UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the Quarterly Period Ended March 31, 2022 | |
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OR | |
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 0-20293
ATLANTIC UNION BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
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Virginia | 54-1598552 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
1051 East Cary Street
Suite 1200
Richmond, Virginia23219
(Address of principal executive offices) (Zip Code)
(804) 633-5031
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $1.33 per share | | AUB | | The NASDAQ Global Select Market |
Depositary Shares, Each Representing a 1/400th Interest in a Share of 6.875% Perpetual Non-Cumulative Preferred Stock, Series A | | AUBAP | | The NASDAQ Global Select Market |
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
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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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
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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Yes |
The number of shares of common stock outstanding as of November 1, 2017April 28, 2022 was 43,732,082.75,014,103.
ATLANTIC UNION BANKSHARES CORPORATION
FORM 10-Q
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| | Review Report of Independent Registered Public Accounting Firm | | 47 |
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 48 | |
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2021 Form 10-K | – | Annual Report on Form 10-K for the year ended December 31, |
Access | – | |
Access National Corporation and its subsidiaries | ||
ACL | – | Allowance for credit losses |
AFS | – | Available for sale |
ALCO | – | Asset Liability Committee |
ALLL | – | Allowance for loan and lease losses, a component of ACL |
AOCI | – | Accumulated other comprehensive income (loss) |
ASC | – | Accounting Standards Codification |
ASC 820 | – | ASC 820, Fair Value Measurements and Disclosures |
ASU | – | Accounting Standards Update |
ATM | – | Automated teller machine |
AUB | – | Atlantic Union Bankshares Corporation |
AUBAP | – | Atlantic Union Bankshares Corporation trading symbol |
the Bank | – | Atlantic Union Bank (formerly, Union Bank & Trust) |
BOLI | – | Bank-owned life insurance |
bps | – | Basis points |
BVAL | – | Bloomberg Valuation Service |
CAA | – | Consolidated Appropriations Act, 2021 |
CARES Act | – | Coronavirus Aid, Relief, and Economic Security Act |
CECL | – | Current expected credit losses |
the Company | – | Atlantic Union Bankshares Corporation (formerly, Union Bankshares Corporation) and its subsidiaries |
COVID-19 | – | COVID-19 global pandemic |
depositary shares | – | Depositary shares, each representing a 1/400th ownership interest in a share of the Company’s Series A preferred stock, with a liquidation preference of $10,000 per share of Series A preferred stock (equivalent to $25 per depositary share) |
EPS | – | Earnings per common share |
Exchange Act | – | Securities Exchange Act of 1934, as amended |
FASB | – | Financial Accounting Standards Board |
FCMs | – | Futures Commission Merchants |
FDIC | – | Federal Deposit Insurance Corporation |
Federal Reserve | – | Board of Governors of the Federal Reserve System |
FRB | – | Federal Reserve Bank of Richmond |
FHLB | – | Federal Home Loan Bank of Atlanta |
FHLMC | – | Federal Home Loan Mortgage Corporation |
FNMA | – | Federal National Mortgage Association |
FOMC | – | Federal Open Markets Committee |
FTE | – | Fully taxable equivalent |
GAAP or U.S. GAAP | – | Accounting principles generally accepted in the United States |
GNMA | – | Government National Mortgage Association |
HTM | – | Held to maturity |
ICE | – | Intercontinental Exchange Data |
the Joint Guidance | – | The five federal bank regulatory agencies and the Conference of State Bank Supervisors guidance issued on March 22, 2020 (subsequently revised on April 7, 2020) |
LHFI | – | Loans held for investment |
LHFS | – | Loans held for sale |
LIBOR | – | London Interbank Offered Rate |
MBS | – | Mortgage-Backed Securities |
NASDAQ | – | National Association of Securities Dealers Automated Quotation exchange |
NOW | – | Negotiable order of withdrawal |
NPA | – | Nonperforming assets |
OCI | – | Other comprehensive income |
OREO | – | Other real estate owned |
OTC | – | Over-the-counter |
PD/LGD | – | Probability of default/loss given default |
PPP | – | Paycheck Protection Program |
Quarterly Report | – | Quarterly Report on |
Repurchase Program | – | The share repurchase program, approved on |
ROU asset | – | Right of Use Asset |
RUC | – | Reserve for unfunded commitments |
RVI | – | Residual value insurance |
SBA | – | Small Business Administration |
SEC | – | Securities and Exchange Commission |
Series A preferred stock | – | 6.875% Perpetual Non-Cumulative Preferred Stock, Series A, par value $10.00 per share |
SOFR | – | Secured Overnight Financing Rate |
SSFA | – | Simplified supervisory formula approach |
TDR | – | Troubled debt restructuring |
Topic 606 | – | ASU No. 2014-09, “Revenue from Contracts with Customers: Topic 606” |
Topic 848 | – | ASU 2020-04, “Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting” |
VFG | – | Virginia Financial Group, Inc. |
2031 Notes | – | $250.0 million of 2.875% fixed-to-floating rate subordinate notes issued by the Company during the fourth quarter of 2021 with a maturity date of December 15, 2031 |
ITEM 1 – FINANCIAL STATEMENTS
ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES
AS OF MARCH 31, 2022 AND DECEMBER 31, 2021
(Dollars in thousands, except share data)
September 30, 2017 | December 31, 2016 | ||||||
(Unaudited) | (Audited) | ||||||
ASSETS | |||||||
Cash and cash equivalents: | |||||||
Cash and due from banks | $ | 115,776 | $ | 120,758 | |||
Interest-bearing deposits in other banks | 60,294 | 58,030 | |||||
Federal funds sold | 891 | 449 | |||||
Total cash and cash equivalents | 176,961 | 179,237 | |||||
Securities available for sale, at fair value | 968,361 | 946,764 | |||||
Securities held to maturity, at carrying value | 204,801 | 201,526 | |||||
Restricted stock, at cost | 68,441 | 60,782 | |||||
Loans held for sale, at fair value | 30,896 | 36,487 | |||||
Loans held for investment, net of deferred fees and costs | 6,898,729 | 6,307,060 | |||||
Less allowance for loan losses | 37,162 | 37,192 | |||||
Net loans held for investment | 6,861,567 | 6,269,868 | |||||
Premises and equipment, net | 120,808 | 122,027 | |||||
Other real estate owned, net of valuation allowance | 8,764 | 10,084 | |||||
Goodwill | 298,191 | 298,191 | |||||
Amortizable intangibles, net | 16,017 | 20,602 | |||||
Bank owned life insurance | 181,451 | 179,318 | |||||
Other assets | 93,178 | 101,907 | |||||
Total assets | $ | 9,029,436 | $ | 8,426,793 | |||
LIABILITIES | |||||||
Noninterest-bearing demand deposits | $ | 1,535,149 | $ | 1,393,625 | |||
Interest-bearing deposits | 5,346,677 | 4,985,864 | |||||
Total deposits | 6,881,826 | 6,379,489 | |||||
Securities sold under agreements to repurchase | 43,337 | 59,281 | |||||
Other short-term borrowings | 574,000 | 517,500 | |||||
Long-term borrowings | 434,750 | 413,308 | |||||
Other liabilities | 54,152 | 56,183 | |||||
Total liabilities | 7,988,065 | 7,425,761 | |||||
Commitments and contingencies (Note 6) | |||||||
STOCKHOLDERS' EQUITY | |||||||
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,729,229 shares and 43,609,317 shares, respectively. | 57,708 | 57,506 | |||||
Additional paid-in capital | 608,884 | 605,397 | |||||
Retained earnings | 373,468 | 341,938 | |||||
Accumulated other comprehensive income | 1,311 | (3,809 | ) | ||||
Total stockholders' equity | 1,041,371 | 1,001,032 | |||||
Total liabilities and stockholders' equity | $ | 9,029,436 | $ | 8,426,793 |
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| March 31, | | December 31, | ||
| 2022 |
| 2021 | ||
ASSETS | | (unaudited) | | | (audited) |
Cash and cash equivalents: | | | | | |
Cash and due from banks | $ | 178,225 | | $ | 180,963 |
Interest-bearing deposits in other banks | | 213,140 | | | 618,714 |
Federal funds sold | | 4,938 | | | 2,824 |
Total cash and cash equivalents | | 396,303 | | | 802,501 |
Securities available for sale, at fair value | | 3,193,280 | | | 3,481,650 |
Securities held to maturity, at carrying value | | 756,872 | | | 628,000 |
Restricted stock, at cost | | 77,033 | | | 76,825 |
Loans held for sale, at fair value | | 21,227 | | | 20,861 |
Loans held for investment, net of deferred fees and costs | | 13,459,349 | | | 13,195,843 |
Less: allowance for loan and lease losses | | 102,591 | | | 99,787 |
Total loans held for investment, net | | 13,356,758 | | | 13,096,056 |
Premises and equipment, net | | 130,998 | | | 134,808 |
Goodwill | | 935,560 | | | 935,560 |
Amortizable intangibles, net | | 40,273 | | | 43,312 |
Bank owned life insurance | | 434,012 | | | 431,517 |
Other assets | | 440,114 | | | 413,706 |
Total assets | $ | 19,782,430 | | $ | 20,064,796 |
LIABILITIES | | | | | |
Noninterest-bearing demand deposits | $ | 5,370,063 | | $ | 5,207,324 |
Interest-bearing deposits | | 11,114,160 | | | 11,403,744 |
Total deposits | | 16,484,223 | | | 16,611,068 |
Securities sold under agreements to repurchase | | 115,027 | | | 117,870 |
Long-term borrowings | | 389,005 | | | 388,724 |
Other liabilities | | 295,840 | | | 237,063 |
Total liabilities | | 17,284,095 | | | 17,354,725 |
Commitments and contingencies (Note 7) | | | | | |
STOCKHOLDERS' EQUITY | | | | | |
Preferred stock, $10.00 par value | | 173 | | | 173 |
Common stock, $1.33 par value | | 99,651 | | | 100,101 |
Additional paid-in capital | | 1,786,640 | | | 1,807,368 |
Retained earnings | | 803,354 | | | 783,794 |
Accumulated other comprehensive income (loss) | | (191,483) | | | 18,635 |
Total stockholders' equity | | 2,498,335 | | | 2,710,071 |
Total liabilities and stockholders' equity | $ | 19,782,430 | | $ | 20,064,796 |
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Common shares outstanding | | 75,335,956 | | | 75,663,648 |
Common shares authorized | | 200,000,000 | | | 200,000,000 |
Preferred shares outstanding | | 17,250 | | | 17,250 |
Preferred shares authorized | | 500,000 | | | 500,000 |
See accompanying notes to consolidated financial statements.
-2-
ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES
THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Dollars in thousands, except share and per share data)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||
Interest and dividend income: | |||||||||||||||
Interest and fees on loans | $ | 75,948 | $ | 66,190 | $ | 216,644 | $ | 193,884 | |||||||
Interest on deposits in other banks | 181 | 65 | 367 | 178 | |||||||||||
Interest and dividends on securities: | |||||||||||||||
Taxable | 5,175 | 4,732 | 15,081 | 13,558 | |||||||||||
Nontaxable | 3,546 | 3,446 | 10,620 | 10,344 | |||||||||||
Total interest and dividend income | 84,850 | 74,433 | 242,712 | 217,964 | |||||||||||
Interest expense: | |||||||||||||||
Interest on deposits | 7,234 | 4,552 | 18,410 | 12,945 | |||||||||||
Interest on short-term borrowings | 1,871 | 765 | 4,221 | 2,098 | |||||||||||
Interest on long-term borrowings | 4,547 | 2,088 | 13,316 | 6,386 | |||||||||||
Total interest expense | 13,652 | 7,405 | 35,947 | 21,429 | |||||||||||
Net interest income | 71,198 | 67,028 | 206,765 | 196,535 | |||||||||||
Provision for credit losses | 3,050 | 2,472 | 7,345 | 7,376 | |||||||||||
Net interest income after provision for credit losses | 68,148 | 64,556 | 199,420 | 189,159 | |||||||||||
Noninterest income: | |||||||||||||||
Service charges on deposit accounts | 5,153 | 4,965 | 14,945 | 14,454 | |||||||||||
Other service charges and fees | 4,529 | 4,397 | 13,575 | 12,971 | |||||||||||
Fiduciary and asset management fees | 2,794 | 2,844 | 8,313 | 7,315 | |||||||||||
Mortgage banking income, net | 2,305 | 3,207 | 7,123 | 8,324 | |||||||||||
Gains on securities transactions, net | 184 | — | 782 | 145 | |||||||||||
Bank owned life insurance income | 1,377 | 1,389 | 4,837 | 4,122 | |||||||||||
Loan-related interest rate swap fees | 416 | 1,303 | 2,627 | 3,056 | |||||||||||
Other operating income | 778 | 845 | 2,228 | 2,470 | |||||||||||
Total noninterest income | 17,536 | 18,950 | 54,430 | 52,857 | |||||||||||
Noninterest expenses: | |||||||||||||||
Salaries and benefits | 29,769 | 30,493 | 92,499 | 87,061 | |||||||||||
Occupancy expenses | 4,939 | 4,841 | 14,560 | 14,627 | |||||||||||
Furniture and equipment expenses | 2,559 | 2,635 | 7,882 | 7,867 | |||||||||||
Printing, postage, and supplies | 1,154 | 1,147 | 3,710 | 3,566 | |||||||||||
Communications expense | 798 | 948 | 2,580 | 2,964 | |||||||||||
Technology and data processing | 4,232 | 3,917 | 12,059 | 11,340 | |||||||||||
Professional services | 1,985 | 1,895 | 5,734 | 6,432 | |||||||||||
Marketing and advertising expense | 1,944 | 1,975 | 5,963 | 5,838 | |||||||||||
FDIC assessment premiums and other insurance | 1,141 | 1,262 | 2,793 | 4,003 | |||||||||||
Other taxes | 2,022 | 639 | 6,065 | 3,864 | |||||||||||
Loan-related expenses | 1,349 | 1,531 | 3,959 | 3,638 | |||||||||||
OREO and credit-related expenses | 1,139 | 503 | 2,023 | 1,965 | |||||||||||
Amortization of intangible assets | 1,480 | 1,843 | 4,661 | 5,468 | |||||||||||
Training and other personnel costs | 887 | 863 | 2,900 | 2,512 | |||||||||||
Merger-related costs | 732 | — | 3,476 | — | |||||||||||
Other expenses | 1,366 | 2,421 | 3,957 | 5,291 | |||||||||||
Total noninterest expenses | 57,496 | 56,913 | 174,821 | 166,436 | |||||||||||
Income before income taxes | 28,188 | 26,593 | 79,029 | 75,580 | |||||||||||
Income tax expense | 7,530 | 6,192 | 21,292 | 18,881 | |||||||||||
Net income | $ | 20,658 | $ | 20,401 | $ | 57,737 | $ | 56,699 | |||||||
Basic earnings per common share | $ | 0.47 | $ | 0.47 | $ | 1.32 | $ | 1.29 | |||||||
Diluted earnings per common share | $ | 0.47 | $ | 0.47 | $ | 1.32 | $ | 1.29 | |||||||
Dividends declared per common share | $ | 0.20 | $ | 0.19 | $ | 0.60 | $ | 0.57 | |||||||
Basic weighted average number of common shares outstanding | 43,706,635 | 43,565,937 | 43,685,045 | 43,853,548 | |||||||||||
Diluted weighted average number of common shares outstanding | 43,792,058 | 43,754,915 | 43,767,502 | 43,967,725 |
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| Three Months Ended | | ||||
| March 31, | | March 31, | | ||
| 2022 |
| 2021 |
| ||
Interest and dividend income: | | | | | | |
Interest and fees on loans | $ | 114,200 | | $ | 128,006 | |
Interest on deposits in other banks | | 131 | | | 77 | |
Interest and dividends on securities: | | | | | | |
Taxable | | 13,666 | | | 10,353 | |
Nontaxable | | 10,459 | | | 9,237 | |
Total interest and dividend income | | 138,456 | | | 147,673 | |
Interest expense: | | | | | | |
Interest on deposits | | 4,483 | | | 9,128 | |
Interest on short-term borrowings | | 21 | ��� | | 48 | |
Interest on long-term borrowings | | 3,021 | | | 3,599 | |
Total interest expense | | 7,525 | | | 12,775 | |
Net interest income | | 130,931 | | | 134,898 | |
Provision for credit losses | | 2,800 | | | (13,624) | |
Net interest income after provision for credit losses | | 128,131 | | | 148,522 | |
Noninterest income: | | | | | | |
Service charges on deposit accounts | | 7,596 | | | 5,509 | |
Other service charges, commissions and fees | | 1,655 | | | 1,701 | |
Interchange fees | | 1,810 | | | 1,847 | |
Fiduciary and asset management fees | | 7,255 | | | 6,475 | |
Mortgage banking income | | 3,117 | | | 8,255 | |
Bank owned life insurance income | | 2,697 | | | 2,265 | |
Loan-related interest rate swap fees | | 3,860 | | | 1,754 | |
Other operating income | | 2,163 | | | 3,179 | |
Total noninterest income | | 30,153 | | | 30,985 | |
Noninterest expenses: | | | | | | |
Salaries and benefits | | 58,298 | | | 52,660 | |
Occupancy expenses | | 6,883 | | | 7,315 | |
Furniture and equipment expenses | | 3,597 | | | 3,968 | |
Technology and data processing | | 7,796 | | | 6,904 | |
Professional services | | 4,090 | | | 4,960 | |
Marketing and advertising expense | | 2,163 | | | 2,044 | |
FDIC assessment premiums and other insurance | | 2,485 | | | 2,307 | |
Other taxes | | 4,499 | | | 4,436 | |
Loan-related expenses | | 1,776 | | | 1,877 | |
Amortization of intangible assets | | 3,039 | | | 3,730 | |
Loss on debt extinguishment | | 0 | | | 14,695 | |
Other expenses | | 10,695 | | | 7,041 | |
Total noninterest expenses | | 105,321 | | | 111,937 | |
Income from continuing operations before income taxes | | 52,963 | | | 67,570 | |
Income tax expense | | 9,273 | | | 11,381 | |
Net income | | 43,690 | | | 56,189 | |
Dividends on preferred stock | | 2,967 | | | 2,967 | |
Net income available to common shareholders | $ | 40,723 | | $ | 53,222 | |
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Basic earnings per common share | $ | 0.54 | | $ | 0.67 | |
Diluted earnings per common share | $ | 0.54 | | $ | 0.67 | |
Dividends declared per common share | $ | 0.28 | | $ | 0.25 | |
Basic weighted average number of common shares outstanding | | 75,544,644 | | | 78,863,468 | |
Diluted weighted average number of common shares outstanding | | 75,556,127 | | | 78,884,235 | |
See accompanying notes to consolidated financial statements.
-3-
ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES
THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Dollars in thousands)
| | | | | | | |
| | Three Months Ended |
| ||||
| | March 31, |
| ||||
|
| 2022 |
| 2021 |
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Net income | | $ | 43,690 | | $ | 56,189 | |
Other comprehensive income (loss): | |
| | |
| | |
Cash flow hedges: | |
| | |
| | |
Change in fair value of cash flow hedges (net of tax, $6,197 and $380 for the three months ended March 31, 2022 and 2021, respectively) | |
| (23,313) | |
| (1,428) | |
Reclassification adjustment for gains included in net income (net of tax, $0 and $12 for the three months ended March 31, 2022 and 2021, respectively) (1) | |
| 0 | |
| (47) | |
AFS securities: | |
| | |
| | |
Unrealized holding losses arising during period (net of tax, $49,700 and $8,806 for the three months ended March 31, 2022 and 2021, respectively) | |
| (186,967) | |
| (33,125) | |
Reclassification adjustment for gains included in net income (net of tax, $0 and $16 for the three months ended March 31, 2022 and 2021, respectively) (2) | |
| 0 | |
| (62) | |
HTM securities: | |
| | |
| | |
Reclassification adjustment for accretion of unrealized gain on AFS securities transferred to HTM (net of tax, $1 and $1 for the three months ended March 31, 2022 and 2021, respectively) (3) | |
| (5) | |
| (5) | |
Bank owned life insurance: | |
| | |
| | |
Reclassification adjustment for losses included in net income (4) | |
| 167 | |
| 153 | |
Other comprehensive loss | |
| (210,118) | |
| (34,514) | |
Comprehensive (loss) income | | $ | (166,428) | | $ | 21,675 | |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 20,658 | $ | 20,401 | $ | 57,737 | $ | 56,699 | |||||||
Other comprehensive income (loss): | |||||||||||||||
Cash flow hedges: | |||||||||||||||
Change in fair value of cash flow hedges | 41 | (78 | ) | (766 | ) | (3,766 | ) | ||||||||
Reclassification adjustment for losses (gains) included in net income (net of tax, $102 and $83 for the three months and $370 and $233 for the nine months ended September 30, 2017 and 2016, respectively) | 189 | 154 | 688 | 433 | |||||||||||
AFS securities: | |||||||||||||||
Unrealized holding gains (losses) arising during period (net of tax, $1,470 and $604 for the three months and $3,195 and $4,227 for the nine months ended September 30, 2017 and 2016, respectively) | (2,729 | ) | 1,121 | 5,935 | 7,851 | ||||||||||
Reclassification adjustment for losses (gains) included in net income (net of tax, $64 and $0 for the three months and $274 and $51 for the nine months ended September 30, 2017 and 2016, respectively) | (119 | ) | — | (508 | ) | (95 | ) | ||||||||
HTM securities: | |||||||||||||||
Reclassification adjustment for accretion of unrealized gain on AFS securities transferred to HTM (net of tax, $88 and $128 for the three months and $273 and $439 for the nine months ended September 30, 2017 and 2016, respectively) | (163 | ) | (237 | ) | (507 | ) | (816 | ) | |||||||
Bank owned life insurance: | |||||||||||||||
Reclassification adjustment for losses included in net income | 84 | — | 278 | — | |||||||||||
Other comprehensive income (loss) | (2,697 | ) | 960 | 5,120 | 3,607 | ||||||||||
Comprehensive income | $ | 17,961 | $ | 21,361 | $ | 62,857 | $ | 60,306 |
(1)The gross amounts are generally reported in the interest income and interest expense sections of the Company’s Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense.
(2)The gross amounts reclassified into earnings are reported as "Gains on securities transactions" on the Company’s Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense.
(3)The gross amounts reclassified into earnings are reported within interest income on the Company’s Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense.
(4)Reclassifications in earnings are reported in "Salaries and benefits" expense on the Company’s Consolidated Statements of Income.
See accompanying notes to consolidated financial statements.
-4-
ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES
THREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2022 AND 2016
(Dollars in thousands, except share and per share amounts)
Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | |||||||||||||||
Balance - December 31, 2015 | $ | 59,159 | $ | 631,822 | $ | 298,134 | $ | 6,252 | $ | 995,367 | |||||||||
Net income - 2016 | 56,699 | 56,699 | |||||||||||||||||
Other comprehensive income (net of taxes of $3,970) | 3,607 | 3,607 | |||||||||||||||||
Issuance of common stock in regard to acquisition (17,232 shares) | 23 | 430 | 453 | ||||||||||||||||
Dividends on common stock ($0.57 per share) | (24,957 | ) | (24,957 | ) | |||||||||||||||
Stock purchased under stock repurchase plan (1,411,131 shares) | (1,876 | ) | (31,300 | ) | (33,176 | ) | |||||||||||||
Issuance of common stock under Equity Compensation Plans (54,044 shares) | 72 | 681 | 753 | ||||||||||||||||
Issuance of common stock for services rendered (14,576 shares) | 19 | 360 | 379 | ||||||||||||||||
Vesting of restricted stock, net of shares held for taxes, under Equity Compensation Plans (35,515 shares) | 47 | (492 | ) | (445 | ) | ||||||||||||||
Stock-based compensation expense | 2,284 | 2,284 | |||||||||||||||||
Balance - September 30, 2016 | $ | 57,444 | $ | 603,785 | $ | 329,876 | $ | 9,859 | $ | 1,000,964 | |||||||||
Balance - December 31, 2016 | $ | 57,506 | $ | 605,397 | $ | 341,938 | $ | (3,809 | ) | $ | 1,001,032 | ||||||||
Net income - 2017 | 57,737 | 57,737 | |||||||||||||||||
Other comprehensive income (net of taxes of $3,018) | 5,120 | 5,120 | |||||||||||||||||
Dividends on common stock ($0.60 per share) | (26,207 | ) | (26,207 | ) | |||||||||||||||
Issuance of common stock under Equity Compensation Plans (58,421 shares) | 78 | 891 | 969 | ||||||||||||||||
Issuance of common stock for services rendered (16,529 shares) | 22 | 539 | 561 | ||||||||||||||||
Vesting of restricted stock, net of shares held for taxes, under Equity Compensation Plans (76,505 shares) | 102 | (1,415 | ) | (1,313 | ) | ||||||||||||||
Stock-based compensation expense | 3,472 | 3,472 | |||||||||||||||||
Balance - September 30, 2017 | $ | 57,708 | $ | 608,884 | $ | 373,468 | $ | 1,311 | $ | 1,041,371 |
| | | | | | | | | | | | | | | | | | |
|
| | |
| | |
| | |
| | |
| Accumulated |
| | | |
| | | | | | | | Additional | | | | | Other | | | | ||
| | Common | | Preferred | | Paid-In | | Retained | | Comprehensive | | | | |||||
| | Stock | | Stock | | Capital | | Earnings | | Income (Loss) | | Total | ||||||
Balance - December 31, 2021 | | $ | 100,101 | | $ | 173 | | $ | 1,807,368 | | $ | 783,794 | | $ | 18,635 | | $ | 2,710,071 |
Net Income | |
| | | | | | | | | | 43,690 | | | | |
| 43,690 |
Other comprehensive loss (net of taxes of $49,701) | |
| | | | | | | | | | | | | (210,118) | |
| (210,118) |
Dividends on common stock ($0.28 per share) | |
| | | | | | | | | | (21,163) | | | | |
| (21,163) |
Dividends on preferred stock ($171.88 per share) | |
| | | | | | | | | | (2,967) | | | | |
| (2,967) |
Stock purchased under stock repurchase plan (629,691 shares) | | | (837) | | | | | | (24,181) | | | | | | | | | (25,018) |
Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (291,723 shares) | |
| 387 | | | | | | 1,044 | | | | | | | | | 1,431 |
Stock-based compensation expense | |
| | | | | | | 2,409 | | | | | | | |
| 2,409 |
Balance - March 31, 2022 | | $ | 99,651 | | $ | 173 | | $ | 1,786,640 | | $ | 803,354 | | $ | (191,483) | | $ | 2,498,335 |
| | | | | | | | | | | | | | | | | | |
Balance - December 31, 2020 | | $ | 104,169 | | $ | 173 | | $ | 1,917,081 | | $ | 616,052 | | $ | 71,015 | | $ | 2,708,490 |
Net Income | |
| | | | | | | | | | 56,189 | | | | |
| 56,189 |
Other comprehensive loss (net of taxes of $8,835) | |
|
| | | | | | | | | | | | (34,514) | |
| (34,514) |
Dividends on common stock ($0.25 per share) | |
|
| | | | | | | | | (19,700) | | | | |
| (19,700) |
Dividends on preferred stock ($171.88 per share) | | | | | | | | | | | | (2,967) | | | | | | (2,967) |
Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (243,884 shares) | |
| 324 | | | | | | (289) | | | | | | | |
| 35 |
Stock-based compensation expense | |
|
| | | | | | 2,199 | | | | | | | |
| 2,199 |
Balance- March 31, 2021 | | $ | 104,493 | | $ | 173 | | $ | 1,918,991 | | $ | 649,574 | | $ | 36,501 | | $ | 2,709,732 |
See accompanying notes to consolidated financial statements.
-5-
ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Dollars in thousands)
| | | | | | |
|
| 2022 |
| 2021 | ||
Operating activities: |
| |
|
| |
|
Net income | | $ | 43,690 | | $ | 56,189 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |
|
| |
|
|
Depreciation of premises and equipment | |
| 3,599 | |
| 3,969 |
Writedown of ROU assets and equipment | |
| 4,570 | |
| 1,065 |
Amortization, net | |
| 8,619 | |
| 7,904 |
Amortization (accretion) related to acquisitions, net | |
| 875 | |
| (532) |
Provision for credit losses | |
| 2,800 | |
| (13,624) |
Gains on securities transactions, net | |
| 0 | |
| (78) |
BOLI income | |
| (2,697) | |
| (2,265) |
Originations and purchases of loans held for sale | |
| (91,957) | |
| (185,885) |
Proceeds from sales of loans held for sale | | | 91,434 | | | 231,250 |
Gains on sales of foreclosed properties and former bank premises, net | | | 0 | | | (706) |
Losses on debt extinguishment | | | 0 | | | 14,695 |
Stock-based compensation expenses | |
| 2,409 | |
| 2,199 |
Issuance of common stock for services | |
| 217 | |
| 0 |
Net decrease in other assets | |
| 46,434 | |
| 42,567 |
Net increase (decrease) in other liabilities | |
| 1,454 | |
| (72,375) |
Net cash provided by operating activities | |
| 111,447 | |
| 84,373 |
Investing activities: | |
|
| |
|
|
Purchases of AFS securities, restricted stock, and other investments | |
| (62,773) | |
| (355,992) |
Purchases of HTM securities | |
| (130,533) | |
| 0 |
Proceeds from sales of AFS securities and restricted stock | |
| 0 | |
| 45,436 |
Proceeds from maturities, calls and paydowns of AFS securities | |
| 109,974 | |
| 124,053 |
Proceeds from maturities, calls and paydowns of HTM securities | |
| 550 | |
| 432 |
Net increase in loans held for investment | | | (258,502) | | | (250,762) |
Net increase in premises and equipment | |
| (797) | |
| (3,520) |
Proceeds from BOLI settlements | | | 2,068 | | | 556 |
Proceeds from sales of foreclosed properties and former bank premises | |
| 0 | |
| 2,431 |
Net cash used in investing activities | |
| (340,013) | |
| (437,366) |
Financing activities: | |
|
| |
|
|
Net increase in noninterest-bearing deposits | |
| 162,739 | |
| 697,696 |
Net decrease in interest-bearing deposits | |
| (289,594) | |
| (122,424) |
Net decrease in short-term borrowings | |
| (2,843) | |
| (77,366) |
Repayments of long-term debt | | | 0 | | | (214,695) |
Cash dividends paid - common stock | |
| (21,163) | |
| (19,700) |
Cash dividends paid - preferred stock | | | (2,967) | | | (2,967) |
Repurchase of common stock | | | (25,018) | | | 0 |
Issuance of common stock | |
| 3,804 | |
| 2,183 |
Vesting of restricted stock, net of shares held for taxes | |
| (2,590) | |
| (2,148) |
Net cash (used in) provided by financing activities | |
| (177,632) | |
| 260,579 |
Decrease in cash and cash equivalents | |
| (406,198) | | | (92,414) |
Cash, cash equivalents and restricted cash at beginning of the period | |
| 802,501 | |
| 493,294 |
Cash, cash equivalents and restricted cash at end of the period | | $ | 396,303 | | $ | 400,880 |
-6-
ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2022 AND 2016
(Dollars in thousands)
2017 | 2016 | ||||||
Operating activities: | |||||||
Net income | $ | 57,737 | $ | 56,699 | |||
Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities: | |||||||
Depreciation of premises and equipment | 8,307 | 7,617 | |||||
Writedown of OREO | 845 | 879 | |||||
Amortization, net | 10,500 | 10,241 | |||||
Amortization (accretion) related to acquisition, net | (158 | ) | 1,400 | ||||
Provision for credit losses | 7,345 | 7,376 | |||||
Gains on securities transactions, net | (782 | ) | (145 | ) | |||
BOLI income | (3,999 | ) | (4,122 | ) | |||
Decrease (increase) in loans held for sale, net | 5,591 | (10,784 | ) | ||||
Losses (gains) on sales of other real estate owned, net | 32 | (278 | ) | ||||
Losses on sales of premises, net | 51 | 97 | |||||
Stock-based compensation expenses | 3,472 | 2,284 | |||||
Issuance of common stock for services | 561 | 379 | |||||
Net decrease (increase) in other assets | 4,952 | (11,169 | ) | ||||
Net increase in other liabilities | 909 | 11,192 | |||||
Net cash and cash equivalents provided by (used in) operating activities | 95,363 | 71,666 | |||||
Investing activities: | |||||||
Purchases of securities available for sale and restricted stock | (205,965 | ) | (159,863 | ) | |||
Purchases of securities held to maturity | (7,836 | ) | — | ||||
Proceeds from sales of securities available for sale and restricted stock | 91,911 | 18,272 | |||||
Proceeds from maturities, calls and paydowns of securities available for sale | 88,675 | 83,942 | |||||
Proceeds from maturities, calls and paydowns of securities held to maturity | 818 | 1,841 | |||||
Net increase in loans held for investment | (594,967 | ) | (479,346 | ) | |||
Net increase in premises and equipment | (7,139 | ) | (5,102 | ) | |||
Proceeds from BOLI settlements | 2,497 | — | |||||
Proceeds from sales of other real estate owned | 1,028 | 4,982 | |||||
Cash paid in acquisition | — | (4,077 | ) | ||||
Cash acquired in acquisitions | — | 207 | |||||
Net cash and cash equivalents provided by (used in) investing activities | (630,978 | ) | (539,144 | ) | |||
Financing activities: | |||||||
Net increase in noninterest-bearing deposits | 141,524 | 69,331 | |||||
Net increase in interest-bearing deposits | 360,813 | 225,239 | |||||
Net increase in short-term borrowings | 40,556 | 276,748 | |||||
Cash paid for contingent consideration | (3,003 | ) | — | ||||
Proceeds from issuance of long-term debt | 20,000 | — | |||||
Repayments of long-term debt | — | (32,500 | ) | ||||
Cash dividends paid - common stock | (26,207 | ) | (24,957 | ) | |||
Repurchase of common stock | — | (33,176 | ) | ||||
Issuance of common stock | 969 | 753 | |||||
Vesting of restricted stock, net of shares held for taxes | (1,313 | ) | (445 | ) | |||
Net cash and cash equivalents provided by (used in) financing activities | 533,339 | 480,993 | |||||
Increase (decrease) in cash and cash equivalents | (2,276 | ) | 13,515 | ||||
Cash and cash equivalents at beginning of the period | 179,237 | 142,660 | |||||
Cash and cash equivalents at end of the period | $ | 176,961 | $ | 156,175 | |||
Supplemental Disclosure of Cash Flow Information | |||||||
Cash payments for: | |||||||
Interest | $ | 33,947 | $ | 21,812 | |||
Income taxes | 19,600 | 19,800 | |||||
Supplemental schedule of noncash investing and financing activities | |||||||
Transfers between loans and other real estate owned | $ | 585 | $ | 865 | |||
Issuance of common stock in exchange for net assets in acquisition | — | 453 |
| | | | | | |
|
| 2022 |
| 2021 | ||
Supplemental Disclosure of Cash Flow Information |
| |
|
| |
|
Cash payments for: |
| |
|
| |
|
Interest | | $ | 5,393 | | $ | 11,502 |
| | | | | | |
Supplemental schedule of noncash investing and financing activities | |
|
| |
|
|
Transfers from bank premises to OREO | | | 0 | | | 1,425 |
See accompanying notes to consolidated financial statements.
-7-
ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated FinancialFinancial Statements (Unaudited)
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The Company
Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation (Nasdaq: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank has 114 branches and approximately 130 ATMs located throughout Virginia, and in portions of Maryland and North Carolina as of March 31, 2022. Certain non-bank financial services affiliates of Atlantic Union Bank include: Atlantic Union Equipment Finance, Inc., which provides equipment financing; Dixon, Hubard, Feinour & Brown, Inc., which provides investment advisory services; Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance products.
The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant inter-company accounts and transactions have been eliminated in consolidation.
The unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s 20162021 Form 10-K. Certain prior period amounts have been reclassified to conform to current period presentation.
Adoption of New Accounting Standards
In March 2016,2020, the FASB issued ASU No. 2016-09, “
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company defines cash and cash equivalents as cash, cash due from banks, interest-bearing deposits in other banks, short-term money market investments, other interest-bearing deposits, and federal funds sold.
Restricted cash is disclosed in Note 7 “Commitments and Contingencies” in Part I, Item I of this Quarterly Report and is comprised of cash maintained at various correspondent banks as collateral for the Company’s derivative portfolio and is included in interest-bearing deposits in other banks in the Company’s Consolidated Balance Sheets. In addition, the Company is required to maintain reserve balances with the FRB based on the type and amount of deposits; however, on March 15, 2020 the Federal Reserve announced that reserve requirement ratios would be reduced to zero percent effective March 26, 2020 due to economic conditions, which eliminated the reserve requirement for all depository institutions. The reserve requirement is still at zero percent as of March 31, 2022.
Accrued Interest Receivable
The Company has elected to exclude accrued interest from the amortized cost basis in its determination of the ALLL, as well as the ACL reserve for securities. Accrued interest receivable totaled $42.5 million and $43.3 million on LHFI, $6.2 million and $7.0 million on HTM securities, and $13.8 million and $14.5 million on AFS securities at March 31, 2022 and December 31, 2021, respectively, and is included in “Other assets” on the Company’s Consolidated Balance Sheets. The Company’s policy is to write off accrued interest receivable through reversal of interest income when it becomes probable the Company
-8-
will not be able to collect the accrued interest. For the quarters ended March 31, 2022 and March 30, 2021, accrued interest receivable write offs were not material to the Company’s consolidated financial statements.
Segment Reporting
Operating segments are similarly excluded from the scope. Entities can elect to adopt the guidance either on a full or modified retrospective basis. Full retrospective adoption will require a cumulative effect adjustment to retained earnings as of the beginning of the earliest comparative period presented. Modified retrospective adoption will require a cumulative effect adjustment to retained earnings as of the beginning of the reporting period in which the entity first applies the new guidance. The Company plans to adopt this guidance on the effective date, January 1, 2018 via the modified retrospective approach. The Company performed its assessment of the adoption of this ASU and the related subsequent technical corrections issued. Based on the completed contracts reviewed thus far, the adoption of this accounting guidance is not expected to have a material impact on the Company's consolidated financial statements.
-9-
Available for Sale
The Company’s AFS investment portfolio is generally highly-rated or agency backed. All AFS securities were current with 0 securities past due or on non-accrual as of March 31, 2022 and December 31, 2021.
The amortized cost, gross unrealized gains and losses, and estimated fair values of AFS securities available for sale as of September 30, 2017 and DecemberMarch 31, 20162022 are summarized as follows (dollars in thousands):
| | | | | | | | | | | | |
| | Amortized | | Gross Unrealized | | Estimated | ||||||
|
| Cost |
| Gains |
| (Losses) |
| Fair Value | ||||
March 31, 2022 |
| |
|
| |
|
| |
| | |
|
U.S. government and agency securities | | $ | 72,068 | | $ | — | | $ | (4,029) | | $ | 68,039 |
Obligations of states and political subdivisions | |
| 967,219 | |
| 8,336 | |
| (87,255) | |
| 888,300 |
Corporate and other bonds (1) | |
| 185,884 | |
| 802 | |
| (2,763) | |
| 183,923 |
Commercial MBS | |
| | | | | | | | |
| |
Agency | | | 342,966 | |
| 978 | |
| (15,592) | | | 328,352 |
Non-agency | | | 108,462 | |
| — | |
| (2,323) | | | 106,139 |
Total commercial MBS | | | 451,428 | |
| 978 | |
| (17,915) | | | 434,491 |
Residential MBS | | | | | | | | | | | | |
Agency | | | 1,634,860 | |
| 2,401 | |
| (103,848) | | | 1,533,413 |
Non-agency | | | 86,876 | |
| 6 | |
| (3,413) | | | 83,469 |
Total residential MBS | | | 1,721,736 | |
| 2,407 | |
| (107,261) | | | 1,616,882 |
Other securities | |
| 1,645 | |
| 0 | |
| 0 | |
| 1,645 |
Total AFS securities | | $ | 3,399,980 | | $ | 12,523 | | $ | (219,223) | | $ | 3,193,280 |
(1) Other bonds include asset-backed securities
The amortized cost, gross unrealized gains and losses, and estimated fair values of AFS securities as of December 31, 2021 are summarized as follows (dollars in thousands):
| | | | | | | | | | | | |
| | Amortized | | Gross Unrealized | | Estimated | ||||||
|
| Cost |
| Gains |
| (Losses) |
| Fair Value | ||||
December 31, 2021 | | | | | | | | | | | | |
U.S. government and agency securities | | $ | 73,830 | | $ | 179 | | $ | (160) | | $ | 73,849 |
Obligations of states and political subdivisions | | | 971,126 | | | 39,343 | | | (2,073) | | | 1,008,396 |
Corporate and other bonds (1) | |
| 150,201 | |
| 3,353 | |
| (178) | |
| 153,376 |
Commercial MBS | |
| | | | | | | | |
| |
Agency | | | 361,806 | | | 6,761 | | | (4,215) | | | 364,352 |
Non-agency | | | 107,087 | | | 139 | | | (421) | | | 106,805 |
Total commercial MBS | | | 468,893 | | | 6,900 | | | (4,636) | | | 471,157 |
Residential MBS | | | | | | | | | | | | |
Agency | | | 1,691,651 | | | 15,180 | | | (24,337) | | | 1,682,494 |
Non-agency | | | 91,443 | | | 243 | | | (948) | | | 90,738 |
Total residential MBS | | | 1,783,094 | | | 15,423 | | | (25,285) | | | 1,773,232 |
Other securities | |
| 1,640 | |
| 0 | |
| 0 | |
| 1,640 |
Total AFS securities | | $ | 3,448,784 | | $ | 65,198 | | $ | (32,332) | | $ | 3,481,650 |
Amortized | Gross Unrealized | Estimated | |||||||||||||
Cost | Gains | (Losses) | Fair Value | ||||||||||||
September 30, 2017 | |||||||||||||||
Obligations of states and political subdivisions | $ | 285,921 | $ | 7,582 | $ | (1,304 | ) | $ | 292,199 | ||||||
Corporate bonds | 114,997 | 1,241 | (816 | ) | 115,422 | ||||||||||
Mortgage-backed securities | 546,038 | 4,119 | (3,253 | ) | 546,904 | ||||||||||
Other securities | 13,890 | — | (54 | ) | 13,836 | ||||||||||
Total available for sale securities | $ | 960,846 | $ | 12,942 | $ | (5,427 | ) | $ | 968,361 | ||||||
December 31, 2016 | |||||||||||||||
Obligations of states and political subdivisions | $ | 274,007 | $ | 4,962 | $ | (3,079 | ) | $ | 275,890 | ||||||
Corporate bonds | 123,674 | 892 | (2,786 | ) | 121,780 | ||||||||||
Mortgage-backed securities | 536,031 | 4,626 | (5,371 | ) | 535,286 | ||||||||||
Other securities | 13,885 | — | (77 | ) | 13,808 | ||||||||||
Total available for sale securities | $ | 947,597 | $ | 10,480 | $ | (11,313 | ) | $ | 946,764 |
(1) Other bonds include asset-backed securities
-10-
The following table shows the gross unrealized losses and fair value (dollars in thousands) of the Company’s available for saleAFS securities with unrealized losses for which an ACL has not been recorded at March 31, 2022 and December 31, 2021 and that are not deemed to be other-than-temporarily impaired as of September 30, 2017 and December 31, 2016.those dates. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.
| | | | | | | | | | | | | | | | | | |
| | Less than 12 months | | More than 12 months | | Total | ||||||||||||
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized | ||||||
| | Value | | Losses | | Value | | Losses | | Value | | Losses | ||||||
March 31, 2022 | |
| | |
| | |
| | |
| | |
| | |
| |
U.S. government and agency securities | | $ | 64,366 | | $ | (3,972) | | $ | 3,604 | | $ | (57) | | $ | 67,970 | | $ | (4,029) |
Obligations of states and political subdivisions | | | 533,491 | | | (79,311) | | | 31,225 | | | (7,944) | | | 564,716 | | | (87,255) |
Corporate and other bonds(1) | |
| 112,253 | |
| (2,763) | |
| 0 | |
| 0 | |
| 112,253 | |
| (2,763) |
Commercial MBS | |
| | | | | | | | | | | | | | | | |
Agency | | | 175,651 | | | (11,545) | | | 40,654 | | | (4,047) | | | 216,305 | | | (15,592) |
Non-agency | | | 87,127 | | | (1,526) | | | 19,013 | | | (797) | | | 106,140 | | | (2,323) |
Total commercial MBS | | | 262,778 | | | (13,071) | | | 59,667 | | | (4,844) | | | 322,445 | | | (17,915) |
Residential MBS | | | | | | | | | | | | | | | | | | |
Agency | | | 1,016,786 | | | (71,954) | | | 333,594 | | | (31,894) | | | 1,350,380 | | | (103,848) |
Non-agency | | | 63,140 | | | (2,550) | | | 12,162 | | | (863) | | | 75,302 | | | (3,413) |
Total residential MBS | | | 1,079,926 | | | (74,504) | | | 345,756 | | | (32,757) | | | 1,425,682 | | | (107,261) |
Total AFS securities | | $ | 2,052,814 | | $ | (173,621) | | $ | 440,252 | | $ | (45,602) | | $ | 2,493,066 | | $ | (219,223) |
| | | | | | | | | | | | | | | | | | |
December 31, 2021 | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
U.S. government and agency securities | | $ | 64,474 | | $ | (115) | | $ | 3,900 | | $ | (45) | | $ | 68,374 | | $ | (160) |
Obligations of states and political subdivisions | | | 249,701 | | | (2,020) | | | 2,123 | | | (53) | | | 251,824 | | | (2,073) |
Corporate and other bonds(1) | |
| 21,134 | |
| (177) | |
| 703 | |
| (1) | |
| 21,837 | |
| (178) |
Commercial MBS | |
| | |
| | |
| | |
| | |
| | |
| |
Agency | | | 175,588 | | | (4,053) | | | 3,172 | | | (162) | | | 178,760 | | | (4,215) |
Non-agency | | | 33,759 | | | (313) | | | 11,029 | | | (108) | | | 44,788 | | | (421) |
Total commercial MBS | | | 209,347 | | | (4,366) | | | 14,201 | | | (270) | | | 223,548 | | | (4,636) |
Residential MBS | | | | | | | | | | | | | | | | | | |
Agency | | | 1,140,701 | | | (21,147) | | | 106,104 | | | (3,190) | | | 1,246,805 | | | (24,337) |
Non-agency | | | 48,392 | | | (584) | | | 12,716 | | | (364) | | | 61,108 | | | (948) |
Total residential MBS | | | 1,189,093 | | | (21,731) | | | 118,820 | | | (3,554) | | | 1,307,913 | | | (25,285) |
Total AFS securities | | $ | 1,733,749 | | $ | (28,409) | | $ | 139,747 | | $ | (3,923) | | $ | 1,873,496 | | $ | (32,332) |
Less than 12 months | More than 12 months | Total | |||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
September 30, 2017 | |||||||||||||||||||||||
Obligations of states and political subdivisions | $ | 55,319 | $ | (700 | ) | $ | 9,338 | $ | (604 | ) | $ | 64,657 | $ | (1,304 | ) | ||||||||
Mortgage-backed securities | 283,466 | (2,708 | ) | 42,481 | (545 | ) | 325,947 | (3,253 | ) | ||||||||||||||
Corporate bonds and other securities | 21,128 | (353 | ) | 32,674 | (517 | ) | 53,802 | (870 | ) | ||||||||||||||
Total available for sale securities | $ | 359,913 | $ | (3,761 | ) | $ | 84,493 | $ | (1,666 | ) | $ | 444,406 | $ | (5,427 | ) | ||||||||
December 31, 2016 | |||||||||||||||||||||||
Obligations of states and political subdivisions | $ | 108,440 | $ | (3,007 | ) | $ | 588 | $ | (72 | ) | $ | 109,028 | $ | (3,079 | ) | ||||||||
Mortgage-backed securities | 316,469 | (4,979 | ) | 42,096 | (392 | ) | 358,565 | (5,371 | ) | ||||||||||||||
Corporate bonds and other securities | 47,388 | (1,537 | ) | 40,468 | (1,326 | ) | 87,856 | (2,863 | ) | ||||||||||||||
Total available for sale securities | $ | 472,297 | $ | (9,523 | ) | $ | 83,152 | $ | (1,790 | ) | $ | 555,449 | $ | (11,313 | ) |
(1) Other bonds include asset-backed securities
As of September 30, 2017,March 31, 2022, there were $84.5 $440.3 million or 36 issues,AFS securities, comprised of individual available for sale securities that had been in a continuous loss position for more than 12 months. These securities had an unrealized loss of $1.7 million and consisted of municipal obligations, mortgage-backed securities, and corporate bonds. As of December 31, 2016, there were $83.2 million, or 30 issues, of106 individual securities that had been in a continuous loss position for more than 12 months. Thesemonths and had an aggregate unrealized loss of approximately $45.6 million. As of December 31, 2021, there were $139.7 million AFS securities, comprised of 33 individual securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of $3.9 million.
The Company has evaluated AFS securities in an unrealized loss of $1.8 millionposition for credit related impairment at March 31, 2022 and consistedDecember 31, 2021 and concluded 0 impairment existed based on several factors which included: (1) the majority of municipal obligations, mortgage-backed securities, and corporate bonds. The Company has determined that these securities are temporarily impaired as of September 30, 2017 and December 31, 2016 for the reasons set out below:
Additionally, the Company does not consider these investments to be other-than-temporarily impaired.
-11-
The following table presents the amortized cost and estimated fair value of available for saleAFS securities as of September 30, 2017March 31, 2022 and December 31, 2016,2021, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
September 30, 2017 | December 31, 2016 | ||||||||||||||
Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated Fair Value | ||||||||||||
Due in one year or less | $ | 23,387 | $ | 23,510 | $ | 21,403 | $ | 21,517 | |||||||
Due after one year through five years | 128,261 | 130,107 | 108,198 | 109,778 | |||||||||||
Due after five years through ten years | 267,492 | 271,830 | 300,552 | 301,888 | |||||||||||
Due after ten years | 541,706 | 542,914 | 517,444 | 513,581 | |||||||||||
Total securities available for sale | $ | 960,846 | $ | 968,361 | $ | 947,597 | $ | 946,764 |
| | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 | ||||||||
|
| Amortized |
| Estimated |
| Amortized |
| Estimated | ||||
| | Cost | | Fair Value | | Cost | | Fair Value | ||||
Due in one year or less | | $ | 23,826 | | $ | 23,702 | | $ | 18,247 | | $ | 18,317 |
Due after one year through five years | |
| 179,752 | |
| 179,192 | |
| 180,080 | |
| 183,981 |
Due after five years through ten years | |
| 344,061 | |
| 335,913 | |
| 324,615 | |
| 331,215 |
Due after ten years | |
| 2,852,341 | |
| 2,654,473 | |
| 2,925,842 | |
| 2,948,137 |
Total AFS securities | | $ | 3,399,980 | | $ | 3,193,280 | | $ | 3,448,784 | | $ | 3,481,650 |
Refer to Note 7 "Commitments and Contingencies" in Part I, Item I of this Quarterly Report for information regarding the estimated fair value of available for saleAFS securities whichthat were pledged to secure public deposits, repurchase agreements, and for other purposes as permitted or required by law as of September 30, 2017March 31, 2022 and December 31, 2016, see Note 6 “Commitments and Contingencies.”
Held to Maturity
The Company’s HTM investment portfolio primarily consists of highly-rated municipal securities. The Company’s HTM securities were all current, with 0 securities past due or on non-accrual at March 31, 2022 and December 31, 2021.
The Company reports HTM securities held to maturity on the Company’s Consolidated Balance Sheets at carrying value. Carrying value is amortized cost, which includes any unamortized unrealized gains and losses recognized in accumulated other comprehensive incomeAOCI prior to reclassifying the securities from AFS securities available for sale to securities held to maturity.HTM securities. Investment securities transferred into the held to maturityHTM category from the available for saleAFS category are recorded at fair value at the date of transfer. The unrealized holding gaingains or losslosses at the date of transfer isare retained in accumulated other comprehensive incomeAOCI and in the carrying value of the securities held to maturity.HTM securities. Such unrealized gains or losses are accreted over the remaining life of the security with no impact on future net income.
The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities held to maturity as of September 30, 2017 and DecemberMarch 31, 20162022 are summarized as follows (dollars in thousands):
| | | | | | | | | | | | |
| | Carrying | | Gross Unrealized | | Estimated | ||||||
|
| Value |
| Gains |
| (Losses) | | Fair Value | ||||
March 31, 2022 |
| |
|
| |
|
| |
| | |
|
U.S. government and agency securities | | $ | 2,483 | | $ | 0 | | $ | (74) | | $ | 2,409 |
Obligations of states and political subdivisions | | | 684,294 | | | 24,828 | | | (17,616) | | | 691,506 |
Commercial MBS | |
| | | | | | | | | | |
Agency | | | 31,221 | | | 0 | | | (1,697) | | | 29,524 |
Total commercial MBS | | | 31,221 | | | 0 | | | (1,697) | | | 29,524 |
Residential MBS | | | | | | | | | | | | |
Agency | | | 38,874 | | | 0 | | | (2,136) | | | 36,738 |
Total residential MBS | | | 38,874 | | | 0 | | | (2,136) | | | 36,738 |
Total held-to-maturity securities | | $ | 756,872 | | $ | 24,828 | | $ | (21,523) | | $ | 760,177 |
-12-
Carrying | Gross Unrealized | Estimated | |||||||||||||
Value (1) | Gains | (Losses) | Fair Value | ||||||||||||
September 30, 2017 | |||||||||||||||
Obligations of states and political subdivisions | $ | 204,801 | $ | 5,111 | $ | (77 | ) | $ | 209,835 | ||||||
December 31, 2016 | |||||||||||||||
Obligations of states and political subdivisions | $ | 201,526 | $ | 1,617 | $ | (828 | ) | $ | 202,315 |
The carrying value, includes $4.0 million asgross unrealized gains and losses, and estimated fair values of September 30, 2017 and $5.2 millionHTM securities as of December 31, 20162021 are summarized as follows (dollars in thousands):
| | | | | | | | | | | | |
| | Carrying | | Gross Unrealized | | Estimated | ||||||
|
| Value |
| Gains |
| (Losses) |
| Fair Value | ||||
December 31, 2021 | |
|
| |
|
| |
|
| |
|
|
U.S. government and agency securities | | $ | 2,604 | | $ | 0 | | $ | (29) | | $ | 2,575 |
Obligations of states and political subdivisions | | | 620,873 | | | 65,982 | | | (121) | | | 686,734 |
Commercial MBS | | | | |
| | |
| | |
| |
Agency | | | 4,523 | | | 0 | | | (58) | | | 4,465 |
Total commercial MBS | | | 4,523 | | | 0 | | | (58) | | | 4,465 |
Total held-to-maturity securities | | $ | 628,000 | | $ | 65,982 | | $ | (208) | | $ | 693,774 |
Credit Quality Indicators & Allowance for Credit Losses - HTM
For HTM securities, the Company evaluates the credit risk of net unrealized gains presentits securities on at least a quarterly basis. The Company estimates expected credit losses on HTM debt securities on an individual basis based on the timePD/LGD methodology primarily using security-level credit ratings. The Company’s HTM securities ACL was immaterial at March 31, 2022 and December 31, 2021. The primary indicators of transfer from availablecredit quality for salethe Company’s HTM portfolio are security type and credit rating, which is influenced by a number of factors including obligor cash flow, geography, seniority, and others. The Company’s only HTM securities netwith credit risk are obligations of any accretion.
The following table showspresents the gross unrealized lossesamortized cost of HTM securities as of March 31, 2022 and fair valueDecember 31, 2021 by security type and credit rating (dollars in thousands) of the Company’s held to maturity securities with unrealized losses that are not deemed to be other-than-temporarily impaired as of September 30, 2017 and December 31, 2016. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.
| | | | | | | | | | | | |
|
| U.S. Government and Agency |
| Obligations of states and political |
| Mortgage-backed |
| Total HTM | ||||
| | securities | | subdivisions | | securities | | securities | ||||
March 31, 2022 | | | | | | | | | | | | |
Credit Rating: | |
| | |
| | | | | | | |
AAA/AA/A | | $ | 0 | | $ | 684,294 | | $ | 0 | | $ | 684,294 |
Not Rated - Agency(1) | | | 2,483 | | | 0 | | | 70,095 | | | 72,578 |
Total | | $ | 2,483 | | $ | 684,294 | | $ | 70,095 | | $ | 756,872 |
December 31, 2021 | | | | | | | | | | | | |
Credit Rating: | |
| | |
| | | | | | | |
AAA/AA/A | | $ | 0 | | $ | 620,873 | | $ | 0 | | $ | 620,873 |
Not Rated - Agency(1) | | | 2,604 | | | 0 | | | 4,523 | | | 7,127 |
Total | | $ | 2,604 | | $ | 620,873 | | $ | 4,523 | | $ | 628,000 |
Less than 12 months | More than 12 months | Total | |||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
September 30, 2017 | |||||||||||||||||||||||
Obligations of states and political subdivisions | $ | 5,130 | $ | (53 | ) | $ | 638 | $ | (24 | ) | $ | 5,768 | $ | (77 | ) | ||||||||
December 31, 2016 | |||||||||||||||||||||||
Obligations of states and political subdivisions | $ | 92,841 | $ | (747 | ) | $ | 648 | $ | (81 | ) | $ | 93,489 | $ | (828 | ) |
(1) Generally considered not to maturity security that had been in a continuous loss position for more than 12 months and had an unrealized loss of $24,000. As of December 31, 2016, there was $648,000, or one issue, of an individual held to maturity security that had been in a continuous loss position for more than 12 months and had an unrealized loss of $81,000. This security is a municipal bondhave credit risk given the government guarantees associated with minimal credit exposure and is credit enhanced with a guarantee from the local school board. For this reason, the Company has determined that this security in a loss position is temporarily impaired as of September 30, 2017 and December 31, 2016. Because the Company does not intend to sell this investment and the accounting standard of “more likely than not” has not been met for the Company to be required to sell the investment before recovery of its amortized cost basis, which may be maturity, the Company does not consider this investment to be other-than-temporarily impaired.
The following table presents the amortized cost and estimated fair value of held to maturityHTM securities as of September 30, 2017March 31, 2022 and December 31, 2016,2021, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
| | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 | ||||||||
|
| Carrying |
| Estimated |
| Carrying |
| Estimated | ||||
| | Value | | Fair Value | | Value | | Fair Value | ||||
Due in one year or less | | $ | 5,061 | | $ | 5,018 | | $ | 3,034 | | $ | 3,027 |
Due after one year through five years | |
| 10,381 | |
| 10,827 | |
| 5,852 | |
| 6,065 |
Due after five years through ten years | |
| 15,877 | |
| 16,537 | |
| 14,019 | |
| 15,984 |
Due after ten years | |
| 725,553 | |
| 727,795 | |
| 605,095 | |
| 668,698 |
Total HTM securities | | $ | 756,872 | | $ | 760,177 | | $ | 628,000 | | $ | 693,774 |
-13-
September 30, 2017 | December 31, 2016 | ||||||||||||||
Carrying Value (1) | Estimated Fair Value | Carrying Value (1) | Estimated Fair Value | ||||||||||||
Due in one year or less | $ | 5,879 | $ | 5,902 | $ | 4,403 | $ | 4,440 | |||||||
Due after one year through five years | 41,196 | 41,959 | 28,383 | 28,763 | |||||||||||
Due after five years through ten years | 65,893 | 67,444 | 51,730 | 51,522 | |||||||||||
Due after ten years | 91,833 | 94,530 | 117,010 | 117,590 | |||||||||||
Total securities held to maturity | $ | 204,801 | $ | 209,835 | $ | 201,526 | $ | 202,315 |
Refer to Note 7 "Commitments and Contingencies" in Part I, Item I of September 30, 2017 and $5.2 million as of December 31, 2016 of net unrealized gains present at the time of transfer from availablethis Quarterly Report for sale securities, net of any accretion.
Restricted Stock, at cost
Due to restrictions placed upon the Bank’s common stock investment in the Federal Reserve BankFRB and FHLB, these securities have been classified as restricted equity securities and carried at cost. These restricted securities are not subject to the investment security classifications and are included as a separate line item on the Company’s Consolidated Balance Sheets. At September 30, 2017 and December 31, 2016, the FHLB required the Bank to maintainRestricted stock in an amount equal to 4.25%consists of outstanding borrowings and a specific percentage of the Bank’s total assets. The Federal Reserve Bank required the Bank to maintain stock with a par value equal to 6% of its outstanding capital at both September 30, 2017 and December 31, 2016. Restricted equity securities consist of Federal Reserve BankFRB stock in the amount of $27.6 million and $23.8$67.0 million for September 30, 2017March 31, 2022 and December 31, 20162021 and FHLB stock in the amount of $40.9$10.0 million and $37.0$9.8 million as of September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively.
Realized Gains and Losses
The following table presents the gross realized gains and losses on and the proceeds from the sale of securities during the three and nine months ended September 30, 2017March 31, 2022 and 20162021 (dollars in thousands).
| | | | | | |
|
| Three Months Ended |
| Three Months Ended | ||
| | March 31, 2022 | | March 31, 2021 | ||
Realized gains (losses)(1): |
| |
|
| |
|
Gross realized gains | | $ | 0 | | $ | 138 |
Gross realized losses | |
| 0 | |
| (60) |
Net realized gains | | $ | 0 | | $ | 78 |
| | | | | | |
Proceeds from sales of securities | | $ | 0 | | $ | 45,436 |
(1) Includes gains (losses) on sales and calls of securities
Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | ||||||
Realized gains (losses): | |||||||
Gross realized gains | $ | 296 | $ | 958 | |||
Gross realized losses | (112 | ) | (176 | ) | |||
Net realized gains | $ | 184 | $ | 782 | |||
Proceeds from sales of securities | $ | 39,284 | $ | 91,911 |
-14-
Three Months Ended September 30, 2016 | Nine Months Ended September 30, 2016 | ||||||
Realized gains (losses): | |||||||
Gross realized gains | $ | — | $ | 242 | |||
Gross realized losses | — | (97 | ) | ||||
Net realized gains | $ | — | $ | 145 | |||
Proceeds from sales of securities | $ | 2,848 | $ | 18,272 |
The information included below reflects the impact of the CARES Act, as amended by the CAA, and the Joint Guidance. See Note 1 “Summary of Significant Accounting Policies” in the Company’s 2021 Form 10-K for information about COVID-19 and related legislative and regulatory developments.
The Company’s loans are stated at their face amount, net of deferred fees and costs, and consist of the following at September 30, 2017March 31, 2022 and December 31, 20162021 (dollars in thousands):
| | | | | | |
| | March 31, 2022 |
| December 31, 2021 | ||
Construction and Land Development | | $ | 969,059 | | $ | 862,236 |
Commercial Real Estate - Owner Occupied | |
| 2,007,671 | |
| 1,995,409 |
Commercial Real Estate - Non-Owner Occupied | |
| 3,875,681 | |
| 3,789,377 |
Multifamily Real Estate | |
| 723,940 | |
| 778,626 |
Commercial & Industrial(1) | |
| 2,540,680 | |
| 2,542,243 |
Residential 1-4 Family - Commercial | |
| 569,801 | |
| 607,337 |
Residential 1-4 Family - Consumer | |
| 824,163 | |
| 816,524 |
Residential 1-4 Family - Revolving | |
| 568,403 | |
| 560,796 |
Auto | |
| 499,855 | |
| 461,052 |
Consumer | |
| 171,875 | |
| 176,992 |
Other Commercial(2) | |
| 708,221 | |
| 605,251 |
Total LHFI, net of deferred fees and costs(3) | | | 13,459,349 | | | 13,195,843 |
Allowance for loan and lease losses | | | (102,591) | | | (99,787) |
Total LHFI, net | | $ | 13,356,758 | | $ | 13,096,056 |
September 30, 2017 | December 31, 2016 | ||||||
Construction and Land Development | $ | 841,738 | $ | 751,131 | |||
Commercial Real Estate - Owner Occupied | 903,523 | 857,805 | |||||
Commercial Real Estate - Non-Owner Occupied | 1,748,039 | 1,564,295 | |||||
Multifamily Real Estate | 368,686 | 334,276 | |||||
Commercial & Industrial | 554,522 | 551,526 | |||||
Residential 1-4 Family | 1,083,112 | 1,029,547 | |||||
Auto | 276,572 | 262,071 | |||||
HELOC | 535,446 | 526,884 | |||||
Consumer and all other | 587,091 | 429,525 | |||||
Total loans held for investment, net (1) | $ | 6,898,729 | $ | 6,307,060 |
(1)
(2)Other commercial loans include approximately $1.1 million and $5.1 million in loans from the PPP at March 31, 2022 and December 31, 2021, respectively.
(3) Total loans include unamortized premiums and discounts, and unamortized deferred fees and costs totaling $335,000$44.0 million and $1.8$49.3 million as of September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively.
-15-
The following table shows the aging of the Company’s loan portfolio, by segment,class, at September 30, 2017March 31, 2022 (dollars in thousands):
30-59 Days Past Due | 60-89 Days Past Due | Greater than 90 Days and still Accruing | PCI | Nonaccrual | Current | Total Loans | |||||||||||||||||||||
Construction and Land Development | $ | 7,221 | $ | 100 | $ | 54 | $ | 3,026 | $ | 5,671 | $ | 825,666 | $ | 841,738 | |||||||||||||
Commercial Real Estate - Owner Occupied | 1,707 | 689 | 679 | 17,668 | 2,205 | 880,575 | 903,523 | ||||||||||||||||||||
Commercial Real Estate - Non-Owner Occupied | 909 | 571 | 298 | 14,376 | 2,701 | 1,729,184 | 1,748,039 | ||||||||||||||||||||
Multifamily Real Estate | — | — | — | 77 | — | 368,609 | 368,686 | ||||||||||||||||||||
Commercial & Industrial | 1,558 | 255 | 101 | 625 | 1,252 | 550,731 | 554,522 | ||||||||||||||||||||
Residential 1-4 Family | 5,633 | 1,439 | 2,360 | 14,077 | 6,163 | 1,053,440 | 1,083,112 | ||||||||||||||||||||
Auto | 2,415 | 293 | 143 | — | 174 | 273,547 | 276,572 | ||||||||||||||||||||
HELOC | 1,400 | 628 | 709 | 982 | 1,791 | 529,936 | 535,446 | ||||||||||||||||||||
Consumer and all other | 3,469 | 1,445 | 188 | 210 | 165 | 581,614 | 587,091 | ||||||||||||||||||||
Total loans held for investment | $ | 24,312 | $ | 5,420 | $ | 4,532 | $ | 51,041 | $ | 20,122 | $ | 6,793,302 | $ | 6,898,729 |
| | | | | | | | | | | | | | | | | | | |
|
| | |
| | |
| |
| Greater than |
| | |
| | | | ||
| | | | | 30-59 Days | | 60-89 Days | | 90 Days and | | | | | | | | |||
| | Current | | Past Due | | Past Due | | still Accruing | | Nonaccrual | | Total Loans | | ||||||
Construction and Land Development | | $ | 968,019 | | $ | 170 | | $ | 0 | | $ | 1 | | $ | 869 | | $ | 969,059 | |
Commercial Real Estate - Owner Occupied | |
| 1,995,329 | |
| 5,081 | |
| 0 | |
| 2,396 | |
| 4,865 | |
| 2,007,671 | |
Commercial Real Estate - Non-Owner Occupied | |
| 3,870,357 | |
| 79 | |
| 223 | |
| 1,735 | |
| 3,287 | |
| 3,875,681 | |
Multifamily Real Estate | |
| 723,816 | |
| 124 | |
| 0 | |
| 0 | |
| 0 | |
| 723,940 | |
Commercial & Industrial | |
| 2,535,815 | |
| 1,382 | |
| 745 | |
| 763 | |
| 1,975 | |
| 2,540,680 | |
Residential 1-4 Family - Commercial | |
| 565,606 | |
| 827 | |
| 251 | |
| 878 | |
| 2,239 | |
| 569,801 | |
Residential 1-4 Family - Consumer | |
| 804,069 | |
| 5,890 | |
| 1,018 | |
| 1,147 | |
| 12,039 | |
| 824,163 | |
Residential 1-4 Family - Revolving | |
| 562,159 | |
| 1,157 | |
| 651 | |
| 1,065 | |
| 3,371 | |
| 568,403 | |
Auto | |
| 497,639 | |
| 1,508 | |
| 183 | |
| 192 | |
| 333 | |
| 499,855 | |
Consumer | |
| 171,083 | |
| 467 | |
| 201 | |
| 70 | |
| 54 | |
| 171,875 | |
Other Commercial | | | 706,856 | | | 1,270 | | | 95 | | | 0 | | | 0 | | | 708,221 | |
Total LHFI | | $ | 13,400,748 | | $ | 17,955 | | $ | 3,367 | | $ | 8,247 | | $ | 29,032 | | $ | 13,459,349 | |
% of total loans | | | 99.56 | % | | 0.13 | % | | 0.03 | % | | 0.06 | % | | 0.22 | % | | 100.00 | % |
The following table shows the aging of the Company’s loan portfolio, by segment,class, at December 31, 20162021 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | |
|
| | |
| | |
| | |
| Greater than |
| | |
| | |
| |
| | | | | 30-59 Days | | 60-89 Days | | 90 Days and | | | | | | |
| |||
| | Current | | Past Due | | Past Due | | still Accruing | | Nonaccrual | | Total Loans |
| ||||||
Construction and Land Development | | $ | 857,883 | | $ | 1,357 | | $ | 0 | | $ | 299 | | $ | 2,697 | | $ | 862,236 | |
Commercial Real Estate - Owner Occupied | |
| 1,987,133 | |
| 1,230 | |
| 152 | |
| 1,257 | |
| 5,637 | |
| 1,995,409 | |
Commercial Real Estate - Non-Owner Occupied | |
| 3,783,211 | |
| 1,965 | |
| 127 | |
| 433 | |
| 3,641 | |
| 3,789,377 | |
Multifamily Real Estate | |
| 778,429 | |
| 84 | |
| 0 | |
| 0 | |
| 113 | |
| 778,626 | |
Commercial & Industrial | |
| 2,536,100 | |
| 1,161 | |
| 1,438 | |
| 1,897 | |
| 1,647 | |
| 2,542,243 | |
Residential 1-4 Family - Commercial | |
| 601,946 | |
| 1,844 | |
| 272 | |
| 990 | |
| 2,285 | |
| 607,337 | |
Residential 1-4 Family - Consumer | |
| 795,821 | |
| 3,368 | |
| 2,925 | |
| 3,013 | |
| 11,397 | |
| 816,524 | |
Residential 1-4 Family - Revolving | |
| 554,652 | |
| 1,493 | |
| 363 | |
| 882 | |
| 3,406 | |
| 560,796 | |
Auto | |
| 458,473 | |
| 1,866 | |
| 249 | |
| 241 | |
| 223 | |
| 461,052 | |
Consumer | |
| 175,943 | |
| 689 | |
| 186 | |
| 120 | |
| 54 | |
| 176,992 | |
Other Commercial | | | 605,214 | | | 37 | | | 0 | | | 0 | | | 0 | | | 605,251 | |
Total LHFI | | $ | 13,134,805 | | $ | 15,094 | | $ | 5,712 | | $ | 9,132 | | $ | 31,100 | | $ | 13,195,843 | |
% of total loans | | | 99.54 | % | | 0.11 | % | | 0.04 | % | | 0.07 | % | | 0.24 | % | | 100.00 | % |
-16-
30-59 Days Past Due | 60-89 Days Past Due | Greater than 90 Days and still Accruing | PCI | Nonaccrual | Current | Total Loans | |||||||||||||||||||||
Construction and Land Development | $ | 1,162 | $ | 232 | $ | 76 | $ | 2,922 | $ | 2,037 | $ | 744,702 | $ | 751,131 | |||||||||||||
Commercial Real Estate - Owner Occupied | 1,842 | 109 | 35 | 18,343 | 794 | 836,682 | 857,805 | ||||||||||||||||||||
Commercial Real Estate - Non-Owner Occupied | 2,369 | — | — | 17,303 | — | 1,544,623 | 1,564,295 | ||||||||||||||||||||
Multifamily Real Estate | 147 | — | — | 2,066 | — | 332,063 | 334,276 | ||||||||||||||||||||
Commercial & Industrial | 759 | 858 | 9 | 1,074 | 124 | 548,702 | 551,526 | ||||||||||||||||||||
Residential 1-4 Family | 7,038 | 534 | 2,048 | 16,200 | 5,279 | 998,448 | 1,029,547 | ||||||||||||||||||||
Auto | 2,570 | 317 | 111 | — | 169 | 258,904 | 262,071 | ||||||||||||||||||||
HELOC | 1,836 | 1,140 | 635 | 1,161 | 1,279 | 520,833 | 526,884 | ||||||||||||||||||||
Consumer and all other | 2,522 | 1,431 | 91 | 223 | 291 | 424,967 | 429,525 | ||||||||||||||||||||
Total loans held for investment | $ | 20,245 | $ | 4,621 | $ | 3,005 | $ | 59,292 | $ | 9,973 | $ | 6,209,924 | $ | 6,307,060 |
30-89 Days Past Due | Greater than 90 Days | Current | Total | ||||||||||||
Construction and Land Development | $ | 62 | $ | — | $ | 2,964 | $ | 3,026 | |||||||
Commercial Real Estate - Owner Occupied | 463 | 643 | 16,562 | 17,668 | |||||||||||
Commercial Real Estate - Non-Owner Occupied | 318 | 1,032 | 13,026 | 14,376 | |||||||||||
Multifamily Real Estate | — | — | 77 | 77 | |||||||||||
Commercial & Industrial | — | — | 625 | 625 | |||||||||||
Residential 1-4 Family | 949 | 1,125 | 12,003 | 14,077 | |||||||||||
HELOC | 132 | 128 | 722 | 982 | |||||||||||
Consumer and all other | 34 | — | 176 | 210 | |||||||||||
Total | $ | 1,958 | $ | 2,928 | $ | 46,155 | $ | 51,041 |
30-89 Days Past Due | Greater than 90 Days | Current | Total | ||||||||||||
Construction and Land Development | $ | — | $ | 84 | $ | 2,838 | $ | 2,922 | |||||||
Commercial Real Estate - Owner Occupied | 271 | 519 | 17,553 | 18,343 | |||||||||||
Commercial Real Estate - Non-Owner Occupied | 409 | 126 | 16,768 | 17,303 | |||||||||||
Multifamily Real Estate | — | — | 2,066 | 2,066 | |||||||||||
Commercial & Industrial | 44 | 56 | 974 | 1,074 | |||||||||||
Residential 1-4 Family | 1,298 | 945 | 13,957 | 16,200 | |||||||||||
HELOC | 175 | 121 | 865 | 1,161 | |||||||||||
Consumer and all other | — | — | 223 | 223 | |||||||||||
Total | $ | 2,197 | $ | 1,851 | $ | 55,244 | $ | 59,292 |
The following table shows the Company’s impairedamortized cost basis of loans excluding PCI loans, by segment at September 30, 2017 andon nonaccrual status as of December 31, 20162021, as well as amortized cost basis of loans on nonaccrual status and loans past due 90 days and still accruing as of March 31, 2022 (dollars in thousands):
September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||
Recorded Investment | Unpaid Principal Balance | Related Allowance | Recorded Investment | Unpaid Principal Balance | Related Allowance | ||||||||||||||||||
Loans without a specific allowance | |||||||||||||||||||||||
Construction and Land Development | $ | 13,889 | $ | 13,981 | $ | — | $ | 13,877 | $ | 14,353 | $ | — | |||||||||||
Commercial Real Estate - Owner Occupied | 5,238 | 5,378 | — | 5,886 | 6,042 | — | |||||||||||||||||
Commercial Real Estate - Non-Owner Occupied | 5,548 | 5,636 | — | 1,399 | 1,399 | — | |||||||||||||||||
Commercial & Industrial | 1,632 | 1,880 | — | 648 | 890 | — | |||||||||||||||||
Residential 1-4 Family | 9,510 | 10,523 | — | 8,496 | 9,518 | — | |||||||||||||||||
HELOC | 1,651 | 1,741 | — | 1,017 | 1,094 | — | |||||||||||||||||
Consumer and all other | 521 | 631 | — | 230 | 427 | — | |||||||||||||||||
Total impaired loans without a specific allowance | $ | 37,989 | $ | 39,770 | $ | — | $ | 31,553 | $ | 33,723 | $ | — | |||||||||||
Loans with a specific allowance | |||||||||||||||||||||||
Construction and Land Development | $ | 1,347 | $ | 1,444 | $ | 113 | $ | 1,395 | $ | 1,404 | $ | 107 | |||||||||||
Commercial Real Estate - Owner Occupied | 2,118 | 2,132 | 157 | 646 | 646 | 4 | |||||||||||||||||
Commercial Real Estate - Non-Owner Occupied | 2,032 | 2,032 | 42 | 2,809 | 2,809 | 474 | |||||||||||||||||
Commercial & Industrial | 2,511 | 2,562 | 909 | 857 | 880 | 14 | |||||||||||||||||
Residential 1-4 Family | 4,421 | 4,543 | 249 | 3,335 | 3,535 | 200 | |||||||||||||||||
Auto | 174 | 235 | 1 | 169 | 235 | 1 | |||||||||||||||||
HELOC | 766 | 800 | 56 | 323 | 433 | 15 | |||||||||||||||||
Consumer and all other | 242 | 310 | 43 | 62 | 298 | 1 | |||||||||||||||||
Total impaired loans with a specific allowance | $ | 13,611 | $ | 14,058 | $ | 1,570 | $ | 9,596 | $ | 10,240 | $ | 816 | |||||||||||
Total impaired loans | $ | 51,600 | $ | 53,828 | $ | 1,570 | $ | 41,149 | $ | 43,963 | $ | 816 |
| | | | | | | | | | | | |
| | Nonaccrual | | | | | | | ||||
| | December 31, 2021 | | March 31, 2022 | | Nonaccrual With No ALLL | | 90 Days Past due and still Accruing | ||||
Construction and Land Development | | $ | 2,697 | | $ | 869 | | $ | 0 | | $ | 1 |
Commercial Real Estate - Owner Occupied | | | 5,637 | | | 4,865 | | | 970 | | | 2,396 |
Commercial Real Estate - Non-Owner Occupied | | | 3,641 | | | 3,287 | | | 1,089 | | | 1,735 |
Multifamily Real Estate | | | 113 | | | 0 | | | 0 | | | 0 |
Commercial & Industrial | | | 1,647 | | | 1,975 | | | 1 | | | 763 |
Residential 1-4 Family - Commercial | | | 2,285 | | | 2,239 | | | 0 | | | 878 |
Residential 1-4 Family - Consumer | | | 11,397 | | | 12,039 | | | 1 | | | 1,147 |
Residential 1-4 Family - Revolving | | | 3,406 | | | 3,371 | | | 0 | | | 1,065 |
Auto | | | 223 | | | 333 | | | 0 | | | 192 |
Consumer | | | 54 | | | 54 | | | 0 | | | 70 |
Total LHFI | | $ | 31,100 | | $ | 29,032 | | $ | 2,061 | | $ | 8,247 |
The following tables showtable shows the average recorded investmentCompany’s amortized cost basis of loans on nonaccrual status as of December 31, 2020, as well as amortized cost basis of loans on nonaccrual status and loans past due 90 days and still accruing as of December 31, 2021 (dollars in thousands):
| | | | | | | | | | | | |
| | Nonaccrual | | | | | | | ||||
| | December 31, 2020 | | December 31, 2021 | | Nonaccrual With No ALLL | | 90 Days Past due and still Accruing | ||||
Construction and Land Development | | $ | 3,072 | | $ | 2,697 | | $ | 1,985 | | $ | 299 |
Commercial Real Estate - Owner Occupied | | | 7,128 | | | 5,637 | | | 970 | | | 1,257 |
Commercial Real Estate - Non-Owner Occupied | | | 2,317 | | | 3,641 | | | 1,089 | | | 433 |
Multifamily Real Estate | | | 33 | | | 113 | | | 0 | | | 0 |
Commercial & Industrial | | | 2,107 | | | 1,647 | | | 1 | | | 1,897 |
Residential 1-4 Family - Commercial | | | 9,993 | | | 2,285 | | | 0 | | | 990 |
Residential 1-4 Family - Consumer | | | 12,600 | | | 11,397 | | | 0 | | | 3,013 |
Residential 1-4 Family - Revolving | | | 4,629 | | | 3,406 | | | 0 | | | 882 |
Auto | | | 500 | | | 223 | | | 0 | | | 241 |
Consumer | | | 69 | | | 54 | | | 0 | | | 120 |
Total LHFI | | $ | 42,448 | | $ | 31,100 | | $ | 4,045 | | $ | 9,132 |
There was 0 interest income recognized foron nonaccrual loans during the three months ended March 31, 2022 and 2021. See Note 1 “Summary of Significant Accounting Policies” in the Company’s impaired loans, excluding PCI loans, by segment2021 Form 10-K for additional information on the three and nine months ended September 30, 2017 and 2016 (dollars in thousands):Company’s policies for nonaccrual loans.
-17-
Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | ||||||||||||||
Average Investment | Interest Income Recognized | Average Investment | Interest Income Recognized | ||||||||||||
Construction and Land Development | $ | 15,654 | $ | 128 | $ | 15,378 | $ | 368 | |||||||
Commercial Real Estate - Owner Occupied | 7,354 | 62 | 7,407 | 245 | |||||||||||
Commercial Real Estate - Non-Owner Occupied | 7,597 | 57 | 7,584 | 185 | |||||||||||
Commercial & Industrial | 4,139 | 36 | 4,203 | 121 | |||||||||||
Residential 1-4 Family | 14,218 | 94 | 14,358 | 261 | |||||||||||
Auto | 192 | — | 223 | 2 | |||||||||||
HELOC | 2,460 | 7 | 2,492 | 29 | |||||||||||
Consumer and all other | 800 | 8 | 690 | 20 | |||||||||||
Total impaired loans | $ | 52,414 | $ | 392 | $ | 52,335 | $ | 1,231 |
Three Months Ended September 30, 2016 | Nine Months Ended September 30, 2016 | ||||||||||||||
Average Investment | Interest Income Recognized | Average Investment | Interest Income Recognized | ||||||||||||
Construction and Land Development | $ | 28,195 | $ | 464 | $ | 27,645 | $ | 1,346 | |||||||
Commercial Real Estate - Owner Occupied | 7,691 | 72 | 7,862 | 230 | |||||||||||
Commercial Real Estate - Non-Owner Occupied | 3,777 | 33 | 3,759 | 98 | |||||||||||
Commercial & Industrial | 4,628 | 42 | 4,964 | 134 | |||||||||||
Residential 1-4 Family | 13,106 | 89 | 13,439 | 267 | |||||||||||
Auto | 271 | — | 289 | 4 | |||||||||||
HELOC | 2,118 | 7 | 2,185 | 35 | |||||||||||
Consumer and all other | 453 | — | 620 | 6 | |||||||||||
Total impaired loans | $ | 60,239 | $ | 707 | $ | 60,763 | $ | 2,120 |
Troubled Debt Restructurings
As of March 31, 2022, the Company considershas TDRs to be impairedtotaling $19.7 million with an estimated $724,000 of allowance for those loans. As of December 31, 2021, the Company had TDRs totaling $18.0 million with an estimated $859,000 of allowance for those loans.
A modification ofTDR occurs when a loan’s terms constitutes a TDR if the creditorlender, for economic or legal reasons, grants a concession to the borrower related to the borrower’s financial difficulties, that it would not otherwise consider to the borrower for economic or legal reasons related to the borrower’s financial difficulties.consider. All loans that are considered to be TDRs are evaluated for impairmentcredit losses in accordance with the Company’s allowance for loan loss methodology and are included in the preceding impaired loan tables.ALLL methodology. For the three and nine months ended September 30, 2017,March 31, 2022 and March 31, 2021, the recorded investment in TDRs prior to modifications was not materially impacted by the modification.
The following table provides a summary, by segment,class, of TDRs that continue to accrue interest under the terms of the applicable restructuring agreement, which are considered to be performing, and TDRs that have been placed on nonaccrual status, which are considered to be nonperforming, as of September 30, 2017March 31, 2022 and December 31, 20162021 (dollars in thousands):
September 30, 2017 | December 31, 2016 | ||||||||||||||||||||
No. of Loans | Recorded Investment | Outstanding Commitment | No. of Loans | Recorded Investment | Outstanding Commitment | ||||||||||||||||
Performing | |||||||||||||||||||||
Construction and Land Development | 7 | $ | 2,841 | $ | — | 8 | $ | 3,793 | $ | — | |||||||||||
Commercial Real Estate - Owner Occupied | 7 | 2,934 | — | 7 | 3,106 | — | |||||||||||||||
Commercial Real Estate - Non-Owner Occupied | 3 | 2,196 | — | 2 | 2,390 | — | |||||||||||||||
Commercial & Industrial | 12 | 2,112 | — | 3 | 533 | — | |||||||||||||||
Residential 1-4 Family | 34 | 5,941 | — | 28 | 4,145 | — | |||||||||||||||
Consumer and all other | 1 | 495 | — | — | — | — | |||||||||||||||
Total performing | 64 | $ | 16,519 | $ | — | 48 | $ | 13,967 | $ | — | |||||||||||
Nonperforming | |||||||||||||||||||||
Construction and Land Development | 5 | $ | 400 | $ | — | 2 | $ | 215 | $ | — | |||||||||||
Commercial Real Estate - Owner Occupied | 2 | 142 | — | 2 | 156 | — | |||||||||||||||
Commercial & Industrial | 5 | 1,062 | — | 1 | 116 | — | |||||||||||||||
Residential 1-4 Family | 8 | 1,095 | — | 8 | 948 | — | |||||||||||||||
Consumer and all other | 1 | 26 | — | — | — | — | |||||||||||||||
Total nonperforming | 21 | $ | 2,725 | $ | — | 13 | $ | 1,435 | $ | — | |||||||||||
Total performing and nonperforming | 85 | $ | 19,244 | $ | — | 61 | $ | 15,402 | $ | — |
| | | | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 | ||||||||||||
|
| No. of |
| Recorded |
| Outstanding |
| No. of |
| Recorded |
| Outstanding | ||||
| | Loans | | Investment | | Commitment | | Loans | | Investment | | Commitment | ||||
Performing |
|
|
| |
|
| |
|
|
|
| |
|
| |
|
Construction and Land Development |
| 4 | | $ | 198 | | $ | 0 |
| 4 | | $ | 201 | | $ | 0 |
Commercial Real Estate - Owner Occupied |
| 2 | |
| 1,020 | |
| 0 |
| 3 | |
| 572 | |
| 0 |
Residential 1-4 Family - Commercial |
| 2 | |
| 1,589 | |
| 0 |
| — | |
| — | |
| 0 |
Residential 1-4 Family - Consumer |
| 76 | |
| 8,839 | |
| 0 |
| 75 | |
| 9,021 | |
| 0 |
Residential 1-4 Family - Revolving |
| 3 | |
| 263 | |
| 4 |
| 3 | |
| 265 | |
| 4 |
Consumer |
| 2 | |
| 14 | |
| 0 |
| 2 | |
| 15 | |
| 0 |
Other Commercial | | 1 | | | 234 | | | 0 | | 1 | | | 239 | | | 0 |
Total performing |
| 90 | | $ | 12,157 | | $ | 4 |
| 88 | | $ | 10,313 | | $ | 4 |
Nonperforming |
|
| |
|
| |
|
|
|
| |
|
| |
|
|
Commercial Real Estate - Owner Occupied |
| 1 | | $ | 17 | | $ | 0 |
| 2 | | $ | 830 | | $ | 0 |
Commercial Real Estate - Non-Owner Occupied | | 3 | | | 1,348 | | | 0 | | 3 | | | 1,357 | | | 0 |
Commercial & Industrial |
| 3 | |
| 672 | |
| 0 |
| 3 | |
| 729 | |
| 0 |
Residential 1-4 Family - Commercial |
| 3 | |
| 383 | |
| 0 |
| 3 | |
| 388 | |
| 0 |
Residential 1-4 Family - Consumer |
| 25 | |
| 5,031 | |
| 0 |
| 24 | |
| 4,239 | |
| 0 |
Residential 1-4 Family - Revolving |
| 3 | |
| 101 | |
| 0 |
| 3 | |
| 99 | |
| 0 |
Total nonperforming |
| 38 | | $ | 7,552 | | $ | 0 |
| 38 | | $ | 7,642 | | $ | 0 |
Total performing and nonperforming |
| 128 | | $ | 19,709 | | $ | 4 |
| 126 | | $ | 17,955 | | $ | 4 |
The Company considers a default of a TDR to occur when the borrower is 90 days past due following the restructure or a foreclosure and repossession of the applicable collateral occurs. The following table shows, by segment, TDRs that were identified by the Company as going into default during the period shown that were restructured in the prior twelve-month period (dollars in thousands):
Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | ||||||||||||
No. of Loans | Recorded Investment | No. of Loans | Recorded Investment | ||||||||||
Construction and Land Development | — | $ | — | 2 | $ | 198 | |||||||
Commercial Real Estate - Owner Occupied | — | — | 1 | 469 | |||||||||
Commercial & Industrial | 1 | 350 | 1 | 350 | |||||||||
Residential 1-4 Family | 2 | 187 | 4 | 605 | |||||||||
Total | 3 | $ | 537 | 8 | $ | 1,622 |
-18-
The following table shows, by segmentclass and modification type, TDRs that occurred during the three and nine months ended September 30, 2017March 31, 2022 and 2021 (dollars in thousands):
| | | | | | | | | | | |
| | Three Months Ended March 31, 2022 | | Three Months Ended March 31, 2021 | | ||||||
|
| |
| Recorded |
| |
| Recorded |
| ||
| | No. of | | Investment at | | No. of | | Investment at | | ||
| | Loans | | Period End | | Loans | | Period End | | ||
Modified to interest only, at a market rate |
|
|
| |
|
|
|
| |
|
|
Residential 1-4 Family - Commercial | | 1 | | $ | 1,334 | | 0 | | $ | 0 | |
Total interest only at market rate of interest |
| 1 | | $ | 1,334 |
| 0 | | $ | 0 |
|
| | | | | | | | | | | |
Term modification, at a market rate |
|
| |
|
|
|
| |
|
|
|
Commercial Real Estate - Owner Occupied |
| 1 | | $ | 778 |
| 0 | | $ | 0 |
|
Residential 1-4 Family - Consumer | | 0 | | | 0 | | 2 | | | 105 | |
Total loan term extended at a market rate |
| 1 | | $ | 778 |
| 2 | | $ | 105 |
|
| | | | | | | | | | | |
Term modification, below market rate |
|
| |
|
|
|
| |
|
|
|
Residential 1-4 Family - Commercial | | 1 | | $ | 256 | | 0 | | $ | 0 | |
Residential 1-4 Family - Consumer |
| 6 | | | 862 |
| 9 | | | 472 |
|
Consumer |
| 0 | |
| 0 |
| 1 | |
| 16 |
|
Total loan term extended at a below market rate |
| 7 | | $ | 1,118 |
| 10 | | $ | 488 |
|
| | | | | | | | | | | |
Interest rate modification, below market rate |
|
| |
|
|
|
| |
|
|
|
Residential 1-4 Family - Commercial |
| 0 | | $ | 0 |
| 1 | | $ | 45 |
|
Total interest only at below market rate of interest |
| 0 | | $ | 0 |
| 1 | | $ | 45 |
|
| | | | | | | | | | | |
Total |
| 9 | | $ | 3,230 |
| 13 | | $ | 638 |
|
-19-
Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | ||||||||||||
No. of Loans | Recorded Investment at Period End | No. of Loans | Recorded Investment at Period End | ||||||||||
Modified to interest only, at a market rate | |||||||||||||
Commercial & Industrial | 3 | $ | 936 | 8 | $ | 1,596 | |||||||
Total interest only at market rate of interest | 3 | $ | 936 | 8 | $ | 1,596 | |||||||
Term modification, at a market rate | |||||||||||||
Construction and Land Development | 1 | $ | 160 | 4 | $ | 1,150 | |||||||
Commercial Real Estate - Owner Occupied | 1 | 380 | 1 | 380 | |||||||||
Commercial Real Estate - Non-Owner Occupied | 1 | 571 | 3 | 2,196 | |||||||||
Commercial & Industrial | — | — | 4 | 969 | |||||||||
Residential 1-4 Family | 3 | 1,647 | 8 | 2,574 | |||||||||
Consumer and all other | 1 | 26 | 2 | 522 | |||||||||
Total loan term extended at a market rate | 7 | $ | 2,784 | 22 | $ | 7,791 | |||||||
Term modification, below market rate | |||||||||||||
Commercial Real Estate - Owner Occupied | — | $ | — | 1 | $ | 841 | |||||||
Commercial & Industrial | — | — | 3 | 179 | |||||||||
Residential 1-4 Family | 1 | 40 | 8 | 1,143 | |||||||||
Total loan term extended at a below market rate | 1 | $ | 40 | 12 | $ | 2,163 | |||||||
Total | 11 | $ | 3,760 | 42 | $ | 11,550 |
Allowance for Loan and Lease Losses
ALLL on the loan portfolio is a material estimate for the Company. The Company estimates its ALLL on its loan portfolio on a quarterly basis. The Company models the ALLL using two primary segments, Commercial and Consumer. Each loan segment is further disaggregated into classes based on similar risk characteristics. The Company has identified the following table shows, by segment and modification type, TDRs that occurred during the three and nine months ended September 30, 2016 (dollars in thousands):
● | Commercial: Construction and Land Development, Commercial Real Estate – Owner Occupied, Commercial Real Estate – Non-Owner Occupied, Multifamily Real Estate, Commercial & Industrial, Residential 1-4 Family – Commercial, and Other Commercial |
● | Consumer: Residential 1-4 Family – Consumer, Residential 1-4 Family – Revolving, Auto, and Consumer |
Three Months Ended September 30, 2016 | Nine Months Ended September 30, 2016 | ||||||||||||
No. of Loans | Recorded Investment at Period End | No. of Loans | Recorded Investment at Period End | ||||||||||
Term modification, at a market rate | |||||||||||||
Construction and Land Development | — | $ | — | 1 | $ | 1,177 | |||||||
Commercial Real Estate - Owner Occupied | — | — | 2 | 739 | |||||||||
Commercial & Industrial | 1 | 457 | 1 | 457 | |||||||||
Residential 1-4 Family | — | — | 2 | 474 | |||||||||
Total loan term extended at a market rate | 1 | $ | 457 | 6 | $ | 2,847 | |||||||
Term modification, below market rate | |||||||||||||
Residential 1-4 Family | — | $ | — | 1 | $ | 36 | |||||||
Total loan term extended at a below market rate | — | $ | — | 1 | $ | 36 | |||||||
Interest rate modification, below market rate | |||||||||||||
Commercial & Industrial | — | $ | — | 1 | $ | 125 | |||||||
Total interest only at below market rate of interest | — | $ | — | 1 | $ | 125 | |||||||
Total | 1 | $ | 457 | 8 | $ | 3,008 |
The following table shows the allowance forALLL activity by loan loss activity, balances for allowance for loan losses, and loan balances based on impairment methodology by segment for the ninethree months ended March 31, 2022 and as of September 30, 2017. The table below includes the provision for loan losses. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories2021 (dollars in thousands):
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2022 | | Three Months Ended March 31, 2021 | ||||||||||||||
| | Commercial | | Consumer | | Total |
| Commercial | | Consumer | | Total | ||||||
Balance at beginning of period | | $ | 77,902 | | $ | 21,885 | | $ | 99,787 | | $ | 117,403 | | $ | 43,137 | | $ | 160,540 |
Loans charged-off | |
| (759) | |
| (750) | |
| (1,509) |
|
| (1,974) | |
| (1,667) | |
| (3,641) |
Recoveries credited to allowance | |
| 726 | |
| 787 | |
| 1,513 | |
| 1,606 | |
| 863 | |
| 2,469 |
Provision charged to operations | |
| 1,902 | |
| 898 | |
| 2,800 |
|
| (10,603) | |
| (5,854) | |
| (16,457) |
Balance at end of period | | $ | 79,771 | | $ | 22,820 | | $ | 102,591 |
| $ | 106,432 | | $ | 36,479 | | $ | 142,911 |
-20-
Allowance for loan losses | |||||||||||||||||||
Balance, beginning of the year | Recoveries credited to allowance | Loans charged off | Provision charged to operations | Balance, end of period | |||||||||||||||
Construction and Land Development | $ | 10,055 | $ | 193 | $ | (2,115 | ) | $ | 535 | $ | 8,668 | ||||||||
Commercial Real Estate - Owner Occupied | 3,801 | 84 | (46 | ) | (620 | ) | 3,219 | ||||||||||||
Commercial Real Estate - Non-Owner Occupied | 6,622 | 2 | (1,181 | ) | 1,825 | 7,268 | |||||||||||||
Multifamily Real Estate | 1,236 | — | — | (136 | ) | 1,100 | |||||||||||||
Commercial & Industrial | 4,627 | 451 | (1,241 | ) | 1,526 | 5,363 | |||||||||||||
Residential 1-4 Family | 6,399 | 332 | (815 | ) | (35 | ) | 5,881 | ||||||||||||
Auto | 946 | 352 | (761 | ) | 398 | 935 | |||||||||||||
HELOC | 1,328 | 240 | (861 | ) | 675 | 1,382 | |||||||||||||
Consumer and all other | 2,178 | 905 | (2,929 | ) | 3,192 | 3,346 | |||||||||||||
Total | $ | 37,192 | $ | 2,559 | $ | (9,949 | ) | $ | 7,360 | $ | 37,162 |
Loans individually evaluated for impairment | Loans collectively evaluated for impairment | Loans acquired with deteriorated credit quality | Total | ||||||||||||||||||||||||||||
Loans | ALL | Loans | ALL | Loans | ALL | Loans | ALL | ||||||||||||||||||||||||
Construction and Land Development | $ | 15,236 | $ | 113 | $ | 823,476 | $ | 8,555 | $ | 3,026 | $ | — | $ | 841,738 | $ | 8,668 | |||||||||||||||
Commercial Real Estate - Owner Occupied | 7,356 | 157 | 878,499 | 3,062 | 17,668 | — | 903,523 | 3,219 | |||||||||||||||||||||||
Commercial Real Estate - Non-Owner Occupied | 7,580 | 42 | 1,726,083 | 7,226 | 14,376 | — | 1,748,039 | 7,268 | |||||||||||||||||||||||
Multifamily Real Estate | — | — | 368,609 | 1,100 | 77 | — | 368,686 | 1,100 | |||||||||||||||||||||||
Commercial & Industrial | 4,143 | 909 | 549,754 | 4,454 | 625 | — | 554,522 | 5,363 | |||||||||||||||||||||||
Residential 1-4 Family | 13,931 | 249 | 1,055,104 | 5,632 | 14,077 | — | 1,083,112 | 5,881 | |||||||||||||||||||||||
Auto | 174 | 1 | 276,398 | 934 | — | — | 276,572 | 935 | |||||||||||||||||||||||
HELOC | 2,417 | 56 | 532,047 | 1,326 | 982 | — | 535,446 | 1,382 | |||||||||||||||||||||||
Consumer and all other | 763 | 43 | 586,118 | 3,303 | 210 | — | 587,091 | 3,346 | |||||||||||||||||||||||
Total loans held for investment, net | $ | 51,600 | $ | 1,570 | $ | 6,796,088 | $ | 35,592 | $ | 51,041 | $ | — | $ | 6,898,729 | $ | 37,162 |
Credit Quality Indicators
Credit quality indicators are utilized to help estimate the allowancecollectability of each loan class within the Commercial and Consumer loan segments. For classes of loans within the Commercial segment, the primary credit quality indicator used for loan loss activity, balancesevaluating credit quality and estimating the ALLL is risk rating categories of Pass, Watch, Special Mention, Substandard, and Doubtful. For classes of loans within the Consumer segment, the primary credit quality indicator used for allowance for loan losses,evaluating credit quality and loan balances based on impairment methodology by segment forestimating the nine months endedALLL is delinquency bands of Current, 30-59, 60-89, 90+, and Nonaccrual. While other credit quality indicators are evaluated and analyzed as part of September 30, 2016. In addition, a $175,000 provision was recognized during the nine months ended September 30, 2016 for unfunded loan commitments for which the reserves are recorded as a component of “Other Liabilities” on the Company’s Consolidated Balance Sheets. Allocationcredit risk management activities, these indicators are primarily used in estimating the ALLL. The Company evaluates the credit risk of its loan portfolio on at least a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories (dollars in thousands):
Allowance for loan losses | |||||||||||||||||||
Balance, beginning of the year | Recoveries credited to allowance | Loans charged off | Provision charged to operations | Balance, end of period | |||||||||||||||
Construction and Land Development | $ | 6,040 | $ | 165 | $ | (869 | ) | $ | 5,464 | $ | 10,800 | ||||||||
Commercial Real Estate - Owner Occupied | 4,614 | 112 | (772 | ) | (770 | ) | 3,184 | ||||||||||||
Commercial Real Estate - Non-Owner Occupied | 6,929 | 3 | (1 | ) | (813 | ) | 6,118 | ||||||||||||
Multifamily Real Estate | 1,606 | — | — | (658 | ) | 948 | |||||||||||||
Commercial & Industrial | 3,163 | 422 | (1,301 | ) | 3,119 | 5,403 | |||||||||||||
Residential 1-4 Family | 5,414 | 466 | (741 | ) | 518 | 5,657 | |||||||||||||
Auto | 1,703 | 243 | (815 | ) | (260 | ) | 871 | ||||||||||||
HELOC | 2,934 | 229 | (1,272 | ) | (534 | ) | 1,357 | ||||||||||||
Consumer and all other | 1,644 | 382 | (957 | ) | 1,135 | 2,204 | |||||||||||||
Total | $ | 34,047 | $ | 2,022 | $ | (6,728 | ) | $ | 7,201 | $ | 36,542 |
Loans individually evaluated for impairment | Loans collectively evaluated for impairment | Loans acquired with deteriorated credit quality | Total | ||||||||||||||||||||||||||||
Loans | ALL | Loans | ALL | Loans | ALL | Loans | ALL | ||||||||||||||||||||||||
Construction and Land Development | $ | 27,241 | $ | 123 | $ | 745,984 | $ | 10,677 | $ | 3,205 | $ | — | $ | 776,430 | $ | 10,800 | |||||||||||||||
Commercial Real Estate - Owner Occupied | 7,612 | 5 | 830,466 | 3,179 | 19,064 | — | 857,142 | 3,184 | |||||||||||||||||||||||
Commercial Real Estate - Non-Owner Occupied | 3,792 | 1 | 1,432,895 | 6,117 | 18,141 | — | 1,454,828 | 6,118 | |||||||||||||||||||||||
Multifamily Real Estate | — | — | 337,234 | 948 | 2,079 | — | 339,313 | 948 | |||||||||||||||||||||||
Commercial & Industrial | 3,448 | 642 | 505,264 | 4,761 | 1,145 | — | 509,857 | 5,403 | |||||||||||||||||||||||
Residential 1-4 Family | 12,673 | 115 | 969,860 | 5,542 | 16,828 | — | 999,361 | 5,657 | |||||||||||||||||||||||
Auto | 231 | 1 | 254,957 | 870 | — | — | 255,188 | 871 | |||||||||||||||||||||||
HELOC | 2,053 | 17 | 520,546 | 1,340 | 1,498 | — | 524,097 | 1,357 | |||||||||||||||||||||||
Consumer and all other | 451 | 88 | 431,865 | 2,116 | 386 | — | 432,702 | 2,204 | |||||||||||||||||||||||
Total loans held for investment, net | $ | 57,501 | $ | 992 | $ | 6,029,071 | $ | 35,550 | $ | 62,346 | $ | — | $ | 6,148,918 | $ | 36,542 |
Commercial Loans
The Company uses a risk rating system and past due status as the primary credit quality indicatorsindicator for classes of loans within the loan categories.Commercial segment. The risk rating system on a scale of 0 through 9 is used to determine risk level as used in the calculation of the allowance for loan losses; on those loans without a risk rating, the Company uses past due status to determine risk level.ACL. The risk levels, as described below, do not necessarily follow the regulatory definitions of risk levels with the same name. A general description of the characteristics of the risk levels follows:
Pass is determined by the following criteria:
● | Risk rated 0 loans have little or no risk and are with General Obligation Municipal Borrowers; |
● | Risk rated 1 loans have little or no risk and are generally secured by cash or cash equivalents; |
● | Risk rated 2 loans have minimal risk to well qualified borrowers and no significant questions as to safety; |
● | Risk rated 3 loans are satisfactory loans with strong borrowers and secondary sources of repayment; |
● | Risk rated 4 loans are satisfactory loans with borrowers not as strong as risk rated 3 loans and may exhibit a greater degree of financial risk based on the type of business supporting the loan. |
Watch is determined by cash or cash equivalents;
● | Risk rated 5 loans are watch loans that warrant more than the normal level of supervision and have the possibility of an event occurring that may weaken the borrower’s ability to repay; |
Special Mention is determined by the following criteria:
● | Risk rated 6 loans have increasing potential weaknesses beyond those at which the loan originally was granted and if not addressed could lead to inadequately protecting the Company’s credit position. |
Substandard is determined by the following criteria:
● | Risk rated 7 loans are substandard loans and are inadequately protected by the current sound worth or paying capacity of the obligor or the collateral pledged; these have well defined weaknesses that jeopardize the liquidation of the debt with the distinct possibility the Company will sustain some loss if the deficiencies are not corrected. |
Doubtful is determined by the following criteria:
● | Risk rated 8 loans are doubtful of collection and the possibility of loss is high but pending specific borrower plans for recovery, its classification as a loss is deferred until its more exact status is determined; |
● | Risk rated 9 loans are loss loans which are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. |
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The table below details the amortized cost of the classes of loans are doubtful of collection andwithin the possibility of loss is high but pending specific borrower plans for
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | March 31, 2022 | |||||||||||||||||||||
| | | Term Loans Amortized Cost Basis by Origination Year | | | | | | | |||||||||||||||
| | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Revolving Loans | | Total | ||||||||
Construction and Land Development | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 61,043 | | $ | 485,263 | | $ | 228,686 | | $ | 43,377 | | $ | 38,969 | | $ | 46,520 | | $ | 22,398 | | $ | 926,256 |
Watch | | | 0 | | | 552 | | | 237 | | | 10,876 | | | 126 | | | 3,151 | | | 0 | | | 14,942 |
Special Mention | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 658 | | | 0 | | | 658 |
Substandard | | | 279 | | | 3,673 | | | 1 | | | 218 | | | 19,434 | | | 3,598 | | | 0 | | | 27,203 |
Total Construction and Land Development | | $ | 61,322 | | $ | 489,488 | | $ | 228,924 | | $ | 54,471 | | $ | 58,529 | | $ | 53,927 | | $ | 22,398 | | $ | 969,059 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Real Estate - Owner Occupied | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 91,850 | | $ | 216,755 | | $ | 273,443 | | $ | 311,840 | | $ | 246,729 | | $ | 720,355 | | $ | 18,716 | | $ | 1,879,688 |
Watch | | | 700 | | | 182 | | | 4,012 | | | 13,611 | | | 10,452 | | | 56,869 | | | 701 | | | 86,527 |
Special Mention | | | 650 | | | 0 | | | 286 | | | 9,672 | | | 607 | | | 9,337 | | | 500 | | | 21,052 |
Substandard | | | 0 | | | 200 | | | 0 | | | 2,877 | | | 1,648 | | | 15,037 | | | 642 | | | 20,404 |
Total Commercial Real Estate - Owner Occupied | | $ | 93,200 | | $ | 217,137 | | $ | 277,741 | | $ | 338,000 | | $ | 259,436 | | $ | 801,598 | | $ | 20,559 | | $ | 2,007,671 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Real Estate - Non-Owner Occupied | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 184,450 | | $ | 640,903 | | $ | 407,354 | | $ | 519,513 | | $ | 395,907 | | $ | 1,488,880 | | $ | 40,029 | | $ | 3,677,036 |
Watch | | | 0 | | | 2,152 | | | 833 | | | 25,867 | | | 20,593 | | | 50,796 | | | 13 | | | 100,254 |
Special Mention | | | 310 | | | 0 | | | 10,583 | | | 18,854 | | | 20,754 | | | 9,394 | | | 0 | | | 59,895 |
Substandard | | | 0 | | | 0 | | | 0 | | | 23,195 | | | 400 | | | 14,749 | | | 152 | | | 38,496 |
Total Commercial Real Estate - Non-Owner Occupied | | $ | 184,760 | | $ | 643,055 | | $ | 418,770 | | $ | 587,429 | | $ | 437,654 | | $ | 1,563,819 | | $ | 40,194 | | $ | 3,875,681 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Commercial & Industrial | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 152,567 | | $ | 654,531 | | $ | 406,607 | | $ | 270,464 | | $ | 106,522 | | $ | 167,277 | | $ | 691,191 | | $ | 2,449,159 |
Watch | | | 373 | | | 1,166 | | | 5,951 | | | 2,556 | | | 14,315 | | | 4,014 | | | 6,583 | | | 34,958 |
Special Mention | | | 0 | | | 492 | | | 1,284 | | | 7,278 | | | 481 | | | 1,008 | | | 5,493 | | | 16,036 |
Substandard | | | 0 | | | 451 | | | 6,548 | | | 4,304 | | | 15,398 | | | 1,730 | | | 12,096 | | | 40,527 |
Total Commercial & Industrial | | $ | 152,940 | | $ | 656,640 | | $ | 420,390 | | $ | 284,602 | | $ | 136,716 | | $ | 174,029 | | $ | 715,363 | | $ | 2,540,680 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Multifamily Real Estate | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 2,165 | | $ | 63,181 | | $ | 189,952 | | $ | 65,004 | | $ | 113,421 | | $ | 284,473 | | $ | 1,553 | | $ | 719,749 |
Watch | | | 0 | | | 0 | | | 0 | | | 357 | | | 454 | | | 436 | | | 0 | | | 1,247 |
Special Mention | | | 0 | | | 0 | | | 2,235 | | | 618 | | | 0 | | | 91 | | | 0 | | | 2,944 |
Substandard | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 |
Total Multifamily Real Estate | | $ | 2,165 | | $ | 63,181 | | $ | 192,187 | | $ | 65,979 | | $ | 113,875 | | $ | 285,000 | | $ | 1,553 | | $ | 723,940 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 Family - Commercial | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 11,521 | | $ | 104,567 | | $ | 87,934 | | $ | 58,117 | | $ | 42,770 | | $ | 232,124 | | $ | 893 | | $ | 537,926 |
Watch | | | 0 | | | 0 | | | 2,033 | | | 879 | | | 7,464 | | | 7,930 | | | 117 | | | 18,423 |
Special Mention | | | 0 | | | 0 | | | 96 | | | 0 | | | 429 | | | 3,440 | | | 0 | | | 3,965 |
Substandard | | | 0 | | | 92 | | | 0 | | | 3,222 | | | 528 | | | 5,346 | | | 299 | | | 9,487 |
Total Residential 1-4 Family - Commercial | | $ | 11,521 | | $ | 104,659 | | $ | 90,063 | | $ | 62,218 | | $ | 51,191 | | $ | 248,840 | | $ | 1,309 | | $ | 569,801 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other Commercial | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 70,632 | | $ | 222,540 | | $ | 162,150 | | $ | 118,741 | | $ | 5,508 | | $ | 78,886 | | $ | 43,320 | | $ | 701,777 |
Watch | | | 0 | | | 0 | | | 0 | | | 0 | | | 567 | | | 5,548 | | | 0 | | | 6,115 |
Special Mention | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 95 | | | 95 |
Substandard | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | �� | | 234 | | | 0 | | | 234 |
Total Other Commercial | | $ | 70,632 | | $ | 222,540 | | $ | 162,150 | | $ | 118,741 | | $ | 6,075 | | $ | 84,668 | | $ | 43,415 | | $ | 708,221 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Commercial | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 574,228 | | $ | 2,387,740 | | $ | 1,756,126 | | $ | 1,387,056 | | $ | 949,826 | | $ | 3,018,515 | | $ | 818,100 | | $ | 10,891,591 |
Watch | | | 1,073 | | | 4,052 | | | 13,066 | | | 54,146 | | | 53,971 | | | 128,744 | | | 7,414 | | | 262,466 |
Special Mention | | | 960 | | | 492 | | | 14,484 | | | 36,422 | | | 22,271 | | | 23,928 | | | 6,088 | | | 104,645 |
Substandard | | | 279 | | | 4,416 | | | 6,549 | | | 33,816 | | | 37,408 | | | 40,694 | | | 13,189 | | | 136,351 |
Total Commercial | | $ | 576,540 | | $ | 2,396,700 | | $ | 1,790,225 | | $ | 1,511,440 | | $ | 1,063,476 | | $ | 3,211,881 | | $ | 844,791 | | $ | 11,395,053 |
-22-
Pass | Special Mention | Substandard | Doubtful | Total | |||||||||||||||
Construction and Land Development | $ | 768,206 | $ | 57,190 | $ | 13,201 | $ | 115 | $ | 838,712 | |||||||||
Commercial Real Estate - Owner Occupied | 834,265 | 47,019 | 4,571 | — | 885,855 | ||||||||||||||
Commercial Real Estate - Non-Owner Occupied | 1,702,500 | 23,764 | 7,399 | — | 1,733,663 | ||||||||||||||
Multifamily Real Estate | 361,175 | 7,434 | — | — | 368,609 | ||||||||||||||
Commercial & Industrial | 534,594 | 16,400 | 2,903 | — | 553,897 | ||||||||||||||
Residential 1-4 Family | 1,045,736 | 15,878 | 4,480 | 2,941 | 1,069,035 | ||||||||||||||
Auto | 273,446 | 2,910 | 143 | 73 | 276,572 | ||||||||||||||
HELOC | 530,263 | 2,427 | 1,051 | 723 | 534,464 | ||||||||||||||
Consumer and all other | 583,728 | 2,618 | 530 | 5 | 586,881 | ||||||||||||||
Total | $ | 6,633,913 | $ | 175,640 | $ | 34,278 | $ | 3,857 | $ | 6,847,688 |
The following table showsbelow details the recorded investment in allamortized cost of the classes of loans excluding PCI loans,within the Commercial segment by segment with their related risk level and year of origination as of December 31, 20162021 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2021 | |||||||||||||||||||||
| | | Term Loans Amortized Cost Basis by Origination Year | | | | | | | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||
| | | | | | | | | | | | | | | | | | | | | | | ||
| | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Revolving Loans | | Total | ||||||||
Construction and Land Development | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 430,764 | | $ | 218,672 | | $ | 39,937 | | $ | 40,128 | | $ | 11,299 | | $ | 50,908 | | $ | 22,996 | | $ | 814,704 |
Watch | | | 395 | | | 185 | | | 12,923 | | | 129 | | | 349 | | | 4,026 | | | 0 | | | 18,007 |
Special Mention | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 735 | | | 0 | | | 735 |
Substandard | | | 3,541 | | | 1 | | | 221 | | | 19,264 | | | 198 | | | 5,565 | | | 0 | | | 28,790 |
Total Construction and Land Development | | $ | 434,700 | | $ | 218,858 | | $ | 53,081 | | $ | 59,521 | | $ | 11,846 | | $ | 61,234 | | $ | 22,996 | | $ | 862,236 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Real Estate - Owner Occupied | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 222,079 | | $ | 279,165 | | $ | 321,503 | | $ | 263,422 | | $ | 179,994 | | $ | 555,540 | | $ | 19,705 | | $ | 1,841,408 |
Watch | | | 185 | | | 18 | | | 7,959 | | | 10,875 | | | 14,648 | | | 57,466 | | | 702 | | | 91,853 |
Special Mention | | | 0 | | | 932 | | | 11,826 | | | 610 | | | 1,052 | | | 19,480 | | | 507 | | | 34,407 |
Substandard | | | 200 | | | 153 | | | 7,455 | | | 2,538 | | | 1,935 | | | 14,834 | | | 626 | | | 27,741 |
Total Commercial Real Estate - Owner Occupied | | $ | 222,464 | | $ | 280,268 | | $ | 348,743 | | $ | 277,445 | | $ | 197,629 | | $ | 647,320 | | $ | 21,540 | | $ | 1,995,409 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Real Estate - Non-Owner Occupied | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 642,386 | | $ | 421,063 | | $ | 520,035 | | $ | 377,176 | | $ | 374,949 | | $ | 1,102,193 | | $ | 36,568 | | $ | 3,474,370 |
Watch | | | 2,152 | | | 841 | | | 35,721 | | | 39,356 | | | 18,242 | | | 101,797 | | | 14 | | | 198,123 |
Special Mention | | | 0 | | | 10,609 | | | 25,691 | | | 20,119 | | | 12,741 | | | 4,775 | | | 0 | | | 73,935 |
Substandard | | | 0 | | | 0 | | | 23,376 | | | 11,369 | | | 0 | | | 7,952 | | | 252 | | | 42,949 |
Total Commercial Real Estate - Non-Owner Occupied | | $ | 644,538 | | $ | 432,513 | | $ | 604,823 | | $ | 448,020 | | $ | 405,932 | | $ | 1,216,717 | | $ | 36,834 | | $ | 3,789,377 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Commercial & Industrial | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 770,662 | | $ | 450,478 | | $ | 287,926 | | $ | 110,710 | | $ | 38,395 | | $ | 170,857 | | $ | 619,583 | | $ | 2,448,611 |
Watch | | | 1,233 | | | 9,641 | | | 2,766 | | | 31,635 | | | 1,370 | | | 4,405 | | | 17,220 | | | 68,270 |
Special Mention | | | 206 | | | 935 | | | 8,477 | | | 1,023 | | | 564 | | | 561 | | | 3,249 | | | 15,015 |
Substandard | | | 379 | | | 575 | | | 3,636 | | | 1,965 | | | 463 | | | 1,639 | | | 1,690 | | | 10,347 |
Total Commercial & Industrial | | $ | 772,480 | | $ | 461,629 | | $ | 302,805 | | $ | 145,333 | | $ | 40,792 | | $ | 177,462 | | $ | 641,742 | | $ | 2,542,243 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Multifamily Real Estate | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 63,431 | | $ | 187,616 | | $ | 108,402 | | $ | 114,077 | | $ | 66,562 | | $ | 228,013 | | $ | 1,548 | | $ | 769,649 |
Watch | | | 0 | | | 0 | | | 359 | | | 459 | | | 0 | | | 522 | | | 0 | | | 1,340 |
Special Mention | | | 44 | | | 2,248 | | | 624 | | | 4,517 | | | 0 | | | 91 | | | 0 | | | 7,524 |
Substandard | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 113 | | | 0 | | | 113 |
Total Multifamily Real Estate | | $ | 63,475 | | $ | 189,864 | | $ | 109,385 | | $ | 119,053 | | $ | 66,562 | | $ | 228,739 | | $ | 1,548 | | $ | 778,626 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 Family - Commercial | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 108,259 | | $ | 94,184 | | $ | 65,682 | | $ | 46,267 | | $ | 55,995 | | $ | 196,052 | | $ | 550 | | $ | 566,989 |
Watch | | | 0 | | | 2,041 | | | 4,887 | | | 7,483 | | | 2,415 | | | 7,573 | | | 311 | | | 24,710 |
Special Mention | | | 0 | | | 96 | | | 0 | | | 436 | | | 391 | | | 4,126 | | | 0 | | | 5,049 |
Substandard | | | 93 | | | 0 | | | 3,494 | | | 536 | | | 1,291 | | | 4,876 | | | 299 | | | 10,589 |
Total Residential 1-4 Family - Commercial | | $ | 108,352 | | $ | 96,321 | | $ | 74,063 | | $ | 54,722 | | $ | 60,092 | | $ | 212,627 | | $ | 1,160 | | $ | 607,337 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other Commercial | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 226,595 | | $ | 167,497 | | $ | 98,848 | | $ | 5,620 | | $ | 25,723 | | $ | 44,114 | | $ | 30,445 | | $ | 598,842 |
Watch | | | 0 | | | 0 | | | 0 | | | 581 | | | 1,246 | | | 4,341 | | | 0 | | | 6,168 |
Special Mention | | | 0 | | | 0 | | | 0 | | | 0 | | | 2 | | | 0 | | | 0 | | | 2 |
Substandard | | | — | | | — | | | — | | | — | | | — | | | 239 | | | — | | | 239 |
Total Other Commercial | | $ | 226,595 | | $ | 167,497 | | $ | 98,848 | | $ | 6,201 | | $ | 26,971 | | $ | 48,694 | | $ | 30,445 | | $ | 605,251 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Commercial | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 2,464,176 | | $ | 1,818,675 | | $ | 1,442,333 | | $ | 957,400 | | $ | 752,917 | | $ | 2,347,677 | | $ | 731,395 | | $ | 10,514,573 |
Watch | | | 3,965 | | | 12,726 | | | 64,615 | | | 90,518 | | | 38,270 | | | 180,130 | | | 18,247 | | | 408,471 |
Special Mention | | | 250 | | | 14,820 | | | 46,618 | | | 26,705 | | | 14,750 | | | 29,768 | | | 3,756 | | | 136,667 |
Substandard | | | 4,213 | | | 729 | | | 38,182 | | | 35,672 | | | 3,887 | | | 35,218 | | | 2,867 | | | 120,768 |
Total Commercial | | $ | 2,472,604 | | $ | 1,846,950 | | $ | 1,591,748 | | $ | 1,110,295 | | $ | 809,824 | | $ | 2,592,793 | | $ | 756,265 | | $ | 11,180,479 |
-23-
Pass | Special Mention | Substandard | Doubtful | Total | |||||||||||||||
Construction and Land Development | $ | 667,018 | $ | 69,311 | $ | 11,857 | $ | 23 | $ | 748,209 | |||||||||
Commercial Real Estate - Owner Occupied | 801,565 | 32,364 | 5,533 | — | 839,462 | ||||||||||||||
Commercial Real Estate - Non-Owner Occupied | 1,505,153 | 37,631 | 4,208 | — | 1,546,992 | ||||||||||||||
Multifamily Real Estate | 312,711 | 19,499 | — | — | 332,210 | ||||||||||||||
Commercial & Industrial | 539,999 | 9,391 | 1,062 | — | 550,452 | ||||||||||||||
Residential 1-4 Family | 986,973 | 18,518 | 4,813 | 3,043 | 1,013,347 | ||||||||||||||
Auto | 258,188 | 3,648 | 135 | 100 | 262,071 | ||||||||||||||
HELOC | 519,928 | 4,225 | 969 | 601 | 525,723 | ||||||||||||||
Consumer and all other | 425,520 | 3,491 | 40 | 251 | 429,302 | ||||||||||||||
Total | $ | 6,017,055 | $ | 198,078 | $ | 28,617 | $ | 4,018 | $ | 6,247,768 |
Consumer Loans
For Consumer loans, the Company evaluates credit quality based on the delinquency status of the loan. The following table showsdetails the recorded investment in only PCIamortized cost of the classes of loans bywithin the Consumer segment withbased on their related risk leveldelinquency status and year of origination as of September 30, 2017March 31, 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | March 31, 2022 | |||||||||||||||||||||
| | | Term Loans Amortized Cost Basis by Origination Year | | | | | | | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||
| | | | | | | | | | | | | | | | | | | | | | | ||
| | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Revolving Loans | | Total | ||||||||
Residential 1-4 Family - Consumer | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | $ | 54,254 | | $ | 245,445 | | $ | 167,608 | | $ | 42,408 | | $ | 26,370 | | $ | 267,973 | | $ | 11 | | $ | 804,069 |
30-59 Days Past Due | | | 0 | | | 0 | | | 972 | | | 289 | | | 752 | | | 3,877 | | | 0 | | | 5,890 |
60-89 Days Past Due | | | 0 | | | 0 | | | 249 | | | 66 | | | 0 | | | 703 | | | 0 | | | 1,018 |
90+ Days Past Due | | | 0 | | | 0 | | | 0 | | | 45 | | | 0 | | | 1,102 | | | 0 | | | 1,147 |
Nonaccrual | | | 0 | | | 436 | | | 0 | | | 113 | | | 870 | | | 10,620 | | | 0 | | | 12,039 |
Total Residential 1-4 Family - Consumer | | $ | 54,254 | | $ | 245,881 | | $ | 168,829 | | $ | 42,921 | | $ | 27,992 | | $ | 284,275 | | $ | 11 | | $ | 824,163 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 Family - Revolving | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | $ | 30,547 | | $ | 16,011 | | $ | 8,979 | | $ | 1,869 | | $ | 916 | | $ | 482 | | $ | 503,355 | | $ | 562,159 |
30-59 Days Past Due | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,157 | | | 1,157 |
60-89 Days Past Due | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 651 | | | 651 |
90+ Days Past Due | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,065 | | | 1,065 |
Nonaccrual | | | 0 | | | 0 | | | 61 | | | 0 | | | 17 | | | 0 | | | 3,293 | | | 3,371 |
Total Residential 1-4 Family - Revolving | | $ | 30,547 | | $ | 16,011 | | $ | 9,040 | | $ | 1,869 | | $ | 933 | | $ | 482 | | $ | 509,521 | | $ | 568,403 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Auto | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | $ | 75,173 | | $ | 201,289 | | $ | 111,697 | | $ | 64,359 | | $ | 27,115 | | $ | 18,006 | | $ | 0 | | $ | 497,639 |
30-59 Days Past Due | | | 96 | | | 371 | | | 288 | | | 256 | | | 160 | | | 337 | | | 0 | | | 1,508 |
60-89 Days Past Due | | | 0 | | | 0 | | | 54 | | | 107 | | | 15 | | | 7 | | | 0 | | | 183 |
90+ Days Past Due | | | 0 | | | 47 | | | 40 | | | 40 | | | 36 | | | 29 | | | 0 | | | 192 |
Nonaccrual | | | 0 | | | 55 | | | 163 | | | 43 | | | 24 | | | 48 | | | 0 | | | 333 |
Total Auto | | $ | 75,269 | | $ | 201,762 | | $ | 112,242 | | $ | 64,805 | | $ | 27,350 | | $ | 18,427 | | $ | 0 | | $ | 499,855 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Consumer | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | $ | 14,212 | | $ | 21,042 | | $ | 14,440 | | $ | 33,778 | | $ | 26,135 | | $ | 25,747 | | $ | 35,729 | | $ | 171,083 |
30-59 Days Past Due | | | 0 | | | 21 | | | 56 | | | 115 | | | 113 | | | 150 | | | 12 | | | 467 |
60-89 Days Past Due | | | 0 | | | 3 | | | 15 | | | 48 | | | 106 | | | 29 | | | 0 | | | 201 |
90+ Days Past Due | | | 0 | | | 3 | | | 0 | | | 10 | | | 40 | | | 0 | | | 17 | | | 70 |
Nonaccrual | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 54 | | | 0 | | | 54 |
Total Consumer | | $ | 14,212 | | $ | 21,069 | | $ | 14,511 | | $ | 33,951 | | $ | 26,394 | | $ | 25,980 | | $ | 35,758 | | $ | 171,875 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Consumer | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | $ | 174,186 | | $ | 483,787 | | $ | 302,724 | | $ | 142,414 | | $ | 80,536 | | $ | 312,208 | | $ | 539,095 | | $ | 2,034,950 |
30-59 Days Past Due | | | 96 | | | 392 | | | 1,316 | | | 660 | | | 1,025 | | | 4,364 | | | 1,169 | | | 9,022 |
60-89 Days Past Due | | | 0 | | | 3 | | | 318 | | | 221 | | | 121 | | | 739 | | | 651 | | | 2,053 |
90+ Days Past Due | | | 0 | | | 50 | | | 40 | | | 95 | | | 76 | | | 1,131 | | | 1,082 | | | 2,474 |
Nonaccrual | | | 0 | | | 491 | | | 224 | | | 156 | | | 911 | | | 10,722 | | | 3,293 | | | 15,797 |
Total Consumer | | $ | 174,282 | | $ | 484,723 | | $ | 304,622 | | $ | 143,546 | | $ | 82,669 | | $ | 329,164 | | $ | 545,290 | | $ | 2,064,296 |
The Company did not have any material revolving loans convert to term during the three months ended March 31, 2022.
-24-
Pass | Special Mention | Substandard | Doubtful | Total | |||||||||||||||
Construction and Land Development | $ | 1,460 | $ | 1,311 | $ | 255 | $ | — | $ | 3,026 | |||||||||
Commercial Real Estate - Owner Occupied | 5,521 | 8,237 | 3,910 | — | 17,668 | ||||||||||||||
Commercial Real Estate - Non-Owner Occupied | 10,676 | 2,435 | 1,265 | — | 14,376 | ||||||||||||||
Multifamily Real Estate | — | 77 | — | — | 77 | ||||||||||||||
Commercial & Industrial | 94 | 309 | 222 | — | 625 | ||||||||||||||
Residential 1-4 Family | 7,498 | 4,227 | 1,577 | 775 | 14,077 | ||||||||||||||
HELOC | 722 | 132 | 6 | 122 | 982 | ||||||||||||||
Consumer and all other | 154 | 46 | 10 | — | 210 | ||||||||||||||
Total | $ | 26,125 | $ | 16,774 | $ | 7,245 | $ | 897 | $ | 51,041 |
The following table showsdetails the recorded investment in only PCIamortized cost of the classes of loans bywithin the Consumer segment withbased on their related risk leveldelinquency status and year of origination as of December 31, 20162021 (dollars in thousands):
Pass | Special Mention | Substandard | Doubtful | Total | |||||||||||||||
Construction and Land Development | $ | 1,092 | $ | 1,432 | $ | 398 | $ | — | $ | 2,922 | |||||||||
Commercial Real Estate - Owner Occupied | 5,520 | 8,889 | 3,934 | — | 18,343 | ||||||||||||||
Commercial Real Estate - Non-Owner Occupied | 10,927 | 4,638 | 1,738 | — | 17,303 | ||||||||||||||
Multifamily Real Estate | 343 | 1,723 | — | — | 2,066 | ||||||||||||||
Commercial & Industrial | 107 | 480 | 487 | — | 1,074 | ||||||||||||||
Residential 1-4 Family | 8,557 | 4,455 | 2,672 | 516 | 16,200 | ||||||||||||||
HELOC | 857 | 183 | 7 | 114 | 1,161 | ||||||||||||||
Consumer and all other | 166 | 37 | 20 | — | 223 | ||||||||||||||
Total | $ | 27,569 | $ | 21,837 | $ | 9,256 | $ | 630 | $ | 59,292 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2021 | |||||||||||||||||||||
| | | Term Loans Amortized Cost Basis by Origination Year | | | | | | | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||
| | | | | | | | | | | | | | | | | | | | | | | ||
| | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Revolving Loans | | Total | ||||||||
Residential 1-4 Family - Consumer | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | $ | 248,904 | | $ | 174,459 | | $ | 47,905 | | $ | 33,809 | | $ | 44,179 | | $ | 246,554 | | $ | 11 | | $ | 795,821 |
30-59 Days Past Due | | | 0 | | | 157 | | | 143 | | | 807 | | | 460 | | | 1,801 | | | 0 | | | 3,368 |
60-89 Days Past Due | | | 0 | | | 0 | | | 0 | | | 624 | | | 107 | | | 2,194 | | | 0 | | | 2,925 |
90+ Days Past Due | | | 0 | | | 0 | | | 46 | | | 20 | | | 304 | | | 2,643 | | | 0 | | | 3,013 |
Nonaccrual | | | 444 | | | 0 | | | 117 | | | 884 | | | 1,330 | | | 8,622 | | | 0 | | | 11,397 |
Total Residential 1-4 Family - Consumer | | $ | 249,348 | | $ | 174,616 | | $ | 48,211 | | $ | 36,144 | | $ | 46,380 | | $ | 261,814 | | $ | 11 | | $ | 816,524 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Residential 1-4 Family - Revolving | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | $ | 16,546 | | $ | 9,511 | | $ | 2,230 | | $ | 1,056 | | $ | 0 | | $ | 484 | | $ | 524,825 | | $ | 554,652 |
30-59 Days Past Due | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,493 | | | 1,493 |
60-89 Days Past Due | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 363 | | | 363 |
90+ Days Past Due | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 882 | | | 882 |
Nonaccrual | | | 0 | | | 63 | | | 0 | | | 18 | | | 0 | | | 0 | | | 3,325 | | | 3,406 |
Total Residential 1-4 Family - Revolving | | $ | 16,546 | | $ | 9,574 | | $ | 2,230 | | $ | 1,074 | | $ | 0 | | $ | 484 | | $ | 530,888 | | $ | 560,796 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Auto | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | $ | 207,229 | | $ | 123,848 | | $ | 72,427 | | $ | 31,745 | | $ | 16,020 | | $ | 7,204 | | $ | 0 | | $ | 458,473 |
30-59 Days Past Due | | | 299 | | | 382 | | | 518 | | | 259 | | | 245 | | | 163 | | | 0 | | | 1,866 |
60-89 Days Past Due | | | 45 | | | 29 | | | 95 | | | 33 | | | 36 | | | 11 | | | 0 | | | 249 |
90+ Days Past Due | | | 55 | | | 101 | | | 42 | | | 20 | | | 23 | | | 0 | | | 0 | | | 241 |
Nonaccrual | | | 0 | | | 81 | | | 55 | | | 27 | | | 27 | | | 33 | | | 0 | | | 223 |
Total Auto | | $ | 207,628 | | $ | 124,441 | | $ | 73,137 | | $ | 32,084 | | $ | 16,351 | | $ | 7,411 | | $ | 0 | | $ | 461,052 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Consumer | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | $ | 25,084 | | $ | 16,059 | | $ | 38,594 | | $ | 30,890 | | $ | 12,853 | | $ | 16,929 | | $ | 35,534 | | $ | 175,943 |
30-59 Days Past Due | | | 31 | | | 94 | | | 201 | | | 186 | | | 63 | | | 26 | | | 88 | | | 689 |
60-89 Days Past Due | | | 11 | | | 13 | | | 62 | | | 60 | | | 34 | | | 0 | | | 6 | | | 186 |
90+ Days Past Due | | | 1 | | | 4 | | | 33 | | | 72 | | | 8 | | | 0 | | | 2 | | | 120 |
Nonaccrual | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 54 | | | 0 | | | 54 |
Total Consumer | | $ | 25,127 | | $ | 16,170 | | $ | 38,890 | | $ | 31,208 | | $ | 12,958 | | $ | 17,009 | | $ | 35,630 | | $ | 176,992 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Consumer | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | $ | 497,763 | | $ | 323,877 | | $ | 161,156 | | $ | 97,500 | | $ | 73,052 | | $ | 271,171 | | $ | 560,370 | | $ | 1,984,889 |
30-59 Days Past Due | | | 330 | | | 633 | | | 862 | | | 1,252 | | | 768 | | | 1,990 | | | 1,581 | | | 7,416 |
60-89 Days Past Due | | | 56 | | | 42 | | | 157 | | | 717 | | | 177 | | | 2,205 | | | 369 | | | 3,723 |
90+ Days Past Due | | | 56 | | | 105 | | | 121 | | | 112 | | | 335 | | | 2,643 | | | 884 | | | 4,256 |
Nonaccrual | | | 444 | | | 144 | | | 172 | | | 929 | | | 1,357 | | | 8,709 | | | 3,325 | | | 15,080 |
Total Consumer | | $ | 498,649 | | $ | 324,801 | | $ | 162,468 | | $ | 100,510 | | $ | 75,689 | | $ | 286,718 | | $ | 566,529 | | $ | 2,015,364 |
The Company did not have any material revolving loans being identified as impaired atconvert to term during the date of purchase. The fair values were determined based on the credit quality of the portfolio, expected future cash flows, and timing of those expected future cash flows.
For the Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Balance at beginning of period | $ | 19,739 | $ | 22,139 | |||
Accretion | (4,896 | ) | (4,232 | ) | |||
Reclass of nonaccretable difference due to improvement in expected cash flows | 2,175 | 3,580 | |||||
Other, net (1) | (452 | ) | (1,149 | ) | |||
Balance at end of period | $ | 16,566 | $ | 20,338 |
-25-
The Company’s intangible assets consist of core deposits, goodwill, and other intangibles arising from acquisitions. The Company has determined that core deposit intangibles have finite lives and amortizes them over their estimated useful lives. Core deposit intangible assetsintangibles are being amortized over the period of expected benefit, which ranges from 4 to 1410 years, using an accelerated method. Other amortizable intangible assets are being amortized over the period of expected benefit, which ranges from 54 to 10 years, using a straight-line method.
The Company performed its annual impairment testing in the second quarter of 2017 and determined that there was no0 impairment to its goodwill or intangible assets.
The Company analyzed its intangible assets at March 31, 2022 and concluded 0 impairment existed as of the balance sheet date. Amortization expense of core deposit intangibles for the three and nine months ended September 30, 2017March 31, 2022 and 2021 totaled $1.4$3.0 million and $4.3$3.7 million, respectively; and the three and nine months ended September 30, 2016 totaled $1.7 million and $5.3 million, respectively. Amortization expense of other intangibles for the three and nine months ended September 30, 2017 totaled $120,000 and $360,000, respectively and $160,000 for the
As of September 30, 2017,March 31, 2022, the estimated remaining amortization expense of intangibles is as follows for the years ending (dollars in thousands):
| | | |
For the remaining nine months of 2022 |
| $ | 8,452 |
2023 | | | 9,687 |
2024 | | | 7,820 |
2025 | | | 6,221 |
2026 | | | 4,420 |
Thereafter | | | 3,673 |
Total estimated amortization expense | | $ | 40,273 |
-26-
5. LEASES
The Company enters into both lessor and lessee arrangements and determines if an arrangement is a lease at inception. As both a lessee and lessor, the Company elected the practical expedient permitted under the transition guidance within the standard to account for lease and non-lease components as a single lease component for all asset classes.
Lessor Arrangements
The Company’s lessor arrangements consist of sales-type and direct financing leases for equipment. Lease payment terms are fixed and are typically payable in monthly installments with terms ranging from 14 months to 125 months. The lease arrangements may contain renewal options and purchase options that allow the lessee to purchase the leased equipment at the end of the lease term. The leases generally do not contain non-lease components. The Company has no material sale leaseback transactions and 0 lease transactions with related parties.
At lease inception the Company estimates the expected residual value of the leased property at the end of the lease term by considering both internal and third-party appraisals. In certain cases, the Company obtains lessee-provided residual value guarantees and third-party RVI to reduce its residual asset risk. At March 31, 2022 and December 31, 2021, the carrying value of residual assets covered by residual value guarantees and RVI was $23.8 million and $23.0 million, respectively.
The net investment in sales-type and direct financing leases consists of the carrying amount of the lease receivables plus unguaranteed residual assets, net of unearned income and any deferred selling profit on direct financing leases. The lease receivables include the lessor’s right to receive lease payments and the guaranteed residual asset value the lessor expects to derive from the underlying assets at the end of the lease term. The Company’s net investment in sales-type and direct financing leases are included in “Loans held for investment, net of deferred fees and costs” on the Company’s Consolidated Balance Sheets. Lease income is recorded in “Interest and fees on loans” on the Company’s Consolidated Statements of Income.
Total net investment in sales-type and direct financing leases consists of the following (dollars in thousands):
| | | | | | | |
|
| March 31, 2022 | | | December 31, 2021 | ||
Sales-type and direct financing leases: | | | | | | | |
Lease receivables, net of unearned income and deferred selling profit | | $ | 196,601 | | | $ | 199,423 |
Unguaranteed residual values, net of unearned income and deferred selling | | | 8,840 | | | | 8,911 |
Total net investment in sales-type and direct financing leases |
| $ | 205,441 | | | $ | 208,334 |
Lessee Arrangements
The Company’s lessee arrangements consist of operating and finance leases; however, the majority of the leases have been classified as non-cancellable operating leases and are primarily for real estate leases with remaining lease terms of up to 24 years. The Company’s real estate lease agreements do not contain residual value guarantees and most agreements do not contain restrictive covenants. The Company does not have any material arrangements where the Company is in a sublease contract.
Lessee arrangements with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. The ROU assets and lease liabilities associated with operating and finance leases greater than 12 months are recorded in the Company’s Consolidated Balance Sheets; ROU assets within “Other assets” and lease liabilities within “Other liabilities”. ROU assets represent the Company’s right to use an underlying asset over the course of the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The initial measurement of lease liabilities and ROU assets are the same for operating and finance leases. Lease liabilities are recognized at the commencement date based on the present value of the remaining lease payments, discounted using the incremental borrowing rate. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. ROU assets are recognized at commencement date based on the initial measurement of the lease liability, any lease payments made excluding lease incentives, and any initial direct costs incurred. Most of the Company’s operating leases include one or more options to renew and if the Company is reasonably certain to exercise those options, it would be included in the measurement of the operating ROU assets and lease liabilities.
-27-
Lease expense for operating lease payments is recognized on a straight-line basis over the lease term and recorded in “Occupancy expenses” on the Company’s Consolidated Statements of Income. Finance lease expenses consist of straight-line amortization expense of the ROU Assets recognized over the lease term and interest expense on the lease liability. Total finance lease expenses for the amortization of the ROU assets are recorded in “Occupancy expenses” on the Company’s Consolidated Statements of Income and interest expense on the finance lease liability is recorded in “Interest on long-term borrowings” on the Company’s Consolidated Statements of Income.
The tables below provide information about the Company’s lessee lease portfolio and other supplemental lease information (dollars in thousands):
| | | | | | | | | | | | | | | | | |
|
| March 31, 2022 | | | | December 31, 2021 | | ||||||||||
| | Operating | | | Finance | | | | Operating | | | Finance | | ||||
ROU assets | | $ | 35,237 | | | $ | 6,277 | | | | $ | 40,653 | | | $ | 6,506 | |
Lease liabilities | | | 48,304 | | | | 9,183 | | | | | 50,742 | | | | 9,477 | |
Lease Term and Discount Rate of Operating leases: |
| | | | | | | | | | | | | | | | |
Weighted-average remaining lease term (years) |
| | 6.62 | | | | 6.83 | | | | | 6.75 | | | | 7.08 | |
Weighted-average discount rate (1) |
| | 2.58 | % | | | 1.17 | % | | | | 2.57 | % | | | 1.17 | % |
(1)An incremental borrowing rate is used based on information available at commencement date of lease or at remeasurement date
| | | | | | |
| | Three months ended March 31, | ||||
|
| 2022 | | 2021 | ||
Cash paid for amounts included in measurement of lease liabilities: | | | | | | |
Operating Cash Flows from Finance Leases | | $ | 27 | | $ | 30 |
Operating Cash Flows from Operating Leases | |
| 2,891 | | | 3,015 |
Financing Cash Flows from Finance Leases | | | 294 | | | 283 |
ROU assets obtained in exchange for lease obligations: | | | | | | |
Operating leases | | $ | 143 | | $ | 1,820 |
For the remaining three months of 2017 | $ | 1,420 | |
For the year ending December 31, 2018 | 4,664 | ||
For the year ending December 31, 2019 | 3,599 | ||
For the year ending December 31, 2020 | 2,509 | ||
For the year ending December 31, 2021 | 1,481 | ||
Thereafter | 2,344 | ||
Total estimated amortization expense | $ | 16,017 |
| | | | | | | |
| | | Three months ended March 31, | ||||
| | | | 2022 | | | 2021 |
Net Operating Lease Cost | |
| $ | 2,309 | | $ | 2,541 |
Finance Lease Cost: | | | | | | | |
Amortization of right-of-use assets | | | | 230 | | | 230 |
Interest on lease liabilities | | |
| 27 | | | 30 |
Total Lease Cost | | | $ | 2,566 | | $ | 2,801 |
The maturities of lessor and lessee arrangements outstanding at March 31, 2022 are presented in the table below (dollars in thousands):
| | | | | | | | | |
| | March 31, 2022 | |||||||
| | Lessor | | Lessee | |||||
| | | Sales-type and Direct Financing | | Operating | | Finance | ||
For the remaining nine months of 2022 |
| $ | 37,728 | | $ | 8,515 | | $ | 971 |
2023 | | | 47,004 | | | 10,400 | | | 1,325 |
2024 | |
| 45,782 | | | 9,274 | | | 1,358 |
2025 | |
| 33,791 | | | 7,017 | | | 1,392 |
2026 | |
| 18,920 | | | 4,494 | | | 1,427 |
Thereafter | |
| 30,846 | | | 13,326 | | | 3,088 |
Total undiscounted cash flows | |
| 214,071 | | | 53,026 | | | 9,561 |
Less: Adjustments (1) | |
| 17,470 | | | 4,722 | | | 378 |
Total (2) | | $ | 196,601 | | $ | 48,304 | | $ | 9,183 |
(1) Lessor – unearned income and unearned guaranteed residual value; Lessee – imputed interest
(2) Representslease receivables for lessor arrangements and lease liabilities for lessee arrangements
-28-
Short-term Borrowings
The Company classifies all borrowings that will mature within a year from the date on which the Company enters into them as short-term borrowings. Total short-term borrowings consist primarily of securities sold under agreements to repurchase, which are secured transactions with customers and generally mature the day following the date sold, advances from the FHLB, federal funds purchased (which are secured overnight borrowings from other financial institutions), and other lines of credit. Also included in total short-term borrowings are securities sold under agreements to repurchase, which are secured transactions with customers and generally mature the day following the date sold.
Total short-term borrowings consist of the following as of September 30, 2017March 31, 2022 and December 31, 20162021 (dollars in thousands):
September 30, 2017 | December 31, 2016 | ||||||
Securities sold under agreements to repurchase | $ | 43,337 | $ | 59,281 | |||
Other short-term borrowings (1) | 574,000 | 517,500 | |||||
Total short-term borrowings | $ | 617,337 | $ | 576,781 | |||
Maximum month-end outstanding balance | $ | 696,529 | $ | 678,262 | |||
Average outstanding balance during the period | 606,441 | 590,074 | |||||
Average interest rate (year-to-date) | 0.93 | % | 0.49 | % | |||
Average interest rate at end of period | 1.15 | % | 0.60 | % |
| | | | | | | |
|
| March 31, | | December 31, |
| ||
| | 2022 | | 2021 |
| ||
Securities sold under agreements to repurchase | | $ | 115,027 | | $ | 117,870 | |
Federal Funds Purchased | | | 0 | | | 0 | |
FHLB Advances | |
| 0 | |
| 0 | |
Total short-term borrowings | | $ | 115,027 | | $ | 117,870 | |
| | | | | | | |
Average outstanding balance during the period | | $ | 113,500 | | $ | 113,030 | |
Average interest rate during the period | |
| 0.08 | % |
| 0.10 | % |
Average interest rate at end of period | |
| 0.09 | % |
| 0.07 | % |
The Bank maintains federal funds lines with several correspondent banks;banks, the remaining available balance was $185.0 million and $175.0$997.0 million at September 30, 2017both March 31, 2022 and December 31, 2016, respectively.2021. The Company maintains an alternate line of credit at a correspondent bank; the available balance was $25.0 million at both September 30, 2017March 31, 2022 and December 31, 2016.2021. The Company has certain restrictive covenants related to certain asset quality, capital, and profitability metrics associated with these lines and is considered to be in compliance with these covenants.covenants as of March 31, 2022 and December 31, 2021. Additionally, the Company had a collateral dependent line of credit with the FHLB of up to $2.7 billion and $2.4$6.0 billion at September 30, 2017both March 31, 2022 and December 31, 2016, respectively.
Long-term Borrowings
During the fourth quarter of 2021, the company issued the 2031 Notes. The 2031 Notes were sold at par resulting in net proceeds, after underwriting discounts and offering expenses, of approximately $246.9 million. The Company used a portion of the net proceeds from the 2031 Notes issuance to repay its outstanding $150 million of 5.00% fixed-to-floating rate subordinated notes that were due in 2026.
In connection with twoseveral previous bank acquisitions, prior to 2006, the Company issued $58.5 million and acquired $87.0 million of trust preferred capital notes to fund the cash portion of those acquisitions, collectively totaling $58.5 million. Innotes. Most recently, in connection with the acquisition of StellarOne,Access on February 1, 2019, the Company acquired additional trust preferred capital notes totaling $5.0 million. The remaining fair value discount on all acquired trust preferred capital notes totaling $32.0was $13.1 million with a remaining fair value discount of $6.5and $13.3 million at September 30, 2017. The trust preferred capital notes currently qualify for Tier 1 capitalMarch 31, 2022 and December 31, 2021, respectively.
-29-
| | | | | | | | | | | | |
| | | | Spread to | | | | | | | | |
| | Principal | | 3-Month LIBOR | | Rate (1) | | Maturity | | Investment (2) | ||
Trust Preferred Capital Securities | | | | | | | | | | | | |
Trust Preferred Capital Note - Statutory Trust I | | $ | 22,500 |
| 2.75 | % | 3.71 | % | 6/17/2034 | | $ | 696 |
Trust Preferred Capital Note - Statutory Trust II | |
| 36,000 |
| 1.40 | % | 2.36 | % | 6/15/2036 | |
| 1,114 |
VFG Limited Liability Trust I Indenture | |
| 20,000 |
| 2.73 | % | 3.69 | % | 3/18/2034 | |
| 619 |
FNB Statutory Trust II Indenture | |
| 12,000 |
| 3.10 | % | 4.06 | % | 6/26/2033 | |
| 372 |
Gateway Capital Statutory Trust I | |
| 8,000 |
| 3.10 | % | 4.06 | % | 9/17/2033 | |
| 248 |
Gateway Capital Statutory Trust II | |
| 7,000 |
| 2.65 | % | 3.61 | % | 6/17/2034 | |
| 217 |
Gateway Capital Statutory Trust III | |
| 15,000 |
| 1.50 | % | 2.46 | % | 5/30/2036 | |
| 464 |
Gateway Capital Statutory Trust IV | |
| 25,000 |
| 1.55 | % | 2.51 | % | 7/30/2037 | |
| 774 |
MFC Capital Trust II | |
| 5,000 |
| 2.85 | % | 3.81 | % | 1/23/2034 | |
| 155 |
Total Trust Preferred Capital Securities | | $ | 150,500 |
|
|
|
|
|
| | $ | 4,659 |
Subordinated Debt(3)(4) | | | | | | | | | | | | |
2031 Subordinated Debt | | | 250,000 | | - | % | 2.875 | % | 12/15/2031 | | | |
Total Subordinated Debt(5) | | $ | 250,000 | | | | | | | | | |
Fair Value Discount(6) | | | (16,154) | | | | | | | | | |
Investment in Trust Preferred Capital Securities | | | 4,659 | | | | | | | | | |
Total Long-term Borrowings | | $ | 389,005 | | | | | | | | | |
Trust Preferred Capital Securities (1) | Investment (1) | Spread to 3-Month LIBOR | Rate | Maturity | |||||||||||
Trust Preferred Capital Note - Statutory Trust I | $ | 22,500,000 | $ | 696,000 | 2.75 | % | 4.08 | % | 6/17/2034 | ||||||
Trust Preferred Capital Note - Statutory Trust II | 36,000,000 | 1,114,000 | 1.40 | % | 2.73 | % | 6/15/2036 | ||||||||
VFG Limited Liability Trust I Indenture | 20,000,000 | 619,000 | 2.73 | % | 4.06 | % | 3/18/2034 | ||||||||
FNB Statutory Trust II Indenture | 12,000,000 | 372,000 | 3.10 | % | 4.43 | % | 6/26/2033 | ||||||||
Total | $ | 90,500,000 | $ | 2,801,000 |
(1)
Rate as of March 31, 2022. Calculated using non-rounded numbers.
(2) The total of the trust preferred capital securities and investments in the respective trusts represents the principal asset of the Company'sCompany’s junior subordinated debt securities with like maturities and like interest rates to the capital securities. The Company'sCompany’s investment in the trusts is reported in "Other Assets"assets" on the Company’s Consolidated Balance Sheets.
(3) The remaining issuance discount as of 2016,March 31, 2022 is $3.0 million.
(4) Subordinated notes qualify as Tier 2 capital for the Company issued $150.0 million of fixed-to-floatingfor regulatory purposes.
(5) Fixed-to-floating rate subordinated notes with an initial fixed interest rate of 5.00% throughnotes. On December 15, 2021. The2026, the interest rate then changes to a floating rate of LIBOR
(6) Remaining discounts of $13.1 million and$3.0 million on Trust Preferred Capital Securities and Subordinated Debt, respectively.
-30-
Total long-term borrowings consist of the following as of December 31, 2016, the carrying value2021 (dollars in thousands):
| | | | | | | | | | | | |
| | | | Spread to | | | | | | | | |
| | Principal | | 3-Month LIBOR | | Rate (1) | | Maturity | | Investment (2) | ||
Trust Preferred Capital Securities | | | | | | | | | | | | |
Trust Preferred Capital Note - Statutory Trust I | | $ | 22,500 |
| 2.75 | % | 2.96 | % | 6/17/2034 | | $ | 696 |
Trust Preferred Capital Note - Statutory Trust II | |
| 36,000 |
| 1.40 | % | 1.61 | % | 6/15/2036 | |
| 1,114 |
VFG Limited Liability Trust I Indenture | |
| 20,000 |
| 2.73 | % | 2.94 | % | 3/18/2034 | |
| 619 |
FNB Statutory Trust II Indenture | |
| 12,000 |
| 3.10 | % | 3.31 | % | 6/26/2033 | |
| 372 |
Gateway Capital Statutory Trust I | |
| 8,000 |
| 3.10 | % | 3.31 | % | 9/17/2033 | |
| 248 |
Gateway Capital Statutory Trust II | |
| 7,000 |
| 2.65 | % | 2.86 | % | 6/17/2034 | |
| 217 |
Gateway Capital Statutory Trust III | |
| 15,000 |
| 1.50 | % | 1.71 | % | 5/30/2036 | |
| 464 |
Gateway Capital Statutory Trust IV | |
| 25,000 |
| 1.55 | % | 1.76 | % | 7/30/2037 | |
| 774 |
MFC Capital Trust II | |
| 5,000 |
| 2.85 | % | 3.06 | % | 1/23/2034 | |
| 155 |
Total Trust Preferred Capital Securities | | $ | 150,500 |
|
|
|
|
|
| | $ | 4,659 |
Subordinated Debt(3)(4) | | | | | | | | | | | | |
2031 Subordinated Debt | | | 250,000 | | - | % | 2.875 | % | 12/15/2031 | | | |
Total Subordinated Debt(5) | | $ | 250,000 | | | | | | | | | |
Fair Value Discount(6) | | | (16,435) | | | | | | | | | |
Investment in Trust Preferred Capital Securities | | | 4,659 | | | | | | | | | |
Total Long-term Borrowings | | $ | 388,724 | | | | | | | | | |
(1) Rate as of December 31, 2021. Calculated using non-rounded numbers.
(2) The total of the trust preferred capital securities and investments in the respective trusts represents the principal asset of the Company’s junior subordinated debt was $150.0 million,securities with a remaining discount of $1.8 million, respectively.
(3) The amortization expense is includedremaining issuance discount as a component of interest expense on long-term borrowings on the Company’s Consolidated Statements of Income. Amortization expense for the three and nine months ended September 30, 2017 and 2016 was $486,000 and $1.4 million and $474,000 and $1.4 million, respectively.
Long-term Type | Spread to 3-Month LIBOR | Interest Rate (1) | Maturity Date | Advance Amount | ||||||||
Adjustable Rate Credit | 0.44 | % | 1.77 | % | 8/23/2022 | $ | 55,000 | |||||
Adjustable Rate Credit | 0.45 | % | 1.79 | % | 11/23/2022 | 65,000 | ||||||
Adjustable Rate Credit | 0.45 | % | 1.79 | % | 11/23/2022 | 10,000 | ||||||
Adjustable Rate Credit | 0.45 | % | 1.79 | % | 11/23/2022 | 10,000 | ||||||
Fixed Rate | — | 3.62 | % | 11/28/2017 | 10,000 | |||||||
Fixed Rate | — | 3.75 | % | 7/30/2018 | 5,000 | |||||||
Fixed Rate | — | 3.97 | % | 7/30/2018 | 5,000 | |||||||
Fixed Rate Hybrid | — | 0.99 | % | 10/19/2018 | 30,000 | |||||||
Fixed Rate Hybrid | — | 1.58 | % | 5/18/2020 | 20,000 | |||||||
$ | 210,000 | |||||||||||
(1) Interest rates calculated using non-rounded numbers. |
(4) Subordinated notes qualify as Tier 2 capital for the Company had long-term advances fromfor regulatory purposes.
(5) Fixed-to-floating rate notes. On December 15, 2026, the FHLB consistinginterest changes to a floating rate of the following (dollars in thousands):
Long-term Type | Spread to 3-Month LIBOR | Interest Rate (1) | Maturity Date | Advance Amount | ||||||||
Adjustable Rate Credit | 0.44 | % | 1.44 | % | 8/23/2022 | $ | 55,000 | |||||
Adjustable Rate Credit | 0.45 | % | 1.45 | % | 11/23/2022 | 65,000 | ||||||
Adjustable Rate Credit | 0.45 | % | 1.45 | % | 11/23/2022 | 10,000 | ||||||
Adjustable Rate Credit | 0.45 | % | 1.45 | % | 11/23/2022 | 10,000 | ||||||
Fixed Rate | — | 3.62 | % | 11/28/2017 | 10,000 | |||||||
Fixed Rate | — | 3.75 | % | 7/30/2018 | 5,000 | |||||||
Fixed Rate | — | 3.97 | % | 7/30/2018 | 5,000 | |||||||
Fixed Rate Hybrid | — | 0.99 | % | 10/19/2018 | 30,000 | |||||||
$ | 190,000 | |||||||||||
(1) Interest rates calculated using non-rounded numbers. |
(6) Remaining discounts of loans$13.3 million and securities pledged as collateral$3.1 million on FHLB advances as of September 30, 2017Trust Preferred Capital Securities and December 31, 2016, refer to Note 6 "Commitments and Contingencies".
As of September 30, 2017,March 31, 2022, the contractual maturities of long-term debt are as follows for the years ending (dollars in thousands):
| | | | | | | | | | | | |
|
| Trust |
| |
| |
| | ||||
|
| Preferred |
| |
| |
| Total | ||||
|
| Capital |
| Subordinated |
| Fair Value |
| Long-term | ||||
|
| Notes |
| Debt |
| Discount (1) |
| Borrowings | ||||
For the remaining nine months of 2022 | | $ | 0 | | $ | 0 | | $ | (858) | | $ | (858) |
2023 | |
| 0 | |
| 0 | |
| (1,162) | |
| (1,162) |
2024 | |
| 0 | |
| 0 | |
| (1,187) | |
| (1,187) |
2025 | |
| 0 | |
| 0 | |
| (1,211) | |
| (1,211) |
2026 | |
| 0 | |
| 0 | |
| (1,236) | |
| (1,236) |
Thereafter | |
| 155,159 | |
| 250,000 | |
| (10,500) | |
| 394,659 |
Total long-term borrowings | | $ | 155,159 | | $ | 250,000 | | $ | (16,154) | | $ | 389,005 |
Trust Preferred Capital Notes | Subordinated Debt | FHLB Advances | Fair Value Premium (Discount) | Prepayment Penalty | Total Long-term Borrowings | ||||||||||||||||||
For the remaining three months of 2017 | $ | — | $ | — | $ | 10,000 | $ | (21 | ) | $ | (488 | ) | $ | 9,491 | |||||||||
2018 | — | — | 40,000 | (343 | ) | (1,970 | ) | 37,687 | |||||||||||||||
2019 | — | — | — | (486 | ) | (2,018 | ) | (2,504 | ) | ||||||||||||||
2020 | — | — | 20,000 | (501 | ) | (2,074 | ) | 17,425 | |||||||||||||||
2021 | — | — | — | (516 | ) | (2,119 | ) | (2,635 | ) | ||||||||||||||
Thereafter | 93,301 | 150,000 | 140,000 | (6,308 | ) | (1,707 | ) | 375,286 | |||||||||||||||
Total Long-term borrowings | $ | 93,301 | $ | 150,000 | $ | 210,000 | $ | (8,175 | ) | $ | (10,376 | ) | $ | 434,750 |
(1) Includes discount on issued subordinated notes.
-31-
Litigation Matters
In addition to the Rowe Lawsuit, in the ordinary course of its operations, the Company and its subsidiaries are partiesinvolved in various legal and regulatory proceedings. The amount, if any, of the ultimate liability with respect to various other legal proceedings. Basedsuch matters cannot be determined. Despite the uncertainties of such litigation and investigations, and based on the information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in such other legal proceedings in the aggregate will not have a material adverse effect on the business, or the financial condition, or results of operations of the Company.
Financial Instruments with Off-Balance Sheet Risk
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve elements of credit and interest rate risk in excess of the amount recognized on the Company’s Consolidated Balance Sheets. The contractual amounts of these instruments reflect the extent of the Company’s involvement in particular classes of financial instruments.
The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and letters of credit written is represented by the contractual amount of these instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Unless noted otherwise, the Company does not require collateral or other security to support off-balance sheet
Commitments to extend credit are agreements to lend to customers as long as there are no violations of any conditions established in the contracts. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because many of the commitments may expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
Letters of credit are conditional commitments issued by the Company to guarantee the performance of customers to third parties. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.
The following table presents the balances of commitments and contingencies as of the following dates (dollars in thousands):
September 30, 2017 | December 31, 2016 | ||||||
Commitments with off-balance sheet risk: | |||||||
Commitments to extend credit (1) | $ | 2,085,103 | $ | 1,924,885 | |||
Standby letters of credit | 119,977 | 84,212 | |||||
Total commitments with off-balance sheet risk | $ | 2,205,080 | $ | 2,009,097 |
| | | | | | |
|
| March 31, 2022 |
| December 31, 2021 | ||
Commitments with off-balance sheet risk: |
| |
|
| |
|
Commitments to extend credit (1) | | $ | 6,140,109 | | $ | 5,825,557 |
Letters of credit | |
| 159,740 | |
| 152,506 |
Total commitments with off-balance sheet risk | | $ | 6,299,849 | | $ | 5,978,063 |
(1) Includes unfunded overdraft protection. | | | | | | |
As of September 30, 2017,March 31, 2022, the Company had approximately $45.4$218.8 million in deposits in other financial institutions of which $23.8$147.4 million served as collateral for cash flow and loan swap derivatives. As of December 31, 2021, the Company had approximately $187.4 million in deposits in other financial institutions of which $82.3 million served as collateral for the Company’s derivative interest rate contracts. The Company had approximately $20.3$67.9 million and $102.0 million in deposits in other financial institutions that were uninsured at September 30, 2017.March 31, 2022 and December 31, 2021, respectively. At least annually, the Company’s management evaluates the loss risk of its uninsured deposits in financial counterparties.
For asset/liability management purposes, the Company uses interest rate swap agreementscontracts to hedge various exposures or to modify the interest rate characteristics of various balance sheet accounts. SeeFor the OTC derivatives cleared with the central clearinghouses, the variation margin is treated as a settlement of the related derivatives fair values. Refer to Note 78 “Derivatives” in Part I, Item I of this Quarterly Report for additional information.
-32-
The Company pledges collateral to secure various financing and other activities that occur during the normal course of business.business as part of the liquidity management strategy. The following tables present the types of collateral pledged at September 30, 2017March 31, 2022 and December 31, 20162021 (dollars in thousands):
| | | | | | | | | | | | | | | |
| | Pledged Assets as of March 31, 2022 | | | | ||||||||||
|
| | |
| AFS |
| HTM |
| | |
| | | ||
| | Cash | | Securities (1) | | Securities (1) | | Loans (2) | | Total | |||||
Public deposits | | $ | 0 | | $ | 619,431 | | $ | 527,412 | | $ | 0 | | $ | 1,146,843 |
Repurchase agreements | |
| 0 | |
| 116,260 | |
| 0 | |
| 0 | |
| 116,260 |
FHLB advances | |
| 0 | |
| 40,919 | |
| 0 | |
| 2,966,527 | |
| 3,007,446 |
Derivatives | |
| 147,411 | |
| 61,255 | |
| 0 | |
| 0 | |
| 208,666 |
Fed Funds | | | 0 | | | 0 | | | 0 | | | 424,875 | | | 424,875 |
Other purposes | |
| 0 | | | 19,018 | | | 915 | | | 0 | | | 19,933 |
Total pledged assets | | $ | 147,411 | | $ | 856,883 | | $ | 528,327 | | $ | 3,391,402 | | $ | 4,924,023 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | Pledged Assets as of December 31, 2021 | | | | ||||||||||
|
| | |
| AFS |
| HTM |
| | |
| | | ||
| | Cash | | Securities (1) | | Securities (1) | | Loans (2) | | Total | |||||
Public deposits | | $ | 0 | | $ | 703,489 | | $ | 472,243 | | $ | 0 | | $ | 1,175,732 |
Repurchase agreements | |
| 0 | |
| 130,217 | |
| 0 | |
| 0 | |
| 130,217 |
FHLB advances | |
| 0 | |
| 43,722 | |
| 0 | |
| 4,263,259 | |
| 4,306,981 |
Derivatives | |
| 82,299 | |
| 65,053 | |
| 0 | |
| 0 | |
| 147,352 |
Fed Funds | | | 0 | | | 0 | | | 0 | | | 392,067 | | | 392,067 |
Other purposes | |
| 0 | | | 22,003 | | | 985 | | | 0 | | | 22,988 |
Total pledged assets | | $ | 82,299 | | $ | 964,484 | | $ | 473,228 | | $ | 4,655,326 | | $ | 6,175,337 |
| | | | | | | | | | | | | | | |
(1) Balance represents market value. | | | | | | | | | | | | | | | |
(2) Balance represents book value. | | | | | | | | | | | | | | | |
-33-
Pledged Assets as of September 30, 2017 | |||||||||||||||||||
Cash | AFS Securities (1) | HTM Securities (1) | Loans (2) | Total | |||||||||||||||
Public deposits | $ | — | $ | 224,153 | $ | 206,878 | $ | — | $ | 431,031 | |||||||||
Repurchase agreements | — | 88,257 | — | — | 88,257 | ||||||||||||||
FHLB advances | — | 1,022 | — | 2,404,355 | 2,405,377 | ||||||||||||||
Derivatives | 23,831 | 3,898 | — | — | 27,729 | ||||||||||||||
Other purposes | — | 15,580 | — | — | 15,580 | ||||||||||||||
Total pledged assets | $ | 23,831 | $ | 332,910 | $ | 206,878 | $ | 2,404,355 | $ | 2,967,974 |
Pledged Assets as of December 31, 2016 | |||||||||||||||||||
Cash | AFS Securities (1) | HTM Securities (1) | Loans (2) | Total | |||||||||||||||
Public deposits | $ | — | $ | 210,546 | $ | 197,889 | $ | — | $ | 408,435 | |||||||||
Repurchase agreements | — | 108,208 | — | — | 108,208 | ||||||||||||||
FHLB advances | — | 1,475 | — | 1,959,929 | 1,961,404 | ||||||||||||||
Derivatives | 33,595 | 4,376 | — | — | 37,971 | ||||||||||||||
Other purposes | — | 17,499 | — | — | 17,499 | ||||||||||||||
Total pledged assets | $ | 33,595 | $ | 342,104 | $ | 197,889 | $ | 1,959,929 | $ | 2,533,517 |
8. DERIVATIVES
The Company is exposed to economic risks arising from its business operations and uses derivatives primarily to manage risk associated with changing interest rates, and to assist customers with their risk management objectives. The Company designates certain derivatives as hedging instruments in a qualifying hedge accounting relationship (cash flow or fair value hedge). The remaining are classified as free standingfree-standing derivatives consisting of customer accommodation loan swaps and interest rate lock commitments that do not qualify for hedge accounting.
Derivatives Counterparty Credit Risk
Derivative instruments contain an element of credit risk that arises from the potential failure of a counterparty to perform according to the terms of the contract. The Company’s exposure to derivative counterparty credit risk, at any point in time, is equal to the amount reported as a derivative asset on the Company’s Consolidated Balance Sheets, assuming no recoveries of underlying collateral. The Company clears certain OTC derivatives with central clearinghouses through FCMs due to applicable regulatory requirements, which reduces the Company’s counterparty risk.
The Company also enters into legally enforceable master netting agreements and collateral agreements, where possible, with certain derivative counterparties to mitigate the risk of default on a bilateral basis. These bilateral agreements typically provide the right to offset exposures and require one counterparty to post collateral on derivative instruments in a net liability position to the other counterparty. For the OTC derivatives cleared with central clearinghouses, the variation margin is treated as settlement of the related derivatives fair values.
Cash Flow Hedges
The Company designates derivatives as cash flow hedges when they are used to manage exposure to variability in cash flows related to forecasted transactions on variable rate borrowings, such as trust preferred capital notes, FHLB borrowings, and prime commercial loans.financial instruments. The Company uses interest rate swap agreements as part of its hedging strategy by exchanging a notional amount, equal to the principal amount of the borrowings or commercial loans, for fixed-rate interest based on benchmarked interest rates. The original terms and conditions of the interest rate swaps vary and range in length with a maximum hedging time through November 2022.length. Amounts receivable or payable are recognized as accrued under the terms of the agreements.
All swaps were entered into with counterparties that met the Company’s credit standards, and the agreements contain collateral provisions protecting the at-risk party. The Company believesconcluded that the credit risk inherent in the contract is not significant.
For derivatives designated and qualifying as cash flow hedges, ineffectiveness is not measured or separately disclosed. Rather, as long as the effectiveness of each hedging relationship on a periodic basis using statistical regression analysis. The Company also measurescontinues to qualify for hedge accounting, the ineffectiveness of each hedging relationship using theentire change in variable cash flows method which compares the cumulative changes in cash flowsfair value of the hedging instrument relative to cumulative changesis recorded in OCI and recognized in earnings as the hedged item’s cash flows. In accordancetransaction affects earnings. Derivative amounts affecting earnings are recognized consistent with ASC 815,
At March 31, 2022 and December 31, 2021, the Company terminated threehad interest rate swaps designated and qualifying as cash flow hedges priorof the Company’s forecasted variable interest receipts on variable rate loans due to their respective maturity dates. The unrealized gain of $1.3 million within Accumulated Other Comprehensive Income will be reclassified into earnings overchanges in the interest rate with a three year period using the effective interest method. The estimated netnotional amount of gains expected to be reclassified into earnings by September 30, 2018 is $395,000.
Fair Value Hedge
Derivatives are designated as fair value hedges when they are used to manage exposure to changes in the fair value of certain financial assets and liabilities, referred to as the hedged items, which fluctuate in value as a result of movements in interest rates.
Loans:During the normal course of business, the Company enters into interest rate swapsswap agreements to convert certain long-term fixed-rate loans to floating rates to hedge the Company’s exposure to interest rate risk. The Company pays a fixed interest rate to the counterparty and receives a floating rate from the same counterparty calculated on the aggregate notional amount. At September 30, 2017March 31, 2022 and December 31, 2016,2021, the aggregate notional amount of the related hedged items for certain long-term fixed rate loans totaled $82.0$87.4 million and $65.9$88.6 million, respectively, and the fair value of the swaps associated with the derivative related to hedged items was an unrealized gain of $4.3 million and an unrealized loss of $620,000, respectively.
-34-
AFS Securities: The Company has entered into a swap agreement to hedge the interest rate risk on a portion of its fixed rate AFS securities. At March 31, 2022 and December 31, 2021, the aggregate notional amount of the related hedged items of the AFS securities totaled $50.0 million and the fair value of the swaps associated with the derivative related to hedged items was an unrealized loss of $597,000$1.2 million and $890,000,$4.1 million, respectively.
The Company applies hedge accounting in accordance with ASC 815,
Derivatives and Hedging, and the fair value hedge and the underlying hedged item, attributable to the risk being hedged, are recorded at fair value with unrealized gains and losses being recorded on the Company’s Consolidated Statements of Income.Interest Rate Contracts
During the normal course of business, the Company enters into interest rate swap loan relationships (“loan swaps”)contracts with borrowers to help meet their financing needs. Upon entering into the loan swaps,interest rate contracts, the Company enters into offsetting positions with a third party in order to minimize interest rate risk. These back-to-back loan swapsinterest rate contracts qualify as financial derivatives with fair values as reported in “Other Assets”assets” and “Other Liabilities”liabilities” on the Company’s Consolidated Balance Sheets.
The following table summarizes key elements of the Company’s derivative instruments as of September 30, 2017March 31, 2022 and December 31, 2016,2021, segregated by derivatives that are considered accounting hedges and those that are not (dollars in thousands):
September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||||
Derivative (2) | Derivative (2) | ||||||||||||||||||||||||
Notional or Contractual Amount (1) | Assets | Liabilities | Notional or Contractual Amount (1) | Assets | Liabilities | ||||||||||||||||||||
Derivatives designated as accounting hedges: | |||||||||||||||||||||||||
Interest rate contracts: | |||||||||||||||||||||||||
Cash flow hedges | $ | 152,500 | $ | 120 | $ | 9,460 | $ | 188,500 | $ | 211 | $ | 9,619 | |||||||||||||
Fair value hedges | 81,965 | 1,253 | 371 | 65,920 | 1,437 | 296 | |||||||||||||||||||
Derivatives not designated as accounting hedges: | |||||||||||||||||||||||||
Loan Swaps | |||||||||||||||||||||||||
Pay fixed - receive floating interest rate swaps | 506,056 | 3,051 | — | 373,355 | — | 1,005 | |||||||||||||||||||
Pay floating - receive fixed interest rate swaps | 506,056 | — | 3,051 | 373,355 | 1,005 | — | |||||||||||||||||||
Other contracts: | |||||||||||||||||||||||||
Interest rate lock commitments | 50,311 | 685 | — | 48,743 | 610 | — | |||||||||||||||||||
Best efforts forward delivery commitments | 80,307 | 245 | — | 85,400 | 1,469 | — |
| | | | | | | | | | | | | | | | | | |
|
| March 31, 2022 |
| December 31, 2021 | ||||||||||||||
| | | | | Derivative (2) | | | | | Derivative (2) | ||||||||
|
| Notional or |
| | |
| | |
| Notional or |
| | |
| | | ||
| | Contractual | | | | | | | | Contractual | | | | | | | ||
| | Amount (1) | | Assets | | Liabilities | | Amount (1) | | Assets | | Liabilities | ||||||
Derivatives designated as accounting hedges: | | | | | | | | | | | | | | | | | | |
Interest rate contracts: (3) |
| | |
| |
|
| |
| | | |
| |
|
| |
|
Cash flow hedges | | $ | 500,000 | | $ | 0 | | $ | — | | $ | 500,000 | | $ | 0 | | $ | 0 |
Fair value hedges | |
| 137,410 | |
| 597 | |
| 1,397 | |
| 138,606 | |
| 0 | |
| 5,387 |
Derivatives not designated as accounting hedges: | | | | | | | | | | | | | | | | | | |
Interest rate contracts (3) | |
| 5,324,908 | |
| 23,506 | |
| 90,632 | |
| 5,017,574 | |
| 73,696 | |
| 49,051 |
(1)
Notional amounts are not recorded on the(2)
Balancesrepresent fair value of derivative financial instruments.(3) The Company’s cleared derivatives are classified as a single-unit of accounting, resulting in the fair value of the designated swap being reduced by the variation margin, which is treated as settlement of the related derivatives fair value for accounting purposes.
-35-
The following table summarizes the carrying value of the Company’s hedged assets in fair value hedges and Contingencies.”the associated cumulative basis adjustments included in those carrying values as of March 31, 2022 and December 31, 2021 (dollars in thousands):
| | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 | ||||||||
|
| | |
| Cumulative |
| |
| Cumulative | |||
| | | | | Amount of Basis | | | | Amount of Basis | |||
| | | | | Adjustments | | | | Adjustments | |||
| | | | | Included in the | | | | Included in the | |||
| | Carrying Amount | | Carrying | | Carrying Amount | | Carrying | ||||
| | of Hedged | | Amount of the | | of Hedged | | Amount of the | ||||
| | Assets/(Liabilities) | | Hedged | | Assets/(Liabilities) | | Hedged | ||||
| | Amount (1) |
| Assets/(Liabilities) | | Amount (1) |
| Assets/(Liabilities) | ||||
Line items on the Consolidated Balance Sheets in which the hedged item is included: |
| |
|
| |
|
| |
|
| |
|
Securities available-for-sale (1) (2) | | $ | 105,162 | | $ | 1,154 | | $ | 112,562 | | $ | 4,051 |
Loans | |
| 87,410 | |
| (4,369) | |
| 88,606 | |
| 546 |
(1) These amounts include the amortized cost basis of the investment securities designated in hedging relationships for which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. At March 31, 2022 and December 31, 2021, the amortized cost basis of this portfolio was $105 million and $113 million, respectively, and the cumulative basis adjustment associated with this hedge was $1.2 million and $4.1 million, respectively. The amount of the designated hedged item at March 31, 2022 and December 31, 2021 totaled $50 million.
(2) Carrying value represents amortized cost.
-36-
9. STOCKHOLDERS’ EQUITY
Series A Preferred Stock
On June 9, 2020, the Company issued and sold 6,900,000 depositary shares, each representing a 1/400th ownership interest in a share of its Series A preferred stock, with a liquidation preference of $10,000 per share of Series A preferred stock (equivalent to $25 per depositary share), including 900,000 depositary shares pursuant to the exercise in full by the underwriters of their option to purchase additional depositary shares. The total net proceeds to the Company were approximately $166.4 million, after deducting the underwriting discount and other offering expenses payable by the Company.
Repurchase Programs
On December 10, 2021, the Company’s Board of Directors authorized a new share Repurchase Program (the “Repurchase Program”) to purchase up to $100.0 million of the Company’s common stock through December 9, 2022 in open market transactions or privately negotiated transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and / or Rule 10b-18 under the Exchange Act. During the quarter ended March 31, 2022, the Company repurchased an aggregate of approximately 630,000 shares (or $25.0 million), at an average price of $39.73. NaN shares were repurchased during the quarter ended December 31, 2021.
Accumulated Other Comprehensive Income (Loss)
The change in accumulated other comprehensive income (loss)AOCI for the three and nine months ended September 30, 2017March 31, 2022 is summarized as follows, net of tax (dollars in thousands):
Unrealized Gains (Losses) on AFS Securities | Unrealized Gain for AFS Securities Transferred to HTM | Change in Fair Value of Cash Flow Hedge | Unrealized Gains (Losses) on BOLI | Total | |||||||||||||||
Balance - June 30, 2017 | $ | 7,733 | $ | 3,033 | $ | (5,487 | ) | $ | (1,271 | ) | $ | 4,008 | |||||||
Other comprehensive income (loss) | (2,729 | ) | — | 41 | — | (2,688 | ) | ||||||||||||
Amounts reclassified from accumulated other comprehensive income | (119 | ) | (163 | ) | 189 | 84 | (9 | ) | |||||||||||
Net current period other comprehensive income (loss) | (2,848 | ) | (163 | ) | 230 | 84 | (2,697 | ) | |||||||||||
Balance - September 30, 2017 | $ | 4,885 | $ | 2,870 | $ | (5,257 | ) | $ | (1,187 | ) | $ | 1,311 |
Unrealized Gains (Losses) on AFS Securities | Unrealized Gain for AFS Securities Transferred to HTM | Change in Fair Value of Cash Flow Hedge | Unrealized Gains (Losses) on BOLI | Total | |||||||||||||||
Balance - December 31, 2016 | $ | (542 | ) | $ | 3,377 | $ | (5,179 | ) | $ | (1,465 | ) | $ | (3,809 | ) | |||||
Other comprehensive income (loss) | 5,935 | — | (766 | ) | — | 5,169 | |||||||||||||
Amounts reclassified from accumulated other comprehensive income | (508 | ) | (507 | ) | 688 | 278 | (49 | ) | |||||||||||
Net current period other comprehensive income (loss) | 5,427 | (507 | ) | (78 | ) | 278 | 5,120 | ||||||||||||
Balance - September 30, 2017 | $ | 4,885 | $ | 2,870 | $ | (5,257 | ) | $ | (1,187 | ) | $ | 1,311 |
| | | | | | | | | | | | | | | |
|
| | |
| Unrealized Gains |
| | |
| | |
| | | |
| | | | | (Losses) | | | | | | | | | | |
| | Unrealized | | for AFS | | | | | Unrealized | | | | |||
| | Gains (Losses) | | Securities | | Change in Fair | | Gains | | | | ||||
| | on AFS | | Transferred to | | Value of Cash | | (Losses) on | | | | ||||
| | Securities | | HTM | | Flow Hedge | | BOLI | | Total | |||||
Balance - December 31, 2021 | | $ | 22,763 | | $ | 35 | | $ | (1,567) | | $ | (2,596) | | $ | 18,635 |
Other comprehensive income (loss): | |
| | | | | | | | | | | |
|
|
Other comprehensive loss before reclassification | |
| (186,967) | | | 0 | | | (23,313) | | | 0 | |
| (210,280) |
Amounts reclassified from AOCI into earnings | |
| 0 | | | (5) | | | 0 | | | 167 | |
| 162 |
Net current period other comprehensive income (loss) | |
| (186,967) | |
| (5) | |
| (23,313) | |
| 167 | |
| (210,118) |
Balance - March 31, 2022 | | $ | (164,204) | | $ | 30 | | $ | (24,880) | | $ | (2,429) | | $ | (191,483) |
The change in accumulated other comprehensive income (loss)AOCI for the three and nine months ended September 30, 2016March 31, 2021 is summarized as follows, net of tax (dollars in thousands):
| | | | | | | | | | | | | | | |
|
| | |
| Unrealized Gain |
| | |
| | |
| | | |
| | | | | (Losses) | | | | | | | | | | |
| | Unrealized | | for AFS | | | | | Unrealized | | | | |||
| | Gains (Losses) | | Securities | | Change in Fair | | Gains | | | | ||||
| | on AFS | | Transferred to | | Value of Cash | | (Losses) | | | | ||||
| | Securities | | HTM | | Flow Hedge | | on BOLI | | Total | |||||
Balance - December 31, 2020 | | $ | 74,161 | | $ | 55 | | $ | 0 | | $ | (3,201) | | $ | 71,015 |
Cumulative effects from adoption of new accounting standard | | | | | | | | | | | | | | | |
Other comprehensive income (loss): | |
| | | | | | | | | | | | | |
Other comprehensive loss before reclassification | |
| (33,125) | | | 0 | | | (1,428) | | | 0 | | | (34,553) |
Amounts reclassified from AOCI into earnings | |
| (62) | | | (5) | | | (47) | | | 153 | | | 39 |
Net current period other comprehensive income (loss) | |
| (33,187) | |
| (5) | |
| (1,475) | |
| 153 | |
| (34,514) |
Balance - March 31, 2021 | | $ | 40,974 | | $ | 50 | | $ | (1,475) | | $ | (3,048) | | $ | 36,501 |
-37-
Unrealized Gains (Losses) on AFS Securities | Unrealized Gain for AFS Securities Transferred to HTM | Change in Fair Value of Cash Flow Hedge | Total | ||||||||||||
Balance - June 30, 2016 | $ | 14,412 | $ | 3,853 | $ | (9,366 | ) | $ | 8,899 | ||||||
Other comprehensive income (loss) | 1,121 | — | (78 | ) | 1,043 | ||||||||||
Amounts reclassified from accumulated other comprehensive income | — | (237 | ) | 154 | (83 | ) | |||||||||
Net current period other comprehensive income (loss) | $ | 1,121 | $ | (237 | ) | $ | 76 | $ | 960 | ||||||
Balance - September 30, 2016 | $ | 15,533 | $ | 3,616 | $ | (9,290 | ) | $ | 9,859 |
Unrealized Gains (Losses) on AFS Securities | Unrealized Gain for AFS Securities Transferred to HTM | Change in Fair Value of Cash Flow Hedge | Total | ||||||||||||
Balance - December 31, 2015 | $ | 7,777 | $ | 4,432 | $ | (5,957 | ) | $ | 6,252 | ||||||
Other comprehensive income (loss) | 7,851 | — | (3,766 | ) | 4,085 | ||||||||||
Amounts reclassified from accumulated other comprehensive income | (95 | ) | (816 | ) | 433 | (478 | ) | ||||||||
Net current period other comprehensive income (loss) | 7,756 | (816 | ) | (3,333 | ) | 3,607 | |||||||||
Balance - September 30, 2016 | $ | 15,533 | $ | 3,616 | $ | (9,290 | ) | $ | 9,859 |
10. FAIR VALUE MEASUREMENTS
The Company follows ASC 820
ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The three levels of the fair value hierarchy under ASC 820 based on these two types of inputs are as follows:
Level 1 Valuation is based on quoted prices in active markets for identical assets and liabilities.
Level 2 Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the markets.
Level 3 Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market. These unobservable inputs reflect the Company’s assumptions about what market participants would use and information that is reasonably available under the circumstances without undue cost and effort.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements.
Derivative instruments
As discussed in Note 78 “Derivatives”, the Company records derivative instruments at fair value on a recurring basis. The Company utilizes derivative instruments as part of the management of interest rate risk to modify the re-pricing characteristics of certain portions of the Company’s interest-bearing assets and liabilities. The Company has contracted with a third partythird-party vendor to provide valuations for derivatives using standard valuation techniques and therefore classifies such valuations as Level 2. Third party valuations are validated by the Company using Bloomberg Valuation Service’sBVAL derivative pricing functions. No material differences were identified during the validation as of March 31, 2022 and December 31, 2021. The Company has considered counterparty credit risk in the valuation of its derivative assets and has considered its own credit risk in the valuation of its derivative liabilities.
AFS Securities available for sale
AFS securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data (Level 2). If the inputs used to provide the evaluation for certain securities are unobservable and/or there is little, if any, market activity, then the security would fall to the lowest level of the hierarchy (Level 3).
The Company’s investment portfolio is primarily valued using fair value measurements that are considered to be Level 2. The Company has contracted with a third partythird-party portfolio accounting service vendor for valuation of its securities portfolio. The vendor’s primary source for security valuation is Interactive Data Corporation (“IDC”),ICE, which evaluates securities based on market data. IDCICE utilizes evaluated pricing models that vary by asset class and include available trade, bid, and other market information. Generally, the methodology includes broker quotes, proprietary models, vast descriptive terms and conditions databases, as well as extensive quality control programs.
-38-
The vendor utilizes proprietary valuation matrices for valuing all municipals securities. The initial curves for determining the price, movement, and yield relationships within the municipal matrices are derived from industry benchmark curves or sourced from a municipal trading desk. The securities are further broken down according to issuer, credit support, state of issuance, and rating to incorporate additional spreads to the industry benchmark curves.
The Company primarily uses Bloomberg Valuation Service,BVAL an independent information source that draws on quantitative models and market data contributed from over 4,000 market participants, to validate third party valuations. Any material differences between valuation sources are researched by further analyzing the various inputs that are utilized by each pricing source. No material differences were identified during the validation as of September 30, 2017March 31, 2022 and December 31, 2016.
The carrying value of restricted Federal Reserve BankFRB and FHLB stock approximates fair value based on the redemption provisions of each entity and is therefore excluded from the following table.
Loans heldHeld for sale
Residential loans originated for sale in the secondary market.open market are carried at fair value. Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). Gains and losses on the sale of loans are recorded within the mortgage segment and are reported onin current period earnings as a separate line itemcomponent of "Mortgage banking income" on the Company’s Consolidated Statements of Income.
The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis at September 30, 2017March 31, 2022 and December 31, 20162021 (dollars in thousands):
| | | | | | | | | | | | |
|
| Fair Value Measurements at March 31, 2022 using | ||||||||||
|
| | |
| Significant |
| | |
| | | |
| | Quoted Prices in | | Other | | Significant | | | | |||
| | Active Markets for | | Observable | | Unobservable | | | | |||
| | Identical Assets | | Inputs | | Inputs | | | | |||
| | Level 1 | | Level 2 | | Level 3 | | Balance | ||||
ASSETS | | |
|
| |
|
| |
|
| |
|
AFS securities: | | |
|
| |
|
| |
|
| |
|
U.S. government and agency securities | | $ | 60,702 | | $ | 7,337 | | $ | 0 | | $ | 68,039 |
Obligations of states and political subdivisions | |
| 0 | |
| 888,300 | |
| 0 | |
| 888,300 |
Corporate and other bonds(1) | |
| 0 | |
| 183,923 | |
| 0 | |
| 183,923 |
MBS | |
| 0 | |
| 2,051,373 | |
| 0 | |
| 2,051,373 |
Other securities | |
| 0 | |
| 1,645 | |
| 0 | |
| 1,645 |
LHFS | |
| 0 | |
| 21,227 | |
| 0 | |
| 21,227 |
Derivatives: | |
|
| |
|
| |
|
| |
|
|
Interest rate contracts | |
| 0 | |
| 23,506 | |
| 0 | |
| 23,506 |
Fair value hedges | |
| 0 | |
| 597 | |
| 0 | |
| 597 |
| | | | | | | | | | | | |
LIABILITIES | | | | | | | | | | | | |
Derivatives: | |
|
| |
|
| |
|
| |
|
|
Interest rate contracts | | $ | 0 | | $ | 90,632 | | $ | 0 | | $ | 90,632 |
Fair value hedges | | | 0 | | | 1,397 | |
| 0 | | | 1,397 |
(1) Other bonds include asset-backed securities.
-39-
Fair Value Measurements at September 30, 2017 using | |||||||||||||||
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||
Level 1 | Level 2 | Level 3 | Balance | ||||||||||||
ASSETS | |||||||||||||||
Securities available for sale: | |||||||||||||||
Obligations of states and political subdivisions | $ | — | $ | 292,199 | $ | — | $ | 292,199 | |||||||
Corporate and other bonds | — | 115,422 | — | 115,422 | |||||||||||
Mortgage-backed securities | — | 546,904 | — | 546,904 | |||||||||||
Other securities | — | 13,836 | — | 13,836 | |||||||||||
Loans held for sale | — | 30,896 | — | 30,896 | |||||||||||
Derivatives: | |||||||||||||||
Interest rate swap | — | 3,051 | — | 3,051 | |||||||||||
Cash flow hedges | — | 120 | — | 120 | |||||||||||
Fair value hedges | — | 1,253 | — | 1,253 | |||||||||||
Interest rate lock commitments | — | — | 685 | 685 | |||||||||||
Best efforts forward delivery commitments | — | — | 245 | 245 | |||||||||||
LIABILITIES | |||||||||||||||
Derivatives: | |||||||||||||||
Interest rate swap | $ | — | $ | 3,051 | $ | — | $ | 3,051 | |||||||
Cash flow hedges | — | 9,460 | — | 9,460 | |||||||||||
Fair value hedges | — | 371 | — | 371 |
Fair Value Measurements at December 31, 2016 using | |||||||||||||||
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||
Level 1 | Level 2 | Level 3 | Balance | ||||||||||||
ASSETS | |||||||||||||||
Securities available for sale: | |||||||||||||||
Obligations of states and political subdivisions | $ | — | $ | 275,890 | $ | — | $ | 275,890 | |||||||
Corporate and other bonds | — | 121,780 | — | 121,780 | |||||||||||
Mortgage-backed securities | — | 535,286 | — | 535,286 | |||||||||||
Other securities | — | 13,808 | — | 13,808 | |||||||||||
Loans held for sale | — | 36,487 | — | 36,487 | |||||||||||
Derivatives: | |||||||||||||||
Interest rate swap | — | 1,005 | — | 1,005 | |||||||||||
Cash flow hedges | — | 211 | — | 211 | |||||||||||
Fair value hedges | — | 1,437 | — | 1,437 | |||||||||||
Interest rate lock commitments | — | — | 610 | 610 | |||||||||||
Best efforts forward delivery commitments | — | — | 1,469 | 1,469 | |||||||||||
LIABILITIES | |||||||||||||||
Derivatives: | |||||||||||||||
Interest rate swap | $ | — | $ | 1,005 | $ | — | $ | 1,005 | |||||||
Cash flow hedges | — | 9,619 | — | 9,619 | |||||||||||
Fair value hedges | — | 296 | — | 296 |
| | | | | | | | | | | | |
|
| Fair Value Measurements at December 31, 2021 using | ||||||||||
|
| | |
| Significant |
| | |
| | | |
| | Quoted Prices in | | Other | | Significant | | | | |||
| | Active Markets for | | Observable | | Unobservable | | | | |||
| | Identical Assets | | Inputs | | Inputs | | | | |||
| | Level 1 | | Level 2 | | Level 3 | | Balance | ||||
ASSETS | | |
|
| |
|
| |
|
| |
|
AFS securities: | | |
|
| |
|
| |
|
| |
|
U.S. government and agency securities | | $ | 64,474 | | $ | 9,375 | | $ | 0 | | $ | 73,849 |
Obligations of states and political subdivisions | | | 0 | | | 1,008,396 | | | 0 | | | 1,008,396 |
Corporate and other bonds(1) | |
| 0 | |
| 153,376 | |
| 0 | |
| 153,376 |
MBS | |
| 0 | |
| 2,244,389 | |
| 0 | |
| 2,244,389 |
Other securities | |
| 0 | |
| 1,640 | |
| 0 | |
| 1,640 |
LHFS | | | 0 | | | 20,861 | | | 0 | | | 20,861 |
Derivatives: | |
|
| |
|
| |
|
| |
|
|
Interest rate contracts | |
| 0 | |
| 73,696 | |
| 0 | |
| 73,696 |
| | | | | | | | | | | | |
LIABILITIES | |
|
| |
|
| |
|
| |
|
|
Derivatives: | |
|
| |
|
| |
|
| |
|
|
Interest rate contracts | | $ | 0 | | $ | 49,051 | | $ | 0 | | $ | 49,051 |
Fair value hedges | |
| 0 | |
| 5,387 | |
| 0 | |
| 5,387 |
(1) Other bonds include asset-backed securities.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets are measured at fair value on a nonrecurring basis in accordance with U.S. GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets.
Fair Value of Income.
Fair Value Measurements at September 30, 2017 using | |||||||||||||||
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||
Level 1 | Level 2 | Level 3 | Balance | ||||||||||||
ASSETS | |||||||||||||||
Impaired loans | $ | — | $ | — | $ | 7,143 | $ | 7,143 | |||||||
Other real estate owned | — | — | 8,764 | 8,764 |
Fair Value Measurements at December 31, 2016 using | |||||||||||||||
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||
Level 1 | Level 2 | Level 3 | Balance | ||||||||||||
ASSETS | |||||||||||||||
Impaired loans | $ | — | $ | — | $ | 4,344 | $ | 4,344 | |||||||
Other real estate owned | — | — | 10,084 | 10,084 |
ASC 825,
Financial Instruments,requires disclosure about fair value of financial instruments for interim periods and excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.Cash and cash equivalents
For those short-term instruments, the carrying amount is a reasonable estimate of fair value.
HTM Securities
The Company’s investment portfolio is primarily valued using fair value measurements that are considered to be Level 2. The Company has contracted with a third partythird-party portfolio accounting service vendor for valuation of its securities portfolio. The vendor’s primary source for security valuation is IDC,ICE, which evaluates securities based on market data. IDCICE utilizes evaluated pricing models that vary by asset class and include available trade, bid, and other market information. Generally, the methodology includes broker quotes, proprietary models, vast descriptive terms and conditions databases, as well as extensive quality control programs.
-40-
The vendor utilizes proprietary valuation matrices for valuing all municipals securities. The initial curves for determining the price, movement, and yield relationships within the municipal matrices are derived from industry benchmark curves or sourced from a municipal trading desk. The securities are further broken down according to issuer, credit support, state of issuance, and rating to incorporate additional spreads to the industry benchmark curves.
The Company primarily uses Bloomberg Valuation Service,BVAL, an independent information source that draws on quantitative models and market data contributed from over 4,000 market participants, to validate third party valuations. Any material differences between valuation sources are researched by further analyzing the various inputs that are utilized by each pricing source. No material differences were identified during the validation as of September 30, 2017March 31, 2022 and December 31, 2016.
Loans
The fair value of loans and leases were estimated using an exit price, representing the amount that would be expected to be received if the Company sold the loans and leases. The fair value of performing loans isand leases were estimated by discounting expected futurethrough use of discounted cash flows using a yield curve that is constructed by adding a loan spread to a market yield curve. Loan spreads areflows. Credit loss assumptions were based on spreads currently observed in the market PD/LGD for loans of similar typeloan and structure.lease cohorts. The discount rate was based primarily on recent market origination rates. Fair value for impairedof loans and leases individually assessed and their respective levellevels within the fair value hierarchy are described in the previous disclosuresection related to fair value measurements of assets that are measured on a nonrecurring basis.
Bank Owned Life Insurance
The carrying value of BOLI approximates fair value. The Company records these policies at their cash surrender value, which is estimated using information provided by insurance carriers.
Deposits
The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated by discounting the futuredeposits were valued using a discounted cash flows using the rates currently offered for deposits of similar remaining maturities.
Accrued interest
The carrying amounts of accrued interest approximate fair value.
-41-
The carrying values and estimated fair values of the Company’s financial instruments at September 30, 2017March 31, 2022 and December 31, 20162021 are as follows (dollars in thousands):
| | | | | | | | | | | | | | | |
| | Fair Value Measurements at March 31, 2022 using | |||||||||||||
|
| | |
| Quoted Prices |
| Significant |
| | |
| | | ||
| | | | | in Active | | Other | | Significant | | | | |||
| | | | | Markets for | | Observable | | Unobservable | | Total Fair | ||||
| | | | | Identical Assets | | Inputs | | Inputs | | Value | ||||
| | Carrying | | | | | | | | | | | | | |
|
| Value | | Level 1 | | Level 2 | | Level 3 | | Balance | |||||
ASSETS | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 396,303 | | $ | 396,303 | | $ | 0 | | $ | 0 | | $ | 396,303 |
AFS securities | |
| 3,193,280 | |
| 60,702 | |
| 3,132,578 | |
| 0 | |
| 3,193,280 |
HTM securities | |
| 756,872 | |
| 0 | |
| 753,401 | |
| 6,776 | |
| 760,177 |
Restricted stock | |
| 77,033 | |
| 0 | |
| 77,033 | |
| 0 | |
| 77,033 |
LHFS | |
| 21,227 | |
| 0 | |
| 21,227 | |
| 0 | |
| 21,227 |
Net loans | |
| 13,356,758 | |
| 0 | |
| 0 | |
| 13,122,875 | |
| 13,122,875 |
Derivatives: | |
|
| |
|
| |
|
| |
|
| |
|
|
Interest rate contracts | |
| 23,506 | |
| 0 | |
| 23,506 | |
| 0 | |
| 23,506 |
Fair value hedges | |
| 597 | |
| 0 | |
| 597 | |
| 0 | |
| 597 |
Accrued interest receivable | |
| 62,852 | |
| 0 | |
| 62,852 | |
| 0 | |
| 62,852 |
BOLI | |
| 434,012 | |
| 0 | |
| 434,012 | |
| 0 | |
| 434,012 |
| | | | | | | | | | | | | | | |
LIABILITIES | |
|
| |
|
| |
|
| |
|
| |
|
|
Deposits | | $ | 16,484,223 | | $ | 0 | | $ | 16,499,674 | | $ | 0 | | $ | 16,499,674 |
Borrowings | |
| 504,032 | |
| 0 | |
| 488,385 | |
| 0 | |
| 488,385 |
Accrued interest payable | |
| 2,774 | |
| 0 | |
| 2,774 | |
| 0 | |
| 2,774 |
Derivatives: | |
|
| |
|
| |
|
| |
|
| |
|
|
Interest rate contracts | |
| 90,632 | |
| 0 | |
| 90,632 | |
| 0 | |
| 90,632 |
Fair value hedges | |
| 1,397 | |
| 0 | |
| 1,397 | |
| 0 | |
| 1,397 |
| | | | | | | | | | | | | | | |
|
| Fair Value Measurements at December 31, 2021 using | |||||||||||||
| | | | | Quoted Prices | | Significant | | | | | | | ||
| | | | | in Active | | Other | | Significant | | | | |||
| | | | | Markets for | | Observable | | Unobservable | | Total Fair | ||||
| | | | | Identical Assets | | Inputs | | Inputs | | Value | ||||
| | Carrying | | | | | | | | | | | | | |
| | Value | | Level 1 | | Level 2 | | Level 3 | | Balance | |||||
ASSETS | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 802,501 | | $ | 802,501 | | $ | 0 | | $ | 0 | | $ | 802,501 |
AFS securities | |
| 3,481,650 | |
| 64,474 | |
| 3,417,176 | |
| 0 | |
| 3,481,650 |
HTM securities | |
| 628,000 | |
| 0 | |
| 686,733 | |
| 7,041 | |
| 693,774 |
Restricted stock | |
| 76,825 | |
| 0 | |
| 76,825 | |
| 0 | |
| 76,825 |
LHFS | | | 20,861 | | | 0 | |
| 20,861 | |
| 0 | | | 20,861 |
Net loans | |
| 13,096,056 | |
| 0 | |
| 0 | |
| 12,861,274 | |
| 12,861,274 |
Derivatives: | |
|
| |
|
| |
|
| |
|
| |
|
|
Interest rate contracts | |
| 73,696 | |
| 0 | |
| 73,696 | |
| 0 | |
| 73,696 |
Accrued interest receivable | |
| 65,015 | |
| 0 | |
| 65,015 | |
| 0 | |
| 65,015 |
BOLI | |
| 431,517 | |
| 0 | |
| 431,517 | |
| 0 | |
| 431,517 |
| | | | | | | | | | | | | | | |
LIABILITIES | |
|
| |
|
| |
|
| |
|
| |
|
|
Deposits | | $ | 16,611,068 | | $ | 0 | | $ | 16,630,087 | | $ | 0 | | $ | 16,630,087 |
Borrowings | |
| 506,594 | |
| 0 | |
| 488,796 | |
| 0 | |
| 488,796 |
Accrued interest payable | |
| 933 | |
| 0 | |
| 933 | |
| 0 | |
| 933 |
Derivatives: | |
|
| |
|
| |
|
| |
|
| |
|
|
Interest rate contracts | |
| 49,051 | |
| 0 | |
| 49,051 | |
| 0 | |
| 49,051 |
Fair value hedges | |
| 5,387 | |
| 0 | |
| 5,387 | |
| 0 | |
| 5,387 |
-42-
Fair Value Measurements at September 30, 2017 using | |||||||||||||||||||
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | Total Fair Value | ||||||||||||||||
Carrying Value | Level 1 | Level 2 | Level 3 | Balance | |||||||||||||||
ASSETS | |||||||||||||||||||
Cash and cash equivalents | $ | 176,961 | $ | 176,961 | $ | — | $ | — | $ | 176,961 | |||||||||
Securities available for sale | 968,361 | — | 968,361 | — | 968,361 | ||||||||||||||
Held to maturity securities | 204,801 | — | 209,835 | — | 209,835 | ||||||||||||||
Restricted stock | 68,441 | — | 68,441 | — | 68,441 | ||||||||||||||
Loans held for sale | 30,896 | — | 30,896 | — | 30,896 | ||||||||||||||
Net loans | 6,861,567 | — | — | 6,873,609 | 6,873,609 | ||||||||||||||
Derivatives: | |||||||||||||||||||
Interest rate swap | 3,051 | — | 3,051 | — | 3,051 | ||||||||||||||
Cash flow hedge | 120 | — | 120 | — | 120 | ||||||||||||||
Fair value hedge | 1,253 | — | 1,253 | — | 1,253 | ||||||||||||||
Interest rate lock commitments | 685 | — | — | 685 | 685 | ||||||||||||||
Best efforts forward delivery commitments | 245 | — | — | 245 | 245 | ||||||||||||||
Accrued interest receivable | 25,279 | — | 25,279 | — | 25,279 | ||||||||||||||
Bank owned life insurance | 181,451 | — | 181,451 | — | 181,451 | ||||||||||||||
LIABILITIES | |||||||||||||||||||
Deposits | $ | 6,881,826 | $ | — | $ | 6,873,124 | $ | — | $ | 6,873,124 | |||||||||
Borrowings | 1,052,087 | — | 1,031,983 | — | 1,031,983 | ||||||||||||||
Accrued interest payable | 4,372 | — | 4,372 | — | 4,372 | ||||||||||||||
Derivatives: | |||||||||||||||||||
Interest rate swap | 3,051 | — | 3,051 | — | 3,051 | ||||||||||||||
Cash flow hedges | 9,460 | — | 9,460 | — | 9,460 | ||||||||||||||
Fair value hedges | 371 | — | 371 | — | 371 |
Fair Value Measurements at December 31, 2016 using | |||||||||||||||||||
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | Total Fair Value | ||||||||||||||||
Carrying Value | Level 1 | Level 2 | Level 3 | Balance | |||||||||||||||
ASSETS | |||||||||||||||||||
Cash and cash equivalents | $ | 179,237 | $ | 179,237 | $ | — | $ | — | $ | 179,237 | |||||||||
Securities available for sale | 946,764 | — | 946,764 | — | 946,764 | ||||||||||||||
Held to maturity securities | 201,526 | — | 202,315 | — | 202,315 | ||||||||||||||
Restricted stock | 60,782 | — | 60,782 | — | 60,782 | ||||||||||||||
Loans held for sale | 36,487 | — | 36,487 | — | 36,487 | ||||||||||||||
Net loans | 6,269,868 | — | — | 6,265,443 | 6,265,443 | ||||||||||||||
Derivatives: | |||||||||||||||||||
Interest rate swap | 1,005 | — | 1,005 | — | 1,005 | ||||||||||||||
Cash flow hedges | 211 | — | 211 | — | 211 | ||||||||||||||
Fair value hedges | 1,437 | — | 1,437 | — | 1,437 | ||||||||||||||
Interest rate lock commitments | 610 | — | — | 610 | 610 | ||||||||||||||
Best efforts forward delivery commitments | 1,469 | — | — | 1,469 | 1,469 | ||||||||||||||
Accrued interest receivable | 23,448 | — | 23,448 | — | 23,448 | ||||||||||||||
Bank owned life insurance | 179,318 | — | 179,318 | — | 179,318 | ||||||||||||||
LIABILITIES | |||||||||||||||||||
Deposits | $ | 6,379,489 | $ | — | $ | 6,370,457 | $ | — | $ | 6,370,457 | |||||||||
Borrowings | 990,089 | — | 970,195 | — | 970,195 | ||||||||||||||
Accrued interest payable | 2,320 | — | 2,230 | — | 2,230 | ||||||||||||||
Derivatives: | |||||||||||||||||||
Interest rate swap | 1,005 | — | 1,005 | — | 1,005 | ||||||||||||||
Cash flow hedges | 9,619 | — | 9,619 | — | 9,619 | ||||||||||||||
Fair value hedges | 296 | — | 296 | — | 296 |
The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair values of the Company’s financial instruments will change when interest rate levels change and that change may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. Borrowers with fixed rate obligations, however, are less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk.
-43-
11. REVENUE
The majority of the Company’s noninterest income comes from short term contracts associated with fees for services provided on deposit accounts, credit cards, and wealth management accounts and is being accounted for in accordance with Topic 606. Typically, the duration of a contract does not extend beyond the services performed; therefore, the Company concluded that discussion regarding contract balances is immaterial.
The Company’s performance obligations on revenue from interchange fees and deposit accounts are generally satisfied immediately, when the transaction occurs, or by month-end. Performance obligations on revenue from fiduciary and asset management fees are generally satisfied monthly or quarterly. For a majority of fee income on deposit accounts, the Company is a principal, controlling the promised good or service before transferring it to the customer. For the majority of income related to wealth management income, the Company is an agent, responsible for arranging for the provision of goods and services by another party.
Mortgage banking income is earned when the originated loans are sold to an investor on the secondary market. The loans are classified as LHFS prior to being sold. Additionally, the changes in fair value of the LHFS, loan commitments, and related derivatives are included in mortgage banking income.
Noninterest income disaggregated by major source for the three months ended March 31, 2022 and 2021, consisted of the following (dollars in thousands):
| | | | | | |
|
| Three Months Ended | ||||
| | March 31, | | March 31, | ||
| | 2022 | | 2021 | ||
Noninterest income: |
| |
|
| |
|
Deposit Service Charges (1): |
| |
|
| |
|
Overdraft fees | | $ | 4,994 | | $ | 3,081 |
Maintenance fees & other | |
| 2,602 | |
| 2,428 |
Other service charges, commissions, and fees (1) | |
| 1,655 | |
| 1,701 |
Interchange fees(1) | |
| 1,810 | |
| 1,847 |
Fiduciary and asset management fees (1): | |
| | |
| |
Trust asset management fees | |
| 3,391 | |
| 2,908 |
Registered advisor management fees | |
| 2,660 | |
| 2,327 |
Brokerage management fees | |
| 1,204 | |
| 1,240 |
Mortgage banking income | |
| 3,117 | |
| 8,255 |
Bank owned life insurance income | |
| 2,697 | |
| 2,265 |
Loan-related interest rate swap fees | |
| 3,860 | |
| 1,754 |
Other operating income | |
| 2,163 | |
| 3,179 |
Total noninterest income | | $ | 30,153 | | $ | 30,985 |
(1)Income within scope of Topic 606.
-44-
Basic EPS is computed by dividing net income available to common stockholdersshareholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common shares outstanding during the period, including the effect of dilutive potential common shares outstanding attributable to stock awards.
The following is a reconciliation of the denominators of thetable presents basic and diluted EPS computationscalculations for the three and nine months ended September 30, 2017March 31, 2022 and 20162021 (dollars in thousands except per share data):
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
| | 2022 | | 2021 | ||
Net Income: | | | | | | |
Net Income | | $ | 43,690 | | $ | 56,189 |
Less: Preferred Stock Dividends | | | 2,967 | | | 2,967 |
Net income available to common shareholders | | $ | 40,723 | | $ | 53,222 |
| | | | | | |
| | | | | | |
Weighted average shares outstanding, basic | |
| 75,545 | |
| 78,863 |
Dilutive effect of stock awards | |
| 11 | |
| 21 |
Weighted average shares outstanding, diluted | |
| 75,556 | |
| 78,884 |
| | | | | | |
Earnings per common share, basic | | $ | 0.54 | | $ | 0.67 |
Earnings per common share, diluted | | $ | 0.54 | | $ | 0.67 |
-45-
Net Income Available to Common Stockholders (Numerator) | Weighted Average Common Shares (Denominator) | Per Share Amount | ||||||||
Three months ended September 30, 2017 | ||||||||||
Basic | 20,658 | 43,707 | $ | 0.47 | ||||||
Add: potentially dilutive common shares - stock awards | — | 85 | — | |||||||
Diluted | $ | 20,658 | 43,792 | $ | 0.47 | |||||
Three months ended September 30, 2016 | ||||||||||
Basic | 20,401 | 43,566 | $ | 0.47 | ||||||
Add: potentially dilutive common shares - stock awards | — | 189 | — | |||||||
Diluted | $ | 20,401 | 43,755 | $ | 0.47 | |||||
Nine months ended September 30, 2017 | ||||||||||
Basic | 57,737 | 43,685 | $ | 1.32 | ||||||
Add: potentially dilutive common shares - stock awards | — | 83 | — | |||||||
Diluted | $ | 57,737 | 43,768 | $ | 1.32 | |||||
Nine months ended September 30, 2016 | ||||||||||
Basic | 56,699 | 43,854 | $ | 1.29 | ||||||
Add: potentially dilutive common shares - stock awards | — | 114 | — | |||||||
Diluted | $ | 56,699 | 43,968 | $ | 1.29 |
13. SUBSEQUENT EVENTS
The Company’s management has evaluated subsequent events through May 5, 2022, the date the financial statements were issued.
On May 3, 2022, the Company’s Board of Directors declared a quarterly dividend on the outstanding shares of its Series A preferred stock. The Series A preferred stock is represented by depositary shares, each representing a 1/400th ownership interest in a share of Series A preferred stock. The dividend of $171.88 per share (equivalent to $0.43 per outstanding depositary share) is payable on June 1, 2022 to preferred shareholders of record as of May 17, 2022.
The Company’s Board of Directors also declared a quarterly dividend of $0.28 per share of common stock. The common stock dividend is payable on June 3, 2022 to common shareholders of record as of May 20, 2022.
As discussed in Note 9 “Stockholders’ Equity,” the Company has two reportable segments: a traditional full service community bank segment and a mortgage loan origination business segment. The community bank segment includes one subsidiary bank,an active Repurchase Program. Subsequent to the Bank, which provides loan, deposit, investment, and trust services to retail and commercial customers throughout its 111 retail locations in Virginia as of September 30, 2017. The mortgage segment includes UMG, which provides a variety of mortgage loan products principally in Virginia, North Carolina, Maryland, and the Washington D.C. metro area. These loans are originated and sold primarily in the secondary market through purchase commitments from investors, which serves to mitigate the Company’s exposure to interest rate risk.
-46-
Community Bank | Mortgage | Eliminations | Consolidated | ||||||||||||
Three Months Ended September 30, 2017 | |||||||||||||||
Net interest income | $ | 70,718 | $ | 480 | $ | — | $ | 71,198 | |||||||
Provision for credit losses | 3,056 | (6 | ) | — | 3,050 | ||||||||||
Net interest income after provision for credit losses | 67,662 | 486 | — | 68,148 | |||||||||||
Noninterest income | 15,121 | 2,527 | (112 | ) | 17,536 | ||||||||||
Noninterest expenses | 55,133 | 2,475 | (112 | ) | 57,496 | ||||||||||
Income before income taxes | 27,650 | 538 | — | 28,188 | |||||||||||
Income tax expense | 7,339 | 191 | — | 7,530 | |||||||||||
Net income | $ | 20,311 | $ | 347 | $ | — | $ | 20,658 | |||||||
Total assets | $ | 9,020,486 | $ | 97,154 | $ | (88,204 | ) | $ | 9,029,436 | ||||||
Three Months Ended September 30, 2016 | |||||||||||||||
Net interest income | $ | 66,605 | $ | 423 | $ | — | $ | 67,028 | |||||||
Provision for credit losses | 2,455 | 17 | — | 2,472 | |||||||||||
Net interest income after provision for credit losses | 64,150 | 406 | — | 64,556 | |||||||||||
Noninterest income | 15,589 | 3,501 | (140 | ) | 18,950 | ||||||||||
Noninterest expenses | 54,353 | 2,700 | (140 | ) | 56,913 | ||||||||||
Income before income taxes | 25,386 | 1,207 | — | 26,593 | |||||||||||
Income tax expense | 5,770 | 422 | — | 6,192 | |||||||||||
Net income | $ | 19,616 | $ | 785 | $ | — | $ | 20,401 | |||||||
Total assets | $ | 8,251,351 | $ | 90,692 | $ | (83,813 | ) | $ | 8,258,230 | ||||||
Nine Months Ended September 30, 2017 | |||||||||||||||
Net interest income | $ | 205,534 | $ | 1,231 | $ | — | $ | 206,765 | |||||||
Provision for credit losses | 7,344 | 1 | — | 7,345 | |||||||||||
Net interest income after provision for credit losses | 198,190 | 1,230 | — | 199,420 | |||||||||||
Noninterest income | 47,080 | 7,743 | (393 | ) | 54,430 | ||||||||||
Noninterest expenses | 167,643 | 7,571 | (393 | ) | 174,821 | ||||||||||
Income before income taxes | 77,627 | 1,402 | — | 79,029 | |||||||||||
Income tax expense | 20,791 | 501 | — | 21,292 | |||||||||||
Net income | $ | 56,836 | $ | 901 | $ | — | $ | 57,737 | |||||||
Total assets | $ | 9,020,486 | $ | 97,154 | $ | (88,204 | ) | $ | 9,029,436 | ||||||
Nine Months Ended September 30, 2016 | |||||||||||||||
Net interest income | $ | 195,508 | $ | 1,027 | $ | — | $ | 196,535 | |||||||
Provision for credit losses | 7,215 | 161 | — | 7,376 | |||||||||||
Net interest income after provision for credit losses | 188,293 | 866 | — | 189,159 | |||||||||||
Noninterest income | 44,137 | 9,185 | (465 | ) | 52,857 | ||||||||||
Noninterest expenses | 158,964 | 7,937 | (465 | ) | 166,436 | ||||||||||
Income before income taxes | 73,466 | 2,114 | — | 75,580 | |||||||||||
Income tax expense | 18,145 | 736 | — | 18,881 | |||||||||||
Net income | $ | 55,321 | $ | 1,378 | $ | — | $ | 56,699 | |||||||
Total assets | $ | 8,251,351 | $ | 90,692 | $ | (83,813 | ) | $ | 8,258,230 |
To the Stockholders and the Board of Directors of Atlantic Union Bankshares Corporation
Results of Review of Interim Financial Statements
We have reviewed the accompanying consolidated balance sheet of Atlantic Union Bankshares Corporation (the “Company”)Company) as of September 30, 2017, andMarch 31, 2022, the related consolidated statements of income, and comprehensive income, and stockholders’ equity for the three and nine-monththree-month periods ended September 30, 2017March 31, 2022 and 2016, and2021, the consolidated statements of changes in stockholders’ equity and cash flows for the nine-monththree-month periods ended September 30, 2017March 31, 2022 and 2016. These2021, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements are the responsibility of the Company's management.
We conducted our reviewhave previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the consolidated balance sheet of the Company as of December 31, 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated February 25, 2022, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial informationstatements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States),PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ Ernst & Young LLP
Richmond, Virginia
May 5, 2022
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Management’s discussion and analysis is presented to aid the reader in understanding and evaluating the financial condition and results of operations of Union Bankshares Corporation and its subsidiaries (collectively, the “Company”).Company. This discussion and analysis should be read with the Company’s consolidated financial statements, the notes to the financial statements, and the other financial data included in this report, as well as the Company’s 20162021 Form 10-K, including management’s discussionthe “Management’s Discussion and analysis.Analysis of Financial Condition and Results of Operations” section therein. Highlighted in the discussion are material changes from prior reporting periods and any identifiable trends materially affecting the Company. Results of operations for the three and nine months ended September 30, 2017 and 2016interim periods are not necessarily indicative of results that may be attainedexpected for the full year or for any other period. Amounts are rounded for presentation purposes; however, some of the percentages presented are computed based on unrounded amounts.
In management’s discussion and analysis, the Company provides certain financial information determined by methods other than in accordance with U.S. GAAP. These non-GAAP financial measures are a supplement to GAAP, which is used to prepare the Company’s financial statements, and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, the Company’s non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies. The Company believes that these non-GAAP financial measures provide additional understanding of ongoing operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in the Company’s underlying performance. Non-GAAP financial measures may be identified with the symbol (+) and may be labeled as adjusted. Refer to the “Non-GAAP Financial Measures” section within this Item 2 for more information about these non-GAAP financial measures, including a reconciliation of these measures to the most directly comparable financial measures in accordance with GAAP.
FORWARD-LOOKING STATEMENTS
Certain statements in this report may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include, without limitation, statements regarding future interest rate environments and potential impacts on the Company’s net interest margin, future economic conditions, and the impacts of the COVID-19 pandemic, and statements that include other projections, predictions, expectations, or beliefs about future events or results or otherwise are not statements of historical fact,fact. Such forward-looking statements are based on certain assumptions as of the time they are made, and are inherently subject to known and unknown risks, uncertainties, and uncertainties,other factors, some of which cannot be predicted or quantified. Suchquantified, that may cause actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements. Forward-looking statements are often characterized by the use of qualified words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” “may,” “view,” “opportunity,” “potential,” or words of similar meaning or other statements concerning opinions or judgment of the Company and its management about future events. Although the Company believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual future results, performance, or achievements of, or trends affecting, the Company will not differ materially from any projected future results, performance, achievements or achievementstrends expressed or implied by such forward-looking statements. Actual future results, andperformance, achievements or trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to the effects of or changes in:
● | market interest rates; and the impacts on macroeconomic conditions, customer and client behavior and the Company’s funding costs; |
● | higher inflation and its impacts; |
● | general economic and financial market conditions, in the United States generally and particularly in the markets in which the Company operates and which its loans are concentrated, including the effects of declines in real estate values, an increase in unemployment levels and slowdowns in economic growth, including as a result of COVID-19; |
● | the quality or composition of the loan or investment portfolios and changes therein; |
● | demand for loan products and financial services in the Company’s market area; |
● | the Company’s ability to manage its growth or implement its growth strategy; |
● | the effectiveness of expense reduction plans; |
● | the introduction of new lines of business or new products and services; |
● | the Company’s ability to recruit and retain key employees; |
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● | real estate values in the Bank’s lending area; |
● | an insufficient ACL; |
● | changes in accounting principles, including, without limitation, relating to the CECL methodology; |
● | the Company’s liquidity and capital positions; |
● | concentrations of loans secured by real estate, particularly commercial real estate; |
● | the effectiveness of the Company’s credit processes and management of the Company’s credit risk; |
● | the Company’s ability to compete in the market for financial services and increased competition from fintech companies; |
● | technological risks and developments, and cyber threats, attacks, or events; |
● | the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts, geopolitical conflicts (such as the ongoing conflict between Russia and Ukraine) or public health events (such as COVID-19), and of governmental and societal responses thereto; these potential adverse effects may include, without limitation, adverse effects on the ability of the Company's borrowers to satisfy their obligations to the Company, on the value of collateral securing loans, on the demand for the Company's loans or its other products and services, on supply chains and methods used to distribute products and services, on incidents of cyberattack and fraud, on the Company’s liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of the Company's business operations and on financial markets and economic growth; |
● | the effect of steps the Company takes in response to COVID-19, the severity and duration of the pandemic, the uncertainty regarding new variants of COVID-19 that have emerged, the speed and efficacy of vaccine and treatment developments, the impact of loosening or tightening of government restrictions, the pace of recovery when the pandemic subsides and the heightened impact it has on many of the risks described herein; |
● | the discontinuation of LIBOR and its impact on the financial markets, and the Company’s ability to manage operational, legal and compliance risks related to the discontinuation of LIBOR and implementation of one or more alternate reference rates, |
● | performance by the Company’s counterparties or vendors; |
● | deposit flows; |
● | the availability of financing and the terms thereof; |
● | the level of prepayments on loans and MBS; |
● | legislative or regulatory changes and requirements, including the impact of the CARES Act, as amended by the CAA, and other legislative and regulatory reactions to COVID-19; |
● | potential claims, damages, and fines related to litigation or government actions, including litigation or actions arising from the Company’s participation in and administration of programs related to COVID-19, including, among other things, under the CARES Act, as amended by the CAA, and other legislative and regulatory reactions to COVID-19; |
● | the effects of changes in federal, state or local tax laws and regulations; |
● | monetary and fiscal policies of the U.S. government, including policies of the U.S. Department of the Treasury and the Federal Reserve; |
● | changes to applicable accounting principles and guidelines; and |
● | other factors, many of which are beyond the control of the Company. |
Please refer to the possibility that any“Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the anticipated benefits of the acquisition of Xenith pursuant to a definitive merger agreement between the Company and Xenith, dated as of May 19, 2017 (the “Pending Merger”) with Xenith will not be realized or will not be realized within the expected time period, the businesses of the Company and Xenith may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected, the expected revenue synergies and cost savings from the Pending Merger may not be fully realized or realized within the expected time frame, revenues following the Pending Merger may be lower than expected, customer and employee relationships and business operations may be disrupted by the Pending Merger, or completing the Pending Merger on the expected timeframe, may be more difficult, time-consuming or costly than expected,
CRITICAL ACCOUNTING POLICIES
The accounting and reporting policies of the Company are in accordance with U.S. GAAP and conform to general practices within the banking industry. The Company’s financial position and results of operations are affected by management’s application of accounting policies, including estimates, assumptions, and judgments made to arrive at the carrying value of
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assets and liabilities and amounts reported for revenues, expenses, and related disclosures. Different assumptions in the application of these policies could result in material changes in the Company’s consolidated financial position and/or results of operations. The Company evaluates its critical accounting estimates and assumptions on an ongoing basis and updates them as needed. Management has discussed the Company’s critical accounting policies and estimates with the Audit Committee of the Board of Directors.
The critical accounting and reporting policies include the Company’s accounting for the allowance for loan losses,ALLL, acquired loans, and goodwill and intangible assets.goodwill. The Company’s accounting policies are fundamental to understanding the Company’s consolidated financial position and consolidated results of operations. Accordingly, the Company’s significant accounting policies are discussed in detail in Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 "Financial Statements and Supplementary Data" of the Company’s 20162021 Form 10-K.
The Company provides additional information on its critical accounting policies and estimates listed above under “Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in its 20162021 Form 10-K and in Note 1 “Summary of Significant Accounting Policies” in Part I, Item 1 of this Quarterly Report.
RECENT ACCOUNTING PRONOUNCEMENTS (ISSUED BUT NOT FULLY ADOPTED)
In March 2022, the FASB issued ASU No. 2022-02 “Financial Instruments- Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” This guidance eliminates the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, for public business entities, the amendments require disclosure of current period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20. The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the amendments is permitted if ASU 2016-13 has been adopted, including adoption in an interim period. The Company is evaluating the impact ASU No. 2022-02 will have on its consolidated financial statements.
In March 2022, the FASB issued ASU No. 2022-01 “Derivatives and Hedging (Topic 815): Fair Value Hedging- Portfolio Layer Method” to allow nonprepayable financial assets to be included in a closed portfolio hedge using the portfolio layer method and to allow multiple hedged layers to be designated for a single closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments. The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the amendments is permitted if the amendments in ASU 2017-12 have been adopted for the corresponding period. The Company is evaluating the impact ASU No. 2022-01 will have on its consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This guidance provides temporary, optional guidance to ease the potential burden in accounting for reference rate reform associated with the LIBOR transition. LIBOR and other interbank offered rates are widely used benchmark or reference rates that have been used in the valuation of loans, derivatives, and other financial contracts. Global capital markets are going to be required to move away from LIBOR and other interbank offered rates and toward rates that are more observable or transaction based and less susceptible to manipulation. Topic 848 provides optional expedients and exceptions, subject to meeting certain criteria, for applying current GAAP to contract modifications and hedging relationships, for contracts that reference LIBOR or another reference rate expected to be discontinued. Topic 848 is intended to help stakeholders during the global market-wide reference rate transition period. The amendments are effective as of March 12, 2020 through December 31, 2022 and can be adopted at an instrument level. As of March 31, 2021, the Company utilized the expedient to assert probability of hedged interest as detailed in Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of the Company’s 2021 Form 10-K.
ABOUT ATLANTIC UNION BANKSHARES CORPORATION
Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation is the largest community banking organization headquartered in Virginia and operates in all major banking markets of the Commonwealth. Union Bankshares Corporation(Nasdaq: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank & Trust, which provides banking, trust, and wealth management services and has a statewide presence of 111 bank114 branches and approximately 173 ATMs. Non-bank130 ATMs located throughout Virginia, and in
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portions of Maryland and North Carolina. Certain non-bank financial services affiliates of the holding companyAtlantic Union Bank include: Atlantic Union Mortgage Group,Equipment Finance, Inc., which provides a full line of mortgage products;equipment financing; Dixon, Hubard, Feinour & Brown, Inc., which provides investment advisory services; Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance products; and Old Dominion Capital Management, Inc., which provides investment advisory services.
Shares of the Company’s common stock are traded on the NASDAQNasdaq Global Select Market under the symbol UBSH."AUB". Additional information is available on the Company’s website at
RESULTS OF OPERATIONS
SIGNIFICANT ACTIVITIES
Strategic Initiatives
During the fourth quarter of 2021, the Company took certain actions to reduce expenses in light of the period's prevailing and expected operating environment, including the closure of the Company’s operations center and consolidation of 16 branches, all of which were completed in March 2022. These actions resulted in restructuring expenses in the first quarter of 2022 of approximately $5.5 million, compared to $16.5 million in the quarter ended September 30, 2017,December 31, 2021. Restructuring expenses in the first quarter of 2022 primarily related to lease and other asset write downs, as well as severance costs.
Share Repurchase Program
On December 10, 2021, the Company’s Board of Directors authorized a share repurchase program to purchase up to $100.0 million of the Company’s common stock through December 9, 2022 in open market transactions or privately negotiated transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and / or Rule 10b-18 under the Exchange Act. As part of the Repurchase Program, approximately 630,000 shares (or $25.0 million) were repurchased during the quarter ended March 31, 2022, and no shares were repurchased during the quarter ended December 31, 2021.
COVID-19 UPDATE
The Company’s financial performance generally, and in particular the ability of its borrowers to repay their loans, the value of collateral securing those loans, as well as demand for loans and other products and services the Company reported net incomeoffers, is highly dependent on the business environment in its primary markets where it operates and in the United States as a whole. COVID has had, and may have in the future, a wide range of $20.7 millioneconomic impacts nationally and earnings per sharein the Company’s primary markets. The Company will carefully monitor any future economic impacts attributable to the COVID-19 pandemic and potential impact on the Company’s borrowers and their ability to repay loans.
Since the start of $0.47. Excluding after-tax merger-related coststhe pandemic, the Company has taken and is continuing to take precautions to protect the safety and well-being of $661,000, netthe Bank’s employees and customers during COVID-19. The Bank has implemented additional safety policies and procedures and follows guidance issued by the Centers for Disease Control and Prevention, state health authorities, and state and local executive orders where our branches and corporate offices are located. The Bank remains very focused on the safety and well-being of its employees and customers during COVID-19 and is committed to safely and responsibly operating earnings
COVID-19 has adversely affected the thirdCompany’s business, financial condition, and results of operations since the first quarter of 2017.2020. The Company's net operating earningsduration, nature and operating earnings per share forseverity of future impacts of COVID-19 on the thirdCompany’s operational and financial performance will depend on future developments with respect to COVID-19, many of which remain highly uncertain and cannot be predicted.
SUMMARY OF QUARTERLY FINANCIAL RESULTS
Net Income and Performance Metrics
● | Net income available to common shareholders was $40.7 million and basic and diluted EPS was $0.54 for the first quarter of 2022, compared to $53.2 million and $0.67 for the first quarter of 2021. |
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● | Adjusted operating earnings available to common shareholders(+) totaled $45.1 million and diluted adjusted operating EPS(+) was $0.60 for the first quarter of 2022, compared to adjusted operating earnings available to common shareholders(+) of $65.5 million and diluted adjusted operating EPS(+) of $0.83 for the first quarter of 2021. |
Balance Sheet
● | At March 31, 2022, total assets were $19.8 billion, a decrease of $282.4 million or approximately 5.7% (annualized) from December 31, 2021. Total assets declined from the prior quarter due to a decrease in cash and cash equivalents of $406.2 million primarily related to the deployment of excess liquidity to fund loan growth and deposit run-off. In addition, the investment securities portfolio decreased $159.5 million primarily due to a decline in the market value of the AFS securities portfolio. |
● | LHFI (net of deferred fees and costs) were $13.5 billion, including $67.4 million in PPP loans at March 31, 2022, an increase of $263.5 million or 8.1% (annualized) from December 31, 2021. Excluding the impact of the PPP(+), LHFI (net of deferred fees and costs) increased $346.4 million or 10.8% (annualized) during this period. |
● | Total deposits were $16.5 billion at March 31, 2022, a decrease of $126.8 million or 3.1% (annualized) from December 31, 2021. |
Net Interest Income
| | | | | | | | | | | |
| | For the Three Months Ended | | | | | | ||||
| | March 31, | | | | | | ||||
|
| 2022 |
| 2021 |
| Change |
| | |||
| | (Dollars in thousands) | | | |||||||
Average interest-earning assets | | $ | 17,885,018 | | $ | 17,692,095 | | $ | 192,923 |
|
|
Interest and dividend income | | $ | 138,456 | | $ | 147,673 | | $ | (9,217) |
|
|
Interest and dividend income (FTE) (+) | | $ | 141,792 | | $ | 150,726 | | $ | (8,934) |
|
|
Yield on interest-earning assets | |
| 3.14 | % |
| 3.39 | % |
| (25) |
| bps |
Yield on interest-earning assets (FTE) (+) | |
| 3.22 | % |
| 3.46 | % |
| (24) |
| bps |
Average interest-bearing liabilities | | $ | 11,797,999 | | $ | 12,065,807 | | $ | (267,808) |
|
|
Interest expense | | $ | 7,525 | | $ | 12,775 | | $ | (5,250) |
|
|
Cost of interest-bearing liabilities | |
| 0.26 | % |
| 0.43 | % |
| (17) |
| bps |
Cost of funds | |
| 0.18 | % |
| 0.30 | % |
| (12) |
| bps |
Net interest income | | $ | 130,931 | | $ | 134,898 | | $ | (3,967) |
|
|
Net interest income (FTE) (+) | | $ | 134,267 | | $ | 137,951 | | $ | (3,684) |
|
|
Net interest margin | |
| 2.97 | % |
| 3.09 | % |
| (12) |
| bps |
Net interest margin (FTE) (+) | |
| 3.04 | % |
| 3.16 | % |
| (12) |
| bps |
For the first quarter of 2017 represent an increase of $918,000, or 4.5%, over net income and an increase of $0.02, or 4.3%, over earnings per share, in each case compared to the third quarter of 2016. These increases are primarily attributable to increases in2022, net interest income driven by higher average loan balances partially offset bywas $130.9 million, a decrease of $4.0 million from the impactfirst quarter of 2021. For the decline infirst quarter of 2022, net interest margin.
For the Three Months Ended September 30, | |||||||||||||
2017 | 2016 | Change | |||||||||||
(Dollars in thousands) | |||||||||||||
Average interest-earning assets | $ | 8,167,919 | $ | 7,354,684 | $ | 813,235 | |||||||
Interest income | $ | 84,850 | $ | 74,433 | $ | 10,417 | |||||||
Interest income (FTE) (1) | $ | 87,498 | $ | 76,860 | $ | 10,638 | |||||||
Yield on interest-earning assets | 4.12 | % | 4.03 | % | 9 | bps | |||||||
Yield on interest-earning assets (FTE) (1) | 4.25 | % | 4.16 | % | 9 | bps | |||||||
Average interest-bearing liabilities | $ | 6,382,452 | $ | 5,681,102 | $ | 701,350 | |||||||
Interest expense | $ | 13,652 | $ | 7,405 | $ | 6,247 | |||||||
Cost of interest-bearing liabilities | 0.85 | % | 0.52 | % | 33 | bps | |||||||
Cost of funds | 0.66 | % | 0.40 | % | 26 | bps | |||||||
Net interest income | $ | 71,198 | $ | 67,028 | $ | 4,170 | |||||||
Net interest income (FTE) (1) | $ | 73,846 | $ | 69,455 | $ | 4,391 | |||||||
Net interest margin | 3.46 | % | 3.63 | % | (17 | ) | bps | ||||||
Net interest margin (FTE) (1) | 3.59 | % | 3.76 | % | (17 | ) | bps |
On March 16, 2022, the FOMC increased its Federal Funds target rates to subordinated debt that the Company issued in the fourth quarterits current range of 2016 as well as increased interest-bearing deposit and short-term borrowing rates.
For the Nine Months Ended September 30, | |||||||||||||
2017 | 2016 | Change | |||||||||||
(Dollars in thousands) | |||||||||||||
Average interest-earning assets | $ | 7,922,944 | $ | 7,159,813 | $ | 763,131 | |||||||
Interest income | $ | 242,712 | $ | 217,964 | $ | 24,748 | |||||||
Interest income (FTE) (1) | $ | 250,548 | $ | 225,331 | $ | 25,217 | |||||||
Yield on interest-earning assets | 4.10 | % | 4.07 | % | 3 | bps | |||||||
Yield on interest-earning assets (FTE) (1) | 4.23 | % | 4.20 | % | 3 | bps | |||||||
Average interest-bearing liabilities | $ | 6,196,663 | $ | 5,528,833 | $ | 667,830 | |||||||
Interest expense | $ | 35,947 | $ | 21,429 | $ | 14,518 | |||||||
Cost of interest-bearing liabilities | 0.78 | % | 0.52 | % | 26 | bps | |||||||
Cost of funds | 0.61 | % | 0.40 | % | 21 | bps | |||||||
Net interest income | $ | 206,765 | $ | 196,535 | $ | 10,230 | |||||||
Net interest income (FTE) (1) | $ | 214,601 | $ | 203,902 | $ | 10,699 | |||||||
Net interest margin | 3.49 | % | 3.67 | % | (18 | ) | bps | ||||||
Net interest margin (FTE) (1) | 3.62 | % | 3.80 | % | (18 | ) | bps |
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The following tables showtable shows interest income on earning assets and related average yields as well as interest expense on interest-bearing liabilities and related average rates paid for the periods indicated:
AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)
| | | | | | | | | | | | | | | | | |
| | For the Three Months Ended March 31, |
| ||||||||||||||
| | 2022 | | 2021 |
| ||||||||||||
|
| | |
| Interest |
| |
| | |
| Interest |
| |
| ||
| | Average | | Income / | | Yield / | | Average | | Income / | | Yield / |
| ||||
| | Balance | | Expense (1) | | Rate (1)(2) | | Balance | | Expense (1) | | Rate (1)(2) |
| ||||
|
| (Dollars in thousands) | | ||||||||||||||
Assets: |
| |
|
| |
|
|
|
| |
|
| |
|
|
| |
Securities: |
| |
|
| |
|
|
|
| |
|
| |
|
|
| |
Taxable | | $ | 2,617,156 | | $ | 13,666 |
| 2.12 | % | $ | 1,906,585 | | $ | 10,353 |
| 2.20 | % |
Tax-exempt | |
| 1,581,426 | |
| 13,240 |
| 3.40 | % |
| 1,302,792 | |
| 11,693 |
| 3.64 | % |
Total securities | |
| 4,198,582 | |
| 26,906 |
| 2.60 | % |
| 3,209,377 | |
| 22,046 |
| 2.79 | % |
Loans, net (3) | |
| 13,300,789 | |
| 114,602 |
| 3.49 | % |
| 14,064,123 | |
| 128,122 |
| 3.69 | % |
Other earning assets | |
| 385,647 | |
| 284 |
| 0.30 | % |
| 418,595 | |
| 558 |
| 0.54 | % |
Total earning assets | |
| 17,885,018 | | $ | 141,792 |
| 3.22 | % |
| 17,692,095 | | $ | 150,726 |
| 3.46 | % |
Allowance for credit losses | |
| (100,342) | | | |
|
| |
| (157,802) | |
|
|
|
| |
Total non-earning assets | |
| 2,135,692 | | | |
|
| |
| 2,152,561 | |
|
|
|
| |
Total assets | | $ | 19,920,368 | | | |
|
| | $ | 19,686,854 | |
|
|
|
| |
Liabilities and Stockholders' Equity: | |
|
| |
|
|
|
| |
|
| |
|
|
|
| |
Interest-bearing deposits: | |
|
| |
|
|
|
| |
|
| |
|
|
|
| |
Transaction and money market accounts | | $ | 8,376,766 | | $ | 1,324 |
| 0.06 | % | $ | 8,060,328 | | $ | 2,152 |
| 0.11 | % |
Regular savings | |
| 1,142,854 | |
| 55 |
| 0.02 | % |
| 940,369 | |
| 59 |
| 0.03 | % |
Time deposits | |
| 1,766,657 | |
| 3,104 |
| 0.71 | % |
| 2,490,432 | |
| 6,917 |
| 1.13 | % |
Total interest-bearing deposits | |
| 11,286,277 | |
| 4,483 |
| 0.16 | % |
| 11,491,129 | |
| 9,128 |
| 0.32 | % |
Other borrowings | |
| 511,722 | |
| 3,042 |
| 2.41 | % |
| 574,678 | |
| 3,647 |
| 2.57 | % |
Total interest-bearing liabilities | |
| 11,797,999 | | $ | 7,525 |
| 0.26 | % |
| 12,065,807 | | $ | 12,775 |
| 0.43 | % |
Noninterest-bearing liabilities: | |
|
| |
|
|
|
| |
|
| |
|
|
|
| |
Demand deposits | |
| 5,228,098 | | | |
|
| |
| 4,583,521 | |
|
|
|
| |
Other liabilities | |
| 233,287 | | | |
|
| |
| 317,585 | |
|
|
|
| |
Total liabilities | |
| 17,259,384 | | | |
|
| |
| 16,966,913 | |
|
|
|
| |
Stockholders' equity | |
| 2,660,984 | | | |
|
| |
| 2,719,941 | |
|
|
|
| |
Total liabilities and stockholders' equity | | $ | 19,920,368 | | | |
|
| | $ | 19,686,854 | |
|
|
|
| |
Net interest income | | | | | $ | 134,267 |
|
| |
|
| | $ | 137,951 |
|
| |
Interest rate spread | | | | | | |
| 2.96 | % |
|
| |
|
|
| 3.03 | % |
Cost of funds | | | | | | |
| 0.18 | % |
|
| |
|
|
| 0.30 | % |
Net interest margin | | | | | | |
| 3.04 | % |
|
| |
|
|
| 3.16 | % |
For the Three Months Ended September 30, | |||||||||||||||||||||
2017 | 2016 | ||||||||||||||||||||
Average Balance | Interest Income / Expense (1) | Yield / Rate (1)(2) | Average Balance | Interest Income / Expense (1) | Yield / Rate (1)(2) | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
Assets: | |||||||||||||||||||||
Securities: | |||||||||||||||||||||
Taxable | $ | 774,513 | $ | 5,175 | 2.65 | % | $ | 768,608 | $ | 4,732 | 2.45 | % | |||||||||
Tax-exempt | 469,391 | 5,455 | 4.61 | % | 449,944 | 5,302 | 4.69 | % | |||||||||||||
Total securities | 1,243,904 | 10,630 | 3.39 | % | 1,218,552 | 10,034 | 3.28 | % | |||||||||||||
Loans, net (3) (4) | 6,822,498 | 76,333 | 4.44 | % | 6,033,723 | 66,397 | 4.38 | % | |||||||||||||
Other earning assets | 101,517 | 535 | 2.09 | % | 102,409 | 429 | 1.67 | % | |||||||||||||
Total earning assets | 8,167,919 | $ | 87,498 | 4.25 | % | 7,354,684 | $ | 76,860 | 4.16 | % | |||||||||||
Allowance for loan losses | (38,138 | ) | (35,995 | ) | |||||||||||||||||
Total non-earning assets | 844,183 | 835,262 | |||||||||||||||||||
Total assets | $ | 8,973,964 | $ | 8,153,951 | |||||||||||||||||
Liabilities and Stockholders' Equity: | |||||||||||||||||||||
Interest-bearing deposits: | |||||||||||||||||||||
Transaction and money market accounts | $ | 3,457,279 | $ | 3,491 | 0.40 | % | $ | 3,016,337 | $ | 1,682 | 0.22 | % | |||||||||
Regular savings | 555,153 | 151 | 0.11 | % | 598,232 | 207 | 0.14 | % | |||||||||||||
Time deposits | 1,289,794 | 3,592 | 1.10 | % | 1,181,936 | 2,663 | 0.90 | % | |||||||||||||
Total interest-bearing deposits | 5,302,226 | 7,234 | 0.54 | % | 4,796,505 | 4,552 | 0.38 | % | |||||||||||||
Other borrowings (5) | 1,080,226 | 6,418 | 2.36 | % | 884,597 | 2,853 | 1.28 | % | |||||||||||||
Total interest-bearing liabilities | 6,382,452 | $ | 13,652 | 0.85 | % | 5,681,102 | $ | 7,405 | 0.52 | % | |||||||||||
Noninterest-bearing liabilities: | |||||||||||||||||||||
Demand deposits | 1,495,614 | 1,408,453 | |||||||||||||||||||
Other liabilities | 58,106 | 67,728 | |||||||||||||||||||
Total liabilities | 7,936,172 | 7,157,283 | |||||||||||||||||||
Stockholders' equity | 1,037,792 | 996,668 | |||||||||||||||||||
Total liabilities and stockholders' equity | $ | 8,973,964 | $ | 8,153,951 | |||||||||||||||||
Net interest income | $ | 73,846 | $ | 69,455 | |||||||||||||||||
Interest rate spread | 3.40 | % | 3.64 | % | |||||||||||||||||
Cost of funds | 0.66 | % | 0.40 | % | |||||||||||||||||
Net interest margin | 3.59 | % | 3.76 | % |
(1)
Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of(2)
Rates and yields are annualized and calculated from actual, not rounded amounts in thousands, which appear above.(3)
Nonaccrual loans are included in average loans outstanding.-53-
For the Nine Months Ended September 30, | |||||||||||||||||||||
2017 | 2016 | ||||||||||||||||||||
Average Balance | Interest Income / Expense (1) | Yield / Rate (1)(2) | Average Balance | Interest Income / Expense (1) | Yield / Rate (1)(2) | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
Assets: | |||||||||||||||||||||
Securities: | |||||||||||||||||||||
Taxable | $ | 763,276 | $ | 15,081 | 2.64 | % | $ | 756,042 | $ | 13,558 | 2.40 | % | |||||||||
Tax-exempt | 463,944 | 16,338 | 4.71 | % | 446,840 | 15,914 | 4.76 | % | |||||||||||||
Total securities | 1,227,220 | 31,419 | 3.42 | % | 1,202,882 | 29,472 | 3.27 | % | |||||||||||||
Loans, net (3) (4) | 6,613,078 | 217,910 | 4.41 | % | 5,869,511 | 194,839 | 4.43 | % | |||||||||||||
Other earning assets | 82,646 | 1,219 | 1.97 | % | 87,420 | 1,020 | 1.56 | % | |||||||||||||
Total earning assets | 7,922,944 | $ | 250,548 | 4.23 | % | 7,159,813 | $ | 225,331 | 4.20 | % | |||||||||||
Allowance for loan losses | (38,205 | ) | (35,439 | ) | |||||||||||||||||
Total non-earning assets | 846,076 | 832,467 | |||||||||||||||||||
Total assets | $ | 8,730,815 | $ | 7,956,841 | |||||||||||||||||
Liabilities and Stockholders' Equity: | |||||||||||||||||||||
Interest-bearing deposits: | |||||||||||||||||||||
Transaction and money market accounts | $ | 3,344,248 | $ | 8,189 | 0.33 | % | $ | 2,903,336 | $ | 4,523 | 0.21 | % | |||||||||
Regular savings | 571,735 | 493 | 0.12 | % | 591,699 | 649 | 0.15 | % | |||||||||||||
Time deposits | 1,250,180 | 9,728 | 1.04 | % | 1,172,856 | 7,773 | 0.89 | % | |||||||||||||
Total interest-bearing deposits | 5,166,163 | 18,410 | 0.48 | % | 4,667,891 | 12,945 | 0.37 | % | |||||||||||||
Other borrowings (5) | 1,030,500 | 17,537 | 2.28 | % | 860,942 | 8,484 | 1.32 | % | |||||||||||||
Total interest-bearing liabilities | 6,196,663 | $ | 35,947 | 0.78 | % | 5,528,833 | $ | 21,429 | 0.52 | % | |||||||||||
Noninterest-bearing liabilities: | |||||||||||||||||||||
Demand deposits | 1,449,555 | 1,376,001 | |||||||||||||||||||
Other liabilities | 59,744 | 60,910 | |||||||||||||||||||
Total liabilities | 7,705,962 | 6,965,744 | |||||||||||||||||||
Stockholders' equity | 1,024,853 | 991,097 | |||||||||||||||||||
Total liabilities and stockholders' equity | $ | 8,730,815 | $ | 7,956,841 | |||||||||||||||||
Net interest income | $ | 214,601 | $ | 203,902 | |||||||||||||||||
Interest rate spread | 3.45 | % | 3.68 | % | |||||||||||||||||
Cost of funds | 0.61 | % | 0.40 | % | |||||||||||||||||
Net interest margin | 3.62 | % | 3.80 | % |
The Volume Rate Analysis table below presents changes in interest income and interest expense and distinguishes between the changes related to increases or decreases in average outstanding balances of interest-earning assets and interest-bearing liabilities (volume), and the changes related to increases or decreases in average interest rates on such assets and liabilities (rate). Changes attributable to both volume and rate have been allocated proportionally. Results, on a taxable equivalent basis, are as follows (dollars in thousands):
Three Months Ended September 30, 2017 vs. September 30, 2016 Increase (Decrease) Due to Change in: | Nine Months Ended September 30, 2017 vs. September 30, 2016 Increase (Decrease) Due to Change in: | ||||||||||||||||||||||
Volume | Rate | Total | Volume | Rate | Total | ||||||||||||||||||
Earning Assets: | |||||||||||||||||||||||
Securities: | |||||||||||||||||||||||
Taxable | $ | 37 | $ | 406 | $ | 443 | $ | 131 | $ | 1,392 | $ | 1,523 | |||||||||||
Tax-exempt | 226 | (73 | ) | 153 | 603 | (179 | ) | 424 | |||||||||||||||
Total securities | 263 | 333 | 596 | 734 | 1,213 | 1,947 | |||||||||||||||||
Loans, net (1) | 8,809 | 1,127 | 9,936 | 24,512 | (1,441 | ) | 23,071 | ||||||||||||||||
Other earning assets | (3 | ) | 109 | 106 | (58 | ) | 257 | 199 | |||||||||||||||
Total earning assets | $ | 9,069 | $ | 1,569 | $ | 10,638 | $ | 25,188 | $ | 29 | $ | 25,217 | |||||||||||
Interest-Bearing Liabilities: | |||||||||||||||||||||||
Interest-bearing deposits: | |||||||||||||||||||||||
Transaction and money market accounts | $ | 276 | $ | 1,533 | $ | 1,809 | $ | 769 | $ | 2,897 | $ | 3,666 | |||||||||||
Regular savings | (14 | ) | (42 | ) | (56 | ) | (21 | ) | (135 | ) | (156 | ) | |||||||||||
Time Deposits | 259 | 670 | 929 | 537 | 1,418 | 1,955 | |||||||||||||||||
Total interest-bearing deposits | 521 | 2,161 | 2,682 | 1,285 | 4,180 | 5,465 | |||||||||||||||||
Other borrowings (2) | 742 | 2,823 | 3,565 | 1,930 | 7,123 | 9,053 | |||||||||||||||||
Total interest-bearing liabilities | 1,263 | 4,984 | 6,247 | 3,215 | 11,303 | 14,518 | |||||||||||||||||
Change in net interest income | $ | 7,806 | $ | (3,415 | ) | $ | 4,391 | $ | 21,973 | $ | (11,274 | ) | $ | 10,699 |
| | | | | | | | | |
| | Three Months Ended | |||||||
| | March 31, 2022 vs. March 31, 2021 | |||||||
| | Increase (Decrease) Due to Change in: | |||||||
|
| Volume |
| Rate |
| Total | |||
Earning Assets: | | | | | | | | | |
Securities: | | | | | | | | | |
Taxable | | $ | 3,724 | | $ | (411) | | $ | 3,313 |
Tax-exempt | |
| 2,373 | |
| (826) | |
| 1,547 |
Total securities | |
| 6,097 | |
| (1,237) | |
| 4,860 |
Loans, net | |
| (6,765) | |
| (6,755) | |
| (13,520) |
Other earning assets | |
| (40) | |
| (234) | |
| (274) |
Total earning assets | | $ | (708) | | $ | (8,226) | | $ | (8,934) |
Interest-Bearing Liabilities: | |
|
| |
|
| |
|
|
Interest-bearing deposits: | |
|
| |
|
| |
|
|
Transaction and money market accounts | | $ | 81 | | $ | (909) | | $ | (828) |
Regular savings | |
| 11 | |
| (15) | |
| (4) |
Time Deposits | |
| (1,684) | |
| (2,129) | |
| (3,813) |
Total interest-bearing deposits | |
| (1,592) | |
| (3,053) | |
| (4,645) |
Other borrowings | |
| (384) | |
| (221) | |
| (605) |
Total interest-bearing liabilities | |
| (1,976) | |
| (3,274) | |
| (5,250) |
Change in net interest income | | $ | 1,268 | | $ | (4,952) | | $ | (3,684) |
The Company’s fully taxable equivalent net interest margin (FTE)(+) includes the impact of acquisition accounting fair value adjustments. The impact of net accretion related to acquisition accounting fair value adjustments for the first three quartersquarter of 2017 as well as2021, and the remaining estimated net accretionfirst quarter of 2022 are reflected in the following table (dollars in thousands):
| | | | | | | | | | | | |
|
| | |
| | |
| | |
| | |
| | Loan | | Deposit | | Borrowings | | | | |||
| | Accretion | | Accretion (Amortization) | | Amortization | | Total | ||||
For the quarter ended March 31, 2021 | | $ | 4,287 | | $ | 20 | | $ | (198) | | $ | 4,109 |
For the quarter ended March 31, 2022 | | | 2,253 | | | (10) | | | (203) | | | 2,040 |
-54-
Loan Accretion | Borrowings Accretion (Amortization) | Total | |||||||||
For the quarter ended March 31, 2017 | $ | 1,445 | $ | 48 | $ | 1,493 | |||||
For the quarter ended June 30, 2017 | 1,570 | 47 | 1,617 | ||||||||
For the quarter ended September 30, 2017 | 1,662 | 47 | 1,709 | ||||||||
For the remaining three months of 2017 (estimated) (1) | 1,358 | 28 | 1,386 | ||||||||
For the years ending (estimated) (1): | |||||||||||
2018 | 4,842 | (143 | ) | 4,699 | |||||||
2019 | 3,483 | (286 | ) | 3,197 | |||||||
2020 | 2,689 | (301 | ) | 2,388 | |||||||
2021 | 2,187 | (316 | ) | 1,871 | |||||||
2022 | 1,767 | (332 | ) | 1,435 | |||||||
Thereafter | 6,589 | (4,974 | ) | 1,615 |
Noninterest Income
For the Three Months Ended | ||||||||||||||
September 30, | Change | |||||||||||||
2017 | 2016 | $ | % | |||||||||||
(Dollars in thousands) | ||||||||||||||
Noninterest income: | ||||||||||||||
Service charges on deposit accounts | $ | 5,153 | $ | 4,965 | $ | 188 | 3.8 | % | ||||||
Other service charges and fees | 4,529 | 4,397 | 132 | 3.0 | % | |||||||||
Fiduciary and asset management fees | 2,794 | 2,844 | (50 | ) | (1.8 | )% | ||||||||
Mortgage banking income, net | 2,305 | 3,207 | (902 | ) | (28.1 | )% | ||||||||
Gains on securities transactions, net | 184 | — | 184 | NM | ||||||||||
Bank owned life insurance income | 1,377 | 1,389 | (12 | ) | (0.9 | )% | ||||||||
Loan-related interest rate swap fees | 416 | 1,303 | (887 | ) | (68.1 | )% | ||||||||
Other operating income | 778 | 845 | (67 | ) | (7.9 | )% | ||||||||
Total noninterest income | $ | 17,536 | $ | 18,950 | $ | (1,414 | ) | (7.5 | )% | |||||
Community bank segment | $ | 15,121 | $ | 15,589 | $ | (468 | ) | (3.0 | )% | |||||
Mortgage segment | 2,527 | 3,501 | (974 | ) | (27.8 | )% | ||||||||
Intercompany eliminations | (112 | ) | (140 | ) | 28 | 20.0 | % | |||||||
Total noninterest income | $ | 17,536 | $ | 18,950 | $ | (1,414 | ) | (7.5 | )% |
| | | | | | | | | | | | |
| | For the Three Months Ended | | | | | |
| ||||
| | March 31, | | Change |
| |||||||
|
| 2022 |
| 2021 |
| $ | | % |
| |||
| | (Dollars in thousands) |
| |||||||||
Noninterest income: | | | | | | | | | | | | |
Service charges on deposit accounts | | $ | 7,596 | | $ | 5,509 | | $ | 2,087 | | 37.9 | % |
Other service charges, commissions, and fees | |
| 1,655 | |
| 1,701 | |
| (46) | | (2.7) | % |
Interchange fees | |
| 1,810 | |
| 1,847 | |
| (37) | | (2.0) | % |
Fiduciary and asset management fees | |
| 7,255 | |
| 6,475 | |
| 780 | | 12.0 | % |
Mortgage banking income | |
| 3,117 | |
| 8,255 | |
| (5,138) | | (62.2) | % |
Bank owned life insurance income | |
| 2,697 | |
| 2,265 | |
| 432 | | 19.1 | % |
Loan-related interest rate swap fees | |
| 3,860 | |
| 1,754 | |
| 2,106 | | 120.1 | % |
Other operating income | |
| 2,163 | |
| 3,179 | |
| (1,016) | | (32.0) | % |
Total noninterest income | | $ | 30,153 | | $ | 30,985 | | $ | (832) | | (2.7) | % |
Noninterest income declined $1.4 million,decreased $832,000 or 7.5%,2.7% to $17.5$30.2 million for the quarter ended September 30, 2017March 31, 2022, compared to $31.0 million for the quarter ended September 30, 2016.March 31, 2021. The declinedecrease was primarily due to lowerdriven by a decrease in mortgage banking income of $902,000, driven by declines$5.1 million due to a decline in mortgage loan originations compared to the third quarter of 2016origination volumes and unrealized losses on mortgage banking derivativesa decline in the third quarter of 2017 compared to unrealized gains on mortgage banking derivativesequity method investments of $487,000 included within other operating income. These noninterest income declines were partially offset by an increase in the third quarter of 2016. Loan-relatedloan-related interest swap fees also declined $887,000 in the third quarter of 2017 compared to the third quarter of 2016. Customer-related fee income increased $320,000 primarily relatedof $2.1 million due to increaseshigher transaction volumes, a $2.1 million increase in overdraftservice charges on deposit accounts, and debit card interchange fees, and gains on sales of securities were $184,000 higher,a $780,000 increase in each case as compared to the third quarter of 2016.
For the Nine Months Ended | ||||||||||||||
September 30, | Change | |||||||||||||
2017 | 2016 | $ | % | |||||||||||
(Dollars in thousands) | ||||||||||||||
Noninterest income: | ||||||||||||||
Service charges on deposit accounts | $ | 14,945 | $ | 14,454 | $ | 491 | 3.4 | % | ||||||
Other service charges and fees | 13,575 | 12,971 | 604 | 4.7 | % | |||||||||
Fiduciary and asset management fees | 8,313 | 7,315 | 998 | 13.6 | % | |||||||||
Mortgage banking income, net | 7,123 | 8,324 | (1,201 | ) | (14.4 | )% | ||||||||
Gains on securities transactions, net | 782 | 145 | 637 | NM | ||||||||||
Bank owned life insurance income | 4,837 | 4,122 | 715 | 17.3 | % | |||||||||
Loan-related interest rate swap fees | 2,627 | 3,056 | (429 | ) | (14.0 | )% | ||||||||
Other operating income | 2,228 | 2,470 | (242 | ) | (9.8 | )% | ||||||||
Total noninterest income | $ | 54,430 | $ | 52,857 | $ | 1,573 | 3.0 | % | ||||||
Community bank segment | $ | 47,080 | $ | 44,137 | $ | 2,943 | 6.7 | % | ||||||
Mortgage segment | 7,743 | 9,185 | (1,442 | ) | (15.7 | )% | ||||||||
Intercompany eliminations | (393 | ) | (465 | ) | 72 | 15.5 | % | |||||||
Total noninterest income | $ | 54,430 | $ | 52,857 | $ | 1,573 | 3.0 | % |
-55-
Noninterest expense
For the Three Months Ended | ||||||||||||||
September 30, | Change | |||||||||||||
2017 | 2016 | $ | % | |||||||||||
(Dollars in thousands) | ||||||||||||||
Noninterest expense: | ||||||||||||||
Salaries and benefits | $ | 29,769 | $ | 30,493 | $ | (724 | ) | (2.4 | )% | |||||
Occupancy expenses | 4,939 | 4,841 | 98 | 2.0 | % | |||||||||
Furniture and equipment expenses | 2,559 | 2,635 | (76 | ) | (2.9 | )% | ||||||||
Printing, postage, and supplies | 1,154 | 1,147 | 7 | 0.6 | % | |||||||||
Communications expense | 798 | 948 | (150 | ) | (15.8 | )% | ||||||||
Technology and data processing | 4,232 | 3,917 | 315 | 8.0 | % | |||||||||
Professional services | 1,985 | 1,895 | 90 | 4.7 | % | |||||||||
Marketing and advertising expense | 1,944 | 1,975 | (31 | ) | (1.6 | )% | ||||||||
FDIC assessment premiums and other insurance | 1,141 | 1,262 | (121 | ) | (9.6 | )% | ||||||||
Other taxes | 2,022 | 639 | 1,383 | 216.4 | % | |||||||||
Loan-related expenses | 1,349 | 1,531 | (182 | ) | (11.9 | )% | ||||||||
OREO and credit-related expenses | 1,139 | 503 | 636 | 126.4 | % | |||||||||
Amortization of intangible assets | 1,480 | 1,843 | (363 | ) | (19.7 | )% | ||||||||
Training and other personnel costs | 887 | 863 | 24 | 2.8 | % | |||||||||
Merger-related costs | 732 | — | 732 | NM | ||||||||||
Other expenses | 1,366 | 2,421 | (1,055 | ) | (43.6 | )% | ||||||||
Total noninterest expense | $ | 57,496 | $ | 56,913 | $ | 583 | 1.0 | % | ||||||
Community bank segment | $ | 55,133 | $ | 54,353 | $ | 780 | 1.4 | % | ||||||
Mortgage segment | 2,475 | 2,700 | (225 | ) | (8.3 | )% | ||||||||
Intercompany eliminations | (112 | ) | (140 | ) | 28 | 20.0 | % | |||||||
Total noninterest expense | $ | 57,496 | $ | 56,913 | $ | 583 | 1.0 | % |
| | | | | | | | | | | | |
| | For the Three Months Ended | | | | | |
| ||||
| | March 31, | | Change |
| |||||||
|
| 2022 |
| 2021 |
| $ | | % |
| |||
| | (Dollars in thousands) |
| |||||||||
Noninterest expense: | | | | | | | | | | | | |
Salaries and benefits | | $ | 58,298 | | $ | 52,660 | | $ | 5,638 | | 10.7 | % |
Occupancy expenses | |
| 6,883 | |
| 7,315 | |
| (432) | | (5.9) | % |
Furniture and equipment expenses | |
| 3,597 | |
| 3,968 | |
| (371) | | (9.3) | % |
Technology and data processing | |
| 7,796 | |
| 6,904 | |
| 892 | | 12.9 | % |
Professional services | |
| 4,090 | |
| 4,960 | |
| (870) | | (17.5) | % |
Marketing and advertising expense | |
| 2,163 | |
| 2,044 | |
| 119 | | 5.8 | % |
FDIC assessment premiums and other insurance | |
| 2,485 | |
| 2,307 | |
| 178 | | 7.7 | % |
Other taxes | |
| 4,499 | |
| 4,436 | |
| 63 | | 1.4 | % |
Loan-related expenses | |
| 1,776 | |
| 1,877 | |
| (101) | | (5.4) | % |
Amortization of intangible assets | |
| 3,039 | |
| 3,730 | |
| (691) | | (18.5) | % |
Loss on debt extinguishment | | | — | |
| 14,695 | |
| (14,695) | | (100.0) | % |
Other expenses | |
| 10,695 | |
| 7,041 | |
| 3,654 | | 51.9 | % |
Total noninterest expense | | $ | 105,321 | | $ | 111,937 | | $ | (6,616) | | (5.9) | % |
Noninterest expense increased $583,000,decreased $6.6 million or 1.0%,5.9% to $57.5$105.3 million for the quarter ended September 30, 2017March 31, 2022, compared to $56.9$111.9 million for the third quarter of 2016. Excluding merger-related costs of $732,000, noninterest expense for the quarter ended September 30, 2017 declined $149,000, or 0.3%,March 31, 2021. Excluding amortization of intangible assets ($3.0 million for the quarter ended March 31, 2022 compared to $3.7 million for the third quarter ended March 31, 2021), losses related to balance sheet repositioning ($0 for the quarter ended March 31, 2022 compared to $14.7 million for the quarter ended March 31, 2021), and branch closing and facility consolidation costs ($5.5 million for the quarter ended March 31, 2022 compared to $924,000 for the quarter ended March 31, 2021) adjusted operating noninterest expense(+) for the quarter ended March 31, 2022 increased by $4.2 million or 4.5% from the prior year quarter. The increase was mainly due to an increase of 2016. Salaries$5.6 million in salaries and benefits expenses declinedprimarily driven by $724,000 primarily related to decreasesan increase in benefitssalaries, wages, and variable incentive compensation, offsetand an increase of $892,000 in technology and data processing expense primarily driven by increases related to annual merit adjustments. Declinesan increase in other expenses primarily related to lower fraud-relatedsoftware licensing and other losses of $364,000 as well as $400,000 in nonrecurring branch closing costs recognized in the third quarter of 2016.maintenance expenses. These decreasesnoninterest expense category increases were partially offset by a nonrecurring reductiondecrease of $870,000 in professional services expenses, of approximately $900,000 in other taxes related to historic tax credits realized in the third quarter of 2016 related to the Company's investment in a historic rehabilitation project that was completed in that quarter and increased OREO and credit-related expenses due to losses on sales of OREO property in the third quarter of 2017 compared to gains on sales of OREO property in the third quarter of 2016 as well as higher valuation adjustments compared to the third quarter of 2016.
For the Nine Months Ended | ||||||||||||||
September 30, | Change | |||||||||||||
2017 | 2016 | $ | % | |||||||||||
(Dollars in thousands) | ||||||||||||||
Noninterest expense: | ||||||||||||||
Salaries and benefits | $ | 92,499 | $ | 87,061 | $ | 5,438 | 6.2 | % | ||||||
Occupancy expenses | 14,560 | 14,627 | (67 | ) | (0.5 | )% | ||||||||
Furniture and equipment expenses | 7,882 | 7,867 | 15 | 0.2 | % | |||||||||
Printing, postage, and supplies | 3,710 | 3,566 | 144 | 4.0 | % | |||||||||
Communications expense | 2,580 | 2,964 | (384 | ) | (13.0 | )% | ||||||||
Technology and data processing | 12,059 | 11,340 | 719 | 6.3 | % | |||||||||
Professional services | 5,734 | 6,432 | (698 | ) | (10.9 | )% | ||||||||
Marketing and advertising expense | 5,963 | 5,838 | 125 | 2.1 | % | |||||||||
FDIC assessment premiums and other insurance | 2,793 | 4,003 | (1,210 | ) | (30.2 | )% | ||||||||
Other taxes | 6,065 | 3,864 | 2,201 | 57.0 | % | |||||||||
Loan-related expenses | 3,959 | 3,638 | 321 | 8.8 | % | |||||||||
OREO and credit-related expenses | 2,023 | 1,965 | 58 | 3.0 | % | |||||||||
Amortization of intangible assets | 4,661 | 5,468 | (807 | ) | (14.8 | )% | ||||||||
Training and other personnel costs | 2,900 | 2,512 | 388 | 15.4 | % | |||||||||
Merger-related costs | 3,476 | — | 3,476 | NM | ||||||||||
Other expenses | 3,957 | 5,291 | (1,334 | ) | (25.2 | )% | ||||||||
Total noninterest expense | $ | 174,821 | $ | 166,436 | $ | 8,385 | 5.0 | % | ||||||
Community bank segment | $ | 167,643 | $ | 158,964 | $ | 8,679 | 5.5 | % | ||||||
Mortgage segment | 7,571 | 7,937 | (366 | ) | (4.6 | )% | ||||||||
Intercompany eliminations | (393 | ) | (465 | ) | 72 | 15.5 | % | |||||||
Total noninterest expense | $ | 174,821 | $ | 166,436 | $ | 8,385 | 5.0 | % |
Income Taxes
The provision for income taxes is based upon the results of operations, adjusted for the effect of certain tax-exempt income and non-deductible expenses. In addition, certain items of income and expense are reported in different periods for financial reporting and tax return purposes. The tax effects of these temporary differences are recognized currently in the deferred income tax provision or benefit. Deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the applicable enacted marginal tax rate.
The effective tax rate for the three months ended September 30, 2017March 31, 2022 and 20162021 was 26.7%17.5% and 23.3%, respectively; the effective tax rate for the nine months ended September 30, 2017 and 2016 was 26.9% and 25.0%16.8%, respectively. The increase in the effective tax raterates is primarily relateddue to the lower proportion of tax-exempt interest and bank owned life insurance income being a smaller percentage ofto pre-tax income in 2017 compared to 2016 as well as the impact of nondeductible acquisition-related expenses recognized in 2017. Additionally, the Company's effective tax rate in 2016 was lower due to historic tax credits realized in the thirdfirst quarter of 2016 related to the Company's investment in a historic rehabilitation project that was completed in such quarter.2022.
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DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Overview
Assets
At September 30, 2017,March 31, 2022, total assets were $9.0$19.8 billion, an increasea decrease of $602.6$282.4 million or 9.6%approximately 5.7% (annualized), from $8.4$20.1 billion at December 31, 2016.2021. The increasedecrease in assets was mostlyprimarily a result of a decrease in cash and cash equivalents related to the deployment of excess liquidity to fund loan growth.
LHFI (net of deferred fees and costs,costs) were $6.9$13.5 billion, including $67.4 million in PPP loans, at September 30, 2017,March 31, 2022, an increase of $591.7$263.5 million or 12.5%8.1% (annualized), from December 31, 2016. Loan growth occurred across all categories. Quarterly average loans2021. Excluding the effects of the PPP(+), LHFI (net of deferred fees and costs) at March 31, 2022 increased $788.8$346.4 million or 13.1%10.8% (annualized) from December 31, 2021. Average loans decreased $763.3 million from March 31, 2021. Excluding the effects of the PPP(+), the average loan balances at March 31, 2022 increased $443.0 million or 3.5% from March 31, 2021. Refer to "Loan Portfolio" within Item 2 and Note 3 "Loans and Allowance for the quarter ended September 30, 2017 compared to the quarter ended September 30, 2016. ForLoan and Lease Losses" in Part I, Item 1 of this Quarterly Report for additional information on the Company’s loan activity, please referactivity.
Liabilities and Stockholders’ Equity
At March 31, 2022, total liabilities were $17.3 billion, a decrease of $70.6 million from $17.4 billion at December 31, 2021.
Total deposits at March 31, 2022 were $16.5 billion, a decrease of $126.8 million or approximately 3.1% (annualized) from December 31, 2021. For the quarter ended March 31, 2022, quarterly average deposits increased $439.7 million or 2.7% compared to “Loan Portfolio”the quarter ended March 31, 2021 primarily due to additional liquidity of bank customers since the start of COVID-19 and increased savings. Refer to “Deposits” within this Item 2 for further discussion on this topic.
Total short-term and long-term borrowings at March 31, 2022 were $504.0 million, a decrease of $2.6 million or 0.5% when compared to $506.6 million at December 31, 2021. Refer to Note 3 “Loans and Allowance6 “Borrowings” in Part I, Item I for Loan Losses”further discussion on this topic.
At March 31, 2022, stockholders’ equity was $2.5 billion, a decrease of $211.7 million from December 31, 2021. Refer to “Capital Resources” within this Item 2, as well as Note 9 "Stockholders’ Equity" in Part I, Item 1 “Financial Statements” of this report.
For information related to the Company’s stock repurchase activity and Stockholders’ Equity
During the first quarter of $502.3 million, or 10.5% (annualized)2022, the Company declared and paid a quarterly dividend on the outstanding shares of Series A preferred stock of $171.88 per share (equivalent to $0.43 per outstanding depositary share), from December 31, 2016. Deposits increased in all categoriesconsistent with the exceptionfourth quarter of savings accounts when compared to year-end 2016, but was primarily driven by increases in demand2021 and interest-bearing deposits consistingthe first quarter of NOW and money market accounts. Quarterly average deposits increased $592.9 million, or 9.6%, for2021. During the first quarter ended September 30, 2017 compared to the quarter ended September 30, 2016. For further discussion on this topic, see “Deposits” within this Item 2.
-57-
Securities
At September 30, 2017,March 31, 2022, the Company had total investments in the amount of $1.2$4.0 billion, or 13.8 %20.4% of total assets, as compared to $1.2$4.2 billion, or 14.3%20.9% of total assets, at December 31, 2016.2021. This decline in the Company’s investment portfolio was primarily due to a decline in the market value of the AFS securities portfolio. The Company seeks to diversify its portfolio to minimize risk. It focuses on purchasing mortgage-backed securitiesMBS for cash flow and reinvestment opportunities and securities issued by states and political subdivisions due to the tax benefits and the higher yield offered from these securities. The majority of the Company’s mortgage-backedMBS are agency-backed securities, are investment grade. The investment portfolio haswhich have a high percentagegovernment guarantee. For information regarding the hedge transaction related to AFS securities, see Note 8 "Derivatives" in Part I, Item 1 of municipals and mortgage-backed securities; therefore the Company earns a higher taxable equivalent yield on its portfolio as compared to many of its peers. The Company does not engage in structured derivative or hedging activities within the investment portfolio.
The table below sets forth a summary of the AFS securities, available for sale,HTM securities, held to maturity, and restricted stock as of the dates indicated (dollars in thousands):
| | | | | | |
|
| March 31, |
| December 31, | ||
| | 2022 | | 2021 | ||
Available for Sale: |
| |
|
| |
|
U.S. government and agency securities | | $ | 68,039 | | $ | 73,849 |
Obligations of states and political subdivisions | |
| 888,300 | |
| 1,008,396 |
Corporate and other bonds | |
| 183,923 | |
| 153,376 |
MBS | |
| | |
| |
Commercial | | | 434,491 | | | 471,157 |
Residential | | | 1,616,882 | | | 1,773,232 |
Total MBS | | | 2,051,373 | | | 2,244,389 |
Other securities | |
| 1,645 | |
| 1,640 |
Total AFS securities, at fair value | |
| 3,193,280 | |
| 3,481,650 |
Held to Maturity: | |
|
| |
|
|
U.S. government and agency securities | | | 2,483 | | | 2,604 |
Obligations of states and political subdivisions | |
| 684,294 | |
| 620,873 |
MBS | |
| | |
| |
Commercial | | | 31,221 | | | 4,523 |
Residential | | | 38,874 | | | — |
Total MBS | | | 70,095 | | | 4,523 |
Total held to maturity securities, at carrying value | |
| 756,872 | |
| 628,000 |
Restricted Stock: | |
|
| |
|
|
FRB stock | |
| 67,032 | |
| 67,032 |
FHLB stock | |
| 10,001 | |
| 9,793 |
Total restricted stock, at cost | |
| 77,033 | |
| 76,825 |
Total investments | | $ | 4,027,185 | | $ | 4,186,475 |
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September 30, 2017 | December 31, 2016 | ||||||
Available for Sale: | |||||||
Obligations of states and political subdivisions | $ | 292,199 | $ | 275,890 | |||
Corporate and other bonds | 115,422 | 121,780 | |||||
Mortgage-backed securities | 546,904 | 535,286 | |||||
Other securities | 13,836 | 13,808 | |||||
Total securities available for sale, at fair value | 968,361 | 946,764 | |||||
Held to Maturity: | |||||||
Obligations of states and political subdivisions, at carrying value | 204,801 | 201,526 | |||||
Federal Reserve Bank stock | 27,559 | 23,808 | |||||
Federal Home Loan Bank stock | 40,882 | 36,974 | |||||
Total restricted stock, at cost | 68,441 | 60,782 | |||||
Total investments | $ | 1,241,603 | $ | 1,209,072 |
The following table summarizes the contractual maturity of securities available for sale at fair value and their weighted average yields(1) for AFS securities by contractual maturity date of the underlying securities as of September 30, 2017 (dollars in thousands):
| | | | | | | | | | | | | | | | |
|
| 1 Year or |
| | |
| 5 – 10 |
| Over 10 |
| | |
| |||
| | Less | | 1 - 5 Years | | Years | | Years | | Total |
| |||||
U.S. government and agency securities |
| | — | % | | 2.57 | % | | 1.42 | % | | — | % | | 1.45 | % |
Obligations of states and political subdivisions | |
| 5.00 | % |
| 2.79 | % | | 2.63 | % | | 2.77 | % | | 2.77 | % |
Corporate bonds and other securities | |
| 0.25 | % |
| 4.54 | % | | 3.91 | % | | 2.57 | % | | 3.74 | % |
MBS: | |
| | |
| | | | | | | | | | | |
Commercial | | | 3.74 | % | | 3.28 | % | | 2.40 | % | | 2.56 | % | | 2.80 | % |
Residential | | | 2.41 | % | | 2.35 | % | | 2.39 | % | | 1.97 | % | | 1.99 | % |
Total MBS | | | 3.16 | % | | 3.21 | % | | 2.39 | % | | 2.06 | % | | 2.16 | % |
Total AFS securities | |
| 3.04 | % |
| 3.25 | % | | 2.88 | % | | 2.29 | % | | 2.40 | % |
1 Year or Less | 1 - 5 Years | 5 - 10 Years | Over 10 Years | Total | |||||||||||||||
Mortgage backed securities: | |||||||||||||||||||
Amortized cost | $ | 197 | $ | 82,828 | $ | 121,469 | $ | 341,544 | $ | 546,038 | |||||||||
Fair value | 202 | 83,072 | 121,515 | 342,115 | 546,904 | ||||||||||||||
Weighted average yield (1) | 3.08 | % | 2.16 | % | 2.19 | % | 2.43 | % | 2.34 | % | |||||||||
Obligations of states and political subdivisions: | |||||||||||||||||||
Amortized cost | 11,795 | 44,929 | 82,296 | 146,901 | 285,921 | ||||||||||||||
Fair value | 11,968 | 46,531 | 85,491 | 148,209 | 292,199 | ||||||||||||||
Weighted average yield (1) | 5.69 | % | 4.92 | % | 4.34 | % | 3.80 | % | 4.21 | % | |||||||||
Corporate bonds and other securities: | |||||||||||||||||||
Amortized cost | 11,395 | 504 | 63,727 | 53,261 | 128,887 | ||||||||||||||
Fair value | 11,340 | 504 | 64,824 | 52,590 | 129,258 | ||||||||||||||
Weighted average yield (1) | 0.93 | % | 1.04 | % | 4.46 | % | 2.31 | % | 3.24 | % | |||||||||
Total securities available for sale: | |||||||||||||||||||
Amortized cost | 23,387 | 128,261 | 267,492 | 541,706 | 960,846 | ||||||||||||||
Fair value | 23,510 | 130,107 | 271,830 | 542,914 | 968,361 | ||||||||||||||
Weighted average yield (1) | 3.35 | % | 3.12 | % | 3.39 | % | 2.79 | % | 3.01 | % |
(1)
Yields on tax-exempt securities have been computed on a tax-equivalent basis.
The following table summarizes the contractual maturity of securities held to maturity at carrying value and their weighted average yields(1) for HTM securities by contractual maturity date of the underlying securitiesas of September 30, 2017 (dollars in thousands):
| | | | | | | | | | | | | | | | |
|
| 1 Year or |
| | |
| 5 – 10 |
| Over 10 |
| | |
| |||
| | Less | | 1 - 5 Years | | Years | | Years | | Total |
| |||||
U.S. government and agency securities | | | 4.14 | % | | 4.03 | % | | - | % | | - | % | | 4.09 | % |
Obligations of states and political subdivisions | | | 2.31 | % | | 3.86 | % | | 3.85 | % | | 3.64 | % | | 3.64 | % |
MBS: | |
| | | | | | | | | | | | | | |
Commercial | | | — | % | | — | % | | — | % | | 2.44 | % | | 2.44 | % |
Residential | | | — | % | | — | % | | — | % | | 2.25 | % | | 2.25 | % |
Total MBS | | | — | % | | — | % | | — | % | | 2.34 | % | | 2.34 | % |
Total HTM securities | |
| 2.85 | % | | 3.88 | % | | 3.85 | % | | 3.51 | % | | 3.52 | % |
1 Year or Less | 1 - 5 Years | 5 - 10 Years | Over 10 Years | Total | |||||||||||||||
Obligations of states and political subdivisions: | |||||||||||||||||||
Carrying Value | $ | 5,879 | $ | 41,196 | $ | 65,893 | $ | 91,833 | $ | 204,801 | |||||||||
Fair value | 5,902 | 41,959 | 67,444 | 94,530 | 209,835 | ||||||||||||||
Weighted average yield (1) | 2.96 | % | 2.78 | % | 3.21 | % | 3.78 | % | 3.37 | % |
(1)
Yields on tax-exempt securities have been computed on a tax-equivalent basis.
Weighted average yield is calculated as the tax-equivalent yield on a pro rata basis for each security based on its relative amortized cost.
As of September 30, 2017,March 31, 2022, the Company maintained a diversified municipal bond portfolio with approximately 75%65% of its holdings in general obligation issues and the majority of the remainder primarily backed by revenue bonds. Issuances within the State of Texas represented 12% and issuances within19% of the State of Washington and the Commonwealth of Virginia both represented 11% of thetotal municipal portfolio; no other state had a concentration above 10%. Substantially all municipal holdings are considered investment grade. When purchasing municipal securities, the Company focuses on strong underlying ratings for general obligation issuers or bonds backed by essential service revenues.
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Liquidity
Liquidity represents an institution’s ability to meet present and future financial obligations through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. Liquid assets include cash, interest-bearing deposits with banks, money market investments, federal funds sold, loans held for sale,LHFS, and securities and loans maturing or re-pricing within one year. Additional sources of liquidity available to the Company include its capacity to borrow additional funds when necessary through federal funds lines with several correspondent banks, a line of credit with the FHLB, the Federal Reserve Discount Window, the purchase of brokered certificates of deposit, and a corporate line of credit with a large correspondent bank.bank, and debt and capital issuance. Management considers the Company’s overall liquidity to be sufficient to satisfy its depositors’ requirements and to meet its customers’ credit needs.
The Company has continued to see elevated customer deposit balances as a result of the impacts of COVID-19, including as a result of government stimulus programs. The Company considers a portion of the increases in customer deposits to be temporary, which it expects will result in outflows in subsequent quarters.
As of September 30, 2017,March 31, 2022, liquid assets totaled $2.6$5.1 billion or 29.2%,25.7% of total assets, and liquid earning assets totaled $2.5$4.9 billion or 30.6%27.7% of total earning assets. Asset liquidity is also provided by managing loan and securities maturities and cash flows. As of September 30, 2017,March 31, 2022, loan payments of approximately $2.3$4.3 billion or 32.9%32.2% of total loans are scheduled to matureexpected within one year based on contractual maturity,terms, adjusted for expected prepayments, and approximately $156.3$332.8 million or 12.6%8.3% of total securities are scheduled to maturebe paid down within one year.
For additional information and the available balances on various lines of credit, please refer to Note 56 “Borrowings” in Part I, Item 1 “Financial Statements” of this report.Quarterly Report. In addition to lines of credit, the Bank may also borrow additional funds by purchasing certificates of deposit through a nationally recognized network of financial institutions. For additional information and outstanding balances on purchased certificates of deposits, please refer to “Deposits” within this Item 2.
Cash Requirements
The Company’s cash requirements, outside of lending transactions, consist primarily of borrowings, debt and capital instruments which are used as part of the Company’s overall liquidity and capital management strategy. Cash required to repay these obligations will be sourced from future debt and capital issuances and from other general liquidity sources as described above under “Liquidity” within this Item 2.
The following table presents the Company’s contractual obligations related to its major cash requirements and the scheduled payments due at the various intervals over the next year and beyond as of March 31, 2022 (dollars in thousands):
| | | | | | | | | |
| | | | | Less than | | More than | ||
| | Total | | 1 year | | 1 year | |||
Long-term debt (1) | | $ | 250,000 | | $ | - | | $ | 250,000 |
Trust preferred capital notes (1) | | | 155,159 | | | - | | | 155,159 |
Leases (2) | | | 214,071 | | | 37,728 | | | 176,343 |
Repurchase agreements | | | 115,027 | | | 115,027 | | | - |
Total contractual obligations | | $ | 734,257 | | $ | 152,755 | | $ | 581,502 |
(1) | Excludes related unamortized premium/discount and interest payments. |
(2) | Represents lease payments due on non-cancellable operating leases at March 31, 2022. Excluded from these tables are variable lease payments or renewals. |
For more information pertaining to the previous table, reference Note 5 “Leases” and Note 6 “Borrowings” in Part I, Item 1 of this Quarterly Report.
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Loan Portfolio
LHFI, net of deferred fees and costs, were $6.9$13.5 billion at September 30, 2017, $6.3March 31, 2022, and $13.2 billion at December 31, 2016,2021. Commercial & industrial loans and $6.1 billion at September 30, 2016, respectively. Commercialcommercial real estate - non-ownerestate-non-owner occupied loans continue to representrepresented the Company’s largest category, comprising 25.3% ofcategories at March 31, 2022. Commercial and industrial loans included approximately $66.3 million in loans from the totalPPP loan portfolio at September 30, 2017.
September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | ||||||||||||||||||||||||||||||
Construction and Land Development | $ | 841,738 | 12.2 | % | $ | 799,938 | 11.8 | % | $ | 770,287 | 11.8 | % | $ | 751,131 | 11.9 | % | $ | 776,430 | 12.6 | % | ||||||||||||||
Commercial Real Estate - Owner Occupied | 903,523 | 13.1 | % | 888,285 | 13.1 | % | 870,559 | 13.3 | % | 857,805 | 13.6 | % | 857,142 | 13.9 | % | |||||||||||||||||||
Commercial Real Estate - Non-Owner Occupied | 1,748,039 | 25.3 | % | 1,698,329 | 25.1 | % | 1,631,767 | 24.9 | % | 1,564,295 | 24.8 | % | 1,454,828 | 23.7 | % | |||||||||||||||||||
Multifamily Real Estate | 368,686 | 5.4 | % | 367,257 | 5.4 | % | 353,769 | 5.4 | % | 334,276 | 5.3 | % | 339,313 | 5.5 | % | |||||||||||||||||||
Commercial & Industrial | 554,522 | 8.0 | % | 568,602 | 8.4 | % | 576,567 | 8.8 | % | 551,526 | 8.7 | % | 509,857 | 8.3 | % | |||||||||||||||||||
Residential 1-4 Family | 1,083,112 | 15.7 | % | 1,066,519 | 15.8 | % | 1,057,439 | 16.1 | % | 1,029,547 | 16.3 | % | 999,361 | 16.3 | % | |||||||||||||||||||
Auto | 276,572 | 4.0 | % | 274,162 | 4.0 | % | 271,466 | 4.1 | % | 262,071 | 4.2 | % | 255,188 | 4.2 | % | |||||||||||||||||||
HELOC | 535,446 | 7.8 | % | 535,088 | 7.9 | % | 527,863 | 8.1 | % | 526,884 | 8.4 | % | 524,097 | 8.5 | % | |||||||||||||||||||
Consumer and all other | 587,091 | 8.5 | % | 573,310 | 8.5 | % | 494,329 | 7.5 | % | 429,525 | 6.8 | % | 432,702 | 7.0 | % | |||||||||||||||||||
Total loans held for investment | $ | 6,898,729 | 100.0 | % | $ | 6,771,490 | 100.0 | % | $ | 6,554,046 | 100.0 | % | $ | 6,307,060 | 100.0 | % | $ | 6,148,918 | 100.0 | % |
The following table presents the remaining maturities, based on contractual maturity, by loan type and by rate type (variable or fixed), as of September 30, 2017March 31, 2022 (dollars in thousands):
Variable Rate | Fixed Rate | ||||||||||||||||||||||||||||||
Total Maturities | Less than 1 year | Total | 1-5 years | More than 5 years | Total | 1-5 years | More than 5 years | ||||||||||||||||||||||||
Construction and Land Development | $ | 841,738 | $ | 481,566 | $ | 220,078 | $ | 170,885 | $ | 49,193 | $ | 140,094 | $ | 102,639 | $ | 37,455 | |||||||||||||||
Commercial Real Estate - Owner Occupied | 903,523 | 106,283 | 252,090 | 31,982 | 220,108 | 545,150 | 384,557 | 160,593 | |||||||||||||||||||||||
Commercial Real Estate - Non-Owner Occupied | 1,748,039 | 173,965 | 601,345 | 198,386 | 402,959 | 972,729 | 693,236 | 279,493 | |||||||||||||||||||||||
Multifamily Real Estate | 368,686 | 29,313 | 145,063 | 37,143 | 107,920 | 194,310 | 169,340 | 24,970 | |||||||||||||||||||||||
Commercial & Industrial | 554,522 | 165,346 | 153,500 | 111,836 | 41,664 | 235,676 | 157,121 | 78,555 | |||||||||||||||||||||||
Residential 1-4 Family | 1,083,112 | 76,215 | 337,860 | 11,569 | 326,291 | 669,037 | 370,497 | 298,540 | |||||||||||||||||||||||
Auto | 276,572 | 2,188 | — | — | — | 274,384 | 135,387 | 138,997 | |||||||||||||||||||||||
HELOC | 535,446 | 39,610 | 493,368 | 46,379 | 446,989 | 2,468 | 2,025 | 443 | |||||||||||||||||||||||
Consumer and all other | 587,091 | 54,890 | 70,097 | 11,524 | 58,573 | 462,104 | 193,576 | 268,528 | |||||||||||||||||||||||
Total loans held for investment | $ | 6,898,729 | $ | 1,129,376 | $ | 2,273,401 | $ | 619,704 | $ | 1,653,697 | $ | 3,495,952 | $ | 2,208,378 | $ | 1,287,574 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Variable Rate | | Fixed Rate | ||||||||||||||||||||
|
| Total |
| Less than 1 |
| | |
| | |
| | |
| More than |
| | |
| | |
| | |
| More than | ||||
| | Maturities | | year | | Total | | 1-5 years | | 5-15 years | | 15 years | | Total | | 1-5 years | | 5-15 years | | 15 years | ||||||||||
Construction and Land Development | | $ | 969,059 | | $ | 361,917 | | $ | 462,982 | | $ | 401,318 | | $ | 60,399 | | $ | 1,265 | | $ | 144,160 | | $ | 84,211 | | $ | 25,101 | | $ | 34,848 |
Commercial Real Estate - Owner Occupied | |
| 2,007,671 | |
| 185,951 | |
| 645,878 | |
| 120,766 | |
| 506,347 | |
| 18,765 | |
| 1,175,842 | |
| 475,436 | |
| 669,873 | |
| 30,533 |
Commercial Real Estate - Non-Owner Occupied | |
| 3,875,681 | |
| 406,424 | |
| 2,086,321 | |
| 913,994 | |
| 1,154,467 | |
| 17,860 | |
| 1,382,936 | |
| 984,951 | |
| 341,157 | |
| 56,828 |
Multifamily Real Estate | |
| 723,940 | |
| 70,472 | |
| 427,586 | |
| 107,912 | |
| 319,674 | |
| — | |
| 225,882 | |
| 158,757 | |
| 67,125 | |
| — |
Commercial & Industrial | |
| 2,540,680 | |
| 404,695 | |
| 1,284,023 | |
| 1,072,807 | |
| 204,842 | |
| 6,374 | |
| 851,962 | |
| 530,090 | |
| 311,456 | |
| 10,416 |
Residential 1-4 Family - Commercial | |
| 569,801 | |
| 85,334 | |
| 113,904 | |
| 30,156 | |
| 74,497 | |
| 9,251 | |
| 370,563 | |
| 269,226 | |
| 89,083 | |
| 12,254 |
Residential 1-4 Family - Consumer | |
| 824,163 | |
| 5,101 | |
| 177,437 | |
| 1,978 | |
| 28,868 | |
| 146,591 | |
| 641,625 | |
| 8,281 | |
| 71,942 | |
| 561,402 |
Residential 1-4 Family - Revolving | |
| 568,403 | |
| 32,738 | |
| 480,322 | |
| 33,433 | |
| 135,698 | |
| 311,191 | |
| 55,343 | |
| 2,256 | |
| 16,796 | |
| 36,291 |
Auto | |
| 499,855 | |
| 3,061 | |
| — | |
| — | |
| — | |
| — | |
| 496,794 | |
| 189,760 | |
| 307,034 | |
| — |
Consumer | |
| 171,875 | |
| 12,644 | |
| 24,230 | |
| 21,357 | |
| 2,180 | |
| 693 | |
| 135,001 | |
| 56,921 | |
| 52,695 | |
| 25,385 |
Other Commercial | |
| 708,221 | |
| 67,034 | |
| 112,152 | |
| 7,975 | |
| 71,172 | |
| 33,005 | |
| 529,035 | |
| 156,029 | |
| 246,938 | |
| 126,068 |
Total LHFI | | $ | 13,459,349 | | $ | 1,635,371 | | $ | 5,814,835 | | $ | 2,711,696 | | $ | 2,558,144 | | $ | 544,995 | | $ | 6,009,143 | | $ | 2,915,918 | | $ | 2,199,200 | | $ | 894,025 |
The Company remains committed to originating soundly underwritten loans to qualifying borrowers within its markets. The Company is focused on providing community-based financial services and discourages the origination of portfolio loans outside of its principal trade areas. As reflected in the loan table, at September 30, 2017,March 31, 2022, the largest components of the Company’s loan portfolio consisted of commercial real estate loans, residential 1-4 family loans, and construction and land developmentcommercial & industrial loans. The risks attributable to these concentrations are mitigated by the Company’s credit underwriting and monitoring processes, including oversight by a centralized credit administration function and credit policy and risk management committee, as well as seasoned bankers focusing their lending to borrowers with proven track records in markets with which the Company is familiar. UMG primarily serves
The Company had no short-term loan modifications related to COVID-19 as a secondary mortgage banking operation, selling the majority of itsMarch 31, 2022 and had insignificant short-term loan production in the secondary market or selling loansmodifications related to meet the Bank’s current asset/liability management needs.COVID-19 as of December 31, 2021.
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Asset Quality
Overview
At September 30, 2017,March 31, 2022, the Company had higher levels ofexperienced decreases in NPAs compared to December 31, 20162021 and September 30, 2016, due to the increasedecreases in nonaccrual loan levels, primarily related to three unrelated credit relationships that were classified as nonaccrual during the first and second quarters of 2017. Partially offsetting this increase, OREO balances declined compared to the same periods. The Company experienced increases inaccruing past due loan levels compared to December 31, 2016 and September 30, 2016 due to performing loans not being renewed prior to quarter end. As the Company's NPAs and past due loan
The Company believes its continued proactive efforts to effectively manage its loan portfolio, combined with the unprecedented government stimulus and programs and regulatory support, have contributed to the sustained historically low levels of NPAs. The Company’s efforts included identifying potential problem credits through early identification and diligent monitoring of specific problem credits where the uncertainty has been realized, or conversely, has been reduced or eliminated. The Company continues to refrain from originating or purchasing loans from foreign entities. The Company selectively originates loans to higher risk borrowers. The Company’s loan portfolio generally does not include exposure to option adjustable rate mortgage products, high loan-to-value ratio mortgages, interest only mortgage loans, subprime mortgage loans or mortgage loans with initial teaser rates, which are all considered higher risk instruments.
Nonperforming Assets
At March 31, 2022, NPAs totaled $30.7 million, a decrease of $2.1 million or 24.2%,6.3% from September 30, 2016. In addition,December 31, 2021. NPAs as a percentage of total outstanding loans increased 10 basis points to 0.42% at September 30, 2017March 31, 2022 were 0.23%, a decrease of 2 bps from 0.32% at December 31, 2016 and increased 4 basis points from 0.38% at September 30, 2016. These increases are due to the higher levels of nonaccrual loans at September 30, 2017 compared to the prior periods.
The following table shows a summary of asset quality balances and related ratios as of and for the quarters ended (dollars in thousands):
| | | | | | | |
|
| March 31, |
| December 31, |
| ||
|
| 2022 |
| 2021 |
| ||
Nonaccrual loans | | $ | 29,032 | | $ | 31,100 | |
Foreclosed properties | |
| 1,696 | |
| 1,696 | |
Total NPAs | |
| 30,728 | |
| 32,796 | |
Loans past due 90 days and accruing interest | |
| 8,247 | |
| 9,132 | |
Total NPAs and loans past due 90 days and accruing interest | | $ | 38,975 | | $ | 41,928 | |
Performing TDRs | | $ | 12,157 | | $ | 10,313 | |
| | | | | | | |
Balances | |
|
| |
|
| |
Allowance for loan and lease losses | | $ | 102,591 | | $ | 99,787 | |
Allowance for credit losses | | | 110,591 | | | 107,787 | |
Average loans, net of deferred fees and costs | |
| 13,300,789 | |
| 13,082,412 | |
Loans, net of deferred fees and costs | |
| 13,459,349 | |
| 13,195,843 | |
| | | | | | | |
Ratios | |
|
| |
|
| |
Nonaccrual loans to total loans | | | 0.22 | % | | 0.24 | % |
NPAs to total loans | |
| 0.23 | % |
| 0.25 | % |
NPAs & loans 90 days past due and accruing interest to total loans | |
| 0.29 | % |
| 0.32 | % |
NPAs to total loans & foreclosed property | |
| 0.23 | % |
| 0.25 | % |
NPAs & loans 90 days past due and accruing interest to total loans & foreclosed property | |
| 0.29 | % |
| 0.32 | % |
ALLL to nonaccrual loans | |
| 353.37 | % |
| 320.86 | % |
ALLL to nonaccrual loans & loans 90 days past due and accruing interest | |
| 275.20 | % |
| 248.03 | % |
ACL to nonaccrual loans | | | 380.93 | % | | 346.58 | % |
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September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Nonaccrual loans, excluding PCI loans | $ | 20,122 | $ | 24,574 | $ | 22,338 | $ | 9,973 | $ | 12,677 | |||||||||
Foreclosed properties | 6,449 | 6,828 | 6,951 | 7,430 | 7,927 | ||||||||||||||
Former bank premises | 2,315 | 2,654 | 2,654 | 2,654 | 2,654 | ||||||||||||||
Total nonperforming assets | 28,886 | 34,056 | 31,943 | 20,057 | 23,258 | ||||||||||||||
Loans past due 90 days and accruing interest | 4,532 | 3,625 | 2,323 | 3,005 | 3,529 | ||||||||||||||
Total nonperforming assets and loans past due 90 days and accruing interest | $ | 33,418 | $ | 37,681 | $ | 34,266 | $ | 23,062 | $ | 26,787 | |||||||||
Performing TDRs | $ | 16,519 | $ | 14,947 | $ | 14,325 | $ | 13,967 | $ | 11,824 | |||||||||
PCI loans | 51,041 | 56,167 | 57,770 | 59,292 | 62,346 | ||||||||||||||
Balances | |||||||||||||||||||
Allowance for loan losses | $ | 37,162 | $ | 38,214 | $ | 38,414 | $ | 37,192 | $ | 36,542 | |||||||||
Average loans, net of deferred fees and costs | 6,822,498 | 6,628,011 | 6,383,905 | 6,214,084 | 6,033,723 | ||||||||||||||
Loans, net of deferred fees and costs | 6,898,729 | 6,771,490 | 6,554,046 | 6,307,060 | 6,148,918 | ||||||||||||||
Ratios | |||||||||||||||||||
NPAs to total loans | 0.42 | % | 0.50 | % | 0.49 | % | 0.32 | % | 0.38 | % | |||||||||
NPAs & loans 90 days past due to total loans | 0.48 | % | 0.56 | % | 0.52 | % | 0.37 | % | 0.44 | % | |||||||||
NPAs to total loans & OREO | 0.42 | % | 0.50 | % | 0.49 | % | 0.32 | % | 0.38 | % | |||||||||
NPAs & loans 90 days past due and accruing to total loans & OREO | 0.48 | % | 0.56 | % | 0.52 | % | 0.37 | % | 0.43 | % | |||||||||
ALL to nonaccrual loans | 184.68 | % | 155.51 | % | 171.97 | % | 372.93 | % | 288.25 | % | |||||||||
ALL to nonaccrual loans & loans 90 days past due and accruing | 150.73 | % | 135.52 | % | 155.77 | % | 286.58 | % | 225.48 | % |
NPAs at September 30, 2017March 31, 2022 included $20.1$29.0 million in nonaccrual loans, a net increasedecrease of $10.1$2.1 million or 101.8%,6.6% from December 31, 2016 and a net increase of $7.4 million, or 58.7%, from September 30, 2016.2021. The following table shows the activity in nonaccrual loans for the quarterquarters ended (dollars in thousands):
September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Beginning Balance | $ | 24,574 | $ | 22,338 | $ | 9,973 | $ | 12,677 | $ | 10,861 | |||||||||
Net customer payments | (4,642 | ) | (1,498 | ) | (1,068 | ) | (1,451 | ) | (1,645 | ) | |||||||||
Additions | 4,114 | 5,979 | 13,557 | 1,094 | 4,359 | ||||||||||||||
Charge-offs | (3,376 | ) | (2,004 | ) | (97 | ) | (1,216 | ) | (660 | ) | |||||||||
Loans returning to accruing status | — | (134 | ) | (27 | ) | (1,039 | ) | (23 | ) | ||||||||||
Transfers to OREO | (548 | ) | (107 | ) | — | (92 | ) | (215 | ) | ||||||||||
Ending Balance | $ | 20,122 | $ | 24,574 | $ | 22,338 | $ | 9,973 | $ | 12,677 |
| | | | | | |
|
| March 31, |
| December 31, | ||
| | 2022 |
| 2021 | ||
Beginning Balance | | $ | 31,100 | | $ | 35,472 |
Net customer payments | |
| (4,132) | |
| (5,068) |
Additions | |
| 2,087 | |
| 1,294 |
Charge-offs | |
| (23) | |
| (598) |
Ending Balance | | $ | 29,032 | | $ | 31,100 |
The following table presents the composition of nonaccrual loans atand the quarters endedcoverage ratio, which is the ALLL expressed as a percentage of nonaccrual loans, as of (dollars in thousands):
| | | | | | | |
|
| March 31, |
| December 31, |
| ||
| | 2022 |
| 2021 |
| ||
Construction and Land Development | | $ | 869 | | $ | 2,697 | |
Commercial Real Estate - Owner Occupied | |
| 4,865 | |
| 5,637 | |
Commercial Real Estate - Non-owner Occupied | |
| 3,287 | |
| 3,641 | |
Multifamily Real Estate | | | — | | | 113 | |
Commercial & Industrial | |
| 1,975 | |
| 1,647 | |
Residential 1-4 Family - Commercial | |
| 2,239 | |
| 2,285 | |
Residential 1-4 Family - Consumer | |
| 12,039 | |
| 11,397 | |
Residential 1-4 Family - Revolving | |
| 3,371 | |
| 3,406 | |
Auto | |
| 333 | |
| 223 | |
Consumer | | | 54 | | | 54 | |
Total | | $ | 29,032 | | $ | 31,100 | |
Coverage Ratio(1) | | | 353.37 | % | | 320.86 | % |
September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Construction and Land Development | $ | 5,671 | $ | 5,659 | $ | 6,545 | $ | 2,037 | $ | 2,301 | |||||||||
Commercial Real Estate - Owner Occupied | 2,205 | 1,279 | 1,298 | 794 | 1,609 | ||||||||||||||
Commercial Real Estate - Non-owner Occupied | 2,701 | 4,765 | 2,798 | — | — | ||||||||||||||
Commercial & Industrial | 1,252 | 4,281 | 3,245 | 124 | 1,344 | ||||||||||||||
Residential 1-4 Family | 6,163 | 6,128 | 5,856 | 5,279 | 5,279 | ||||||||||||||
Auto | 174 | 270 | 393 | 169 | 231 | ||||||||||||||
HELOC | 1,791 | 2,059 | 1,902 | 1,279 | 1,464 | ||||||||||||||
Consumer and all other | 165 | 133 | 301 | 291 | 449 | ||||||||||||||
Total | $ | 20,122 | $ | 24,574 | $ | 22,338 | $ | 9,973 | $ | 12,677 |
(1)Represents the activity in OREO for the quarters ended (dollars in thousands):
September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Beginning Balance | $ | 9,482 | $ | 9,605 | $ | 10,084 | $ | 10,581 | $ | 13,381 | |||||||||
Additions of foreclosed property | 621 | 132 | — | 859 | 246 | ||||||||||||||
Valuation adjustments | (588 | ) | (19 | ) | (238 | ) | (138 | ) | (479 | ) | |||||||||
Proceeds from sales | (648 | ) | (272 | ) | (277 | ) | (1,282 | ) | (2,844 | ) | |||||||||
Gains (losses) from sales | (103 | ) | 36 | 36 | 64 | 277 | |||||||||||||
Ending Balance | $ | 8,764 | $ | 9,482 | $ | 9,605 | $ | 10,084 | $ | 10,581 |
September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Land | $ | 2,755 | $ | 3,205 | $ | 3,328 | $ | 3,328 | $ | 3,440 | |||||||||
Land Development | 1,993 | 2,050 | 2,111 | 2,379 | 2,320 | ||||||||||||||
Residential Real Estate | 1,562 | 1,399 | 1,338 | 1,549 | 1,806 | ||||||||||||||
Commercial Real Estate | 139 | 174 | 174 | 174 | 361 | ||||||||||||||
Former Bank Premises (1) | 2,315 | 2,654 | 2,654 | 2,654 | 2,654 | ||||||||||||||
Total | $ | 8,764 | $ | 9,482 | $ | 9,605 | $ | 10,084 | $ | 10,581 |
Past Due Loans
At September 30, 2017, total accruingMarch 31, 2022, past due loans were $34.3still accruing interest totaled $29.6 million or 0.50%0.22% of total loans,LHFI, compared to $27.9$29.9 million or 0.44%0.23% of total loans,LHFI at December 31, 2016 and $26.9 million, or 0.44% of total loans, at September 30, 2016.2021. Of the total past due loans still accruing interest, at September 30, 2017, $4.5$8.2 million or 0.07%0.06% of total loans,LHFI were past due 90 days or more at March 31, 2022, compared to $3.0$9.1 million or 0.05%0.07% of total loans,LHFI at December 31, 20162021.
Troubled Debt Restructurings
A modification of a loan’s terms constitutes a TDR if the creditor grants a concession that it would not otherwise consider to the borrower for economic or legal reasons related to the borrower’s financial difficulties. Management strives to identify borrowers in financial difficulty early and $3.5work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, extension of terms that are considered to be below market, conversion to interest only, principal forgiveness and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.
The total recorded investment in TDRs at March 31, 2022 was $19.7 million, an increase of $1.7 million or 0.06%9.8% from $18.0 million at December 31, 2021. Of the $19.7 million of total loans,TDRs at September 30, 2016. AsMarch 31, 2022, $12.2 million or 61.7% were considered performing, while the Company's past due loan levels have beenremaining $7.5 million were considered nonperforming. Of the $18.0 million of TDRs at historic lows overDecember 31, 2021, $10.3 million or 57.4% were considered performing while the last several quarters, certain changesremaining $7.6 million were considered nonperforming. Loans are removed from quarter to quarter might stand outTDR status in comparison to one another but have an insignificant impact onaccordance with the Company's overall asset quality position.established policy described in Note 1 “Summary of Significant Accounting Policies” in Item 8 “Financial Statements and Supplementary Data” in the Company’s 2021 Form 10-K.
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Net Charge-offs
For the quarter ended September 30, 2017,March 31, 2022, net charge-offs were $4.1 million, or 0.24%less than 0.01% of average loans on an annualized basis, compared to $929,000,$1.2 million or 0.06%,0.03% for the first quarter of 2021. The net charge-offs of loans continue to be insignificant, driven by benign credit impacts since the pandemic began.
Provision for Credit Losses
The Company recorded a provision for credit losses of $2.8 million for the quarter ended September 30, 2016. OfMarch 31, 2022, an increase of $16.4 million compared to the net charge-offs innegative provision for credit losses of $13.6 million recorded during the thirdsame quarter of 2017, the majority were previously considered impaired. For the nine months ended September 30, 2017, net charge-offs were $7.4 million, or 0.15% of total average loans on annualized basis, compared to $4.7 million, or 0.11%, for the same period in 2016. Of the net charge-offs during 2017, the majority were previously considered impaired.
Allowance for Credit Losses
At March 31, 2022, the ACL was $110.6 million and included an ALLL of $102.6 million and an RUC of $8.0 million. The ACL increased $2.8 million from December 31, 2021, primarily due to increased uncertainty in the macroeconomic outlook and the impact of loan losses increasedgrowth in the first nine monthsquarter of 2017 compared to the same period in 2016, primarily driven by higher loan balances and higher charge-off levels.
The current level of the allowance for loan losses reflects specific reserves related to nonperforming loans, current risk ratings on loans, net charge-off activity, loan growth, delinquency trends, and other credit risk factors that the Company considers important in assessing the adequacy of the allowance for loan losses. The allowance for loan lossesACL as a percentage of the total loan portfolio and as a percentage of total adjusted loans(+) was 0.54%0.82% and 0.83%, respectively, at September 30, 2017 compared to 0.59% at bothMarch 31, 2022 and December 31, 2016 and September 30, 2016. The decline is primarily related to lower specific reserves as well as declining historical loss factors.
The following table summarizes activity in the allowance for loan lossesALLL during the quarters ended (dollars in thousands):
| | | | | | | |
|
| March 31, |
| December 31, |
| ||
| | 2022 |
| 2021 |
| ||
Total ALLL | | $ | 102,591 | | $ | 99,787 | |
Total RUC | | | 8,000 | | | 8,000 | |
Total ACL | | $ | 110,591 | | $ | 107,787 | |
| | | | | | | |
ALLL to total loans | |
| 0.76 | % |
| 0.76 | % |
ACL to total loans | | | 0.82 | % | | 0.82 | % |
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The following table summarizes the net-charge off activity by segment for the quarters ended (dollars in thousands):
| | | | | | | | | | | | | | | | | | | |
| March 31, | | | March 31, | | ||||||||||||||
| 2022 | | | 2021 | | ||||||||||||||
| Commercial |
| Consumer |
| Total |
| | Commercial | | Consumer |
| Total | | ||||||
Loans charged-off | $ | (759) | | $ | (750) | | $ | (1,509) | | | $ | (1,974) | | $ | (1,667) | | $ | (3,641) | |
Recoveries | | 726 | | | 787 | | | 1,513 | | | | 1,606 | | | 863 | | | 2,469 | |
Net charge-offs | $ | (33) | | $ | 37 | | $ | 4 | | | $ | (368) | | $ | (804) | | $ | (1,172) | |
Net charge-offs to average loans(1) |
| 0.00 | % | | (0.01) | % | | 0.00 | % | | | 0.01 | % |
| 0.16 | % |
| 0.03 | % |
September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Balance, beginning of period | $ | 38,214 | $ | 38,414 | $ | 37,192 | $ | 36,542 | $ | 35,074 | |||||||||
Loans charged-off: | |||||||||||||||||||
Commercial | 684 | 316 | 241 | 620 | 16 | ||||||||||||||
Real estate | 3,049 | 1,595 | 374 | 469 | 929 | ||||||||||||||
Consumer | 1,256 | 1,416 | 1,018 | 738 | 518 | ||||||||||||||
Total loans charged-off | 4,989 | 3,327 | 1,633 | 1,827 | 1,463 | ||||||||||||||
Recoveries: | |||||||||||||||||||
Commercial | 189 | 123 | 139 | 61 | 67 | ||||||||||||||
Real estate | 272 | 306 | 273 | 806 | 303 | ||||||||||||||
Consumer | 426 | 398 | 433 | 136 | 164 | ||||||||||||||
Total recoveries | 887 | 827 | 845 | 1,003 | 534 | ||||||||||||||
Net charge-offs | 4,102 | 2,500 | 788 | 824 | 929 | ||||||||||||||
Provision for loan losses | 3,050 | 2,300 | 2,010 | 1,474 | 2,397 | ||||||||||||||
Balance, end of period | $ | 37,162 | $ | 38,214 | $ | 38,414 | $ | 37,192 | $ | 36,542 | |||||||||
ALL to loans | 0.54 | % | 0.56 | % | 0.59 | % | 0.59 | % | 0.59 | % | |||||||||
Net charge-offs to average loans | 0.24 | % | 0.15 | % | 0.05 | % | 0.05 | % | 0.06 | % | |||||||||
Provision to average loans | 0.18 | % | 0.14 | % | 0.13 | % | 0.09 | % | 0.16 | % |
(1)Annualized
The following table shows both an allocationthe ACL by loan segment and the percentage of the allowance for loan losses among loan categories based upon the loan portfolio’s composition and the ratio ofportfolio that the related outstanding loan balances to total loansACL covers as of the quarters ended (dollars in thousands):
| | | | | | | | | | | | | | | | | | | |
| March 31, | | | December 31, | | ||||||||||||||
| 2022 | | | 2021 | | ||||||||||||||
| Commercial | | Consumer |
| Total |
| | Commercial | | Consumer |
| Total | | ||||||
ACL | $ | 87,182 | | $ | 23,409 | | $ | 110,591 | | | $ | 85,323 | | $ | 22,464 | | $ | 107,787 | |
Loan %(1) | | 84.7 | % | | 15.3 | % | | 100.0 | % | | | 84.7 | % | | 15.3 | % | | 100.0 | % |
ACL to total loans | | 0.77 | % | | 1.13 | % | | 0.82 | % | | | 0.76 | % |
| 1.11 | % |
| 0.82 | % |
September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | ||||||||||||||||||||||||||||||
$ | % (1) | $ | % (1) | $ | % (1) | $ | % (1) | $ | % (1) | |||||||||||||||||||||||||
Commercial | $ | 5,363 | 8.0 | % | $ | 5,614 | 8.4 | % | $ | 5,279 | 8.8 | % | $ | 4,627 | 8.7 | % | $ | 5,403 | 8.3 | % | ||||||||||||||
Real estate | 27,518 | 79.5 | % | 28,450 | 79.1 | % | 29,356 | 79.6 | % | 29,441 | 80.3 | % | 28,064 | 81.0 | % | |||||||||||||||||||
Consumer | 4,281 | 12.5 | % | 4,150 | 12.5 | % | 3,779 | 11.6 | % | 3,124 | 11.0 | % | 3,075 | 10.7 | % | |||||||||||||||||||
Total | $ | 37,162 | 100.0 | % | $ | 38,414 | 100.0 | % | $ | 38,414 | 100.0 | % | $ | 37,192 | 100.0 | % | $ | 36,542 | 100.0 | % |
(1)
The
The increase in the ACL for both loan segments is due to increased uncertainty in the macroeconomic outlook and the impact of loan growth in the first quarter of 2022.
Deposits
As of September 30, 2017,March 31, 2022, total deposits were $6.9$16.5 billion, an increasea decrease of $502.3$126.8 million or 10.5% (annualized),3.1% annualized from December 31, 2016.2021. Total interest-bearing deposits consist of NOW, money market, savings, and time deposit account balances. Total time deposit balances of $1.3$1.7 billion accounted for 24.7%15.1% of total interest-bearing deposits at September 30, 2017.
The following table presents the deposit balances by major categoriescategory as of the quarters ended (dollars in thousands):
| | | | | | | | | | | |
| | March 31, 2022 |
| December 31, 2021 |
| ||||||
|
| | |
| % of total |
| | |
| % of total |
|
Deposits: | | Amount | | deposits | | Amount | | deposits |
| ||
Non-interest bearing | | $ | 5,370,063 |
| 32.6 | % | $ | 5,207,324 |
| 31.3 | % |
NOW accounts | |
| 4,121,257 |
| 25.0 | % |
| 4,176,032 |
| 25.1 | % |
Money market accounts | |
| 4,151,155 |
| 25.2 | % |
| 4,249,858 |
| 25.6 | % |
Savings accounts | |
| 1,166,922 |
| 7.1 | % |
| 1,121,297 |
| 6.8 | % |
Time deposits of $250,000 and over | |
| 365,796 |
| 2.2 | % |
| 452,193 |
| 2.7 | % |
Other time deposits | |
| 1,309,030 |
| 7.9 | % |
| 1,404,364 |
| 8.5 | % |
Total Deposits (1) | | $ | 16,484,223 |
| 100.0 | % | $ | 16,611,068 |
| 100.0 | % |
September 30, 2017 | December 31, 2016 | ||||||||||||
Deposits: | Amount | % of total deposits | Amount | % of total deposits | |||||||||
Non-interest bearing | $ | 1,535,149 | 22.3 | % | $ | 1,393,625 | 21.8 | % | |||||
NOW accounts | 1,851,327 | 26.9 | % | 1,765,956 | 27.7 | % | |||||||
Money market accounts | 1,621,443 | 23.6 | % | 1,435,591 | 22.5 | % | |||||||
Savings accounts | 553,082 | 8.0 | % | 591,742 | 9.3 | % | |||||||
Time deposits of $100,000 and over | 621,070 | 9.0 | % | 530,275 | 8.3 | % | |||||||
Other time deposits | 699,755 | 10.2 | % | 662,300 | 10.4 | % | |||||||
Total Deposits | $ | 6,881,826 | 100.0 | % | $ | 6,379,489 | 100.0 | % |
(1) Includes uninsured deposits of $5.7 billion and $5.9 billion as of March 31, 2022 and December 31, 2021, respectively. Amounts are based on estimated amounts of uninsured deposits as of the reported period.
The Company may also borrow additional funds by purchasing certificates of deposit through a nationally recognized network of financial institutions. The Company utilizes this funding source when rates are more favorable than other funding sources. As of September 30, 2017 and December 31, 2016, thereThere were $19.4 million and $0, respectively,no purchased certificates of deposit included in certificates of deposit on the Company’s Consolidated Balance Sheets.
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Sheets as of March 31, 2022 and December 31, 2021. The reduced usage of purchase certificates of deposit as of March 31, 2021 and December 31, 2021, as compared to historical levels, is due to the increase in customer deposits since the beginning of COVID-19.
Maturities of uninsured time deposits in excess of FDIC limits as of September 30, 2017March 31, 2022 and December 31, 2021 were as follows (dollars in thousands):
Within 3 Months | 3 - 12 Months | Over 12 Months | Total | ||||||||||||
Maturities of time deposits of $100,000 and over | $ | 57,493 | $ | 201,742 | $ | 361,835 | $ | 621,070 | |||||||
Maturities of other time deposits | 62,724 | 273,340 | 363,691 | 699,755 | |||||||||||
Total time deposits | $ | 120,217 | $ | 475,082 | $ | 725,526 | $ | 1,320,825 |
| | | | | |
| March 31, 2022 |
| December 31, 2021 | ||
| Amount | | Amount | ||
Within 3 Months | $ | 19,862 | | $ | 42,696 |
3 - 6 Months |
| 68,788 | |
| 30,313 |
6 - 12 Months | | 85,752 | | | 101,942 |
Over 12 Months |
| 39,191 | |
| 104,242 |
Total | $ | 213,593 | | $ | 279,193 |
Capital Resources
Capital resources represent funds, earned or obtained, over which financial institutions can exercise greater or longer control in comparison with deposits and borrowed funds. The adequacy of the Company’s capital is reviewed by management on an ongoing basis with reference to size, composition, and quality of the Company’s resources and consistency with regulatory requirements and industry standards. Management seeks to maintain a capital structure that will assure an adequate level of capital to support anticipated asset growth and to absorb potential losses, yet allow management to effectively leverage its capital to maximize return to stockholders.
On December 10, 2021, the Company’s Board of Directors authorized the Repurchase Program to purchase up to $100.0 million of the Company’s common stock through December 9, 2022 in open market transactions or privately negotiated transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and /or Rule 10b-18 under the Exchange Act. During the quarter ended March 31, 2022, the Company repurchased an aggregate of approximately 630,000 shares (or $25.0 million), at an average price of $39.73. No shares were repurchased during the quarter ended December 31, 2021.
For information about the Company’s stock repurchase activity and the Repurchase Program, please refer to Note 9 “Stockholders’ Equity” in Part I, Item 1 and Part II, Item 2 of this Quarterly Report.
On January 28, 2022, the Company announced that its Board of Directors declared a quarterly dividend on the outstanding shares of its Series A preferred stock. The dividend of $171.88 per share (equivalent to $0.43 per outstanding depositary share) was payable on March 1, 2022 to preferred shareholders of record as of February 14, 2022. The Board also declared a quarterly dividend of $0.28 per share of common stock. The common stock dividend was payable on February 25, 2022 to common shareholders on record as of February 11, 2022.
The Federal Reserve issued final rules to include technical changes to its market risk capital rules to align them with the Basel III regulatory capital framework and meet certain requirements of the Dodd-Frank Act. Effective January 1, 2015, the final rules requirerequires the Company and the Bank to comply with the following minimum capital ratios: (i) a new common equity Tier 1 capital ratio of 4.5%7.0% of risk-weighted assets; (ii) a Tier 1 capital ratio of 6.0%8.5% of risk-weighted assets (increased from the prior requirement of 4.0%);assets; (iii) a total capital ratio of 8.0%10.5% of risk-weighted assets (unchanged from the prior requirement);assets; and (iv) a leverage ratio of 4.0% of total assets (unchanged fromassets. These ratios, with the prior requirement). These capital requirements will be phased in overexception of the leverage ratio, include a four-year period. When fully phased in on January 1, 2019, the rules will require the Company and the Bank to maintain (i) a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% common equity Tier 1 ratio as that buffer is phased in, effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 7.0% upon full implementation), (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer, (which is added to the 6.0% Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum Tier 1 capital ratio of 8.5% upon full implementation), (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (which is added to the 8.0% total capital ratio as that buffer is phased in, effectively resulting in a minimum total capital ratio of 10.5% upon full implementation), and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average assets.
On March 27, 2020, the banking agencies issued an interim final rule that allows the Company to phase in the impact of adopting the CECL methodology up to two years, with a three-year transition period to phase out the cumulative benefit to regulatory capital provided during the two-year delay. The Company is allowed to include the impact of the CECL transition, which is defined as the CECL Day 1 impact to capital plus 25% of the Company’s provision for credit losses during 2020, in regulatory capital through 2021. The Company elected to phase-in the regulatory capital impact as permitted under the aforementioned interim final rule. Beginning in 2022, the transition amount will begin to impact regulatory capital by phasing it in over a three-year period ending in 2024.
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The table summarizes the Company’s regulatory capital and related ratios for the periods presented (dollars(2) (dollars in thousands):
| | | |
| March 31, | December 31, | March 31, |
| 2022 | 2021 | 2021 |
Common equity Tier 1 capital | $ 1,557,135 | $ 1,569,752 | $ 1,547,675 |
Tier 1 capital | 1,723,491 | 1,736,108 | 1,714,031 |
Tier 2 capital | 454,002 | 437,435 | 374,101 |
Total risk-based capital | 2,177,493 | 2,173,543 | 2,088,132 |
Risk-weighted assets | 15,795,239 | 15,336,432 | 14,651,486 |
Capital ratios: | | | |
Common equity Tier 1 capital ratio | 9.86% | 10.24% | 10.56% |
Tier 1 capital ratio | 10.91% | 11.32% | 11.70% |
Total capital ratio | 13.79% | 14.17% | 14.25% |
Leverage ratio (Tier 1 capital to average assets) | 9.08% | 9.01% | 9.18% |
Capital conservation buffer ratio (1) | 4.91% | 5.32% | 5.70% |
Common equity to total assets | 11.79% | 12.68% | 12.81% |
Tangible common equity to tangible assets (+) | 7.21% | 8.20% | 8.24% |
September 30, 2017 | December 31, 2016 | September 30, 2016 | |||||||||
Common equity Tier 1 capital | $ | 734,892 | $ | 699,728 | $ | 685,329 | |||||
Tier 1 capital | 825,392 | 790,228 | 775,829 | ||||||||
Tier 2 capital | 186,012 | 185,917 | 37,032 | ||||||||
Total risk-based capital | 1,011,404 | 976,145 | 812,861 | ||||||||
Risk-weighted assets | 7,817,079 | 7,200,778 | 7,010,112 | ||||||||
Capital ratios: | |||||||||||
Common equity Tier 1 capital ratio | 9.40 | % | 9.72 | % | 9.78 | % | |||||
Tier 1 capital ratio | 10.56 | % | 10.97 | % | 11.07 | % | |||||
Total capital ratio | 12.94 | % | 13.56 | % | 11.60 | % | |||||
Leverage ratio (Tier 1 capital to average assets) | 9.52 | % | 9.87 | % | 9.89 | % | |||||
Capital conservation buffer ratio (1) | 4.56 | % | 4.97 | % | 3.60 | % | |||||
Common equity to total assets | 11.53 | % | 11.88 | % | 12.12 | % | |||||
Tangible common equity to tangible assets | 8.34 | % | 8.41 | % | 8.57 | % |
(1)
Calculated by subtracting the regulatory minimum capital ratio requirements from the(2) All ratios and amounts at March 31, 2022 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.
(+) Refer to “Non-GAAP Financial Measures” section within this Item 2 for more information about this non-GAAP financial measure, including a reconciliation of this measure to the most directly comparable financial measure calculated in accordance with GAAP.
For the quarter ended March 31, 2022, the Company’s common equity to total assets capital ratio and the tangible common equity to tangible assets capital ratio decreased from the prior quarter primarily due to the unrealized losses on the AFS securities portfolio recorded in OCI due to market interest rate increases in the first quarter of 2022.
NON-GAAP FINANCIAL MEASURES
In reporting the results of September 30, 2017,this Quarterly Report, the Company has provided supplemental performance measures on a tax-equivalent, tangible, and/operating, adjusted or operatingpre-tax pre-provision basis. These non-GAAP financial measures are a supplement to GAAP, which is used to prepare the Company'sCompany’s financial statements and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, the Company'sCompany’s non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies.
Net interest income (FTE), total revenue (FTE) and total adjusted revenue (FTE), which isare used in computing net interest margin (FTE) and adjusted operating efficiency ratio (FTE), providesrespectively, provide valuable additional insight into the net interest margin and the efficiency ratio by adjusting for differences in the tax treatment of interest income sources. The entire FTE adjustment is attributable to interest income on earning assets, which is used in computing the yield on earning assets. Interest expense and the related cost of interest-bearing liabilities and cost of funds ratios are not affected by the FTE components.
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The following table reconciles non-GAAP financial measures from the most directly comparable GAAP financial measures for each of the periods presented (dollars in thousands):
| | | | | | | |
| | Three Months Ended |
| ||||
| | March 31, |
| ||||
|
| 2022 |
| 2021 |
| ||
Interest Income (FTE) | | | | | | | |
Interest and dividend income (GAAP) | | $ | 138,456 | | $ | 147,673 | |
FTE adjustment | |
| 3,336 | |
| 3,053 | |
Interest and dividend income FTE (non-GAAP) | | $ | 141,792 | | $ | 150,726 | |
Average earning assets | | $ | 17,885,018 | | $ | 17,692,095 | |
Yield on interest-earning assets (GAAP) | |
| 3.14 | % |
| 3.39 | % |
Yield on interest-earning assets (FTE) (non-GAAP) | |
| 3.22 | % |
| 3.46 | % |
Net Interest Income (FTE) | |
|
| |
|
| |
Net interest income (GAAP) | | $ | 130,931 | | $ | 134,898 | |
FTE adjustment | |
| 3,336 | |
| 3,053 | |
Net interest income (FTE) (non-GAAP) | | $ | 134,267 | | $ | 137,951 | |
Noninterest income (GAAP) | | | 30,153 | | | 30,985 | |
Total revenue (FTE) (non-GAAP) | | $ | 164,420 | | $ | 168,936 | |
Average earning assets | | $ | 17,885,018 | | $ | 17,692,095 | |
Net interest margin (GAAP) | |
| 2.97 | % |
| 3.09 | % |
Net interest margin (FTE) (non-GAAP) | |
| 3.04 | % |
| 3.16 | % |
The Company believes tangible common equity is an important indication of its ability to grow organically and through business combinations as well as its ability to pay dividends and to engage in various capital management strategies. Tangible common equity is used in the calculation of certain profitability, capital, and per share ratios. TheseThe Company believes tangible common equity and related ratios are meaningful measures of capital adequacy because they provide a meaningful basebasis for period-to-period and company-to-company comparisons, which the Company believes will assist investors in assessing the capital of the Company and its ability to absorb potential losses.
The following table reconciles non-GAAP financial measures from the most directly comparable GAAP financial measures for each of the periods presented (dollars in thousands):
| | | | | | | | | | |
| | Three Months Ended | | |||||||
| | March 31, | | December 31, | | March 31, | | |||
|
| 2022 |
| 2021 |
| 2021 |
| |||
Tangible Assets | |
|
| |
|
| |
|
| |
Ending Assets (GAAP) | | $ | 19,782,430 | | $ | 20,064,796 | | $ | 19,854,612 | |
Less: Ending goodwill | |
| 935,560 | |
| 935,560 | |
| 935,560 | |
Less: Ending amortizable intangibles | |
| 40,273 | |
| 43,312 | |
| 53,471 | |
Ending tangible assets (non-GAAP) | | $ | 18,806,597 | | $ | 19,085,924 | | $ | 18,865,581 | |
Tangible Common Equity | |
|
| |
|
| |
|
| |
Ending Equity (GAAP) | | $ | 2,498,335 | | $ | 2,710,071 | | $ | 2,709,732 | |
Less: Ending goodwill | |
| 935,560 | |
| 935,560 | |
| 935,560 | |
Less: Ending amortizable intangibles | |
| 40,273 | |
| 43,312 | |
| 53,471 | |
Less: Perpetual preferred stock | | | 166,357 | | | 166,357 | | | 166,357 | |
Ending tangible common equity (non-GAAP) | | $ | 1,356,145 | | $ | 1,564,842 | | $ | 1,554,344 | |
Average equity (GAAP) | | $ | 2,660,984 | | $ | 2,715,610 | | $ | 2,719,941 | |
Less: Average goodwill | |
| 935,560 | |
| 935,560 | |
| 935,560 | |
Less: Average amortizable intangibles | |
| 41,743 | |
| 44,866 | |
| 55,450 | |
Less: Average perpetual preferred stock | | | 166,356 | | | 166,356 | | | 166,356 | |
Average tangible common equity (non-GAAP) | | $ | 1,517,325 | | $ | 1,568,828 | | $ | 1,562,575 | |
Common equity to total assets (GAAP) | | | 11.79 | % | | 12.68 | % | | 12.81 | % |
Tangible common equity to tangible assets (non-GAAP) | |
| 7.21 | % |
| 8.20 | % |
| 8.24 | % |
Book value per share (GAAP) | | $ | 31.12 | | $ | 33.80 | | $ | 32.37 | |
Tangible book value per share (non-GAAP) | | $ | 18.10 | | $ | 20.79 | | $ | 19.78 | |
Adjusted operating measures exclude merger-relatedthe losses related to balance sheet repositioning (principally composed of losses on debt extinguishment), gains on sale of securities, as well as branch closing and facility consolidation costs unrelated to the Company’s normal operations. Such costs were only incurred during the second(principally composed of leases and third quarters of 2017; thus each of these operating measures is equivalent to the corresponding GAAP financial measure for the threeother assets write downs, as well as severance associated with branch closing and nine months ended September 30, 2016.corporate expense reduction initiatives). The Company believes these non-GAAP adjusted measures are useful toprovide investors as they exclude certain costs resulting from acquisition activity and allow investors to more clearly seewith important information about the combinedcontinuing economic results of the organization'sorganization’s operations. Prior periods in this Quarterly Report have been adjusted for previously announced branch closing and corporate expense reduction initiatives.
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The following table reconciles these non-GAAP financial measures from their respective U.S.the most directly comparable GAAP basisfinancial measures for each of the periods presented (dollars in thousands, except per share amounts):
| | | | | | | |
| | Three Months Ended |
| ||||
| | March 31, |
| ||||
|
| 2022 |
| 2021 |
| ||
Adjusted Operating Earnings & EPS | | | | | | | |
Net income (GAAP) | | $ | 43,690 | | $ | 56,189 | |
Plus: Net loss related to balance sheet repositioning, net of tax | | | — | | | 11,609 | |
Less: Gain on sale of securities, net of tax | | | — | | | 62 | |
Less: Gain on Visa, Inc. Class B common stock, net of tax | | | — | | | — | |
Plus: Branch closing and facility consolidation costs, net of tax | | | 4,351 | | | 730 | |
Adjusted operating earnings (non-GAAP) | | $ | 48,041 | | $ | 68,466 | |
Less: Dividends on preferred stock | | | 2,967 | | | 2,967 | |
Adjusted operating earnings available to common shareholders (non-GAAP) | | $ | 45,074 | | $ | 65,499 | |
| | | | | | | |
Weighted average common shares outstanding, diluted | |
| 75,556,127 | |
| 78,884,235 | |
Earnings per common share, diluted (GAAP) | | $ | 0.54 | | $ | 0.67 | |
Adjusted operating earnings per common share, diluted (non-GAAP) | | $ | 0.60 | | $ | 0.83 | |
| | | | | | | |
Adjusted operating measures exclude the amortization of intangible assets and the losses related to balance sheet repositioning, principally composed of losses on debt extinguishment and gains on sale of securities. The Company believes this adjusted measure provides investors with important information about the combined economic results of the organization’s operations. The adjusted operating efficiency ratio (FTE) excludes the amortization of intangible assets and losses related to balance sheet repositioning (principally composed of losses on debt extinguishment), as well as branch closing and facility consolidation costs. This measure is similar to the measure utilized by the Company when analyzing corporate performance and is also similar to the measure utilized for incentive compensation. Net interest income (FTE) and total adjusted revenue (FTE), which are used in computing net interest margin (FTE) and adjusted operating efficiency ratio (FTE), respectively, provide valuable additional insight into the net interest margin and the efficiency ratio by adjusting for differences in tax treatment of interest income sources. The entire FTE adjustment is attributable to interest income on earning assets, which is used in computing yield on earning assets. Interest expense and the related cost of interest-bearing liabilities and cost of funds ratios are not affected by the FTE components.
The following table reconciles non-GAAP financial measures from the most directly comparable GAAP financial measures for each of the periods presented (dollars in thousands):
| | | | | | | |
| | Three Months Ended |
| ||||
| | March 31, |
| ||||
|
| 2022 |
| 2021 |
| ||
Adjusted Operating Noninterest Expense, Noninterest Income & Efficiency Ratio | | | | | | | |
Noninterest expense (GAAP) | | $ | 105,321 | | $ | 111,937 | |
Less: Amortization of intangible assets | |
| 3,039 | |
| 3,730 | |
Less: Losses related to balance sheet repositioning | | | — | | | 14,695 | |
Less: Branch closing and facility consolidation costs | | | 5,508 | | | 924 | |
Adjusted operating noninterest expense (non-GAAP) | | $ | 96,774 | | $ | 92,588 | |
Noninterest income (GAAP) | | $ | 30,153 | | $ | 30,985 | |
Less: Gains on sale of securities | | | — | | | 78 | |
Adjusted operating noninterest income (non-GAAP) | | $ | 30,153 | | $ | 30,907 | |
Net interest income (FTE) (non-GAAP) | | $ | 134,267 | | $ | 137,951 | |
Adjusted operating noninterest income (non-GAAP) | | | 30,153 | | | 30,907 | |
Total adjusted revenue (FTE)(non-GAAP) | | $ | 164,420 | | $ | 168,858 | |
Efficiency ratio (GAAP) | |
| 65.38 | % |
| 67.48 | % |
Adjusted operating efficiency ratio (FTE) (non-GAAP) | |
| 58.86 | % |
| 54.83 | % |
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Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Interest Income (FTE) | |||||||||||||||
Interest Income (GAAP) | $ | 84,850 | $ | 74,433 | $ | 242,712 | $ | 217,964 | |||||||
FTE adjustment | 2,648 | 2,427 | 7,836 | 7,367 | |||||||||||
Interest Income FTE (non-GAAP) | $ | 87,498 | $ | 76,860 | $ | 250,548 | $ | 225,331 | |||||||
Average earning assets | $ | 8,167,919 | $ | 7,354,684 | $ | 7,922,944 | $ | 7,159,813 | |||||||
Yield on interest-earning assets (GAAP) | 4.12 | % | 4.03 | % | 4.10 | % | 4.07 | % | |||||||
Yield on interest-earning assets (FTE) (non-GAAP) | 4.25 | % | 4.16 | % | 4.23 | % | 4.20 | % | |||||||
Net Interest Income (FTE) | |||||||||||||||
Net Interest Income (GAAP) | $ | 71,198 | $ | 67,028 | $ | 206,765 | $ | 196,535 | |||||||
FTE adjustment | 2,648 | 2,427 | 7,836 | 7,367 | |||||||||||
Net Interest Income FTE (non-GAAP) | 73,846 | 69,455 | 214,601 | 203,902 | |||||||||||
Average earning assets | $ | 8,167,919 | $ | 7,354,684 | $ | 7,922,944 | $ | 7,159,813 | |||||||
Net interest margin (GAAP) | 3.46 | % | 3.63 | % | 3.49 | % | 3.67 | % | |||||||
Net interest margin (FTE) (non-GAAP) | 3.59 | % | 3.76 | % | 3.62 | % | 3.80 | % | |||||||
Tangible Assets | |||||||||||||||
Ending Assets (GAAP) | $ | 9,029,436 | $ | 8,258,230 | $ | 9,029,436 | $ | 8,258,230 | |||||||
Less: Ending goodwill | 298,191 | 298,191 | 298,191 | 298,191 | |||||||||||
Less: Ending amortizable intangibles | 16,017 | 22,343 | 16,017 | 22,343 | |||||||||||
Ending tangible assets (non-GAAP) | $ | 8,715,228 | $ | 7,937,696 | $ | 8,715,228 | $ | 7,937,696 | |||||||
Tangible Common Equity | |||||||||||||||
Ending Equity (GAAP) | $ | 1,041,371 | $ | 1,000,964 | $ | 1,041,371 | $ | 1,000,964 | |||||||
Less: Ending goodwill | 298,191 | 298,191 | 298,191 | 298,191 | |||||||||||
Less: Ending amortizable intangibles | 16,017 | 22,343 | 16,017 | 22,343 | |||||||||||
Ending tangible common equity (non-GAAP) | $ | 727,163 | $ | 680,430 | $ | 727,163 | $ | 680,430 | |||||||
Average equity (GAAP) | $ | 1,037,792 | $ | 996,668 | $ | 1,024,853 | $ | 991,097 | |||||||
Less: Average goodwill | 298,191 | 297,707 | 298,191 | 295,380 | |||||||||||
Less: Average amortizable intangibles | 16,681 | 22,653 | 18,184 | 22,249 | |||||||||||
Average tangible common equity (non-GAAP) | $ | 722,920 | $ | 676,308 | $ | 708,478 | $ | 673,468 | |||||||
ROE (GAAP) | 7.90 | % | 8.14 | % | 7.53 | % | 7.64 | % | |||||||
ROTCE (non-GAAP) | 11.34 | % | 12.00 | % | 10.90 | % | 11.25 | % | |||||||
Common equity to assets (GAAP) | 11.53 | % | 12.12 | % | 11.53 | % | 12.12 | % | |||||||
Tangible common equity to tangible assets (non-GAAP) | 8.34 | % | 8.57 | % | 8.34 | % | 8.57 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating Measures | |||||||||||||||
Net income (GAAP) | $ | 20,658 | $ | 20,401 | $ | 57,737 | $ | 56,699 | |||||||
Merger-related costs, net of tax | 661 | — | 3,020 | — | |||||||||||
Net operating earnings (non-GAAP) | $ | 21,319 | $ | 20,401 | $ | 60,757 | $ | 56,699 | |||||||
Weighted average common shares outstanding, diluted | 43,792,058 | 43,754,915 | 43,767,502 | 43,967,725 | |||||||||||
Earnings per common share, diluted (GAAP) | $ | 0.47 | $ | 0.47 | $ | 1.32 | $ | 1.29 | |||||||
Operating earnings per common share, diluted (non-GAAP) | $ | 0.49 | $ | 0.47 | $ | 1.39 | $ | 1.29 | |||||||
Average assets (GAAP) | $ | 8,973,964 | $ | 8,153,951 | $ | 8,730,815 | $ | 7,956,841 | |||||||
ROA (GAAP) | 0.91 | % | 1.00 | % | 0.88 | % | 0.95 | % | |||||||
Operating ROA (non-GAAP) | 0.94 | % | 1.00 | % | 0.93 | % | 0.95 | % | |||||||
Average common equity (GAAP) | $ | 1,037,792 | $ | 996,668 | $ | 1,024,853 | $ | 991,097 | |||||||
ROE (GAAP) | 7.90 | % | 8.14 | % | 7.53 | % | 7.64 | % | |||||||
Operating ROE (non-GAAP) | 8.15 | % | 8.14 | % | 7.93 | % | 7.64 | % | |||||||
Average tangible common equity (non-GAAP) | $ | 722,920 | $ | 676,308 | $ | 708,478 | $ | 673,468 | |||||||
ROTCE (non-GAAP) | 11.34 | % | 12.00 | % | 10.90 | % | 11.25 | % | |||||||
Operating ROTCE (non-GAAP) | 11.70 | % | 12.00 | % | 11.47 | % | 11.25 | % | |||||||
Noninterest expense (GAAP) | $ | 57,496 | $ | 56,913 | $ | 174,821 | $ | 166,436 | |||||||
Less: Merger-related costs | 732 | — | 3,476 | — | |||||||||||
Operating noninterest expense (non-GAAP) | $ | 56,764 | $ | 56,913 | $ | 171,345 | $ | 166,436 | |||||||
Net interest income (GAAP) | $ | 71,198 | $ | 67,028 | $ | 206,765 | $ | 196,535 | |||||||
Net interest income (FTE) (non-GAAP) | 73,846 | 69,455 | 214,601 | 203,902 | |||||||||||
Noninterest income (GAAP) | 17,536 | 18,950 | 54,430 | 52,857 | |||||||||||
Efficiency ratio (GAAP) | 64.80 | % | 66.19 | % | 66.93 | % | 66.74 | % | |||||||
Efficiency ratio (FTE) (non-GAAP) | 62.92 | % | 64.38 | % | 64.98 | % | 64.82 | % | |||||||
Operating efficiency ratio (FTE) (non-GAAP) | 62.12 | % | 64.38 | % | 63.69 | % | 64.82 | % | |||||||
Community Bank Segment Operating Measures | |||||||||||||||
Community bank segment net income (GAAP) | $ | 20,311 | $ | 19,616 | $ | 56,836 | $ | 55,321 | |||||||
Merger-related costs, net of tax | 661 | — | 3,020 | — | |||||||||||
Community bank segment net operating earnings (non-GAAP) | $ | 20,972 | $ | 19,616 | $ | 59,856 | $ | 55,321 | |||||||
Weighted average common shares outstanding, diluted | 43,792,058 | 43,754,915 | 43,767,502 | 43,967,725 | |||||||||||
Earnings per common share, diluted (GAAP) | $ | 0.46 | $ | 0.45 | $ | 1.30 | $ | 1.26 | |||||||
Operating earnings per common share, diluted (non-GAAP) | $ | 0.48 | $ | 0.45 | $ | 1.37 | $ | 1.26 | |||||||
Community bank segment noninterest expense (GAAP) | $ | 55,133 | $ | 54,353 | $ | 167,643 | $ | 158,964 | |||||||
Less: Merger-related costs | 732 | — | 3,476 | — | |||||||||||
Community bank segment operating noninterest expense (non-GAAP) | $ | 54,401 | $ | 54,353 | $ | 164,167 | $ | 158,964 |
PPP adjustment impact excludes the unforgiven portion of PPP loans. The Company believes LHFI (net of deferred fees and costs), excluding PPP is useful to investors as it provides more clarity on the Company’s organic growth.
The following table reconciles non-GAAP financial measures from the most directly comparable GAAP financial measures for each of the periods presented (dollars in thousands):
| | | | | | | | | | |
| | Three Months Ended | | |||||||
| | March 31, | | December 31, | | March 31, | | |||
| | 2022 | | 2021 | | 2021 | | |||
Adjusted Loans | | | | | | | | | | |
Loans held for investment (net of deferred fees and costs)(GAAP) | | $ | 13,459,349 | | $ | 13,195,843 | | $ | 14,272,280 | |
Less: PPP adjustments (net of deferred fees and costs) | | | 67,444 | | | 150,363 | | | 1,512,714 | |
Total adjusted loans (non-GAAP) | | $ | 13,391,905 | | $ | 13,045,480 | | $ | 12,759,566 | |
| | | | | | | | | | |
Average loans held for investment (net of deferred fees and costs) (GAAP) | | $ | 13,300,789 | | $ | 13,082,412 | | $ | 14,064,123 | |
Less: Average PPP adjustments (net of deferred fees and costs) | | | 103,041 | | | 288,204 | | | 1,309,326 | |
Total adjusted average loans (non-GAAP) | | $ | 13,197,748 | | $ | 12,794,208 | | $ | 12,754,797 | |
Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates, and equity prices. The Company’s market risk is composed primarily of interest rate risk. The ALCO of the Company is responsible for reviewing the interest rate sensitivity position of the Company and establishing policies to
Interest rate risk is monitored through the use of three complementary modeling tools: static gap analysis, earnings simulation modeling, and economic value simulation (net present value estimation). Each of these models measures changes in a variety of interest rate scenarios. While each of the interest rate risk models has limitations, taken together they represent a reasonably comprehensive view of the magnitude of interest rate risk in the Company, the distribution of risk along the yield curve, the level of risk through time, and the amount of exposure to changes in certain interest rate relationships. Static gap, which measures aggregate re-pricing values, is less utilized because it does not effectively measure the options risk impact on the Company and is not addressed here. Earnings simulation and economic value models, which more effectively measure the cash flow and optionality impacts, are utilized by management on a regular basis and are explained below.
The Company determines the overall magnitude of interest sensitivity risk and then formulates policies and practices governing asset generation and pricing, funding sources and pricing, and off-balance sheet commitments. These decisions are based on management’s expectations regarding future interest rate movements, the states of the national, regional and local economies, and other financial and business risk factors. The Company uses simulation modeling to measure and monitor the effect of various interest rate scenarios and business strategies on net interest income. This modeling reflects interest rate changes and the related impact on net interest income and net income over specified time horizons.
Earnings Simulation Analysis
Management uses simulation analysis to measure the sensitivity of net interest income to changes in interest rates. The model calculates an earnings estimate based on current and projected balances and rates. This method is subject to the accuracy of the assumptions that underlie the process, but it provides a better analysis of the sensitivity of earnings to changes in interest rates than other analyses, such as the static gap analysis discussed above.
Assumptions used in the model are derived from historical trends and management’s outlook and include loan and deposit growth rates and projected yields and rates. These assumptions may not materialize and unanticipated events and circumstances may occur. The model also does not take into account any future actions of management to mitigate the impact of interest rate changes. Such assumptions are monitored by management and periodically adjusted as appropriate. All maturities, calls, and prepayments in the securities portfolio are assumed to be reinvested in like instruments. Mortgage loans and mortgage-backed securitiesMBS prepayment assumptions are based on industry estimates of prepayment speeds for portfolios with similar coupon ranges and seasoning. Different interest rate scenarios and yield curves are used to measure the sensitivity of earnings to changing interest rates.
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Interest rates on different asset and liability accounts move differently when the prime rate changes and are reflected in the different rate scenarios.
The Company uses its simulation model to estimate earnings in rate environments where rates are instantaneously shocked up or down around a “most likely” rate scenario, based on implied forward rates.rates and futures curves. The analysis assesses the impact on net interest income over a 12 month12-month time horizon after an immediate increase or “shock” in rates, of 100 basis pointsbps up to 300 basis points. The shock down 200 or 300 basis points analysis is not as meaningful as interest rates across most of the yield curve are near historic lows and cannot decrease another 200 or 300 basis points.bps. The model, under all scenarios, does not drop the index below zero.
The following table represents the interest rate sensitivity on net interest income for the Company across the rate paths modeled for balances as of September 30, 2017March 31, 2022, December 31, 2021, and 2016 (dollars in thousands):
Change In Net Interest Income September 30, | |||||||||||
2017 | 2016 | ||||||||||
% | $ | % | $ | ||||||||
Change in Yield Curve: | |||||||||||
+300 basis points | 7.65 | 23,401 | 11.25 | 31,821 | |||||||
+200 basis points | 5.24 | 16,034 | 7.65 | 21,636 | |||||||
+100 basis points | 2.82 | 8,634 | 3.91 | 11,051 | |||||||
Most likely rate scenario | — | — | — | — | |||||||
-100 basis points | (3.21 | ) | (9,828 | ) | (3.30 | ) | (9,338 | ) | |||
-200 basis points | (6.69 | ) | (20,459 | ) | (4.66 | ) | (13,197 | ) | |||
-300 basis points | (7.04 | ) | (21,528 | ) | (4.76 | ) | (13,464 | ) |
| | | | | | | |
| | Change In Net Interest Income | |||||
| | March 31, | | December 31, | | March 31, | |
| | 2022 | | 2021 | | 2021 | |
|
| % |
| % |
| % |
|
Change in Yield Curve: |
|
|
|
| |
|
|
+300 basis points |
| 15.55 |
| 30.15 | | 14.71 | |
+200 basis points |
| 10.42 |
| 20.39 | | 9.80 | |
+100 basis points |
| 5.36 |
| 10.33 | | 4.76 | |
Most likely rate scenario |
| — |
| — | | — | |
-100 basis points |
| (7.40) |
| (9.20) | | (3.92) | |
-200 basis points |
| (14.17) |
| (13.62) | | (5.02) | |
Asset sensitivity indicates that in a rising interest rate environment, the Company’s net interest income would increase and in a decreasing interest rate environment, the Company’s net interest income would decrease. Liability sensitivity indicates that in a rising interest rate environment, the Company’s net interest income would decrease and in a decreasing interest rate environment, the Company’s net interest income would increase.
From a net interest income perspective, the Company was lessmore asset sensitive in a rising interest rate environment scenario whenas of March 31, 2022, compared to September 30, 2016its position as of March 31, 2021. This shift is in part due to the compositionchanging market characteristics of the balance sheetcertain loan and deposit products and in part due to the market characteristics of certain deposit products.various other balance sheet strategies. The Company would expect net interest income to increase with an immediate increase or shock in market rates. In the decreasing interest rate environments, the Company would expect a decline in net interest income as interest-earning assets re-price at lower rates and interest-bearing deposits remain at or near their floors. It should be noted that although net interest income simulation results are presented through the down 300 basis points interest rate environments, the Company does not believe the down 200 and 300 basis point scenarios are plausible given the current level of interest rates.
Economic Value Simulation
Economic value simulation is used to calculate the estimated fair value of assets and liabilities over different interest rate environments. Economic values are calculated based on discounted cash flow analysis. The net economic value of equity is the economic value of all assets minus the economic value of all liabilities. The change in net economic value over different rate environments is an indication of the longer-term earnings capability of the balance sheet. The same assumptions are used in the economic value simulation as in the earnings simulation. The economic value simulation uses instantaneous rate shocks to the balance sheet.
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The following chart reflects the estimated change in net economic value over different rate environments using economic value simulation for the balances at the quarterly periods ended September 30, 2017March 31, 2022, December 31, 2021, and 2016 (dollars in thousands):
Change In Economic Value of Equity September 30, | |||||||||||
2017 | 2016 | ||||||||||
% | $ | % | $ | ||||||||
Change in Yield Curve: | |||||||||||
+300 basis points | (1.11 | ) | (16,200 | ) | 2.67 | 35,364 | |||||
+200 basis points | (0.05 | ) | (800 | ) | 2.65 | 35,109 | |||||
+100 basis points | 0.41 | 5,960 | 1.85 | 24,533 | |||||||
Most likely rate scenario | — | — | — | — | |||||||
-100 basis points | (2.72 | ) | (39,795 | ) | (4.68 | ) | (61,889 | ) | |||
-200 basis points | (8.27 | ) | (120,822 | ) | (8.92 | ) | (117,988 | ) | |||
-300 basis points | (9.58 | ) | (139,886 | ) | (5.86 | ) | (77,480 | ) |
| | | | | | | |
| | Change In Economic Value of Equity | |||||
| | March 31, | | December 31, | | March 31, | |
| | 2022 | | 2021 | | 2021 | |
|
| % |
| % |
| % |
|
Change in Yield Curve: |
|
| |
| |
| |
+300 basis points |
| (9.59) | | (6.85) | | 5.79 | |
+200 basis points |
| (6.16) | | (3.55) | | 4.58 | |
+100 basis points |
| (2.90) | | (1.22) | | 2.86 | |
Most likely rate scenario |
| - | | — | | — | |
-100 basis points |
| 0.56 | | (4.82) | | (5.62) | |
-200 basis points |
| (3.93) | | (12.89) | | (7.29) | |
As of September 30, 2017,March 31, 2022, the Company wasCompany’s economic value of equity is generally less asset sensitive to marketin a rising interest rate fluctuations in the shock down 100, shock down 200 and shock up 100, 200, and 300 basis points scenarios whenenvironment compared to September 30, 2016. The Company believes thatits position as of March 31, 2021 primarily due to the shock down 200 or 300 basis points analyses are not as meaningful since interest rates across mostcomposition of the yield curve are near historic lowsConsolidated Balance Sheets and are not likelydue in part to decrease another 200 or 300 basis points. While management considers this scenario highly unlikely, the natural floor increases the Company's sensitivity in rates down scenarios.
Evaluation of Disclosure Controls and Procedures
Management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2022. The Company maintainsterm “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act, means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and to ensure that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2022, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.
In designing and evaluating itsthe Company’s disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control Over Financial Officer have concluded that the disclosure controls and procedures were effective at the reasonable assurance level.
Management has taken measures to maintain the internal control over financial reporting that occurred(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2017March 31, 2022. There have been no changes during the quarter ended March 31, 2022 that hashave materially affected, or isare reasonably likely to materially affect, the internal control over financial reporting.
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ITEM 1 – LEGAL PROCEEDINGS
In addition to the Rowe Lawsuit, in the ordinary course of its operations, the Company and its subsidiaries are parties to various other legal proceedings. Based on the information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in such other legal proceedings, in the aggregate, will not have a material adverse effect on the business or the financial condition or results of operations of the Company.
ITEM 1A – RISK FACTORS
During the quarter ended March 31, 2022, there have been no material changes from the risk factors previously disclosed under Part I, Item 1A. “Risk Factors” in the Company’s 2021 Annual Report on Form 10-K forReport.
An investment in the fiscal year ended December 31, 2016 andCompany’s securities involves risks. In addition to the Company'sother information set forth in this Quarterly Report, on Form 10-Q forincluding the quarter ended June 30, 2017.
(a) Sales of Unregistered Securities – None.
(b) Use of Proceeds – Not Applicable.
(c) Issuer Purchases of Securities - None.
Stock Repurchase Program; Other Repurchases
On May 4, 2021, the Company’s Board of Directors authorized a share repurchase program to purchase up to $125 million worth of the Company’s common stock through June 30, 2022 in open market transactions or privately negotiated transactions, which was fully utilized as of September 30, 2021. The Company repurchased an aggregate of approximately 3.4 million shares, at an average price of $36.99 per share, pursuant to this program.
On December 10, 2021, the Company’s Board of Directors authorized a new share repurchase program (the “Repurchase Program”) to purchase up to $100.0 million of the Company’s common stock through December 9, 2022 in open market transactions or privately negotiated transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and /or Rule 10b-18 under the Exchange Act. The Repurchase Program permits management to repurchase shares of the Company’s common stock from time to time at management’s discretion. The actual means and timing of any shares purchased under the Repurchase Program will depend on a variety of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal and regulatory requirements. The Repurchase Program does not obligate the Company to purchase any particular number of shares.
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The following information describes the Company’s common stock repurchases for the three months ended March 31, 2022:
| | | | | | | | | |
Period | | Total number of shares purchased(1) | | | Average price paid per share ($)(2) | | Total number of shares purchased as part of publicly announced plans or programs | | Approximate dollar value of shares that may yet be purchased under the plans or programs ($)(2) |
January 1 - January 31, 2022 | | 169,879 | | | 39.53 | | 156,303 | | 93,838,742 |
February 1 - February 28, 2022 | | 245,758 | | | 40.31 | | 199,383 | | 85,816,177 |
March 1 - March 31, 2022 | | 277,980 | | | 39.53 | | 274,005 | | 74,981,173 |
Total | | 693,617 | | | 39.80 | | 629,691 | | |
_________________________________________
(1) For the three months ended March 31, 2022, 63,926 shares were withheld upon vesting of restricted shares granted to employees of the Company in order to satisfy tax withholding obligations.
(2) These amounts include fees and commissions associated with the shares repurchased.
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The following exhibits are filed as part of this Form 10-QQuarterly Report and this list includes the Exhibit Index:
| | |
Exhibit No. | Description | |
| | |
2.1 | | |
| | |
2.2 | | Agreement and Plan of Reorganization, dated as of October 4, 2018, as amended on December 7, 2018, by and between Union Bankshares Corporation and Access National Corporation (incorporated by reference to Annex A to Form S-4/A Registration Statement filed on December 10, 2018; SEC file no. 333-228455). |
| | |
3.1 | | |
| | |
3.1.1 | | |
| | |
3.2 | | |
| | |
10.1 | | |
| | |
10.2 | | |
| | |
10.9 | | |
| | |
10.10 | | |
| | |
10.25 | | |
| | |
10.26 | | |
| | |
10.27 | | |
| | |
10.28 | | |
| | |
15.1 | | |
| | |
31.1 | | |
| | |
31.2 | | |
| | |
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32.1 | | |
| | |
101 | | Interactive data files formatted in Inline eXtensible Business Reporting Language for the quarter ended |
| | |
104 | | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline eXtensible Business Reporting Language (included with Exhibit 101). |
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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.
| | | |
| |||
Atlantic Union Bankshares Corporation | |||
| | ||
| (Registrant) | ||
| | ||
Date: | By: | /s/ John C. Asbury | |
| | John C. Asbury, | |
| | President and Chief Executive Officer | |
| | (principal executive officer) | |
| | | |
Date: | By: | /s/ Robert M. Gorman | |
| | Robert M. Gorman, | |
| | Executive Vice President and Chief Financial Officer | |
| | (principal financial and accounting officer) |
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