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 endedSeptember 30, 20182019
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period fromto
Commission file number: 001-36827
001-36872
HANCOCK WHITNEY 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.) | |
|
| |
HancockWhitneyPlaza, 2510 14thStreet, 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 every Interactive Data File required to be submitted 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 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.
85,166,40487,214,220 common shares were outstanding as of October 31, 2018. 2019.
1
HaTable of Contentsncock
Hancock Whitney Corporation
Index
Part I. Financial Information | Page Number | ||
ITEM 1. | 4 | ||
| Consolidated Balance Sheets (unaudited) – September 30, | 4 | |
| 5 | ||
| 6 | ||
| 7 | ||
| 8 | ||
| Notes to Consolidated Financial Statements (unaudited) – September 30, | 9 | |
ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 39 | |
ITEM 3. | 62 | ||
ITEM 4. | 63 | ||
Part II. Other Information |
| ||
ITEM 1. | 64 | ||
ITEM 1A. | 64 | ||
ITEM 2. | 64 | ||
ITEM 3. | N/A | ||
ITEM 4. | N/A | ||
ITEM 5. | N/A | ||
ITEM 6. | 64 | ||
65 |
2
2
Hancock Whitney Corporation
Glossary of Defined Terms
Entities:
Entities:
Hancock Whitney Corporation*Corporation –a financial holding companyregistered with the Securities and Exchange Commission
Hancock Whitney Bank*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
*On May 25, 2018, Hancock Whitney Corporation changed its name from Hancock Holding Company, and Hancock Whitney Bank changed its name from 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 - automated teller machine
Basel II - Basel Committee's 2004 Regulatory Capital Framework (Second Accord)
Basel III -Basel Committee's 2010 Regulatory Capital Framework (Third Accord)
Basel Committee - Basel Committee on Banking SupervisionBeta – amount 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-ownedbank-owned life insurance
bp(s) –Basis 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 Obligationcollateralized mortgage obligation
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
HFC – Harrison Finance Company, a former consumer finance subsidiary
HTM – held to maturity securities
3
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 acquired on September 21, 2019
NAICS – North American Industry Classification System
NII – net interest income
n/m – not meaningful
OCI– other comprehensive income
OFI – Louisiana Office of Financial Institutions
ORE – other real estate defined as foreclosed and surplus real estate
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
te– 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
3
4
Item 1.1. Financial Statements
Hancock Whitney Corporationand Subsidiaries
Consolidated Balance Sheets
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, | ||
(in thousands, except per share data) |
| 2018 |
| 2017 | ||
ASSETS |
|
|
|
|
|
|
Cash and due from banks |
| $ | 339,609 |
| $ | 386,948 |
Interest-bearing bank deposits |
|
| 107,635 |
|
| 92,157 |
Federal funds sold |
|
| 439 |
|
| 227 |
Securities available for sale, at fair value (amortized cost of $3,048,851 and $2,949,057) |
|
| 2,918,185 |
|
| 2,910,869 |
Securities held to maturity (fair value of $2,975,455 and $2,962,010) |
|
| 3,069,262 |
|
| 2,977,511 |
Loans held for sale |
|
| 29,043 |
|
| 39,865 |
Loans |
|
| 19,543,717 |
|
| 19,004,163 |
Less: allowance for loan losses |
|
| (214,550) |
|
| (217,308) |
Loans, net |
|
| 19,329,167 |
|
| 18,786,855 |
Property and equipment, net of accumulated depreciation of $221,295 and $214,998 |
|
| 343,833 |
|
| 333,663 |
Prepaid expenses |
|
| 35,470 |
|
| 28,015 |
Other real estate and foreclosed assets, net |
|
| 27,475 |
|
| 27,542 |
Accrued interest receivable |
|
| 87,567 |
|
| 82,191 |
Goodwill |
|
| 791,157 |
|
| 745,523 |
Other intangible assets, net |
|
| 101,438 |
|
| 90,640 |
Life insurance contracts |
|
| 550,261 |
|
| 541,081 |
Deferred tax asset, net |
|
| 59,570 |
|
| 53,979 |
Other assets |
|
| 308,064 |
|
| 239,020 |
Total assets |
| $ | 28,098,175 |
| $ | 27,336,086 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
Noninterest-bearing |
| $ | 8,140,530 |
| $ | 8,307,497 |
Interest-bearing |
|
| 14,277,277 |
|
| 13,945,705 |
Total deposits |
|
| 22,417,807 |
|
| 22,253,202 |
Short-term borrowings |
|
| 2,276,647 |
|
| 1,703,890 |
Long-term debt |
|
| 215,912 |
|
| 305,513 |
Accrued interest payable |
|
| 15,986 |
|
| 8,680 |
Other liabilities |
|
| 192,945 |
|
| 179,852 |
Total liabilities |
|
| 25,119,297 |
|
| 24,451,137 |
Stockholders' equity: |
|
|
|
|
|
|
Common stock |
|
| 292,716 |
|
| 292,716 |
Capital surplus |
|
| 1,735,444 |
|
| 1,718,117 |
Retained earnings |
|
| 1,170,897 |
|
| 1,008,518 |
Accumulated other comprehensive loss, net |
|
| (220,179) |
|
| (134,402) |
Total stockholders' equity |
|
| 2,978,878 |
|
| 2,884,949 |
Total liabilities and stockholders' equity |
| $ | 28,098,175 |
| $ | 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 |
|
| 85,364 |
|
| 85,200 |
See notes to unaudited consolidated financial statements.
5
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | ||||||||
|
| September 30, |
| September 30, | ||||||||
(in thousands, except per share data) |
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
| $ | 224,332 |
| $ | 199,702 |
| $ | 645,340 |
| $ | 566,663 |
Loans held for sale |
|
| 268 |
|
| 216 |
|
| 784 |
|
| 669 |
Securities-taxable |
|
| 32,482 |
|
| 26,616 |
|
| 92,566 |
|
| 74,385 |
Securities-tax exempt |
|
| 5,461 |
|
| 5,608 |
|
| 16,488 |
|
| 16,643 |
Short-term investments |
|
| 669 |
|
| 574 |
|
| 1,733 |
|
| 3,048 |
Total interest income |
|
| 263,212 |
|
| 232,716 |
|
| 756,911 |
|
| 661,408 |
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
| 34,190 |
|
| 21,789 |
|
| 91,019 |
|
| 52,972 |
Short-term borrowings |
|
| 11,780 |
|
| 4,425 |
|
| 24,547 |
|
| 11,598 |
Long-term debt |
|
| 3,048 |
|
| 3,645 |
|
| 9,940 |
|
| 12,573 |
Total interest expense |
|
| 49,018 |
|
| 29,859 |
|
| 125,506 |
|
| 77,143 |
Net interest income |
|
| 214,194 |
|
| 202,857 |
|
| 631,405 |
|
| 584,265 |
Provision for loan losses |
|
| 6,872 |
|
| 13,040 |
|
| 28,016 |
|
| 43,982 |
Net interest income after provision for loan losses |
|
| 207,322 |
|
| 189,817 |
|
| 603,389 |
|
| 540,283 |
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
| 21,377 |
|
| 21,444 |
|
| 63,806 |
|
| 60,711 |
Trust fees |
|
| 16,738 |
|
| 10,742 |
|
| 39,726 |
|
| 33,459 |
Bank card and ATM fees |
|
| 14,862 |
|
| 13,390 |
|
| 44,784 |
|
| 39,545 |
Investment and annuity fees and insurance commissions |
|
| 6,652 |
|
| 6,230 |
|
| 19,041 |
|
| 17,939 |
Secondary mortgage market operations |
|
| 4,333 |
|
| 4,157 |
|
| 11,699 |
|
| 11,965 |
Other income |
|
| 11,556 |
|
| 11,152 |
|
| 31,546 |
|
| 34,474 |
Total noninterest income |
|
| 75,518 |
|
| 67,115 |
|
| 210,602 |
|
| 198,093 |
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
|
| 84,389 |
|
| 82,242 |
|
| 244,374 |
|
| 237,486 |
Employee benefits |
|
| 18,084 |
|
| 16,901 |
|
| 55,316 |
|
| 54,869 |
Personnel expense |
|
| 102,473 |
|
| 99,143 |
|
| 299,690 |
|
| 292,355 |
Net occupancy expense |
|
| 11,895 |
|
| 12,448 |
|
| 35,221 |
|
| 36,285 |
Equipment expense |
|
| 4,520 |
|
| 3,779 |
|
| 12,328 |
|
| 11,457 |
Data processing expense |
|
| 20,492 |
|
| 16,798 |
|
| 55,214 |
|
| 48,993 |
Professional services expense |
|
| 9,555 |
|
| 10,062 |
|
| 32,191 |
|
| 31,691 |
Amortization of intangible assets |
|
| 5,638 |
|
| 6,070 |
|
| 16,578 |
|
| 16,532 |
Telecommunications and postage |
|
| 3,598 |
|
| 3,876 |
|
| 11,063 |
|
| 11,081 |
Deposit insurance and regulatory fees |
|
| 8,345 |
|
| 7,883 |
|
| 24,669 |
|
| 21,356 |
Other real estate (income) expense |
|
| 16 |
|
| 199 |
|
| (63) |
|
| (2,329) |
Other expense |
|
| 14,655 |
|
| 17,358 |
|
| 49,489 |
|
| 57,207 |
Total noninterest expense |
|
| 181,187 |
|
| 177,616 |
|
| 536,380 |
|
| 524,628 |
Income before income taxes |
|
| 101,653 |
|
| 79,316 |
|
| 277,611 |
|
| 213,748 |
Income taxes |
|
| 17,775 |
|
| 20,414 |
|
| 50,081 |
|
| 53,565 |
Net income |
| $ | 83,878 |
| $ | 58,902 |
| $ | 227,530 |
| $ | 160,183 |
Earnings per common share-basic |
| $ | 0.96 |
| $ | 0.68 |
| $ | 2.62 |
| $ | 1.85 |
Earnings per common share-diluted |
| $ | 0.96 |
| $ | 0.68 |
| $ | 2.61 |
| $ | 1.85 |
Dividends paid per share |
| $ | 0.27 |
| $ | 0.24 |
| $ | 0.75 |
| $ | 0.72 |
Weighted average shares outstanding-basic |
|
| 85,348 |
|
| 84,749 |
|
| 85,298 |
|
| 84,577 |
Weighted average shares outstanding-diluted |
|
| 85,539 |
|
| 84,980 |
|
| 85,482 |
|
| 84,818 |
See notes to unaudited consolidated financial statements.
6
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | ||||||||
|
| September 30, |
| September 30, | ||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||
Net income |
| $ | 83,878 |
| $ | 58,902 |
| $ | 227,530 |
| $ | 160,183 |
Other comprehensive income/loss before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized gain/loss on securities available for sale and cash flow hedges |
|
| (25,242) |
|
| 5,949 |
|
| (110,895) |
|
| 19,794 |
Reclassification of net losses realized and included in earnings |
|
| 2,547 |
|
| 1,374 |
|
| 6,560 |
|
| 4,479 |
Valuation adjustment for pension plan amendment |
|
| — |
|
| — |
|
| — |
|
| 17,315 |
Other valuation adjustments for employee benefit plans |
|
| — |
|
| 1,597 |
|
| (9,039) |
|
| (9,185) |
Amortization of unrealized net loss on securities transferred to held to maturity |
|
| 747 |
|
| 977 |
|
| 2,427 |
|
| 2,726 |
Other comprehensive income/loss before income taxes |
|
| (21,948) |
|
| 9,897 |
|
| (110,947) |
|
| 35,129 |
Income tax expense (benefit) |
|
| (4,978) |
|
| 3,609 |
|
| (25,170) |
|
| 12,748 |
Other comprehensive income/loss net of income taxes |
|
| (16,970) |
|
| 6,288 |
|
| (85,777) |
|
| 22,381 |
Comprehensive income |
| $ | 66,908 |
| $ | 65,190 |
| $ | 141,753 |
| $ | 182,564 |
|
| September 30, |
|
| December 31, |
| ||
(in thousands, except per share data) |
| 2019 |
|
| 2018 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Cash and due from banks |
| $ | 468,063 |
|
| $ | 383,372 |
|
Interest-bearing bank deposits |
|
| 47,604 |
|
|
| 110,579 |
|
Federal funds sold |
|
| 1,909 |
|
|
| 515 |
|
Securities available for sale, at fair value (amortized cost of $3,480,949 and $2,755,806) |
|
| 3,549,657 |
|
|
| 2,691,037 |
|
Securities held to maturity (fair value of $2,920,356 and $2,935,856) |
|
| 2,855,062 |
|
|
| 2,979,547 |
|
Loans held for sale |
|
| 75,789 |
|
|
| 28,150 |
|
Loans |
|
| 21,035,952 |
|
|
| 20,026,411 |
|
Less: allowance for loan losses |
|
| (195,572 | ) |
|
| (194,514 | ) |
Loans, net |
|
| 20,840,380 |
|
|
| 19,831,897 |
|
Property and equipment, net of accumulated depreciation of $245,013 and $225,969 |
|
| 382,934 |
|
|
| 353,668 |
|
Right of use assets, net of accumulated amortization of $9,328 |
|
| 113,598 |
|
|
| — |
|
Prepaid expenses |
|
| 41,768 |
|
|
| 35,047 |
|
Other real estate and foreclosed assets, net |
|
| 30,955 |
|
|
| 26,270 |
|
Accrued interest receivable |
|
| 93,038 |
|
|
| 86,681 |
|
Goodwill |
|
| 861,291 |
|
|
| 790,972 |
|
Other intangible assets, net |
|
| 116,078 |
|
|
| 96,151 |
|
Life insurance contracts |
|
| 609,567 |
|
|
| 549,300 |
|
Deferred tax asset, net |
|
| — |
|
|
| 22,967 |
|
Funded pension assets, net |
|
| 171,080 |
|
|
| 65,125 |
|
Other assets |
|
| 284,776 |
|
|
| 184,629 |
|
Total assets |
| $ | 30,543,549 |
|
| $ | 28,235,907 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
Noninterest-bearing |
| $ | 8,686,383 |
|
| $ | 8,499,027 |
|
Interest-bearing |
|
| 15,514,916 |
|
|
| 14,651,158 |
|
Total deposits |
|
| 24,201,299 |
|
|
| 23,150,185 |
|
Short-term borrowings |
|
| 2,108,815 |
|
|
| 1,589,128 |
|
Long-term debt |
|
| 246,641 |
|
|
| 224,993 |
|
Accrued interest payable |
|
| 17,956 |
|
|
| 12,267 |
|
Lease liabilities |
|
| 131,077 |
|
|
| — |
|
Deferred tax liability, net |
|
| 25,510 |
|
|
| — |
|
Other liabilities |
|
| 225,871 |
|
|
| 177,994 |
|
Total liabilities |
|
| 26,957,169 |
|
|
| 25,154,567 |
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Common stock |
|
| 309,513 |
|
|
| 292,716 |
|
Capital surplus |
|
| 1,919,840 |
|
|
| 1,725,741 |
|
Retained earnings |
|
| 1,408,183 |
|
|
| 1,243,592 |
|
Accumulated other comprehensive loss, net |
|
| (51,156 | ) |
|
| (180,709 | ) |
Total stockholders' equity |
|
| 3,586,380 |
|
|
| 3,081,340 |
|
Total liabilities and stockholders' equity |
| $ | 30,543,549 |
|
| $ | 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 |
|
| 92,947 |
|
|
| 87,903 |
|
Common shares outstanding |
|
| 90,822 |
|
|
| 85,643 |
|
See notes to unaudited consolidated financial statements.
4
7
Hancock Whitney Corporationand Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
| Common Stock |
| Capital |
| Retained |
|
| Comprehensive |
|
|
| |||||
(in thousands, except per share data) |
| Shares Issued |
| Amount |
| Surplus |
| Earnings |
|
| Loss, Net |
|
| Total | |||
Balance, December 31, 2016 |
| 87,495 |
| $ | 291,358 |
| $ | 1,698,253 |
| $ | 850,689 |
| $ | (120,532) |
| $ | 2,719,768 |
Net income |
| — |
|
| — |
|
| — |
|
| 160,183 |
|
| — |
|
| 160,183 |
Other comprehensive income |
| — |
|
| — |
|
| — |
|
| — |
|
| 22,381 |
|
| 22,381 |
Comprehensive income |
| — |
|
| — |
|
| — |
|
| 160,183 |
|
| 22,381 |
|
| 182,564 |
Cash dividends declared ($0.72 per common share) |
| — |
|
| — |
|
| — |
|
| (62,400) |
|
| — |
|
| (62,400) |
Common stock activity, long-term incentive plan |
| — |
|
| — |
|
| 20,910 |
|
| 119 |
|
| — |
|
| 21,029 |
Issuance of stock from dividend reinvestment |
| — |
|
| — |
|
| 2,314 |
|
| — |
|
| — |
|
| 2,314 |
Balance, September 30, 2017 |
| 87,495 |
| $ | 291,358 |
| $ | 1,721,477 |
| $ | 948,591 |
| $ | (98,151) |
| $ | 2,863,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017 |
| 87,903 |
| $ | 292,716 |
| $ | 1,718,117 |
| $ | 1,008,518 |
| $ | (134,402) |
| $ | 2,884,949 |
Net income |
| — |
|
| — |
|
| — |
|
| 227,530 |
|
| — |
|
| 227,530 |
Other comprehensive income |
| — |
|
| — |
|
| — |
|
| — |
|
| (85,777) |
|
| (85,777) |
Comprehensive income |
| — |
|
| — |
|
| — |
|
| 227,530 |
|
| (85,777) |
|
| 141,753 |
Cash dividends declared ($0.75 per common share) |
| — |
|
| — |
|
| — |
|
| (65,287) |
|
| — |
|
| (65,287) |
Common stock activity, long-term incentive plan |
| — |
|
| — |
|
| 14,832 |
|
| 136 |
|
| — |
|
| 14,968 |
Issuance of stock from dividend reinvestment and stock purchase plan |
| — |
|
| — |
|
| 2,495 |
|
| — |
|
| — |
|
| 2,495 |
Balance, September 30, 2018 |
| 87,903 |
| $ | 292,716 |
| $ | 1,735,444 |
| $ | 1,170,897 |
| $ | (220,179) |
| $ | 2,978,878 |
See notes to unaudited consolidated financial statements.
8
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Cash FlowsIncome
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended | ||||
|
| September 30, | ||||
(in thousands) |
| 2018 |
| 2017 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net income |
| $ | 227,530 |
| $ | 160,183 |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
| 19,740 |
|
| 20,942 |
Provision for loan losses |
|
| 28,016 |
|
| 43,982 |
Gain on other real estate owned |
|
| (313) |
|
| (1,865) |
Deferred tax expense |
|
| 20,342 |
|
| 8,072 |
Increase in cash surrender value of life insurance contracts |
|
| (6,714) |
|
| (10,855) |
Loss on disposal of other assets |
|
| 1,748 |
|
| 1,662 |
Loss on sale of business |
|
| 1,145 |
|
| — |
Net decrease in loans held for sale |
|
| 10,942 |
|
| 11,583 |
Net amortization of securities premium/discount |
|
| 25,440 |
|
| 24,119 |
Amortization of intangible assets |
|
| 16,578 |
|
| 16,532 |
Amortization of FDIC indemnification asset |
|
| — |
|
| 2,427 |
Stock-based compensation expense |
|
| 14,868 |
|
| 12,370 |
Decrease in interest payable and other liabilities |
|
| (2,662) |
|
| (5,038) |
Net cash receipts from FDIC for loss share claims |
|
| — |
|
| 2,300 |
Decrease in FDIC loss share receivable |
|
| — |
|
| 8,613 |
Increase (decrease) in payable to FDIC for loan servicing |
|
| (11,113) |
|
| 180,882 |
(Increase) decrease in other assets |
|
| (15,748) |
|
| 11,446 |
Other, net |
|
| 299 |
|
| 17,723 |
Net cash provided by operating activities |
|
| 330,098 |
|
| 505,078 |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
Proceeds from sales of securities available for sale |
|
| — |
|
| 213,877 |
Proceeds from maturities of securities available for sale |
|
| 253,755 |
|
| 249,270 |
Purchases of securities available for sale |
|
| (365,529) |
|
| (578,690) |
Proceeds from maturities of securities held to maturity |
|
| 272,986 |
|
| 276,073 |
Purchases of securities held to maturity |
|
| (375,770) |
|
| (554,442) |
Net (increase) decrease in short-term investments |
|
| (15,690) |
|
| 331,746 |
Proceeds from sales of loans and leases |
|
| 47,481 |
|
| 44,823 |
Net increase in loans |
|
| (706,989) |
|
| (770,051) |
Purchase of life insurance contracts |
|
| (1,601) |
|
| (50,000) |
Purchases of property and equipment |
|
| (32,583) |
|
| (16,086) |
Proceeds from sales of property and equipment |
|
| 52 |
|
| 389 |
Proceeds from sales of other real estate |
|
| 10,114 |
|
| 15,357 |
Cash received in excess of cash paid for acquisitions |
|
| 141,769 |
|
| 476,801 |
Proceeds from the sale of business, net of cash sold |
|
| 77,648 |
|
| — |
Other, net |
|
| (50,987) |
|
| (28,976) |
Net cash used in investing activities |
|
| (745,344) |
|
| (389,909) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
Net increase (decrease) in deposits |
|
| (52,709) |
|
| 181,084 |
Net increase (decrease) in short-term borrowings |
|
| 572,757 |
|
| (84,890) |
Repayments of long-term debt |
|
| (90,142) |
|
| (198,690) |
Net proceeds from issuance of long-term debt |
|
| 124 |
|
| 124 |
Dividends paid |
|
| (65,287) |
|
| (62,400) |
Payroll tax remitted on net share settlement of equity awards |
|
| (563) |
|
| (3,235) |
Proceeds from exercise of stock options |
|
| 1,232 |
|
| 11,610 |
Proceeds from dividend reinvestment and stock purchase plans |
|
| 2,495 |
|
| 2,314 |
Net cash provided by (used in) financing activities |
|
| 367,907 |
|
| (154,083) |
NET DECREASE IN CASH AND DUE FROM BANKS |
|
| (47,339) |
|
| (38,914) |
CASH AND DUE FROM BANKS, BEGINNING |
|
| 386,948 |
|
| 372,689 |
CASH AND DUE FROM BANKS, ENDING |
| $ | 339,609 |
| $ | 333,775 |
SUPPLEMENTAL INFORMATION FOR NON-CASH |
|
|
|
|
|
|
INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
Assets acquired in settlement of loans |
| $ | 19,542 |
| $ | 4,770 |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands, except per share data) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
| $ | 243,875 |
|
| $ | 224,332 |
|
| $ | 725,390 |
|
| $ | 645,340 |
|
Loans held for sale |
|
| 592 |
|
|
| 268 |
|
|
| 1,189 |
|
|
| 784 |
|
Securities-taxable |
|
| 32,724 |
|
|
| 32,482 |
|
|
| 94,107 |
|
|
| 92,566 |
|
Securities-tax exempt |
|
| 5,058 |
|
|
| 5,461 |
|
|
| 15,715 |
|
|
| 16,488 |
|
Short-term investments |
|
| 915 |
|
|
| 669 |
|
|
| 3,424 |
|
|
| 1,733 |
|
Total interest income |
|
| 283,164 |
|
|
| 263,212 |
|
|
| 839,825 |
|
|
| 756,911 |
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
| 49,220 |
|
|
| 34,190 |
|
|
| 145,201 |
|
|
| 91,019 |
|
Short-term borrowings |
|
| 7,729 |
|
|
| 11,780 |
|
|
| 23,658 |
|
|
| 24,547 |
|
Long-term debt |
|
| 3,276 |
|
|
| 3,048 |
|
|
| 8,905 |
|
|
| 9,940 |
|
Total interest expense |
|
| 60,225 |
|
|
| 49,018 |
|
|
| 177,764 |
|
|
| 125,506 |
|
Net interest income |
|
| 222,939 |
|
|
| 214,194 |
|
|
| 662,061 |
|
|
| 631,405 |
|
Provision for loan losses |
|
| 12,421 |
|
|
| 6,872 |
|
|
| 38,552 |
|
|
| 28,016 |
|
Net interest income after provision for loan losses |
|
| 210,518 |
|
|
| 207,322 |
|
|
| 623,509 |
|
|
| 603,389 |
|
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
| 21,892 |
|
|
| 21,377 |
|
|
| 62,982 |
|
|
| 63,806 |
|
Trust fees |
|
| 15,098 |
|
|
| 16,738 |
|
|
| 46,126 |
|
|
| 39,726 |
|
Bank card and ATM fees |
|
| 17,154 |
|
|
| 14,862 |
|
|
| 49,063 |
|
|
| 44,784 |
|
Investment and annuity fees and insurance commissions |
|
| 7,048 |
|
|
| 6,652 |
|
|
| 20,167 |
|
|
| 19,041 |
|
Secondary mortgage market operations |
|
| 5,713 |
|
|
| 4,333 |
|
|
| 13,872 |
|
|
| 11,699 |
|
Other income |
|
| 16,325 |
|
|
| 11,556 |
|
|
| 40,773 |
|
|
| 31,546 |
|
Total noninterest income |
|
| 83,230 |
|
|
| 75,518 |
|
|
| 232,983 |
|
|
| 210,602 |
|
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
|
| 93,858 |
|
|
| 84,389 |
|
|
| 265,573 |
|
|
| 244,374 |
|
Employee benefits |
|
| 18,622 |
|
|
| 18,084 |
|
|
| 57,240 |
|
|
| 55,316 |
|
Personnel expense |
|
| 112,480 |
|
|
| 102,473 |
|
|
| 322,813 |
|
|
| 299,690 |
|
Net occupancy expense |
|
| 13,156 |
|
|
| 11,895 |
|
|
| 38,101 |
|
|
| 35,221 |
|
Equipment expense |
|
| 4,685 |
|
|
| 4,520 |
|
|
| 13,706 |
|
|
| 12,328 |
|
Data processing expense |
|
| 21,532 |
|
|
| 20,492 |
|
|
| 60,951 |
|
|
| 55,214 |
|
Professional services expense |
|
| 17,704 |
|
|
| 9,555 |
|
|
| 35,537 |
|
|
| 32,191 |
|
Amortization of intangible assets |
|
| 4,889 |
|
|
| 5,638 |
|
|
| 15,074 |
|
|
| 16,578 |
|
Deposit insurance and regulatory fees |
|
| 3,995 |
|
|
| 8,345 |
|
|
| 14,156 |
|
|
| 24,669 |
|
Other real estate and foreclosed assets (income) expense |
|
| 2,055 |
|
|
| 16 |
|
|
| 1,459 |
|
|
| (63 | ) |
Other expense |
|
| 33,058 |
|
|
| 18,253 |
|
|
| 71,024 |
|
|
| 60,552 |
|
Total noninterest expense |
|
| 213,554 |
|
|
| 181,187 |
|
|
| 572,821 |
|
|
| 536,380 |
|
Income before income taxes |
|
| 80,194 |
|
|
| 101,653 |
|
|
| 283,671 |
|
|
| 277,611 |
|
Income taxes |
|
| 12,387 |
|
|
| 17,775 |
|
|
| 48,423 |
|
|
| 50,081 |
|
Net income |
| $ | 67,807 |
|
| $ | 83,878 |
|
| $ | 235,248 |
|
| $ | 227,530 |
|
Earnings per common share-basic |
| $ | 0.77 |
|
| $ | 0.96 |
|
| $ | 2.69 |
|
| $ | 2.62 |
|
Earnings per common share-diluted |
| $ | 0.77 |
|
| $ | 0.96 |
|
| $ | 2.69 |
|
| $ | 2.61 |
|
Dividends paid per share |
| $ | 0.27 |
|
| $ | 0.27 |
|
| $ | 0.81 |
|
| $ | 0.75 |
|
Weighted average shares outstanding-basic |
|
| 86,377 |
|
|
| 85,348 |
|
|
| 85,934 |
|
|
| 85,298 |
|
Weighted average shares outstanding-diluted |
|
| 86,462 |
|
|
| 85,539 |
|
|
| 86,010 |
|
|
| 85,482 |
|
See notes to unaudited consolidated financial statements.
5
9
Hancock Whitney Corporationand Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Net income |
| $ | 67,807 |
|
| $ | 83,878 |
|
| $ | 235,248 |
|
| $ | 227,530 |
|
Other comprehensive income/loss before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized gain/loss on securities available for sale and cash flow hedges |
|
| 34,159 |
|
|
| (25,242 | ) |
|
| 160,627 |
|
|
| (110,895 | ) |
Reclassification of net losses realized and included in earnings |
|
| 3,280 |
|
|
| 2,547 |
|
|
| 11,483 |
|
|
| 6,560 |
|
Other valuation adjustments for employee benefit plan |
|
| (7,015 | ) |
|
| — |
|
|
| (7,015 | ) |
|
| (9,039 | ) |
Amortization of unrealized net loss on securities transferred to held to maturity |
|
| 954 |
|
|
| 747 |
|
|
| 2,435 |
|
|
| 2,427 |
|
Other comprehensive income/loss before income taxes |
|
| 31,378 |
|
|
| (21,948 | ) |
|
| 167,530 |
|
|
| (110,947 | ) |
Income tax expense (benefit) |
|
| 7,331 |
|
|
| (4,978 | ) |
|
| 37,977 |
|
|
| (25,170 | ) |
Other comprehensive income/loss net of income taxes |
|
| 24,047 |
|
|
| (16,970 | ) |
|
| 129,553 |
|
|
| (85,777 | ) |
Comprehensive income |
| $ | 91,854 |
|
| $ | 66,908 |
|
| $ | 364,801 |
|
| $ | 141,753 |
|
See notes to unaudited consolidated financial statements.
6
Hancock Whitney Corporationand Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
Three Months Ended September 30, 2019 and 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |
|
| Common Stock |
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
| ||||||
(in thousands, except per share data) |
| Shares Issued |
|
| Amount |
|
| Capital Surplus |
|
| Retained Earnings |
|
| Comprehensive Loss, Net |
|
| Total |
| ||||||
Balance, June 30, 2019 |
|
| 87,903 |
|
| $ | 292,716 |
|
| $ | 1,737,492 |
|
| $ | 1,363,910 |
|
| $ | (75,203 | ) |
| $ | 3,318,915 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 67,807 |
|
|
| — |
|
|
| 67,807 |
|
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 24,047 |
|
|
| 24,047 |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 67,807 |
|
|
| 24,047 |
|
|
| 91,854 |
|
Cash dividends declared ($0.27 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23,597 | ) |
|
| — |
|
|
| (23,597 | ) |
Common stock issued in business combination |
|
| 5,044 |
|
|
| 16,797 |
|
|
| 177,052 |
|
|
| — |
|
|
| — |
|
|
| 193,849 |
|
Common stock activity, long-term incentive plan |
|
| — |
|
|
| — |
|
|
| 4,407 |
|
|
| 63 |
|
|
| — |
|
|
| 4,470 |
|
Issuance of stock from dividend reinvestment and stock purchase plans |
|
| — |
|
|
| — |
|
|
| 889 |
|
|
| — |
|
|
| — |
|
|
| 889 |
|
Balance, September 30, 2019 |
|
| 92,947 |
|
| $ | 309,513 |
|
| $ | 1,919,840 |
|
| $ | 1,408,183 |
|
| $ | (51,156 | ) |
| $ | 3,586,380 |
|
Balance, June 30, 2018 |
|
| 87,903 |
|
| $ | 292,716 |
|
| $ | 1,729,542 |
|
| $ | 1,110,506 |
|
| $ | (203,209 | ) |
| $ | 2,929,555 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 83,878 |
|
|
| — |
|
|
| 83,878 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16,970 | ) |
|
| (16,970 | ) |
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 83,878 |
|
|
| (16,970 | ) |
|
| 66,908 |
|
Cash dividends declared ($0.27 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23,512 | ) |
|
| — |
|
|
| (23,512 | ) |
Common stock activity, long-term incentive plan |
|
| — |
|
|
| — |
|
|
| 5,053 |
|
|
| 25 |
|
|
| — |
|
|
| 5,078 |
|
Issuance of stock from dividend reinvestment and stock purchase plans |
|
| — |
|
|
| — |
|
|
| 849 |
|
|
| — |
|
|
| — |
|
|
| 849 |
|
Balance, September 30, 2018 |
|
| 87,903 |
|
| $ | 292,716 |
|
| $ | 1,735,444 |
|
| $ | 1,170,897 |
|
| $ | (220,179 | ) |
| $ | 2,978,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019 and 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |
|
| Common Stock |
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
| ||||||
(in thousands, except per share data) |
| Shares Issued |
|
| Amount |
|
| Capital Surplus |
|
| Retained Earnings |
|
| Comprehensive Loss, Net |
|
| Total |
| ||||||
Balance, December 31, 2018 |
|
| 87,903 |
|
| $ | 292,716 |
|
| $ | 1,725,741 |
|
| $ | 1,243,592 |
|
| $ | (180,709 | ) |
| $ | 3,081,340 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 235,248 |
|
|
| — |
|
|
| 235,248 |
|
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 129,553 |
|
|
| 129,553 |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 235,248 |
|
|
| 129,553 |
|
|
| 364,801 |
|
Cash dividends declared ($0.81 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (70,771 | ) |
|
| — |
|
|
| (70,771 | ) |
Common stock issued in business combination |
|
| 5,044 |
|
|
| 16,797 |
|
|
| 177,052 |
|
|
| — |
|
|
| — |
|
|
| 193,849 |
|
Common stock activity, long-term incentive plan |
|
| — |
|
|
| — |
|
|
| 14,355 |
|
|
| 114 |
|
|
| — |
|
|
| 14,469 |
|
Issuance of stock from dividend reinvestment and stock purchase plans |
|
| — |
|
|
| — |
|
|
| 2,692 |
|
|
| — |
|
|
| — |
|
|
| 2,692 |
|
Balance, September 30, 2019 |
|
| 92,947 |
|
| $ | 309,513 |
|
| $ | 1,919,840 |
|
| $ | 1,408,183 |
|
| $ | (51,156 | ) |
| $ | 3,586,380 |
|
Balance, December 31, 2017 |
|
| 87,903 |
|
| $ | 292,716 |
|
| $ | 1,718,117 |
|
| $ | 1,008,518 |
|
| $ | (134,402 | ) |
| $ | 2,884,949 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 227,530 |
|
|
| — |
|
|
| 227,530 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (85,777 | ) |
|
| (85,777 | ) |
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 227,530 |
|
|
| (85,777 | ) |
|
| 141,753 |
|
Cash dividends declared ($0.75 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (65,287 | ) |
|
| — |
|
|
| (65,287 | ) |
Common stock activity, long-term incentive plan |
|
| — |
|
|
| — |
|
|
| 14,832 |
|
|
| 136 |
|
|
| — |
|
|
| 14,968 |
|
Issuance of stock from dividend reinvestment and stock purchase plans |
|
| — |
|
|
| — |
|
|
| 2,495 |
|
|
| — |
|
|
| — |
|
|
| 2,495 |
|
Balance, September 30, 2018 |
|
| 87,903 |
|
| $ | 292,716 |
|
| $ | 1,735,444 |
|
| $ | 1,170,897 |
|
| $ | (220,179 | ) |
| $ | 2,978,878 |
|
See notes to unaudited consolidated financial statements.
7
Hancock Whitney Corporationand Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
|
| Nine Months Ended |
| |||||
|
| September 30, |
| |||||
(in thousands) |
| 2019 |
|
| 2018 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
| $ | 235,248 |
|
| $ | 227,530 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 22,867 |
|
|
| 19,740 |
|
Provision for loan losses |
|
| 38,552 |
|
|
| 28,016 |
|
(Gain) loss on other real estate and foreclosed assets |
|
| 852 |
|
|
| (313 | ) |
Deferred tax expense |
| �� | 30,136 |
|
|
| 20,342 |
|
Increase in cash surrender value of life insurance contracts |
|
| (10,792 | ) |
|
| (6,714 | ) |
Loss on disposal of other assets |
|
| 70 |
|
|
| 1,748 |
|
Loss on sale of business |
|
| — |
|
|
| 1,145 |
|
Net (increase) decrease in loans held for sale |
|
| (46,727 | ) |
|
| 10,942 |
|
Net amortization of securities premium/discount |
|
| 23,133 |
|
|
| 25,440 |
|
Amortization of intangible assets |
|
| 15,074 |
|
|
| 16,578 |
|
Stock-based compensation expense |
|
| 15,497 |
|
|
| 14,868 |
|
Contribution to pension plan |
|
| (100,000 | ) |
|
| — |
|
Decrease in interest payable and other liabilities |
|
| (44,132 | ) |
|
| (2,662 | ) |
Decrease in payable to FDIC for loan servicing |
|
| — |
|
|
| (11,113 | ) |
Increase in other assets |
|
| (10,631 | ) |
|
| (15,748 | ) |
Other, net |
|
| (2,854 | ) |
|
| 299 |
|
Net cash provided by operating activities |
|
| 166,293 |
|
|
| 330,098 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from the sale of securities available for sale |
|
| 143,334 |
|
|
| — |
|
Proceeds from maturities of securities available for sale |
|
| 204,391 |
|
|
| 253,755 |
|
Purchases of securities available for sale |
|
| (810,198 | ) |
|
| (365,529 | ) |
Proceeds from maturities of securities held to maturity |
|
| 297,150 |
|
|
| 272,986 |
|
Purchases of securities held to maturity |
|
| (183,626 | ) |
|
| (375,770 | ) |
Net (increase) decrease in short-term investments |
|
| 383,970 |
|
|
| (15,690 | ) |
Proceeds from sales of loans and leases |
|
| 111,141 |
|
|
| 47,481 |
|
Net increase in loans |
|
| (353,971 | ) |
|
| (706,989 | ) |
Purchase of life insurance contracts |
|
| (32,788 | ) |
|
| (1,601 | ) |
Purchases of property and equipment |
|
| (33,746 | ) |
|
| (32,583 | ) |
Proceeds from sales of other real estate |
|
| 20,764 |
|
|
| 10,114 |
|
Cash acquired in stock-based business combination |
|
| 28,060 |
|
|
| — |
|
Consideration (paid) received in business combination |
|
| (1,112 | ) |
|
| 141,769 |
|
Proceeds from the sale of business, net of cash sold |
|
| — |
|
|
| 77,648 |
|
Other, net |
|
| (19,815 | ) |
|
| (50,935 | ) |
Net cash used in investing activities |
|
| (246,446 | ) |
|
| (745,344 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net decrease in deposits |
|
| (229,964 | ) |
|
| (52,709 | ) |
Net increase in short-term borrowings |
|
| 452,691 |
|
|
| 572,757 |
|
Repayments of long-term debt |
|
| (226 | ) |
|
| (90,142 | ) |
Net proceeds from issuance of long-term debt |
|
| 11,649 |
|
|
| 124 |
|
Dividends paid |
|
| (70,771 | ) |
|
| (65,287 | ) |
Payroll tax remitted on net share settlement of equity awards |
|
| (1,594 | ) |
|
| (563 | ) |
Proceeds from exercise of stock options |
|
| 367 |
|
|
| 1,232 |
|
Proceeds from dividend reinvestment and stock purchase plans |
|
| 2,692 |
|
|
| 2,495 |
|
Net cash provided by financing activities |
|
| 164,844 |
|
|
| 367,907 |
|
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS |
|
| 84,691 |
|
|
| (47,339 | ) |
CASH AND DUE FROM BANKS, BEGINNING |
|
| 383,372 |
|
|
| 386,948 |
|
CASH AND DUE FROM BANKS, ENDING |
| $ | 468,063 |
|
| $ | 339,609 |
|
SUPPLEMENTAL INFORMATION FOR NON-CASH |
|
|
|
|
|
|
|
|
INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Value of stock-based consideration in business combination |
| $ | 193,849 |
|
| $ | — |
|
Assets acquired in settlement of loans |
| $ | 14,170 |
|
| $ | 19,542 |
|
See notes to unaudited consolidated financial statements.
8
HANCOCK WHITNEY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of Hancock Whitney 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.
On May 25, 2018, the Company changed its name from Hancock Holding Company to Hancock Whitney Corporation, and its wholly- owned banking subsidiary changed its name from Whitney Bank to Hancock Whitney Bank. In connection with the name change, the Company changed its stock ticker symbol from “HBHC” to “HWC” on the NASDAQ Global Select Market.
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 16 – Recent Accounting Pronouncements for a discussion of accounting standards adopted during the nine months ended September 30, 2018.2019.
2. Business Combinations
MidSouth Bancorp, Inc.
On September 21, 2019, the Company completed the acquisition of MidSouth Bancorp, Inc. (“MidSouth”) (NYSE: MSL), parent company of MidSouth Bank, N.A. The transaction provides the Company opportunity for both enhanced growth in several of its 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 transaction was accounted for as a business combination whereby the Company acquired net assets with an estimated fair value of $124.6 million and recorded goodwill of $69.2 million. In consideration for the net assets acquired, each outstanding share of MidSouth common stock converted to 0.2952 shares of the Company’s common stock. As such, the Company issued approximately 5.0 million shares resulting in a transaction value of $193.8 million. The following table sets forth the preliminary acquisition date fair value of the assets acquired and liabilities assumed, and the resulting goodwill. The goodwill is not deductible for federal income tax purposes.
(in thousands) |
|
|
|
ASSETS |
|
|
|
Cash and due from banks |
| $ | 28,060 |
Interest bearing bank deposits |
|
| 318,914 |
Federal funds sold |
|
| 3,475 |
Securities available for sale |
|
| 272,406 |
Loans |
|
| 785,204 |
Property and equipment |
|
| 30,164 |
Other real estate |
|
| 435 |
Identifiable intangible assets |
|
| 35,000 |
Other assets |
|
| 56,860 |
Total identifiable assets |
|
| 1,530,518 |
LIABILITIES |
|
|
|
Deposit liabilities |
|
| 1,281,078 |
Short term borrowings |
|
| 66,996 |
9
Long term debt |
|
| 13,919 |
Other liabilities |
|
| 43,883 |
Total liabilities |
|
| 1,405,876 |
Net assets acquired |
|
| 124,642 |
Value of stock-based consideration |
|
| 193,849 |
Goodwill |
| $ | 69,207 |
The loans acquired were recorded at an estimated fair value at the acquisition date using a loss adjusted cash flow method, with no carryover of the related allowance for loan losses. Acquired loans are classified as either purchased credit performing or purchased credit impaired based on such factors as past due status, nonaccrual status and internal risk rating. Loans considered to be purchased credit performing were accounted for under Accounting Standards Codification (“ASC”) 310-20. The purchased credit performing loans had a book balance of $686.0 million, of which $17.2 million is not expected to be collected, and an estimated fair value of $667.2 million. Loans considered to be purchased credit impaired were accounted for under ASC 310-30 using the expected cash flow method. The purchased credit impaired loans had a book balance of $140.3 million and an estimated fair value of $118.0 million.
The securities available for sale portfolio consisted primarily of collateralized mortgage obligations and mortgaged backed securities. Approximately $143.3 million of the acquired portfolio was sold prior to September 30, 2019, and the Company intends to sell the remainder of the portfolio during the fourth quarter of 2019.
The core deposit intangible asset of $35 million represents the value of the relationships with deposit customers based on the favorable source of funds method. The core deposit intangible will be amortized using sum of years’ digits over the asset’s estimated life of 15 years.
Short-term borrowings consisted of customer repurchase agreements of $39.5 million and 2 FHLB advances totaling $27.5 million. The FHLB advances had 30 day maturities with fixed interest rates of 2.16%.
Long-term debt consists of 3 trust preferred debentures with maturities through 2037; however, each is callable and may be redeemed at the Company’s election. The Company intends to redeem each debenture in full before December 31, 2019.
The results of the acquired business were included in the Company’s consolidated results of operations from the date of acquisition. The results of the acquired business are not material to the Company’s consolidated results of operations and, as such, neither supplemental pro forma information of the combined entity nor revenue and earnings contributed by the acquired business since the date of acquisition are presented.
10
2. AcquisitionsDuring the three and Divestiturenine months ended September 30, 2019, the Company incurred acquisition related costs of approximately $28.8 million. The following table presents the acquisition related costs by component:
(in thousands) |
|
|
|
|
Personnel expense |
| $ | 5,002 |
|
Net occupancy expense |
|
| 735 |
|
Equipment expense |
|
| 188 |
|
Data processing expense |
|
| 437 |
|
Professional services expense |
|
| 7,491 |
|
Advertising |
|
| 2,624 |
|
Printing and supplies |
|
| 433 |
|
Other expense |
|
| 11,900 |
|
Total acquisition related expenses |
| $ | 28,810 |
|
Personnel expense includes severance and change in control costs. Professional services expense includes legal and consulting costs, including costs associated with systems conversion. Other expense includes contract and lease termination fees and other transaction-related costs.
Trust and Asset Management Business
On July 13, 2018, the Company acquired the bank-managed high net worth individual and institutional investment management and trust business of Capital One, National Association (“Capital One”). The transaction added assets under management of $4 billion and assets under management and administration of $10.4 billion to the Company’s existing trust and asset management business. In addition, the Company assumed approximately $217 million of customer deposit liabilities. The net consideration received is subject to final settlement, which is expected to occur during the first quarter of 2019. The following table sets forth the preliminary acquisition date fair value of the assets acquired and the liabilities assumed, the consideration received, and the resulting goodwill.
The goodwill is deductible for federal income tax purposes.
| ||
| ||
|
| |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
|
|
(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 |
|
10
Identifiable 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.
The acquired trust and asset management business added $14.8 million in trust fee revenue and $14.0 million of expense to the Company’s results of operations for the nine months ended September 30, 2019. The results are not material to the Company’s results of operations and, as such, supplemental proforma financial information for the nine months ended September 30, 2018 is not presented. During the nine months ended September 30, 2018, the Company incurred acquisition related costs of approximately $5.7 million.
11
Goodwill Resulting from Business Combinations
Goodwill represents the excess of the consideration transferred over the fair value of the net assets acquired or excess of the 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 existing markets and entry into new 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 expected to be deductible for federal income tax purposes. The following table presents the change in the Company’s goodwill during the nine monthsyear ended September 30, 2018.
(in thousands)
|
| |
| ||
|
|
The results of acquired business are not material to the Company’s results of operations. As such, supplemental proforma financial information for the nine months ended September 30, 2018 and 2017 is not presented. During the nine months ended September 30, 2018, the Company incurred acquisition related costs of approximately $5.7 million.2019.
On March 10, 2017, the Company, through its banking subsidiary, Hancock Whitney Bank (“Hancock Whitney”), acquired certain assets and assumed certain liabilities, including nine branches, from First NBC Bank (“FNBC”), referred to as the FNBC I transaction. Hancock 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. Hancock Whitney entered into a purchase and assumption agreement with the FDIC, referred to as the FNBC II transaction. Pursuant to the agreement, Hancock Whitney acquired selected assets and assumed selected liabilities of the former FNBC, including substantially all of the transaction and savings deposits. Hancock 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 Hancock Whitney against certain liabilities of FNBC and its affiliates not assumed or otherwise purchased by Hancock Whitney. Neither the Company nor Hancock Whitney acquired any assets, common stock, preferred stock or debt, or assumed any other obligations, of First NBC Bank Holding Company.
On March 9, 2018, the Company sold its consumer finance subsidiary, Harrison Finance Company (“HFC”). The Company received cash of approximately $78.9 million and recorded a loss on the sale of $1.1 million.
(in thousands) |
|
|
|
|
Goodwill balance at December 31, 2017 |
| $ | 745,523 |
|
Initial 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 |
|
Initial goodwill recorded - acquisition of MidSouth |
|
| 69,207 |
|
Goodwill balance at September 30, 2019 |
| $ | 861,291 |
|
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 September 30, 2019 and December 31, 2018 follow.
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| September 30, 2019 |
|
| December 31, 2018 |
| ||||||||||||||||||||||||||
|
|
|
|
|
| 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 |
| $ | 93,415 |
|
| $ | 1,726 |
|
| $ | — |
|
| $ | 95,141 |
|
| $ | 74,339 |
|
| $ | — |
|
| $ | 2,633 |
|
| $ | 71,706 |
|
Municipal obligations |
|
| 243,941 |
|
|
| 8,222 |
|
|
| — |
|
|
| 252,163 |
|
|
| 246,713 |
|
|
| 360 |
|
|
| 6,646 |
|
|
| 240,427 |
|
Residential mortgage-backed securities |
|
| 1,321,109 |
|
|
| 20,598 |
|
|
| 2,236 |
|
|
| 1,339,471 |
|
|
| 1,468,912 |
|
|
| 4,284 |
|
|
| 29,794 |
|
|
| 1,443,402 |
|
Commercial mortgage-backed securities |
|
| 1,585,956 |
|
|
| 39,066 |
|
|
| 853 |
|
|
| 1,624,169 |
|
|
| 799,060 |
|
|
| 1,953 |
|
|
| 30,936 |
|
|
| 770,077 |
|
Collateralized mortgage obligations |
|
| 232,577 |
|
|
| 2,302 |
|
|
| 63 |
|
|
| 234,816 |
|
|
| 163,282 |
|
|
| 903 |
|
|
| 2,260 |
|
|
| 161,925 |
|
Corporate debt securities |
|
| 3,951 |
|
|
| — |
|
|
| 54 |
|
|
| 3,897 |
|
|
| 3,500 |
|
|
| — |
|
|
| — |
|
|
| 3,500 |
|
|
| $ | 3,480,949 |
|
| $ | 71,914 |
|
| $ | 3,206 |
|
| $ | 3,549,657 |
|
| $ | 2,755,806 |
|
| $ | 7,500 |
|
| $ | 72,269 |
|
| $ | 2,691,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Securities Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
(in thousands) |
| September 30, 2018 |
| December 31, 2017 |
| September 30, 2019 |
|
| December 31, 2018 |
| ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| Gross |
| Gross |
|
|
|
|
| Gross |
| Gross |
|
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
| ||||||||||||
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||||||||||||||
|
| Cost |
| Gains |
| Losses |
| Value |
| Cost |
| Gains |
| Losses |
| Value |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||||||||||||||
U.S. Treasury and government agency securities |
| $ | 94,366 |
|
| — |
|
| 5,054 |
|
| 89,312 |
| $ | 99,535 |
| $ | — |
| $ | 2,263 |
| $ | 97,272 |
| $ | 50,000 |
|
| $ | — |
|
| $ | 46 |
|
| $ | 49,954 |
|
| $ | 50,000 |
|
| $ | — |
|
| $ | 478 |
|
| $ | 49,522 |
|
Municipal obligations |
|
| 243,546 |
|
| 95 |
|
| 10,928 |
|
| 232,713 |
|
| 245,997 |
|
| 1,135 |
|
| 3,346 |
|
| 243,786 |
|
| 647,500 |
|
|
| 28,613 |
|
|
| 95 |
|
|
| 676,018 |
|
|
| 688,201 |
|
|
| 2,347 |
|
|
| 9,503 |
|
|
| 681,045 |
|
Residential mortgage-backed securities |
|
| 1,793,698 |
|
| 1,969 |
|
| 64,392 |
|
| 1,731,275 |
|
| 1,729,989 |
|
| 5,611 |
|
| 20,387 |
|
| 1,715,213 |
|
| 549,929 |
|
|
| 9,226 |
|
|
| 355 |
|
|
| 558,800 |
|
|
| 640,393 |
|
|
| 1,461 |
|
|
| 6,117 |
|
|
| 635,737 |
|
Commercial mortgage-backed securities |
|
| 770,245 |
|
| — |
|
| 47,363 |
|
| 722,882 |
|
| 704,518 |
|
| 480 |
|
| 17,863 |
|
| 687,135 |
|
| 539,877 |
|
|
| 20,099 |
|
|
| 10 |
|
|
| 559,966 |
|
|
| 357,175 |
|
|
| 376 |
|
|
| 10,882 |
|
|
| 346,669 |
|
Collateralized mortgage obligations |
|
| 143,496 |
|
| — |
|
| 4,993 |
|
| 138,503 |
|
| 165,518 |
|
| 4 |
|
| 1,559 |
|
| 163,963 |
|
| 1,067,756 |
|
|
| 9,920 |
|
|
| 2,058 |
|
|
| 1,075,618 |
|
|
| 1,243,778 |
|
|
| 1,598 |
|
|
| 22,493 |
|
|
| 1,222,883 |
|
Corporate debt securities |
|
| 3,500 |
|
| — |
|
| — |
|
| 3,500 |
|
| 3,500 |
|
| — |
|
| — |
|
| 3,500 | ||||||||||||||||||||||||||||||||
|
| $ | 3,048,851 |
| $ | 2,064 |
| $ | 132,730 |
| $ | 2,918,185 |
| $ | 2,949,057 |
| $ | 7,230 |
| $ | 45,418 |
| $ | 2,910,869 |
| $ | 2,855,062 |
|
| $ | 67,858 |
|
| $ | 2,564 |
|
| $ | 2,920,356 |
|
| $ | 2,979,547 |
|
| $ | 5,782 |
|
| $ | 49,473 |
|
| $ | 2,935,856 |
|
12
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
(in thousands) |
| September 30, 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 |
|
| — |
|
| 708 |
|
| 49,292 |
| $ | 50,000 |
| $ | — |
| $ | 289 |
| $ | 49,711 |
Municipal obligations |
|
| 699,470 |
|
| 355 |
|
| 17,809 |
|
| 682,016 |
|
| 723,094 |
|
| 8,323 |
|
| 4,245 |
|
| 727,172 |
Residential mortgage-backed securities |
|
| 668,320 |
|
| — |
|
| 15,501 |
|
| 652,819 |
|
| 725,748 |
|
| 4,175 |
|
| 2,690 |
|
| 727,233 |
Commercial mortgage-backed securities |
|
| 357,428 |
|
| — |
|
| 17,429 |
|
| 339,999 |
|
| 317,185 |
|
| 40 |
|
| 3,915 |
|
| 313,310 |
Collateralized mortgage obligations |
|
| 1,294,044 |
|
| — |
|
| 42,715 |
|
| 1,251,329 |
|
| 1,161,484 |
|
| 572 |
|
| 17,472 |
|
| 1,144,584 |
|
| $ | 3,069,262 |
| $ | 355 |
| $ | 94,162 |
| $ | 2,975,455 |
| $ | 2,977,511 |
| $ | 13,110 |
| $ | 28,611 |
| $ | 2,962,010 |
The following tables present the amortized cost and estimated fair value of debt securities available for sale and held to maturity at September 30, 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 |
| $ | 4,814 |
| $ | 4,820 |
| $ | 6,598 |
|
| $ | 6,629 |
|
Due after one year through five years |
| 54,339 |
| 54,077 |
|
| 1,529,328 |
|
|
| 1,558,458 |
| ||
Due after five years through ten years |
| 1,259,696 |
| 1,196,235 |
|
| 1,569,872 |
|
|
| 1,606,207 |
| ||
Due after ten years |
|
| 1,730,002 |
|
| 1,663,053 |
|
| 375,151 |
|
|
| 378,363 |
|
Total available for sale debt securities |
| $ | 3,048,851 |
| $ | 2,918,185 |
| $ | 3,480,949 |
|
| $ | 3,549,657 |
|
|
|
|
|
|
|
| ||||||||
Debt Securities Held to Maturity |
| Amortized |
| Fair | ||||||||||
(in thousands) |
| Cost |
| Value | ||||||||||
Due in one year or less |
| $ | 24,832 |
| $ | 24,909 | ||||||||
Due after one year through five years |
| 130,348 |
| 127,950 | ||||||||||
Due after five years through ten years |
| 1,452,690 |
| 1,407,279 | ||||||||||
Due after ten years |
|
| 1,461,392 |
|
| 1,415,317 | ||||||||
Total held to maturity securities |
| $ | 3,069,262 |
| $ | 2,975,455 |
Debt Securities Held to Maturity |
| Amortized |
|
| Fair |
| ||
(in thousands) |
| Cost |
|
| Value |
| ||
Due in one year or less |
| $ | 74,476 |
|
| $ | 74,611 |
|
Due after one year through five years |
|
| 1,852,708 |
|
|
| 1,864,562 |
|
Due after five years through ten years |
|
| 927,878 |
|
|
| 981,183 |
|
Due after ten years |
|
| — |
|
|
| — |
|
Total held to maturity securities |
| $ | 2,855,062 |
|
| $ | 2,920,356 |
|
The Company held no0 securities classified as trading at September 30, 2018 or2019 and December 31, 2017.2018.
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 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
September 30, 2018 |
| Losses < 12 months |
| Losses 12 months or > |
| Total | ||||||||||||||||||||||||||||||||||||
|
|
|
| Gross |
|
|
| Gross |
|
|
| Gross | ||||||||||||||||||||||||||||||
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized | ||||||||||||||||||||||||||||||
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
September 30, 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 |
| $ | 41,765 |
|
| 2,027 |
|
| 47,547 |
|
| 3,027 |
| $ | 89,312 |
| $ | 5,054 |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Municipal obligations |
| 53,337 |
| 1,568 |
| 165,732 |
| 9,360 |
| 219,069 |
| 10,928 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||
Residential mortgage-backed securities |
| 652,504 |
| 11,892 |
| 1,029,004 |
| 52,500 |
| 1,681,508 |
| 64,392 |
|
| 2 |
|
|
| — |
|
|
| 438,339 |
|
|
| 2,236 |
|
|
| 438,341 |
|
|
| 2,236 |
| ||||||
Commercial mortgage-backed securities |
| 247,504 |
| 8,368 |
| 475,379 |
| 38,995 |
| 722,883 |
| 47,363 |
|
| 108,208 |
|
|
| 844 |
|
|
| 15,098 |
|
|
| 9 |
|
|
| 123,306 |
|
|
| 853 |
| ||||||
Collateralized mortgage obligations |
|
| 82,853 |
|
| 2,836 |
|
| 55,650 |
|
| 2,157 |
|
| 138,503 |
|
| 4,993 |
|
| 613 |
|
|
| — |
|
|
| 4,091 |
|
|
| 63 |
|
|
| 4,704 |
|
|
| 63 |
|
Other debt obligation |
|
| 1,903 |
|
|
| 54 |
|
|
| — |
|
|
| — |
|
|
| 1,903 |
|
|
| 54 |
| ||||||||||||||||||
|
| $ | 1,077,963 |
| $ | 26,691 |
| $ | 1,773,312 |
| $ | 106,039 |
| $ | 2,851,275 |
| $ | 132,730 |
| $ | 110,726 |
|
| $ | 898 |
|
| $ | 457,528 |
|
| $ | 2,308 |
|
| $ | 568,254 |
|
| $ | 3,206 |
|
Securities 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 |
|
13
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
September 30, 2018 |
| Losses < 12 months |
| Losses 12 months or > |
| Total | ||||||||||||||||||||||||||||||||||||
Securities Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
September 30, 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 |
| $ | — |
|
| — |
|
| 49,292 |
|
| 708 |
| $ | 49,292 |
| $ | 708 |
| $ | — |
|
|
| — |
|
| $ | 49,954 |
|
| $ | 46 |
|
| $ | 49,954 |
|
| $ | 46 |
|
Municipal obligations |
| 378,622 |
| 7,288 |
| 217,955 |
| 10,521 |
| 596,577 |
| 17,809 |
|
| 3,820 |
|
|
| 30 |
|
|
| 6,431 |
|
|
| 65 |
|
|
| 10,251 |
|
|
| 95 |
| ||||||
Residential mortgage-backed securities |
| 454,003 |
| 6,996 |
| 198,816 |
| 8,505 |
| 652,819 |
| 15,501 |
|
| — |
|
|
| — |
|
|
| 122,687 |
|
|
| 355 |
|
|
| 122,687 |
|
|
| 355 |
| ||||||
Commercial mortgage-backed securities |
| 270,664 |
| 11,146 |
| 69,335 |
| 6,283 |
| 339,999 |
| 17,429 |
|
| 29,101 |
|
|
| 10 |
|
|
| — |
|
|
| — |
|
|
| 29,101 |
|
|
| 10 |
| ||||||
Collateralized mortgage obligations |
|
| 572,469 |
|
| 11,263 |
|
| 678,860 |
|
| 31,452 |
|
| 1,251,329 |
|
| 42,715 |
|
| 18,661 |
|
|
| 65 |
|
|
| 255,511 |
|
|
| 1,993 |
|
|
| 274,172 |
|
|
| 2,058 |
|
|
| $ | 1,675,758 |
| $ | 36,693 |
| $ | 1,214,258 |
| $ | 57,469 |
| $ | 2,890,016 |
| $ | 94,162 |
| $ | 51,582 |
|
| $ | 105 |
|
| $ | 434,583 |
|
| $ | 2,459 |
|
| $ | 486,165 |
|
| $ | 2,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Held to maturity |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
December 31, 2017 |
| Losses < 12 months |
| Losses 12 months or > |
| Total | ||||||||||||||||||||||||||||||||||||
Securities Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
December 31, 2018 |
| 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 |
| $ | — |
| $ | — |
| $ | 49,711 |
| $ | 289 |
| $ | 49,711 |
| $ | 289 |
| $ | — |
|
| $ | — |
|
| $ | 49,521 |
|
| $ | 478 |
|
| $ | 49,521 |
|
| $ | 478 |
|
Municipal obligations |
| 14,603 |
| 19 |
| 230,960 |
| 4,226 |
| 245,563 |
| 4,245 |
|
| 233,469 |
|
|
| 2,256 |
|
|
| 233,280 |
|
|
| 7,247 |
|
|
| 466,749 |
|
|
| 9,503 |
| ||||||
Residential mortgage-backed securities |
| 8,815 |
| 99 |
| 230,277 |
| 2,591 |
| 239,092 |
| 2,690 |
|
| 90,730 |
|
|
| 123 |
|
|
| 235,251 |
|
|
| 5,994 |
|
|
| 325,981 |
|
|
| 6,117 |
| ||||||
Commercial mortgage-backed securities |
| 174,882 |
| 744 |
| 72,499 |
| 3,171 |
| 247,381 |
| 3,915 |
|
| — |
|
|
| — |
|
|
| 305,419 |
|
|
| 10,882 |
|
|
| 305,419 |
|
|
| 10,882 |
| ||||||
Collateralized mortgage obligations |
|
| 570,289 |
|
| 5,653 |
|
| 472,536 |
|
| 11,819 |
|
| 1,042,825 |
|
| 17,472 |
|
| 77,394 |
|
|
| 281 |
|
|
| 897,153 |
|
|
| 22,212 |
|
|
| 974,547 |
|
|
| 22,493 |
|
|
| $ | 768,589 |
| $ | 6,515 |
| $ | 1,055,983 |
| $ | 22,096 |
| $ | 1,824,572 |
|
| 28,611 |
| $ | 401,593 |
|
| $ | 2,660 |
|
| $ | 1,720,624 |
|
| $ | 46,813 |
|
| $ | 2,122,217 |
|
| $ | 49,473 |
|
The unrealized losses relate primarily 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 had adequate liquidity as of September 30, 20182019 and December 31, 20172018 and did not intend to nor believe that it would be required to sell these securities before recovery of the indicated impairment. Accordingly, the unrealized losses on these securities were 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.
Proceeds from the sales of securities were approximately $143.3 million with 0 gross gains or losses during the nine months ended September 30, 2019. There were no sales of securities during the nine months ended September 30, 2018. Proceeds from the sales of securities were approximately $213.9 million with no gain or loss for the nine months ended September 30, 2017.
Securities with carrying values totaling $3.1$3.0 billion and $3.3$3.4 billion at September 30, 20182019 and December 31, 2017,2018, respectively, were pledged as collateral, primarily to secure public deposits or securities sold under agreements to repurchase.
13
4. Loans and Allowance for Loan Losses
The Company generally makes loans in its market areas of south Mississippi, southern and central Alabama, northwest, central and south Louisiana, the Houston,East Texas, area, the northern, central, and panhandle regions of Florida, and Nashville, Tennessee. Loans, net of unearned income, by portfolio are presented in the table below.
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
| September 30, |
| December 31, |
| September 30, |
|
| December 31, |
| ||||
(in thousands) |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
| ||||
Commercial non-real estate |
| $ | 8,438,884 |
| $ | 8,297,937 |
| $ | 8,893,004 |
|
| $ | 8,620,601 |
|
Commercial real estate - owner occupied |
|
| 2,300,271 |
|
| 2,142,439 |
|
| 2,734,379 |
|
|
| 2,457,748 |
|
Total commercial and industrial |
|
| 10,739,155 |
|
| 10,440,376 |
|
| 11,627,383 |
|
|
| 11,078,349 |
|
Commercial real estate - income producing |
| 2,311,699 |
| 2,384,599 |
|
| 3,060,568 |
|
|
| 2,341,779 |
| ||
Construction and land development |
| 1,523,419 |
| 1,373,421 |
|
| 1,190,718 |
|
|
| 1,548,335 |
| ||
Residential mortgages |
| 2,846,916 |
| 2,690,472 |
|
| 3,004,958 |
|
|
| 2,910,081 |
| ||
Consumer |
|
| 2,122,528 |
|
| 2,115,295 |
|
| 2,152,325 |
|
|
| 2,147,867 |
|
Total loans |
| $ | 19,543,717 |
| $ | 19,004,163 |
| $ | 21,035,952 |
|
| $ | 20,026,411 |
|
14
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.
15
14
Allowance for Loan Losses
The following tables show activity in the allowance for loan losses by portfolio class for the nine months ended September 30, 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 |
| and industrial |
| producing |
| development |
| mortgages |
| Consumer |
| Total |
| estate |
|
| occupied |
|
| industrial |
|
| producing |
|
| development |
|
| mortgages |
|
| Consumer |
|
| Total |
| ||||||||||||||||
|
| Nine Months Ended September 30, 2018 |
| Nine Months Ended September 30, 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 |
|
| (15,401) |
|
| (7,330) |
|
| (22,731) |
|
| (1,633) |
|
| (265) |
|
| (585) |
|
| (18,599) |
|
| (43,813) |
|
| (33,382 | ) |
|
| (137 | ) |
|
| (33,519 | ) |
|
| (10 | ) |
|
| (7 | ) |
|
| (660 | ) |
|
| (13,169 | ) |
|
| (47,365 | ) |
Recoveries |
|
| 13,234 |
|
| 282 |
|
| 13,516 |
|
| 221 |
|
| 68 |
|
| 1,854 |
|
| 4,028 |
|
| 19,687 |
|
| 5,662 |
|
|
| 284 |
|
|
| 5,946 |
|
|
| 518 |
|
|
| 108 |
|
|
| 433 |
|
|
| 2,866 |
|
|
| 9,871 |
|
Net provision for loan losses |
|
| (5,073) |
|
| 7,203 |
|
| 2,130 |
|
| 6,288 |
|
| 6,248 |
|
| (1,803) |
|
| 15,153 |
|
| 28,016 |
|
| 29,267 |
|
|
| 545 |
|
|
| 29,812 |
|
|
| 7,604 |
|
|
| (5,982 | ) |
|
| (2,076 | ) |
|
| 9,194 |
|
|
| 38,552 |
|
Reduction as a result of sale of subsidiary |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (6,648) |
|
| (6,648) | ||||||||||||||||||||||||||||||||
Ending balance |
| $ | 120,678 |
| $ | 13,117 |
| $ | 133,795 |
| $ | 18,585 |
| $ | 13,423 |
| $ | 24,310 |
| $ | 24,437 |
| $ | 214,550 |
| $ | 99,299 |
|
| $ | 14,449 |
|
| $ | 113,748 |
|
| $ | 25,750 |
|
| $ | 9,766 |
|
| $ | 21,479 |
|
| $ | 24,829 |
|
| $ | 195,572 |
|
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance: |
| September 30, 2018 |
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment |
| $ | 23,101 |
| $ | 225 |
| $ | 23,326 |
| $ | 285 |
| $ | 1 |
| $ | 163 |
| $ | 131 |
| $ | 23,906 |
| $ | 11,535 |
|
| $ | 57 |
|
| $ | 11,592 |
|
| $ | 49 |
|
| $ | 29 |
|
| $ | 183 |
|
| $ | 365 |
|
| $ | 12,218 |
|
Amounts related to purchased credit impaired loans |
|
| 327 |
|
| 403 |
|
| 730 |
|
| 45 |
|
| 91 |
|
| 10,109 |
|
| 433 |
|
| 11,408 |
|
| 135 |
|
|
| 172 |
|
|
| 307 |
|
|
| 40 |
|
|
| 144 |
|
|
| 8,032 |
|
|
| 300 |
|
|
| 8,823 |
|
Collectively evaluated for impairment |
|
| 97,250 |
|
| 12,489 |
|
| 109,739 |
|
| 18,255 |
|
| 13,331 |
|
| 14,038 |
|
| 23,873 |
|
| 179,236 |
|
| 87,629 |
|
|
| 14,220 |
|
|
| 101,849 |
|
|
| 25,661 |
|
|
| 9,593 |
|
|
| 13,264 |
|
|
| 24,164 |
|
|
| 174,531 |
|
Total allowance |
| $ | 120,678 |
| $ | 13,117 |
| $ | 133,795 |
| $ | 18,585 |
| $ | 13,423 |
| $ | 24,310 |
| $ | 24,437 |
| $ | 214,550 |
| $ | 99,299 |
|
| $ | 14,449 |
|
| $ | 113,748 |
|
| $ | 25,750 |
|
| $ | 9,766 |
|
| $ | 21,479 |
|
| $ | 24,829 |
|
| $ | 195,572 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 275,966 |
| $ | 22,437 |
| $ | 298,403 |
| $ | 4,615 |
| $ | 112 |
| $ | 3,061 |
| $ | 890 |
| $ | 307,081 |
| $ | 201,979 |
|
| $ | 11,109 |
|
| $ | 213,088 |
|
| $ | 2,781 |
|
| $ | 3,385 |
|
| $ | 4,301 |
|
| $ | 1,583 |
|
| $ | 225,138 |
|
Purchased credit impaired loans |
|
| 7,907 |
|
| 7,113 |
|
| 15,020 |
|
| 3,790 |
|
| 4,232 |
|
| 107,535 |
|
| 4,458 |
|
| 135,035 |
|
| 33,040 |
|
|
| 45,124 |
|
|
| 78,164 |
|
|
| 27,281 |
|
|
| 23,431 |
|
|
| 93,450 |
|
|
| 6,294 |
|
|
| 228,620 |
|
Collectively evaluated for impairment |
|
| 8,155,011 |
|
| 2,270,721 |
|
| 10,425,732 |
|
| 2,303,294 |
|
| 1,519,075 |
|
| 2,736,320 |
|
| 2,117,180 |
|
| 19,101,601 |
|
| 8,657,985 |
|
|
| 2,678,146 |
|
|
| 11,336,131 |
|
|
| 3,030,506 |
|
|
| 1,163,902 |
|
|
| 2,907,207 |
|
|
| 2,144,448 |
|
|
| 20,582,194 |
|
Total loans |
| $ | 8,438,884 |
| $ | 2,300,271 |
| $ | 10,739,155 |
| $ | 2,311,699 |
| $ | 1,523,419 |
| $ | 2,846,916 |
| $ | 2,122,528 |
| $ | 19,543,717 |
| $ | 8,893,004 |
|
| $ | 2,734,379 |
|
| $ | 11,627,383 |
|
| $ | 3,060,568 |
|
| $ | 1,190,718 |
|
| $ | 3,004,958 |
|
| $ | 2,152,325 |
|
| $ | 21,035,952 |
|
|
|
|
|
|
| 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 |
| ||||||||
|
| Nine Months Ended September 30, 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 |
|
| (15,401 | ) |
|
| (7,330 | ) |
|
| (22,731 | ) |
|
| (1,633 | ) |
|
| (265 | ) |
|
| (585 | ) |
|
| (18,599 | ) |
|
| (43,813 | ) |
Recoveries |
|
| 13,234 |
|
|
| 282 |
|
|
| 13,516 |
|
|
| 221 |
|
|
| 68 |
|
|
| 1,854 |
|
|
| 4,028 |
|
|
| 19,687 |
|
Net provision for loan losses |
|
| (5,073 | ) |
|
| 7,203 |
|
|
| 2,130 |
|
|
| 6,288 |
|
|
| 6,248 |
|
|
| (1,803 | ) |
|
| 15,153 |
|
|
| 28,016 |
|
Reduction as a result of sale of subsidiary |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,648 | ) |
|
| (6,648 | ) |
Ending balance |
| $ | 120,678 |
|
| $ | 13,117 |
|
| $ | 133,795 |
|
| $ | 18,585 |
|
| $ | 13,423 |
|
| $ | 24,310 |
|
| $ | 24,437 |
|
| $ | 214,550 |
|
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 23,101 |
|
| $ | 225 |
|
| $ | 23,326 |
|
| $ | 285 |
|
| $ | 1 |
|
| $ | 163 |
|
| $ | 131 |
|
| $ | 23,906 |
|
Amounts related to purchased credit impaired loans |
|
| 327 |
|
|
| 403 |
|
| $ | 730 |
|
|
| 45 |
|
|
| 91 |
|
|
| 10,109 |
|
|
| 433 |
|
|
| 11,408 |
|
Collectively evaluated for impairment |
|
| 97,250 |
|
|
| 12,489 |
|
| $ | 109,739 |
|
|
| 18,255 |
|
|
| 13,331 |
|
|
| 14,038 |
|
|
| 23,873 |
|
|
| 179,236 |
|
Total allowance |
| $ | 120,678 |
|
| $ | 13,117 |
|
| $ | 133,795 |
|
| $ | 18,585 |
|
| $ | 13,423 |
|
| $ | 24,310 |
|
| $ | 24,437 |
|
| $ | 214,550 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 275,966 |
|
| $ | 22,437 |
|
| $ | 298,403 |
|
| $ | 4,615 |
|
| $ | 112 |
|
| $ | 3,061 |
|
| $ | 890 |
|
| $ | 307,081 |
|
Purchased credit impaired loans |
|
| 7,907 |
|
|
| 7,113 |
|
| $ | 15,020 |
|
|
| 3,790 |
|
|
| 4,232 |
|
|
| 107,535 |
|
|
| 4,458 |
|
|
| 135,035 |
|
Collectively evaluated for impairment |
|
| 8,155,011 |
|
|
| 2,270,721 |
|
| $ | 10,425,732 |
|
|
| 2,303,294 |
|
|
| 1,519,075 |
|
|
| 2,736,320 |
|
|
| 2,117,180 |
|
|
| 19,101,601 |
|
Total loans |
| $ | 8,438,884 |
|
| $ | 2,300,271 |
|
| $ | 10,739,155 |
|
| $ | 2,311,699 |
|
| $ | 1,523,419 |
|
| $ | 2,846,916 |
|
| $ | 2,122,528 |
|
| $ | 19,543,717 |
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
|
|
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Commercial |
| real estate- |
| Total |
| real estate- |
| Construction |
|
|
|
|
|
|
|
|
| |||||
|
| non-real |
| owner |
| commercial |
| income |
| and land |
| Residential |
|
|
|
|
|
| ||||||
(in thousands) |
| estate |
| occupied |
| and industrial |
| producing |
| development |
| mortgages |
| Consumer |
| Total | ||||||||
|
| Nine Months Ended September 30, 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 |
|
| (35,247) |
|
| (527) |
|
| (35,774) |
|
| (160) |
|
| (670) |
|
| (2,485) |
|
| (22,844) |
|
| (61,933) |
Recoveries |
|
| 6,442 |
|
| 447 |
|
| 6,889 |
|
| 655 |
|
| 1,050 |
|
| 339 |
|
| 5,248 |
|
| 14,181 |
Net provision for loan losses |
|
| 15,895 |
|
| 2,556 |
|
| 18,451 |
|
| 486 |
|
| (70) |
|
| 4,163 |
|
| 20,952 |
|
| 43,982 |
Decrease in FDIC loss share receivable |
|
| (47) |
|
| — |
|
| (47) |
|
| — |
|
| — |
|
| (2,344) |
|
| (135) |
|
| (2,526) |
Ending balance |
| $ | 134,095 |
| $ | 13,559 |
| $ | 147,654 |
| $ | 14,490 |
| $ | 6,581 |
| $ | 25,034 |
| $ | 29,363 |
| $ | 223,122 |
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 20,880 |
| $ | 477 |
| $ | 21,357 |
| $ | 1,321 |
| $ | 1 |
| $ | 406 |
| $ | 405 |
| $ | 23,490 |
Amounts related to purchased credit impaired loans |
|
| 417 |
|
| 784 |
|
| 1,201 |
|
| 199 |
|
| 254 |
|
| 12,795 |
|
| 863 |
|
| 15,312 |
Collectively evaluated for impairment |
|
| 112,798 |
|
| 12,298 |
|
| 125,096 |
|
| 12,970 |
|
| 6,326 |
|
| 11,833 |
|
| 28,095 |
|
| 184,320 |
Total allowance |
| $ | 134,095 |
| $ | 13,559 |
| $ | 147,654 |
| $ | 14,490 |
| $ | 6,581 |
| $ | 25,034 |
| $ | 29,363 |
| $ | 223,122 |
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 271,024 |
| $ | 6,351 |
| $ | 277,375 |
| $ | 14,295 |
| $ | 480 |
| $ | 8,942 |
| $ | 1,306 |
| $ | 302,398 |
Purchased credit impaired loans |
|
| 20,186 |
|
| 13,021 |
|
| 33,207 |
|
| 5,353 |
|
| 6,670 |
|
| 123,244 |
|
| 7,637 |
|
| 176,111 |
Collectively evaluated for impairment |
|
| 7,838,219 |
|
| 2,056,642 |
|
| 9,894,861 |
|
| 2,492,160 |
|
| 1,365,898 |
|
| 2,464,506 |
|
| 2,090,351 |
|
| 18,307,776 |
Total loans |
| $ | 8,129,429 |
| $ | 2,076,014 |
| $ | 10,205,443 |
| $ | 2,511,808 |
| $ | 1,373,048 |
| $ | 2,596,692 |
| $ | 2,099,294 |
| $ | 18,786,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
Impaired Loans
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.
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
| ||||||||
|
| September 30, |
| December 31, |
| September 30, |
|
| December 31, |
| ||||
(in thousands) |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
| ||||
Commercial non-real estate |
| $ | 126,429 |
| $ | 152,863 |
| $ | 150,705 |
|
| $ | 110,653 |
|
Commercial real estate - owner occupied |
|
| 20,719 |
|
| 25,989 |
|
| 13,087 |
|
|
| 16,895 |
|
Total commercial and industrial |
|
| 147,148 |
|
| 178,852 |
|
| 163,792 |
|
|
| 127,548 |
|
Commercial real estate - income producing |
|
| 3,941 |
|
| 14,574 |
|
| 2,957 |
|
|
| 4,991 |
|
Construction and land development |
|
| 3,249 |
|
| 3,807 |
|
| 1,336 |
|
|
| 2,146 |
|
Residential mortgages |
|
| 31,732 |
|
| 40,480 |
|
| 37,901 |
|
|
| 35,866 |
|
Consumer |
|
| 15,576 |
|
| 15,087 |
|
| 16,874 |
|
|
| 16,744 |
|
Total loans |
| $ | 201,646 |
| $ | 252,800 |
| $ | 222,860 |
|
| $ | 187,295 |
|
Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (“TDRs”) of $92.7$101.1 million and $99.2$85.5 million at September 30, 20182019 and December 31, 2017,2018, respectively. Total TDRs, both accruing and nonaccruing, were $254.9$162.0 million at September 30, 20182019 and $219.7$224.6 million at December 31, 2017.2018. All TDRs are individually evaluated for impairment. At September 30, 20182019 and December 31, 2017,2018, the Company had unfunded commitments of $8.2$2.0 million and $7.3$2.1 million, respectively, to borrowers whose loan terms have been modified in a TDR.
The tables below detail by portfolio class TDRs that were modified during the three and nine months ended September 30, 20182019 and 2017:
2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
| Three Months Ended |
| Three Months Ended |
| |||||||||||||||||||||||||||||||||||||||||||
($ in thousands) |
| September 30, 2018 |
|
|
| September 30, 2017 |
|
| September 30, 2019 |
|
| September 30, 2018 |
| ||||||||||||||||||||||||||||||||||
|
|
|
|
| Pre-Modification |
| Post-Modification |
|
|
|
|
| Pre-Modification |
| Post-Modification |
|
|
|
|
| Pre- Modification |
|
| Post- Modification |
|
|
|
|
|
| Pre- Modification |
|
| Post- Modification |
| ||||||||||||
|
| Number |
|
| Outstanding |
| Outstanding |
|
| Number |
|
| Outstanding |
| Outstanding |
|
| Number |
|
| Outstanding |
|
| Outstanding |
|
| Number |
|
| Outstanding |
|
| Outstanding |
| |||||||||||||
|
| of |
|
| Recorded |
| Recorded |
|
| 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 |
| 11 |
|
| $ | 23,347 |
|
| $ | 23,347 |
|
|
| 13 |
|
|
| 42,148 |
|
|
| 42,148 |
|
|
| 2 |
|
| $ | 13,083 |
|
| $ | 6,271 |
|
|
| 11 |
|
| $ | 23,347 |
|
| $ | 23,347 |
|
Commercial real estate - owner occupied |
| 1 |
|
|
| 229 |
|
| 229 |
|
|
| — |
|
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 229 |
|
|
| 229 |
| ||
Total commercial and industrial |
| 12 |
|
|
| 23,576 |
|
| 23,576 |
|
|
| 13 |
|
|
| 42,148 |
|
| 42,148 |
|
|
| 2 |
|
|
| 13,083 |
|
|
| 6,271 |
|
|
| 12 |
|
|
| 23,576 |
|
|
| 23,576 |
| ||
Commercial real estate - income producing |
| — |
|
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
| — |
|
|
| 1 |
|
|
| 123 |
|
|
| 123 |
|
|
| — |
|
|
| — |
|
|
| — |
| ||
Construction and land development |
| — |
|
|
| — |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
|
| 3 |
|
|
| 323 |
|
|
| 323 |
|
|
| — |
|
|
| — |
|
|
| — |
| |||
Residential mortgages |
| 8 |
|
|
| 930 |
|
| 930 |
|
|
| 7 |
|
| 970 |
|
| 970 |
|
|
| 3 |
|
|
| 297 |
|
|
| 297 |
|
|
| 8 |
|
|
| 930 |
|
|
| 930 |
| |||
Consumer |
| 6 |
|
|
| 89 |
|
| 89 |
|
|
| — |
|
|
| — |
|
| — |
|
|
| 4 |
|
|
| 70 |
|
|
| 70 |
|
|
| 6 |
|
|
| 89 |
|
|
| 89 |
| ||
Total loans |
| 26 |
|
| $ | 24,595 |
| $ | 24,595 |
|
|
| 20 |
|
|
| 43,118 |
|
| 43,118 |
|
|
| 13 |
|
| $ | 13,896 |
|
| $ | 7,084 |
|
|
| 26 |
|
| $ | 24,595 |
|
| $ | 24,595 |
|
|
| Nine Months Ended |
| |||||||||||||||||||||
($ in thousands) |
| September 30, 2019 |
|
| September 30, 2018 |
| ||||||||||||||||||
Troubled Debt Restructurings: |
| Number of Contracts |
|
| Pre- Modification Outstanding Recorded Investment |
|
| Post- Modification Outstanding Recorded Investment |
|
| Number of Contracts |
|
| Pre- Modification Outstanding Recorded Investment |
|
| Post- Modification Outstanding Recorded Investment |
| ||||||
Commercial non-real estate |
|
| 10 |
|
| $ | 27,220 |
|
| $ | 20,408 |
|
|
| 29 |
|
| $ | 85,306 |
|
| $ | 85,306 |
|
Commercial real estate - owner occupied |
|
| 1 |
|
|
| 167 |
|
|
| 167 |
|
|
| 2 |
|
|
| 6,138 |
|
|
| 6,138 |
|
Total commercial and industrial |
|
| 11 |
|
|
| 27,387 |
|
|
| 20,575 |
|
|
| 31 |
|
|
| 91,444 |
|
|
| 91,444 |
|
Commercial real estate - income producing |
|
| 1 |
|
|
| 123 |
|
|
| 123 |
|
|
| 1 |
|
|
| 1,564 |
|
|
| 1,564 |
|
Construction and land development |
|
| 3 |
|
|
| 323 |
|
|
| 323 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Residential mortgages |
|
| 10 |
|
|
| 2,199 |
|
|
| 2,199 |
|
|
| 11 |
|
|
| 1,048 |
|
|
| 1,048 |
|
Consumer |
|
| 6 |
|
|
| 116 |
|
|
| 116 |
|
|
| 7 |
|
|
| 311 |
|
|
| 311 |
|
Total loans |
|
| 31 |
|
| $ | 30,148 |
|
| $ | 23,336 |
|
|
| 50 |
|
| $ | 94,367 |
|
| $ | 94,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended | |||||||||||||||||||||
($ in thousands) |
| September 30, 2018 |
|
|
| September 30, 2017 | ||||||||||||||||
|
|
|
|
| Pre-Modification |
| Post-Modification |
|
|
|
|
| Pre-Modification |
| Post-Modification | |||||||
|
| Number |
|
| Outstanding |
| Outstanding |
|
| Number |
|
| Outstanding |
| Outstanding | |||||||
|
| of |
|
| Recorded |
| Recorded |
|
| of |
|
| Recorded |
| Recorded | |||||||
Troubled Debt Restructurings: |
| Contracts |
|
| Investment |
| Investment |
| Contracts |
| Investment |
| Investment | |||||||||
Commercial non-real estate |
| 29 |
|
| $ | 85,306 |
|
| $ | 85,306 |
|
|
| 50 |
|
| $ | 135,926 |
|
| $ | 135,926 |
Commercial real estate - owner occupied |
| 2 |
|
|
| 6,138 |
|
|
| 6,138 |
|
|
| 4 |
|
|
| 3,734 |
|
|
| 3,734 |
Total commercial and industrial |
| 31 |
|
|
| 91,444 |
|
|
| 91,444 |
|
|
| 54 |
|
|
| 139,660 |
|
|
| 139,660 |
Commercial real estate - income producing |
| 1 |
|
|
| 1,564 |
|
|
| 1,564 |
|
|
| 5 |
|
|
| 5,684 |
|
|
| 5,684 |
Construction and land development |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
Residential mortgages |
| 11 |
|
|
| 1,048 |
|
|
| 1,048 |
|
|
| 13 |
|
|
| 2,068 |
|
|
| 2,068 |
Consumer |
| 7 |
|
|
| 311 |
|
|
| 311 |
|
|
| 1 |
|
|
| 40 |
|
|
| 42 |
Total loans |
| 50 |
|
| $ | 94,367 |
|
| $ | 94,367 |
|
|
| 73 |
|
| $ | 147,452 |
|
| $ | 147,454 |
17
The TDRs modified during the nine months ended September 30, 20182019 reflected in the table above include $0.6 million of loans with extended amortization terms or other payment concessions, $22.1 million with significant covenant waivers and $7.4 million with other modifications. In addition, the Company received approximately $6.8 million of equity securities of one commercial non-real estate borrower in satisfaction of a portion of its debt. The TDRs modified during the nine months ended September 30, 2018 include $50.7 million of loans with extended amortization terms or other payment concessions, $14.6 million with significant covenant waivers and $29.1 million with other modifications. The TDRs modified
There were 0 defaults on loans during the three and nine months ended September 30, 2017 include $96.1 million of loans with extended amortization terms2019 or other payment concessions, $50.1 million with significant covenant waivers and $1.3 million with other modifications.
16
One residential mortgage totaling $0.2 million and one owner-occupied commercial real estate loan totaling $1.9 million that defaulted during the nine months ended September 30, 2018 were modified in TDRs during the twelve months prior to default. There were no defaults on loans during the nine months ended September 30, 2017 that had been modified in a TDR during the prior twelve months.
The tables below present loans that are individually evaluated for impairment disaggregated by portfolio class at September 30, 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.
|
| September 30, 2019 |
| |||||||||||||
(in thousands) |
| Recorded investment without an allowance |
|
| Recorded investment with an allowance |
|
| Unpaid principal balance |
|
| Related allowance |
| ||||
Commercial non-real estate |
| $ | 161,275 |
|
| $ | 40,704 |
|
| $ | 239,506 |
|
| $ | 11,535 |
|
Commercial real estate - owner occupied |
|
| 9,183 |
|
|
| 1,926 |
|
|
| 15,087 |
|
|
| 57 |
|
Total commercial and industrial |
|
| 170,458 |
|
|
| 42,630 |
|
|
| 254,593 |
|
|
| 11,592 |
|
Commercial real estate - income producing |
|
| 1,222 |
|
|
| 1,559 |
|
|
| 3,793 |
|
|
| 49 |
|
Construction and land development |
|
| 3,121 |
|
|
| 264 |
|
|
| 4,123 |
|
|
| 29 |
|
Residential mortgages |
|
| 2,665 |
|
|
| 1,636 |
|
|
| 4,831 |
|
|
| 183 |
|
Consumer |
|
| 494 |
|
|
| 1,089 |
|
|
| 1,864 |
|
|
| 365 |
|
Total loans |
| $ | 177,960 |
|
| $ | 47,178 |
|
| $ | 269,204 |
|
| $ | 12,218 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| September 30, 2018 | ||||||||||||||||||||||||||
|
| Recorded investment |
|
| Recorded investment |
|
| Unpaid |
|
|
|
| December 31, 2018 |
| |||||||||||||
(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 | $ | 140,504 |
| $ | 135,462 |
| $ | 293,012 |
| $ | 23,101 |
| $ | 144,625 |
|
| $ | 94,759 |
|
| $ | 273,290 |
|
| $ | 3,636 |
|
Commercial real estate - owner occupied |
| 13,259 |
|
| 9,178 |
|
| 26,787 |
|
| 225 |
|
| 13,027 |
|
|
| 8,639 |
|
|
| 25,888 |
|
|
| 607 |
|
Total commercial and industrial |
| 153,763 |
|
| 144,640 |
|
| 319,799 |
|
| 23,326 |
|
| 157,652 |
|
|
| 103,398 |
|
|
| 299,178 |
|
|
| 4,243 |
|
Commercial real estate - income producing |
| 2,977 |
|
| 1,638 |
|
| 5,474 |
|
| 285 |
|
| 1,138 |
|
|
| 1,563 |
|
|
| 3,428 |
|
|
| 210 |
|
Construction and land development |
| 100 |
|
| 12 |
|
| 112 |
|
| 1 |
|
| 100 |
|
|
| 21 |
|
|
| 121 |
|
|
| 1 |
|
Residential mortgages |
| 1,482 |
|
| 1,579 |
|
| 3,609 |
|
| 163 |
|
| 2,058 |
|
|
| 1,818 |
|
|
| 4,421 |
|
|
| 444 |
|
Consumer |
| 279 |
|
| 611 |
|
| 1,136 |
|
| 131 |
|
| 279 |
|
|
| 728 |
|
|
| 1,253 |
|
|
| 216 |
|
Total loans | $ | 158,601 |
| $ | 148,480 |
| $ | 330,130 |
| $ | 23,906 |
| $ | 161,227 |
|
| $ | 107,528 |
|
| $ | 308,401 |
|
| $ | 5,114 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| 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 and 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 |
17
The tables below present the average balances and interest income for total impaired loans for the three and nine months ended September 30, 20182019 and 2017.2018. Interest income recognized represents interest on accruing loans modified in a TDR.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended | ||||||||||
|
| September 30, 2018 |
| September 30, 2017 | ||||||||
(in thousands) |
| Average |
| Interest |
| Average |
| Interest | ||||
Commercial non-real estate |
| $ | 283,519 |
| $ | 2,275 |
| $ | 260,640 |
| $ | 872 |
Commercial real estate - owner occupied |
|
| 24,702 |
|
| 90 |
|
| 6,916 |
|
| 24 |
Total commercial and industrial |
|
| 308,221 |
|
| 2,365 |
|
| 267,556 |
|
| 896 |
Commercial real estate - income producing |
|
| 6,718 |
|
| 15 |
|
| 14,604 |
|
| 35 |
Construction and land development |
|
| 113 |
|
| — |
|
| 663 |
|
| 1 |
Residential mortgages |
|
| 3,397 |
|
| 4 |
|
| 6,204 |
|
| 7 |
Consumer |
|
| 745 |
|
| 10 |
|
| 1,179 |
|
| 4 |
Total loans |
| $ | 319,194 |
| $ | 2,394 |
| $ | 290,206 |
| $ | 943 |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| Nine Months Ended |
| Three Months Ended |
| |||||||||||||||||||||||
|
| September 30, 2018 |
| September 30, 2017 |
| September 30, 2019 |
|
| September 30, 2018 |
| ||||||||||||||||||
(in thousands) |
| Average |
| Interest |
| Average |
| Interest |
| Average Recorded Investment |
|
| Interest Income Recognized |
|
| Average Recorded Investment |
|
| Interest Income Recognized |
| ||||||||
Commercial non-real estate |
| $ | 295,636 |
| $ | 5,863 |
| $ | 251,129 |
| $ | 1,806 |
| $ | 213,291 |
|
| $ | 1,062 |
|
| $ | 283,519 |
|
| $ | 2,275 |
|
Commercial real estate - owner occupied |
|
| 26,416 |
|
| 258 |
|
| 5,895 |
|
| 46 |
|
| 14,439 |
|
|
| 45 |
|
|
| 24,702 |
|
|
| 90 |
|
Total commercial and industrial |
|
| 322,052 |
|
| 6,121 |
|
| 257,024 |
|
| 1,852 |
|
| 227,730 |
|
|
| 1,107 |
|
|
| 308,221 |
|
|
| 2,365 |
|
Commercial real estate - income producing |
|
| 10,988 |
|
| 64 |
|
| 14,449 |
|
| 112 |
|
| 2,331 |
|
|
| 7 |
|
|
| 6,718 |
|
|
| 15 |
|
Construction and land development |
| 155 |
| — |
| 1,216 |
| 1 |
|
| 1,702 |
|
|
| 2 |
|
|
| 113 |
|
|
| — |
| ||||
Residential mortgages |
| 6,307 |
| 14 |
| 4,449 |
| 12 |
|
| 4,195 |
|
|
| 2 |
|
|
| 3,397 |
|
|
| 4 |
| ||||
Consumer |
|
| 769 |
|
| 28 |
|
| 1,644 |
|
| 9 |
|
| 1,552 |
|
|
| 21 |
|
|
| 745 |
|
|
| 10 |
|
Total loans |
| $ | 340,271 |
| $ | 6,227 |
| $ | 278,782 |
| $ | 1,986 |
| $ | 237,510 |
|
| $ | 1,139 |
|
| $ | 319,194 |
|
| $ | 2,394 |
|
18
| Nine Months Ended |
| ||||||||||||||
|
| September 30, 2019 |
|
| September 30, 2018 |
| ||||||||||
(in thousands) |
| Average Recorded Investment |
|
| Interest Income Recognized |
|
| Average Recorded Investment |
|
| Interest Income Recognized |
| ||||
Commercial non-real estate |
| $ | 225,597 |
|
| $ | 4,202 |
|
| $ | 295,636 |
|
| $ | 5,863 |
|
Commercial real estate - owner occupied |
|
| 17,044 |
|
|
| 196 |
|
|
| 26,416 |
|
|
| 258 |
|
Total commercial and industrial |
|
| 242,641 |
|
|
| 4,398 |
|
|
| 322,052 |
|
|
| 6,121 |
|
Commercial real estate - income producing |
|
| 2,430 |
|
|
| 21 |
|
|
| 10,988 |
|
|
| 64 |
|
Construction and land development |
|
| 597 |
|
|
| 2 |
|
|
| 155 |
|
|
| — |
|
Residential mortgages |
|
| 4,525 |
|
|
| 9 |
|
|
| 6,307 |
|
|
| 14 |
|
Consumer |
|
| 1,442 |
|
|
| 55 |
|
|
| 769 |
|
|
| 28 |
|
Total loans |
| $ | 251,635 |
|
| $ | 4,485 |
|
| $ | 340,271 |
|
| $ | 6,227 |
|
Aging Analysis
The tables below present the age analysis of past due loans by portfolio class at September 30, 20182019 and December 31, 2017.2018. Purchased credit impaired loans accounted for in pools with an accretable yield are considered to be current.
September 30, 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 |
| $ | 29,770 |
|
| $ | 19,786 |
|
| $ | 56,767 |
|
| $ | 106,323 |
|
| $ | 8,786,681 |
|
| $ | 8,893,004 |
|
| $ | 2,928 |
|
Commercial real estate - owner occupied |
|
| 5,222 |
|
|
| 909 |
|
|
| 14,635 |
|
| $ | 20,766 |
|
|
| 2,713,613 |
|
|
| 2,734,379 |
|
|
| 2,837 |
|
Total commercial and industrial |
|
| 34,992 |
|
|
| 20,695 |
|
|
| 71,402 |
|
|
| 127,089 |
|
|
| 11,500,294 |
|
|
| 11,627,383 |
|
|
| 5,765 |
|
Commercial real estate - income producing |
|
| 817 |
|
|
| 473 |
|
|
| 2,751 |
|
|
| 4,041 |
|
|
| 3,056,527 |
|
|
| 3,060,568 |
|
|
| — |
|
Construction and land development |
|
| 550 |
|
|
| 77 |
|
|
| 1,076 |
|
|
| 1,703 |
|
|
| 1,189,015 |
|
|
| 1,190,718 |
|
|
| 644 |
|
Residential mortgages |
|
| 5,650 |
|
|
| 11,140 |
|
|
| 21,964 |
|
|
| 38,754 |
|
|
| 2,966,204 |
|
|
| 3,004,958 |
|
|
| 576 |
|
Consumer |
|
| 14,598 |
|
|
| 4,730 |
|
|
| 9,434 |
|
|
| 28,762 |
|
|
| 2,123,563 |
|
|
| 2,152,325 |
|
|
| 887 |
|
Total |
| $ | 56,607 |
|
| $ | 37,115 |
|
| $ | 106,627 |
|
| $ | 200,349 |
|
| $ | 20,835,603 |
|
| $ | 21,035,952 |
|
| $ | 7,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Recorded | |||||||||||||||||||||||||||||
|
|
|
|
|
| Greater than |
|
|
|
|
|
|
|
| investment | ||||||||||||||||||||||||||||||||||
|
| 30-59 days |
| 60-89 days |
| 90 days |
| Total |
|
|
| Total |
| > 90 days and | |||||||||||||||||||||||||||||||||||
September 30, 2018 |
| 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 |
| $ | 10,752 |
| $ | 26,454 |
| $ | 116,791 |
| $ | 153,997 |
| $ | 8,284,887 |
| $ | 8,438,884 |
| $ | 27,606 |
| $ | 12,257 |
|
| $ | 3,895 |
|
| $ | 77,551 |
|
| $ | 93,703 |
|
| $ | 8,526,898 |
|
|
| 8,620,601 |
|
| $ | 10,823 |
|
Commercial real estate - owner occupied |
|
| 2,001 |
|
| 459 |
|
| 16,377 |
|
| 18,837 |
|
| 2,281,434 |
|
| 2,300,271 |
|
| 641 |
|
| 2,394 |
|
|
| 1,570 |
|
|
| 14,542 |
|
|
| 18,506 |
|
|
| 2,439,242 |
|
|
| 2,457,748 |
|
|
| 380 |
|
Total commercial and industrial |
|
| 12,753 |
|
| 26,913 |
|
| 133,168 |
|
| 172,834 |
|
| 10,566,321 |
|
| 10,739,155 |
|
| 28,247 |
|
| 14,651 |
|
|
| 5,465 |
|
|
| 92,093 |
|
|
| 112,209 |
|
|
| 10,966,140 |
|
|
| 11,078,349 |
|
|
| 11,203 |
|
Commercial real estate - income producing |
|
| 1,541 |
|
| 198 |
|
| 6,371 |
|
| 8,110 |
|
| 2,303,589 |
|
| 2,311,699 |
|
| 1,830 |
|
| 2,371 |
|
|
| 772 |
|
|
| 5,495 |
|
|
| 8,638 |
|
|
| 2,333,141 |
|
|
| 2,341,779 |
|
|
| 1,844 |
|
Construction and land development |
|
| 11,976 |
|
| 1,532 |
|
| 2,044 |
|
| 15,552 |
|
| 1,507,867 |
|
| 1,523,419 |
|
| 78 |
|
| 7,397 |
|
|
| 1,129 |
|
|
| 2,165 |
|
|
| 10,691 |
|
|
| 1,537,644 |
|
|
| 1,548,335 |
|
|
| 644 |
|
Residential mortgages |
|
| 36,632 |
|
| 11,976 |
|
| 18,006 |
|
| 66,614 |
|
| 2,780,302 |
|
| 2,846,916 |
|
| — |
|
| 32,869 |
|
|
| 14,706 |
|
|
| 23,175 |
|
|
| 70,750 |
|
|
| 2,839,331 |
|
|
| 2,910,081 |
|
|
| — |
|
Consumer |
|
| 14,582 |
|
| 4,919 |
|
| 9,162 |
|
| 28,663 |
|
| 2,093,865 |
|
| 2,122,528 |
|
| 371 |
|
| 20,402 |
|
|
| 4,695 |
|
|
| 9,665 |
|
|
| 34,762 |
|
|
| 2,113,105 |
|
|
| 2,147,867 |
|
|
| 618 |
|
Total |
| $ | 77,484 |
| $ | 45,538 |
| $ | 168,751 |
| $ | 291,773 |
| $ | 19,251,944 |
| $ | 19,543,717 |
| $ | 30,526 |
| $ | 77,690 |
|
| $ | 26,767 |
|
| $ | 132,593 |
|
| $ | 237,050 |
|
| $ | 19,789,361 |
|
| $ | 20,026,411 |
|
| $ | 14,309 |
|
19
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 | |||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 62,766 |
| $ | 10,761 |
| $ | 92,982 |
| $ | 166,509 |
| $ | 8,131,428 |
| $ | 8,297,937 |
| $ | 21,989 |
Commercial real estate - owner occupied |
|
| 8,493 |
|
| 648 |
|
| 15,517 |
|
| 24,658 |
|
| 2,117,781 |
|
| 2,142,439 |
|
| 2,032 |
Total commercial and industrial |
|
| 71,259 |
|
| 11,409 |
|
| 108,499 |
|
| 191,167 |
|
| 10,249,209 |
|
| 10,440,376 |
|
| 24,021 |
Commercial real estate - income producing |
|
| 5,315 |
|
| 2,165 |
|
| 6,081 |
|
| 13,561 |
|
| 2,371,038 |
|
| 2,384,599 |
|
| 489 |
Construction and land development |
|
| 4,113 |
|
| 1,056 |
|
| 3,412 |
|
| 8,581 |
|
| 1,364,840 |
|
| 1,373,421 |
|
| 477 |
Residential mortgages |
|
| 33,621 |
|
| 10,554 |
|
| 30,537 |
|
| 74,712 |
|
| 2,615,760 |
|
| 2,690,472 |
|
| 2,208 |
Consumer |
|
| 22,959 |
|
| 7,816 |
|
| 8,553 |
|
| 39,328 |
|
| 2,075,967 |
|
| 2,115,295 |
|
| 571 |
Total |
| $ | 137,267 |
| $ | 33,000 |
| $ | 157,082 |
| $ | 327,349 |
| $ | 18,676,814 |
| $ | 19,004,163 |
| $ | 27,766 |
Credit Quality Indicators
The following tables present the credit quality indicators by segments and portfolio class of loans at September 30, 20182019 and December 31, 2017.2018.
|
| September 30, 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 |
| $ | 8,193,707 |
|
| $ | 2,498,260 |
|
| $ | 10,691,967 |
|
| $ | 2,941,146 |
|
| $ | 1,149,268 |
|
| $ | 14,782,381 |
|
Pass-Watch |
|
| 209,523 |
|
|
| 132,611 |
|
|
| 342,134 |
|
|
| 64,280 |
|
|
| 30,455 |
|
| $ | 436,869 |
|
Special Mention |
|
| 84,741 |
|
|
| 18,697 |
|
|
| 103,438 |
|
|
| 15,409 |
|
|
| 81 |
|
| $ | 118,928 |
|
Substandard |
|
| 405,025 |
|
|
| 84,811 |
|
|
| 489,836 |
|
|
| 39,733 |
|
|
| 10,914 |
|
| $ | 540,483 |
|
Doubtful |
|
| 8 |
|
|
| — |
|
|
| 8 |
|
|
| — |
|
|
| — |
|
| $ | 8 |
|
Total |
| $ | 8,893,004 |
|
| $ | 2,734,379 |
|
| $ | 11,627,383 |
|
| $ | 3,060,568 |
|
| $ | 1,190,718 |
|
| $ | 15,878,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| September 30, 2018 |
| December 31, 2018 |
| ||||||||||||||||||||||||||||||||||||||
(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 |
|
| 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 |
| $ | 7,593,629 |
| $ | 2,106,568 |
| $ | 9,700,197 |
| $ | 2,211,829 |
| $ | 1,473,080 |
| $ | 13,385,106 |
|
| $ | 7,875,588 |
|
| $ | 2,274,211 |
|
| $ | 10,149,799 |
|
|
| 2,265,087 |
|
| $ | 1,487,599 |
|
| $ | 13,902,485 |
|
Pass-Watch |
|
| 201,226 |
|
| 70,831 |
|
| 272,057 |
|
| 46,155 |
|
| 37,100 |
|
| 355,312 |
|
|
| 260,510 |
|
|
| 84,271 |
|
|
| 344,781 |
|
|
| 46,535 |
|
|
| 49,099 |
|
|
| 440,415 |
|
Special Mention |
|
| 89,825 |
|
| 34,133 |
|
| 123,958 |
|
| 26,086 |
|
| 952 |
|
| 150,996 |
|
|
| 75,752 |
|
|
| 23,149 |
|
|
| 98,901 |
|
|
| 5,510 |
|
|
| 816 |
|
|
| 105,227 |
|
Substandard |
|
| 554,184 |
|
| 88,739 |
|
| 642,923 |
|
| 27,629 |
|
| 12,287 |
|
| 682,839 |
|
|
| 408,751 |
|
|
| 76,117 |
|
|
| 484,868 |
|
|
| 24,647 |
|
|
| 10,821 |
|
|
| 520,336 |
|
Doubtful |
|
| 20 |
|
| — |
|
| 20 |
|
| — |
|
| — |
|
| 20 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 8,438,884 |
| $ | 2,300,271 |
| $ | 10,739,155 |
| $ | 2,311,699 |
| $ | 1,523,419 |
| $ | 14,574,273 |
|
| $ | 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 and 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| September 30, 2018 |
| December 31, 2017 |
| September 30, 2019 |
|
| December 31, 2018 |
| |||||||||||||||||||||||||||||||||
(in thousands) |
| Residential mortgage |
| Consumer |
| Total |
| Residential mortgage |
| Consumer |
| Total |
|
| Residential mortgage |
|
| Consumer |
|
| Total |
|
| Residential mortgage |
|
| Consumer |
|
| Total |
| ||||||||||||
Performing |
| $ | 2,815,184 |
| $ | 2,106,581 |
| $ | 4,921,765 |
| $ | 2,647,784 |
| $ | 2,099,637 |
| $ | 4,747,421 |
|
| $ | 2,966,578 |
|
| $ | 2,134,360 |
|
| $ | 5,100,938 |
|
| $ | 2,873,669 |
|
| $ | 2,130,395 |
|
| $ | 5,004,064 |
|
Nonperforming |
|
| 31,732 |
|
| 15,947 |
|
| 47,679 |
|
| 42,688 |
|
| 15,658 |
|
| 58,346 |
|
|
| 38,380 |
|
|
| 17,965 |
|
| $ | 56,345 |
|
|
| 36,412 |
|
|
| 17,472 |
|
|
| 53,884 |
|
Total |
| $ | 2,846,916 |
| $ | 2,122,528 |
| $ | 4,969,444 |
| $ | 2,690,472 |
| $ | 2,115,295 |
| $ | 4,805,767 |
|
| $ | 3,004,958 |
|
| $ | 2,152,325 |
|
| $ | 5,157,283 |
|
| $ | 2,910,081 |
|
| $ | 2,147,867 |
|
| $ | 5,057,948 |
|
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. |
19
| 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. |
20
Residential and Consumer:
| Performing – accruing loans |
| Nonperforming – |
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 nine months ended September 30, 20182019 and the year ended December 31, 2017.
2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
| September 30, 2018 |
| December 31, 2017 | ||||||||||||||||||||||||||
|
| Carrying |
|
|
|
| Carrying |
|
|
| ||||||||||||||||||||
|
| Amount |
| Accretable |
|
| Amount |
| Accretable |
|
| September 30, 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 |
|
| — |
| ||||||||||||||||
Additions |
|
| 118,047 |
|
|
| 6,238 |
|
|
| — |
|
|
| — |
| ||||||||||||||
Payments received, net |
|
| (30,448) |
|
| (4,564) |
|
|
| (69,591) |
|
| (7,412) |
|
|
| (28,846 | ) |
|
| (3,517 | ) |
|
| (39,556 | ) |
|
| (5,779 | ) |
Accretion |
|
| 12,080 |
|
| (12,080) |
|
|
| 17,079 |
|
| (17,079) |
|
|
| 9,823 |
|
|
| (9,823 | ) |
|
| 15,749 |
|
|
| (15,749 | ) |
Decrease in expected cash flows based on actual cash flows and changes in cash flow assumptions |
|
| — |
|
| (2,801) |
|
|
| — |
|
| (30,379) |
| ||||||||||||||||
Net transfers from nonaccretable difference to accretable yield |
|
| — |
|
| — |
|
|
| — |
|
| 3,701 |
| ||||||||||||||||
Increase in expected cash flows based on actual cash flows and changes in cash flow assumptions |
|
| — |
|
|
| 4,190 |
|
|
| — |
|
|
| (3,695 | ) | ||||||||||||||
Balance at end of period |
| $ | 135,035 |
| $ | 43,072 |
|
| $ | 153,403 |
| $ | 62,517 |
|
| $ | 228,620 |
|
| $ | 34,382 |
|
| $ | 129,596 |
|
| $ | 37,294 |
|
Certain of the Company’s purchased credit impaired loans were covered by a loss share agreement with the FDIC. The agreement was terminated by the Company during the third quarter of 2017. Prior to termination, the Company carried a receivable from the FDIC representing an indemnification asset arising from the agreement. The receivable was accounted for separately from the covered loans as the agreement was not contractually part of the loans and were not transferrable should the Company have disposed of the loans.
Residential Mortgage Loans in Process of Foreclosure
Included in loans are $6.9$8.9 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 September 30, 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 $1.9$2.7 million and $3.4$1.8 million of foreclosed single family residential properties in other real estate owned as ofat September 30, 20182019 and December 31, 2017,2018, respectively.
5. Operating Leases
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.
5.
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.
21
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 Company’s consolidated results of operations, and is not expected to in future periods.
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 September 30, 2019 |
|
| Nine months ended September 30, 2019 |
| ||
Cash paid for amounts included in the measurement of lease liabilities for operating leases | $ | 3,922 |
|
| $ | 11,802 |
|
Right of use assets obtained in exchange for lease liabilities | $ | 3,343 |
|
| $ | 121,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2019 |
| |
Weighted average remaining lease term (in years) |
|
|
|
|
| 13.09 |
|
Weighted average discount rate |
|
|
|
|
| 3.53 | % |
The following table sets forth the maturities of the Company’s lease liabilities and the present value discount at September 30, 2019.
(dollars in thousands) |
|
|
|
|
|
2019 |
|
| $ | 4,309 |
|
2020 |
|
|
| 16,543 |
|
2021 |
|
|
| 15,846 |
|
2022 |
|
|
| 15,449 |
|
2023 |
|
|
| 13,903 |
|
Thereafter |
|
|
| 102,110 |
|
Total |
|
|
| 168,160 |
|
Present value discount |
|
|
| (37,083 | ) |
Lease liability |
|
| $ | 131,077 |
|
The following table sets forth the components of the Company’s lease expense for the three and nine months ended September 30, 2019.
(in thousands) |
| Three months ended September 30, 2019 |
|
| Nine months ended September 30, 2019 |
| ||
Operating lease expense |
| $ | 4,286 |
|
| $ | 12,783 |
|
Short-term lease expense |
|
| 109 |
|
|
| 148 |
|
Variable lease expense |
|
| 11 |
|
|
| 35 |
|
Sublease income |
|
| (70 | ) |
|
| (246 | ) |
Total |
| $ | 4,336 |
|
| $ | 12,720 |
|
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 $416.0$545.9 million and $430.6$428.6 million at September 30, 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.
22
20
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 has made 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
The update provides that 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.
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 toassociated with fixed rate brokered deposits, certain investment securities and select pools of variable rate loans and fixed rate brokered deposits.loans. 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 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.
21
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 September 30, 20182019 and December 31, 2017.2018.
|
|
|
| September 30, 2019 |
|
| December 31, 2018 |
| ||||||||||||||||||
|
|
|
|
|
|
|
| Derivative (1) |
|
|
|
|
|
| Derivative (1) |
| ||||||||||
(in thousands) |
| Type of Hedge |
| Notional or Contractual Amount |
|
| Assets |
|
| Liabilities |
|
| Notional or Contractual Amount |
|
| Assets |
|
| Liabilities |
| ||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps - variable rate loans |
| Cash Flow |
| $ | 1,075,000 |
|
| $ | 31,453 |
|
| $ | — |
|
| $ | 875,000 |
|
| $ | 3,954 |
|
| $ | 9,173 |
|
Interest rate swaps - securities |
| Fair Value |
|
| 441,400 |
|
|
| — |
|
|
| 7,872 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Interest rate swaps - brokered deposits |
| Fair Value |
|
| 163,110 |
|
|
| — |
|
|
| 80 |
|
|
| 483,110 |
|
|
| — |
|
|
| 2,089 |
|
|
|
|
|
| 1,679,510 |
|
|
| 31,453 |
|
|
| 7,952 |
|
| $ | 1,358,110 |
|
| $ | 3,954 |
|
| $ | 11,262 |
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps (2) |
| N/A |
|
| 1,726,248 |
|
|
| 70,701 |
|
|
| 72,804 |
|
| $ | 1,277,404 |
|
| $ | 23,670 |
|
| $ | 24,669 |
|
Risk participation agreements |
| N/A |
|
| 237,081 |
|
|
| 38 |
|
|
| 60 |
|
|
| 171,222 |
|
|
| 10 |
|
|
| 131 |
|
Forward commitments to sell residential mortgage loans |
| N/A |
|
| 151,413 |
|
|
| 335 |
|
|
| 649 |
|
|
| 77,208 |
|
|
| 110 |
|
|
| 664 |
|
Interest rate-lock commitments on residential mortgage loans |
| N/A |
|
| 78,769 |
|
|
| 240 |
|
|
| 149 |
|
|
| 59,119 |
|
|
| 464 |
|
|
| 67 |
|
Foreign exchange forward contracts |
| N/A |
|
| 73,076 |
|
|
| 735 |
|
|
| 692 |
|
|
| 37,749 |
|
|
| 751 |
|
|
| 718 |
|
Visa Class B derivative contract |
| N/A |
|
| 43,753 |
|
|
| — |
|
|
| 6,249 |
|
|
| 43,753 |
|
|
| — |
|
|
| 7,304 |
|
|
|
|
|
| 2,310,340 |
|
|
| 72,049 |
|
|
| 80,603 |
|
|
| 1,666,455 |
|
|
| 25,005 |
|
|
| 33,553 |
|
Total derivatives |
|
|
| $ | 3,989,850 |
|
| $ | 103,502 |
|
| $ | 88,555 |
|
| $ | 3,024,565 |
|
| $ | 28,959 |
|
| $ | 44,815 |
|
Less: netting adjustment (3) |
|
|
|
|
|
|
|
| (31,598 | ) |
|
| (65,088 | ) |
|
|
|
|
|
| (11,979 | ) |
|
| (22,588 | ) |
Total derivative assets/liabilities |
|
|
|
|
|
|
| $ | 71,904 |
|
| $ | 23,467 |
|
|
|
|
|
| $ | 16,980 |
|
| $ | 22,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2018 |
| December 31, 2017 | |||||||||||||
|
|
|
|
|
|
| Derivative (1) |
|
|
| Derivative (1) | |||||||||
(in thousands) |
| 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 |
| $ | — |
| $ | 23,131 |
| $ | 875,000 |
| $ | — |
| $ | 14,020 |
Interest rate swaps |
| Fair Value |
|
| 483,110 |
|
| — |
|
| 3,408 |
|
| 483,110 |
|
| — |
|
| 2,475 |
|
|
|
|
| 1,358,110 |
|
| — |
|
| 26,539 |
|
| 1,358,110 |
|
| — |
|
| 16,495 |
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps (2) |
| N/A |
|
| 1,223,626 |
|
| 28,397 |
|
| 28,239 |
|
| 1,144,789 |
|
| 15,408 |
|
| 15,857 |
Risk participation agreements |
| N/A |
|
| 173,066 |
|
| 5 |
|
| 56 |
|
| 119,951 |
|
| 23 |
|
| 109 |
Forward commitments to sell residential mortgage loans |
| N/A |
|
| 79,432 |
|
| 882 |
|
| 330 |
|
| 80,462 |
|
| 1,000 |
|
| 290 |
Interest rate-lock commitments on residential mortgage loans |
| N/A |
|
| 55,502 |
|
| 227 |
|
| 784 |
|
| 53,724 |
|
| 186 |
|
| 782 |
Foreign exchange forward contracts |
| N/A |
|
| 38,742 |
|
| 1,457 |
|
| 1,429 |
|
| 42,260 |
|
| 2,453 |
|
| 2,419 |
|
|
|
|
| 1,570,368 |
|
| 30,968 |
|
| 30,838 |
|
| 1,441,186 |
|
| 19,070 |
|
| 19,457 |
Total derivatives |
|
|
| $ | 2,928,478 |
| $ | 30,968 |
| $ | 57,377 |
| $ | 2,799,296 |
| $ | 19,070 |
| $ | 35,952 |
Less: netting adjustment (3) |
|
|
|
|
|
|
| (19,557) |
|
| (28,586) |
|
|
|
|
| (4,913) |
|
| (21,563) |
Total derivative assets/liabilities |
|
|
|
|
|
| $ | 11,411 |
| $ | 28,791 |
|
|
|
| $ | 14,157 |
| $ | 14,389 |
(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 institutions. |
(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. |
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 nine months ended September 30, 2018, the Company terminated five5 of its shorter-term swap agreements with notional amounts totaling $450 million and entered into five5 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 is being amortized over the remaining maturities of the designated instruments. Amortization of other comprehensive loss on terminated cash flow hedges totaled $1.6$3.4 million and $4.1 million for the three and nine months ended September 30, 2018, respectively.2019 and 2018. The notional amounts of the swap agreements in place at September 30, 20182019 expire as follows: $425$50 million in 2021; $475 million in 2022; $350$450 million in 2023; and $100 million in 2024.
23
FairValue Hedges of Interest Rate Risk
Interest rate swaps on brokered deposits
The Company enters 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.
Interest rate swaps on securities available for sale
22
TableIn the third quarter of Contents2019, the Company executed multiple forward starting fixed payer swaps to convert the latter portion of pools of available for sale securities to a floating rate. These instruments were designated as last-of-layer fair value hedges against the select closed pools of prepayable commercial mortgage backed securities. This strategy provides the Company with a fixed rate coupon during the front end unhedged tenor of the bonds and results in a floating rate security during the back end hedged tenor, with hedged start dates between August 2023 through August 2024 and maturity dates from January 2028 through January 2029. In accordance with ASC 815, an entity may exclude prepayment risk when measuring the change in fair value of the hedged item attributable to interest rate risk under the last-of-layer approach. The fair value of the hedged item attributable to interest rate risk will be presented in interest income along with the change in the fair value of the hedging instrument.
At September 30, 2019, the amortized cost basis of the closed portfolio of prepayable commercial mortgage backed securities totaled $499.2 million. The amount that represents the hedged items was $441.4 million and the basis adjustment associated with the hedged items totaled $7.9 million.
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
24
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 account 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 September 30, 2019 and December 31, 2018 the fair value of the liability associated with this contract was $6.2 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.
Effect of Derivative Instruments on theStatement of Income
The effects of derivative instruments on the consolidated statements of income for the three and nine months ended September 30, 20182019 and 20172018 are presented in the table below. For the three and nine months ended September 30, 2019 and 2018, the reduction of interest income attributable to cash flow hedges includes amortization of accumulated other comprehensive loss that resulted from termination of five interest rate swap contracts.
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
|
| Three Months Ended |
| Nine Months Ended |
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
|
|
| September 30, |
| September 30, |
|
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||
Derivative Instruments: | Location of Gain (Loss) Recognized in the Statement of Income: |
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
| Location of Gain (Loss) Recognized in the Statement of Income: |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Interest rate swaps - cash flow hedges | Interest income |
| $ | (1,276) |
| $ | (126) |
| $ | (2,841) |
| $ | (222) | ||||||||||||||||||
Interest rate swaps - fair value hedges | Interest expense |
| (725) |
| 176 |
| (1,371) |
| 620 | ||||||||||||||||||||||
Interest rate swaps designated as hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash flow hedges - variable rate loans |
| Interest income |
| $ | (956 | ) |
| $ | (1,276 | ) |
| $ | (4,632 | ) |
| $ | (2,841 | ) | |||||||||||||
Fair value hedges - securities |
| Interest income |
|
| 15 |
|
|
| — |
|
|
| 15 |
|
|
| — |
| |||||||||||||
Fair value hedges - brokered deposits |
| Interest expense |
|
| (243 | ) |
|
| (725 | ) |
|
| (1,692 | ) |
|
| (1,371 | ) | |||||||||||||
All other instruments | Other noninterest income |
|
| 1,363 |
|
| 1,339 |
|
| 4,474 |
|
| 4,484 |
| Other noninterest income |
|
| 4,324 |
|
|
| 1,363 |
|
|
| 8,733 |
|
|
| 4,474 |
|
Total |
|
| $ | (638) |
| $ | 1,389 |
| $ | 262 |
| $ | 4,882 |
|
|
| $ | 3,140 |
|
| $ | (638 | ) |
| $ | 2,424 |
|
| $ | 262 |
|
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. As ofAt September 30, 2018,2019, the Company was not in violation of any such provisions.
23
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 September 30, 20182019 and December 31, 20172018 is presented in the following tables.
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
(in thousands) |
|
|
|
| Gross |
| Net Amounts |
| Gross Amounts Not Offset in the Statement |
|
|
|
|
| Gross Amounts |
|
| Net Amounts |
|
| Gross Amounts Not Offset in the Statement of Income |
| ||||||||||||||||||||
Description |
| Gross |
| Offset in |
| Presented in |
| Financial |
| Cash |
| Net |
| Gross Amounts Recognized |
|
| Offset in the Statement of Income |
|
| Presented in the Statement of Income |
|
| Financial Instruments |
|
| Cash Collateral |
|
| Net Amount |
| ||||||||||||
As of September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Derivative Assets |
| $ | 26,648 |
| $ | (19,897) |
| $ | 6,751 |
| $ | 309 |
| $ | — |
| $ | 6,442 |
| $ | 32,718 |
|
| $ | (32,694 | ) |
| $ | 24 |
|
| $ | 24 |
|
|
|
|
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Derivative Liabilities |
| $ | 26,437 |
| $ | (26,128) |
| $ | 309 |
| $ | 309 |
| $ | 2,263 |
| $ | (2,263) |
| $ | 79,900 |
|
| $ | (65,280 | ) |
| $ | 14,620 |
|
| $ | 24 |
|
| $ | 37,657 |
|
| $ | (23,061 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
(in thousands) |
|
|
|
| Gross |
| Net Amounts |
| Gross Amounts Not Offset in the Statement |
|
|
|
|
| Gross Amounts |
|
| Net Amounts |
|
| Gross Amounts Not Offset in the Statement of Income |
| ||||||||||||||||||||
Description |
| Gross |
| Offset in |
| Presented in |
| Financial |
| Cash |
| 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.
7.8. Stockholders’ Equity
Common Shares Outstanding
Common shares outstanding excludes treasury shares totaling 1.1 million and 1.20.8 million at September 30, 20182019 and 0.9 million at December 31, 2017, respectively,2018, with a first-in-first-out cost basis of $23.8$14.9 million and $25.5$18.5 million at September 30, 20182019 and December 31, 2017,2018, respectively. Shares outstanding also excludes unvested restricted share awards totaling 1.51.3 million at September 30, 20182019 and December 31, 2017.2018.
Shares Issued as Consideration in Business Combination
On September 20, 2019, the Company issued approximately 5.0 million shares of common stock at $38.42 as consideration in its acquisition of MidSouth. Refer to Note 2 – Business Combinations for further information.
Stock Buyback Program
On May 24, 2018, the Company’s board of directors approved a stock buyback program thatwhereby the Company was authorized theto repurchase of up to 5%, or approximately 4.3 million shares, of its outstanding85.3 million shares common stock.stock then outstanding. The program was set to expire on December 31, 2019. Under this program, 200,000 shares of the Company’s common stock were repurchased at an average price of $41.30 per share.
On September 23, 2019, the Company’s board of directors approved a new amended stock buyback program that authorizes the Company to repurchase up to 5.5 million shares of its common stock through the expiration date of December 31, 2020. The program, as amended, 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, orby block purchase, through accelerated share repurchase programs, 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.transactions. 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. AsRefer to Note 17 – Subsequent Event for information about the accelerated share repurchase agreement the Company entered into subsequent to the balance sheet date.
26
24
Accumulated Other Comprehensive Loss
The components of Accumulated Other Comprehensive Loss and changes in those components are presented in the following table.
|
| Available for Sale Securities |
|
| HTM Securities Transferred from AFS |
|
| Employee Benefit Plans |
|
| Cash Flow Hedges |
|
| Equity Method Investment |
|
| Total |
| ||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017 |
| $ | (29,512 | ) |
| $ | (14,585 | ) |
| $ | (79,078 | ) |
| $ | (11,227 | ) |
| $ | — |
|
| $ | (134,402 | ) |
Other comprehensive income/loss before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized loss |
|
| (92,477 | ) |
|
| — |
|
|
| — |
|
|
| (18,418 | ) |
|
| — |
|
|
| (110,895 | ) |
Reclassification of net loss realized and included in earnings |
|
| — |
|
|
| — |
|
|
| 3,719 |
|
|
| 2,841 |
|
|
| — |
|
|
| 6,560 |
|
Other Valuation adjustments for employee benefit plan |
|
| — |
|
|
| — |
|
|
| (9,039 | ) |
|
| — |
|
|
| — |
|
|
| (9,039 | ) |
Amortization of unrealized net loss on securities transferred to HTM |
|
| — |
|
|
| 2,427 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,427 |
|
Income tax expense (benefit) |
|
| (20,985 | ) |
|
| 550 |
|
|
| (1,205 | ) |
|
| (3,530 | ) |
|
| — |
|
|
| (25,170 | ) |
Balance, September 30, 2018 |
| $ | (101,004 | ) |
| $ | (12,708 | ) |
| $ | (83,193 | ) |
| $ | (23,274 | ) |
| $ | — |
|
| $ | (220,179 | ) |
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 |
|
| 125,589 |
|
|
| — |
|
|
| — |
|
|
| 35,472 |
|
|
| (434 | ) |
|
| 160,627 |
|
Reclassification of net loss realized and included in earnings |
|
| — |
|
|
| — |
|
|
| 6,851 |
|
|
| 4,632 |
|
|
| — |
|
|
| 11,483 |
|
Valuation adjustment employee benefit plan |
|
| — |
|
|
| — |
|
|
| (7,015 | ) |
|
| — |
|
|
| — |
|
|
| (7,015 | ) |
Amortization of unrealized net loss on securities transferred to HTM |
|
| — |
|
|
| 2,435 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,435 |
|
Income tax expense (benefit) |
|
| 28,395 |
|
|
| 551 |
|
|
| (37 | ) |
|
| 9,068 |
|
|
| — |
|
|
| 37,977 |
|
Balance, September 30, 2019 |
| $ | 47,069 |
|
| $ | (10,160 | ) |
| $ | (110,374 | ) |
| $ | 22,743 |
|
| $ | (434 | ) |
| $ | (51,156 | ) |
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Available |
| HTM Securities |
|
|
|
|
|
|
| ||||
|
| for Sale |
| Transferred |
| Employee |
| Cash |
|
|
| ||||
(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 (loss) |
|
| 21,026 |
|
| — |
|
| — |
|
| (1,232) |
|
| 19,794 |
Reclassification of net loss realized and included in earnings |
|
| — |
|
| — |
|
| 4,144 |
|
| 335 |
|
| 4,479 |
Valuation adjustment for pension plan amendment |
|
| — |
|
| — |
|
| 17,315 |
|
| — |
|
| 17,315 |
Other valuation adjustments for employee benefit plan |
|
| — |
|
| — |
|
| (9,185) |
|
| — |
|
| (9,185) |
Amortization of unrealized net loss on securities transferred to HTM |
|
| — |
|
| 2,726 |
|
| — |
|
| — |
|
| 2,726 |
Income tax expense (benefit) |
|
| 7,649 |
|
| 1,012 |
|
| 4,416 |
|
| (329) |
|
| 12,748 |
Balance, September 30, 2017 |
| $ | (15,302) |
| $ | (12,678) |
| $ | (64,643) |
| $ | (5,528) |
| $ | (98,151) |
Balance, December 31, 2017 |
| $ | (29,512) |
| $ | (14,585) |
| $ | (79,078) |
| $ | (11,227) |
| $ | (134,402) |
Other comprehensive income (loss) before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized losses |
|
| (92,477) |
|
| — |
|
| — |
|
| (18,418) |
|
| (110,895) |
Reclassification of net losses realized and included in earnings |
|
| — |
|
| — |
|
| 3,719 |
|
| 2,841 |
|
| 6,560 |
Other valuation adjustments for employee benefit plan |
|
| — |
|
| — |
|
| (9,039) |
|
| — |
|
| (9,039) |
Amortization of unrealized net loss on securities transferred to HTM |
|
| — |
|
| 2,427 |
|
| — |
|
| — |
|
| 2,427 |
Income tax expense (benefit) |
|
| (20,985) |
|
| 550 |
|
| (1,205) |
|
| (3,530) |
|
| (25,170) |
Balance, September 30, 2018 |
| $ | (101,004) |
| $ | (12,708) |
| $ | (83,193) |
| $ | (23,274) |
| $ | (220,179) |
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 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 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 swaps will be amortized over the remaining maturities of the designated instruments. Gains and 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.
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
| |||||||||||
|
| Nine Months Ended |
|
|
| Nine Months |
|
|
| |||||||||
Amount reclassified from AOCI (a) |
| September 30, |
| Affected line item on |
| September 30, |
|
| Affected line item on | |||||||||
(in thousands) |
|
| 2018 |
|
| 2017 |
| the statement of income |
| 2019 |
|
| 2018 |
|
| the statement of income | ||
Amortization of unrealized net loss on securities transferred to HTM |
| $ | (2,427) |
| $ | (2,726) |
| Interest income |
| $ | (2,435 | ) |
| $ | (2,427 | ) |
| Interest income |
Tax effect |
|
| 550 |
|
| 1,012 |
| Income taxes |
|
| 551 |
|
|
| 550 |
|
| Income taxes |
Net of tax |
|
| (1,877) |
|
| (1,714) |
| Net income |
|
| (1,884 | ) |
|
| (1,877 | ) |
| Net income |
Amortization of defined benefit pension and post-retirement items |
|
| (3,719) |
|
| (4,144) |
| Other noninterest expense (b) |
|
| (6,851 | ) |
|
| (3,719 | ) |
| Other noninterest expense (b) |
Tax effect |
|
| 842 |
|
| 1,491 |
| Income taxes |
|
| 1,546 |
|
|
| 842 |
|
| Income taxes |
Net of tax |
|
| (2,877) |
|
| (2,653) |
| Net income |
|
| (5,305 | ) |
|
| (2,877 | ) |
| Net income |
Reclassification of unrealized gain on cash flow hedges |
|
| 1,264 |
|
| — |
| Interest income | ||||||||||
Reclassification of unrealized gain (loss) on cash flow hedges |
|
| (1,200 | ) |
|
| 1,264 |
|
| Interest income | ||||||||
Tax effect |
|
| (286) |
|
| — |
| Income taxes |
|
| 271 |
|
|
| (286 | ) |
| Income taxes |
Net of tax |
|
| 978 |
|
| — |
| Net income |
|
| (929 | ) |
|
| 978 |
|
| Net income |
Amortization of loss on terminated cash flow hedges |
|
| (4,105) |
|
| (335) |
| Interest income |
|
| (3,432 | ) |
|
| (4,105 | ) |
| Interest income |
Tax effect |
|
| 930 |
|
| 123 |
| Income taxes |
|
| 776 |
|
|
| 930 |
|
| Income taxes |
Net of tax |
|
| (3,175) |
|
| (212) |
| Net income |
|
| (2,656 | ) |
|
| (3,175 | ) |
| Net income |
Total reclassifications, net of tax |
| $ | (6,951) |
| $ | (4,579) |
| Net income |
| $ | (10,774 | ) |
| $ | (6,951 | ) |
| Net income |
(a) | Amounts in parentheses indicate reduction in net income. |
(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). |
25
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 into 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, and 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.
26
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 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 the 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 of 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.
27
9. Other Noninterest Income
Components of other noninterest income are as follows:
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
|
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
|
| September 30, |
| September 30, |
| September 30, |
|
| September 30, |
| ||||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||
Income from bank-owned life insurance |
| $ | 3,100 |
| $ | 3,097 |
| $ | 9,283 |
| $ | 8,632 |
| $ | 4,147 |
|
| $ | 3,100 |
|
| $ | 11,495 |
|
| $ | 9,283 |
|
Credit related fees |
|
| 2,762 |
| 2,521 |
| 7,900 |
|
| 8,297 |
|
| 2,988 |
|
|
| 2,762 |
|
|
| 8,520 |
|
|
| 7,900 |
| ||
Income from derivatives |
|
| 1,363 |
| 1,339 |
| 4,474 |
|
| 4,484 |
|
| 4,324 |
|
|
| 1,363 |
|
|
| 8,733 |
|
|
| 4,474 |
| ||
Gain (loss) on sales of assets |
|
| 989 |
| 400 |
| (177) |
| 4,465 |
|
| 205 |
|
|
| 989 |
|
|
| 636 |
|
|
| (177 | ) | |||
Amortization of FDIC loss share receivable |
|
| — |
| — |
| — |
| (2,427) | |||||||||||||||||||
Other miscellaneous |
|
| 3,342 |
|
| 3,795 |
|
| 10,066 |
|
| 11,023 |
|
| 4,661 |
|
|
| 3,342 |
|
|
| 11,389 |
|
|
| 10,066 |
|
Total other noninterest income |
| $ | 11,556 |
| $ | 11,152 |
| $ | 31,546 |
| $ | 34,474 |
| $ | 16,325 |
|
| $ | 11,556 |
|
| $ | 40,773 |
|
| $ | 31,546 |
|
28
10. Other Noninterest Expense
Components of other noninterest expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
|
| September 30, |
| September 30, |
| September 30, |
|
| September 30, |
| ||||||||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||
Advertising |
| $ | 2,553 |
| $ | 3,910 |
| $ | 8,596 |
| $ | 11,971 |
| $ | 5,435 |
|
| $ | 2,553 |
|
| $ | 11,768 |
|
| $ | 8,596 |
|
Corporate value and franchise taxes |
|
| 3,718 |
|
| 3,387 |
|
| 10,735 |
|
| 9,942 |
|
| 4,109 |
|
|
| 3,718 |
|
|
| 12,366 |
|
|
| 10,735 |
|
Telecommunications and postage |
|
| 3,610 |
|
|
| 3,598 |
|
|
| 10,439 |
|
|
| 11,063 |
| ||||||||||||
Entertainment and contributions |
|
| 2,765 |
|
|
| 2,539 |
|
|
| 8,215 |
|
|
| 8,250 |
| ||||||||||||
Printing and supplies |
|
| 1,287 |
|
| 1,421 |
|
| 4,261 |
|
| 3,929 |
|
| 1,459 |
|
|
| 1,287 |
|
|
| 3,720 |
|
|
| 4,261 |
|
Travel expense |
|
| 1,365 |
|
| 1,226 |
|
| 3,872 |
|
| 3,635 |
|
| 1,172 |
|
|
| 1,365 |
|
|
| 3,614 |
|
|
| 3,872 |
|
Entertainment and contributions |
|
| 2,539 |
|
| 2,322 |
|
| 8,250 |
|
| 6,087 | ||||||||||||||||
Tax credit investment amortization |
|
| 1,560 |
|
| 1,212 |
|
| 3,309 |
|
| 3,637 |
|
| 1,286 |
|
|
| 1,560 |
|
|
| 3,658 |
|
|
| 3,309 |
|
FDIC loss share agreement termination |
|
| — |
|
| — |
|
| — |
|
| 6,603 | ||||||||||||||||
Other retirement expense |
|
| (4,664) |
|
| (4,402) |
|
| (13,585) |
|
| (10,850) |
|
| (4,152 | ) |
|
| (4,664 | ) |
|
| (12,409 | ) |
|
| (13,585 | ) |
Loss on restructuring of bank-owned life insurance contracts |
|
| — |
|
| — |
|
| 3,240 |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,240 |
|
Other miscellaneous |
|
| 6,297 |
|
| 8,282 |
|
| 20,811 |
|
| 22,253 |
|
| 17,374 |
|
|
| 6,297 |
|
|
| 29,653 |
|
|
| 20,811 |
|
Total other noninterest expense |
| $ | 14,655 |
| $ | 17,358 |
| $ | 49,489 |
| $ | 57,207 |
| $ | 33,058 |
|
| $ | 18,253 |
|
| $ | 71,024 |
|
| $ | 60,552 |
|
Included in other miscellaneous expense for the three and nine months ended September 30, 2019 is approximately $11.9 million of expenses associated with the MidSouth acquisition, such as contract and lease termination fees, and other transaction related costs.
11. Earnings PerCommonShare
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 |
| Nine Months Ended |
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
|
| September 30, |
| September 30, |
| September 30, |
|
| September 30, |
| ||||||||||||||||||
(in thousands, except per share data) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income to common shareholders |
| $ | 83,878 |
| $ | 58,902 |
| $ | 227,530 |
| $ | 160,183 |
| $ | 67,807 |
|
| $ | 83,878 |
|
| $ | 235,248 |
|
| $ | 227,530 |
|
Net income allocated to participating securities - basic and diluted |
|
| 1,544 |
|
| 1,244 |
|
| 4,238 |
|
| 3,566 |
|
| 1,141 |
|
|
| 1,544 |
|
|
| 3,980 |
|
|
| 4,238 |
|
Net income allocated to common shareholders - basic and diluted |
| $ | 82,334 |
| $ | 57,658 |
| $ | 223,292 |
| $ | 156,617 |
| $ | 66,666 |
|
| $ | 82,334 |
|
| $ | 231,268 |
|
| $ | 223,292 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares - basic |
| $ | 85,348 |
| $ | 84,749 |
| $ | 85,298 |
| $ | 84,577 |
|
| 86,377 |
|
|
| 85,348 |
|
| $ | 85,934 |
|
| $ | 85,298 |
|
Dilutive potential common shares |
|
| 191 |
|
| 231 |
|
| 184 |
|
| 241 |
|
| 85 |
|
|
| 191 |
|
|
| 76 |
|
|
| 184 |
|
Weighted-average common shares - diluted |
| $ | 85,539 |
| $ | 84,980 |
| $ | 85,482 |
| $ | 84,818 |
|
| 86,462 |
|
|
| 85,539 |
|
| $ | 86,010 |
|
| $ | 85,482 |
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.96 |
| $ | 0.68 |
| $ | 2.62 |
| $ | 1.85 |
| $ | 0.77 |
|
| $ | 0.96 |
|
| $ | 2.69 |
|
| $ | 2.62 |
|
Diluted |
| $ | 0.96 |
| $ | 0.68 |
| $ | 2.61 |
| $ | 1.85 |
| $ | 0.77 |
|
| $ | 0.96 |
|
| $ | 2.69 |
|
| $ | 2.61 |
|
28
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 antidilutive, i.e., increase earnings per share or reduce a loss per share. Weighted average antidilutive potential common shares totaled 14,90443,794 and 18,257, respectively,37,680 for the three and nine months ended September 30, 2018. Weighted average2019, respectively. There were 14,904 and 18,257 antidilutive potential common shares totaled 1,380 and 11,057, respectively,excluded from the calculation of diluted earnings per share for the three and nine months ended September 30, 2017. 2018, respectively.
29
12. Retirement Plans
The Company sponsors a qualified defined benefit pension plan, theHancock Whitney CorporationPension Plan (“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 asof January 1, 2018 and will not thereafter not increase. The Company makes contributions tothe Pension Planin amounts sufficient to meet funding requirements set forth in federal employee benefit and tax laws, plus such additional amounts as the Company may determine tobe appropriate. During the first quarter of 2019, the Company made a discretionary contribution of $100 million to the Pension Plan. During the third quarter of 2018, the Company made a discretionary contribution of $39 $39million to thePensionPlandesignated tothe 2017 plan year.
The Company also offers a defined contribution retirement benefit plan, the Hancock Whitney Corporation 401(k) Savings Plan (“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 provided 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.
The following tables show the components of net periodic benefits cost included in expense for the plans for the periods indicated.
|
|
|
|
|
|
|
|
|
| Other Post- |
| |||||
(in thousands) |
| Pension Benefits |
|
| Retirement Benefits |
| ||||||||||
For the Three Months Ended September 30, |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Service cost |
| $ | 2,735 |
|
| $ | 3,163 |
|
| $ | 22 |
|
| $ | 28 |
|
Interest cost |
|
| 4,659 |
|
|
| 4,279 |
|
|
| 165 |
|
|
| 161 |
|
Expected return on plan assets |
|
| (11,299 | ) |
|
| (10,375 | ) |
|
| — |
|
|
| — |
|
Amortization of net loss and prior service costs |
|
| 2,553 |
|
|
| 1,366 |
|
|
| (229 | ) |
|
| (95 | ) |
Net periodic benefit cost (reduction of cost) |
| $ | (1,352 | ) |
| $ | (1,567 | ) |
| $ | (42 | ) |
| $ | 94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
| Other Post- |
|
|
|
|
|
|
|
|
| Other Post- |
| |||||||||
(in thousands) |
| Pension Benefits |
| Retirement Benefits |
| Pension Benefits |
|
| Retirement Benefits |
| ||||||||||||||||||
Three Months Ended September 30, 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||||||||||||||
For the Nine Months Ended September 30, |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||||||||||
Service cost |
| $ | 3,163 |
| $ | 3,769 |
| $ | 28 |
| $ | 17 |
| $ | 8,245 |
|
| $ | 9,251 |
|
| $ | 73 |
|
| $ | 91 |
|
Interest cost |
|
| 4,279 |
|
| 4,056 |
|
| 161 |
|
| 155 |
|
| 14,183 |
|
|
| 12,481 |
|
|
| 457 |
|
|
| 459 |
|
Expected return on plan assets |
|
| (10,375) |
|
| (9,652) |
|
| — |
|
| — |
|
| (33,899 | ) |
|
| (30,244 | ) |
|
| — |
|
|
| — |
|
Amortization of net loss and prior service costs |
|
| 1,366 |
|
| 1,167 |
|
| (95) |
|
| (128) |
|
| 7,535 |
|
|
| 4,057 |
|
|
| (684 | ) |
|
| (338 | ) |
Net periodic benefit cost (reduction of cost) |
| $ | (1,567) |
| $ | (660) |
| $ | 94 |
| $ | 44 |
| $ | (3,936 | ) |
| $ | (4,455 | ) |
| $ | (154 | ) |
| $ | 212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
| Other Post- | ||||||||||||||||||||
(in thousands) |
| Pension Benefits |
| Retirement Benefits | ||||||||||||||||||||||||
Nine Months Ended September 30, 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||||||||||||||
Service cost |
| $ | 9,251 |
|
| 11,612 |
| $ | 91 |
|
| 112 | ||||||||||||||||
Interest cost |
|
| 12,481 |
|
| 12,470 |
|
| 459 |
|
| 514 | ||||||||||||||||
Expected return on plan assets |
|
| (30,244) |
|
| (27,978) |
|
| — |
|
| — | ||||||||||||||||
Amortization of net loss and prior service costs |
|
| 4,057 |
|
| 4,368 |
|
| (338) |
|
| (224) | ||||||||||||||||
Net periodic benefit cost (reduction of cost) |
| $ | (4,455) |
| $ | 472 |
| $ | 212 |
| $ | 402 |
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.
29
13. Share-Based Payment Arrangements
The 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.
30
A summary of stock option activity for the nine months ended September 30, 20182019 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
| Weighted |
| Remaining |
|
|
| |
|
|
|
| Average |
| Contractual |
| Aggregate | ||
|
| Number of |
| Exercise |
| Term |
| Intrinsic | ||
Options |
| Shares |
| Price |
| (Years) |
| Value ($000) | ||
Outstanding at January 1, 2018 |
| 88,301 |
| $ | 34.84 |
| 2.8 |
| $ | 1,294 |
Exercised/Released |
| (35,317) |
|
| 37.39 |
|
|
|
| 592 |
Cancelled/Forfeited |
| — |
|
| — |
|
|
|
| — |
Expired |
| (2,298) |
|
| 44.91 |
|
|
|
| 10 |
Outstanding at September 30, 2018 |
| 50,686 |
| $ | 32.61 |
| 2.6 |
| $ | 757 |
Exercisable at September 30, 2018 |
| 50,686 |
| $ | 32.61 |
| 2.6 |
| $ | 757 |
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
| |
|
|
|
|
|
| Weighted |
|
| Average |
|
|
|
|
| ||
|
|
|
|
|
| Average |
|
| Remaining |
|
| Aggregate |
| |||
|
| Number of |
|
| Exercise |
|
| Contractual |
|
| Intrinsic |
| ||||
Options |
| Shares |
|
| Price |
|
| Term (Years) |
|
| Value ($000) |
| ||||
Outstanding at January 1, 2019 |
|
| 46,865 |
|
| $ | 31.88 |
|
|
| 2.6 |
|
| $ | 164 |
|
Former MidSouth options converted at acquisition |
|
| 20,530 |
|
|
| 46.76 |
|
|
|
|
|
|
| — |
|
Exercised/Released |
|
| (18,969 | ) |
|
| 31.54 |
|
|
|
|
|
|
| 172 |
|
Cancelled/Forfeited |
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
Expired |
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
Outstanding at September 30, 2019 |
|
| 48,426 |
|
| $ | 38.32 |
|
|
| 1.5 |
|
| $ | 174 |
|
Exercisable at September 30, 2019 |
|
| 48,426 |
|
| $ | 38.32 |
|
|
| 1.5 |
|
| $ | 174 |
|
The total intrinsic value of options exercised forduring the nine months ended September 30, 2019 and 2018 was $0.2 million and 2017 was $0.6 million, and $4.1 million, respectively.
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 September 30, 20182019 and changes during the nine months ended September 30, 2018,2019, are presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
| Average |
|
| Number of |
|
| Grant Date |
|
| Shares |
|
| Fair Value |
Nonvested at January 1, 2018 |
| 1,708,942 |
| $ | 37.05 |
Granted |
| 94,958 |
|
| 49.57 |
Vested |
| (41,502) |
|
| 31.85 |
Forfeited |
| (60,859) |
|
| 36.79 |
Nonvested at September 30, 2018 |
| 1,701,539 |
| $ | 37.88 |
|
|
|
|
|
| Weighted |
| |
|
|
|
|
|
| Average |
| |
|
| Number of |
|
| Grant Date |
| ||
|
| Shares |
|
| Fair Value |
| ||
Nonvested at January 1, 2019 |
|
| 1,494,041 |
|
| $ | 39.89 |
|
Granted |
|
| 102,221 |
|
|
| 35.74 |
|
Vested |
|
| (35,353 | ) |
|
| 40.96 |
|
Forfeited |
|
| (53,525 | ) |
|
| 39.22 |
|
Nonvested at September 30, 2019 |
|
| 1,507,384 |
|
| $ | 39.60 |
|
As of September 30, 2018,2019, there was $39.0$41.3 million of total unrecognized compensation expense related to nonvested restricted and performance shares expected to vest.vest in the future. This compensation is expected to be recognized in expense over a weighted average period of 2.973.0 years. The total fair value of shares which vested during the nine months ended September 30, 2019 and 2018 was $1.3 million and 2017 was $2.0 million, and $10.1 million, respectively.
During the nine months ended September 30, 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 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 coreoperating 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.
30
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
31
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 September 30, 20182019 and December 31, 2017:
2018:
|
|
|
|
|
| |||||||||
|
|
| September 30, |
|
| December 31, |
| September 30, |
|
| December 31, |
| ||
(in thousands) |
|
| 2018 |
|
| 2017 |
| 2019 |
|
| 2018 |
| ||
Commitments to extend credit |
| $ | 7,212,886 |
| $ | 6,689,033 |
| $ | 7,478,907 |
|
| $ | 7,234,528 |
|
Letters of credit |
|
| 353,490 |
| 348,377 |
|
| 389,998 |
|
|
| 365,498 |
|
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 ValueMeasurements
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.
31
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 September 30, 2019 and December 31, 2018:
|
| September 30, 2019 |
| |||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and government agency securities |
| $ | — |
|
| $ | 95,141 |
|
| $ | — |
|
| $ | 95,141 |
|
Municipal obligations |
|
| — |
|
|
| 252,163 |
|
|
| — |
|
| $ | 252,163 |
|
Corporate debt securities |
|
| — |
|
|
| 3,897 |
|
|
| — |
|
| $ | 3,897 |
|
Residential mortgage-backed securities |
|
| — |
|
|
| 1,339,471 |
|
|
| — |
|
| $ | 1,339,471 |
|
Commercial mortgage-backed securities |
|
| — |
|
|
| 1,624,169 |
|
|
| — |
|
| $ | 1,624,169 |
|
Collateralized mortgage obligations |
|
| — |
|
|
| 234,816 |
|
|
| — |
|
| $ | 234,816 |
|
Total available for sale securities |
|
| — |
|
|
| 3,549,657 |
|
|
| — |
|
|
| 3,549,657 |
|
Derivative assets (1) |
|
| — |
|
|
| 71,904 |
|
|
| — |
|
|
| 71,904 |
|
Total recurring fair value measurements - assets |
| $ | — |
|
| $ | 3,621,561 |
|
| $ | — |
|
| $ | 3,621,561 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (1) |
| $ | — |
|
| $ | 17,218 |
|
| $ | 6,249 |
|
| $ | 23,467 |
|
Total recurring fair value measurements - liabilities |
| $ | — |
|
| $ | 17,218 |
|
| $ | 6,249 |
|
| $ | 23,467 |
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2018 | ||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and government agency securities |
| $ | — |
| $ | 89,312 |
| $ | — |
| $ | 89,312 |
Municipal obligations |
|
| — |
|
| 232,713 |
|
| — |
|
| 232,713 |
Corporate debt securities |
|
| — |
|
| 3,500 |
|
| — |
|
| 3,500 |
Residential mortgage-backed securities |
|
| — |
|
| 1,731,275 |
|
| — |
|
| 1,731,275 |
Commercial mortgage-backed securities |
|
| — |
|
| 722,882 |
|
| — |
|
| 722,882 |
Collateralized mortgage obligations |
|
| — |
|
| 138,503 |
|
| — |
|
| 138,503 |
Total available for sale securities |
|
| — |
|
| 2,918,185 |
|
| — |
|
| 2,918,185 |
Derivative assets (1) |
|
| — |
|
| 11,411 |
|
| — |
|
| 11,411 |
Total recurring fair value measurements - assets |
| $ | — |
| $ | 2,929,596 |
| $ | — |
| $ | 2,929,596 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (1) |
| $ | — |
| $ | 28,791 |
| $ | — |
| $ | 28,791 |
Total recurring fair value measurements - liabilities |
| $ | — |
| $ | 28,791 |
| $ | — |
| $ | 28,791 |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| 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 value33
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, all 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
32
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 nine months ended September 30, 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) |
|
|
|
|
Balance at December 31, 2017 |
| $ | — |
|
Entry into derivative contract |
|
| 7,304 |
|
Balance at December 31, 2018 |
|
| 7,304 |
|
Cash settlements |
|
| (1,262 | ) |
Losses included in earnings |
|
| 207 |
|
Balance at September 30, 2019 |
| $ | 6,249 |
|
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 |
| September 30, 2019 |
|
| December 31, 2018 |
|
| Valuation Technique |
| Unobservable Input |
| Values Utilized | ||
|
|
|
|
|
|
|
|
|
|
|
| Visa Class A appreciation |
| 6% - 18% |
Derivative liability |
| $ | 6,249 |
|
| $ | 7,304 |
|
| Discounted cash flow |
| Conversion rate |
| 1.62x - 1.59x |
|
|
|
|
|
|
|
|
|
|
|
| Time until resolution |
| 24-39 months |
34
The Company’s policy is to recognize transfers between valuation hierarchy levels as of the end of a reporting period. There were no0 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.from loans or property and equipment. Subsequently, other real estate owned and foreclosed assets 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.assets.
The fair value information presented below is not as of the 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.
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.
|
| September 30, 2019 |
| |||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Collateral-dependent impaired loans |
| $ | — |
|
| $ | 170,425 |
|
| $ | — |
|
| $ | 170,425 |
|
Other real estate owned and foreclosed assets, net |
|
| — |
|
|
| — |
|
|
| 30,955 |
|
| $ | 30,955 |
|
Total nonrecurring fair value measurements |
| $ | — |
|
| $ | 170,425 |
|
| $ | 30,955 |
|
| $ | 201,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
| September 30, 2018 |
| December 31, 2018 |
| |||||||||||||||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Collateral-dependent impaired loans |
| $ | — |
| $ | 180,730 |
| $ | — |
| $ | 180,730 |
| $ | — |
|
| $ | 170,918 |
|
| $ | — |
|
| $ | 170,918 |
|
Other real estate owned and foreclosed assets, net |
|
| — |
|
| — |
|
| 24,900 |
|
| 24,900 |
|
| — |
|
|
| — |
|
|
| 14,594 |
|
|
| 14,594 |
|
Total nonrecurring fair value measurements |
| $ | — |
| $ | 180,730 |
| $ | 24,900 |
| $ | 205,630 |
| $ | — |
|
| $ | 170,918 |
|
| $ | 14,594 |
|
| $ | 185,512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2017 | ||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Collateral-dependent impaired loans |
| $ | — |
| $ | 184,205 |
| $ | — |
| $ | 184,205 |
Other real estate owned and foreclosed assets, net |
|
| — |
|
| — |
|
| 19,595 |
|
| 19,595 |
Total nonrecurring fair value measurements |
| $ | — |
| $ | 184,205 |
| $ | 19,595 |
| $ | 203,800 |
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.
Securities– 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.
Deposits– 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.
33
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.
35
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.
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 September 30, 2018 and December 31, 2017.
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| September 30, 2018 |
| September 30, 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 |
| $ | 447,683 |
| $ | — |
| $ | — |
| $ | 447,683 |
| $ | 447,683 |
| $ | 517,576 |
|
| $ | — |
|
| $ | — |
|
| $ | 517,576 |
|
| $ | 517,576 |
|
Available for sale securities |
|
| — |
|
| 2,918,185 |
|
| — |
|
| 2,918,185 |
|
| 2,918,185 |
|
| — |
|
|
| 3,549,657 |
|
|
| — |
|
|
| 3,549,657 |
|
|
| 3,549,657 |
|
Held to maturity securities |
|
| — |
|
| 2,975,455 |
|
| — |
|
| 2,975,455 |
|
| 3,069,262 |
|
| — |
|
|
| 2,920,356 |
|
|
| — |
|
|
| 2,920,356 |
|
|
| 2,855,062 |
|
Loans, net |
|
| — |
|
| 180,730 |
|
| 18,843,738 |
|
| 19,024,468 |
|
| 19,329,167 |
|
| — |
|
|
| 170,425 |
|
|
| 20,812,059 |
|
|
| 20,982,484 |
|
|
| 20,840,380 |
|
Loans held for sale |
|
| — |
|
| 29,043 |
|
| — |
|
| 29,043 |
|
| 29,043 |
|
| — |
|
|
| 75,789 |
|
|
| — |
|
|
| 75,789 |
|
|
| 75,789 |
|
Derivative financial instruments |
|
| — |
|
| 11,411 |
|
| — |
|
| 11,411 |
|
| 11,411 |
|
| — |
|
|
| 71,904 |
|
|
| — |
|
|
| 71,904 |
|
|
| 71,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| $ | — |
| $ | — |
| $ | 22,373,052 |
| $ | 22,373,052 |
| $ | 22,417,807 |
|
| — |
|
|
| — |
|
|
| 24,188,274 |
|
|
| 24,188,274 |
|
|
| 24,201,299 |
|
Federal funds purchased |
|
| 50,325 |
|
| — |
|
| — |
|
| 50,325 |
|
| 50,325 |
|
| 125,400 |
|
|
| — |
|
|
| — |
|
|
| 125,400 |
|
|
| 125,400 |
|
Securities sold under agreements to repurchase |
|
| 415,960 |
|
| — |
|
| — |
|
| 415,960 |
|
| 415,960 |
|
| 545,915 |
|
|
| — |
|
|
| — |
|
|
| 545,915 |
|
|
| 545,915 |
|
FHLB short-term borrowings |
|
| 1,810,362 |
|
| — |
|
| — |
|
| 1,810,362 |
|
| 1,810,362 |
|
| 1,437,500 |
|
|
| — |
|
|
| — |
|
|
| 1,437,500 |
|
|
| 1,437,500 |
|
Long-term debt |
|
| — |
|
| 213,076 |
|
| — |
|
| 213,076 |
|
| 215,912 |
|
| — |
|
|
| 245,715 |
|
|
| — |
|
|
| 245,715 |
|
|
| 246,641 |
|
Derivative financial instruments |
|
| — |
|
| 28,791 |
|
| — |
|
| 28,791 |
|
| 28,791 |
|
| — |
|
|
| 17,218 |
|
|
| 6,249 |
|
|
| 23,467 |
|
|
| 23,467 |
|
|
| December 31, 2018 |
| |||||||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total Fair Value |
|
| Carrying Amount |
| |||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, interest-bearing bank deposits, and federal funds sold |
| $ | 494,466 |
|
| $ | — |
|
| $ | — |
|
| $ | 494,466 |
|
| $ | 494,466 |
|
Available for sale securities |
|
| — |
|
|
| 2,691,037 |
|
|
| — |
|
|
| 2,691,037 |
|
|
| 2,691,037 |
|
Held to maturity securities |
|
| — |
|
|
| 2,935,856 |
|
|
| — |
|
|
| 2,935,856 |
|
|
| 2,979,547 |
|
Loans, net |
|
| — |
|
|
| 170,918 |
|
|
| 19,555,969 |
|
|
| 19,726,887 |
|
|
| 19,831,897 |
|
Loans held for sale |
|
| — |
|
|
| 28,150 |
|
|
| — |
|
|
| 28,150 |
|
|
| 28,150 |
|
Derivative financial instruments |
|
| — |
|
|
| 16,980 |
|
|
| — |
|
|
| 16,980 |
|
|
| 16,980 |
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
| — |
|
|
| — |
|
|
| 23,129,574 |
|
|
| 23,129,574 |
|
|
| 23,150,185 |
|
Federal funds purchased |
|
| 425 |
|
|
| — |
|
|
| — |
|
|
| 425 |
|
|
| 425 |
|
Securities sold under agreements to repurchase |
|
| 428,599 |
|
|
| — |
|
|
| — |
|
|
| 428,599 |
|
|
| 428,599 |
|
FHLB short-term borrowings |
|
| 1,160,104 |
|
|
| — |
|
|
| — |
|
|
| 1,160,104 |
|
|
| 1,160,104 |
|
Long-term debt |
|
| — |
|
|
| 223,135 |
|
|
| — |
|
|
| 223,135 |
|
|
| 224,993 |
|
Derivative financial instruments |
|
| — |
|
|
| 14,923 |
|
|
| 7,304 |
|
|
| 22,227 |
|
|
| 22,227 |
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2017 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
| Total Fair |
| Carrying | ||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Value |
| Amount | |||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, interest-bearing bank deposits, and federal funds sold |
| $ | 479,332 |
| $ | — |
| $ | — |
| $ | 479,332 |
| $ | 479,332 |
Available for sale securities |
|
| — |
|
| 2,910,869 |
|
| — |
|
| 2,910,869 |
|
| 2,910,869 |
Held to maturity securities |
|
| — |
|
| 2,962,010 |
|
| — |
|
| 2,962,010 |
|
| 2,977,511 |
Loans, net |
|
| — |
|
| 184,205 |
|
| 18,403,303 |
|
| 18,587,508 |
|
| 18,786,855 |
Loans held for sale |
|
| — |
|
| 39,865 |
|
| — |
|
| 39,865 |
|
| 39,865 |
Derivative financial instruments |
|
| — |
|
| 14,157 |
|
| — |
|
| 14,157 |
|
| 14,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| $ | — |
| $ | — |
| $ | 22,238,847 |
| $ | 22,238,847 |
| $ | 22,253,202 |
Federal funds purchased |
|
| 140,754 |
|
| — |
|
| — |
|
| 140,754 |
|
| 140,754 |
Securities sold under agreements to repurchase |
|
| 430,569 |
|
| — |
|
| — |
|
| 430,569 |
|
| 430,569 |
FHLB short-term borrowings |
|
| 1,132,567 |
|
| — |
|
| — |
|
| 1,132,567 |
|
| 1,132,567 |
Long-term debt |
|
| — |
|
| 303,631 |
|
| — |
|
| 303,631 |
|
| 305,513 |
Derivative financial instruments |
|
| — |
|
| 14,389 |
|
| — |
|
| 14,389 |
|
| 14,389 |
34
16. Recent Accounting Pronouncements
Accounting Standards Adopted in 2018
2019
In August 2018,February 2016, the FASB issued ASU 2018-15, “Intangibles – Goodwill2016-02, “Leases (Topic 842),” to increase transparency and Other – Internal-Use Software (Subtopic 350-40): Customer’scomparability 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 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 upon adoption. Lessor accounting was largely unchanged under the new guidance, except for clarification of the definition of initial direct costs which provided additional guidance on the timing of recognition of those costs. Subsequent to the issuance of this update, the FASB issued three additional ASUs that provide codification improvements and certain 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 the period of adoption. The Company was required to and did adopt the standard effective January 1, 2019, using the modified retrospective transition method permitted by 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 Implementation Costs Incurredleases in a Cloud Computing Arrangement That Is a Service Contract.” The amendments in this Update improve current GAAP by clarifying the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract, which alignsaccordance with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company early adopted this standard during the third quarter of 2018. Adoption of this standard didTopic 842 has not havehad a material impact upon the Company’s financial condition orconsolidated results of operations.
In March 2018, the FASB issued ASU 2018-05, “Income Taxes (Topic 740): Amendmentsoperations, and is not expected to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118.” The ASU amends Topic 740 to incorporate SEC guidance issued in its Staff Bulletin No. 118 (SAB 118). SAB 118 addressed the application of GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act. The amendments in this update were effective upon issuance, at which time the Company adopted the standard. Adoption of this standard did not have a material impact on the Company’s financial condition or results of operations.
In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” with the objective of improving financial reporting of hedging relationships to better portray the economic results 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, and interim periods within those fiscal years. Early application is permitted in any interim 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 the Company’s financial condition or results of operations. See further discussion in Note 6 – Derivatives.
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 are 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 annualfuture 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 adopted 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 125 – Retirement Plans –Operating Leases for detail on the componentsfurther information related to operating lease accounting policy, practical expedient elections for adoption and operating leasing information at adoption and as 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, 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
35
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.
Additionally, the following ASUs were adopted by the Company on January 1, 2018, but did not have a significant impact on the Company’s consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019.
Issued but Not Yet Adopted Accounting Standards
In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” The Update provides clarification and correction to certain areas of previously issued ASUs concerning financial instruments (2016-01, 2016-13 and 2017-12). The FASB does not expect the provisions contained in this Update to have a significant effect on current accounting practice. Effective dates for adoption of this Update’s provisions vary in accordance with the effective dates and adoption status of the amended ASUs. The Company is currently assessing the impact of adoption of this guidance, but it is not expected to have a material impact upon its financial position and results of operations.
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 July 2018, the FASB issued ASU 2018-09, “Codification Improvements,” that clarifies certain topics within the Accounting Standards Codification (“ASC”) in an effort to correct unintended application of guidance. The amendments in this Update affect a wide variety of Topics in the Codification, some topics of which are applicable to the Company. The amendments apply to all reporting entities within the scope of the affected accounting guidance. The transition and effective date guidance is based on the facts and circumstances of each amendment, with some of the amendments effective upon issuance of this Update and with other transition guidance effective for annual periods beginning after December 15, 2018 for public business entities. The Company is currently assessing the impact of adoption of this guidance, but does not expect it to have a material impact upon its financial condition or results of operations.
In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation – (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods and services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide financing to the issuer or awards granted in conjunction with the selling of goods or services to customers as part of a contract accounted for under Topic 606, “Revenue from Contracts with Customers.” The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company does not expect the adoption of this guidance to have a material impact upon its financial condition or results of operations.
36
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,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 noware required to 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 for non-purchased credit impaired loans as of the beginning of the year of adoption. For purchased credit impaired loans, there is no impact to retained earnings upon adoption; rather, the entity will reclassify a portion of the purchase accounting fair value mark to
37
allowance for credit losses 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 iswill not planning to early adopt this guidance.
The Company has engaged third party consultantsinternally developed credit models and formed cross-functional working groups comprisedcompleted the implementation of individuals from various areas includinga vendor provided platform to aggregate inputs and perform the calculation of allowance for credit finance, risk management and information technology for implementation. Five work streams have been created to developlosses. The validation of the expected credit loss models; execute system implementation; complete balance sheet scoping; ensuremodels is ongoing and expected to be completed during the fourth quarter of 2019. Additional CECL implementation activities in the fourth quarter 2019 will include refinement of procedures, completion of the design and implementation of effective internal controls surrounding new processes;over financial reporting, conclusion of validation of credit models and provide executive oversightend-to-end processes, and drafting of the project. Balance sheet scoping is largely complete. newly required disclosures.
The Company has contracted withcompleted parallel testing of the CECL estimation process for the third quarter 2019, which included executed controls established to-date surrounding data, models and governance. Results from this process indicated a vendor for a software solutionnet increase of approximately 20 to 30 percent over the September 30, 2019 incurred loan loss reserve level utilizing the CECL models and has begun configuration for an implementation expected to be complete in second quarter of 2019. An internal analytics team is developing and testing credit loss models expected to be used incurrent economic forecast; this range excludes the calculation. 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 theloans and debt securities recently acquired from MidSouth. The Company’s CECL allowance for loan losses givenestimates losses over a two-year reasonable and supportable forecast period utilizing the change in methodology from coveringweighted average of a range of macroeconomic scenarios, and then reverts to longer historical loss experience to estimate losses inherentfor the remaining life. Significant drivers in the portfolio to covering losses over the remaining expectedaforementioned increase were higher calculated reserve levels forlonger life of the portfolio,real-estate secured loans and the reclassificationexpected funding of nonaccretable difference on purchasedoff-balance sheet exposures, partially offset by lower reserves for shorter-term commercial loans. Immaterial expected credit impaired loans to allowance (offset by an increase in the carrying value of the related loans). Application of the guidance is also expected to result in the establishment of an allowance for credit losslosses were calculated on held to maturity debt securities. The amount of the increase in these allowancesallowance for credit losses upon adoption will be impacted by the portfolio composition and quality at the adoption date as well as current economic conditions and forecasts at that time.
In February 2016,
17. Subsequent Event
On October 18, 2019, the FASB issued ASU 2016-02, “Leases (Topic 842),”Company entered into an accelerated share repurchase (“ASR”) agreement with Morgan Stanley & Co. LLC (“Morgan Stanley”) to increase transparencyrepurchase $185 million of the Company’s common stock. The ASR agreement was entered into under the current stock buyback program, under which the Company is authorized to repurchase up to 5.5 million shares of its common stock prior to December 31, 2020. Refer to Note 8 – Stockholders’ Equity for information about the stock buyback program.
Pursuant to the ASR agreement, the Company made a $185 million payment to Morgan Stanley on October 21, 2019, and comparability among organizations by recognizing lease assets and lease liabilitiesreceived from Morgan Stanley on the balance sheet and disclosing key information about leasing arrangements. Withsame day an initial delivery of approximately 3.6 million shares of the exceptionCompany’s common stock, which represents approximately 75% of short-term leases, lesseesthe estimated total number of shares to be repurchased under the ASR agreement based on the October 18, 2019 closing price of the Company’s common stock. The final number of shares to be repurchased will be required to recognize a lease liability representingbased generally on 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 as a source of off-balance sheet financing. Lessor accounting is largely unchanged under the new guidance, except for clarificationvolume-weighted average price per share of the definitionCompany’s common stock during the term of initial direct costs which may impact the timing of recognition of those costs. SubsequentASR agreement, less a discount, and subject to the issuance of this Update, the FASB issued three additional ASUs that provide codification improvements and certain 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 the period of adoption. Consequently, the entity’s reporting for the comparative periods presented in the financial statements in which the entity adopts the new lease requirements would continue to bepossible adjustments in accordance with current GAAP (Topic 840), including disclosures. The Company plans to elect this transition method. Public business entities are required to apply the amendments for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has preliminarily determined the practical expedients expected to be applied and continues to review existing service contracts that may include embedded leases. The Company has completed the upgrade of its existing third-party leasing software and has tested the capitalization functionalityterms of the platform. The Company will record a gross-up of its Consolidated Balance Sheets as a result of recognizing lease liabilities and right of use assets upon adoption. The impact upon the Company’s consolidated financial statements will be based on the present value of future minimum lease payments as adjusted for lease incentives for the population of leases on the date of adoption and interest rates on the date of adoption. As such, the amount is not yet known. The Company does not expect material changes to its consolidated results of operations as a resultASR agreement. Final settlement of the applicationASR agreement is scheduled to occur no later than the third quarter of this guidance.2020.
38
37
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. Important factors that could cause actual results to differ materially from the forward-looking statements we make 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 |
| • | the risk that our provision for |
| • | loan growth expectations; |
| • | management’s predictions about charge-offs, |
| the risk that our enterprise risk management framework may not identify or address risks adequately, which may result in unexpected losses; |
• | the impact of the |
|
|
| • | deposit trends; |
| • | credit quality trends; |
| • | changes in interest |
• | the impact of the change in the LIBOR benchmark; |
• | net interest margin trends; |
| • | future expense levels; |
| improvements in expense to revenue (efficiency ratio); |
• | success of revenue-generating initiatives; |
| • | the effectiveness of derivative financial instruments and hedging activities to manage risks; |
| 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; |
• | 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; |
• | projected tax rates; |
| • | future profitability; |
|
|
| • | purchase accounting impacts, such as accretion levels; |
| our ability to identify and address potential |
|
|
| 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 |
| changes in laws and regulations affecting our businesses, including legislation and regulations relating to bank products and services, as well as changes in the |
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,” 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.
39
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 Data section on page 48 ofthat appears later in this report.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.
38
We present certain additional non-GAAP financial measures to assist the reader with a better understanding of the Company’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.
Rebranding
MidSouth Acquisition
On May 24, 2018, our shareholders approvedSeptember 21, 2019, we completed the Company’s proposal to changeacquisition of MidSouth Bancorp, Inc. (“MidSouth”) (NYSE: MSL), parent company of MidSouth Bank, N.A, with simultaneous operational conversion. We acquired net assets of approximately $124.7 million, including the name of the organization from “Hancock Holding Company” to “Hancock Whitney Corporation.” Related to the name change, the Company also changed its common stock ticker from “HBHC” to “HWC.” Both changes were effective May 25, 2018.
Additional corporate changes resulting from rebranding are as follows:following:
|
|
|
|
|
|
Acquisitions
On July 13, 2018, we completed the acquisition of the bank-managed high net worth individual and institutional investment management and trust business of Capital One, National Association (“Capital One”). In addition, we assumed approximately $217 million of customer deposit liabilities. The combination brings assets under administration and assets under management to approximately $26 billion and $10 billion, respectively, and is expected to provide opportunity to develop relationships for other private, wholesale and retail services.
On March 10, 2017, our wholly-owned subsidiary, Hancock Whitney Bank (“Hancock Whitney”), completed a transaction with First NBC Bank (“FNBC”), whereby Hancock 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.
On April 28, 2017, Hancock 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, Hancock 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, Hancock Whitney exercised its option to acquire seven former FNBC locations and closed and consolidated 25 overlapping branch locations.
Under the Agreement, Hancock 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. Hancock 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 FDICconsideration for the net liabilities assumed and $158 million in branch cash acquired).
The termsassets acquired, each outstanding share of the Agreement require the FDIC to indemnify Hancock Whitney against certain liabilities of FNBC and its affiliates not assumed or otherwise purchased by Hancock Whitney. Neither the Company nor Hancock Whitney acquired any assets,MidSouth common stock preferred stock or debt, or assumed any other obligations,converted to 0.2952 shares of First NBC Bank Holding Company.
39
Divestiture
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.approximately $193.8 million. The transaction resulted in a loss on sale totaling $1.1estimated goodwill of $69.2 million.
40
Upon acquisition, we closed or consolidated 20 MidSouth branches. The Company incurred acquisition-related expenses of $28.8 million, or $0.26 per diluted share, in the third quarter and expects to incur an additional $3 to $5 million of expenses before the end of year. The transaction is expected to be accretive to income beginning in the first quarter of 2020 and is projected to add approximately $0.13 to $0.15 to 2020 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.
Current Economic Environment
Most of our market areaareas experienced a solidmodest to moderate expansion in economic activity during the third quarter of 2018,2019, according to the Federal Reserve’s Summary of Commentary on Current Economic Conditions (“Beige Book”). Overall, the economic outlook remainswas generally positive, with some uncertainty on the impactthough there is continued concern over trade tensions and a more pessimistic outlook in energy as a result of tariffs on trade. reduced expectations for global economic growth.
Drilling activity leveled offin the energy sector continued to erode, contributing to a notable weakness in oilfield services. However, oil and gas production continued to rise and well completion continued to increase in the Permian Basin. The attacks on Saudi Arabian oil facilities did not change planned capital spending in the energy sector because there was not a lasting increase in the price of oil. Forecast for energy related businesses operating mainly in our south Louisiana and Houston, Texas marketsthe remainder of the year was slightly more pessimistic than previously reported due to pipeline capacity constraints. However, outlooks remained positive as additional pipeline capacity is expected in 2019. lower spending and a weaker economic outlook.
The commercialCommercial real estate market maintained strong demandconditions remained steady in most of our footprint,markets, with the pacevacancies continuing to trend downward at a modest pace. Industrial demand and construction remained solid, despite growing construction costs. A robust amount of nonresidentialconcentrated new multifamily construction activity at least matched with the year-ago level except for retail construction, which was unchangedin some metro submarkets is leading to down. In the Houston market, a large numbersome concern of new apartments continued to suppress rent growth and office space net absorption remained weak in part due to the broader national trend among firms to move out of larger spaces into more efficient, smaller ones.oversupply.
The residential real estate market has a varied outlook withexperienced increased demand in most of our markets, reporting modest but ongoing growth, with an increase in construction activity. However, constraints on the availability of lotslower mortgage rates and land as well as the construction labor market may affect growtha relatively healthy economy. Demand was strongest in the short term. Inmore affordable price segments where inventory remained limited. Declining inventory levels led to strong upward pressure on home prices across most of our Houston market, new home sales were slower than expected and existing home sales were flat but remained near recent highs. There was also some concern regarding higher interest rates, rising building costs, and uncertainty surrounding trade and immigration policies on future sales, with some expectation that sales will start to flatten in the near term.markets.
Retail sales activity and consumer spending outlook was positive with an increasewere steady in sales levels. Auto sales were up in allmost of our markets.markets and auto sales increased. Retailers remained concerned that heightened uncertainty among consumers due to the geopolitical environment would negatively impact consumer confidence and spending during the upcoming holiday season. Tourism and hospitality industries reported mixed results with some areas experiencing strong activity and some areas experiencing a decrease in year over year activity. The labor market remained tight citing low availability of quality labor as a growing challenge.in our markets with accelerated wage growth in lower-skilled positions.
Economic reports indicatedata indicates that loan growth slowedwas positive but slowing in most of our markets, as highergenerally led by real estate lending. Interest rate margins were stable to declining across most institutions and there continues to be concern over lower interest rates, the uncertain business climate, and savings from tax reform impacted loan demand. Reports also indicated that financial institutions were relying more on borrowingspolitical and noncore deposits to fund asset growth, with the competition for core deposits fueling an increase in mergers and acquisitions. However, loan demand expanded in our Houston market, with broad based growth. Our loan production in the third quarter of 2018 was up $173 million, or 4% annualized.trade tensions.
Highlights of Third Quarter 2018
2019
Net income for the third quarter of 20182019 was $83.9$67.8 million, or $.96$.77 per diluted common share (EPS), compared to $71.2$88.3 million, or $.82$1.01 EPS in the second quarter of 20182019 and $58.9$83.9 million, or $.68$.96 EPS, in the third quarter of 2017.2018. The third quarter of 2019 included $28.8 million ($.26 per share after-tax impact) of merger costs associated with the September 21, 2019 acquisition of MidSouth. The second quarter of 2019 did not include any nonoperating items while the third quarter of 2018 included $4.8 million ($.05 per share after-tax impact) of nonoperating items. The second quarter of 2018 included $15.8 million ($.14 per share impact) of nonoperating items and the third quarter of 2017 included nonoperating items of $11.4 million ($.08 per share impact).
Highlights of our third quarter 2018 results (compared to second quarter 2018):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
Results of the third quarter reflect steady progress towards achieving our goals and enhancing shareholder value. We achieved our corporate strategic objective (“CSO”) for operating EPS this quarter at $1.01, and our operating return of average asset ratio of 1.24% is just below the top end of our targeted range. Asset quality improved with criticized commercial loans, both energy and nonenergy, down compared to prior quarter. Loan growth was positive despite the continued decline of the energy portfolio, which is now below 5% of total loans, and more balanced among upstream reserve-based lending, midstream and support services. We completed the trust and asset management acquisition which contributedthat closed on July 13, 2018.
Highlights of our third quarter 2019 results (compared to second quarter 2019):
• | Closed MidSouth acquisition effective September 21, 2019 with a simultaneous systems conversion. The acquisition included $785 million of loans (net of a $41 million loan mark) at 5.57% yield, and $1.3 billion of deposits at 38 basis points. |
• | Net income was $67.8 million, or $.77 per diluted share. |
• | Results include $28.8 million, or $.26 per share, of merger-related costs. |
• | Operating leverage increased $5.8 million with revenue up $7.0 million and operating expense up $1.2 million. |
• | Energy loans, including those acquired from MidSouth, remained virtually unchanged at $1.0 billion, or 4.9% of total loans. |
• | Net interest margin narrowed by 4 bps to 3.41%. |
• | Tangible common equity ratio was up 7 bps to 8.82%. |
• | Board approved increased buyback authorization to 5.5 million shares. |
41
The third quarter of 2019 results were solid and included the quarter’s improvedacquisition and integration of MidSouth ten days prior to quarter-end. Earnings, excluding merger costs, were in line with our guidance and expectations for the quarter. We also noted increased operating leverage.leverage and reduced total nonperforming loan levels. While our net interest margin narrowed 4 basis points in the quarter, an interest recovery from a support services credit and a proactive stance on reducing deposit costs helped offset two Federal Reserve rate cuts.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income (te) for the third quarter of 20182019 was $218.3$226.6 million, a $2.7$3.0 million, or 1%, increase from the second quarter of 2018. Over the same period, core net interest income increased $3.6 million. Net interest income (te) for2019. Compared to the third quarter of 2018, increased $6.9 million, or 3%, compared to the third quarter of 2017, while core net interest income was up $9.0(te) increased $8.3 million, or 4%, over the same period.. The linked quarter increase is primarily attributable to one additional accrual day and a higher level of average earning assets, partially offset by a lowerthe impact of two Federal Reserve rate decreases. The increase compared to the prior year is due largely to an increase in loan balances with higher yields and an overall more favorable net interest margin.mix of rates.
The net interest margin was 3.36%(te) for the third quarter of 2018,2019 was down 4 basis points (bps)bps at 3.41% from the second quarter of 2018.2019. The decrease inwas primarily due to the impact of the Federal Reserve rate decreases, with the yield on earning assets decline of 7 bps exceeding the cost of funds of 3 bps. Interest recoveries on problem credits have favorably impacted the net interest margin (te) from the prior quarter reflects an 11 bp increase in the cost of funds, partially offset by a positive impact from a 6 bp increase in the average earning asset yield, (an 8 bp increase in loan yield and aadding 5 bp increase in yield on the securities portfolio. The core net interest margin forbps to the third quarter of 2018 was 3.28%, down2019, compared to 3 bps from the second quarter of 2018. Contributing to the decline in the margin was an increase in our deposit beta from 17% in the second quarter of 2018 to 35% this2019. The third quarter while our loan beta increased to 52% from 44% in the second quarter. 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. The deposit beta increased partly due to the higher-cost deposits that we assumed in the trust and asset management acquisition, a 24 bp increase in the cost of brokered CDs, and a 14 bp increase in the rate paid on public fund deposits. Also contributing to the decline in the2019 net interest margin (te) was the impact from narrowing of the spread of the 30 day LIBOR to federal funds had on the loan yieldalso positively impacted by a proactive move in lowering deposit costs and a shift in funding mix to higher cost Federal Home Loan Bank advances. We expect some improvement in funding mixchange in the fourth quarterborrowing mix related to the addition of 2018 with the usual inflow of seasonal deposits and expect loan yields to improve with the full quarter impact of the September rate increase. MidSouth.
Compared to the third quarter of 2017,2018, the net interest margin decreased 8(te) increased 5 bps, and the core net interest margin was down 4 bps. The net interest margin was negatively impacted by 8 bps from lower taxable equivalent adjustment as a result of a lower statutory income tax rate. Excluding the tax rate change, the margin was flat to the third quarter of 2017, primarily due to the benefits from the increased average earning asset yield being offset by the increased rates paid on interest bearing liabilities along with unfavorable changes to the funding mix.
Net interest income (te) for the nine months ended September 30, 2018 totaled $643.5 million, up $33.8 million, or 6%, from the nine months ended September 30 2017. Core net interest income was up $36.0 million, which is net of a decline in the taxable equivalent adjustment of $13.3 million. Interest earned on loans, excluding purchase accounting accretion, increased $72.5 million as average total loans grew $1.1 billion, or 6%, due to the FNBC transactions and organic loan growth and a 26 bp increase in loan yield. The securities yield of 2.50% was flat compared to the same period in 2017, which reflects a negative impact of 10 bps from tax reform. The cost of funds was up 23 bps to .66%, due in part to interest rate hikes, promotional pricing campaigns aimed at attractingrecoveries, which favorably impacted the net interest margin in the third quarter of 2019 by 5 bps and retaining deposits, and a less favorableby 2 bps in the third quarter of 2018, as well as an improvement in the earning asset mix, inpartially offset by increased funding sources.costs.
42
41
The following tables detail the components of our net interest income (te) and net interest margin.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
|
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
|
|
| September 30, 2018 |
| June 30, 2018 |
| September 30, 2017 |
| Three Months Ended |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2019 |
|
| June 30, 2019 |
|
| September 30, 2018 |
| |||||||||||||||||||||||||||
(dollars in millions) |
| Volume |
| Interest |
| Rate |
| Volume |
| Interest |
| Rate |
| Volume |
| Interest |
| Rate |
| Volume |
|
| Interest (d) |
|
| Rate |
|
| Volume |
|
| Interest (d) |
|
| Rate |
|
| Volume |
|
| Interest (d) |
|
| Rate |
| ||||||||||||||||||||
Average earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & real estate loans (te) (a) |
| $ | 14,542.3 |
| $ | 168.9 |
| 4.61 | % |
| $ | 14,380.9 |
| $ | 162.3 |
| 4.53 | % |
| $ | 13,945.8 |
| $ | 151.3 |
|
| 4.31 | % |
| $ | 15,126.1 |
|
| $ | 185.5 |
|
|
| 4.87 | % |
| $ | 15,081.9 |
|
| $ | 185.3 |
|
|
| 4.93 | % |
| $ | 14,542.3 |
|
| $ | 168.9 |
|
|
| 4.61 | % | |
Residential mortgage loans |
|
| 2,816.2 |
|
| 29.4 |
| 4.17 |
|
|
| 2,754.3 |
|
| 28.1 |
| 4.08 |
|
|
| 2,549.3 |
|
| 25.0 |
|
| 3.94 |
|
|
| 2,978.7 |
|
|
| 30.1 |
|
|
| 4.05 | % |
|
| 2,969.7 |
|
|
| 30.1 |
|
|
| 4.03 | % |
|
| 2,816.2 |
|
|
| 29.4 |
|
|
| 4.17 | % | |
Consumer loans |
|
| 2,106.2 |
|
| 28.6 |
| 5.39 |
|
|
| 2,058.0 |
|
| 27.2 |
| 5.30 |
|
|
| 2,096.1 |
|
| 29.4 |
|
| 5.57 |
|
|
| 2,092.3 |
|
|
| 30.4 |
|
|
| 5.76 | % |
|
| 2,098.5 |
|
|
| 30.3 |
|
|
| 5.79 | % |
|
| 2,106.2 |
|
|
| 28.6 |
|
|
| 5.39 | % | |
Loan fees & late charges |
|
| — |
|
| — |
| — |
|
|
| — |
|
| 0.2 |
| — |
|
|
| — |
|
| (0.5) |
|
| — |
|
|
| — |
|
|
| 0.1 |
|
|
| 0.00 | % |
|
| — |
|
|
| (0.1 | ) |
|
| 0.00 | % |
|
| — |
|
|
| — |
|
|
| 0.00 | % | |
Total loans (te) (b) |
|
| 19,464.7 |
|
| 226.9 |
| 4.63 |
|
|
| 19,193.2 |
|
| 217.8 |
| 4.55 |
|
|
| 18,591.2 |
|
| 205.2 |
|
| 4.39 |
|
|
| 20,197.1 |
|
|
| 246.1 |
|
|
| 4.84 | % |
|
| 20,150.1 |
|
|
| 245.6 |
|
|
| 4.89 | % |
|
| 19,464.7 |
|
|
| 226.9 |
|
|
| 4.63 | % | |
Loans held for sale |
|
| 26.0 |
|
| 0.3 |
| 3.60 |
|
|
| 22.6 |
|
| 0.3 |
| 5.22 |
|
|
| 21.7 |
|
| 0.2 |
|
| 3.97 |
|
|
| 55.3 |
|
|
| 0.6 |
|
|
| 4.26 | % |
|
| 27.9 |
|
|
| 0.3 |
|
|
| 4.96 | % |
|
| 26.0 |
|
|
| 0.3 |
|
|
| 3.60 | % | |
US Treasury and government agency securities |
|
| 144.7 |
|
| 0.8 |
| 2.21 |
|
|
| 145.6 |
|
| 0.8 |
| 2.22 |
|
|
| 125.6 |
|
| 0.7 |
|
| 2.08 |
|
|
| 141.6 |
|
|
| 0.8 |
|
|
| 2.33 | % |
|
| 126.0 |
|
|
| 0.7 |
|
|
| 2.30 | % |
|
| 144.7 |
|
|
| 0.8 |
|
|
| 2.21 | % | |
Mortgage-backed securities and collateralized mortgage obligations |
|
| 5,092.4 |
|
| 31.1 |
| 2.44 |
|
|
| 4,932.0 |
|
| 29.3 |
| 2.38 |
|
|
| 4,575.0 |
|
| 25.4 |
|
| 2.21 |
|
|
| 4,966.5 |
|
|
| 31.4 |
|
|
| 2.53 | % |
|
| 4,550.1 |
|
|
| 29.0 |
|
|
| 2.55 | % |
|
| 5,092.4 |
|
|
| 31.1 |
|
|
| 2.44 | % | |
Municipals (te) |
|
| 945.7 |
|
| 7.5 |
| 3.19 |
|
|
| 951.0 |
|
| 7.6 |
| 3.18 |
|
|
| 975.4 |
|
| 9.2 |
|
| 3.80 |
|
|
| 893.1 |
|
|
| 6.9 |
|
|
| 3.08 | % |
|
| 906.8 |
|
|
| 7.1 |
|
|
| 3.12 | % |
|
| 945.7 |
|
|
| 7.5 |
|
|
| 3.19 | % | |
Other securities |
|
| 3.6 |
|
| — |
| 2.81 |
|
|
| 3.5 |
|
| — |
| 2.84 |
|
|
| 3.8 |
|
| — |
|
| 1.94 |
|
|
| 3.5 |
|
| 0.0 |
|
|
| 3.61 | % |
|
| 3.5 |
|
| 0.0 |
|
|
| 3.30 | % |
|
| 3.6 |
|
| 0.0 |
|
|
| 2.81 | % | ||||
Total securities (te) (c) |
|
| 6,186.4 |
|
| 39.4 |
| 2.55 |
|
|
| 6,032.1 |
|
| 37.7 |
| 2.50 |
|
|
| 5,679.8 |
|
| 35.3 |
|
| 2.48 |
|
|
| 6,004.7 |
|
|
| 39.1 |
|
|
| 2.61 | % |
|
| 5,586.4 |
|
|
| 36.8 |
|
|
| 2.64 | % |
|
| 6,186.4 |
|
|
| 39.4 |
|
|
| 2.55 | % | |
Total short-term investments |
|
| 155.3 |
|
| 0.7 |
| 1.71 |
|
|
| 143.1 |
|
| 0.6 |
| 1.61 |
|
|
| 194.7 |
|
| 0.6 |
|
| 1.17 |
|
|
| 180.5 |
|
|
| 1.0 |
|
|
| 2.01 | % |
|
| 228.5 |
|
|
| 1.4 |
|
|
| 2.36 | % |
|
| 155.3 |
|
|
| 0.7 |
|
|
| 1.71 | % | |
Total earning assets (te) |
| $ | 25,832.4 |
| $ | 267.3 |
| 4.11 | % |
| $ | 25,391.0 |
| $ | 256.4 |
| 4.05 | % |
| $ | 24,487.4 |
| $ | 241.3 |
|
| 3.92 | % |
| $ | 26,437.6 |
|
| $ | 286.8 |
|
|
| 4.31 | % |
| $ | 25,992.9 |
|
| $ | 284.1 |
|
|
| 4.38 | % |
| $ | 25,832.4 |
|
| $ | 267.3 |
|
|
| 4.11 | % | |
Average interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest-bearing transaction and savings deposits |
| $ | 7,944.3 |
| $ | 10.9 |
| 0.54 | % |
| $ | 7,860.0 |
| $ | 9.3 |
| 0.47 | % |
| $ | 8,097.4 |
| $ | 8.4 |
|
| 0.41 | % |
| $ | 8,179.3 |
|
| $ | 15.7 |
|
|
| 0.76 | % |
| $ | 8,026.0 |
|
| $ | 15.3 |
|
|
| 0.76 | % |
| $ | 7,944.3 |
|
| $ | 10.9 |
|
|
| 0.54 | % | |
Time deposits |
|
| 3,377.6 |
|
| 14.1 |
| 1.66 |
|
|
| 3,121.8 |
|
| 11.5 |
| 1.48 |
|
|
| 2,711.6 |
|
| 7.7 |
|
| 1.12 |
|
|
| 3,840.1 |
|
|
| 20.0 |
|
|
| 2.07 | % |
|
| 3,817.8 |
|
|
| 19.4 |
|
|
| 2.03 | % |
|
| 3,377.6 |
|
|
| 14.1 |
|
|
| 1.66 | % | |
Public funds |
|
| 2,682.3 |
|
| 9.2 |
| 1.36 |
|
|
| 2,970.1 |
|
| 9.1 |
| 1.22 |
|
|
| 2,764.9 |
|
| 5.7 |
|
| 0.82 |
|
|
| 2,979.5 |
|
|
| 13.5 |
|
|
| 1.80 | % |
|
| 3,194.1 |
|
|
| 15.2 |
|
|
| 1.91 | % |
|
| 2,682.3 |
|
|
| 9.2 |
|
|
| 1.36 | % | |
Total interest-bearing deposits |
|
| 14,004.2 |
|
| 34.2 |
| 0.97 |
|
|
| 13,951.9 |
|
| 29.9 |
| 0.86 |
|
|
| 13,573.9 |
|
| 21.8 |
|
| 0.64 |
|
|
| 14,998.9 |
|
|
| 49.2 |
|
|
| 1.30 | % |
|
| 15,037.9 |
|
|
| 49.9 |
|
|
| 1.33 | % |
|
| 14,004.2 |
|
|
| 34.2 |
|
|
| 0.97 | % | |
Short-term borrowings |
|
| 2,610.2 |
|
| 11.8 |
| 1.81 |
|
|
| 1,989.4 |
|
| 7.4 |
| 1.49 |
|
|
| 1,909.4 |
|
| 4.4 |
|
| 0.92 |
|
|
| 2,063.3 |
|
|
| 8.1 |
|
|
| 1.57 | % |
|
| 1,617.8 |
|
|
| 7.8 |
|
|
| 1.94 | % |
|
| 2,610.2 |
|
|
| 11.8 |
|
|
| 1.81 | % | |
Long-term debt |
|
| 241.5 |
|
| 3.0 |
| 5.05 |
|
|
| 299.7 |
|
| 3.5 |
| 4.63 |
|
|
| 339.5 |
|
| 3.6 |
|
| 4.29 |
|
|
| 234.3 |
|
|
| 2.9 |
|
|
| 4.82 | % |
|
| 232.3 |
|
|
| 2.8 |
|
|
| 4.86 | % |
|
| 241.5 |
|
|
| 3.0 |
|
|
| 5.05 | % | |
Total borrowings |
|
| 2,851.7 |
|
| 14.8 |
| 2.07 |
|
|
| 2,289.1 |
|
| 10.9 |
| 1.91 |
|
|
| 2,248.9 |
|
| 8.0 |
|
| 1.43 |
|
|
| 2,297.6 |
|
|
| 11.0 |
|
|
| 1.90 | % |
|
| 1,850.1 |
|
|
| 10.6 |
|
|
| 2.31 | % |
|
| 2,851.7 |
|
|
| 14.8 |
|
|
| 2.07 | % | |
Total interest-bearing liabilities |
|
| 16,855.9 |
|
| 49.0 |
| 1.15 | % |
|
| 16,241.0 |
|
| 40.8 |
| 1.01 | % |
|
| 15,822.8 |
|
| 29.8 |
|
| 0.75 | % |
|
| 17,296.5 |
|
|
| 60.2 |
|
|
| 1.38 | % |
|
| 16,888.0 |
|
|
| 60.5 |
|
|
| 1.44 | % |
|
| 16,855.9 |
|
|
| 49.0 |
|
|
| 1.15 | % | |
Net interest-free funding sources |
|
| 8,976.5 |
|
|
|
|
|
|
|
| 9,150.0 |
|
|
|
|
|
|
|
| 8,664.6 |
|
|
|
|
|
|
|
|
| 9,141.1 |
|
|
|
|
|
|
|
|
|
|
| 9,104.9 |
|
|
|
|
|
|
|
|
|
|
| 8,976.5 |
|
|
|
|
|
|
|
|
| |
Total cost of funds |
| $ | 25,832.4 |
| $ | 49.0 |
| 0.75 | % |
| $ | 25,391.0 |
| $ | 40.8 |
| 0.64 | % |
| $ | 24,487.4 |
| $ | 29.8 |
|
| 0.48 | % |
| $ | 26,437.6 |
|
| $ | 60.2 |
|
|
| 0.90 | % |
| $ | 25,992.9 |
|
| $ | 60.5 |
|
|
| 0.93 | % |
| $ | 25,832.4 |
|
| $ | 49.0 |
|
|
| 0.75 | % | |
Net interest spread (te) |
|
|
|
| $ | 218.3 |
| 2.96 | % |
|
|
|
| $ | 215.6 |
| 3.04 | % |
|
|
|
| $ | 211.5 |
|
| 3.17 | % |
|
|
|
|
| $ | 226.6 |
|
|
| 2.93 | % |
|
|
|
|
| $ | 223.6 |
|
|
| 2.94 | % |
|
|
|
|
| $ | 218.3 |
|
|
| 2.96 | % | |
Net interest margin |
| $ | 25,832.4 |
| $ | 218.3 |
| 3.36 | % |
| $ | 25,391.0 |
| $ | 215.6 |
| 3.40 | % |
| $ | 24,487.4 |
| $ | 211.5 |
|
| 3.44 | % |
| $ | 26,437.6 |
|
| $ | 226.6 |
|
|
| 3.41 | % |
| $ | 25,992.9 |
|
| $ | 223.6 |
|
|
| 3.45 | % |
| $ | 25,832.4 |
|
| $ | 218.3 |
|
|
| 3.36 | % |
(a) | Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21% |
(b) | Includes nonaccrual loans. |
(c) | Average securities do not include unrealized holding gains/losses on available for sale securities. |
(d) | Included in interest income is net purchase accounting accretion of $4.6 million, $4.8 million and $5.2 million for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively. |
43
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
| Nine Months Ended |
| Nine Months Ended |
| |||||||||||||||||||||||||||||||||||||||
|
|
|
| September 30, 2018 |
|
|
| September 30, 2017 |
|
| September 30, 2019 |
|
| September 30, 2018 |
| |||||||||||||||||||||||||||||
(dollars in millions) |
|
|
| Volume |
| Interest |
| Rate |
|
|
| Volume |
| Interest |
| Rate |
| Volume |
|
| Interest (d) |
|
| Rate |
|
| Volume |
|
| Interest (d) |
|
| Rate |
| ||||||||||
Average earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Commercial & real estate loans (te) (a) |
| $ | 14,383.7 |
| $ | 482.2 |
| 4.48 | % |
|
| $ | 13,634.7 |
| $ | 430.1 |
| 4.22 | % |
| $ | 15,090.3 |
|
| $ | 551.3 |
|
|
| 4.88 | % |
| $ | 14,383.7 |
|
| $ | 482.2 |
|
|
| 4.48 | % | |
Residential mortgage loans |
|
| 2,763.3 |
|
| 85.4 |
| 4.12 |
|
|
|
| 2,379.6 |
|
| 68.7 |
| 3.85 |
|
|
| 2,963.7 |
|
|
| 91.4 |
|
|
| 4.11 | % |
|
| 2,763.3 |
|
|
| 85.4 |
|
|
| 4.12 | % | |
Consumer loans |
|
| 2,083.4 |
|
| 84.8 |
| 5.44 |
|
|
|
| 2,078.3 |
|
| 85.3 |
| 5.49 |
|
|
| 2,104.3 |
|
|
| 90.6 |
|
|
| 5.76 | % |
|
| 2,083.4 |
|
|
| 84.8 |
|
|
| 5.44 | % | |
Loan fees & late charges |
|
| — |
|
| 0.7 |
| — |
|
|
|
| — |
|
| (0.9) |
| — |
|
|
| — |
|
|
| (0.9 | ) |
|
| 0.00 | % |
|
| — |
|
|
| 0.7 |
|
|
| 0.00 | % | |
Total loans (te) (b) |
|
| 19,230.4 |
|
| 653.1 |
| 4.54 |
|
|
|
| 18,092.6 |
|
| 583.2 |
| 4.31 |
|
|
| 20,158.3 |
|
|
| 732.4 |
|
|
| 4.86 | % |
|
| 19,230.4 |
|
|
| 653.1 |
|
|
| 4.54 | % | |
Loans held for sale |
|
| 26.9 |
|
| 0.8 |
| 3.89 |
|
|
|
| 21.8 |
|
| 0.7 |
| 4.09 |
|
|
| 34.7 |
|
|
| 1.2 |
|
|
| 4.57 | % |
|
| 26.9 |
|
|
| 0.8 |
|
|
| 3.89 | % | |
US Treasury and government agency securities |
|
| 146.2 |
|
| 2.4 |
| 2.21 |
|
|
|
| 122.6 |
|
| 1.9 |
| 2.07 |
|
|
| 130.5 |
|
|
| 2.2 |
|
|
| 2.30 | % |
|
| 146.2 |
|
|
| 2.4 |
|
|
| 2.21 | % | |
Mortgage-backed securities and collateralized mortgage obligations |
|
| 4,937.7 |
|
| 88.2 |
| 2.38 |
|
|
|
| 4,208.4 |
|
| 70.1 |
| 2.22 |
|
|
| 4,706.7 |
|
|
| 90.3 |
|
|
| 2.56 | % |
|
| 4,937.7 |
|
|
| 88.2 |
|
|
| 2.38 | % | |
Municipals (te) |
|
| 952.2 |
|
| 22.7 |
| 3.18 |
|
|
|
| 967.0 |
|
| 27.7 |
| 3.82 |
|
|
| 909.8 |
|
|
| 21.4 |
|
|
| 3.13 | % |
|
| 952.2 |
|
|
| 22.7 |
|
|
| 3.18 | % | |
Other securities |
|
| 3.5 |
|
| 0.1 |
| 2.57 |
|
|
|
| 24.0 |
|
| 0.3 |
| 1.92 |
|
|
| 3.5 |
|
|
| 0.1 |
|
|
| 3.33 | % |
|
| 3.5 |
|
|
| 0.1 |
|
|
| 2.57 | % | |
Total securities (te) (c) |
|
| 6,039.6 |
|
| 113.4 |
| 2.50 |
|
|
|
| 5,322.0 |
|
| 100.0 |
| 2.50 |
|
|
| 5,750.5 |
|
|
| 114.0 |
|
|
| 2.64 | % |
|
| 6,039.6 |
|
|
| 113.4 |
|
|
| 2.50 | % | |
Total short-term investments |
|
| 149.0 |
|
| 1.7 |
| 1.56 |
|
|
|
| 435.1 |
|
| 3.0 |
| 0.94 |
|
|
| 208.3 |
|
|
| 3.4 |
|
|
| 2.20 | % |
|
| 149.0 |
|
|
| 1.7 |
|
|
| 1.56 | % | |
Total earning assets (te) |
| $ | 25,445.9 |
| $ | 769.0 |
| 4.04 | % |
|
| $ | 23,871.5 |
| $ | 686.9 |
| 3.84 | % |
| $ | 26,151.8 |
|
| $ | 851.0 |
|
|
| 4.35 | % |
| $ | 25,445.9 |
|
| $ | 769.0 |
|
|
| 4.04 | % | |
Average interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest-bearing transaction and savings deposits |
| $ | 7,948.8 |
| $ | 29.3 |
| 0.49 | % |
|
| $ | 7,685.2 |
| $ | 21.0 |
| 0.37 | % |
| $ | 8,096.3 |
|
| $ | 45.6 |
|
|
| 0.75 | % |
| $ | 7,948.8 |
|
| $ | 29.3 |
|
|
| 0.49 | % | |
Time deposits |
|
| 3,160.9 |
|
| 35.4 |
| 1.50 |
|
|
|
| 2,543.9 |
|
| 19.3 |
| 1.01 |
|
|
| 3,800.8 |
|
|
| 57.4 |
|
|
| 2.02 | % |
|
| 3,160.9 |
|
|
| 35.4 |
|
|
| 1.50 | % | |
Public funds |
|
| 2,906.1 |
|
| 26.4 |
| 1.21 |
|
|
|
| 2,618.2 |
|
| 12.6 |
| 0.64 |
|
|
| 3,077.7 |
|
|
| 42.1 |
|
|
| 1.83 | % |
|
| 2,906.1 |
|
|
| 26.4 |
|
|
| 1.21 | % | |
Total interest-bearing deposits |
|
| 14,015.8 |
|
| 91.1 |
| 0.87 |
|
|
|
| 12,847.3 |
|
| 52.9 |
| 0.55 |
|
|
| 14,974.8 |
|
|
| 145.1 |
|
|
| 1.30 | % |
|
| 14,015.8 |
|
|
| 91.1 |
|
|
| 0.87 | % | |
Short-term borrowings |
|
| 2,143.8 |
|
| 24.5 |
| 1.53 |
|
|
|
| 2,089.0 |
|
| 11.7 |
| 0.75 |
|
|
| 1,790.1 |
|
|
| 24.1 |
|
|
| 1.93 | % |
|
| 2,143.8 |
|
|
| 24.5 |
|
|
| 1.53 | % | |
Long-term debt |
|
| 281.9 |
|
| 9.9 |
| 4.70 |
|
|
|
| 408.2 |
|
| 12.6 |
| 4.11 |
|
|
| 230.5 |
|
|
| 8.5 |
|
|
| 3.22 | % |
|
| 281.9 |
|
|
| 9.9 |
|
|
| 4.70 | % | |
Total borrowings |
|
| 2,425.7 |
|
| 34.4 |
| 1.90 |
|
|
|
| 2,497.2 |
|
| 24.3 |
| 1.29 |
|
|
| 2,020.6 |
|
|
| 32.6 |
|
|
| 2.15 | % |
|
| 2,425.7 |
|
|
| 34.4 |
|
|
| 1.90 | % | |
Total interest-bearing liabilities |
|
| 16,441.5 |
|
| 125.5 |
| 1.02 | % |
|
|
| 15,344.5 |
|
| 77.2 |
| 0.67 | % |
|
| 16,995.4 |
|
|
| 177.7 |
|
|
| 1.40 | % |
|
| 16,441.5 |
|
|
| 125.5 |
|
|
| 1.02 | % | |
Net interest-free funding sources |
|
| 9,004.4 |
|
|
|
|
|
|
|
|
| 8,527.0 |
|
|
|
|
|
|
|
| 9,156.4 |
|
|
|
|
|
|
|
|
|
|
| 9,004.4 |
|
|
|
|
|
|
|
|
| |
Total cost of funds |
| $ | 25,445.9 |
| $ | 125.5 |
| 0.66 | % |
|
| $ | 23,871.5 |
| $ | 77.2 |
| 0.43 | % |
| $ | 26,151.8 |
|
| $ | 177.7 |
|
|
| 0.91 | % |
| $ | 25,445.9 |
|
| $ | 125.5 |
|
|
| 0.66 | % | |
Net interest spread (te) |
|
|
|
| $ | 643.5 |
| 3.02 | % |
|
|
|
|
| $ | 609.7 |
| 3.17 | % |
|
|
|
|
| $ | 673.3 |
|
|
| 2.95 | % |
|
|
|
|
| $ | 643.5 |
|
|
| 3.02 | % | |
Net interest margin |
| $ | 25,445.9 |
| $ | 643.5 |
| 3.38 | % |
|
| $ | 23,871.5 |
| $ | 609.7 |
| 3.41 | % |
| $ | 26,151.8 |
|
| $ | 673.3 |
|
|
| 3.44 | % |
| $ | 25,445.9 |
|
| $ | 643.5 |
|
|
| 3.38 | % |
(a) | Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21% |
(b) | Includes nonaccrual loans. |
(c) | Average securities do not include unrealized holding gains/losses on available for sale securities. |
(d) | Included in interest income is net purchase accounting accretion of $14.4 million and $18.1 million for the nine months ended September 30, 2019 and 2018, respectively. |
Provision for Loan Losses
During the third quarter of 2018,2019, we recorded a provision for loan losses of $6.9$12.4 million, down $2.0up $4.3 million from the second quarter of 20182019 and down $6.2$5.5 million from the third quarter of 2017.2018, due primarily to a $9.3 million energy charge-off in the current quarter. For the nine months ended September 30, 2018,2019, we recorded a total provision for loan losses of $28.0$38.6 million, compared to $44.0up $10.5 million forfrom the same period in 2018. Included in the first nine months ended September 30, 2017.of 2019 provision was a $9.0 million charge-off related to the DC Solar credit discussed below. The remaining year-over-year increase is primarily attributable to the third quarter 2019 energy charge-off noted above, partially offset by lower losses and reserves in the consumer portfolio.
The Company had a lease financing facility outstanding 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. Management continues to believe there could be potential for recovery in the future as we work to sell or re-lease the solar units.
The third quarter of 2019 provision includesincluded net charge-offs totaling $6.9of $12.5 million, which represents 0.14%or 0.25% of average total loans on an annualized basis, compared to $7.2 million, or 0.14% in the second quarter of 2019 and $6.9 million, or 0.14% in the third quarter of 2018, compared to $5.1 million, or 0.11% of average total loans2018. Included in the second quarter of 2018. In the energy portfolio, there were no net charge offs incharge-offs for the third quarter of 2018, compared to a $1.92019 was $9.8 million net recovery in the second quarter of 2018. The provision for the nine months ended September 30, 2018 included net charge-offs totaling $24.1 million compared to $47.8 million in the nine months ended September 30, 2017, with energy related net charge-offs down $24 million.losses, primarily in our upstream segment.
The provision for loan losses reflects a continued decline in energy allowance, with reduced exposure and an overall improvement in portfolio performance, and an increase in nonenergy allowance as that portfolio continues to grow. 44
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 $75.5$83.2 million for the third quarter of 2018,2019, up $6.7$4.0 million, or 10%5%, from the second quarter of 20182019 and up $8.4$7.7 million, or 13%10%, compared to the third quarter of 2017.2018. The increase over the prior quarter was primarily driven by an increase in trust fees as a result of the the trust and asset management acquisition. The increase compared toresults for the third quarter of 2017 was also largely driven by higher trust fees as well as higher bank card and ATM fees discussed2019 reflect increases in more detail below.most of our products, with continued growth in many of our specialty business lines.
43
The components of noninterest income are presented in the following table for the indicated periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| |||||||||
|
| Three Months Ended |
| Nine Months Ended |
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| |||||||||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, | ||||||||||||||||||||||||||||
(in thousands) |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||||||||||||||||||||
Service charges on deposit accounts |
| $ | 21,377 |
| $ | 20,981 |
| $ | 21,444 |
| $ | 63,806 |
| $ | 60,711 |
| $ | 21,892 |
|
| $ | 20,723 |
|
| $ | 21,377 |
|
| $ | 62,982 |
|
| $ | 63,806 |
| |
Trust fees |
|
| 16,738 |
|
| 11,653 |
|
| 10,742 |
|
| 39,726 |
|
| 33,459 |
|
| 15,098 |
|
|
| 15,904 |
|
|
| 16,738 |
|
|
| 46,126 |
|
|
| 39,726 |
| |
Bank card and ATM fees |
|
| 14,862 |
|
| 15,464 |
|
| 13,390 |
|
| 44,784 |
|
| 39,545 |
|
| 17,154 |
|
|
| 16,619 |
|
|
| 14,862 |
|
|
| 49,063 |
|
|
| 44,784 |
| |
Investment and annuity fees and insurance commissions |
|
| 6,652 |
|
| 6,264 |
|
| 6,230 |
|
| 19,041 |
|
| 17,939 |
|
| 7,048 |
|
|
| 6,591 |
|
|
| 6,652 |
|
|
| 20,167 |
|
|
| 19,041 |
| |
Secondary mortgage market operations |
|
| 4,333 |
|
| 3,965 |
|
| 4,157 |
|
| 11,699 |
|
| 11,965 |
|
| 5,713 |
|
|
| 4,433 |
|
|
| 4,333 |
|
|
| 13,872 |
|
|
| 11,699 |
| |
Amortization of FDIC loss share receivable |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| (2,427) | ||||||||||||||||||||
Income from bank-owned life insurance |
|
|
| 3,100 |
|
| 3,113 |
|
| 3,097 |
|
| 9,283 |
|
| 8,632 |
|
| 4,147 |
|
|
| 4,083 |
|
|
| 3,100 |
|
|
| 11,495 |
|
|
| 9,283 |
|
Credit related fees |
|
|
| 2,762 |
|
| 2,416 |
|
| 2,521 |
|
| 7,900 |
|
| 8,297 |
|
| 2,988 |
|
|
| 2,937 |
|
|
| 2,762 |
|
|
| 8,520 |
|
|
| 7,900 |
|
Income from derivatives |
|
|
| 1,363 |
|
| 1,588 |
|
| 1,339 |
|
| 4,474 |
|
| 4,484 |
|
| 4,324 |
|
|
| 3,600 |
|
|
| 1,363 |
|
|
| 8,733 |
|
|
| 4,474 |
|
Gain (loss) on sales of assets |
|
|
| 989 |
|
| 41 |
|
| 400 |
|
| 968 |
|
| 113 |
|
| 205 |
|
|
| 34 |
|
|
| 989 |
|
|
| 636 |
|
|
| (177 | ) |
Other miscellaneous |
|
|
| 3,342 |
|
| 3,347 |
|
| 3,795 |
|
| 10,066 |
|
| 11,023 |
|
| 4,661 |
|
|
| 4,326 |
|
|
| 3,342 |
|
|
| 11,389 |
|
|
| 10,066 |
|
Total noninterest operating income |
| $ | 75,518 |
| $ | 68,832 |
| $ | 67,115 |
| $ | 211,747 |
| $ | 193,741 | |||||||||||||||||||||
Nonoperating income items |
|
| — |
|
| — |
|
| — |
|
| (1,145) |
|
| 4,352 | |||||||||||||||||||||
Total noninterest income |
| $ | 75,518 |
| $ | 68,832 |
| $ | 67,115 |
| $ | 210,602 |
| $ | 198,093 |
| $ | 83,230 |
|
| $ | 79,250 |
|
| $ | 75,518 |
|
| $ | 232,983 |
|
| $ | 210,602 |
|
Service charges on deposits totaled $21.4$21.9 million for the third quarter of 2018,2019, up $0.4$1.2 million, or 6%, from the second quarter of 2019 and $0.5 million, or 2%, from the second quarter of 2018 and down $0.1 million, or less than 1%, from the third quarter of 2017.2018. The increase from the prior quarter was primarily due to a seasonalan additional processing day. The increase in consumer overdraft fees. The decrease from the third quarter of 2017 is2018 was due to lower consumerhigher overdraft fees and business service charges, partially offset by increased check printing fees.
charges.
Trust fees increased $5.1decreased $0.8 million, or 44%5%, linked quarter as a result of the acquisition of a trust and asset management business on July 13, 2018. Trust fee incomelargely due to seasonal tax preparation fees in the thirdsecond quarter of 2018 attributable to the acquired business was approximately $5.5 million.2019. Compared to the third quarter of 2017,2018, trust fees increased $6.0decreased $1.6 million, or 56%10%, also largely due to the trust and asset management acquisition.changes in market conditions.
Bank card and ATM fees totaled $14.9$17.2 million for the third quarter of 2018, down $0.62019, up $0.5 million, or 4%3%, from the second quarter of 2018,2019, primarily due to seasonally lower activityan additional day in the third quarter. Compared to the third quarter of 2017,2018, bank card and ATM fees were up $1.5$2.3 million, or 11%15%, primarily due to increased card activity.
Investment and annuity fees and insurance commissions increased $0.5 million, or 7%, compared to second quarter 2019 primarily due to an increase in corporate underwriting fees, bond trading fees, and insurance commissions, partially offset by a decrease in annuity fees. Investment and annuity fees and insurance commissions increased $0.4 million, or 6%, compared to secondthird quarter 2018 due to higher bond trading fees, investment fees and insurance fees, partially offset by a decrease in annuity sales volume and underwriting activity, and increased $0.4 million, or 7%, compared to third quarter 2017.sales.
Fee income from secondary mortgage market operations was up $0.4$1.3 million, or 9%29%, from the second quarter of 2018 with seasonally higher sales activity,2019 and up $0.2$1.4 million, or 4%32%, from the third quarter of 2017. 2018. Origination volume during the third quarter of 2019 was positively impacted by both seasonality and lower interest rates. These fees will vary based on origination volume and the timing of subsequent sales.
Income from bank-owned life insurance was $4.1 million in the third quarter of 2019, up $0.1 million, or 2%, from the second quarter of 2019 and up $1.0 million, or 34%, from the third quarter of 2018. The increase from the third quarter of 2018 is attributable to both mortality gains and incremental earnings on the additional investment of $33 million in April 2019.
Credit related fees were $3.0 million for the third quarter of 2019, up $0.1 million, or 2%, from the second quarter of 2019 and up $0.2 million, or 8%, from the third quarter of 2018. The linked quarter increase was due to both higher unused commitment fees and letter of credit fees, with the increase over the same quarter last year primarily due to higher unused commitment fees.
Income from our customer interest rate derivative program resulted in a $1.4totaled $4.3 million net gain for the third quarter of 20182019 compared to net gains of $1.6$3.6 million in the second quarter of 20182019 and $1.3$1.4 million for the third quarter of 2017.2018. Increased derivative income reflects increased activity due to market conditions. Derivative income can be volatile and is dependent upon boththe composition of the portfolio, customer sales activity as well asand market value adjustments due to market interest rate movement.
Other miscellaneous income of $4.7 million was up $0.3 million, or 8%, compared to the second quarter of 2019 and $1.3 million, or 39%, compared to the third quarter of 2018. The increase compared to the prior quarter was due to higher syndication fees. The
45
increase compared to the third quarter of 2018 includes higher income from investments in small business investment companies of $1.2 million and $0.8 million higher syndication fees.
Noninterest income was $210.6$233.0 million forin the first nine months ended September 30, 2018,of 2019, up $12.5$22.4 million, or 6%, from the same period in 2017. Excluding nonoperating items, which include a loss related to the sale of Harrison Finance in 2018 and a gain related to the sale of select Hancock Horizon funds in 2017, noninterest income was $211.7 million, up $18.0 million, or 9%11%, from the first nine months of 2017.2018. Trust fees were up $6.3increased $6.4 million, or 19%16%, at $39.7 million, due primarily to the July 13, 2018 trust and asset management acquisition.acquisition in July 2018. Bank card and ATM fees were $49.1 million, up $5.2$4.3 million, or 13%10%, at $44.8 million due to increased card activity. Service charges were up $3.1Derivative income increased $4.3 million, or 5%95%, at $63.8with increased activity and the changing interest rate environment. Income from bank-owned life insurance was up $2.2 million, primarilyor 24%, due to an increase in check printing fees and overdraft fees driven from the sustained overdraft fee introduced in the third quarter 2018 restructure and the additional investment in April of 2017. The loss share agreements with the FDIC were terminated in July 2017, resulting in an increase in2019. Secondary mortgage market income from the prior year of $2.4was up $2.2 million, or 19%, to $13.9 million due to the elimination of amortization of the FDIC loss share receivable.higher production and sales volumes. Investment and annuity fees and insurance commissions totaled $19.0 million, an increase ofincreased $1.1 million, or 6%. Service charges were down $0.8 million, or 1%, mostlyprimarily due to increased annuity income partially offset by lower insurance commissions due to the sale of Harrison Finance on March 9, 2018.consumer overdraft fees and service charges.
44
Noninterest Expense
Noninterest expense for the third quarter of 20182019 was $181.2$213.6 million, down $3.2up $30.0 million, or 2%16%, from the second quarter of 2018,2019, and up $3.6$32.4 million, or 2%18%, from the third quarter of 2017. Excluding nonoperating expenses, operating expense for the third quarter2018. There were $28.8 million of 2018 totaled $176.4 million, an increase of $7.8 million, or 5%, linked quarter and up $10.1 million, or 6%, from the third quarter of 2017. For the nine months ended September 30, 2018, total noninterest expense was $536.4 million, an $11.8 million, or 2%, increase over the same period in 2017. Excluding nonoperating expenses, operating expense for the nine months ended September 30, 2018 totaled $509.9 million, up $13.7 million, or 3%, over the same period in 2017.
Nonoperating expenses in the third quarter of 2018 totaled $4.8 million2019 related to the acquisition and primarily included costs associated with the trust and asset management acquisition. Nonoperatingoperational integration of MidSouth Bancorp, Inc. There were no nonoperating expenses in the second quarter of 20182019 and there were $15.8$4.8 million and included costs associated with the brand consolidation project, the trust and asset management acquisition, and a charge related to the restructuring of a portion of our bank-owned life insurance contracts. The year-to-date 2018 nonoperating expenses of $26.5 million also includes a one-time all hands bonus. The nonoperating expenses in the third quarter of 2017 and the nine months ended September 30, 2017 of $11.4 million and $28.5 million, respectively, included costs associated with the FNBC transactions. The nine months ended September 30, 2017 also included costs associated with termination of the FDIC loss share agreements. The components of noninterest operating and nonoperating expense are presented in the following tables for the indicated periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | |||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, | |||||||
(in thousands) |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 | |||||
Operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
| $ | 83,212 |
| $ | 79,670 |
| $ | 80,358 |
| $ | 239,625 |
| $ | 234,239 |
Employee benefits |
|
| 17,961 |
|
| 17,165 |
|
| 16,665 |
|
| 54,749 |
|
| 54,454 |
Personnel expense |
|
| 101,173 |
|
| 96,835 |
|
| 97,023 |
|
| 294,374 |
|
| 288,693 |
Net occupancy expense |
|
| 11,829 |
|
| 11,698 |
|
| 12,101 |
|
| 34,470 |
|
| 35,832 |
Equipment expense |
|
| 3,624 |
|
| 3,641 |
|
| 3,626 |
|
| 10,758 |
|
| 11,133 |
Data processing expense |
|
| 18,418 |
|
| 17,279 |
|
| 15,869 |
|
| 52,065 |
|
| 48,019 |
Professional services expense |
|
| 8,917 |
|
| 8,189 |
|
| 7,208 |
|
| 24,953 |
|
| 22,010 |
Amortization of intangible assets |
|
| 5,638 |
|
| 5,322 |
|
| 6,070 |
|
| 16,578 |
|
| 16,532 |
Telecommunications and postage |
|
| 3,567 |
|
| 3,250 |
|
| 3,848 |
|
| 10,667 |
|
| 11,013 |
Deposit insurance and regulatory fees |
|
| 8,345 |
|
| 8,376 |
|
| 7,563 |
|
| 24,669 |
|
| 21,036 |
Other real estate (income) expense |
|
| 16 |
|
| (289) |
|
| 199 |
|
| (63) |
|
| (818) |
Advertising |
|
| 2,913 |
|
| 2,390 |
|
| 3,552 |
|
| 7,644 |
|
| 10,582 |
Corporate value and franchise taxes |
|
| 3,718 |
|
| 3,577 |
|
| 3,387 |
|
| 10,735 |
|
| 9,942 |
Printing and supplies |
|
| 1,282 |
|
| 842 |
|
| 1,248 |
|
| 3,155 |
|
| 3,746 |
Travel expense |
|
| 1,333 |
|
| 1,436 |
|
| 1,188 |
|
| 3,833 |
|
| 3,438 |
Entertainment and contributions |
|
| 2,448 |
|
| 2,950 |
|
| 2,016 |
|
| 7,907 |
|
| 5,757 |
Tax credit investment amortization |
|
| 1,560 |
|
| 875 |
|
| 1,212 |
|
| 3,309 |
|
| 3,637 |
Other retirement expense |
|
| (4,664) |
|
| (4,458) |
|
| (4,402) |
|
| (13,585) |
|
| (10,850) |
Other miscellaneous |
|
| 6,243 |
|
| 6,684 |
|
| 4,515 |
|
| 18,426 |
|
| 16,453 |
Total operating expense |
| $ | 176,360 |
| $ | 168,597 |
| $ | 166,223 |
| $ | 509,895 |
| $ | 496,155 |
Nonoperating expense items |
|
| 4,827 |
|
| 15,805 |
|
| 11,393 |
|
| 26,485 |
|
| 28,473 |
Total noninterest expense |
| $ | 181,187 |
| $ | 184,402 |
| $ | 177,616 |
| $ | 536,380 |
| $ | 524,628 |
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | |||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, | |||||||
(in thousands) |
| 2018 |
| 2018 |
| 2017 |
|
| 2018 |
|
| 2017 | |||
Nonoperating expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel expense |
| $ | 1,300 |
| $ | 408 |
| $ | 2,120 |
| $ | 5,316 |
| $ | 3,662 |
Net occupancy and equipment expense |
|
| 962 |
|
| 1,239 |
|
| 500 |
|
| 2,321 |
|
| 777 |
Data processing expense |
|
| 2,074 |
|
| 994 |
|
| 929 |
|
| 3,149 |
|
| 974 |
Professional services expense |
|
| 638 |
|
| 5,192 |
|
| 2,854 |
|
| 7,238 |
|
| 9,681 |
Other real estate (income) expense |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (1,511) |
Advertising |
|
| (360) |
|
| 1,127 |
|
| 358 |
|
| 952 |
|
| 1,389 |
Printing and supplies |
|
| 5 |
|
| 846 |
|
| 173 |
|
| 1,106 |
|
| 183 |
Write-down related to FDIC loss share termination |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 6,603 |
Loss on restructure of bank-owned life insurance contracts |
|
| — |
|
| 3,240 |
|
| — |
|
| 3,240 |
|
| — |
Other expense |
|
| 208 |
|
| 2,759 |
|
| 4,459 |
|
| 3,163 |
|
| 6,715 |
Total nonoperating expenses |
| $ | 4,827 |
| $ | 15,805 |
| $ | 11,393 |
| $ | 26,485 |
| $ | 28,473 |
The following discussion of the components of operating expense excludes nonoperating items for each period.
Personnel expense totaled $101.2 million for the third quarter of 2018, up $4.3 million, or 4%, compared to the prior quarter, due to the addition of trust and asset management employees and higher incentives. Personnel costs are up $4.2 million, or 4%, compared to the third quarter of 2017 due to merit increases and the additional payroll expenseprimarily related to the trust and asset management acquisition. YearItems 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. Due to date September 30, 2018 personnelthe late quarter timing of the acquisition, MidSouth had limited impact to operating results.
The components of noninterest and nonoperating expense wasfor the periods indicated are presented in the following tables.
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| ||||||||
(in thousands) |
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| |||||
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
| $ | 93,858 |
|
| $ | 87,747 |
|
| $ | 84,389 |
|
| $ | 265,573 |
|
| $ | 244,374 |
|
Employee benefits |
|
| 18,622 |
|
|
| 18,888 |
|
|
| 18,084 |
|
|
| 57,240 |
|
|
| 55,316 |
|
Personnel expense |
|
| 112,480 |
|
|
| 106,635 |
|
|
| 102,473 |
|
|
| 322,813 |
|
|
| 299,690 |
|
Net occupancy expense |
|
| 13,156 |
|
|
| 12,961 |
|
|
| 11,895 |
|
|
| 38,101 |
|
|
| 35,221 |
|
Equipment expense |
|
| 4,685 |
|
|
| 4,342 |
|
|
| 4,520 |
|
|
| 13,706 |
|
|
| 12,328 |
|
Data processing expense |
|
| 21,532 |
|
|
| 20,088 |
|
|
| 20,492 |
|
|
| 60,951 |
|
|
| 55,214 |
|
Professional services expense |
|
| 17,704 |
|
|
| 9,665 |
|
|
| 9,555 |
|
|
| 35,537 |
|
|
| 32,191 |
|
Amortization of intangible assets |
|
| 4,889 |
|
|
| 5,047 |
|
|
| 5,638 |
|
|
| 15,074 |
|
|
| 16,578 |
|
Deposit insurance and regulatory fees |
|
| 3,995 |
|
|
| 4,755 |
|
|
| 8,345 |
|
|
| 14,156 |
|
|
| 24,669 |
|
Other real estate and foreclosed assets (income) expense |
|
| 2,055 |
|
|
| 395 |
|
|
| 16 |
|
|
| 1,459 |
|
|
| (63 | ) |
Advertising |
|
| 5,435 |
|
|
| 3,253 |
|
|
| 2,553 |
|
|
| 11,768 |
|
|
| 8,596 |
|
Corporate value and franchise taxes |
|
| 4,109 |
|
|
| 4,215 |
|
|
| 3,718 |
|
|
| 12,366 |
|
|
| 10,735 |
|
Printing and supplies |
|
| 1,459 |
|
|
| 1,092 |
|
|
| 1,287 |
|
|
| 3,720 |
|
|
| 4,261 |
|
Telecommunications and postage |
|
| 3,610 |
|
|
| 3,363 |
|
|
| 3,598 |
|
|
| 10,439 |
|
|
| 11,063 |
|
Travel expense |
|
| 1,172 |
|
|
| 1,344 |
|
|
| 1,365 |
|
|
| 3,614 |
|
|
| 3,872 |
|
Entertainment and contributions |
|
| 2,765 |
|
|
| 2,742 |
|
|
| 2,539 |
|
|
| 8,215 |
|
|
| 8,250 |
|
Tax credit investment amortization |
|
| 1,286 |
|
|
| 1,234 |
|
|
| 1,560 |
|
|
| 3,658 |
|
|
| 3,309 |
|
Other retirement expense |
|
| (4,152 | ) |
|
| (4,152 | ) |
|
| (4,664 | ) |
|
| (12,409 | ) |
|
| (13,585 | ) |
Other miscellaneous |
|
| 17,374 |
|
|
| 6,588 |
|
|
| 6,297 |
|
|
| 29,653 |
|
|
| 24,051 |
|
Total noninterest expense |
| $ | 213,554 |
|
| $ | 183,567 |
|
| $ | 181,187 |
|
| $ | 572,821 |
|
| $ | 536,380 |
|
46
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| ||||||||
(in thousands) |
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| |||||
Nonoperating expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel expense |
| $ | 5,002 |
|
| $ | — |
|
| $ | 1,300 |
|
| $ | 5,002 |
|
| $ | 5,316 |
|
Net occupancy expense |
|
| 735 |
|
|
| — |
|
|
| 66 |
|
|
| 735 |
|
|
| 751 |
|
Equipment expense |
|
| 188 |
|
|
| — |
|
|
| 896 |
|
|
| 188 |
|
|
| 1,570 |
|
Data processing expense |
|
| 437 |
|
|
| — |
|
|
| 2,074 |
|
|
| 437 |
|
|
| 3,149 |
|
Professional services expense |
|
| 7,491 |
|
|
| — |
|
|
| 638 |
|
|
| 7,491 |
|
|
| 7,238 |
|
Advertising |
|
| 2,624 |
|
|
| — |
|
|
| (360 | ) |
|
| 2,624 |
|
|
| 952 |
|
Printing and supplies |
|
| 433 |
|
|
| — |
|
|
| 5 |
|
|
| 433 |
|
|
| 1,106 |
|
Loss on restructure of bank-owned life insurance contracts |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,240 |
|
Other expense |
|
| 11,900 |
|
|
| — |
|
|
| 208 |
|
|
| 11,900 |
|
|
| 3,163 |
|
Total nonoperating expenses |
| $ | 28,810 |
|
| $ | — |
|
| $ | 4,827 |
|
| $ | 28,810 |
|
| $ | 26,485 |
|
Personnel expense totaled $112.5 million for the third quarter of 2019, up $5.7$6.1 million, or 2%7%, compared to the prior year.quarter, primarily due to $5.0 million of merger-related expenses from the MidSouth acquisition, including severance and change in control expense, as well as one additional payroll day. Compared to the third quarter of 2018, personnel costs were up $10.0 million, or 10%, primarily related to annual merit increases, an increase in incentives and a $3.7 million increase in merger-related expense.
Occupancy and equipment expenses totaled $15.5$17.8 million in the third quarter of 2018,2019, up $0.1$ 0.5 million, or 1%3%, from the second quarter of 20182019 and down $0.3up $1.4 million, or 9%, from the third quarter of 2017.2018. The increase compared to the prior quarter is primarilylargely due to anadditional merger-related expenses of $0.9 million from the MidSouth acquisition, partially offset by annual insurance payments in the second quarter of 2019. The increase in depreciation related to new signage following the Company’s rebranding. The reduction compared to the prior year is due largely to costs related to FNBC branches that had not yet been consolidated. Occupancy and equipment expenses totaled $45.2 million for the first nine monthsthird quarter of 2018 $1.7 million, or 4%, less thanis largely attributable to the first nine monthsmove of 2017, due to previously mentioned items. the New Orleans regional headquarters.
Data processing expense was $18.4$21.5 million for the third quarter of 2018,2019, up $1.1$1.4 million, or 7%, from the second quarter of 2018,2019, and up $2.5$1.0 million, or 16%5%, from the third quarter of 2017. Data processing expense was $52.1 million for the first nine months of 2018, $4.0 million, or 8%, over the first nine months of 2017.2018. The increase in expensefrom the second quarter of 2019 is attributableprimarily due to revenue-generating initiatives related to new digital offerings, higher card transaction processing costsexpenses resulting from increased card activity and additional processing cost associated withmerger-related expense from the acquired trustMidSouth transaction. The increase from the third quarter of 2018 was primarily the result of expenses related to increased card activity and asset management business that is awaiting system conversion.
Professional service expense totaled $8.9 millionexpenses from investments in new technology, partially offset by merger-related expenses in the third quarter of 2018 from the trust and asset management acquisition.
Professional services expense for the third quarter of 2019 totaled $17.7 million, up $0.7$8.0 million, or 9%83%, compared to the previous quarter and up $1.7$8.1 million, or 24% compared85%, from the third quarter of 2018. The increase over both periods is largely due to $7.5 million in expenses related to the sameMidSouth acquisition in the third quarter last year. Professional service expense totaled $25.0 million for the first nine months of 2018, up $2.9 million, or 13%, compared2019, including transaction-related expenses and costs related to the first nine months of 2017.systems integration. The increase over the previousthird quarter was dueof 2018 also includes a higher level of expense related to loan collection coststhe investment in new technology aimed at becoming more scalable, effective and various other projects. Professional service expense includes legal, audit, accounting and other consulting services.efficient.
Deposit insurance and regulatory fees and corporate value and franchise taxes were $12.1$8.1 million, an increase of $0.1down $0.9 million, or 1%10%, from the second quarter of 20182019 and up $1.1down $4.0 million, or 10%33%, from the third quarter of 2017. Deposit2018. The decrease from both the prior quarter and the same period in 2018 is primarily due to a reduction in the risk-based deposit insurance assessment fees, with the year over year variance also favorably impacted by the elimination of the large bank deposit insurance fund surcharge.
Business development-related expenses (including advertising, travel, entertainment and regulatory feescontributions) were $9.4 million for the third quarter of 2019, up $2.0 million, or 28%, from the second quarter of 2019 and up $2.9 million, or 45%, from the third quarter of 2018. The linked-quarter and year-over-year increase was largely due to $3.2 million of merger-related expenses, primarily advertising expense.
Other real estate and foreclosed asset (income) expense was $2.1 million for the third quarter of 2019, compared to $0.4 million in the second quarter of 2019 and less than $0.1 million in the third quarter of 2018. Third quarter of 2019 expense includes a non-cash write-down of foreclosed assets, partially offset by a gain on the sale of a former corporate valueoffice building. Management believes that the second quarter of 2019 reflects a more typical level of other real estate and franchise taxesforeclosed asset expense.
All other expenses, excluding amortization of intangibles, totaled $35.4$19.6 million for the third quarter of 2019, an increase of $11.5 million from both the second quarter of 2019 and third quarter of 2018. The linked-quarter and year-over-year increase is primarily due to expenses associated with the MidSouth acquisition, including contract buyouts, lease terminations, and other merger-related costs.
47
Noninterest expense for the first nine months of 2019 was $572.8 million, an increase of $36.4 million, or 7%, from the same period in 2018. The first nine months of 2019 includes $28.8 million of merger-related MidSouth expenses and the first nine months of 2018 includes $26.5 million of nonoperating expenses related to the brand consolidation, the trust and asset management business acquisition, the relocation of the New Orleans regional headquarters, a charge related to the restructure of our bank-owned life insurance contracts, as well as a one-time all hands bonus and other miscellaneous items. Personnel expense for the nine months ended September 30, 2019 totaled $322.8 million, up $23.1 million, or 8%. Occupancy and equipment expenses totaled $51.8 million, up $4.3 million, or 9%. Data processing expense was $61.0 million, an increase of $5.7 million, or 10%. Professional service expense was $35.5 million for the first nine months of 2018,2019, up $4.4$3.3 million, or 14%, from the first nine months of 2017.10%. Deposit insurance and regulatory fees and corporate value and franchise taxes were up both quarter over quarter and year over year primarily due to asset growth.
down $8.9 million, or 25%. Business development-related expenses (including advertising, travel and entertainment and contributions) were $6.7$24.0 million, for the third quarter of 2018, down $0.1up $2.9 million, or 1%, from the second quarter of 2018 and down $0.1 million, or 1%, from the third quarter of 2017. Business development expense totaled $19.4 million for the first nine months of 2018, $0.4 million, or 2%, less than the first nine months of 2017.
There was virtually no other real estate (“ORE”) expense in the third quarter of 2018, compared to net gains on ORE dispositions of $0.3 million during the second quarter of 2018 and net ORE costs of $0.2 million in the third quarter of 2017. Net gains on ORE dispositions exceeded ORE costs by $0.1 million for the nine months ended September 30, 2018 and $0.8 million for the same period in 2017. ORE income/loss can vary from period to period.
14%. All other expenses, excluding amortization of intangibles, and nonoperating expense items, totaled $8.0 million for the third quarter of 2018,were up $0.8$6.0 million, or 11%, from the second quarter of 2018, and up $1.6 million, or 24%, from the third quarter of 2017. All other expenses, excluding amortization of intangibles and nonoperating20%. The increase in noninterest expense items, totaled $22.0 million for the first nine months of
46
2018, down $2.0 million, or 8%, from the first nine months in 2018 is in large part attributable to annual merit raises, increased expenses related to the trust and asset management business acquired in July of 2017.2018, investment in new technologies, and the relocation of the New Orleans regional headquarters. The decrease compared to prior year are primarilydecline in deposit insurance and regulatory fees and corporate value and franchise tax expense is due to lower other retirement expensea reduction in the risk-based deposit insurance assessment fees and the elimination of FNBC related costs through branch consolidation.the large bank deposit insurance fund surcharge.
Income Taxes
The effective income tax rate for the third quarter of 20182019 was approximately 17.5%15.5%, compared to 18.3%17.9% in the second quarter of 20182019 and 25.7%17.5% in the third quarter of 2017.2018. The decrease in the effective tax rate from the prior quarter is due to an expected increase in investments in new market tax credits, and the decrease from the third quarter of 2017 is primarily dueattributable to the enactmentbenefit of including the Tax Cuts and Jobs Act (“Tax Act”) on December 22, 2017. The Tax Act significantly revised U.S. corporate incomeimpact of merger-related costs in our estimated annual effective tax laws by, among other things, loweringrate.
Management expects the statutory corporate federal incomeeffective 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.
Our deferred tax assets and liabilities were re-measured to reflect the lower income tax rate duringfor 2019 will be approximately 17% in the fourth quarter of 2017. Pursuant to ASU 2018-05, entities have a measurement period not to exceed oneand full year from the enactment date of the Tax Act to record provisional amounts related to the impact of the Tax Act. As of September 30, 2018, no adjustment had been made to the provisional benefit recorded. Management does not expect to adjust the provisional benefit recorded unless new guidance is issued by federal and/or state tax authorities that would require us to reevaluate our original estimate of provisional impact. If so, any such adjustments could materially impact income tax expense in the period in which the adjustments are made.
2019, based on current forecasts. Our effective tax rate has historically varied 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 bank-owned life insurance contract program are the major components of tax-exempt income. The $3.2 million charge recorded during the second quarter of 2018 related to restructuring a portion of our bank-owned life insurance contracts negatively impacted the tax benefit attributable to life insurance contracts, as reflected in the table below.
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. In February 2018,
Based on tax credit investments that have been made to date and those anticipated to be made utilizing the U.S. Departmentremaining portion of Treasury announced the 2017 New Market Tax Credit allocation. We were awarded a New Market Tax Credit allocation that will allow us to investour $50 million NMTC allocation award received in tax credit projects2018, we expect to realize benefits from federal and receive a total of $19.5 million instate tax credits to be recognized over a seven-year period.
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 and those we expect to make from our new allocation award, we expect to realize benefits from federal and state tax credits totaling $8.2 million, $5.8 million and $3.8 million for 2019, 2020 and 2021, respectively.
Additionally, the effective tax rate is affected by other items that may impact comparability from quarter to quarter, such as the excess benefit of vested employee share-based compensation. As of September 30, 2018, the year to date excess benefit of vested share-based compensation decreased income tax expense by $0.5 million. Management expects an effective tax rate of 8% to 10% for the fourth quarter of 2018 and 15% to 17% for the year ended December 31, 2018 due to fourth quarter stock compensation vesting and other tax reform related strategies that together will generate an additional income tax benefit of approximately $9 to $11 million, based on the Company’s share price at September 28, 2018.
47
The following table reconciles reported income tax expense to that computed at the statutory federal tax rate for the indicated periods.
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
|
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, |
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
(in thousands) |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||||
Taxes computed at statutory rate |
| $ | 21,347 |
| $ | 18,288 |
| $ | 27,761 |
| $ | 58,298 |
| $ | 74,812 |
| $ | 16,841 |
|
| $ | 22,567 |
|
| $ | 21,347 |
|
| $ | 59,571 |
|
| $ | 58,298 |
|
Tax credits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
QZAB/QSCB |
| (760) |
| (760) |
| (643) |
| (2,279) |
| (1,928) |
|
| (710 | ) |
|
| (710 | ) |
|
| (760 | ) |
|
| (2,130 | ) |
|
| (2,279 | ) | |||||
NMTC - Federal and State |
|
| (1,379) |
|
| (1,378) |
|
| (1,679) |
|
| (4,136) |
|
| (5,037) |
|
| (1,701 | ) |
|
| (1,999 | ) |
|
| (1,379 | ) |
|
| (5,102 | ) |
|
| (4,136 | ) |
Total tax credits |
|
| (2,139) |
|
| (2,138) |
|
| (2,322) |
|
| (6,415) |
|
| (6,965) |
|
| (2,411 | ) |
|
| (2,709 | ) |
|
| (2,139 | ) |
|
| (7,232 | ) |
|
| (6,415 | ) |
State income taxes, net of federal income tax benefit |
| 1,989 |
| 1,924 |
| 1,167 |
| 5,957 |
| 3,143 |
|
| 1,519 |
|
|
| 1,756 |
|
|
| 1,989 |
|
|
| 5,180 |
|
|
| 5,957 |
| |||||
Tax-exempt interest |
| (2,720) |
| (2,761) |
| (4,629) |
| (8,267) |
| (14,021) |
|
| (2,881 | ) |
|
| (2,274 | ) |
|
| (2,720 | ) |
|
| (7,572 | ) |
|
| (8,267 | ) | |||||
Life insurance contracts |
| (866) |
| 306 |
| (1,248) |
| (1,490) |
| (3,241) |
|
| (1,266 | ) |
|
| (927 | ) |
|
| (866 | ) |
|
| (2,871 | ) |
|
| (1,490 | ) | |||||
Employee share-based compensation |
| (146) |
| (176) |
| (202) |
| (461) |
| (2,003) |
|
| (85 | ) |
|
| (74 | ) |
|
| (146 | ) |
|
| (431 | ) |
|
| (461 | ) | |||||
Impact from interim estimated effective tax rate |
| (664) |
| (844) |
| (471) |
| (1,152) |
| 2,230 |
|
| (289 | ) |
|
| 27 |
|
|
| (664 | ) |
|
| (1,038 | ) |
|
| (1,152 | ) | |||||
FDIC Assessment Disallowance |
| 748 |
| 758 |
| — |
| 2,252 |
| — |
|
| 443 |
|
|
| 379 |
|
|
| 748 |
|
|
| 1,367 |
|
|
| 2,252 |
| |||||
Other, net |
|
| 226 |
|
| 552 |
|
| 358 |
|
| 1,359 |
|
| (390) |
|
| 516 |
|
|
| 441 |
|
|
| 226 |
|
|
| 1,449 |
|
|
| 1,359 |
|
Income tax expense |
| $ | 17,775 |
| $ | 15,909 |
| $ | 20,414 |
| $ | 50,081 |
| $ | 53,565 |
| $ | 12,387 |
|
| $ | 19,186 |
|
| $ | 17,775 |
|
| $ | 48,423 |
|
| $ | 50,081 |
|
48
48
Selected Financial Data
The following tables contain selected financial data as of the dates and for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, |
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
|
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||||
Common Share Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
| $ | 0.96 |
| $ | 0.82 |
| $ | 0.68 |
| $ | 2.62 |
| $ | 1.85 |
| $ | 0.77 |
|
| $ | 1.01 |
|
| $ | 0.96 |
|
| $ | 2.69 |
|
| $ | 2.62 |
|
Diluted |
| $ | 0.96 |
| $ | 0.82 |
| $ | 0.68 |
| $ | 2.61 |
| $ | 1.85 |
| $ | 0.77 |
|
| $ | 1.01 |
|
| $ | 0.96 |
|
| $ | 2.69 |
|
| $ | 2.61 |
|
Cash dividends paid |
| $ | 0.27 |
| $ | 0.24 |
| $ | 0.24 |
| $ | 0.75 |
| $ | 0.72 |
| $ | 0.27 |
|
| $ | 0.27 |
|
| $ | 0.27 |
|
| $ | 0.81 |
|
| $ | 0.75 |
|
Book value per share (period-end) |
| $ | 34.90 |
| $ | 34.33 |
| $ | 33.78 |
| $ | 34.90 |
| $ | 33.78 |
| $ | 39.49 |
|
| $ | 38.70 |
|
| $ | 34.90 |
|
| $ | 39.49 |
|
| $ | 34.90 |
|
Tangible book value per share (period-end) |
| $ | 24.44 |
| $ | 24.66 |
| $ | 23.92 |
| $ | 24.44 |
| $ | 23.92 |
| $ | 28.73 |
|
| $ | 28.46 |
|
| $ | 24.44 |
|
| $ | 28.73 |
|
| $ | 24.44 |
|
Weighted average number of shares (000s): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
| 85,348 |
|
| 85,305 |
|
| 84,749 |
|
| 85,298 |
|
| 84,577 |
|
| 86,377 |
|
|
| 85,728 |
|
|
| 85,348 |
|
|
| 85,934 |
|
|
| 85,298 |
| |
Diluted |
| 85,539 |
|
| 85,483 |
|
| 84,980 |
|
| 85,482 |
|
| 84,818 |
|
| 86,462 |
|
|
| 85,835 |
|
|
| 85,539 |
|
|
| 86,010 |
|
|
| 85,482 |
| |
Period-end number of shares (000s) |
| 85,364 |
|
| 85,335 |
|
| 84,767 |
|
| 85,364 |
|
| 84,767 |
|
| 90,822 |
|
|
| 85,759 |
|
|
| 85,364 |
|
|
| 90,822 |
|
|
| 85,364 |
| |
Market data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
High sales price |
| $ | 53.00 |
| $ | 55.00 |
| $ | 50.40 |
| $ | 56.40 |
| $ | 52.94 |
| $ | 42.11 |
|
| $ | 44.74 |
|
| $ | 53.00 |
|
| $ | 44.74 |
|
| $ | 56.40 |
|
Low sales price |
| $ | 46.05 |
| $ | 45.76 |
| $ | 41.05 |
| $ | 45.76 |
| $ | 41.05 |
| $ | 33.63 |
|
| $ | 37.03 |
|
| $ | 46.05 |
|
| $ | 33.63 |
|
| $ | 45.76 |
|
Period-end closing price |
| $ | 47.55 |
| $ | 46.65 |
| $ | 48.45 |
| $ | 47.55 |
| $ | 48.45 |
| $ | 38.30 |
|
| $ | 40.06 |
|
| $ | 47.55 |
|
| $ | 38.30 |
|
| $ | 47.55 |
|
Trading volume (000s) (a) |
| 28,332 |
|
| 35,705 |
|
| 33,243 |
|
| 99,407 |
|
| 117,397 |
|
| 29,038 |
|
|
| 27,874 |
|
|
| 28,332 |
|
|
| 85,037 |
|
|
| 99,407 |
|
(a) |
| Trading volume is based on the total volume as determined by NASDAQ on the last day of the quarter. |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| ||||||||
(in thousands) |
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| |||||
Income Statement: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
| $ | 283,164 |
|
| $ | 280,378 |
|
| $ | 263,212 |
|
| $ | 839,825 |
|
| $ | 756,911 |
|
Interest income (te) (a) |
|
| 286,816 |
|
|
| 284,096 |
|
|
| 267,307 |
|
|
| 851,019 |
|
|
| 769,050 |
|
Interest expense |
|
| 60,225 |
|
|
| 60,510 |
|
|
| 49,018 |
|
|
| 177,764 |
|
|
| 125,506 |
|
Net interest income (te) |
|
| 226,591 |
|
|
| 223,586 |
|
|
| 218,289 |
|
|
| 673,255 |
|
|
| 643,544 |
|
Provision for loan and lease losses |
|
| 12,421 |
|
|
| 8,088 |
|
|
| 6,872 |
|
|
| 38,552 |
|
|
| 28,016 |
|
Noninterest income |
|
| 83,230 |
|
|
| 79,250 |
|
|
| 75,518 |
|
|
| 232,983 |
|
|
| 210,602 |
|
Noninterest expense (excluding amortization of intangibles) |
|
| 208,665 |
|
|
| 178,520 |
|
|
| 175,549 |
|
|
| 557,747 |
|
|
| 519,802 |
|
Amortization of intangibles |
|
| 4,889 |
|
|
| 5,047 |
|
|
| 5,638 |
|
|
| 15,074 |
|
|
| 16,578 |
|
Income before income taxes |
|
| 80,194 |
|
|
| 107,463 |
|
|
| 101,653 |
|
|
| 283,671 |
|
|
| 277,611 |
|
Income tax expense |
|
| 12,387 |
|
|
| 19,186 |
|
|
| 17,775 |
|
|
| 48,423 |
|
|
| 50,081 |
|
Net income |
| $ | 67,807 |
|
| $ | 88,277 |
|
| $ | 83,878 |
|
| $ | 235,248 |
|
| $ | 227,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating items, pre-tax (for informational purpose |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for alleged fraud (b) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10,084 |
|
|
| — |
|
Loss on sale of business |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,145 |
|
Merger-related expenses |
|
| 28,810 |
|
|
| — |
|
|
| 3,853 |
|
|
| 28,810 |
|
|
| 5,707 |
|
Other nonoperating expenses |
|
| — |
|
|
| — |
|
|
| 974 |
|
|
| — |
|
|
| 20,778 |
|
Nonoperating items, pre-tax |
|
| 28,810 |
|
|
| — |
|
|
| 4,827 |
|
|
| 38,894 |
|
|
| 27,630 |
|
49
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | |||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, | |||||||
(in thousands) |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 | |||||
Income Statement: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
| $ | 263,212 |
| $ | 252,304 |
| $ | 232,716 |
| $ | 756,911 |
| $ | 661,408 |
Interest income (te) (a) |
|
| 267,307 |
|
| 256,385 |
|
| 241,295 |
|
| 769,050 |
|
| 686,849 |
Interest expense |
|
| 49,018 |
|
| 40,757 |
|
| 29,859 |
|
| 125,506 |
|
| 77,143 |
Net interest income (te) |
|
| 218,289 |
|
| 215,628 |
|
| 211,436 |
|
| 643,544 |
|
| 609,706 |
Provision for loan losses |
|
| 6,872 |
|
| 8,891 |
|
| 13,040 |
|
| 28,016 |
|
| 43,982 |
Noninterest income |
|
| 75,518 |
|
| 68,832 |
|
| 67,115 |
|
| 210,602 |
|
| 198,093 |
Noninterest expense (excluding amortization of intangibles) |
|
| 175,549 |
|
| 179,080 |
|
| 171,546 |
|
| 519,802 |
|
| 508,096 |
Amortization of intangibles |
|
| 5,638 |
|
| 5,322 |
|
| 6,070 |
|
| 16,578 |
|
| 16,532 |
Income before income taxes |
|
| 101,653 |
|
| 87,086 |
|
| 79,316 |
|
| 277,611 |
|
| 213,748 |
Income tax expense |
|
| 17,775 |
|
| 15,909 |
|
| 20,414 |
|
| 50,081 |
|
| 53,565 |
Net income |
| $ | 83,878 |
| $ | 71,177 |
| $ | 58,902 |
| $ | 227,530 |
| $ | 160,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings excluding nonoperating items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 83,878 |
| $ | 71,177 |
| $ | 58,902 |
| $ | 227,530 |
| $ | 160,183 |
Nonoperating income |
|
| — |
|
| — |
|
| — |
|
| 1,145 |
|
| (4,352) |
Nonoperating expense |
|
| 4,827 |
|
| 15,805 |
|
| 11,393 |
|
| 26,485 |
|
| 28,473 |
Income tax benefit |
|
| (1,014) |
|
| (3,319) |
|
| (3,988) |
|
| (5,549) |
|
| (8,442) |
Nonoperating items, net of applicable income tax benefit |
|
| 3,813 |
|
| 12,486 |
|
| 7,405 |
|
| 22,081 |
|
| 15,679 |
Operating earnings |
| $ | 87,691 |
| $ | 83,663 |
| $ | 66,307 |
| $ | 249,611 |
| $ | 175,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| Three Months ended |
|
| Nine Months ended |
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||||||||||||||||
|
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||
|
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| |||||||||||||||
Performance Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets |
|
| 1.19 | % |
|
| 1.04 | % |
|
| 0.88 | % |
|
| 1.10 | % |
|
| 0.82 | % |
|
| 0.92 | % |
|
| 1.24 | % |
|
| 1.19 | % |
|
| 1.10 | % |
|
| 1.10 | % |
Return on average common equity |
|
| 11.27 | % |
|
| 9.81 | % |
|
| 8.23 | % |
|
| 10.45 | % |
|
| 7.69 | % |
|
| 7.95 | % |
|
| 10.96 | % |
|
| 11.27 | % |
|
| 9.69 | % |
|
| 10.45 | % |
Return on average tangible common equity |
|
| 16.11 | % |
|
| 13.72 | % |
|
| 11.68 | % |
|
| 14.75 | % |
|
| 10.77 | % |
|
| 10.77 | % |
|
| 15.07 | % |
|
| 16.11 | % |
|
| 13.32 | % |
|
| 14.75 | % |
Earning asset yield (te) (a) |
|
| 4.11 | % |
|
| 4.05 | % |
|
| 3.92 | % |
|
| 4.04 | % |
|
| 3.84 | % |
|
| 4.31 | % |
|
| 4.38 | % |
|
| 4.11 | % |
|
| 4.35 | % |
|
| 4.04 | % |
Total cost of funds |
|
| 0.75 | % |
|
| 0.64 | % |
|
| 0.48 | % |
|
| 0.66 | % |
|
| 0.43 | % |
|
| 0.90 | % |
|
| 0.93 | % |
|
| 0.75 | % |
|
| 0.91 | % |
|
| 0.66 | % |
Net interest margin (te) |
|
| 3.36 | % |
|
| 3.40 | % |
|
| 3.44 | % |
|
| 3.38 | % |
|
| 3.41 | % |
|
| 3.41 | % |
|
| 3.45 | % |
|
| 3.36 | % |
|
| 3.44 | % |
|
| 3.38 | % |
Noninterest income to total revenue (te) |
|
| 25.70 | % |
|
| 24.20 | % |
|
| 24.09 | % |
|
| 24.66 | % |
|
| 24.52 | % |
|
| 26.86 | % |
|
| 26.17 | % |
|
| 25.70 | % |
|
| 25.71 | % |
|
| 24.66 | % |
Efficiency ratio (c) |
|
| 58.05 | % |
|
| 58.95 | % |
|
| 58.11 | % |
|
| 58.37 | % |
|
| 57.68 | % | ||||||||||||||||||||
Average loan/deposit ratio |
|
| 88.39 | % |
|
| 86.84 | % |
|
| 87.08 | % |
|
| 87.19 | % |
|
| 88.18 | % |
|
| 87.47 | % |
|
| 87.09 | % |
|
| 88.39 | % |
|
| 87.21 | % |
|
| 87.19 | % |
FTE employees (period-end) |
|
| 3,858 |
|
|
| 3,780 |
|
|
| 3,979 |
|
|
| 3,858 |
|
|
| 3,979 |
|
|
| 3,894 |
|
|
| 3,930 |
|
|
| 3,858 |
|
|
| 3,894 |
|
|
| 3,858 |
|
Capital Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stockholders' equity to total assets |
|
| 10.60 | % |
|
| 10.49 | % |
|
| 10.68 | % |
|
| 10.60 | % |
|
| 10.68 | % |
|
| 11.74 | % |
|
| 11.54 | % |
|
| 10.60 | % |
|
| 11.74 | % |
|
| 10.60 | % |
Tangible common equity ratio (b) |
|
| 7.67 | % |
|
| 7.76 | % |
|
| 7.80 | % |
|
| 7.67 | % |
|
| 7.80 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Select performance measures excluding nonoperating items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Operating earnings per share - diluted (d) |
| $ | 1.01 |
|
| $ | 0.96 |
|
| $ | 0.76 |
|
| $ | 2.87 |
|
| $ | 2.03 |
| ||||||||||||||||||||
Return on average assets - operating |
|
| 1.24 | % |
|
| 1.22 | % |
|
| 0.99 | % |
|
| 1.21 | % |
|
| 0.90 | % | ||||||||||||||||||||
Return on average common equity - operating |
|
| 11.78 | % |
|
| 11.54 | % |
|
| 9.27 | % |
|
| 11.46 | % |
|
| 8.44 | % | ||||||||||||||||||||
Return on average tangible common equity - operating |
|
| 16.84 | % |
|
| 16.12 | % |
|
| 13.14 | % |
|
| 16.18 | % |
|
| 11.82 | % | ||||||||||||||||||||
Efficiency ratio (c) |
|
| 58.11 | % |
|
| 57.40 | % |
|
| 57.50 | % |
|
| 57.68 | % |
|
| 59.70 | % | ||||||||||||||||||||
Noninterest income as a percent of total revenue (te) - operating |
|
| 25.70 | % |
|
| 24.20 | % |
|
| 24.09 | % |
|
| 24.76 | % |
|
| 24.11 | % | ||||||||||||||||||||
Tangible common equity ratio (d) |
|
| 8.82 | % |
|
| 8.75 | % |
|
| 7.67 | % |
|
| 8.82 | % |
|
| 7.67 | % |
(a) |
| Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21% |
(b) |
|
|
(c) | The efficiency ratio is noninterest expense to total net interest (te) and noninterest income, excluding amortization of purchased intangibles and nonoperating items. |
(d) |
|
|
50
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| ||||||||
($ in thousands) |
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| |||||
Asset Quality Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans (a) |
| $ | 222,860 |
|
| $ | 209,831 |
|
| $ | 201,646 |
|
| $ | 222,860 |
|
| $ | 201,646 |
|
Restructured loans - still accruing |
|
| 60,897 |
|
|
| 101,250 |
|
|
| 162,189 |
|
|
| 60,897 |
|
|
| 162,189 |
|
Total nonperforming loans |
|
| 283,757 |
|
|
| 311,081 |
|
|
| 363,835 |
|
|
| 283,757 |
|
|
| 363,835 |
|
Other real estate (ORE) and foreclosed assets |
|
| 30,955 |
|
|
| 27,520 |
|
|
| 27,475 |
|
|
| 30,955 |
|
|
| 27,475 |
|
Total nonperforming assets |
| $ | 314,712 |
|
| $ | 338,601 |
|
| $ | 391,310 |
|
| $ | 314,712 |
|
| $ | 391,310 |
|
Accruing loans 90 days past due (b) |
| $ | 7,872 |
|
| $ | 6,493 |
|
| $ | 24,460 |
|
| $ | 7,872 |
|
| $ | 24,460 |
|
Net charge-offs |
|
| 12,474 |
|
|
| 7,151 |
|
|
| 6,852 |
|
|
| 37,494 |
|
|
| 24,126 |
|
Allowance for loan and lease losses |
|
| 195,572 |
|
|
| 195,625 |
|
|
| 214,550 |
|
|
| 195,572 |
|
|
| 214,550 |
|
Provision for loan and lease losses |
|
| 12,421 |
|
|
| 8,088 |
|
|
| 6,872 |
|
|
| 38,552 |
|
|
| 28,016 |
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets to loans, ORE and foreclosed assets |
|
| 1.49 | % |
|
| 1.68 | % |
|
| 2.00 | % |
|
| 1.49 | % |
|
| 2.00 | % |
Accruing loans 90 days past due to loans |
|
| 0.04 | % |
|
| 0.03 | % |
|
| 0.13 | % |
|
| 0.04 | % |
|
| 0.13 | % |
Nonperforming assets + accruing loans 90 days past due to loans, ORE and foreclosed assets |
|
| 1.53 | % |
|
| 1.71 | % |
|
| 2.12 | % |
|
| 1.53 | % |
|
| 2.12 | % |
Net charge-offs to average loans |
|
| 0.25 | % |
|
| 0.14 | % |
|
| 0.14 | % |
|
| 0.25 | % |
|
| 0.17 | % |
Allowance for loan losses to period-end loans |
|
| 0.93 | % |
|
| 0.97 | % |
|
| 1.10 | % |
|
| 0.93 | % |
|
| 1.10 | % |
Allowance for loan losses to nonperforming loans + accruing loans 90 days past due |
|
| 67.06 | % |
|
| 61.60 | % |
|
| 55.25 | % |
|
| 67.06 | % |
|
| 55.25 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | ||||||||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, |
| September 30, | ||||||||||
($ in thousands) |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||||
Asset Quality Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans (a) |
| $ | 201,646 |
|
| $ | 241,681 |
|
| $ | 269,676 |
|
| $ | 201,646 |
|
| $ | 269,676 |
|
Restructured loans - still accruing |
|
| 162,189 |
|
|
| 152,507 |
|
|
| 96,735 |
|
|
| 162,189 |
|
|
| 96,735 |
|
Total nonperforming loans |
|
| 363,835 |
|
|
| 394,188 |
|
|
| 366,411 |
|
|
| 363,835 |
|
|
| 366,411 |
|
Other real estate (ORE) and foreclosed assets |
|
| 27,475 |
|
|
| 22,342 |
|
|
| 21,219 |
|
|
| 27,475 |
|
|
| 21,219 |
|
Total nonperforming assets |
| $ | 391,310 |
|
| $ | 416,530 |
|
| $ | 387,630 |
|
| $ | 391,310 |
|
| $ | 387,630 |
|
Accruing loans 90 days past due (a) |
| $ | 24,460 |
|
| $ | 7,941 |
|
| $ | 28,850 |
|
| $ | 24,460 |
|
| $ | 28,850 |
|
Net charge-offs |
|
| 6,852 |
|
|
| 5,074 |
|
|
| 11,783 |
|
|
| 24,126 |
|
|
| 47,752 |
|
Allowance for loan losses |
|
| 214,550 |
|
|
| 214,530 |
|
|
| 223,122 |
|
|
| 214,550 |
|
|
| 223,122 |
|
Provision for loan losses |
|
| 6,872 |
|
|
| 8,891 |
|
|
| 13,040 |
|
|
| 28,016 |
|
|
| 43,982 |
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets to loans, ORE and foreclosed assets |
|
| 2.00 | % |
|
| 2.15 | % |
|
| 2.06 | % |
|
| 2.00 | % |
|
| 2.06 | % |
Accruing loans 90 days past due to loans |
|
| 0.13 | % |
|
| 0.04 | % |
|
| 0.15 | % |
|
| 0.13 | % |
|
| 0.15 | % |
Nonperforming assets + accruing loans 90 days past due to loans, ORE and foreclosed assets |
|
| 2.12 | % |
|
| 2.19 | % |
|
| 2.21 | % |
|
| 2.12 | % |
|
| 2.21 | % |
Net charge-offs to average loans |
|
| 0.14 | % |
|
| 0.11 | % |
|
| 0.25 | % |
|
| 0.17 | % |
|
| 0.35 | % |
Allowance for loan losses to period-end loans |
|
| 1.10 | % |
|
| 1.11 | % |
|
| 1.19 | % |
|
| 1.10 | % |
|
| 1.19 | % |
Allowance for loan losses to nonperforming loans + accruing loans 90 days past due |
|
| 55.25 | % |
|
| 53.35 | % |
|
| 56.45 | % |
|
| 55.25 | % |
|
| 56.45 | % |
(a) |
| Included in nonaccrual loans are nonaccruing restructured loans totaling $101.1 million, $99.1 million and $92.7 million at September 30, 2019, June 30, 2019 and September 30, 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 |
50
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| September 30, | |||||
(in thousands) |
| 2018 |
| 2018 |
| 2018 |
| 2017 |
| 2017 | |||||
Period-End Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income (a) |
| $ | 19,543,717 |
| $ | 19,370,917 |
| $ | 19,092,504 |
| $ | 19,004,163 |
| $ | 18,786,285 |
Loans held for sale |
|
| 29,043 |
|
| 36,047 |
|
| 21,827 |
|
| 39,865 |
|
| 23,236 |
Securities |
|
| 5,987,447 |
|
| 6,113,873 |
|
| 5,930,076 |
|
| 5,888,380 |
|
| 5,624,552 |
Short-term investments |
|
| 108,074 |
|
| 104,210 |
|
| 61,541 |
|
| 92,384 |
|
| 111,725 |
Earning assets |
|
| 25,668,281 |
|
| 25,625,047 |
|
| 25,105,948 |
|
| 25,024,792 |
|
| 24,545,798 |
Allowance for loan losses |
|
| (214,550) |
|
| (214,530) |
|
| (210,713) |
|
| (217,308) |
|
| (223,122) |
Goodwill |
|
| 791,157 |
|
| 745,523 |
|
| 745,523 |
|
| 745,523 |
|
| 739,403 |
Other intangible assets, net |
|
| 101,438 |
|
| 79,700 |
|
| 85,021 |
|
| 90,640 |
|
| 96,525 |
Other assets |
|
| 1,751,849 |
|
| 1,689,707 |
|
| 1,571,558 |
|
| 1,692,439 |
|
| 1,658,151 |
Total assets |
| $ | 28,098,175 |
| $ | 27,925,447 |
| $ | 27,297,337 |
| $ | 27,336,086 |
| $ | 26,816,755 |
Noninterest-bearing deposits |
| $ | 8,140,530 |
| $ | 8,165,796 |
| $ | 8,230,060 |
| $ | 8,307,497 |
| $ | 7,896,384 |
Interest-bearing transaction and savings deposits |
|
| 7,972,417 |
|
| 7,711,542 |
|
| 8,058,793 |
|
| 8,181,554 |
|
| 7,893,546 |
Interest-bearing public funds deposits |
|
| 2,613,858 |
|
| 2,854,839 |
|
| 3,108,008 |
|
| 3,040,318 |
|
| 2,762,048 |
Time deposits |
|
| 3,691,002 |
|
| 3,503,161 |
|
| 3,088,861 |
|
| 2,723,833 |
|
| 2,981,881 |
Total interest-bearing deposits |
|
| 14,277,277 |
|
| 14,069,542 |
|
| 14,255,662 |
|
| 13,945,705 |
|
| 13,637,475 |
Total deposits |
|
| 22,417,807 |
|
| 22,235,338 |
|
| 22,485,722 |
|
| 22,253,202 |
|
| 21,533,859 |
Short-term borrowings |
|
| 2,276,647 |
|
| 2,314,190 |
|
| 1,452,097 |
|
| 1,703,890 |
|
| 1,737,151 |
Long-term debt |
|
| 215,912 |
|
| 266,009 |
|
| 300,443 |
|
| 305,513 |
|
| 331,179 |
Other liabilities |
|
| 208,931 |
|
| 180,355 |
|
| 163,037 |
|
| 188,532 |
|
| 351,291 |
Stockholders' equity |
|
| 2,978,878 |
|
| 2,929,555 |
|
| 2,896,038 |
|
| 2,884,949 |
|
| 2,863,275 |
Total liabilities & stockholders' equity |
| $ | 28,098,175 |
| $ | 27,925,447 |
| $ | 27,297,337 |
| $ | 27,336,086 |
| $ | 26,816,755 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
|
| Three Months Ended |
| Nine Months Ended | |||||||||||||||||||||||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, |
| June 30, |
| September 30, |
|
| June 30, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2018 |
| ||||||||||
Average Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Total loans, net of unearned income (a) |
| $ | 19,464,639 |
| $ | 19,193,234 |
| $ | 18,591,219 |
| $ | 19,230,385 |
| $ | 18,092,622 | ||||||||||||||||||||
Period-End Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total loans |
| $ | 21,035,952 |
|
| $ | 20,175,812 |
|
| $ | 20,112,838 |
|
| $ | 20,026,411 |
|
| $ | 19,543,717 |
| |||||||||||||||
Loans held for sale |
| 25,992 |
| 22,575 |
| 21,723 |
| 26,898 |
| 21,815 |
|
| 75,789 |
|
|
| 36,150 |
|
|
| 27,437 |
|
|
| 28,150 |
|
|
| 29,043 |
| |||||
Securities (b) |
| 6,186,410 |
| 6,032,058 |
| 5,679,841 |
| 6,039,645 |
| 5,321,974 | |||||||||||||||||||||||||
Securities |
|
| 6,404,719 |
|
|
| 5,725,735 |
|
|
| 5,577,522 |
|
|
| 5,670,584 |
|
|
| 5,987,447 |
| |||||||||||||||
Short-term investments |
|
| 155,331 |
|
| 143,158 |
|
| 194,643 |
|
| 148,958 |
|
| 435,066 |
|
| 49,513 |
|
|
| 151,062 |
|
|
| 163,762 |
|
|
| 111,094 |
|
|
| 108,074 |
|
Earning assets |
|
| 25,832,372 |
|
| 25,391,025 |
|
| 24,487,426 |
|
| 25,445,886 |
|
| 23,871,477 |
|
| 27,565,973 |
|
|
| 26,088,759 |
|
|
| 25,881,559 |
|
|
| 25,836,239 |
|
|
| 25,668,281 |
|
Allowance for loan losses |
| (214,376) |
| (212,766) |
| (224,537) |
| (214,637) |
| (222,623) |
|
| (195,572 | ) |
|
| (195,625 | ) |
|
| (194,688 | ) |
|
| (194,514 | ) |
|
| (214,550 | ) | |||||
Goodwill and other intangible assets |
| 886,226 |
| 827,760 |
| 837,107 |
| 849,279 |
| 798,050 |
|
| 977,369 |
|
|
| 878,051 |
|
|
| 883,097 |
|
|
| 887,123 |
|
|
| 892,595 |
| |||||
Other assets |
|
| 1,522,701 |
|
| 1,479,033 |
|
| 1,577,577 |
|
| 1,505,382 |
|
| 1,546,910 |
|
| 2,195,779 |
|
|
| 1,990,678 |
|
|
| 1,920,263 |
|
|
| 1,707,059 |
|
|
| 1,751,849 |
|
Total assets |
| $ | 28,026,923 |
| $ | 27,485,052 |
| $ | 26,677,573 |
| $ | 27,585,910 |
| $ | 25,993,814 |
| $ | 30,543,549 |
|
| $ | 28,761,863 |
|
| $ | 28,490,231 |
|
| $ | 28,235,907 |
|
| $ | 28,098,175 |
|
Noninterest-bearing deposits |
| $ | 8,017,353 |
| $ | 8,149,521 |
| $ | 7,775,913 |
| $ | 8,039,574 |
| $ | 7,670,517 |
| $ | 8,686,383 |
|
| $ | 8,114,632 |
|
| $ | 8,158,658 |
|
| $ | 8,499,027 |
|
| $ | 8,140,530 |
|
Interest-bearing transaction and savings deposits |
|
| 7,944,349 |
|
| 7,860,019 |
|
| 8,097,370 |
|
| 7,948,819 |
|
| 7,685,213 |
|
| 8,758,993 |
|
|
| 8,034,801 |
|
|
| 8,224,203 |
|
|
| 8,000,093 |
|
|
| 7,972,417 |
|
Interest-bearing public fund deposits |
| 2,682,269 |
| 2,970,117 |
| 2,764,961 |
| 2,906,067 |
| 2,618,215 | |||||||||||||||||||||||||
Interest-bearing public funds deposits |
|
| 2,954,966 |
|
|
| 3,159,790 |
|
|
| 3,229,589 |
|
|
| 3,006,516 |
|
|
| 2,613,858 |
| |||||||||||||||
Time deposits |
|
| 3,377,588 |
|
| 3,121,817 |
|
| 2,711,574 |
|
| 3,160,943 |
|
| 2,543,834 |
|
| 3,800,957 |
|
|
| 3,926,819 |
|
|
| 3,767,844 |
|
|
| 3,644,549 |
|
|
| 3,691,002 |
|
Total interest-bearing deposits |
|
| 14,004,206 |
|
| 13,951,953 |
|
| 13,573,905 |
|
| 14,015,829 |
|
| 12,847,262 |
|
| 15,514,916 |
|
|
| 15,121,410 |
|
|
| 15,221,636 |
|
|
| 14,651,158 |
|
|
| 14,277,277 |
|
Total deposits |
|
| 22,021,559 |
|
| 22,101,474 |
|
| 21,349,818 |
|
| 22,055,403 |
|
| 20,517,779 |
|
| 24,201,299 |
|
|
| 23,236,042 |
|
|
| 23,380,294 |
|
|
| 23,150,185 |
|
|
| 22,417,807 |
|
Short-term borrowings |
| 2,610,176 |
| 1,989,416 |
| 1,909,365 |
| 2,143,759 |
| 2,089,024 |
|
| 2,108,815 |
|
|
| 1,641,598 |
|
|
| 1,388,735 |
|
|
| 1,589,128 |
|
|
| 2,276,647 |
| |||||
Long-term debt |
| 241,517 |
| 299,695 |
| 339,535 |
| 281,876 |
| 408,191 |
|
| 246,641 |
|
|
| 232,754 |
|
|
| 224,962 |
|
|
| 224,993 |
|
|
| 215,912 |
| |||||
Other liabilities |
| 201,240 |
| 185,470 |
| 240,338 |
| 193,166 |
| 192,376 |
|
| 400,414 |
|
|
| 332,554 |
|
|
| 305,665 |
|
|
| 190,261 |
|
|
| 208,931 |
| |||||
Stockholders' equity |
|
| 2,952,431 |
|
| 2,908,997 |
|
| 2,838,517 |
|
| 2,911,706 |
|
| 2,786,444 |
|
| 3,586,380 |
|
|
| 3,318,915 |
|
|
| 3,190,575 |
|
|
| 3,081,340 |
|
|
| 2,978,878 |
|
Total liabilities & stockholders' equity |
| $ | 28,026,923 |
| $ | 27,485,052 |
| $ | 26,677,573 |
| $ | 27,585,910 |
| $ | 25,993,814 |
| $ | 30,543,549 |
|
| $ | 28,761,863 |
|
| $ | 28,490,231 |
|
| $ | 28,235,907 |
|
| $ | 28,098,175 |
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| ||||||||
(in thousands) |
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| |||||
Average Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
| $ | 20,197,114 |
|
| $ | 20,150,104 |
|
| $ | 19,464,639 |
|
| $ | 20,158,313 |
|
| $ | 19,230,385 |
|
Loans held for sale |
|
| 55,348 |
|
|
| 27,873 |
|
|
| 25,992 |
|
|
| 34,740 |
|
|
| 26,898 |
|
Securities (a) |
|
| 6,004,688 |
|
|
| 5,586,390 |
|
|
| 6,186,410 |
|
|
| 5,750,530 |
|
|
| 6,039,645 |
|
Short-term investments |
|
| 180,463 |
|
|
| 228,527 |
|
|
| 155,331 |
|
|
| 208,263 |
|
|
| 148,958 |
|
Earning assets |
|
| 26,437,613 |
|
|
| 25,992,894 |
|
|
| 25,832,372 |
|
|
| 26,151,846 |
|
|
| 25,445,886 |
|
Allowance for loan losses |
|
| (197,259 | ) |
|
| (195,238 | ) |
|
| (214,376 | ) |
|
| (196,297 | ) |
|
| (214,637 | ) |
Goodwill and other intangible assets |
|
| 886,868 |
|
|
| 880,497 |
|
|
| 886,226 |
|
|
| 884,254 |
|
|
| 849,279 |
|
Other assets |
|
| 2,020,884 |
|
|
| 1,859,657 |
|
|
| 1,522,701 |
|
|
| 1,875,236 |
|
|
| 1,505,382 |
|
Total assets |
| $ | 29,148,106 |
|
| $ | 28,537,810 |
|
| $ | 28,026,923 |
|
| $ | 28,715,039 |
|
| $ | 27,585,910 |
|
Noninterest-bearing deposits |
| $ | 8,092,482 |
|
| $ | 8,099,621 |
|
| $ | 8,017,353 |
|
| $ | 8,139,439 |
|
| $ | 8,039,574 |
|
Interest-bearing transaction and savings deposits |
|
| 8,179,240 |
|
|
| 8,026,012 |
|
|
| 7,944,349 |
|
|
| 8,096,299 |
|
|
| 7,948,819 |
|
Interest-bearing public fund deposits |
|
| 2,979,494 |
|
|
| 3,194,113 |
|
|
| 2,682,269 |
|
|
| 3,077,760 |
|
|
| 2,906,067 |
|
Time deposits |
|
| 3,840,139 |
|
|
| 3,817,817 |
|
|
| 3,377,588 |
|
|
| 3,800,771 |
|
|
| 3,160,943 |
|
Total interest-bearing deposits |
|
| 14,998,873 |
|
|
| 15,037,942 |
|
|
| 14,004,206 |
|
|
| 14,974,830 |
|
|
| 14,015,829 |
|
Total deposits |
|
| 23,091,355 |
|
|
| 23,137,563 |
|
|
| 22,021,559 |
|
|
| 23,114,269 |
|
|
| 22,055,403 |
|
Short-term borrowings |
|
| 2,063,335 |
|
|
| 1,617,776 |
|
|
| 2,610,176 |
|
|
| 1,790,058 |
|
|
| 2,143,759 |
|
Long-term debt |
|
| 234,240 |
|
|
| 232,277 |
|
|
| 241,517 |
|
|
| 230,528 |
|
|
| 281,876 |
|
Other liabilities |
|
| 375,438 |
|
|
| 319,691 |
|
|
| 201,240 |
|
|
| 335,113 |
|
|
| 193,166 |
|
Stockholders' equity |
|
| 3,383,738 |
|
|
| 3,230,503 |
|
|
| 2,952,431 |
|
|
| 3,245,071 |
|
|
| 2,911,706 |
|
Total liabilities & stockholders' equity |
| $ | 29,148,106 |
|
| $ | 28,537,810 |
|
| $ | 28,026,923 |
|
| $ | 28,715,039 |
|
| $ | 27,585,910 |
|
(a) |
|
|
| Average securities do not include unrealized holding gains/losses on available for sale securities. |
51
52
Reconciliation of Non-GAAP Measures
Reported to core net interest income (te) and core net interest margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | ||||||||||||||||
| September 30, |
| June 30, |
| September 30, |
| September 30, | ||||||||||||
($ in thousands) | 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||||
Net interest income | $ | 214,194 |
|
| $ | 211,547 |
|
| $ | 202,857 |
|
| $ | 631,405 |
|
| $ | 584,265 |
|
Tax-equivalent adjustment (te)(a) |
| 4,095 |
|
|
| 4,081 |
|
|
| 8,579 |
|
|
| 12,139 |
|
|
| 25,441 |
|
Net interest income (te) | $ | 218,289 |
|
| $ | 215,628 |
|
| $ | 211,436 |
|
| $ | 643,544 |
|
| $ | 609,706 |
|
Purchase accounting adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan discount accretion (b) |
| 5,415 |
|
|
| 6,376 |
|
|
| 7,711 |
|
|
| 18,899 |
|
|
| 21,529 |
|
Bond premium amortization (c) |
| (221) |
|
|
| (259) |
|
|
| (364) |
|
|
| (795) |
|
|
| (1,216) |
|
Total net purchase accounting adjustments |
| 5,194 |
|
|
| 6,117 |
|
|
| 7,347 |
|
|
| 18,104 |
|
|
| 20,313 |
|
Net interest income (te) - core | $ | 213,095 |
|
| $ | 209,511 |
|
| $ | 204,089 |
|
| $ | 625,440 |
|
| $ | 589,393 |
|
Average earning assets | $ | 25,832,372 |
|
| $ | 25,391,025 |
|
| $ | 24,487,426 |
|
| $ | 25,445,886 |
|
| $ | 23,871,477 |
|
Net interest margin - reported |
| 3.36 | % |
|
| 3.40 | % |
|
| 3.44 | % |
|
| 3.38 | % |
|
| 3.41 | % |
Net purchase accounting adjustments |
| 0.08 | % |
|
| 0.09 | % |
|
| 0.12 | % |
|
| 0.10 | % |
|
| 0.11 | % |
Net interest margin - core |
| 3.28 | % |
|
| 3.31 | % |
|
| 3.32 | % |
|
| 3.28 | % |
|
| 3.30 | % |
Operating revenue (te) and operating pre-provision net revenue (te)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||||||||
| September 30, |
| June 30, |
| September 30, |
| September 30, |
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||
(in thousands) | 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2019 |
|
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||||
Net interest income | $ | 214,194 |
| $ | 211,547 |
| $ | 202,857 |
| $ | 631,405 |
| $ | 584,265 |
| $ | 222,939 |
|
| $ | 219,868 |
|
|
| $ | 214,194 |
|
| $ | 662,061 |
|
| $ | 631,405 |
|
Noninterest income |
| 75,518 |
|
| 68,832 |
|
| 67,115 |
|
| 210,602 |
|
| 198,093 |
|
| 83,230 |
|
|
| 79,250 |
|
|
|
| 75,518 |
|
|
| 232,983 |
|
|
| 210,602 |
|
Total revenue | $ | 289,712 |
| $ | 280,379 |
| $ | 269,972 |
| $ | 842,007 |
| $ | 782,358 |
| $ | 306,169 |
|
| $ | 299,118 |
|
|
| $ | 289,712 |
|
| $ | 895,044 |
|
| $ | 842,007 |
|
Tax-equivalent adjustment (a) |
| 4,095 |
|
| 4,081 |
|
| 8,579 |
|
| 12,139 |
|
| 25,441 |
|
| 3,652 |
|
|
| 3,718 |
|
|
|
| 4,095 |
|
|
| 11,194 |
|
|
| 12,139 |
|
Nonoperating revenue |
| — |
|
| — |
|
| — |
|
| 1,145 |
|
| (4,352) |
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| 1,145 |
|
Operating revenue (te) | $ | 293,807 |
| $ | 284,460 |
| $ | 278,551 |
| $ | 855,291 |
| $ | 803,447 |
| $ | 309,821 |
|
| $ | 302,836 |
|
|
| $ | 293,807 |
|
| $ | 906,238 |
|
| $ | 855,291 |
|
Noninterest expense |
| (181,187) |
|
| (184,402) |
|
| (177,616) |
|
| (536,380) |
|
| (524,628) |
|
| (213,554 | ) |
|
| (183,567 | ) |
|
|
| (181,187 | ) |
|
| (572,821 | ) |
|
| (536,380 | ) |
Nonoperating expense |
| 4,827 |
|
| 15,805 |
|
| 11,393 |
|
| 26,485 |
|
| 28,473 |
|
| 28,810 |
|
|
| — |
|
|
|
| 4,827 |
|
|
| 28,810 |
|
|
| 26,485 |
|
Operating pre-prevision net revenue (te) | $ | 117,447 |
| $ | 115,863 |
| $ | 112,328 |
| $ | 345,396 |
| $ | 307,292 |
| $ | 125,077 |
|
| $ | 119,269 |
|
|
| $ | 117,447 |
|
| $ | 362,227 |
|
| $ | 345,396 |
|
Operating earnings per share - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
| Three Months Ended | Nine Months Ended |
| Three Months Ended | Nine Months Ended |
| ||||||||||||||||||||||||||||
| September 30, |
| June 30, |
| September 30, |
| September 30, |
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
(in thousands) | 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||||
Net income | $ | 83,878 |
| $ | 71,177 |
| $ | 58,902 |
| $ | 227,530 |
| $ | 160,183 |
| $ | 67,807 |
|
| $ | 88,277 |
|
| $ | 83,878 |
|
| $ | 235,248 |
|
| $ | 227,530 |
|
Net income allocated to participating securities |
| (1,544) |
|
| (1,328) |
|
| (1,244) |
|
| (4,238) |
|
| (3,566) |
|
| (1,141 | ) |
|
| (1,502 | ) |
|
| (1,544 | ) |
|
| (3,980 | ) |
|
| (4,238 | ) |
Net income available to common shareholders |
| 82,334 |
|
| 69,849 |
| $ | 57,658 |
| $ | 223,292 |
| $ | 156,617 |
|
| 66,666 |
|
|
| 86,775 |
|
|
| 82,334 |
|
|
| 231,268 |
|
|
| 223,292 |
|
Nonoperating items, net of applicable income tax |
| 3,813 |
|
| 12,486 |
|
| 7,405 |
|
| 22,081 |
|
| 15,679 |
|
| 22,760 |
|
|
| — |
|
|
| 3,813 |
|
|
| 30,720 |
|
|
| 22,081 |
|
Nonoperating items allocated to participating securities |
| (71) |
|
| (233) |
|
| (156) |
|
| (413) |
|
| (342) |
|
| (383 | ) |
|
| — |
|
|
| (71 | ) |
|
| (517 | ) |
|
| (413 | ) |
Operating earnings available to common shareholders | $ | 86,076 |
| $ | 82,102 |
|
| 64,907 |
|
| 244,960 |
|
| 171,954 |
|
| 89,043 |
|
|
| 86,775 |
|
|
| 86,076 |
|
|
| 261,471 |
|
|
| 244,960 |
|
Weighted average common shares - diluted |
| 85,539 |
|
| 85,483 |
|
| 84,980 |
|
| 85,482 |
|
| 84,818 |
|
| 86,462 |
|
|
| 85,835 |
|
|
| 85,539 |
|
|
| 86,010 |
|
|
| 85,482 |
|
Earnings per share -diluted | $ | 0.96 |
| $ | 0.82 |
| $ | 0.68 |
| $ | 2.61 |
| $ | 1.85 | ||||||||||||||||||||
Earnings per share - diluted |
| $ | 0.77 |
|
| $ | 1.01 |
|
| $ | 0.96 |
|
| $ | 2.69 |
|
| $ | 2.61 |
| ||||||||||||||
Operating earnings per share - diluted | $ | 1.01 |
| $ | 0.96 |
| $ | 0.76 |
| $ | 2.87 |
| $ | 2.03 |
| $ | 1.03 |
|
| $ | 1.01 |
|
| $ | 1.01 |
|
| $ | 3.04 |
|
| $ | 2.87 |
|
(a) |
| Taxable equivalent adjustment (te) amounts |
|
|
|
|
53
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. We develop liquidity management strategies and measure and regularly monitor liquidity risk as part of our 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 54.44% at September 30, 2019, compared to 40.10% at June 30, 2019 and 48.90% at September 30, 2018, compared to 49.31% at June 30, 2018 and 36.61% at September 30, 2017.2018. The total of pledged securities at September 30, 20182019 was $3.1$3.0 billion, down $29$511.5 million from June 30, 20182019 as we used FHLB letters of credit as collateral during the quarter, impacting the availability on that line. Securities and FHLB letters of credit are pledged as collateral related to seasonal public fund tax depositsfunds and repurchase agreements. Also impacting the free securities ratio was released. Totalan increase in total securities atavailable for pledging, up $698.2 million compared to June 30, 2019 and $442.3 million compared to September 30, 2018, was $0.4as the Company acquired bonds during third quarter of 2019 in anticipation of the MidSouth acquisition. The total bond portfolio is expected to decrease to our targeted level of approximately $6.2 billion higher than at September 30, 2017.during the fourth quarter of 2019.
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| September 30, |
| June 30, |
| March 31, |
|
| December 31, |
| September 30, |
| September 30, |
|
| June 30, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
| |||||||||
Liquidity Metrics |
| 2018 |
| 2018 |
| 2018 |
|
| 2017 |
| 2017 |
| 2019 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2018 |
| |||||||||
Free securities / total securities |
| 48.90 | % |
| 49.31 | % |
| 43.35 | % |
| 44.15 | % |
| 36.61 | % |
|
| 54.44 | % |
|
| 40.10 | % |
|
| 33.57 | % |
|
| 41.39 | % |
|
| 48.90 | % |
Core deposits / total deposits |
| 89.71 | % |
| 89.65 | % |
| 90.84 | % |
| 93.03 | % |
| 91.70 | % |
|
| 90.31 | % |
|
| 89.30 | % |
|
| 89.98 | % |
|
| 90.47 | % |
|
| 89.71 | % |
Wholesale funds / core deposits |
| 19.34 | % |
| 19.93 | % |
| 14.44 | % |
| 13.76 | % |
| 15.94 | % |
|
| 15.54 | % |
|
| 15.13 | % |
|
| 13.61 | % |
|
| 14.53 | % |
|
| 19.34 | % |
Quarter-to-date average loans /quarter-to-date average deposits |
| 88.39 | % |
| 86.84 | % |
| 86.32 | % |
| 86.57 | % |
| 87.08 | % |
|
| 87.47 | % |
|
| 87.09 | % |
|
| 87.08 | % |
|
| 88.09 | % |
|
| 88.39 | % |
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 September 30, 2019, deposits totaled $24.2 billion, an increase of $965.3 million, or 4%, from June 30, 2019 and an increase of $1.8 billion, or 8%, from September 30, 2018. The increase over both periods is due largely to the acquisition of $1.3 billion in deposits in the MidSouth transaction. Core deposits consist of total deposits excluding certificates of deposit (“CDs”) of $250,000 or more and brokered deposits. Core deposits totaled $21.9 billion at September 30, 2019, an increase of $1.1 billion from June 30, 2019, and $1.7 billion from September 30, 2018. The ratio of core deposits to total deposits was 90.31% at September 30, 2019, compared to 89.30% at June 30, 2019 and 89.71% at September 30, 2018, compared to 89.65% at June 30, 2018 and 91.70% at September 30, 2017. Core deposits totaled $20.1 billion at September 30, 2018, an increase of $0.2 billion from June 30, 2018, and $0.4 billion from September 30, 2017.2018. Brokered deposits totaled $1.4$1.0 billion as of September 30, 2018,2019, a $26decrease of $223.1 million increase compared to June 30, 20182019 and $354$354.8 million compared to September 30, 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 September 30, 2018,2019, the Bank had borrowings of approximately $1.8$1.4 billion and had approximately $2.8$3.0 billion available under this line. The Bank also has unused borrowing capacity at the Federal Reserve’s discount window of approximately $2.3$2.5 billion; there were no outstanding borrowings with the Federal Reserve at any date during the twelve months ended September 30, 2018.any period covered by this report.
Wholesale funds, which are comprised of short-term borrowings, long-term debt and brokered deposits were 19.34%15.54% of core deposits at September 30, 2018,2019, compared to 19.93%15.13% at June 30, 20182019 and 15.94%19.34% at September 30, 2017.2018. The linked quarter decrease in wholesale funds was primarily related to decreases in FHLB borrowings, customer repurchase agreements, and long-term debt, partially offset by an increase in federal funds purchased. The year over year increase in wholesale funds was primarily related to increases in FHLB borrowings and brokered deposits,federal funds purchased, partially offset by a decrease in long-term debt. Managementbrokered certificates of deposit and repurchase agreements. The year over year decrease in wholesale funds was primarily related to decreases in FHLB borrowings and brokered certificates of deposit, partially offset by an increase in repurchase agreements and federal funds purchased. The Company has established an internal target for wholesale funds to be less than 25% of core deposits.
Another key measure used to monitor our 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 for each dollar of deposits on hand. Our average loan-to-deposit ratio for the third quarter of 20182019 was 88.39%87.47%, compared to 86.84%87.09% for the second quarter of 20182019 and 87.08%88.39% for the third quarter of 2017.2018. Management has an established target range for itsthe loan-to-deposit ratio of 83%87% to 87%89%, but will operate temporarily outside of that range depending on market conditions. which could be exceeded under certain circumstances.
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 nine months ended September 30, 20182019 and 2017.2018.
Dividends received from the Bank have been the primary source of funds available to the Parent 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. The Parent targets cash and other liquid assets to provide liquidity in an amount sufficient to fund approximately sixfour quarters of anticipated common stockholder dividends.
54
Tabledividends, but will temporarily operate below that level if a return to the target can be achieved in the near-term. On September 23, 2019, the Bank declared a special dividend of Contents$150 million to the Parent to assist in the completion of the MidSouth acquisition and provide additional liquidity for the approved share buyback program and other activity of the Parent.
CAPITAL RESOURCES
Stockholders’ equity totaled $3.0$3.6 billion at September 30, 2018,2019, up $49$267.5 million, or 2%8%, from June 30, 20182019 and up $116$607.5 million, or 4%20%, from September 30, 2017.2018. The tangible common equity ratio was 8.82% at September 30, 2019, compared to 8.75% at June 30, 2019 and 7.67% at September 30, 2018, compared to 7.76% at2018. The increase in the tangible common equity ratio from both June 30, 20182019 and 7.80% at September 30, 2017. The decrease in the ratio from prior quarter is due to increase in goodwill and other intangibles resulting from the trust and asset management acquisition, partially offset by net tangible retained earnings. The decrease from September 30, 20172018 was primarily relatedattributable to the change in accumulated other comprehensive loss, tangible asset growth and an increase in intangible assets related to acquisition transactions, partially offset by an increase in net tangible retained earnings.earnings and net gains on fair value adjustments of securities available for sale included in other accumulated comprehensive loss, partially offset by the impact of the MidSouth acquisition and other growth in tangible assets. Management has established an internal target for the tangible common equity ratio of at least 8.00%; however,
53
management will allow the 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. We expect to be backoperations within our target range in the first half of 2019.
a short time frame.
The regulatory capital ratios of the Company and the Bank as ofat September 30, 2018 declined compared to prior quarter due mostly to the intangible assets generated from the trust and asset management transaction and asset growth, however, the ratios remain strong and are2019 remained well in excess of current regulatory minimum requirements. The decline in Bank regulatory capital ratios compared to the prior quarter was due in part to a special $150 million dividend from the Bank to the Parent in the third quarter of 2019 to assist in the MidSouth transaction and provide additional liquidity for the approved buyback program and other activities of the Parent. 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. Seerequirements. Refer 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 our 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 quarters ending March 31, 2018 and
|
| Well- |
|
| September 30, |
|
| June 30, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
| ||||||
|
| Capitalized |
|
| 2019 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2018 |
| ||||||
Total capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hancock Whitney Corporation |
|
| 10.00 | % |
|
| 12.43 | % |
|
| 12.43 | % |
|
| 12.24 | % |
|
| 11.99 | % |
|
| 11.98 | % |
Hancock Whitney Bank |
|
| 10.00 | % |
|
| 11.19 | % |
|
| 11.81 | % |
|
| 11.73 | % |
|
| 11.17 | % |
|
| 11.25 | % |
Tier 1 common equity capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hancock Whitney Corporation |
|
| 6.50 | % |
|
| 11.02 | % |
|
| 10.94 | % |
|
| 10.74 | % |
|
| 10.48 | % |
|
| 10.36 | % |
Hancock Whitney Bank |
|
| 6.50 | % |
|
| 10.39 | % |
|
| 10.97 | % |
|
| 10.88 | % |
|
| 10.32 | % |
|
| 10.30 | % |
Tier 1 capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hancock Whitney Corporation |
|
| 8.00 | % |
|
| 11.02 | % |
|
| 10.94 | % |
|
| 10.74 | % |
|
| 10.48 | % |
|
| 10.36 | % |
Hancock Whitney Bank |
|
| 8.00 | % |
|
| 10.39 | % |
|
| 10.97 | % |
|
| 10.88 | % |
|
| 10.32 | % |
|
| 10.30 | % |
Tier 1 leverage capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hancock Whitney Corporation |
|
| 5.00 | % |
|
| 9.49 | % |
|
| 9.10 | % |
|
| 8.85 | % |
|
| 8.67 | % |
|
| 8.50 | % |
Hancock Whitney Bank |
|
| 5.00 | % |
|
| 8.95 | % |
|
| 9.12 | % |
|
| 8.97 | % |
|
| 8.54 | % |
|
| 8.46 | % |
On July 29, 2019, our board of directors declared a regular third quarter cash dividend of $0.27 per share, consistent with the prior were filedquarter.
On September 21, 2019, we issued approximately 5.0 million shares of common stock at $38.42 as consideration in the namesacquisition of Hancock Holding Company and Whitney Bank, respectively.MidSouth. Refer to Note 2 – Business Combinations for more information regarding this transaction.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Well- |
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| September 30, | ||||||
|
| Capitalized |
| 2018 |
| 2018 |
| 2018 |
|
| 2017 |
| 2017 | |||||
Total capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hancock Whitney Corporation |
| 10.00 | % |
| 11.98 | % |
| 12.12 | % |
| 12.00 | % |
| 11.90 | % |
| 11.84 | % |
Hancock Whitney Bank |
| 10.00 | % |
| 11.25 | % |
| 11.57 | % |
| 11.60 | % |
| 11.55 | % |
| 11.35 | % |
Tier 1 common equity capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hancock Whitney Corporation |
| 6.50 | % |
| 10.36 | % |
| 10.48 | % |
| 10.35 | % |
| 10.21 | % |
| 10.10 | % |
Hancock Whitney Bank |
| 6.50 | % |
| 10.30 | % |
| 10.60 | % |
| 10.63 | % |
| 10.54 | % |
| 10.31 | % |
Tier 1 capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hancock Whitney Corporation |
| 8.00 | % |
| 10.36 | % |
| 10.48 | % |
| 10.35 | % |
| 10.21 | % |
| 10.10 | % |
Hancock Whitney Bank |
| 8.00 | % |
| 10.30 | % |
| 10.60 | % |
| 10.63 | % |
| 10.54 | % |
| 10.31 | % |
Tier 1 leverage capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hancock Whitney Corporation |
| 5.00 | % |
| 8.50 | % |
| 8.66 | % |
| 8.51 | % |
| 8.43 | % |
| 8.34 | % |
Hancock Whitney Bank |
| 5.00 | % |
| 8.46 | % |
| 8.77 | % |
| 8.75 | % |
| 8.72 | % |
| 8.53 | % |
Regulatory definitions:
|
|
|
|
|
|
|
|
|
|
On May 24, 2018, ourthe Company’s board of directors approved a stock buyback program thatwhereby the Company was authorized theto repurchase of up to 5%, or approximately 4.3 million shares, of its outstanding85.3 million shares common stock.stock then outstanding. The program was set to expire on December 31, 2019. Under this program, 200,000 shares of the Company’s common stock were repurchased at an average price of $41.30 per share.
On September 23, 2019, the Company’s board of directors approved a new stock buyback program allows usthat authorizes the Company to repurchase up to 5.5 million shares of our common stock eitherthrough the expiration date of December 31, 2020. The program allows the Company to repurchase its common shares in the open market, in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, orby block purchase, through accelerated share repurchase programs, 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.transactions. 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. Asexpiration date.
Subsequent to quarter end, we entered into an accelerated share repurchase (“ASR”) agreement with Morgan Stanley & Co. LLC (“Morgan Stanley”) to repurchase $185 million of September 30, 2018,our common stock. Pursuant to the ASR agreement, we had not purchased anymade a $185 million payment to Morgan Stanley on October 21, 2019, and received from Morgan Stanley on the same day an initial delivery of approximately 3.6 million shares of our common stock, under this program.which represents 75% of the estimated total number of shares to be repurchased based on the October 18, 2019 closing price of our common stock. The final number of shares to be repurchased will be based generally on the volume-weighted average price per share of our common stock during the term of the ASR agreement, less a discount, and subject to possible adjustments in accordance with the terms of the ASR agreement. Final settlement of the ASR agreement is scheduled to occur no later than the third quarter of 2020.
On July 26, 2018, the board of directors declared the regular third quarter cash dividend at $0.27 per share, a 12.5% increase from the prior quarter. The annual cash dividend payable rate increased to $1.08 per share, compared to the previous rate of $0.96 per share. The Company has paid uninterrupted quarter dividends to shareholders since 1967.54
55
BALANCE SHEET ANALYSIS
Securities
InvestmentsInvestment in securities totaled approximately $6.0$6.4 billion at September 30, 2018, down $1262019, up $679 million, or 2%12%, from June 30, 2018,2019 and up $363$417 million, or 7%, from September 30, 2017.2018. At September 30, 2018,2019, securities available for sale totaled $2.9$3.5 billion and securities held to maturity totaled $3.1$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 effectiveportfolio 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 September 30, 2018,2019, the average expected maturity of the portfolio was 5.615.75 years with an effective duration of 4.904.0 years and a nominal weighted-average yield of 2.54%2.63%. Management simulations indicate that the effective duration would decreaseincrease to 4.844.21 years with a 100 bpsbp increase in the yield curve and increase to 4.914.38 years with a 200 bpsbp increase. At June 30, 2018,2019, the average expected maturity of the portfolio was 6.095.41 years with an effective duration of 4.894.18 years and a nominal weighted-average yield of 2.53%2.75%. The average maturity of the portfolio at September 30, 20172018 was 5.575.61 years, while thewith an effective duration was 4.644.90 years and the nominal weighted averageweighted-average yield was 2.36%2.54%. The changes in expected maturity, effective duration, and nominal weighted-average yield compared to prior quarter and year-over-year were primarily related to purchases during the third quarter of 2019 in anticipation of the MidSouth acquisition. Year-over-year metrics were also impacted by the fourth quarter 2018 portfolio restructure.
Loans
Total loans at September 30, 20182019 were $19.5$21.0 billion, up approximately $173 million, or 1%, from June 30, 2018, and up $757$860.1 million, or 4%, from June 30, 2019, and up $1.5 billion, or 8%, from September 30, 2017. The increase from June 30, 2018 is2018. Growth compared to both the prior quarter and same quarter last year reflect the acquisition of $785 million in loans, net of approximately $90 millionpurchase discount, from MidSouth during the third quarter of paydowns on two relationships that occurred at quarter end, approximately half of which was in the energy related transportation sector, where we are working to reduce our exposure. Net2019. Additional net loan growth continues to be diversified both regionallyacross products and the Bank’s footprint. Management continues to anticipate the year-over-year average loan growth percentage for 2019 will be in areas identified as a part of the Company’s revenue generating initiatives, including equipment finance and healthcare. Loans to energy related entities decreased $58 million during third quarter of 2018 and are down $206 million compared to September 30, 2017 as we continue to reduce our exposure to the energy sector. mid-single digits.
The following table shows the composition of our loan portfolio:
portfolio at each date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
| |||||||||||||||||||||||||||||||||
|
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| September 30, |
| September 30, |
|
| June 30 |
|
| March 31, |
|
| December 31, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2018 |
| 2018 |
| 2018 |
| 2017 |
| 2017 |
| 2019 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2018 |
| ||||||||||
Total loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 8,438,884 |
| $ | 8,410,961 |
| $ | 8,336,222 |
| $ | 8,297,937 |
| $ | 8,129,429 |
| $ | 8,893,004 |
|
| $ | 8,559,118 |
|
| $ | 8,656,326 |
|
| $ | 8,620,601 |
|
| $ | 8,438,884 |
|
Commercial real estate - owner occupied |
|
| 2,300,271 |
|
| 2,233,794 |
|
| 2,185,543 |
|
| 2,142,439 |
|
| 2,076,014 |
|
| 2,734,379 |
|
|
| 2,519,970 |
|
|
| 2,515,428 |
|
|
| 2,457,748 |
|
|
| 2,300,271 |
|
Total commercial and industrial |
|
| 10,739,155 |
|
| 10,644,755 |
|
| 10,521,765 |
|
| 10,440,376 |
|
| 10,205,443 |
|
| 11,627,383 |
|
|
| 11,079,088 |
|
|
| 11,171,754 |
|
|
| 11,078,349 |
|
|
| 10,739,155 |
|
Commercial real estate - income producing |
|
| 2,311,699 |
|
| 2,342,192 |
|
| 2,394,862 |
|
| 2,384,599 |
|
| 2,511,808 |
|
| 3,060,568 |
|
|
| 2,895,468 |
|
|
| 2,563,394 |
|
|
| 2,341,779 |
|
|
| 2,311,699 |
|
Construction and land development |
|
| 1,523,419 |
|
| 1,515,233 |
|
| 1,413,878 |
|
| 1,373,421 |
|
| 1,373,048 |
|
| 1,190,718 |
|
|
| 1,144,062 |
|
|
| 1,340,067 |
|
|
| 1,548,335 |
|
|
| 1,523,419 |
|
Residential mortgages |
|
| 2,846,916 |
|
| 2,780,359 |
|
| 2,732,821 |
|
| 2,690,472 |
|
| 2,596,692 |
|
| 3,004,958 |
|
|
| 2,968,271 |
|
|
| 2,933,251 |
|
|
| 2,910,081 |
|
|
| 2,846,916 |
|
Consumer |
|
| 2,122,528 |
|
| 2,088,378 |
|
| 2,029,178 |
|
| 2,115,295 |
|
| 2,099,294 |
|
| 2,152,325 |
|
|
| 2,088,923 |
|
|
| 2,104,372 |
|
|
| 2,147,867 |
|
|
| 2,122,528 |
|
Total loans |
| $ | 19,543,717 |
| $ | 19,370,917 |
| $ | 19,092,504 |
| $ | 19,004,163 |
| $ | 18,786,285 |
| $ | 21,035,952 |
|
| $ | 20,175,812 |
|
| $ | 20,112,838 |
|
| $ | 20,026,411 |
|
| $ | 19,543,717 |
|
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.
56
The following table provides detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| September 30, | ||||||||||||||||||||
|
| 2018 |
| 2018 |
| 2018 |
| 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: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Rental and Leasing |
| $ | 1,232,737 |
| 11 | % |
| $ | 1,195,278 |
| 11 | % |
| $ | 1,154,304 |
| 11 | % |
| $ | 1,122,389 |
| 11 | % |
| $ | 1,134,451 |
| 12 | % |
Health Care and Social Assistance |
|
| 1,135,040 |
| 11 |
|
|
| 1,152,593 |
| 11 |
|
|
| 1,159,214 |
| 11 |
|
|
| 1,118,288 |
| 11 |
|
|
| 1,023,939 |
| 10 |
|
Retail Trade (a) |
|
| 930,134 |
| 9 |
|
|
| 901,020 |
| 8 |
|
|
| 869,662 |
| 8 |
|
|
| 757,998 |
| 7 |
|
|
| 761,418 |
| 7 |
|
Mining, Quarrying, and Oil and Gas Extraction (a) |
|
| 874,223 |
| 8 |
|
|
| 932,113 |
| 9 |
|
|
| 972,580 |
| 9 |
|
|
| 992,179 |
| 10 |
|
|
| 1,074,822 |
| 11 |
|
Manufacturing (a) |
|
| 846,447 |
| 8 |
|
|
| 820,135 |
| 8 |
|
|
| 795,014 |
| 8 |
|
|
| 745,744 |
| 7 |
|
|
| 726,339 |
| 7 |
|
Public Administration |
|
| 842,199 |
| 8 |
|
|
| 866,052 |
| 8 |
|
|
| 857,736 |
| 8 |
|
|
| 840,773 |
| 8 |
|
|
| 832,638 |
| 8 |
|
Transportation and Warehousing (a) |
|
| 700,698 |
| 6 |
|
|
| 702,615 |
| 7 |
|
|
| 651,869 |
| 6 |
|
|
| 609,011 |
| 6 |
|
|
| 563,263 |
| 6 |
|
Construction |
|
| 582,761 |
| 5 |
|
|
| 632,592 |
| 6 |
|
|
| 626,013 |
| 6 |
|
|
| 619,956 |
| 6 |
|
|
| 564,444 |
| 6 |
|
Wholesale Trade (a) |
|
| 559,638 |
| 5 |
|
|
| 523,839 |
| 5 |
|
|
| 536,791 |
| 5 |
|
|
| 578,037 |
| 6 |
|
|
| 513,086 |
| 5 |
|
Finance and Insurance |
|
| 524,836 |
| 5 |
|
|
| 460,803 |
| 4 |
|
|
| 437,547 |
| 4 |
|
|
| 501,157 |
| 5 |
|
|
| 559,092 |
| 5 |
|
Professional, Scientific, and Technical Services (a) |
|
| 439,153 |
| 4 |
|
|
| 440,727 |
| 4 |
|
|
| 433,169 |
| 4 |
|
|
| 429,637 |
| 4 |
|
|
| 356,560 |
| 3 |
|
Educational Services |
|
| 430,238 |
| 4 |
|
|
| 437,484 |
| 4 |
|
|
| 440,272 |
| 4 |
|
|
| 462,595 |
| 4 |
|
|
| 438,247 |
| 4 |
|
Other Services (except Public Administration) |
|
| 391,040 |
| 4 |
|
|
| 382,737 |
| 4 |
|
|
| 371,913 |
| 4 |
|
|
| 356,787 |
| 3 |
|
|
| 349,711 |
| 3 |
|
Accommodation and Food Services |
|
| 331,604 |
| 3 |
|
|
| 366,240 |
| 3 |
|
|
| 357,693 |
| 3 |
|
|
| 324,619 |
| 3 |
|
|
| 340,551 |
| 3 |
|
Other (a) |
|
| 918,407 |
| 9 |
|
|
| 830,527 |
| 8 |
|
|
| 857,988 |
| 9 |
|
|
| 981,206 |
| 9 |
|
|
| 966,882 |
| 10 |
|
Total commercial & industrial loans |
| $ | 10,739,155 |
| 100 | % |
| $ | 10,644,755 |
| 100 | % |
| $ | 10,521,765 |
| 100 | % |
| $ | 10,440,376 |
| 100 | % |
| $ | 10,205,443 |
| 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 $.9 billion at September 30, 2018, $1.0 billion at June 30, 2018, and $1.1 billion at March 31, 2018, December 31, 2017 and September 30, 2017.
At September 30, 2018, commercialCommercial and industrial (“C&I”) loans, including both non-real estate and owner occupied real estate secured loans, totaled approximately $10.7$11.6 billion, or 55% of the total loan portfolio at September 30, 2019, an increase of $94$548.3 million, or 1%4.9%, from June 30, 2018. Included in C&I are $927 million in energy related loans, which are comprised of credits to both the exploration and production segment and the support services segment. Energy related loans comprised 4.7% of total loans at September 30, 2018, down from 12.4% in fourth quarter of 2014, the beginning2019. Approximately 70% of the downturn inlinked-quarter increase is related to the energy cycle, meeting our strategic target to reduce concentration of energy loans to 5% or lower. The energy portfolio is also more balancedMidSouth acquisition, with the remaining growth across the segments with 53% in support servicesmost regions and 47% in upstream and midstream at September 30, 2018, compared to 62% and 38%, respectively, at June 30, 2018. Third quarter 2018 activity in the energy portfolio included payoffs and paydowns of approximately $151 million, partially offset by approximately $93 million in draws on existing lines of credit. There were no energy charge-offs during the third quarter of 2018.specialty lines.
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 September 30, 2018 totaling2019 totaled approximately $1.8$2.1 billion, or 9%,10% of total loans, were up $77.9an increase of $14.7 million from June 30, 2018.2019. Approximately $458$499.7 million of our shared national credits were with energy related customers at September 30, 2019 were with energy-related customers.
Loans to borrowers in the energy sector totaled $1.0 billion at September 30, 2019, up $26.2 million, or 3%, from June 30, 2019 and $106.9 million, or 12%, compared to September 30, 2018. The linked quarter increase in energy-related loans resulted from $82 million in MidSouth acquired loans that are largely in support services sector, partially offset by net payoffs and charge-offs. While our overall energy exposure increased during the third quarter of 2019 due to the MidSouth acquisition, the level remains below our target of 5%. At
55
September 30, 2019, approximately $494 million, or 48%, of the energy portfolio was comprised of customers engaged in exploration and production, transportation, and storage activities. The remaining $540 million, or 52%, of the portfolio was comprised of customers engaged in onshore and offshore services and products to support exploration and production activities. We expect to continue to reduce our energy exposure through the next several quarters.
The following table provides detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes.
|
| September 30, |
|
| June 30, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
| |||||||||||||||||||||||||
|
| 2019 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2018 |
| |||||||||||||||||||||||||
|
|
|
|
|
| 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: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Rental and Leasing |
| $ | 1,426,334 |
|
|
| 12 | % |
| $ | 1,303,770 |
|
|
| 12 | % |
| $ | 1,406,207 |
|
|
| 12 | % |
| $ | 1,326,146 |
|
|
| 12 | % |
| $ | 1,232,737 |
|
|
| 11 | % |
Health Care and Social Assistance |
|
| 1,084,884 |
|
|
| 9 | % |
|
| 1,040,352 |
|
|
| 9 | % |
|
| 1,083,469 |
|
|
| 10 | % |
|
| 1,120,799 |
|
|
| 10 | % |
|
| 1,135,040 |
|
|
| 11 | % |
Retail Trade (a) |
|
| 1,060,765 |
|
|
| 9 | % |
|
| 1,024,031 |
|
|
| 9 | % |
|
| 970,599 |
|
|
| 9 | % |
|
| 937,971 |
|
|
| 8 | % |
|
| 934,281 |
|
|
| 9 | % |
Manufacturing (a) |
|
| 1,034,030 |
|
|
| 9 | % |
|
| 946,700 |
|
|
| 9 | % |
|
| 922,365 |
|
|
| 8 | % |
|
| 877,950 |
|
|
| 8 | % |
|
| 852,643 |
|
|
| 8 | % |
Mining, Quarrying, and Oil and Gas Extraction (a) |
|
| 893,218 |
|
|
| 8 | % |
|
| 922,055 |
|
|
| 8 | % |
|
| 957,590 |
|
|
| 8 | % |
|
| 1,016,870 |
|
|
| 9 | % |
|
| 917,389 |
|
|
| 9 | % |
Transportation and Warehousing (a) |
|
| 775,869 |
|
|
| 7 | % |
|
| 745,403 |
|
|
| 7 | % |
|
| 746,837 |
|
|
| 7 | % |
|
| 717,746 |
|
|
| 7 | % |
|
| 700,698 |
|
|
| 6 | % |
Public Administration |
|
| 765,492 |
|
|
| 7 | % |
|
| 778,622 |
|
|
| 7 | % |
|
| 799,237 |
|
|
| 7 | % |
|
| 814,442 |
|
|
| 7 | % |
|
| 842,199 |
|
|
| 8 | % |
Wholesale Trade (a) |
|
| 699,993 |
|
|
| 6 | % |
|
| 657,215 |
|
|
| 6 | % |
|
| 657,685 |
|
|
| 6 | % |
|
| 602,052 |
|
|
| 5 | % |
|
| 559,638 |
|
|
| 5 | % |
Construction |
|
| 638,384 |
|
|
| 6 | % |
|
| 619,204 |
|
|
| 6 | % |
|
| 645,107 |
|
|
| 6 | % |
|
| 643,932 |
|
|
| 6 | % |
|
| 582,761 |
|
|
| 5 | % |
Finance and Insurance |
|
| 632,197 |
|
|
| 5 | % |
|
| 610,900 |
|
|
| 5 | % |
|
| 595,373 |
|
|
| 5 | % |
|
| 605,663 |
|
|
| 6 | % |
|
| 524,836 |
|
|
| 5 | % |
Professional, Scientific, and Technical Services (a) |
|
| 498,591 |
|
|
| 4 | % |
|
| 459,794 |
|
|
| 4 | % |
|
| 421,999 |
|
|
| 4 | % |
|
| 462,984 |
|
|
| 4 | % |
|
| 439,153 |
|
|
| 4 | % |
Other Services (except Public Administration) |
|
| 477,625 |
|
|
| 4 | % |
|
| 452,958 |
|
|
| 4 | % |
|
| 450,153 |
|
|
| 4 | % |
|
| 436,390 |
|
|
| 4 | % |
|
| 391,040 |
|
|
| 4 | % |
Accommodation and Food Services |
|
| 451,150 |
|
|
| 4 | % |
|
| 415,814 |
|
|
| 4 | % |
|
| 413,732 |
|
|
| 4 | % |
|
| 385,958 |
|
|
| 4 | % |
|
| 416,734 |
|
|
| 4 | % |
Educational Services |
|
| 353,366 |
|
|
| 3 | % |
|
| 351,697 |
|
|
| 3 | % |
|
| 353,803 |
|
|
| 3 | % |
|
| 359,997 |
|
|
| 3 | % |
|
| 430,238 |
|
|
| 4 | % |
Other (a) |
|
| 835,485 |
|
|
| 7 | % |
|
| 750,573 |
|
|
| 7 | % |
|
| 747,598 |
|
|
| 7 | % |
|
| 769,449 |
|
|
| 7 | % |
|
| 779,768 |
|
|
| 7 | % |
Total commercial & industrial loans |
| $ | 11,627,383 |
|
|
| 100 | % |
| $ | 11,079,088 |
|
|
| 100 | % |
| $ | 11,171,754 |
|
|
| 100 | % |
| $ | 11,078,349 |
|
|
| 100 | % |
| $ | 10,739,155 |
|
|
| 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 $1.0 billion at September 30, 2019 and June 30, 2019, $1.1 billion at March 31, 2019 and December 31, 2018 and $0.9 billion at September 30, 2018. |
Commercial real estate – income producing loans totaled approximately $2.3$3.1 billion at September 30, 2018, a decrease2019, an increase of $30.5$165.1 million, or 1%6%, from June 30, 2018. The decrease was related primarily2019, largely due to healthcare facilities and multifamily properties.the addition of MidSouth loans. The following table details for the preceding five quarters the end-of-period commercial real estate – income producing loan balances by property type.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| September 30, |
| September 30, |
|
| June 30, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
| |||||||||||||||||||||||||||||||||||||||||||||
|
| 2018 |
| 2018 |
| 2018 |
| 2017 |
| 2017 |
| 2019 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2018 |
| |||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
| ||||||||||
($ 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 |
| $ | 499,395 |
| 22 | % |
| $ | 502,809 |
| 22 | % |
| $ | 521,607 |
| 22 | % |
| $ | 526,929 |
| 22 | % |
| $ | 550,720 |
| 22 | % |
| $ | 637,707 |
|
|
| 21 | % |
| $ | 607,622 |
|
|
| 21 | % |
| $ | 542,904 |
|
|
| 21 | % |
| $ | 507,129 |
|
|
| 22 | % |
| $ | 499,395 |
|
|
| 22 | % |
Office |
|
| 421,965 |
| 18 |
|
| 430,319 |
| 18 |
|
|
| 436,789 |
| 18 |
|
|
| 441,539 |
| 19 |
|
|
| 472,169 |
| 19 |
|
|
| 532,191 |
|
|
| 17 | % |
|
| 465,498 |
|
|
| 16 | % |
|
| 436,819 |
|
|
| 17 | % |
|
| 444,973 |
|
|
| 19 | % |
|
| 421,965 |
|
|
| 18 | % | |
Hotel/Motel |
|
| 346,735 |
| 15 |
|
| 332,411 |
| 14 |
|
|
| 336,724 |
| 14 |
|
|
| 328,238 |
| 14 |
|
|
| 299,796 |
| 12 |
| |||||||||||||||||||||||||||||||||||||||||
Multifamily |
|
| 333,144 |
| 15 |
|
| 347,732 |
| 15 |
|
|
| 379,932 |
| 16 |
|
|
| 341,783 |
| 14 |
|
|
| 339,656 |
| 13 |
|
|
| 466,545 |
|
|
| 15 | % |
|
| 519,808 |
|
|
| 18 | % |
|
| 369,041 |
|
|
| 14 | % |
|
| 332,145 |
|
|
| 14 | % |
|
| 333,144 |
|
|
| 15 | % | |
Industrial |
|
| 285,292 |
| 12 |
|
| 279,041 |
| 12 |
|
|
| 270,812 |
| 11 |
|
|
| 272,133 |
| 11 |
|
|
| 327,048 |
| 13 |
|
|
| 409,828 |
|
|
| 13 | % |
|
| 406,926 |
|
|
| 14 | % |
|
| 353,804 |
|
|
| 14 | % |
|
| 311,933 |
|
|
| 13 | % |
|
| 285,292 |
|
|
| 12 | % | |
Hotel/Motel |
|
| 325,003 |
|
|
| 11 | % |
|
| 379,385 |
|
|
| 13 | % |
|
| 377,674 |
|
|
| 15 | % |
|
| 374,430 |
|
|
| 16 | % |
|
| 346,735 |
|
|
| 15 | % | ||||||||||||||||||||||||||||||
Other |
|
| 425,168 |
| 18 |
|
|
| 449,880 |
| 19 |
|
|
| 448,998 |
| 19 |
|
|
| 473,977 |
| 20 |
|
|
| 522,419 |
| 21 |
|
|
| 689,294 |
|
|
| 23 | % |
|
| 516,229 |
|
|
| 18 | % |
|
| 483,152 |
|
|
| 19 | % |
|
| 371,169 |
|
|
| 16 | % |
|
| 425,168 |
|
|
| 18 | % |
Total commercial real estate - income producing loans |
| $ | 2,311,699 |
| 100 | % |
| $ | 2,342,192 |
| 100 | % |
| $ | 2,394,862 |
| 100 | % |
| $ | 2,384,599 |
| 100 | % |
| $ | 2,511,808 |
| 100 | % |
| $ | 3,060,568 |
|
|
| 100 | % |
| $ | 2,895,468 |
|
|
| 100 | % |
| $ | 2,563,394 |
|
|
| 100 | % |
| $ | 2,341,779 |
|
|
| 100 | % |
| $ | 2,311,699 |
|
|
| 100 | % |
57
Construction and land development loans, totaling approximately $1.5$1.2 billion at September 30, 2018, was relatively unchanged2019, increased $46.7 million, or 4%, from June 30, 2018.2019. Residential mortgages increased $66.6$36.7 million and consumer loans increased $34.2$63.4 million during the third quarter of 2018. 2019. These increases were also primarily as a result of the MidSouth acquisition.
56
We currently expect a slight slowdown in production in the fourth quarter of 2018, with end of period fourth quarter net loan growth estimated at $200 to $225 million.
Allowance for Loan Losses and Asset Quality
The Company's total allowance for loan losses was $214.5$195.6 million at September 30, 20182019 virtually unchanged from June 30, 20182019 and down $2.8$19.0 million from $217.3 million at December 31, 2017.compared to September 30, 2018. The ratio of the allowance for loan losses to period-end loans decreased slightly to 1.10%,was 0.93% at September 30, 2019 compared to 1.11%0.97% at both June 30, 2019 and December 31, 2018 with the decline resulting from the addition of MidSouth loans with no allowance as that portfolio is largely covered by the $41 million acquisition discount. Excluding the impact of MidSouth, coverage to total loans would have been flat. The relatively flat allowance (excluding the impact of MidSouth) reflects mixed credit metrics with higher commercial criticized and 1.14%nonaccrual loans, largely attributable to a few shared national credit downgrades, partially offset by problem credit resolutions, payoffs, restructure to performing loans and other upgrades. The energy allowance totaled $32.0 million, or 3.1% of energy loans at year end.September 30, 2019, up $0.5 million, or 1% from June 30, 2019. The slight increase in energy allowance for loan losses compared to second quarter 2018 reflects the replenishment of the $9.9 million of current quarter net of an $8.8 million increase in allowance for loan losses on the nonenergy portfolio, offset by a decrease of $8.8 million in energy reserves. The increasecharge-offs due to increasing concerns over borrower specific liquidity issues in the nonenergy allowance reflects increased growth and diversification of this portfolio, the impact that rising interest rates may have on ability to repay and criticized and nonperforming levels that, while down compared to the prior period-end, remain elevated compared to the last several years. The decline in energy reserves reflects the stabilization in crude oil prices, a sizable decline in energy exposure and a significant reduction in criticized loan balances. While there are a few problem energy credits for which we anticipate future charge-offs, management believes the allowance level is sufficient to cover that potential.upstream subsector.
The Company’s balance of criticized commercial loans totaled $0.8 billion$659.4 million at September 30, 2018, down $632019, up $86.6 million, or 7%15%, compared to June 30, 2018,2019, with a decrease$47.9 million of the increase attributable to MidSouth loans which are covered by the purchased discount. The increase in nonenergycommercial criticized loans of $12includes $63.4 million attributable to the commercial nonenergy portfolio ($43.1 million from MidSouth) and a decrease in energy of $51 million. Commercial criticized loans are down $242$23.1 million comparedattributable to December 31, 2017, with the energy portfolio ($4.5 million from MidSouth). Compared to September 30, 2018, criticized commercial loans were down $193$174.4 million, or 21%, with $98.5 million attributable to the commercial nonenergy portfolio and nonenergy down $49 million.$76.0 million of the decrease attributable to the energy 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. Our commercial nonenergy criticized portfolio, totaling $477$378.4 million at September 30, 20182019, is comprised of loans that are diversified as to both industry and geography, and the level ofgeography. Commercial nonenergy criticized loans as a percentagecomprised 2.55% of total loans is not outside of historical norms. As ofthat portfolio at September 30, 2018,2019, compared to 2.23% at June 30, 2019 and 3.49% at September 30, 2018. At September 30, 2019, criticized loans in the energy portfolio were $357$281.0 million, or approximately 39%,27% of that portfolio. Energy related loans delinquent for more thanportfolio, up slightly compared to 26% at June 30, days, including accrual and nonaccrual loans, totaled $71 million, or 8%, of the energy portfolio2019, but down significantly from 39% at September 30, 2018, up from $62 million, or 6%, at June 30, 2018.
Management continues to closely monitor the ability of our energy related customers to service their debt, including reviews of customers’ balance sheets, leverage ratios, collateral values and other critical lending metrics. With oil prices approximating $70 per barrel, and continued stabilization in prices, we anticipate the cycle for us could end soon. We believe we are adequately reserved for losses on remaining credits, and do not expect a significant provision for any additional issues. Management maintains 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 have recorded approximately $79 million in energy related net charge-offs since the cycle began. See Item 7 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.
The following table provides a breakout of the allowance for loan loss for the energy portfolio, allocated by sector, as of September 30, 2018 and December 31, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 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) |
| $ | 375 |
| $ | 7.6 |
| 2.0% |
| $ | 353 |
| $ | 11.4 |
| 3.2% |
Midstream |
|
| 57 |
|
| 0.7 |
| 1.2% |
|
| 52 |
|
| 0.4 |
| 0.7% |
Support - drilling |
|
| 110 |
|
| 6.3 |
| 5.7% |
|
| 121 |
|
| 10.5 |
| 8.6% |
Support - nondrilling |
|
| 385 |
|
| 35.6 |
| 9.2% |
|
| 529 |
|
| 47.9 |
| 9.1% |
Total |
| $ | 927 |
| $ | 50.2 |
| 5.4% |
| $ | 1,055 |
| $ | 70.2 |
| 6.7% |
Net charge-offs were $6.9$12.5 million, or 0.14%0.25%, of average total loans on an annualized basis in the third quarter of 2018,2019, up from $5.1$7.2 million, or 0.11%0.14%, of average total loans in the second quarter of 2018. There were no energy2019. Commercial net charge-offs duringtotaled $8.3 million in the third quarter of 20182019, up compared to a net recovery$4.3 million in the second quarter of 2018 of $1.9 million. Commercial nonenergy net charge-offs were up $0.4 million to $3.2 million2019. The increase in third quarter of 2018. Consumer loan2019 charge-offs is largely due to net charge-offs of $4.7$9.8 million in energy portfolio, primarily in the upstream subsector, partially offset by nonenergy commercial net recoveries. There were up $1.1 million compared tono energy-related net charge-offs in the second quarter of 2018, but were more in line with first quarter 2018 and fourth quarter 2017 when adjusted to exclude Harrison
58
Finance. The mortgage portfolio continued to perform well during2019 or the third quarter of 2018 with2018. Residential mortgage net charge-offs at $0.1 million were relatively flat to linked-quarter and were up from a net recovery of $1.1 million compared to net recovery of $0.3 million in secondthe third quarter of 2018. Consumer net charge-offs were up $1.2 million compared to the prior quarter, but were down $0.6 million when compared to the same quarter last year.
We have completed our first round of parallel testing of the calculation of our Current Expected Credit Loss (CECL) or life of loan loss allowance that replaces the current incurred loss allowance method effective January 1, 2020. Preliminary results using September 30, 2019 information indicates a net increase of approximately 20 to 30% over our incurred loan loss reserve level utilizing the CECL models and current economic forecast; this range excludes the impact of the loans and debt securities recently acquired from MidSouth. Significant drivers in the aforementioned increase were higher calculated reserve levels forlonger life real-estate secured loans and the expected funding of off-balance sheet exposures, partially offset by releases in reserves for shorter-term commercial loans. The amount of actual increase in allowance for credit losses upon adoption will be impacted by the portfolio composition and quality, as well as current economic conditions and forecasts at that time. Refer to Note 16 – Recent Accounting Pronouncements for additional discussion on status of implementation activities and our CECL estimation process.
57
The following table sets forth activity in the allowance for loan losses for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| Three Months Ended |
| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, |
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
(in thousands) |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||||
Allowance for loan losses at beginning of period |
| $ | 214,530 |
| $ | 210,713 |
| $ | 221,865 |
| $ | 217,308 |
| $ | 229,418 |
|
| $ | 195,625 |
|
| $ | 194,688 |
|
| $ | 214,530 |
|
| $ | 194,514 |
|
| $ | 217,308 |
|
Loans charged-off: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non real estate |
|
| 3,556 |
|
| 2,510 |
|
| 9,029 |
|
| 15,401 |
|
| 35,247 |
|
|
| 11,729 |
|
|
| 5,309 |
|
|
| 3,556 |
|
|
| 33,382 |
|
|
| 15,401 |
|
Commercial real estate - owner-occupied |
|
| 526 |
|
| 5,953 |
|
| 10 |
|
| 7,330 |
|
| 527 |
|
|
| 66 |
|
|
| 71 |
|
|
| 526 |
|
|
| 137 |
|
|
| 7,330 |
|
Total commercial & industrial |
|
| 4,082 |
|
| 8,463 |
|
| 9,039 |
|
| 22,731 |
|
| 35,774 |
|
|
| 11,795 |
|
|
| 5,380 |
|
|
| 4,082 |
|
|
| 33,519 |
|
|
| 22,731 |
|
Commercial real estate - income producing |
|
| 29 |
|
| 1,604 |
|
| — |
|
| 1,633 |
|
| 160 |
|
|
| — |
|
|
| — |
|
|
| 29 |
|
|
| 10 |
|
|
| 1,633 |
|
Construction and land development |
|
| 45 |
|
| 210 |
|
| 498 |
|
| 265 |
|
| 670 |
|
|
| 7 |
|
|
| — |
|
|
| 45 |
|
|
| 7 |
|
|
| 265 |
|
Total commercial |
|
| 4,156 |
|
| 10,277 |
|
| 9,537 |
|
| 24,629 |
|
| 36,604 |
|
|
| 11,802 |
|
|
| 5,380 |
|
|
| 4,156 |
|
|
| 33,536 |
|
|
| 24,629 |
|
Residential mortgages |
|
| 87 |
|
| 306 |
|
| 1,709 |
|
| 585 |
|
| 2,485 |
|
|
| 221 |
|
|
| 33 |
|
|
| 87 |
|
|
| 660 |
|
|
| 585 |
|
Consumer |
|
| 5,635 |
|
| 4,916 |
|
| 7,584 |
|
| 18,599 |
|
| 22,844 |
|
|
| 5,002 |
|
|
| 3,936 |
|
|
| 5,635 |
|
|
| 13,169 |
|
|
| 18,599 |
|
Total charge-offs |
|
| 9,878 |
|
| 15,499 |
|
| 18,830 |
|
| 43,813 |
|
| 61,933 |
|
|
| 17,025 |
|
|
| 9,349 |
|
|
| 9,878 |
|
|
| 47,365 |
|
|
| 43,813 |
|
Commercial non real estate |
|
| 758 |
|
| 8,330 |
|
| 4,624 |
|
| 13,234 |
|
| 6,442 |
|
|
| 2,932 |
|
|
| 804 |
|
|
| 758 |
|
|
| 5,662 |
|
|
| 13,234 |
|
Commercial real estate - owner-occupied |
|
| 7 |
|
| 187 |
|
| 111 |
|
| 282 |
|
| 447 |
|
|
| 63 |
|
|
| 204 |
|
|
| 7 |
|
|
| 284 |
|
|
| 282 |
|
Total commercial & industrial |
|
| 765 |
|
| 8,517 |
|
| 4,735 |
|
| 13,516 |
|
| 6,889 |
|
|
| 2,995 |
|
|
| 1,008 |
|
|
| 765 |
|
|
| 5,946 |
|
|
| 13,516 |
|
Commercial real estate - income producing |
|
| 156 |
|
| 2 |
|
| 257 |
|
| 221 |
|
| 655 |
|
|
| 516 |
|
|
| — |
|
|
| 156 |
|
|
| 518 |
|
|
| 221 |
|
Construction and land development |
|
| 30 |
|
| 9 |
|
| 295 |
|
| 68 |
|
| 1,050 |
|
|
| 11 |
|
|
| 86 |
|
|
| 30 |
|
|
| 108 |
|
|
| 68 |
|
Total commercial |
|
| 951 |
|
| 8,528 |
|
| 5,287 |
|
| 13,805 |
|
| 8,594 |
|
|
| 3,522 |
|
|
| 1,094 |
|
|
| 951 |
|
|
| 6,572 |
|
|
| 13,805 |
|
Residential mortgages |
|
| 1,142 |
|
| 596 |
|
| 58 |
|
| 1,854 |
|
| 339 |
|
|
| 167 |
|
|
| 104 |
|
|
| 1,142 |
|
|
| 433 |
|
|
| 1,854 |
|
Consumer |
|
| 933 |
|
| 1,301 |
|
| 1,702 |
|
| 4,028 |
|
| 5,248 |
|
|
| 862 |
|
|
| 1,000 |
|
|
| 933 |
|
|
| 2,866 |
|
|
| 4,028 |
|
Total recoveries |
|
| 3,026 |
|
| 10,425 |
|
| 7,047 |
|
| 19,687 |
|
| 14,181 |
|
|
| 4,551 |
|
|
| 2,198 |
|
|
| 3,026 |
|
|
| 9,871 |
|
|
| 19,687 |
|
Total net charge-offs |
|
| 6,852 |
|
| 5,074 |
|
| 11,783 |
|
| 24,126 |
|
| 47,752 |
|
|
| 12,474 |
|
|
| 7,151 |
|
|
| 6,852 |
|
|
| 37,494 |
|
|
| 24,126 |
|
Provision for loan losses |
|
| 6,872 |
|
| 8,891 |
|
| 13,040 |
|
| 28,016 |
|
| 43,982 |
|
|
| 12,421 |
|
|
| 8,088 |
|
|
| 6,872 |
|
|
| 38,552 |
|
|
| 28,016 |
|
Decrease in allowance as a result of sale of subsidiary |
|
| — |
|
| — |
|
| — |
|
| (6,648) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,648 | ) |
Increase (decrease) in FDIC loss share receivable |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (2,526) |
| ||||||||||||||||||||
Allowance for loan losses at end of period |
| $ | 214,550 |
| $ | 214,530 |
| $ | 223,122 |
| $ | 214,550 |
| $ | 223,122 |
|
| $ | 195,572 |
|
| $ | 195,625 |
|
| $ | 214,550 |
|
| $ | 195,572 |
|
| $ | 214,550 |
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs to average loans |
|
| 0.20 | % |
| 0.32 | % |
| 0.40 | % |
| 0.30 | % |
| 0.46 | % |
|
| 0.33 | % |
|
| 0.19 | % |
|
| 0.20 | % |
|
| 0.31 | % |
|
| 0.30 | % |
Recoveries to average loans |
|
| 0.06 | % |
| 0.22 | % |
| 0.15 | % |
| 0.14 | % |
| 0.10 | % |
|
| 0.09 | % |
|
| 0.04 | % |
|
| 0.06 | % |
|
| 0.07 | % |
|
| 0.14 | % |
Net charge-offs to average loans |
|
| 0.14 | % |
| 0.11 | % |
| 0.25 | % |
| 0.17 | % |
| 0.35 | % |
|
| 0.25 | % |
|
| 0.14 | % |
|
| 0.14 | % |
|
| 0.25 | % |
|
| 0.17 | % |
Allowance for loan losses to period-end loans |
|
| 1.10 | % |
| 1.11 | % |
| 1.19 | % |
| 1.10 | % |
| 1.19 | % |
|
| 0.93 | % |
|
| 0.97 | % |
|
| 1.10 | % |
|
| 0.93 | % |
|
| 1.10 | % |
58
59
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.
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
| |||||||||
|
| September 30, |
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
(in thousands) |
| 2018 |
| 2017 |
|
| 2019 |
|
| 2018 |
| ||||
Loans accounted for on a nonaccrual basis: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 35,334 |
| $ | 63,387 |
|
| $ | 52,131 |
|
| $ | 26,617 |
|
Commercial non-real estate - restructured |
|
| 91,095 |
|
| 89,476 |
|
|
| 98,574 |
|
|
| 84,036 |
|
Total commercial non-real estate |
|
| 126,429 |
|
| 152,863 |
|
|
| 150,705 |
|
|
| 110,653 |
|
Commercial real estate - owner occupied |
|
| 20,501 |
|
| 23,549 |
|
|
| 12,790 |
|
|
| 16,682 |
|
Commercial real estate - owner-occupied - restructured |
|
| 218 |
|
| 2,440 |
|
|
| 295 |
|
|
| 213 |
|
Total commercial real estate - owner-occupied |
|
| 20,719 |
|
| 25,989 |
|
|
| 13,085 |
|
|
| 16,895 |
|
Commercial real estate - income producing |
|
| 3,656 |
|
| 9,054 |
|
|
| 2,848 |
|
|
| 4,991 |
|
Commercial real estate - income producing - restructured |
|
| 285 |
|
| 5,520 |
|
|
| 109 |
|
|
| — |
|
Total commercial real estate - income producing |
|
| 3,941 |
|
| 14,574 |
|
|
| 2,957 |
|
|
| 4,991 |
|
Construction and land development |
|
| 3,237 |
|
| 3,791 |
|
|
| 1,184 |
|
|
| 2,134 |
|
Construction and land development - restructured |
|
| 12 |
|
| 16 |
|
|
| 153 |
|
|
| 12 |
|
Total construction and land development |
|
| 3,249 |
|
| 3,807 |
|
|
| 1,337 |
|
|
| 2,146 |
|
Residential mortgage |
|
| 30,608 |
|
| 38,703 |
|
|
| 36,122 |
|
|
| 34,594 |
|
Residential mortgage - restructured |
|
| 1,124 |
|
| 1,777 |
|
|
| 1,778 |
|
|
| 1,272 |
|
Total residential mortgage |
|
| 31,732 |
|
| 40,480 |
|
|
| 37,900 |
|
|
| 35,866 |
|
Consumer |
|
| 15,576 |
|
| 15,087 |
|
|
| 16,661 |
|
|
| 16,744 |
|
Consumer - restructured |
|
| — |
|
| — |
|
|
| 215 |
|
|
| — |
|
Total consumer |
|
| 15,576 |
|
| 15,087 |
|
|
| 16,876 |
|
|
| 16,744 |
|
Total nonaccrual loans |
| $ | 201,646 |
| $ | 252,800 |
|
| $ | 222,860 |
|
| $ | 187,295 |
|
Restructured loans - still accruing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 151,613 |
| $ | 114,224 |
|
| $ | 58,837 |
|
| $ | 130,075 |
|
Commercial real estate - owner occupied |
|
| 8,827 |
|
| 1,578 |
|
|
| — |
|
|
| 7,286 |
|
Commercial real estate - income producing |
|
| 401 |
|
| 3,827 |
|
|
| 379 |
|
|
| 398 |
|
Construction and land development |
|
| — |
|
| — |
|
|
| 112 |
|
|
| 9 |
|
Residential mortgage |
|
| 737 |
|
| 480 |
|
|
| 480 |
|
|
| 546 |
|
Consumer |
|
| 611 |
|
| 384 |
|
|
| 1,089 |
|
|
| 728 |
|
Total restructured loans - still accruing |
|
| 162,189 |
|
| 120,493 |
|
|
| 60,897 |
|
|
| 139,042 |
|
Total nonperforming loans |
|
| 363,835 |
|
| 373,293 |
|
|
| 283,757 |
|
|
| 326,337 |
|
ORE and foreclosed assets |
|
| 27,475 |
|
| 27,542 |
|
|
| 30,955 |
|
|
| 26,270 |
|
Total nonperforming assets (b) |
| $ | 391,310 |
| $ | 400,835 |
|
| $ | 314,712 |
|
| $ | 352,607 |
|
Loans 90 days past due still accruing to loans (c) |
| $ | 24,460 |
| $ | 27,766 |
|
| $ | 7,872 |
|
| $ | 5,589 |
|
Total restructured loans |
| $ | 254,923 |
| $ | 219,722 |
|
| $ | 162,021 |
|
| $ | 224,575 |
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Nonperforming assets to loans plus ORE and foreclosed assets |
|
| 2.00 | % |
| 2.11 | % |
|
| 1.49 | % |
|
| 1.76 | % |
Allowance for loan losses to nonperforming loans and accruing loans 90 days past due |
|
| 55.25 | % |
| 54.18 | % |
|
| 67.06 | % |
|
| 58.60 | % |
Loans 90 days past due still accruing to loans |
|
| 0.13 | % |
| 0.15 | % |
|
| 0.04 | % |
|
| 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 $391.3$314.7 million at September 30, 2018,2019, down $25.2$23.9 million from June 30, 2018 and $9.52019, $37.9 million from December 31, 2017, but up $3.72018 and $76.6 million from September 30, 2017.2018. Nonperforming loans decreased approximately $30.4$27.3 million compared to June 30, 2018, with2019, due largely to a reduction in restructured accruing loans as a result of one of our energy credits returning to a conforming market structure, as well as other activity including both net paydowns and charge-offs, partially offset by new downgrades. Our nonperforming loans included $60.9 million of accruing restructured loans, most of which are energy credits that endured challenges during the downturn in the energy portfolio down $17.5 million and nonenergy down $12.9 million.cycle. Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was 2.00%1.49% at September 30, 2018,2019, down 1519 bps from June 30, 2018, 112019, 27 bps from December 31, 2017,2018 and 651 bps from September 30, 2017. 2018.
59
60
Short-Term Investments
Short-term liquidity investments, including interest-bearing bank deposits and federal funds sold, were $49.5 million at September 30, 2019. This represents a decrease of $101.5 million from June 30, 2019 and $58.6 million from September 30, 2018. These asset levels vary on a daily basis depending upon movement in customer loan and deposit accounts. Average short-term investments of $180.5 million for the third quarter of 2019 were down $48.1 million compared to the second quarter of 2019, and up $25.1 million compared to the third 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 $108.1 million at September 30, 2018. This represents an increase of $3.9 million from June 30, 2018 and a decrease of $3.7 million compared to September 30, 2017. These assets are highly volatile on a daily basis depending upon movement in customer loan and deposit accounts. Average short-term investments of $155.3 million for the third quarter of 2018 were up $12.2 million compared to the second quarter of 2018, and down $39.3 million compared to the third quarter of 2017. See the Liquidity section earlier in this Item for further discussion regarding the management of our short-term investment portfolio and the impact upon our liquidity in general.
Deposits
Total deposits were $22.4$24.2 billion at September 30, 2018,2019, up $182.5 million, or 1%, from June 30, 2018, and up $883.9$965.3 million, or 4%, from June 30, 2019, and $1.8 billion, or 8%, from September 30, 2017.2018, which included the impact of approximately $1.3 billion of deposits assumed from the MidSouth acquisition. MidSouth deposits improved our overall deposit mix and facilitated the paydown of $223 million in brokered certificates of deposit. Average deposits for the third quarter of 20182019 were $22.0$23.1 billion, down $79.9$46.2 million, or less than 1%, from the second quarter of 20182019 and up $671.7 million,$1.1 billion, or 3%5%, from the third quarter of 2017.
2018.
Noninterest-bearing demand deposits were $8.1$8.7 billion at September 30, 2018, down $25.32019, up $571.8 million, or less than 1%7%, linked quarter,from June 30, 2019, and up $244.1$545.9 million, or 3%7%, year over year.from September 30, 2018. The linked-quarter increase reflects the $389 million of noninterest-bearing demand deposits assumed in the MidSouth acquisition. Noninterest-bearing demand deposits comprised 36% of total deposits at September 30, 2018, and 37%2019, 35% at June 30, 20182019 and 36% at September 30, 2017.
2018.
Interest-bearing transaction and savings accounts of $8.0$8.8 billion at September 30, 20182019 increased $260.9$724.2 million, or 3%9%, compared tofrom June 30, 2018, mainly due to $229 million of customer deposits related to the trust2019 and asset management acquisition, and increased $78.9$786.6 million, or 1%10%, compared tofrom September 30, 2017. 2018, with the linked-quarter and year-over-year increase mainly attributable to deposits from the MidSouth acquisition.
Interest-bearing public fund deposits totaled $2.6$3.0 billion at September 30, 2018,2019, down $241$204.8 million, or 8%6%, from June 30, 2018, consistent with seasonal trends,2019, and down $148.2up $341.1 million, or 5%13%, compared tofrom September 30, 2017.2018. The decrease in public fund deposits is related to typical seasonality and is expected to increase in fourth quarter of 2019. Time deposits other than public funds totaled $3.7$3.8 billion at September 30, 2018 up $187.82019, down $125.9 million, or 3%, from June 30, 2018,2019, driven primarily by promotional certificatea $222 million decrease in brokered certificates of deposit, offers across our markets.partially offset by an increase in retail certificates of deposits, largely from the MidSouth acquisition. Time deposits other than public funds waswere up $709.1$110.0 million, or 24%3%, from September 30, 2018, largely due to an increase in retail certificates of deposit, primarily from the MidSouth acquisition, offset by a decrease in brokered certificates of deposit. The level of time deposits was impacted by $446 million of maturities during the third quarter of 2019 compared to September 30, 2017, due to both increased retail$715 million in second quarter of 2019 and brokered deposits.$239 million during the third quarter of 2018.
Short-Term Borrowings
At September 30, 2018,2019, short-term borrowings totaled $2.3$2.1 billion, down $37.5up $467.2 million, or 28%, from June 30, 2018, as2019, with increases in FHLB borrowings decreased $50.3 million, securities sold under repurchase agreements decreased $37.0of $427.5 million and federal funds purchased increased $49.8 million.of $124.9 million partially offset by an $85.1 million decrease in securities sold under repurchase agreements. The increase in FHLB borrowings was due largely to preparations for the MidSouth acquisition in anticipation of near-term balance sheet changes. Short-term borrowings increased $539.5decreased $167.8 million, or 7%, from September 30, 2017.2018. The decrease compared to third quarter of 2018 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, partially offset by increases in securities sold under repurchase agreements.
Average short-term borrowings of $2.6$2.1 billion in the third quarter of 20182019 were up $620.8$445.6 million, or 31%28%, compared to the second quarter of 2018,2019, and up $700.8down $546.8 million, or 37%21%, compared to the third quarter of 2017. 2018.
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 September 30, 2018, long-term debt totaled $215.9 million, down $50.1 million from June 30, 2018.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 decreasecore principle of Topic 842 is that a lessee should recognize in long-term debt during the third quarter 2018 reflectsstatement of financial position a $50 million early payoffliability representing the present value of the Parent’s term scheduled to mature in December 2018.future lease
60
61
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 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 our consolidated results of operations, and is not expected to in future periods. Refer to Note 5 – Operating Leases for further information related to the operating lease accounting policy, practical expedient elections for adoption and operating leasing information at adoption.
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 theirits 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 September 30, 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 |
| $ | 7,212,886 |
| $ | 2,963,452 |
| $ | 1,414,145 |
| $ | 1,507,202 |
| $ | 1,328,087 |
| $ | 7,478,907 |
|
| $ | 3,352,245 |
|
| $ | 1,549,939 |
|
| $ | 1,622,515 |
|
| $ | 954,208 |
|
Letters of credit |
|
| 353,490 |
|
| 266,377 |
|
| 36,895 |
|
| 50,218 |
|
| — |
|
| 389,998 |
|
|
| 303,681 |
|
|
| 41,756 |
|
|
| 44,561 |
|
|
| — |
|
Total |
| $ | 7,566,376 |
| $ | 3,229,829 |
| $ | 1,451,040 |
| $ | 1,557,420 |
| $ | 1,328,087 |
| $ | 7,868,905 |
|
| $ | 3,655,926 |
|
| $ | 1,591,695 |
|
| $ | 1,667,076 |
|
| $ | 954,208 |
|
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.
61
NEW ACCOUNTING PRONOUNCEMENTS
Refer to Note 16 to our Consolidated Financial Statements included elsewhere in this report.
62
Item 3. Quantitative and Qualitative 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 September 30, 2018 for year 1 and year 2, assuming the indicatedresulting from an instantaneous and sustained parallel shift in rates at September 30, 2019. Shifts are measured in 100 basis point increments in a range from -500 to +500 basis points from base case, with -100 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 of Directors. All policy scenarios assume a static volume forecast where the balance sheet is held constant, although other scenarios are modeled.
|
| Estimated Increase |
| |||||
|
| (Decrease) in NII |
| |||||
Change in Interest Rates |
| Year 1 |
|
| Year 2 |
| ||
(basis points) |
|
|
|
|
|
|
|
|
-100 |
|
| (4.30 | )% |
|
| (6.84 | )% |
+100 |
|
| 1.94 | % |
|
| 3.69 | % |
+200 |
|
| 4.43 | % |
|
| 7.77 | % |
+300 |
|
| 6.76 | % |
|
| 11.55 | % |
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Estimated Increase | ||||
|
| (Decrease) in NII | ||||
Change in Interest Rates |
| Year 1 |
| Year 2 | ||
(basis points) |
|
|
|
|
|
|
- 100 |
| (2.45) | % |
| (3.51) | % |
+100 |
| 1.71 | % |
| 2.50 | % |
+200 |
| 3.04 | % |
| 4.43 | % |
+300 |
| 4.13 | % |
| 5.86 | % |
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.
In July 2017, the United Kingdom Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. At September 30, 2019, approximately 30% of our loan portfolio consisted of variable rate loans tied to LIBOR, along with related derivatives and other financial instruments. During the third quarter of 2019, we began transition activities by modifying new and renewed loan and derivative documents to include the following terms: (1) ability for the Bank to use its discretion to determine when to name a replacement index; (2) ability for the Bank to name the replacement index; (3) ability for the Bank to adjust credit spread to the replacement index for the loan; and (4) ability for the Bank to make these changes by notifying the customer and without requiring a modification of the document. Our LIBOR transition team is continuing to monitor developments and is taking steps to ensure readiness should the LIBOR benchmark rate be discontinued.
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.
62
Item 4. Controls 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 September 30, 2018,2019, the Company’s disclosure controls and procedures were effective.
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 September 30, 2018,2019, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
63
63
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,
64
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
(a) Exhibits:
Exhibit Number |
| Description |
| Filed Herewith |
| Form |
| Exhibit |
| Filing Date |
3.1 |
|
|
|
| 8-K |
| 3.1 |
| 5/24/2018 | |
3.2 |
|
|
|
| 8-K |
| 3.2 |
| 5/24/2018 | |
31.1 |
|
| X |
|
|
|
|
|
| |
31.2 |
|
| X |
|
|
|
|
|
| |
32.1 |
|
| X |
|
|
|
|
|
| |
32.2 |
|
| X |
|
|
|
|
|
| |
101 |
| Inline XBRL Interactive Data |
| X |
|
|
|
|
|
|
104 |
| The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL |
| X |
|
|
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit |
|
|
| Filed |
| Incorporated by Reference | ||||
Number |
| Description |
| Herewith |
| Form |
| Exhibit |
| Filing Date |
3.1 |
|
|
|
| 8-K |
| 3.1 |
| 5/24/2018 | |
3.2 |
|
|
|
| 8-K |
| 3.2 |
| 5/24/2018 | |
*10.1 |
|
| X |
|
|
|
|
|
| |
31.1 |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| X |
|
|
|
|
|
|
31.2 |
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| X |
|
|
|
|
|
|
32.1 |
| Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| X |
|
|
|
|
|
|
32.2 |
| Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| X |
|
|
|
|
|
|
101 |
| XBRL Interactive Data |
| X |
|
|
|
|
|
|
* Compensatory plan or arrangement
65
SIGNATURES
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 | ||||
|
|
| ||
By: |
| /s/ John M. Hairston | ||
|
| John M. Hairston | ||
|
| President & Chief Executive Officer | ||
|
| (Principal Executive Officer) | ||
|
|
| ||
|
| /s/ Michael M. Achary | ||
|
| Michael M. Achary | ||
|
| Senior Executive Vice President & Chief Financial Officer (Principal Financial Officer) | ||
|
|
| ||
|
| /s/ Stephen E. Barker | ||
|
| Stephen E. Barker | ||
|
| Executive Vice President,
| ||
|
|
| ||
|
| |||
November 8, 2019 |
65
66