WASHINGTON,
FORM 10-Q
2019
North Carolina | 56-1421916 | ||||
(State or Other Jurisdiction of | |||||
Incorporation or Organization) | (I.R.S. Employer Identification Number) | ||||
300 SW Broad St., | Southern Pines, | North Carolina | 28387 | ||
(Address of Principal Executive Offices) | (Zip Code) | ||||
(Registrant's telephone number, including area code) | (910) | 246-2500 |
xLarge Accelerated FileroAccelerated FileroNon-Accelerated FileroSmaller Reporting Company
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).oEmerging growth company
☒ | Large Accelerated Filer | ☐ | Accelerated Filer |
☐ | Non-Accelerated Filer | ☐ | Smaller Reporting Company |
☐ | Emerging growth company |
Title of each class | Trading Symbol | Name of each exchange on which registered: |
Common Stock, No Par Value | FBNC | The Nasdaq Global Select Market |
Page 8940 58Part II. Other Information 596120172018 Annual Report on Form 10-K.
($ in thousands-unaudited) | June 30, 2018 | December 31, 2017 (audited) | June 30, 2017 | |||||||||
ASSETS | ||||||||||||
Cash and due from banks, noninterest-bearing | $ | 97,163 | 114,301 | 80,234 | ||||||||
Due from banks, interest-bearing | 462,972 | 375,189 | 337,326 | |||||||||
Total cash and cash equivalents | 560,135 | 489,490 | 417,560 | |||||||||
Securities available for sale | 334,068 | 343,270 | 207,496 | |||||||||
Securities held to maturity (fair values of $107,068, $118,998, and $129,697) | 108,265 | 118,503 | 127,866 | |||||||||
Presold mortgages in process of settlement | 9,311 | 12,459 | 13,071 | |||||||||
Loans | 4,149,390 | 4,042,369 | 3,375,976 | |||||||||
Allowance for loan losses | (23,298 | ) | (23,298 | ) | (24,025 | ) | ||||||
Net loans | 4,126,092 | 4,019,071 | 3,351,951 | |||||||||
Premises and equipment | 113,774 | 116,233 | 96,605 | |||||||||
Accrued interest receivable | 13,930 | 14,094 | 10,830 | |||||||||
Goodwill | 232,458 | 233,070 | 139,124 | |||||||||
Other intangible assets | 23,152 | 24,437 | 12,132 | |||||||||
Foreclosed real estate | 8,296 | 12,571 | 11,196 | |||||||||
Bank-owned life insurance | 100,413 | 99,162 | 87,501 | |||||||||
Other assets | 87,706 | 64,677 | 53,288 | |||||||||
Total assets | $ | 5,717,600 | 5,547,037 | 4,528,620 | ||||||||
LIABILITIES | ||||||||||||
Deposits: Noninterest bearing checking accounts | $ | 1,252,214 | 1,196,161 | 990,004 | ||||||||
Interest bearing checking accounts | 915,666 | 884,254 | 728,973 | |||||||||
Money market accounts | 1,021,659 | 984,945 | 782,963 | |||||||||
Savings accounts | 440,475 | 454,860 | 411,814 | |||||||||
Time deposits of $100,000 or more | 647,206 | 593,123 | 479,839 | |||||||||
Other time deposits | 276,401 | 293,612 | 250,737 | |||||||||
Total deposits | 4,553,621 | 4,406,955 | 3,644,330 | |||||||||
Borrowings | 407,076 | 407,543 | 355,405 | |||||||||
Accrued interest payable | 1,651 | 1,235 | 1,014 | |||||||||
Other liabilities | 30,530 | 38,325 | 27,220 | |||||||||
Total liabilities | 4,992,878 | 4,854,058 | 4,027,969 | |||||||||
Commitments and contingencies | ||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||
Preferred stock, no par value per share. Authorized: 5,000,000 shares | ||||||||||||
Series C, convertible, issued & outstanding: none, none, and none | — | — | — | |||||||||
Common stock, no par value per share. Authorized: 40,000,000 shares | ||||||||||||
Issued & outstanding: 29,702,912, 29,639,374, and 24,678,295 shares | 434,117 | 432,794 | 262,901 | |||||||||
Retained earnings | 301,800 | 264,331 | 240,682 | |||||||||
Stock in rabbi trust assumed in acquisition | (3,214 | ) | (3,581 | ) | (4,257 | ) | ||||||
Rabbi trust obligation | 3,214 | 3,581 | 4,257 | |||||||||
Accumulated other comprehensive income (loss) | (11,195 | ) | (4,146 | ) | (2,932 | ) | ||||||
Total shareholders’ equity | 724,722 | 692,979 | 500,651 | |||||||||
Total liabilities and shareholders’ equity | $ | 5,717,600 | 5,547,037 | 4,528,620 |
($ in thousands) | June 30, 2019 (unaudited) | December 31, 2018 | June 30, 2018 (unaudited) | ||||||
ASSETS | |||||||||
Cash and due from banks, noninterest-bearing | $ | 52,679 | 56,050 | 97,163 | |||||
Due from banks, interest-bearing | 286,781 | 406,848 | 462,972 | ||||||
Total cash and cash equivalents | 339,460 | 462,898 | 560,135 | ||||||
Securities available for sale | 691,971 | 501,351 | 334,068 | ||||||
Securities held to maturity (fair values of $79,044, $99,906, and $107,068) | 79,050 | 101,237 | 108,265 | ||||||
Presold mortgages in process of settlement | 6,222 | 4,279 | 9,311 | ||||||
Loans | 4,339,497 | 4,249,064 | 4,149,390 | ||||||
Allowance for loan losses | (20,789 | ) | (21,039 | ) | (23,298 | ) | |||
Net loans | 4,318,708 | 4,228,025 | 4,126,092 | ||||||
Premises and equipment | 136,901 | 119,000 | 113,774 | ||||||
Accrued interest receivable | 16,909 | 16,004 | 13,930 | ||||||
Goodwill | 234,368 | 234,368 | 232,458 | ||||||
Other intangible assets | 19,401 | 21,112 | 23,152 | ||||||
Foreclosed properties | 5,107 | 7,440 | 8,296 | ||||||
Bank-owned life insurance | 103,154 | 101,878 | 100,413 | ||||||
Other assets | 60,788 | 66,524 | 87,706 | ||||||
Total assets | $ | 6,012,039 | 5,864,116 | 5,717,600 | |||||
LIABILITIES | |||||||||
Deposits: Noninterest bearing checking accounts | $ | 1,441,064 | 1,320,131 | 1,252,214 | |||||
Interest bearing checking accounts | 931,945 | 916,374 | 915,666 | ||||||
Money market accounts | 1,104,052 | 1,035,523 | 1,021,659 | ||||||
Savings accounts | 413,065 | 432,389 | 440,475 | ||||||
Time deposits of $100,000 or more | 690,734 | 690,922 | 647,206 | ||||||
Other time deposits | 262,194 | 264,000 | 276,401 | ||||||
Total deposits | 4,843,054 | 4,659,339 | 4,553,621 | ||||||
Borrowings | 301,140 | 406,609 | 407,076 | ||||||
Accrued interest payable | 2,258 | 1,976 | 1,651 | ||||||
Other liabilities | 50,418 | 31,962 | 30,530 | ||||||
Total liabilities | 5,196,870 | 5,099,886 | 4,992,878 | ||||||
Commitments and contingencies | |||||||||
SHAREHOLDERS’ EQUITY | |||||||||
Preferred stock, no par value per share. Authorized: 5,000,000 shares | |||||||||
Issued & outstanding: none, none, and none | — | — | — | ||||||
Common stock, no par value per share. Authorized: 40,000,000 shares | |||||||||
Issued & outstanding: 29,717,223, 29,724,874, and 29,702,912 shares | 432,533 | 434,453 | 434,117 | ||||||
Retained earnings | 380,748 | 341,738 | 301,800 | ||||||
Stock in rabbi trust assumed in acquisition | (2,866 | ) | (3,235 | ) | (3,214 | ) | |||
Rabbi trust obligation | 2,866 | 3,235 | 3,214 | ||||||
Accumulated other comprehensive income (loss) | 1,888 | (11,961 | ) | (11,195 | ) | ||||
Total shareholders’ equity | 815,169 | 764,230 | 724,722 | ||||||
Total liabilities and shareholders’ equity | $ | 6,012,039 | 5,864,116 | 5,717,600 |
($ in thousands, except share data-unaudited) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
INTEREST INCOME | ||||||||||||
Interest and fees on loans | $ | 55,652 | 51,451 | 109,612 | 101,621 | |||||||
Interest on investment securities: | ||||||||||||
Taxable interest income | 4,993 | 2,465 | 9,730 | 5,051 | ||||||||
Tax-exempt interest income | 271 | 368 | 608 | 748 | ||||||||
Other, principally overnight investments | 2,106 | 2,451 | 4,807 | 4,376 | ||||||||
Total interest income | 63,022 | 56,735 | 124,757 | 111,796 | ||||||||
INTEREST EXPENSE | ||||||||||||
Savings, checking and money market accounts | 2,335 | 1,132 | 4,344 | 2,111 | ||||||||
Time deposits of $100,000 or more | 3,522 | 1,850 | 6,700 | 3,325 | ||||||||
Other time deposits | 467 | 251 | 857 | 470 | ||||||||
Borrowings | 2,289 | 2,270 | 5,086 | 4,151 | ||||||||
Total interest expense | 8,613 | 5,503 | 16,987 | 10,057 | ||||||||
Net interest income | 54,409 | 51,232 | 107,770 | 101,739 | ||||||||
Provision (reversal) for loan losses | (308 | ) | (710 | ) | 192 | (4,369 | ) | |||||
Net interest income after provision for loan losses | 54,717 | 51,942 | 107,578 | 106,108 | ||||||||
NONINTEREST INCOME | ||||||||||||
Service charges on deposit accounts | 3,210 | 3,122 | 6,155 | 6,385 | ||||||||
Other service charges, commissions and fees | 5,786 | 4,674 | 11,034 | 9,159 | ||||||||
Fees from presold mortgage loans | 857 | 796 | 1,402 | 1,655 | ||||||||
Commissions from sales of insurance and financial products | 2,204 | 2,119 | 4,233 | 4,059 | ||||||||
SBA consulting fees | 921 | 1,126 | 2,184 | 2,267 | ||||||||
SBA loan sale gains | 3,069 | 2,598 | 5,131 | 6,400 | ||||||||
Bank-owned life insurance income | 631 | 628 | 1,277 | 1,251 | ||||||||
Foreclosed property gains (losses), net | (381 | ) | (99 | ) | (626 | ) | (387 | ) | ||||
Other gains (losses), net | (308 | ) | 908 | (226 | ) | 912 | ||||||
Total noninterest income | 15,989 | 15,872 | 30,564 | 31,701 | ||||||||
NONINTEREST EXPENSES | ||||||||||||
Salaries expense | 19,732 | 18,446 | 38,697 | 37,844 | ||||||||
Employee benefits expense | 4,418 | 4,084 | 9,006 | 8,691 | ||||||||
Total personnel expense | 24,150 | 22,530 | 47,703 | 46,535 | ||||||||
Occupancy expense | 2,729 | 2,543 | 5,483 | 5,345 | ||||||||
Equipment related expenses | 1,183 | 1,241 | 2,552 | 2,493 | ||||||||
Merger and acquisition expenses | 103 | 640 | 213 | 3,401 | ||||||||
Intangibles amortization expense | 1,242 | 1,506 | 2,574 | 3,066 | ||||||||
Other operating expenses | 11,032 | 10,174 | 21,185 | 21,280 | ||||||||
Total noninterest expenses | 40,439 | 38,634 | 79,710 | 82,120 | ||||||||
Income before income taxes | 30,267 | 29,180 | 58,432 | 55,689 | ||||||||
Income tax expense | 6,408 | 6,450 | 12,288 | 12,286 | ||||||||
Net income | $ | 23,859 | 22,730 | 46,144 | 43,403 | |||||||
Earnings per common share: | ||||||||||||
Basic | $ | 0.80 | 0.77 | 1.55 | 1.47 | |||||||
Diluted | 0.80 | 0.77 | 1.55 | 1.46 | ||||||||
Dividends declared per common share | $ | 0.12 | 0.10 | 0.24 | 0.20 | |||||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 29,626,931 | 29,544,747 | 29,607,074 | 29,539,308 | ||||||||
Diluted | 29,796,941 | 29,632,738 | 29,808,859 | 29,630,822 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
($ in thousands-unaudited) | 2019 | 2018 | 2019 | 2018 | ||||||||
Net income | $ | 23,859 | 22,730 | 46,144 | 43,403 | |||||||
Other comprehensive income (loss): | ||||||||||||
Unrealized gains (losses) on securities available for sale: | ||||||||||||
Unrealized holding gains (losses) arising during the period, pretax | 11,701 | (2,012 | ) | 17,604 | (9,302 | ) | ||||||
Tax (expense) benefit | (2,714 | ) | 471 | (4,094 | ) | 2,174 | ||||||
Postretirement Plans: | ||||||||||||
Amortization of unrecognized net actuarial loss | 228 | 51 | 456 | 103 | ||||||||
Tax benefit | (63 | ) | (12 | ) | (117 | ) | (24 | ) | ||||
Other comprehensive income (loss) | 9,152 | (1,502 | ) | 13,849 | (7,049 | ) | ||||||
Comprehensive income | $ | 33,011 | 21,228 | 59,993 | 36,354 |
($ in thousands, except per share - unaudited) | Common Stock | Retained Earnings | Stock in Rabbi Trust Assumed in Acquisition | Rabbi Trust Obligation | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||
Shares | Amount | ||||||||||||||||||||
Three Months Ended June 30, 2018 | |||||||||||||||||||||
Balances, April 1, 2018 | 29,661 | $ | 433,305 | 282,038 | (3,588 | ) | 3,588 | (9,693 | ) | 705,650 | |||||||||||
Net income | 22,730 | 22,730 | |||||||||||||||||||
Cash dividends declared ($0.10 per common share) | (2,968 | ) | (2,968 | ) | |||||||||||||||||
Change in Rabbi Trust Obligation | 374 | (374 | ) | — | |||||||||||||||||
Stock option exercises | 17 | 216 | 216 | ||||||||||||||||||
Stock withheld for payment of taxes | (4 | ) | — | — | |||||||||||||||||
Stock-based compensation | 29 | 596 | 596 | ||||||||||||||||||
Other comprehensive income (loss) | (1,502 | ) | (1,502 | ) | |||||||||||||||||
Balances, June 30, 2018 | 29,703 | $ | 434,117 | 301,800 | (3,214 | ) | 3,214 | (11,195 | ) | 724,722 | |||||||||||
Three Months Ended June 30, 2019 | |||||||||||||||||||||
Balances, April 1, 2019 | 29,746 | 434,948 | 360,455 | (3,245 | ) | 3,245 | (7,264 | ) | 788,139 | ||||||||||||
Net income | 23,859 | 23,859 | |||||||||||||||||||
Cash dividends declared ($0.12 per common share) | (3,566 | ) | (3,566 | ) | |||||||||||||||||
Change in Rabbi Trust Obligation | 379 | (379 | ) | — | |||||||||||||||||
Equity issued related to acquisition earn-out | 78 | 3,070 | 3,070 | ||||||||||||||||||
Stock repurchases | (182 | ) | (6,524 | ) | (6,524 | ) | |||||||||||||||
Stock option exercises | 9 | 129 | 129 | ||||||||||||||||||
Stock-based compensation | 65 | 910 | 910 | ||||||||||||||||||
Other comprehensive income (loss) | 9,152 | 9,152 | |||||||||||||||||||
Balances, June 30, 2019 | 29,717 | $ | 432,533 | 380,748 | (2,866 | ) | 2,866 | 1,888 | 815,169 |
($ in thousands, except per share - unaudited) | Common Stock | Retained Earnings | Stock in Rabbi Trust Assumed in Acquisition | Rabbi Trust Obligation | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||
Shares | Amount | ||||||||||||||||||||
Six Months Ended June 30, 2018 | |||||||||||||||||||||
Balances, January 1, 2018 | 29,639 | $ | 432,794 | 264,331 | (3,581 | ) | 3,581 | (4,146 | ) | 692,979 | |||||||||||
Net income | 43,403 | 43,403 | |||||||||||||||||||
Cash dividends declared ($0.20 per common share) | (5,934 | ) | (5,934 | ) | |||||||||||||||||
Change in Rabbi Trust Obligation | 367 | (367 | ) | — | |||||||||||||||||
Stock option exercises | 25 | 324 | 324 | ||||||||||||||||||
Stock withheld for payment of taxes | (4 | ) | — | — | |||||||||||||||||
Stock-based compensation | 43 | 999 | 999 | ||||||||||||||||||
Other comprehensive income (loss) | (7,049 | ) | (7,049 | ) | |||||||||||||||||
June 30, 2018 | 29,703 | $ | 434,117 | 301,800 | (3,214 | ) | 3,214 | (11,195 | ) | 724,722 | |||||||||||
Six Months Ended June 30, 2019 | |||||||||||||||||||||
Balances, January 1, 2019 | 29,725 | 434,453 | 341,738 | (3,235 | ) | 3,235 | (11,961 | ) | 764,230 | ||||||||||||
Net income | 46,144 | 46,144 | |||||||||||||||||||
Cash dividends declared ($0.24 per common share) | (7,134 | ) | (7,134 | ) | |||||||||||||||||
Change in Rabbi Trust Obligation | 369 | (369 | ) | — | |||||||||||||||||
Equity issued related to acquisition earnout | 78 | 3,070 | 3,070 | ||||||||||||||||||
Stock repurchases | (182 | ) | (6,524 | ) | (6,524 | ) | |||||||||||||||
Stock option exercises | 9 | 129 | 129 | ||||||||||||||||||
Stock withheld for payment of taxes | (2 | ) | (91 | ) | (91 | ) | |||||||||||||||
Stock-based compensation | 89 | 1,496 | 1,496 | ||||||||||||||||||
Other comprehensive income (loss) | 13,849 | 13,849 | |||||||||||||||||||
Balances, June 30, 2019 | 29,717 | $ | 432,533 | 380,748 | (2,866 | ) | 2,866 | 1,888 | 815,169 |
Six Months Ended June 30, | ||||||
($ in thousands-unaudited) | 2019 | 2018 | ||||
Cash Flows From Operating Activities | ||||||
Net income | $ | 46,144 | 43,403 | |||
Reconciliation of net income to net cash provided by operating activities: | ||||||
Provision (reversal) for loan losses | 192 | (4,369 | ) | |||
Net security premium amortization | 1,104 | 1,476 | ||||
Loan discount accretion | (3,149 | ) | (4,407 | ) | ||
Other purchase accounting accretion and amortization, net | (18 | ) | (125 | ) | ||
Foreclosed property (gains) losses and write-downs, net | 626 | 387 | ||||
Other losses (gains) | 226 | (912 | ) | |||
Increase in net deferred loan costs | (485 | ) | (955 | ) | ||
Depreciation of premises and equipment | 2,886 | 2,859 | ||||
Amortization of operating lease right-of-use assets | 911 | — | ||||
Repayments of lease obligations | (1,198 | ) | — | |||
Stock-based compensation expense | 1,202 | 827 | ||||
Amortization of intangible assets | 2,574 | 3,066 | ||||
Amortization of SBA servicing assets | 621 | 351 | ||||
Fees/gains from sale of presold mortgages and SBA loans | (6,533 | ) | (8,055 | ) | ||
Origination of presold mortgage loans in process of settlement | (53,390 | ) | (70,056 | ) | ||
Proceeds from sales of presold mortgage loans in process of settlement | 52,878 | 74,729 | ||||
Origination of SBA loans for sale | (91,323 | ) | (110,116 | ) | ||
Proceeds from sales of SBA loans | 73,313 | 88,811 | ||||
(Increase) decrease in accrued interest receivable | (905 | ) | 164 | |||
Decrease (increase) in other assets | 80 | (14,988 | ) | |||
Increase in accrued interest payable | 282 | 416 | ||||
Decrease in other liabilities | (1,382 | ) | (7,504 | ) | ||
Net cash provided (used) by operating activities | 24,656 | (4,998 | ) | |||
Cash Flows From Investing Activities | ||||||
Purchases of securities available for sale | (256,609 | ) | (18,850 | ) | ||
Proceeds from maturities/issuer calls of securities available for sale | 82,952 | 17,835 | ||||
Proceeds from maturities/issuer calls of securities held to maturity | 21,725 | 9,679 | ||||
Redemptions (purchases) of FRB and FHLB stock, net | 4,207 | (6,099 | ) | |||
Net increase in loans | (67,139 | ) | (73,471 | ) | ||
Proceeds from sales of foreclosed properties | 3,262 | 4,619 | ||||
Purchases of premises and equipment | (1,968 | ) | (1,959 | ) | ||
Proceeds from sales of premises and equipment | 240 | 2,579 | ||||
Net cash used by investing activities | (213,330 | ) | (65,667 | ) | ||
Cash Flows From Financing Activities | ||||||
Net increase in deposits | 183,823 | 146,882 | ||||
Net decrease in borrowings | (105,559 | ) | (558 | ) | ||
Cash dividends paid – common stock | (6,542 | ) | (5,338 | ) | ||
Repurchases of common stock | (6,524 | ) | — | |||
Proceeds from stock option exercises | 129 | 324 | ||||
Stock withheld for payment of taxes | (91 | ) | — | |||
Net cash provided by financing activities | 65,236 | 141,310 | ||||
(Decrease) increase in cash and cash equivalents | (123,438 | ) | 70,645 | |||
Cash and cash equivalents, beginning of period | 462,898 | 489,490 | ||||
Cash and cash equivalents, end of period | $ | 339,460 | 560,135 | |||
Supplemental Disclosures of Cash Flow Information: | ||||||
Cash paid (received) during the period for: | ||||||
Interest | $ | 16,705 | 9,641 | |||
Income taxes | 13,196 | 10,190 | ||||
Non-cash transactions: | ||||||
Unrealized gain (loss) on securities available for sale, net of taxes | 13,510 | (7,128 | ) | |||
Foreclosed loans transferred to other real estate | 1,555 | 1,913 | ||||
Initial recognition of operating lease right-of-use assets | 19,459 | — | ||||
Initial recognition of operating lease liabilities | 19,459 | — |
Consolidated Statements of Income
($ in thousands, except share data-unaudited) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
INTEREST INCOME | ||||||||||||||||
Interest and fees on loans | $ | 51,451 | 39,656 | 101,621 | 73,359 | |||||||||||
Interest on investment securities: | ||||||||||||||||
Taxable interest income | 2,465 | 1,710 | 5,051 | 3,265 | ||||||||||||
Tax-exempt interest income | 368 | 427 | 748 | 870 | ||||||||||||
Other, principally overnight investments | 2,451 | 1,034 | 4,376 | 1,801 | ||||||||||||
Total interest income | 56,735 | 42,827 | 111,796 | 79,295 | ||||||||||||
INTEREST EXPENSE | ||||||||||||||||
Savings, checking and money market accounts | 1,132 | 685 | 2,111 | 1,207 | ||||||||||||
Time deposits of $100,000 or more | 1,850 | 874 | 3,325 | 1,588 | ||||||||||||
Other time deposits | 251 | 173 | 470 | 339 | ||||||||||||
Borrowings | 2,270 | 1,179 | 4,151 | 1,949 | ||||||||||||
Total interest expense | 5,503 | 2,911 | 10,057 | 5,083 | ||||||||||||
Net interest income | 51,232 | 39,916 | 101,739 | 74,212 | ||||||||||||
Provision (reversal) for loan losses | (710 | ) | — | (4,369 | ) | 723 | ||||||||||
Net interest income after provision for loan losses | 51,942 | 39,916 | 106,108 | 73,489 | ||||||||||||
NONINTEREST INCOME | ||||||||||||||||
Service charges on deposit accounts | 3,122 | 2,966 | 6,385 | 5,580 | ||||||||||||
Other service charges, commissions and fees | 4,913 | 3,554 | 9,510 | 6,727 | ||||||||||||
Fees from presold mortgage loans | 796 | 1,511 | 1,655 | 2,279 | ||||||||||||
Commissions from sales of insurance and financial products | 2,119 | 1,038 | 4,059 | 1,878 | ||||||||||||
SBA consulting fees | 1,126 | 1,050 | 2,267 | 2,310 | ||||||||||||
SBA loan sale gains | 2,598 | 927 | 6,400 | 1,549 | ||||||||||||
Bank-owned life insurance income | 628 | 580 | 1,251 | 1,088 | ||||||||||||
Foreclosed property gains (losses), net | (99 | ) | (248 | ) | (387 | ) | (223 | ) | ||||||||
Securities gains (losses), net | — | — | — | (235 | ) | |||||||||||
Other gains (losses), net | 908 | 497 | 912 | 731 | ||||||||||||
Total noninterest income | 16,111 | 11,875 | 32,052 | 21,684 | ||||||||||||
NONINTEREST EXPENSES | ||||||||||||||||
Salaries expense | 18,446 | 16,299 | 37,844 | 30,249 | ||||||||||||
Employee benefits expense | 4,084 | 4,042 | 8,691 | 7,952 | ||||||||||||
Total personnel expense | 22,530 | 20,341 | 46,535 | 38,201 | ||||||||||||
Occupancy expense | 2,543 | 2,358 | 5,345 | 4,542 | ||||||||||||
Equipment related expenses | 1,241 | 1,363 | 2,493 | 2,421 | ||||||||||||
Merger and acquisition expenses | 640 | 1,122 | 3,401 | 3,495 | ||||||||||||
Intangibles amortization expense | 1,745 | 1,031 | 3,417 | 1,607 | ||||||||||||
Other operating expenses | 10,174 | 8,869 | 21,280 | 16,890 | ||||||||||||
Total noninterest expenses | 38,873 | 35,084 | 82,471 | 67,156 | ||||||||||||
Income before income taxes | 29,180 | 16,707 | 55,689 | 28,017 | ||||||||||||
Income tax expense | 6,450 | 5,553 | 12,286 | 9,308 | ||||||||||||
Net income available to common shareholders | $ | 22,730 | 11,154 | 43,403 | 18,709 | |||||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.77 | 0.45 | 1.47 | 0.80 | |||||||||||
Diluted | 0.77 | 0.45 | 1.46 | 0.80 | ||||||||||||
Dividends declared per common share | $ | 0.10 | 0.08 | 0.20 | 0.16 | |||||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 29,544,747 | 24,593,307 | 29,539,308 | 23,288,635 | ||||||||||||
Diluted | 29,632,738 | 24,671,550 | 29,630,822 | 23,368,503 |
See accompanying notes to consolidated financial statements.
Page 5
First Bancorp and Subsidiaries
Consolidated Statements of Comprehensive Income
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
($ in thousands-unaudited) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 22,730 | 11,154 | 43,403 | 18,709 | |||||||||||
Other comprehensive income (loss): | ||||||||||||||||
Unrealized gains (losses) on securities available for sale: | ||||||||||||||||
Unrealized holding gains (losses) arising during the period, pretax | (2,012 | ) | 1,989 | (9,302 | ) | 3,102 | ||||||||||
Tax (expense) benefit | 471 | (737 | ) | 2,174 | (1,144 | ) | ||||||||||
Reclassification to realized (gains) losses | — | — | — | 235 | ||||||||||||
Tax expense (benefit) | — | — | — | (87 | ) | |||||||||||
Postretirement Plans: | ||||||||||||||||
Amortization of unrecognized net actuarial (gain) loss | 51 | 54 | 103 | 105 | ||||||||||||
Tax expense (benefit) | (12 | ) | (16 | ) | (24 | ) | (36 | ) | ||||||||
Other comprehensive income (loss) | (1,502 | ) | 1,290 | (7,049 | ) | 2,175 | ||||||||||
Comprehensive income | $ | 21,228 | 12,444 | 36,354 | 20,884 | |||||||||||
See accompanying notes to consolidated financial statements.
Page 6
First Bancorp and Subsidiaries
Consolidated Statements of Shareholders’ Equity
(In thousands, except per share - unaudited) | Common Stock | Retained | Stock in Rabbi Trust Assumed in Acquisi- | Rabbi Trust | Accumulated Other Compre- hensive Income | Total Share- holders’ | ||||||||||||||||||||||
Shares | Amount | Earnings | tion | Obligation | (Loss) | Equity | ||||||||||||||||||||||
Balances, January 1, 2017 | 20,845 | $ | 147,287 | 225,921 | — | — | (5,107 | ) | 368,101 | |||||||||||||||||||
Net income | 18,709 | 18,709 | ||||||||||||||||||||||||||
Cash dividends declared ($0.16 per common share) | (3,948 | ) | (3,948 | ) | ||||||||||||||||||||||||
Equity issued pursuant to acquisition | 3,799 | 114,478 | (7,688 | ) | 7,688 | 114,478 | ||||||||||||||||||||||
Payment of deferred fees | 3,431 | (3,431 | ) | — | ||||||||||||||||||||||||
Stock option exercises | 16 | 287 | 287 | |||||||||||||||||||||||||
Stock-based compensation | 18 | 849 | 849 | |||||||||||||||||||||||||
Other comprehensive income (loss) | 2,175 | 2,175 | ||||||||||||||||||||||||||
Balances, June 30, 2017 | 24,678 | $ | 262,901 | 240,682 | (4,257 | ) | 4,257 | (2,932 | ) | 500,651 | ||||||||||||||||||
Balances, January 1, 2018 | 29,639 | $ | 432,794 | 264,331 | (3,581 | ) | 3,581 | (4,146 | ) | 692,979 | ||||||||||||||||||
Net income | 43,403 | 43,403 | ||||||||||||||||||||||||||
Cash dividends declared ($0.20 per common share) | (5,934 | ) | (5,934 | ) | ||||||||||||||||||||||||
Payment of deferred fees | 367 | (367 | ) | — | ||||||||||||||||||||||||
Stock option exercises | 25 | 324 | 324 | |||||||||||||||||||||||||
Stock withheld for payment of taxes | (4 | ) | — | — | ||||||||||||||||||||||||
Stock-based compensation | 43 | 999 | 999 | |||||||||||||||||||||||||
Other comprehensive income (loss) | (7,049 | ) | (7,049 | ) | ||||||||||||||||||||||||
Balances, June 30, 2018 | 29,703 | $ | 434,117 | 301,800 | (3,214 | ) | 3,214 | (11,195 | ) | 724,722 |
See accompanying notes to consolidated financial statements.
Page 7
First Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
Six Months Ended June 30, | ||||||||
($ in thousands-unaudited) | 2018 | 2017 | ||||||
Cash Flows From Operating Activities | ||||||||
Net income | $ | 43,403 | 18,709 | |||||
Reconciliation of net income to net cash provided (used) by operating activities: | ||||||||
Provision (reversal) for loan losses | (4,369 | ) | 723 | |||||
Net security premium amortization | 1,476 | 1,470 | ||||||
Loan discount accretion | (4,407 | ) | (3,328 | ) | ||||
Purchase accounting accretion and amortization, net | (125 | ) | (122 | ) | ||||
Foreclosed property (gains) losses and write-downs, net | 387 | 223 | ||||||
Loss (gain) on securities available for sale | — | 235 | ||||||
Other losses (gains) | (912 | ) | (731 | ) | ||||
Decrease (increase) in net deferred loan fees | (955 | ) | 759 | |||||
Depreciation of premises and equipment | 2,859 | 2,708 | ||||||
Stock-based compensation expense | 827 | 683 | ||||||
Amortization of intangible assets | 3,417 | 1,607 | ||||||
Fees/gains from sale of presold mortgages and SBA loans | (8,055 | ) | (3,828 | ) | ||||
Origination of presold mortgages in process of settlement | (70,056 | ) | (109,454 | ) | ||||
Proceeds from sales of presold mortgages in process of settlement | 74,729 | 107,986 | ||||||
Origination of SBA loans for sale | (110,116 | ) | (27,432 | ) | ||||
Proceeds from sales of SBA loans | 88,811 | 22,260 | ||||||
(Increase) decrease in accrued interest receivable | 164 | (27 | ) | |||||
(Increase) decrease in other assets | (14,988 | ) | 2,810 | |||||
Increase in accrued interest payable | 416 | 211 | ||||||
Decrease in other liabilities | (7,504 | ) | (11,886 | ) | ||||
Net cash provided (used) by operating activities | (4,998 | ) | 3,576 | |||||
Cash Flows From Investing Activities | ||||||||
Purchases of securities available for sale | (18,850 | ) | (29,809 | ) | ||||
Purchases of securities held to maturity | — | (291 | ) | |||||
Proceeds from maturities/issuer calls of securities available for sale | 17,835 | 15,497 | ||||||
Proceeds from maturities/issuer calls of securities held to maturity | 9,679 | 13,683 | ||||||
Proceeds from sales of securities available for sale | — | 45,601 | ||||||
Purchases of Federal Reserve and Federal Home Loan Bank stock, net | (6,099 | ) | (6,527 | ) | ||||
Net increase in loans | (73,471 | ) | (162,197 | ) | ||||
Proceeds from sales of foreclosed real estate | 4,619 | 4,610 | ||||||
Purchases of premises and equipment | (1,959 | ) | (2,135 | ) | ||||
Proceeds from sales of premises and equipment | 2,579 | — | ||||||
Net cash received in acquisition | — | 56,185 | ||||||
Net cash used by investing activities | (65,667 | ) | (65,383 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Net increase in deposits | 146,882 | 111,756 | ||||||
Net increase (decrease) in borrowings | (558 | ) | 64,973 | |||||
Cash dividends paid – common stock | (5,338 | ) | (3,642 | ) | ||||
Proceeds from stock option exercises | 324 | 287 | ||||||
Net cash provided by financing activities | 141,310 | 173,374 | ||||||
Increase in cash and cash equivalents | 70,645 | 111,567 | ||||||
Cash and cash equivalents, beginning of period | 489,490 | 305,993 | ||||||
Cash and cash equivalents, end of period | $ | 560,135 | 417,560 | |||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 9,641 | 4,872 | |||||
Income taxes | 10,190 | 8,570 | ||||||
Non-cash transactions: | ||||||||
Unrealized gain (loss) on securities available for sale, net of taxes | (7,128 | ) | 2,106 | |||||
Foreclosed loans transferred to other real estate | 1,913 | 3,415 |
See accompanying notes to consolidated financial statements.
Page 8
First Bancorp and Subsidiaries
(unaudited) | For the Periods Ended June 30, |
2019
In January 2016, the FASB amended the Financial Instruments topic of the Accounting Standards Codification to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This update is intended to improve the recognition and measurement of financial instruments and it requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in other comprehensive income the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of available for sale debt securities in combination with other deferred tax assets. The guidance also provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes and requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. The amendments were effective for the Company on January 1, 2018 and the adoption of the guidance did not have a material effect on its financial statements.
In March 2016, the FASB amended the Liabilities topic of the Accounting Standards Codification to address the current and potential future diversity in practice related to the derecognition of a prepaid stored-value product liability. The amendments were effective for the Company on January 1, 2018 and did not have a material effect on its financial statements.
In March 2017, the FASB amended the requirements in the Compensation—Retirement Benefits topic of the Accounting Standards Codification related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by pertinent employees during the period. The other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component. The amendments were effective for the Company on January 1, 2018 and did not have a material effect on its financial statements.
Page 9
In February 2018, the FASB issued guidance related to the Income Statement – Reporting Comprehensive Income topic of the Accounting Standards Codification, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017, which was signed into law on December 22, 2017. The guidance will be effective for all annual and interim periods beginning January 1, 2019, with early adoption permitted. The Company chose to early adopt the new standard for the year ending December 31, 2017, as allowed under the new standard, and reclassified $0.7 million between Accumulated Other Comprehensive Income and Retained Earnings.
Accounting Standards Pending Adoption
In February 2016, the FASB issued new guidance on accounting for leases, which generally requires all leases to be recognized in the statement of financial position by recording an asset representing its right to use the underlying asset and recording a liability, which represents the Company’s obligation to make lease payments. The provisionsnew standard was adopted by the Company on January 1, 2019. The guidance provides for a modified retrospective transition approach requiring lessees to recognize and measure leases on the balance sheet at the beginning of either the earliest period presented or as of the beginning of the period of adoption. The Company elected to apply the guidance as of the beginning of the period of adoption (January 1, 2019) and will not restate comparative periods. Adoption of the guidance resulted in the recognition of lease liabilities and the recognition of right-of-use assets totaling $19.4 million as of the date of adoption. Lease liabilities and right-of-use assets are reflected in other liabilities and premises and equipment, respectively. The initial balance sheet gross-up upon adoption was related to operating leases of certain real estate properties. The Company has no finance leases or material subleases or leasing arrangements for which it is the lessor of property or equipment. The Company elected to apply the package of practical expedients allowed by the new standard under which the Company need not reassess whether any expired or existing contracts are leases or contain leases, the Company need not reassess the lease classification for any expired or existing lease, and the Company need not reassess initial direct costs for any existing leases. Adoption of this guidance aredid not have a material impact on the consolidated statements of income or the consolidated statements of cash flows. See Note 13 – Leases for additional disclosures related to leases.
The impact of adoption is expected to be significantly influenced by the composition, characteristics and quality of the Company's loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date.
Page 10
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
Note 4 – Acquisitions
Since January 1, 2017, the Company completed the acquisitions described below. The results of each acquired company are included in the Company’s results beginning on its respective acquisition date.
Carolina Bank Holdings, Inc. was the parent company of Carolina Bank, a North Carolina state-charted bank with eight bank branches located in the North Carolina cities of Greensboro, High Point, Burlington, Winston-Salem, and Asheboro, and mortgage offices in Burlington, Hillsborough, and Sanford. The acquisition complemented the Company’s expansion into several of these high-growth markets and increased its market share in others with facilities, operations and experienced staff already in place. The Company was willing to record goodwill primarily due to the reasons just noted, as well as the positive earnings of Carolina Bank. The total merger consideration consisted of $25.3 million in cash and 3,799,471 shares of the Company’s common stock, with each share of Carolina Bank common stock being exchanged for either $20.00 in cash or 1.002 shares of the Company’s stock, subject to the total consideration being 75% stock / 25% cash. The issuance of common stock was valued at $114.5 million and was based on the Company’s closing stock price on March 3, 2017 of $30.13 per share.
This acquisition was accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of Carolina Bank were recorded based on estimates of fair values as of March 3, 2017. The Company was able to change its valuations of acquired Carolina Bank assets and liabilities for up to one year after the acquisition date. The table below is a condensed balance sheet disclosing the amount assigned to each major asset and liability category of Carolina Bank on March 3, 2017, and the related fair value adjustments recorded by the Company to reflect the acquisition. The $65.1 million in goodwill that resulted from this transaction is non-deductible for tax purposes.
Page 11
($ in thousands)
| As Recorded by Carolina Bank | Initial Fair Value Adjustments | Measurement Period Adjustments | As Recorded by First Bancorp | ||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 81,466 | (2 | ) | (a) | — | 81,464 | |||||||||
Securities | 49,629 | (261 | ) | (b) | — | 49,368 | ||||||||||
Loans, gross | 505,560 | (5,469 | ) | (c) | 146 | (l) | 497,522 | |||||||||
(2,715 | ) | (d) | — | |||||||||||||
Allowance for loan losses | (5,746 | ) | 5,746 | (e) | — | — | ||||||||||
Premises and equipment | 17,967 | 4,251 | (f) | (319 | ) | (m) | 21,899 | |||||||||
Core deposit intangible | — | 8,790 | (g) | — | 8,790 | |||||||||||
Other | 34,976 | (4,804 | ) | (h) | 2,225 | (n) | 32,397 | |||||||||
Total | 683,852 | 5,536 | 2,052 | 691,440 | ||||||||||||
Liabilities | ||||||||||||||||
Deposits | $ | 584,950 | 431 | (i) | — | 585,381 | ||||||||||
Borrowings | 21,855 | (2,855 | ) | (j) | (262 | ) | (o) | 18,738 | ||||||||
Other | 12,855 | 225 | (k) | (444 | ) | (p) | 12,636 | |||||||||
Total | 619,660 | (2,199 | ) | (706 | ) | 616,755 | ||||||||||
Net identifiable assets acquired | 74,685 | |||||||||||||||
Total cost of acquisition | ||||||||||||||||
Value of stock issued | $ | 114,478 | ||||||||||||||
Cash paid in the acquisition | 25,279 | |||||||||||||||
Total cost of acquisition | 139,757 | |||||||||||||||
Goodwill recorded related to acquisition of Carolina Bank | $ | 65,072 | ||||||||||||||
Explanation of Fair Value Adjustments
Page 12
The following unaudited pro forma financial information presents the combined results of the Company and Carolina Bank as if the acquisition had occurred as of January 1, 2016, after giving effect to certain adjustments, including amortization of the core deposit intangible, and related income tax effects. The pro forma financial information does not necessarily reflect the results of operations that would have occurred had the Company and Carolina Bank constituted a single entity during such period.
($ in thousands, except share data) | Carolina Bank earnings - March 3, 2017 to June 30, 2017 - included in Company’s earnings for the six months ended June 30, 2017 | Pro Forma Combined Six Months Ended June 30, 2017 | ||||||
Net interest income | $ | 8,778 | 78,260 | |||||
Noninterest income | 1,871 | 22,874 | ||||||
Total revenue | 10,649 | 101,134 | ||||||
Net income available to common shareholders | 2,275 | 21,229 | ||||||
Earnings per common share | ||||||||
Basic | $ | 0.86 | ||||||
Diluted | 0.86 |
The above pro forma results for the six months ended June 30, 2017 include merger-related expenses and charges recorded by Carolina Bank prior to the acquisition that are nonrecurring in nature and amounted to $4.6 million pretax, or $3.1 million after-tax ($0.12 per basic and diluted share).
Bear Insurance, an insurance agency based in Albemarle, North Carolina, with four locations in Stanly, Cabarrus, and Montgomery counties and annual commission income of approximately $4 million, represented an opportunity to complement the Company’s insurance agency operations in these markets and the surrounding areas. Also, this acquisition provided the Company with a larger platform for leveraging insurance services throughout the Company’s bank branch network. The transaction value was $9.8 million, with the Company paying $7.9 million in cash and issuing 13,374 shares of its common stock, which had a value of approximately $0.4 million. Per the terms of the agreement, the Company also recorded an earn-out liability valued at $1.2 million, which will be paid as a cash distribution after a four-year period if pre-determined goals are met for the periods.
This acquisition was accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of Bear Insurance were recorded based on estimates of fair values as of September 1, 2017. In connection with this acquisition, the Company recorded $5.3 million in goodwill, which is deductible for tax purposes, and $3.9 million in other amortizable intangible assets, which are also deductible for tax purposes.
ASB Bancorp, Inc. was the parent company of Asheville Savings Bank, a North Carolina state-chartered savings bank with eight bank branches located in Buncombe County, North Carolina and five bank branches located in the counties of Henderson, Madison, McDowell and Transylvania, all in North Carolina. The acquisition complemented the Company’s existing presence in the Asheville and surrounding markets, which are high-growth and highly desired markets. The Company was willing to record goodwill primarily due to the reasons just noted, as well as the positive earnings of Asheville Savings Bank. The total merger consideration consisted of $17.9 million in cash and 4,920,061 shares of the Company’s common stock, with each share of Asheville Savings Bank common stock being exchanged for either $41.90 in cash or 1.44 shares of the Company’s stock, subject to the total consideration being 90% stock / 10% cash. The issuance of common stock was valued at $169.3 million and was based on the Company’s closing stock price on September 30, 2017 of $34.41 per share.
Page 13
This acquisition was accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of Asheville Savings Bank were recorded based on estimates of fair values as of October 1, 2017. The Company may change its valuations of acquired Asheville Savings Bank assets and liabilities for up to one year after the acquisition date. The table below is a condensed balance sheet disclosing the amount assigned to each major asset and liability category of Asheville Savings Bank on October 1, 2017, and the related fair value adjustments recorded by the Company to reflect the acquisition. The $88.2 million in goodwill that resulted from this acquisition is non-deductible for tax purposes.
($ in thousands)
| As Recorded by Asheville Savings Bank | Initial Fair Value Adjustments | Measurement Period Adjustments | As Recorded by First Bancorp | ||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 41,824 | — | — | 41,824 | |||||||||||
Securities | 95,020 | — | — | 95,020 | ||||||||||||
Loans, gross | 617,159 | (9,631 | ) | (a) | — | 606,180 | ||||||||||
(1,348 | ) | (b) | — | |||||||||||||
Allowance for loan losses | (6,685 | ) | 6,685 | (c) | — | — | ||||||||||
Presold mortgages | 3,785 | — | — | 3,785 | ||||||||||||
Premises and equipment | 10,697 | 9,857 | (d) | — | 20,554 | |||||||||||
Core deposit intangible | — | 9,760 | (e) | 120 | (i) | 9,880 | ||||||||||
Other | 35,944 | (5,851 | ) | (f) | (777 | ) | (j) | 29,316 | ||||||||
Total | 797,744 | 9,472 | (657 | ) | 806,559 | |||||||||||
Liabilities | ||||||||||||||||
Deposits | $ | 678,707 | 430 | (g) | — | 679,137 | ||||||||||
Borrowings | 20,000 | — | — | 20,000 | ||||||||||||
Other | 8,943 | 298 | (h) | (822 | ) | (k) | 8,419 | |||||||||
Total | 707,650 | 728 | (822 | ) | 707,556 | |||||||||||
Net identifiable assets acquired | 99,003 | |||||||||||||||
Total cost of acquisition | ||||||||||||||||
Value of stock issued | $ | 169,299 | ||||||||||||||
Cash paid in the acquisition | 17,939 | |||||||||||||||
Total cost of acquisition | 187,238 | |||||||||||||||
Goodwill recorded related to acquisition of Asheville Savings Bank | $ | 88,235 |
Explanation of Fair Value Adjustments
Page 14
directors.
provided, the awards become immediately vested.
As it relates The Company issues new shares of common stock when options are exercised.
Page 15
The Company’s senior officers receive their annual bonuses earned under the Company’s annual incentive plan in a mix of 50% cash and 50% stock, with the stock being subject to a three year vesting term. In the last three years, a total of 54,529 shares of restricted stock have been granted related to performance in the preceding fiscal years (net of an immaterial amount of forfeitures). Total compensation expense associated with thosedirector grants was $1.4 million and is being recognized over the respective vesting periods. For the three months ended June 30, 2018 and 2017, total compensation expense related to these grants was $73,000 and $66,000, respectively, and for the six months ended June 30, 2018 and 2017, total compensation expense was $147,000 and $151,000, respectively. The Company expects to record $73,000 in compensation expense during each remaining quarter of 2018.
In the last three years, the Compensation Committee also granted 101,156 shares of stock to various employees of the Company to promote retention (net of an immaterial amount of forfeitures). The total value associated with these grants amounted to $2.7 million, which is being recordedclassified as an expense over their three year vesting periods. For the three months ended June 30, 2018 and 2017, total compensation expense related to these grants was $173,000 and $89,000, respectively, and for the six months ended June 30, 2018 and 2017, total compensation expense was $328,000 and $186,000, respectively. The Company expects to record $211,000 in compensation expense during each remaining quarter of 2018. All grants were issued based on the closing price of the Company’s common stock on the date of the grant.
The following table presents information regarding the activity the first six months of 2018 related to the Company’s outstanding restricted stock:
Long-Term Restricted Stock | ||||||||
Number of Units | Weighted-Average Grant-Date Fair Value | |||||||
Nonvested at January 1, 2018 | 103,063 | $24.08 | ||||||
Granted during the period | 32,027 | 39.10 | ||||||
Vested during the period | (10,626 | ) | 17.53 | |||||
Forfeited or expired during the period | (2,977 | ) | 25.21 | |||||
Nonvested at June 30, 2018 | 121,487 | $ | 28.58 |
In years prior to 2009, stock options were the primary form of equity grant utilized by the Company. The stock options had a term of ten years. Upon a change in control (as defined"other operating expense" in the plans), unless the awards remain outstanding or substitute equivalent awards are provided, the awards become immediately vested.
At June 30, 2018, there were 9,000 stock options outstanding related to the Company’s two equity-based plans, all with an exercise priceConsolidated Statements of $14.35.
Income.
Long-Term Restricted Stock | |||||||
Number of Units | Weighted-Average Grant-Date Fair Value | ||||||
Nonvested at January 1, 2019 | 129,251 | $ | 32.39 | ||||
Granted during the period | 82,411 | 36.37 | |||||
Vested during the period | (8,844 | ) | 26.97 | ||||
Forfeited or expired during the period | (954 | ) | 41.93 | ||||
Nonvested at June 30, 2019 | 201,864 | $ | 34.21 |
Options Outstanding | ||||||||||||||||
Number of Shares | Weighted- Average Exercise Price | Weighted- Average Contractual Term (years) | Aggregate Intrinsic Value | |||||||||||||
Balance at January 1, 2018 | 38,689 | $ | 16.09 | |||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (29,689 | ) | 16.61 | $ | 659,743 | |||||||||||
Forfeited | — | — | ||||||||||||||
Expired | — | — | ||||||||||||||
Outstanding at June 30, 2018 | 9,000 | $ | 14.35 | 0.9 | $ | 239,040 | ||||||||||
Exercisable at June 30, 2018 | 9,000 | $ | 14.35 | 0.9 | $ | 239,040 |
were the primary form of stock-based compensation utilized by the Company. At June 30, 2019, there were no stock options outstanding. The following table presents information regarding the activity for the first six months of 2019 related to the Company’s outstanding stock options:
Options Outstanding | |||||||||||||
Number of Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | ||||||||||
Balance at January 1, 2019 | 9,000 | $ | 14.35 | ||||||||||
Granted | — | — | |||||||||||
Exercised | (9,000 | ) | 14.35 | ||||||||||
Forfeited | — | — | |||||||||||
Expired | — | — | |||||||||||
Outstanding at June 30, 2019 | — | $ | — | 0 | $ | — | |||||||
Exercisable at June 30, 2019 | — | $ | — | 0 | $ | — |
Page 16
plans, as well as contingently issuable shares.
As it relates to contingently issuable shares, the number of shares that are included in the calculation of
For the Three Months Ended June 30, | ||||||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||||
($ in thousands except per share amounts) | Income (Numer- ator) | Shares (Denom- inator) | Per Share Amount | Income (Numer- ator) | Shares (Denom- inator) | Per Share Amount | ||||||||||||||||||
Basic EPS | ||||||||||||||||||||||||
Net income available to common shareholders | $ | 22,730 | 29,544,747 | $ | 0.77 | $ | 11,154 | 24,593,307 | $ | 0.45 | ||||||||||||||
Effect of Dilutive Securities | — | 87,991 | — | 78,243 | ||||||||||||||||||||
Diluted EPS per common share | $ | 22,730 | 29,632,738 | $ | 0.77 | $ | 11,154 | 24,671,550 | $ | 0.45 |
For the Six Months Ended June 30, | ||||||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||||
($ in thousands except per share amounts) | Income (Numer- ator) | Shares (Denom- inator) | Per Share Amount | Income (Numer- ator) | Shares (Denom- inator) | Per Share Amount | ||||||||||||||||||
Basic EPS | ||||||||||||||||||||||||
Net income available to common shareholders | $ | 43,403 | 29,539,308 | $ | 1.47 | $ | 18,709 | 23,288,635 | $ | 0.80 | ||||||||||||||
Effect of Dilutive Securities | — | 91,514 | — | 79,868 | ||||||||||||||||||||
Diluted EPS per common share | $ | 43,403 | 29,630,822 | $ | 1.46 | $ | 18,709 | 23,368,503 | $ | 0.80 |
For the Three Months Ended June 30, | ||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||
($ in thousands except per share amounts) | Per Share Amount | Shares (Denominator) | Per Share Amount | Income (Numerator) | Shares (Denominator) | Per Share Amount | ||||||||||||||||
Basic EPS: | ||||||||||||||||||||||
Net income | $ | 23,859 | $ | 22,730 | ||||||||||||||||||
Less: income allocated to participating securities | (114 | ) | — | |||||||||||||||||||
Basic EPS per common share | $ | 23,745 | 29,626,931 | $ | 0.80 | $ | 22,730 | 29,544,747 | $ | 0.77 | ||||||||||||
Diluted EPS: | ||||||||||||||||||||||
Net income | $ | 23,859 | 29,626,931 | $ | 22,730 | 29,544,747 | ||||||||||||||||
Effect of Dilutive Securities | — | 170,010 | — | 87,991 | ||||||||||||||||||
Diluted EPS per common share | $ | 23,859 | 29,796,941 | $ | 0.80 | $ | 22,730 | 29,632,738 | $ | 0.77 |
For the Six Months Ended June 30, | ||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||
($ in thousands except per share amounts) | Per Share Amount | Shares (Denominator) | Per Share Amount | Income (Numerator) | Shares (Denominator) | Per Share Amount | ||||||||||||||||
Basic EPS: | ||||||||||||||||||||||
Net income | $ | 46,144 | $ | 43,403 | ||||||||||||||||||
Less: income allocated to participating securities | (227 | ) | — | |||||||||||||||||||
Basic EPS per common share | $ | 45,917 | 29,607,074 | $ | 1.55 | $ | 43,403 | 29,539,308 | $ | 1.47 | ||||||||||||
Diluted EPS: | ||||||||||||||||||||||
Net income | $ | 46,144 | 29,607,074 | $ | 43,403 | 29,539,308 | ||||||||||||||||
Effect of Dilutive Securities | — | 201,785 | — | 91,514 | ||||||||||||||||||
Diluted EPS per common share | $ | 46,144 | 29,808,859 | $ | 1.55 | $ | 43,403 | 29,630,822 | $ | 1.46 |
Page 17
June 30, 2018 | December 31, 2017 | |||||||||||||||||||||||||||||||
Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | |||||||||||||||||||||||||||
($ in thousands) | Cost | Value | Gains | (Losses) | Cost | Value | Gains | (Losses) | ||||||||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||||||||||
Government-sponsored enterprise securities | $ | 19,000 | 18,537 | — | (463 | ) | 14,000 | 13,867 | — | (133 | ) | |||||||||||||||||||||
Mortgage-backed securities | 292,809 | 282,287 | 48 | (10,570 | ) | 297,690 | 295,213 | 246 | (2,722 | ) | ||||||||||||||||||||||
Corporate bonds | 33,772 | 33,244 | 64 | (592 | ) | 33,792 | 34,190 | 512 | (114 | ) | ||||||||||||||||||||||
Total available for sale | $ | 345,581 | 334,068 | 112 | (11,625 | ) | 345,482 | 343,270 | 758 | (2,969 | ) | |||||||||||||||||||||
Securities held to maturity: | ||||||||||||||||||||||||||||||||
Mortgage-backed securities | $ | 57,807 | 55,832 | — | (1,975 | ) | 63,829 | 63,092 | — | (737 | ) | |||||||||||||||||||||
State and local governments | 50,458 | 51,236 | 836 | (58 | ) | 54,674 | 55,906 | 1,280 | (48 | ) | ||||||||||||||||||||||
Total held to maturity | $ | 108,265 | 107,068 | 836 | (2,033 | ) | 118,503 | 118,998 | 1,280 | (785 | ) |
($ in thousands) | June 30, 2019 | December 31, 2018 | ||||||||||||||||||||||
Amortized Cost | Fair Value | Unrealized | Amortized Cost | Fair Value | Unrealized | |||||||||||||||||||
Gains | (Losses) | Gains | (Losses) | |||||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||
Government-sponsored enterprise securities | $ | 59,202 | 59,477 | 313 | (38 | ) | 82,995 | 82,662 | 63 | (396 | ) | |||||||||||||
Mortgage-backed securities | 593,824 | 598,024 | 7,088 | (2,888 | ) | 396,995 | 385,551 | 39 | (11,483 | ) | ||||||||||||||
Corporate bonds | 33,731 | 34,470 | 869 | (130 | ) | 33,751 | 33,138 | 76 | (689 | ) | ||||||||||||||
Total available for sale | $ | 686,757 | 691,971 | 8,270 | (3,056 | ) | 513,741 | 501,351 | 178 | (12,568 | ) | |||||||||||||
Securities held to maturity: | ||||||||||||||||||||||||
Mortgage-backed securities | $ | 46,447 | 45,998 | — | (449 | ) | 52,048 | 50,241 | — | (1,807 | ) | |||||||||||||
State and local governments | 32,603 | 33,046 | 444 | (1 | ) | 49,189 | 49,665 | 525 | (49 | ) | ||||||||||||||
Total held to maturity | $ | 79,050 | 79,044 | 444 | (450 | ) | 101,237 | 99,906 | 525 | (1,856 | ) |
($ in thousands) | Securities in an Unrealized Loss Position for Less than 12 Months | Securities in an Unrealized Loss Position for More than 12 Months | Total | |||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
Government-sponsored enterprise securities | $ | 15,615 | 385 | 2,922 | 78 | 18,537 | 463 | |||||||||||||||||
Mortgage-backed securities | 224,713 | 8,050 | 110,958 | 4,495 | 335,671 | 12,545 | ||||||||||||||||||
Corporate bonds | 25,697 | 530 | 938 | 62 | 26,635 | 592 | ||||||||||||||||||
State and local governments | 9,360 | 58 | — | — | 9,360 | 58 | ||||||||||||||||||
Total temporarily impaired securities | $ | 275,385 | 9,023 | 114,818 | 4,635 | 390,203 | 13,658 |
2019:
($ in thousands) | Securities in an Unrealized Loss Position for Less than 12 Months | Securities in an Unrealized Loss Position for More than 12 Months | Total | |||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||
Government-sponsored enterprise securities | $ | — | — | 13,962 | 38 | 13,962 | 38 | |||||||||||
Mortgage-backed securities | — | — | 276,614 | 3,337 | 276,614 | 3,337 | ||||||||||||
Corporate bonds | — | — | 870 | 130 | 870 | 130 | ||||||||||||
State and local governments | — | — | 946 | 1 | 946 | 1 | ||||||||||||
Total temporarily impaired securities | $ | — | — | 292,392 | 3,506 | 292,392 | 3,506 |
($ in thousands) | Securities in an Unrealized Loss Position for Less than 12 Months | Securities in an Unrealized Loss Position for More than 12 Months | Total | |||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
Government-sponsored enterprise securities | $ | 10,897 | 103 | 2,970 | 30 | 13,867 | 133 | |||||||||||||||||
Mortgage-backed securities | 192,702 | 1,582 | 125,060 | 1,877 | 317,762 | 3,459 | ||||||||||||||||||
Corporate bonds | 2,500 | 49 | 935 | 65 | 3,435 | 114 | ||||||||||||||||||
State and local governments | 7,928 | 48 | — | — | 7,928 | 48 | ||||||||||||||||||
Total temporarily impaired securities | $ | 214,027 | 1,782 | 128,965 | 1,972 | 342,992 | 3,754 | |||||||||||||||||
2018:
($ in thousands) | Securities in an Unrealized Loss Position for Less than 12 Months | Securities in an Unrealized Loss Position for More than 12 Months | Total | |||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||
Government-sponsored enterprise securities | $ | 4,921 | 78 | 13,682 | 318 | 18,603 | 396 | |||||||||||
Mortgage-backed securities | 82,525 | 351 | 294,305 | 12,939 | 376,830 | 13,290 | ||||||||||||
Corporate bonds | 20,704 | 433 | 5,817 | 256 | 26,521 | 689 | ||||||||||||
State and local governments | 595 | 1 | 6,641 | 48 | 7,236 | 49 | ||||||||||||
Total temporarily impaired securities | $ | 108,745 | 863 | 320,445 | 13,561 | 429,190 | 14,424 |
Page 18
The book values and approximate fair values of investment securities at June 30, 2018,2019, by contractual maturity, are summarized in the table below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
Securities Available for Sale | Securities Held to Maturity | |||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
($ in thousands) | Cost | Value | Cost | Value | ||||||||||||
Securities | ||||||||||||||||
Due within one year | $ | — | — | 3,248 | 3,276 | |||||||||||
Due after one year but within five years | 40,227 | 39,324 | 28,348 | 28,815 | ||||||||||||
Due after five years but within ten years | 7,545 | 7,460 | 17,066 | 17,355 | ||||||||||||
Due after ten years | 5,000 | 4,997 | 1,796 | 1,790 | ||||||||||||
Mortgage-backed securities | 292,809 | 282,287 | 57,807 | 55,832 | ||||||||||||
Total securities | $ | 345,581 | 334,068 | 108,265 | 107,068 |
Securities Available for Sale | Securities Held to Maturity | |||||||||||
($ in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||
Securities | ||||||||||||
Due within one year | $ | — | — | 1,165 | 1,169 | |||||||
Due after one year but within five years | 77,691 | 78,421 | 22,463 | 22,813 | ||||||||
Due after five years but within ten years | 10,242 | 10,473 | 8,110 | 8,165 | ||||||||
Due after ten years | 5,000 | 5,053 | 865 | 899 | ||||||||
Mortgage-backed securities | 593,824 | 598,024 | 46,447 | 45,998 | ||||||||
Total securities | $ | 686,757 | 691,971 | 79,050 | 79,044 |
In the first six months of 2017, the Company received proceeds from sales of securities of $45,601,000 and recorded losses of $235,000 from the sales. There were no securities sales in the first six months of 2018.
Page 19
On March 3, 2017, the Company acquired Carolina Bank (see Note 4 for more information). As a result of this acquisition, the Company recorded loans with a fair value of $497.5 million. Of those loans, $19.3 million were considered to be purchased credit impaired (“PCI”) loans, which are loans for which it is probable at acquisition date that all contractually required payments will not be collected. The remaining loans are considered to be purchased non-impaired loans and their related fair value discount or premium is being recognized as an adjustment to yield over the remaining life of each loan.
The following table relates to Carolina Bank PCI loans and summarizes the contractually required payments, which includes principal and interest, expected cash flows to be collected, and the fair value of acquired PCI loans at the acquisition date.
($ in thousands)
| Carolina Bank Acquisition on March 3, 2017 | |||
Contractually required payments | $ | 27,108 | ||
Nonaccretable difference | (4,237 | ) | ||
Cash flows expected to be collected at acquisition | 22,871 | |||
Accretable yield | (3,617 | ) | ||
Fair value of PCI loans at acquisition date | $ | 19,254 |
The following table relates to acquired Carolina Bank purchased non-impaired loans and provides the contractually required payments, fair value, and estimate of contractual cash flows not expected to be collected at the acquisition date.
($ in thousands)
| Carolina Bank Acquisition on March 3, 2017 | |||
Contractually required payments | $ | 569,980 | ||
Fair value of acquired loans at acquisition date | 478,515 | |||
Contractual cash flows not expected to be collected | 3,650 |
On October 1, 2017, the Company acquired Asheville Savings Bank (see Note 4 for more information). As a result of this acquisition, the Company recorded loans with a fair value of $606.2 million. Of those loans, $9.9 million were considered to be PCI loans. The remaining loans were considered to be purchased non-impaired loans and their related fair value discount or premium is being recognized as an adjustment to yield over the remaining life of each loan.
The following table relates to acquired Asheville Savings Bank PCI loans and summarizes the contractually required payments, which includes principal and interest, expected cash flows to be collected, and the fair value of acquired PCI loans at the acquisition date.
($ in thousands) | Asheville Savings Bank Acquisition on October 1, 2017 | |||
Contractually required payments | $ | 13,424 | ||
Nonaccretable difference | (1,734 | ) | ||
Cash flows expected to be collected at acquisition | 11,690 | |||
Accretable yield | (1,804 | ) | ||
Fair value of PCI loans at acquisition date | $ | 9,886 |
The following table relates to acquired Asheville Savings Bank purchased non-impaired loans and provides the contractually required payments, fair value, and estimate of contractual cash flows not expected to be collected at the acquisition date.
($ in thousands) | Asheville Savings Bank Acquisition on October 1, 2017 | |||
Contractually required payments | $ | 727,706 | ||
Fair value of acquired loans at acquisition date | 595,167 | |||
Contractual cash flows not expected to be collected | 7,000 |
Page 20
The following is a summary of the major categories of total loans outstanding:
($ in thousands) | June 30, 2018 | December 31, 2017 | June 30, 2017 | |||||||||||||||||||||
Amount | Percentage | Amount | Percentage | Amount | Percentage | |||||||||||||||||||
All loans: | ||||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 417,366 | 10% | $ | 381,130 | 10% | $ | 383,834 | 11% | |||||||||||||||
Real estate – construction, land development & other land loans | 600,031 | 14% | 539,020 | 13% | 446,661 | 13% | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1,000,189 | 24% | 972,772 | 24% | 783,759 | 23% | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 369,875 | 9% | 379,978 | 9% | 320,953 | 10% | ||||||||||||||||||
Real estate – mortgage – commercial and other | 1,690,175 | 41% | 1,696,107 | 42% | 1,384,569 | 41% | ||||||||||||||||||
Installment loans to individuals | 71,823 | 2% | 74,348 | 2% | 57,008 | 2% | ||||||||||||||||||
Subtotal | 4,149,459 | 100% | 4,043,355 | 100% | 3,376,784 | 100% | ||||||||||||||||||
Unamortized net deferred loan fees | (69 | ) | (986 | ) | (808 | ) | ||||||||||||||||||
Total loans | $ | 4,149,390 | $ | 4,042,369 | $ | 3,375,976 |
($ in thousands) | June 30, 2019 | December 31, 2018 | June 30, 2018 | |||||||||||||||||
Amount | Percentage | Amount | Percentage | Amount | Percentage | |||||||||||||||
All loans: | ||||||||||||||||||||
Commercial, financial, and agricultural | $ | 471,188 | 11 | % | $ | 457,037 | 11 | % | $ | 417,366 | 10 | % | ||||||||
Real estate – construction, land development & other land loans | 456,781 | 10 | % | 518,976 | 12 | % | 600,031 | 14 | % | |||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1,090,601 | 25 | % | 1,054,176 | 25 | % | 1,000,189 | 24 | % | |||||||||||
Real estate – mortgage – home equity loans / lines of credit | 349,355 | 8 | % | 359,162 | 8 | % | 369,875 | 9 | % | |||||||||||
Real estate – mortgage – commercial and other | 1,900,188 | 44 | % | 1,787,022 | 42 | % | 1,690,175 | 41 | % | |||||||||||
Installment loans to individuals | 69,600 | 2 | % | 71,392 | 2 | % | 71,823 | 2 | % | |||||||||||
Subtotal | 4,337,713 | 100 | % | 4,247,765 | 100 | % | 4,149,459 | 100 | % | |||||||||||
Unamortized net deferred loan costs (fees) | 1,784 | 1,299 | (69 | ) | ||||||||||||||||
Total loans | $ | 4,339,497 | $ | 4,249,064 | $ | 4,149,390 |
($ in thousands) | June 30, 2019 | December 31, 2018 | June 30, 2018 | ||||||
Guaranteed portions of SBA Loans included in table above | $ | 43,157 | 53,205 | 20,466 | |||||
Unguaranteed portions of SBA Loans included in table above | 106,154 | 97,572 | 98,013 | ||||||
Total SBA loans included in the table above | $ | 149,311 | 150,777 | 118,479 | |||||
Sold portions of SBA loans with servicing retained - not included in table above | $ | 288,914 | 230,424 | 171,462 |
($ in thousands)
Purchased Credit Impaired Loans | For the Six Months Ended June 30, 2018 | For the Year Ended December 31, 2017 | ||||||
Balance at beginning of period | $ | 23,165 | 514 | |||||
Additions due to acquisition of Carolina Bank | — | 19,254 | ||||||
Additions due to acquisition of Asheville Savings Bank | — | 9,886 | ||||||
Change due to payments received and accretion | (2,328 | ) | (6,016 | ) | ||||
Change due to loan charge-offs | (10 | ) | (12 | ) | ||||
Transfers to foreclosed real estate | — | (69 | ) | |||||
Other | 5 | (392 | ) | |||||
Balance at end of period | $ | 20,832 | 23,165 |
PCI loans | For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | ||||
Balance at beginning of period | $ | 17,393 | 23,165 | |||
Change due to payments received and accretion | (3,273 | ) | (5,799 | ) | ||
Change due to loan charge-offs | (11 | ) | (10 | ) | ||
Transfers to foreclosed real estate | — | (4 | ) | |||
Other | 66 | 41 | ||||
Balance at end of period | $ | 14,175 | 17,393 |
($ in thousands)
Accretable Yield for PCI loans | For the Six Months Ended June 30, 2018 | For the Year Ended December 31, 2017 | ||||||
Balance at beginning of period | $ | 4,688 | — | |||||
Additions due to acquisition of Carolina Bank | — | 3,617 | ||||||
Additions due to acquisition of Asheville Savings Bank | — | 1,804 | ||||||
Accretion | (784 | ) | (1,846 | ) | ||||
Reclassification from (to) nonaccretable difference | 206 | 423 | ||||||
Other, net | 48 | 690 | ||||||
Balance at end of period | $ | 4,158 | 4,688 |
Accretable Yield for PCI loans | For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | ||||
Balance at beginning of period | $ | 4,750 | 4,688 | |||
Accretion | (811 | ) | (2,050 | ) | ||
Reclassification from (to) nonaccretable difference | 502 | 849 | ||||
Other, net | (89 | ) | 1,263 | |||
Balance at end of period | $ | 4,352 | 4,750 |
Page 21
Nonperforming assets are defined as nonaccrual loans, troubled debt restructured (“TDR”) loans, loans past due 90 or more days and still accruing interest, and foreclosed real estate. Nonperforming assets are summarized as follows.
($ in thousands) | June 30, 2018 | December 31, 2017 | June 30, 2017 | |||||||||
Nonperforming assets | ||||||||||||
Nonaccrual loans | $ | 25,494 | 20,968 | 22,795 | ||||||||
Restructured loans - accruing | 17,386 | 19,834 | 21,019 | |||||||||
Accruing loans > 90 days past due | — | — | — | |||||||||
Total nonperforming loans | 42,880 | 40,802 | 43,814 | |||||||||
Foreclosed real estate | 8,296 | 12,571 | 11,196 | |||||||||
Total nonperforming assets | $ | 51,176 | 53,373 | 55,010 | ||||||||
Purchased credit impaired loans not included above (1) | $ | 20,832 | 23,165 | 16,846 |
($ in thousands) | June 30, 2019 | December 31, 2018 | June 30, 2018 | ||||||
Nonperforming assets | |||||||||
Nonaccrual loans | $ | 17,375 | 22,575 | 25,494 | |||||
TDRs- accruing | 11,890 | 13,418 | 17,386 | ||||||
Accruing loans > 90 days past due | — | — | — | ||||||
Total nonperforming loans | 29,265 | 35,993 | 42,880 | ||||||
Foreclosed real estate | 5,107 | 7,440 | 8,296 | ||||||
Total nonperforming assets | $ | 34,372 | 43,433 | 51,176 | |||||
Purchased credit impaired loans not included above (1) | $ | 14,175 | 17,393 | 20,832 | |||||
foreclosure, respectively.
($ in thousands) | June 30, 2018 | December 31, 2017 | ||||||
Commercial, financial, and agricultural | $ | 3,407 | 1,001 | |||||
Real estate – construction, land development & other land loans | 1,374 | 1,822 | ||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 11,513 | 12,201 | ||||||
Real estate – mortgage – home equity loans / lines of credit | 1,765 | 2,524 | ||||||
Real estate – mortgage – commercial and other | 7,292 | 3,345 | ||||||
Installment loans to individuals | 143 | 75 | ||||||
Total | $ | 25,494 | 20,968 | |||||
($ in thousands) | June 30, 2019 | December 31, 2018 | ||||
Commercial, financial, and agricultural | $ | 1,490 | 919 | |||
Real estate – construction, land development & other land loans | 1,420 | 2,265 | ||||
Real estate – mortgage – residential (1-4 family) first mortgages | 8,697 | 10,115 | ||||
Real estate – mortgage – home equity loans / lines of credit | 1,404 | 1,685 | ||||
Real estate – mortgage – commercial and other | 4,260 | 7,452 | ||||
Installment loans to individuals | 104 | 139 | ||||
Total | $ | 17,375 | 22,575 |
($ in thousands) | Accruing 30-59 Days Past Due | Accruing 60-89 Days Past Due | Accruing 90 Days or More Past Due | Nonaccrual Loans | Accruing Current | Total Loans Receivable | ||||||||||||||||||
Commercial, financial, and agricultural | $ | 1,398 | 28 | — | 3,407 | 412,264 | 417,097 | |||||||||||||||||
Real estate – construction, land development & other land loans | 913 | 276 | — | 1,374 | 597,143 | 599,706 | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 4,708 | 692 | — | 11,513 | 975,883 | 992,796 | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 1,189 | 171 | — | 1,765 | 366,377 | 369,502 | ||||||||||||||||||
Real estate – mortgage – commercial and other | 2,604 | 560 | — | 7,292 | 1,667,577 | 1,678,033 | ||||||||||||||||||
Installment loans to individuals | 279 | 148 | — | 143 | 70,923 | 71,493 | ||||||||||||||||||
Purchased credit impaired | 452 | 163 | 463 | — | 19,754 | 20,832 | ||||||||||||||||||
Total | $ | 11,543 | 2,038 | 463 | 25,494 | 4,109,921 | 4,149,459 | |||||||||||||||||
Unamortized net deferred loan fees | (69 | ) | ||||||||||||||||||||||
Total loans | $ | 4,149,390 |
Page 22
($ in thousands) | Accruing 30-59 Days Past Due | Accruing 60-89 Days Past Due | Accruing 90 Days or More Past Due | Nonaccrual Loans | Accruing Current | Total Loans Receivable | |||||||||||||
Commercial, financial, and agricultural | $ | 3,716 | 606 | — | 1,490 | 465,112 | 470,924 | ||||||||||||
Real estate – construction, land development & other land loans | 299 | — | — | 1,420 | 454,890 | 456,609 | |||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 4,821 | 101 | — | 8,697 | 1,071,040 | 1,084,659 | |||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 856 | 620 | — | 1,404 | 346,265 | 349,145 | |||||||||||||
Real estate – mortgage – commercial and other | 1,007 | 2,514 | — | 4,260 | 1,884,964 | 1,892,745 | |||||||||||||
Installment loans to individuals | 354 | 77 | — | 104 | 68,921 | 69,456 | |||||||||||||
Purchased credit impaired | 167 | 174 | 622 | — | 13,212 | 14,175 | |||||||||||||
Total | $ | 11,220 | 4,092 | 622 | 17,375 | 4,304,404 | 4,337,713 | ||||||||||||
Unamortized net deferred loan costs | 1,784 | ||||||||||||||||||
Total loans | $ | 4,339,497 |
($ in thousands) | Accruing 30-59 Days Past Due | Accruing 60-89 Days Past Due | Accruing 90 Days or More Past Due | Nonaccrual Loans | Accruing Current | Total Loans Receivable | ||||||||||||||||||
Commercial, financial, and agricultural | $ | 89 | 151 | — | 1,001 | 379,241 | 380,482 | |||||||||||||||||
Real estate – construction, land development & other land loans | 1,154 | 214 | — | 1,822 | 535,423 | 538,613 | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 6,777 | 1,370 | — | 12,201 | 943,565 | 963,913 | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 1,347 | 10 | — | 2,524 | 375,814 | 379,695 | ||||||||||||||||||
Real estate – mortgage – commercial and other | 1,270 | 451 | — | 3,345 | 1,678,529 | 1,683,595 | ||||||||||||||||||
Installment loans to individuals | 445 | 95 | — | 75 | 73,277 | 73,892 | ||||||||||||||||||
Purchased credit impaired | 821 | 77 | 601 | — | 21,666 | 23,165 | ||||||||||||||||||
Total | $ | 11,903 | 2,368 | 601 | 20,968 | 4,007,515 | 4,043,355 | |||||||||||||||||
Unamortized net deferred loan fees | (986 | ) | ||||||||||||||||||||||
Total loans | $ | 4,042,369 |
($ in thousands) | Accruing 30-59 Days Past Due | Accruing 60-89 Days Past Due | Accruing 90 Days or More Past Due | Nonaccrual Loans | Accruing Current | Total Loans Receivable | |||||||||||||
Commercial, financial, and agricultural | $ | 191 | 5 | — | 919 | 455,691 | 456,806 | ||||||||||||
Real estate – construction, land development & other land loans | 849 | 212 | — | 2,265 | 515,472 | 518,798 | |||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 14,178 | 1,369 | — | 10,115 | 1,022,262 | 1,047,924 | |||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 1,048 | 254 | — | 1,685 | 355,831 | 358,818 | |||||||||||||
Real estate – mortgage – commercial and other | 709 | 520 | — | 7,452 | 1,768,205 | 1,776,886 | |||||||||||||
Installment loans to individuals | 359 | 220 | — | 139 | 70,422 | 71,140 | |||||||||||||
Purchased credit impaired | 990 | 138 | 583 | — | 15,682 | 17,393 | |||||||||||||
Total | $ | 18,324 | 2,718 | 583 | 22,575 | 4,203,565 | 4,247,765 | ||||||||||||
Unamortized net deferred loan costs | 1,299 | ||||||||||||||||||
Total loans | $ | 4,249,064 |
($ in thousands) | Commercial, Financial, and Agricultural | Real Estate – Construction, Land Development & Other Land Loans | Real Estate – Residential (1-4 Family) First Mortgages | Real Estate – Mortgage – Home Equity Lines of Credit | Real Estate – Mortgage – Commercial and Other | Installment Loans to Individuals | Unallocated | Total | |||||||||||||||||
As of and for the three months ended June 30, 2019 | |||||||||||||||||||||||||
Beginning balance | $ | 3,709 | 2,284 | 4,510 | 1,374 | 8,120 | 1,006 | 92 | 21,095 | ||||||||||||||||
Charge-offs | (690 | ) | (29 | ) | (155 | ) | (66 | ) | (2 | ) | (155 | ) | — | (1,097 | ) | ||||||||||
Recoveries | 191 | 202 | 222 | 327 | 103 | 54 | — | 1,099 | |||||||||||||||||
Provisions | 8 | (642 | ) | (454 | ) | (364 | ) | 631 | 306 | 207 | (308 | ) | |||||||||||||
Ending balance | $ | 3,218 | 1,815 | 4,123 | 1,271 | 8,852 | 1,211 | 299 | 20,789 | ||||||||||||||||
As of and for the six months ended June 30, 2019 | |||||||||||||||||||||||||
Beginning balance | $ | 2,889 | 2,243 | 5,197 | 1,665 | 7,983 | 952 | 110 | 21,039 | ||||||||||||||||
Charge-offs | (936 | ) | (293 | ) | (185 | ) | (146 | ) | (838 | ) | (436 | ) | — | (2,834 | ) | ||||||||||
Recoveries | 605 | 489 | 382 | 455 | 374 | 87 | — | 2,392 | |||||||||||||||||
Provisions | 660 | (624 | ) | (1,271 | ) | (703 | ) | 1,333 | 608 | 189 | 192 | ||||||||||||||
Ending balance | $ | 3,218 | 1,815 | 4,123 | 1,271 | 8,852 | 1,211 | 299 | 20,789 | ||||||||||||||||
Ending balance as of June 30, 2019: Allowance for loan losses | |||||||||||||||||||||||||
Individually evaluated for impairment | $ | 435 | 44 | 770 | — | 783 | — | — | 2,032 | ||||||||||||||||
Collectively evaluated for impairment | $ | 2,776 | 1,771 | 3,289 | 1,271 | 8,013 | 1,195 | 299 | 18,614 | ||||||||||||||||
Purchased credit impaired | $ | 7 | — | 64 | — | 56 | 16 | — | 143 | ||||||||||||||||
Loans receivable as of June 30, 2019 | |||||||||||||||||||||||||
Ending balance – total | $ | 471,188 | 456,781 | 1,090,601 | 349,355 | 1,900,188 | 69,600 | — | 4,337,713 | ||||||||||||||||
Unamortized net deferred loan costs | 1,784 | ||||||||||||||||||||||||
Total loans | $ | 4,339,497 | |||||||||||||||||||||||
Ending balances as of June 30, 2019: Loans | |||||||||||||||||||||||||
Individually evaluated for impairment | $ | 992 | 1,020 | 10,334 | 21 | 7,451 | — | — | 19,818 | ||||||||||||||||
Collectively evaluated for impairment | $ | 469,932 | 455,589 | 1,074,325 | 349,124 | 1,885,294 | 69,456 | — | 4,303,720 | ||||||||||||||||
Purchased credit impaired | $ | 264 | 172 | 5,942 | 210 | 7,443 | 144 | — | 14,175 |
($ in thousands) | Commercial, Financial, and Agricultural | Real Estate – Construction, Land Development & Other Land Loans | Real Estate – Residential (1-4 Family) First Mortgages | Real Estate – Mortgage – Home Equity Lines of Credit | Real Estate – Mortgage – Commercial and Other | Installment Loans to Individuals | Unallocated | Total | |||||||||||||||||
As of and for the year ended December 31, 2018 | |||||||||||||||||||||||||
Beginning balance | $ | 3,111 | 2,816 | 6,147 | 1,827 | 6,475 | 950 | 1,972 | 23,298 | ||||||||||||||||
Charge-offs | (2,128 | ) | (158 | ) | (1,734 | ) | (711 | ) | (1,459 | ) | (781 | ) | — | (6,971 | ) | ||||||||||
Recoveries | 1,195 | 4,097 | 833 | 364 | 1,503 | 309 | — | 8,301 | |||||||||||||||||
Provisions | 711 | (4,512 | ) | (49 | ) | 185 | 1,464 | 474 | (1,862 | ) | (3,589 | ) | |||||||||||||
Ending balance | $ | 2,889 | 2,243 | 5,197 | 1,665 | 7,983 | 952 | 110 | 21,039 | ||||||||||||||||
Ending balances as of December 31, 2018: Allowance for loan losses | |||||||||||||||||||||||||
Individually evaluated for impairment | $ | 226 | 134 | 955 | 48 | 906 | — | — | 2,269 | ||||||||||||||||
Collectively evaluated for impairment | $ | 2,661 | 2,109 | 4,143 | 1,608 | 7,070 | 941 | 110 | 18,642 | ||||||||||||||||
Purchased credit impaired | $ | 2 | — | 99 | 9 | 7 | 11 | — | 128 | ||||||||||||||||
Loans receivable as of December 31, 2018: | |||||||||||||||||||||||||
Ending balance – total | $ | 457,037 | 518,976 | 1,054,176 | 359,162 | 1,787,022 | 71,392 | — | 4,247,765 | ||||||||||||||||
Unamortized net deferred loan costs | 1,299 | ||||||||||||||||||||||||
Total loans | $ | 4,249,064 | |||||||||||||||||||||||
Ending balances as of December 31, 2018: Loans | |||||||||||||||||||||||||
Individually evaluated for impairment | $ | 696 | 1,345 | 12,391 | 296 | 9,525 | — | — | 24,253 | ||||||||||||||||
Collectively evaluated for impairment | $ | 456,111 | 517,453 | 1,035,532 | 358,522 | 1,767,361 | 71,140 | — | 4,206,119 | ||||||||||||||||
Purchased credit impaired | $ | 230 | 178 | 6,253 | 344 | 10,136 | 252 | — | 17,393 |
($ in thousands) | Commercial, Financial, and Agricultural | Real Estate – Construction, Land Development & Other Land Loans | Real Estate – Residential (1-4 Family) First Mortgages | Real Estate – Mortgage – Home Equity Lines of Credit | Real Estate – Mortgage – Commercial and Other | Installment Loans to Individuals | Unallo -cated | Total | ||||||||||||||||||||||||
As of and for the three months ended June 30, 2018 | ||||||||||||||||||||||||||||||||
Beginning balance | $ | 2,536 | 2,317 | 5,892 | 2,266 | 5,991 | 844 | 3,452 | 23,298 | |||||||||||||||||||||||
Charge-offs | (370 | ) | (30 | ) | (172 | ) | (10 | ) | (271 | ) | (144 | ) | — | (997 | ) | |||||||||||||||||
Recoveries | 313 | 341 | 371 | 90 | 542 | 50 | — | 1,707 | ||||||||||||||||||||||||
Provisions | (211 | ) | 64 | 968 | (96 | ) | 1,033 | 147 | (2,615 | ) | (710 | ) | ||||||||||||||||||||
Ending balance | $ | 2,268 | 2,692 | 7,059 | 2,250 | 7,295 | 897 | 837 | 23,298 | |||||||||||||||||||||||
As of and for the six months ended June 30, 2018 | ||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,111 | 2,816 | 6,147 | 1,827 | 6,475 | 950 | 1,972 | 23,298 | |||||||||||||||||||||||
Charge-offs | (609 | ) | (32 | ) | (415 | ) | (186 | ) | (312 | ) | (262 | ) | — | (1,816 | ) | |||||||||||||||||
Recoveries | 812 | 3,387 | 516 | 243 | 1,124 | 103 | — | 6,185 | ||||||||||||||||||||||||
Provisions | (1,046 | ) | (3,479 | ) | 811 | 366 | 8 | 106 | (1,135 | ) | (4,369 | ) | ||||||||||||||||||||
Ending balance | $ | 2,268 | 2,692 | 7,059 | 2,250 | 7,295 | 897 | 837 | 23,298 | |||||||||||||||||||||||
Ending balances as of June 30, 2018: Allowance for loan losses | ||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 277 | 302 | 2,756 | 415 | 1,231 | 6 | — | 4,987 | |||||||||||||||||||||||
Collectively evaluated for impairment | $ | 1,991 | 2,390 | 4,133 | 1,794 | 6,052 | 891 | 837 | 18,088 | |||||||||||||||||||||||
Purchased credit impaired | $ | — | — | 170 | 41 | 12 | — | — | 223 | |||||||||||||||||||||||
Loans receivable as of June 30, 2018: | ||||||||||||||||||||||||||||||||
Ending balance – total | $ | 417,366 | 600,031 | 1,000,189 | 369,875 | 1,690,175 | 71,823 | — | 4,149,459 | |||||||||||||||||||||||
Unamortized net deferred loan fees | (69 | ) | ||||||||||||||||||||||||||||||
Total loans | $ | 4,149,390 | ||||||||||||||||||||||||||||||
Ending balances as of June 30, 2018: Loans | ||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 3,208 | 3,549 | 15,247 | 671 | 10,333 | 10 | — | 33,018 | |||||||||||||||||||||||
Collectively evaluated for impairment | $ | 413,889 | 596,157 | 977,549 | 368,831 | 1,667,700 | 71,483 | — | 4,095,609 | |||||||||||||||||||||||
Purchased credit impaired | $ | 269 | 325 | 7,393 | 373 | 12,142 | 330 | — | 20,832 |
($ in thousands) | Commercial, Financial, and Agricultural | Real Estate – Construction, Land Development, & Other Land Loans | Real Estate – Residential (1-4 Family) First Mortgages | Real Estate – Mortgage – Home Equity Lines of Credit | Real Estate – Mortgage – Commercial and Other | Installment Loans to Individuals | Unallocated | Total | ||||||||||||||||
As of and for the three months ended June 30, 2018 | ||||||||||||||||||||||||
Beginning balance | $ | 2,536 | 2,317 | 5,892 | 2,266 | 5,991 | 844 | 3,452 | 23,298 | |||||||||||||||
Charge-offs | (370 | ) | (30 | ) | (172 | ) | (10 | ) | (271 | ) | (144 | ) | — | (997 | ) | |||||||||
Recoveries | 313 | 341 | 371 | 90 | 542 | 50 | — | 1,707 | ||||||||||||||||
Provisions | (211 | ) | 64 | 968 | (96 | ) | 1,033 | 147 | (2,615 | ) | (710 | ) | ||||||||||||
Ending balance | $ | 2,268 | 2,692 | 7,059 | 2,250 | 7,295 | 897 | 837 | 23,298 | |||||||||||||||
As of and for the six months ended June 30, 2018 | ||||||||||||||||||||||||
Beginning balance | $ | 3,111 | 2,816 | 6,147 | 1,827 | 6,475 | 950 | 1,972 | 23,298 | |||||||||||||||
Charge-offs | (609 | ) | (32 | ) | (415 | ) | (186 | ) | (312 | ) | (262 | ) | — | (1,816 | ) | |||||||||
Recoveries | 812 | 3,387 | 516 | 243 | 1,124 | 103 | — | 6,185 | ||||||||||||||||
Provisions | (1,046 | ) | (3,479 | ) | 811 | 366 | 8 | 106 | (1,135 | ) | (4,369 | ) | ||||||||||||
Ending balance | $ | 2,268 | 2,692 | 7,059 | 2,250 | 7,295 | 897 | 837 | 23,298 | |||||||||||||||
Ending balances as of June 30, 2018: Allowance for loan losses | ||||||||||||||||||||||||
Individually evaluated for impairment | $ | 277 | 302 | 2,756 | 415 | 1,231 | 6 | — | 4,987 | |||||||||||||||
Collectively evaluated for impairment | $ | 1,991 | 2,390 | 4,133 | 1,794 | 6,052 | 891 | 837 | 18,088 | |||||||||||||||
Purchased credit impaired | $ | — | — | 170 | 41 | 12 | — | — | 223 | |||||||||||||||
Loans receivable as of June 30, 2018 | ||||||||||||||||||||||||
Ending balance – total | $ | 417,366 | 600,031 | 1,000,189 | 369,875 | 1,690,175 | 71,823 | — | 4,149,459 | |||||||||||||||
Unamortized net deferred loan fees | (69 | ) | ||||||||||||||||||||||
Total loans | 4,149,390 | |||||||||||||||||||||||
Ending balances as of June 30, 2018: Loans | ||||||||||||||||||||||||
Individually evaluated for impairment | $ | 3,208 | 3,549 | 15,247 | 671 | 10,333 | 10 | — | 33,018 | |||||||||||||||
Collectively evaluated for impairment | $ | 413,889 | 596,157 | 977,549 | 368,831 | 1,667,700 | 71,483 | — | 4,095,609 | |||||||||||||||
Purchased credit impaired | $ | 269 | 325 | 7,393 | 373 | 12,142 | 330 | — | 20,832 |
The following table presents the activity in the allowance for loan losses for the year ended December 31, 2017.
($ in thousands) | Commercial, Financial, and Agricultural | Real Estate – Construction, Land Development, & Other Land Loans | Real Estate – Residential (1-4 Family) First Mortgages | Real Estate – Mortgage – Home Equity Lines of Credit | Real Estate – Mortgage – Commercial and Other | Installment Loans to Individuals | Unallo -cated | Total | ||||||||||||||||||||||||
As of and for the year ended December 31, 2017 | ||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,829 | 2,691 | 7,704 | 2,420 | 5,098 | 1,145 | 894 | 23,781 | |||||||||||||||||||||||
Charge-offs | (1,622 | ) | (589 | ) | (2,641 | ) | (978 | ) | (1,182 | ) | (799 | ) | — | (7,811 | ) | |||||||||||||||||
Recoveries | 1,311 | 2,579 | 1,076 | 333 | 1,027 | 279 | — | 6,605 | ||||||||||||||||||||||||
Provisions | (407 | ) | (1,865 | ) | 8 | 52 | 1,532 | 325 | 1,078 | 723 | ||||||||||||||||||||||
Ending balance | $ | 3,111 | 2,816 | 6,147 | 1,827 | 6,475 | 950 | 1,972 | 23,298 | |||||||||||||||||||||||
Ending balances as of December 31, 2017: Allowance for loan losses | ||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 215 | 18 | 1,099 | — | 232 | — | — | 1,564 | |||||||||||||||||||||||
Collectively evaluated for impairment | $ | 2,896 | 2,798 | 4,831 | 1,788 | 6,226 | 950 | 1,972 | 21,461 | |||||||||||||||||||||||
Purchased credit impaired | $ | — | — | 217 | 39 | 17 | — | — | 273 | |||||||||||||||||||||||
Loans receivable as of December 31, 2017: | ||||||||||||||||||||||||||||||||
Ending balance – total | $ | 381,130 | 539,020 | 972,772 | 379,978 | 1,696,107 | 74,348 | — | 4,043,355 | |||||||||||||||||||||||
Unamortized net deferred loan fees | (986 | ) | ||||||||||||||||||||||||||||||
Total loans | $ | 4,042,369 | ||||||||||||||||||||||||||||||
Ending balances as of December 31, 2017: Loans | ||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 579 | 2,975 | 14,800 | 368 | 8,493 | — | — | 27,215 | |||||||||||||||||||||||
Collectively evaluated for impairment | $ | 379,903 | 535,638 | 949,113 | 379,327 | 1,675,102 | 73,892 | — | 3,992,975 | |||||||||||||||||||||||
Purchased credit impaired | $ | 648 | 407 | 8,859 | 283 | 12,512 | 456 | — | 23,165 |
Page 25
The following table presents the activity in the allowance for loan losses for all loans for the three and six months ended June 30, 2017.
($ in thousands) | Commercial, Financial, and Agricultural | Real Estate – Construction, Land Development & Other Land Loans | Real Estate – Residential (1-4 Family) First Mortgages | Real Estate – Mortgage – Home Equity Lines of Credit | Real Estate – Mortgage – Commercial and Other | Installment Loans to Individuals | Unallo -cated | Total | ||||||||||||||||||||||||
As of and for the three months ended June 30, 2017 | ||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,792 | 2,764 | 7,376 | 2,138 | 5,979 | 1,067 | 430 | 23,546 | |||||||||||||||||||||||
Charge-offs | (814 | ) | (92 | ) | (353 | ) | (347 | ) | (88 | ) | (172 | ) | — | (1,866 | ) | |||||||||||||||||
Recoveries | 220 | 981 | 440 | 65 | 555 | 84 | — | 2,345 | ||||||||||||||||||||||||
Provisions | 232 | (977 | ) | (378 | ) | 201 | (293 | ) | 95 | 1,120 | — | |||||||||||||||||||||
Ending balance | $ | 3,430 | 2,676 | 7,085 | 2,057 | 6,153 | 1,074 | 1,550 | 24,025 | |||||||||||||||||||||||
As of and for the six months ended June 30, 2017 | ||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,829 | 2,691 | 7,704 | 2,420 | 5,098 | 1,145 | 894 | 23,781 | |||||||||||||||||||||||
Charge-offs | (1,204 | ) | (269 | ) | (1,247 | ) | (578 | ) | (414 | ) | (359 | ) | — | (4,071 | ) | |||||||||||||||||
Recoveries | 518 | 1,471 | 636 | 130 | 698 | 139 | — | 3,592 | ||||||||||||||||||||||||
Provisions | 287 | (1,217 | ) | (8 | ) | 85 | 771 | 149 | 656 | 723 | ||||||||||||||||||||||
Ending balance | $ | 3,430 | 2,676 | 7,085 | 2,057 | 6,153 | 1,074 | 1,550 | 24,025 | |||||||||||||||||||||||
Ending balances as of June 30, 2017: Allowance for loan losses | ||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 8 | 182 | 1,304 | — | 424 | — | — | 1,918 | |||||||||||||||||||||||
Collectively evaluated for impairment | $ | 3,422 | 2,494 | 5,781 | 2,057 | 5,729 | 1,074 | 1,550 | 22,107 | |||||||||||||||||||||||
Purchased credit impaired | $ | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Loans receivable as of June 30, 2017: | ||||||||||||||||||||||||||||||||
Ending balance – total | $ | 383,834 | 446,661 | 783,759 | 320,953 | 1,384,569 | 57,008 | — | 3,376,784 | |||||||||||||||||||||||
Unamortized net deferred loan fees | (808 | ) | ||||||||||||||||||||||||||||||
Total loans | $ | 3,375,976 | ||||||||||||||||||||||||||||||
Ending balances as of June 30, 2017: Loans | ||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 235 | 3,250 | 17,083 | 54 | 9,053 | — | — | 29,675 | |||||||||||||||||||||||
Collectively evaluated for impairment | $ | 383,330 | 442,956 | 763,224 | 320,174 | 1,363,629 | 56,950 | — | 3,330,263 | |||||||||||||||||||||||
Purchased credit impaired | $ | 269 | 455 | 3,452 | 725 | 11,887 | 58 | — | 16,846 |
Page 26
The following table presents loans individually evaluated for impairment by class of loans, excluding PCI loans, as of June 30, 2018.
($ in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | ||||||||||||
Impaired loans with no related allowance recorded: | ||||||||||||||||
Commercial, financial, and agricultural | $ | 2,530 | 2,580 | — | 928 | |||||||||||
Real estate – mortgage – construction, land development & other land loans | 2,948 | 3,429 | — | 2,901 | ||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 4,514 | 5,118 | — | 4,885 | ||||||||||||
Real estate – mortgage –home equity loans / lines of credit | 23 | 35 | — | 138 | ||||||||||||
Real estate – mortgage –commercial and other | 3,494 | 3,685 | — | 3,441 | ||||||||||||
Installment loans to individuals | — | 3 | — | — | ||||||||||||
Total impaired loans with no allowance | $ | 13,509 | 14,850 | — | 12,293 | |||||||||||
Impaired loans with an allowance recorded: | ||||||||||||||||
Commercial, financial, and agricultural | $ | 678 | 708 | 277 | 479 | |||||||||||
Real estate – mortgage – construction, land development & other land loans | 601 | 723 | 302 | 355 | ||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 10,733 | 11,347 | 2,756 | 9,724 | ||||||||||||
Real estate – mortgage –home equity loans / lines of credit | 648 | 776 | 415 | 216 | ||||||||||||
Real estate – mortgage –commercial and other | 6,839 | 6,942 | 1,231 | 5,856 | ||||||||||||
Installment loans to individuals | 10 | 15 | 6 | 3 | ||||||||||||
Total impaired loans with allowance | $ | 19,509 | 20,511 | 4,987 | 16,633 |
2019.
($ in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | ||||||||
Impaired loans with no related allowance recorded: | ||||||||||||
Commercial, financial, and agricultural | $ | — | — | — | 113 | |||||||
Real estate – mortgage – construction, land development & other land loans | 439 | 766 | — | 461 | ||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 4,645 | 4,972 | — | 4,687 | ||||||||
Real estate – mortgage –home equity loans / lines of credit | 21 | 30 | — | 21 | ||||||||
Real estate – mortgage –commercial and other | 3,287 | 4,276 | — | 3,593 | ||||||||
Installment loans to individuals | — | — | — | — | ||||||||
Total impaired loans with no allowance | $ | 8,392 | 10,044 | — | 8,875 | |||||||
Impaired loans with an allowance recorded: | ||||||||||||
Commercial, financial, and agricultural | $ | 992 | 1,323 | 435 | 798 | |||||||
Real estate – mortgage – construction, land development & other land loans | 581 | 581 | 44 | 593 | ||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 5,689 | 5,881 | 770 | 6,519 | ||||||||
Real estate – mortgage –home equity loans / lines of credit | — | — | — | 91 | ||||||||
Real estate – mortgage –commercial and other | 4,164 | 4,763 | 783 | 4,865 | ||||||||
Installment loans to individuals | — | — | — | — | ||||||||
Total impaired loans with allowance | $ | 11,426 | 12,548 | 2,032 | 12,866 |
($ in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | ||||||||||||
Impaired loans with no related allowance recorded: | ||||||||||||||||
Commercial, financial, and agricultural | $ | 183 | 425 | — | 276 | |||||||||||
Real estate – mortgage – construction, land development & other land loans | 2,743 | 3,941 | — | 2,846 | ||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 5,205 | 5,728 | — | 7,067 | ||||||||||||
Real estate – mortgage –home equity loans / lines of credit | 368 | 387 | — | 129 | ||||||||||||
Real estate – mortgage –commercial and other | 3,066 | 3,321 | — | 3,143 | ||||||||||||
Installment loans to individuals | — | — | — | — | ||||||||||||
Total impaired loans with no allowance | $ | 11,565 | 13,802 | — | 13,461 | |||||||||||
Impaired loans with an allowance recorded: | ||||||||||||||||
Commercial, financial, and agricultural | $ | 396 | 396 | 215 | 214 | |||||||||||
Real estate – mortgage – construction, land development & other land loans | 232 | 241 | 18 | 503 | ||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 9,595 | 9,829 | 1,099 | 10,077 | ||||||||||||
Real estate – mortgage –home equity loans / lines of credit | — | — | — | 66 | ||||||||||||
Real estate – mortgage –commercial and other | 5,427 | 5,427 | 232 | 5,369 | ||||||||||||
Installment loans to individuals | — | — | — | — | ||||||||||||
Total impaired loans with allowance | $ | 15,650 | 15,893 | 1,564 | 16,229 |
2018.
($ in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | ||||||||
Impaired loans with no related allowance recorded: | ||||||||||||
Commercial, financial, and agricultural | $ | 310 | 310 | — | 957 | |||||||
Real estate – mortgage – construction, land development & other land loans | 485 | 803 | — | 2,366 | ||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 4,626 | 4,948 | — | 4,804 | ||||||||
Real estate – mortgage –home equity loans / lines of credit | 22 | 31 | — | 91 | ||||||||
Real estate – mortgage –commercial and other | 3,475 | 4,237 | — | 3,670 | ||||||||
Installment loans to individuals | — | — | — | — | ||||||||
Total impaired loans with no allowance | $ | 8,918 | 10,329 | — | 11,888 | |||||||
Impaired loans with an allowance recorded: | ||||||||||||
Commercial, financial, and agricultural | $ | 386 | 387 | 226 | 422 | |||||||
Real estate – mortgage – construction, land development & other land loans | 860 | 864 | 134 | 385 | ||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 7,765 | 7,904 | 955 | 8,963 | ||||||||
Real estate – mortgage –home equity loans / lines of credit | 274 | 275 | 48 | 184 | ||||||||
Real estate – mortgage –commercial and other | 6,050 | 6,054 | 906 | 5,911 | ||||||||
Installment loans to individuals | — | — | — | 2 | ||||||||
Total impaired loans with allowance | $ | 15,335 | 15,484 | 2,269 | 15,867 |
Page 27
The Company tracks credit quality based on its internal risk ratings. Upon origination, a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower’s credit score, the loan-to-value ratio, the debt-to-income ratio, etc. Loans that are risk-graded as substandard during the origination process are declined. After loans are initially graded, they are monitored regularly for credit quality based on many factors, such as payment history, the borrower’s financial status, and changes in collateral value. Loans can be downgraded or upgraded depending on management’s evaluation of these factors. Internal risk-grading policies are consistent throughout each loan type.
Risk Grade | Description | |
Pass: | ||
1 | Loans with virtually no risk, including cash secured loans. | |
2 | Loans with documented significant overall financial strength. These loans have minimum chance of loss due to the presence of multiple sources of repayment – each clearly sufficient to satisfy the obligation. | |
3 | Loans with documented satisfactory overall financial strength. These loans have a low loss potential due to presence of at least two clearly identified sources of repayment – each of which is sufficient to satisfy the obligation under the present circumstances. | |
4 | Loans to borrowers with acceptable financial condition. These loans could have signs of minor operational weaknesses, lack of adequate financial information, or loans supported by collateral with questionable value or marketability. | |
5 | Loans that represent above average risk due to minor weaknesses and warrant closer scrutiny by management. Collateral is generally required and felt to provide reasonable coverage with realizable liquidation values in normal circumstances. Repayment performance is satisfactory. | |
P (Pass) | Consumer loans (<$500,000) that are of satisfactory credit quality with borrowers who exhibit good personal credit history, average personal financial strength and moderate debt levels. These loans generally conform to Bank policy, but may include approved mitigated exceptions to the guidelines. | |
Special Mention: | ||
6 | Existing loans with defined weaknesses in primary source of repayment that, if not corrected, could cause a loss to the Bank. | |
Classified: | ||
7 | An existing loan inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged, if any. These loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. | |
8 | Loans that have a well-defined weakness that make the collection or liquidation in full highly questionable and improbable. Loss appears imminent, but the exact amount and timing is uncertain. | |
9 | Loans that are considered uncollectible and are in the process of being charged-off. This grade is a temporary grade assigned for administrative purposes until the charge-off is completed. | |
F (Fail) | Consumer loans (<$500,000) with a well-defined weakness, such as exceptions of any kind with no mitigating factors, history of paying outside the terms of the note, insufficient income to support the current level of debt, etc. |
Page 28
The following table presents the Company’s recorded investment in loans by credit quality indicators as of June 30, 2018.
($ in thousands) | ||||||||||||||||||||
Pass | Special Mention Loans | Classified Accruing Loans | Classified Nonaccrual Loans | Total | ||||||||||||||||
Commercial, financial, and agricultural | $ | 410,434 | 2,322 | 934 | 3,407 | 417,097 | ||||||||||||||
Real estate – construction, land development & other land loans | 586,310 | 6,812 | 5,210 | 1,374 | 599,706 | |||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 941,399 | 13,829 | 26,055 | 11,513 | 992,796 | |||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 357,507 | 1,698 | 8,532 | 1,765 | 369,502 | |||||||||||||||
Real estate – mortgage – commercial and other | 1,648,367 | 16,644 | 5,730 | 7,292 | 1,678,033 | |||||||||||||||
Installment loans to individuals | 70,776 | 215 | 359 | 143 | 71,493 | |||||||||||||||
Purchased credit impaired | 6,376 | 7,059 | 7,397 | — | 20,832 | |||||||||||||||
Total | $ | 4,021,169 | 48,579 | 54,217 | 25,494 | 4,149,459 | ||||||||||||||
Unamortized net deferred loan fees | (69 | ) | ||||||||||||||||||
Total loans | 4,149,390 |
2019.
($ in thousands) | Pass | Special Mention Loans | Classified Accruing Loans | Classified Nonaccrual Loans | Total | ||||||||||
Commercial, financial, and agricultural | $ | 460,804 | 7,643 | 987 | 1,490 | 470,924 | |||||||||
Real estate – construction, land development & other land loans | 447,686 | 4,680 | 2,823 | 1,420 | 456,609 | ||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1,040,778 | 16,274 | 18,910 | 8,697 | 1,084,659 | ||||||||||
Real estate – mortgage – home equity loans / lines of credit | 340,085 | 1,361 | 6,295 | 1,404 | 349,145 | ||||||||||
Real estate – mortgage – commercial and other | 1,857,389 | 20,539 | 10,557 | 4,260 | 1,892,745 | ||||||||||
Installment loans to individuals | 68,190 | 223 | 939 | 104 | 69,456 | ||||||||||
Purchased credit impaired | 8,060 | 2,884 | 3,231 | — | 14,175 | ||||||||||
Total | $ | 4,222,992 | 53,604 | 43,742 | 17,375 | 4,337,713 | |||||||||
Unamortized net deferred loan costs | 1,784 | ||||||||||||||
Total loans | 4,339,497 |
($ in thousands) | ||||||||||||||||||||
Pass | Special Mention Loans | Classified Accruing Loans | Classified Nonaccrual Loans | Total | ||||||||||||||||
Commercial, financial, and agricultural | $ | 368,658 | 9,901 | 922 | 1,001 | 380,482 | ||||||||||||||
Real estate – construction, land development & other land loans | 523,642 | 7,129 | 6,020 | 1,822 | 538,613 | |||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 905,111 | 16,235 | 30,366 | 12,201 | 963,913 | |||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 365,982 | 3,784 | 7,405 | 2,524 | 379,695 | |||||||||||||||
Real estate – mortgage – commercial and other | 1,647,725 | 23,335 | 9,190 | 3,345 | 1,683,595 | |||||||||||||||
Installment loans to individuals | 73,379 | 222 | 216 | 75 | 73,892 | |||||||||||||||
Purchased credit impaired | 6,541 | 12,309 | 4,315 | — | 23,165 | |||||||||||||||
Total | $ | 3,891,038 | 72,915 | 58,434 | 20,968 | 4,043,355 | ||||||||||||||
Unamortized net deferred loan fees | (986 | ) | ||||||||||||||||||
Total loans | 4,042,369 |
2018.
($ in thousands) | Pass | Special Mention Loans | Classified Accruing Loans | Classified Nonaccrual Loans | Total | ||||||||||
Commercial, financial, and agricultural | $ | 452,372 | 3,056 | 459 | 919 | 456,806 | |||||||||
Real estate – construction, land development & other land loans | 509,251 | 5,668 | 1,614 | 2,265 | 518,798 | ||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1,004,458 | 12,238 | 21,113 | 10,115 | 1,047,924 | ||||||||||
Real estate – mortgage – home equity loans / lines of credit | 348,792 | 1,688 | 6,653 | 1,685 | 358,818 | ||||||||||
Real estate – mortgage – commercial and other | 1,750,810 | 14,484 | 4,140 | 7,452 | 1,776,886 | ||||||||||
Installment loans to individuals | 70,357 | 231 | 413 | 139 | 71,140 | ||||||||||
Purchased credit impaired | 8,355 | 5,214 | 3,824 | — | 17,393 | ||||||||||
Total | $ | 4,144,395 | 42,579 | 38,216 | 22,575 | 4,247,765 | |||||||||
Unamortized net deferred loan costs | 1,299 | ||||||||||||||
Total loans | 4,249,064 |
Page 29
The following table presents information related to loans modified in a troubled debt restructuring during the three months ended June 30, 20182019 and 2017.
($ in thousands) | For three months ended June 30, 2018 | For the three months ended June 30, 2017 | ||||||||||||||||||||||
Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | |||||||||||||||||||
TDRs – Accruing | ||||||||||||||||||||||||
Commercial, financial, and agricultural | — | $ | — | $ | — | — | $ | — | $ | — | ||||||||||||||
Real estate – construction, land development & other land loans | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1 | 18 | 18 | — | — | — | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – commercial and other | — | — | — | 3 | 1,000 | 1,000 | ||||||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | ||||||||||||||||||
TDRs – Nonaccrual | ||||||||||||||||||||||||
Commercial, financial, and agricultural | — | — | — | 1 | 38 | 25 | ||||||||||||||||||
Real estate – construction, land development & other land loans | — | — | — | 1 | 32 | 32 | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | — | — | — | 1 | 215 | 215 | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – commercial and other | — | — | — | — | — | — | ||||||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | ||||||||||||||||||
Total TDRs arising during period | 1 | $ | 18 | $ | 18 | 6 | $ | 1,285 | $ | 1,272 |
($ in thousands) | For the three months ended June 30, 2019 | For the three months ended June 30, 2018 | |||||||||||||||||||
Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | ||||||||||||||||
TDRs – Accruing | |||||||||||||||||||||
Commercial, financial, and agricultural | 1 | $ | 143 | $ | 143 | — | $ | — | $ | — | |||||||||||
Real estate – construction, land development & other land loans | — | — | — | — | — | — | |||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | — | — | — | 1 | 18 | 18 | |||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | |||||||||||||||
Real estate – mortgage – commercial and other | — | — | — | — | — | — | |||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | |||||||||||||||
TDRs – Nonaccrual | |||||||||||||||||||||
Commercial, financial, and agricultural | — | — | — | — | — | — | |||||||||||||||
Real estate – construction, land development & other land loans | — | — | — | — | — | — | |||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | — | — | — | — | — | — | |||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | |||||||||||||||
Real estate – mortgage – commercial and other | — | — | — | — | — | — | |||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | |||||||||||||||
Total TDRs arising during period | 1 | $ | 143 | $ | 143 | 1 | $ | 18 | $ | 18 |
($ in thousands) | For six months ended June 30, 2018 | For the six months ended June 30, 2017 | ||||||||||||||||||||||
Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | |||||||||||||||||||
TDRs – Accruing | ||||||||||||||||||||||||
Commercial, financial, and agricultural | — | $ | — | $ | — | — | $ | — | $ | — | ||||||||||||||
Real estate – construction, land development & other land loans | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1 | 18 | 18 | — | — | — | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – commercial and other | — | — | — | 5 | 3,550 | 3,525 | ||||||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | ||||||||||||||||||
TDRs – Nonaccrual | ||||||||||||||||||||||||
Commercial, financial, and agricultural | — | — | — | 1 | 38 | 25 | ||||||||||||||||||
Real estate – construction, land development & other land loans | 1 | 61 | 61 | 1 | 32 | 32 | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 2 | 254 | 264 | 1 | 215 | 215 | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – commercial and other | — | — | — | — | — | — | ||||||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | ||||||||||||||||||
Total TDRs arising during period | 4 | $ | 333 | $ | 343 | 8 | $ | 3,835 | $ | 3,797 |
2018.
($ in thousands) | For the six months ended June 30, 2019 | For the six months ended June 30, 2018 | |||||||||||||||||||
Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | ||||||||||||||||
TDRs – Accruing | |||||||||||||||||||||
Commercial, financial, and agricultural | 1 | $ | 143 | $ | 143 | — | $ | — | $ | — | |||||||||||
Real estate – construction, land development & other land loans | — | — | — | — | — | — | |||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1 | 55 | 55 | 1 | 18 | 18 | |||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | |||||||||||||||
Real estate – mortgage – commercial and other | — | — | — | — | — | — | |||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | |||||||||||||||
TDRs – Nonaccrual | |||||||||||||||||||||
Commercial, financial, and agricultural | — | — | — | — | — | — | |||||||||||||||
Real estate – construction, land development & other land loans | — | — | — | 1 | 61 | 61 | |||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | — | — | — | 2 | 254 | 264 | |||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | |||||||||||||||
Real estate – mortgage – commercial and other | — | — | — | — | — | — | |||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | |||||||||||||||
Total TDRs arising during period | 2 | $ | 198 | $ | 198 | 4 | $ | 333 | $ | 343 |
($ in thousands) | For the three months ended June 30, 2018 | For the three months ended June 30, 2017 | ||||||||||||||
Number of Contracts | Recorded Investment | Number of Contracts | Recorded Investment | |||||||||||||
Accruing TDRs that subsequently defaulted | ||||||||||||||||
Real estate – mortgage – residential (1-4 family first mortgages) | 1 | $ | 60 | 1 | $ | 254 | ||||||||||
Real estate – mortgage – commercial and other | 2 | 763 | — | — | ||||||||||||
Total accruing TDRs that subsequently defaulted | 3 | $ | 823 | 1 | $ | 254 |
($ in thousands) | For the Three Months Ended June 30, 2019 | For the Three Months Ended June 30, 2018 | |||||||||||
Number of Contracts | Recorded Investment | Number of Contracts | Recorded Investment | ||||||||||
Accruing TDRs that subsequently defaulted | |||||||||||||
Real estate – mortgage – residential (1-4 family first mortgages) | — | $ | — | 1 | $ | 60 | |||||||
Real estate – mortgage – commercial and other | — | — | 2 | 763 | |||||||||
Total accruing TDRs that subsequently defaulted | — | $ | — | 3 | $ | 823 |
($ in thousands) | For the six months ended June 30, 2018 | For the six months ended June 30, 2017 | ||||||||||||||
Number of Contracts | Recorded Investment | Number of Contracts | Recorded Investment | |||||||||||||
Accruing TDRs that subsequently defaulted | ||||||||||||||||
Real estate – mortgage – residential (1-4 family first mortgages) | 1 | $ | 60 | 2 | $ | 880 | ||||||||||
Real estate – mortgage – commercial and other | 3 | 1,333 | — | — | ||||||||||||
Total accruing TDRs that subsequently defaulted | 4 | $ | 1,393 | 2 | $ | 880 |
Page 31
($ in thousands) | For the Six Months Ended June 30, 2019 | For the Six Months Ended June 30, 2018 | |||||||||||
Number of Contracts | Recorded Investment | Number of Contracts | Recorded Investment | ||||||||||
Accruing TDRs that subsequently defaulted | |||||||||||||
Real estate – mortgage – residential (1-4 family first mortgages) | — | $ | — | 1 | $ | 60 | |||||||
Real estate – mortgage – commercial and other | — | — | 2 | 763 | |||||||||
Total accruing TDRs that subsequently defaulted | — | $ | — | 3 | $ | 823 |
Note 9 – Deferred Loan (Fees) Costs
The amount of loans shown on the consolidated balance sheets includes net deferred loan (fees) costs of approximately ($69,000), ($986,000), and ($808,000) at June 30, 2018, December 31, 2017, and June 30, 2017, respectively.
June 30, 2018 | December 31, 2017 | June 30, 2017 | ||||||||||||||||||||||
($ in thousands) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||||||
Amortizable intangible assets: | ||||||||||||||||||||||||
Customer lists | $ | 6,013 | 1,322 | 6,013 | 1,090 | 2,369 | 866 | |||||||||||||||||
Core deposit intangibles | 28,440 | 14,078 | 28,280 | 11,475 | 18,520 | 9,404 | ||||||||||||||||||
SBA servicing asset | 4,166 | 558 | 2,194 | 207 | 928 | 66 | ||||||||||||||||||
Other | 1,303 | 812 | 1,303 | 581 | 1,032 | 381 | ||||||||||||||||||
Total | $ | 39,922 | 16,770 | 37,790 | 13,353 | 22,849 | 10,717 | |||||||||||||||||
Unamortizable intangible | ||||||||||||||||||||||||
assets: | ||||||||||||||||||||||||
Goodwill | $ | 232,458 | 233,070 | 139,124 |
Activity related to transactions during the periods includes the following:
In addition to the above acquisition related activity, the
June 30, 2019 | December 31, 2018 | June 30, 2018 | |||||||||||||||||
($ in thousands) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | |||||||||||||
Amortizable intangible assets: | |||||||||||||||||||
Customer lists | $ | 6,013 | 1,911 | 6,013 | 1,637 | 6,013 | 1,185 | ||||||||||||
Core deposit intangibles | 28,440 | 18,648 | 28,440 | 16,469 | 28,440 | 12,803 | |||||||||||||
SBA servicing asset | 6,956 | 1,674 | 5,472 | 1,053 | 3,348 | 319 | |||||||||||||
Other | 1,303 | 1,078 | 1,303 | 957 | 1,303 | 718 | |||||||||||||
Total | $ | 42,712 | 23,311 | 41,228 | 20,116 | 39,104 | 15,025 | ||||||||||||
Unamortizable intangible assets: | |||||||||||||||||||
Goodwill | $ | 234,368 | 234,368 | 232,458 |
loans and are tested for impairment on a quarterly basis. SBA servicing asset amortization expense is recorded within noninterest income to offset SBA servicing fees.
($ in thousands)
| Estimated Amortization Expense | |||
July 1 to December 31, 2018 | $ | 3,164 | ||
2019 | 5,440 | |||
2020 | 4,370 | |||
2021 | 3,288 | |||
2022 | 2,312 | |||
Thereafter | 4,578 | |||
Total | $ | 23,152 |
Page 32
($ in thousands) | Estimated Amortization Expense | |||
July 1 to December 31, 2019 | $ | 2,284 | ||
2020 | 3,841 | |||
2021 | 2,927 | |||
2022 | 2,022 | |||
2023 | 1,041 | |||
Thereafter | 2,004 | |||
Total | $ | 14,119 |
For the Three Months Ended June 30, | ||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 Total | 2017 Total | |||||||||||||||||||
($ in thousands) | Pension Plan | Pension Plan | SERP | SERP | Both Plans | Both Plans | ||||||||||||||||||
Service cost | $ | — | — | 33 | 32 | 33 | 32 | |||||||||||||||||
Interest cost | 326 | 350 | 53 | 53 | 379 | 403 | ||||||||||||||||||
Expected return on plan assets | (556 | ) | (730 | ) | — | — | (556 | ) | (730 | ) | ||||||||||||||
Amortization of net (gain)/loss | 59 | 62 | (8 | ) | (8 | ) | 51 | 54 | ||||||||||||||||
Net periodic pension cost (income) | $ | (171 | ) | (318 | ) | 78 | 77 | (93 | ) | (241 | ) |
The Company recorded pension cost (income) totaling$488,000 and $272,000 and $(403,000) for the six months ended June 30, 20182019 and 2017,2018, respectively. The following table contains the components of the pension cost (income).
For the Six Months Ended June 30, | ||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 Total | 2017 Total | |||||||||||||||||||
($ in thousands) | Pension Plan | Pension Plan | SERP | SERP | Both Plans | Both Plans | ||||||||||||||||||
Service cost | $ | — | — | 62 | 59 | 62 | 59 | |||||||||||||||||
Interest cost | 656 | 725 | 110 | 113 | 766 | 838 | ||||||||||||||||||
Expected return on plan assets | (659 | ) | (1,405 | ) | — | — | (659 | ) | (1,405 | ) | ||||||||||||||
Amortization of net (gain)/loss | 119 | 122 | (16 | ) | (17 | ) | 103 | 105 | ||||||||||||||||
Net periodic pension cost (income) | $ | 116 | (558 | ) | 156 | 155 | 272 | (403 | ) |
cost.
For the Three Months Ended June 30, | ||||||||||||||||||
($ in thousands) | 2019 Pension Plan | 2018 Pension Plan | 2019 SERP | 2018 SERP | 2019 Total Both Plans | Both Plans | 2018 Total Both Plans | |||||||||||
Service cost | $ | — | — | — | 33 | — | 33 | |||||||||||
Interest cost | 372 | 326 | 41 | 53 | 413 | 379 | ||||||||||||
Expected return on plan assets | (397 | ) | (556 | ) | — | — | (397 | ) | (556 | ) | ||||||||
Amortization of net (gain)/loss | 223 | 59 | 5 | (8 | ) | 228 | 51 | |||||||||||
Net periodic pension cost (income) | $ | 198 | (171 | ) | 46 | 78 | 244 | (93 | ) |
For the Six Months Ended June 30, | ||||||||||||||||||
($ in thousands) | 2019 Pension Plan | 2018 Pension Plan | 2019 SERP | 2018 SERP | 2019 Total Both Plans | 2018 Total Both Plans | ||||||||||||
Service cost | $ | — | — | — | 62 | — | 62 | |||||||||||
Interest cost | 744 | 656 | 82 | 110 | 826 | 766 | ||||||||||||
Expected return on plan assets | (794 | ) | (659 | ) | — | — | (794 | ) | (659 | ) | ||||||||
Amortization of net (gain)/loss | 446 | 119 | 10 | (16 | ) | 456 | 103 | |||||||||||
Net periodic pension cost | $ | 396 | 116 | 92 | 156 | 488 | 272 |
the remainder of 2019.
($ in thousands)
| June 30, 2018 | December 31, 2017 | June 30, 2017 | |||||||||
Unrealized gain (loss) on securities available for sale | $ | (11,513 | ) | (2,211 | ) | 252 | ||||||
Deferred tax asset (liability) | 2,691 | 517 | (93 | ) | ||||||||
Net unrealized gain (loss) on securities available for sale | (8,822 | ) | (1,694 | ) | 159 | |||||||
Additional pension asset (liability) | (3,097 | ) | (3,200 | ) | (4,907 | ) | ||||||
Deferred tax asset (liability) | 724 | 748 | 1,816 | |||||||||
Net additional pension asset (liability) | (2,373 | ) | (2,452 | ) | (3,091 | ) | ||||||
Total accumulated other comprehensive income (loss) | $ | (11,195 | ) | (4,146 | ) | (2,932 | ) |
Page 33
($ in thousands) | June 30, 2019 | December 31, 2018 | June 30, 2018 | ||||||
Unrealized gain (loss) on securities available for sale | $ | 5,214 | (12,390 | ) | (11,513 | ) | |||
Deferred tax asset (liability) | (1,198 | ) | 2,896 | 2,691 | |||||
Net unrealized gain (loss) on securities available for sale | 4,016 | (9,494 | ) | (8,822 | ) | ||||
Additional pension asset (liability) | (2,764 | ) | (3,220 | ) | (3,097 | ) | |||
Deferred tax asset (liability) | 636 | 753 | 724 | ||||||
Net additional pension asset (liability) | (2,128 | ) | (2,467 | ) | (2,373 | ) | |||
Total accumulated other comprehensive income (loss) | $ | 1,888 | (11,961 | ) | (11,195 | ) |
($ in thousands) | Unrealized Gain (Loss) on Securities Available for Sale | Additional Pension Asset (Liability) | Total | ||||||
Beginning balance at January 1, 2019 | $ | (9,494 | ) | (2,467 | ) | (11,961 | ) | ||
Other comprehensive income (loss) before reclassifications | 13,510 | — | 13,510 | ||||||
Amounts reclassified from accumulated other comprehensive income | — | 339 | 339 | ||||||
Net current-period other comprehensive income (loss) | 13,510 | 339 | 13,849 | ||||||
Ending balance at June 30, 2019 | $ | 4,016 | (2,128 | ) | 1,888 |
($ in thousands) | Unrealized Gain (Loss) on Securities Available for Sale | Additional Pension Asset (Liability) | Total | ||||||
Beginning balance at January 1, 2018 | $ | (1,694 | ) | (2,452 | ) | (4,146 | ) | ||
Other comprehensive income (loss) before reclassifications | (7,128 | ) | — | (7,128 | ) | ||||
Amounts reclassified from accumulated other comprehensive income | — | 79 | 79 | ||||||
Net current-period other comprehensive income (loss) | (7,128 | ) | 79 | (7,049 | ) | ||||
Ending balance at June 30, 2018 | $ | (8,822 | ) | (2,373 | ) | (11,195 | ) |
The following table discloses the changes in accumulated other comprehensive income (loss) for the six months ended June 30, 2017 (all amounts are net of tax).
($ in thousands)
| Unrealized Gain (Loss) on Securities Available for Sale | Additional Pension Asset (Liability) | Total | |||||||||
Beginning balance at January 1, 2017 | $ | (1,947 | ) | (3,160 | ) | (5,107 | ) | |||||
Other comprehensive income (loss) before reclassifications | 1,958 | — | 1,958 | |||||||||
Amounts reclassified from accumulated other comprehensive income | 148 | 69 | 217 | |||||||||
Net current-period other comprehensive income (loss) | 2,106 | 69 | 2,175 | |||||||||
Ending balance at June 30, 2017 | $ | 159 | (3,091 | ) | (2,932 | ) |
Page 34
The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at June 30, 2018.
($ in thousands) | ||||||||||||||||
Description of Financial Instruments | Fair Value at June 30, 2018 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Recurring | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
Government-sponsored enterprise securities | $ | 18,537 | — | 18,537 | — | |||||||||||
Mortgage-backed securities | 282,287 | — | 282,287 | — | ||||||||||||
Corporate bonds | 33,244 | — | 33,244 | — | ||||||||||||
Total available for sale securities | $ | 334,068 | — | 334,068 | — | |||||||||||
Nonrecurring | ||||||||||||||||
Impaired loans | $ | 14,586 | — | — | 14,586 | |||||||||||
Foreclosed real estate | 8,296 | — | — | 8,296 |
2019.
($ in thousands) | |||||||||||||
Description of Financial Instruments | Fair Value at June 30, 2019 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||
Recurring | |||||||||||||
Securities available for sale: | |||||||||||||
Government-sponsored enterprise securities | $ | 59,477 | — | 59,477 | — | ||||||||
Mortgage-backed securities | 598,024 | — | 598,024 | — | |||||||||
Corporate bonds | 34,470 | — | 34,470 | — | |||||||||
Total available for sale securities | $ | 691,971 | — | 691,971 | — | ||||||||
Nonrecurring | |||||||||||||
Impaired loans | $ | 11,351 | — | — | 11,351 | ||||||||
Foreclosed real estate | 2,539 | — | — | 2,539 |
($ in thousands) | ||||||||||||||||
Description of Financial Instruments | Fair Value at December 31, 2017 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Recurring | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
Government-sponsored enterprise securities | $ | 13,867 | — | 13,867 | — | |||||||||||
Mortgage-backed securities | 295,213 | — | 295,213 | — | ||||||||||||
Corporate bonds | 34,190 | — | 34,190 | — | ||||||||||||
Total available for sale securities | $ | 343,270 | — | 343,270 | — | |||||||||||
Nonrecurring | ||||||||||||||||
Impaired loans | $ | 14,086 | — | — | 14,086 | |||||||||||
Foreclosed real estate | 12,571 | — | — | 12,571 |
2018.
($ in thousands) | |||||||||||||
Description of Financial Instruments | Fair Value at December 31, 2018 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||
Recurring | |||||||||||||
Securities available for sale: | |||||||||||||
Government-sponsored enterprise securities | $ | 82,662 | — | 82,662 | — | ||||||||
Mortgage-backed securities | 385,551 | — | 385,551 | — | |||||||||
Corporate bonds | 33,138 | — | 33,138 | — | |||||||||
Total available for sale securities | $ | 501,351 | — | 501,351 | — | ||||||||
Nonrecurring | |||||||||||||
Impaired loans | $ | 13,071 | — | — | 13,071 | ||||||||
Foreclosed real estate | 7,440 | — | — | 7,440 |
Page 35
Impaired loans — Fair values for impaired loans in the above table are measured on a non-recurring basis and are based on the underlying collateral values securing the loans, adjusted for estimated selling costs, or the net present value of the cash flows expected to be received for such loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined using an income or market valuation approach based on an appraisal conducted by an independent, licensed third party appraiser (Level 3). The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable borrower’s financial statements if not considered significant. Likewise, values for inventory and accounts receivable collateral are based on borrower financial statement balances or aging reports on a discounted basis as appropriate (Level 3). Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.
|
|
|
|
|
($ in thousands) | ||||||||||
Description | Fair Value at June 30, 2019 | Valuation Technique | Significant Unobservable Inputs | Range of Significant Unobservable Input Values | ||||||
Impaired loans | $ | 11,351 | Appraised value; PV of expected cash flows | Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell | 0-10% | |||||
Foreclosed real estate | 2,539 | Appraised value; List or contract price | Discounts to reflect current market conditions, abbreviated holding period and estimated costs to sell | 0-10% | ||||||
|
|
|
|
|
($ in thousands) | ||||||||||
Description | Fair Value at December 31, 2018 | Valuation Technique | Significant Unobservable Inputs | Range of Significant Unobservable Input Values | ||||||
Impaired loans | $ | 13,071 | Appraised value; PV of expected cash flows | Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell | 0-10% | |||||
Foreclosed real estate | 7,440 | Appraised value; List or contract price | Discounts to reflect current market conditions and estimated costs to sell | 0-10% | ||||||
2018.
Page 36
The carrying amounts and estimated fair values of financial instruments at June 30, 20182019 and December 31, 20172018 are as follows:
June 30, 2018 | December 31, 2017 | |||||||||||||||||
($ in thousands) | Level in Fair Value Hierarchy | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||||
Cash and due from banks, noninterest-bearing | Level 1 | $ | 97,163 | 97,163 | 114,301 | 114,301 | ||||||||||||
Due from banks, interest-bearing | Level 1 | 462,972 | 462,972 | 375,189 | 375,189 | |||||||||||||
Securities available for sale | Level 2 | 334,068 | 334,068 | 343,270 | 343,270 | |||||||||||||
Securities held to maturity | Level 2 | 108,265 | 107,068 | 118,503 | 118,998 | |||||||||||||
Presold mortgages in process of settlement | Level 1 | 9,311 | 9,311 | 12,459 | 12,459 | |||||||||||||
Total loans, net of allowance | Level 3 | 4,126,092 | 4,084,898 | 4,019,071 | 4,010,551 | |||||||||||||
Accrued interest receivable | Level 1 | 13,930 | 13,930 | 14,094 | 14,094 | |||||||||||||
Bank-owned life insurance | Level 1 | 100,413 | 100,413 | 99,162 | 99,162 | |||||||||||||
Deposits | Level 2 | 4,553,621 | 4,547,235 | 4,406,955 | 4,401,757 | |||||||||||||
Borrowings | Level 2 | 407,076 | 398,113 | 407,543 | 397,903 | |||||||||||||
Accrued interest payable | Level 2 | 1,651 | 1,651 | 1,235 | 1,235 |
Fair value methods and assumptions are set forth below for the Company’s financial instruments.
Cash and Amounts Due from Banks, Presold Mortgages in Process of Settlement, Accrued Interest Receivable, and Accrued Interest Payable-The carrying amounts approximate their fair value because of the short maturity of these financial instruments.
Available for Sale and Held to Maturity Securities-Fair values are provided by a third-party and are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments or matrix pricing.
Loans-For nonimpaired loans, fair values are determined assuming the sale of the notes to a third-party financial investor. Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, financial and agricultural, real estate construction, real estate mortgages and installment loans to individuals. Each loan category is further segmented into fixed and variable interest rate terms. The fair value for each category is determined by discounting scheduled future cash flows using current interest rates with a liquidity discount offered on loans with similar risk characteristics, and includes the Company’s estimate of future credit losses expected to be incurred over the life of the loan. Fair values for impaired loans are primarily based on estimated proceeds expected upon liquidation of the collateral or the present value of expected cash flows.
Bank-Owned Life Insurance – The carrying value of life insurance approximates fair value because this investment is carried at cash surrender value, as determined by the issuer.
Deposits-The fair value of deposits with no stated maturity, such as noninterest-bearing checking accounts, savings accounts, interest-bearing checking accounts, and money market accounts, is equal to the amount payable on demand as of the valuation date. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered in the marketplace for deposits of similar remaining maturities.
Borrowings-The fair value of borrowings is based on the discounted value of the contractual cash flows. The discount rate is estimated using the rates currently offered by the Company’s lenders for debt of similar maturities.
June 30, 2019 | December 31, 2018 | |||||||||||||
($ in thousands) | Level in Fair Value Hierarchy | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||
Cash and due from banks, noninterest-bearing | Level 1 | $ | 52,679 | 52,679 | 56,050 | 56,050 | ||||||||
Due from banks, interest-bearing | Level 1 | 286,781 | 286,781 | 406,848 | 406,848 | |||||||||
Securities available for sale | Level 2 | 691,971 | 691,791 | 501,351 | 501,351 | |||||||||
Securities held to maturity | Level 2 | 79,050 | 79,044 | 101,237 | 99,906 | |||||||||
Presold mortgages in process of settlement | Level 1 | 6,222 | 6,222 | 4,279 | 4,279 | |||||||||
Total loans, net of allowance | Level 3 | 4,318,708 | 4,264,663 | 4,228,025 | 4,181,139 | |||||||||
Accrued interest receivable | Level 1 | 16,909 | 16,909 | 16,004 | 16,004 | |||||||||
Bank-owned life insurance | Level 1 | 103,154 | 103,154 | 101,878 | 101,878 | |||||||||
SBA Servicing Asset | Level 3 | 5,284 | 5,807 | 4,419 | 4,617 | |||||||||
Deposits | Level 2 | 4,843,054 | 4,839,229 | 4,659,339 | 4,653,522 | |||||||||
Borrowings | Level 2 | 301,140 | 295,309 | 406,609 | 402,556 | |||||||||
Accrued interest payable | Level 2 | 2,258 | 2,258 | 1,976 | 1,972 |
Page 37
Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include net premises and equipment, intangible and other assets such as deferred income taxes, prepaid expense accounts, income taxes currently payable and other various accrued expenses. In addition, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.
For the Six Months Ended | ||||||||
$ in thousands | June 30, 2018 | June 30, 2017 | ||||||
Service charges on deposit accounts | $ | 6,385 | 5,580 | |||||
Other service charges, commissions, and fees: | ||||||||
Interchange income | 6,543 | 4,697 | ||||||
Other fees | 2,967 | 2,030 | ||||||
Fees from presold mortgage loans (1) | 1,655 | 2,279 | ||||||
Commissions from sales of insurance and financial products: | ||||||||
Insurance income | 2,903 | 858 | ||||||
Wealth management income | 1,156 | 1,020 | ||||||
SBA consulting fees | 2,267 | 2,310 | ||||||
SBA loan sale gains (1) | 6,400 | 1,549 | ||||||
Bank-owned life insurance income (1) | 1,251 | 1,088 | ||||||
Foreclosed property gains (losses), net | (387 | ) | (223 | ) | ||||
Securities gains (losses), net (1) | — | (235 | ) | |||||
Other gains (losses), net (1) | 912 | 731 | ||||||
Total noninterest income | $ | 32,052 | 21,684 | |||||
(1) Not within the scope of ASC 606. |
For the Three Months Ended | For the Six Months Ended | |||||||||||
$ in thousands | June 30, 2019 | June 30, 2018 | June 30, 2019 | June 30, 2018 | ||||||||
Noninterest Income | ||||||||||||
In-scope of Topic 606: | ||||||||||||
Service charges on deposit accounts: | $ | 3,210 | 3,122 | 6,155 | 6,385 | |||||||
Other service charges, commissions, and fees: | ||||||||||||
Interchange income | 4,228 | 3,482 | 7,779 | 6,543 | ||||||||
Other service charges and fees | 1,558 | 1,192 | 3,255 | 2,616 | ||||||||
Commissions from sales of insurance and financial products: | ||||||||||||
Insurance income | 1,304 | 1,489 | 2,672 | 2,903 | ||||||||
Wealth management income | 900 | 630 | 1,561 | 1,156 | ||||||||
SBA consulting fees | 921 | 1,126 | 2,184 | 2,267 | ||||||||
Foreclosed property gains (losses), net | (381 | ) | (99 | ) | (626 | ) | (387 | ) | ||||
Noninterest income (in-scope of Topic 606) | 11,740 | 10,942 | 22,980 | 21,483 | ||||||||
Noninterest income (out-of-scope of Topic 606) | 4,249 | 4,930 | 7,584 | 10,218 | ||||||||
Total noninterest income | $ | 15,989 | 15,872 | 30,564 | 31,701 |
Page 38
Commissions from the sale of insurance and financial products:
The Company earns commissions from the sale of insurance policies and wealth management products.period.
satisfied, upon closing the loan.
Page 39
($ in thousands) | Estimated Amortization Expense | ||
July 1 to December 31, 2019 | $ | 1,164 | |
2020 | 2,332 | ||
2021 | 2,135 | ||
2022 | 1,741 | ||
2023 | 1,643 | ||
Thereafter | 19,776 | ||
Total estimated lease payments | 28,791 | ||
Less effect of discounting | (9,558 | ) | |
Present value of estimated lease payments (lease liability) | $ | 19,233 |
($ in thousands) | Future obligations for minimum rentals under noncancelable operating leases | ||
2019 | $ | 2,268 | |
2020 | 1,973 | ||
2021 | 1,344 | ||
2022 | 869 | ||
2023 | 768 | ||
Thereafter | 4,082 | ||
Total estimated lease payments | $ | 11,304 |
Page 41
Fair Value and Discount Accretion of Acquired Loans
adopted and accounting standards that are pending adoption.
2018.
Comparisons for the financial periods presented were significantly impacted by our acquisitions of Carolina Bank in March 2017 with total assets of $684 million and Asheville Savings Bank in October 2017 with $798 million in total assets. The assets, liabilities and earnings for these acquisitions were recorded beginning on their respective acquisition dates.
2018.
Page 42
The net interest margins for the periodsrealized in 2019 were also impacted byprimarily due to lower loan discount accretion associated with acquired loan portfolios. accretion.
interest-bearing liability costs that have risen by more than earning asset yields has been substantially offset by the impact of the 15.1% growth in noninterest-bearing deposits, which has resulted in total funding costs increasing by approximately the same amount as the increase in earning asset yields.
During2018. In the first halfquarter of 2018, we experienced net loan recoveries of $4.4$3.7 million, including full payoffs received on four loans inwhich drove the first quarter of 2018 that had been previously charged-down by approximately $3.3 million. The amounts received in excess ofnegative provision during the prior charge-downs were recorded as interest income recoveries, and those four loans were primarily responsible for the $750,000 in interest recoveries previously noted.
period. Our provision for loan losses have also been impacted by continued improvement inhas remained at a low level over the past several years as a result of strong asset quality. Our nonperforming assets to total assets ratio was 0.90% at June 30, 2018 compared to 1.21% at June 30, 2017. quality, including low loan charge-offs.
2018. Our nonperforming assets to total assets ratio was 0.57% at June 30, 2019 compared to 0.90% at June 30, 2018.
Core noninterest income for2018.
The primary reason forassociated with increased usage. For the increase in core noninterest income in 2018 was an increase in SBA loan sales volume. During the three and six months ended June 30, 2018, we realized $2.6 million2019, higher “Other service charges, commissions and $6.4 million in fees” were substantially offset by lower fees/gains on sales of mortgage loans and SBA loan sales, respectively. In comparison, during the three and six months ended June 30, 2017, we realized $0.9 million and $1.5 million inloans.
Noninterest Expenses
Noninterest expenses(losses) amounted to $38.9a loss of $0.3 million in the second quarter of 2019 due to miscellaneous items, whereas in the second quarter of 2018, comparedwe recorded a $0.9 million gain on the sale of a former branch location.
Page 43
Also impacting expenses were other growth initiatives, including continued growth of our SBA consulting firm and SBA lending division, as well as the acquisition of an insurance agency during the thirdsecond quarter of 2017.
2018, and declined by $3.2 million in the six months ended June 30, 2019 compared to the same period in 2018.
2.5%, which became effective January 1, 2019.
We also experienced steady organic loan and2019 was 4.3%. Annualized deposit growth duringfor the first half of 2019 was 8.0%. Within deposits, our retail deposits (excludes brokered deposits and internet time deposits) grew at an annualized rate of 12.5% for the first six months of 2019. As a result of the strong retail deposit growth, we have reduced our usage of brokered deposits, which have declined by $87 million, or 36.6%, since June 30, 2018. Organic loan growth forAdditionally, we have paid down our borrowings by $106 million, or 26.0%, over that same period.
investment securities balances have increased by 74%.
2018.
Three Months Ended June 30, | ||||||||
($ in thousands) | 2018 | 2017 | ||||||
Net interest income, as reported | $ | 51,232 | 39,916 | |||||
Tax-equivalent adjustment | 367 | 693 | ||||||
Net interest income, tax-equivalent | $ | 51,599 | 40,609 |
Three Months Ended June 30, | ||||||
($ in thousands) | 2019 | 2018 | ||||
Net interest income, as reported | $ | 54,409 | 51,232 | |||
Tax-equivalent adjustment | 423 | 367 | ||||
Net interest income, tax-equivalent | $ | 54,832 | 51,599 |
Six Months Ended June 30, | ||||||||
($ in thousands) | 2018 | 2017 | ||||||
Net interest income, as reported | $ | 101,739 | 74,212 | |||||
Tax-equivalent adjustment | 723 | 1,278 | ||||||
Net interest income, tax-equivalent | $ | 102,462 | 75,490 |
2018.
Six Months Ended June 30, | ||||||
($ in thousands) | 2019 | 2018 | ||||
Net interest income, as reported | $ | 107,770 | 101,739 | |||
Tax-equivalent adjustment | 847 | 723 | ||||
Net interest income, tax-equivalent | $ | 108,617 | 102,462 |
Page 44
For the six months ended June 30, 2018,2019, the higher net interest income compared to the same period of 20172018 was due primarily to the growth in our loans and deposits, as reflected in the tables below.
outstanding.
For the Three Months Ended June 30, | ||||||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||||
($ in thousands) | Average Volume | Average Rate | Interest Earned or Paid | Average Volume | Average Rate | Interest Earned or Paid | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Loans (1) | $ | 4,133,689 | 4.99% | $ | 51,451 | $ | 3,327,391 | 4.78% | $ | 39,656 | ||||||||||||||
Taxable securities | 409,478 | 2.41% | 2,465 | 292,333 | 2.35% | 1,710 | ||||||||||||||||||
Non-taxable securities | 50,531 | 2.92% | 368 | 60,252 | 2.84% | 427 | ||||||||||||||||||
Short-term investments, principally federal funds | 449,206 | 2.19% | 2,451 | 309,617 | 1.34% | 1,034 | ||||||||||||||||||
Total interest-earning assets | 5,042,904 | 4.51% | 56,735 | 3,989,593 | 4.31% | 42,827 | ||||||||||||||||||
Cash and due from banks | 94,525 | 74,918 | ||||||||||||||||||||||
Premises and equipment | 114,200 | 97,353 | ||||||||||||||||||||||
Other assets | 419,991 | 286,541 | ||||||||||||||||||||||
Total assets | $ | 5,671,620 | $ | 4,448,405 | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Interest bearing checking | $ | 877,270 | 0.10% | $ | 212 | $ | 689,406 | 0.06% | $ | 108 | ||||||||||||||
Money market deposits | 1,033,676 | 0.27% | 707 | 791,967 | 0.18% | 359 | ||||||||||||||||||
Savings deposits | 442,671 | 0.19% | 213 | 411,048 | 0.21% | 218 | ||||||||||||||||||
Time deposits >$100,000 | 629,319 | 1.18% | 1,850 | 488,141 | 0.72% | 874 | ||||||||||||||||||
Other time deposits | 281,704 | 0.36% | 251 | 255,682 | 0.27% | 173 | ||||||||||||||||||
Total interest-bearing deposits | 3,264,640 | 0.40% | 3,233 | 2,636,244 | 0.26% | 1,732 | ||||||||||||||||||
Borrowings | 407,052 | 2.24% | 2,270 | 307,964 | 1.54% | 1,179 | ||||||||||||||||||
Total interest-bearing liabilities | 3,671,692 | 0.60% | 5,503 | 2,944,208 | 0.40% | 2,911 | ||||||||||||||||||
Noninterest bearing checking | 1,247,919 | 974,700 | ||||||||||||||||||||||
Other liabilities | 34,034 | 32,706 | ||||||||||||||||||||||
Shareholders’ equity | 717,975 | 496,791 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 5,671,620 | $ | 4,448,405 | ||||||||||||||||||||
Net yield on interest-earning assets and net interest income | 4.07% | $ | 51,232 | 4.01% | $ | 39,916 | ||||||||||||||||||
Net yield on interest-earning assets and net interest income – tax-equivalent (2) | 4.10% | $ | 51,599 | 4.08% | $ | 40,609 | ||||||||||||||||||
Interest rate spread | 3.91% | 3.91% | ||||||||||||||||||||||
Average prime rate | 4.80% | 4.04% |
For the Three Months Ended June 30, | |||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||
($ in thousands) | Average Volume | Average Rate | Interest Earned or Paid | Average Volume | Average Rate | Interest Earned or Paid | |||||||||||||||
Assets | |||||||||||||||||||||
Loans (1) | $ | 4,329,866 | 5.16 | % | $ | 55,652 | $ | 4,133,689 | 4.99 | % | $ | 51,451 | |||||||||
Taxable securities | 715,848 | 2.80 | % | 4,993 | 409,478 | 2.41 | % | 2,465 | |||||||||||||
Non-taxable securities | 34,604 | 3.14 | % | 271 | 50,531 | 2.92 | % | 368 | |||||||||||||
Short-term investments, primarily overnight funds | 336,966 | 2.51 | % | 2,106 | 486,674 | 2.02 | % | 2,451 | |||||||||||||
Total interest-earning assets | 5,417,284 | 4.67 | % | 63,022 | 5,080,372 | 4.48 | % | 56,735 | |||||||||||||
Cash and due from banks | 53,853 | 94,525 | |||||||||||||||||||
Premises and equipment | 136,813 | 114,200 | |||||||||||||||||||
Other assets | 386,645 | 382,523 | |||||||||||||||||||
Total assets | $ | 5,994,595 | $ | 5,671,620 | |||||||||||||||||
Liabilities | |||||||||||||||||||||
Interest bearing checking | $ | 892,615 | 0.14 | % | $ | 301 | 877,270 | 0.10 | % | $ | 212 | ||||||||||
Money market deposits | 1,099,531 | 0.63 | % | 1,725 | 1,033,676 | 0.27 | % | 707 | |||||||||||||
Savings deposits | 414,095 | 0.30 | % | 309 | 442,671 | 0.19 | % | 213 | |||||||||||||
Time deposits >$100,000 | 723,218 | 1.95 | % | 3,522 | 629,319 | 1.18 | % | 1,850 | |||||||||||||
Other time deposits | 262,537 | 0.71 | % | 467 | 281,704 | 0.36 | % | 251 | |||||||||||||
Total interest-bearing deposits | 3,391,996 | 0.75 | % | 6,324 | 3,264,640 | 0.40 | % | 3,233 | |||||||||||||
Borrowings | 324,096 | 2.83 | % | 2,289 | 407,052 | 2.24 | % | 2,270 | |||||||||||||
Total interest-bearing liabilities | 3,716,092 | 0.93 | % | 8,613 | 3,671,692 | 0.60 | % | 5,503 | |||||||||||||
Noninterest bearing checking | 1,418,033 | 1,247,919 | |||||||||||||||||||
Other liabilities | 58,339 | 34,034 | |||||||||||||||||||
Shareholders’ equity | 802,131 | 717,975 | |||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 5,994,595 | 5,671,620 | ||||||||||||||||||
Net yield on interest-earning assets and net interest income | 4.03 | % | $ | 54,409 | 4.04 | % | $ | 51,232 | |||||||||||||
Net yield on interest-earning assets and net interest income – tax-equivalent (2) | 4.06 | % | $ | 54,832 | 4.07 | % | $ | 51,599 | |||||||||||||
Interest rate spread | 3.74 | % | 3.88 | % | |||||||||||||||||
Average prime rate | 5.50 | % | 4.80 | % |
For the Six Months Ended June 30, | ||||||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||||
($ in thousands) | Average Volume | Average Rate | Interest Earned or Paid | Average Volume | Average Rate | Interest Earned or Paid | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Loans (1) | $ | 4,116,592 | 4.98% | $ | 101,621 | $ | 3,115,335 | 4.75% | $ | 73,359 | ||||||||||||||
Taxable securities | 410,032 | 2.48% | 5,051 | 289,110 | 2.28% | 3,265 | ||||||||||||||||||
Non-taxable securities | 51,738 | 2.92% | 748 | 56,835 | 3.09% | 870 | ||||||||||||||||||
Short-term investments, principally federal funds | 401,904 | 2.20% | 4,376 | 272,779 | 1.33% | 1,801 | ||||||||||||||||||
Total interest-earning assets | 4,980,266 | 4.53% | 111,796 | 3,734,059 | 4.28% | 79,295 | ||||||||||||||||||
Cash and due from banks | 93,855 | 71,107 | ||||||||||||||||||||||
Premises and equipment | 115,078 | 89,765 | ||||||||||||||||||||||
Other assets | 421,369 | 252,164 | ||||||||||||||||||||||
Total assets | $ | 5,610,568 | $ | 4,147,095 | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Interest bearing checking | $ | 881,349 | 0.09% | $ | 411 | $ | 671,039 | 0.06% | $ | 215 | ||||||||||||||
Money market deposits | 1,019,632 | 0.25% | 1,282 | 760,345 | 0.18% | 695 | ||||||||||||||||||
Savings deposits | 445,728 | 0.19% | 418 | 342,081 | 0.18% | 297 | ||||||||||||||||||
Time deposits >$100,000 | 614,523 | 1.09% | 3,325 | 462,460 | 0.69% | 1,588 | ||||||||||||||||||
Other time deposits | 282,191 | 0.34% | 470 | 250,240 | 0.27% | 339 | ||||||||||||||||||
Total interest-bearing deposits | 3,243,423 | 0.37% | 5,906 | 2,486,165 | 0.25% | 3,134 | ||||||||||||||||||
Borrowings | 407,105 | 2.06% | 4,151 | 276,414 | 1.42% | 1,949 | ||||||||||||||||||
Total interest-bearing liabilities | 3,650,528 | 0.56% | 10,057 | 2,762,579 | 0.37% | 5,083 | ||||||||||||||||||
Noninterest bearing checking | 1,214,759 | 895,696 | ||||||||||||||||||||||
Other liabilities | 35,588 | 32,405 | ||||||||||||||||||||||
Shareholders’ equity | 709,693 | 456,415 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 5,610,568 | $ | 4,147,095 | ||||||||||||||||||||
Net yield on interest-earning assets and net interest income | 4.12% | $ | 101,739 | 4.01% | $ | 74,212 | ||||||||||||||||||
Net yield on interest-earning assets and net interest income – tax-equivalent (2) | 4.15% | $ | 102,462 | 4.08% | $ | 75,490 | ||||||||||||||||||
Interest rate spread | 3.97% | 3.91% | ||||||||||||||||||||||
Average prime rate | 4.66% | 3.92% |
(1) Average loans include nonaccruing loans, the effect of which is to lower the average rate shown. (2) Includes tax-equivalent adjustments of $847,000 and $723,000 in 2019 and |
The tables above reflect significant increases in our levelsthe tax benefit that we receive related to tax-exempt securities and tax-exempt loans, which carry interest rates lower than similar taxable investments/loans due to their tax exempt status. This amount has been computed assuming a 23% tax rate and is reduced by the related nondeductible portion of loan and deposit balances. These increasesinterest expense.
Our net interest margin (tax-equivalent net interest income divided by average earning assets, referred to as “net yield on interest-earning assets” in the tables above)outstanding for the periods reflected abovesecond quarter of 2018 ($4.134 billion). For the first six months of 2019, average loans outstanding were $4.305 billion, which was fairly stable, ranging from 4.08%-4.15%$188 million, or 4.6% higher than the average loans outstanding for the comparable period of 2018 ($4.117 billion). Both asset yields and liability costs have increased approximately 18-25 basis pointsThe higher amount of average loans outstanding in 2018 compared to the same periods of 2017 shown above2019 was primarily due to increases in the interest rate environment. Whileour loan yields have increasedgrowth initiatives, including our continued focus and expansion into higher than deposit costs, which has benefittedgrowth markets, our net interest margin,hiring of experienced bankers and our interest ratesemphasis on borrowings are highly correlated to short term interest rates set by the Federal Reserve and have increased more significantly.
Impacting our net interest margin for all periods reflected in the tables above are net accretion of purchase accounting premiums/discounts associated with acquired loans and deposits. For the three months ended June 30, 2018 and 2017, we recorded $2.4 million and $2.0 million, respectively, in net accretion of purchase accounting premiums/discounts that increased net interest income. For the six months ended June 30, 2018 and 2017, we recorded $4.5 million and $3.5 million, respectively. The increase in accretion in 2018 is due to the aforementioned acquisitions. Unaccreted loan discount has increased from $18.0 million at June 30, 2017 to $25.0 million at June 30, 2018 primarily as a result of the Asheville Savings Bank acquisition.
strong asset quality, including low loan charge-offs.
2018.
2018.
For the Three Months Ended | For the Six Months Ended | ||||||||||
$ in thousands | June 30, 2019 | June 30, 2018 | June 30, 2019 | June 30, 2018 | |||||||
Service charges on deposit accounts | $ | 3,210 | 3,122 | 6,155 | 6,385 | ||||||
Other service charges, commissions, and fees | 5,786 | 4,674 | 11,034 | 9,159 | |||||||
Fees from presold mortgage loans | 857 | 796 | 1,402 | 1,655 | |||||||
Commissions from sales of insurance and financial products | 2,204 | 2,119 | 4,233 | 4,059 | |||||||
SBA consulting fees | 921 | 1,126 | 2,184 | 2,267 | |||||||
SBA loan sale gains | 3,069 | 2,598 | 5,131 | 6,400 | |||||||
Bank-owned life insurance income | 631 | 628 | 1,277 | 1,251 | |||||||
Foreclosed property gains (losses), net | (381 | ) | (99 | ) | (626 | ) | (387 | ) | |||
Other gains (losses), net | (308 | ) | 908 | (226 | ) | 912 | |||||
Noninterest income | $ | 15,989 | 15,872 | 30,564 | 31,701 | ||||||
Non-GAAP adjustments - Exclude: | |||||||||||
Foreclosed property losses from above | 381 | 99 | 626 | 387 | |||||||
Other gains and losses from above | 308 | (908 | ) | 226 | (912 | ) | |||||
Adjusted noninterest income | $ | 16,678 | 15,063 | 31,416 | 31,176 |
The following table presents our core2018. Adjusted noninterest income for the three and six month periods endingmonths ended June 30, 2018 and 2017, respectively.
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
$ in thousands | June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | ||||||||||||
Service charges on deposit accounts | $ | 3,122 | 2,966 | 6,385 | 5,580 | |||||||||||
Other service charges, commissions, and fees | 4,913 | 3,554 | 9,510 | 6,727 | ||||||||||||
Fees from presold mortgage loans | 796 | 1,511 | 1,655 | 2,279 | ||||||||||||
Commissions from sales of insurance and financial products | 2,119 | 1,038 | 4,059 | 1,878 | ||||||||||||
SBA consulting fees | 1,126 | 1,050 | 2,267 | 2,310 | ||||||||||||
SBA loan sale gains | 2,598 | 927 | 6,400 | 1,549 | ||||||||||||
Bank-owned life insurance income | 628 | 580 | 1,251 | 1,088 | ||||||||||||
Core noninterest income | $ | 15,302 | 11,626 | 31,527 | 21,411 |
2019 was $31.4 million, a 0.8% increase from the $31.2 million reported for the first half of 2018.
Page 47
Other service charges, commissions, and fees increased in 20182019 compared to 2017,2018, primarily due to a combination of the aforementioned acquisitions andas a result of higher debit card and credit card interchange fees.fees associated with increased usage. We earn a small fee each time a customer uses a debit or credit card to make a purchase. Due to the growth in checking accounts and increased customer usage of debit cards, we have experienced increases in this line item. Interchange income from credit cards has also increased due to growth in the number and usage of credit cards, which we believe is a result of increasedcontinued promotion of this product.
product
industry and employee turnover within the mortgage department.
The largest increase in core noninterest income in 2018 was in our SBA loan sale gains, which resulted from an increase in sales volumes. During the first half of 2018, we sold $82.4 million of the guaranteed portions of newly originated SBA loans, which resulted in $6.4 million in gains on sales. In comparison, duringSBA loan sales, respectively. The decline in the first half of 2017, we sold $20.62019 was a result of a combination of a lower sales volume and lower premiums realized.
Bank-owned life insurance income was $1.3and $0.2 million in the first six months of 2018three and $1.1 million in the first six months of 2017, which increased due to bank-owned life insurance policies assumed in the aforementioned acquisitions.
During the six months ended June 30, 2017, we recorded $0.22019, respectively, and gains of $0.9 million for both the three and six months ended June 30, 2018. Losses in losses from sales of securities. For2019 were due to miscellaneous items, whereas in the comparable periodsecond quarter of 2018, we had no salesrecorded a $0.9 million gain on the sale of securities.
Other gains and losses for the periods presented represent the net effects of miscellaneous gains and losses that are non-routine in nature. We recorded other gains of $0.9a former branch location.
Noninterest expenses amounted to $38.9 millionrecorded in the second quarter of 2018, a 10.8% increase over the $35.1 million recorded in the same period of 2017.2018. Noninterest expenses for the six months ended June 30, 20182019 amounted to $82.5$79.7 million compared to $67.2$82.1 million in 2017.2018, a decrease of 2.9%.
Also impacting expenses were other growth initiatives, including continued growth ofincreased hiring within our SBA consulting firmdivision as we continue to focus on growth and SBA lending division.
expansion of that business.
Employee benefits2018. The higher merger and acquisition expenses recorded in 2018 related to the Asheville Savings Bank acquisition which converted its operations into First Bank late in the first quarter of 2018.
Occupancy and equipment expense increased in 2018 primarily due to the acquisitions discussed above. For the three months ended June 30, 2018, occupancy and equipment expense totaled $3.8 million compared to $3.7 million in the second quarter of 2017. For the six months ended June 30, 2018, occupancy and equipment expense totaled $7.8 million compared to $7.0$3.1 million in the first half of 2017.
Page 48
Merger and acquisition expenses amounted2018 to $0.6 million and $3.4 million for the three and six months ended June 30, 2018, respectively, and include $0.6 million and $1.4 million of expense related to increases in an earn-out liability associated with a prior year acquisition, respectively. Merger and acquisition expenses amounted to $1.1 million and $3.5 million for the three and six months ended June 30, 2017, respectively.
Intangibles amortization expense increased from $1.0 million in the second quarter of 2017 to $1.7 million in the second quarter of 2018 and from $1.6$2.6 million in the first half of 2017 to $3.4 million in the first half of 2018,
2019. The declines were primarily as a result of the amortization of intangible assets associated with acquisitions that we recorded in connection with our acquisitions.
typically have amortization schedules that decline over time.
The increase in 2019 was due to miscellaneous expenses associated with the Company's growth. Other operating expenses amounted to $21.2 million in the first six months of 2019 compared to $21.3 million in the same period of 2018. For the secondyear to date period, the decline in this line item was impacted by efficiencies realized from the conversion of the operations of the Asheville Savings Bank into First Bank during the first quarter of 2018.
2.5%, as well as the impact of certain merger expenses recorded in 2018 that were not tax deductible.
Page 49
July 1, 2017 to June 30, 2018 | Balance at beginning of period | Internal Growth, net | Growth from Acquisitions (1) | Balance at end of period | Total percentage growth | Internal percentage growth | ||||||||||||||||||
Total loans | $ | 3,375,976 | 167,234 | 606,180 | 4,149,390 | 22.9% | 5.0% | |||||||||||||||||
Deposits – Noninterest bearing checking | 990,004 | 128,454 | 133,756 | 1,252,214 | 26.5% | 13.0% | ||||||||||||||||||
Deposits – Interest bearing checking | 728,973 | 13,488 | 173,205 | 915,666 | 25.6% | 1.9% | ||||||||||||||||||
Deposits – Money market | 781,086 | 64,635 | 175,938 | 1,021,659 | 30.8% | 8.3% | ||||||||||||||||||
Deposits – Savings | 411,814 | (34,122 | ) | 62,783 | 440,475 | 7.0% | -8.3% | |||||||||||||||||
Deposits – Brokered | 167,669 | 36,267 | 34,162 | 238,098 | 42.0% | 21.6% | ||||||||||||||||||
Deposits – Internet time | 9,779 | (2,780 | ) | — | 6,999 | -28.4% | -28.4% | |||||||||||||||||
Deposits – Time>$100,000 | 304,716 | 61,622 | 35,771 | 402,109 | 32.0% | 20.2% | ||||||||||||||||||
Deposits – Time<$100,000 | 250,289 | (37,410 | ) | 63,522 | 276,401 | 10.4% | -14.9% | |||||||||||||||||
Total deposits | $ | 3,644,330 | 230,154 | 679,137 | 4,553,621 | 25.0% | 6.3% | |||||||||||||||||
January 1, 2018 to June 30, 2018 | ||||||||||||||||||||||||
Total loans | $ | 4,042,369 | 107,021 | — | 4,149,390 | 2.6% | 2.6% | |||||||||||||||||
Deposits – Noninterest bearing checking | 1,196,161 | 56,053 | — | 1,252,214 | 4.7% | 4.7% | ||||||||||||||||||
Deposits – Interest bearing checking | 884,254 | 31,412 | — | 915,666 | 3.6% | 3.6% | ||||||||||||||||||
Deposits – Money market | 982,822 | 38,837 | — | 1,021,659 | 4.0% | 4.0% | ||||||||||||||||||
Deposits – Savings | 454,860 | (14,385 | ) | — | 440,475 | -3.2% | -3.2% | |||||||||||||||||
Deposits – Brokered | 239,659 | (1,561 | ) | — | 238,098 | -0.7% | -0.7% | |||||||||||||||||
Deposits – Internet time | 7,995 | (996 | ) | — | 6,999 | -12.5% | -12.5% | |||||||||||||||||
Deposits – Time>$100,000 | 347,862 | 54,247 | — | 402,109 | 15.6% | 15.6% | ||||||||||||||||||
Deposits – Time<$100,000 | 293,342 | (16,941 | ) | — | 276,401 | -5.8% | -5.8% | |||||||||||||||||
Total deposits | $ | 4,406,955 | 146,666 | — | 4,553,621 | 3.3% | 3.3% |
(1) Includes the acquisition of Asheville Savings Bank on October 1, 2017, which had $606.2 million in loans and $679.1 million in deposits.
2019.
July 1, 2018 to June 30, 2019 | Balance at beginning of period | Internal Growth, net | Balance at end of period | Total percentage growth | |||||||||
Total loans | $ | 4,149,390 | 190,107 | 4,339,497 | 4.6 | % | |||||||
Deposits – Noninterest bearing checking | 1,252,214 | 188,850 | 1,441,064 | 15.1 | % | ||||||||
Deposits – Interest bearing checking | 915,666 | 16,279 | 931,945 | 1.8 | % | ||||||||
Deposits – Money market | 1,021,659 | 82,393 | 1,104,052 | 8.1 | % | ||||||||
Deposits – Savings | 440,475 | (27,410 | ) | 413,065 | (6.2 | )% | |||||||
Deposits – Brokered | 238,098 | (87,210 | ) | 150,888 | (36.6 | )% | |||||||
Deposits – Internet time | 6,999 | (5,554 | ) | 1,445 | (79.4 | )% | |||||||
Deposits – Time>$100,000 | 402,109 | 136,292 | 538,401 | 33.9 | % | ||||||||
Deposits – Time<$100,000 | 276,401 | (14,207 | ) | 262,194 | (5.1 | )% | |||||||
Total deposits | $ | 4,553,621 | 289,433 | 4,843,054 | 6.4 | % | |||||||
January 1, 2019 to June 30, 2019 | |||||||||||||
Total loans | $ | 4,249,064 | 90,433 | 4,339,497 | 2.1 | % | |||||||
Deposits – Noninterest bearing checking | 1,320,131 | 120,933 | 1,441,064 | 9.2 | % | ||||||||
Deposits – Interest bearing checking | 916,374 | 15,571 | 931,945 | 1.7 | % | ||||||||
Deposits – Money market | 1,035,523 | 68,529 | 1,104,052 | 6.6 | % | ||||||||
Deposits – Savings | 432,389 | (19,324 | ) | 413,065 | (4.5 | )% | |||||||
Deposits – Brokered | 239,875 | (88,987 | ) | 150,888 | (37.1 | )% | |||||||
Deposits – Internet time | 3,428 | (1,983 | ) | 1,445 | (57.8 | )% | |||||||
Deposits – Time>$100,000 | 447,619 | 90,782 | 538,401 | 20.3 | % | ||||||||
Deposits – Time<$100,000 | 264,000 | (1,806 | ) | 262,194 | (0.7 | )% | |||||||
Total deposits | $ | 4,659,339 | 183,715 | 4,843,054 | 3.9 | % | |||||||
in 2019.
We have also
Page 50
Impacting the deposit growth discussed above was the receipt of a $41 million money market deposit in the first quarter of 2018 that iswhere borrowers are encouraged and normally expected to be transferred outsidemaintain deposit accounts with us, (2) pricing deposits at rate levels that will attract and/or retain deposits, and (3)
brokered deposits over the periods presented. For those same reasons, we were able to pay down our borrowings by $105.9 million over the past year.
lower interest rates. Total securities available for sale increased from $334.1 million at June 30, 2018 to $692.0 million at June 30, 2019, while total cash balance have declined from $560.1 million to $339.5 million over that same period.
ASSET QUALITY DATA($ in thousands) | As of/for the quarter ended June 30, 2018 | As of/for the quarter ended December 31, 2017 | As of/for the quarter ended June 30, 2017 | |||||||||
Nonperforming assets | ||||||||||||
Nonaccrual loans | $ | 25,494 | 20,968 | 22,795 | ||||||||
Restructured loans – accruing | 17,386 | 19,834 | 21,019 | |||||||||
Accruing loans >90 days past due | — | — | — | |||||||||
Total nonperforming loans | 42,880 | 40,802 | 43,814 | |||||||||
Foreclosed real estate | 8,296 | 12,571 | 11,196 | |||||||||
Total nonperforming assets | $ | 51,176 | 53,373 | 55,010 | ||||||||
Purchased credit impaired loans not included above (1) | $ | 20,832 | 23,165 | 16,846 | ||||||||
Asset Quality Ratios – All Assets | ||||||||||||
Net charge-offs to average loans – annualized | (0.07% | ) | 0.13% | (0.06% | ) | |||||||
Nonperforming loans to total loans | 1.03% | 1.01% | 1.30% | |||||||||
Nonperforming assets to total assets | 0.90% | 0.96% | 1.21% | |||||||||
Allowance for loan losses to total loans | 0.56% | 0.58% | 0.71% | |||||||||
Allowance for loan losses + unaccreted discount to total loans | 1.16% | 1.24% | 1.24% | |||||||||
Allowance for loan losses to nonperforming loans | 54.33% | 57.10% | 54.83% |
ASSET QUALITY DATA ($ in thousands) | As of/for the quarter ended June 30, 2019 | As of/for the quarter ended December 31, 2018 | As of/for the quarter ended June 30, 2018 | |||||||
Nonperforming assets | ||||||||||
Nonaccrual loans | $ | 17,375 | 22,575 | 25,494 | ||||||
TDRs – accruing | 11,890 | 13,418 | 17,386 | |||||||
Accruing loans >90 days past due | — | — | — | |||||||
Total nonperforming loans | 29,265 | 35,993 | 42,880 | |||||||
Foreclosed real estate | 5,107 | 7,440 | 8,296 | |||||||
Total nonperforming assets | $ | 34,372 | 43,433 | 51,176 | ||||||
Purchased credit impaired loans not included above (1) | $ | 14,175 | 17,393 | 20,832 | ||||||
Asset Quality Ratios – All Assets | ||||||||||
Net charge-offs to average loans - annualized | — | % | 0.02 | % | (0.07 | )% | ||||
Nonperforming loans to total loans | 0.67 | % | 0.85 | % | 1.03 | % | ||||
Nonperforming assets to total assets | 0.57 | % | 0.74 | % | 0.90 | % | ||||
Allowance for loan losses to total loans | 0.48 | % | 0.50 | % | 0.56 | % | ||||
Allowance for loan losses + unaccreted discount on acquired loans to total loans | 0.82 | % | 0.90 | % | 1.16 | % | ||||
Allowance for loan losses to nonperforming loans | 71.04 | % | 58.45 | % | 54.33 | % |
(1) | In the March 3, 2017 acquisition of Carolina Bank and the October 1, 2017 acquisition of Asheville Savings Bank, we acquired $19.3 million and $9.9 million, respectively, in PCI loans in accordance with ASC 310-30 accounting guidance. These loans are excluded from the nonperforming loan amounts, including |
Consistent with the weak economy experienced in much of our market associated with the onset of the recession in 2008, we experienced higher levels of loan losses, delinquencies and nonperforming assets compared to our historical averages. In recent years, economic conditions have improved and our asset quality has steadily improved.
The following is the composition, by loan type, of all of our nonaccrual loans at each period end:
($ in thousands) | At June 30, 2018 | At December 31, 2017 | At June 30, 2017 | |||||||||
Commercial, financial, and agricultural | $ | 3,407 | 1,001 | 1,027 | ||||||||
Real estate – construction, land development, and other land loans | 1,374 | 1,822 | 1,007 | |||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 11,513 | 12,201 | 15,262 | |||||||||
Real estate – mortgage – home equity loans/lines of credit | 1,765 | 2,524 | 1,942 | |||||||||
Real estate – mortgage – commercial and other | 7,292 | 3,345 | 3,451 | |||||||||
Installment loans to individuals | 143 | 75 | 106 | |||||||||
Total nonaccrual loans | $ | 25,494 | 20,968 | 22,795 |
“Restructured loans – accruing”, or troubled debt restructurings (“TDRs”),
Page 51
Foreclosed real estate includes primarily foreclosed properties. Total foreclosed real estate amounted to $5.1 million at June 30, 2019, $7.4 million at December 31, 2018, and $8.3 million at June 30, 2018, $12.6 million at December 31, 2017, and $11.2 million at June 30, 2017.2018. Our foreclosed property balances have generally been decreasing as a result of sales activity during the periods and the improvement in our overall asset quality. In
($ in thousands) | At June 30, 2019 | At December 31, 2018 | At June 30, 2018 | ||||||
Commercial, financial, and agricultural | $ | 1,490 | 919 | 3,407 | |||||
Real estate – construction, land development, and other land loans | 1,420 | 2,265 | 1,374 | ||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 8,697 | 10,115 | 11,513 | ||||||
Real estate – mortgage – home equity loans/lines of credit | 1,404 | 1,685 | 1,765 | ||||||
Real estate – mortgage – commercial and other | 4,260 | 7,452 | 7,292 | ||||||
Installment loans to individuals | 104 | 139 | 143 | ||||||
Total nonaccrual loans | $ | 17,375 | 22,575 | 25,494 |
our nonperforming assets.
($ in thousands) | At June 30, 2018 | At December 31, 2017 | At June 30, 2017 | |||||||||
Vacant land | $ | 2,521 | 6,032 | 4,132 | ||||||||
1-4 family residential properties | 3,973 | 4,229 | 4,648 | |||||||||
Commercial real estate | 1,802 | 2,310 | 2,416 | |||||||||
Total foreclosed real estate | $ | 8,296 | 12,571 | 11,196 |
($ in thousands) | At June 30, 2019 | At December 31, 2018 | At June 30, 2018 | ||||||
Vacant land and farmland | $ | 1,788 | 2,035 | 2,521 | |||||
1-4 family residential properties | 1,452 | 2,311 | 3,973 | ||||||
Commercial real estate | 1,867 | 3,094 | 1,802 | ||||||
Total foreclosed real estate | $ | 5,107 | 7,440 | 8,296 |
As of June 30, 2018 | ||||||||||||||||
($ in thousands) | Total Nonperforming Loans | Total Loans | Nonperforming Loans to Total Loans | Total Foreclosed Real Estate | ||||||||||||
Region (1) | ||||||||||||||||
Eastern Region (NC) | $ | 13,314 | 868,000 | 1.5% | 304 | |||||||||||
Triangle Region (NC) | 11,510 | 856,000 | 1.3% | 1,486 | ||||||||||||
Triad Region (NC) | 7,819 | 914,000 | 0.9% | 1,227 | ||||||||||||
Charlotte Region (NC) | 1,024 | 278,000 | 0.4% | 264 | ||||||||||||
Southern Piedmont Region (NC) | 6,430 | 267,000 | 2.4% | 1,228 | ||||||||||||
Western Region (NC) | 598 | 689,000 | 0.1% | 1,958 | ||||||||||||
South Carolina Region | 1,785 | 144,000 | 1.2% | 669 | ||||||||||||
Former Virginia Region | 355 | 2,000 | 17.8% | 1,160 | ||||||||||||
Other | 45 | 131,000 | 0.0% | — | ||||||||||||
Total | $ | 42,880 | 4,149,000 | 1.0% | 8,296 | |||||||||||
As of June 30, 2019 | |||||||||||||
($ in thousands) | Total Nonperforming Loans | Total Loans | Nonperforming Loans to Total Loans | Total Foreclosed Real Estate | |||||||||
Region (1) | |||||||||||||
Eastern Region (NC) | $ | 6,955 | 924,000 | 0.75 | % | $ | 877 | ||||||
Triangle Region (NC) | 7,217 | 928,000 | 0.78 | % | 1,053 | ||||||||
Triad Region (NC) | 4,562 | 865,000 | 0.53 | % | 83 | ||||||||
Charlotte Region (NC) | 774 | 338,000 | 0.23 | % | 146 | ||||||||
Southern Piedmont Region (NC) | 5,470 | 284,000 | 1.93 | % | 587 | ||||||||
Western Region (NC) | 658 | 680,000 | 0.10 | % | 908 | ||||||||
South Carolina Region | 1,083 | 157,000 | 0.69 | % | 763 | ||||||||
Former Virginia Region | 83 | 1,000 | 8.30 | % | 690 | ||||||||
Other | 2,463 | 162,000 | 1.52 | % | — | ||||||||
Total | $ | 29,265 | 4,339,000 | 0.67 | % | $ | 5,107 |
(1) | The counties comprising each region are as follows: |
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($ in thousands) | Six Months Ended June 30, | Twelve Months Ended December 31, | Six Months Ended June 30, | |||||||||
2018 | 2017 | 2017 | ||||||||||
Loans outstanding at end of period | $ | 4,149,390 | 4,042,369 | 3,375,976 | ||||||||
Average amount of loans outstanding | $ | 4,116,592 | 3,420,939 | 3,115,335 | ||||||||
Allowance for loan losses, at beginning of year | $ | 23,298 | 23,781 | 23,781 | ||||||||
Provision (reversal) for loan losses | (4,369 | ) | 723 | 723 | ||||||||
18,929 | 24,504 | 24,504 | ||||||||||
Loans charged off: | ||||||||||||
Commercial, financial, and agricultural | (609 | ) | (1,622 | ) | (1,204 | ) | ||||||
Real estate – construction, land development & other land loans | (32 | ) | (589 | ) | (269 | ) | ||||||
Real estate – mortgage – residential (1-4 family) first mortgages | (415 | ) | (2,641 | ) | (1,247 | ) | ||||||
Real estate – mortgage – home equity loans / lines of credit | (186 | ) | (978 | ) | (578 | ) | ||||||
Real estate – mortgage – commercial and other | (312 | ) | (1,182 | ) | (414 | ) | ||||||
Installment loans to individuals | (262 | ) | (799 | ) | (359 | ) | ||||||
Total charge-offs | (1,816 | ) | (7,811 | ) | (4,071 | ) | ||||||
Recoveries of loans previously charged-off: | ||||||||||||
Commercial, financial, and agricultural | 812 | 1,311 | 518 | |||||||||
Real estate – construction, land development & other land loans | 3,387 | 2,579 | 1,471 | |||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 516 | 1,076 | 636 | |||||||||
Real estate – mortgage – home equity loans / lines of credit | 243 | 333 | 130 | |||||||||
Real estate – mortgage – commercial and other | 1,124 | 1,027 | 698 | |||||||||
Installment loans to individuals | 103 | 279 | 139 | |||||||||
Total recoveries | 6,185 | 6,605 | 3,592 | |||||||||
Net recoveries (charge-offs) | 4,369 | (1,206 | ) | (479 | ) | |||||||
Allowance for loan losses, at end of period | $ | 23,298 | 23,298 | 24,025 | ||||||||
Ratios: | ||||||||||||
Net charge-offs (recoveries) as a percent of average loans (annualized) | (0.21% | ) | 0.04% | 0.03% | ||||||||
Allowance for loan losses as a percent of loans at end of period | 0.56% | 0.58% | 0.71% | |||||||||
Allowance for loan losses + unaccreted discount as a percent of loans | 1.16% | 1.24% | 1.24% | |||||||||
($ in thousands) | Six Months Ended June 30, 2019 | Twelve Months Ended December 31, 2018 | Six Months Ended June 30, 2018 | ||||||
Loans outstanding at end of period | $ | 4,339,467 | 4,249,064 | 4,149,390 | |||||
Average amount of loans outstanding | $ | 4,305,069 | 4,161,838 | 4,116,592 | |||||
Allowance for loan losses, at beginning of year | $ | 21,039 | 23,298 | 23,298 | |||||
Provision (reversal) for loan losses | 192 | (3,589 | ) | (4,369 | ) | ||||
21,231 | 19,709 | 18,929 | |||||||
Loans charged off: | |||||||||
Commercial, financial, and agricultural | (936 | ) | (2,128 | ) | (609 | ) | |||
Real estate – construction, land development & other land loans | (293 | ) | (158 | ) | (32 | ) | |||
Real estate – mortgage – residential (1-4 family) first mortgages | (185 | ) | (1,734 | ) | (415 | ) | |||
Real estate – mortgage – home equity loans / lines of credit | (146 | ) | (711 | ) | (186 | ) | |||
Real estate – mortgage – commercial and other | (838 | ) | (1,459 | ) | (312 | ) | |||
Installment loans to individuals | (436 | ) | (781 | ) | (262 | ) | |||
Total charge-offs | (2,834 | ) | (6,971 | ) | (1,816 | ) | |||
Recoveries of loans previously charged-off: | |||||||||
Commercial, financial, and agricultural | 605 | 1,195 | 812 | ||||||
Real estate – construction, land development & other land loans | 489 | 4,097 | 3,387 | ||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 382 | 833 | 516 | ||||||
Real estate – mortgage – home equity loans / lines of credit | 455 | 364 | 243 | ||||||
Real estate – mortgage – commercial and other | 374 | 1,503 | 1,124 | ||||||
Installment loans to individuals | 87 | 309 | 103 | ||||||
Total recoveries | 2,392 | 8,301 | 6,185 | ||||||
Net (charge-offs) recoveries | (442 | ) | 1,330 | 4,369 | |||||
Allowance for loan losses, at end of period | $ | 20,789 | 21,039 | 23,298 | |||||
Ratios: | |||||||||
Net charge-offs (recoveries) as a percent of average loans (annualized) | 0.02 | % | (0.03 | )% | (0.21 | )% | |||
Allowance for loan losses as a percent of loans at end of period | 0.48 | % | 0.50 | % | 0.56 | % | |||
Allowance for loan losses + unaccreted discount on acquired loans as a percent of loans | 0.82 | % | 0.90 | % | 1.16 | % |
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The2018, the Company experienced net loan recoveries of $4.4 million, which drove the negative provision for the period and was the primary reason for the variance in the provision for loan losses that we record is driven by anwhen comparing the first six months of 2019 to the first six months of 2018. Other factors impacting the provision for loan loss are discussed in the following two paragraphs.
The
2018.
2018.
June 30, 2018 | December 31, 2017 | June 30, 2017 | ||||||||||
Risk-based capital ratios: | ||||||||||||
Common equity Tier 1 to Tier 1 risk weighted assets | 11.41% | 10.72% | 10.44% | |||||||||
Minimum required Common equity Tier 1 capital | 6.375% | 5.75% | 5.75% | |||||||||
Tier I capital to Tier 1 risk weighted assets | 12.61% | 11.94% | 11.91% | |||||||||
Minimum required Tier 1 capital | 7.875% | 7.25% | 7.25% | |||||||||
Total risk-based capital to Tier II risk weighted assets | 13.17% | 12.50% | 12.61% | |||||||||
Minimum required total risk-based capital | 9.875% | 9.25% | 9.25% | |||||||||
Leverage capital ratios: | ||||||||||||
Tier 1 capital to quarterly average total assets | 10.05% | 9.58% | 9.77% | |||||||||
Minimum required Tier 1 leverage capital | 4.00% | 4.00% | 4.00% |
June 30, 2019 | December 31, 2018 | June 30, 2018 | ||||||
Risk-based capital ratios: | ||||||||
Common equity Tier 1 to Tier 1 risk weighted assets | 12.94 | % | 12.28 | % | 11.41 | % | ||
Minimum required Common equity Tier 1 capital | 7.00 | % | 6.375 | % | 6.375 | % | ||
Tier I capital to Tier 1 risk weighted assets | 14.12 | % | 13.48 | % | 12.61 | % | ||
Minimum required Tier 1 capital | 8.50 | % | 7.875 | % | 7.875 | % | ||
Total risk-based capital to Tier II risk weighted assets | 14.60 | % | 13.97 | % | 13.17 | % | ||
Minimum required total risk-based capital | 10.50 | % | 9.875 | % | 9.875 | % | ||
Leverage capital ratios: | ||||||||
Tier 1 capital to quarterly average total assets | 10.89 | % | 10.47 | % | 10.05 | % | ||
Minimum required Tier 1 leverage capital | 4.00 | % | 4.00 | % | 4.00 | % |
2018.
Page 56
Using stated maturities for all fixed rate instruments except mortgage-backed securities (which are allocated in the periods of their expected payback) and securities and borrowings with call features that are expected to be called (which are shown in the period of their expected call). At June 30, 2018,2019, we had $1.3$1.4 billion more in interest-bearing liabilities that are subject to interest rate changes within one year than earning assets. This generally would indicate that net interest income would experience downward pressure in a rising interest rate environment and would benefit from a declining interest rate environment. However, this method of analyzing interest sensitivity only measures the magnitude of the timing differences and does not address earnings, market value, or management actions. Also, interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. In addition to the effects of “when” various rate-sensitive products reprice, market rate changes may not result in uniform changes in rates among all products. For example, included in interest-bearing liabilities subject to interest rate changes within one year at June 30, 20182019 are deposits totaling $2.4 billion comprised of checking, savings, and certain types of money market deposits with interest rates set by management. These types of deposits historically have not repriced with, or in the same proportion, as general market indicators.
Overall, the Company's interest rate modeling indicates that the Company is slightly asset sensitive in a 1-2 year horizon.
Page 57
As previously discussed in the section “Net Interest Income,” our net interest income has been impacted by certain purchase accounting adjustments related to the acquired banks. The purchase accounting adjustments related to the premium amortization on loans, deposits and borrowings are based on amortization schedules and are thus systematic and predictable. The accretion of the loan discount on acquired loans which amounted to $4.4$2.5 million and $3.3$4.0 million for the six months ended June 30, 20182019 and 2017,2018, respectively, is less predictable and could be materially different among periods. This is because of the magnitude of the discounts that wereare initially recorded and the fact that the accretion being recorded is dependent on both the credit quality of the acquired loans and the impact of any accelerated loan repayments, including payoffs. If the credit quality of the loans declines, some, or all, of the remaining discount will cease to be accreted into income. If the underlying loans experience accelerated paydowns or improved performance expectations, the remaining discount will be accreted into income on an accelerated basis. In the event of total payoff, the remaining discount will be entirely accreted into income in the period of the payoff. Each of these factors is difficult to predict and susceptible to volatility. The remaining loan discount on acquired accruing loans amounted to $25.0$14.8 million at June 30, 2019 compared to $20.3 million at June 30, 2018.
interest-sensitive funding costs.
Page 58
Issuer Purchases of Equity Securities | |||||||||||||||
Period | Total Number of Shares Purchased (2) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) | |||||||||||
April 1, 2019 to April 30, 2019 | — | $ | — | $ | — | $ | 25,000,000 | ||||||||
May 1, 2019 to May 31, 2019 | 58,400 | 35.70 | 2,085,141 | $ | 22,914,859 | ||||||||||
June 1, 2019 to June 30, 2019 | 123,568 | 35.92 | 4,438,942 | $ | 18,475,917 | ||||||||||
Total | 181,968 | 35.85 | 6,524,083 | $ | 18,475,917 |
(1) | All shares available for repurchase are pursuant to publicly announced share repurchase authorizations. On |
(2) | The table above does not include shares that were used by option holders to satisfy the exercise price of the call options issued by the Company to its employees and directors pursuant to the Company’s stock option plans. |
2.a |
2.b |
2.c |
2.d |
3.a | Articles of Incorporation of the Company and amendments thereto were filed asExhibits 3.a.i through 3.a.v to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2002, and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed asExhibits 3.1 and3.2 to the Company’s Current Report on Form 8-K filed on January 13, 2009, and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed asExhibit 3.1.b to the Company’s Registration Statement on Form S-3D filed on June 29, 2010 (Commission File No. 333-167856), and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed asExhibit 3.1 to the Company’s Current Report on Form 8-K filed on September 6, 2011, and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed asExhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 26, 2012, and are incorporated herein by |
Page 59
3.b |
4.a |
31.1 |
31.2 |
32.1 |
32.2 |
101 | The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, |
FIRST BANCORP | |||
August 9, 2019 | BY:/s/ Richard H. Moore | ||
Richard H. Moore Chief Executive Officer (Principal Executive Officer), and Director | |||
August 9, | |||
BY:/s/ Eric P. Credle | |||
Eric P. Credle | |||
Executive Vice President | |||
and Chief Financial Officer |