaction that cannot be individually identified or do not qualify for separate recognition. These benefits include expanded presence in the second quarter of 2018. existing markets and entry into new
9
10
markets, and expected earnings streams and operational efficiencies that the Company believes will result from this business combination. The tax basis of the goodwill is deductible for federal income tax purposes.
The following table presents the change in the Company’s goodwill during the year ended December 31, 2018 and the three months ended March 31, 2019.
(in thousands) |
|
|
|
|
Goodwill balance at December 31, 2017 |
| $ | 745,523 |
|
Intital goodwill recorded - acquisition of trust and asset management business |
|
| 45,634 |
|
Measurement period adjustments - acquisition of trust and asset management business |
|
| (185 | ) |
Goodwill balance at December 31, 2018 |
| $ | 790,972 |
|
Final settlement of cash consideration - acquisition of trust and asset management business |
|
| 1,112 |
|
Goodwill balance at March 31, 2019 |
| $ | 792,084 |
|
The acquired trust and asset management business added $4.9 million in trust fee revenue and $4.8 million of expense to the Company’s results of operations for the three months ended March 31, 2019. The results are not material to the Company’s results of operations and, as such, supplemental proforma financial information for the three months ended March 31, 2018 is not presented. During the three months ended March 31, 2018, the Company incurred acquisition related costs of approximately $0.3 million.
3. Securities
The amortized cost, gross unrealized gains and losses, and estimated fair value of securities classified as available for sale and held to maturity at March 31, 2019 and December 31, 2018 follow.
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| March 31, 2019 |
|
| December 31, 2018 |
| ||||||||||||||||||||||||||
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
|
|
|
|
| Gross |
|
|
|
|
|
|
|
|
| ||||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||||||
U.S. Treasury and government agency securities |
| $ | 73,426 |
|
|
| — |
|
|
| 1,283 |
|
| $ | 72,143 |
|
| $ | 74,339 |
|
| $ | — |
|
| $ | 2,633 |
|
| $ | 71,706 |
|
Municipal obligations |
|
| 245,707 |
|
|
| 1,833 |
|
|
| 1,600 |
|
|
| 245,940 |
|
|
| 246,713 |
|
|
| 360 |
|
|
| 6,646 |
|
|
| 240,427 |
|
Residential mortgage-backed securities |
|
| 1,418,881 |
|
|
| 9,964 |
|
|
| 15,813 |
|
|
| 1,413,032 |
|
|
| 1,468,912 |
|
|
| 4,284 |
|
|
| 29,794 |
|
|
| 1,443,402 |
|
Commercial mortgage-backed securities |
|
| 798,447 |
|
|
| 4,594 |
|
|
| 15,207 |
|
|
| 787,834 |
|
|
| 799,060 |
|
|
| 1,953 |
|
|
| 30,936 |
|
|
| 770,077 |
|
Collateralized mortgage obligations |
|
| 158,904 |
|
|
| 1,212 |
|
|
| 1,485 |
|
|
| 158,631 |
|
|
| 163,282 |
|
|
| 903 |
|
|
| 2,260 |
|
|
| 161,925 |
|
Corporate debt securities |
|
| 3,500 |
|
|
| — |
|
|
| — |
|
|
| 3,500 |
|
|
| 3,500 |
|
|
| — |
|
|
| — |
|
|
| 3,500 |
|
|
| $ | 2,698,865 |
|
| $ | 17,603 |
|
| $ | 35,388 |
|
| $ | 2,681,080 |
|
| $ | 2,755,806 |
|
| $ | 7,500 |
|
| $ | 72,269 |
|
| $ | 2,691,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, 2019 |
|
| December 31, 2018 |
| ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
|
|
|
|
| Gross |
|
|
|
|
|
|
|
|
| ||||
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Securities Held to Maturity |
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||||||||||||||||||||||||||||||
(in thousands) |
| March 31, 2018 |
| December 31, 2017 |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||||||||||||||||||||||||||
|
|
|
| Gross |
| Gross |
|
|
|
|
| Gross |
| Gross |
|
| ||||||||||||||||||||||||||||||||||||||||
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| Amortized |
| Unrealized |
| Unrealized |
| Fair | ||||||||||||||||||||||||||||||||||||||||
|
| Cost |
| Gains |
| Losses |
| Value |
| Cost |
| Gains |
| Losses |
| Value | ||||||||||||||||||||||||||||||||||||||||
U.S. Treasury and government agency securities |
| $ | 97,431 |
|
| — |
|
| 3,547 |
|
| 93,884 |
| $ | 99,535 |
| $ | — |
| $ | 2,263 |
| $ | 97,272 |
| $ | 50,000 |
|
|
| — |
|
|
| 317 |
|
| $ | 49,683 |
|
| $ | 50,000 |
|
| $ | — |
|
| $ | 478 |
|
| $ | 49,522 |
|
Municipal obligations |
|
| 245,164 |
|
| 211 |
|
| 8,084 |
|
| 237,291 |
|
| 245,997 |
|
| 1,135 |
|
| 3,346 |
|
| 243,786 |
|
| 676,651 |
|
|
| 11,247 |
|
|
| 1,726 |
|
|
| 686,172 |
|
|
| 688,201 |
|
|
| 2,347 |
|
|
| 9,503 |
|
|
| 681,045 |
|
Residential mortgage-backed securities |
|
| 1,787,382 |
|
| 3,552 |
|
| 47,391 |
|
| 1,743,543 |
|
| 1,729,989 |
|
| 5,611 |
|
| 20,387 |
|
| 1,715,213 |
|
| 613,964 |
|
|
| 3,701 |
|
|
| 3,148 |
|
|
| 614,517 |
|
|
| 640,393 |
|
|
| 1,461 |
|
|
| 6,117 |
|
|
| 635,737 |
|
Commercial mortgage-backed securities |
|
| 715,360 |
|
| — |
|
| 35,088 |
|
| 680,272 |
|
| 704,518 |
|
| 480 |
|
| 17,863 |
|
| 687,135 |
|
| 356,919 |
|
|
| 1,233 |
|
|
| 3,780 |
|
|
| 354,372 |
|
|
| 357,175 |
|
|
| 376 |
|
|
| 10,882 |
|
|
| 346,669 |
|
Collateralized mortgage obligations |
|
| 158,114 |
|
| — |
|
| 2,956 |
|
| 155,158 |
|
| 165,518 |
|
| 4 |
|
| 1,559 |
|
| 163,963 |
|
| 1,198,908 |
|
|
| 3,285 |
|
|
| 14,027 |
|
|
| 1,188,166 |
|
|
| 1,243,778 |
|
|
| 1,598 |
|
|
| 22,493 |
|
|
| 1,222,883 |
|
Corporate debt securities |
|
| 5,500 |
|
| — |
|
| — |
|
| 5,500 |
|
| 3,500 |
|
| — |
|
| — |
|
| 3,500 | ||||||||||||||||||||||||||||||||
|
| $ | 3,008,951 |
| $ | 3,763 |
| $ | 97,066 |
| $ | 2,915,648 |
| $ | 2,949,057 |
| $ | 7,230 |
| $ | 45,418 |
| $ | 2,910,869 |
| $ | 2,896,442 |
|
| $ | 19,466 |
|
| $ | 22,998 |
|
| $ | 2,892,910 |
|
| $ | 2,979,547 |
|
| $ | 5,782 |
|
| $ | 49,473 |
|
| $ | 2,935,856 |
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
(in thousands) |
| March 31, 2018 |
| December 31, 2017 | ||||||||||||||||||||
|
|
|
| Gross |
| Gross |
|
|
|
|
| Gross |
| Gross |
|
| ||||||||
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| Amortized |
| Unrealized |
| Unrealized |
| Fair | ||||||||
|
| Cost |
| Gains |
| Losses |
| Value |
| Cost |
| Gains |
| Losses |
| Value | ||||||||
U.S. Treasury and government agency securities |
| $ | 50,000 |
|
| — |
|
| 576 |
|
| 49,424 |
| $ | 50,000 |
| $ | — |
| $ | 289 |
| $ | 49,711 |
Municipal obligations |
|
| 707,581 |
|
| 1,315 |
|
| 13,453 |
|
| 695,443 |
|
| 723,094 |
|
| 8,323 |
|
| 4,245 |
|
| 727,172 |
Residential mortgage-backed securities |
|
| 695,655 |
|
| 721 |
|
| 10,624 |
|
| 685,752 |
|
| 725,748 |
|
| 4,175 |
|
| 2,690 |
|
| 727,233 |
Commercial mortgage-backed securities |
|
| 316,966 |
|
| — |
|
| 11,400 |
|
| 305,566 |
|
| 317,185 |
|
| 40 |
|
| 3,915 |
|
| 313,310 |
Collateralized mortgage obligations |
|
| 1,244,226 |
|
| 391 |
|
| 28,507 |
|
| 1,216,110 |
|
| 1,161,484 |
|
| 572 |
|
| 17,472 |
|
| 1,144,584 |
|
| $ | 3,014,428 |
| $ | 2,427 |
| $ | 64,560 |
| $ | 2,952,295 |
| $ | 2,977,511 |
| $ | 13,110 |
| $ | 28,611 |
| $ | 2,962,010 |
The following table presentstables present the amortized cost and estimated fair value of debt securities available for sale and held to maturity at March 31, 20182019 by contractual maturity. Actual maturities will differ from contractual maturities because of rights to call or repay obligations with or without penalties and scheduled and unscheduled principal payments on mortgage-backed securities and collateralized mortgage obligations.
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
Debt Securities Available for Sale |
| Amortized |
| Fair |
| Amortized |
|
| Fair |
| ||||
(in thousands) |
| Cost |
| Value |
| Cost |
|
| Value |
| ||||
Due in one year or less |
| $ | 7,388 |
| $ | 7,408 |
| $ | 368 |
|
| $ | 374 |
|
Due after one year through five years |
| 45,623 |
| 45,740 |
|
| 107,225 |
|
|
| 108,866 |
| ||
Due after five years through ten years |
| 1,249,127 |
| 1,202,997 |
|
| 1,184,905 |
|
|
| 1,175,070 |
| ||
Due after ten years |
|
| 1,706,813 |
|
| 1,659,503 |
|
| 1,406,367 |
|
|
| 1,396,770 |
|
Total available for sale debt securities |
| $ | 3,008,951 |
| $ | 2,915,648 |
| $ | 2,698,865 |
|
| $ | 2,681,080 |
|
|
|
|
|
|
|
| ||||||||
Debt Securities Held to Maturity |
| Amortized |
| Fair | ||||||||||
(in thousands) |
| Cost |
| Value | ||||||||||
Due in one year or less |
| $ | 4,190 |
| $ | 4,205 | ||||||||
Due after one year through five years |
| 132,047 |
| 131,197 | ||||||||||
Due after five years through ten years |
| 1,478,419 |
| 1,446,343 | ||||||||||
Due after ten years |
|
| 1,399,772 |
|
| 1,370,550 | ||||||||
Total held to maturity securities |
| $ | 3,014,428 |
| $ | 2,952,295 |
Debt Securities Held to Maturity |
| Amortized |
|
| Fair |
| ||
(in thousands) |
| Cost |
|
| Value |
| ||
Due in one year or less |
| $ | 80,915 |
|
| $ | 80,716 |
|
Due after one year through five years |
|
| 67,617 |
|
|
| 67,418 |
|
Due after five years through ten years |
|
| 1,392,654 |
|
|
| 1,398,880 |
|
Due after ten years |
|
| 1,355,256 |
|
|
| 1,345,896 |
|
Total held to maturity securities |
| $ | 2,896,442 |
|
| $ | 2,892,910 |
|
The Company held no securities classified as trading at March 31, 2018 or2019 and December 31, 2017.2018.
11
The fair value and gross unrealized losses for securities classified as available for sale with unrealized losses for the periods indicated follow.
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
March 31, 2018 |
| Losses < 12 months |
| Losses 12 months or > |
| Total | ||||||||||||||||||||||||||||||||||||
|
|
|
| Gross |
|
|
| Gross |
|
|
| Gross | ||||||||||||||||||||||||||||||
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized | ||||||||||||||||||||||||||||||
March 31, 2019 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||||||||||||||||||||
(in thousands) |
| Value |
| Losses |
| Value |
| Losses |
| Value |
| Losses |
| Fair Value |
|
| Gross Unrealized Losses |
|
| Fair Value |
|
| Gross Unrealized Losses |
|
| Fair Value |
|
| Gross Unrealized Losses |
| ||||||||||||
U.S. Treasury and government agency securities |
| $ | 43,521 |
|
| 1,214 |
|
| 50,362 |
|
| 2,333 |
| $ | 93,883 |
| $ | 3,547 |
| $ | - |
|
|
| - |
|
|
| 72,143 |
|
|
| 1,283 |
|
| $ | 72,143 |
|
| $ | 1,283 |
|
Municipal obligations |
| 54,330 |
| 948 |
| 169,119 |
| 7,136 |
| 223,449 |
| 8,084 |
|
| 2,270 |
|
|
| 40 |
|
|
| 106,042 |
|
|
| 1,560 |
|
|
| 108,312 |
|
|
| 1,600 |
| ||||||
Residential mortgage-backed securities |
| 654,990 |
| 14,667 |
| 850,853 |
| 32,724 |
| 1,505,843 |
| 47,391 |
|
| 640 |
|
|
| 6 |
|
|
| 852,716 |
|
|
| 15,807 |
|
|
| 853,356 |
|
|
| 15,813 |
| ||||||
Commercial mortgage-backed securities |
| 279,631 |
| 8,091 |
| 400,641 |
| 26,997 |
| 680,272 |
| 35,088 |
|
| - |
|
|
| - |
|
|
| 583,978 |
|
|
| 15,207 |
|
|
| 583,978 |
|
|
| 15,207 |
| ||||||
Collateralized mortgage obligations |
|
| 122,186 |
|
| 2,324 |
|
| 32,972 |
|
| 632 |
|
| 155,158 |
|
| 2,956 |
|
| - |
|
|
| - |
|
|
| 108,798 |
|
|
| 1,485 |
|
|
| 108,798 |
|
|
| 1,485 |
|
|
| $ | 1,154,658 |
| $ | 27,244 |
| $ | 1,503,947 |
| $ | 69,822 |
| $ | 2,658,605 |
| $ | 97,066 |
| $ | 2,910 |
|
| $ | 46 |
|
| $ | 1,723,677 |
|
| $ | 35,342 |
|
| $ | 1,726,587 |
|
| $ | 35,388 |
|
Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||
|
|
|
|
|
| Gross |
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
| |||
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||
(in thousands) |
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
| ||||||
U.S. Treasury and government agency securities |
| $ | — |
|
|
| — |
|
| $ | 71,706 |
|
| $ | 2,633 |
|
| $ | 71,706 |
|
| $ | 2,633 |
|
Municipal obligations |
|
| 41,203 |
|
|
| 591 |
|
|
| 170,883 |
|
|
| 6,054 |
|
|
| 212,086 |
|
|
| 6,645 |
|
Residential mortgage-backed securities |
|
| 305,090 |
|
|
| 2,485 |
|
|
| 762,826 |
|
|
| 27,309 |
|
|
| 1,067,916 |
|
|
| 29,794 |
|
Commercial mortgage-backed securities |
|
| 96,226 |
|
|
| 1,851 |
|
|
| 570,485 |
|
|
| 29,085 |
|
|
| 666,711 |
|
|
| 30,936 |
|
Collateralized mortgage obligations |
|
| 254 |
|
|
| 1 |
|
|
| 111,804 |
|
|
| 2,259 |
|
|
| 112,058 |
|
|
| 2,260 |
|
|
| $ | 442,773 |
|
| $ | 4,928 |
|
| $ | 1,687,704 |
|
| $ | 67,340 |
|
| $ | 2,130,477 |
|
| $ | 72,268 |
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
| Losses < 12 months |
| Losses 12 months or > |
| Total | ||||||||||||
|
|
|
| Gross |
|
|
| Gross |
|
|
| Gross | ||||||
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized | ||||||
(in thousands) |
| Value |
| Losses |
| Value |
| Losses |
| Value |
| Losses | ||||||
U.S. Treasury and government agency securities |
| $ | 45,616 |
| $ | 42 |
| $ | 51,157 |
| $ | 2,221 |
| $ | 96,773 |
| $ | 2,263 |
Municipal obligations |
|
| 2,768 |
|
| 11 |
|
| 173,530 |
|
| 3,335 |
|
| 176,298 |
|
| 3,346 |
Residential mortgage-backed securities |
|
| 461,835 |
|
| 4,195 |
|
| 898,099 |
|
| 16,192 |
|
| 1,359,934 |
|
| 20,387 |
Commercial mortgage-backed securities |
|
| 203,618 |
|
| 995 |
|
| 411,046 |
|
| 16,868 |
|
| 614,664 |
|
| 17,863 |
Collateralized mortgage obligations |
|
| 128,174 |
|
| 1,076 |
|
| 35,488 |
|
| 483 |
|
| 163,662 |
|
| 1,559 |
|
| $ | 842,011 |
| $ | 6,319 |
| $ | 1,569,320 |
| $ | 39,099 |
| $ | 2,411,331 |
| $ | 45,418 |
The fair value and gross unrealized losses for securities classified as held to maturity with unrealized losses for the periods indicated follow.
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Held to maturity |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
March 31, 2018 |
| Losses < 12 months |
| Losses 12 months or > |
| Total | ||||||||||||||||||||||||||||||||||||
Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
March 31, 2019 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||||||||||||||||||||
|
|
|
| Gross |
|
|
| Gross |
|
|
| Gross |
|
|
|
|
| Gross |
|
|
|
|
|
| Gross |
|
|
|
|
|
| Gross |
| |||||||||
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||||||||
(in thousands) |
| Value |
| Losses |
| Value |
| Losses |
| Value |
| Losses |
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
| ||||||||||||
U.S. Treasury and government agency securities |
| $ | — |
|
| — |
|
| 49,424 |
|
| 576 |
| $ | 49,424 |
| $ | 576 |
| $ | — |
|
|
| — |
|
| $ | 49,682 |
|
| $ | 317 |
|
| $ | 49,682 |
|
| $ | 317 |
|
Municipal obligations |
| 341,011 |
| 4,530 |
| 221,438 |
| 8,923 |
| 562,449 |
| 13,453 |
|
| 8,750 |
|
|
| 63 |
|
|
| 169,931 |
|
|
| 1,663 |
|
|
| 178,681 |
|
|
| 1,726 |
| ||||||
Residential mortgage-backed securities |
| 403,985 |
| 4,090 |
| 224,200 |
| 6,534 |
| 628,185 |
| 10,624 |
|
| — |
|
|
| — |
|
|
| 186,221 |
|
|
| 3,148 |
|
|
| 186,221 |
|
|
| 3,148 |
| ||||||
Commercial mortgage-backed securities |
| 234,468 |
| 6,845 |
| 71,098 |
| 4,555 |
| 305,566 |
| 11,400 |
|
| — |
|
|
| — |
|
|
| 312,296 |
|
|
| 3,780 |
|
|
| 312,296 |
|
|
| 3,780 |
| ||||||
Collateralized mortgage obligations |
|
| 672,660 |
|
| 12,567 |
|
| 441,866 |
|
| 15,940 |
|
| 1,114,526 |
|
| 28,507 |
|
| — |
|
|
| — |
|
|
| 860,183 |
|
|
| 14,027 |
|
|
| 860,183 |
|
|
| 14,027 |
|
|
| $ | 1,652,124 |
| $ | 28,032 |
| $ | 1,008,026 |
| $ | 36,528 |
| $ | 2,660,150 |
| $ | 64,560 |
| $ | 8,750 |
|
| $ | 63 |
|
| $ | 1,578,313 |
|
| $ | 22,935 |
|
| $ | 1,587,063 |
|
| $ | 22,998 |
|
Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
December 31, 2018 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
|
| Gross |
|
|
|
|
| |||||||||||||||||||||
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||||||||||||||||||||
(in thousands) |
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
| ||||||||||||||||||||||||
U.S. Treasury and government agency securities |
| $ | — |
|
| $ | — |
|
| $ | 49,521 |
|
| $ | 478 |
|
| $ | 49,521 |
|
| $ | 478 |
| ||||||||||||||||||
Municipal obligations |
|
| 233,469 |
|
|
| 2,256 |
|
|
| 233,280 |
|
|
| 7,247 |
|
|
| 466,749 |
|
|
| 9,503 |
| ||||||||||||||||||
Residential mortgage-backed securities |
|
| 90,730 |
|
|
| 123 |
|
|
| 235,251 |
|
|
| 5,994 |
|
|
| 325,981 |
|
|
| 6,117 |
| ||||||||||||||||||
Commercial mortgage-backed securities |
|
| — |
|
|
| — |
|
|
| 305,419 |
|
|
| 10,882 |
|
|
| 305,419 |
|
|
| 10,882 |
| ||||||||||||||||||
Collateralized mortgage obligations |
|
| 77,394 |
|
|
| 281 |
|
|
| 897,153 |
|
|
| 22,212 |
|
|
| 974,547 |
|
|
| 22,493 |
| ||||||||||||||||||
|
| $ | 401,593 |
|
| $ | 2,660 |
|
| $ | 1,720,624 |
|
| $ | 46,813 |
|
| $ | 2,122,217 |
|
| $ | 49,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
| Losses < 12 months |
| Losses 12 months or > |
| Total | ||||||||||||
|
|
|
| Gross |
|
|
| Gross |
|
|
| Gross | ||||||
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized | ||||||
(in thousands) |
| Value |
| Losses |
| Value |
| Losses |
| Value |
| Losses | ||||||
U.S. Treasury and government agency securities |
| $ | — |
| $ | — |
| $ | 49,711 |
| $ | 289 |
| $ | 49,711 |
| $ | 289 |
Municipal obligations |
|
| 14,603 |
|
| 19 |
|
| 230,960 |
|
| 4,226 |
|
| 245,563 |
|
| 4,245 |
Residential mortgage-backed securities |
|
| 8,815 |
|
| 99 |
|
| 230,277 |
|
| 2,591 |
|
| 239,092 |
|
| 2,690 |
Commercial mortgage-backed securities |
|
| 174,882 |
|
| 744 |
|
| 72,499 |
|
| 3,171 |
|
| 247,381 |
|
| 3,915 |
Collateralized mortgage obligations |
|
| 570,289 |
|
| 5,653 |
|
| 472,536 |
|
| 11,819 |
|
| 1,042,825 |
|
| 17,472 |
|
| $ | 768,589 |
| $ | 6,515 |
| $ | 1,055,983 |
| $ | 22,096 |
| $ | 1,824,572 |
|
| 28,611 |
The unrealized losses relate primarily relate to changes in market rates on fixed rate debt securities since the respective purchase dates. In all cases, the indicated impairment on these debt securities would be recovered no later than the security’s maturity date or possibly earlier if the market price for the security increases with a reduction in the yield required by the market. None of the unrealized losses relate to the marketability of the securities or the issuers’ abilities to meet contractual obligations. The Company believes it hashad adequate liquidity as of March 31, 2019 and therefore, doesDecember 31, 2018 and did not planintend to and, more likely than not, will notnor believe that it would be required to sell these securities before recovery of the indicated impairment. Accordingly, the unrealized losses on these securities have beenwere determined to be temporary. Should the Company’s intent to sell these securities change, the difference between the amortized cost and the fair value will be recognized into earnings at that time.
There were no sales of securities during either of the three months ended March 31, 2018 or 2017.2019 and 2018.
Securities with carrying values totaling $3.4$3.7 billion and $3.3$3.4 billion at March 31, 20182019 and December 31, 2017,2018, respectively, were pledged as collateral, primarily to secure public deposits or securities sold under agreements to repurchase.
12
4. Loans and Allowance for Loan Losses
The Company generally makes loans in its market areas of south Mississippi, southern and central Alabama, south Louisiana, the Houston, Texas area, and the northern, central, and panhandle regions of Florida.Florida, and Nashville, Tennessee. Loans, net of unearned income, by portfolio are presented in the table below.
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
| March 31, |
| December 31, |
| March 31, |
|
| December 31, |
| ||||
(in thousands) |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
| ||||
Commercial non-real estate |
| $ | 8,336,222 |
| $ | 8,297,937 |
| $ | 8,656,326 |
|
| $ | 8,620,601 |
|
Commercial real estate - owner occupied |
|
| 2,185,543 |
|
| 2,142,439 |
|
| 2,515,428 |
|
|
| 2,457,748 |
|
Total commercial & industrial |
|
| 10,521,765 |
|
| 10,440,376 | ||||||||
Total commercial and industrial |
|
| 11,171,754 |
|
|
| 11,078,349 |
| ||||||
Commercial real estate - income producing |
| 2,394,862 |
| 2,384,599 |
|
| 2,563,394 |
|
|
| 2,341,779 |
| ||
Construction and land development |
| 1,413,878 |
| 1,373,421 |
|
| 1,340,067 |
|
|
| 1,548,335 |
| ||
Residential mortgages |
| 2,732,821 |
| 2,690,472 |
|
| 2,933,251 |
|
|
| 2,910,081 |
| ||
Consumer |
|
| 2,029,178 |
|
| 2,115,295 |
|
| 2,104,372 |
|
|
| 2,147,867 |
|
Total loans |
| $ | 19,092,504 |
| $ | 19,004,163 |
| $ | 20,112,838 |
|
| $ | 20,026,411 |
|
12
The following briefly describes the composition of each loan category.
Commercial and industrial
Commercial and industrial loans are made available to businesses for working capital (including financing of inventory and receivables), business expansion, to facilitate the acquisition of a business, and the purchase of equipment and machinery, including equipment leasing. These loans are primarily made based on the identified cash flows of the borrower and, when secured, have the added strength of the underlying collateral.
Commercial non-real estate loans may be secured by the assets being financed or other tangible or intangible business assets such as accounts receivable, inventory, ownership, enterprise value or commodity interests, and may incorporate a personal or corporate guarantee; however, some short-term loans may be made on an unsecured basis, including a small portfolio of corporate credit cards, generally issued as a part of overall customer relationships.
Commercial real estate – owner occupied loans consist of commercial mortgages on properties where repayment is generally dependent on the cash flow from the ongoing operations and activities of the borrower. Like commercial non-real estate, these loans are primarily made based on the identified cash flows of the borrower, but also have the added strength of the value of underlying real estate collateral.
Commercial real estate – income producing
Commercial real estate – income producing loans consist of loans secured by commercial mortgages on properties where the loan is made to real estate developers or investors and repayment is dependent on the sale, refinance, or income generated from the operation of the property. Properties financed include retail, office, multifamily, senior housing, hotel/motel, skilled nursing facilities and other commercial properties.
Construction and land development
Construction and land development loans are made to facilitate the acquisition, development, improvement and construction of both commercial and residential-purpose properties. Such loans are made to builders and investors where repayment is expected to be made from the sale, refinance or operation of the property or to businesses to be used in their business operations. This portfolio also includes a small amount of residential construction loans and loans secured by raw land not yet under development.
Residential mortgages
Residential mortgages consist of closed-end loans secured by first liens on 1- 4 family residential properties. The portfolio includes both fixed and adjustable rate loans, although most longer term, fixed rate loans originated are sold in the secondary mortgage market.
Consumer
Consumer loans include second lien mortgage home loans, home equity lines of credit and nonresidential consumer purpose loans. Nonresidential consumer loans include both direct and indirect loans. Direct nonresidential consumer loans are made to finance the purchase of personal property, including automobiles, recreational vehicles and boats, and for other personal purposes (secured and unsecured), and deposit account secured loans. Indirect nonresidential consumer loans include automobile financing provided to the consumer through an agreement with automobile dealerships. Consumer loans also include a small portfolio of credit card receivables issued on the basis of applications received through referrals from the Bank’s branches, online and other marketing efforts.
13
13
The following tables show activity in the allowance for loan losses by portfolio class for the three months ended March 31, 20182019 and 2017,2018, as well as the corresponding recorded investment in loans at the end of each period. Charge-off, recovery and provision activity in the purchased credit impaired portfolio previously segregated has been collapsed into the remainder of the portfolio’s activity as it is no longer material, and the respective reclassifications have been made to the prior period to conform to the current presentation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
|
|
|
|
| Commercial |
|
|
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
|
| Total |
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Commercial |
| real estate- |
| Total |
| real estate- |
| Construction |
|
|
|
|
|
|
|
|
|
| Commercial |
|
| real estate- |
|
| commercial |
|
| real estate- |
|
| Construction |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
| non-real |
| owner |
| commercial & |
| income |
| and land |
| Residential |
|
|
|
|
|
|
| non-real |
|
| owner |
|
| and |
|
| income |
|
| and land |
|
| Residential |
|
|
|
|
|
|
|
|
| |||||||||||
(in thousands) |
| estate |
| occupied |
| industrial |
| producing |
| development |
| mortgages |
| Consumer |
| Total |
| estate |
|
| occupied |
|
| industrial |
|
| producing |
|
| development |
|
| mortgages |
|
| Consumer |
|
| Total |
| ||||||||||||||||
|
| Three Months Ended March 31, 2018 |
| Three Months Ended March 31, 2019 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 127,918 |
| $ | 12,962 |
| $ | 140,880 |
| $ | 13,709 |
| $ | 7,372 |
| $ | 24,844 |
| $ | 30,503 |
| $ | 217,308 |
| $ | 97,752 |
|
| $ | 13,757 |
|
| $ | 111,509 |
|
| $ | 17,638 |
|
| $ | 15,647 |
|
| $ | 23,782 |
|
| $ | 25,938 |
|
| $ | 194,514 |
|
Charge-offs |
|
| (9,335) |
|
| (851) |
|
| (10,186) |
|
| — |
|
| (10) |
|
| (192) |
|
| (8,048) |
|
| (18,436) |
|
| (16,344 | ) |
|
| — |
|
|
| (16,344 | ) |
|
| (10 | ) |
|
| — |
|
|
| (406 | ) |
|
| (4,231 | ) |
|
| (20,991 | ) |
Recoveries |
|
| 4,146 |
|
| 88 |
|
| 4,234 |
|
| 63 |
|
| 29 |
|
| 116 |
|
| 1,794 |
|
| 6,236 |
|
| 1,926 |
|
|
| 17 |
|
|
| 1,943 |
|
|
| 2 |
|
|
| 11 |
|
|
| 162 |
|
|
| 1,004 |
|
|
| 3,122 |
|
Net provision for loan losses |
|
| 3,877 |
|
| 1,421 |
|
| 5,298 |
|
| (787) |
|
| 2,533 |
|
| 150 |
|
| 5,059 |
|
| 12,253 |
|
| 14,186 |
|
|
| 33 |
|
|
| 14,219 |
|
|
| 3,173 |
|
|
| (1,631 | ) |
|
| (3 | ) |
|
| 2,285 |
|
|
| 18,043 |
|
Reduction as a result of sale of subsidiary |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (6,648) |
|
| (6,648) | ||||||||||||||||||||||||||||||||
Ending balance |
| $ | 126,606 |
| $ | 13,620 |
| $ | 140,226 |
| $ | 12,985 |
| $ | 9,924 |
| $ | 24,918 |
| $ | 22,660 |
| $ | 210,713 |
| $ | 97,520 |
|
| $ | 13,807 |
|
| $ | 111,327 |
|
| $ | 20,803 |
|
| $ | 14,027 |
|
| $ | 23,535 |
|
| $ | 24,996 |
|
| $ | 194,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Allowance at end of period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Allowance: |
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment |
| $ | 20,356 |
| $ | 2,475 |
| $ | 22,831 |
| $ | 1,261 |
| $ | 1 |
| $ | 276 |
| $ | 232 |
| $ | 24,601 |
| $ | 1,775 |
|
| $ | 205 |
|
| $ | 1,980 |
|
| $ | 143 |
|
| $ | 1 |
|
| $ | 219 |
|
| $ | 347 |
|
| $ | 2,690 |
|
Amounts related to purchased credit impaired loans |
|
| 471 |
|
| 495 |
|
| 966 |
|
| 576 |
|
| 173 |
|
| 11,720 |
|
| 612 |
|
| 14,047 |
|
| 288 |
|
|
| 185 |
|
|
| 473 |
|
|
| 35 |
|
|
| 78 |
|
|
| 9,162 |
|
|
| 341 |
|
|
| 10,089 |
|
Collectively evaluated for impairment |
|
| 105,779 |
|
| 10,650 |
|
| 116,429 |
|
| 11,148 |
|
| 9,750 |
|
| 12,922 |
|
| 21,816 |
|
| 172,065 |
|
| 95,457 |
|
|
| 13,417 |
|
|
| 108,874 |
|
|
| 20,625 |
|
|
| 13,948 |
|
|
| 14,154 |
|
|
| 24,308 |
|
|
| 181,909 |
|
Total allowance |
| $ | 126,606 |
| $ | 13,620 |
| $ | 140,226 |
| $ | 12,985 |
| $ | 9,924 |
| $ | 24,918 |
| $ | 22,660 |
| $ | 210,713 |
| $ | 97,520 |
|
| $ | 13,807 |
|
| $ | 111,327 |
|
| $ | 20,803 |
|
| $ | 14,027 |
|
| $ | 23,535 |
|
| $ | 24,996 |
|
| $ | 194,688 |
|
Loans at end of period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Individually evaluated for impairment |
| $ | 323,913 |
| $ | 30,318 |
| $ | 354,231 |
| $ | 14,071 |
| $ | 113 |
| $ | 8,338 |
| $ | 617 |
| $ | 377,370 |
| $ | 231,506 |
|
| $ | 16,974 |
|
| $ | 248,480 |
|
| $ | 2,668 |
|
| $ | 19 |
|
| $ | 5,397 |
|
| $ | 1,508 |
|
| $ | 258,072 |
|
Purchased credit impaired loans |
|
| 8,510 |
|
| 8,384 |
|
| 16,894 |
|
| 4,361 |
|
| 5,843 |
|
| 116,409 |
|
| 5,876 |
|
| 149,383 |
|
| 6,445 |
|
|
| 5,472 |
|
|
| 11,917 |
|
|
| 4,267 |
|
|
| 2,897 |
|
|
| 102,199 |
|
|
| 3,615 |
|
|
| 124,895 |
|
Collectively evaluated for impairment |
|
| 8,003,799 |
|
| 2,146,841 |
|
| 10,150,640 |
|
| 2,376,430 |
|
| 1,407,922 |
|
| 2,608,074 |
|
| 2,022,685 |
|
| 18,565,751 |
|
| 8,418,375 |
|
|
| 2,492,982 |
|
|
| 10,911,357 |
|
|
| 2,556,459 |
|
|
| 1,337,151 |
|
|
| 2,825,655 |
|
|
| 2,099,249 |
|
|
| 19,729,871 |
|
Total loans |
| $ | 8,336,222 |
| $ | 2,185,543 |
| $ | 10,521,765 |
| $ | 2,394,862 |
| $ | 1,413,878 |
| $ | 2,732,821 |
| $ | 2,029,178 |
| $ | 19,092,504 |
| $ | 8,656,326 |
|
| $ | 2,515,428 |
|
| $ | 11,171,754 |
|
| $ | 2,563,394 |
|
| $ | 1,340,067 |
|
| $ | 2,933,251 |
|
| $ | 2,104,372 |
|
| $ | 20,112,838 |
|
|
|
|
|
|
| Commercial |
|
| Total |
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Commercial |
|
| real estate- |
|
| commercial |
|
| real estate- |
|
| Construction |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| non-real |
|
| owner |
|
| and |
|
| income |
|
| and land |
|
| Residential |
|
|
|
|
|
|
|
|
| ||||||
(in thousands) |
| estate |
|
| occupied |
|
| industrial |
|
| producing |
|
| development |
|
| mortgages |
|
| Consumer |
|
| Total |
| ||||||||
|
| Three Months Ended March 31, 2018 |
| |||||||||||||||||||||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 127,918 |
|
| $ | 12,962 |
|
| $ | 140,880 |
|
| $ | 13,709 |
|
| $ | 7,372 |
|
| $ | 24,844 |
|
| $ | 30,503 |
|
| $ | 217,308 |
|
Charge-offs |
|
| (9,335 | ) |
|
| (851 | ) |
|
| (10,186 | ) |
|
| — |
|
|
| (10 | ) |
|
| (192 | ) |
|
| (8,048 | ) |
|
| (18,436 | ) |
Recoveries |
|
| 4,146 |
|
|
| 88 |
|
|
| 4,234 |
|
|
| 63 |
|
|
| 29 |
|
|
| 116 |
|
|
| 1,794 |
|
|
| 6,236 |
|
Net provision for loan losses |
|
| 3,877 |
|
|
| 1,421 |
|
|
| 5,298 |
|
|
| (787 | ) |
|
| 2,533 |
|
|
| 150 |
|
|
| 5,059 |
|
|
| 12,253 |
|
Reduction as a result of sale of subsidiary |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,648 | ) |
|
| (6,648 | ) |
Ending balance |
| $ | 126,606 |
|
| $ | 13,620 |
|
| $ | 140,226 |
|
| $ | 12,985 |
|
| $ | 9,924 |
|
| $ | 24,918 |
|
| $ | 22,660 |
|
| $ | 210,713 |
|
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 20,356 |
|
| $ | 2,475 |
|
| $ | 22,831 |
|
| $ | 1,261 |
|
| $ | 1 |
|
| $ | 276 |
|
| $ | 232 |
|
| $ | 24,601 |
|
Amounts related to purchased credit impaired loans |
|
| 471 |
|
|
| 495 |
|
|
| 966 |
|
|
| 576 |
|
|
| 173 |
|
|
| 11,720 |
|
|
| 612 |
|
|
| 14,047 |
|
Collectively evaluated for impairment |
|
| 105,779 |
|
|
| 10,650 |
|
|
| 116,429 |
|
|
| 11,148 |
|
|
| 9,750 |
|
|
| 12,922 |
|
|
| 21,816 |
|
|
| 172,065 |
|
Total allowance |
| $ | 126,606 |
|
| $ | 13,620 |
|
| $ | 140,226 |
|
| $ | 12,985 |
|
| $ | 9,924 |
|
| $ | 24,918 |
|
| $ | 22,660 |
|
| $ | 210,713 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 323,913 |
|
| $ | 30,318 |
|
| $ | 354,231 |
|
| $ | 14,071 |
|
| $ | 113 |
|
| $ | 8,338 |
|
| $ | 617 |
|
| $ | 377,370 |
|
Purchased credit impaired loans |
|
| 8,510 |
|
|
| 8,384 |
|
|
| 16,894 |
|
|
| 4,361 |
|
|
| 5,843 |
|
|
| 116,409 |
|
|
| 5,876 |
|
|
| 149,383 |
|
Collectively evaluated for impairment |
|
| 8,003,799 |
|
|
| 2,146,841 |
|
|
| 10,150,640 |
|
|
| 2,376,430 |
|
|
| 1,407,922 |
|
|
| 2,608,074 |
|
|
| 2,022,685 |
|
|
| 18,565,751 |
|
Total loans |
| $ | 8,336,222 |
|
| $ | 2,185,543 |
|
| $ | 10,521,765 |
|
| $ | 2,394,862 |
|
| $ | 1,413,878 |
|
| $ | 2,732,821 |
|
| $ | 2,029,178 |
|
| $ | 19,092,504 |
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
|
|
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Commercial |
| real estate- |
| Total |
| real estate- |
| Construction |
|
|
|
|
|
|
|
|
| |||||
|
| non-real |
| owner |
| commercial & |
| income |
| and land |
| Residential |
|
|
|
|
|
| ||||||
(in thousands) |
| estate |
| occupied |
| industrial |
| producing |
| development |
| mortgages |
| Consumer |
| Total | ||||||||
|
| Three Months Ended March 31, 2017 | ||||||||||||||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 147,052 |
| $ | 11,083 |
| $ | 158,135 |
| $ | 13,509 |
| $ | 6,271 |
| $ | 25,361 |
| $ | 26,142 |
| $ | 229,418 |
Charge-offs |
|
| (24,791) |
|
| (29) |
|
| (24,820) |
|
| (7) |
|
| (91) |
|
| (348) |
|
| (8,678) |
|
| (33,944) |
Recoveries |
|
| 938 |
|
| 275 |
|
| 1,213 |
|
| 375 |
|
| 471 |
|
| 113 |
|
| 1,743 |
|
| 3,915 |
Net provision for loan losses |
|
| 8,101 |
|
| 193 |
|
| 8,294 |
|
| (266) |
|
| 69 |
|
| 376 |
|
| 7,518 |
|
| 15,991 |
Decrease in FDIC loss share receivable |
|
| (31) |
|
| — |
|
| (31) |
|
| — |
|
| — |
|
| (1,696) |
|
| (103) |
|
| (1,830) |
Ending balance |
| $ | 131,269 |
| $ | 11,522 |
| $ | 142,791 |
| $ | 13,611 |
| $ | 6,720 |
| $ | 23,806 |
| $ | 26,622 |
| $ | 213,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance at end of period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 15,017 |
| $ | 76 |
| $ | 15,093 |
| $ | 1,114 |
| $ | 1 |
| $ | 94 |
| $ | 199 |
| $ | 16,501 |
Amounts related to purchased credit impaired loans |
|
| 411 |
|
| 787 |
|
| 1,198 |
|
| 213 |
|
| 283 |
|
| 13,286 |
|
| 1,019 |
|
| 15,999 |
Collectively evaluated for impairment |
|
| 115,841 |
|
| 10,659 |
|
| 126,500 |
|
| 12,284 |
|
| 6,436 |
|
| 10,426 |
|
| 25,404 |
|
| 181,050 |
Total allowance |
| $ | 131,269 |
| $ | 11,522 |
| $ | 142,791 |
| $ | 13,611 |
| $ | 6,720 |
| $ | 23,806 |
| $ | 26,622 |
| $ | 213,550 |
Loans at end of period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 231,988 |
| $ | 3,894 |
| $ | 235,882 |
| $ | 13,599 |
| $ | 1,592 |
| $ | 3,236 |
| $ | 2,149 |
| $ | 256,458 |
Purchased credit impaired loans |
|
| 6,693 |
|
| 12,468 |
|
| 19,161 |
|
| 7,669 |
|
| 4,326 |
|
| 138,260 |
|
| 9,951 |
|
| 179,367 |
Collectively evaluated for impairment |
|
| 7,835,606 |
|
| 2,031,089 |
|
| 9,866,695 |
|
| 2,483,836 |
|
| 1,246,749 |
|
| 2,124,767 |
|
| 2,046,996 |
|
| 17,769,043 |
Total loans |
| $ | 8,074,287 |
| $ | 2,047,451 |
| $ | 10,121,738 |
| $ | 2,505,104 |
| $ | 1,252,667 |
| $ | 2,266,263 |
| $ | 2,059,096 |
| $ | 18,204,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the composition of nonaccrual loans by portfolio class. Purchased credit impaired loans accounted for in pools with an accretable yield are considered to be performing and are excluded from the table.
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
| ||||||||
|
| March 31, |
| December 31, |
| March 31, |
|
| December 31, |
| ||||
(in thousands) |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
| ||||
Commercial non-real estate |
| $ | 179,203 |
| $ | 152,863 |
| $ | 126,992 |
|
| $ | 110,653 |
|
Commercial real estate - owner occupied |
|
| 27,387 |
|
| 25,989 |
|
| 14,466 |
|
|
| 16,895 |
|
Total commercial & industrial |
|
| 206,590 |
|
| 178,852 | ||||||||
Total commercial and industrial |
|
| 141,458 |
|
|
| 127,548 |
| ||||||
Commercial real estate - income producing |
|
| 15,633 |
|
| 14,574 |
|
| 4,205 |
|
|
| 4,991 |
|
Construction and land development |
|
| 3,724 |
|
| 3,807 |
|
| 2,013 |
|
|
| 2,146 |
|
Residential mortgages |
|
| 35,069 |
|
| 40,480 |
|
| 39,275 |
|
|
| 35,866 |
|
Consumer |
|
| 14,163 |
|
| 15,087 |
|
| 17,880 |
|
|
| 16,744 |
|
Total loans |
| $ | 275,179 |
| $ | 252,800 |
| $ | 204,831 |
|
| $ | 187,295 |
|
14
Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (“TDRs”) of $118.0$105.9 million and $99.2$85.5 million at March 31, 20182019 and December 31, 2017,2018, respectively. Total TDRs, both accruing and nonaccruing, were $284.5$223.4 million at March 31, 20182019 and $219.7$224.6 million at December 31, 2017.2018. All TDRs are individually evaluated for impairment. At March 31, 20182019 and December 31, 2017,2018, the Company had unfunded commitments of $8.5 million and $7.3$2.1 million, respectively, to borrowers whose loan terms have been modified in a TDR.
The tabletables below detailsdetail by portfolio class TDRs that were modified during the three months ended March 31, 20182019 and 2017:
2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
| Three Months Ended |
| Three Months Ended |
| ||||||||||||||||||||||||||||||||||||||||||
($ in thousands) |
| March 31, 2018 |
|
|
| March 31, 2017 |
| March 31, 2019 |
|
| March 31, 2018 |
| ||||||||||||||||||||||||||||||||||
|
|
|
|
| Pre-Modification |
| Post-Modification |
|
|
|
|
| Pre-Modification |
| Post-Modification |
|
|
|
|
| Pre- Modification |
|
| Post- Modification |
|
|
|
|
|
| Pre- Modification |
|
| Post- Modification |
| |||||||||||
|
|
|
|
| Outstanding |
| Outstanding |
|
|
|
|
| Outstanding |
| Outstanding |
| Number |
|
| Outstanding |
|
| Outstanding |
|
| Number |
|
| Outstanding |
|
| Outstanding |
| |||||||||||||
|
| Number of |
|
| Recorded |
| Recorded |
|
| Number of |
|
| Recorded |
| Recorded |
| of |
|
| Recorded |
|
| Recorded |
|
| of |
|
| Recorded |
|
| Recorded |
| |||||||||||||
Troubled Debt Restructurings: |
| Contracts |
|
| Investment |
| Investment |
| Contracts |
| Investment |
| Investment |
| Contracts |
|
| Investment |
|
| Investment |
|
| Contracts |
|
| Investment |
|
| Investment |
| |||||||||||||||
Commercial non-real estate |
| 13 |
|
| $ | 55,482 |
|
| $ | 55,482 |
|
|
| 9 |
|
| $ | 38,659 |
|
| $ | 38,659 |
|
| 7 |
|
| $ | 13,803 |
|
| $ | 13,803 |
|
|
| 13 |
|
| $ | 55,482 |
|
| $ | 55,482 |
|
Commercial real estate - owner occupied |
| 1 |
|
|
| 5,909 |
|
| 5,909 |
|
|
| 1 |
|
|
| 656 |
|
|
| 656 |
|
| 1 |
|
|
| 167 |
|
|
| 167 |
|
|
| 1 |
|
|
| 5,909 |
|
|
| 5,909 |
| |
Total commercial & industrial |
| 14 |
|
|
| 61,391 |
|
| 61,391 |
|
|
| 10 |
|
|
| 39,315 |
|
|
| 39,315 | |||||||||||||||||||||||||
Total commercial and industrial |
|
| 8 |
|
|
| 13,970 |
|
|
| 13,970 |
|
|
| 14 |
|
|
| 61,391 |
|
|
| 61,391 |
| ||||||||||||||||||||||
Commercial real estate - income producing |
| 1 |
|
|
| 1,564 |
|
| 1,564 |
|
|
| 2 |
|
|
| 5,527 |
|
|
| 5,527 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 1,564 |
|
|
| 1,564 |
| |
Construction and land development |
| 1 |
|
|
| 43 |
|
| 43 |
|
|
| — |
|
| — |
|
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 43 |
|
|
| 43 |
| ||
Residential mortgages |
| — |
|
|
| — |
|
| — |
|
|
| 1 |
|
| 250 |
|
|
| 250 |
|
| 5 |
|
|
| 1,264 |
|
|
| 1,264 |
|
|
| — |
|
|
| — |
|
|
| — |
| ||
Consumer |
| 1 |
|
|
| 222 |
|
| 222 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| 2 |
|
|
| 46 |
|
|
| 46 |
|
|
| 1 |
|
|
| 222 |
|
|
| 222 |
| |
Total loans |
| 17 |
|
| $ | 63,220 |
| $ | 63,220 |
|
|
| 13 |
|
| $ | 45,092 |
|
| $ | 45,092 |
|
| 15 |
|
| $ | 15,280 |
|
| $ | 15,280 |
|
|
| 17 |
|
| $ | 63,220 |
|
| $ | 63,220 |
|
The TDRs modified during the three months ended March 31, 20182019 reflected in the table above include $0.1 million of loans with extended amortization terms or other payment concessions, $8.8 million with significant covenant waivers and $6.4 million with other modifications. The TDRs modified during the three months ended March 31, 2018 include $48.4 million of loans with extended amortization terms or other payment concessions, $14.6 million with significant covenant waivers and $0.2 million with other modifications. The TDRs modified
There were no defaults on loans during the three months ended March 31, 2017 include $27.4 million of loans with extended amortization terms2019 or other payment concessions, $10.7 million with significant covenant waivers and $6.9 million with other modifications.
For the three month periods ended March 31, 2018 and 2017, there were no loansthat had been modified in a TDR within the previous twelve months that subsequently defaulted during the respective periods. prior twelve months.
15
The tables below present loans that are individually evaluated for impairment disaggregated by portfolio class at March 31, 20182019 and December 31, 2017.2018. Loans individually evaluated for impairment include TDRs and loans that are determined to be impaired and have aggregate relationship balances of $1 million or more.
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| March 31, 2018 | ||||||||||||||||||||||||||
|
| Recorded investment |
|
| Recorded investment |
|
| Unpaid |
|
|
|
| March 31, 2019 |
| |||||||||||||
(in thousands) |
| without an allowance |
|
| with an allowance |
|
| principal balance |
|
| Related allowance |
| Recorded investment without an allowance |
|
| Recorded investment with an allowance |
|
| Unpaid principal balance |
|
| Related allowance |
| ||||
Commercial non-real estate | $ | 108,898 |
| $ | 215,015 |
| $ | 335,178 |
| $ | 20,356 |
| $ | 158,767 |
|
| $ | 72,739 |
|
| $ | 278,392 |
|
| $ | 1,775 |
|
Commercial real estate - owner occupied |
| 6,064 |
|
| 24,254 |
|
| 30,997 |
|
| 2,475 |
|
| 10,442 |
|
|
| 6,532 |
|
|
| 20,888 |
|
|
| 205 |
|
Total commercial & industrial |
| 114,962 |
|
| 239,269 |
|
| 366,175 |
|
| 22,831 | ||||||||||||||||
Total commercial and industrial |
|
| 169,209 |
|
|
| 79,271 |
|
|
| 299,280 |
|
|
| 1,980 |
| |||||||||||
Commercial real estate - income producing |
| 6,055 |
|
| 8,016 |
|
| 14,269 |
|
| 1,261 |
|
| 1,130 |
|
|
| 1,538 |
|
|
| 3,403 |
|
|
| 143 |
|
Construction and land development |
| 100 |
|
| 13 |
|
| 114 |
|
| 1 |
|
| - |
|
|
| 19 |
|
|
| 20 |
|
|
| 1 |
|
Residential mortgages |
| 5,861 |
|
| 2,477 |
|
| 11,682 |
|
| 276 |
|
| 3,630 |
|
|
| 1,767 |
|
|
| 5,942 |
|
|
| 219 |
|
Consumer |
| 14 |
|
| 603 |
|
| 718 |
|
| 232 |
|
| 471 |
|
|
| 1,037 |
|
|
| 1,753 |
|
|
| 347 |
|
Total loans | $ | 126,992 |
| $ | 250,378 |
| $ | 392,958 |
| $ | 24,601 |
| $ | 174,440 |
|
| $ | 83,632 |
|
| $ | 310,398 |
|
| $ | 2,690 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| December 31, 2017 | ||||||||||||||||||||||||||
|
| Recorded investment |
|
| Recorded investment |
|
| Unpaid |
|
|
| ||||||||||||||||
(in thousands) |
| without an allowance |
|
| with an allowance |
|
| principal balance |
|
| Related allowance | ||||||||||||||||
Commercial non-real estate | $ | 116,682 |
| $ | 151,199 |
| $ | 285,685 |
| $ | 16,129 | ||||||||||||||||
Commercial real estate - owner occupied |
| 16,927 |
|
| 4,564 |
|
| 24,829 |
|
| 793 | ||||||||||||||||
Total commercial & industrial |
| 133,609 |
|
| 155,763 |
|
| 310,514 |
|
| 16,922 | ||||||||||||||||
Commercial real estate - income producing |
| 5,101 |
|
| 10,429 |
|
| 15,687 |
|
| 1,326 | ||||||||||||||||
Construction and land development |
| 100 |
|
| 263 |
|
| 363 |
|
| 11 | ||||||||||||||||
Residential mortgages |
| 8,245 |
|
| 2,395 |
|
| 13,855 |
|
| 189 | ||||||||||||||||
Consumer |
| — |
|
| 1,292 |
|
| 1,294 |
|
| 118 | ||||||||||||||||
Total loans | $ | 147,055 |
| $ | 170,142 |
| $ | 341,713 |
| $ | 18,566 |
|
| December 31, 2018 |
| |||||||||||||
(in thousands) |
| Recorded investment without an allowance |
|
| Recorded investment with an allowance |
|
| Unpaid principal balance |
|
| Related allowance |
| ||||
Commercial non-real estate |
| $ | 144,625 |
|
| $ | 94,759 |
|
| $ | 273,290 |
|
| $ | 3,636 |
|
Commercial real estate - owner occupied |
|
| 13,027 |
|
|
| 8,639 |
|
|
| 25,888 |
|
|
| 607 |
|
Total commercial and industrial |
|
| 157,652 |
|
|
| 103,398 |
|
|
| 299,178 |
|
|
| 4,243 |
|
Commercial real estate - income producing |
|
| 1,138 |
|
|
| 1,563 |
|
|
| 3,428 |
|
|
| 210 |
|
Construction and land development |
|
| 100 |
|
|
| 21 |
|
|
| 121 |
|
|
| 1 |
|
Residential mortgages |
|
| 2,058 |
|
|
| 1,818 |
|
|
| 4,421 |
|
|
| 444 |
|
Consumer |
|
| 279 |
|
|
| 728 |
|
|
| 1,253 |
|
|
| 216 |
|
Total loans |
| $ | 161,227 |
|
| $ | 107,528 |
|
| $ | 308,401 |
|
| $ | 5,114 |
|
The tables below present the average balances and interest income for total impaired loans for the three months ended March 31, 2018
15
2019 and 2017.2018. Interest income recognized represents interest on accruing loans modified in a TDR.
|
| Three Months Ended |
| |||||||||||||
|
| March 31, 2019 |
|
| March 31, 2018 |
| ||||||||||
(in thousands) |
| Average Recorded Investment |
|
| Interest Income Recognized |
|
| Average Recorded Investment |
|
| Interest Income Recognized |
| ||||
Commercial non-real estate |
| $ | 235,445 |
|
| $ | 1,696 |
|
| $ | 295,897 |
|
| $ | 1,586 |
|
Commercial real estate - owner occupied |
|
| 19,320 |
|
|
| 80 |
|
|
| 25,905 |
|
|
| 66 |
|
Total commercial and industrial |
|
| 254,765 |
|
|
| 1,776 |
|
|
| 321,802 |
|
|
| 1,652 |
|
Commercial real estate - income producing |
|
| 2,685 |
|
|
| 7 |
|
|
| 14,801 |
|
|
| 25 |
|
Construction and land development |
|
| 70 |
|
|
| — |
|
|
| 238 |
|
|
| — |
|
Residential mortgages |
|
| 4,637 |
|
|
| 5 |
|
|
| 9,489 |
|
|
| 5 |
|
Consumer |
|
| 1,258 |
|
|
| 16 |
|
|
| 955 |
|
|
| 9 |
|
Total loans |
| $ | 263,415 |
|
| $ | 1,804 |
|
| $ | 347,285 |
|
| $ | 1,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended | ||||||||||
|
| March 31, 2018 | March 31, 2017 | |||||||||
|
| Average |
| Interest |
| Average |
|
| Interest | |||
|
| recorded |
| income |
| recorded |
|
| income | |||
(in thousands) |
| investment |
| recognized |
| investment |
|
| recognized | |||
Commercial non-real estate |
| $ | 295,897 |
| $ | 1,586 |
| $ | 251,625 |
| $ | 337 |
Commercial real estate - owner occupied |
|
| 25,905 |
|
| 66 |
|
| 5,081 |
|
| 4 |
Total commercial & industrial |
|
| 321,802 |
|
| 1,652 |
|
| 256,706 |
|
| 341 |
Commercial real estate - income producing |
|
| 14,801 |
|
| 25 |
|
| 14,487 |
|
| 43 |
Construction and land development |
|
| 238 |
|
| — |
|
| 1,766 |
|
| — |
Residential mortgages |
|
| 9,489 |
|
| 5 |
|
| 3,792 |
|
| 2 |
Consumer |
|
| 955 |
|
| 9 |
|
| 2,152 |
|
| 2 |
Total loans |
| $ | 347,285 |
| $ | 1,691 |
| $ | 278,903 |
| $ | 388 |
16
The tables below present the age analysis of past due loans by portfolio class at March 31, 20182019 and December 31, 2017.2018. Purchased credit impaired loans accounted for in pools with an accretable yield are considered to be current.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Recorded | |||||||||||||||||||||||||||||
|
|
|
|
|
| Greater than |
|
|
|
|
|
|
|
| investment | ||||||||||||||||||||||||||||||||||
|
| 30-59 days |
| 60-89 days |
| 90 days |
| Total |
|
|
| Total |
| > 90 days and | |||||||||||||||||||||||||||||||||||
March 31, 2018 |
| past due |
| past due |
| past due |
| past due |
| Current |
| Loans |
| still accruing | |||||||||||||||||||||||||||||||||||
March 31, 2019 |
| 30-59 days past due |
|
| 60-89 days past due |
|
| Greater than 90 days past due |
|
| Total past due |
|
| Current |
|
| Total Loans |
|
| Recorded investment > 90 days and still accruing |
| ||||||||||||||||||||||||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 45,309 |
| $ | 18,497 |
| $ | 130,360 |
| $ | 194,166 |
| $ | 8,142,056 |
| $ | 8,336,222 |
| $ | 20,330 |
| $ | 19,036 |
|
| $ | 2,527 |
|
| $ | 69,249 |
|
| $ | 90,812 |
|
| $ | 8,565,514 |
|
| $ | 8,656,326 |
|
| $ | 13,920 |
|
Commercial real estate - owner occupied |
|
| 7,464 |
|
| 115 |
|
| 22,138 |
|
| 29,717 |
|
| 2,155,826 |
|
| 2,185,543 |
|
| 1,360 |
|
| 4,543 |
|
|
| 561 |
|
|
| 16,336 |
|
|
| 21,440 |
|
|
| 2,493,988 |
|
|
| 2,515,428 |
|
|
| 3,937 |
|
Total commercial & industrial |
|
| 52,773 |
|
| 18,612 |
|
| 152,498 |
|
| 223,883 |
|
| 10,297,882 |
|
| 10,521,765 |
|
| 21,690 | ||||||||||||||||||||||||||||
Total commercial and industrial |
|
| 23,579 |
|
|
| 3,088 |
|
|
| 85,585 |
|
|
| 112,252 |
|
|
| 11,059,502 |
|
|
| 11,171,754 |
|
|
| 17,857 |
| |||||||||||||||||||||
Commercial real estate - income producing |
|
| 928 |
|
| 1,954 |
|
| 8,419 |
|
| 11,301 |
|
| 2,383,561 |
|
| 2,394,862 |
|
| 2,771 |
|
| 6,124 |
|
|
| - |
|
|
| 5,854 |
|
|
| 11,978 |
|
|
| 2,551,416 |
|
|
| 2,563,394 |
|
|
| 1,876 |
|
Construction and land development |
|
| 6,537 |
|
| 416 |
|
| 3,115 |
|
| 10,068 |
|
| 1,403,810 |
|
| 1,413,878 |
|
| 259 |
|
| 8,328 |
|
|
| 186 |
|
|
| 1,757 |
|
|
| 10,271 |
|
|
| 1,329,796 |
|
|
| 1,340,067 |
|
|
| 721 |
|
Residential mortgages |
|
| 32,815 |
|
| 4,496 |
|
| 20,122 |
|
| 57,433 |
|
| 2,675,388 |
|
| 2,732,821 |
|
| 1,170 |
|
| 39,534 |
|
|
| 8,045 |
|
|
| 19,299 |
|
|
| 66,878 |
|
|
| 2,866,373 |
|
|
| 2,933,251 |
|
|
| 679 |
|
Consumer |
|
| 16,083 |
|
| 5,124 |
|
| 7,542 |
|
| 28,749 |
|
| 2,000,429 |
|
| 2,029,178 |
|
| 573 |
|
| 15,738 |
|
|
| 4,120 |
|
|
| 9,225 |
|
|
| 29,083 |
|
|
| 2,075,289 |
|
|
| 2,104,372 |
|
|
| 660 |
|
Total |
| $ | 109,136 |
| $ | 30,602 |
| $ | 191,696 |
| $ | 331,434 |
| $ | 18,761,070 |
| $ | 19,092,504 |
| $ | 26,463 |
| $ | 93,303 |
|
| $ | 15,439 |
|
| $ | 121,720 |
|
| $ | 230,462 |
|
| $ | 19,882,376 |
|
| $ | 20,112,838 |
|
| $ | 21,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Recorded | |||||||||||||||||||||||||||||
|
|
|
|
|
|
| Greater than |
|
|
|
|
|
|
|
| investment | |||||||||||||||||||||||||||||||||
|
| 30-59 days |
| 60-89 days |
| 90 days |
| Total |
|
|
| Total |
| > 90 days and | |||||||||||||||||||||||||||||||||||
December 31, 2017 |
| past due |
| past due |
| past due |
| past due |
| Current |
| Loans |
| still accruing | |||||||||||||||||||||||||||||||||||
December 31, 2018 |
| 30-59 days past due |
|
| 60-89 days past due |
|
| Greater than 90 days past due |
|
| Total past due |
|
| Current |
|
| Total Loans |
|
| Recorded investment > 90 days and still accruing |
| ||||||||||||||||||||||||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 62,766 |
| $ | 10,761 |
| $ | 92,982 |
| $ | 166,509 |
| $ | 8,131,428 |
| $ | 8,297,937 |
| $ | 21,989 |
| $ | 12,257 |
|
| $ | 3,895 |
|
| $ | 77,551 |
|
| $ | 93,703 |
|
| $ | 8,526,898 |
|
|
| 8,620,601 |
|
| $ | 10,823 |
|
Commercial real estate - owner occupied |
|
| 8,493 |
|
| 648 |
|
| 15,517 |
|
| 24,658 |
|
| 2,117,781 |
|
| 2,142,439 |
|
| 2,032 |
|
| 2,394 |
|
|
| 1,570 |
|
|
| 14,542 |
|
|
| 18,506 |
|
|
| 2,439,242 |
|
|
| 2,457,748 |
|
|
| 380 |
|
Total commercial & industrial |
|
| 71,259 |
|
| 11,409 |
|
| 108,499 |
|
| 191,167 |
|
| 10,249,209 |
|
| 10,440,376 |
|
| 24,021 | ||||||||||||||||||||||||||||
Total commercial and industrial |
|
| 14,651 |
|
|
| 5,465 |
|
|
| 92,093 |
|
|
| 112,209 |
|
|
| 10,966,140 |
|
|
| 11,078,349 |
|
|
| 11,203 |
| |||||||||||||||||||||
Commercial real estate - income producing |
|
| 5,315 |
|
| 2,165 |
|
| 6,081 |
|
| 13,561 |
|
| 2,371,038 |
|
| 2,384,599 |
|
| 489 |
|
| 2,371 |
|
|
| 772 |
|
|
| 5,495 |
|
|
| 8,638 |
|
|
| 2,333,141 |
|
|
| 2,341,779 |
|
|
| 1,844 |
|
Construction and land development |
|
| 4,113 |
|
| 1,056 |
|
| 3,412 |
|
| 8,581 |
|
| 1,364,840 |
|
| 1,373,421 |
|
| 477 |
|
| 7,397 |
|
|
| 1,129 |
|
|
| 2,165 |
|
|
| 10,691 |
|
|
| 1,537,644 |
|
|
| 1,548,335 |
|
|
| 644 |
|
Residential mortgages |
|
| 33,621 |
|
| 10,554 |
|
| 30,537 |
|
| 74,712 |
|
| 2,615,760 |
|
| 2,690,472 |
|
| 2,208 |
|
| 32,869 |
|
|
| 14,706 |
|
|
| 23,175 |
|
|
| 70,750 |
|
|
| 2,839,331 |
|
|
| 2,910,081 |
|
|
| — |
|
Consumer |
|
| 22,959 |
|
| 7,816 |
|
| 8,553 |
|
| 39,328 |
|
| 2,075,967 |
|
| 2,115,295 |
|
| 571 |
|
| 20,402 |
|
|
| 4,695 |
|
|
| 9,665 |
|
|
| 34,762 |
|
|
| 2,113,105 |
|
|
| 2,147,867 |
|
|
| 618 |
|
Total |
| $ | 137,267 |
| $ | 33,000 |
| $ | 157,082 |
| $ | 327,349 |
| $ | 18,676,814 |
| $ | 19,004,163 |
| $ | 27,766 |
| $ | 77,690 |
|
| $ | 26,767 |
|
| $ | 132,593 |
|
| $ | 237,050 |
|
| $ | 19,789,361 |
|
| $ | 20,026,411 |
|
| $ | 14,309 |
|
16
Credit Quality Indicators
The following tables present the credit quality indicators by segments and portfolio class of loans at March 31, 20182019 and December 31, 2017. 2018.
|
| March 31, 2019 |
| |||||||||||||||||||||
(in thousands) |
| Commercial non-real estate |
|
| Commercial real estate - owner- occupied |
|
| Total commercial and industrial |
|
| Commercial real estate - income producing |
|
| Construction and land development |
|
| Total commercial |
| ||||||
Grade: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 8,028,706 |
|
| $ | 2,342,948 |
|
| $ | 10,371,654 |
|
| $ | 2,450,517 |
|
| $ | 1,319,519 |
|
| $ | 14,141,690 |
|
Pass-Watch |
|
| 166,406 |
|
|
| 91,434 |
|
|
| 257,840 |
|
|
| 81,718 |
|
|
| 9,743 |
|
|
| 349,301 |
|
Special Mention |
|
| 62,830 |
|
|
| 16,159 |
|
|
| 78,989 |
|
|
| 10,760 |
|
|
| 890 |
|
|
| 90,639 |
|
Substandard |
|
| 398,384 |
|
|
| 64,887 |
|
|
| 463,271 |
|
|
| 20,399 |
|
|
| 9,915 |
|
|
| 493,585 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 8,656,326 |
|
| $ | 2,515,428 |
|
| $ | 11,171,754 |
|
| $ | 2,563,394 |
|
| $ | 1,340,067 |
|
| $ | 15,075,215 |
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| ||||||||||||||||||||||||
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|
|
| ||||||||||||||||||||||||
|
| March 31, 2018 |
| December 31, 2018 |
| ||||||||||||||||||||||||||||||||||||||
(in thousands) |
| Commercial non-real estate |
| Commercial real estate - owner-occupied |
| Total commercial & industrial |
| Commercial real estate - income producing |
| Construction and land development |
| Total commercial |
|
| Commercial non-real estate |
|
| Commercial real estate - owner- occupied |
|
| Total commercial and industrial |
|
| Commercial real estate - income producing |
|
| Construction and land development |
|
| Total commercial |
| ||||||||||||
Grade: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 7,250,715 |
| $ | 1,954,384 |
| $ | 9,205,099 |
| $ | 2,268,358 |
| $ | 1,334,456 |
| $ | 12,807,913 |
|
| $ | 7,875,588 |
|
| $ | 2,274,211 |
|
| $ | 10,149,799 |
|
|
| 2,265,087 |
|
| $ | 1,487,599 |
|
| $ | 13,902,485 |
|
Pass-Watch |
|
| 269,657 |
|
| 51,856 |
|
| 321,513 |
|
| 58,092 |
|
| 59,208 |
|
| 438,813 |
|
|
| 260,510 |
|
|
| 84,271 |
|
|
| 344,781 |
|
|
| 46,535 |
|
|
| 49,099 |
|
|
| 440,415 |
|
Special Mention |
|
| 100,005 |
|
| 35,971 |
|
| 135,976 |
|
| 9,344 |
|
| 6,279 |
|
| 151,599 |
|
|
| 75,752 |
|
|
| 23,149 |
|
|
| 98,901 |
|
|
| 5,510 |
|
|
| 816 |
|
|
| 105,227 |
|
Substandard |
|
| 715,827 |
|
| 143,332 |
|
| 859,159 |
|
| 59,068 |
|
| 13,935 |
|
| 932,162 |
|
|
| 408,751 |
|
|
| 76,117 |
|
|
| 484,868 |
|
|
| 24,647 |
|
|
| 10,821 |
|
|
| 520,336 |
|
Doubtful |
|
| 18 |
|
| — |
|
| 18 |
|
| — |
|
| — |
|
| 18 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 8,336,222 |
| $ | 2,185,543 |
| $ | 10,521,765 |
| $ | 2,394,862 |
| $ | 1,413,878 |
| $ | 14,330,505 |
|
| $ | 8,620,601 |
|
| $ | 2,457,748 |
|
| $ | 11,078,349 |
|
| $ | 2,341,779 |
|
| $ | 1,548,335 |
|
| $ | 14,968,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| December 31, 2017 | |||||||||||||||||||||||||||||||||||||||||
(in thousands) |
| Commercial non-real estate |
| Commercial real estate - owner-occupied |
| Total commercial & industrial |
| Commercial real estate - income producing |
| Construction and land development |
| Total commercial |
| ||||||||||||||||||||||||||||||
Grade: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Pass |
| $ | 7,190,604 |
| $ | 1,896,366 |
| $ | 9,086,970 |
| $ | 2,223,245 |
| $ | 1,291,638 |
| $ | 12,601,853 |
| ||||||||||||||||||||||||
Pass-Watch |
|
| 293,069 |
|
| 82,913 |
|
| 375,982 |
|
| 83,444 |
|
| 60,804 |
|
| 520,230 |
| ||||||||||||||||||||||||
Special Mention |
|
| 80,649 |
|
| 27,456 |
|
| 108,105 |
|
| 13,244 |
|
| 4,788 |
|
| 126,137 |
| ||||||||||||||||||||||||
Substandard |
|
| 733,558 |
|
| 135,704 |
|
| 869,262 |
|
| 64,658 |
|
| 16,191 |
|
| 950,111 |
| ||||||||||||||||||||||||
Doubtful |
|
| 57 |
|
| — |
|
| 57 |
|
| 8 |
|
| — |
|
| 65 |
| ||||||||||||||||||||||||
Total |
| $ | 8,297,937 |
| $ | 2,142,439 |
| $ | 10,440,376 |
| $ | 2,384,599 |
| $ | 1,373,421 |
| $ | 14,198,396 |
|
|
| March 31, 2019 |
|
| December 31, 2018 |
| ||||||||||||||||||
(in thousands) |
| Residential mortgage |
|
| Consumer |
|
| Total |
|
| Residential mortgage |
|
| Consumer |
|
| Total |
| ||||||
Performing |
| $ | 2,893,635 |
|
| $ | 2,085,456 |
|
| $ | 4,979,091 |
|
| $ | 2,873,669 |
|
| $ | 2,130,395 |
|
| $ | 5,004,064 |
|
Nonperforming |
|
| 39,616 |
|
|
| 18,916 |
|
|
| 58,532 |
|
|
| 36,412 |
|
|
| 17,472 |
|
|
| 53,884 |
|
Total |
| $ | 2,933,251 |
|
| $ | 2,104,372 |
|
| $ | 5,037,623 |
|
| $ | 2,910,081 |
|
| $ | 2,147,867 |
|
| $ | 5,057,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, 2018 |
| December 31, 2017 | |||||||||||||||
(in thousands) |
| Residential mortgage |
| Consumer |
| Total |
| Residential mortgage |
| Consumer |
| Total |
| ||||||
Performing |
| $ | 2,696,582 |
| $ | 2,014,442 |
| $ | 4,711,024 |
| $ | 2,647,784 |
| $ | 2,099,637 |
| $ | 4,747,421 |
|
Nonperforming |
|
| 36,239 |
|
| 14,736 |
|
| 50,975 |
|
| 42,688 |
|
| 15,658 |
|
| 58,346 |
|
Total |
| $ | 2,732,821 |
| $ | 2,029,178 |
| $ | 4,761,999 |
| $ | 2,690,472 |
| $ | 2,115,295 |
| $ | 4,805,767 |
|
Below are the definitions of the Company’s internally assigned grades:
Commercial:
|
|
Pass – loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.
|
|
Pass-Watch – credits in this category are of sufficient risk to cause concern. This category is reserved for credits that display negative performance trends. The “Watch” grade should be regarded as a transition category.
|
|
Special Mention – a criticized asset category defined as having potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the credit or the institution’s credit position. Special mention credits are not considered part of the Classified credit categories and do not expose the institution to sufficient risk to warrant adverse classification.
|
|
Substandard – an asset that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
|
|
Doubtful – an asset that has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
|
|
Loss – credits classified as Loss are considered uncollectable and are charged off promptly once so classified.
Residential and Consumer:
|
|
Performing – accruing loans that have not been modified in a troubled debt restructuring.
|
|
Nonperforming – loans for which there are good reasons to doubt that payments will be made in full. All loans with nonaccrual status and all loans that have been modified in a troubled debt restructuring are classified as nonperforming.
18
17
Purchased Credit Impaired Loans
Changes in the carrying amount of purchased credit impaired loans and related accretable yield are presented in the following table for the three months ended March 31, 20182019 and the year ended December 31, 2017.
2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
| March 31, 2018 |
| December 31, 2017 | ||||||||||||||||||||||||||
|
| Carrying |
|
|
|
| Carrying |
|
|
| ||||||||||||||||||||
|
| Amount |
| Accretable |
|
| Amount |
| Accretable |
|
| March 31, 2019 |
|
| December 31, 2018 |
| ||||||||||||||
(in thousands) |
| of Loans |
| Yield |
|
| of Loans |
| Yield |
|
| Carrying Amount of Loans |
|
| Accretable Yield |
|
| Carrying Amount of Loans |
|
| Accretable Yield |
| ||||||||
Balance at beginning of period |
| $ | 153,403 |
| $ | 62,517 |
|
| $ | 190,915 |
| $ | 113,686 |
|
| $ | 129,596 |
|
| $ | 37,294 |
|
| $ | 153,403 |
|
| $ | 62,517 |
|
Addition of cost recovery loans - FNBC I |
|
| — |
|
| — |
|
|
| 15,000 |
|
| — |
| ||||||||||||||||
Payments received, net |
|
| (8,288) |
|
| (1,703) |
|
|
| (69,591) |
|
| (7,412) |
|
|
| (8,286 | ) |
|
| (1,100 | ) |
|
| (39,556 | ) |
|
| (5,779 | ) |
Accretion |
|
| 4,268 |
|
| (4,268) |
|
|
| 17,079 |
|
| (17,079) |
|
|
| 3,584 |
|
|
| (3,584 | ) |
|
| 15,749 |
|
|
| (15,749 | ) |
Increase in expected cash flows based on actual cash flows and changes in cash flow assumptions |
|
| — |
|
| (956) |
|
|
| — |
|
| (30,379) |
| ||||||||||||||||
Net transfers from nonaccretable difference to accretable yield |
|
| — |
|
| — |
|
|
| — |
|
| 3,701 |
| ||||||||||||||||
Decrease in expected cash flows based on actual cash flows and changes in cash flow assumptions |
|
| — |
|
|
| (872 | ) |
|
| — |
|
|
| (3,695 | ) | ||||||||||||||
Balance at end of period |
| $ | 149,383 |
| $ | 55,590 |
|
| $ | 153,403 |
| $ | 62,517 |
|
| $ | 124,894 |
|
| $ | 31,738 |
|
| $ | 129,596 |
|
| $ | 37,294 |
|
During the three months ended March 31, 2017, certain of the Company’s purchased credit impaired loans were covered by two loss share agreements with the FDIC. The Company had a receivable representing an indemnification asset arising from the agreements. The receivable was accounted for separately from the covered loans as the agreements were not contractually part of the loans and were not transferrable should the Company have disposed of the loans. The agreements were terminated by the Company during the third quarter of 2017.
Residential Mortgage Loans in Process of Foreclosure
Included in loans are $7.8$7.3 million and $7.5$7.1 million of consumer loans secured by single family residential real estate that are in process of foreclosure as of March 31, 20182019 and December 31, 2017,2018, respectively. Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction. In addition to the single family residential real estate loans in process of foreclosure, the Company also held $3.7$2.2 million and $3.4$1.8 million of foreclosed single family residential properties in other real estate owned as ofat March 31, 20182019 and December 31, 2017,2018, respectively.
5. Operating Leases
5.Effective January 1, 2019, the Company adopted the amended provisions of Financial Accounting Standards Codification Topic 842, “Leases,” using the modified retrospective approach, impacting the reporting and disclosures for operating leases. The core principle of Topic 842 is that a lessee should recognize in the statement of financial position a liability representing the present value of future lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset over the lease term, as well as the disclosure of key information about operating leasing arrangements.
The Company has amended its accounting policy related to leases to comply with the new standard as follows. The Company determines if an arrangement is a lease at inception of the contract and assesses the appropriate classification as finance or operating. Operating leases with terms greater than one year are included in right-of-use lease assets and lease obligations on the Company’s balance sheets. The lease term includes payments to be made in optional or renewal periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term using the interest rate implicit in the contract, when available, or the Company’s incremental collateralized borrowing rate with similar terms. Agreements with both lease and non-lease components are accounted for separately, with only the lease component capitalized. The right-of-use asset is the amount of the lease liability adjusted for prepaid or accrued lease payments, remaining balance of any lease incentives received, unamortized initial direct costs, and impairment. Lease expense is recorded on a straight-line basis over the lease term through amortization of the right-of-use asset plus implicit interest accreted on the operating lease liability obligation, and is reflected in Net Occupancy Expense in the Consolidated Statement of Income.
Some of the Company’s leases contain variable components, such as annual changes to rent based on the consumer price index. Operating lease liabilities are not re-measured as a result of changes to variable components unless the lease must be re-measured for some other reason such as a renewal that was not reasonably certain of being exercised. Changes to the variable components are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred.
The standard provides several practical expedients available for use in transition. The Company elected to use the standard’s “package of practical expedients,” which allows the use of previous conclusions about lease identification, lease classification and the accounting treatment for initial direct costs. The Company also elected the short-term lease recognition exemption for all leases with lease terms of one year or less; as such, the Company will not recognize right-of-use assets or lease liabilities on the consolidated balance sheet for such leases. The Company valued its lease obligation using incremental collateralized borrowing rates as of January 1, 2019 for the remaining term of each identified lease. At adoption, the Company recorded a right-of-use asset totaling $115.9 million and a liability for lease payment obligations totaling $130.7 million, offset by the elimination of $14.8 million of existing lease incentive and other deferred rent liabilities. Accounting for leases in accordance with Topic 842 has not had a material impact upon the consolidated results of operations, and is not expected to in future periods.
19
The Company has operating leases on a number of its branches, certain regional headquarters and other properties to limit its exposure to ownership risks such as fluctuations in real estate prices and obsolescence. The Company leases real estate with lease terms generally from five to 20 years, some of which have renewal options from one to 20 years. As these extension options are not generally considered reasonably certain of renewal, they are not included in the lease term. The Company is not a lessee in any contracts classified as finance leases.
Supplemental balance sheet information pertaining to operating leases:
(dollars in thousands) |
| Three months ended March 31, 2019 |
| |
Cash paid for amounts included in the measurement of lease liabilities for operating leases |
| $ | 4,007 |
|
Right of use assets obtained in exchange for lease liabilities |
| $ | 116,618 |
|
|
|
|
|
|
|
| March 31, 2019 |
| |
Weighted average remaining lease term (in years) |
|
| 13.12 |
|
Weighted average discount rate |
|
| 3.56 | % |
The following table sets forth the maturities of the Company’s lease liabilities and the present value discount at March 31, 2019.
(in thousands) |
|
|
|
|
2019 |
| $ | 12,198 |
|
2020 |
|
| 15,421 |
|
2021 |
|
| 14,587 |
|
2022 |
|
| 14,391 |
|
2023 |
|
| 13,109 |
|
Thereafter |
|
| 95,414 |
|
Total |
| $ | 165,120 |
|
Present value discount |
|
| (36,626 | ) |
Lease liability |
| $ | 128,494 |
|
The following table sets forth the components of the Company’s lease expense for the three months ended March 31, 2019.
(in thousands) |
|
|
|
|
Operating lease expense |
| $ | 4,253 |
|
Short-term lease expense |
|
| 19 |
|
Variable lease expense |
|
| 12 |
|
Sublease income |
|
| (116 | ) |
Total |
| $ | 4,168 |
|
6. Securities Sold under Agreements to Repurchase
Included in short-term borrowings are customer securities sold under agreements to repurchase (“repurchase agreements”) that mature daily and are secured by U.S. agency securities totaling $443.2$478.3 million and $430.6$428.6 million at March 31, 20182019 and December 31, 2017,2018, respectively. The Company borrows funds on a secured basis by selling securities under agreements to repurchase, mainly in connection with treasury management services offered to its deposit customers. As the Company maintains effective control over assets sold under agreements to repurchase, the securities continue to be carried on the consolidated statements of financial condition. Because the Company acts as borrower transferring assets to the counterparty, and the agreements mature daily, the Company’s risk is limited.
6.7. Derivatives
On January 1, 2018, the Company adopted the provisions of Accounting Standards Update (ASU) 2017-12, “Derivatives and Hedging,” using the modified retrospective transition approach. As a result of adoption of the update, the Company is making certain adjustments to its existing designation documentation for active hedging relationships to take advantage of specific provisions of the update. Adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations. Following is a discussion of the provisions of the guidance relevant to the Company:
Ineffectiveness measurement and presentation
The provisions of the update eliminate the concept of ineffectiveness from an accounting perspective. The guidance provides that, as long as a hedging instrument is designated and the results of the effectiveness testing support that the instrument qualifies for hedge accounting treatment, there will be no periodic measurement or recognition of ineffectiveness. Rather, the full impact of hedge gains and losses will be recognized in the period in which the hedged transactions impact the entity’s earnings.
Presentation of reclassifications from Accumulated Other Comprehensive Income
Amounts in Accumulated Other Comprehensive Income that are included in the assessment of effectiveness should be reclassified into earnings in the same period in which the hedged forecasted transactions impact earnings. As such, the Company will recognize all reclassifications out of Other Comprehensive Income in the same statement of income line item in which the earnings effect of the hedged item is presented.
18
Changes to hedged risk
The update also states that if the designated hedged risk changes during the life of the hedging relationship, an entity may continue to apply hedge accounting as long as the hedging instrument is highly effective at achieving offsetting cash flows attributable to the revised hedged risk. Regardless of the description of the hedged transactions contained in the initial designation documentation, the Company intends to utilize this provision in the updated guidance to the extent possible.
Risk component hedging in fair value hedges
The update allows an entity to make a one-time transition election regarding the fair value measurement methodology applied to fair value hedges in place at adoption. The Company did not elect either of the one-time transition options; rather, it will continue to measure the hedged items as documented in the initial hedge documentation.
Risk Management Objective of Using Derivatives
The Company enters into derivative financial instruments to manage risks related to differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments, currently related to select pools of variable rate loans and fixed rate brokered deposits. The Bank also enters into interest rate derivative agreements as a service to certain qualifying customers. The Bank manages a matched book with respect to these customer derivatives in order to minimize its net risk exposure resulting from such agreements. The Bank also enters into risk participation agreements under which it may either sell or buy
20
credit risk associated with a customer’s performance under certain interest rate derivative contracts related to loans in which participation interests have been sold to or purchased from other banks.
Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the notional or contractual amounts and fair values of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as ofat March 31, 20182019 and December 31, 2017.2018.
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| March 31, 2018 |
| December 31, 2017 |
|
|
| March 31, 2019 |
|
| December 31, 2018 |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
| Derivative (1) |
|
|
| Derivative (1) |
|
|
|
|
|
|
| Derivative (1) |
|
|
|
|
|
| Derivative (1) |
| |||||||||||||||||||
(in thousands) |
| Type of Hedge |
|
| Notional or Contractual Amount |
| Assets |
| Liabilities |
| Notional or Contractual Amount |
| Assets |
| Liabilities |
| Type of Hedge |
| Notional or Contractual Amount |
|
| Assets |
|
| Liabilities |
|
| Notional or Contractual Amount |
|
| Assets |
|
| Liabilities |
| |||||||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
| Cash Flow |
| $ | 875,000 |
| $ | 1,752 |
| $ | 12,667 |
| $ | 875,000 |
| $ | — |
| $ | 14,020 | ||||||||||||||||||||||||||
Interest rate swaps |
| Cash Flow |
| $ | 975,000 |
|
| $ | 9,765 |
|
| $ | 4,899 |
|
| $ | 875,000 |
|
| $ | 3,954 |
|
| $ | 9,173 |
| ||||||||||||||||||||
Interest rate swaps |
| Fair Value |
|
| 483,110 |
|
| — |
|
| 3,948 |
|
| 483,110 |
|
| — |
|
| 2,475 |
| Fair Value |
|
| 388,110 |
|
|
| — |
|
|
| 960 |
|
|
| 483,110 |
|
|
| — |
|
|
| 2,089 |
|
|
|
|
| $ | 1,358,110 |
| $ | 1,752 |
| $ | 16,615 |
| $ | 1,358,110 |
| $ | — |
| $ | 16,495 |
|
|
|
| 1,363,110 |
|
|
| 9,765 |
|
|
| 5,859 |
|
|
| 1,358,110 |
|
|
| 3,954 |
|
|
| 11,262 |
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps (2) |
| N/A |
| $ | 1,184,109 |
| $ | 20,680 |
| $ | 20,710 |
| $ | 1,144,789 |
| $ | 15,408 |
| $ | 15,857 |
| N/A |
|
| 1,373,378 |
|
|
| 28,570 |
|
|
| 30,506 |
|
|
| 1,277,404 |
|
|
| 23,670 |
|
|
| 24,669 |
|
Risk participation agreements |
| N/A |
|
| 121,479 |
|
| 13 |
|
| 61 |
|
| 119,951 |
|
| 23 |
|
| 109 |
| N/A |
|
| 169,317 |
|
|
| 10 |
|
|
| 162 |
|
|
| 171,222 |
|
|
| 10 |
|
|
| 131 |
|
Forward commitments to sell residential mortgage loans |
| N/A |
|
| 81,326 |
|
| 847 |
|
| 454 |
|
| 80,462 |
|
| 1,000 |
|
| 290 |
| N/A |
|
| 82,845 |
|
|
| 21 |
|
|
| 607 |
|
|
| 77,208 |
|
|
| 110 |
|
|
| 664 |
|
Interest rate-lock commitments on residential mortgage loans |
| N/A |
|
| 61,904 |
|
| 376 |
|
| 789 |
|
| 53,724 |
|
| 186 |
|
| 782 |
| N/A |
|
| 69,931 |
|
|
| 493 |
|
|
| 1 |
|
|
| 59,119 |
|
|
| 464 |
|
|
| 67 |
|
Foreign exchange forward contracts |
| N/A |
|
| 42,815 |
|
| 3,096 |
|
| 3,062 |
|
| 42,260 |
|
| 2,453 |
|
| 2,419 |
| N/A |
|
| 39,029 |
|
|
| 482 |
|
|
| 448 |
|
|
| 37,749 |
|
|
| 751 |
|
|
| 718 |
|
Visa Class B derivative contract |
| N/A |
|
| 43,753 |
|
|
| — |
|
|
| 6,953 |
|
|
| 43,753 |
|
|
| — |
|
|
| 7,304 |
| ||||||||||||||||||||
|
|
|
|
| 1,491,633 |
|
| 25,012 |
|
| 25,076 |
|
| 1,441,186 |
|
| 19,070 |
|
| 19,457 |
|
|
|
| 1,778,253 |
|
|
| 29,576 |
|
|
| 38,677 |
|
|
| 1,666,455 |
|
|
| 25,005 |
|
|
| 33,553 |
|
Total derivatives |
|
|
| $ | 2,849,743 |
| $ | 26,764 |
| $ | 41,691 |
| $ | 2,799,296 |
| $ | 19,070 |
| $ | 35,952 |
|
|
| $ | 3,141,363 |
|
| $ | 39,341 |
|
| $ | 44,536 |
|
| $ | 3,024,565 |
|
| $ | 28,959 |
|
| $ | 44,815 |
|
Less: netting adjustment (3) |
|
|
|
|
|
|
| (14,081) |
|
| (19,162) |
|
|
|
|
| (4,913) |
|
| (21,563) |
|
|
|
|
|
|
|
| (13,514 | ) |
|
| (26,407 | ) |
|
|
|
|
|
| (11,979 | ) |
|
| (22,588 | ) |
Total derivative assets/liabilities |
|
|
|
|
|
| $ | 12,683 |
| $ | 22,529 |
|
|
|
| $ | 14,157 |
| $ | 14,389 |
|
|
|
|
|
|
| $ | 25,827 |
|
| $ | 18,129 |
|
|
|
|
|
| $ | 16,980 |
|
| $ | 22,227 |
|
(1) | Derivative assets and liabilities are reported at fair value in other assets or other liabilities, respectively, in the consolidated balance sheets. |
(2) | The notional amount represents both the customer accommodation agreements and offsetting agreements with unrelated financial |
(3) | Represents balance sheet netting of derivative assets and liabilities for variation margin collateral held or placed with the same central clearing counterparty. See offsetting assets and liabilities for further information. |
19
Cash Flow Hedges of Interest Rate Risk
The Company is party to various interest rate swap agreements designated and qualifying as cash flow hedges of the Company’s forecasted variable cash flows for pools of variable rate loans. For each agreement, the Company receives interest at a fixed rate and pays at a variable rate. During the three months ended March 31, 2018, the Company terminated five of its shorter-term swap agreements with notional amounts totaling $450 million and entered into five longer-term agreements with notional amounts totaling $450 million. The Company paid termination fees of approximately $10.6 million to settle the interest rate swap liabilities, and the resulting accumulated other comprehensive loss will beis being amortized over the remaining maturities of the designated instruments. Amortization of other comprehensive loss on terminated cash flow hedges totaled $1.4 million and $1.0 million for the three months ended March 31, 2018.2019 and 2018, respectively. The notional amounts of the swap agreements in place at March 31, 20182019 expire as follows: $425$50 million in 2021; $475 million in 2022; $350 million in 2023; and $100 million in 2024.
Fair Value Hedges of Interest Rate Risk
During 2017, theThe Company enteredenters into interest rate swap agreements that modify the Company’s exposure to interest rate risk by effectively converting a portion of the Company’s brokered certificates of deposit from fixed rates to variable rates. The maturities and call features of these interest rate swaps match the features of the hedged deposits. As interest rates fall, the decline in the value of the certificates of deposit is offset by the increase in the value of the interest rate swaps. Conversely, as interest rates rise, the value of the underlying hedged deposits increases, but the value of the interest rate swaps decreases, resulting in no impact on earnings. Interest expense is adjusted by the difference between the fixed and floating rates for the period the swaps are in effect.
21
Derivatives Not Designated as Hedges
Customer interest rate derivative program
The Bank enters into interest rate derivative agreements, primarily rate swaps, with commercial banking customers to facilitate their risk management strategies. The Bank enters into offsetting agreements with unrelated financial institutions, thereby mitigating its net risk exposure resulting from such transactions. Because the interest rate derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.
Risk participation agreements
The Bank also enters into risk participation agreements under which it may either assume or sell credit risk associated with a borrower’s performance under certain interest rate derivative contracts. In those instances where the Bank has assumed credit risk, it is not a direct counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because it is a party to the related loan agreement with the borrower. In those instances in which the Bank has sold credit risk, it is the sole counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because other banks participate in the related loan agreement. The Bank manages its credit risk under risk participation agreements by monitoring the creditworthiness of the borrower, based on the Bank’s normal credit review process.
Mortgage banking derivatives
The Bank also enters into certain derivative agreements as part of its mortgage banking activities. These agreements include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a best efforts delivery basis.
Customer foreign exchange forward contract derivatives
The Bank enters into foreign exchange forward derivative agreements, primarily forward foreign currency contracts, with commercial banking customers to facilitate their risk management strategies. The Bank manages its risk exposure from such transactions by entering into offsetting agreements with unrelated financial institutions. Because the foreign exchange forward contract derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.
Visa Class B derivative contract
The Company is a member of Visa USA. During the fourth quarter of 2018, the Company sold the majority of its Visa Class B holdings, at which time it entered into a derivative agreement with the purchaser whereby the Company will make or receive cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. The conversion ratio changes when Visa deposits funds to a litigation escrow established by Visa to pay settlements for certain litigation, for which Visa is indemnified by Visa USA members. The Company is also required to make periodic financing payments to the purchaser until all of Visa’s covered litigation matters are resolved. Thus, the derivative contract extends until the end of Visa’s covered litigation matters, the timing of which is uncertain.
The contract includes a contingent accelerated termination clause based on the credit ratings of the Company. At March 31, 2019 and December 31, 2018 the fair value of the liability associated with this contract was $6.9 million and $7.3 million, respectively. Refer to Note 15 – Fair Value of Financial Instruments for discussion of the valuation inputs for this derivative liability.
22
Effect of Derivative Instruments on the Statement of Income Statement
Derivative instrumentThe effects of derivative instruments on the consolidated statements of income consisting primarily of customer interest rate swap fees, net of fair value adjustments, is reflected in the income statement in other noninterest income, totaling $1.5 million and $0.5 million for the three months ended March 31, 2019 and 2018 and 2017, respectively. The impact to interest income from cash flow hedges, including amortization of comprehensive loss on terminated cash flow hedges, was $(0.6) million and $0.1 million forare presented in the table below. For the three months ended March 31, 2019 and 2018, and 2017, respectively. Interest expense as a resultthe reduction of markinterest income attributable to market adjustmentscash flow hedges includes amortization of fair value hedges was $0.1 million and $(0.1) million for the three months ended March 31, 2018 and 2017.accumulated other comprehensive loss that resulted from termination of five interest rate swap contracts.
20
|
|
|
| Three Months Ended |
| |||||
|
|
|
| March 31, |
| |||||
Derivative Instruments: |
| Location of Gain (Loss) Recognized in the Statement of Income: |
| 2019 |
|
| 2018 |
| ||
Interest rate swaps - cash flow hedges |
| Interest income |
| $ | (2,016 | ) |
| $ | (618 | ) |
Interest rate swaps - fair value hedges |
| Interest expense |
|
| (988 | ) |
|
| (126 | ) |
All other instruments |
| Other noninterest income |
|
| 809 |
|
|
| 1,523 |
|
Total |
|
|
| $ | (2,195 | ) |
| $ | 779 |
|
Credit Risk-Related Contingent Features
Certain of the Bank’s derivative instruments contain provisions allowing the financial institution counterparty to terminate the contracts in certain circumstances, such as a downgrade of the Bank’s credit ratings below specified levels, a default by the Bank on its indebtedness, or the failure of the Bank to maintain specified minimum regulatory capital ratios or its regulatory status as a well-capitalized institution. These derivative agreements also contain provisions regarding the posting of collateral by each party. At March 31, 2019, the Company was not in violation of any such provisions.
Offsetting Assets and Liabilities
The Bank’s derivative instruments with certain counterparties contain legally enforceable netting provisions that allow for net settlement of multiple transactions to a single amount, which may be positive, negative, or zero. Agreements with certain bilateral counterparties require both parties to maintain collateral in the event that the fair values of derivative instruments exceed established exposure thresholds. For centrally cleared derivatives, the Company is subject to initial margin posting and daily variation margin exchange with the central clearinghouses. Offsetting information in regards to all derivative assets and liabilities, including accrued interest, subject to these master netting agreements at March 31, 20182019 and December 31, 20172018 is presented in the following tables.
(in thousands) |
|
|
|
|
| Gross Amounts |
|
| Net Amounts |
|
| Gross Amounts Not Offset in the Statement of Income |
| |||||||||||
Description |
| Gross Amounts Recognized |
|
| Offset in the Statement of Income |
|
| Presented in the Statement of Income |
|
| Financial Instruments |
|
| Cash Collateral |
|
| Net Amount |
| ||||||
As of March 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets |
| $ | 17,165 |
|
| $ | (15,439 | ) |
| $ | 1,726 |
|
| $ | 1,726 |
|
| $ | — |
|
| $ | — |
|
Derivative Liabilities |
| $ | 30,630 |
|
| $ | (26,032 | ) |
| $ | 4,598 |
|
| $ | 1,726 |
|
| $ | 6,986 |
|
| $ | (4,114 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
| Gross |
| Net Amounts |
| Gross Amounts Not Offset in the Statement | |||||||||
Description |
| Gross |
| Offset in |
| Presented in |
| Financial |
| Cash |
| Net | ||||||
As of March 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets |
| $ | 18,822 |
| $ | (14,314) |
| $ | 4,508 |
| $ | 1,517 |
| $ | — |
| $ | 2,991 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities |
| $ | 18,081 |
| $ | (16,497) |
| $ | 1,584 |
| $ | 1,517 |
| $ | 4,770 |
| $ | (4,703) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
(in thousands) |
|
|
|
| Gross Amounts |
| Net Amounts |
| Gross Amounts Not Offset in the Statement of Income |
|
|
|
|
| Gross Amounts |
|
| Net Amounts |
|
| Gross Amounts Not Offset in the Statement of Income |
| ||||||||||||||||||||
Description |
| Gross Amounts Recognized |
| Offset in the Statement of Income |
| Presented in the Statement of Income |
| Financial |
| Cash Collateral |
| Net |
| Gross Amounts Recognized |
|
| Offset in the Statement of Income |
|
| Presented in the Statement of Income |
|
| Financial Instruments |
|
| Cash Collateral |
|
| Net Amount |
| ||||||||||||
As of December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
As of December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Derivative Assets |
| $ | 7,155 |
| $ | (5,007) |
| $ | 2,148 |
| $ | 2,148 |
| $ | — |
| $ | — |
| $ | 16,167 |
|
| $ | (12,842 | ) |
| $ | 3,325 |
|
| $ | 1,846 |
|
| $ | — |
|
| $ | 1,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Derivative Liabilities |
| $ | 24,015 |
| $ | (20,077) |
| $ | 3,938 |
| $ | 2,148 |
| $ | 4,099 |
| $ | (2,309) |
| $ | 23,811 |
|
| $ | (21,651 | ) |
| $ | 2,160 |
|
| $ | 1,846 |
|
| $ | 2,871 |
|
| $ | (2,557 | ) |
The Company has excess collateral compared to total exposure due to initial margin requirements for day-to-day rate volatility.
23
7.
8. Stockholders’ Equity
Common Shares Outstanding
Common shares outstanding excludes treasury shares totaling 1.1 million and 1.20.9 million at March 31, 20182019 and December 31, 2017, respectively,2018, with a first-in-first-out cost basis of $24.4$16.6 million and $25.5$18.5 million at March 31, 20182019 and December 31, 2017,2018, respectively. Shares outstanding also excludes unvested restricted share awards totaling 1.51.3 million at March 31, 20182019 and December 31, 2017.2018.
Stock Buyback Program
21
TableOn May 24, 2018, the Company’s board of Contentsdirectors approved a stock buyback program that authorized the repurchase of up to 5%, or approximately 4.3 million shares, of its outstanding common stock. The approved program allows the Company to repurchase its common shares either in the open market in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions with non-affiliated sellers or as otherwise determined by the Company in one or more transactions, from time to time until December 31, 2019. The Company is not obligated to purchase any shares under this program, and the board of directors may terminate or amend the program at any time prior to the expiration date. As of March 31, 2019, 200,000 shares of the Company’s common stock had been purchased at an average price of $41.30 per share under this program.
Accumulated Other Comprehensive Income (Loss)Loss
The components of Accumulated Other Comprehensive Loss and changes in those components are presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| Available |
| HTM Securities |
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
| for Sale |
| Transferred |
| Employee |
| Cash |
|
|
|
| Available for Sale Securities |
|
| HTM Securities Transferred from AFS |
|
| Employee Benefit Plans |
|
| Cash Flow Hedges |
|
| Equity Method Investment |
|
| Total |
| ||||||||||
(in thousands) |
| Securities |
| from AFS |
| Benefit Plans |
| Flow Hedges |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance, December 31, 2016 |
| $ | (28,679) |
| $ | (14,392) |
| $ | (72,501) |
| $ | (4,960) |
| $ | (120,532) | ||||||||||||||||||||||||
Other comprehensive income (loss) before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net change in unrealized gain |
|
| 2,319 |
|
| — |
|
| — |
|
| (1,135) |
|
| 1,184 | ||||||||||||||||||||||||
Reclassification of net (gain) loss realized and included in earnings |
|
| — |
|
| — |
|
| 1,387 |
|
| — |
|
| 1,387 | ||||||||||||||||||||||||
Amortization of unrealized net loss on securities transferred to HTM |
|
| — |
|
| 650 |
|
| — |
|
| — |
|
| 650 | ||||||||||||||||||||||||
Income tax expense (benefit) |
|
| 843 |
|
| 266 |
|
| 504 |
|
| (412) |
|
| 1,201 | ||||||||||||||||||||||||
Balance, March 31, 2017 |
| $ | (27,203) |
| $ | (14,008) |
| $ | (71,618) |
| $ | (5,683) |
| $ | (118,512) | ||||||||||||||||||||||||
Balance, December 31, 2017 |
| $ | (29,512) |
| $ | (14,585) |
| $ | (79,078) |
| $ | (11,227) |
| $ | (134,402) |
| $ | (29,512 | ) |
| $ | (14,585 | ) |
| $ | (79,078 | ) |
| $ | (11,227 | ) |
| $ | — |
|
| $ | (134,402 | ) |
Other comprehensive income (loss) before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net change in unrealized gain (loss) |
|
| (55,114) |
|
| — |
|
| — |
|
| (7,130) |
|
| (62,244) | ||||||||||||||||||||||||
Reclassification of net losses realized and included in earnings |
|
| — |
|
| — |
|
| 1,177 |
|
| 619 |
|
| 1,796 | ||||||||||||||||||||||||
Other valuation adjustments for employee benefit plan |
|
| — |
|
| — |
|
| — |
|
|
|
|
| — | ||||||||||||||||||||||||
Other comprehensive income/loss before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net change in unrealized loss |
|
| (55,114 | ) |
|
| — |
|
|
| — |
|
|
| (7,130 | ) |
|
| — |
|
|
| (62,244 | ) | |||||||||||||||
Reclassification of net loss realized and included in earnings |
|
| — |
|
|
| — |
|
|
| 1,177 |
|
|
| 619 |
|
|
| — |
|
|
| 1,796 |
| |||||||||||||||
Amortization of unrealized net loss on securities transferred to HTM |
|
| — |
|
| 755 |
|
| — |
|
| — |
|
| 755 |
|
| — |
|
|
| 755 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 755 |
|
Income tax expense (benefit) |
|
| (12,508) |
|
| 171 |
|
| 267 |
|
| (1,476) |
|
| (13,546) |
|
| (12,508 | ) |
|
| 171 |
|
|
| 267 |
|
|
| (1,476 | ) |
|
| — |
|
|
| (13,546 | ) |
Balance, March 31, 2018 |
| $ | (72,118) |
| $ | (14,001) |
| $ | (78,168) |
| $ | (16,262) |
| $ | (180,549) |
| $ | (72,118 | ) |
| $ | (14,001 | ) |
| $ | (78,168 | ) |
| $ | (16,262 | ) |
| $ | — |
|
| $ | (180,549 | ) |
Balance, December 31, 2018 |
| $ | (50,125 | ) |
| $ | (12,044 | ) |
| $ | (110,247 | ) |
| $ | (8,293 | ) |
| $ | — |
|
| $ | (180,709 | ) | |||||||||||||||
Other comprehensive income (loss) before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net change in unrealized gain or loss |
|
| 46,984 |
|
|
| — |
|
|
| — |
|
|
| 9,475 |
|
|
| 784 |
|
|
| 57,243 |
| |||||||||||||||
Reclassification of net loss realized and included in earnings |
|
| — |
|
|
| — |
|
|
| 2,203 |
|
|
| 2,016 |
|
|
| — |
|
|
| 4,219 |
| |||||||||||||||
Amortization of unrealized net loss on securities transferred to HTM |
|
| — |
|
|
| 591 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 591 |
| |||||||||||||||
Income tax expense |
|
| 10,623 |
|
|
| 134 |
|
|
| 498 |
|
|
| 2,598 |
|
|
| — |
|
|
| 13,853 |
| |||||||||||||||
Balance, March 31, 2019 |
| $ | (13,764 | ) |
| $ | (11,587 | ) |
| $ | (108,542 | ) |
| $ | 600 |
|
| $ | 784 |
|
| $ | (132,509 | ) |
AOCI
Accumulated Other Comprehensive Income or Loss (“AOCI”) is reported as a component of stockholders’ equity. AOCI can include, among other items, unrealized holding gains and losses on securities available for sale (“AFS”), including the Company’s share of unrealized gains and losses reported by a partnership accounted for under the equity method, gains and losses associated with pension or other post-retirement benefits that are not recognized immediately as a component of net periodic benefit cost, and gains and losses on derivative instruments that are designated as, and qualify as, cash flow hedges. Net unrealized gains/gains and losses on AFS securities reclassified as securities held to maturity (“HTM”) also continue to be reported as a component of AOCI and will be amortized over the estimated remaining life of the securities as an adjustment to interest income. Subject to certain thresholds, unrealized losses on employee benefit plans will be reclassified into income as pension and post-retirement costs are recognized over the remaining service period of plan participants. Accumulated gains/gains or losses on the cash flow hedge of the variable rate loans described in Note 67 will be reclassified into income over the life of the hedge. Accumulated other comprehensive loss resulting from the terminated interest rate
24
swaps will be amortized over the remaining maturities of the designated instruments. Gains (losses) inand losses within AOCI are net of deferred income taxes.taxes, where applicable.
The following table shows the line items of the consolidated statements of income affected by amounts reclassified from AOCI.
|
| Three Months Ended |
|
|
| |||||
Amount reclassified from AOCI (a) |
| March 31, |
|
| Affected line item on | |||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| the statement of income | ||
Amortization of unrealized net loss on securities transferred to HTM |
| $ | (591 | ) |
| $ | (755 | ) |
| Interest income |
Tax effect |
|
| 134 |
|
|
| 171 |
|
| Income taxes |
Net of tax |
|
| (457 | ) |
|
| (584 | ) |
| Net income |
Amortization of defined benefit pension and post-retirement items |
|
| (2,203 | ) |
|
| (1,177 | ) |
| Other noninterest expense (b) |
Tax effect |
|
| 498 |
|
|
| 267 |
|
| Income taxes |
Net of tax |
|
| (1,705 | ) |
|
| (910 | ) |
| Net income |
Reclassification of unrealized gain (loss) on cash flow hedges |
|
| (610 | ) |
|
| 336 |
|
| Interest income |
Tax effect |
|
| 138 |
|
|
| (76 | ) |
| Income taxes |
Net of tax |
|
| (472 | ) |
|
| 260 |
|
| Net income |
Amortization of loss on terminated cash flow hedges |
|
| (1,406 | ) |
|
| (954 | ) |
| Interest income |
Tax effect |
|
| 318 |
|
|
| 216 |
|
| Income taxes |
Net of tax |
|
| (1,088 | ) |
|
| (738 | ) |
| Net income |
Total reclassifications, net of tax |
| $ | (3,722 | ) |
| $ | (1,972 | ) |
| Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| ||||
Amount reclassified from AOCI (a) |
| March 31, |
| Affected line item on | ||||
(in thousands) |
|
| 2018 |
|
| 2017 |
| the statement of income |
Amortization of unrealized net loss on securities transferred to HTM |
|
| (755) |
|
| (650) |
| Interest income |
Tax effect |
|
| 171 |
|
| 266 |
| Income taxes |
Net of tax |
|
| (584) |
|
| (384) |
| Net income |
Amortization of defined benefit pension and post-retirement items |
|
| (1,177) |
|
| (1,387) |
| Other noninterest expense (b) |
Tax effect |
|
| 267 |
|
| 504 |
| Income taxes |
Net of tax |
|
| (910) |
|
| (883) |
| Net income |
Reclassification of unrealized gain on cash flow hedges |
|
| 336 |
|
| — |
| Interest income |
Tax effect |
|
| (76) |
|
| — |
| Income taxes |
Net of tax |
|
| 260 |
|
|
|
| Net income |
Amortization of loss on terminated cash flow hedges |
|
| (954) |
|
| — |
| Interest income |
Tax effect |
|
| 216 |
|
| — |
| Income taxes |
Net of tax |
|
| (738) |
|
| — |
| Net income |
Total reclassifications, net of tax |
| $ | (1,972) |
| $ | (1,267) |
| Net income |
(a) | Amounts in |
(b) | These AOCI components are included in the computation of net periodic pension and post-retirement cost that is reported with employee benefits expense (see Note 12 – Retirement Plans for additional details). |
22
8. Revenue Recognition
Effective January 1, 2018, the Company adopted the amended provisions of the Financial Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers,” using the modified retrospective approach. The standard applies to most of the Company’s noninterest income, with a significant portion of the Company’s revenue excluded from the scope of the standard, including interest and loan origination fees associated with financial instruments, gains and losses on investment securities, derivatives and sales of financial instruments.
The Company’s evaluation of contracts for compliance with the standard did not identify any material changes to the timing of revenue recognition as the standard was largely consistent with the existing guidance and current practices. Therefore, the adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations and there was no cumulative effect adjustment to opening retained earnings. However, upon adoption the Company has begun presenting certain underwriting costs (previously offset against Investment and Annuity Fees), as well as certain subadvisor costs (previously offset against Trust Fees) gross as noninterest expense, neither of which are material to operating results.
Due to the nature of the Company’s primary sources of revenue, there are no significant receivables, contract assets or contract liabilities not otherwise disclosed. The Company has assessed that its current disclosures are consistent with the requirements of the standard to present revenue disaggregated in to categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The following provides additional qualitative disclosures about the Company’s noninterest income and revenue recognition policies.
Service Charges on Deposit Accounts
Service charges on deposit accounts include transaction based fees for non-sufficient funds, account analysis fees, and other service charges on deposits, including monthly account service fees. Non-sufficient funds fees are recognized at the time when the account overdraft occurs in accordance with regulatory guidelines. Account analysis fees consist of fees charged on certain business deposit accounts based upon account activity as well as other monthly account fees, are recorded under the accrual method of accounting as services are performed.
Other service charges are earned by providing depositors safeguard and remittance of funds as well as by providing other elective services for depositors that are performed upon the depositor’s request. Charges for deposit services for the safeguard and remittance of funds are recognized at the end of the statement cycle, after services are provided, as the customer retains funds in the account. Revenue for other elective services is earned at the point in time the customer uses the service.
Trust Fees
Trust fee income represents revenue generated from asset management services provided to individuals, businesses, and institutions. The Company has a fiduciary responsibility to the beneficiary of the trust to perform agreed upon services which can include investing assets, periodic reporting, and providing tax information regarding the trust. In exchange for these trust and custodial services, the Company collects fee income from beneficiaries as contractually determined via fee schedules. The Company’s performance obligation is primarily satisfied over time as the services are performed and provided to the customer. These fees are recorded under the accrual method of accounting as the services are performed. The Company generally acts as the principal in these transactions and records revenue and expenses on a gross basis.
Bank Card and Automated Teller Machine (“ATM”) Fees
Bank card and ATM fees include credit card, debit card and ATM transaction revenue. The majority of this revenue is card interchange fees earned through a third party network. Performance obligations are satisfied for each transaction when the card is used and the funds are remitted. The network establishes interchange fees that the merchant remits for each transaction, and costs are incurred from the network for facilitating the interchange with the merchant. Card fees also include merchant services fees earned for providing merchants with card processing capabilities.
ATM income is generated from allowing customers to withdraw funds from other banks’ machines and from allowing a non-customer cardholder to withdraw funds from the Company’s machines. The Company satisfies its performance obligations for each transaction at the point in time that the withdrawal is processed.
Bank card and ATM fee income is recorded on accrual basis as services are provided with the related expense reflected in data processing expense.
Investment and Annuity Fees and Insurance Commissions
Investment and annuity services fee income represents income earned from investment and advisory services. The Company provides its customers with access to investment products through the use of third party carriers to meet their financial needs and investment objectives. Upon selection of an investment product, the customer enters into a policy with the carrier. The performance obligation is satisfied by fulfilling its responsibility to acquire the investment for which a commission fee is earned from the carrier based on agreed-upon fee percentages on a trade date basis. The Company has a contractual relationship with a third party broker dealer to
23
provide full service brokerage and investment advisory activities. As the agent in the arrangement, the Company recognizes the investment services commissions on a net basis. Investment revenue also includes portfolio management fees, which represent monthly fees charged on a contractual basis to customers for the management of their investment portfolios and are recorded under the accrual method of accounting on a gross basis, with expenses recorded in the appropriate expense line item.
This revenue line item includes investment banking income, which includes fees for services arising from securities offerings or placements in which the Company acts as a principal. Revenue is recognized at the time the underwriting is completed and the revenue is reasonably determinable.
Insurance commission revenue is recognized, net of cost, as of the effective date of the insurance policy as the Company’s performance obligation is connecting the customer to the insurance products. The Company also receives contingent commissions from insurance companies as additional incentive for achieving specified premium volume goals and/or the loss experience of the insurance placed. Contingent commissions from insurance companies are recognized when determinable, which is generally when such commissions are received or when we receive data from the insurance companies that allows the reasonable estimation of these amounts.
Secondary Mortgage Market Operations
Secondary mortgage market operations revenue is primarily comprised of service release premiums earned on the sale of closed-end mortgage loans to other financial institutions or government agencies that are recognized in revenue as each sales transaction occurs.
Income from Bank-Owned Life Insurance
Bank-owned life insurance income primarily represents income earned from the appreciation of cash surrender value of insurance contracts held and the proceeds of insurance benefits. Revenue from the proceeds of insurance benefits is recognized at the time a claim is confirmed.
Credit Related Fee Income
Credit-related fee income includes letters of credit fees and unused commercial commitment fees. Revenue for letters of credit fees is recognized over time. Revenue for unused commercial commitment fees are recognized based on contractual terms, generally when collected.
Income from Derivatives
Income from derivatives consists primarily of interest rate swap fees, net of fair value adjustments for customer derivatives and the related offsetting agreements with unrelated financial institutions for which the derivative instruments are not designated as hedges. This line item also includes the resulting gain or loss from ineffectiveness on derivatives that are designated as hedged items.
Gain (Loss) on Sales of Assets
Gain (loss) on sales of assets reflects the excess (deficiency) of proceeds received over the carrying amount assets sold plus cost to sell for various assets other than foreclosed real estate. Gain or loss on the sale of assets are recognized as each transaction occurs.
Other Miscellaneous Income
Other miscellaneous income represents a variety of revenue streams, including safe deposit box income, wire transfer fees, syndication fees and any other income not reflected above. Income is recorded once the performance obligation is satisfied, generally on the accrual basis or on a cash basis if not material and/or considered constrained.
9. Other Noninterest Income
Components of other noninterest income are as follows:
|
|
|
|
| ||||||||||
|
|
|
|
|
| |||||||||
|
| Three Months Ended |
| Three Months Ended |
| |||||||||
|
| March 31, |
| March 31, |
| |||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
| ||||
Income from bank-owned life insurance |
| $ | 3,070 |
| $ | 2,652 |
| $ | 3,265 |
|
| $ | 3,070 |
|
Credit related fees |
|
| 2,722 |
| 2,878 |
|
| 2,595 |
|
|
| 2,722 |
| |
Income from derivatives |
|
| 1,523 |
| 465 |
|
| 809 |
|
|
| 1,523 |
| |
Gain (loss) on sales of assets |
|
| (1,207) |
| 4,125 |
|
| 397 |
|
|
| (1,207 | ) | |
Amortization of FDIC loss share receivable |
|
| — |
| (1,100) | |||||||||
Other miscellaneous |
|
| 3,377 |
|
| 2,755 |
|
| 2,402 |
|
|
| 3,377 |
|
Total other noninterest income |
| $ | 9,485 |
| $ | 11,775 |
| $ | 9,468 |
|
| $ | 9,485 |
|
24
10. Other Noninterest Expense
Components of other noninterest expense are as follows:
|
|
|
|
|
| |||||||||
|
|
|
|
|
| |||||||||
|
| Three Months Ended |
| Three Months Ended |
| |||||||||
|
| March 31, |
| March 31, |
| |||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
| ||||
Advertising |
| $ | 2,526 |
| $ | 3,077 |
| $ | 3,080 |
|
| $ | 2,526 |
|
Corporate value and franchise taxes |
|
| 3,440 |
|
| 3,036 |
|
| 4,042 |
|
|
| 3,440 |
|
Printing and supplies |
|
| 1,286 |
|
| 1,178 |
|
| 1,169 |
|
|
| 1,286 |
|
Telecommunications and postage |
|
| 3,466 |
|
|
| 3,850 |
| ||||||
Travel expense |
|
| 1,066 |
|
| 1,059 |
|
| 1,098 |
|
|
| 1,066 |
|
Entertainment and contributions |
|
| 2,518 |
|
| 1,783 |
|
| 2,708 |
|
|
| 2,518 |
|
Tax credit investment amortization |
|
| 874 |
|
| 1,212 |
|
| 1,138 |
|
|
| 874 |
|
Other retirement expense |
|
| (4,463) |
|
| (3,060) |
|
| (4,105 | ) |
|
| (4,463 | ) |
Other miscellaneous |
|
| 5,684 |
|
| 7,285 |
|
| 5,691 |
|
|
| 5,684 |
|
Total other noninterest expense |
| $ | 12,931 |
| $ | 15,570 |
| $ | 18,287 |
|
| $ | 16,781 |
|
25
11. Earnings Per Common Share
The Company calculates earnings per share using the two-class method. The two-class method allocates net income to each class of common stock and participating security according to common dividends declared and participation rights in undistributed earnings. Participating securities consist of nonvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents.
A summary of the information used in the computation of earnings per common share follows.
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
| Three Months Ended |
| Three Months Ended |
| |||||||||
|
| March 31, |
| March 31, |
| |||||||||
(in thousands, except per share data) |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income to common shareholders |
| $ | 72,475 |
| $ | 49,014 |
| $ | 79,164 |
|
| $ | 72,475 |
|
Net income allocated to participating securities - basic and diluted |
|
| 1,366 |
|
| 1,156 |
|
| 1,337 |
|
|
| 1,366 |
|
Net income allocated to common shareholders - basic and diluted |
| $ | 71,109 |
| $ | 47,858 |
| $ | 77,827 |
|
| $ | 71,109 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares - basic |
| $ | 85,241 |
| $ | 84,365 |
|
| 85,688 |
|
|
| 85,241 |
|
Dilutive potential common shares |
|
| 182 |
|
| 259 |
|
| 112 |
|
|
| 182 |
|
Weighted-average common shares - diluted |
| $ | 85,423 |
| $ | 84,624 |
|
| 85,800 |
|
|
| 85,423 |
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.83 |
| $ | 0.57 |
| $ | 0.91 |
|
| $ | 0.83 |
|
Diluted |
| $ | 0.83 |
| $ | 0.57 |
| $ | 0.91 |
|
| $ | 0.83 |
|
Potential common shares consist of stock options, nonvested performance-based awards, and nonvested restricted share awards deferred under the Company’s nonqualified deferred compensation plan. These potential common shares do not enter into the calculation of diluted earnings per share if the impact would be anti-dilutive,antidilutive, i.e., increase earnings per share or reduce a loss per share. Weighted average antidilutive potential common shares totaled 1,281 for the three months ended March 31, 2019. There were no anti-dilutiveantidilutive potential common shares excluded from the calculation of diluted earnings per share for the three months ended March 31, 2018. Weighted average anti-dilutive potential common shares totaled 15,986 for the three months ended March 31, 2017.
12. Retirement Plans
The Company sponsors a qualified defined benefit pension plan, the Hancock Holding CompanyWhitney Corporation Pension Plan and Trust Agreement (“Pension Plan”), covering certain eligible associates. Eligibility is based on minimum age and service-related requirements. During the second quarter of 2017, the Pension Plan was amended to exclude any individualThose hired or rehired by the Company afterprior to June 30, 2017 from eligibilityare eligible to participate. The Pension Plan amendment further provided thatparticipate; however, the accrued benefits of each participant in the Pension Plan whose combined age plus years of service as of January 1, 2018 totalstotaled less than 55 were to be frozen as of January 1, 2018 and thereforewill not thereafter increase. The Company makes contributions to the Pension Plan in amounts sufficient to meet funding requirements set forth in federal employee benefit and tax laws, plus such additional amounts as the Company may determine to be appropriate. TheDuring the first quarter of 2019, the Company was not requiredmade a discretionary contribution of $100 million to makethe Pension Plan. During the third quarter of 2018, the Company made a discretionary contribution of $39 million to the Pension Plan indesignated to the 2017 and does not anticipate making a contribution in 2018.plan year.
25
The Company also offers a defined contribution retirement benefit plan, (401(k) plan), the Hancock Holding CompanyWhitney Corporation 401(k) Savings Plan and Trust Agreement (“401(k) Plan”), that covers substantially all associates who have been employed 60 days and meet a minimum age requirement and employment classification criteria. The Company matches 100% of the first 1% of compensation saved by a participant, and 50% of the next 5% of compensation saved. Newly eligible associates are automatically enrolled at an initial 3% savings rate unless the associate actively opts out of participation in the plan. The 401(k)Beginning January 1, 2018, the Company makes an additional basic contribution to associates hired or rehired after June 30, 2017 in an amount equal to 2% of the associate’s eligible compensation. For Pension Plan was also amended during the second quarter of 2017 for participants whose benefits arewere frozen underas of January 1, 2018, the Pension401(k) Plan to addprovides an enhanced Company contribution beginning January 1, 2018, in the amount of 2%, 4% or 6% of such participant’s eligible compensation, based on the participant’s age and years of service with the Company. The 401(k) Plan’s amendment further provides that the Company will contribute to the benefit of those associates of the Company hired or rehired after June 30, 2017 and those associates of the Company never enrolled in the Pension Plan an additional basic contribution in an amount equal to 2% of the associate’s eligible compensation beginning January 1, 2018. Participants will vest in the new basic and enhanced Company contributions upon completion of three years of service.
The Company sponsors a nonqualified defined benefit plan covering certain legacy Whitney employees that was frozen as of December 31, 2012 and no future benefits are accrued under this plan.
The Company sponsors defined benefit postretirement plans for both legacy Hancock and legacy Whitney employees that provide health care and life insurance benefits. Benefits under the Hancock plan are not available to employees hired on or after January 1, 2000. Benefits under the Whitney plan are restricted to retirees who were already receiving benefits at the time of plan amendments in 2007 or active participants who were eligible to receive benefits as of December 31, 2007.
26
The following tables show the components of net periodic benefits cost included in expense for the plans for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
| Other Post- |
|
|
|
|
|
|
|
|
| Other Post- |
| |||||||||
(in thousands) |
| Pension Benefits |
| Retirement Benefits |
| Pension Benefits |
|
| Retirement Benefits |
| ||||||||||||||||||
Three months Ended March 31, |
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||||||||||||||
For the Three Months Ended March 31, |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||||||||||
Service cost |
| $ | 2,925 |
| $ | 3,750 |
| $ | 35 |
| $ | 48 |
| $ | 2,775 |
|
| $ | 2,925 |
|
| $ | 29 |
|
| $ | 35 |
|
Interest cost |
|
| 3,923 |
|
| 4,123 |
|
| 137 |
|
| 180 |
|
| 4,863 |
|
|
| 3,923 |
|
|
| 128 |
|
|
| 137 |
|
Expected return on plan assets |
|
| (9,700) |
|
| (8,750) |
|
| — |
|
| — |
|
| (11,300 | ) |
|
| (9,700 | ) |
|
| — |
|
|
| — |
|
Amortization of net loss and prior service costs |
|
| 1,326 |
|
| 1,435 |
|
| (149) |
|
| (48) |
|
| 2,430 |
|
|
| 1,326 |
|
|
| (227 | ) |
|
| (149 | ) |
Net periodic benefit cost (reduction of cost) |
| $ | (1,526) |
| $ | 558 |
| $ | 23 |
| $ | 180 |
| $ | (1,232 | ) |
| $ | (1,526 | ) |
| $ | (70 | ) |
| $ | 23 |
|
Effective January 1, 2018, the Company adopted ASU 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs.” In accordance with the Update, only the service component of net periodic benefit cost is included in the Employee Benefits line item on the Company’s Consolidated Statements of Income. All other components have been included in Other Noninterest Expense. Prior period amounts have been reclassified to conform to current presentation.
13. Share-Based Payment Arrangements
HancockThe Company maintains incentive compensation plans that provide for awards of share-based compensation to employees and directors. These plans have been approved by the Company’s shareholders. Detailed descriptions of these plans were included in Note 17 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. 2018.
A summary of stock option activity for the three months ended March 31, 20182019 is presented below:
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
| Weighted |
|
|
| ||||||||||||||||
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
| |
|
|
|
| Weighted |
| Remaining |
|
|
|
|
|
|
|
| Weighted |
|
| Average |
|
|
|
|
| |||
|
|
|
| Average |
| Contractual |
| Aggregate |
|
|
|
|
| Average |
|
| Remaining |
|
| Aggregate |
| |||||
|
| Number of |
| Exercise |
| Term |
| Intrinsic |
| Number of |
|
| Exercise |
|
| Contractual |
|
| Intrinsic |
| ||||||
Options |
| Shares |
| Price |
| (Years) |
| Value ($000) |
| Shares |
|
| Price |
|
| Term (Years) |
|
| Value ($000) |
| ||||||
Outstanding at January 1, 2018 |
| 88,301 |
| $ | 34.84 |
| 2.8 |
| $ | 1,294 | ||||||||||||||||
Outstanding at January 1, 2019 |
|
| 46,865 |
|
| $ | 31.88 |
|
|
| 2.6 |
|
| $ | 164 |
| ||||||||||
Exercised/Released |
| (24,793) |
|
| 35.12 |
|
|
|
| 495 |
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
Cancelled/Forfeited |
| — |
|
| — |
|
|
|
| — |
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
Expired |
| — |
|
| — |
|
|
|
| — |
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
Outstanding at March 31, 2018 |
| 63,508 |
| $ | 34.73 |
| 2.6 |
| $ | 1,078 | ||||||||||||||||
Exercisable at March 31, 2018 |
| 63,508 |
| $ | 34.73 |
| 2.6 |
| $ | 1,078 | ||||||||||||||||
Outstanding at March 31, 2019 |
|
| 46,865 |
|
| $ | 31.88 |
|
|
| 2.3 |
|
| $ | 399 |
| ||||||||||
Exercisable at March 31, 2019 |
|
| 46,865 |
|
| $ | 31.88 |
|
|
| 2.3 |
|
| $ | 399 |
|
There were no exercises of stock options during the three months ended March 31, 2019. The total intrinsic value of options exercised forduring the three months ended March 31, 2018 and 2017 was $0.5 million and $3.3 million, respectively.million.
26
The Company’s restricted and performance-based share awards to certain employees and directors are subject to service requirements. A summary of the status of the Company’s nonvested restricted and performance-based share awards as ofat March 31, 20182019 and changes during the three months ended March 31, 2018, is2019, are presented in the following table.
|
|
|
|
|
|
|
|
|
|
| Weighted |
| |
|
|
|
|
|
|
|
|
|
|
| Average |
| |
|
|
|
|
| Weighted |
| Number of |
|
| Grant Date |
| ||
|
|
|
|
| Average |
| Shares |
|
| Fair Value |
| ||
|
| Number of |
|
| Grant Date | ||||||||
|
| Shares |
|
| Fair Value | ||||||||
Nonvested at January 1, 2018 |
| 1,708,942 |
| $ | 37.05 | ||||||||
Nonvested at January 1, 2019 |
|
| 1,494,041 |
|
| $ | 39.89 |
| |||||
Granted |
| 54,710 |
|
| 48.22 |
|
| 72,081 |
|
|
| 34.20 |
|
Vested |
| (9,587) |
|
| 35.90 |
|
| (8,028 | ) |
|
| 47.17 |
|
Forfeited |
| (30,376) |
|
| 35.25 |
|
| (20,499 | ) |
|
| 38.92 |
|
Nonvested at March 31, 2018 |
| 1,723,689 |
| $ | 37.44 | ||||||||
Nonvested at March 31, 2019 |
|
| 1,537,595 |
|
| $ | 39.60 |
|
As ofAt March 31, 2018,2019, there was $47.5$51.0 million of total unrecognized compensation expense related to nonvested restricted and performance shares expected to vest. This compensation is expected to be recognized in expense over a weighted average period of 3.3 years. The total fair value of shares which vested during the three months ended March 31, 2019 and 2018 was $0.1 million and 2017 was $0.3 million, and $0.5 million, respectively.
During the three months ended March 31, 2018,2019, the Company granted 26,14733,691 performance share awards subject to a total shareholder return (“TSR”) performance metric with a grant date fair value of $51.13$35.27 per share and 26,14733,691 performance shares subject to an operating earnings per share performance metric with a grant date fair value of $44.84$32.15 per share to key members of executive management. The number of performance shares subject to TSR that ultimately vest at the end of the three-year performance period, if any, will be based on the relative rank of the Company’s three-year TSR among the TSRs of a peer group of 4342 regional banks. The fair
27
value of the performance shares subject to TSR at the grant date was determined using a Monte Carlo simulation method. The number of performance shares subject to core earnings per share that ultimately vest will be based on the Company’s attainment of certain coreoperating earnings per share goals over the two-year performance period. The maximum number of performance shares that could vest is 200% of the target award. Compensation expense for these performance shares is recognized on a straight line basis over the three-year service period.
14. Commitments and Contingencies
In the normal course of business, the Bank enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of its customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, although they expose the Bank to varying degrees of credit risk and interest rate risk in much the same way as funded loans. Under regulatory capital guidelines, the Company and Bank must include unfunded commitments meeting certain criteria in risk-weighted capital calculations.
Commitments to extend credit include revolving commercial credit lines, nonrevolving loan commitments issued mainly to finance the acquisition and development or construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and has not violated other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent future cash requirements of the Company.
A substantial majority of the letters of credit are standby agreements that obligate the Bank to fulfill a customer’s financial commitments to a third party if the customer is unable to perform. The Bank issues standby letters of credit primarily to provide credit enhancement to its customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.
The contract amounts of these instruments reflect the Company’s exposure to credit risk. The Company undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support. The following table presents a summary of the Company’s off-balance sheet financial instruments as of March 31, 2019 and December 31, 2018:
|
| March 31, |
|
| December 31, |
| ||
(in thousands) |
| 2019 |
|
| 2018 |
| ||
Commitments to extend credit |
| $ | 7,198,032 |
|
| $ | 7,234,528 |
|
Letters of credit |
|
| 336,419 |
|
|
| 365,498 |
|
14.
Legal Proceedings
The Company is party to various legal proceedings arising in the ordinary course of business. Management does not believe that loss contingencies, if any, arising from pending litigation and regulatory matters will have a material adverse effect on the consolidated financial position or liquidity of the Company.
15. Fair Value Measurements
The Financial Accounting Standards Board (“FASB”) defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The FASB’s guidance also establishes a fair value hierarchy that prioritizes the inputs to these valuation techniques used to measure fair value, giving preference to quoted prices in active markets for identical assets or liabilities (“level 1”) and the lowest priority to unobservable inputs such as a reporting entity’s own data (“level 3”).Level 2inputs includequoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets that are not active, observable inputs other than quoted prices, such as interest rates and yield curves, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
28
Fair Value of Assets and Liabilities Measured on a Recurring Basis
The following tables present for each of the fair value hierarchy levels the Company’s assets and liabilities that are measured at fair value on a recurring basis in the consolidated balance sheets.sheets at March 31, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, 2018 | ||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and government agency securities |
| $ | — |
| $ | 93,884 |
| $ | — |
| $ | 93,884 |
Municipal obligations |
|
| — |
|
| 237,291 |
|
| — |
|
| 237,291 |
Corporate debt securities |
|
| — |
|
| 5,500 |
|
| — |
|
| 5,500 |
Residential mortgage-backed securities |
|
| — |
|
| 1,743,543 |
|
| — |
|
| 1,743,543 |
Commercial mortgage-backed securities |
|
| — |
|
| 680,272 |
|
| — |
|
| 680,272 |
Collateralized mortgage obligations |
|
| — |
|
| 155,158 |
|
| — |
|
| 155,158 |
Total available for sale securities |
|
| — |
|
| 2,915,648 |
|
| — |
|
| 2,915,648 |
Derivative assets (1) |
|
| — |
|
| 12,682 |
|
| — |
|
| 12,682 |
Total recurring fair value measurements - assets |
| $ | — |
| $ | 2,928,330 |
| $ | — |
| $ | 2,928,330 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (1) |
| $ | — |
| $ | 22,529 |
| $ | — |
| $ | 22,529 |
Total recurring fair value measurements - liabilities |
| $ | — |
| $ | 22,529 |
| $ | — |
| $ | 22,529 |
27
|
| March 31, 2019 |
| |||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and government agency securities |
| $ | — |
|
| $ | 72,143 |
|
| $ | — |
|
| $ | 72,143 |
|
Municipal obligations |
|
| — |
|
|
| 245,940 |
|
|
| — |
|
|
| 245,940 |
|
Corporate debt securities |
|
| — |
|
|
| 3,500 |
|
|
| — |
|
|
| 3,500 |
|
Residential mortgage-backed securities |
|
| — |
|
|
| 1,413,032 |
|
|
| — |
|
|
| 1,413,032 |
|
Commercial mortgage-backed securities |
|
| — |
|
|
| 787,834 |
|
|
| — |
|
|
| 787,834 |
|
Collateralized mortgage obligations |
|
| — |
|
|
| 158,631 |
|
|
| — |
|
|
| 158,631 |
|
Total available for sale securities |
|
| — |
|
|
| 2,681,080 |
|
|
| — |
|
|
| 2,681,080 |
|
Derivative assets (1) |
|
| — |
|
|
| 25,827 |
|
|
| — |
|
|
| 25,827 |
|
Total recurring fair value measurements - assets |
|
| — |
|
| $ | 2,706,907 |
|
|
| — |
|
| $ | 2,706,907 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (1) |
| $ | — |
|
| $ | 11,176 |
|
| $ | 6,953 |
|
| $ | 18,129 |
|
Total recurring fair value measurements - liabilities |
| $ | — |
|
| $ | 11,176 |
|
| $ | 6,953 |
|
| $ | 18,129 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| December 31, 2017 |
| December 31, 2018 |
| |||||||||||||||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Treasury and government agency securities |
| $ | — |
| $ | 97,272 |
| $ | — |
| $ | 97,272 |
| $ | — |
|
| $ | 71,706 |
|
| $ | — |
|
| $ | 71,706 |
|
Municipal obligations |
| — |
| 243,786 |
| — |
| 243,786 |
|
| — |
|
|
| 240,427 |
|
|
| — |
|
|
| 240,427 |
| ||||
Corporate debt securities |
|
| — |
| 3,500 |
| — |
| 3,500 |
|
| — |
|
|
| 3,500 |
|
|
| — |
|
|
| 3,500 |
| |||
Residential mortgage-backed securities |
|
| — |
| 1,715,213 |
| — |
| 1,715,213 |
|
| — |
|
|
| 1,443,402 |
|
|
| — |
|
|
| 1,443,402 |
| |||
Commercial mortgage-backed securities |
|
| — |
| 687,135 |
| — |
| 687,135 |
|
| — |
|
|
| 770,077 |
|
|
| — |
|
|
| 770,077 |
| |||
Collateralized mortgage obligations |
|
| — |
|
| 163,963 |
|
| — |
|
| 163,963 |
|
| — |
|
|
| 161,925 |
|
|
| — |
|
|
| 161,925 |
|
Total available for sale securities |
|
| — |
|
| 2,910,869 |
|
| — |
|
| 2,910,869 |
|
| — |
|
|
| 2,691,037 |
|
|
| — |
|
|
| 2,691,037 |
|
Derivative assets (1) |
|
| — |
|
| 14,157 |
|
| — |
|
| 14,157 |
|
| — |
|
|
| 16,980 |
|
|
| — |
|
|
| 16,980 |
|
Total recurring fair value measurements - assets |
| $ | — |
| $ | 2,925,026 |
| $ | — |
| $ | 2,925,026 |
|
| — |
|
| $ | 2,708,017 |
|
|
| — |
|
| $ | 2,708,017 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (1) |
| $ | — |
| $ | 14,389 |
| $ | — |
| $ | 14,389 |
| $ | — |
|
| $ | 14,923 |
|
| $ | 7,304 |
|
| $ | 22,227 |
|
Total recurring fair value measurements - liabilities |
| $ | — |
| $ | 14,389 |
| $ | — |
| $ | 14,389 |
| $ | — |
|
| $ | 14,923 |
|
| $ | 7,304 |
|
| $ | 22,227 |
|
(1) | For further disaggregation of derivative assets and liabilities, see Note |
Securities classified as level 2 include obligations of U.S. Government agencies and U.S. Government-sponsored agencies, residential and commercial mortgage-backed securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies, and state and municipal bonds. The level 2 fair value measurements for investment securities are obtained quarterly from a third-party pricing service that uses industry-standard pricing models. Substantially all of the model inputs are observable in the marketplace or can be supported by observable data.
The Company invests only in securities of investment grade quality with a targeted duration, for the overall portfolio, generally between two and five and a half years. Company policies generally limit investments to U.S. agency securities and municipal securities determined to be investment grade according to an internally generated score which generally includes a rating of not less than “Baa” or its equivalent by a nationally recognized statistical rating agency.
The fair value29
For the Company’s derivative financial instruments which are predominantlydesignated as hedges and those under the customer interest rate swaps,program, the fair value is obtained from a third-party pricing service that uses an industry-standard discounted cash flow model that relies on inputs, LIBOR swap curves, and Overnight Index swap rate curves, observable in the marketplace. To comply with the accounting guidance, credit valuation adjustments are incorporated in the fair values to appropriately reflect nonperformance risk for both the Company and the counterparties. Although the Company has determined that the majority of the inputs used to value thethese derivative instruments fall within level 2 of the fair value hierarchy, the credit value adjustments utilize level 3 inputs, such as estimates of current credit spreads. The Company has determined that the impact of the credit valuation adjustments is not significant to the overall valuation of these derivatives. As a result, the Company has classified its derivative valuations in their entiretyfor these instruments in level 2 of the fair value hierarchy. The Company’s policy is to measure counterparty credit risk quarterly for all derivative instruments including those subject to master netting arrangements consistent with how market participants would price the net risk exposure at the measurement date.
The Company also has certain derivative instruments associated with the Bank’s mortgage bankingmortgage-banking activities. These derivative instruments include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a best efforts delivery basis. The fair value of these derivative instruments is measured using observable market prices for similar instruments and is classified as a level 2 measurement.
The Company’s Level 3 liability consists of a derivative contract with the purchaser of 192,163 shares of Visa Class B common stock. Pursuant to the agreement, the Company retains the risks associated with the ultimate conversion of the Visa Class B common shares into shares of Visa Class A common stock, such that the counterparty will be compensated for any dilutive adjustments to the conversion ratio and the Company will be compensated for any anti-dilutive adjustments to the ratio. The agreement also requires periodic payments by the Company to the counterparty calculated by reference to the market price of Visa Class A common shares at the time of sale and a fixed rate of interest that steps up once after the eighth scheduled quarterly payment. The fair value of the liability is determined using a discounted cash flow methodology. The significant unobservable inputs used in the fair value measurement are the Company’s own assumptions about estimated changes in the conversion rate of the Visa Class B common shares into Visa Class A common shares, the date on which such conversion is expected to occur and the estimated growth rate of the Visa Class A common share price. Refer to Note 7 – Derivatives for information about the derivative contract with the counterparty.
The Company believes its valuation methods for its assets and liabilities carried at fair value are appropriate; however, the use of different methodologies or assumptions, particularly as applied to Level 3 assets and liabilities, could have a material effect on the computation of their estimated fair values.
Changes in Level 3 Fair Value Measurements and Quantitative Information about Level 3 Fair Value Measurements
The table below presents a rollforward of the amounts on the consolidated balance sheets for the three months ended March 31, 2019 and the year ended December 31, 2018 for financial instruments of a material nature that are classified within Level 3 of the fair value hierarchy and are measured at fair value on a recurring basis:
(in thousands) |
|
|
|
|
Liability balance at December 31, 2017 |
| $ | — |
|
Entry into derivative contract |
|
| 7,304 |
|
Liability balance at December 31, 2018 |
|
| 7,304 |
|
Cash settlement |
|
| (414 | ) |
Losses included in earnings |
|
| 63 |
|
Liability balance at March 31, 2019 |
| $ | 6,953 |
|
The table below provides an overview of the valuation techniques and significant unobservable inputs used in those techniques to measure the financial instrument measured on a recurring basis and classified within Level 3 of the valuation. The range of sensitivities that management utilized in its fair value calculations is deemed acceptable in the industry with respect to the identified financial instrument.
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value |
|
|
|
|
|
|
| |||||
Level 3 Class |
| March 31, 2019 |
|
| December 31, 2018 |
|
| Valuation Technique |
| Unobservable Input |
| Values Utilized | ||
|
|
|
|
|
|
|
|
|
|
|
| Visa Class A appreciation |
| 6% - 18% |
Derivative liability |
| $ | 6,953 |
|
| $ | 7,304 |
|
| Discounted cash flow |
| Conversion rate |
| 1.62x - 1.59x |
|
|
|
|
|
|
|
|
|
|
|
| Time until resolution |
| 24-48 months |
30
The Company’s policy is to recognize transfers between valuation hierarchy levels as of the end of a reporting period. There were no transfers between levels during the periods presented.
Fair Value of Assets Measured on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis. Collateral-dependent impaired loans are level 2 assets measured at the fair value of the underlying collateral based on independent third-party appraisals that take into consideration market-based information such as recent sales activity for similar assets in the property’s market.
Other real estate owned and foreclosed assets, including both foreclosed property and surplus banking property, are level 3 assets that are adjusted to fair value, less estimated selling costs, upon transfer to other real estate owned. Subsequently, other real estate owned is carried at the lower of carrying value or fair value less estimated selling costs. Fair values are determined by sales agreement or third-party appraisals as discounted for estimated selling costs, information from comparable sales, and marketability of the property.
The fair value information presented below is not as of the period-end,period end, rather it was as of the date the fair value adjustment was recorded during the twelve months for each of the dates presented below, and excludes nonrecurring fair value measurements of assets no longer on the balance sheet.
28
The following tables present the Company’s financial assets that are measured at fair value on a nonrecurring basis for each of the fair value hierarchy levels.
|
| March 31, 2019 |
| |||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Collateral-dependent impaired loans |
| $ | — |
|
| $ | 163,781 |
|
| $ | — |
|
| $ | 163,781 |
|
Other real estate owned and foreclosed assets, net |
|
| — |
|
|
| — |
|
|
| 7,688 |
|
|
| 7,688 |
|
Total nonrecurring fair value measurements |
| $ | — |
|
| $ | 163,781 |
|
| $ | 7,688 |
|
| $ | 171,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, 2018 | ||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Collateral-dependent impaired loans |
| $ | — |
| $ | 205,945 |
| $ | — |
| $ | 205,945 |
Other real estate owned |
|
| — |
|
| — |
|
| 5,493 |
|
| 5,493 |
Total nonrecurring fair value measurements |
| $ | — |
| $ | 205,945 |
| $ | 5,493 |
| $ | 211,438 |
|
|
|
|
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|
|
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| ||||||||||||||||
|
| December 31, 2017 |
| December 31, 2018 |
| |||||||||||||||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Collateral-dependent impaired loans |
| $ | — |
| $ | 184,205 |
| $ | — |
| $ | 184,205 |
| $ | — |
|
| $ | 170,918 |
|
| $ | — |
|
| $ | 170,918 |
|
Other real estate owned |
|
| — |
|
| — |
|
| 6,928 |
|
| 6,928 | ||||||||||||||||
Other real estate owned and foreclosed assets, net |
|
| — |
|
|
| — |
|
|
| 14,594 |
|
|
| 14,594 |
| ||||||||||||
Total nonrecurring fair value measurements |
| $ | — |
| $ | 184,205 |
| $ | 6,928 |
| $ | 191,133 |
| $ | — |
|
| $ | 170,918 |
|
| $ | 14,594 |
|
| $ | 185,512 |
|
Accounting guidance from the FASB requires the disclosure of estimated fair value information about certain on- and off-balance sheet financial instruments, including those financial instruments that are not measured and reported at fair value on a recurring basis. The significant methods and assumptions used by the Company to estimate the fair value of financial instruments are discussed below.
Cash, Short‑TermShort-Term Investments and Federal Funds Sold –For these short‑termshort-term instruments, the carrying amount is a reasonable estimate of fair value.
SecuritiesSecurities – The fair value measurement for securities available for sale was discussed earlier in the note. The same measurement techniques were applied to the valuation of securities held to maturity.
Loans, Net–The fair value measurement for certain impaired loans was discussed earlier in the note. For the remaining portfolio, fair values were generally determined by discounting scheduled cash flows using discount rates determined with reference to current market rates at which loans with similar terms would be made to borrowers of similar credit quality.
Loans Held for Sale – These loans are recorded at fair value and carried at the lower of cost or market. The carrying amount is considered a reasonable estimate of fair value.
DepositsDeposits – The accounting guidance requires that the fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing checking and savings accounts, be assigned fair values equal to amounts payable upon demand (“carrying amounts”). The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.
Securities Sold under Agreements to Repurchase, Federal Funds Purchased, and FHLB Borrowings – For these short-term liabilities, the carrying amount is a reasonable estimate of fair value.
31
Long-Term Debt – The fair value is estimated by discounting the future contractual cash flows using current market rates at which debt with similar terms could be obtained.
Derivative Financial Instruments – The fair value measurement for derivative financial instruments was discussed earlier in the note.
29
The following tables present the estimated fair values of the Company’s financial instruments by fair value hierarchy levels and the corresponding carrying amount at March 31, 2018 and December 31, 2017.
amounts:
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
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|
|
|
| ||||||||||||||||||||
|
| March 31, 2018 |
| March 31, 2019 |
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Total Fair |
| Carrying |
|
|
|
|
|
|
|
|
|
|
|
|
| Total Fair |
|
| Carrying |
| ||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Value |
| Amount |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
|
| Amount |
| ||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, interest-bearing bank deposits, and federal funds sold |
| $ | 315,401 |
| $ | — |
| $ | — |
| $ | 315,401 |
| $ | 315,401 |
| $ | 523,956 |
|
| $ | — |
|
| $ | — |
|
| $ | 523,956 |
|
| $ | 523,956 |
|
Available for sale securities |
|
| — |
|
| 2,915,648 |
|
| — |
|
| 2,915,648 |
|
| 2,915,648 |
|
| — |
|
|
| 2,681,080 |
|
|
| — |
|
|
| 2,681,080 |
|
|
| 2,681,080 |
|
Held to maturity securities |
|
| — |
|
| 2,952,295 |
|
| — |
|
| 2,952,295 |
|
| 3,014,428 |
|
| — |
|
|
| 2,892,910 |
|
|
| — |
|
|
| 2,892,910 |
|
|
| 2,896,442 |
|
Loans, net |
|
| — |
|
| 205,945 |
|
| 18,337,770 |
|
| 18,543,715 |
|
| 18,881,791 |
|
| — |
|
|
| 163,781 |
|
|
| 19,646,070 |
|
|
| 19,809,851 |
|
|
| 19,918,150 |
|
Loans held for sale |
|
| — |
|
| 21,827 |
|
| — |
|
| 21,827 |
|
| 21,827 |
|
| — |
|
|
| 27,437 |
|
|
| — |
|
|
| 27,437 |
|
|
| 27,437 |
|
Derivative financial instruments |
|
| — |
|
| 12,682 |
|
| — |
|
| 12,682 |
|
| 12,682 |
|
| — |
|
|
| 25,827 |
|
|
| — |
|
|
| 25,827 |
|
|
| 25,827 |
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| $ | — |
| $ | — |
| $ | 22,438,772 |
| $ | 22,438,772 |
| $ | 22,485,722 |
| $ | — |
|
| $ | — |
|
| $ | 23,351,829 |
|
| $ | 23,351,829 |
|
| $ | 23,380,294 |
|
Federal funds purchased |
|
| 25,967 |
|
| — |
|
| — |
|
| 25,967 |
|
| 25,967 |
|
| 450 |
|
|
| — |
|
|
| — |
|
|
| 450 |
|
|
| 450 |
|
Securities sold under agreements to repurchase |
|
| 443,151 |
|
| — |
|
| — |
|
| 443,151 |
|
| 443,151 |
|
| 478,285 |
|
|
| — |
|
|
| — |
|
|
| 478,285 |
|
|
| 478,285 |
|
FHLB short-term borrowings |
|
| 982,979 |
|
| — |
|
| — |
|
| 982,979 |
|
| 982,979 |
|
| 910,000 |
|
|
| — |
|
|
| — |
|
|
| 910,000 |
|
|
| 910,000 |
|
Long-term debt |
|
| — |
|
| 297,555 |
|
| — |
|
| 297,555 |
|
| 300,443 |
|
| — |
|
|
| 227,206 |
|
|
| — |
|
|
| 227,206 |
|
|
| 224,962 |
|
Derivative financial instruments |
|
| — |
|
| 22,529 |
|
| — |
|
| 22,529 |
|
| 22,529 |
|
| — |
|
|
| 11,176 |
|
|
| 6,953 |
|
|
| 18,129 |
|
|
| 18,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| December 31, 2017 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Total Fair |
| Carrying |
| December 31, 2018 |
| |||||||||||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Value |
| Amount |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total Fair Value |
|
| Carrying Amount |
| ||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, interest-bearing bank deposits, and federal funds sold |
| $ | 479,332 |
| $ | — |
| $ | — |
| $ | 479,332 |
| $ | 479,332 |
| $ | 494,466 |
|
| $ | — |
|
| $ | — |
|
| $ | 494,466 |
|
| $ | 494,466 |
|
Available for sale securities |
|
| — |
|
| 2,910,869 |
|
| — |
|
| 2,910,869 |
|
| 2,910,869 |
|
| — |
|
|
| 2,691,037 |
|
|
| — |
|
|
| 2,691,037 |
|
|
| 2,691,037 |
|
Held to maturity securities |
|
| — |
|
| 2,962,010 |
|
| — |
|
| 2,962,010 |
|
| 2,977,511 |
|
| — |
|
|
| 2,935,856 |
|
|
| — |
|
|
| 2,935,856 |
|
|
| 2,979,547 |
|
Loans, net |
|
| — |
|
| 184,205 |
|
| 18,403,303 |
|
| 18,587,508 |
|
| 18,786,855 |
|
| — |
|
|
| 170,918 |
|
|
| 19,555,969 |
|
|
| 19,726,887 |
|
|
| 19,831,897 |
|
Loans held for sale |
|
| — |
|
| 39,865 |
|
| — |
|
| 39,865 |
|
| 39,865 |
|
| — |
|
|
| 28,150 |
|
|
| — |
|
|
| 28,150 |
|
|
| 28,150 |
|
Derivative financial instruments |
|
| — |
|
| 14,157 |
|
| — |
|
| 14,157 |
|
| 14,157 |
|
| — |
|
|
| 16,980 |
|
|
| — |
|
|
| 16,980 |
|
|
| 16,980 |
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| $ | — |
| $ | — |
| $ | 22,238,847 |
| $ | 22,238,847 |
| $ | 22,253,202 |
| $ | — |
|
| $ | — |
|
| $ | 23,129,574 |
|
| $ | 23,129,574 |
|
| $ | 23,150,185 |
|
Federal funds purchased |
|
| 140,754 |
|
| — |
|
| — |
|
| 140,754 |
|
| 140,754 |
|
| 425 |
|
|
| — |
|
|
| — |
|
|
| 425 |
|
|
| 425 |
|
Securities sold under agreements to repurchase |
|
| 430,569 |
|
| — |
|
| — |
|
| 430,569 |
|
| 430,569 |
|
| 428,599 |
|
|
| — |
|
|
| — |
|
|
| 428,599 |
|
|
| 428,599 |
|
FHLB short-term borrowings |
|
| 1,132,567 |
|
| — |
|
| — |
|
| 1,132,567 |
|
| 1,132,567 |
|
| 1,160,104 |
|
|
| — |
|
|
| — |
|
|
| 1,160,104 |
|
|
| 1,160,104 |
|
Long-term debt |
|
| — |
|
| 303,631 |
|
| — |
|
| 303,631 |
|
| 305,513 |
|
| — |
|
|
| 223,135 |
|
|
| — |
|
|
| 223,135 |
|
|
| 224,993 |
|
Derivative financial instruments |
|
| — |
|
| 14,389 |
|
| — |
|
| 14,389 |
|
| 14,389 |
|
| — |
|
|
| 14,923 |
|
|
| 7,304 |
|
|
| 22,227 |
|
|
| 22,227 |
|
15.16. Recent Accounting Pronouncements
Accounting Standards Adopted in 20182019
In August 2017,February 2016, the FASB issued ASU 2017-12, “Derivatives2016-02, “Leases (Topic 842),” to increase transparency and Hedging (Topic 815): Targeted Improvementscomparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. With the exception of short-term leases, lessees are required to Accountingrecognize a lease liability representing the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset representing the lessee’s right to use, or control the use of, a specified asset for Hedging Activities,” with the objectivelease term upon adoption. Lessor accounting was largely unchanged under the new guidance, except for clarification of improving financial reportingthe definition of hedging relationshipsinitial direct costs which provided additional guidance on the timing of recognition of those costs. Subsequent to better portray the economic resultsissuance of an entity’s risk management activities in its financial statements. The update provides changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments in this update, are effective for fiscal years beginning after December 15, 2018,the FASB issued three additional ASUs that provide codification improvements and interim periods within those fiscal years. Early application is permittedcertain transition elections, including ASU 2018-11, which permits an additional transition method whereby an entity may elect to record a cumulative-effect adjustment to the opening balance of retained earnings in any interimthe period after issuance of the update. All transition requirements and elections are to be applied to hedging relationships existing on the date of adoption, and the effect of the adoption should be reflected as of the beginning of the fiscal year of adoption. The Company early adopted this standard effective January 1, 2018 and has made certain adjustments to its existing designation documentation for active hedging relationships in order to take advantage of specific provisions in the new guidance and to fully align its documentation with the ASU. The adoption of this standard did not have a material impact on its financial condition or results of operations. See further discussion in Note 6 – Derivatives.
30
In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs,” to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost arewas required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The amendments also allow only the service cost component to be eligible for capitalization when applicable. These amendments are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Disclosures of the nature of and reason for the change in accounting principle are required in the first interim and annual periods of adoption. The Company adopteddid adopt the standard effective January 1, 2018 and the amendments were applied retrospectively for the presentation of the service cost component and the other components of net periodic pension and postretirement benefit costs in the statement of income. Refer to Note 12 – Retirement Plans – for detail on the components of net periodic pension and post-retirement benefit costs that were reclassified for each reporting period. The provisions of this update apply only to presentation and therefore did not have a material impact on the Company’s financial condition or results of operations.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” affecting any entity that enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principle of this standard is 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. Most revenue associated with financial instruments, including interest and loan origination fees, is outside the scope of the guidance. Gains and losses on investment securities, derivatives, and sales of financial instruments are also excluded from the scope. Subsequent to issuance of the revenue recognition guidance, the FASB has issued several updates that deferred by one year the effective date for revenue recognition guidance; clarified its guidance for performing the principal-versus-agent analysis; clarified guidance for identifying performance obligations allowing entities to ignore immaterial promised goods and services in the context of a contract with a customer and other clarifying guidance and technical corrections. Entities could elect to adopt the guidance either on a full or modified retrospective basis. The standard was effective and the Company adopted this guidance on January 1, 2018,2019, using the modified retrospective approach. The Company inventoried and evaluated its contracts with customers for compliance with the standard. The Company did not identify material changes to the timing of revenue recognition and the adoption of this guidance did not have a material impact on its financial condition or results of operations. See Note 8 - Revenue Recognition for additional information regarding the implementation of this standard. transition method permitted by
32
Additionally, the following ASUs were applicable to the Company January 1, 2018, but did not have a significant impact on the Company’s consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
ASU 2018-11. Thus, the Company’s reporting for the comparative period presented in the financial statements and disclosures continues to be in accordance with GAAP Topic 840. Upon adoption, the Company recorded a gross-up of assets and liabilities in its Consolidated Balance Sheet, with approximately $116 million for right of use assets and $131 million of lease payment obligations offset by the elimination of $15 million of existing lease incentive and other deferred rent liabilities. Accounting for leases in accordance with Topic 842 has not had a material impact upon the consolidated results of operations, and is not expected to in future periods. Refer to Note 5 – Operating Leases for further information related to operating lease accounting policy, practical expedient elections for adoption and operating leasing information at adoption and as of March 31, 2019.
Issued but Not Yet Adopted Accounting Standards
In August 2018, the FASB issued ASU 2018-14, “Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans.” The amendments in this Update modify certain disclosure requirements by removing disclosures that are no longer considered cost beneficial, clarifying specific requirements of disclosures, and adding disclosure requirements identified as relevant. The amendments in this Update are effective for fiscal years ending after December 15, 2020 for public business entities, and early adoption is permitted. The Company is currently assessing the impact of adoption of this guidance upon its pension and postretirement plan disclosures. Adoption of this guidance will have no impact upon the Company’s results of operations or financial condition.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments in this Update modify certain disclosure requirements on fair value measurements set forth in Topic 820, Fair Value Measurements. In addition, the amendments in this Update eliminate the phrase “an entity shall disclose at a minimum” to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures to clarify that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2019, and early adoption is permitted. The Company is currently assessing the impact of adoption of this guidance upon its fair value measurements disclosures. Adoption of this guidance will have no impact upon the Company’s results of operations or financial condition.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – CreditsCredit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU, more commonly referred to as Current Expected Credit Losses, or CECL, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques currently applied will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. In addition, the ASU amends the accounting for credit losses on debt securities and purchased financial assets with credit deterioration. The ASU is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. Early application is permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is not planning to early adopt this guidance. The Company has begun the implementation process by engaging aengaged third party consultantconsultants and forming aformed cross-functional working groupgroups comprised of individuals from various areas including credit, finance, treasury, risk management and information technology. Threetechnology for implementation. Five work streams have been created to complete balance sheet scoping, execute system implementation, and develop the expected credit loss models.models; execute system implementation; complete balance sheet scoping; ensure the design of effective internal controls surrounding new processes; and provide executive oversight of the project. The Company has completed the configuration of a vendor provided software solution for which testing and implementation is expected to be complete in second quarter of 2019. Validation of models began in the first quarter of 2019 and is expected to be completed during the second quarter of 2019. While the Company has not yet quantified the financial impact of adoption, the expectation is that application of this guidance will result in an increase in the allowance for loan losses given the change in methodology from covering losses inherent in the portfolio to covering losses over the remaining expected life of the portfolio, and the reclassification of nonaccretable difference on purchased credit impaired loans to allowance (offset by an increase in the carrying value of the related loans).portfolio. Application of the guidance is also expected to result in the establishment of an allowance for credit loss on held to maturity debt securities. The amount of the increase in these allowances will be impacted by the portfolio composition and quality at the adoption date as well as economic conditions and forecasts at that time.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” that provides new lease accounting guidance. With the exception of short-term leases, lessees will be required to recognize a lease liability representing the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset representing the lessee’s right to use, or control the use of, a specified asset for the lease term. Consequently, lessees will no longer be able to utilize leases a source of off-balance sheet financing. Lessor accounting is largely unchanged under the new guidance, except for clarification of the definition of initial direct costs which may impact the timing of recognition of those costs. Public business entities are required to apply the amendments for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. In the first quarter of 2018, the FASB issued a targeted improvement standard that allows an additional transition method to the new lease standard by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which the entity adopts the new lease requirements would continue to be in accordance with current GAAP (Topic 840), including disclosures. The Company plans to elect this transition method. The Company has begun its review of existing lease and service contracts that may include embedded leases. The Company also begun the process of upgrading its existing third-party leasing software that will be used for implementation, with a targeted completion date in the fourth quarter of 2018. The Company expects a gross-up of its Consolidated Balance Sheets as a result of recognizing lease liabilities and right of use assets; the extent of such is under evaluation. The Company does not expect material changes to its consolidated results of operations as a result of the application of this guidance.
33
32
Ite
On April 30, 2019, the Company announced its entry to an Agreement and Plan of Merger providing for, among other things, the acquisition of MidSouth Bancorp, Inc. (“MidSouth”) (NYSE: MSL), parent company of MidSouth Bank, N.A. At March 31, 2019, MidSouth had approximately $1.7 billion in assets, including $0.9 billion of loans, and $1.4 billion of deposits. Under the terms of the agreement, each share of MidSouth common stock outstanding will convert, pursuant to a fixed conversion ratio, into the right to receive 0.2952 shares of the Company’s common stock. In addition, the merger agreement allows for the redemption of all of MidSouth’s outstanding preferred stock at closing, subject to receipt of applicable governmental approvals. The value of the stock-based consideration will be determined at the time of closing based on the fixed conversion ratio. The approximate transaction value based on an average of the Company’s share price at the date of the agreement, April 30, 2019, was $213 million. The acquisition is subject to the satisfaction of customary closing conditions, including the receipt of regulatory approvals and approval by the shareholders of MidSouth. The transaction is expected to close late in the third quarter of 2019.
34
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning and protections of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. ImportantImportant factors that could cause actual results to differ materially from the forward-looking statements we make in this annual report are set forth in this Quarterly Report on Form 10-Q and in other reports or documents that we file from time to time with the SEC and include, but are not limited to, the following:
|
|
balance sheet and revenue growth expectations may differ from actual results;
|
|
the risk that our provision for loan losses may be inadequate or may be negatively affected by credit risk exposure;
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loan growth expectations;
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management’s predictions about charge-offs, including energy-related credits, the impact of changes in oil and gas prices on our energy portfolio, and the downstream impact on businesses that support that sector, especially in the Gulf Coast Region;
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the risk that our enterprise risk management framework may not identify or address risks adequately, which may result in unexpected losses;
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the impact of the trust and asset management transaction, the proposed MidSouth acquisition, or future business combinations on our performance and financial condition including our ability to successfully integrate the businesses;
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deposit trends;
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credit quality trends;
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changes in interest rates;
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net interest margin trends;
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future expense levels;
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success of revenue-generating initiatives;
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the effectiveness of derivative financial instruments and hedging activities to manage risks;
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risks related to our reliance on third parties to provide key components of our business infrastructure, including the risks related to disruptions in services or financial difficulties of a third-party vendor;
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risks related to the ability of our operational framework to manage risks associated with our business such as credit risk and operation risk, including third-party vendors and other service providers, which could among other things, result in a breach of operating or security systems as a result of a cyber-attack or similar act;
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projected tax rates;
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future profitability;
purchase accounting impacts, such as accretion levels; |
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our ability to identify and address potential cybersecurity risks, including data security breaches, credential stuffing, malware, “denial-of-service” attacks, “hacking” and identify theft, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation;
our ability to receive dividends from Hancock Whitney Bank could affect our liquidity, including our ability to pay dividends or take other capital actions;
the impact on our financial results, reputation, and business if we are unable to comply with all applicable federal and state regulations or other supervisory actions or directives and any necessary capital initiatives;
our ability to effectively compete with other traditional and non-traditional financial services companies, some of whom possess greater financial resources than we do or are subject to different regulatory standards than we are;
our ability to maintain adequate internal controls over financial reporting;
potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions;
the financial impact of future tax legislation; and
changes in laws and regulations affecting our businesses, including legislation and regulations relating to bank products and services, as well as changes in the enforcement and interpretation of such laws and regulations by applicable governmental and self-regulatory agencies, which could require us to change certain business practices, increase compliance risk, reduce our revenue, impose additional costs on us, or otherwise negatively affect our businesses.
Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “forecast,” “goals,” “targets,” “initiatives,” “focus,” “potentially,” “probably,” “projects,” “outlook”“outlook,” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” and “could.” Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events.
35
Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward looking statements. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20172018 and in other periodic reports that we file with the SEC.
You are cautioned not to place undue reliance on these forward-looking statements. We do not intend, and undertake no obligation, to update or revise any forward-looking statements, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements, except as required by law.
OVERVIEW
Non-GAAP Financial Measures
Management’s Discussion and Analysis of Financial Condition and Results of Operations include non-GAAP measures used to describe our performance. These non-GAAP financial measures have inherent limitations as analytical tools and should not be considered on a standalone basis or as a substitute for analyses of financial condition and results as reported under GAAP. Non-GAAP financial measures are not standardized and therefore, it may not be possible to compare these measures with other companies that present measures having the same or similar names. These disclosures should not be considered an alternative to GAAP.
A reconciliation of those measures to GAAP measures are provided within the selected financial dataSelected Financial Data section ofthat appears later in this Item.item. The following is a summary of these non-GAAP measures and an explanation as to why they are deemed useful.
Consistent with Securities and Exchange Commission Industry Guide 3, we present net interest income, net interest margin and efficiency ratios on a fully taxable equivalent (“te”) basis. The te basis adjusts for the tax-favored status of net interest income from certain loans and investments using a statutory federal tax ratesrate of 21% and 35% for 2018 and 2017, respectively, to increase tax-exempt interest income to a taxable equivalent basis. We believe this measure to be the preferred industry measurement of net interest income, and that it enhances comparability of net interest income arising from taxable and tax-exempt sources.
33
We present certain additional non-GAAP financial measures to assist the reader with a better understanding of the company’sCompany’s performance period over period, as well as to provide investors with assistance in understanding the success management has experienced in executing its strategic initiatives. These non-GAAP measures may reference the concepts “core” orconcept “operating.” We use the term “core” to describe a financial measure that excludes income or expense arising from accretion or amortization of fair value adjustments recorded as part of purchase accounting. We use the term “operating” to describe a financial measure that excludes income or expense considered to be nonoperating in nature. Items identified as nonoperating are those that, when excluded from a reported financial measure, provide management or the reader with a measure that may be more indicative of forward-looking trends in our business.
We define Core Net Interest Income as net interest income (te) excluding net purchase accounting accretion and amortization. We define Core Net Interest Margin as core net interest income expressed as a percentage of average earning assets. Management believes that core net interest income and core net interest margin provide investors with meaningful financial measures of the Company’s performance over time.
We define Operating Revenue as net interest income (te) and noninterest income less nonoperating revenue. We define Operating Pre-Provision Net Revenue as operating revenue (te) less noninterest expense, excluding nonoperating items. Management believes that operating pre-provision net revenue is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
We define Operating Earnings as reported net income excluding nonoperating items net of income tax. We define Operating Earnings per Share as operating earnings expressed as an amount available to each common shareholder on a diluted basis.
Acquisitions and Divestiture
On March 10, 2017, we, through our wholly-owned subsidiary, Whitney Bank (“Whitney”), completed a transaction with First NBC Bank (“FNBC”), whereby Whitney acquired approximately $1.2 billion in loans (net of fair value discount or “loan mark”), nine branch locations with $398 million in deposits, and assumed $604 million in FHLB borrowings. The operational conversion of the branch locations occurred in the second quarter of 2017, along with the simultaneous closure of 10 overlapping branches. This transaction is referred to as the FNBC I transaction throughout this document.
Pending Acquisition
On April 28, 2017, Whitney entered into a purchase and assumption agreement with the FDIC (“Agreement”), which acted as the receiver for the Louisiana Office of Financial Institutions (OFI) following the OFI’s closure of FNBC. This transaction is referred to as the FNBC II transaction throughout this document. Pursuant to the Agreement, Whitney acquired selected assets and liabilities of FNBC from the FDIC and continued to operate the 29 former FNBC branch locations until systems conversion, which occurred in July 2017. In the third quarter of 2017, Whitney exercised its option to acquire seven former FNBC locations and closed and consolidated 25 overlapping branch locations.
Under the Agreement, Whitney assumed approximately $1.6 billion in deposits and customer repurchase agreements and acquired $165 million in performing loans, and $791 million in other assets. Whitney paid a premium of $35 million to the FDIC for the earnings stream acquired and received approximately $800 million in cash ($642 million from the FDIC for the net liabilities assumed and $158 million in branch cash acquired).
The terms of the Agreement require the FDIC to indemnify Whitney against certain liabilities of FNBC and its affiliates not assumed or otherwise purchased by Whitney. Neither the Company nor Whitney Bank acquired any assets, common stock, preferred stock or debt, or assumed any other obligations, of First NBC Bank Holding Company.
In December 2017,30, 2019, we announced our entry into an agreement to acquire MidSouth Bancorp, Inc. (“MidSouth”) (NYSE: MSL) in a stock-for-stock transaction. MidSouth Bank N.A., the bank-managed high net worth individualwholly-owned banking subsidiary of MidSouth, operates 42 locations in Louisiana and institutional investment managementTexas and trust business from Capital One.had approximately $1.7 billion of assets, including $0.9 billion of loans, and $1.4 billion of deposits at March 31, 2019. At the closing, each share of MidSouth’s common stock will convert to the right to receive 0.2952 shares of our common stock. The merger agreement also allows for the redemption of MidSouth’s outstanding preferred stock at closing, subject to the receipt of applicable governmental approvals. The Company expects acquisition-related expenses to approximate $38 million in 2019 and expects the transaction to be accretive to income beginning in the first quarter of 2020. The transaction is expected to add approximately $0.13 to $0.15 to earnings once fully phased-in. The transaction provides the opportunity for both enhanced growth in several of our current markets, such as MidSouth’s home market of Lafayette, Louisiana, as well as opportunities for expansion into new markets in Louisiana and Texas. The acquisition is subject to the satisfaction of customary closing conditions, including the receipt of regulatory approvals and approval by the shareholders of MidSouth. The transaction is expected to close with a simultaneous systems conversion late in earlythe third quarter of 2018, subject to regulatory approvals and other customary conditions. The combination is expected to bring assets under administration and assets under management to approximately $26 billion and $10 billion, respectively, and produce combined annual revenue2019.
36
On March 9, 2018, we sold our consumer finance subsidiary, Harrison Finance Company (“HFC”), due to a change in corporate strategy. The subsidiary operated in 35 branches with 137 employees and had $95 million in loans as of December 31, 2017. The transaction resulted in a loss on sale totaling $1.1 million.
Most of our market area experienced a modest to moderate expansion in economic activity during the first quarter of 2018,2019, according to the Federal Reserve’s Summary of Commentary on Current Economic Conditions (“Beige Book”). Overall, the economic outlook remains positive,positive. Activity in the energy sector expanded and outlooks improved compared to the prior quarter. Oil and gas production rose at a slow pace; however, there is some uncertainty on the impact of thespending for drilling activity declined as firms invested less into new tariffs on trade. Energy related businesses operating mainly in our south Louisiana and Houston, Texas marketsequipment.
Commercial real estate conditions continued to expand. U.S. land based drilling and completion activity was up, and outlook remains positive for 2018. However, competitive markets for labor and equipment may constrain further acceleration of activity.
34
The commercial real estate market continued to improveadvance in most of our footprint, with growing demand for multifamily construction.markets. In theour Houston market, apartment rent growth accelerated. Commercial construction activity wasrents were flat to slightly up, with a continued improvement in general economic conditions. Continued improvement is expected in the commercial real estate market in 2018. and industrial leasing slowed.
The residential real estate market has a variedpositive outlook with new home construction improving, and overall home salesour markets reporting that lower mortgage rates are helping to boost growth from the prior report, but flat to slightly down, but rising moderately in our Houston market. Residential real estate contacts signaled continued improvement in general economic conditions. Builders report flat to slightly higher construction activitythe prior year and an increase in home prices. Construction activity is expected to be flat or increase slightly overoptimistic as the next three months.spring selling season gets underway.
Retail sales activity and consumer spending outlook was positive.grew slightly in most of our markets. The Houston market reported flat sales and slower demand. Auto sales gained tractionwere down in all of our Houston market but demand for vehicles weakened in our other markets. The labor market remained tight and overall wagein our markets with an increase in wages for hard-to-fill or in-demand positions.
Economic data indicates that loan growth was modest. Employment growth was steady,stable in most of our markets, with challenges continuingan increase in filling high demand and high growth sectors, particularlyloan volumes in the information technology, long-haul transportation,our Houston market, primarily with construction and medical fields.
Overall economic reports indicate that loan demand was strong, with growth in commercial real estate loans, butlending. Reports also indicated that financial institutions were able to fund the majority of lending with demandtheir deposit base, although competition for residential real estate loans and consumer loans flatdeposits continues to down.increase. Our newtotal loan production inbalance increased $86.4 million, or 2% annualized, during the first quarter 2018 was strong, however, payoffs were elevated, resulting in lower than expected loan growth.of 2019.
Highlights of First Quarter 2018 Financial Results2019
Net income for the first quarter of 20182019 was $72.5$79.2 million, or $.83$.91 per diluted common share (EPS), compared to $55.4$96.2 million, or $.64$1.10 EPS in the fourth quarter of 20172018 and $49.0$72.5 million, or $.57$.83 EPS, in the first quarter of 2017.2018. The first quarter of 2019 included a $10.1 million ($.09 per share after-tax impact) provision for loan losses related to the previously disclosed potential fraud associated with DC Solar (further discussion of this matter appears in the Provision for Loan Losses section later in this Item). The fourth quarter of 2018 includesincluded $1.9 million ($.02 per share impact) of nonoperating items and the first quarter of 2018 included $7.0 million ($.07 per share after-tax impact) of nonoperating items.
Highlights of our first quarter 2019 results (compared to fourth quarter 2018):
Net income was $79.2 million, or $.91 per diluted share, a decrease of $17.1 million, or $.19 per share. Excluding nonoperating items, net income was $87.1 million, a decrease of $10.6 million, or $.12 per share.
The first quarter results were impacted by a charge-off to the provision taken related to potential fraud on an equipment finance lease with DC Solar ($.09). Fourth quarter 2018 results were impacted by benefits realized on tax reform-related initiatives ($.11).
Net interest margin expanded 7 bps to 3.46%.
Criticized commercial loans declined $41 million, or 7% ($15 million energy and $26 million nonenergy).
Improved mix within the saleenergy portfolio of the consumer finance subsidiary, the pending Capital One trust55% in exploration & production, transportation and asset management transaction, the brand consolidation projectstorage, and a one-time all hands bonus. The fourth quarter of 2017 included an estimated $19.5 million charge ($.22 per share) for the re-measurement of net deferred tax assets related to the Tax Act. 45% in onshore and offshore support services.
The first quarter of 2017 included $6.5 million2019 reflects improvements in the net interest margin and asset quality, two key areas of nonoperating costs related tofocus. During the FNBC I transaction ($0.05 per share after-tax impact), partially offset by a $4.4 million nonoperating gain from the sale of selected Hancock Horizon funds ($0.03 per share after-tax impact).
Highlights of Our First Quarter 2018 Results (Compared to Fourth Quarter 2017):
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Results for first quarter of 2018, were solid, reflecting positive impacts fromwe restructured a lower provision for loan loss, lower operating expenses, and a lower income tax rate, partially offset by negative impacts of tax reform on our TE income, the loss on saleportion of our consumer finance business, typical first quarter seasonalityinvestment and loan portfolios whereby we sold certain lower yielding securities and loans and reinvested in higher yielding assets. The portfolio restructuring and other improvements in our earning asset mix, along with the impact of today’sDecember 2018 interest rate environment on our capital ratios.
We intendincrease, contributed to consolidate the Hancockexpansion in the net interest margin. Asset quality improved with criticized commercial loans down in both the energy and Whitney brands during the second quarter of 2018, pending shareholder approval, after which time the Company and Bank expect to operate as Hancock Whitney Corporation and Hancock Whitney Bank, respectively. The brand consolidation is a natural progression of our business that allows the simplification of certain operations, while honoring the legacies of the iconic brands of Hancock and Whitney that have existed since the late 1800s. nonenergy portfolios.
35
RESULTS OF OPERATIONS
Net Interest Income
Net interest income (te) for the first quarter of 20182019 was $209.6$223.1 million, a $7.4$1.6 million, or 3%1%, decreaseincrease from the fourth quarter of 2017. Over the same period, core net interest income decreased $6.2 million.2018. Net interest income (te) for the first quarter of 20182019 increased $19.6$13.5 million, or 10%6%, compared to the first quarter of 2017, while core net interest income was up $17.4 million, or 9%.2018. The linked quarter decreaseincrease is primarily attributable to a $4.2 millionfull quarter impact of tax reform on the TE adjustment resulting fromfourth quarter portfolio restructure and the change in the statutory taxDecember 2018 rate approximately $3.3 million fromincrease, partially offset by two fewer accrual days, and $1.7 million reversaldays.
37
Table of interest on nonaccrual loans. Contents
The net interest margin (te) was 3.37%3.46 % for the first quarter of 2018, down 112019, up 7 bps from the fourth quarter of 2017. The core net2018. Net interest margin for(te) was favorably impacted by the late 2018 portfolio restructuring. The restructuring and other improvements in the earning asset mix and the recent interest rate increase resulted in a 14 bp improvement in the earning asset yield, including increases in the loan yield of 13 bps, bond portfolio yield of 7 bps, and short term investments yield of 17 bps. Partially offsetting the linked quarter improvement in the earning asset yield was the movement of our deposit and loan betas at differing intervals. The deposit and loan betas are defined as the amount by which deposit and loan costs change in response to the movement in short-term interest rates. Our deposit beta moved from 31% to 50% in the first quarter of 2019, while our loan beta moved from 40% to 54% over the same period. The movement in the deposit beta was influenced by a 20 bp increase in the cost of brokered CDs, and a 20 bp increase in the rate paid on public fund deposits.
Compared to the first quarter of 2018, was 3.26%, down 9 bps from the fourth quarter of 2017. The net interest margin was down 8 bps related to the impact of the lower tax rate on the TE adjustment, 3 bps related to reversals of interest on nonaccrual loans and 2 bps related to the sale of the consumer finance company. Excluding those items, the net interest margin would have been up 2increased 9 bps, primarily due to an improvement in the earning asset mix and the core net benefit from interest margin was up 4 bps. The loan yield of 4.43% is down 3 bps compared to fourth quarter of 2017, which reflects negative impacts from the lower tax rate of 6 bps and sale of the consumer finance subsidiary of 3 bps. The securities yield of 2.46% was down 4 bps compared to fourth quarter of 2017, which reflects a negative impact of 10 bps from tax reform. The cost of funds was up 8 bps to .58%, due in part to promotional pricing campaigns aimed at attracting and retaining deposits.
The net interest margin was flat to the first quarter of 2017 at 3.37%, and the core net interest margin was down 3 bps, with comparability also affected by the 8 bps impact of tax reform, the FNBC transactions and rising interest rates.increases during 2018.
The following tables detail the components of our net interest income (te) and net interest margin.
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| March 31, 2018 |
| December 31, 2017 |
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(dollars in millions) |
| Average Balance |
| Interest |
| Rate |
| Average Balance |
| Interest |
| Rate |
| Average Balance |
| Interest |
| Rate |
| Volume |
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| Interest (d) |
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| Rate |
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| Volume |
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| Interest (d) |
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| Rate |
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| Volume |
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| Interest (d) |
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| Rate |
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Average earning assets |
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Commercial & real estate loans (te) (a) |
| $ | 14,224.4 |
| $ | 150.9 |
| 4.30 | % |
| $ | 14,096.1 |
| $ | 154.5 |
| 4.35 | % |
| $ | 13,058.7 |
| $ | 130.4 |
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| 4.04 | % |
| $ | 15,062.1 |
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| $ | 180.5 |
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| 4.86 | % |
| $ | 14,794.9 |
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| $ | 172.8 |
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| 4.64 | % |
| $ | 14,224.4 |
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| $ | 150.9 |
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| 4.30 | % | |
Residential mortgage loans |
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| 2,718.4 |
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| 27.9 |
| 4.10 |
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| 2,642.3 |
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| 26.3 |
| 3.99 |
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| 2,185.9 |
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| 21.3 |
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| 3.90 |
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| 2,942.4 |
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| 31.1 |
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| 4.23 | % |
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| 2,888.2 |
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| 29.2 |
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| 4.04 | % |
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| 2,718.4 |
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| 27.9 |
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| 4.10 | % | |
Consumer loans |
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| 2,085.7 |
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| 29.0 |
| 5.64 |
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| 2,101.1 |
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| 29.8 |
| 5.63 |
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| 2,058.5 |
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| 26.6 |
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| 5.24 |
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| 2,122.4 |
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| 29.9 |
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| 5.72 | % |
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| 2,134.6 |
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| 32.5 |
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| 6.04 | % |
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| 2,085.7 |
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| 29.0 |
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| 5.64 | % | |
Loan fees & late charges |
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| — |
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| 0.5 |
| — |
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| — |
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| 0.6 |
| — |
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| — |
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| (0.1) |
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| — |
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| — |
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| (0.9 | ) |
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| 0.00 | % |
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| — |
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| 0.6 |
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| 0.00 | % |
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| — |
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| 0.5 |
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| 0.00 | % | |
Total loans (te) (a) (b) |
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| 19,028.5 |
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| 208.3 |
| 4.43 |
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| 18,839.5 |
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| 211.2 |
| 4.46 |
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| 17,303.1 |
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| 178.2 |
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| 4.16 |
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Total loans (te) (b) |
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| 20,126.9 |
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| 240.6 |
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| 4.84 | % |
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| 19,817.7 |
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| 235.1 |
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| 4.71 | % |
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| 19,028.5 |
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| 208.3 |
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| 4.43 | % | |||||||||||||||||||||||||||||
Loans held for sale |
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| 32.2 |
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| 0.2 |
| 2.75 |
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| 22.2 |
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| 0.2 |
| 3.28 |
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| 21.3 |
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| 0.2 |
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| 4.08 |
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| 20.6 |
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| 0.3 |
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| 4.92 | % |
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| 22.2 |
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| 0.2 |
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| 2.91 | % |
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| 32.2 |
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| 0.2 |
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| 2.75 | % | |
US Treasury and government agency securities |
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| 148.4 |
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| 0.8 |
| 2.21 |
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| 144.5 |
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| 0.8 |
| 2.21 |
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| 116.3 |
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| 0.6 |
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| 2.04 |
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| 123.8 |
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| 0.7 |
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| 2.25 | % |
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| 131.8 |
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| 0.8 |
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| 2.23 | % |
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| 148.4 |
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| 0.8 |
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| 2.21 | % | |
Mortgage-backed securities and collateralized mortgage obligations |
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| 4,785.3 |
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| 27.9 |
| 2.33 |
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| 4,682.2 |
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| 26.2 |
| 2.24 |
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| 3,975.2 |
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| 22.1 |
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| 2.22 |
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| 4,599.4 |
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| 29.9 |
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| 2.60 | % |
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| 4,896.2 |
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| 30.9 |
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| 2.53 | % |
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| 4,785.3 |
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| 27.9 |
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| 2.33 | % | |
Municipals (te) (a) |
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| 960.1 |
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| 7.6 |
| 3.18 |
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| 971.1 |
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| 9.3 |
| 3.82 |
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| 942.1 |
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| 9.0 |
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| 3.84 |
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Municipals (te) |
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| 930.0 |
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| 7.4 |
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| 3.17 | % |
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| 933.9 |
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| 7.4 |
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| 3.17 | % |
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| 960.1 |
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| 7.6 |
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| 3.18 | % | |||||||||||||||||||||||||||||
Other securities |
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| 3.5 |
|
| — |
| 2.06 |
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| 3.7 |
|
| — |
| 2.03 |
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| 3.7 |
|
| — |
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| 1.96 |
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| 3.5 |
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| 0.0 |
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| 3.09 | % |
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| 3.6 |
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| 0.0 |
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| 2.77 | % |
|
| 3.5 |
|
| 0.0 |
|
|
| 2.06 | % | ||||
Total securities (te) (a) (c) |
|
| 5,897.3 |
|
| 36.3 |
| 2.46 |
|
|
| 5,801.5 |
|
| 36.3 |
| 2.50 |
|
|
| 5,037.3 |
|
| 31.7 |
|
| 2.52 |
| |||||||||||||||||||||||||||||||||||||
Total securities (te) (c) |
|
| 5,656.7 |
|
|
| 38.0 |
|
|
| 2.69 | % |
|
| 5,965.5 |
|
|
| 39.1 |
|
|
| 2.62 | % |
|
| 5,897.3 |
|
|
| 36.3 |
|
|
| 2.46 | % | |||||||||||||||||||||||||||||
Total short-term investments |
|
| 148.3 |
|
| 0.5 |
| 1.34 |
|
|
| 149.5 |
|
| 0.4 |
| 1.07 |
|
|
| 408.3 |
|
| 0.7 |
|
| 0.74 |
|
|
| 216.2 |
|
|
| 1.2 |
|
|
| 2.18 | % |
|
| 205.8 |
|
|
| 1.0 |
|
|
| 2.01 | % |
|
| 148.3 |
|
|
| 0.5 |
|
|
| 1.34 | % | |
Total earning assets (te) (a) |
| $ | 25,106.3 |
| $ | 245.3 |
| 3.95 | % |
| $ | 24,812.7 |
| $ | 248.1 |
| 3.98 | % |
| $ | 22,770.0 |
| $ | 210.8 |
|
| 3.74 | % | |||||||||||||||||||||||||||||||||||||
Total earning assets (te) |
| $ | 26,020.4 |
|
| $ | 280.1 |
|
|
| 4.35 | % |
| $ | 26,011.2 |
|
| $ | 275.4 |
|
|
| 4.21 | % |
| $ | 25,106.3 |
|
| $ | 245.3 |
|
|
| 3.95 | % | |||||||||||||||||||||||||||||
Average interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest-bearing transaction and savings deposits |
| $ | 8,043.2 |
| $ | 9.1 |
| 0.46 | % |
| $ | 7,927.3 |
| $ | 8.3 |
| 0.42 | % |
| $ | 6,897.7 |
| $ | 4.5 |
|
| 0.27 | % |
| $ | 8,082.6 |
|
| $ | 14.7 |
|
|
| 0.74 | % |
| $ | 7,940.7 |
|
| $ | 12.4 |
|
|
| 0.62 | % |
| $ | 8,043.2 |
|
| $ | 9.1 |
|
|
| 0.46 | % | |
Time deposits |
|
| 2,979.0 |
|
| 9.7 |
| 1.32 |
|
|
| 2,936.4 |
|
| 8.7 |
| 1.17 |
|
|
| 2,340.0 |
|
| 5.1 |
|
| 0.89 |
|
|
| 3,743.3 |
|
|
| 18.0 |
|
|
| 1.95 | % |
|
| 3,616.2 |
|
|
| 16.6 |
|
|
| 1.82 | % |
|
| 2,979.0 |
|
|
| 9.7 |
|
|
| 1.32 | % | |
Public funds |
|
| 3,070.1 |
|
| 8.1 |
| 1.07 |
|
|
| 2,803.5 |
|
| 6.6 |
| 0.93 |
|
|
| 2,547.9 |
|
| 3.2 |
|
| 0.50 |
|
|
| 3,060.5 |
|
|
| 13.4 |
|
|
| 1.78 | % |
|
| 2,680.8 |
|
|
| 10.7 |
|
|
| 1.58 | % |
|
| 3,070.1 |
|
|
| 8.1 |
|
|
| 1.07 | % | |
Total interest-bearing deposits |
|
| 14,092.3 |
|
| 26.9 |
| 0.78 |
|
|
| 13,667.2 |
|
| 23.6 |
| 0.68 |
|
|
| 11,785.6 |
|
| 12.8 |
|
| 0.44 |
|
|
| 14,886.4 |
|
|
| 46.1 |
|
|
| 1.26 | % |
|
| 14,237.7 |
|
|
| 39.7 |
|
|
| 1.11 | % |
|
| 14,092.3 |
|
|
| 26.9 |
|
|
| 0.78 | % | |
Short-term borrowings |
|
| 1,823.1 |
|
| 5.4 |
| 1.17 |
|
|
| 1,763.2 |
|
| 4.1 |
| 0.92 |
|
|
| 2,127.3 |
|
| 2.9 |
|
| 0.56 |
|
|
| 1,684.9 |
|
|
| 8.1 |
|
|
| 1.92 | % |
|
| 2,330.3 |
|
|
| 11.5 |
|
|
| 1.98 | % |
|
| 1,823.1 |
|
|
| 5.4 |
|
|
| 1.17 | % | |
Long-term debt |
|
| 305.1 |
|
| 3.4 |
| 4.48 |
|
|
| 312.7 |
|
| 3.4 |
| 4.37 |
|
|
| 458.0 |
|
| 5.1 |
|
| 4.42 |
|
|
| 225.0 |
|
|
| 2.8 |
|
|
| 4.99 | % |
|
| 222.3 |
|
|
| 2.7 |
|
|
| 4.82 | % |
|
| 305.1 |
|
|
| 3.4 |
|
|
| 4.48 | % | |
Total borrowings |
|
| 2,128.2 |
|
| 8.8 |
| 1.66 |
|
|
| 2,075.9 |
|
| 7.5 |
| 1.45 |
|
|
| 2,585.3 |
|
| 8.0 |
|
| 1.24 |
|
|
| 1,909.9 |
|
|
| 10.9 |
|
|
| 2.30 | % |
|
| 2,552.6 |
|
|
| 14.2 |
|
|
| 2.21 | % |
|
| 2,128.2 |
|
|
| 8.8 |
|
|
| 1.66 | % | |
Total interest-bearing liabilities |
|
| 16,220.5 |
|
| 35.7 |
| 0.89 | % |
|
| 15,743.1 |
|
| 31.1 |
| 0.79 | % |
|
| 14,370.9 |
|
| 20.8 |
|
| 0.59 | % |
|
| 16,796.3 |
|
|
| 57.0 |
|
|
| 1.38 | % |
|
| 16,790.3 |
|
|
| 53.9 |
|
|
| 1.27 | % |
|
| 16,220.5 |
|
|
| 35.7 |
|
|
| 0.89 | % | |
Net interest-free funding sources |
|
| 8,885.8 |
|
|
|
|
|
|
|
| 9,069.6 |
|
|
|
|
|
|
|
| 8,399.1 |
|
|
|
|
|
|
|
|
| 9,224.1 |
|
|
|
|
|
|
|
|
|
|
| 9,220.9 |
|
|
|
|
|
|
|
|
|
|
| 8,885.8 |
|
|
|
|
|
|
|
|
| |
Total cost of funds |
| $ | 25,106.3 |
| $ | 35.7 |
| 0.58 | % |
| $ | 24,812.7 |
| $ | 31.1 |
| 0.50 | % |
| $ | 22,770.0 |
| $ | 20.8 |
|
| 0.37 | % |
| $ | 26,020.4 |
|
| $ | 57.0 |
|
|
| 0.89 | % |
| $ | 26,011.2 |
|
| $ | 53.9 |
|
|
| 0.82 | % |
| $ | 25,106.3 |
|
| $ | 35.7 |
|
|
| 0.58 | % | |
Net interest spread (te) (a) |
|
|
|
| $ | 209.6 |
| 3.05 | % |
|
|
|
| $ | 217.0 |
| 3.19 | % |
|
|
|
| $ | 190.0 |
|
| 3.15 | % | |||||||||||||||||||||||||||||||||||||
Net interest spread (te) |
|
|
|
|
| $ | 223.1 |
|
|
| 2.97 | % |
|
|
|
|
| $ | 221.5 |
|
|
| 2.94 | % |
|
|
|
|
| $ | 209.6 |
|
|
| 3.05 | % | |||||||||||||||||||||||||||||
Net interest margin |
| $ | 25,106.3 |
| $ | 209.6 |
| 3.37 | % |
| $ | 24,812.7 |
| $ | 217.0 |
| 3.48 | % |
| $ | 22,770.0 |
| $ | 190.0 |
|
| 3.37 | % |
| $ | 26,020.4 |
|
| $ | 223.1 |
|
|
| 3.46 | % |
| $ | 26,011.2 |
|
| $ | 221.5 |
|
|
| 3.39 | % |
| $ | 25,106.3 |
|
| $ | 209.6 |
|
|
| 3.37 | % |
(a) | Taxable equivalent (te) amounts |
(b) | Includes nonaccrual loans. |
(c) | Average securities do not include unrealized holding gains/losses on available for sale |
(d) Included in interest income is net purchase accounting accretion of $5.0 million for the three months ended March 31, 2019 and December 31, 2018 and $6.8 million for the three months ended March 31, 2018.
36
During the first quarter of 2018,2019, we recorded a provision for loan losses of $12.3$18.0 million, down $2.7up $9.9 million from the fourth quarter of 20172019 and down $3.7up $5.8 million from the first quarter of 2017. 2018. Included in the current quarter’s provision is a $10.1 million charge-off related to the DC Solar credit discussed below and a relatively flat allowance compared to the prior quarter.
NetThe Company had a lease financing facility to DC Solar, a company that sold and managed mobile solar generators. In February 2019, the borrower filed for Chapter 11 bankruptcy protection and we became aware of an affidavit from a Federal Bureau of Investigation special agent that alleged that this borrower was operating a potentially fraudulent Ponzi-type scheme and that the majority of mobile solar generators sold to investors and managed by the borrower and the majority of the related lease revenues claimed to have been received by the borrower may not have existed. The $10.1 million charged-off taken in the quarter represents the majority of our exposure to this borrower. There could be potential for some recovery in the future depending on our ability to sell or re-lease the solar units.
The provision includes net charge-offs totaled $12.2totaling $17.9 million, which represents 0.26%0.36% of average total loans on an annualized basis in the first quarter of 2018,2019, or 0.16% when adjusted to exclude the DC Solar charge-off, compared to $20.8net charge-offs of $28.1 million, or 0.44%0.56 % of average total loans in the fourth quarter of 2017. Net charge-offs from energy credits in the first quarter of 2018 were $4.3 million and included gross charges of $7.6 million, and recoveries totaling $3.3 million. There were $8.4 million in net charges-offs related to energy credits in the fourth quarter of 2017.2018.
The provision for loan losses reflects a continued decline in the energy allowance, offset by an increase in nonenergy reserves. The discussion of Allowance for Loan Losses and Asset Quality later in this Item provides additional information on changes in the allowance for loan losses and general credit quality.
Noninterest Income
Noninterest income totaled $66.3$70.5 million for the first quarter of 2018,2019, down $3.4$4.0 million, or 5%, from the fourth quarter of 20172018 and up $2.8$4.3 million, or 4%6%, compared to the first quarter of 2017.2018. Excluding nonoperating items noninterest income totaled $67.4 million forrelated to a portfolio restructure in the fourth quarter of 2018 and a loss on the sale of a subsidiary in the first quarter of 2018, noninterest income was down $2.3$3.4 million, or 3%,5% from the fourth quarter of 20172018 and up $8.3$3.1 million, or 14%5%, from the first quarter of 2017.2018. The decrease from the prior quarter was largelyprimarily driven by a declinedecreases due to seasonality, market conditions and fewer business days in gain on sales of assets as the fourth quarter of 2017 included a $2.9 million gain from a bulk sale of loans, and a declinediscussed in service charges on deposits, partially offset by increases in most other revenue sources.more detail below. The increase compared to the first quarter of 20172018 was largely driven by an increase in trust fees following the trust and asset management acquisition, as well as higher service charges on deposit accounts, bank card and ATM fees and income from derivatives
Included in the first quarter of 2018 is a loss on the sale of the finance company of $1.1 million and included in the first quarter of 2017 is a $4.4 million gain related to the sale of selected Hancock Horizon funds, both considered to be nonoperating items.fees.
The components of operating and nonoperating noninterest income are presented in the following table for the indicated periods.
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
| March 31, |
|
| December 31, |
|
| March 31, |
| ||||
|
| Three Months Ended |
| 2019 |
|
| 2018 |
|
| 2018 |
| |||||||||||
|
| March 31, |
| December 31, |
| March 31, | ||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2017 | ||||||||||||||||
Service charges on deposit accounts |
| $ | 21,448 |
| $ | 22,455 |
| $ | 19,206 |
| $ | 20,367 |
|
| $ | 21,466 |
|
| $ | 21,448 |
| |
Trust fees |
|
| 11,335 |
|
| 11,079 |
|
| 11,211 |
|
| 15,124 |
|
|
| 15,762 |
|
|
| 11,335 |
| |
Bank card and ATM fees |
|
| 14,458 |
|
| 14,234 |
|
| 12,468 |
|
| 15,290 |
|
|
| 15,656 |
|
|
| 14,458 |
| |
Investment and annuity fees and insurance commissions |
|
| 6,125 |
|
| 5,802 |
|
| 5,264 |
|
| 6,528 |
|
|
| 6,307 |
|
|
| 6,125 |
| |
Secondary mortgage market operations |
|
| 3,401 |
|
| 3,244 |
|
| 3,567 |
|
| 3,726 |
|
|
| 3,933 |
|
|
| 3,401 |
| |
Amortization of FDIC loss share receivable |
|
|
| — |
|
| — |
|
| (1,100) | ||||||||||||
Income from bank-owned life insurance |
|
|
| 3,070 |
|
| 2,841 |
|
| 2,652 |
|
| 3,265 |
|
|
| 3,141 |
|
|
| 3,070 |
|
Credit related fees |
|
|
| 2,722 |
|
| 2,843 |
|
| 2,878 |
|
| 2,595 |
|
|
| 3,165 |
|
|
| 2,722 |
|
Income from derivatives |
|
|
| 1,523 |
|
| 1,385 |
|
| 465 |
|
| 809 |
|
|
| 893 |
|
|
| 1,523 |
|
Gain (loss) on sales of assets |
|
|
| (62) |
|
| 3,013 |
|
| (227) |
|
| 397 |
|
|
| (151 | ) |
|
| (62 | ) |
Other miscellaneous |
|
|
| 3,377 |
|
| 2,792 |
|
| 2,755 |
|
| 2,402 |
|
|
| 3,762 |
|
|
| 3,377 |
|
Total noninterest operating income |
| $ | 67,397 |
| $ | 69,688 |
| $ | 59,139 |
| $ | 70,503 |
|
| $ | 73,934 |
|
| $ | 67,397 |
| |
Nonoperating income items |
|
| (1,145) |
|
| — |
|
| 4,352 |
|
| — |
|
|
| 604 |
|
|
| (1,145 | ) | |
Total noninterest income |
| $ | 66,252 |
| $ | 69,688 |
| $ | 63,491 |
| $ | 70,503 |
|
| $ | 74,538 |
|
| $ | 66,252 |
|
39
| Three Months Ended |
| ||||||||||
|
| March 31, |
|
| December 31, |
|
| March 31, |
| |||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2018 |
| |||
Gain (loss) on portfolio restructure: |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of Visa Class B common shares |
| $ | - |
|
| $ | 33,229 |
|
| $ | - |
|
Loss on sale of investment securities |
|
| - |
|
|
| (25,480 | ) |
|
| - |
|
Loss on sale of loans |
|
| - |
|
|
| (7,145 | ) |
|
| - |
|
Total net gain on portfolio restructure |
| $ | - |
|
| $ | 604 |
|
| $ | - |
|
Loss on sale of subsidiary |
|
| - |
|
|
| - |
|
|
| (1,145 | ) |
Total nonoperating income |
| $ | - |
|
| $ | 604 |
|
| $ | (1,145 | ) |
Service charges on deposits totaled $21.4$20.4 million for the first quarter of 2019, down $1.1 million, or 5%, from both the fourth quarter of 2018 and the first quarter of 2018. The decrease from the prior quarter was primarily due to fewer business days and seasonal decrease in consumer overdraft fees. The decrease from the first quarter of 2018 was due to lower consumer overdraft fees and service charges, partially offset by increased check printing fees.
Trust fees decreased $0.6 million, or 4%, linked quarter largely as a result of market conditions, which began to decline towards the end of fourth quarter 2018 and gradually recovered over the current quarter. Compared to the first quarter of 2018, trust fees increased $3.8 million, or 33%, largely due to the July 2018 trust and asset management acquisition.
Bank card and ATM fees totaled $15.3 million for the first quarter of 2019, down $1.0$0.4 million, or 2%, from the fourth quarter of 2018, due to fewer days in the first quarter. Compared to the first quarter of 2018, bank card and ATM fees were up $0.8 million, or 6%, primarily due to increased card activity.
Investment and annuity fees and insurance commissions increased $0.2 million, or 4%, compared to fourth quarter 2018 primarily due to bond trading fees attributable to a higher volume of institutional brokerage sales and underwriting activity, partially offset by a decrease in insurance and annuity sales. Investment and annuity fees and insurance commissions increased $0.4 million, or 7%, compared to first quarter 2018.
Fee income from secondary mortgage market operations was down $0.2 million, or 5%, from fourth quarter of 2018 and up $0.3 million, or 10%, from the first quarter of 2018. These fees will vary based on origination volume and the timing of subsequent sales.
Income from bank-owned life insurance was $3.3 million in the first quarter of 2019, up $0.1 million, or 4%, from the fourth quarter of 20172018 and up $2.2$0.2 million, or 12%6%, from the first quarter of 2017.2018. The decreaseincrease from the prior quarter was dueis related to a seasonal increase in customer balances in the fourth quarter 2017,mortality gain and the increase overfrom the first quarter of 2017 was primarily due2018 is related to an increase in consumer overdraftthe restructure of a portion of our bank owned life insurance contracts during the third quarter of 2018.
Credit related fees and new sustained overdraft fees, along with the larger deposit base following the FNBC transactions.
Bank card and ATM fees totaled $14.5were $2.6 million for the first quarter of 2018, up $0.22019, down $0.6 million, or 2%18%, from the fourth quarter of 2017, due mostly to activity in the merchant business. Compared to the first quarter of 2017, bank card and ATM fees were up $2.0 million, or 16%, due to increased activity.
Fee income from secondary mortgage market operations was up $0.2 million, or 5%, from fourth quarter of 2017 with a slightly higher sales activity,2018 and down $0.2$0.1 million, or 5%, from the first quarter of 2017.
Trust fees increased $0.3 million, or 2%, linked quarter, due in part to higher market values of assets managed. For the first quarter of 2018, trust fees increased $0.1 million, or 1%, compared to the first quarter of 2017.
37
Investment and annuity fees and insurance commisisons increased $0.3 million, or 6%, compared to fourth quarter 2017 and increased $0.9 million, or 16%, compared to first quarter 2017.2018. The increases are mainlylinked-quarter decline was due to higher sales volumes in annuities, mutual fundslower letter of credit and bond trading. unused commitment fees, primarily attributable to fewer energy-related participation relationships.
Income from bank-owned life insurance increased $0.2 million, or 8%, compared to the fourth quarter of 2017, and increased $0.4 million, or 16%, compared to the first quarter of 2017. The increase over the first quarter of 2017 is due to an additional policy investment of $50 million made in the second quarter of 2017.
Income on our customer interest rate derivative program resulted in a $1.5$0.8 million net gain for the first quarter of 20182019 compared to net gains of $1.4$0.9 million in the fourth quarter of 20172018 and $0.5$1.5 million for the first quarter of 2017. This2018. Derivative income can be volatile and is dependent upon both customer sales activity as well asand market value adjustments due to market interest rate movement.
Gain (loss) on salesdisposal of assets was down $3.1$0.4 million fromin the first quarter of 2019, primarily attributable to the sale of mortgage loans. In the fourth quarter of 2017 and up2018, we recorded a loss of $0.2 million, fromprimarily attributable to fixed asset retirements.
Other miscellaneous income of $2.4 million was down $1.4 million, or 36%, compared to the fourth quarter of 2018 and $1.0 million, or 29%, compared to the first quarter of 2017.2018. The fourthdecrease compared to both periods was due largely to lower syndication fees and first quarters of 2017 included the previously mentioned $2.9 million gain on the sale of loansearnings from community development entities and $4.4 million gain on the sale of selected Hancock Horizon funds, respectively.other investments.
Noninterest Expense
Noninterest expense for the first quarter of 20182019 was $170.8$175.7 million, up $2.7down $3.7 million, or 2%, from the fourth quarter of 2017,2018, and up $7.2$4.9 million, or 4%3%, from the first quarter of 2017.2018. Excluding nonoperating expense items, totalexpenses, operating expense for the first quarter of 2018 totaled $164.9 million, a decrease of $3.12019 was down $1.2 million, or 2%less than 1%, linked quarter and up $7.9$10.9 million, or 5%7%, from the first quarter of 2017.2018.
NonoperatingThere were no nonoperating noninterest expenses in the first quarter of 2019. Nonoperating noninterest expenses in the fourth quarter of 2018 totaled $2.5 million and primarily included costs associated with Hurricane Michael damage, the trust and asset management acquisition and the move of the New Orleans Main regional headquarters. Nonoperating noninterest expenses for the first quarter of
40
2018 included costs of a one-time all hands bonus, the brand consolidation project, the sale of the consumer finance company, and the pending acquisition of Capital One’sthe trust and asset management business. There were no nonoperating expenses in the fourth quarter of 2017. The nonoperating expenses in the first quarter of 2017 related to the FNBC I transaction. The components of noninterest expenseoperating and nonoperating expense are presented in the following tables for the indicated periods.
|
| Three Months Ended |
| |||||||||
|
| March 31, |
|
| December 31, |
|
| March 31, |
| |||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2018 |
| |||
Operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
| $ | 83,968 |
|
| $ | 86,508 |
|
| $ | 76,743 |
|
Employee benefits |
|
| 19,730 |
|
|
| 18,400 |
|
|
| 19,623 |
|
Personnel expense |
|
| 103,698 |
|
|
| 104,908 |
|
|
| 96,366 |
|
Net occupancy expense |
|
| 11,984 |
|
|
| 12,153 |
|
|
| 10,943 |
|
Equipment expense |
|
| 4,679 |
|
|
| 3,827 |
|
|
| 3,493 |
|
Data processing expense |
|
| 19,331 |
|
|
| 18,492 |
|
|
| 16,368 |
|
Professional services expense |
|
| 8,168 |
|
|
| 9,390 |
|
|
| 7,847 |
|
Amortization of intangible assets |
|
| 5,138 |
|
|
| 5,472 |
|
|
| 5,618 |
|
Deposit insurance and regulatory fees |
|
| 5,406 |
|
|
| 6,754 |
|
|
| 7,948 |
|
Other real estate (income) expense |
|
| (991 | ) |
|
| (2,924 | ) |
|
| 210 |
|
Advertising |
|
| 3,080 |
|
|
| 3,934 |
|
|
| 2,341 |
|
Corporate value and franchise taxes |
|
| 4,042 |
|
|
| 2,860 |
|
|
| 3,440 |
|
Printing and supplies |
|
| 1,169 |
|
|
| 1,209 |
|
|
| 1,031 |
|
Telecommunications and postage |
|
| 3,466 |
|
|
| 3,555 |
|
|
| 3,850 |
|
Travel expense |
|
| 1,098 |
|
|
| 1,462 |
|
|
| 1,064 |
|
Entertainment and contributions |
|
| 2,708 |
|
|
| 2,899 |
|
|
| 2,509 |
|
Tax credit investment expense |
|
| 1,138 |
|
|
| 1,857 |
|
|
| 874 |
|
Other retirement expense |
|
| (4,105 | ) |
|
| (5,076 | ) |
|
| (4,463 | ) |
Other miscellaneous |
|
| 5,691 |
|
|
| 6,136 |
|
|
| 5,499 |
|
Total operating expense |
| $ | 175,700 |
|
| $ | 176,908 |
|
| $ | 164,938 |
|
Nonoperating expense items |
|
| - |
|
|
| 2,458 |
|
|
| 5,853 |
|
Total noninterest expense |
| $ | 175,700 |
|
| $ | 179,366 |
|
| $ | 170,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended | |||||||
|
| March 31, |
| December 31, |
| March 31, | |||
(in thousands) |
| 2018 |
| 2017 |
| 2017 | |||
Operating expense |
|
|
|
|
|
|
|
|
|
Compensation expense |
| $ | 76,743 |
| $ | 82,610 |
| $ | 73,005 |
Employee benefits |
|
| 19,623 |
|
| 16,948 |
|
| 19,067 |
Personnel expense |
|
| 96,366 |
|
| 99,558 |
|
| 92,072 |
Net occupancy expense |
|
| 10,943 |
|
| 11,585 |
|
| 10,762 |
Equipment expense |
|
| 3,493 |
|
| 3,383 |
|
| 3,708 |
Data processing expense |
|
| 16,368 |
|
| 17,392 |
|
| 15,395 |
Professional services expense |
|
| 7,847 |
|
| 8,544 |
|
| 6,649 |
Amortization of intangibles |
|
| 5,618 |
|
| 5,885 |
|
| 4,705 |
Telecommunications and postage |
|
| 3,850 |
|
| 3,605 |
|
| 3,467 |
Deposit insurance and regulatory fees |
|
| 7,948 |
|
| 8,271 |
|
| 6,490 |
Other real estate (income) expense, net |
|
| 210 |
|
| (340) |
|
| (13) |
Advertising |
|
| 2,341 |
|
| 3,060 |
|
| 2,947 |
Corporate value and franchise taxes |
|
| 3,440 |
|
| 2,855 |
|
| 3,036 |
Printing and supplies |
|
| 1,031 |
|
| 1,210 |
|
| 1,174 |
Travel expense |
|
| 1,064 |
|
| 1,408 |
|
| 1,044 |
Entertainment and contributions |
|
| 2,509 |
|
| 2,173 |
|
| 1,767 |
Tax credit investment amortization |
|
| 874 |
|
| 1,213 |
|
| 1,212 |
Other Retirement expense |
|
| (4,463) |
|
| (4,399) |
|
| (3,060) |
Other miscellaneous |
|
| 5,499 |
|
| 2,660 |
|
| 5,724 |
Total operating expense |
| $ | 164,938 |
| $ | 168,063 |
| $ | 157,079 |
Nonoperating expense items |
|
| 5,853 |
|
| — |
|
| 6,463 |
Total noninterest expense |
| $ | 170,791 |
| $ | 168,063 |
| $ | 163,542 |
|
| Three Months Ended |
| |||||||||
|
| March 31, |
|
| December 31, |
|
| March 31, |
| |||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2018 |
| |||
Nonoperating expense |
|
|
|
|
|
|
|
|
|
|
|
|
Personnel expense |
| $ | — |
|
| $ | 97 |
|
| $ | 3,608 |
|
Net occupancy expense |
|
| — |
|
|
| 421 |
|
|
| 67 |
|
Equipment expense |
|
| — |
|
|
| 212 |
|
|
| 53 |
|
Data processing expense |
|
| — |
|
|
| 423 |
|
|
| 81 |
|
Professional services expense |
|
| — |
|
|
| (2 | ) |
|
| 1,408 |
|
Advertising |
|
| — |
|
|
| (196 | ) |
|
| 185 |
|
Printing and supplies |
|
| — |
|
|
| 78 |
|
|
| 255 |
|
Loss on restructure of bank-owned life insurance contracts |
|
| — |
|
|
| 62 |
|
|
| — |
|
Other expense |
|
| — |
|
|
| 1,363 |
|
|
| 196 |
|
Total nonoperating expenses |
| $ | — |
|
| $ | 2,458 |
|
| $ | 5,853 |
|
38
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended | |||||||
|
| March 31, |
| December 31, |
| March 31, | |||
(in thousands) |
| 2018 |
| 2017 |
| 2017 | |||
Nonoperating expense |
|
|
|
|
|
|
|
|
|
Personnel expense |
| $ | 3,608 |
| $ | — |
| $ | 107 |
Net occupancy and equipment expense |
|
| 120 |
|
| — |
|
| 1 |
Professional services expense |
|
| 1,408 |
|
| — |
|
| 4,627 |
Advertising |
|
| 185 |
|
| — |
|
| 130 |
Printing and supplies |
|
| 255 |
|
| — |
|
| 4 |
Other expense |
|
| 277 |
|
| — |
|
| 1,594 |
Total nonoperating expenses |
| $ | 5,853 |
| $ | — |
| $ | 6,463 |
The following discussion of the components of operating expense excludes nonoperating items for each period.
Personnel expense totaled $96.4$103.7 million for the first quarter of 2018,2019, down $3.2$1.2 million, or 3%1%, fromcompared to the previousprior quarter, due to a decrease in incentive and bonus expense, partially offset by seasonal increase in benefit costs. Year over year, personnel expense was up $4.3 million, or 5%, primarily due to two fewer payroll days in the quarter. Personnel costs were up $7.3 million, or 8%, compared to the first quarter of 2018 due to merit increases.increases and additional headcount following the trust and asset management acquisition.
Occupancy and equipment expenses totaled $14.4$16.7 million in the first quarter of 2018, down $0.52019, up $ 0.7 million, or 4%, from the fourth quarter of 20172018 and flat toup $2.2 million, or 15%, from the first quarter of 2017.2018. The increase compared to the prior quarter is largely due to higher depreciation expense on furniture and equipment following the move of the New Orleans regional headquarters. The increase compared to first quarter of 2018 is attributable to both the move of the regional headquarters and an increase in depreciation of new signage following the Company’s rebranding.
41
OREData processing expense was $19.3 million for the first quarter of 2019, up $0.8 million, or 5%, from the fourth quarter of 2018, was $0.2and up $3.0 million, compared to small net gains on ORE dispositionsor 18%, from the first quarter of $0.32018.
Professional service expense totaled $8.2 million in the linked quarter and small gain in the first quarter of 2017. Management believes2019, down $1.2 million, or 13%, compared to the currentprevious quarter reflectsand up $0.3 million, or 4% compared to the same quarter last year. The decrease from the prior quarter was largely due to a more typical leveldecrease in costs associated with problem credits. Professional service expense includes legal, audit, accounting and other consulting services.
Deposit insurance and regulatory fees and corporate value and franchise taxes were $9.4 million, a decrease of ORE expense.$0.2 million, or 2%, from the fourth quarter of 2018 and down $1.9 million, or 17%, from the first quarter of 2018. Deposit insurance and regulatory fees and corporate value and franchise taxes were down both quarter over quarter and year over year primarily due to a reduction in the risk-based deposit insurance assessment fees, with the year-over-year variance impacted by the elimination of the quarterly deposit insurance fund surcharge.
Business development-related expenses (including advertising, travel and entertainment and contributions) were $6.9 million for the first quarter of 2019, down $1.4 million, or 17%, from the fourth quarter of 2018 and up $1.0 million, or 16%, from the first quarter of 2018. The primary driver of the decrease from the prior quarter and the increase from the same quarter a year ago is advertising expenditures.
Other real estate income was $1.0 million for the first quarter of 2019 compared to $2.9 million in the fourth quarter of 2018 and a net expense of $0.2 million in the first quarter of 2018. The first quarter of 2019 and fourth quarter of 2018 reflect gains on dispositions of properties in excess of holding costs.
All other expenses, excluding amortization of intangibles and nonoperating expense items, totaled $48.3$7.4 million for the first quarter of 2018, up2019, down $0.3 million, or 1%4%, from the fourth quarter of 2017,2018, and up $2.5$0.6 million, or 5%8%, from the first quarter of 2017.2018. The increases fromvariances compared to prior quarter and prior year were largely driven by changes in tax credit investment expense, the first quarter of 2017 include professional services, regulatory fees, data processing and entertainment, partially offset with decreases innet credit for other retirement expense and advertising.other miscellaneous expense.
Income Taxes
The effective income tax rate for the first quarter of 20182019 was approximately 18.5%17.6%, compared to 20.8%7.9% in the fourth quarter of 2017 (exclusive of the $19.5 million of income tax expense resulting from re-measurement of the deferred tax asset)2018 and 25.3%18.5% in the first quarter of 2017.2018. The decrease in the effective tax rate was lower in the fourth quarter of 2018 primarily due to the enactment$9.9 million income tax benefit attributable to the 2017 tax savings initiatives implemented following the passage of the Tax Cuts and Jobs Act (“Tax Act”) on December 22, 2017. The Tax Act significantly revised U.S. corporate income tax laws by,, which, among other things, loweringlowered the statutory corporate federal income tax rate from 35% to 21%, eliminating or reducing the deductibility of certain meals and entertainment expenses, limiting the deduction of FDIC insurance premiums as well as modifying the deductibility of executive compensation through the elimination of the performance-based compensation exception and changes to the definition of a covered employee.
As a result of the reduced. The fourth quarter 2018 effective tax rate we re-measured our deferred tax assets and liabilities during the fourth quarter of 2017 resulting in incremental income tax expense of $19.5 million. The re-measurement charge was comprised of $25.3 million related to certain items included in AOCI and a provisional income tax benefit of $5.8 million related to items included in continuing operations. Pursuant to the SEC’s Staff Accounting Bulletin No. 118, entities have a measurement period not to exceed one year from the enactment date of the Tax Act to record provisional amounts related to theexcluding impact of the Tax Act. As of March 31, 2018, no adjustment hastax savings initiatives would have been made17.5%, which is comparable to the initial provisional benefit recorded. We are stillfirst quarter 2019 effective tax rate. Management expects the effective tax rate for 2019 will be in the processrange of collecting information, finalizing calculations and awaiting additional guidance from the IRS or other regulatory agencies. Any such adjustments could materially impact income tax expense in the period in which the adjustments are made.17%-19% based on current forecasts.
Our effective tax rate has historically variesvaried from the federal statutory rate primarily because of tax-exempt income and tax credits. Interest income on bonds issued by or loans to state and municipal governments and authorities, and earnings from the BOLIlife insurance contract program are the major components of tax-exempt income. The main source of tax credits has been investments in tax-advantaged securities and tax credit projects. These investments are made primarily in the markets the Company serves and are directed at tax credits issued under the Qualified Zone Academy Bonds (“QZAB”), Qualified School Construction Bonds (“QSCB”) andas well as Federal and State New Market Tax Credit (“NMTC”) programs. The investments generate tax credits, which reduce current and future taxes and are recognized when earned as a benefit in the provision for income taxes. The Tax Act repealed the provision related to tax credit bonds effective for bonds issued after December 31, 2017. As such, these bonds are no longer viable alternatives for lowering our effective tax rate.
We have invested in NMTC projects through investments in our own Community Development Entity (“CDE”), as well as other unrelated CDEs. These investments are expected to generate approximately $104 million in federal and state tax credits. Federal tax credits from NMTC investments are recognized over a seven-year period, while recognition of the benefits from state tax credits varies from three to five years.
39
our $50 million NMTC allocation award received in 2018, we expect to realize benefits from federal and state tax credits over the next three years totaling $7.5 million, $5.6 million and $4.9 million for 2020, 2021 and 2022, respectively. We intend to continue making investments in tax credit projects. However, our ability to access new credits will depend upon, among other factors, federal and state tax policies and the level of competition for such credits. Based on tax credit investments that have been made to date, we expect to realize benefits from federal and state tax credits totaling $6.1 million, $3.6 million and $1.6 million for 2019, 2020 and 2021, respectively. In February 2018, the U.S. Department
42
The following table reconciles reported income tax expense to that computed at the statutory federal tax rate for the indicated periods.
periods.
|
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
| |||||||||||||||
|
| Three Months Ended |
| Three Months Ended |
| ||||||||||||||||
|
| March 31, |
| December 31, |
| March 31, |
| March 31, |
|
| December 31, |
|
| March 31, |
| ||||||
(in thousands) |
| 2018 |
| 2017 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
| ||||||
Taxes computed at statutory rate |
| $ | 18,663 |
| $ | 33,140 |
| $ | 22,977 |
| $ | 20,163 |
|
| $ | 21,946 |
|
| $ | 18,663 |
|
Tax credits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
QZAB/QSCB |
| (759) |
| (642) |
| (642) |
|
| (710 | ) |
|
| (759 | ) |
|
| (759 | ) | |||
NMTC - Federal and State |
| (1,379) |
| (1,679) |
| (1,679) |
|
| (1,402 | ) |
|
| (3,805 | ) |
|
| (1,379 | ) | |||
LIHTC and other credits |
|
| — |
|
| (88) |
|
| — | ||||||||||||
LIHTC and other tax credits |
|
| — |
|
|
| (365 | ) |
|
| — |
| |||||||||
Total tax credits |
|
| (2,138) |
|
| (2,409) |
|
| (2,321) |
|
| (2,112 | ) |
|
| (4,929 | ) |
|
| (2,138 | ) |
State income taxes, net of federal income tax benefit |
| 2,044 |
| 1,594 |
| 843 |
|
| 1,905 |
|
|
| 2,813 |
|
|
| 2,044 |
| |||
Tax-exempt interest |
| (2,786) |
| (4,849) |
| (4,673) |
|
| (2,417 | ) |
|
| (2,536 | ) |
|
| (2,786 | ) | |||
Life insurance contracts |
| (930) |
| (2,119) |
| (947) |
|
| (678 | ) |
|
| (529 | ) |
|
| (930 | ) | |||
Employee share-based compensation |
| (140) |
| (3,821) |
| (434) |
|
| (272 | ) |
|
| (919 | ) |
|
| (140 | ) | |||
Impact of deferred tax asset re-measurment |
| — |
| 19,520 |
| — | |||||||||||||||
Impact from interim estimated effective tax rate |
| 356 |
| (2,230) |
| 1,880 |
|
| (776 | ) |
|
| 1,152 |
|
|
| 356 |
| |||
FDIC Assessment Disallowance |
| 747 |
| — |
| — | |||||||||||||||
FDIC assessment disallowance |
|
| 545 |
|
|
| 566 |
|
|
| 747 |
| |||||||||
Return to provision adjustment |
|
| — |
|
|
| (9,942 | ) |
|
| — |
| |||||||||
Other, net |
|
| 581 |
|
| 411 |
|
| (690) |
|
| 492 |
|
|
| 643 |
|
|
| 581 |
|
Income tax expense |
| $ | 16,397 |
| $ | 39,237 |
| $ | 16,635 |
| $ | 16,850 |
|
| $ | 8,265 |
|
| $ | 16,397 |
|
Selected Financial Data
The following tables contain selected financial data as of the dates and for the periods indicated.
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Three Months Ended |
| Three Months Ended |
| ||||||||||||||||
|
| March 31, |
| December 31, |
| March 31, |
| March 31, |
|
| December 31, |
|
| March 31, |
| ||||||
|
| 2018 |
| 2017 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
| ||||||
Common Share Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
| $ | 0.83 |
| $ | 0.64 |
| $ | 0.57 |
| $ | 0.91 |
|
| $ | 1.11 |
|
| $ | 0.83 |
|
Diluted |
| $ | 0.83 |
| $ | 0.64 |
| $ | 0.57 |
| $ | 0.91 |
|
| $ | 1.10 |
|
| $ | 0.83 |
|
Cash dividends paid |
| $ | 0.24 |
| $ | 0.24 |
| $ | 0.24 |
| $ | 0.27 |
|
| $ | 0.27 |
|
| $ | 0.24 |
|
Book value per share (period-end) |
| $ | 33.96 |
| $ | 33.86 |
| $ | 32.70 |
| $ | 37.23 |
|
| $ | 35.98 |
|
| $ | 33.96 |
|
Tangible book value per share (period-end) |
| $ | 24.22 |
| $ | 24.05 |
| $ | 23.19 |
| $ | 26.92 |
|
| $ | 25.62 |
|
| $ | 24.22 |
|
Weighted average number of shares (000s): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
| 85,241 |
|
| 85,044 |
|
| 84,365 |
|
| 85,688 |
|
|
| 85,522 |
|
|
| 82,241 |
| |
Diluted |
| 85,423 |
|
| 85,303 |
|
| 84,624 |
|
| 85,800 |
|
|
| 85,677 |
|
|
| 85,423 |
| |
Period-end number of shares (000s) |
| 85,285 |
|
| 85,200 |
|
| 84,517 |
|
| 85,710 |
|
|
| 85,643 |
|
|
| 85,285 |
| |
Market data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
High sales price |
| $ | 56.40 |
| $ | 53.35 |
| $ | 49.50 |
| $ | 44.34 |
|
| $ | 49.22 |
|
| $ | 56.40 |
|
Low sales price |
| $ | 49.48 |
| $ | 46.18 |
| $ | 41.71 |
| $ | 34.11 |
|
| $ | 32.59 |
|
| $ | 49.48 |
|
Period-end closing price |
| $ | 51.70 |
| $ | 49.50 |
| $ | 45.55 |
| $ | 40.40 |
|
| $ | 34.77 |
|
| $ | 51.70 |
|
Trading volume (000s) (a) |
| 35,459 |
|
| 29,308 |
|
| 45,119 |
|
| 28,124 |
|
|
| 33,269 |
|
|
| 35,459 |
|
(a) | Trading volume is based on the total volume as determined by NASDAQ on the last day of the quarter. |
43
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended | |||||||
|
| March 31, |
| December 31, |
| March 31, | |||
(in thousands) |
| 2018 |
| 2017 |
| 2017 | |||
Income Statement: |
|
|
|
|
|
|
|
|
|
Interest income |
| $ | 241,395 |
| $ | 239,173 |
| $ | 202,515 |
Interest income (te) (a) |
|
| 245,358 |
|
| 248,122 |
|
| 210,813 |
Interest expense |
|
| 35,731 |
|
| 31,126 |
|
| 20,824 |
Net interest income (te) (a) |
|
| 209,627 |
|
| 216,996 |
|
| 189,989 |
Provision for loan losses |
|
| 12,253 |
|
| 14,986 |
|
| 15,991 |
Noninterest income |
|
| 66,252 |
|
| 69,688 |
|
| 63,491 |
Noninterest expense (excluding amortization of intangibles) |
|
| 165,173 |
|
| 162,178 |
|
| 158,837 |
Amortization of intangibles |
|
| 5,618 |
|
| 5,885 |
|
| 4,705 |
Income before income taxes |
|
| 88,872 |
|
| 94,686 |
|
| 65,649 |
Income tax expense |
|
| 16,397 |
|
| 39,237 |
|
| 16,635 |
Net income |
| $ | 72,475 |
| $ | 55,449 |
| $ | 49,014 |
|
|
|
|
|
|
|
|
|
|
Earnings excluding nonoperating items |
|
|
|
|
|
|
|
|
|
Net income |
| $ | 72,475 |
| $ | 55,449 |
| $ | 49,014 |
Nonoperating income |
|
| 1,145 |
|
| — |
|
| (4,352) |
Nonoperating expense |
|
| 5,853 |
|
| — |
|
| 6,463 |
Income tax benefit |
|
| (1,216) |
|
| — |
|
| (739) |
Income tax resulting from re-measurement of deferred tax asset |
|
| — |
|
| 19,520 |
|
| — |
Nonoperating items, net of applicable income tax benefit |
|
| 5,782 |
|
| 19,520 |
|
| 1,372 |
Operating earnings |
|
| 78,257 |
|
| 74,969 |
|
| 50,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months ended | |||||||||
|
|
| March 31, |
|
| December 31, |
|
| March 31, | |||
|
|
| 2018 |
|
| 2017 |
|
| 2017 | |||
Performance Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets |
|
| 1.08 | % |
|
| 0.82 | % |
|
| 0.80 | % |
Return on average common equity |
|
| 10.23 | % |
|
| 7.67 | % |
|
| 7.27 | % |
Return on average tangible common equity |
|
| 14.41 | % |
|
| 10.81 | % |
|
| 9.92 | % |
Earning asset yield (te) (a) |
|
| 3.95 | % |
|
| 3.98 | % |
|
| 3.74 | % |
Total cost of funds |
|
| 0.58 | % |
|
| 0.50 | % |
|
| 0.37 | % |
Net interest margin (te) (a) |
|
| 3.37 | % |
|
| 3.48 | % |
|
| 3.37 | % |
Noninterest income to total revenue (te) (a) |
|
| 24.01 | % |
|
| 24.31 | % |
|
| 25.05 | % |
Average loan/deposit ratio |
|
| 86.32 | % |
|
| 86.57 | % |
|
| 89.90 | % |
FTE employees (period-end) |
|
| 3,775 |
|
|
| 3,887 |
|
|
| 3,819 |
|
Capital Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
Common stockholders' equity to total assets |
|
| 10.61 | % |
|
| 10.55 | % |
|
| 10.84 | % |
Tangible common equity ratio (b) |
|
| 7.80 | % |
|
| 7.73 | % |
|
| 7.94 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Select performance measures excluding nonoperating items |
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings per share - diluted (d) |
| $ | 0.90 |
|
| $ | 0.86 |
|
| $ | 0.58 |
|
Return on average assets - operating |
|
| 1.17 | % |
|
| 1.10 | % |
|
| 0.83 | % |
Return on average common equity - operating |
|
| 11.05 | % |
|
| 10.37 | % |
|
| 7.48 | % |
Return on average tangible common equity - operating |
|
| 15.56 | % |
|
| 14.62 | % |
|
| 10.20 | % |
Efficiency ratio (c) |
|
| 57.51 | % |
|
| 56.57 | % |
|
| 61.16 | % |
Noninterest income as a percent of total revenue (te) - operating |
|
| 24.33 | % |
|
| 24.31 | % |
|
| 23.74 | % |
|
| Three Months Ended |
| |||||||||
|
| March 31, |
|
| December 31, |
|
| March 31, |
| |||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2018 |
| |||
Income Statement: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
| $ | 276,283 |
|
| $ | 271,357 |
|
| $ | 241,395 |
|
Interest income (te) (a) |
|
| 280,107 |
|
|
| 275,395 |
|
|
| 245,358 |
|
Interest expense |
|
| 57,029 |
|
|
| 53,924 |
|
|
| 35,731 |
|
Net interest income (te) |
|
| 223,078 |
|
|
| 221,471 |
|
|
| 209,627 |
|
Provision for loan and lease losses |
|
| 18,043 |
|
|
| 8,100 |
|
|
| 12,253 |
|
Noninterest income |
|
| 70,503 |
|
|
| 74,538 |
|
|
| 66,252 |
|
Noninterest expense (excluding amortization of intangibles) |
|
| 170,562 |
|
|
| 173,894 |
|
|
| 165,173 |
|
Amortization of intangibles |
|
| 5,138 |
|
|
| 5,472 |
|
|
| 5,618 |
|
Income before income taxes |
|
| 96,014 |
|
|
| 104,505 |
|
|
| 88,872 |
|
Income tax expense |
|
| 16,850 |
|
|
| 8,265 |
|
|
| 16,397 |
|
Net income |
| $ | 79,164 |
|
| $ | 96,240 |
|
| $ | 72,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings excluding nonoperating items |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 79,164 |
|
| $ | 96,240 |
|
| $ | 72,475 |
|
Provision for alleged fraud (b) |
| $ | 10,084 |
|
|
| — |
|
|
| — |
|
Nonoperating income |
|
| — |
|
|
| (604 | ) |
|
| 1,145 |
|
Nonoperating expense |
|
| — |
|
|
| 2,458 |
|
|
| 5,853 |
|
Income tax benefit |
|
| (2,118 | ) |
|
| (389 | ) |
|
| (1,216 | ) |
Nonoperating items, net of applicable income tax benefit |
|
| 7,966 |
|
|
| 1,465 |
|
|
| 5,782 |
|
Operating earnings |
| $ | 87,130 |
|
| $ | 97,705 |
|
| $ | 78,257 |
|
|
| Three Months Ended |
| |||||||||
|
| March 31, |
|
| December 31, |
|
| March 31, |
| |||
|
| 2019 |
|
| 2018 |
|
| 2018 |
| |||
Performance Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets |
|
| 1.13 | % |
|
| 1.35 | % |
|
| 1.08 | % |
Return on average common equity |
|
| 10.30 | % |
|
| 12.76 | % |
|
| 10.23 | % |
Return on average tangible common equity |
|
| 14.38 | % |
|
| 18.15 | % |
|
| 14.41 | % |
Earning asset yield (te) (a) |
|
| 4.35 | % |
|
| 4.21 | % |
|
| 3.95 | % |
Total cost of funds |
|
| 0.89 | % |
|
| 0.82 | % |
|
| 0.58 | % |
Net interest margin (te) |
|
| 3.46 | % |
|
| 3.39 | % |
|
| 3.37 | % |
Noninterest income to total revenue (te) |
|
| 24.01 | % |
|
| 25.18 | % |
|
| 24.01 | % |
Average loan/deposit ratio |
|
| 87.08 | % |
|
| 88.09 | % |
|
| 86.32 | % |
FTE employees (period-end) |
|
| 3,885 |
|
|
| 3,933 |
|
|
| 3,775 |
|
Capital Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
Common stockholders' equity to total assets |
|
| 11.20 | % |
|
| 10.91 | % |
|
| 10.61 | % |
Tangible common equity ratio (c) |
|
| 8.36 | % |
|
| 8.02 | % |
|
| 7.80 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Select performance measures excluding nonoperating items |
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings per share - diluted (d) |
| $ | 1.00 |
|
| $ | 1.12 |
|
| $ | 0.90 |
|
Return on average assets - operating |
|
| 1.24 | % |
|
| 1.37 | % |
|
| 1.17 | % |
Return on average common equity - operating |
|
| 11.33 | % |
|
| 12.95 | % |
|
| 11.05 | % |
Return on average tangible common equity - operating |
|
| 15.83 | % |
|
| 18.43 | % |
|
| 15.56 | % |
Efficiency ratio (e) |
|
| 58.10 | % |
|
| 58.03 | % |
|
| 57.51 | % |
Noninterest income as a percent of total revenue (te) - operating |
|
| 24.01 | % |
|
| 25.03 | % |
|
| 24.33 | % |
(a) | Taxable equivalent (te) amounts |
(b) | Provision for loan loss in response to circumstances surrounding the bankruptcy filing and alleged fraud by DC Solar. |
(c) | The tangible common equity ratio is common stockholders’ equity less intangible assets divided by total assets less intangible assets. |
(d) |
|
(e) | The efficiency ratio is noninterest expense to total net interest (te) and noninterest income, excluding amortization of purchased intangibles and nonoperating items. |
|
|
44
41
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Three Months Ended |
| Three Months Ended |
| |||||||||||||||||||
|
| March 31, |
| December 31, |
| March 31, |
| March 31, |
|
| December 31, |
|
| March 31, |
| |||||||||
($ in thousands) |
| 2018 |
| 2017 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
| |||||||||
Asset Quality Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans (a) |
| $ | 275,179 |
|
| $ | 252,800 |
|
| $ | 262,649 |
|
| $ | 204,831 |
|
| $ | 187,295 |
|
| $ | 275,179 |
|
Restructured loans - still accruing |
|
| 166,520 |
|
|
| 120,493 |
|
|
| 47,267 |
|
|
| 117,578 |
|
|
| 139,042 |
|
|
| 166,520 |
|
Total nonperforming loans |
|
| 441,699 |
|
|
| 373,293 |
|
|
| 309,916 |
|
|
| 322,409 |
|
|
| 326,337 |
|
|
| 441,699 |
|
Other real estate (ORE) and foreclosed assets |
|
| 26,630 |
|
|
| 27,542 |
|
|
| 17,156 |
|
|
| 27,148 |
|
|
| 26,270 |
|
|
| 26,630 |
|
Total nonperforming assets |
| $ | 468,329 |
|
| $ | 400,835 |
|
| $ | 327,072 |
|
| $ | 349,557 |
|
| $ | 352,607 |
|
| $ | 468,329 |
|
Accruing loans 90 days past due (a) |
| $ | 12,724 |
|
| $ | 27,766 |
|
| $ | 590 |
| ||||||||||||
Accruing loans 90 days past due (b) |
| $ | 20,308 |
|
| $ | 5,589 |
|
| $ | 12,724 |
| ||||||||||||
Net charge-offs |
|
| 12,200 |
|
|
| 20,800 |
|
|
| 30,029 |
|
|
| 17,869 |
|
|
| 28,136 |
|
|
| 12,200 |
|
Allowance for loan losses |
|
| 210,713 |
|
|
| 217,308 |
|
|
| 213,550 |
| ||||||||||||
Provision for loan losses |
|
| 12,253 |
|
|
| 14,986 |
|
|
| 15,991 |
| ||||||||||||
Allowance for loan and lease losses |
|
| 194,688 |
|
|
| 194,514 |
|
|
| 210,713 |
| ||||||||||||
Provision for loan and lease losses |
|
| 18,043 |
|
|
| 8,100 |
|
|
| 12,253 |
| ||||||||||||
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets to loans, ORE and foreclosed assets |
|
| 2.45 | % |
|
| 2.11 | % |
|
| 1.79 | % |
|
| 1.74 | % |
|
| 1.76 | % |
|
| 2.45 | % |
Accruing loans 90 days past due to loans |
|
| 0.07 | % |
|
| 0.15 | % |
|
| 0.00 | % |
|
| 0.10 | % |
|
| 0.03 | % |
|
| 0.07 | % |
Nonperforming assets + accruing loans 90 days past due to loans, ORE and foreclosed assets |
|
| 2.52 | % |
|
| 2.25 | % |
|
| 1.80 | % |
|
| 1.84 | % |
|
| 1.79 | % |
|
| 2.52 | % |
Net charge-offs to average loans |
|
| 0.26 | % |
|
| 0.44 | % |
|
| 0.70 | % |
|
| 0.36 | % |
|
| 0.56 | % |
|
| 0.26 | % |
Allowance for loan losses to period-end loans |
|
| 1.10 | % |
|
| 1.14 | % |
|
| 1.17 | % |
|
| 0.97 | % |
|
| 0.97 | % |
|
| 1.10 | % |
Allowance for loan losses to nonperforming loans + accruing loans 90 days past due |
|
| 46.37 | % |
|
| 54.18 | % |
|
| 68.77 | % |
|
| 56.81 | % |
|
| 58.60 | % |
|
| 46.37 | % |
(a) | Included in nonaccrual loans are nonaccruing restructured loans totaling $105.9 million, $85.5 million and $118.0 million at 3/31/2019, 12/31/2018 and 3/31/2018, respectively. Nonaccrual loans and accruing loans past due 90 days or more do not include purchased credit impaired loans |
(b) | Excludes 90+ accruing troubled debt restructured loans already reflected in |
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| March 31, |
| December 31, |
| September 30, |
|
| June 30, |
| March 31, | ||||
(in thousands) |
| 2018 |
| 2017 |
| 2017 |
| 2017 |
| 2017 | |||||
Period-End Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income (a) |
| $ | 19,092,504 |
| $ | 19,004,163 |
| $ | 18,786,285 |
| $ | 18,473,841 |
| $ | 18,204,868 |
Loans held for sale |
|
| 21,827 |
|
| 39,865 |
|
| 23,236 |
|
| 26,787 |
|
| 20,883 |
Securities |
|
| 5,930,076 |
|
| 5,888,380 |
|
| 5,624,552 |
|
| 5,668,836 |
|
| 5,001,273 |
Short-term investments |
|
| 61,541 |
|
| 92,384 |
|
| 111,725 |
|
| 126,428 |
|
| 51,273 |
Earning assets |
|
| 25,105,948 |
|
| 25,024,792 |
|
| 24,545,798 |
|
| 24,295,892 |
|
| 23,278,297 |
Allowance for loan losses |
|
| (210,713) |
|
| (217,308) |
|
| (223,122) |
|
| (221,865) |
|
| (213,550) |
Goodwill |
|
| 745,523 |
|
| 745,523 |
|
| 739,403 |
|
| 740,265 |
|
| 716,761 |
Other intangible assets, net |
|
| 85,021 |
|
| 90,640 |
|
| 96,525 |
|
| 101,694 |
|
| 86,952 |
Other assets |
|
| 1,571,558 |
|
| 1,692,439 |
|
| 1,658,151 |
|
| 1,714,583 |
|
| 1,616,566 |
Total assets |
| $ | 27,297,337 |
| $ | 27,336,086 |
| $ | 26,816,755 |
| $ | 26,630,569 |
| $ | 25,485,026 |
Noninterest-bearing deposits |
| $ | 8,230,060 |
| $ | 8,307,497 |
| $ | 7,896,384 |
| $ | 7,887,867 |
| $ | 7,722,279 |
Interest-bearing transaction and savings deposits |
|
| 8,058,793 |
|
| 8,181,554 |
|
| 7,893,546 |
|
| 8,402,133 |
|
| 7,162,760 |
Interest-bearing public funds deposits |
|
| 3,108,008 |
|
| 3,040,318 |
|
| 2,762,048 |
|
| 2,537,030 |
|
| 2,595,263 |
Time deposits |
|
| 3,088,861 |
|
| 2,723,833 |
|
| 2,981,881 |
|
| 2,615,785 |
|
| 2,441,718 |
Total interest-bearing deposits |
|
| 14,255,662 |
|
| 13,945,705 |
|
| 13,637,475 |
|
| 13,554,948 |
|
| 12,199,741 |
Total deposits |
|
| 22,485,722 |
|
| 22,253,202 |
|
| 21,533,859 |
|
| 21,442,815 |
|
| 19,922,020 |
Short-term borrowings |
|
| 1,452,097 |
|
| 1,703,890 |
|
| 1,737,151 |
|
| 1,810,907 |
|
| 2,121,932 |
Long-term debt |
|
| 300,443 |
|
| 305,513 |
|
| 331,179 |
|
| 407,876 |
|
| 525,082 |
Other liabilities |
|
| 163,037 |
|
| 188,532 |
|
| 351,291 |
|
| 155,009 |
|
| 152,370 |
Stockholders' equity |
|
| 2,896,038 |
|
| 2,884,949 |
|
| 2,863,275 |
|
| 2,813,962 |
|
| 2,763,622 |
Total liabilities & stockholders' equity |
| $ | 27,297,337 |
| $ | 27,336,086 |
| $ | 26,816,755 |
| $ | 26,630,569 |
| $ | 25,485,026 |
42
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| |||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| |||||
Period-End Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income |
| $ | 20,112,838 |
|
| $ | 20,026,411 |
|
| $ | 19,543,717 |
|
| $ | 19,370,917 |
|
| $ | 19,092,504 |
|
Loans held for sale |
|
| 27,437 |
|
|
| 28,150 |
|
|
| 29,043 |
|
|
| 36,047 |
|
|
| 21,827 |
|
Securities |
|
| 5,577,522 |
|
|
| 5,670,584 |
|
|
| 5,987,447 |
|
|
| 6,113,873 |
|
|
| 5,930,076 |
|
Short-term investments |
|
| 163,762 |
|
|
| 111,094 |
|
|
| 108,074 |
|
|
| 104,210 |
|
|
| 61,541 |
|
Earning assets |
|
| 25,881,559 |
|
|
| 25,836,239 |
|
|
| 25,668,281 |
|
|
| 25,625,047 |
|
|
| 25,105,948 |
|
Allowance for loan losses |
|
| (194,688 | ) |
|
| (194,514 | ) |
|
| (214,550 | ) |
|
| (214,530 | ) |
|
| (210,713 | ) |
Goodwill and other intangible assets |
|
| 883,097 |
|
|
| 887,123 |
|
|
| 892,595 |
|
|
| 825,223 |
|
|
| 830,544 |
|
Other assets |
|
| 1,920,263 |
|
|
| 1,707,059 |
|
|
| 1,751,849 |
|
|
| 1,689,707 |
|
|
| 1,571,558 |
|
Total assets |
| $ | 28,490,231 |
|
| $ | 28,235,907 |
|
| $ | 28,098,175 |
|
| $ | 27,925,447 |
|
| $ | 27,297,337 |
|
Noninterest-bearing deposits |
| $ | 8,158,658 |
|
| $ | 8,499,027 |
|
| $ | 8,140,530 |
|
| $ | 8,165,796 |
|
| $ | 8,230,060 |
|
Interest-bearing transaction and savings deposits |
|
| 8,224,203 |
|
|
| 8,000,093 |
|
|
| 7,972,417 |
|
|
| 7,711,542 |
|
|
| 8,058,793 |
|
Interest-bearing public funds deposits |
|
| 3,229,589 |
|
|
| 3,006,516 |
|
|
| 2,613,858 |
|
|
| 2,854,839 |
|
|
| 3,108,008 |
|
Time deposits |
|
| 3,767,844 |
|
|
| 3,644,549 |
|
|
| 3,691,002 |
|
|
| 3,503,161 |
|
|
| 3,088,861 |
|
Total interest-bearing deposits |
|
| 15,221,636 |
|
|
| 14,651,158 |
|
|
| 14,277,277 |
|
|
| 14,069,542 |
|
|
| 14,255,662 |
|
Total deposits |
|
| 23,380,294 |
|
|
| 23,150,185 |
|
|
| 22,417,807 |
|
|
| 22,235,338 |
|
|
| 22,485,722 |
|
Short-term borrowings |
|
| 1,388,735 |
|
|
| 1,589,128 |
|
|
| 2,276,647 |
|
|
| 2,314,190 |
|
|
| 1,452,097 |
|
Long-term debt |
|
| 224,962 |
|
|
| 224,993 |
|
|
| 215,912 |
|
|
| 266,009 |
|
|
| 300,443 |
|
Other liabilities |
|
| 305,665 |
|
|
| 190,261 |
|
|
| 208,931 |
|
|
| 180,355 |
|
|
| 163,037 |
|
Stockholders' equity |
|
| 3,190,575 |
|
|
| 3,081,340 |
|
|
| 2,978,878 |
|
|
| 2,929,555 |
|
|
| 2,896,038 |
|
Total liabilities & stockholders' equity |
| $ | 28,490,231 |
|
| $ | 28,235,907 |
|
| $ | 28,098,175 |
|
| $ | 27,925,447 |
|
| $ | 27,297,337 |
|
|
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
| |||||||||||||||
|
| Three Months Ended |
| Three Months Ended |
| ||||||||||||||||
|
| March 31, |
| December 31, |
| March 31, |
| March 31, |
|
| December 31, |
|
| March 31, |
| ||||||
(in thousands) |
| 2018 |
| 2017 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
| ||||||
Average Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income (a) |
| $ | 19,028,490 |
| $ | 18,839,537 |
| $ | 17,303,044 | ||||||||||||
Total loans, net of unearned income |
| $ | 20,126,948 |
|
| $ | 19,817,729 |
|
| $ | 19,028,490 |
| |||||||||
Loans held for sale |
| 32,194 |
| 22,231 |
| 21,328 |
|
| 20,618 |
|
|
| 22,187 |
|
|
| 32,194 |
| |||
Securities (b) |
| 5,897,290 |
| 5,801,451 |
| 5,037,286 | |||||||||||||||
Securities (a) |
|
| 5,656,689 |
|
|
| 5,965,461 |
|
|
| 5,897,290 |
| |||||||||
Short-term investments |
|
| 148,309 |
|
| 149,457 |
|
| 408,343 |
|
| 216,192 |
|
|
| 205,806 |
|
|
| 148,309 |
|
Earning assets |
|
| 25,106,283 |
|
| 24,812,676 |
|
| 22,770,001 |
|
| 26,020,447 |
|
|
| 26,011,183 |
|
|
| 25,106,283 |
|
Allowance for loan losses |
| (216,796) |
| (225,769) |
| (226,503) |
|
| (196,384 | ) |
|
| (213,902 | ) |
|
| (216,796 | ) | |||
Goodwill and other intangible assets |
| 833,269 |
| 833,162 |
| 729,766 |
|
| 885,381 |
|
|
| 889,820 |
|
|
| 833,269 |
| |||
Other assets |
|
| 1,514,321 |
|
| 1,553,438 |
|
| 1,483,242 |
|
| 1,742,104 |
|
|
| 1,572,862 |
|
|
| 1,514,321 |
|
Total assets |
| $ | 27,237,077 |
| $ | 26,973,507 |
| $ | 24,756,506 |
| $ | 28,451,548 |
|
| $ | 28,259,963 |
|
| $ | 27,237,077 |
|
Noninterest-bearing deposits |
| $ | 7,951,121 |
| $ | 8,095,563 |
| $ | 7,462,258 |
| $ | 8,227,698 |
|
| $ | 8,260,487 |
|
| $ | 7,951,121 |
|
Interest-bearing transaction and savings deposits |
|
| 8,043,176 |
|
| 7,927,250 |
|
| 6,897,660 |
|
| 8,082,584 |
|
|
| 7,940,670 |
|
|
| 8,043,176 |
|
Interest-bearing public fund deposits |
| 3,070,079 |
| 2,803,547 |
| 2,547,874 |
|
| 3,060,565 |
|
|
| 2,680,837 |
|
|
| 3,070,079 |
| |||
Time deposits |
|
| 2,979,043 |
|
| 2,936,397 |
|
| 2,340,066 |
|
| 3,743,292 |
|
|
| 3,616,151 |
|
|
| 2,979,043 |
|
Total interest-bearing deposits |
|
| 14,092,298 |
|
| 13,667,194 |
|
| 11,785,600 |
|
| 14,886,441 |
|
|
| 14,237,658 |
|
|
| 14,092,298 |
|
Total deposits |
|
| 22,043,419 |
|
| 21,762,757 |
|
| 19,247,858 |
|
| 23,114,139 |
|
|
| 22,498,145 |
|
|
| 22,043,419 |
|
Short-term borrowings |
| 1,823,033 |
| 1,763,189 |
| 2,127,256 |
|
| 1,684,904 |
|
|
| 2,330,280 |
|
|
| 1,823,033 |
| |||
Long-term debt |
| 305,117 |
| 312,719 |
| 458,050 |
|
| 224,966 |
|
|
| 222,339 |
|
|
| 305,117 |
| |||
Other liabilities |
| 192,695 |
| 267,367 |
| 190,253 |
|
| 309,488 |
|
|
| 215,934 |
|
|
| 192,695 |
| |||
Stockholders' equity |
|
| 2,872,813 |
|
| 2,867,475 |
|
| 2,733,089 |
|
| 3,118,051 |
|
|
| 2,993,265 |
|
|
| 2,872,813 |
|
Total liabilities & stockholders' equity |
| $ | 27,237,077 |
| $ | 26,973,507 |
| $ | 24,756,506 |
| $ | 28,451,548 |
|
| $ | 28,259,963 |
|
| $ | 27,237,077 |
|
(a) |
|
| Average securities do not include unrealized holding gains/losses on available for sale securities. |
46
Reconciliation of Non-GAAP Measures
Reported to core net interest income (te) and core net interest margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| ||||||||||||||||||
| March 31, |
| December 31, |
| September 30, |
| June 30, |
| March 31, |
| ||||||||||
($ in thousands) |
| 2018 |
|
|
| 2017 |
|
|
| 2017 |
|
|
| 2017 |
|
|
| 2017 |
|
|
Net interest income | $ | 205,664 |
|
| $ | 208,047 |
|
| $ | 202,857 |
|
| $ | 199,717 |
|
| $ | 181,691 |
|
|
Tax-equivalent adjustment (te)(a) |
| 3,963 |
|
|
| 8,949 |
|
|
| 8,579 |
|
|
| 8,564 |
|
|
| 8,298 |
|
|
Net interest income (te) | $ | 209,627 |
|
| $ | 216,996 |
|
| $ | 211,436 |
|
| $ | 208,281 |
|
| $ | 189,989 |
|
|
Purchase accounting adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan discount accretion (b) |
| 7,108 |
|
|
| 8,280 |
|
|
| 7,711 |
|
|
| 8,801 |
|
|
| 5,017 |
|
|
Bond premium amortization (c) |
| (315) |
|
|
| (320) |
|
|
| (364) |
|
|
| (398) |
|
|
| (454) |
|
|
Total net purchase accounting adjustments (d) |
| 6,793 |
|
|
| 7,960 |
|
|
| 7,347 |
|
|
| 8,403 |
|
|
| 4,563 |
|
|
Net interest income (te) - core | $ | 202,834 |
|
| $ | 209,036 |
|
| $ | 204,089 |
|
| $ | 199,878 |
|
| $ | 185,426 |
|
|
Average earning assets | $ | 25,106,283 |
|
| $ | 24,812,676 |
|
| $ | 24,487,426 |
|
| $ | 24,338,130 |
|
| $ | 22,770,001 |
|
|
Net interest margin - reported |
| 3.37 | % |
|
| 3.48 | % |
|
| 3.44 | % |
|
| 3.43 | % |
|
| 3.37 | % |
|
Net purchase accounting adjustments |
| 0.11 | % |
|
| 0.13 | % |
|
| 0.12 | % |
|
| 0.14 | % |
|
| 0.08 | % |
|
Net interest margin - core |
| 3.26 | % |
|
| 3.35 | % |
|
| 3.32 | % |
|
| 3.29 | % |
|
| 3.29 | % |
|
43
Reconciliation of Non-GAAP Measures
Operating revenue (te) and operating pre-provision net revenue (te)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
| Three Months Ended |
| Three Months Ended |
| ||||||||||||||||||||||||||||||
| March 31, |
| December 31, |
| September 30, |
| June 30, |
| March 31, |
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| ||||||||||
(in thousands) | 2018 |
| 2017 |
| 2017 |
| 2017 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| ||||||||||
Net interest income | $ | 205,664 |
| $ | 208,047 |
| $ | 202,857 |
| $ | 199,717 |
| $ | 181,691 |
| $ | 219,254 |
|
| $ | 217,433 |
|
| $ | 214,194 |
|
| $ | 211,547 |
|
| $ | 205,664 |
|
Noninterest income |
| 66,252 |
|
| 69,688 |
|
| 67,115 |
|
| 67,487 |
|
| 63,491 |
|
| 70,503 |
|
|
| 74,538 |
|
|
| 75,518 |
|
|
| 68,832 |
|
|
| 66,252 |
|
Total revenue | $ | 271,916 |
| $ | 277,735 |
| $ | 269,972 |
| $ | 267,204 |
| $ | 245,182 |
| $ | 289,757 |
|
| $ | 291,971 |
|
| $ | 289,712 |
|
| $ | 280,379 |
|
| $ | 271,916 |
|
Tax-equivalent adjustment (a) |
| 3,963 |
|
| 8,949 |
|
| 8,579 |
|
| 8,564 |
|
| 8,298 |
|
| 3,824 |
|
|
| 4,038 |
|
|
| 4,095 |
|
|
| 4,081 |
|
|
| 3,963 |
|
Nonoperating revenue |
| 1,145 |
|
| — |
|
| — |
|
| — |
|
| (4,352) |
|
| — |
|
|
| (604 | ) |
|
| — |
|
|
| — |
|
|
| 1,145 |
|
Operating revenue (te) | $ | 277,024 |
| $ | 286,684 |
| $ | 278,551 |
| $ | 275,768 |
| $ | 249,128 |
| $ | 293,581 |
|
| $ | 295,405 |
|
| $ | 293,807 |
|
| $ | 284,460 |
|
| $ | 277,024 |
|
Noninterest expense |
| (170,791) |
|
| (168,063) |
|
| (177,616) |
|
| (183,470) |
|
| (163,542) |
|
| (175,700 | ) |
|
| (179,366 | ) |
|
| (181,187 | ) |
|
| (184,402 | ) |
|
| (170,791 | ) |
Nonoperating expense |
| 5,853 |
|
| — |
|
| 11,393 |
|
| 10,617 |
|
| 6,463 |
|
| - |
|
|
| 2,458 |
|
|
| 4,827 |
|
|
| 15,805 |
|
|
| 5,853 |
|
Operating pre-prevision net revenue (te) | $ | 112,086 |
| $ | 118,621 |
| $ | 112,328 |
| $ | 102,915 |
| $ | 92,049 | ||||||||||||||||||||
Operating pre-provision net revenue (te) |
| $ | 117,881 |
|
| $ | 118,497 |
|
| $ | 117,447 |
|
| $ | 115,863 |
|
| $ | 112,086 |
|
Operating earnings per share - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
| Three Months Ended |
| Three Months Ended |
| ||||||||||||||||||||||||||||||
| March 31, |
| December 31, |
| September 30, |
| June 30, |
| March 31, |
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| ||||||||||
(in thousands) | 2018 |
| 2017 |
| 2017 |
| 2017 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| ||||||||||
Net income | $ | 72,475 |
| $ | 55,449 |
| $ | 58,902 |
| $ | 52,267 |
| $ | 49,014 |
| $ | 79,164 |
|
| $ | 96,240 |
|
| $ | 83,878 |
|
| $ | 71,177 |
|
| $ | 72,475 |
|
Net income allocated to participating securities |
| (1,366) |
|
| (1,104) |
|
| (1,244) |
|
| (1,166) |
|
| (1,156) |
|
| (1,337 | ) |
|
| (1,691 | ) |
|
| (1,544 | ) |
|
| (1,328 | ) |
|
| (1,366 | ) |
Net income available to common shareholders |
| 71,109 |
|
| 54,345 |
| $ | 57,658 |
| $ | 51,101 |
|
| 47,858 |
|
| 77,827 |
|
|
| 94,549 |
|
|
| 82,334 |
|
|
| 69,849 |
|
|
| 71,109 |
|
Nonoperating items, net of applicable income tax |
| 5,782 |
|
| 19,520 |
|
| 7,405 |
|
| 6,902 |
|
| 1,372 |
|
| 7,966 |
|
|
| 1,465 |
|
|
| 3,813 |
|
|
| 12,486 |
|
|
| 5,782 |
|
Nonoperating items allocated to participating securities |
| (109) |
|
| (390) |
|
| (156) |
|
| (154) |
|
| (32) |
|
| (134 | ) |
|
| (26 | ) |
|
| (71 | ) |
|
| (233 | ) |
|
| (109 | ) |
Operating earnings available to common shareholders | $ | 76,782 |
| $ | 73,475 |
|
| 64,907 |
|
| 57,849 |
| $ | 49,198 |
|
| 85,659 |
|
|
| 95,988 |
|
|
| 86,076 |
|
|
| 82,102 |
|
|
| 76,782 |
|
Weighted average common shares - diluted |
| 85,423 |
|
| 85,303 |
|
| 84,980 |
|
| 84,867 |
|
| 84,624 |
|
| 85,800 |
|
|
| 85,677 |
|
|
| 85,539 |
|
|
| 85,483 |
|
|
| 85,423 |
|
Earnings per share -diluted | $ | 0.83 |
| $ | 0.64 |
| $ | 0.68 |
| $ | 0.60 |
| $ | 0.57 | ||||||||||||||||||||
Earnings per share - diluted |
| $ | 0.91 |
|
| $ | 1.10 |
|
| $ | 0.96 |
|
| $ | 0.82 |
|
| $ | 0.83 |
| ||||||||||||||
Operating earnings per share - diluted | $ | 0.90 |
| $ | 0.86 |
| $ | 0.76 |
| $ | 0.68 |
| $ | 0.58 |
| $ | 1.00 |
|
| $ | 1.12 |
|
| $ | 1.01 |
|
| $ | 0.96 |
|
| $ | 0.90 |
|
(a) | Taxable equivalent adjustment (te) amounts are calculated using |
|
|
|
|
|
|
44
LIQUIDITY
Liquidity management is focused on ensuring that funds are available to meet the cash flow requirements of our depositors and borrowers, while also meeting the operating, capital and strategic cash flow needs of the Company, the Bank and other subsidiaries. Hancock develops itsWe develop liquidity management strategies and measuresmeasure and regularly monitorsmonitor liquidity risk as part of itsour overall asset/liability management process.
The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, as well as maturities and repayments of investment securities.securities and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with the Federal Reserve Bank or with other commercial banks are additional sources of liquidity to meet cash flow requirements. Free securities represent unpledged securities that can be sold or used as collateral for borrowings, and include unpledged securities assigned to short-term dealer repurchase agreements or to the Federal Reserve Bank discount window. Management has established an internal target for the ratio of free securities to total securities to be 20% or more. As shown in the table below, our ratio of free securities to total securities was 33.57% at March 31, 2019, compared to 41.39% at December 31, 2018 and 43.35% at March 31, 2018, compared to 44.15% at December 31, 2017 and 20.29% at March 31, 2017.2018. The total of pledged securities at March 31, 20182019 was $3.4$3.7 billion, up $76$391.2 million from December 31, 2017.2018. Securities are pledged as collateral related to public funds and repurchase agreements. Total securities of $5.6 billion at March 31, 2019 were down $93.1 million compared to December 31, 2018 were $0.9 billion higherand $297.7 million lower than at March 31, 2017.2018.
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
| March 31, |
| December 31, |
| September 30, |
| June 30, |
| March 31, |
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| ||||||||||
Liquidity Metrics | 2018 |
| 2017 |
| 2017 |
| 2017 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| ||||||||||
Free securities / total securities | 43.35 | % |
| 44.15 | % |
| 36.61 | % |
| 33.57 | % |
| 20.29 | % |
|
| 33.57 | % |
|
| 41.39 | % |
|
| 48.90 | % |
|
| 49.31 | % |
|
| 43.35 | % |
Core deposits / total deposits | 90.84 | % |
| 93.03 | % |
| 91.70 | % |
| 93.05 | % |
| 92.93 | % |
|
| 89.98 | % |
|
| 90.47 | % |
|
| 89.71 | % |
|
| 89.65 | % |
|
| 90.94 | % |
Wholesale funds / core deposits | 8.58 | % |
| 9.71 | % |
| 10.47 | % |
| 11.12 | % |
| 14.30 | % |
|
| 13.61 | % |
|
| 14.53 | % |
|
| 19.34 | % |
|
| 19.93 | % |
|
| 14.32 | % |
Quarter-to-date average loans /quarter-to-date average deposits | 86.32 | % |
| 86.57 | % |
| 87.08 | % |
| 87.76 | % |
| 89.90 | % | ||||||||||||||||||||
Quarterly average loans /quarterly average deposits |
|
| 87.08 | % |
|
| 88.09 | % |
|
| 88.39 | % |
|
| 86.84 | % |
|
| 86.32 | % |
The liability portion of the balance sheet provides liquidity mainly through the Company’s ability to use cash sourced from various customers’ interest-bearing and noninterest-bearing deposit and sweep accounts. At March 31, 2019, deposits totaled $23.4 billion, an increase of $230.1 million, or 1%, from December 31, 2018 and an increase of $894.6 million, or 4%, from March 31, 2018. Core deposits consist of total deposits excluding certificates of deposit (“CDs”) of $250,000 or more and brokered deposits. Core deposits totaled $21.0 billion at March 31, 2019, an increase of $93.6 million from December 31, 2018, and $591.2 million from March 31, 2018. The ratio of core deposits to total deposits was 90.84%89.98% at March 31, 2018,2019, compared to 93.03%90.47% at December 31, 2017December31, 2018 and 92.93%90.94% at March 31, 2017. Core deposits totaled $20.4 billion at March 31, 2018, a decrease of $0.3 billion from December 31, 2017, and up $1.9 billion from March 31, 2017. The increase from March 31, 2017 was primarily due to the FNBC II transaction.2018. Brokered deposits totaled $1.2 billion as of March 31, 2018, a $0.4 billion2019, an increase of $21.2 million compared to December 31, 20172018 and $74.9 million compared to March 31, 2017.2018. The use of brokered deposits as a funding source is subject to strict parameterscertain policies regarding the amount, term and interest rate.
Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings from customers provide additional sources of liquidity to meet short-term funding requirements. Besides funding from customer sources, the Bank has a line of credit with the FHLB that is secured by blanket pledges of certain mortgage loans. At March 31, 2018,2019, the Bank had borrowings of approximately $1.0 billion$900 million and had approximately $3.5$3.8 billion available under this line. The Bank also has unused borrowing capacity at the Federal Reserve’s discount window of approximately $2.2$2.7 billion; there were no outstanding borrowings with the Federal Reserve at any date during the twelve months ended March 31, 2018.any period covered by this report.
Wholesale funds, which are comprised of short-term borrowings, and long-term debt and brokered deposits were 8.58%13.61% of core deposits at March 31, 2018,2019, compared to 9.71%14.53% at December 31, 20172018 and 14.30%14.32% at March 31, 2017.2018. The linked quarter decrease in wholesale funds was primarily related to a $0.3 million decreasedecreases in both wholesale funds and core deposits.FHLB borrowings. The year over year decrease in wholesale funds was primarily duerelated to a decreasedecreases in FHLB borrowings. Managementborrowings, long-term debt and federal funds purchased, partially offset by increases in brokered deposits and repurchase agreements. The Company has established an internal target for wholesale funds to be less than 25% of core deposits.
Another key measure the Company usesused to monitor itsour liquidity position is the loan-to-deposit ratio (average loans outstanding for the reporting period divided by average deposits outstanding). The loan-to-deposit ratio measures the amount of funds the Company lends out for each dollar of deposits on hand. Our loan-to-deposit ratio for the first quarter of 20182019 was 86.32%87.08%, compared to 86.57% at December 31, 201788.09% for the fourth quarter of 2018 and 89.90% at March 31, 2017.86.32% for the first quarter of 2018. Management has an established a target range for itsthe loan-to-deposit ratio of 83%87% to 87%89%.
Cash generated from operations is another important source of funds to meet liquidity needs. The consolidated statements of cash flows present operating cash flows and summarize all significant sources and uses of funds for the three months ended March 31, 20182019 and 2017.2018.
Dividends received from the Bank have been the primary source of funds available to the Parent Company for the payment of dividends to our stockholders and for servicing its debt. The liquidity management process takes into account the various regulatory provisions that can limit the amount of dividends the Bank can distribute to the Parent Company.Parent. The Parent Company maintainstargets cash and other liquid assets to provide liquidity in an amount sufficient to fund a minimum of at leastapproximately six quarters of anticipated common stockholder dividends. dividends, but will temporarily operate below that level if a return to the target can be achieved in the near-term.
45
CAPITAL RESOURCES
Stockholders’ equity totaled $2.9$3.2 billion at March 31, 2018,2019, up $11$109 million, or less than 1%4%, from December 31, 20172018 and up $132$295 million, or 5%10%, from March 31, 2017.2018. The tangible common equity ratio was 8.36 % at March 31, 2019, compared to 8.02% at December 31, 2018 and 7.80% at March 31, 2018, compared to 7.73% at December 31, 2017 and 7.94% at March 31, 2017.2018. The increase in the ratio from prior quarter is due to increases in net tangible retained earnings partially offset by the changeand net gains on fair value adjustments of securities available for sale included in accumulated other comprehensive loss.income. The decreaseincrease from March 31, 20172018 was primarily related to the increasechange in net tangible assetsretained earnings and the increase in goodwill and core deposits related to the FNBC transactions, and the changereduction in accumulated other comprehensive loss,losses, partially offset by net tangible earnings. The Companyasset growth and an increase in intangible assets related to acquisition transactions. Management has established an internal target for the tangible common equity ratio of at least 8.00%. However,; however, management will allow the Company’s tangible common equity ratio to drop below 8.00% on a temporary basis if it believes that the shortfall can be replenished through normal operations.operations within a short time frame.
48
The regulatory capital ratios of the Company and the Bank as of March 31, 20182019 continued to improve and remainremained well in excess of current regulatory minimum requirements. The Company and the Bank have been categorized as “well-capitalized” in the most recent notices received from our regulators. Both entities currently exceed all capital requirements of the Basel III requirements, including the fully phased-in conservation buffer. SeeRefer to the Supervision and Regulation section in the Company’s Annual Report on Form 10-K for the year ended December 31, 20172018 for further discussion of the Company’sour capital requirements.
The following table shows the regulatory capital ratios for the Company and the Bank as calculated under current rules for the indicated periods. The Company’s and Bank’s regulatory filings for quarter ended March 31, 2018 were filed in the names of Hancock Holding Company and Whitney Bank, respectively.
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| Well- |
| March 31, |
| December 31, |
| September 30, |
|
| June 30, |
| March 31, | |||||
|
| Capitalized |
| 2018 |
| 2017 |
| 2017 |
|
| 2017 |
| 2017 | |||||
Total capital (to risk weighted assets) |
|
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|
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|
|
Hancock Holding Company |
| 10.00 | % |
| 12.00 | % |
| 11.90 | % |
| 11.84 | % |
| 11.76 | % |
| 11.91 | % |
Whitney Bank |
| 10.00 | % |
| 11.60 | % |
| 11.55 | % |
| 11.35 | % |
| 11.33 | % |
| 11.52 | % |
Tier 1 common equity capital (to risk weighted assets) |
|
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|
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|
|
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|
|
Hancock Holding Company |
| 6.50 | % |
| 10.35 | % |
| 10.21 | % |
| 10.10 | % |
| 10.01 | % |
| 10.16 | % |
Whitney Bank |
| 6.50 | % |
| 10.63 | % |
| 10.54 | % |
| 10.31 | % |
| 10.28 | % |
| 10.49 | % |
Tier 1 capital (to risk weighted assets) |
|
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|
Hancock Holding Company |
| 8.00 | % |
| 10.35 | % |
| 10.21 | % |
| 10.10 | % |
| 10.01 | % |
| 10.16 | % |
Whitney Bank |
| 8.00 | % |
| 10.63 | % |
| 10.54 | % |
| 10.31 | % |
| 10.28 | % |
| 10.49 | % |
Tier 1 leverage capital |
|
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|
|
|
|
Hancock Holding Company |
| 5.00 | % |
| 8.51 | % |
| 8.43 | % |
| 8.34 | % |
| 8.21 | % |
| 8.79 | % |
Whitney Bank |
| 5.00 | % |
| 8.75 | % |
| 8.72 | % |
| 8.53 | % |
| 8.44 | % |
| 9.09 | % |
|
| Well- |
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| ||||||
|
| Capitalized |
|
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| ||||||
Total capital (to risk weighted assets) |
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Hancock Whitney Corporation |
|
| 10.00 | % |
|
| 12.24 | % |
|
| 11.99 | % |
|
| 11.98 | % |
|
| 12.12 | % |
|
| 12.00 | % |
Hancock Whitney Bank |
|
| 10.00 | % |
|
| 11.73 | % |
|
| 11.17 | % |
|
| 11.25 | % |
|
| 11.57 | % |
|
| 11.60 | % |
Tier 1 common equity capital (to risk weighted assets) |
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Hancock Whitney Corporation |
|
| 6.50 | % |
|
| 10.74 | % |
|
| 10.48 | % |
|
| 10.36 | % |
|
| 10.48 | % |
|
| 10.35 | % |
Hancock Whitney Bank |
|
| 6.50 | % |
|
| 10.88 | % |
|
| 10.32 | % |
|
| 10.30 | % |
|
| 10.60 | % |
|
| 10.63 | % |
Tier 1 capital (to risk weighted assets) |
|
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|
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|
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|
|
|
|
|
|
Hancock Whitney Corporation |
|
| 8.00 | % |
|
| 10.74 | % |
|
| 10.48 | % |
|
| 10.36 | % |
|
| 10.48 | % |
|
| 10.35 | % |
Hancock Whitney Bank |
|
| 8.00 | % |
|
| 10.88 | % |
|
| 10.32 | % |
|
| 10.30 | % |
|
| 10.60 | % |
|
| 10.63 | % |
Tier 1 leverage capital |
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|
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|
Hancock Whitney Corporation |
|
| 5.00 | % |
|
| 8.85 | % |
|
| 8.67 | % |
|
| 8.50 | % |
|
| 8.66 | % |
|
| 8.51 | % |
Hancock Whitney Bank |
|
| 5.00 | % |
|
| 8.97 | % |
|
| 8.54 | % |
|
| 8.46 | % |
|
| 8.77 | % |
|
| 8.75 | % |
Regulatory definitions:On May 24, 2018, our board of directors approved a stock buyback program that authorized the repurchase of up to 5%, or approximately 4.3 million shares, of outstanding common stock. The approved program allows us to repurchase shares of our common stock either in the open market in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions with non-affiliated sellers or as otherwise determined by the Company in one or more transactions, from time to time until December 31, 2019. The Company is not obligated to purchase any shares under this program and the board of directors may terminate or amend the program at any time prior to the expiration. As of March 31, 2019, we had purchased 200,000 shares of our common stock at an average price of $41.30 per share under this program.
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|
On January 28, 2019, our board of directors declared the regular first quarter cash dividend at $0.27 per share, the same as prior quarter. The Company has paid uninterrupted quarterly dividends to shareholders since 1967.
46
BALANCE SHEET ANALYSIS
Securities
InvestmentsInvestment in securities totaled $5.9$5.6 billion at March 31, 2018, up $41.72019, down $93.1 million, or less than 1%2%, from at December 31, 2017,2018 and up $928.8down $352.6 million, or 6%, from March 31, 2017.2018. At March 31, 2018,2019, securities available for sale totaled $2.9$2.7 billion and securities held to maturity totaled $3.0$2.9 billion.
TheOur securities portfolio consists mainly of residential and commercial mortgage-backed securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies. The portfolio is designed to enhance liquidity while providing an acceptable rate of return. The Company investsWe invest only in high quality investment grade securities with a targeted effective duration for the overall portfolio ofgenerally between two and five and a half years. The effective duration calculates the price sensitivity to changes in interest rates. At March 31, 2018,2019, the average expected maturity of the portfolio was 6.155.52 years with an effective duration of 4.874.37 years and a nominal weighted-average yield of 2.47%2.75%. Management simulations indicate that the effective duration would increase to 4.814.59 years with a 100 bpsbp increase in the yield curve and increase to 4.894.75 years with a 200 bpsbp increase. At December 31, 2017,2018, the average expected maturity of the portfolio was 5.785.67 years with an effective duration of 4.744.67 years and a nominal weighted-average yield of 2.41%2.75%. The averagechange in expected maturity, effective duration, and nominal weighted-average yield is primarily related to securities prepayments and maturities during the first quarter of the portfolio at March 31, 2017 was 5.80 years, while the duration was 5.0 years, and the nominal weighted average yield was 2.35%.2019.
Loans
Total loans at March 31, 20182019 were $19.1$20.1 billion, up approximately $88$86.4 million, or less than 1%, from December 31, 2017, with growth2018, and up $1.0 billion, or 5.3%, from March 31, 2018. Growth from December 31, 2018 was impacted by unanticipated paydowns, approximately $42 million of
49
mortgage loan sales, and $17.9 million in commercial loans, including healthcare and equipment finance, as well as mortgage and indirect linesnet charge-offs, of business. Growth in loans is net of a $95which $10.1 million decreasewas related to the saleDC Solar alleged fraud. Net loan growth continues to be diversified across products and the Company’s footprint. Management anticipates $75 million to $125 million of the consumer finance companyperiod end loan growth during the firstsecond quarter of 2018. Loans2019, with full year average percentage growth expected to energy related companies remained relatively flat during first quarter of 2018. be in mid-single digits.
The following table shows the composition of our loan portfolio:portfolio at each date indicated:
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| ||||||||||||||||||||
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|
| |||||||||||||||||||||||||||||||||
|
| March 31, |
| December 31, |
| September 30, |
| June 30, |
| March 31, |
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| ||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2017 |
| 2017 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| ||||||||||
Total loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 8,336,222 |
| $ | 8,297,937 |
| $ | 8,129,429 |
| $ | 8,093,104 |
| $ | 8,074,287 |
| $ | 8,656,326 |
|
| $ | 8,620,601 |
|
| $ | 8,438,884 |
|
| $ | 8,410,961 |
|
| $ | 8,336,222 |
|
Commercial real estate - owner occupied |
|
| 2,185,543 |
|
| 2,142,439 |
|
| 2,076,014 |
|
| 2,078,332 |
|
| 2,047,451 |
|
| 2,515,428 |
|
|
| 2,457,748 |
|
|
| 2,300,271 |
|
|
| 2,233,794 |
|
|
| 2,185,543 |
|
Total commercial and industrial |
|
| 10,521,765 |
|
| 10,440,376 |
|
| 10,205,443 |
|
| 10,171,436 |
|
| 10,121,738 |
|
| 11,171,754 |
|
|
| 11,078,349 |
|
|
| 10,739,155 |
|
|
| 10,644,755 |
|
|
| 10,521,765 |
|
Commercial real estate - income producing |
|
| 2,394,862 |
|
| 2,384,599 |
|
| 2,511,808 |
|
| 2,401,673 |
|
| 2,505,104 |
|
| 2,563,394 |
|
|
| 2,341,779 |
|
|
| 2,311,699 |
|
|
| 2,342,192 |
|
|
| 2,394,862 |
|
Construction and land development |
|
| 1,413,878 |
|
| 1,373,421 |
|
| 1,373,048 |
|
| 1,313,522 |
|
| 1,252,667 |
|
| 1,340,067 |
|
|
| 1,548,335 |
|
|
| 1,523,419 |
|
|
| 1,515,233 |
|
|
| 1,413,878 |
|
Residential mortgages |
|
| 2,732,821 |
|
| 2,690,472 |
|
| 2,596,692 |
|
| 2,493,923 |
|
| 2,266,263 |
|
| 2,933,251 |
|
|
| 2,910,081 |
|
|
| 2,846,916 |
|
|
| 2,780,359 |
|
|
| 2,732,821 |
|
Consumer |
|
| 2,029,178 |
|
| 2,115,295 |
|
| 2,099,294 |
|
| 2,093,287 |
|
| 2,059,096 |
|
| 2,104,372 |
|
|
| 2,147,867 |
|
|
| 2,122,528 |
|
|
| 2,088,378 |
|
|
| 2,029,178 |
|
Total loans |
| $ | 19,092,504 |
| $ | 19,004,163 |
| $ | 18,786,285 |
| $ | 18,473,841 |
| $ | 18,204,868 |
| $ | 20,112,838 |
|
| $ | 20,026,411 |
|
| $ | 19,543,717 |
|
| $ | 19,370,917 |
|
| $ | 19,092,504 |
|
Our commercial customer base is diversified over a range of industries, including energy, healthcare, wholesale and retail trade in various durable and nondurable products and the manufacture of such products, marine transportation and maritime construction, financial and professional services, and agricultural production.
47
The following tables provide detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes, and property type concentrations of our commercial real estate – income producing portfolio.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
| March 31, |
| December 31, |
| September 30, |
| June 30, |
| March 31, | ||||||||||||||||||||
|
| 2018 |
| 2017 |
| 2017 |
| 2017 |
| 2017 | ||||||||||||||||||||
|
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
| Pct of | |||||
($ in thousands) |
| Balance |
| Total |
| Balance |
| Total |
| Balance |
| Total |
| Balance |
| Total |
| Balance |
| Total | ||||||||||
Commercial & industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care and Social Assistance |
| $ | 1,159,214 |
| 11 | % |
| $ | 1,118,288 |
| 11 | % |
| $ | 1,023,939 |
| 10 | % |
| $ | 1,084,644 |
| 11 | % |
| $ | 1,076,164 |
| 11 | % |
Real Estate and Rental and Leasing |
|
| 1,154,304 |
| 11 |
|
|
| 1,122,389 |
| 11 |
|
|
| 1,134,451 |
| 12 |
|
|
| 1,116,117 |
| 11 |
|
|
| 1,119,937 |
| 11 |
|
Mining, Quarrying, and Oil and Gas Extraction (a) |
|
| 972,580 |
| 9 |
|
|
| 992,179 |
| 10 |
|
|
| 1,074,822 |
| 11 |
|
|
| 1,131,279 |
| 11 |
|
|
| 1,211,006 |
| 12 |
|
Retail Trade (a) |
|
| 869,662 |
| 8 |
|
|
| 757,998 |
| 7 |
|
|
| 761,418 |
| 7 |
|
|
| 774,414 |
| 8 |
|
|
| 755,059 |
| 8 |
|
Public Administration |
|
| 857,736 |
| 8 |
|
|
| 840,773 |
| 8 |
|
|
| 832,638 |
| 8 |
|
|
| 848,543 |
| 8 |
|
|
| 839,005 |
| 8 |
|
Manufacturing (a) |
|
| 795,014 |
| 8 |
|
|
| 745,744 |
| 7 |
|
|
| 726,339 |
| 7 |
|
|
| 769,161 |
| 8 |
|
|
| 769,118 |
| 8 |
|
Transportation and Warehousing (a) |
|
| 651,869 |
| 6 |
|
|
| 609,011 |
| 6 |
|
|
| 563,263 |
| 6 |
|
|
| 569,923 |
| 6 |
|
|
| 556,468 |
| 5 |
|
Construction |
|
| 626,013 |
| 6 |
|
|
| 619,956 |
| 6 |
|
|
| 564,444 |
| 6 |
|
|
| 521,926 |
| 5 |
|
|
| 519,663 |
| 5 |
|
Wholesale Trade (a) |
|
| 536,791 |
| 5 |
|
|
| 578,037 |
| 6 |
|
|
| 513,086 |
| 5 |
|
|
| 492,910 |
| 5 |
|
|
| 490,569 |
| 5 |
|
Educational Services |
|
| 440,272 |
| 4 |
|
|
| 462,595 |
| 4 |
|
|
| 438,247 |
| 4 |
|
|
| 434,955 |
| 4 |
|
|
| 428,248 |
| 4 |
|
Finance and Insurance |
|
| 437,547 |
| 4 |
|
|
| 501,157 |
| 5 |
|
|
| 559,092 |
| 5 |
|
|
| 503,551 |
| 5 |
|
|
| 478,473 |
| 5 |
|
Professional, Scientific, and Technical Services (a) |
|
| 433,169 |
| 4 |
|
|
| 429,637 |
| 4 |
|
|
| 356,560 |
| 3 |
|
|
| 371,055 |
| 4 |
|
|
| 362,610 |
| 4 |
|
Other Services (except Public Administration) |
|
| 371,913 |
| 4 |
|
|
| 356,787 |
| 3 |
|
|
| 349,711 |
| 3 |
|
|
| 348,080 |
| 3 |
|
|
| 342,155 |
| 3 |
|
Accommodation and Food Services |
|
| 357,693 |
| 3 |
|
|
| 324,619 |
| 3 |
|
|
| 340,551 |
| 3 |
|
|
| 305,421 |
| 3 |
|
|
| 338,241 |
| 3 |
|
Other (a) |
|
| 857,988 |
| 9 |
|
|
| 981,206 |
| 9 |
|
|
| 966,882 |
| 10 |
|
|
| 899,457 |
| 8 |
|
|
| 835,022 |
| 8 |
|
Total commercial & industrial loans |
| $ | 10,521,765 |
| 100 | % |
| $ | 10,440,376 |
| 100 | % |
| $ | 10,205,443 |
| 100 | % |
| $ | 10,171,436 |
| 100 | % |
| $ | 10,121,738 |
| 100 | % |
(a) The Company's energy related lending portfolio includes certain balances within each of these selected industry categories as the definition is based on the borrower’s source of revenue. The energy related lending portfolio totaled approximately $1.1 billion at March 31, 2018, December 31, 2017 and September 30, 2017, $1.2 billion at June 30, 2017, and $1.3 billion at March 31, 2017.
At March 31, 2018,2019, commercial and industrial (“C&I”) loans, including both non-real estate and owner occupied real estate secured loans, totaled approximately $10.5$11.2 billion, or 56% of the total loan portfolio, an increase of $81.4$93 million, or 1%, from December 31, 2017. Included2018. The growth was across the Company’s footprint and in C&I are $1.1 billion in energy related loans, which are comprised of credits to both the explorationmany major lines including real estate, manufacturing, retail and production segment and the support services segment. Energy related loans comprised 5.5% of total loans at March 31, 2018, down from 12.4% in fourth quarter of 2014, the beginning of the downturn in the energy cycle. Payoffs and paydowns of approximately $76 million and charge-offs of approximately $7.6 million were partially offset by approximately $85 million in draws on existing lines of credit. Management has a strategic target to reduce the concentration of energy loans to total loans to 5%.transportation.
The Bank lends mainly to middle market and smaller commercial entities, although it participates in larger shared credit loan facilities. Shared national credits funded at March 31, 20182019 totaling approximately $1.7$2.1 billion, or 9%,10% of total loans, were down $368up $96.6 million from December 31, 2017, primarily due to a change in the definition2018. Approximately $555.6 million of a shared national credit from an aggregate loan commitment threshold of $20 million to $100 million. Approximately $474 million ofour shared national credits under the new definition were with energy relatedenergy-related customers at March 31, 2019.
Loans to borrowers in the energy sector totaled $1.1 billion, relatively unchanged from December 31, 2018 and March 31, 2018. We intend to maintain our total energy concentration at approximately 5% while continuing to shift the mix within the portfolio to approximately one-third support services subsector and two-thirds exploration and production and midstream subsectors. At March 31, 2019, approximately $580 million, or 55%, of the portfolio was comprised of customers engaged in exploration and production, transportation, and storage activities. The remaining $483 million, or 45%, of the portfolio was comprised of customers engaged in onshore and offshore services and products to support exploration and production activities.
50
The following table provide s detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes.
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| |||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| |||||||||||||||||||||||||
|
|
|
|
|
| Pct of |
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|
|
| Pct of |
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|
| Pct of |
|
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| Pct of |
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| Pct of |
| |||||
( $ in thousands ) |
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
| ||||||||||
Commercial & industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
Real Estate and Rental and Leasing |
| $ | 1,430,878 |
|
|
| 13 | % |
| $ | 1,349,674 |
|
|
| 12 | % |
| $ | 1,232,737 |
|
|
| 11 | % |
| $ | 1,195,278 |
|
|
| 11 | % |
| $ | 1,154,304 |
|
|
| 11 | % |
Health Care and Social Assistance |
|
| 1,083,469 |
|
|
| 10 | % |
|
| 1,120,799 |
|
|
| 10 | % |
|
| 1,135,040 |
|
|
| 11 | % |
|
| 1,152,593 |
|
|
| 11 | % |
|
| 1,159,214 |
|
|
| 11 | % |
Mining, Quarrying, and Oil and Gas Extraction (a) |
|
| 957,590 |
|
|
| 8 | % |
|
| 1,016,870 |
|
|
| 9 | % |
|
| 874,223 |
|
|
| 8 | % |
|
| 932,113 |
|
|
| 9 | % |
|
| 972,580 |
|
|
| 9 | % |
Retail Trade (a) |
|
| 932,857 |
|
|
| 8 | % |
|
| 902,783 |
|
|
| 8 | % |
|
| 930,134 |
|
|
| 9 | % |
|
| 901,020 |
|
|
| 8 | % |
|
| 869,662 |
|
|
| 8 | % |
Manufacturing (a) |
|
| 913,363 |
|
|
| 8 | % |
|
| 866,079 |
|
|
| 8 | % |
|
| 846,447 |
|
|
| 8 | % |
|
| 820,135 |
|
|
| 8 | % |
|
| 795,014 |
|
|
| 8 | % |
Public Administration |
|
| 799,237 |
|
|
| 7 | % |
|
| 814,442 |
|
|
| 7 | % |
|
| 842,199 |
|
|
| 8 | % |
|
| 866,052 |
|
|
| 8 | % |
|
| 857,736 |
|
|
| 8 | % |
Transportation and Warehousing (a) |
|
| 746,837 |
|
|
| 7 | % |
|
| 717,746 |
|
|
| 7 | % |
|
| 700,698 |
|
|
| 6 | % |
|
| 702,615 |
|
|
| 7 | % |
|
| 651,869 |
|
|
| 6 | % |
Wholesale Trade (a) |
|
| 657,685 |
|
|
| 6 | % |
|
| 602,052 |
|
|
| 6 | % |
|
| 559,638 |
|
|
| 5 | % |
|
| 523,839 |
|
|
| 5 | % |
|
| 536,791 |
|
|
| 5 | % |
Construction |
|
| 645,107 |
|
|
| 6 | % |
|
| 643,932 |
|
|
| 6 | % |
|
| 582,761 |
|
|
| 5 | % |
|
| 632,592 |
|
|
| 6 | % |
|
| 626,013 |
|
|
| 6 | % |
Finance and Insurance |
|
| 595,373 |
|
|
| 5 | % |
|
| 605,663 |
|
|
| 6 | % |
|
| 524,836 |
|
|
| 5 | % |
|
| 460,803 |
|
|
| 4 | % |
|
| 437,547 |
|
|
| 4 | % |
Other Services (except Public Administration) |
|
| 450,153 |
|
|
| 4 | % |
|
| 436,390 |
|
|
| 4 | % |
|
| 391,040 |
|
|
| 4 | % |
|
| 382,737 |
|
|
| 4 | % |
|
| 371,913 |
|
|
| 4 | % |
Professional, Scientific, and Technical Services (a) |
|
| 421,999 |
|
|
| 4 | % |
|
| 462,984 |
|
|
| 4 | % |
|
| 439,153 |
|
|
| 4 | % |
|
| 440,727 |
|
|
| 4 | % |
|
| 433,169 |
|
|
| 4 | % |
Accommodation and Food Services |
|
| 410,754 |
|
|
| 4 | % |
|
| 383,087 |
|
|
| 3 | % |
|
| 331,604 |
|
|
| 3 | % |
|
| 366,240 |
|
|
| 3 | % |
|
| 357,693 |
|
|
| 3 | % |
Educational Services |
|
| 353,803 |
|
|
| 3 | % |
|
| 359,997 |
|
|
| 3 | % |
|
| 430,238 |
|
|
| 4 | % |
|
| 437,484 |
|
|
| 4 | % |
|
| 440,272 |
|
|
| 4 | % |
Other (a) |
|
| 772,649 |
|
|
| 7 | % |
|
| 795,851 |
|
|
| 7 | % |
|
| 918,407 |
|
|
| 9 | % |
|
| 830,527 |
|
|
| 8 | % |
|
| 857,988 |
|
|
| 9 | % |
Total commercial & industrial loans |
| $ | 11,171,754 |
|
|
| 100 | % |
| $ | 11,078,349 |
|
|
| 100 | % |
| $ | 10,739,155 |
|
|
| 100 | % |
| $ | 10,644,755 |
|
|
| 100 | % |
| $ | 10,521,765 |
|
|
| 100 | % |
(a) | Certain balances within each of these industry categories may contain loans considered to be energy related lending, as our definition of energy related is based on the borrower’s source of revenue. The energy related portfolio totaled approximately $1.1 billion at March 31, 2019 and December 31, 2018, $0.9 billion at September 30, 2018, $1.0 billion at June 30, 2018, and $1.1 billion at March 31, 2018. |
Commercial real estate – income producing loans totaled approximately $2.4$2.6 billion at March 31, 2018,2019, an increase of $10.3$222 million, or 0.4%9%, from December 31, 2017.2018. The majorityincrease reflects the transfer of loans from construction to permanent financing, as well as new production that included increases for senior care facilities, multifamily properties and retail properties. The following table details for the increase inpreceding five quarters the end-of-period commercial real estate – income producing loans was related to the multifamily and hotel/motel properties. The following table details commercial real estate – income producingloan balances by property types for the last five quarters.type.
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
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|
|
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|
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| |||||||||||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| March 31, |
| December 31, |
| September 30, |
| June 30, |
| March 31, |
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| |||||||||||||||||||||||||||||||||||||||||||||
|
| 2018 |
| 2017 |
| 2017 |
| 2017 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| |||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
| ||||||||||
($ in thousands) |
| Balance |
| Total |
| Balance |
| Total |
| Balance |
| Total |
| Balance |
| Total |
| Balance |
| Total |
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
| ||||||||||||||||||||
Commercial real estate - income producing loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
| $ | 521,607 |
| 22 | % |
| $ | 526,929 |
| 22 | % |
| $ | 550,720 |
| 22 | % |
| $ | 511,708 |
| 22 | % |
| $ | 565,673 |
| 23 | % |
| $ | 542,904 |
|
|
| 21 | % |
| $ | 507,129 |
|
|
| 22 | % |
| $ | 499,395 |
|
|
| 22 | % |
| $ | 502,809 |
|
|
| 22 | % |
| $ | 521,607 |
|
|
| 22 | % |
Office |
|
| 436,789 |
| 18 |
|
| 441,539 |
| 19 |
|
|
| 472,169 |
| 19 |
|
|
| 481,626 |
| 20 |
|
|
| 482,121 |
| 19 |
|
|
| 436,819 |
|
|
| 17 | % |
|
| 444,973 |
|
|
| 19 | % |
|
| 421,965 |
|
|
| 18 | % |
|
| 430,319 |
|
|
| 18 | % |
|
| 436,789 |
|
|
| 18 | % | |
Hotel/Motel |
|
| 377,674 |
|
|
| 15 | % |
|
| 374,430 |
|
|
| 16 | % |
|
| 346,735 |
|
|
| 15 | % |
|
| 332,411 |
|
|
| 14 | % |
|
| 336,724 |
|
|
| 14 | % | ||||||||||||||||||||||||||||||
Multifamily |
|
| 379,932 |
| 15 |
|
| 341,783 |
| 14 |
|
|
| 339,656 |
| 13 |
|
|
| 347,583 |
| 15 |
|
|
| 444,188 |
| 18 |
|
|
| 369,041 |
|
|
| 14 | % |
|
| 332,145 |
|
|
| 14 | % |
|
| 333,144 |
|
|
| 15 | % |
|
| 347,732 |
|
|
| 15 | % |
|
| 379,932 |
|
|
| 16 | % | |
Hotel/Motel |
|
| 336,724 |
| 14 |
|
| 328,238 |
| 14 |
|
|
| 299,796 |
| 12 |
|
|
| 296,996 |
| 12 |
|
|
| 307,170 |
| 12 |
| |||||||||||||||||||||||||||||||||||||||||
Industrial |
|
| 270,812 |
| 11 |
|
| 272,133 |
| 11 |
|
|
| 327,048 |
| 13 |
|
|
| 269,985 |
| 11 |
|
|
| 268,138 |
| 11 |
|
|
| 353,804 |
|
|
| 14 | % |
|
| 311,933 |
|
|
| 13 | % |
|
| 285,292 |
|
|
| 12 | % |
|
| 279,041 |
|
|
| 12 | % |
|
| 270,812 |
|
|
| 11 | % | |
Other |
|
| 448,998 |
| 19 |
|
|
| 473,977 |
| 20 |
|
|
| 522,419 |
| 21 |
|
|
| 493,775 |
| 21 |
|
|
| 437,814 |
| 17 |
|
|
| 483,152 |
|
|
| 19 | % |
|
| 371,169 |
|
|
| 16 | % |
|
| 425,168 |
|
|
| 18 | % |
|
| 449,880 |
|
|
| 19 | % |
|
| 448,998 |
|
|
| 19 | % |
Total commercial real estate - income producing loans |
| $ | 2,394,862 |
| 100 | % |
| $ | 2,384,599 |
| 100 | % |
| $ | 2,511,808 |
| 100 | % |
| $ | 2,401,673 |
| 100 | % |
| $ | 2,505,104 |
| 100 | % |
| $ | 2,563,394 |
|
|
| 100 | % |
| $ | 2,341,779 |
|
|
| 100 | % |
| $ | 2,311,699 |
|
|
| 100 | % |
| $ | 2,342,192 |
|
|
| 100 | % |
| $ | 2,394,862 |
|
|
| 100 | % |
48
Construction and land development loans, totaling approximately $1.4$1.3 billion at March 31, 2018, increased approximately $40.52019, decreased $208.3 million from December 31, 2017.2018. The decrease was primarily due to the reclassification of loans from construction and land development loans to commercial real estate loans as noted above. Residential mortgages increased $42.3$23.2 million and consumer loans decreased $86.1$43.5 million during the first quarter of 2018. The decrease in consumer loans is primarily the result2019.
51
Table of the sale of our consumer finance company in the first quarter of 2018.Contents
While our first quarter 2018 loan production was strong, we experienced lower than expected growth, due to the sale of our consumer finance company and a high volume of large payoffs. We currently expect end of period loan growth for second quarter 2018 of approximately $250 to $300 million and the full year 2018 loan growth in the range of 5% to 6%.
Allowance for Loan Losses and Asset Quality
The Company's total allowance for loan losses was $210.7$194.7 million at March 31, 2019 virtually unchanged from December 31, 2018 and down $16.0 million compared to $217.3 million at DecemberMarch 31, 2017.2018. The ratio of the allowance for loan losses to period-end loans decreased 4 bps to 1.10%, compared to 1.14%of 0.97% at March 31, 2019 was unchanged from December 31, 2017. The decrease in allowance as well as coverage is largely driven by the sale of the consumer finance company, which had an allowance of $6.6 million at the time of sale.2018. The allowance for loan losses onat March 31, 2019 compared to December 31, 2018 reflects a net build in the commercial nonenergy portfolio of $3.0 million, partially offset by a net release of $1.7 million in the energy portfolio decreasedportfolio. The consumer and residential mortgage allowances had releases of $0.9 million and $0.2 million, respectively. The relatively flat allowance reflects the favorable impact of improvement in criticized levels and other credit metrics across most of the loan portfolios, offset by $7.6 million, whileslightly elevated loss coverage ratios in the allowance on the nonenergy portfolio was increased by roughly the same amount. Energy prices improved compared the prior quarter and criticized loan levels continued to decline. Management believes the allowance level for the energycommercial portfolio as built in previous quarters, remains adequatewe continue to grow and we are continuingdiversify that portfolio. Energy performance continues to allow it to decline as we work through problem credits. The increase in the nonenergy allowance reflectsbe stable with increasing oil prices and a continued trend of increasingdecline in criticized balances and increased growth and diversification of the portfolio. levels compared to prior quarter.
The Company’s balance of criticized commercial loans totaled $1.1 billion$584 million at both March 31, 2018 and2019, down $41 million, or 7%, compared to December 31, 2017,2018, with an increase in$26 million of the decrease attributable to the commercial nonenergy criticized loans of $35portfolio and $15 million offset by a decrease inattributable to the energy of $27 million.portfolio. Commercial criticized loans are down $105$500 million, or 46%, compared to the first quarter of 2017,2018, with $259 million of the decrease attributable to the energy portfolio down $214and $241 million offset by an increase in non- energy of $109 million.attributable to the commercial nonenergy portfolio. Criticized loans are defined as those having potential weaknesses that deserve management’s close attention (risk-rated as special mention, substandard and doubtful), including both accruing and nonaccruing loans. The increase inOur commercial nonenergy criticized loansportfolio, totaling $320 million at March 31, 2019, is comprised of loans that are diversified as to both industry and geographygeography. Commercial nonenergy criticized loans comprised 2.12% of that portfolio at March 31, 2019, compared to 2.31% at December 31, 2018 and the level as a percent of total loans is not outside of historical norms.3.91% at March 31, 2018. As of March 31, 2018,2019, criticized loans in the energy portfolio were $523$264 million, or approximately 50%25% of that portfolio. Energy related loans delinquent for more than 30 days, including accrual and nonaccrual loans, totaled $101 million, or 10%, of the energy portfolio at March 31, 2018.
Management continues to closely monitor the ability of our energy relatedenergy-related customers to service their debt, including reviews of customers’ balance sheets, leverage ratios, collateral values and other critical lending metrics. We note that even with the rise in commodity prices,believe we are adequately reserved for losses on remaining credits, and do not expect a lag in the recovery of energy service and support credits, with the key to resolution being stabilized prices over the longer-term. Many reserve based lending credits continue to show signs of improvement, however, we are seeing limited improvement in the support sector, with the expectationsignificant provision for land based services to recover more quickly than drilling and nondrilling services that support offshore production. Based upon information currently available, management is maintaining the estimate that net charge-offs from energy related credits could be as high as $95 million over the duration of the cycle, which started in the fourth quarter of 2014. To date, we haveany additional issues. The Company has recorded approximately $81$95 million in energy related net charge-offs sinceduring the start of the cycle. See Item 7latest down cycle that began in our Annual Report on Form 10-K for the year ended December 31, 2017 for further discussion of our energy portfolio and its potential impact on the allowance for loan losses.late 2014.
The following table provides a breakout of the allowance for loan loss for the energy portfolio, allocated by sector, as of March 31, 2018 and December 31, 2017.
|
|
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|
|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
| March 31, 2018 |
| December 31, 2017 | ||||||||||||
(in millions) |
| Outstanding Balance |
| Allocated Allowance for Loan and Lease Losses |
| Allowance for Loan and Lease Losses as a % of Loans |
| Outstanding Balance |
| Allocated Allowance for Loan and Lease Losses |
| Allowance for Loan and Lease Losses as a % of Loans | ||||
Upstream (reserve-based lending) |
| $ | 344 |
| $ | 9.9 |
| 2.88% |
| $ | 353 |
| $ | 11.4 |
| 3.24% |
Midstream |
|
| 57 |
|
| 0.5 |
| 0.88% |
|
| 52 |
|
| 0.4 |
| 0.71% |
Support - drilling |
|
| 125 |
|
| 7.6 |
| 6.08% |
|
| 121 |
|
| 10.5 |
| 8.62% |
Support - nondrilling |
|
| 527 |
|
| 44.6 |
| 8.46% |
|
| 529 |
|
| 47.9 |
| 9.06% |
Total |
| $ | 1,053 |
| $ | 62.6 |
| 5.94% |
| $ | 1,055 |
| $ | 70.2 |
| 6.65% |
Net charge-offscharge- offs were $12.2$17.9 million, or 0.26%0.36%, of average total loans on an annualized basis in the first quarter of 2018,2019, down from $20.8$28.1 million, or 0.44%,0.56% of average total loans in the fourth quarter of 2017. Net2018. Commercial net charge-offs of energy creditstotaled $14.4 million in the first quarter of 2018 totaled $4.32019 compared to $24.3 million consistingin the fourth quarter of gross2018. The first quarter net charge-offs included $10.1 million related to the alleged fraud associated with the DC Solar equipment finance credit. There were no energy net charge-offs during the first quarter of 2019 compared to $15.8 million of net charge-offs in the fourth quarter of 2018. Consumer loan net charge-offs of $7.6$3.2 million netwere down $1.0 million compared to the fourth quarter of recoveries2018 and down $3.0 million compared to the first quarter 2018. The first quarter of $3.3 million. There were approximately $8.42018 included $1.5 million of net charge-offs related to energy credits and $5.5 million of net charge-offs related to nonenergy commercial loans in the fourth quarter of 2017. Consumer loan charge-offs were down $0.9 million compared to fourth quarter due to the sale of the consumer finance company during the first quarter ofsubsidiary that was sold on March 9, 2018.
52
49
The following table sets forth activity in the allowance for loan losses for the periods indicated:
|
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|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||||||||
|
| March 31, |
| December 31, |
| March 31, |
|
| March 31, |
|
| December 31, |
|
| March 31, |
| ||||||
(in thousands) |
| 2018 |
| 2017 |
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2018 |
| ||||||
Allowance for loan losses at beginning of period |
| $ | 217,308 |
| $ | 223,122 |
| $ | 229,418 |
|
| $ | 194,514 |
|
| $ | 214,550 |
|
| $ | 217,308 |
|
Loans charged-off: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non real estate |
|
| 9,335 |
|
| 16,232 |
|
| 24,791 |
|
|
| 16,344 |
|
|
| 24,668 |
|
|
| 9,335 |
|
Commercial real estate - owner-occupied |
|
| 851 |
|
| 31 |
|
| 29 |
|
|
| — |
|
|
| 729 |
|
|
| 851 |
|
Total commercial & industrial |
|
| 10,186 |
|
| 16,263 |
|
| 24,820 |
|
|
| 16,344 |
|
|
| 25,397 |
|
|
| 10,186 |
|
Commercial real estate - income producing |
|
| — |
|
| 99 |
|
| 7 |
|
|
| 10 |
|
|
| - |
|
|
| — |
|
Construction and land development |
|
| 10 |
|
| 26 |
|
| 91 |
|
|
| — |
|
|
| 69 |
|
|
| 10 |
|
Total commercial |
|
| 10,196 |
|
| 16,388 |
|
| 24,918 |
|
|
| 16,354 |
|
|
| 25,466 |
|
|
| 10,196 |
|
Residential mortgages |
|
| 192 |
|
| 354 |
|
| 348 |
|
|
| 406 |
|
|
| 29 |
|
|
| 192 |
|
Consumer |
|
| 8,048 |
|
| 8,586 |
|
| 8,678 |
|
|
| 4,231 |
|
|
| 5,314 |
|
|
| 8,048 |
|
Total charge-offs |
|
| 18,436 |
|
| 25,328 |
|
| 33,944 |
|
|
| 20,991 |
|
|
| 30,809 |
|
|
| 18,436 |
|
Commercial non real estate |
|
| 4,146 |
|
| 1,084 |
|
| 938 |
|
|
| 1,926 |
|
|
| 1,151 |
|
|
| 4,146 |
|
Commercial real estate - owner-occupied |
|
| 88 |
|
| 401 |
|
| 275 |
|
|
| 17 |
|
|
| 35 |
|
|
| 88 |
|
Total commercial & industrial |
|
| 4,234 |
|
| 1,485 |
|
| 1,213 |
|
|
| 1,943 |
|
|
| 1,186 |
|
|
| 4,234 |
|
Commercial real estate - income producing |
|
| 63 |
|
| 333 |
|
| 375 |
|
|
| 2 |
|
|
| - |
|
|
| 63 |
|
Construction and land development |
|
| 29 |
|
| 553 |
|
| 471 |
|
|
| 11 |
|
|
| 28 |
|
|
| 29 |
|
Total commercial |
|
| 4,326 |
|
| 2,371 |
|
| 2,059 |
|
|
| 1,956 |
|
|
| 1,214 |
|
|
| 4,326 |
|
Residential mortgages |
|
| 116 |
|
| 725 |
|
| 113 |
|
|
| 162 |
|
|
| 325 |
|
|
| 116 |
|
Consumer |
|
| 1,794 |
|
| 1,432 |
|
| 1,743 |
|
|
| 1,004 |
|
|
| 1,134 |
|
|
| 1,794 |
|
Total recoveries |
|
| 6,236 |
|
| 4,528 |
|
| 3,915 |
|
|
| 3,122 |
|
|
| 2,673 |
|
|
| 6,236 |
|
Total net charge-offs |
|
| 12,200 |
|
| 20,800 |
|
| 30,029 |
|
|
| 17,869 |
|
|
| 28,136 |
|
|
| 12,200 |
|
Provision for loan losses |
|
| 18,043 |
|
|
| 8,100 |
|
|
| 12,253 |
| ||||||||||
Decrease in allowance as a result of sale of subsidiary |
|
| (6,648) |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,648 | ) |
Provision for loan losses before FDIC benefit |
|
| 12,253 |
|
| 14,986 |
|
| 14,161 |
| ||||||||||||
Benefit attributable to FDIC loss share agreement |
|
| — |
|
| — |
|
| 1,830 |
| ||||||||||||
Provision for loan losses, net |
|
| 12,253 |
|
| 14,986 |
|
| 15,991 |
| ||||||||||||
Increase (decrease) in FDIC loss share receivable |
|
| — |
|
| — |
|
| (1,830) |
| ||||||||||||
Allowance for loan losses at end of period |
| $ | 210,713 |
| $ | 217,308 |
| $ | 213,550 |
|
| $ | 194,688 |
|
| $ | 194,514 |
|
| $ | 210,713 |
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs to average loans |
|
| 0.39 | % |
| 0.53 | % |
| 0.79 | % |
|
| 0.42 | % |
|
| 0.62 | % |
|
| 0.39 | % |
Recoveries to average loans |
|
| 0.13 | % |
| 0.10 | % |
| 0.09 | % |
|
| 0.06 | % |
|
| 0.05 | % |
|
| 0.13 | % |
Net charge-offs to average loans |
|
| 0.26 | % |
| 0.44 | % |
| 0.70 | % |
|
| 0.36 | % |
|
| 0.56 | % |
|
| 0.26 | % |
Allowance for loan losses to period-end loans |
|
| 1.10 | % |
| 1.14 | % |
| 1.17 | % |
|
| 0.97 | % |
|
| 0.97 | % |
|
| 1.10 | % |
53
50
The following table sets forth nonperforming assets by type for the periods indicated, consisting of nonaccrual loans, troubled debt restructurings and foreclosed and surplus ORE and other foreclosed assets. Loans past due 90 days or more and still accruing are also disclosed.
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
| |||||||||
|
| March 31, |
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
(in thousands) |
| 2018 |
| 2017 |
|
| 2019 |
|
| 2018 |
| ||||
Loans accounted for on a nonaccrual basis: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 70,773 |
| $ | 63,387 |
|
| $ | 22,933 |
|
| $ | 26,617 |
|
Commercial non-real estate - restructured |
|
| 108,430 |
|
| 89,476 |
|
|
| 104,060 |
|
|
| 84,036 |
|
Total commercial non-real estate |
|
| 179,203 |
|
| 152,863 |
|
|
| 126,993 |
|
|
| 110,653 |
|
Commercial real estate - owner occupied |
|
| 25,011 |
|
| 23,549 |
|
|
| 14,104 |
|
|
| 16,682 |
|
Commercial real estate - owner-occupied - restructured |
|
| 2,376 |
|
| 2,440 |
|
|
| 362 |
|
|
| 213 |
|
Total commercial real estate - owner-occupied |
|
| 27,387 |
|
| 25,989 |
|
|
| 14,466 |
|
|
| 16,895 |
|
Commercial real estate - income producing |
|
| 10,176 |
|
| 9,054 |
|
|
| 4,205 |
|
|
| 4,991 |
|
Commercial real estate - income producing - restructured |
|
| 5,457 |
|
| 5,520 |
|
|
| — |
|
|
| — |
|
Total commercial real estate - income producing |
|
| 15,633 |
|
| 14,574 |
|
|
| 4,205 |
|
|
| 4,991 |
|
Construction and land development |
|
| 3,711 |
|
| 3,791 |
|
|
| 2,002 |
|
|
| 2,134 |
|
Construction and land development - restructured |
|
| 13 |
|
| 16 |
|
|
| 11 |
|
|
| 12 |
|
Total construction and land development |
|
| 3,724 |
|
| 3,807 |
|
|
| 2,013 |
|
|
| 2,146 |
|
Residential mortgage |
|
| 33,385 |
|
| 38,703 |
|
|
| 37,849 |
|
|
| 34,594 |
|
Residential mortgage - restructured |
|
| 1,684 |
|
| 1,777 |
|
|
| 1,426 |
|
|
| 1,272 |
|
Total residential mortgage |
|
| 35,069 |
|
| 40,480 |
|
|
| 39,275 |
|
|
| 35,866 |
|
Consumer |
|
| 14,163 |
|
| 15,087 |
|
|
| 17,879 |
|
|
| 16,744 |
|
Consumer - restructured |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
Total consumer |
|
| 14,163 |
|
| 15,087 |
|
|
| 17,879 |
|
|
| 16,744 |
|
Total nonaccrual loans |
| $ | 275,179 |
| $ | 252,800 |
|
| $ | 204,831 |
|
| $ | 187,295 |
|
Restructured loans - still accruing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 152,612 |
| $ | 114,224 |
|
| $ | 109,872 |
|
| $ | 130,075 |
|
Commercial real estate - owner occupied |
|
| 10,308 |
|
| 1,578 |
|
|
| 5,928 |
|
|
| 7,286 |
|
Commercial real estate - income producing |
|
| 2,522 |
|
| 3,827 |
|
|
| 391 |
|
|
| 398 |
|
Construction and land development |
|
| — |
|
| — |
|
|
| 9 |
|
|
| 9 |
|
Residential mortgage |
|
| 475 |
|
| 480 |
|
|
| 341 |
|
|
| 546 |
|
Consumer |
|
| 603 |
|
| 384 |
|
|
| 1,037 |
|
|
| 728 |
|
Total restructured loans - still accruing |
|
| 166,520 |
|
| 120,493 |
|
|
| 117,578 |
|
|
| 139,042 |
|
Total nonperforming loans |
|
| 441,699 |
|
| 373,293 |
|
|
| 322,409 |
|
|
| 326,337 |
|
ORE and foreclosed assets |
|
| 26,630 |
|
| 27,542 |
|
|
| 27,148 |
|
|
| 26,270 |
|
Total nonperforming assets (b) |
| $ | 468,329 |
| $ | 400,835 |
|
| $ | 349,557 |
|
| $ | 352,607 |
|
Loans 90 days past due still accruing (c) |
| $ | 12,724 |
| $ | 27,766 |
| ||||||||
Loans 90 days past due still accruing to loans (c) |
| $ | 20,308 |
|
| $ | 5,589 |
| |||||||
Total restructured loans |
| $ | 284,480 |
| $ | 219,722 |
|
| $ | 223,437 |
|
| $ | 224,575 |
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Nonperforming assets to loans plus ORE and foreclosed assets |
|
| 2.45 | % |
| 2.11 | % |
|
| 1.74 | % |
|
| 1.76 | % |
Allowance for loan losses to nonperforming loans and accruing loans 90 days past due |
|
| 46.37 | % |
| 54.18 | % |
|
| 56.81 | % |
|
| 58.60 | % |
Loans 90 days past due still accruing to loans |
|
| 0.07 | % |
| 0.15 | % | ||||||||
Loans 90 days past due still accruing to loans (c) |
|
| 0.10 | % |
|
| 0.03 | % |
(a) | Nonaccrual loans and accruing loans past due 90 days or more do not include purchased credit impaired loans which were written down to fair value upon acquisition and accrete interest income over the remaining life of the loan. |
(b) | Includes total nonaccrual loans, total restructured loans - still accruing and ORE and foreclosed assets. |
(c) | Excludes 90+ accruing TDR already reflected as a restructured accruing |
Nonperforming assets totaled $468.3$349.6 million at March 31, 2018, up $67.52019, down $3.1 million or 16.8%, from December 31, 2017,2018 and up $141.3$118.8 million from March 31, 2017. During the first quarter2018. Nonperforming loans decreased approximately $3.9 million compared to December 31, 2018 with a continued reduction in energy nonperforming loans of 2018,$15 million, partially offset by an increase in commercial nonenergy nonperforming loans of $11 million. Our nonperforming loans included $117.8 million of accruing restructured loans, or approximately one-third of total nonperforming loans, increased approximately $68.4 million from December 31, 2017, and $131.8 million from March 31, 2017. Most of the linked quarter increase in nonperforming loans is attributable tomost within energy credits that endured challenges during the energy portfolio, and approximately $3.9 million of the increase is attributable to the remainder of the portfolio. The $64.5 million increase in nonperforming energy loans from December 31, 2017 was related to accruing restructured support nondrilling credits.cycle. Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was 2.45%1.74% at March 31, 2018, up 342019, down 2 bps from December 31, 20172018 and up 6671 bps from March 31, 2017. 2018.
54
51
Short-term liquidity investments, including interest-bearing bank deposits and federal funds sold, were $163.8 million at March 31, 2019. This represents an increase of $52.7 million from December 31, 2018 and an increase of $102.2 million from March 31, 2018. These assets are volatile on a daily basis depending upon movement in customer loan and deposit accounts. Average short-term investments of $216.2 million for the first quarter of 2019 were up $10.4 million compared to the fourth quarter of 2018, and up $67.9 million compared to the first quarter of 2018. Short-term liquidity assets are held to ensure funds are available to meet the cash flow needs of both borrowers and depositors. Short-term liquidity investments, including interest-bearing bank deposits and federal funds sold, were $61.5 million at March 31, 2018. This represents a decrease of $30.8 million from December 31, 2017 and an increase of $10.3 million compared to March 31, 2017. These assets are highly volatile on a daily basis depending upon movement in customer loan and deposit accounts. Average short-term investments of $148.3 million for the first quarter of 2018 were down $1.1 million compared to the fourth quarter of 2017, and down $260.0 million compared to the first quarter of 2017. See the Liquidity section above for further discussion regarding the management of our short-term investment portfolio and the impact upon our liquidity in general.
Deposits
Total deposits were $22.5$23.4 billion at March 31, 2018,2019, up $232.5$230.1 million, or 1%, from December 31, 2017,2018, and up $2.6 billion,$894.6 million, or 13%4%, from March 31, 2017.2018. Average deposits for the first quarter of 20182019 were $22.0$23.1 billion, up $280.7$616.0 million, or 1%3%, from the fourth quarter of 20172018 and up $2.8$1.1 billion, or 15%5%, from the first quarter of 2017. The deposits assumed in the FNBC transactions made up $1.1 billion of the increase in total deposits and $1.4 billion in average deposits over the first quarter 2017.
2018.
Noninterest-bearing demand deposits were $8.2 billion at March 31, 2018,2019, down $77.4$340.4 million, or less than4%, compared to December 31, 2018, and down $71.4 million, or 1%, linked quarter, and up $507.8 million, or 7%, year over year. The FNBC transactions added noninterest-bearing demand deposits of $211.0 million, compared to the first quarter of 2017.March 31, 2018. Noninterest-bearing demand deposits comprised 37%35% of total deposits at March 31, 2019, and 37% at December 31, 2018 and December 31, 2017, and 39% at March 31, 2017.
2018.
Interest-bearing transaction and savings accounts of $8.1$8.2 billion at March 31, 2019 increased $224 million, or 3%, compared to December 31, 2018 decreased $122.8and increased $165.4 million, or 2%, compared to December 31, 2017 and increased $0.9 billion, or 13%, compared to March 31, 2017. The majority of2018, with the year-over-year increase overmainly attributable to customer deposits assumed in the first quarter of 2017 was related to the FNBC transactions.trust and asset management acquisition.
Interest-bearing public fund deposits totaled $3.1$3.2 billion at March 31, 2018,2019, up $67.7$223.1 million, or 2%7%, from December 31, 20172018, primarily due to both new and enhanced business relationships, and up $512.7$121.6 million, or 20%4%, compared to March 31, 2017.2018. Time deposits other than public funds totaled $3.1$3.7 billion at March 31, 20182019 up $365.0$123.3 million from December 31, 2017, which includes2018, driven by promotional certificate of deposit offers across our markets and a $21.2 million increase in brokered certificates of deposit. Time deposits other than public funds were up $679.0 million, or 22.0%, compared to March 31, 2018, due largely an increase in brokered CDsretail certificates of $345.1 million. deposit.
Short-Term Borrowings
At March 31, 2018,2019, short-term borrowings totaled $1.5$1.4 billion, down $251.8$200.4 million from December 31, 2017,2018, as FHLB borrowings decreased $149.6$250.1 million and federal funds purchased decreased $114.8securities sold under repurchase agreements increased $49.7 million. Short-term borrowings decreased $669.8$63.4 million from March 31, 2017. 2018.
Average short-term borrowings of $1.8$1.7 billion in the first quarter of 20182019 were up $59.8down $645.4 million, or 3%28%, compared to the fourth quarter of 2017,2018, and down $304.2$138.1 million, or 14%8%, compared to the first quarter of 2017. 2018. The decrease compared to prior periods was due in part to a portfolio restructure late in the fourth quarter where proceeds from the sale of loans and securities were used to pay down a portion of FHLB borrowings.
Customer repurchase agreements and FHLB borrowings are the major sources of short-term borrowings. Customer repurchase agreements are offered mainly to commercial customers to assist them with their cash management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, the amounts available over time can be volatile.will vary. FHLB borrowings are funds from the Federal Home Loan Bank that are collateralized by single family and commercial real estate loans included in the Bank’s loan portfolio, subject to specific criteria.
Long-Term DebtOperating Leases
At March 31, 2018, long-term debt totaled $300.4Effective January 1, 2019, the Company adopted the amended provisions of Financial Accounting Standards Codification Topic 842, “Leases,” using the modified retrospective approach, impacting the reporting and disclosures for operating leases. The core principle of Topic 842 is that a lessee should recognize in the statement of financial position a liability representing the present value of future lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset over the lease term, as well as the disclosure of key information about operating leasing arrangements. Upon adoption, the Company recorded a gross-up of assets and liabilities in its consolidated balance sheet, with approximately $116 million down $5.1for right-of-use assets and $131 million from December 31, 2017. The Company wasof lease payment obligations offset by the elimination of $15 million of existing lease incentive and other deferred rent liabilities. Accounting for leases in complianceaccordance with all contractual covenants, as amended,Topic 842 has not had a material impact upon our consolidated results of operations, and is not expected to in future periods. Refer to Note 5 – Operating Leases for further information related to long-term debt as of March 31, 2018.the operating lease accounting policy, practical expedient elections for adoption and operating leasing information at adoption.
55
52
OFF-BALANCE SHEET ARRANGEMENTS
Loan Commitments and Letters of Credit
In the normal course of business, the Bank enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of their customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, although they expose the Bank to varying degrees of credit risk and interest rate risk in much the same way as funded loans. Under regulatory capital guidelines, the Company and Bank must include unfunded commitments meeting certain criteria in risk-weighted capital calculations.
Commitments to extend credit include revolving commercial credit lines, nonrevolving loan commitments issued mainly to finance the acquisition and development or construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and has not violated other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent future cash requirements of the Company.
A substantial majority of the letters of credit are standby agreements that obligate the Bank to fulfill a customer’s financial commitments to a third party if the customer is unable to perform. The Bank issues standby letters of credit primarily to provide credit enhancement to its customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.
The contract amounts of these instruments reflect the Company's exposure to credit risk. The Company undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support.
The following table shows the commitments to extend credit and letters of credit at March 31, 20182019 according to expiration date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
| Expiration Date | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Expiration Date |
| |||||||||||||
|
|
|
|
| Less than |
| 1-3 |
| 3-5 |
| More than |
|
|
|
|
| Less than |
|
| 1-3 |
|
| 3-5 |
|
| More than |
| ||||||||
(in thousands) |
| Total |
| 1 year |
| years |
| years |
| 5 years |
| Total |
|
| 1 year |
|
| years |
|
| years |
|
| 5 years |
| ||||||||||
Commitments to extend credit |
| $ | 6,962,514 |
| $ | 2,859,578 |
| $ | 1,612,277 |
| $ | 1,224,069 |
| $ | 1,266,590 |
| $ | 7,198,032 |
|
| $ | 3,275,846 |
|
| $ | 1,543,306 |
|
| $ | 1,456,399 |
|
| $ | 922,481 |
|
Letters of credit |
|
| 344,045 |
|
| 295,753 |
|
| 44,361 |
|
| 3,799 |
|
| 132 |
|
| 336,419 |
|
|
| 250,652 |
|
|
| 35,805 |
|
|
| 49,962 |
|
|
| — |
|
Total |
| $ | 7,306,559 |
| $ | 3,155,331 |
| $ | 1,656,638 |
| $ | 1,227,868 |
| $ | 1,266,722 |
| $ | 7,534,451 |
|
| $ | 3,526,498 |
|
| $ | 1,579,111 |
|
| $ | 1,506,361 |
|
| $ | 922,481 |
|
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There were no material changes or developments with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017. 2018.
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and with those generally practiced within the banking industry which require management to make estimates and assumptions about future events. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, and the resulting estimates form the basis for making judgments about the carrying values of certain assets and liabilities not readily apparent from other sources. Actual results could differ significantly from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
Refer to Note 1516 to our Consolidated Financial Statements included elsewhere in this report.
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ItemItem 3. Quantitative and QualitativeQualitative Disclosures About Market Risk
The Company’s net income is materially dependent on net interest income. The Company’s primary market risk is interest rate risk which stems from uncertainty with respect to absolute and relative levels of future market interest rates that affect financial products and services. In order to manage the exposures to interest rate risk, management measures the sensitivity of net interest income and cash flows under various market interest rate scenarios, establishes interest rate risk management policies and implements asset/liability management strategies designed to produce a relatively stable net interest margin under varying rate environments.
The Company measures itsfollowing table presents an analysis of our interest rate sensitivity primarilyrisk as measured by running variousthe estimated changes in net interest income simulations. The Company’s balance sheet is asset sensitive over a two-year period due to a larger volume of rate sensitive assets than rate sensitive liabilities. The model measures annual net interest income sensitivity relative to a base case scenario and incorporates assumptions regarding balance sheet growth and the mix of earning assets and funding sources as well as pricing, repricing and maturity characteristics of the existing and projected balance sheet.
The table below presents the results of simulations run as of March 31, 2018 for year 1 and year 2, assuming the indicatedresulting from an instantaneous and sustained parallel shift in rates at March 31, 2019. Shifts are measured in 100 basis point increments in a range from -500 to +500 basis points from base case, with -200 through +300 basis points presented in the yield curve attable below. Our interest rate sensitivity modeling incorporates a number of assumptions including loan and deposit repricing characteristics, the measurement date.rate of loan prepayments and other factors. The results demonstrate an increasebase scenario assumes that the current interest rate environment is held constant over a 24-month forecast period and is the scenario to which all others are compared in order to measure the change in net interest income. Policy limits on the change in net interest income as rates riseunder a variety of interest rate scenarios are approved by the Board. All policy scenarios assume a static volume forecast where the balance sheet is held constant, although other scenarios are modeled.
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| Estimated Increase |
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| (Decrease) in NII |
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Change in Interest Rates |
| Year 1 |
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| Year 2 |
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(basis points) |
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-200 |
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| (9.96 | )% |
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| (13.82 | )% |
-100 |
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| (4.27 | )% |
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| (5.69 | )% |
+100 |
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| 3.10 | % |
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| 3.92 | % |
+200 |
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| 5.77 | % |
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| 7.13 | % |
+300 |
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| 8.12 | % |
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| 9.80 | % |
The results indicate a general asset sensitivity across most scenarios driven primarily by repricing in variable rate loans and a decline should rates fall as comparedfunding mix which is composed of material volumes of non-interest bearing and lower rate sensitive deposits. When deemed prudent, management has taken actions to mitigate exposure to interest rate risk with on- or off-balance sheet financial instruments and intends to do so in the stablefuture. Possible actions include, but are not limited to, changes in the pricing of loan and deposit products, modifying the composition of earning assets and interest-bearing liabilities, and adding to, modifying or terminating existing interest rate environment assumedswap agreements or other financial instruments used for the base case.interest rate risk management purposes.
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Change in Interest Rates |
| Year 1 |
| Year 2 | ||
(basis points) |
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- 100 |
| (1.36) | % |
| (2.79) | % |
+100 |
| 1.91 | % |
| 2.53 | % |
+200 |
| 3.43 | % |
| 4.41 | % |
+300 |
| 4.62 | % |
| 5.68 | % |
Note: DecreaseEven if interest rates change in the designated amounts, there can be no assurance that our assets and liabilities would perform as anticipated. Additionally, a change in the U.S. Treasury rates in the designated amounts accompanied by a change in the shape of the U.S. Treasury yield curve would cause significantly different changes to net interest income than indicated above. Strategic management of our balance sheet and earnings is fluid and would be adjusted to accommodate these movements. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analysis presented above. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Certain assets such as adjustable-rate loans have features which restrict changes in interest rates limitedon a short-term basis and over the life of the asset. Also, the ability of many borrowers to 100 basis pointsservice their debt may decrease in the currentevent of an interest rate environmentincrease. We consider all of these factors in monitoring exposure to interest rate risk.
The foregoing disclosures related to our market risk should be read in conjunction with our audited consolidated financial statements, related notes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, 2017.2018.
Item 4. ControlsControls and Procedures
In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2018,2019, the Company’s disclosure controls and procedures were effective.
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Our management, including the Chief Executive Officer and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during the three month period ended March 31, 2018,2019, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
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54
PART II
. OTHERPART II. OTHER INFORMATION
The Company, including subsidiaries, is party to various legal proceedings arising in the ordinary course of business. We do not believe that loss contingencies, if any, arising from pending litigation and regulatory matters will have a material adverse effect on our consolidated financial position or liquidity.
The Company disclosed risk factors in its Annual Report on Form 10-K for the year ended December 31, 2017.2018. The risks described may not be the only risks facing us. Additional risks and uncertainties not currently known to us or that are currently considered to not be material also may materially adversely affect our business, financial condition, and/or operating results. The following risk factor regarding cybersecurity matters has been included in this Quarterly Report on Form 10-Q in response to the SEC’s Statement and Guidance on Public Company Cybersecurity Disclosures published on February 26, 2018.
Our operational and communications systems and infrastructure may fail or may be the subject of a breach or cyber-attack that, if successful, could adversely affect our business and disrupt business continuity.
We depend on our ability to process, record and monitor a large number of client transactions and to communicate with clients and other institutions on a continuous basis. As client, industry, public and regulatory expectations regarding operational and information security have increased, our operational systems and infrastructure continue to be safeguarded and monitored for potential failures, disruptions and breakdowns, whether as a result of events beyond our control or otherwise.
Our business, financial, accounting, data processing, or other operating systems and facilities may stop operating properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control. For example, there could be sudden increases in client transaction volume; electrical or telecommunications outages; natural disasters such as earthquakes, tornadoes, floods, and hurricanes; disease pandemics; events arising from local or larger scale political or social matters, including terrorist acts; occurrences of employee error, fraud, or malfeasance; and, as described below, cyber-attacks.
Although we have business continuity plans and other safeguards in place, our operations and communications may be adversely affected by significant and widespread disruption to our systems and infrastructure that support our businesses and clients. While we continue to evolve and modify our business continuity plans, there can be no assurance in an escalating threat environment that they will be effective in avoiding disruption and business impacts. Our insurance may not be adequate to compensate us for all resulting losses, and the cost to obtain adequate coverage may increase for us or the industry.
Security risks for financial institutions such as ours have dramatically increased in recent years, in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication, resources and activities of hackers, terrorists, activists, organized crime, and other external parties, including nation state actors. In addition, clients may use devices or software to access our products and services that are beyond our control environment, which may provide additional avenues for attackers to gain access to confidential information. Although we have information security procedures and controls in place, our technologies, systems, networks, and clients’ devices and software may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss, change or destruction of our or our clients’ confidential, proprietary and other information (including personal identifying information of individuals), or otherwise disrupt our or our clients’ or other third parties’ business operations. Other U.S. financial institutions and financial service companies have reported breaches in the security of their websites or other systems, including attempts to shut down access to their networks and systems in an attempt to extract compensation from them to regain control. Financial institutions have experienced distributed denial-of-service attacks, a sophisticated and targeted attack intended to disable or degrade internet service or to sabotage systems.
We and others in our industry are regularly the subject of attempts by attackers to gain unauthorized access to our networks, systems, and data, or to obtain, change, or destroy confidential data (including personal identifying information of individuals) through a variety of means, including computer viruses, malware, and phishing. In the future, these attacks may result in unauthorized individuals obtaining access to our confidential information or that of our clients, or otherwise accessing, damaging, or disrupting our systems or infrastructure.
We are continuously enhancing our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access. This continued enhancement will require us to expend additional resources, including to investigate and remediate any information security vulnerabilities that may be detected. Despite our ongoing investments in security resources, talent, and business practices, we are unable to assure that security measures will be effective.
If our systems and infrastructure were to be breached, damaged, or disrupted, or if we were to experience a loss of our confidential information or that of our clients, we could be subject to serious negative consequences, including disruption of our operations,
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damage to our reputation, a loss of trust in us on the part of our clients, vendors or other counterparties, client attrition, reimbursement or other costs, increased compliance costs, significant litigation exposure and legal liability, or regulatory fines, penalties or intervention. Any of these could materially and adversely affect our results of operations, our financial condition, and/or our share price.
Item 2.2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
(a) Exhibits:
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Number |
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| Herewith |
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Exhibit Number |
| Description |
| Filed Herewith |
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| Filing Date | ||||||||||
3.1 |
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| 10-K |
| 3.1 |
| 2/26/2018 |
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| 8-K |
| 3.1 |
| 5/24/2018 | ||
3.2 |
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| 3.2 |
| 2/26/2018 |
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31.1 |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| X |
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| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| X |
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32.1 |
| Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| X |
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32.2 |
| Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| X |
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101 |
| XBRL Interactive Data |
| X |
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| XBRL Interactive Data |
| X |
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56
TURES
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.
Hancock Whitney Corporation |
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| ||||
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By: |
| /s/ John M. Hairston | ||
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| John M. Hairston | ||
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| President & Chief Executive Officer | ||
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| (Principal Executive Officer) | ||
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| /s/ Michael M. Achary | ||
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| Michael M. Achary | ||
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| Senior Executive Vice President & Chief Financial Officer
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| /s/ Stephen E. Barker | ||
Stephen E. Barker | ||||
Executive Vice President & Chief Accounting Officer (Principal Accounting Officer) | ||||
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May 7, 2019 |
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